Melbourne Corporation v Commonwealth

74 CLR 31
[1947] ALR 377

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(Judgment by: Williams J)

Briginshaw v.
Briginshaw

Court:

Judges: Latham CJ
Rich J
Starke J
Dixon J
McTiernan J

Williams J

Judgment date: 15 and 16 July, 13 August 1947

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Judgment by:
Williams J

The questions raised upon the argument of the demurrer and the material sections of the Banking Act 1945, and in particular s 48, have been fully set out in the preceding judgments, and I shall not repeat them. The first question is whether s 48 of the Banking Act is legislation with respect to State banking within the meaning of the exception in s 51(xiii) of the Constitution. The origin of the placitum is s 91(15) of The British North America Act 1867, which gives the Parliament of Canada exclusive legislative authority over "banking, the incorporation of banks, and the issue of paper money." The additional words "other than State banking, also State banking extending beyond the limits of the State concerned" have been incorporated in the placitum. In Tennant v Union Bank of Canada (1894) AC 31, at p 46, Lord Watson, in delivering the judgment of the Privy Council, said that banking is "an expression which is wide enough to embrace every transaction coming within the legitimate business of a banker." This statement was recently repeated by Lord Porter in delivering the judgment of the Privy Council in Attorney-General for Canada v Attorney-General for Quebec (1947) AC 33, at pp 41,42. These citations show, if authority is needed, that the legislation authorized by the placitum is legislation with respect to the business of banking. The bodies which engage in the business of banking are the banks. It would not be an ordinary use of language to say that the customers of the banks engage in such a business. The customers carry on some other business of their own, and it is the business of the banks to provide one form of facility which enables their customers to carry on such businesses. The States would not be concerned (that is, interested) in any real sense in the business of banking other than in the business of banks which were their agencies. There would be no reason why the States as customers of independent banks should not be subject to general laws made by the Commonwealth Parliament relating to the conduct of banking business. There would be even less reason why, if the States as customers were not subject to such laws in the case of accounts in their own territories, they should not also be exempt in respect of accounts which they opened in other States when those other States as customers were exempt within their own territorial limits. In my opinion the expression "State banking" in the placitum does not refer to the States as mere customers of banks, but to banks constituted and controlled by the States.

The second question is whether s 48 is legislation with respect to banking within the ambit of placitum (xiii). The Banking Act controls the right to carry on the business of banking in Australia by providing that -- (1) a person other than a body corporate shall not, at any time after the expiration of six months from the commencement of Pt II, carry on any banking business in Australia (s 6); (2) a body corporate shall not, after the expiration of the same period, carry on any banking business in Australia unless it is in possession of an authority in writing granted by the Governor-General to carry on banking business, but the Governor-General shall, within seven days after the commencement of Pt II, grant to each body corporate specified in the First Schedule an authority to carry on such business (ss 7 and 8); (3) bodies corporate which are authorized to carry on banking business in Australia cannot carry on such business for a State or any authority of a State, including a local governing authority, except with the consent in writing of the Treasurer (s 48). The First Schedule consists of two parts, the first containing the names of fourteen incorporated banks, compendiously known as the private trading banks, and the second the names of the Hobart Savings Bank and Launceston Bank for Savings. The Commonwealth Bank Act 1945 was assented to on the same date as the Banking Act. S 17 of the former Act provides that the Commonwealth Bank shall carry on general banking business. This is a specific provision relating to the Commonwealth Bank which, in my opinion, relieves the Commonwealth Bank, which is under a duty to carry on general banking business, from the necessity of obtaining any further authority to do so under s 7 of the Banking Act. Accordingly, the existing banks to which s 48 applies are those enumerated in the First Schedule to that Act.

While s 48 in form prohibits private trading banks from conducting business with the States and their authorities without the consent of the Treasurer, its pith, substance, effect and operation is to compel the States and their authorities to bank either with a State Bank or with the Commonwealth Bank. The express exception of State banking in placitum (xiii) prevents the Commonwealth directing the States not to bank with State banks. The purpose of s 48 is therefore to give the Commonwealth Bank as complete a monopoly as possible of the business of the States and their authorities as customers of banks. If the Commonwealth can say to the States and their authorities that they shall not bank with the private trading banks, it can equally say that they shall not bank with the Commonwealth Bank or with any State bank if and in so far as it extends beyond the limits of the State concerned, and thereby prohibit the States and their authorities from resorting to any bank other than a State bank, and then only in respect of business within the State concerned. The receipt, custody and payment of the public moneys of a State is an essential governmental function of that State. The Audit Acts of the States, to several of which we were referred, authorize the Treasurers of the States to make agreements with such banks as they may think fit for these purposes. But s 48 of the Banking Act seeks to empower the Treasurer of the Commonwealth to override the Audit Acts of the States and to impose his will upon the Treasurers of the States as to the banks with which the States may do business.

I must give effect to the principles for the construction of the Constitution laid down in the Engineers' Case (1920) 28 CLR 129. It is pointed out that "Laws validly made by authority of the Constitution, bind, so far as they purport to do so, the people of every State considered as individuals or as political organisms called States -- in other words, bind both Crown and subject" (1920) 28 CLR 129, at p 153. But the Parliament of the Commonwealth is only authorized by s 51 to make laws with respect to the enumerated subjects (1) for the peace, order and good government of the Commonwealth, and (2) subject to the Constitution, and there arises from the very nature of the federal compact, which contemplates two independent political organisms, each supreme within its own sphere, existing side by side and exerting divided authority over the same persons and in the same territory, a necessary implication that neither the Commonwealth nor the States may exercise their respective constitutional powers for the purpose of affecting the capacity of the other to perform its essential governmental functions. Therefore a federal law which purports to bind the States must be examined to ascertain whether it is really a law for the peace, order and good government of the Commonwealth with respect to one of the enumerated subjects, or a law which, under colour of such a purpose, is really a law the purpose of which is to interfere with such functions. As the Privy Council has pointed out in relation to the Canadian Constitution in Attorney-General for Alberta v Attorney-General for Canada (1939) AC 117, at p 129, each case must be determined as it arises for "no general test applicable to all cases can safely be laid down." Dixon J has pointed out in West's Case (1939) AC 117, at p 129 that there are two reservations to the principle laid down in the Engineers' Case (1920) 28 CLR 129 that the powers of the Parliament of the Commonwealth under s 51 must be construed as extending to the States. "The first reservation is that in the Engineers' Case (1920) 28 CLR 129 the question was left open whether the principle would warrant legislation affecting the exercise of a prerogative of the Crown in right of the States. The second is that the decision does not appear to deal with or affect the question whether the Parliament is authorized to enact legislation discriminating against the States or their agencies."

S 48 is legislation which clearly discriminates against the States and their agencies. We were not asked, and I would not be prepared, to hold that legislation which conforms to the language of a placitum is necessarily invalid if it discriminate against a State or States. Many emergencies could arise which would justify the Commonwealth enacting legislation under the defence power during hostilities which would discriminate against a State or States. But the presence of discrimination points strongly to the law being aimed at the States, and if the law is in pith and substance a law which seeks to give directions to the States as to the manner in which they shall exercise their executive, legislative or judicial governmental functions it is not a law for the peace, order and good government of the Commonwealth, but an unlawful intervention in the constitutional affairs of the States.

Three recent cases in this Court relating to the exercise of the defence power during hostilities illustrate the operation of the principle. In the Uniform Tax Case (1942) 65 CLR 373, the Income Tax (Wartime Arrangements) Act 1942 was held to be valid by the majority of the Court. That Act in form discriminated against the States because it conscripted into the service of the Commonwealth the taxation staffs of the States and acquired for the Commonwealth the offices in which the State Income Tax Departments were carried on. The purpose of the Act was to create a Commonwealth Income Tax Department to collect taxation levied by the Commonwealth, a large part of which was required to prosecute the war. The loss of the services of these staffs and possession of these premises by the States was likely to hinder the carrying on of the governmental functions of the States, but this hindrance was of the same character as the disturbance which was being caused to all sorts of businesses from the Commonwealth having to conscript employees holding important positions in such businesses and to take possession of convenient premises in which they were being carried on in order to prosecute the war. There was nothing in the Act which attempted to prevent the States from utilizing the services of other officers less experienced, and securing other premises less convenient to carry on the same governmental functions. The convenience of the States, like that of individuals, had to give way to the overriding necessity of the prosecution of the war. In Victoria v The Commonwealth (1942) 66 CLR 488, and Victoria v Foster (1944) 68 CLR 485, on the other hand, where the Commonwealth sought to direct the States as to the remuneration, holidays and hours of work of public servants who were not conscripted by the Commonwealth, but continued to be employed by the States upon work relating to the essential governmental functions of the States, the legislation was held to be beyond the ambit of the defence power and therefore invalid.

The effect of s 48 is to deprive the States and their authorities of the use of banking facilities available to the general public. Its purpose is to give to the Treasurer of the Commonwealth the power to dictate to the States where they shall bank their public moneys. It is plainly in pith and substance legislation aimed at giving directions to the States as to the manner in which they shall exercise part of what the Privy Council has called in James v The Commonwealth (1936) AC 578, at p 611; and in Abitibi Power & Paper Co v The Montreal Trust Company (1943) AC 536, at p 547, their sovereign powers.

The extent to which the legislation encroaches upon such sovereign powers is well illustrated by the provision of the Financial Agreement referred to by the Chief Justice, which gives the States an overriding constitutional right flowing from s 105A of the Constitution to borrow moneys for temporary purposes by way of overdraft. Prior to 1929, when s 105A was inserted in the Constitution, the States had the same right as ordinary members of the public to approach any banks carrying on a general banking business to arrange overdrafts. It was obviously intended by the Financial Agreement that this right should be preserved to the States, subject only to the limitations contained in the provision itself.

It might be contended that s 48 only infringes the provision in question to the extent to which it seeks to prohibit the States arranging such overdrafts with the banks enumerated in the First Schedule to the Banking Act. But overdrafts are not granted in gross. The essence of an overdraft is that the indebtedness of the customer to the bank is not fixed, but fluctuates from time to time within the agreed limit as moneys are paid in and drawn out of an active current account operated upon in the ordinary course of the business of the customer. The Financial Agreement therefore plainly contemplates and intends that the States shall have the right to become ordinary customers of any banks carrying on a general banking business.

For these reasons I am of opinion that s 48 is unconstitutional and invalid and that the demurrer should be overruled.