Bank of New South Wales v Commonwealth
76 CLR 1[1948] 2 ALR 89
1948 - 0811A - HCA
(Judgment by: Starke J)
Bank of New South Wales
v Commonwealth
Judges:
Latham CJ
Rich J and Williams J
Starke JDixon J
McTiernan J
Subject References:
Constitutional law
Powers of Commonwealth Parliament
Banking
Acquisition of property
Freedom of trade, commerce and intercourse
Interference with States
Legislative References:
Constitution (Cth) - ss 51(xiii); 51(xx); 51(xxxi); 51(xxxix); 75(iii); 92; 105A
Banking Act 1947 No 57 - The Act
Judgment date: 11 August 1948
Sydney
Judgment by:
Starke J
STARKE J. Motions to this Court for interlocutory injunctions in each of five actions which the parties agreed to treat as a trial of the action and which by order of 15th January 1948 were directed to be so treated and heard together upon affidavits filed in the said actions and upon such further affidavits or evidence as the Court or a Justice might allow. And it was also directed, pursuant to the Judiciary Act 1903-1947, that the cases be argued before the Full Court and that all questions involved in or arising upon the trials be referred for the consideration of the Full Court.
The plaintiffs in one action are banking companies incorporated in Australia whose names are set forth in the first Schedule, Part I, to the Banking Act 1947 and individuals in representative capacities; in another action the plaintiffs are banking companies incorporated in the United Kingdom but carrying on business in Australia whose names are set forth in the first Schedule, Part II, and individuals in representative capacities and the other three actions are brought by the States of Victoria, South Australia and Western Australia respectively.
In each action the plaintiffs claim a declaration that the Banking Act 1947 is beyond the powers of the Parliament of the Commonwealth, contrary to the Constitution and void, and alternatively that various sections of the Act are void for the same reasons and ancillary relief is also claimed.
The objects of the Act are stated in s. 3 and envisage apparently the nationalization of banking in Australia. England, it was said, had nationalized the Bank of England (9 & 10 Geo. 6, c. 27), the coal industry (9 & 10 Geo. 6, c. 59) and the States might have nationalized banking within the limits of their territories.
But the Parliament of the Commonwealth is not omnipotent as is the English Parliament nor has it a general authority to make laws for the peace, order and good government of the Commonwealth in the like manner as the States have to make laws for the peace, order and good government of their several territories. The Constitution enumerates the powers of the Commonwealth and within the framework of those powers must be found the authority of the Commonwealth to enact the Banking Act 1947.
The main features of that Act are the provisions made for the acquisition by agreement of shares in banking companies incorporated in Australia or in the United Kingdom, the compulsory acquisition of shares in banks incorporated in Australia, the management of banks incorporated in Australia, the acquisition by agreement of the business of the banking companies set out in the first Schedule to the Act whether incorporated in Australia, United Kingdom or elsewhere, the compulsory acquisition of the business in Australia of those banks and the provisions prohibiting the banks from carrying on business in Australia.
Subject to the Constitution (see s. 51) the Parliament of the Commonwealth has power to make laws for the peace, order and good government of the Commonwealth with respect to:
The acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws (s. 51 (xxxi.)).
Banking other than State banking: also State banking extending beyond the limits of the State concerned, the incorporation of banks, and the issue of paper money (s. 51 (xiii.)).
Foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth (s. 51 (xx.)).
Matters incidental to the execution of any power vested by this Constitution in the Parliament or in either House thereof, or in the Government of the Commonwealth, or in the Federal Judicature, or in any department or officer of the Commonwealth (s. 51 (xxxix.)).
The constitutional validity of the Banking Act 1947 was referred to these powers.
The commerce power was not called in aid (cf. Toronto Electric Commissioners v Snider [[321]] , at p. 409).
Unlike the trade and commerce power conferred upon the Parliament of Canada by the British North America Act 1867, the power is limited to trade and commerce with other countries and among the States. And it was also said that banking was not trade or commerce, a contention that, incidentally, denied that the Banking Act 1947 in any way infringed the constitutional guarantee that trade, commerce and intercourse among the States should be absolutely free (Constitution, s. 92).
The Constitution is an instrument of government in general terms and, as Higgins J. said in Attorney-General for New South Wales v Brewery Employees Union of New South Wales [[322]] , at pp. 611, 612: "although we are to interpret the words of the Constitution on the same principles of interpretation as we apply to any ordinary law, these very principles of interpretation compel us to take into account the nature and scope of the Act that we are interpreting-to remember that it is a Constitution, a mechanism under which laws are to be made, and not a mere Act which declares what the law is to be." The Constitution must not, therefore, be cut down by "a narrow and technical construction" but given a "large and liberal interpretation" (See Edwards v Attorney-General for Canada [[323]] , at pp. 136, 137; British Coal Corporation v The King [[324]] , at p. 518).
The legislative power of the Parliament of the Commonwealth is not, however, to make laws for the peace, order and good government of Australia but to make laws with respect to enumerated subjects but, within the appointed limits, the Parliament is supreme. Its powers also are subject to all the limitations imposed by the Constitution. Those limitations may be found in the Federal system itself (Melbourne Corporation v The Commonwealth [[325]] ) or in some express provision of the Constitution such as s. 92.
The extent of the constitutional powers relied upon in support of the Banking Act 1947 must now be examined in the light of these considerations and of judicial decisions.
The acquisition power.
Upon this power are founded the main sections of the Banking Act 1947. It is this power, and no other, that authorized the acquisition of property though the acquisition must be for a purpose in respect of which the Parliament has power to make laws (See Johnston Fear & Kingham & The Offset Printing Co Pty Ltd v The Commonwealth [[326]] , at pp. 317, 318, 325).
The acquisition power is, however, large and extensive, for property is "nomen generalissimum and extends to every species of valuable right and interest including real and personal property" (See Minister of State for the Army v Dalziel [[327]] , at p. 290; and cf. Australasian United Steam Navigation Co Ltd v The Shipping Control Board [[328]] ). And under this power I see no objection to the acquisition of a business being carried on-a going concern, to use an expression of business (cf. Governments Stock and Other Securities Investment Co v Manila Railway Co [[329]] , at p. 86; Palmer, Company Precedents, Part I, 14th ed., (1931) p. 459). But the power is not, in itself, wide enough to include the taking over of liabilities. Vendors and purchasers provide in their agreements how and in what manner the liabilities of a going concern are to be discharged. It appears to me, however, that the incidental power (Constitution, s. 51 (xxxix.)), which is not a limitation or restriction but rather an enlargement of power, warrants legislation providing how and in what manner the liabilities of a going concern taken over should be discharged. The incidental power is not limited to such measures without which the granted power would fail but covers all appropriate means conducive or adapted to the end to be accomplished (cf. Julliard v Greenman [[330]] , at pp. 211, 212]). Provisions for the discharge of the liabilities of a going concern are not, I venture to think, essential to the justice of the terms provided for the acquisition of the concern. And it is not the constitutional requirement of "just terms" that authorizes the taking over of liabilities. Liabilities might be discharged out of the moneys obtained for the concern.
An obligation, however, is imposed upon the Parliament to provide "just terms" for the acquisition of property. But the obligation to provide such terms, it is now recognized in this Court, is "a legislative function ... and the Constitution does not mean to deprive the legislature of all discretion in the matter" (McClintock v The Commonwealth [[331]] , at p. 34). The law must not be so unreasonable as to terms that it cannot find justification in the minds of reasonable men. "Just terms" do not require a disregard of the interests of the public or of the Commonwealth (See Grace Bros. Pty Ltd v The Commonwealth [[332]] , at p. 291).
Ultimately, it is the function of the Courts to determine whether "just terms" have or have not been provided.
And "just terms" require that a party whose property is acquired shall have the pecuniary equivalent of the property acquired (Australian Apple and Pear Marketing Board v Tonking [[333]] , at p. 85; Johnston Fear & Kingham & The Offset Printing Co Pty Ltd v The Commonwealth [[334]] ). Thus the Judicial Committee have said, in respect of a claim for compensation payable to the owner of land resumed, that the party, whose property is acquired, is entitled to receive the sum which a prudent purchaser would have been willing to give for the property sooner than fail to obtain it (Pastoral Finance Association Ltd v The Minister [[335]] ). "The ascertainment of value is not controlled by artificial rules. It is not a matter of formulas, but there must be a reasonable judgment having its basis in a proper consideration of all relevant facts" (cf. Standard Oil Co of New Jersey v Southern Pacific Co [[336]] , at p. 895]). "Just terms" may well be provided by means of a pool but whether "just terms" have been provided by that method depends upon the character of the pool provided (cf. Nelungaloo Pty Ltd v The Commonwealth [[337]] ). Again, in considering the justice of the terms provided the method of ascertaining the value of the property acquired may be considered. A party whose property is compulsorily acquired is entitled to a fair ascertainment of its value and not an arbitrary fixation by the authority acquiring the property (Johnston Fear & Kingham & The Offset Printing Co Pty Ltd v The Commonwealth [[338]] ; McClintock v The Commonwealth [[339]] ). And, further, it has been said in this Court that "just terms ... involve, as a matter of elementary fairness, the payment ... of interest" on the ascertained value of the property until payment (The Commonwealth v Huon Transport Pty Ltd [[340]] , at pp. 306, 307). Scrutton L.J., in his dissenting judgment, said in Swift & Co v Board of Trade [[341]] , at p. 429 "the owner of property seized does not receive full compensation, if he loses the property in one year and only receives the value of the property at the time of loss five years afterwards."
Doubtless, under the acquisition power, the Parliament can provide for payment of interest on unpaid compensation but it is, in all cases, a matter of construction of the particular legislation whether it has done so and if not whether "just terms" have been provided.
Next the acquisition must be for a purpose in respect of which the Parliament has power to make laws. The only powers relied upon in support of the Banking Act 1947 were the banking power (s. 51 (xiii.)) and the foreign corporations and trading or financial corporations power (s. 51 (xx.)) coupled with the incidental power (s. 51 (xxxix.)).
The banking power.
It relates, of course, to the business of bankers but it was said that the power implied the continued existence of the activity and was indeed but a power to regulate and govern it (cf. Toronto Corporation v Virgo [[342]] ). The form of the section was relied upon in support of this view. State banking is excluded from the power. This means the business of banking engaged in by a State as banker and not the transactions of a State as the customer of a bank (Melbourne Corporation v The Commonwealth [[343]] ). The banking power, however, also extends to State banking beyond the limits of the State concerned. These words, it was said, imply the continued existence of inter-State activities on the part of a State bank which the Parliament of the Commonwealth may regulate and govern but cannot suppress. The word "also," it was suggested relates that construction of the power over inter-State transactions back to the subject of banking itself in the constitutional power.
Again, it was also suggested that the express power to incorporate banks contained in the constitutional power, as an extension or addition to the banking power, indicated that the incorporation of banks is not included within the subject of banking. And this supported the view that the banking power was a power to regulate and govern banking and not to suppress it.
But I am unable to accede to this construction of the Constitution.
State banking is excluded from the banking power but States have no power to legislate with respect to transactions in banking extending beyond the limits of the State concerned. It was a special case and the power is therefore conferred upon the National or Federal Parliament.
But this limited power over State banking does not control or in any way restrict the banking power, rather it extends that power.
The express power to incorporate banks was adopted. I should think, from the British North America Act 1867, s. 91 (15). In the Constitution of the United States no power in express terms is given to Congress to incorporate banks yet such a power was deduced by inference or implication from the Constitution (McCulloch v Maryland [[344]] ). Possibly it was to avoid the necessity of such inferences or implications that the express power was inserted both in the Canadian and Australian Constitutions.
Abundans cautela non nocet.
In any case the power does not control or restrict the banking power.
Subject to the Constitution, including the limitation in the banking power itself, the banking power extends over the entire subject. It is plenary and Parliament may embrace within its legislation whatever is necessary or appropriate to a complete and effective banking system. The power, as I have already said, "extends not only to those regulations which aid, foster and protect banking and the choice of persons engaging in it: it also embraces the making of rules which prohibit it" (Melbourne Corporation v The Commonwealth [[345]] and cases there cited).
In the recent decisions, Attorney-General for Alberta v Attorney-General for Canada [[346]] and Attorney-General for Alberta v Attorney-General for Canada [[347]] in which Alberta social credit legislation was considered, the question was whether the legislation was invalid. In the former case an Act respecting the taxation of banks was declared invalid in the Privy Council because it was part of a legislative plan to prevent the operation within the Province of those banking institutions which were carrying on business under the authority of the Parliament of Canada. In short the legislation was inconsistent with the Dominion legislation which prevailed.
But in the Supreme Court of Canada the Social Credit Act which was the basis of the plan was also declared invalid because it was legislation in relation to banking which was exclusively assigned to the Parliament of Canada under the British North America Act 1867. The Judicial Committee did not deal with this Act for reasons stated in the report of the case [[348]] .
In the latter case the Judicial Committee declared the Alberta Bill of Rights Act, which provided for loans involving an expansion of credit, invalid because it was legislation in relation to banking exclusively assigned to the Dominion Parliament. "Legislation which aims at restricting (credit) or controlling this practice must," said the Lord Chanceller, Lord Simon, "be beyond the powers of a provincial legislature."
It was said that this decision does not necessarily require the banking power in the British North America Act to support it for the general power of the Dominion (Act s. 91) to make laws for the peace, order and good government of Canada in relation to all matters not coming within the classes of subjects exclusively assigned to the legislatures of the Provinces equally supports it. That may be true, but the Judicial Committee rested its decision upon the banking power and not upon the general power. And the reasoning is an exposition of the banking power.
Still, legislation under the acquisition power must have some real connection with and afford some reasonable and substantial basis for the conclusion that it is for a purpose in respect of which the Parliament has power to make laws, for example, in the present case that the legislation has a real and substantial connection with banking (Victoria v The Commonwealth [[349]] , at p. 508; Reid v Sinderberry [[350]] , at pp. 515, 516; Australian Woollen Mills Ltd v The Commonwealth [[351]] , at pp. 490, 491). "These questions affecting limitation on the legislative powers of subordinate parliaments ... in a Federal system are now familiar ... It is well established that you are to look at the `true nature and character of the legislation' ... `the pith and substance of the legislation.' If, on the view of the statute as a whole, you find that the substance of the legislation is within the express powers, then it is not invalidated if incidentally it affects matters which are outside the authorized field. The legislation must not under the guise of dealing with one matter in fact encroach upon the forbidden field" (Gallugher v Lynn [[352]] , at p. 870).
The foreign corporations and trading or financial corporations power.
This provision of the Constitution s. 51 (xx.) does not give any power to incorporate companies (Huddart, Parker & Co Pty Ltd v Moorchead [[353]] ). Isaacs J. was of opinion that it gave to the Commonwealth Parliament power to regulate the conduct of the corporations in their transactions with or as affecting the public (see [[354]] ). Higgins J. regarded it as a power to legislate with respect to corporations as corporations.
The capacities and faculties of these corporations are unalterable by the Commonwealth [[355]] . The power is, as are all the powers granted by s. 51, subject to the Constitution.
It is an independent power complete in itself. And, in my opinion, the power authorizes the Commonwealth to govern and regulate the operation of these companies but would not authorize the suppression of all such corporations or the nationalization of their activities. Thus, the carrying on business in Australia by these corporations might be prohibited absolutely or except upon certain conditions and the exercise of their powers in Australia might be regulated and so forth. Moreover, the Constitution must be construed as one whole document (James v The Commonwealth [[356]] , at p. 43) and it may well be that this corporation power is confined to corporations that are not within the banking power.
Be this as it may, this power does not, I think, support the Banking Act 1947. The banking power is the appropriate power and the one upon which reliance must be placed. It is unnecessary, therefore, to refer again to this corporation power.
Limitations upon power.
The limitations upon Federal constitutional power, which have been relied upon in this case, may now be examined.
The States.
"The federal character of the Australian Constitution," I said in Melbourne Corporation v The Commonwealth "carries implications of its own ... the government of Australia is a dual system based upon a separation of organs and of powers. The maintenance of the States and their powers is as much the object of the Constitution as the maintenance of the Commonwealth and its powers. Therefore it is beyond the power of either to abolish or destroy the other" [[357]] ; "neither Federal nor State governments may destroy the other nor curtail in any substantial manner the exercise of its powers or "obviously interfere with one another's operations" [[358]] ."
Three of the States contend that the Banking Act 1947 curtails their constitutional powers in a substantial manner and interferes with the exercise of those powers. But I shall return later on to this contention.
Freedom of Trade.
Trade, commerce and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.
So s. 92 of the Constitution prescribes but judicial decisions have much weakened its operation.
It is now settled, I think, after some fluctuation in opinion, that s. 92 is an inhibition addressed to the Parliaments of the Commonwealth and the States preventing them from legislating so as to interfere with the freedom prescribed by the section. It gives no rights to the citizens of the Commonwealth except the right to ignore and if necessary to procure the assistance of the judicial power in resisting any such legislation (James v South Australia [[359]] , at p. 31; James v The Commonwealth [[360]] , at pp. 361, 362; James v The Commonwealth [[361]] ). Still the freedom is not limited "to freedom from legislative control; it must equally include executive control" (James v The Commonwealth [[362]] ). But, doubtless, the expression trade, commerce and intercourse "describes the activities of individuals. The object of s. 92 is to enable individuals to conduct their commercial dealings and their personal intercourse with one another independently of State boundaries" (O. Gilpin Ltd v Commissioner for Road Transport and Tramways (N.S.W.) [[363]] , at p. 211). It was said, however, that s. 92 relates only to the passage of goods or visible tangible things and persons across the borders of the States and is wholly inapplicable to intangible things or commercial intercourse across State borders. And it was claimed that the addition of the words "whether by means of internal carriage or ocean navigation" in s. 92 supported this view. And so, also, it was claimed that the opinion of the Judicial Committee in James v The Commonwealth [[364]] was based upon this assumption.
But I am unable to agree with the argument.
Trade, commerce and intercourse among the States includes, in my opinion, not only the sale of tangibles but also of intangibles by a person in one State to a person in another State and also the transportation from one State to another of goods or persons and commercial intercourse whether by air, telegraph, telephone, wireless or other means. This, I think, accords with the view taken in the United States of America under the power in the American Constitution to regulate commerce with foreign nations and among the several States and with the Indian tribes. The word "intercourse" in s. 92 is as applicable to commercial intercourse as to personal intercourse. Indeed, in the basic case in the United States, Gibbons v Ogden [[365]] , at p. 68] Marshall C.J. said: "Commerce, undoubtedly, is traffic, but it is something more: it is intercourse. It describes the commercial intercourse between nations, and parts of nations, in all its branches, and is regulated by prescribing rules for carrying on that intercourse." It may be that the word "intercourse" found its way into s. 92 of the Australian Constitution through some such source.
James v Cowan [[366]] dealt with the nature of the freedom prescribed by s. 92 but not with the subject of that freedom. And the addition of the words "whether by means of internal carriage or ocean navigation" are "not descriptive or limiting; they are to prevent limitation" (W. & A. McArthur Ltd v Queensland [[367]] , at p. 550).
The decisions of the United States Courts are not authoritative upon the interpretation of the Australian Constitution. Thus the power given to Congress to regulate commerce has repeatedly been declared, as to those subjects which require a general system of uniformity of regulation, to be exclusive. In other matters, admitting of diversity of treatment according to the special requirements of local conditions, the States may act within their respective jurisdictions until Congress sees fit to act; and, when Congress does act, the exercise of its authority overrides all conflicting State legislation (The Minnesota Rate Cases: Simpson v Shepard [[368]] , at p. 1541]).
No such doctrine exists in Australia. The powers of the Commonwealth and the States within the limits of their constitutional powers are concurrent, but when the law of a State is inconsistent with a law of the Commonwealth the latter prevails (Constitution, s. 109; James v The Commonwealth [[369]] ). Still, what is "commerce" has been thoroughly explored in the United States of America and what is trade and commerce under the Australian Constitution are indistinguishable descriptions of the same thing. And before "commerce" can be inter-State it must be "commerce."
Much light is thrown upon the whole subject in the judgments of the Supreme Court of the United States and by text writers and others upon the commerce power in the Constitution of the United States (See, for instance, Willoughby on The Constitutional Law of the United States, 2nd ed. (1929), vol. 2, pp. 721-777; Willis on Constitutional Law pp. 281-304; Judson on The Law of Interstate Commerce, 2nd ed. (1912); Prentice & Egan on The Commerce Clause of the Federal Constitution; Constitution of United States (Annotated) to January 1938 compiled pursuant to resolutions of the Senate and the House of Representatives).
The extent of the commerce power in the United States is well illustrated in a recent case before the Supreme Court of the United States (United States v South-Eastern Underwriters Association [[370]] ). The question was whether the business of entering into contracts in one State insuring against the risk of loss by fire of property in others was in itself inter-State commerce. There were numerous decisions of the Court that insurance was not commerce. But these decisions were overruled. The majority of the learned Justices accepted the general description of "commerce" given by Marshall C.J. in Gibbons v Ogden [[371]] . And even those Justices who did not agree with the disposal of the case made by the majority of the Court, in view of the prior decisions of the Court, agree that the business in question in that case did constitute "commerce."
Thus Frankfurter J. [[372]] : "The relations of the insurance business to national commerce and finance ... afford constitutional authority for appropriate regulation by Congress of the business of insurance."
And Jackson J. [[373]] : "The doctrine that insurance business is not commerce always has been criticized as unrealistic, illogical, and inconsistent with other" decisions. "As a matter of fact, modern insurance business, as usually conducted, is commerce; and where it is conducted across State lines, it is in fact inter-State commerce. In contemplation of law, however, insurance has acquired an established doctrinal status not based on present-day facts. For constitutional purposes a fiction has been established, and long acted upon by the Court, the states, and the Congress, that insurance is not commerce" [[374]] .
Stone C.J. was more cautious: "The numerous and unvarying decisions of this Court ... have never denied that acts of inter-State commerce may be incidental to the business of writing and performing contracts of insurance, or that those incidental acts are subject to the commerce power. Our decisions on this subject have uniformly rested on the ground that the formation of an insurance contract, even though it insures against risk of loss to property located in other states or moving in inter-State commerce, is not inter-State commerce, and that although the incidents of inter-State communication and transportation which often attend the formation and performance of an insurance contract are inter-State commerce, they do not serve to render the business of insurance itself inter-State commerce" [[375]] .
In Nathan v Louisiana [[376]] the Supreme Court of the United States held that a person engaged in buying and selling foreign bills of exchange was not engaged in "commerce" but in supplying instruments of commerce and that a State tax on his business was not an infringement of the constitutional power of Congress to regulate "commerce."
Despite this authority the decision in the Insurance Case [[377]] suggests that in the United States the business of banking as usually conducted would now be regarded as commerce or as involving acts or transactions in commerce which if conducted across State lines would be inter-State commerce. Prentice & Egan [[378]] comment upon the case: "To say that an inter-State bill of exchange is merely evidence of the transfer of title to personal property located in another State is not only to ignore the fact that money, as the circulating medium, is essential to all commerce."
It is true that in the Australian Constitution the trade and commerce power, the banking power and the insurance power are separately enumerated but that does not exclude banking and insurance from the inhibition of s. 92 that trade, commerce and intercourse among the States shall be absolutely free if the business of banking and insurance conducted across State lines be trade, commerce or commercial intercourse. Among their multifarious functions bankers finance the sale and purchase of goods and of commerce in general and they also issue, buy, sell and discount bills, often against mercantile documents, transmit moneys and provide credits and engage in commercial intercourse. Such transactions and acts, if conducted across State lines, fall within the general description of trade, commerce and intercourse among the States, already stated. It is not every transaction and act of bankers that belongs to inter-State trade but in Australia bankers do a considerable business across State lines. It would be "unrealistic and illogical" to deny the character of inter-State commerce to business so conducted.
And it is that trade, commerce and intercourse that s. 92 requires shall be "absolutely free." But that means "freedom as at the frontier" or in other words across State boundaries. It must be free from all restraints, hindrances, obstructions, interferences and devices of every kind employed to interfere with that freedom. Those restraints, hindrances and interferences may take many forms such as customs and border duties, prohibitions of every kind, compulsory acquisitions of property directed against inter-State trade, compulsory marketing schemes entirely restrictive of freedom of action on the part of producers and the elimination of the business of inter-State transportation as such in favour of a State undertaking and so forth (James v Cowan [[379]] ; James v The Commonwealth [[380]] ; Peanut Board v Rockhampton Harbour Board [[381]] ; Australian National Airways Pty Ltd v The Commonwealth [[382]] ).
The actual restraint or burden may operate while the property is still in the State of origin (James v The Commonwealth [[383]] ). "In every case," it was said in James v The Commonwealth [[384]] "it must be a question of fact whether there is an interference with this freedom of passage." But the question of fact is, like some other matters of fact in the law, for the Court and not for the jury. The difficulties that arise in the application of s. 92 to legislative and executive action arise, I think, at this point. James v The Commonwealth [[385]] denied that the freedom prescribed by s. 92 was "freedom from all governmental control extending over the whole of any transaction which is treated as having the characteristic of inter-State commerce" and substituted "freedom as at the frontier" as the true criterion [[386]] .
In O. Gilpin Ltd v Commissioner for Road Transport and Tramways (N.S.W.) [[387]] Dixon J. examined many cases decided in this Court and summed up his own opinion in the following proposition:"But, given an act or transaction which falls within the conception of trade, commerce, or intercourse among the States and a restriction or burden operating upon that act or transaction, it appears to me that it must be an infringement upon the absolute freedom guaranteed by s. 92 unless the restriction or burden is imposed in virtue of or in reference to none of the essential qualities which are connoted by the description `trade, commerce, and intercourse among the States' " [[388]] .
It is not therefore "every regulation of commerce or of movement that involves a restriction or burden constituting an impairment of freedom. Traffic regulations affecting the lighting and speed of vehicles, tolls for the use of a bridge, prohibition of fraudulent descriptions upon goods, and provisions for the safe carriage of dangerous things, supply examples" [[389]] (Cf. Home Benefits Pty Ltd v Crafter [[390]] ; R. v Connare; Ex parte Wawn [[391]] ; R. v Martin; Ex parte Wawn [[392]] ).
That proposition of my brother Dixon runs counter, I believe, to several decisions of this Court, notably, Ex parte Nelson [[No. 1]] [[393]] , and what are known as the transport cases (R. v Vizzard; Ex parte Hill [[394]] ; O. Gilpin Ltd v Commissioner of Road Transport [[395]] ; Bessell v Dayman [[396]] ; Duncan v Vizzard [[397]] ; Riverina Transport Pty Ltd v Victoria [[398]] ; and to Hartley v Walsh [[399]] and Milk Board (N.S.W.) v Metropolitan Cream Pty Ltd [[400]] ). And it is opposed to the generalization which is, I think, the prevailing view in this Court that the legislation must be scrutinized in its entirety and its real object, true character and real effect-its pith and substance-in the particular instance under discussion must be determined (James v Cowan [[401]] ; Peanut Board v Rockhampton Harbour Board [[402]] ; Milk Board Case [[403]] ). Or perhaps to express the matter more shortly that legislative or executive action is obnoxious to s. 92 if it restrains or interferes with the freedom of trade and commerce among the States in some real and substantial manner. But the freedom guaranteed by s. 92 is not an unrestricted privilege to engage in business or to conduct it as one pleases. Unfortunately this generalization has led to many opposite conclusions of "fact" in this Court. On the one hand it is claimed that the Peanut Case [[404]] has the approval of the Judicial Committee and on the other that the Transport Cases have that approval.
Neither claim is, I think, beyond question. The passage in James v The Commonwealth [[405]] is guarded and not a clear and definite approval and in Gratwick v Johnson [[406]] , at pp. 17-19 will be found my reasons for thinking that the Judicial Committee did not express approval or disapproval of the actual decisions in the Transport Cases.
Nelson's Case [[407]] may be compared with Tasmania v Victoria [[408]] , and the Peanut Board [[409]] and the Air Line Cases [[410]] with Hartley v Walsh [[411]] and the Milk Board Case [[412]] .
The Transport Cases including Willard v Rawson [[413]] are applications of the generalization. But if all the States legislated or acted in like manner then freedom of inter-State transportation would be greatly hampered. I think the Transport Cases were wrongly decided, they were not mere traffic regulations as I regard Willard's Case [[414]] but a burden imposed directly and immediately upon the transport or movement of passengers and goods whether engaged in domestic, inter-State or other trade and commerce.
The Banking Act 1947.
Turning now to the Banking Act 1947. Part I. of the first Schedule sets out the names of eight banks incorporated in Australia which I shall refer to as the Australian banks, Part II., three banks incorporated in the United Kingdom which I shall refer to as the English banks, and Part III., three banks incorporated elsewhere which I shall refer to as the foreign banks. These banks, often in Australia called "the trading banks," are referred to in the Banking Act as private banks though the Australian and English banks, at all events, are public or chartered companies. And these banks have carried on the banking business of Australia for many years, one, at least, I believe, for more than one hundred years.
In 1911 the Commonwealth Bank was established by the Act 1911 No. 18 and it was authorized to carry on, and has from its establishment carried on, inter alia, a general business of banking. But it is now governed by the Commonwealth Bank Act 1945 (1945 No. 13).
The Banking Act 1947 makes provision for:
- (1)
- The purchase or acquisition by agreement of all or any of the shares in the Australian and English banks by the Commonwealth Bank subject to the approval of the Treasurer.
- (2)
- The compulsory acquisition of Australian shares in Australian banks.
Section 13 (1):
"Where the Treasurer is satisfied that the majority in number of the shares in an Australian private bank are Australian shares, the Treasurer may, by notice ... declare that, upon a date specified ... the shares in that bank which are Australian shares ... shall be vested in the Commonwealth Bank."
"Australian shares" means shares situated, or deemed by law to be situated, in Australia.
All other shares in that Australian bank which ... become Australian shares are vested in the Commonwealth Bank upon the date upon which they become Australian shares.
- (3)
- The management of Australian banks.
Upon the date specified as already mentioned the directors of the Australian bank in relation to which the notice was given, cease, by force of the Act, to hold office and the Governor of the Commonwealth Bank may with the approval of the Treasurer appoint directors in their stead.
Directors so appointed have full power to manage, direct and control the business and affairs of the Australian bank of which they are directors and, in particular, have power to:
- (a)
- declare dividends;
- (b)
- dispose of the business in Australia of that Australian bank to the Commonwealth Bank;
- (c)
- dispose of all or any of the other business of that Australian bank.
Further the Commonwealth Bank is for all purposes the holder of the shares which have been purchased or acquired under the Act and shall be a member of that Australian bank in respect of those shares.
- (4)
- The taking over by agreement with the Commonwealth Bank of the business in Australia of any of the Australian, English or foreign banks mentioned in the Schedule.
- (5)
- The compulsory taking over by the Commonwealth Bank of the business in Australia of any Australian, English or foreign bank already mentioned which has not made an agreement for the taking over of its business.
And provisions are made for taking over Australian assets and liabilities, vesting assets, novating liabilities and discharging the bank taken over from its obligation in respect of those liabilities.
"Australian assets" means assets situated, or deemed by law to be situated, in Australia and "Australian liabilities" means liabilities situated, or deemed by law to be situated, in Australia.
- (6)
- Compensation for property compulsorily acquired and the setting up of a Federal Court of Claims with jurisdiction to hear and determine claims for compensation under the Act.
The Commonwealth Bank, the Act provides, shall pay fair and reasonable compensation in respect of the acquisition of shares by the Commonwealth Bank (s. 15).
The Commonwealth Bank, the Act also provides, shall pay fair and reasonable compensation in respect of the acquisition or taking over by the Commonwealth of the business in Australia of any bank (s. 25).
- (7)
- Prohibition of the carrying on of banking business in Australia by the Australian, English or foreign banks.
Notwithstanding anything contained in any other law, or in any charter or other instrument, a private bank shall not, after the commencement of this Act, carry on banking business in Australia except as required by the Act (s. 46).
But the Act requires each bank to carry on until the Treasurer by notice requires it to cease carrying on banking business in Australia.
- (8)
- Protection and continuation in employment by the Commonwealth Bank of the staff of banks taken over pursuant to the Act.
- (9)
- And there is a declaration of legislative intent with respect to the divisibility or separability of the provisions of the Act (s. 6).
It provides a rule of construction that the legislature intended the provisions of the Act to be divisible.
But it is not, as has been said, an inexorable command and the presumption may be "overcome by considerations which make evident the inseparability of its provisions or the clear probability that the invalid part being eliminated the legislature would not have been satisfied with what remains." "The presumption in favour of separability does not authorize the Court to give the Statute an effect altogether different from that sought by the measure viewed as a whole" (R. v Poole; Ex parte Henry [[415]] ; cf. Williams v Standard Oil Co of Louisiana [[416]] , at p. 309]; Railroad Retirement Board v Alton Railroad Co [[417]] , at p. 1482]; Carter v Carter Coal Co [[418]] , at pp. 1189, 1201]; Attorney-General for Alberta v Attorney-General for Canada [[419]] , at pp. 519, 520).
The several objects of the Act and the purpose of the powers in Divisions 2 and 3 of Part IV. of the Act are stated in ss. 3 and 9 and are designed, I suppose, to relate the provisions of the Act to some constitutional power. In the end, however, these provisions must find constitutional warrant in some one or more of the enumerated powers conferred upon the Parliament of the Commonwealth by the Constitution. And that warrant is found, so it is contended, in the acquisition power and the banking power together or separately and the incidental power.
Acquisition of Shares.
The authority to acquire shares and to take over businesses of the trading banks by agreement raises no difficulties. The Act confers upon the Commonwealth Bank the capacity so to acquire shares and to take over businesses and there is nothing to prevent the proprietors or owners agreeing to sell if they so desire upon agreed terms. But the purchaser-the Commonwealth Bank-can, in such cases, stand in no better position than any other purchaser; it must take what the proprietor or owner has and be subject to the memorandum and articles of association or other regulations of the banking company. A compulsory purchase authorized under the Constitution stands in a somewhat different position for no provisions in the regulations of the company prohibiting or restricting alienation can prevail against the statutory authority. Still, in my opinion, such a purchase does not in itself entitle the purchaser to ignore all the regulations of the banking company. The right the purchaser acquires is a share in the capital of the company freed from all trusts, mortgages, charges, liens, interests and other obligations affecting those shares (s. 13 (5)), and the incidental rights to be exercised in accordance with the regulations of the company.
The complete title to the shares is acquired upon the vesting thereof in the Commonwealth (cf. The Commonwealth v New South Wales [[420]] , at pp. 27, 28). And the Act vests the shares in the Commonwealth Bank but, in my opinion, the regulations of the banking companies govern the right of the Commonwealth Bank or its nominees to go upon the share register as members: if they desire the advantages of registration by the banking company then they must comply with the regulations of the company governing registration (cf. The Commonwealth v New South Wales [[421]] ). Thus, if authority were given to directors enabling them for instance to refuse any transferee of whom they did not approve, then ordinarily the Courts would not interfere with the exercise of their discretion unless the authority were exercised capriciously and wantonly. In short, the Parliament of the Commonwealth cannot, under the banking power, ignore the internal structure and regulations of the trading banks and shape that structure and those regulations as it pleases. Legislation of that character would relate to companies or corporations, as Higgins J. might have said, and not to banking (cf. Huddart, Parker & Co Pty Ltd v Moorehead [[422]] ).
Consequently s. 14 of the Banking Act 1947 is not a valid exercise of power.
Still the compulsory acquisition of shares and of the businesses in Australia of the trading banks, including inter-State banking, is within the plenary power of Parliament under the acquisition, banking and incidental powers, but only if the purpose of the acquisition is banking, that just terms are provided for the acquisition and that trade, commerce and intercourse among the States is absolutely free. The purpose of the acquisition of the shares is to facilitate the control by the Commonwealth Bank of the banking business in Australia of the banking companies and for the purpose of furthering the expansion of the banking business of the Commonwealth. It was pointed out that the acquisition of the shares in a company was one method of acquiring the business or the control of the business of that company. Under the Banking Act however, it is to be noticed that the acquisition of shares in the Australian banks may be piecemeal. Shareholders in the Australian banks are not bankers and shareholding cannot be described as banking though it does enable those holding shares in banks to exercise, through their holdings, subject to the regulations of the banks, some control over their operations. Nationalization and control of Australian banking was, it was said, the aim of the provisions relating to the acquisition of shares and other property, but that control was already established under the Banking Act 1945. Therefore the real aim and object of the Act, it was contended, is not for any purpose of banking but for the purpose of acquiring for the Commonwealth the profitable business of selected Australian banks. The provisions for the management of the banks, the astounding penalties imposed by such sections as 24 (8), 46 (8), 59 and 60, and the case of Melbourne Corporation v The Commonwealth [[423]] were referred to in support of this view. Doubtless the Court must ascertain the purpose of the acquisition but that purpose must be discovered from the words of the Act and any relevant surrounding circumstances and not by any other means. The argument has something of truth in it but I put it on one side partly because the Court properly assumes the integrity of the legislative body and presumes in favour of the validity of legislation until its violation of the Constitution is clearly established and partly because of the provisions for compensation contained in the Act.
Just Terms.
And that leads to the inquiry whether "just terms" are provided in the Banking Act 1947 for the acquisition of shares in the Australian banks. It was contended that the Act makes no provision for interest from the date of acquisition to the date of payment. It would not be just that the Commonwealth Bank or any other body should at one and the same time enjoy the benefits flowing from the acquisition of the shares, for instance, of profits earned in the business and those flowing from unpaid compensation moneys. And yet it is plain, I think, in an acquisition under the Banking Act 1947 that some considerable time must elapse in this case between the acquisition of the shares and the assessment of compensation. It is clear, I think, that the acquisition power in the Constitution enables the Parliament to make provisions for interest. That such a provision is just there can be no doubt. But what is provided is that the bank shall pay fair and reasonable compensation in respect of the acquisition of shares by the Commonwealth Bank. The compensation is given in respect of the acquisition of the shares. Interest cannot be allowed as compensation. There is nothing in the Act to attach an allowance of interest to it (Swift & Co v Board of Trade [[424]] ; Newport Borough Council v Monmouth-shire Borough Council [[425]] , at pp. 561-563; cf. Marine Board of Launceston v Minister of State for the Navy [[426]] ).
The equitable principle stated in International Railway Co v Niagara Parks Commission [[427]] has no bearing upon the present case, for specific performance would be an inappropriate remedy in the circumstances of the case (cf. Marine Board of Launceston v Minister of State for the Navy [[428]] ).
This question has been considered in America and "just compensation" has there "a constitutional connotation." It entitles the property owner to receive interest from the date of the taking to the date of payment as part of his just compensation. However, as Lord Sumner remarked in Swift's Case [[429]] the law of other countries has no bearing on the case. Ordinarily, even in the United States, provision for payment of interest must be "affirmative, clear cut and unambiguous." It is not enough that the terms might be construed to include interest United States v Thayer-West Point Hotel Co [[430]] ). "Just terms" in the present case require that a right to interest should be given and not some merely discretionary authority to award interest.
I should add that the Court of Claims established under the Banking Act 1947 is given jurisdiction to hear and determine claims for compensation arising under the Act. It has no jurisdiction other than that conferred upon it by the Act; it has no inherent or equitable jurisdiction; it has no jurisdiction to award interest.
Consequently, "just terms" have not been provided by the Banking Act 1947 for the acquisition of shares in the Australian banks and the provisions for their acquisition are therefore invalid.
It was also said that "just terms" had not been provided because no provision was made for shareholders' costs in asserting their claims for compensation before the Court of Claims. But that is not a matter affecting justice as a term of acquisition and is no breach of the acquisition power.
And here it is convenient to dispose of an argument presented by the States that the Act does not provide "just terms" for the acquisition of shares or the businesses in Australia of the trading banks. It was said that the banks are possessed of assets of the value of many millions of pounds which the Commonwealth acquires but must provide the full pecuniary value thereof as compensation for the owners. And that the Commonwealth can only discharge that obligation by means of loans, the issue of Treasury Bonds or of paper money by the Commonwealth Bank or out of the assets acquired. But this must involve further inflation of a depreciating currency and a ruinous fall in the value of money. These economic considerations are not. I think, matters that concern the Court or which it can consider. The Court cannot investigate the value of the lawful currency of Australia. The Commonwealth Bank, as any other body, may discharge its obligations in lawful currency. If it does so that is a good discharge of its obligations. Doubtless, a depreciated or depreciating currency entails great hardships but the Court cannot alter, amend or mitigate the law relating to the currency. The argument is untenable.
Management of Private Banks.
The provisions for the management of the Australian banks and their relation to the provision of s. 13 for the acquisition of shares in those banks next fall for consideration.
Upon the notice given under s. 13 and the vesting of shares pursuant to the section, the directors of the Australian banks affected by the notice cease to hold office; new directors may be appointed by the Governor of the Commonwealth Bank, with the approval of the Treasurer, in their place notwithstanding any lack of qualification and the directors so appointed have full power to manage, direct and control the business and affairs of the Australian banks of which they are directors and in particular have power to declare dividends, dispose of the business in Australia of that bank to the Commonwealth Bank and to dispose of all or any of the other business of that Australian bank. The scheme is a connected whole which cannot, notwithstanding s. 6 of the Act, be severed. The presumption of severability established by that section is overcome by the evident inseparability of the provisions themselves. The invalidity of s. 13 relating to the acquisition of shares brings down the provisions relating to the management of private banks but the invalidity of the provisions for the management of private banks would likewise bring down the provisions relating to the acquisition of shares.
Ordinarily those holding shares may, through and by means of their shareholdings, remove directors and appoint others in their place. But that flows from their rights and voting power incident to the ownership of the shares and the regulations of the particular company. Here the directors are removed and others appointed in their place compulsorily without any exercise of shareholding rights. But, as I said before, the constitutional powers with respect to the acquisition of property, and banking and the incidental power together or separately do not authorize the Parliament of the Commonwealth to ignore the internal structure and organization of the trading banks and shape that structure as it pleases.
Shares may be acquired by agreement or compulsorily and if so the rights attaching to those shares may be exercised in accordance with the regulations of the bank. It is another matter, however, when those rights are not exercised but the Parliament removes directors, appoints new directors in their places and gives them full control of the business. In my opinion, that is not a law with respect to banking but a law with respect to the internal structure and organization of corporations or banks, which is a matter for regulation by the incorporating authority.
But if these provisions can be supported under the constitutional powers already mentioned, then they raise in another form the question whether "just terms" have been provided for the acquisition of property of the Australian banks. The substance of the matter is, as already appears, that the directors of Australian banks are removed from office and control is given to directors appointed by the Governor of the Commonwealth Bank with the approval of the Treasurer with power to dispose of the business in Australia of any Australian bank to the Commonwealth Bank. Further the directors appointed pursuant to the Act are also authorized "to dispose of all or any of the other business of that Australian" bank.
In my opinion, these provisions constitute an acquisition or attempted acquisition of the property of Australian banks. By this means, Australian banks and their shareholders are deprived of any bargaining power through their own directorate and the Commonwealth Bank may acquire the business in Australia of any Australian bank upon terms agreed between the directors appointed under the Act and the Commonwealth Bank. And "all or any of the other business of that Australian" bank may be disposed of by the directors appointed under the Act at amounts or values fixed by themselves. But, in my opinion, the Australian banks and their shareholders are entitled to a fair ascertainment of the value of their property and not an arbitrary fixation by the authority disposing of or acquiring that property.
In my opinion, the provisions of Part IV., Division 3, Management of Private Banks are invalid because "just terms" of acquisition have not been provided in accordance with the constitutional requirement.
Taking over of Businesses.
The provisions for taking over the business of the Australian, English and foreign banks in Part IV., Division 4 fall here for consideration.
Postponing for the moment any observations upon the provisions of s. 22, especially sub-s. (8), and s. 23, I come to s. 24 which provides for the taking over in Australia of the business of banks just mentioned.
Standing alone, I should be prepared to say, as already indicated, that the acquisition and banking powers and the incidental power conferred upon the Parliament by the Constitution authorize it to legislate for the acquisition and taking over as a going concern the businesses in Australia of banking companies and of all or any assets and liabilities in connection with such businesses. But I am unable to agree that these powers enable the Parliament to legislate so as to effect a novation of the obligations and contracts of the banking companies with their creditors. Legislation that the Commonwealth Bank shall pay, satisfy and discharge all the liabilities of the banking companies, indemnify and keep them harmless in respect of such liabilities is one thing but legislation that the banking companies shall be discharged from those liabilities and that they shall become the liabilities of the Commonwealth Bank or of any other institution is another. Yet, that is precisely the effect of s. 24, sub-ss. (5) and (7).
The constitutional powers of the Parliament do not enable it to convert the creditors of the banking companies into creditors of the Commonwealth Bank or any other institution and create the relationship between them of creditor and debtor. And the provisions with respect to the liabilities of the banking companies cannot, I think, be severed from the rest of the section. And these constitutional powers also require that legislation for the acquisition of property shall provide "just terms." As in the case of provision for the acquisition of shares in Australian banks so in the case of taking over the business in Australia of the banks, already mentioned, no provision is made for the payment of interest from the date of acquisition of the business to the date of payment. A profit-earning business or concern is taken over and vested in the Commonwealth Bank. It is not just that the Commonwealth Bank or any other institution should at one and the same time enjoy the benefits flowing from possession of the property taken over and those flowing from possession of purchase or compensation money.
A strange provision is found in s. 23 of the Banking Act 1947. Where an agreement has been made by any private bank under s. 22 relief is given from tax upon incomes or profits but if no agreement has been made then the banking companies which have not agreed are not relieved from tax upon incomes or profits. It obviously was passed for the purpose of putting pressure upon the banking companies. It was not suggested, during the long argument of this case, that it involved any contravention of the constitutional provision requiring "just terms" in respect of the acquisition of property. Therefore, I pass it by.
"Just terms" have not been provided for the taking over of the businesses of the Australian, English and foreign banks. For these various reasons the provisions of s. 24 of the Banking Act 1947 fail and are invalid.
Here, I would add, in relation to s. 22 of the Act that I see no objection to an agreement between the Australian, English and foreign banks and the Commonwealth Bank for the acquisition of the business of any of those banks as a going concern but I do not think that sub-s. (8) (b) and (d) can novate the liabilities of the banks, without the agreement of creditors as sub-s. (8) (b) and (d) provide.
Compensation.
Another attack has been made upon the validity of the Banking Act 1947 connected with the Federal Court of Claims and the assessment of compensation.
The Constitution, s. 75, provides that in all matters in which the Commonwealth or a person suing or being sued on behalf of the Commonwealth is a party the High Court shall have original jurisdiction. The jurisdiction so conferred upon the High Court cannot be taken away or withdrawn by the Parliament. It is a constitutional provision in the same position as the provision contained in s. 75 (v ) in relation to mandamus, prohibition and injunction (See R. v Commonwealth Court of Conciliation and Arbitration; Ex parte Brisbane Tramways Co Ltd [[431]] ).
The compensation under the Banking Act 1947 is payable by the Commonwealth Bank (See ss. 15 and 25. Part VI., Divisions 1 and 2). And it is argued that the Commonwealth Bank is but an agency or instrumentality of the Commonwealth and consequently that the High Court has original jurisdiction in any claim for compensation against the Bank because that would be a matter in which the Commonwealth was a party or the Bank was being sued as a party on behalf of the Commonwealth. Consequently, it is said that the Banking Act 1947 is invalid in attempting to withdraw that jurisdiction and providing that claims for compensation shall be determined and ascertained by the Federal Court of Claims and in no other manner.
In 1925 in an unreported case the question was whether the War Service Homes Commissioner, a body corporate established under the War Service Homes Act, was a party suing on behalf of the Commonwealth. I held that he was, because he was but an agency or instrumentality of the Commonwealth (War Service Homes Commissioner v Kirkpatrick [[432]] ). The fact that the Commissioner was a body corporate did not prevent him being an agent or instrumentality of the Commonwealth (Repatriation Commission v Kirkland [[433]] , at p. 15). And the fact that the Commonwealth was not a party on record did not exclude the original jurisdiction conferred upon this Court by s. 75 (iii.) in matters in which a person suing or being sued on behalf of the Commonwealth was a party. I adhere to the view I took in Kirkpatrick's Case [[434]] .
Considerable light is thrown, as Higgins J. said in R. v Murray; Ex parte The Commonwealth [[435]] , at p. 467 upon s. 75 (iii.) by the Constitution of the United States and decisions given in relation to its provisions. Under that Constitution judicial power extends, inter alia, to "controversies to which the United States shall be a party." The United States may not be sued in the courts of that country without its consent. That position is met in Australia by the provisions of the Judiciary Act 1903-1947 (Baume v The Commonwealth [[436]] ); Pitcher v Federal Capital Commission [[437]] ). But in cases in which the United States can be sued "the question whether the United States is in legal effect a party to the controversy is not always determined by the fact that it is not named as a party on record, but by the effect of the judgment or decree which can be rendered" (See Constitution of the United States (Annotated) published pursuant to resolutions of the Senate and House of Representatives, p. 478).
It was, no doubt, because of certain American decisions, said Higgins J., that in s. 75 (iii.) of the Australian Constitution the words were added, "or a person suing or being sued on behalf of the Commonwealth" (R. v Murray; Ex parte The Commonwealth [[438]] ).
And, in my opinion, if the Commonwealth Bank be an agency or instrumentality of the Commonwealth in relation to its functions and in particular in relation to the acquisitions the subject of the legislative provisions in the Banking Act 1947, then the original jurisdiction of this Court in respect of claims for compensation is established and cannot be taken away as the Banking Act 1947 enacts. That it is such an agency or instrumentality is manifest, I think, from the Commonwealth Bank Act 1945 (No. 13 of 1945), the Banking Act 1945 (No. 14 of 1945) and the Banking Act 1947.
In 1911 "a Commonwealth Bank, to be called the Commonwealth Bank of Australia," was established without corporators (Act No. 18 of 1911). Its existence is continued by the Commonwealth Bank Act 1945, s. 7. It is managed by a Governor appointed by the Commonwealth government and its monetary and banking policy is subject to political and governmental direction.
The capital of the bank was twenty million pounds provided in part out of moneys provided by the Commonwealth (See Act No. 15 of 1924, s. 5). But its capital is now governed by the Commonwealth Bank Act 1945. That of the General Banking Division is the aggregate of sums provided from the capital and reserve fund of the Commonwealth Bank and other sums transferred from the General Banking Reserve fund and from profits transferred from the General Banking Division to capital account. One half of those net profits is payable to the National Debt Sinking Fund. The property, income and operation of the Bank are not liable and shall be deemed never to have been liable to income tax or land tax under any law of the Commonwealth or to taxation under any law of a State to which the Commonwealth is not subject (Commonwealth Bank Act 1945, s. 163). Many other functions are also exercised by the Commonwealth Bank under that Act with respect to rural credits, mortgages and industrial finance.
But I shall not go into all the details of the powers and functions of the Bank which may be found at large in the Acts, already mentioned, for what I have said is enough, I think, to establish that the Commonwealth Bank is an agency or instrumentality of the Commonwealth.
The provision in the Banking Act 1947 giving the Federal Court of Claims exclusive jurisdiction in respect of claims for compensation cannot, therefore, operate to oust the jurisdiction of the High Court under s. 75 (iii.) of the Constitution. The consequence is that the whole of the provisions of the Act for the assessment of compensation in respect of the acquisition of shares and assets are invalid for the presumption of severability is overcome by the nature of the provision itself.
Compensation is to be assessed by the Federal Court of Claims and not in any other manner. The Court cannot rewrite that provision and give it an effect entirely different, namely, that compensation may be assessed by the High Court. And the invalidity of the provision for the assessment of compensation necessarily, in my opinion, brings down in its train the provisions for the acquisition of shares in Australian banks and the taking over of the business of the banking corporations mentioned in the Act for there is then no provision under which the compensation provided for in ss. 15 and 25 can be assessed. The Act is explicit that the compensation shall be assessed by the Federal Court of Claims and in no other manner.
Prohibition of the Carrying on of Banking Business.
The provisions of Part VII. of the Banking Act 1947 also require consideration.
Those provisions prohibit the carrying on of banking business in Australia by any of the Australian, English and foreign banks mentioned in the Schedule.
The question is whether those provisions contravene the constitutional requirement of s. 92 that trade, commerce and intercourse among the States shall be absolutely free.
It appears to me that the provisions are so connected and linked up with the provisions for the acquisition of shares and businesses of private banks that they necessarily fall with those provisions. The presumption of severability raised by s. 6 of the Act is overcome, to my mind, by considerations and consequences that make evident their inseparability. They are in their nature ancillary to the acquisition of the shares and businesses of the banks dealt with in earlier sections of the Act. And putting into operation the provisions of Part VII. of the Act would reduce to chaos the trade and commerce of Australia unless the businesses of the banks were compulsorily acquired or the banks under pressure agreed to make them over to the Commonwealth.
A court is not required to attribute such an intention to Parliament if another construction is open.
Let it be assumed, however, that the provisions of Part VII. are severable from the other provisions of the Act. Then the Australian, English and foreign banks are prohibited from carrying on banking business in Australia except as required in Part VII. and those banks are required to carry on until the Treasurer gives notice requiring them to cease. The notice may be given to all or any one or more of the banks. Already, I have expressed the opinion that the business of banking as usually conducted is part of the trade and commerce of Australia and when conducted across State lines forms part of trade, commerce and intercourse among the States. The Banking Act 1947 prohibits all such business on the part of the banks, domestic, inter-State and foreign. And it is not possible to divide the business of banking into compartments; it is one whole and nation-wide.
Yet the Banking Act 1947 prohibits the whole of that business irrespective of "such matters as defence ... prevention of famine, disease and the like" reserved for consideration in James v Cowan [[439]] . "The object of s. 92, is," as I said in the case of Australian National Airways Ltd v The Commonwealth [[440]] , "to maintain freedom of inter-State competition-the open and not the closed door-absolute freedom of inter-State trade and commerce."
In my opinion, the Banking Act of 1947 closes that door and excludes the banks from the business of inter-State banking in Australia. That, I think, is inconsistent with the provisions of s. 92 of the Constitution, and with the reasons of their Lordships of the Judicial Committee in James v Cowan [[441]] ; James v The Commonwealth [[442]] and of this Court in Peanut Board v Rockhampton Harbour Board [[443]] and Australian National Airways Ltd v The Commonwealth [[444]] .
Incidentally, the provision of Part VII. of the Banking Act 1947 standing alone and severed from the other provisions of the Act would result in the banks and their shareholders being deprived of their property without any compensation whatever. That also tends to support the view I have that Part VII. cannot be severed from the provisions of the Act relating to the acquisition of shares and the businesses of the banking companies.
Part VII. of the Banking Act 1947 is invalid and, in my opinion, brings down in its train the connected or linked provisions relating to the acquisition of shares and the businesses of the banking companies.
Protection of Staff.
The invalidity of the various provisions of the Banking Act of 1947, already mentioned, render the provisions of Part VIII. of the Banking Act 1947 inoperative and it is unnecessary, therefore, to further consider them.
General.
The provisions of Part IX., General, likewise become inoperative but ss. 59-62 necessarily fail with the provisions of the Act which are invalid.
The States.
All that remains for consideration is the contention of the States that the Banking Act of 1947 curtails in a substantial manner the exercise by them of their constitutional powers and functions and also contravenes the provisions of the Financial Agreement scheduled to the Financial Agreement Act 1944 (No. 46 of 1944) which obtain constitutional force under an amendment to the Constitution now appearing in s. 105A of that instrument.
In my opinion, the contentions are untenable.
If the Parliament of the Commonwealth has power to enact the Banking Act of 1947 no constitutional power or function of a State is curtailed or impeded. The States can, through their own banks, provide their own financial facilities or resort to the general banking system otherwise established. The Melbourne Corporation Case [[445]] is distinguishable because there the States were subjected to a particular direction.
The Financial Agreement Act contemplates the borrowings by the States from various institutions, including banks, and gives some flexibility in the working of that Agreement. But that it imposes any constitutional restriction upon the Commonwealth to maintain financial institutions as they existed at the time of the agreement and so to keep them that the States should not be hindered or inconvenienced in their arrangements with financial institutions is a hopeless construction, I think, of the Agreement and hopeless also, I think, as a business arrangement.
Summarizing my conclusions the following provisions of the Banking Act 1947 are invalid:
- Part IV., Division 2, except in so far as it provides for the acquisition of shares by agreement.
- Part IV., Division 3, the management of banks, is wholly invalid.
- Part IV., Division 4, taking over of businesses of banks, is invalid except so far as it provides for the acquisition of such businesses by agreement.
- Part VI., assessment of compensation is wholly invalid.
- Part VII., is wholly invalid.
- Part VIII., protection of rights of persons employed by private banks, is inoperative.
- Part IX., is inoperative except in so far as the provisions thereof can be applied to the acquisition of shares or businesses by agreement and in any case ss. 59, 60 and 62 are invalid.
Declarations should be made accordingly and ancillary relief granted by way of injunction.
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