HIGH COURT OF AUSTRALIA

                                                         Jolley

                                                           Vs.

                                                        Mainka

                                       (Rich, Starke, Dixon and Evatt JJ.)

                                                   31 August 1933

Rich J.

I am content to express my concurrence in the reasons so fully expressed by my brother Dixon and
in the conclusion arrived at by him.

Starke J.

The respondent, Karolina Charlotte Mainka, was the owner of two freehold blocks of land, Livuan
and Londip Plantations, which latter included what was known as Londip Reserve, in the Kokopo
District in the Territory of New Guinea. In November 1926, an agreement for the sale of these lands
was made between the respondent and the appellant, Frederick Reidy Jolley. The purchase price was
£38,000, but of this amount the sum of £26,000 was to be secured by mortgages over the property
sold, in manner following: a first mortgage and a second mortgage over Livuan for £6,000 and
£9,600 at 6½ per cent per annum and 8 per cent per annum respectively, and a first mortgage and a
second mortgage for £4,000 and £6,400 over Londip Plantation and Reserve at 6½ per cent per
annum and 8 per cent per annum respectively. Interest was payable half-yearly. An aggregate sum of
£2,000 secured by the first mortgages was payable upon demand by the respondent at any time after
twelve calendar months from the date of the agreement. Clause 9 of the agreement was as follows:
"All payments to be made to the vendor" (the respondent) "by the purchaser" (the appellant) "under
this agreement or under any mortgage executed in pursuance thereof shall be made in gold or in
currency equivalent thereto at the market or exchange rate current at the time every such payment is
actually made."

Mortgages were executed in pursuance of this agreement, and it was expressly stipulated in each
mortgage, as must now be assumed, "that all repayments of principal or payments of interest due
and payable hereunder" (the mortgages), "shall be made in gold or in currency equivalent thereto at
the market or exchange rate current at the time when every such payment is actually made." The
aggregate sum of £2,000 secured by the first mortgages appears to have been paid, for on 30th June
1931 a sum of £900 fell due, being six months' interest payable under the mortgages on a sum of
£24,000. Before it fell due, however, the appellant paid to the credit of the respondent at the Bank of
New South Wales in Rabaul in the Territory of New Guinea nine hundred one pound Australian
notes, in full payment of the interest falling due under the mortgages. At all times material, the
equivalent of £900 in gold in Rabaul was eleven hundred and seventy-two Australian pound notes,
the rate of exchange being £30 5s. per £100. The appellant claims that he satisfied the interest
falling due under the mortgages by payment of nine hundred Australian pound notes, whereas the
respondent insists that a contract providing specifically for payment in gold or in currency
equivalent thereto is not discharged by the payment of such notes.

The question depends upon the obligation of the contract, and the law governing the currency of the
Territory. The obligation of the contract is governed by the law in force in the Territory of New
Guinea: that is, the principles of the common law and equity in force in England in 1921 so far as
the same are applicable (Laws of the Territory of New Guinea, vol. viii., p. 360; Laws Repeal and
Adopting Ordinance 1921-1927). On its proper construction the contract does not create an
obligation to deliver bullion, or a certain weight of standard gold to be ascertained by a count of
coin certified to contain a definite proportion of that weight, as suggested by the case of Bronson v.
Rodes[1], but an obligation to pay a debt with interest thereon in gold or in a currency equivalent
thereto (In re Société Intercommunale Belge d'Electricité; Feist v. La Société Intercommunale Belge
d'Electricité (The Gold Bond Case)[2]; Coinage Act 1909, sec. 7). It is quite immaterial whether the
debt is for moneys due under the contract of sale or for moneys lent and secured by the mortgages
and interest thereon. But, if the obligation between the parties is to pay a debt and interest thereon,
then the stipulation that all payments of principal or interest shall be made in gold or in currency
equivalent thereto necessarily determines the mode or method of payment. The effect of such a
promise depends upon the laws governing currency in the Territory of New Guinea.

Under the Treaty of Peace (art. 119), signed at Versailles on 28th June 1919, Germany renounced in
favour of the Allied and associated Powers her rights over her overseas possessions, including
German New Guinea. Under the Covenant of the League of Nations (art. 22, Part I.) the Allied and
associated Powers agreed that a mandate should be conferred upon His Britannic Majesty, to be
exercised on his behalf by the Government of the Commonwealth of Australia, to administer New
Guinea, and His Majesty, for and on behalf of the Government of the Commonwealth, agreed to
accept the mandate, and undertook to exercise it on behalf of the League of Nations. Accordingly,
on 17th December 1920, a mandate was conferred on His Majesty for and on behalf of the
Commonwealth. The territory over which the mandate was conferred is described as the former
German Colony of New Guinea, and the Commonwealth was granted full power of administration
and legislation over the territory subject to the mandate, as an integral portion of the
Commonwealth of Australia. The mandate is printed at large in Laws of the Territory of New
Guinea, vol. i., Part I., p. 1. The Commonwealth, in anticipation of the mandate, passed an Act in
September 1920 providing for its acceptance and for the government of the territory by the
Commonwealth: It is the New Guinea Act 1920 (No. 25 of 1920). By sec. 5 of that Act, the
Governor-General was authorized to accept the mandate when issued, and, by sec. 4, the territories
and islands formerly constituting German New Guinea were declared to be a territory under the
authority of the Commonwealth by the name of the Territory of New Guinea. Until the Parliament
otherwise provided, the Governor-General was empowered to make ordinances having the force of
law in the Territory (sec. 14). And sec. 13 enacted: "Except as provided in this or any Act, the Acts
of the Parliament of the Commonwealth shall not be in force in the Territory unless expressed to
extend thereto, or unless applied to the Territory by ordinance made by the Governor-General under
this Act."

The constitutional validity of this Act has not been challenged in this appeal, and the decision of this
Court in Mainka v. Custodian of Expropriated Property[3] supports it. (See also Porter v. The King;
Ex parte Yee[4]). The constitutional power of the Commonwealth to accept the mandate must be
referred, I think, to the Treaty of Peace Act, 9 & 10 Geo. V. c. 33, and the powers conferred by the
Constitution, particularly those relating to the naval and military defence of the Commonwealth,
external affairs, and the incidental power (sec. 51, pl. (VI.), (XXIX.), and (XXXIX.)). (Cf.
Willoughby on The Constitutional Law of the United States, 2nd ed. (1929), vol. i., pp. 407-590).
The Constitution, sec. 122, provides: "The Parliament may make laws for the government of any
territory surrendered by any State to and accepted by the Commonwealth, or of any territory placed
by the Queen under the authority of and accepted by the Commonwealth, or otherwise acquired by
the Commonwealth, and may allow the representation of such territory in either House of the
Parliament to the extent and on the terms which it thinks fit."

A "territory placed by the Queen under the authority of and accepted by the Commonwealth" is in
the nature of a mandated territory, and is dealt with on the footing that it is a territory acquired by
the Commonwealth. Consequently I see no difficulty in construing the words "otherwise acquired
by the Commonwealth" as sufficiently large to include a territory placed under the authority of the
Commonwealth by mandate from the League of Nations. The Commonwealth thus acquires plenary
control of the territory, subject to and during the subsistence of the mandate. But the Permanent
Mandate Commissions refuse to recognize the sovereignty of the mandatory in this control (R. v.
Christian[5]; Berriedale Keith, An Introduction to British Constitutional Law (1931), pp. 204, 205,
and The Constitutional Law of the British Dominions (1933), pp. 372, 373). The territory over
which the mandate is conferred is doubtless a new form of acquisition, but that it is an acquisition,
something gained or obtained by the Commonwealth, does not admit of doubt. It is thus a territory
"otherwise acquired by the Commonwealth" within the meaning of sec. 122 of the Constitution.

Turning now to the legislation in force in New Guinea, it is interesting to note an ordinance (1922,
No. 23), made under the New Guinea Act, which provides that all debts or moneys, due under a
contract or otherwise, expressed in marks or fractions thereof, should be regarded as expressed in
the same number of shillings or fractions thereof, and that payment of such debts might be made in
notes of the Commonwealth or in coins which are legal tender in the Commonwealth. But that
provision has no application to this case.

The consolidated Laws Repeal and Adopting Ordinance 1921-1927, sec. 11, applied to the Territory,
so far as they are applicable, the Coinage Act 1909 of the Commonwealth and the Commonwealth
Bank Act 1920 of the Commonwealth, Div. 1 and Div. 5 of Part VIA. The Coinage Act 1909
established the standard weight and standard fineness of the gold, silver and bronze coins of the
denomination mentioned in the Schedule to the Act, and provided (sec. 5) that a tender of money, if
made in coins which are British or Australian coins of current weight, should be legal tender: in
case of gold coins for any amount, in case of silver coins for payment of an amount not exceeding
forty shillings, and in case of bronze coins for payment of an amount not exceeding one shilling.
These provisions have no bearing upon this case. It is well however to note sec. 7 of the Act: "Every
contract ... and security for money, and every transaction, dealing, matter, and thing whatever
relating to money, or involving the payment of or the liability to pay any money, which is made,
executed, or entered into, done or had, shall be made, executed, entered into, done and had
according to the coins which are current and are a legal tender in pursuance of this Act, and not
otherwise, unless the same be made, executed, entered into, done or had according to the currency
of some British possession or some foreign State."

The Commonwealth Bank Act 1920 (1920, No. 43) provided (Div. 4 of Part VIA.) for the issue of
Australian notes in various denominations, and enacted that they should be a legal tender throughout
the Commonwealth and throughout all territories under the control of the Commonwealth, except in
respect of payments due by the Note Issue Department, and should bear the promise of the Treasurer
to redeem the notes in gold coin (or, in case of a single five-shillings Australian note, in silver coin)
on demand at the head office of the Commonwealth Bank. But this Division, it will be observed, is
not the part of the Commonwealth Bank Act 1920 applied to the Territory of New Guinea by the
consolidated Laws Repeal and Adopting Ordinance 1921-1927 already mentioned. And it is
contended that the provision of the Commonwealth Bank Act 1920 making Australian notes legal
tender throughout all territories under the control of the Commonwealth is not in force in the
Territory of New Guinea, because it is not a territory within the meaning of that Act, and also
because the New Guinea Act 1920 provides that the Acts of the Commonwealth shall not be in force
in that Territory unless expressed to extend thereto. New Guinea, although accepted under mandate
from the League of Nations, is nevertheless in my opinion a territory "otherwise acquired by the
Commonwealth" within the meaning of sec. 122 of the Constitution, and necessarily therefore a
territory "under the control of the Commonwealth" within the words of the Commonwealth Bank
Act 1920. Indeed, the New Guinea Act 1920 expressly declares it a territory under the authority of
the Commonwealth. It is true that New Guinea is not specifically named as a territory in the section
of the Commonwealth Bank Act providing that Australian notes shall be a legal tender. But the New
Guinea Act 1920 does not require that New Guinea shall be thus specifically named; and the
Commonwealth Bank Act 1920 has used a phrase--"all territories under the control of the
Commonwealth"--which renders enumeration of territories unnecessary and yet clearly includes
them all. In my opinion that is an ample expression of intention that the provision of the
Commonwealth Bank Act shall extend to New Guinea. As to transactions after the passing of the
Acts Interpretation Act 1930 (No. 23) the matter is placed beyond doubt. Further, it appears to me of
no importance whatever in the construction of the Commonwealth Bank Act 1920 that the
Australian Notes Act 1910, sec. 6, now repealed, contained a somewhat similar section to sec. 60H
of the Commonwealth Bank Act, or that the New Guinea Act of 1920 was passed before, but came
into operation after, that Act. The Commonwealth Bank Act 1920 operates in respect of all territories
which were at the time of its commencement, or thereafter came, under the control of the
Commonwealth; and so, I should think, would the provision in the Australian Notes Act if it had
remained in force.

It is desirable now to mention some amendments of the Commonwealth Bank Act 1920 before
considering the effect of the legislation upon the contract in the present case. In 1929 an Act was
passed (1929, No. 31) enabling the Governor-General to prohibit by proclamation the export of
gold, and also authorizing the Bank Board, when the Treasurer was satisfied that it was expedient so
to do, to require any person to exchange with the bank for its equivalent in Australian notes of the
nominal value thereof any gold coin or bullion held by such person. No proclamation prohibiting
the export of gold has, so far as I know, been issued, but the other authority contained in the Act
has, I understand, been invoked. In 1931 an Act (1931, No. 6) dealt with the gold reserve against the
amount of Australian notes issue. In 1932, Act No. 16 of 1932 also dealt with the gold reserve and
repealed the obligation to redeem Australian notes in gold coin at the Commonwealth Bank.
Australia is therefore, and has been for some time, "off the gold standard." But the provision of the
Act of 1920 remains, that Australian notes are a legal tender throughout the Commonwealth, and
throughout all territories under the control of the Commonwealth. What is the effect of this
provision on the contract between the parties? On the part of the respondent it is insisted that the
Australian law provides two descriptions of currency, metallic money (gold, silver and bronze) and
paper money (Australian notes); both are authorized by law and both made legal tender in
payments: consequently contracts whose obligations are payable in either are equally lawful and, if
lawful, must be equally capable of enforcement (Bronson v. Rodes[6]; Trebilcock v. Wilson[7];
Woodruff v. Mississippi[8]). But, if the legislation on its true construction authorizes payment of
obligations by another medium than that expressed in the particular contract, if it provides that debts
may be discharged by payment either in metallic money or in paper money, then the argument for
the respondent fails, for the parties cannot annul such a provision by agreement among themselves.
The Act provides that Australian notes shall be a legal tender throughout the Commonwealth and its
territories. The expression, legal tender, in itself connotes an offer to perform an obligation in
manner allowed by law. And when the Legislature prescribes, in a law relating to currency, that
Australian notes shall be a legal tender, then it necessarily prescribes that any obligation to pay
money may be discharged by tender of such notes. The provisions of sec. 7 of the Coinage Act 1909
strongly support this view; it also has the support of authority (Gold Bond Case[9]; Com. Dig., vol.
v., p. 146, B8; Bac. Abr., vol. vii., p. 525; Beynon Harris, Law of Tender (1908), p. 62).
Consequently the payment by the appellant of £900 in Australian notes discharged his obligations
under the contracts above mentioned.

The appeal should be allowed and the cause remitted to the Central Court of the Territory of New
Guinea.

Dixon J.

This is an appeal from the Central Court of the Territory of New Guinea brought as in pursuance of
sec. 24 of the Judiciary Ordinance 1921-1931 of that territory. The appeal is from a judgment of his
Honor Chief Judge Wanliss in favour of the plaintiff in an action brought by a mortgagee against a
mortgagor to recover the balance of moneys payable under four mortgages for interest in respect of
a half-year. The amount of interest payments calculated at the rate of interest reserved by the
mortgages was £900.

Australian notes are current as money in the Mandated Territory of New Guinea, and it may be
taken that they are the form of currency in which sterling payments by or to banks would ordinarily
be made.

To discharge his liability in respect of the sum of £900 for interest, the mortgagor placed to the
credit of the mortgagee's current account at her bank that sum expressed in Australian notes.
Thereupon the mortgagee, the respondent, claimed that under a provision, which either was or
should have been incorporated in the mortgages, the mortgagor, the appellant, was obliged to pay
£900 in gold, or, if he was unable or unwilling to do so, to pay in Australian notes or some other
currency an amount equivalent in value to £900 in gold, that is to say, the amount in notes which
would be given in the Mandated Territory by banks and others for nine hundred gold sovereigns. In
fact, a premium of 25 per cent. was obtainable on sovereigns. The respondent accordingly accepted
the credit to her account as part payment only and sued for the residue. The mortgages had been
given to effectuate an agreement of sale containing the provision upon which the respondent relied.
Two of the mortgages failed to express this provision, but the learned Chief Judge held upon the
facts that the failure to do so arose from mutual mistake and he rectified the instruments so as to
include it. The appellant does not attack the order for rectification, but he contends that, in spite of
the provision, the payment of £900 in Australian notes was a discharge of his liability under the
mortgages in respect of the half year's interest.

The four mortgages are not identical in form, but they each acknowledge a loan of a money sum,
expressed in pounds, and covenant to repay the principal sum and to pay interest thereon at a rate
per centum per annum. The critical provision in two mortgages takes the form of a proviso. In the
two mortgages that were rectified it is inserted as a separate or independent clause. But in all the
mortgages the material words of the provision are the same. In the form of a proviso it is as follows:
"Provided also and it is hereby expressly agreed that all repayments of principal or payments of
interest due and payable hereunder shall be made in gold or in currency equivalent thereto at the
market or exchange rate current at the time when every such payment is actually made." The learned
Chief Judge took the view that gold sovereigns and Australian notes were both legal tender
according to their face denomination and that there was nothing to render this stipulation
ineffectual.

Upon the hearing of the appeal two alternative arguments were advanced on behalf of the
respondent. The first is that Australian notes have never been made a legal tender in the Mandated
Territory. The second is that, even if they be a legal tender, the provision in the mortgage is effectual
according to its tenor.

The New Guinea Act 1920 was assented to on 30th September 1920. It was enacted in anticipation
of the issue of the mandate, as appears from its preamble, and, by sec. 2, its commencement was to
be on a date fixed by proclamation. The mandate of the Council of the League of Nations to "His
Britannic Majesty for and on behalf of the Government of the Commonwealth of Australia" is dated
17th December 1920. The date fixed by proclamation for the commencement of the New Guinea
Act 1920 was 9th May 1921. When the New Guinea Act 1920 was passed, the Australian Notes Act
1910-1914 was in force, by sec. 6 (1) (b) of which it was provided that Australian notes shall be a
legal tender throughout the Commonwealth and throughout all territories under the control of the
Commonwealth. The Australian Notes Act 1910-1914 was repealed by the Commonwealth Bank Act
1920, which was assented to on 30th November 1920 and commenced on 14th December 1920
pursuant to a proclamation. But sec. 60H (1) (b) of this statute re-enacted the provision contained in
sec. 6 (1) (b) of the repealed statute, in the same terms, with the addition of an exception not
presently material and now repealed.

The question is whether the general words "throughout all territories under the control of the
Commonwealth," either alone or as a result of a definition enacted by the Acts Interpretation Act,
suffice to make Australian notes a legal tender in New Guinea notwithstanding that New Guinea did
not come under the control of the Commonwealth as a mandatory until after the commencement of
the Commonwealth Bank Act 1920. It appears to have been considered that sec. 122 of the
Constitution is the source of power for the enactment of the New Guinea Act 1920, the King's
acceptance of the mandate on behalf of the Commonwealth presumably being treated as placing the
Territory under the authority of the Commonwealth within the meaning of that section. (Cf. Porter
v. The King; Ex parte Yee[10], explaining Mainka's Case[11]; Keith on the Sovereignty of the British
Dominions (1929) pp. 363, 364; Tagaloa v. Inspector of Police[12].) Thus the description "territory
under the control of the Commonwealth" would not be inapplicable. But sec. 13 of the New Guinea
Act 1920 enacts that, except as provided in that Act or any other Act, the Acts of the Parliament of
the Commonwealth shall not be in force in the Territory unless expressed to extend thereto or unless
applied to the Territory by ordinance made by the Governor-General under that Act. Are the words
"expressed to extend thereto" satisfied by general words applying an enactment to territories by
description without differentiation, and not to New Guinea eo nomine? The question is not an easy
one. On the one hand, it may be said that the object of sec. 13 was to exclude the operation of
statutes of the Parliament, which, although expressed to extend throughout the territorial jurisdiction
of the Legislature and thus otherwise applicable to New Guinea, yet contained no expression of a
particular intention to legislate for the Mandated Territory. In this view the provision would be
explained not only by the fact that before New Guinea came into the possession of the
Commonwealth an entirely different legal system had been established in the country, but also by
the peculiar nature and origin, considered externally, of the Commonwealth's authority over the
Territory. But, on the other hand, the precise meaning of the words "expressed to extend thereto"
requires no more than some expression of an intention that the law shall have an application wide
enough to include New Guinea. It then may fairly be urged that the general words of sec. 60H (1)
(b) of the Commonwealth Bank Act 1920 should be interpreted in the light of the fact that it was
passed by the Legislature while or shortly after the New Guinea Act 1920 was under its
consideration, so that the Legislature must have been aware that the natural meaning of the
expression would extend the operation of the provision to New Guinea: although it must be
conceded that the argument loses some of its force when it appears that these general words are
simply transcribed from the prior legislation contained in the Australian Notes Act 1910-1914 which
the statute repealed. But, again, it is hard to believe that in 1920 to 1921, when government under
the New Guinea Act was commenced, sec. 60H was not understood to apply to the Territory. A full
power to make ordinances having the force of law within the Territory was created by sec. 14 of the
New Guinea Act 1920, and by the exercise of this power the Commonwealth Coinage Act 1909 was
adopted, with the result that British and Australian metallic currency became legal tender within the
Mandated Territory. But the provision of the Commonwealth Bank Act 1920, making Australian
notes a legal tender has not been adopted, although other parts of that statute have been made
applicable (See Laws Repeal and Adopting Ordinance 1921-1927, sec. 11, and First Schedule.) On
the whole, the considerations of most weight are in favour of the view that the words "expressed to
extend thereto" should receive no more than their literal meaning and that sec. 60H of the
Commonwealth Bank Act 1920 is made applicable to the mandated territory by force of its own
terms.

This interpretation of sec. 13 of the New Guinea Act 1920 is arrived at independently of the Acts
Interpretation Act 1930, by sec. 4 of which the following definition was inserted in sec. 17 of the
Acts Interpretation Act 1901-1918: "(p) Territory of the Commonwealth or Territory under the
authority of the Commonwealth includes any territory governed by the Commonwealth under a
mandate." The enactment of this definition would not operate retrospectively to extend the meaning,
and, therefore, the application, of sec. 60H, if previously it did not apply. It should be noticed,
perhaps, that neither of the expressions defined occurs literally in sec. 60H which speaks of
"territories under the control of the Commonwealth." But assuming the definition would cover such
an expression, it is not applicable to statutes passed before the Acts Interpretation Act 1930
commenced. The Acts Interpretation Act 1901 was the second of the Commonwealth statutes, and it
would have been absurd to include any express statement, such as is found in many provisions of
the British Interpretation Act 1889, that any section should apply to an Act whether passed before or
after that Act. When, without any such statement, sec. 4 of the Act of 1930 inserted the definition of
the expressions relating to territories in sec. 17 of the Act of 1901, the result was a simple provision
to the effect that in any Act either of those expressions includes a mandated territory. This provision
speaks and operates from 1930. If it applied to then existing statutes, it might introduce important
retrospective changes in the substantive laws of the Mandated Territory. Upon ordinary principles of
interpretation such words ought not to be construed as doing more than prescribing the meaning of
the terms if used in future Acts of Parliament. This view of the amendment is supported by the
express reference to prior statutes in sec. 15A, inserted by sec. 3 of the Act of 1930. But,
independently of the Acts Interpretation Act 1901-1932, sec. 60H of the Commonwealth Bank Act
1911-1932 extends to New Guinea.

Thus a money debt incurred in the Mandated Territory, which is there payable, may in point of law
be discharged by a payment in gold sovereigns, or in Australian notes of the same face
denomination. Although secs. 7B, 7C, and 7D of the Commonwealth Bank Act 1911-1932 do not
appear to be in force in the Mandated Territory, it is unlikely that in practice sovereigns are any
longer obtainable there. But, so far as the law is concerned, a sovereign and a one pound Australian
note are alike lawful money, either of which must be accepted by a creditor in satisfaction of a debt
of £1. The re-appearance of double or multiple forms of legal tender available as a lawful discharge
of debts up to any amount has revived difficulties with which English law has grown unfamiliar. But
when these difficulties were common, as they were in former times, it was well settled that, given a
debt, a tender in its discharge was good if made in any currency which at the time of tender was
lawful money. When currency was established under the prerogative, it was said that the
denomination or the value for which the coin is to pass current is in the breast of the King
(Blackstone's Commentaries, vol. i., p. 278: cf. Hale's Pleas of the Crown, vol. i., pp. 188-203).
Therefore, "if at the time of making the condition, a purer or more weighty money were current, and
before the day of payment coin of base alloy is established by proclamation, a tender of the sum in
that coin is good" (Fraser's note to Wade's Case[13]). In the Case of Mixed Money (1605) [reported
in Sir John Davies' Reports (English version of 1752, p. 48, reprinted in 2 State Trials 113) and
cited, Co. Litt., 207 a and b], an obligation given to pay in Dublin £100 sterling current and lawful
money of England was answered by a tender in certain mixed money, which had in the meantime
been coined and sent into Ireland to pay the Army and had been proclaimed to be the lawful and
current money of the Kingdom of Ireland. The tender was held good and sufficient by a resolution
of the Irish Judges upon the ground, among others, that, "although at the time of the contract and
obligation made in the present case, pure money of gold and silver was current within this
Kingdom, where the place of payment was assigned; yet the mixed money, being established in this
Kingdom before the day of payment, may well be tendered in discharge of the said obligation, and
the obligee is bound to accept it"[14].

But, if the obligation undertaken was to pay or deliver foreign money or coins in use as money, not
being lawful money of the Kingdom, no debt was created. An action for their recovery lay, but it
was necessary to bring it in the detinet and not in the debet and detinet; that is, it was in the nature
of detinue and not of debt proper. Further, it appears to have been considered that the obligation
could not be discharged except according to its tenor. (See Ward v. Kidswin (or Kedgwin)[15]).
There Jones J. illustrates the distinction by the case of foreign money being proclaimed to be lawful
money of England as had been done with French crowns and, in the reign of Philip and Mary, with
Spanish silver. Jones J. said[16]: "But if French money be current by proclamation then" the action
"lies clearly in the debet and detinet. And if a man is bound to pay 100 crowns French, he can well
tender as much in English coin: et sic e converso." (See further the cases in Dyer's Reports[17].)
The statement of Jones J. means that an obligation the tenor of which requires payment of a sum of
money in a particular form of legal tender constitutes a debt for which any other form of legal
tender is a good and sufficient discharge. This proposition remains as true under the legislation of
to-day as it was at common law in the Seventeenth Century. It was acted upon by the Court of
Appeal in March last in In re Société Intercommunale Belge d' Electricité: Feist v. La Société
Intercommunale Belge d' Electricité (so far reported only in the Times Law Reports[18] and referred
to in the Law Times[19]), where Romer L.J. explicitly denied that effect could be given in law to an
agreement to pay a sum of money in one only of the forms of legal tender to the exclusion of all
others. In the United States after the civil war the consequences of the doctrine were avoided, if its
existence or correctness were acknowledged, by the construction which was given to instruments
containing stipulations for payment in gold dollars to the exclusion of the depreciated greenbacks.
The interpretation adopted of such instruments was, briefly, that they called for the payment or
delivery of an amount of gold calculated by reference to, and made in, gold dollars of the number
specified in the stipulation. In other words, they amounted to contracts for the transfer of an amount
of coined bullion ascertained by tale and not by weight. (See Bronson v. Rodes[20]; Hepburn v.
Griswold[21]; Trebilcock v. Wilson[22]; Gregory v. Morris[23]; and Woodruff v. Mississippi[24].)
But with all respect to those who adopted this construction, an obligation requiring payment of a
money sum cannot be described as a contract for the acquisition of bullion, considered as a
commodity, merely because it specifies the form of money to be paid. It cannot, according to its
tenor, be fulfilled except by a payment, and by a payment of a sum certain made in lawful money. It
constitutes a debt and an essential quality of money that is legal tender is its sufficiency to discharge
a debt. Thus, in the case of Société Intercommunale Belge d' Electricité[25], where the promise was
to make sterling payments for principal and interest in gold coin of the United Kingdom of a weight
and fineness equal to the standard of weight or fineness existing at a specified date just before the
bond was given, Lawrence L.J. said[26] that the obligation was a debt, and not an obligation to hand
over a certain weight of gold differing only from a contract to deliver bullion in that the amount of
gold was to be determined by count and not by weight.

But a further question is raised by the provision contained in the mortgages given to the respondent
by the appellant in the present appeal. That provision does not stipulate absolutely for payment in
gold currency. It stipulates for the performance of alternative duties by the mortgagor, the appellant.
It calls upon him, either to pay in gold the sum which is specified, in the case of principal, and, in
the case of interest, which is ascertainable by calculation, or to pay in other currency another sum
based on the first sum and ascertained by reference to an external standard or event, viz., market or
exchange rate. But these alternatives are prescribed as the methods of discharging a main obligation
to pay money sums. The question arises whether, notwithstanding that the provision is expressed to
govern modes of payment, it should not be considered as a modification or qualification of the tenor
of the main covenants, so that no obligation is undertaken to repay the specified sum of principal
and none to pay the ascertainable sums for interest. The tenor of the obligation in the case of
principal and of the obligation in the case of interest is but to do one or other of two things, either to
pay an amount of gold sovereigns, or to pay some other amount ascertained by reference to the
market value of the currency tendered, which, perhaps, when applied to the existing state of the law
is equivalent to saying Australian notes. Upon this interpretation of the obligation, independently of
the form of currency tendered, there would be no ascertainable sum susceptible of payment, no debt.
In the case of the Société Intercommunale Belge d' Electricité[27] Lawrence L.J. addressed himself
to the question whether the bond in that case secured a principal sum of £100, or an amount to be
ascertained by adding to that nominal amount a further sum in sterling equivalent to any decrease in
the gold value of the same nominal amount as compared with the gold value of the same nominal
amount at the earlier date specified in the bond, and he concluded that the principal sum secured
was £100 sterling and that the words did not measure the amount of the liability but merely
indicated the mode of payment. This is something different from enquiring whether two alternative
sums are provided, differing according to the medium of discharge, and it does not follow that his
Lordship was of opinion that, in such a contract, payment of the lower of the two amounts in any
legal tender would not suffice. In any case, it is clear upon the construction of the provision itself
that the choice between the alternative modes of performance lies with the mortgagor, the appellant
(Reed v. Kilburn Co-operative Society[28]), and that the first alternative is the payment of gold
coins which at the time of payment are current as legal tender in respect of debts expressed in
sterling. It may be remarked that, although, no doubt, the parties anticipated, and with every
likelihood of correctness, that no gold coins would be legal tender in New Guinea except sovereigns
of the weight and fineness established under the then existing law, yet, strictly speaking, the contract
does not adopt this standard but simply prescribes whatever gold currency for the time being may be
legal tender for sterling debts. The second alternative must be understood as contemplating a
payment in some other form of currency which is lawful money or legal tender in New Guinea (see
sec. 7 of the Coinage Act 1909). It follows from these considerations that what the tenor of the
provision requires is payment in one form of currency of an amount which at a future date would
discharge a sterling debt of a determined or determinable amount, or else payment in another form
of currency of an amount equal to the commodity value of the first. The amount of that sterling debt
appears from what in form is an express covenant to pay sums of money. It may be conceded that
the instruments should each be construed as a whole and that the express covenant, divorced from
whatever qualification upon its effect is contained in the provision relating to currency, should not
be treated as conclusively establishing a debt in the sums determined by or under it. But, from its
very nature, this provision cannot operate except upon the hypothesis that a sum certain in sterling is
first ascertained as a debt which must be met in sterling currency. Only when such a debt becomes
payable could its intended operation commence. That intended operation is to defeat the legal
equality in the discharge of obligations which is given to all forms of legal tender of the same
denomination. It is, therefore, ineffectual to require a payment of more than £900 in respect of the
half-yearly interest under the mortgages.

For these reasons the appeal should be allowed with costs and so much of the order of the Central
Court should be discharged as directs that judgment be entered for the plaintiff for £225 and costs to
be taxed and enters such a judgment accordingly. In lieu thereof judgment upon the money claims in
the action should be entered for the defendant. The cause should be remitted to the Central Court to
enter the judgment in the appropriate form and to make such order as may appear to it to be just in
respect of the costs of the action. As the action included a claim for rectification which succeeded,
the learned Chief Judge who tried it is in a better position to dispose of the question of costs than is
this Court.

Evatt J.

This is an appeal from Chief Judge Wanliss of the Mandated Territory of New Guinea. The only
question on which the parties remain in dispute is whether, by delivery of nine hundred Australian
pound notes, the appellant duly discharged the obligation sought to be enforced in these
proceedings.

In her statement of claim, the respondent, who was plaintiff in the Court below, expressed the
appellant's obligation as one for interest due (1) under an agreement whereby the defendant agreed
to pay to the plaintiff the moneys including interest therein mentioned and (2) under a covenant
contained in a memorandum of mortgage to secure the payment of the sum of £9,600 with interest
at the rate of eight pounds per centum per annum and (3) under covenants of a similar form and
character.

It appears that the original agreement between the parties, made on November 26th, 1926, was for
the purchase of lands in the Mandated Territory of New Guinea, where the agreement was executed,
and both parties resided. The mortgages back to the vendor were made in pursuance of the original
agreement, and these mortgages also were executed within the Territory. At all material times the
Commonwealth of Australia alone administered the internal government of the Territory, and,
through various instrumentalities, exercised legislative, executive, and judicial power.

It would seem clear (1) that the relevant obligation which was assumed by the appellant, was to pay
900 "pounds" or "£" to the respondent, (2) that the obligation was intended to create and did create a
debt, and (3) that the unit of "money-of-account" in which the debt was expressed was the "pound"
or "£" unit known and recognized as such throughout the Commonwealth of Australia.

But the same agreement which created such obligation also provided that "all payments ... shall be
made in gold or in currency equivalent thereto at the market or exchange rate current" when the
payment was to be made.

Admittedly, as from May 9th, 1921, the Commonwealth Coinage Act 1909 had the force of law
within the Mandated Territory. This was by virtue of the Laws Repeal and Adopting Ordinance, No.
1 of 1921, now embodied in the Laws Repeal and Adopting Ordinance 1921-1927, both ordinances
being duly made by the Governor-General under sec. 14 of the New Guinea Act 1920. By sec. 7 of
the Coinage Act, thus introduced, every contract, payment, transaction or dealing relating to money
or involving the payment of or liability to pay money "shall be made ... according to the coins
which are current and are a legal tender in pursuance of this Act, and not otherwise, unless the same
be made ... according to the currency of some British possession or some foreign State."

I mention this preliminary aspect of the matter because it reinforces the inference that the "gold"
referred to in the stipulation as to payment means such British or Australian gold coins of standard
weight, as are, by sec. 5 (1) of the Coinage Act, made a good legal tender for the payment of money
up to any amount. The alternative view is that the stipulation only refers to "gold" as a commodity
and so contemplates a payment in bullion.

But the overriding intention of the parties was to create a precise money obligation and secure its
payment by the mortgagor. The use in the gold provision of the phrase "all payments to be made"
also tends to exclude the theory that it was intended to discharge the obligation, in the one event, by
the delivery of bullion quantified only by reference to market price or value, in the other, to pay
"currency equivalent thereto." I agree with Chief Judge Wanliss's statement that

I may add here that the meaning of the word "gold" in the agreement is "gold coin" within the
meaning of the Commonwealth Coinage Act, and incidentally comes directly within the terms of
sec. 7 of that Act.

In the circumstances of the present case, acceptance of the view I have rejected as to the meaning of
the word "gold" in the payment stipulation, would not alter the legal position. For if the view
rejected be correct, it is the appellant (the mortgagor) who has the option of discharging his
obligation either in bullion at its market price (upon this alternative view) or in currency equivalent
to the required quantity of such bullion. As the obligation to be discharged is 900 Australian
"pounds" or "£," if bullion was being offered, the quantity required was what could be procured on
the market for 900 Australian "pounds," and the "currency equivalent" of such bullion was
obviously the currency sufficient to discharge a debt of 900 Australian "pounds." Therefore, if the
delivery of 900 Australian notes was, in law, a full and valid discharge within the Mandated
Territory of a debt of 900 Australian "pounds," the appellant (mortgagor) duly discharged his
obligation.

So also, upon three assumptions which I will state, the respondent duly discharged his obligation if,
as I hold, "gold" in the clause means "gold coins," for the option was to tender 900 gold sovereigns
or their "currency equivalent."

The assumptions are three in number:--

I.
The first assumption, already mentioned, is that the appellant was at liberty to discharge his
obligation in a sufficient quantity of currency and was not bound to tender gold coins themselves.
This is the view favoured by Messrs. Post and Willard (Harvard Law Review, vol. 46, p. 1241, n.
61), in a valuable article on The Power of Congress to Nullify Gold Clauses.

In the present case, the respondent does not contend that the option lay with her to reject paper
currency altogether. Her case is that additional Australian notes should have been tendered sufficient
to make up, as at the time of payment, the depreciated value of Australian notes in relation to gold
coins. In substance the respondent's claim is that she is entitled to receive the value in notes of gold
coins, and that the 900 Australian notes were not equal in value to 900 gold sovereigns.

A claim by the present mortgagee for an "option" in the sense that, by expressing a preference for
gold coins, she might refuse a tender of an agreed equivalent of Australian notes, would also extend
so as to cover a refusal to accept gold coins, and an insistence on equivalent currency, to be named
by the mortgagee. But no such claim was advanced, and I am clearly of opinion that the first
assumption, that the appellant was not bound to tender gold coins, is correct.

II.

That at the time of payment, 900 Australian pound notes were lawful currency of the Territory and
good legal tender for a debt of 900 Australian "pounds." This assumption depends upon a number of
circumstances, and the question will require very close examination.

III.

That, at the time and place of payment, the tender of 900 Australian pound notes was an
"equivalent" of a tender of 900 British or Australian gold sovereigns.

It is convenient to deal at once with the third question.

III. By the Commonwealth Bank Act, No. 43 of 1920, the Commonwealth Parliament inserted Part
VIa. in the principal Act. By sec. 60H (1), contained in Div. 4 of that Part, authority was given to
issue "Australian notes" in specified denominations including that of one "pound." By sec. 60H (1)
(b), they were, upon issue, to "be a legal tender throughout the Commonwealth and throughout all
territories under the control of the Commonwealth except in respect of payments due by the Note
Issue Department."

The Commonwealth Bank Act 1920 was assented to on November 30th, 1920, and, by sec. 3, it
repealed the Australian Notes Act 1910-1914.

By the Australian Notes Act 1910-1914 it was provided in sec. 6 (1) (b) (as in the Commonwealth
Bank Act 1920) that the notes should be a legal tender "throughout all the territories under the
control of the Commonwealth."

If the second assumption is correct, the third question has to be considered upon the footing that a
similar dispute has arisen entirely within the Commonwealth of Australia. A borrows money from B
and promises to repay "£X" "in gold or in Australian notes equivalent thereto." Is the tender of X
Australian "pound" notes a valid discharge of the contract?
The respondent denies that it is, and for support points to certain decisions of the United States
Supreme Court. The leading case is Bronson v. Rodes[29] decided in the year 1869. There it was
held that a promise to pay "dollars payable in gold and silver coin, lawful money of the United
States" was not discharged by a tender of United States greenbacks, which were at a depressed value
in the market. The decision is thus commented on by Messrs. Post and Willard:--

The Court of Appeals of New York held that the tender was a good one, since the obligation fell
within the Legal Tender Act. This was reversed by the Supreme Court, principally on the ground that
an obligation to pay in gold coin was not a "debt," as that word was used in the Legal Tender Act. In
holding that Rodes' tender was ineffective to discharge the obligation, the Court necessarily held
that the gold clause was valid and enforceable (Harvard Law Review, vol. 46, p. 1228).

And also:--

The important point which it decided was that there was nothing in the existing statutes which,
either as a matter of statutory construction or of public policy, required the Court to treat gold
dollars and paper dollars as equivalents. The Court recognized that this was the central issue, for it
said that there were "two kinds of money, essentially different in their nature, but equally lawful."
Since 1868, a policy of recognizing the actual or potential difference between gold and currency,
and consequently of respecting the intent of gold clauses, has been firmly embedded in the Federal
statutes (pp. 1229, 1230).

The Court reviewed, they add, at some length, the currency statutes since 1792, and concluded that
gold dollars and paper dollars were not actual equivalents, "nor was there anything in the currency
Acts purporting to make them such." See 7 Wall., at 251-52[30]. Particular emphasis was laid on the
fact that pars. 1 and 5 of the Act of February 25, 1862, required that duties on imports and interest
on the public debt be paid in coin (p. 1230, n. 17).

The last observations as to payment of debts and interest may avail to distinguish the English
decisions now to be mentioned, but the learned commentators state that

recently the English Courts, in In re Société Intercommunale Belge d' Electricité; Feist v. The
Company[31], reached a conclusion exactly contrary to that reached in Bronson v. Rodes[32]. They
have held that a gold clause in a sterling bond is ineffective, and that the bond can be discharged by
payment of the nominal amount of pounds in depreciated currency (p. 1231).

In the Court of Appeal[33] Lawrence L.J. said:

A contract that a debt shall be discharged by payment of gold coins (being one form of legal tender)
cannot abrogate the enactment by the Legislature that the debt may be discharged by payment in
bank-notes (being another form of legal tender).
This decision of the Court of Appeal is, in my opinion, applicable to this part of the case, and we
should follow it. In the present case the obligation is to pay 900 Australian "pounds," and it is
satisfied by the payment of 900 Australian notes. This is by the direct force of statutory law which
enables a debtor to discharge his debt in the manner prescribed. It cannot be disputed that the
intention of the parties, to require the discharge of the debt by one form of legal tender as opposed
to another, is defeated. That this must be so, follows from the legislative command.

An interesting illustration of an analogous effect of legal tender statutes upon contracts is provided
by the recital to the Imperial Act of 1764 (4 Geo. III. c. 34), passed to prevent paper bills of credit
issued in the then American colonies "from being declared to be a legal tender in payments of
money." The recital states:

Whereas great quantities of paper bills of credit have been created and issued in His Majesty's
Colonies or Plantations in America, by virtue of Acts, orders, resolutions, or votes of assembly,
making and declaring such bills of credit to be legal tender in payments of money: And whereas
such bills of credit have greatly depreciated in their value by means whereof debts have been
discharged with a much less value than was contracted for.

The general principle is clearly stated by Mr. Keynes as follows:--

Furthermore it is a peculiar characteristic of money contracts that it is the State or community not
only which enforces delivery, but also which decides what it is that must be delivered as a lawful or
customary discharge of a contract which has been concluded in terms of the money-of-account. The
State, therefore, comes in first of all as the authority of law which enforces the payment of the thing
which corresponds to the name or description in the contract. But it comes in doubly when, in
addition, it claims the right to determine and declare what thing corresponds to the name, and to
vary its declaration from time to time--when, that is to say, it claims the right to re-edit the
dictionary. This right is claimed by all modern States and has been so claimed for some four
thousand years at least. It is when this stage in the evolution of money has been reached that
Knapp's Chartalism--the doctrine that money is peculiarly a creation of the State--is fully realized
(Money, vol. i., p. 4).

II. It is therefore necessary to return to the second assumption required in order to found the
appellant's case, that the Commonwealth law as to Australian notes being legal tender was in force
in the Mandated Territory.

The argument for the respondent is that the Laws Repeal and Adopting Ordinance introduced into
the mandated territory the Coinage Act 1909, but only Divs. 1 and 5 of Part VIA. of the
Commonwealth Bank Act, and that the fair inference is that Div. 4 was not introduced. But whilst
the New Guinea Act provides, in sec. 14, that the Governor-General may make ordinances having
the force of law in the Territory, it also provides, in sec. 13, that

except as provided in this or any Act, the Acts of the Parliament of the Commonwealth shall not be
in force in the Territory unless expressed to extend thereto, or unless applied to the Territory by
ordinance made by the Governor-General under this Act.
It appears from the terms of sec. 13 that, notwithstanding the clear failure to apply by ordinance the
statutory provision making Australian notes a legal tender, the provision may have to be regarded as
in force by virtue of the Commonwealth Bank Act itself. The Commonwealth Bank Act 1920
actually commenced on December 14th, 1920, the mandate in respect of New Guinea issued from
the Council of the League of Nations at Geneva on December 17th, 1920, and the New Guinea Act
came into force on May 9th, 1921, on which day civil government replaced the period of seven
years' government under military occupation by the King's Australian Forces.

That part of the case, therefore, raises two questions, (a) whether sec. 13 of the New Guinea Act is
satisfied by the terms of the Commonwealth Bank Act; (b) is the Mandated Territory accurately
described as one of the "territories under the control of the Commonwealth" within the meaning of
sec. 60H (1) (b)?

Before dealing with question (b), whether the Mandated Territory is, within the meaning of the
Commonwealth Bank Act, one of the "territories under the control of the Commonwealth," it may be
noted that in sec. 4 of the New Guinea Act itself, there is to be found a statement purporting to
declare the area in question to be a territory under the authority of the Commonwealth, by the name
of the Territory of New Guinea. But this provision does not, of itself, provide an answer to question
(b). If sec. 4 is to be regarded as an attempt to declare the mandated area a territory within the
meaning of sec. 122 of the Constitution, it is obviously futile, for sec. 122 is itself defining and, of
course, controlling.

The question whether the mandated area of New Guinea can be regarded as one of the "territories
under the control of the Commonwealth" involves consideration of the very special position the area
occupies in relation to our constitutional system.

The Treaty of Versailles came into force on January 10th, 1920. By arts. 118 and 119 of the Treaty,
Germany renounced in favour of the principal Allied and associated Powers all her rights over her
overseas possessions, and also undertook to recognize and to accept the measures taken by the
principal Allied and associated Powers, in agreement where necessary with third Powers, in order to
carry the consequences of her renunciation into effect. (Cf. Report of M. Hymans, adopted by the
Council of the League of Nations on August 5th, 1920--League of Nations 20/48/161, Annex. 4).

As part of the Treaty of Versailles, art. 22 of the Covenant of the League of Nations made provision
for the future fate of

those colonies and territories which as a consequence of the late war have ceased to be under
sovereignty of the States which formerly governed them and which are inhabited by people not yet
able to stand by themselves under the strenuous conditions of the modern world.

The principle laid down by art. 22 was that "the well-being and development of such peoples form a
sacred trust of civilization."

The article then proceeded to embody "securities for the performance of this trust." It declared that
the best method of giving practical effect to the principle was that "the tutelage of such peoples
should be entrusted to" advanced nations, and that such tutelage "should be exercised by them as
mandatories on behalf of the League." The character of the mandate must, it was stated, differ
according to certain circumstances, and three classes were described. These have come to be known
as A, B and C mandates, and it is with the C class alone that the Commonwealth of Australia is
concerned.

This class of mandate affects "territories such as South-West Africa and certain of the South Pacific
Islands," which, subject to certain safeguards, "can be best administered under the laws of the
mandatory as integral portions of its territory."

Provision was made in art. 22 for (1) an annual report to be rendered by the mandatory to the
Council in reference to the territory "committed to its charge"; (2) a definition by the League or the
Council of the degree of "authority, control or administration" to be exercised by the mandatory and
(3) the future constitution of a permanent Commission to examine the reports and to "advise the
Council on all matters relating to the observance of the mandates."

On July 31st, 1919, the Parliament of the United Kingdom passed the Treaty of Peace Act 1919,
which authorized His Majesty to

make ... such Orders in Council, and do such things as appear to him to be necessary for carrying
out the said Treaty, and for giving effect to any of the provisions of the said Treaty.

There is not to be found in the Treaty any provision appointing any mandatory, and no Order in
Council was ever issued by His Majesty under the 1919 Act concerning the control of New Guinea
by the Commonwealth authorities.

The various signatures of those representing His Majesty throughout the various constitutional units
of the British Empire were affixed to the Treaty on June 28th, 1919, but, before that date, on May
7th, 1919, at a meeting of the Supreme War Council, decisions had been reached and made public as
to who were to hold mandates in respect of Germany's overseas possessions in Africa and the
Pacific. The decisions were modified to some extent in August 1919. (Memorandum of Secretary-
General of Council--L/N 20/48/161, Annex. 3).

It was not until June 30th, 1920, that the Secretary-General of the League of Nations suggested
definite action by the Council under art. 22 of the Covenant. He pointed out that since the coming
into force of the Treaty of Versailles on January 10th, 1920, the title to "the territories which are to
be placed under mandate" had been invested in the principal Allied and associated Powers and that
it was their "right and duty" to select "the mandatory Powers who shall exercise authority on behalf
of the League" (Memorandum 3).

On August 5th, 1920, the Council adopted the report of the Belgian representative, M. Hymans,
which stated, inter alia (at p. 8):--

It is not enough, however, that the mandatory Powers should be appointed; it is important that they
should also possess a legal title--a mere matter of form perhaps, but one which should be settled,
and the consideration of which will help towards a clear understanding of the conception of
mandates.

It must not be forgotten that, although the mandatory Power is appointed by the principal Powers, it
will govern as a mandatory and in the name of the League of Nations.

It logically follows that the legal title held by the mandatory Power must be a double one: one
conferred by the principal Powers and the other conferred by the League of Nations. The procedure
should, in fact, be the following:

1.

The principal Allied and associated Powers confer a mandate on one of their number or on a third
Power.

2.

The principal Powers officially notify the Council of the League of Nations that a certain Power has
been appointed mandatory for such a certain defined territory.

3.

The Council of the League of Nations takes official cognizance of the appointment of the mandatory
Power and informs the latter that it (the Council) considers it as invested with the mandate, and at
the same time notifies it of the terms of the mandate, after ascertaining whether they are in
accordance with the provisions of the Covenant.

On September 30th, 1920, the statute of the Commonwealth Parliament called the New Guinea Act
1920 was assented to. The Act provided for the acceptance of the mandate to be issued to the
Commonwealth and for the government of the Territory. It was to commence on a date to be fixed
by proclamation (sec. 2). There was recited, inter alia, (1) an agreement by the principal Allied and
associated Powers that a mandate for the described ex-German territories should be conferred on the
Commonwealth of Australia and (2) a statement that, under the Covenant of the League of Nations,
a mandate was to be issued to the Commonwealth of Australia "with full power to administer the
same, subject to the terms of the mandate, as an integral part of the territory of the Commonwealth."

On December 1st, 1920, the proposed Constitution of the Permanent Mandates Commission was
approved by the Council of the League. On December 6th, 1920, the Council reported to the
Assembly, inter alia:--

With regard to the responsibility of the League for securing the observance of the terms of the
mandates, the Council interprets its duties in this connection in the widest manner. Nevertheless the
League will obviously have to display extreme prudence, so that the exercise of its rights of control
should not in any way increase the difficulties of the task undertaken by the mandatory Powers. (pp.
12-13, L/N 20/48/161).

On December 17th, 1920, the Council duly issued the mandate for German New Guinea and all the
German possessions in the Pacific Ocean lying south of the Equator other than German Samoa and
Nauru. This recited (1) the renunciation of all her rights by Germany in art. 119 of the Treaty of
Versailles; (2) an agreement by the principal Allied and associated Powers that a mandate should be
conferred upon "His Britannic Majesty, to be exercised on his behalf by the Government of the
Commonwealth of Australia"; (3) an agreement to accept by the same authority and (4) the
provision in art. 22 for the definition of the terms of the mandate.

Mandates in similar terms also issued to South Africa and New Zealand in respect of the former
German possessions in South-West Africa and Samoa.

Whilst Australia, South Africa and New Zealand has each administered the three mandated
territories committed to their respective charge as though they were "integral portions of its
territory," subject to the important safeguards which are defined in the instruments of the mandate,
conflicting lines of reasoning as to the true legal basis of such administration have been adopted by
the Courts of the three Dominions.

In South Africa the question came to an issue in connection with a charge of treason preferred
against a native chief alleged to have taken part in an armed rebellion against the mandatory in the
Mandated Territory. There has been some divergence of opinion as to what was the precise ratio
decidendi of the judgment of the Supreme Court of South Africa. The actual decision was that the
charge was properly laid and the objection to the indictment should be overruled. But a close
perusal of the judgments suggests the principle that the Union of South Africa possessed, by virtue
of its character of mandatory, sufficient internal sovereignty--majestas operating internally--to
forbid and punish any attempt to overthrow its authority by force. Although full external
sovereignty in relation to the territory was considered as not vested in the Union, such a concession
was unnecessary for the actual decision.

There has been no attempt in South Africa or Australia to base the administration of the mandated
territories upon the Foreign Jurisdiction Act 1890, and no Imperial Order in Council thereunder was
issued in respect of South-West Africa or New Guinea. In New Zealand, however, the
administration of Samoa has been regarded as dependent upon an Imperial Order in Council under
the Foreign Jurisdiction Act. It was made on March 11th, 1920, eight months prior to the issue of
the mandate from the Council of the League (December 17th, 1920).

The matter came up for debate before the Supreme Court of New Zealand in Tagaloa v. Inspector of
Police[34]. In the Urtas Springs Case, which was decided by the Judicial Committee of the Privy
Council on February 16th, 1926 (Jerusalem-Jaffa District Governor v. Suleiman Murra[35]), it was
held that an appeal lay to the Privy Council from the Supreme Court of Palestine by virtue of the
Foreign Jurisdiction Act. In the case of Palestine the mandate had issued to His Britannic Majesty
direct and it was accepted upon the advice and responsibility of British Ministers alone. But the
decision was regarded by the Supreme Court of New Zealand as sufficiently analogous to justify, by
reference solely to the Foreign Jurisdiction Act, the affirmation of the validity of the Samoa Act
1921, by which the Parliament of New Zealand purported to create and endow with legislative,
executive and judicial power over the Mandated Territory of Western Samoa, certain specified
organs of Government.

A grave difficulty as to the applicability of the Foreign Jurisdiction Act lay in the fact that the
Imperial Order in Council, on its fair construction, purported to surrender all power in respect of
Western Samoa to the Parliament or Government of New Zealand. This is, one should imagine, a
stretching of the Imperial Act even beyond its very wide limits of elasticity. The Act proceeds, of
course, upon the fact that the place where the jurisdiction is exercised is outside His Majesty's
Dominions, and, although it always receives a liberal interpretation, it hardly seems to contemplate
the permanent delegation of the foreign jurisdiction of His Majesty's Privy Council to the
Parliament of a self-governing Dominion, and that Parliament's further delegating the jurisdiction to
a local authority, viz., "the Administrator, acting with the advice and consent of the Legislative
Council of Western Samoa" (Samoa Act 1921, sec. 46).

As one authority has stated, with reference to Berar:--

The intention of the Foreign Jurisdiction Act 1890 was to give statutory authority to existing
practice, including presumably the extra-territorial legislation of the Governor-General of India in
(executive) Council. But it is a constitutional commonplace to say that when an Act of Parliament
trenches upon ground formerly occupied by the prerogative, the prerogative is thence-forward
strictly limited by the letter of the statute. The Act does not confer or recognize any power of
legislation in the Governor-General: all that it does in terms is to confer legislative authority,
including the power to create Courts, on the Privy Council, and the Privy Council only. The Indian
(Foreign Jurisdiction) Order in Council of 1902 delegates that authority to the Governor-General:
but there is no authority for any such delegation in the Act. Perhaps, if the point had been raised in
1902, the Order might have been invalidated; but it is much too late to question its validity now
(Vesey Fitzgerald, Law Quarterly Review (1926), vol. 42, p. 517).

The above difficulty was not considered in Tagaloa's Case[36]. The main point taken against the
validity of the Samoa Act was that, by it, the Parliament of New Zealand was attempting to clothe
itself with an extra-territorial jurisdiction. This, it seemed to the majority, was a fatal objection to
the validity of the Samoa Act in the absence of some charter from the Imperial Parliament
authorizing the exercise by New Zealand of such a jurisdiction. This charter was found, mediately,
in the Order in Council mentioned. Sim A.C.J., for the majority, stated the position thus[37]:--

His first main contention was that the Samoa Act 1921 itself was ultra vires of the Legislature of
New Zealand. The Constitution Act, he argued, gave the Legislature power only to legislate for the
peace, order, and good government of New Zealand, and the Legislature, therefore, could not
legislate for territory outside the boundaries of the Dominion. That is true, no doubt, as a general
rule, and the case of R. v. Lander[38] illustrates the application of this rule. There the Court of
Appeal held the Crimes Act 1908 to be ultra vires in so far as it purported to make bigamy
punishable as a crime in New Zealand when the offence was committed outside New Zealand. If,
therefore, the power to legislate for Samoa depended on the Constitution Act the appellant would be
right in his contention. But it does not depend on that Act, and the power is derived from other
sources.

Ostler J., however, was impressed with the additional "status" which had come to be regarded as
belonging to New Zealand by virtue of its possessing something of international personality and
statehood. He said[39]:--

The progress of the Dominion along the path of nationhood has been rapid in recent years. The
older conception of subordination to a central legislative authority has been superseded by the
conception of a partnership of independent nations bound together by ties of loyalty to the same
King, ties of kinship, ties of common interest, common beliefs, common faith in the future. If this
was not clear before, it was made abundantly clear by the proceedings of the Imperial Conference of
1926. In my opinion the time has come for recognition of this fact by the Courts. It is not necessary
to hold that our Constitution Act has fallen into desuetude, though a strong argument could be put
forward to that effect founded on the maxim Cessante ratione legis, cessat ipsa lex. "The tooth of
time will cut away ancient precedent, and gradually deprive it of all authority and validity. The law
becomes animated by a different spirit and assumes a different course, and the older decisions
become obsolete and inoperative" (per Sir J. Salmond in the Law Quarterly Review (1900), vol. 16,
p. 383). But whether the Constitution Act has thus become obsolete or not, so far as the mandate is
concerned. in my opinion, it is a matter entirely outside the scope of the Constitution Act. The
Dominion had a representative at the negotiation of the Treaty of Peace, who signed the Treaty on
behalf of New Zealand, which thus agreed as a separate nation to the Covenant of the League of
Nations and became a member of the League.

Unfortunately the opinion of Ostler J. was not fully elaborated. It has been criticized upon the
ground that the New Zealand Parliament could not lawfully trespass beyond the limits of capacity
prescribed by its own existing Constitution notwithstanding the additional capacities with which it
might otherwise have been regarded as endowed, by its constitutional development within, and its
international development without, the Empire.

It was said, in the criticism:--

A statute may in practice, although not in theory, fall into desuetude through its being so old that it
is never adverted to. It may, for example, legislate for a matter which does not arise in present times.
English law, however, does not favour desuetude as a means of repeal. It recognizes only actual
repeal. In this respect, it differs from Continental legislation. In any case, age cannot affect such a
comparatively recent enactment as the Constitution Act. The only argument could be that conditions
have so changed that there is no subject matter to which the Act could be referable, that is, that New
Zealand has become such a different species of community that the Act could not have reference to
it. In support of this argument may be quoted the status of New Zealand in the League of Nations,
but very little else. The Imperial Conference could not legislate. It was only a conference. It is
difficult to see by what authority one could go further. There is a risk, if one does not test every link
of the chain, of falling into the dangerous and often subtle argument of appeal to sentiment. There
seems to be no legal authority for saying that the Constitution Act is in any way repealed, nor,
therefore, has the Constitution of the Dominion of New Zealand altered at all (Law Quarterly
Review (1928), vol. 44, p. 422).

This comment is powerful, for, from the point of view of municipal and constitutional law, it is
clear that the power of the New Zealand Parliament must be exerted within its Constitution. And the
real question was whether, in relation to the new circumstances and events, Parliament's existing
powers under the New Zealand Constitution were sufficient to authorize administrative control over
Samoa.

In Australia, the legal authority of the Commonwealth Parliament and Government over the
Mandated Territory of New Guinea has long been regarded as indisputable, despite the fact that the
Commonwealth Parliament, unlike those of South Africa or New Zealand, has been invested with
legislative powers only in relation to a specified number of topics. The question came before this
Court in Mainka v. Custodian of Expropriated Property[40]. There it was argued that sec. 122 of the
Commonwealth Constitution gave the Commonwealth Parliament the necessary legal authority. That
section reads:--

The Parliament may make laws for the government of any territory surrendered by any State to and
accepted by the Commonwealth, or of any territory placed by the Queen under the authority of and
accepted by the Commonwealth, or otherwise acquired by the Commonwealth, and may allow the
representation of such territory in either House of the Parliament to the extent and on the terms
which it thinks fit.

But, unfortunately for this argument, the Mandated Territory was never "placed by the King under
the authority of and accepted by the Commonwealth." The documents, in the case of the
Commonwealth, negative any such action on the part of His Majesty or of the Commonwealth. The
sources to which alone the exercise of Commonwealth control must be referred are recited both in
the New Guinea Act 1920 and in the mandate itself. They consist of (1) Germany's renunciation of
all her rights in favour of the principal and associated Powers, (2) the agreement of the principal
Allied and associated Powers that the Commonwealth of Australia should be the mandatory, (3) the
issue under art. 22 of the mandate for the control of the territory, and (4) the acceptance of such
mandate by the Commonwealth. These sources completely exclude any "placing by the King" of
New Guinea under Commonwealth authority. And there are no other sources.

Nor is it possible to regard the mandated area as ever having been "acquired" by the
Commonwealth. The area is not, in law or in fact, so "acquired." No legal title has been vested in
the Commonwealth. Legislative and administrative jurisdiction, and their exercise, are quite
consistent with absence of dominion or title. The mandated territory is not part of, but outside, His
Majesty's Dominions. Very strong, if not conclusive, evidence of that fact is furnished by two
Imperial Orders in Council--No. 648 of 1923 and No. 1030 of 1928. The first was made under sec.
737 of the Merchant Shipping Act 1894, the second under sec. 30 of the Fugitive Offenders Act
1881. Each not only recites, but is expressly based upon the position that, in law and in fact, the
Mandated Territory of New Guinea is a place "outside" or "out of" His Majesty's Dominions.

Further, sec. 122 not only looks to the "acquisition" of territory, but to the possibility of the
representation of every such territory in the Commonwealth Parliament itself. The process
envisaged is one of a gradual approach of the acquired territory towards inclusion within the
existing organization of the Commonwealth. In the Mandated Territory, the process envisaged by
art. 22 is exactly the reverse. It is to be controlled as if it were, contrary to the fact, an integral
portion of the Commonwealth; but its development is to be not towards, but away from, absorption
by the Commonwealth. "It is never," as Corbett says, "to be incorporated in the territory of the
mandatory" unless, of course, by further international action (British Year Book of International
Law (1924), at p. 135).

It is improbable that sec. 122 would ever have been regarded as relevant but for the fact that the
word "territory" is used in that section and in the mandate alike. This is, of course, merely a
coincidence, due to the fact that art. 22 itself speaks of "territories," and describes the C class of
mandates in a clause commencing: "There are territories such as South-West Africa and certain of
the South Pacific Islands."

In Mainka's Case[41], Isaacs J. said "the acceptance of the mandate by His Majesty, is authorized
by the Imperial Act 9 & 10 Geo. V. c. 33 (31st July 1919) called the Treaty of Peace Act 1919." It
may be mentioned that the bearing of the Treaty of Peace Act 1919, an Imperial Act, was not fully
debated in Mainka's Case. The Act authorized measures for the carrying out by His Majesty of the
terms of the Treaty of Versailles, but, in the Treaty, there was no assignment of any mandate. It
certainly may be stated (1) that the 1919 Act did not, of itself, authorize the exercise of legislative
authority by a Dominion in respect of a territory committed to its care by a mandate issued and
defined by the Council of the League of Nations; (2) that no action was taken under the 1919 Act in
relation to New Guinea, and (3) that the legal foundation of the Commonwealth authority in New
Guinea cannot be discovered in the 1919 Act.

Reference has been made to the decisions of the highest Courts in New Zealand, South Africa and
Australia as to the legal basis of the control exercised by those three Dominions over the mandated
territories committed to their respective charges. In New Zealand the only basis relied on was the
Foreign Jurisdiction Act 1890, an Order in Council thereunder giving power to the Parliament of
New Zealand, and exercise of such powers by further delegation to an Administrator and Legislative
Council. This elaborate chain of authority seems to possess one, perhaps two, weak links. It was
thought that the general constitutional power of the New Zealand Parliament was insufficient for the
purpose because authority had to be exerted extra-territorially. The point as to extra-territoriality was
not adverted to in the South Africa case, R. v. Christian[42], nor in Mainka's Case[43]. In the
former it was held that the Government of South-West Africa possesses "majestas operating
internally" sufficient to found a charge of high treason. In the latter it was held that an appeal could
be brought to the High Court from a local Court in the Mandated Territory. In the former, reliance
was placed upon the terms of the mandate, and the position of South Africa as a member of the
League of Nations, de Villiers J.A. stating[44] that

for the purpose of the mandate a mandatory is considered to be on a footing of equality with all
other members of the League and is not itself subject in any respect to any other member. The
mandate is a trust which is delegated to one of the members of the League to be exercised by such
member personally in the spirit of the Treaty, with more especial reference to the well-being of the
indigenous populations, and under the safeguards provided by the Treaty and the terms of the
mandate,

and concluding therefrom that "the Union Government as mandatory of South-West Africa is not in
any respect subject to the Imperial Parliament." In Australia, this general question was not
discussed, but, apparently, the (Imperial) Treaty of Peace Act 1919 was considered to have a bearing
upon the question.

In the case of the Commonwealth of Australia and the mandated area of New Guinea, I have come
to the conclusion that the legal position is as follows:--

(1)

The King's Executive Government of the Commonwealth was possessed of sufficient authority (a)
to become a party to the Treaty of Versailles and to the Covenant of the League of Nations, and (b)
as a member of the League, to accept the position of mandatory with all its incidental rights and
obligations.

(2)

The Commonwealth Parliament having full power to legislate with respect to "external affairs"--
sec. 51 (XXIX.)--was thereby vested with authority to pass the New Guinea Act 1920, as a law for
the fulfilment of the duties imposed upon, and the exercise of the rights of administration committed
to, the Commonwealth as mandatory power.

(3)

Although the New Guinea Act and ordinances made thereunder necessarily operate outside the area
of the Commonwealth or any of its territories properly so-called, such extra-territorial operation
does not invalidate the New Guinea Act, which is a valid law for the peace, order and good
government of the Commonwealth with respect to external affairs.

If this reasoning is correct in relation to the Commonwealth Parliament, it would seem to be
applicable to the case of New Zealand. In the former case the Parliament has authority over the
peace, order and good government "of the Commonwealth with respect to ... external affairs" (sec.
51 (XXIX.)); in the latter case, over the peace, order and good government of New Zealand without
restriction of subject matter. It has been noticed that, in the decision in Christian's Case[45], the
supposed extra-territorial limitation placed upon a Dominion's competence was not mentioned.
There, too, the same reasoning could be applied. Each of the three propositions stated I shall
endeavour to substantiate.

1. Executive Power of the Commonwealth.

We here pass into the realm of the King's prerogative or common law powers. It is well established,
of course, that capacity to enter into agreements with foreign Powers pertains to the King's
prerogative. Such capacity may lawfully be exercised by the King in relation to and acting upon his
Executive within any of his self-governing Dominions. It is the adaptability of the common law (of
which the prerogative of the Crown forms a part) to new circumstances and conditions which
allowed the royal prerogative to be exercised so as to (a) enable the King to enter into binding
arrangements with foreign Powers, in his capacity as head of, and with respect solely to, any one or
more of the self-governing Dominions, and (b) authorize the King in right of and as representing
such Dominion to accept a mandate. As part of the common law, the royal prerogative has what
Parke B. described as "the incalculable advantage of being capable of application to new
combinations of circumstances perpetually occurring."

It is now indisputable that a self-governing Dominion's special constitutional relationship with Great
Britain does not preclude it from having and exercising direct relations with foreign Powers. The
two questions are necessarily related. If the Dominions were, by the relevant rules of the municipal
law of the British Empire, prevented from being subject to any duties or entitled to any rights in
international law, the first question would never arise. On the other hand, a refusal by foreign States
to recognize any separate personality in a Dominion would leave them quite outside the family of
nations, however willing Great Britain herself might be to their being accorded international status.
Neither of these two possibilities has happened. Owing partly to the Dominions' enormous loss of
life and wealth during the Great War, but also to the insistence and persistence of three statesmen--
Hughes, Smuts and Borden--they were accorded recognition at the Peace Conference of 1919, and
their representatives became signatories to the Treaty of Versailles, each self-governing Dominion
becoming an original member of the new family of nations constituted by the Covenant, and taking
appropriate local action in ratification of the Treaty. I do not propose to revive the controversy as to
the precise meaning to be ascribed to the method of signing adopted in 1919, where, according to
Sir Robert Borden, the Dominions enjoyed the "doubtful advantage of a double signature" (quoted
by Professor Noel Baker, p. 73). It is fully and convincingly discussed, both historically and
critically, by Professor Baker in his work on the Juridical Status of the British Dominions in
International Law (1929). The subsequent active participation of the Dominions in the work of the
League as co-equal members thereof shows the general soundness of Baker's critical analysis. The
capacity of the Dominions for separate international personality has been illustrated by their activity
in international deliberations. History has resolved whatever doubt arose because of the form of the
original signatures to the Treaty of Versailles. In particular, a close perusal of the proceedings of the
Permanent Mandates Commission proves to demonstration that the League, including Great Britain,
regards Australia, South Africa and New Zealand as directly responsible to it for their proper
administration. As Noel Baker says:--

The direct and separate responsibility of the Dominion mandatory Powers towards the League is
exemplified in every phase of the working of the mandates system. The Dominions, naturally,
control their mandated areas without any interference or control by the British Government; they
make their annual reports on their administration direct to the League without previous consultation
with the British Colonial Office; they appoint their own Dominion delegates to explain, defend, and
amplify their reports before the Permanent Mandates Commission; their Assembly delegations
defend their actions as mandatories when the Assembly discusses their Reports (p. 107).

This international position of the Dominions has only gradually been recognized by international
jurists. Pearce Higgins says:--

That the self-governing Dominions have acquired something of an international personality by
reason of their membership of the League of Nations seems clear, but how much is not so evident.
They are treated as independent in their relations to the business of the League, but for other
purposes they would appear only to have made good a claim to be consulted on important matters
affecting the whole of the British Empire, while each Dominion is consulted as regards matters of
special import to itself. Representatives from the Dominions were not specially summoned to the
Washington Conference in 1921-2 by the United States, but the British Delegation contained
representatives of several of them. Even should one or more of them be represented by diplomatic
agents appointed by the King to foreign Powers this would not necessarily indicate complete
independence, for many of the German States retained the right of representation under the Imperial
Constitution of 1871. The inclusion of representatives of the Dominions amongst the delegates of
the British Empire at an international conference enables each of the Dominions to give advice
regarding its own peculiar questions, and the authority of each of such delegates is limited to the
Dominion he represents, whereas the delegates appointed for Great Britain have plenary powers to
act for the whole of the Empire. Foreign Powers dealing with such a delegation realize that if one
Dominion fails to sign a treaty, it would not operate so far as that Dominion was concerned, but the
Treaty, when ratified by the King, would be effective as regards the rest of the Empire (Hall's
International Law, 8th ed. (1924), p. 35).

So, too, Professor Keith (Wheaton's Elements of International Law, 6th ed. (1929), vol. I., pp. 130,
131) says:--

Thus in the League of Nations the Dominions have an international personality, and for League
purposes cannot be denied the character of States. In their actions the governments proceed without
control by the United Kingdom, and, if they consult with the British Government, it is merely as
equals; notoriously they have on several occasions of no small importance taken an attitude contrary
to the British view, and Canada in special has struggled energetically for the reduction of her
obligations under article 10 of the Covenant of the League, and has succeeded in securing an
interpretation which, if not binding, is yet sufficiently authoritative for all purposes. Further, the
election of Canada to be a member of the Council of the League in 1927 has emphasized the
independent position of the Dominions.

Indeed, as appears from Noel Baker's further discussion, (cf. pp. 127, 128), with respect to all
matters affecting the execution of the Covenant of the League of Nations, the internal "capacity" or
"status" or "personality" of the Dominion members of the League is clearly established, and now is
seldom disputed even by those who have minimized, partly because they have deprecated, the
position of the Dominions as nations of the world.

It was suggested by Professor H. A. Smith (British Year Book of International Law (1930), at pp.
251-257) and by Professor Keith (Wheaton's Elements of International Law, 6th ed. (1929), p. xvi.),
that the equality of status asserted in the 1926 declaration as to the status of the Dominions was
difficult, perhaps impossible, to reconcile with the dissimilarity of international functions actually
performed by Great Britain and the self-governing Dominions, which dissimilarity is also
sufficiently described in the Balfour Report. In 1928 Keith regarded the 1926 Report as "sentimental
rather than substantial" (Responsible Government in the Dominions (1928), p. xviii.).

However that may be, the Imperial Conferences of 1929 and 1930 and the passing of the Statute of
Westminster seem to have justified the general thesis of Noel Baker as against that of his quondam
critics. But the latter would not dissent from the proposition that the international capacity of the
Commonwealth of Australia to enter into membership of the League and to accept and perform the
New Guinea mandate cannot be denied. However further the powers of the great Dominions may be
extended, or be capable of extending, it is unnecessary to discuss.

2. Legislative Power over "External Affairs."

It may be pointed out that in In re Regulation and Control of Radio Communication in Canada[46],
Viscount Dunedin, for the Privy Council, said:--

Canada as a Dominion is one of the signatories to the convention. In a question with foreign powers
the persons who might infringe some of the stipulations in the convention would not be the
Dominion of Canada as a whole but would be individual persons residing in Canada. These persons
must so to speak be kept in order by legislation and the only legislation that can deal with them all
at once is Dominion legislation. This idea of Canada as a Dominion being bound by a convention
equivalent to a treaty with foreign powers was quite unthought of in 1867. It is the outcome of the
gradual development of the position of Canada vis-à-vis to the mother country Great Britain, which
is found in these later days expressed in the Statute of Westminster. It is not, therefore, to be
expected that such a matter should be dealt with in explicit words in either sec. 91 or sec. 92. The
only class of treaty which would bind Canada was thought of as a treaty by Great Britain, and that
was provided for by sec. 132. Being, therefore, not mentioned explicitly in either sec. 91 or sec. 92,
such legislation falls within the general words at the opening of sec. 91, which assign to the
Government of the Dominion the power to make laws "for the peace order and good government of
Canada in relation to all matters not coming within the classes of subjects by this Act assigned
exclusively to the Legislatures of the Provinces."

The reasoning of the Privy Council in the Radio Case[47] has been subjected to certain criticism in
Canada. It has been said by a learned commentator:--

And we so add another peculiar twist to our Constitution. Sec. 92 of it assigns to the Provinces
exclusive jurisdiction over certain subjects. Nowhere is there given to the Dominion Government
authority to trench upon provincial jurisdiction. Nobody imagined that the Dominion Government
had any such authority. But the Judicial Committee has held that by agreeing with a foreign State
that the Dominion Parliament will trench, the trenching can be done. It is right to add that
complicity in that respect cannot be charged against either the Dominion Government or the lawyers
engaged in the case. Neither in the factum of the Government in the Supreme Court, nor in its case
in the Privy Council, nor, as I am informed, in the oral pleadings was the twist presented on behalf
of Canada. No Canadian lawyer could have thought of it (J. S. Ewart, Canadian Bar Review (1932),
pp. 301-302).

The power of the Commonwealth Parliament to pass the New Guinea Act for the government of the
Mandated Territory is not complicated by the element which led to the dispute between the
Dominion and Provincial Legislatures in the Radio Case[48]. There the legislation of the Dominion
Parliament was attacked as trenching upon the exclusive area of provincial authority, so that a
contest between Dominion and Province had to be resolved. In the case of the Mandated Territory of
New Guinea no contest of Commonwealth and State inter se does or can arise.

Ewart's criticism can therefore have no application at all to the case of New Guinea, because neither
the New Guinea Act nor the ordinances thereunder made operate outside New Guinea itself, and the
States are in no way concerned or affected.

The real question is whether the legislative power exercised by the Commonwealth Parliament in
the New Guinea Act is one truly in respect of "external affairs" under sec. 51 (XXIX.) of the
Constitution? The answer is: Yes. The legislation pertains to external affairs and in no way to
matters occurring within the Commonwealth. It is legislation directed solely towards performing
Australia's obligations to the other members of the League of Nations. Powers of administration and
government are assumed solely towards that end, and over matters and things without the area of the
Commonwealth and its territories.

In the year 1906, Barton J. pointed out that
it is not necessary to decide now whether the external affairs power of the Commonwealth
Parliament under sec. 51 of the Constitution would cover legislation applying to such circumstances
... It is probable that that power includes power to legislate as to the observance of treaties between
Great Britain and foreign nations (McKelvey v. Meagher[49]).

Referring to the "external affairs" power in the year 1899, Lefroy said:

It will look ... as though the Imperial Parliament intended ... to divest itself of its authority over the
external affairs of Australia and commit them to the Commonwealth Parliament; and the Imperial
Parliament has never yet repealed an Act conferring constitutional powers on a colony (Law
Quarterly Review (1899), vol. 15, p. 291).

"The power to legislate upon external affairs," Jethro Brown wrote in 1900,

is a new departure of doubtful significance. The Bill appears to aim at providing a general power
which will apply to ... future emergencies (Law Quarterly Review (1900), vol. 16, p. 26).

"The power to legislate upon external affairs," commented Harrison Moore in the same year,

is a somewhat dark one, especially as the principal "external" matters over which control is desired
are enumerated, e.g. immigration of aliens, naturalization, the influx of criminals, &c. (Law
Quarterly Review (1900), vol. 16, p. 39).

In Roche v. Kronheimer[50], this Court held that the Treaty of Peace Act 1919, which empowered
the Governor-General to carry out and give effect to the economic clauses of the Treaty, was a valid
exercise of the powers of the Parliament of the Commonwealth. In the course of his judgment
Higgins J. said[51]:--

It is difficult to say what limits (if any) can be placed on the power to legislate as to external affairs.
There are none expressed. No doubt, complications may arise should the Commonwealth Parliament
exercise the power in such a way as to produce a conflict between the relations of the
Commonwealth with foreign Governments and the relations of the British Government with foreign
Governments. It may be that the British Parliament preferred to take such a risk rather than curtail
the self-governing powers of the Commonwealth; trusting, with a well-founded confidence, in the
desire of the Australian people to act in co-operation with the British people in regard to foreign
Governments.

In Victorian Stevedoring and General Contracting Co. Pty. Ltd. and Meakes v. Dignan[52] I had
occasion to discuss Roche v. Kronheimer[53] as follows:
Having regard to the peculiar prerogative rights of the Crown in respect to the declaration of war
and the making of peace, the special relationship of the Executive Government of the
Commonwealth to the Treaty of Peace itself, the difficulty of the subject of "external affairs" being
dealt with by an authority other than the Executive, the plenary nature of the defence power in time
of war, including the time of terminating the war, the complexity of the arrangements required for
the purpose of carrying out the economic provisions of the Treaty, and the necessity of a continuous
exercise of authority to change the terms of such arrangements from time to time, the Treaty of
Peace Act was also a law with respect to naval and military defence and with respect to external
affairs.

It is interesting to observe that, in Australia, sec. 51 (XXIX.) of the Constitution--the external
affairs power--has been regarded as having a scope and purpose at least as far-reaching as that of
sec. 132 of the British North America Act. Thus, on the 3rd January 1908, the Secretary of State for
the Colonies, in a despatch to the Governor-General of the Commonwealth, stated:--

His Majesty's Government are pledged to the view that, so far as the relations of Australia with
foreign nations are concerned, the Government of the Commonwealth alone can speak, and that for
everything affecting external communities the Government of the Commonwealth alone are
responsible to the Crown. It follows from this that adherence to no treaty or convention with a
foreign Power, whatever its subject matter, can be notified for which the Commonwealth has not
made itself responsible; in other words, which is not made on behalf of the Commonwealth
(Commonwealth Papers, C11845).

The same communication proceeded:--

In the absence of any authoritative interpretation of the provisions of sec. 51 (XXIX.) of the
Constitution, it is not for His Majesty's Government to say whether they confer on the
Commonwealth Parliament the powers expressly conferred on the Canadian Parliament by the
British North America Act. In matters in which your Ministers do not consider it necessary or
desirable to consult the State Governments as being of Federal concern, the Canadian rule must be
applied to Australia.

The official Commonwealth communication, dated February 6th, 1909, stated, inter alia:

I may add for the information of the Secretary of State that the law advisers of the Government have
expressed the view that under sec. 51 (XXIX.) of the Constitution, the Commonwealth Parliament
has power to make such legislative provision as is necessary to secure the fulfilment of treaty
obligations, and that accordingly the powers of the Commonwealth Parliament are substantially
identical with those of Canada (Ibid.).

3. Extra-territorial Operation of Legislation.
With reference to this question, it has recently been pointed out by Lord Macmillan in the important
case of Croft v. Dunphy[54] that the Dominion of Canada has jurisdiction, quite apart from the
Statute of Westminster, to make its laws operate outside Canada, as far as such operation is
necessarily involved in the power to make laws over any given subject matter. He said[55]:--

But while the Imperial Parliament may be conceded to possess such powers of legislation under
international law and usage, the respondent contends that the Parliament of Canada has no such
powers. It is not contested that under the British North America Act the Dominion Legislature has
full powers to enact customs laws for Canada, but it is maintained that it is debarred from
introducing into such legislation any provisions designed to operate beyond its shores or at any rate
beyond a marine league from the coast. In their Lordships' opinion the Parliament of Canada is not
under any such disability. Once it is found that a particular topic of legislation is among those upon
which the Dominion Parliament may competently legislate as being for the peace, order and good
government of Canada, or as being one of the specific subjects enumerated in sec. 91 of the British
North America Act, their Lordships see no reason to restrict the permitted scope of such legislation
by any other consideration than is applicable to the legislation of a fully sovereign State.

I have elaborated an analysis of this question in my recent judgment in the case of Trustees
Executors and Agency Co. v. Federal Commissioner of Taxation[56].

As it is abundantly clear that the New Guinea Act is a law with respect to "external affairs," and in
like case a "fully sovereign State," to use Lord Macmillan's phrase, would obviously be regarded as
entitled to enact it, the Commonwealth Parliament is entitled to do so.

In Lord Macmillan's judgment[57], it was suggested, as a possibility only, that, if a Dominion
enactment were shown to be "contrary to the principles of international law," that fact might destroy
its validity. In the present case, so far from the New Guinea Act constituting a breach of such
principles, it embodies a direct execution of the principles and pledges which, by international law,
are binding upon the King's Executive Government of the Commonwealth.

I therefore conclude that the principle of Croft v. Dunphy[58] applies, and the fact of the extra-
territorial operation of the Commonwealth's laws and ordinances in relation to New Guinea does not
affect their validity.

The conclusions to be drawn from this examination of the relation between the Commonwealth and
the mandated area are as follows:--

(1)

That the lawful source of the Commonwealth's government of the Mandated Territory of New
Guinea is not to be found in sec. 122 of the Constitution.

(2)

That the Commonwealth's de facto government of the Territory has its lawful source in (a)
legislation under sec. 51 (XXIX.) of the Commonwealth Constitution following upon (b) the
Commonwealth's international right and duty to administer New Guinea according to the terms of
the mandate.

(3)

That such area is not one of the territories referred to in sec. 122.

(4)

But it is, none the less, a territory lawfully "under the control of the Commonwealth."

I am therefore of opinion that there is no reason for saying that the Mandated Territory is not one of
the "territories under the control of the Commonwealth" within the meaning of sec. 60H (1) (b) of
the Commonwealth Bank Act 1920.

It is true, upon this view, the Act applied to the area on December 14th, 1920, three days before the
mandate issued from Geneva. But the Act previously in force, the Australian Notes Act 1910-1914,
had made Australian notes a legal tender "throughout all territories under the control of the
Commonwealth" (sec. 6 (1) (b)). From 1914 until the issue of the mandate, that is, during the period
of military occupation and administration of ex-German New Guinea, the Commonwealth
authorities were always in de facto control. And in particular reference to the currency of Australian
notes it appears:--

(1)

On April 14th, 1916, Colonel Pethebridge, the then Administrator, issued a proclamation
establishing a branch of the Commonwealth Bank of Australia, and prohibiting, as from May 1916,
any other bank from carrying on business within German New Guinea.

(2)

On March 11th, 1916, the Administrator issued the Currency and Coinage Proclamation 1916,
which provided:--(a) That German notes and coinage should not be imported, but that existing
German silver coinage might be used until peace was declared. (b) That German notes or other
paper money should from June 30th, 1916, not be used. (c) That such notes might before June 30th
be surrendered to the Treasury in exchange for "bank notes of the Commonwealth of Australia" at a
specified rate of exchange.

(3)

On May 8th a further Currency and Coinage Proclamation was issued, which provided, inter alia,
that all debts due to and by persons, firms and companies should be paid "either in silver marks ... or
in notes of the Commonwealth of Australia or English or Australian coinage" at rates of exchange in
the proclamation specified.

These proclamations were included amongst those validated and kept in force by sec. 6 of the
Imperial Indemnity Act 1920 (10 & 11 Geo. V. c. 48, sec. 6, referred to in Mainka v. Custodian of
Expropriated Property[59]), and Australian notes were in fact treated as good legal tender until the
military occupation was replaced by civil government under the New Guinea Act.

In these circumstances it is difficult to resist the inference that the omission to make Commonwealth
notes legal tender by express ordinance under the New Guinea Act was because such provision was
considered as already in full operation within the mandated area. And my opinion is that, upon the
commencement of civil administration under the mandate, at the latest, the area came to answer the
description contained in sec. 60H (1) (b) of the Commonwealth Bank Act 1920.

The only remaining point is whether, by sec. 13 of the New Guinea Act, the Commonwealth Bank
Act is an Act prevented from extending to the Mandated Territory.

I regard the provisions of sec. 13 as very important. It is a clear recognition of the Commonwealth's
special international duties in relation to the Territory and its inhabitants. In the circumstances of the
present case it is unnecessary to determine whether the words of sec. 13 would be satisfied by Acts
passed by the Commonwealth Parliament after the coming into force of the New Guinea Act and
merely containing a general description to which the mandated area, and the Territories proper,
might all answer. For the Commonwealth Bank Act was passed, and commenced, prior to the
coming into force of the New Guinea Act. When the mandate issued, or, at all events, on May 9th,
1921, when civil government was established under its terms and those of the New Guinea Act
itself, the territory came within the scope and intendment of sec. 60H (1) (b) of the Commonwealth
Bank Act. Here, I think, the position as to sec. 13 is reasonably clear. Sec. 13 is dealing with all Acts
of Parliament, past as well as future. The general rule is that none of them are to be in force in the
Territory. But, so far as concerns Acts to come into force within the Commonwealth at some future
time, they may be "expressed to extend thereto," or "applied by ordinance." So far as concerns Acts
already in force within the Commonwealth itself, they can hardly be "expressed to extend thereto"
but they may be "applied by ordinance." But the whole of sec. 13 is preceded by the words "Except
as provided in ... any Act." It seems to me that such an exception from the general rule and the
special requirement is contained in the Commonwealth Bank Act, which, of its own force, operated
within every place answering or coming to answer the description of a "territory under the control
of the Commonwealth."

I am therefore of opinion that all three assumptions mentioned earlier are correct, and that, by
delivery of the 900 Australian notes, the appellant fully discharged his obligation to pay 900
Australian "£" to the respondent.

Accordingly the appeal should be allowed.

Appeal allowed with costs. Discharge so much of the order of the Central Court as directs that
judgment be entered for the plaintiff for £225 and costs and as enters such a judgment accordingly.
In lieu thereof direct the entry of judgment for the defendant upon the money claims in the action.
Remit the cause to the Central Court to enter the judgment required by this order in the appropriate
form and to make such order in respect of the costs of the action as to it may appear just.

Solicitors for the appellant, McMaster, Holland & Co.

Solicitors for the respondent, Dalrymple & Blain.

[1] (1869) 74 U.S., at p. 250; 19 Law. Ed., at p. 146.
[2] (1933) 49 T.L.R. 344; 175 L.T. Jo. 226. [Since reversed, 50 T.L.R. 143 (H.L.).]
[3] [1924] HCA 20; (1924) 34 C.L.R. 297.
[4] [1926] HCA 9; (1926) 37 C.L.R. 432.
[5] (1924) App. D. (S. Af.) 101.
[6] [1868] USSC 12; (1869) 74 U.S. 229; 19 Law. Ed. 141.
[7] [1871] USSC 126; (1872) 79 U.S. 687; 20 Law Ed. 460.
[8] [1896] USSC 118; (1896) 162 U.S. 291; 40 Law. Ed. 973.
[9] (1933) 49 T.L.R. 344.
[10] (1926) 37 C.L.R., at p. 450, per Starke J.
[11] [1924] HCA 20; (1924) 34 C.L.R. 297.
[12] (1927) N.Z.L.R. 883.
[13] [1572] EngR 467; (1601) 5 Co. Rep. 114a; 77 E.R. 232, at p. 233.
[14] (1605) 2 State Trials, at p. 128.
[15] (1625) Latch 77, 84 [1662] EngR 294; ; 82 E.R. 283, 286; Palm. 407; 81 E.R. 1145.
[16] (1625) Latch, at p. 84; 82 E.R., at p. 286.
[17] (1552) 1 Dyer 81a-83a; 73 E.R. 174-180.
[18] (1933) 49 T.L.R. 344. [Since reversed, 50 T.L.R. 143 (H.L.).]
[19] (1933) 175 L.T. Jo. 226.
[20] [1868] USSC 12; (1869) 74 U.S. 229; 19 Law. Ed. 141.
[21] [1869] USSC 74; (1869) 75 U.S. 603; 19 Law. Ed. 513.
[22] [1871] USSC 126; (1872) 79 U.S. 687; 20 Law. Ed. 460.
[23] [1877] USSC 87; (1878) 96 U.S. 619; 24 Law. Ed. 740.
[24] [1896] USSC 118; (1896) 162 U.S. 291; 40 Law. Ed. 973.
[25] (1933) 49 T.L.R. 344; 175 L.T. Jo. 226.
[26] (1933) 175 L.T. Jo., at p. 226.
[27] (1933) 175 L.T. Jo., at p. 226.
[28] (1875) L.R. 10 Q.B. 264.
[29] [1868] USSC 12; (1869) 74 U.S. 229; 19 Law. Ed. 141.
[30] (1869) 74 U.S., at pp. 251, 252; 19 Law Ed., at p. 147.
[31] (1933) 49 T.L.R. 344; 175 L.T. Jo. 226. [Since reversed, 50 T.L.R. 143 (H.L.)]
[32] [1868] USSC 12; (1869) 74 U.S. 229; 19 Law. Ed. 141.
[33] (1933) 175 L.T. Jo., at p. 226.
[34] (1927) N.Z.L.R. 883.
[35] (1926) A.C. 321.
[36] (1927) N.Z.L.R. 883.
[37] (1927) N.Z.L.R., at p. 893.
[38] (1919) N.Z.L.R. 305.
[39] (1927) N.Z.L.R., at pp. 900, 901.
[40] [1924] HCA 20; (1924) 34 C.L.R. 297.
[41] (1924) 34 C.L.R., at p. 300.
[42] (1924) App. D. (S. Af.) 101.
[43] [1924] HCA 20; (1924) 34 C.L.R. 297.
[44] (1924) App. D. (S. Af.), at pp. 119, 120.
[45] (1924) App. D. (S. Af.) 101.
[46] (1932) A.C. 304, at p. 312.
[47] (1932) A.C. 304.
[48] (1932) A.C. 304.
[49] [1906] HCA 56; (1906) 4 C.L.R. 265, at p. 286.
[50] [1921] HCA 25; (1921) 29 C.L.R. 329.
[51] (1921) 29 C.L.R., at pp. 338, 339.
[52] [1931] HCA 34; (1931) 46 C.L.R. 73, at p. 122.
[53] [1921] HCA 25; (1921) 29 C.L.R. 329.
[54] (1933) A.C. 156.
[55] (1933) A.C., at p. 163.
[56] Ante, p. 220.
[57] (1933) A.C., at p. 164.
[58] (1933) A.C. 156.
[59] (1924) 34 C.L.R., at p. 302.

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