HIGH COURT OF AUSTRALIA

                                      Lord Mayor, Councillors and Citizens

                                                           Vs.

                                                   Commonwealth

                      (Latham C.J. Rich, Starke, Dixon, McTiernan and Williams JJ.)

                                                   13 August 1947

Latham C.J.

The demurrer to the statement of claim in this action raises the question of the validity of s. 48 of
the Banking Act 1945. The plaintiff corporation, the Lord Mayor, Councillors and Citizens of the
City of Melbourne, claims against the Commonwealth and the Treasurer of the Commonwealth a
declaration that the Banking Act 1945 of the Commonwealth, or alternatively s. 48 thereof, is
invalid. The defendants' demurrer has been supported by the State of Victoria, intervening by leave,
and has been opposed by the other intervening States, South Australia and Western Australia. The
plaintiff has abandoned a claim that s. 48 of the Act is invalid on the ground that other provisions in
the Act are a law imposing taxation within the meaning of s. 55 of the Constitution.

The Commonwealth Constitution, s. 51 (xiii), gives power to the Commonwealth Parliament to
make laws for the peace, order and good government of the Commonwealth with respect to
"Banking, other than State banking; also State banking extending beyond the limits of the State
concerned, the incorporation of banks, and the issue of paper money."

The Commonwealth Parliament in the Banking Act 1945, s. 48, has made the following
provision:--

             48--(1)

             Except with the consent in writing of the Treasurer, a bank shall not conduct any
             banking business for a State or for any authority of a State, including a local
             governing authority.

             Penalty: One thousand pounds.

             (2)

             Any consent of the Treasurer under this section may apply to all such business
             conducted by any particular bank or at a particular office of a bank, or to the
             business of any particular State or authority conducted by any particular bank or at
             any particular office of a bank.

             (3)

             Until a date fixed by the Treasurer by notice published in the Gazette, this section
             shall apply only in relation to banking business conducted for a State or for an
             authority of a State, including a local governing authority, specified by the
             Treasurer by notice in writing, and, if an office of a bank is specified in the notice,
             at the office so specified.

This section does not "apply with respect to State banking"--s. 5 (1).

The statement of claim alleges that the Commonwealth Treasurer has given notice that he proposes
on or about 1st August 1947 to specify certain authorities of a State or local governing authorities,
including the City of Melbourne, to be authorities in relation to which s. 48 of the Act shall apply.
As explained in the communication of the Treasurer, "In effect this will mean that as from the date
on which this specification was made a private bank will not be able legally to conduct business on
behalf of any local governing authority specified in the notice." The term "private bank" is evidently
intended to describe banks other than the Commonwealth Bank. A subsequent communication states
that the Treasurer is satisfied that the Commonwealth Bank is in a position to provide full banking
facilities to the Council. Accordingly, the position is that the Federal Treasurer proposes, by the
exercise of the powers conferred by s. 48 of the Banking Act, to prohibit the "private banks" from
doing any banking business with the City of Melbourne corporation.

The statement of claim alleges that the Council is empowered to make by-laws for the good rule and
government of the City of Melbourne and that the Council carries on various undertakings,
including the City Abattoirs, the City Cattle Market, the Queen Victoria Market, the Fish Market,
public baths, refrigerators, weighbridges electric supply and hydraulic power undertakings; that it
manages and controls various properties, parks and the like, and administers the Health Acts within
the City of Melbourne, the Uniform Building Regulations, and the licensing and control of hackney
carriages. In the course of these activities the plaintiff "receives large sums of money amounting to
upwards of £1,800,000 per annum and makes payments (including appropriations to sinking fund,
reserves and payments of a like character) amounting to a similar sum." In order to deal with its
receipts and payments the plaintiff has established banking accounts, and the banking business of
the plaintiff has been done for the plaintiff by the National Bank of Australasia, which is a bank to
which s. 48 applies.

The council cannot compel the Commonwealth Bank to accept its business. The effect of the
specification made by the Treasurer is therefore that the Melbourne City Council will be compelled
to do its banking business with the Commonwealth Bank upon terms which are acceptable to the
Commonwealth Bank, or, alternatively, that it cannot conduct general banking business with any
bank at all, there being no State bank in Victoria doing general banking business.

Section 48 of the Banking Act is applicable to the banking business of a State or of any authority of
a State, including any local governing authority. The arguments which have been submitted to the
Court have been directed to the validity of the provision as applying in the case of a State. It has not
been argued that s. 48 may be invalid in the case of a State but valid in the case of State authorities,
including local governing authorities; that is, no question of severability has been raised on behalf
of the defendants. Further, the defendants have disclaimed absence of interest in the plaintiff as a
ground of the demurrer, and argument was not heard on that subject. It would, I suggest, have been
difficult to raise a doubt upon the matter if s. 48, instead of providing that no bank should do
business for a local governing authority without a licence from the Treasurer, had provided that no
local governing authority should do business with a bank which did not have such a licence. The
meaning of the provision is the same in either form.
The contentions for the plaintiff are--(1) s. 48 is not legislation with respect to banking; (2)
alternatively, if s. 48 is legislation with respect to banking, it is legislation with respect to State
banking, and for this reason is expressly excluded from the scope of the Commonwealth power
conferred by s. 51 (xiii) of the Constitution; (3) alternatively, if s. 48 is legislation with respect to
banking but is not legislation with respect to State banking, it is a law which is directed against an
essential State Government activity, namely the custody, control and disposition of government
funds; it involves a form of what is called "discrimination," which is forbidden by the
Commonwealth Constitution taken as a whole and is therefore invalid.

Before examining these arguments it is desirable to refer to some other provisions of the Banking
Act and certain provisions of the Commonwealth Bank Act 1945. Assent was given to both of these
Acts on the same day--3rd August 1945. The Banking Act contains general provisions relating to
authority to carry on banking business, protection of depositors, special accounts, advances and
investments, and various subjects which clearly fall within any ordinary definition of "banking."
Section 4 defines "bank" to mean "a body corporate authorised under Part II. of this Act to carry on
banking business in Australia." Section 5 provides that nothing in Part II. or V. or in ss. 48 to 56 of
the Act shall apply with respect to State banking. Part II. (ss. 6 to 28) contains provisions relating to
the carrying on of banking business and Part V. deals with interest rates. Section 48 has already been
quoted.

Part II. of the Act provides in s. 6 that "Subject to this Act, a person other than a body corporate
shall not, at any time after the expiration of six months from the commencement of this Part, carry
on any banking business in Australia." Section 7 requires a body corporate to have an authority in
writing granted by the Governor-General to carry on banking business as a condition of carrying on
such business. Section 8 provides that "The Governor-General shall, within seven days after the
commencement of this Part, grant to each body corporate specified in the First Schedule an
authority to carry on banking business in Australia." The bodies specified in the First Schedule
include, inter alia, the National Bank of Australasia Limited, with which the City Council has been
doing its banking business, and other specified banks which operate under charter or under State
Companies and Bank Acts. Section 8 also provides for the granting of licences, either
unconditionally or subject to conditions specified by the Governor-General, to other bodies
corporate to carry on the business of banking. Under s. 8 (5) it is provided that where an authority is
granted under the section subject to conditions, the Governor-General may from time to time vary
or revoke any of those conditions or impose additional conditions. The penalty for breach of a
condition is £1000 for each day: s. 8 (6). The Act contains no statement of the conditions which the
Governor-General may attach to the grant of an authority; but no question is raised by this case as to
either the construction or the validity of this provision.

The Commonwealth Bank Act 1945 carries on the Commonwealth Bank as established under earlier
Acts, which are repealed by the Act. Section 8 of the Act is as follows:--

       It shall be the duty of the Commonwealth Bank, within the limits of its powers, to
       pursue a monetary and banking policy directed to the greatest advantage of the people
       of Australia, and to exercise its powers under this Act and the Banking Act 1945 in such
       a manner as, in the opinion of the Bank, will best contribute to--

             (a)

             the stability of the currency of Australia;
             (b)

             the maintenance of full employment in Australia; and

             (c)

             the economic prosperity and welfare of the people of Australia.

Section 9 of the Act is in the following terms:--

      (1)

      The Bank shall, from time to time, inform the Treasurer of its monetary and banking policy.

      (2)

      In the event of any difference of opinion between the Bank and the Government as to whether
      the monetary and banking policy of the Bank is directed to the greatest advantage of the people
      of Australia, the Treasurer and the Bank shall endeavour to reach agreement.

      (3)

      If the Treasurer and the Bank are unable to reach agreement, the Treasurer may inform the
      Bank that the Government accepts responsibility for the adoption by the Bank of a policy in
      accordance with the opinion of the Government and will take such action (if any) within its
      powers as the Government considers to be necessary by reason of the adoption of that policy.

      (4)

      The Bank shall then give effect to that policy.

The Act contains provisions relating to central banking functions of the Commonwealth Bank, to
the general banking business of the bank and to other departments of the bank.

Under s. 8 the opinion of the bank determines the manner in which the powers of the bank shall be
used for the purpose of promoting the objects specified under the headings (a), (b) and (c), and s. 9
enables the Treasurer, in the event of difference of opinion, to control the monetary and banking
policy of the bank. I can see no legal ground for objecting to the provision that the powers of the
bank are to be utilized for the purpose of attaining the general objectives mentioned, even though
the Commonwealth Parliament has no specific power of legislation with respect to certain of those
objectives. The Commonwealth Parliament has full power of legislating with respect to the currency
of Australia under the Constitution, s. 51 (xii.). But the Commonwealth Parliament has no power to
legislate with respect to "the maintenance of full employment in Australia" and "the economic
prosperity and welfare of the people of Australia" as subjects in themselves. The Commonwealth
Parliament is a Parliament which possesses only "enumerated or selected legislative powers"--a
proposition "as to which this Court has never faltered" (Amalgamated Society of Engineers v.
Adelaide Steamship Co. Ltd.[1]). As in the United States of America, the State Governments "are
the ordinary governments of the country; the federal government is its instrument only for particular
purposes" (Woodrow Wilson in Constitutional Government in the United States (1908), pp. 183, 184,
quoted by Douglas J. in New York v. United States[2]). The Commonwealth Parliament has no
general power to make laws for the peace, order and good government of the people of Australia. In
s. 51, which is the principal source of the legislative powers of the Commonwealth Parliament,
power is conferred in the following words--"The Parliament shall, subject to this Constitution, have
power to make laws for the peace, order, and good government of the Commonwealth with respect
to--(i.) Trade and commerce with other countries and among the States," and thirty-nine other
specific subjects. Other sections confer powers to legislate with respect to other specific subjects.
No power is conferred upon the Commonwealth Parliament to make laws with respect to the
subjects of full employment in Australia or the economic prosperity and welfare of the people of
Australia.

But the Commonwealth Parliament may exercise the powers which it does possess for the purpose
of assisting in carrying out a policy which may affect matters which are not directly within its
legislative powers. So this Court has held in Osborne v. The Commonwealth[3]; Radio Corporation
Pty. Ltd. v. The Commonwealth[4]; and see other cases cited in South Australia v. The
Commonwealth (Uniform Tax Case)[5]. There is no legal obstacle to the use of the Commonwealth
Bank as a means of aiding Government policy with respect to employment and economic
conditions.

Accordingly, in my opinion, no objection to s. 48 of the Banking Act can be founded merely upon
the fact that legislative directions are given to the Commonwealth Bank by ss. 8 and 9 of the
Commonwealth Bank Act. This conclusion, however, simply means that it is within the power of the
Commonwealth Parliament to give directions to, or to provide for directions being given, the
Commonwealth Bank as to the manner in which it is to exercise its functions. It leaves untouched
the separate and distinct question as to the degree of control over the banking business of States and
State authorities which can be exercised by the Commonwealth Parliament under the power to
legislate with respect to banking.

In the first place, it is contended for the plaintiff that s. 48 is not legislation with respect to banking.
The argument is that s. 48 of the Banking Act simply picks out States and State authorities for
subjection to a Commonwealth banking monopoly without any reason which can be described as a
reason grounded upon any considerations relating to banking. In other words, s. 48, it is said, is
really a law with respect to States and State authorities, controlling them in respect of their banking
business, and is not a law with respect to banking. Various analogies were suggested. It was put that
if s. 48 is valid in its present form a provision would be equally valid which prohibited a bank from
conducting any banking business with any person except with the consent in writing of the
Treasurer. If it were sought to obtain a monopoly for the Commonwealth Bank or for any other bank
favoured by the Treasurer in this manner the result would be the exclusion of particular persons or
classes of persons from the utilization of banking facilities. Under such a provision all persons
professing a particular religion or belonging to a particular political party or following a particular
occupation could be prevented from using any banking facilities or could be compelled to deal with
a particular bank selected by the Treasurer. Such legislation, it was contended, would not be
legislation truly with respect to banking, but would be legislation with respect to the particular
classes of persons arbitrarily selected by the Treasurer for disqualification or limitation in respect of
banking business.

The defendants replied to this contention by referring to Huddart Parker Ltd. v. The
Commonwealth[6] and Victorian Stevedoring and General Contracting Co. Pty. Ltd. v. Dignan[7].
In these cases it was assumed by the Court that the power of the Commonwealth Parliament to make
laws with respect to trade and commerce with other countries and among the States enabled the
Parliament (by the Transport Workers Act 1928-1929) to require persons to obtain licences as a
condition of engaging in certain operations in such trade and commerce. Section 48 of the Banking
Act was, it was submitted, a similar provision requiring banks to obtain a licence from the Treasurer
as a condition of engaging in banking business for States or State authorities. But there are at least
two points of distinction between these cases and the present case. Under the Transport Workers Act
every person had a right to obtain a renewal of a licence, and the reasoning upon which this decision
was based shows, in my opinion, that every person had a right to obtain a licence (R. v. Mahony; Ex
parte Johnson[8]), he could be deprived of his licence only upon specified grounds which were
relevant to the work of transport workers, and there was an appeal to a court against deprivation of
licence. Section 48 of the Banking Act leaves the grant or refusal of consent entirely to the
discretion of the Treasurer. In the second place, s. 48 singles out for special treatment the banking
business of States and State authorities. There was no feature of this character in the Transport
Workers' Acts.

Under the section the Treasurer can give consent in the case of one State and refuse it in the case of
another State. The consent (sub-s. (2)) may apply to all the banking business for a State or State
authority conducted by a particular bank or at a particular office of a bank or to the business of any
particular State or authority conducted by any particular bank or at a particular office of a bank. It
would appear, therefore (though this matter was not fully argued), that the Treasurer could not limit
his consent to some particular kind of banking business--the consent must be to all or none of the
banking business for a State conducted by a particular bank or by a particular bank at a particular
place. Thus, it is argued, the character of the banking business done cannot be a ground for giving
or withholding a licence, so that the section simply gives the Treasurer an arbitrary discretion, not
related to any consideration affecting banking, to prohibit banking operations by a State.

The plaintiff's argument directed to s. 48 as it now actually stands is based upon the proposition that
there can be no reason of a banking character for making a special provision for States or State
authorities. It is contended for the defendants, on the other hand, that the establishment of banks,
and in particular of central banks, for the purpose of conducting the banking business of
governments and managing public finance is a well-recognized department of banking. This
contention, expressed in general terms, appears to me to be well founded.

There are many instances of special relations between governments and banks discharging central
banking functions and to a large extent managing governmental financial operations. The Bank of
England has been a financial agent of the Government of Great Britain for many years. So also in
the United States of America banks have been established as instrumentalities of governments--per
Griffith C.J. in Heiner v. Scott[9], referring to M'Culloch v. Maryland[10] and Osborn v. Bank of
United States[11]. But while the contention of the defendants accurately states the position in the
case of a unitary constitution where it is not necessary to consider the relation in which States stand
to a Commonwealth or Provinces to a Dominion or other federal organism, it cannot be accepted
and applied without limitation in the case of a constitution where the States or Provinces are not
subordinate to the federal power except in respect of particular matters. It is one thing for a
Government to establish a bank for the purpose of doing the banking business of that Government.
It is quite a different thing for the Parliament and Government of a Commonwealth to establish a
bank and to require the States to do all their business with that bank. The giving of a monopoly of
governmental banking business to a particular bank selected by a Government is a not abnormal
feature of legislation with respect to banking, but this statement does not cover the case of one
Government seeking to select a bank to do all the banking business of another Government, both
governments being subject to a federal constitution. Thus, in my opinion, though the argument that
s. 48 is not legislation with respect to banking should not be accepted, the rejection of this argument
still leaves open for consideration the question of the validity of such a provision under a
constitution establishing not only a federal Government with specified and limited powers, but also
State Governments which, in respect of such powers as they possess under the Constitution, are not
subordinate to the federal Parliament or Government. State constitutional powers are, subject to the
Commonwealth Constitution, expressly preserved by the Commonwealth Constitution--ss. 106,
107.

The second argument for the plaintiff is that if s. 48 is a law with respect to banking it is a law with
respect to State banking, and that the express terms of s. 51 (xiii.) of the Constitution prevent the
Commonwealth Parliament from making any law with respect to State banking. The contention that
s. 48 is a law with respect to State banking challenges an assumption upon which s. 48 is based.
Section 5 of the Act expressly provides that s. 48 shall not apply with respect to State banking.
Section 48 expressly relates to the conduct of banking business by a bank (i.e. a bank authorized
under Part II.--see s. 4) for a State. Thus s. 48 assumes that the conduct of banking business by a
bank (not being a State bank--s. 5) is not "State banking." If this assumption is wrong, s. 48 is
invalid as dealing with a subject expressly removed by s. 51 (xiii.) of the Constitution from
Commonwealth legislative power.

A banker conducts a business of banking with customers. The customer of a banker does his
banking business with the banker. That which the banker does as a banker is the business of
banking, and that which the customer does as a customer of the banker is also the business of
banking. If, under the power to legislate with respect to "banking," there is power to legislate with
respect to the conduct of customers of bankers in their capacity as such customers--and this is a
proposition which can hardly be disputed--then, it is argued for the plaintiff, when it becomes
necessary to interpret the words "State banking" the same meaning must be given to "banking" in
that phrase. That is to say, the word "banking" in the exception of "State banking" must be construed
as including the business of banking if the State establishes and conducts a bank, and also the
business done by the State as a customer of any bank. It is contended that it is only upon this view
that the same meaning can be given to the word "banking" where it is twice used in the phrase
"banking other than State banking."

This argument is plausible, but in my opinion it should not be accepted. It is true that the power to
legislate with respect to banking includes a power to legislate with respect to customers of a bank in
their capacity as customers of the bank. So also I interpret the exception of "State banking" as
excluding any power to make laws not only with respect to banks conducted by States, but also with
respect to customers, in their capacity as customers, of banks so conducted. Upon this construction
the same meaning is given to the word "banking" in each case where it appears.

"State banking" cannot, in my opinion, be construed as meaning banking operations transacted
within a State, i.e. intra-State banking. Such a construction is, it is true, suggested by the exclusion
from federal legislative power of "State banking" together with the express inclusion within that
power of "State banking extending beyond the limits of the State concerned." But, if placitum (xiii.)
were so interpreted the federal power could be exercised only under the provision relating to "State
banking extending" &c., because all other banking in Australia would be banking within a State
and, upon the construction suggested, would be "State banking" and therefore excluded from federal
legislative power. The result would be that the power to make laws with respect to "banking" would
have no possible field of operation. The phrase "State banking extending beyond the limits of the
State concerned" shows that the words "State banking" are not used to mean banking transactions
conducted entirely within a State, because if that were the case the phrase quoted would be self-
contradictory.

The words to be construed in the exception "other than State banking" constitute a compound
phrase--"State banking." The question is--What is the natural signification of those words? In my
opinion if the question were asked with respect to a particular country, "Is there any State banking in
the country?" the question would be understood to be an inquiry whether the State conducted banks
in that country. It would not be understood to be an inquiry whether some State had dealings as a
customer with any banks in that country. "State banking" in my opinion refers to banks established
and conducted by a State or by an authority established under State law and representing a State.
The exception contained in the words "other than State banking" prevents the Commonwealth
Parliament from passing any laws with respect to the establishment, management and conduct of
such banks by the State, or with respect to the conduct of customers of such banks in their capacity
as such customers. But the exception does not prevent the Commonwealth Parliament from making
laws with respect to the conduct of customers (including States) of banks other than State banks.
Accordingly, in my opinion, it should not be held that s. 48 of the Banking Act is invalid as being
legislation with respect to State banking.

The third argument of the plaintiff is that s. 48 introduces a degree of control of State banking
activities which is forbidden by the Federal Constitution. The proposition upon which the plaintiff
relies is that the Commonwealth Parliament cannot, even under a legislative power expressly
conferred upon it, make a "discriminatory" as distinct from a general, law, which is aimed at or
directed against an essential governmental power or function of a State.

It may be difficult to determine in some cases whether a function in fact undertaken by a
Government is a governmental function which, under a federal constitution, cannot be controlled by
another Government established under the constitution. But there can be no doubt that not only the
raising of money by taxation, but also provision for the custody, management and disposition of
public revenue moneys are activities which are essential to the very existence of a Government. It is
equally essential that a Government should have the power of borrowing money and of providing
for the custody and expenditure of loan moneys. In M'Culloch v. Maryland[12], it was held that a
bank was "a convenient, a useful, and essential instrument in the prosecution of" the "fiscal
operations" of the Government of the United States. The necessity of banking facilities to the
Government of a country was emphasized in Weston v. City Council of Charleston[13], where
Marshall C.J. referred to the Bank of the United States as "an instrument essential to the fiscal
operations of the Government." It would be impossible in practice for a State Government to exist
without making provision for the custody and expenditure of public moneys, and it could not do this
in modern conditions without using a bank.

The various State Audit Acts contain provisions with respect to the custody and disposition of public
moneys which cannot operate according to their terms if s. 48 is valid and is put into operation. I
mention the following by way of illustration. The Audit Act 1928 Vict., s. 22, requires receivers of
public revenue to pay moneys into such bank at such place and in such manner as the Governor (i.e.
the Governor of the State) in Council appoints. For failure to comply with this provision there is a
penalty not exceeding £500. Section 26 is a similar provision. The Audit Act 1921-1936 S.A., s. 18,
is as follows:--
       The Treasurer may, from time to time, agree with any bank upon such terms and
       conditions as he may think fit for the receipt, custody, payment, and transmission of
       public moneys within or without the State, and for advances to be made and for the
       charges in respect of the same, and for the interest payable by or to the bank upon
       balances or advances respectively, and generally for the conduct of the banking
       business of the State.

Section 19 provides that:--

             (1)

             The Public Account shall be kept in such bank and under such subdivisions (if
             any) as the Treasurer may, in writing, direct.

             (2)

             All moneys paid into any bank to the Public Account shall be deemed to be public
             moneys and the property of His Majesty, and to be money lent by His Majesty to
             the bank.

The Audit Act 1904 W.A., s. 21, is in the same terms as s. 18 of the South Australian Act.

If s. 48 of the Banking Act is valid, these provisions will become ineffective--it will be the
Commonwealth Treasurer, and not the State Treasurer who will determine in what bank the State
moneys will be kept and how they may be withdrawn and for what purposes advances may be made.
These matters are plainly subjects of great importance to the States.

It is conceded for the plaintiff that the Commonwealth Parliament may pass general legislation with
respect to banking, and that it may specify conditions (relevant to the subject of banking) which
must be complied with by banks and by customers of banks. But s. 48 is specifically directed to and
limited to States as customers of banks. It has the effect of submitting their banking operations to
the control of the Commonwealth Bank, which is in turn subject to the control of the
Commonwealth Treasurer (Commonwealth Bank Act, ss. 8 and 9). If s. 48 is valid, a State and a
State authority can, in the absence of any available State bank, be compelled to do all its banking
business with the Commonwealth Bank. This is stated by the Treasurer to be the object (as it is
plainly the consequence) of the notification proposed to be made under s. 48. As the
Commonwealth Bank is under no legal obligation to accept the business of any State--either upon
any particular terms or at all--the result is that the operations of a State in paying money into a
bank, in drawing out money, and in obtaining advances from a bank, will be subject to
Commonwealth control. Such operations are included within banking business as generally
conducted: See Commissioners of State Savings Bank of Victoria v. Permewan, Wright & Co.
Ltd.[14]. Thus the Commonwealth Bank, acting under direction of the Commonwealth Treasurer,
could, so far as legal obligation goes, decline to accept moneys or to allow cheques to be drawn for
particular purposes or at all, and could refuse to make advances for particular purposes--even
though the Parliament of the State had appropriated moneys for those purposes. It is contended that
legislation which is specifically directed towards--or, as it is put, against--a State and State
authorities in relation to the custody, control and management of public revenue and loan moneys is
legislation which is forbidden by the Constitution as dealing, and especially as dealing in a
discriminatory manner, with an essential State governmental power, capacity, and function.

In D'Emden v. Pedder[15], it was decided that "when a State attempts to give to its legislative or
executive authority an operation which, if valid, would fetter, control, or interfere with, the free
exercise of the legislative or executive power of the Commonwealth, the attempt, unless expressly
authorized by the Constitution, is to that extent invalid and inoperative." This rule was, in that case,
applied in favour of the Commonwealth. In Federated Amalgamated Government Railway and
Tramway Service Association v. N.S.W. Railway Traffic Employees Association[16], and other cases,
the rule was extended so as to apply in favour of a State as a reciprocal limitation upon
Commonwealth legislative power. In the Engineers' Case[17], this extension of the rule was
repudiated. It was held that D'Emden v. Pedder[18] really stated in other words the effect of s. 109
of the Constitution, which gives supremacy over State legislation to laws made under powers
conferred upon the Commonwealth Parliament by the Constitution. It was held, therefore, that it
was a fundamental mistake to treat what had been called the "reserved powers" of the States as a
basis for implying any limitation upon Commonwealth power. The "reserved powers" of the States
can be ascertained only after the extent of Commonwealth power has been determined. A grant of
power cannot be construed by first purporting to describe the residue left by the grant. I venture to
refer to what I have said on this matter in the Uniform Taxation Case[19]. In the Engineers'
Case[20] it was decided that "laws validly made by authority of the Constitution bind, so far as they
purport to do so, the people of every State considered as individuals or as political organisms called
States--in other words, bind both Crown and subjects"[21]. Thus the validity of a Commonwealth
law is to be determined by reference to the terms of the Constitution, without applying any
presumption that there are certain powers reserved to the States which must not be impaired or
interfered with by federal laws.

But this principle does not mean that the States are in the position of subjects of the
Commonwealth. The Constitution is based upon and provides for the continued co-existence of
Commonwealth and States as separate Governments, each independent of the other within its own
sphere. The Engineers' Case[22] recognizes, in the case of State legislation, a difference between
"provisions which apply generally to the whole community without discrimination" and "an act of
the State legislature discriminating against Commonwealth officers." The former may be valid and
the latter might be invalid[23]. In Pirrie v. McFarlane[24], there are several references to the same
distinction--see the report[25]. In West v. Commissioner of Taxation (N.S.W.)[26], Dixon J. made
the observation that the Engineers' Case[27] "does not appear to deal with or affect the question
whether the Commonwealth Parliament is authorized to enact legislation discriminating against the
States or their agencies." Dixon J. repeated this comment in Essendon Corporation v. Criterion
Theatres Ltd.[28]. In West's Case[29] Evatt J. referred to the distinction between general laws and
laws "discriminating against" Commonwealth or State officials and said:--"A different angle of
approach to the question of discriminatory legislation is this, that it must at least be implied in the
Constitution, as an instrument of Federal Government, that neither the Commonwealth nor a State
legislature is at liberty to direct its legislation toward the destruction of the normal activities of the
Commonwealth or States." See also the Uniform Taxation Case[30], as to the distinction between
general legislation and legislation limited to a particular case. This distinction has been regarded as
of significance by the Privy Council in determining questions of the validity of laws: See e.g. Great
West Saddlery Co. Ltd. v. The King[31].

In the United States of America, as in Australia, the doctrine of immunity of State instrumentalities
from federal legislative control has had a chequered career. In M'Culloch v. Maryland[32] it was
decided that a State could not impose a tax upon a bank incorporated by Congress for fiscal
purposes of the Government because "the states have no power, by taxation or otherwise, to retard,
impede, burden or in any manner control the operations of the constitutional laws enacted by
congress to carry into execution the powers vested in the general government. This is, we think, the
unavoidable consequence of that supremacy which the constitution has declared." In Weston v.
Charleston[33] the Supreme Court declared invalid a State Act taxing stock of the United States.
The principle stated in these and similar cases was not limited to the power of taxation, but applied
to any State attempt to control federal instrumentalities.

In Veazie Bank v. Fenno[34], it was held that Congress could impose a tax upon the circulation of
notes issued by a bank chartered under State law of such amount as to prevent the use of such notes.
In this case the Court, however, included a saving clause in its reasons for judgment in the following
terms:--"It may be admitted that the reserved rights of the States, such as the right to pass laws, to
give effect to laws through executive action, to administer justice through the courts, and to employ
all necessary agencies for legitimate purposes of State Government, are not proper subjects of the
taxing power of Congress"[35].

In The Collector v. Day[36], the Court applied the general principle of M'Culloch v. Maryland[37]
in favour of State instrumentalities and held that the salary of a State judge could not be taxed under
Acts of Congress which were general taxation laws. The Court said--"in respect to the reserved
powers, the state is as sovereign and independent as the general government. And if the means and
instrumentalities employed by that government to carry into operation the powers granted to it are
necessarily, and, for the sake of self-preservation, exempt from taxation by the states, why are not
those of the states depending upon their reserved powers, for like reasons, equally exempt from
Federal taxation? Their unimpaired existence in the one case is as essential as in the other. It is
admitted that there is no express provision in the Constitution that prohibits the general government
from taxing the means and instrumentalities of the states, nor is there any prohibiting the states from
taxing the means and instrumentalities of that government. In both cases the exemption rests upon
necessary implication, and is upheld by the great law of self-preservation; as any government,
whose means employed in conducting its operations, if subject to the control of another and distinct
government, can exist only at the mercy of that government"[38]. The court relied upon what I have
called the saving clause in Veazie Bank v. Fenno[39]. Thus the doctrine of reciprocal immunity of
Federal and State instrumentalities was fully established.

Many difficulties arose in the application of this doctrine, and in Graves v. New York[40], The
Collector v. Day[41] was overruled. It was held that State income tax could validly be imposed upon
Federal officers, the non-discriminatory nature of the law being made the basis of the decision. This
rule was applied in other cases, such as James v. Dravo Contracting Co.[42] (State taxation of the
gross receipts of a contractor with the federal Government); Helvering v. Gerhardt[43] (federal
taxation of salaries of officers of a State Port Authority); Allen v. Regents of University System of
Georgia[44] (federal taxation of a corporation created as a State instrumentality to manage, inter
alia, athletic exhibitions); O'Malley v. Woodrough[45] (State taxation of the salary of a federal
judge). In all these cases the law was upheld expressly on the ground that it was non-discriminatory.

The case of New York v. United States[46] corresponds to the Engineers' Case[47] in Australia. It
represents a further endeavour to enunciate a principle which will allow Federal and State
Governments to exercise powers, particularly of taxation, over the same persons, without conflict.
The judgments, proceeding as they do upon differing grounds, illustrate the difficulties of the
problem. It is recognized that a federal system fails unless the federal and State Governments can
each carry out their functions as contemplated by the Constitution. The subordination of either to
the other is inconsistent with a federal system. But, as in the Engineers' Case[48], it was held that
some federal legislation, even taxation legislation, is applicable to the States. It was held that the
State of New York, which owned and operated certain mineral water springs, was not immune from
a tax imposed upon mineral waters by an Act of Congress. (Similarly in Australia it has been held
that the States are bound to pay federal customs and excise duties (R. v. Sutton (Wire Netting
Case)[49], and Attorney-General (N.S.W.) v. Collector of Customs (Steel Rails Case)[50]).

In New York v. United States[51] all the justices conceded that the powers of the Federal
Government cannot be used to destroy State Governments and vice versa, but the majority was of
opinion that the extension of governmental activities into many trading and similar activities had
made it impracticable to uphold a general rule of immunity in the broad terms of M'Culloch v.
Maryland[52] and The Collector v. Day[53]. It was admitted, however, by all the justices that there
are some activities which are necessarily governmental in character (cf. Uniform Taxation
Case[54]), and that federal and State legislatures are limited in their powers of legislation with
respect to agencies of other governments.

In the judgment of Frankfurter and Rutledge JJ. it is stated that the fact that "ours is a federal
constitutional system ... carries with it implications regarding the taxing power as in other aspects of
government ... Thus, for Congress to tax State activities while leaving untaxed the same activities
pursued by private persons would do violence to the presuppositions derived from the fact that we
are a Nation composed of States"[55]. (This statement may be compared with those which I have
quoted from Australian cases distinguishing between general legislation which includes States and
State agencies and legislation described as discriminating against States and their agencies.) The
limitation upon federal legislative power in relation to the States is expressed by these learned
justices in the following words:--"There are, of course, State activities and State-owned property
that partake of uniqueness from the point of view of intergovernmental relations. These inherently
constitute a class by themselves. Only a State can own a Statehouse; only a State can get income by
taxing. These could not be included for purposes of federal taxation in any abstract category of
taxpayers without taxing the State as a State. But so long as Congress generally taps a source of
revenue by whomsoever earned and not uniquely capable of being earned only by a State, the
Constitution of the United States does not forbid it merely because its incidence falls also on a State.
If Congress desires, it may of course leave untaxed enterprises pursued by States for the public good
while it taxes like enterprises organized for private ends. Cf. Springfield Gas and Electric Co. v.
City of Springfield2(1921) [1921] USSC 177; 257 U.S. 66 [66 Law. Ed. 131].; University of Illinois
v. United States3(1933) [1933] USSC 66; 289 U.S. 48, at p. 57 [77 Law. Ed. 1025, at p. 1028].;
Puget Sound Power and Light Co. v. City of Seattle4(1934) [1934] USSC 70[1934] USSC 70; ; 291
U.S. 619 [78 Law. Ed. 1025].. If Congress makes no such differentiation and, as in this case, taxes
all vendors of mineral water alike, whether State vendors or private vendors, it simply says, in
effect, to a State: You may carry out your own notions of social policy in engaging in what is called
business, but you must pay your share in having a nation which enables you to pursue your
policy"[59]. The federal law was upheld because it was not specifically directed against the States,
but levied a tax "exacted equally from private persons upon the same subject matter"[60].

Rutledge J., in a separate opinion, based his decision upon the absence of discrimination against a
State. He explained what was meant by discrimination in this connection by saying that he took the
limitation against discrimination "to mean that state functions may not be singled out for taxation
when others performing them are not taxed or for special burdens when they are," and he added,
"Perhaps there are other limitations also"[61].

Stone C.J., Reed, Murphy and Burton JJ., though agreeing in regarding "as untenable" the distinction
which had been drawn in earlier cases between "governmental" and "proprietary" interests of States,
said: "Concededly a federal tax discriminating against a State would be an unconstitutional exertion
of power over a coexisting sovereignty within the same framework of government"[62]. They
proceeded to observe that even a federal tax which was not discriminatory as to the subject matter
"may nevertheless so affect the State, merely because it is a State that is being taxed, as to interfere
unduly with the State's performance of its sovereign functions of government"[63]. (It may be
observed, with respect, that this statement of principle renders it necessary to distinguish between
the "sovereign functions of Government" performed by a State and other functions assumed and
performed by it.) It is said that a tax "even though non-discriminatory, may be regarded as
infringing its sovereignty"[64] because a sovereign Government was the taxpayer. The test is stated
to be whether the tax, even if non-discriminatory, "unduly interferes with the performance of the
State's functions of government"[65]. A law which specifically and directly interfered with a State's
functions of government would plainly be invalid under this principle--whether it was or was not a
taxation law.

I quote these American decisions, not as authorities upon the construction of the Australian
Constitution, but as illustrating in an instructive manner the method by which an endeavour has
been made to solve a problem which necessarily arises under a federal constitution. The relevant
result which emerges is the same as that which is suggested by the more recent cases in this Court to
which reference has been made--namely that federal laws expressed in general terms may apply to
the States (as was shown in the Engineers' Case[66]) but that federal laws which "discriminate"
against the States are not laws authorized by the Constitution. Laws "discriminate" against the States
if they single out the States for taxation or some other form of control and they will also be invalid
if they "unduly interfere" with the performance of what are clearly State functions of government.

I have some difficulty in understanding how "discrimination" in a precise sense can be shown in a
law applying only to one person or class of persons in respect of a particular subject matter.
Discrimination appears to me to involve differences in the treatment of two or more persons or
subjects. Legislation with respect only to one or more persons or with respect only to one or more
subjects is not, I suggest with respect, properly described as discriminating against other persons or
other subjects simply because it leaves them alone. I refer to what I have said as to the nature of
discrimination (but in reference to administrative decisions) in Riverina Transport Pty. Ltd. v.
Victoria[67]. In New York v. United States[68] and the other cases to which I have referred in which
it has been held that a law may be invalid on the ground of "discrimination," the word
"discrimination" is, I think, really used in the sense explained by Douglas J. in New York v. United
States[69]--that is, singling out another government and specifically legislating about it.

But why should legislation "discriminating" in this--or any other sense--against States or
Commonwealth (as the case may be) be held to be invalid? It is true that taxation laws made by the
Commonwealth Parliament must not discriminate between States or parts of States--Constitution, s.
51 (ii.). But this specific provision against discrimination in the case of this class of laws emphasises
the absence from the Constitution of any provision prohibiting Federal legislation "discriminating"
against the States or prohibiting State legislation "discriminating" against the Commonwealth.

In my opinion the reason why such legislation is invalid is that what is called "discrimination"
shows that the legislation is really legislation by the Commonwealth with respect to a State or State
functions as such and not with respect to the subject in respect of which it is sought to bind the
State--or, in the case of a State law specifically dealing with and seeking to control Commonwealth
functions, that the State Parliament is really endeavouring to make laws with respect to the
Commonwealth or Commonwealth functions as such. The Commonwealth Parliament has no power
to make laws with respect to State governmental functions as such, and the State Parliaments have
no power to make laws with respect to Commonwealth governmental functions as such. It is upon
this ground, in my opinion, that what is called "discriminatory" legislation may properly be held to
be invalid. I refer to what I said upon this subject in West v. Commissioner of Taxation[70].

Similarly, federal legislation which, though referring to a subject of federal power, is really
legislation about what is clearly a State governmental function, may be said to "interfere unduly"
with that function and therefore to be invalid. "Undue" interference is a rather vague conception,
and an attempt to apply it as a standard for determining the validity of legislation would invite and
would certainly produce differences of opinion which would often be due to other than objective
considerations. In my opinion the invalidity of a federal law which seeks to control a State
governmental function is brought about by the fact that it is in substance a law with respect to a
subject as to which the Commonwealth Parliament has no power to make laws. Though there will
sometimes be difficulties in applying such a criterion, this is a more satisfactory ground of decision
than an opinion that a particular federal "interference" with a State function reaches a degree which
is "undue."

The application of these principles in the present case brings about the conclusion that s. 48 of the
Banking Act is invalid. The section requires the consent of the Treasurer to the conduct of banking
business by a bank only in the case of States and State authorities, including local governing
authorities. It singles out States and State agencies and creates a rule for them and for no others. It is
in substance legislation about States and State authorities. It can fairly be described as being aimed
at or directed against States--and it none the less falls within this disqualifying category because it
is also aimed at and directed against what are called "private banks." On this ground, in my opinion,
s. 48 is invalid.

No reference was made in argument to a provision of the Financial Agreement (see Financial
Agreement Act 1928) which, in my opinion, is relevant to the question raised by the demurrer.
Section 105A (5) of the Constitution provides in relation to such agreements as the Financial
Agreement:--"Every such agreement and any such variation thereof shall be binding upon the
Commonwealth and the States parties thereto notwithstanding anything contained in this
Constitution or the Constitution of the several States or in any law of the Parliament of the
Commonwealth or of any State." Thus no legislation, whether federal or State, can be valid if it is
inconsistent with the Financial Agreement. The provisions in the Agreement may be varied by
another agreement duly made in accordance with s. 105A, but not by either federal or State statutes
independently of such other agreement.

In the Financial Agreement (see schedule to the Act), Part I. (5), last paragraph, the following
provision appears:--"Notwithstanding anything contained in this Agreement, any State may use for
temporary purposes any public moneys of the State which are available under the laws of the State,
or may, subject to maximum limits (if any) decided upon by the Loan Council from time to time for
interest, brokerage, discount, and other charges, borrow money for temporary purposes by way of
overdraft, or fixed, special or other deposit, and the provisions of this Agreement other than this
paragraph shall not apply to such moneys."
This provision confers upon a State a right to borrow money by way of overdraft subject to certain
conditions. These conditions are that the borrowing must be for temporary purposes, and that any
decisions of the Loan Council as to maximum limits for interest, brokerage, discount and other
charges must be observed.

Lending money on overdraft by a bank and borrowing money by a customer on overdraft from a
bank are "banking business"--Commissioners of State Savings Bank of Victoria v. Permewan,
Wright & Co. Ltd.[71]. Such operations are therefore included within the business for which the
consent of the Federal Treasurer is required when s. 48 of the Banking Act is applied. The right to
borrow money on overdraft includes (if, indeed, it does not actually mean) a right to borrow from a
bank. The word "overdraft" is the word most commonly used to describe advances by a bank.

An ordinary borrowing by overdraft involves the right to draw cheques up to an agreed limit,
reduction of indebtedness from time to time by the payment of moneys into the bank, and the
charging of interest by the bank. To borrow money in this way (subject only to the conditions
specified in the Agreement) is a right conferred upon a State by the Financial Agreement and no
law, federal or State, can limit or restrict it. Federal law cannot validly provide that this right shall
not be exercised except with the consent of the Federal Treasurer. Section 48 attempts to subject the
State in the exercise of this right not even to the control of the Loan Council (which consists of both
Commonwealth and State representatives), but to the control of the Federal Treasurer, who is one of
the members of the Loan Council. Such a provision must, in my opinion, in view of the terms of s.
105A (5) of the Constitution, be held to be invalid in so far as it applies to borrowing on overdraft
by any State.

My conclusion that s. 48 is invalid is not affected by the facts that s. 48 does not apply and, by
reason of the terms of the Constitution, s. 51 (xiii.), could not have been made applicable to State
banking, and that the Parliament of Victoria could, if it thought proper, establish a State bank with
general banking functions. Such a bank would, it is true, be free from Federal control under s. 48 or
under any law passed by the Commonwealth Parliament under the power to make laws with respect
to banking. But it would still be the case that s. 48 is a provision aimed at the States in respect of
what is undeniably an essential governmental function, that it is "discriminatory" in the sense above
explained, and that it makes the exercise of a right assured to the States by the Financial Agreement
dependent upon Federal acquiescence or permission. The exclusion of State banking from s. 48 thus
does not provide a reply to the objections to the validity of the section upon which my conclusion is
based.

For the reasons stated, I am of opinion that s. 48 is wholly invalid. The demurrer should be
overruled and a declaration should be made that s. 48 of the Banking Act 1945 is void. The plaintiff
claimed a declaration that the whole of the Banking Act is invalid, but it is not necessary, for the
purposes of this case, to express an opinion as to the validity of any provision other than s. 48.

Rich J.

The question raised by the demurrer now before us is as to the constitutional validity of s. 48 of the
Banking Act 1945, which, in effect, prohibits a bank from conducting any banking business for a
State or for any authority of a State, including a local governing authority, except at the will of the
Commonwealth Treasurer. It is sought, on behalf of the Commonwealth, to support the provision by
reference to s. 51, pl. (xiii.), of the Commonwealth Constitution, which grants to the Parliament of
the Commonwealth power to make laws with respect to banking, other than State banking: also
State banking extending beyond the limits of the State concerned, the incorporation of banks and the
issue of paper money.

I may say at once that I agree with the submissions that the section relates to banking, and that it
does not relate to State banking in the sense in which that phrase is used in the placitum, namely the
carrying on by the State of the business of banking. While the word "banking" is sometimes used in
a colloquial and crude sense to mean the payment of money to the credit of a customer's account at a
bank, the word in its normal and ordinary signification denotes the business of banking. Some
assistance in defining "banking" can be obtained from the Bills of Exchange Act 1909-1936. In this
Act the word "banker includes a body of persons, whether incorporated or not, who carry on the
business of banking," and though banking is not defined in this Act it seems reasonable to believe
that one legislative interpretation of the word would be the business carried on by a banker. In the
case of Commissioners of State Savings Bank of Victoria v. Permewan, Wright & Co. Ltd.[72],
Isaacs J., as he then was, said: "The fundamental meaning of the term" (banking) "is not, and never
has been, different in Australia from that obtaining in England. Various writers attempt various
definitions, more or less discordant, and many of them referring to functions that are now very
common and convenient, and even prominent, as if they were indispensable attributes. The essential
characteristics of the business of banking are, however, all that are necessary to bring the appellants
within the scope of the enactments" (s. 83 of the Victorian Instruments Act 1890 and s. 88 of the
Bills of Exchange Act 1909) "and these may be described as the collection of money by receiving
deposits upon loan, repayable when and as expressly or impliedly agreed upon, and the utilization of
the money so collected by lending it again in such sums as are required. These are the essential
functions of a bank as an instrument of society." And see Thomson's Dictionary of Banking, 9th ed.
(1939), p. 55. In my opinion s. 51 (xiii.) must be construed in the light of what I consider to be the
ordinary and normal meaning of the word "banking" and if this be so, the words "Banking other
than State banking" should be construed as meaning the business of banking other than the business
of banking carried on by a State. This view is, I think, confirmed by the remaining words of pl.
(xiii.) "also State banking extending beyond the limits of the State concerned, the incorporation of
banks and the issue of paper money." It is difficult to believe that the words "also State banking
extending beyond the limits of the State concerned" were intended to mean the use by the State as a
customer of banking facilities in more than one State and the other words "the incorporation of
banks and the issue of paper money" clearly support the view I have expressed. I may add that in the
Banking Act itself the Commonwealth Parliament appears to have regarded State banking as the
business of banking carried on by a State. This appears to be the obvious meaning of in s. 5 of the
Act. But whatever may be the meaning of "banking" the proper interpretation of the words "other
than State banking" is, that the Commonwealth Parliament, while empowered to make laws with
respect to banking, is not empowered to make laws with respect to State banking, unless it extends
beyond the limits of the State concerned.

In Merchant Service Guild of Australasia v. Commonwealth Steamship Owners' Association (No.
2)[73] Higgins J. said: "Where the Constitution means that the powers conferred on Parliament shall
not be applied to the State operations, it expressly says so, as in pl. xiii. (banking); pl. xiv.
(insurance)." See also Amalgamated Society of Engineers v. Adelaide Steamship Co. Ltd.[74].

The question then is, whether the provision being prima facie within power, it is obnoxious to the
Constitution. The first point to be kept in mind is that the Constitution expressly provides for a
federal form of government involving the existence of both Commonwealth and States, the
Commonwealth having conferred upon it only certain limited and defined legislative powers, and
the States, within the limits of their own Constitutions, retaining exclusive powers in the field which
remains after all Commonwealth powers have been exercised to the full extent of their widest scope.
It is unnecessary to trace in detail the authorities by which the relationship of Commonwealth and
State powers have been defined. The view once prevailed that any legislative or executive act of the
Commonwealth which would, if valid, interfere with the free exercise by a State or its
instrumentalities of their legislative or executive powers was pro tanto invalid. At a very early stage,
however, there were decisions inconsistent with this view, and it was finally exploded by the
Engineers' Case[75]. There is no general implication in the framework of the Commonwealth
Constitution that the Commonwealth is restricted from exercising its defined constitutional powers
to their fullest extent by a supposed reservation to the States of an undefined field of reserved
powers beyond the scope of Commonwealth interference. But this is always subject to the
provisions of the Commonwealth Constitution itself. That Constitution expressly provides for the
continued existence of the States. Any action on the part of the Commonwealth, in purported
exercise of its constitutional powers, which would prevent a State from continuing to exist and
function as such is necessarily invalid because inconsistent with the express provisions of the
Constitution, and it is to be noted that all the powers conferred by s. 51 are conferred "subject to this
Constitution." Such action on the part of the Commonwealth may be invalid in two classes of case,
one, where the Commonwealth singles out the States or agencies to which they have delegated some
of the normal and essential functions of government, and imposes on them restrictions which
prevent them from performing those functions or impede them in doing so; another, where, although
the States or their essential agencies are not singled out, they are subjected to some provision of
general application, which, in its application to them, would so prevent or impede them. Action of
the former type would be invalid because there is nothing in the Commonwealth Constitution to
authorize such action by the Commonwealth. A general income tax Act which purported to include
within its scope the general revenues of the States derived from State taxation would be an instance
of the latter.

I come now to s. 48 of the Banking Act 1945. Sub-section (1) of this section provides that "except
with the consent in writing of the Treasurer, a bank shall not conduct any banking business for a
State or for any authority of a State, including a local governing authority". Though this sub-section
is expressed with some skilfulness, it necessarily implies that no State or authority of a State
including a local governing authority can become the customer of a bank except with the consent in
writing of the Treasurer. It has been laid down frequently by the Judicial Committee that in
considering the constitutional validity of legislation it is necessary to look at the pith and substance
of the legislation. For a recent statement of this principle see the remarks of Lord Porter in
Attorney-General for Canada v. Attorney-General for Quebec[76]. Moreover I think it is not
competent for the Commonwealth or a State under the guise or the pretence or in the form of an
exercise of its own power to carry out an object which is beyond its powers. See Attorney-General
for Alberta v. Attorney-General for Canada[77]. In my opinion, the pith and substance of s. 48,
however ingeniously expressed, is that a State or an authority of a State, including a local governing
authority, must have the consent of the Treasurer in order to become the customer of a bank. Even
assuming that "State banking" is not restricted to the business of banking conducted by a State or
any authority of a State and that it includes banking by a State as a customer of banks, I think while
power in a State and in its essential agencies to carry on the business of banking cannot be impaired,
the power freely to use the facilities provided by banks, under modern conditions, must be regarded
as essential to the efficient working of the business of government, and that power also cannot be
impaired. Accordingly, whatever meaning may be given to "State banking," s. 48 must be
considered as wholly invalid.

It is interesting, although by no means conclusive, and in a sense perhaps hardly relevant, that in the
federation of the United States of America there has been a somewhat similar development in
constitutional law. The case of The Collector v. Day[78], having been overruled by Graves v. New
York[79], the operation of discriminatory and non-discriminatory legislation affecting States has
been examined in New York v. United States[80]. It had already been dealt with to some extent by
this Court in West v. Commissioner of Taxation (N.S.W.)[81], and Tasmanian Steamers Pty. Ltd. v.
Lang[82].

In my opinion the demurrer affords no answer in law to the plaintiff's claim and should be
overruled.

Starke J.

Demurrer on the part of the defendants to the statement of claim of the plaintiff claiming a
declaration that the Banking Act 1945 or alternatively s. 48 thereof is beyond the powers of the
Parliament of the Commonwealth and void, and also a declaration that s. 48 is of no effect by reason
of the inclusion in the Act of a law imposing taxation and ancillary relief.

The claim for a declaration that s. 48 was of no effect by reason of the inclusion in the Act of a law
imposing taxation was abandoned during the argument and in the end the attack upon the Act was
confined to the provisions of s. 48, which provides:--

             (1)

             Except with the consent in writing of the Treasurer, a bank shall not conduct any
             banking business for a State or for any authority of a State, including a local
             governing authority. Penalty: One thousand pounds.

             (2)

             Any consent of the Treasurer under this section may apply to all such business
             conducted by any particular bank or at a particular office of a bank, or to the
             business of any particular State or authority conducted by any particular bank or at
             a particular office of a bank.

             (3)

             Until a date fixed by the Treasurer by notice published in the Gazette, this section
             shall apply only in relation to banking business conducted for a State or for an
             authority of a State, including a local governing authority, specified by the
             Treasurer by notice in writing, and, if an office of a bank is specified in the notice,
             at the office so specified.

The Treasurer has notified the City of Melbourne that he proposes to specify on or about 1st August
1947 that s. 48 of the Banking Act shall apply to it.

The validity of the section depends upon the provisions of s. 51 (xiii.) of the Constitution:--"The
Parliament shall, subject to this Constitution, have power to make laws for the peace, order and
good government of the Commonwealth with respect to ... Banking other than State banking; also
State banking extending beyond the limits of the State concerned, the incorporation of banks, and
the issue of paper money."

A party whose rights or material interests are not adversely affected by an Act of the Parliament has
no right to attack its constitutionality. The prohibition in s. 48 of the Banking Act is directed to
banks and not to their customers but the Act so operates, having regard to the Treasurer's notice, that
the City of Melbourne will be deprived of its right or privilege of dealing with a banker of its own
choice. That, I think, is an interest sufficient to support the present action and to make the city a
competent plaintiff.

Banking, within the meaning of the Constitution, relates to the business of a banker and covers all
those various functions which a banker undertakes. But his main functions appear to be the taking of
deposits and current accounts, the issue and payment of bills and cheques drawn on him and the
collection of bills and cheques for his customers. In Hart's Law of Banking, 4th ed. (1931), vol. 1,
pp. 3-5, a banker's functions have been classified under seven heads (and see Paget on The Law of
Banking, 3rd ed. (1922), p. 6). Plenary power is given to the Parliament subject to the Constitution
and to the exception contained in s. 51 (xiii.) itself to make laws with respect to the subject matter.
Under this power the Parliament may prescribe the rules by which banking is governed. The power
extends not only to those regulations which aid, foster and protect banking and the choice of persons
engaging in it: it also embraces the making of rules which prohibit it (Australian Steamships Ltd. v.
Malcolm[83]; Huddart Parker Ltd. v. The Commonwealth[84]; Victorian Stevedoring and General
Contracting Co. Pty. Ltd. v. Dignan[85]; Australian National Airways Pty. Ltd. v. The
Commonwealth[86]; Attorney-General for Canada v. Attorney-General for Quebec[87]). So far, I
should think that the provisions of s. 48 may be described as a law with respect to banking. But it is
another question whether the Parliament may prohibit a bank from conducting any banking business
with a State or an authority of a State including a local governing authority. The Constitution itself
excludes State banking which does not extend beyond the limits of the State concerned from the
operation of the power. State banking, it was said, means banking with or by a State. It covers, as I
understood the argument, not only banking with State banks, that is banks owned or managed by a
State government, but also banking transactions or other facilities with banks, other than State
banks, of which a State avails itself. At the time the Constitution was passed the only State banks in
Australia were Government Savings Banks but since that date other State banks have been
constituted. Savings banks do not perform many of the functions of bankers but they fall within the
description of bankers in the Bills of Exchange Act (Commissioners of State Savings Bank of
Victoria v. Permewan, Wright & Co. Ltd.[88]). Doubtless the limitation upon the banking power had
reference to these banks (see Quick & Garran, The Annotated Constitution of the Australian
Commonwealth, pp. 756-758) but it also covers the State banks which have been subsequently
created. The State banking excluded from the banking power relates, in my opinion, to banking
operations conducted by banks owned or managed by State Governments or any authority of a State
Government and does not extend to transactions or other facilities with banks, other than State
banks, of which a State avails itself.

But this leads to the critical question in this case, namely, whether the banking power enables the
Parliament to prohibit banks from conducting any banking business for a State or for any authority
of a State including a local governing authority. The provision cannot be severed. Local governing
authorities are included within the words "a State or any authority of a State." It is, therefore,
unnecessary to consider whether the section would be valid if confined to local governing
authorities. That question presents some difficulties of its own.
The federal character of the Australian Constitution carries implications of its own. As I have said
before, "the government of Australia is a dual system based upon a separation of organs and of
powers. The maintenance of the States and their powers is as much the object of the Constitution as
the maintenance of the Commonwealth and its powers. Therefore it is beyond the power of either to
abolish or destroy the other" (South Australia v. The Commonwealth[89]; R. v. Commonwealth
Court of Conciliation and Arbitration; Ex parte Victoria[90]). The same principle was applied to the
dual system of government under the Constitution of the United States of America. "Neither
Government may destroy the other nor curtail in any substantial manner the exercise of its powers"
(Metcalf v. Mitchell[91]). But it is interesting to observe the application of this principle both in
America and in Australia. It was said by the Supreme Court of the United States to be "an
established principle of our constitutional system of dual government that the instrumentalities,
means and operations whereby the United States exercises its governmental powers are exempt from
taxation by the states, and that the instrumentalities, means and operations whereby the states exert
the governmental powers belonging to them are equally exempt from taxation by the United States.
This principle is implied from the independence of the National and State Governments within their
respective spheres and from the provisions of the Constitution which look to the maintenance of the
dual system" (Indian Motocycle Co. v. United States[92], cited by Butler J. in his dissenting opinion
in Helvering v. Gerhardt[93]).

In Australia the principle was applied in like manner (D'Emden v. Pedder[94]; Federated
Amalgamated Government Railway & Tramway Service Association v. N.S.W. Railway Traffic
Employees Association[95]). But in a series of cases in the United States this wide application of the
principle has been restricted as may be gathered from such cases as Helvering v. Gerhardt[96];
Graves v. New York; Ex rel. O'Keefe[97]; New York v. United States[98]. And likewise in Australia
the same wide application of the principle was finally rejected (Federated Engine-Drivers' and
Firemen's Association of Australasia v. Adelaide Chemical and Fertilizer Co. Ltd.[99]).

The applications in America of the basic proposition do not, however, present "a completely logical
pattern." "But they disclose," said Stone J. (subsequently the Chief Justice of the Supreme Court) in
Helvering v. Gerhardt[100], "no purposeful departure from, and indeed, definitely establish, two
guiding principles of limitation for holding the tax immunity of State instrumentalities to its proper
function. The one, dependent upon the nature of the function being performed by the State or in its
behalf, excludes from the immunity activities thought not to be essential To the preservation of State
governments even though the tax be collected from the state Treasury" (See South Carolina v.
United States[101]; Graves v. New York; Ex rel. O'Keefe[102]; New York v. United States[103]).
"The other principle, exemplified by those cases where the tax laid upon individuals affects the state
only as the burden is passed on to it by the taxpayer, forbids recognition of the immunity when the
burden on the state is so speculative and uncertain that if allowed it would restrict the Federal taxing
power without affording any corresponding tangible protection to the state government; even though
the function be thought important enough to demand immunity from a tax upon the state itself, it is
not necessarily protected from a tax which well may be substantially or entirely absorbed by private
persons (Metcalf v. Mitchell9(1926) [1926] USSC 17; 269 U.S. 514 [70 Law. Ed. 384].; Willcuts v.
Bunn10(1931) [1931] USSC 17; 282 U.S. 216 [75 Law. Ed. 304].)"[106]. These are practical
considerations rather than juristic principles. But the Supreme Court still recognizes that there are
State activities and functions of government that are nevertheless immune. "There are, of course,"
said Frankfurter J. in New York v. United States[107], "State activities and State-owned property that
partake of uniqueness from the point of view of intergovernmental relations. These inherently
constitute a class by themselves. Only a State can own a Statehouse; only a State can get income by
taxing. These could not be included for purposes of Federal taxation in any abstract category of
taxpayers without taxing the State as a State. But so long as Congress generally taps a source of
revenue by whomsoever earned and not uniquely capable of being earned only by a State, the
Constitution of the United States does not forbid it merely because its incidence falls also on a
State." The Court however has "edged away from reliance on a sharp distinction between the
governmental and the trading activities of a State"[108]. And at least some of the learned justices of
the Supreme Court of the United States "are not prepared to say that the national government may
constitutionally lay a non-discriminatory tax on every class of property and activities of States and
individuals alike"[109]. For "a Federal tax which is not discriminatory as to the subject matter may
nevertheless so affect the State, merely because it is a State that is being taxed, as to interfere unduly
with the State's performance of its sovereign functions of government"[110]. A non-discriminatory
tax in this sense refers "to a tax laid on a like subject matter, without regard to the personality of the
taxpayer, whether a State, a corporation or a private individual" (see per Stone C.J., Reed, Murphy
and Burton JJ.[111]).

And the same considerations apply, I apprehend, to interference with federal activities by the States.
Immunity, therefore, appears to depend upon practical considerations though the fact that an activity
is a trading activity or that legislation is non-discriminatory are relevant though not necessarily
decisive considerations.

In Australia the problem has been considered in relation to the importation of goods by the States
and immunity of the States from the provisions of the federal customs legislation and duties has
been denied. The Constitution gives the exclusive control of duties and customs and excise to the
Commonwealth (see ss. 86, 90 and 52) and these provisions control the decisions upon the
importation of goods by the States (R. v. Sutton (Wire Netting Case)[112]; Attorney-General
(N.S.W.) v. Collector of Customs (N.S.W.) (Steel Rails Case)[113]).

The problem has also been considered in relation to the arbitration power in the Constitution and
immunity of the States from the provisions of legislation made pursuant to that power has also been
denied (Engineers' Case[114]). "The doctrine of implied prohibition," it was said, "finds no place
where the ordinary principles of construction are applied so as to discover in the actual terms of the
instrument their expressed or necessarily implied meaning. The principle we apply to the
Commonwealth we apply also to the States, leaving their respective acts of legislation in full
operation within their respective areas and subject matters, but, in case of conflict, giving to valid
Commonwealth legislation the supremacy expressly declared by the Constitution, measuring that
supremacy according to the very words of s. 109"[Constitution itself" (South Australia v. The
Commonwealth[116]; Essendon Corporation v. Criterion Theatres Ltd.[117], per Dixon J.).

The actual decision in the Engineers' Case[118] rests upon the terms of the arbitration power which
"necessarily and by reason of the subject matter" extended to all parties, States as well as persons,
engaged in industrial disputes extending beyond the limits of any one State (see R. v.
Commonwealth Court of Conciliation and Arbitration; Ex parte Victoria[119]).

And again in relation to the defence power the problem has also been considered. The decisions of
this Court have so magnified the defence power that it seems almost unlimited (South Australia v.
The Commonwealth (Uniform Tax Case)[120]; Pidoto v. Victoria[121]; Australian Woollen Mills
Ltd. v. The Commonwealth[122]). The former decision enabled the Commonwealth to take over the
State Income Tax Departments and to make itself, in practice, the sole taxing authority in respect of
incomes. It thus, as I think, in abuse of its taxing power, raises considerable sums of money not for
the purposes of the Commonwealth (see Constitution, s. 81) but for compensating the States for the
loss of their revenues from income tax. The latter decisions enable the Commonwealth, in time of
war, to exercise control over the States in relation to all industrial disputes and unrest whatever and
to prescribe the conditions of employment and the wages of State employees accordingly.

Still it is said that "the most complete recognition of the power and responsibility of Parliament and
of the Government in relation to defence does not involve the conclusion that the defence power is
without any limits whatever. The existence of the defence power in the Commonwealth Parliament
and the exercise of that power do not mean that all governmental power in Australia may, by the
action of the Commonwealth Parliament, be concentrated in Commonwealth authorities. The
Constitution cannot be made to disappear because a particular power conferred by the Constitution
upon the Commonwealth Parliament is exercised by that Parliament. Indeed, the grant of the power
to legislate with respect to defence is made expressly subject to this Constitution--see opening
words of s. 51. If, under the defence power, the Commonwealth can control the pay, hours and
duties of all State public servants, it is obvious that the Commonwealth can take complete control of
all governmental administration within Australia. The result would be the abolition, in all but name,
of the Federal system of government which it is the object of the Constitution to establish--
preamble and clause 3 of the covering clauses of the Constitution" (R. v. Commonwealth Court of
Conciliation and Arbitration; Ex parte Victoria[123]; Pidoto v. Victoria[124]; South Australia v. The
Commonwealth (Uniform Tax Case)[125]).

But all this is based upon implications derived from the federal structure of the government
established by the Constitution.

So we may start from the proposition that neither federal nor State governments may destroy the
other nor curtail in any substantial manner the exercise of its powers or "obviously interfere with
one another's operations" (see Graves v. New York; Ex rel O'Keefe[126]). The American authorities
are not controlling nor in many cases safe guides to the interpretation of the Australian Constitution.
But I do agree that a distinction between "governmental" or "the primary and inalienable functions
of a constitutional Government" (see Coomber v. Justices of Berks[127]) and the "trading activities
of a State" is "too shifting a basis for determining constitutional power and too entangled in
expediency to serve as a dependable legal criterion" (New York v. United States[128]). When a
government acts under its constitutional power then its activities are governmental functions (see
Graves v. New York; Ex rel. O'Keefe[129]; Helvering v. Gerhardt[130], per Black J.; New York v.
United States[131], Douglas J, Part 1, in his dissenting opinion). And I cannot agree that the
presence or absence of discrimination affords a decisive test or legal criterion of constitutional
power. As was pointed out in New York v. United States[132] by Stone C.J., Reed, Murphy and
Burton JJ., a tax which is not discriminatory "may nevertheless so affect the State, merely because it
is a State that is being taxed, as to interfere unduly with the State's performance of its sovereign
functions of government." It is a practical question, whether legislation or executive action
thereunder on the part of a Commonwealth or of a State destroys, curtails or interferes with the
operations of the other, depending upon the character and operation of the legislation and executive
action thereunder. No doubt the nature and extent of the activity affected must be considered and
also whether the interference is or is not discriminatory but in the end the question must be whether
the legislation or the executive action curtails or interferes in a substantial manner with the exercise
of constitutional power by the other. The management and control by the States and by local
governing authorities of their revenues and funds is a constitutional power of vital importance to
them. Their operations depend upon the control of those revenues and funds. And to curtail or
interfere with the management of them interferes with their constitutional power. Yet the
Commonwealth by its legislation prescribes that, except with the consent in writing of the Treasurer,
no bank shall conduct any banking business for a State, including any local governing authority. It
operates to prevent the States and local governing authorities from dealing with their old and tried
bankers except with the consent in writing of the Treasurer. The object is, of course, to compel the
States and the local governing authorities to bank with the Commonwealth Bank, which is a Central
Bank. And it was said that the handling of public funds is the appropriate function of a central bank.
But that does not establish any constitutional power in the Commonwealth to compel the States so
to bank. The States and the local governing authorities, and not the Commonwealth, have the power
and the duty of administering, controlling and banking their revenues and funds.

Reliance was placed by the State of South Australia upon the Audit Acts of the States. But I do not
think they show more than that the administration of the revenues and funds of the States is a matter
of great constitutional importance to them and is carefully guarded.

Again the Financial Agreement scheduled to the Financial Agreement Validation Act 1929, No. 4 of
1929, and authorized by Constitution, s. 105A, has no bearing, I think, upon the critical question in
this case though Part I., s. 5, "Borrowing by States," contemplates borrowings from authorities,
bodies, funds or institutions (including Savings Banks) constituted or established under
Commonwealth or State law or practice.

The provisions of s. 48 of the Banking Act 1945 are beyond the constitutional power of the
Commonwealth and therefore void.

The demurrer is too large and should therefore be overruled.

Dixon J.

In questions of validity we now usually find it necessary to consider with some care whether the
provision impugned is capable of restriction or severance and, if so, whether there is not some
severable or restricted part of it which falls within a legislative power and, notwithstanding the
invalidity of the rest of the provision, will yet operate to produce some of the intended objects of the
whole. But in s. 48 of the Banking Act 1945 I do not think there is any difficulty of this kind. Sub-
section (1) clearly enough is a single provision which hangs altogether upon its application to the
conduct of banking business for a State. Sub-section (3) depends in its turn upon sub-s. (1), and so
of course does sub-s. (2). Indeed I did not understand the contrary to be contended. In strictness,
however, the issue is with respect to the efficacy of sub-s. (3); for sub-s. (1) does not come into full
operation unless and until the Treasurer fixes a date for the purpose, a thing he has not yet done. In
the meantime sub-s. (3) gives to sub-s. (1) such partial application as the Treasurer may specify.
Sub-section (1) lays upon banks a general prohibition against conducting any banking business for a
State, except with the consent in writing of the Treasurer. It does not apply to State banks (s. 5 (1)).
It is not clear whether the Commonwealth Bank is or is not comprehended in the prohibition. Upon
this point you are left in doubt by the words used in the sub-section and in the definition of "bank"
given by s. 4 (1) and in s. 7, upon which the definition turns. On the whole, I think that we should
treat s. 48 as inapplicable to the Commonwealth Bank. The Commonwealth Bank Act 1945 was
passed at the same time and was assented to on the same day as the Banking Act. In ss. 49 to 53 and
s. 56 of the latter Act the word "bank" is used in contradistinction from the Commonwealth Bank
and it seems proper to conclude that the former Act was regarded as the place in which the authority
of the Commonwealth Bank to carry on banking business had been completely stated, to the
exclusion of s. 7, and therefore of s. 48, of the Banking Act.
On this interpretation of the provisions, s. 48 (1) amounts to a prohibition upon banks other than the
Commonwealth Bank, and of course other than State banks, against conducting the banking
business for a State or any authority of a State, including a local governing authority, except with
the consent of the Commonwealth Treasurer.

The Commonwealth Bank is to act as a central bank, and, in so far as the Commonwealth requires it
to do so, it must act as banker and financial agent of the Commonwealth (ss. 11 and 12 of the
Commonwealth Bank Act).

The purpose of s. 48 may, therefore, be taken to be to complete the concentration of all
governmental accounts in the Commonwealth Bank or to carry it as near completion as practical
considerations allow, a matter of which the Treasurer is to judge and make exceptions accordingly.
Such a purpose accords with the conceptions held of the function of a central bank and with the
view that for its fulfilment the central bank should carry the government account so that it may take
measures or counter-measures when the necessary financial operations of government might
otherwise produce undesired consequences.

Under a unitary constitutional system there is no legal difficulty in giving effect to such a policy or
in carrying it as far down the line of public authorities as may be desired. But it is otherwise in a
federal system. State and federal governments are separate bodies politic and prima facie each
controls its own moneys. To enable the Parliament of the Commonwealth to deny to the States the
use of any bank but the central bank of the Commonwealth and thus to guide the collections and
disbursements of the States into and through an account of that bank, there must be found in the
Constitution a definite legislative power of sufficient amplitude.

The Commonwealth points to s. 51 (xiii.) as containing a power wide enough to authorize s. 48, the
power to make laws with respect to banking. No other power was adduced. The long title to the
statute describes it as an Act to regulate banking, to make provision for the protection of the
currency and of the public credit of the Commonwealth and for other purposes. But, even if s. 48
may be conceived to contribute to any of these further purposes, it was as a law with respect to
banking that it was supported, and I do not see how it could be justified under any other power.

The question for our decision, therefore, is whether in the exercise of the power to make laws with
respect to banking, other than State banking, the incorporation of banks and the issue of paper
money, the Commonwealth Parliament may forbid banks, except the Commonwealth Bank and
State banks, to conduct any banking business for a State save by the consent of the Federal
Treasurer.

The power should be given an ample meaning and a wide operation and the exception in favour of
State banking should, in my opinion, be understood as referring to the operations of a banker
conducted by or on behalf of a State and not to the State as the customer of a bank.

The purpose of the exception was, I have no doubt, to ensure that State banks should not be affected
by any law which the Parliament of the Commonwealth might make about banking and that the
exclusive power to regulate them should remain with the States.

The form of par. (xiii.) presents a curious point in its express mention of the incorporation of banks
as an extension of or addition to the subject of banking and in its failure to attach the exception of
State banking to the extension or addition. But, whatever its significance or effect, it is not a point
that touches the question before us.

The exception of State banking means that a general law of the Commonwealth governing the
business of banking cannot affect the operations of a State bank within the State concerned. The
express inclusion in the federal legislative power of State banking extending beyond the limits of the
State concerned gives added point to the exception. For it shows that State banking was
contemplated as a possible function of government which should be excluded from the operation of
federal law within the territorial limits of the authority of the government concerned.

This Court has adopted a rule of construction with reference to the application to the States of the
specific powers conferred by the Constitution upon the Parliament of the Commonwealth. It is a
prima-facie rule of construction and its operation may be displaced by sufficient indications of a
contrary intention whether found in the nature or subject matter of the power, in the manner in
which it is expressed, in the context or elsewhere in the Constitution.

The prima-facie rule is that a power to legislate with respect to a given subject enables the
Parliament to make laws which, upon that subject, affect the operations of the States and their
agencies. That, as I have pointed out more than once, is the effect of the Engineers' Case[133]
stripped of embellishment and reduced to the form of a legal proposition. It is subject, however, to
certain reservations and this also I have repeatedly said. Two reservations, that relating to the
prerogative and that relating to the taxation power, do not enter into the determination of this case
and nothing need be said about them. It is, however, upon the third that, in my opinion, this case
turns. The reservation relates to the use of federal legislative power to make, not a general law
which governs all alike who come within the area of its operation whether they are subjects of the
Crown or the agents of the Crown in right of a State, but a law which discriminates against States,
or a law which places a particular disability or burden upon an operation or activity of a State, and
more especially upon the execution of its constitutional powers. In support of such a use of power
the Engineers' Case[134] has nothing to say. Legislation of that nature discloses an immediate
object of controlling the State in the course which otherwise the Executive Government of the State
might adopt, if that Government were left free to exercise its authority. The control may be
attempted in connection with a matter falling within the enumerated subjects of federal legislative
power. But it does not follow that the connection with the matter brings a law aimed at controlling
in some particular the State's exercise of its executive power within the true ambit of the
Commonwealth legislative power. Such a law wears two aspects. In one aspect the matter with
respect to which it is enacted is the restriction of State action, the prescribing of the course which
the Executive Government of the State must take or the limiting of the courses available to it. As the
operation of such a law is to place a particular burden or disability upon the State in that aspect it
may correctly be described as a law for the restriction of State action in the field chosen. That is a
direct operation of the law.

In the other aspect, the law is connected with a subject of Commonwealth power. Conceivably that
connection may be made so insubstantial, tenuous or distant by the character of the control or
restriction the law seeks to impose upon State action that it ought not to be regarded as enacted with
respect to the specified matter falling within the Commonwealth power. If so, the law fails simply
because it cannot be described as made with respect to the requisite subject matter. But, if in its
second aspect the law operates directly upon a matter forming an actual part of a subject enumerated
among the federal legislative powers, its validity could hardly be denied on the simple ground of
irrelevance to a head of power. Speaking generally, once it appears that a federal law has an actual
and immediate operation within a field assigned to the Commonwealth as a subject of legislative
power, that is enough. It will be held to fall within the power unless some further reason appears for
excluding it. That it discloses another purpose and that the purpose lies outside the area of federal
power are considerations which will not in such a case suffice to invalidate the law. In the United
States much use has been made in this way of the postal power and of the commerce power to
legislate in a way calculated to vindicate morality or achieve a social purpose rather than to advance
the postal services or promote or regulate inter-state commerce as such. When this is done the result
is that laws confined to an existing head of federal power nevertheless reach as a matter of purpose
into fields lying under State legislative authority. But it is one thing to say that a federal law may be
valid notwithstanding a purpose of achieving some result which lies directly within the undefined
area of power reserved to the States. It is altogether another thing to apply the same doctrine to a use
of federal power for a purpose of restricting or burdening the State in the exercise of its
constitutional powers. The one involves no more than a distinction between the subject of a power
and the policy which causes its exercise. The other brings into question the independence from
federal control of the State in the discharge of its functions.

In the case of most legislative powers assigned to the Commonwealth some ingenuity would be
needed to base a law squarely upon the subject matter of the power and at the same time effect by it
a restriction or control of the State in respect of some exercise of its executive authority or for that
matter in respect of the working of the judiciary or of the legislature of a State. The difficulty of
using most federal powers in that way arises from the character of the subjects of the powers. It is,
for instance, difficult to see how any law based on the power with respect to lighthouses,
astronomical observations, fisheries, weights and measures, bills of exchange or marriage could be
aimed at controlling States in the execution of their functions. But to attempt to burden the exercise
of State functions by means of the power to tax needs no ingenuity, and that, no doubt, is why that
power occupies such a conspicuous place in the long history both in the United States and here of
the question how far federal power may be used to interfere with the States in the exercise of their
powers. The doctrine that no exercise of the tax power by Congress could work an interference with
State government functions was formerly pushed to extravagant lengths. It was applied artificially to
notional and abstract interferences, and, moreover, this led to the making of untenable distinctions.
The Supreme Court has now reconsidered the older doctrine. The notion of a reciprocal immunity
from which it arose has been condemned as fallacious and the constitutional law of the United
States now gives as little countenance to the extreme applications made of the principle of non-
interference as does the constitutional law of Australia. But, having cleared much of the ground
formerly occupied by this doctrine, the Supreme Court has encountered some difficulty in
formulating a test by which the validity of a federal tax falling upon operations of the States may be
determined. All agree, however, that a tax cannot be laid on the States "as such," that a State cannot
be singled out for taxation or for a special burden of taxation in respect of acts or things when others
are not taxed or are not so burdened in respect of the same acts or things, in other words, that a
taxing law discriminating against a State is unconstitutional and void.

There are problems which this principle may not cover, but into them I need not go. They are
discussed in New York v. United States[135], the various opinions in which will repay study.

What is important is the firm adherence to the principle that the federal power of taxation will not
support a law which places a special burden upon the States. They cannot be singled out and taxed
as States in respect of some exercise of their functions. Such a tax is aimed at the States and is an
attempt to use federal power to burden or, may be, to control State action. The objection to the use
of federal power to single out States and place upon them special burdens or disabilities does not
spring from the nature of the power of taxation. The character of the power lends point to the
objection but it does not give rise to it. The federal system itself is the foundation of the restraint
upon the use of the power to control the States. The same constitutional objection applies to other
powers, if under them the States are made the objects of special burdens or disabilities. Not of
course all powers, for some of them are concerned with the States specially or contemplate some
measure in particular relation to a State. Examples can be seen in pars. (xxxi.), (xxxii.), (xxxiii.), and
(xxxiv.) of s. 51. The meaning and nature of the power cannot be left out of account. Of this the
defence power is a conspicuous example. But plainly the greater number of powers contemplate
legislation of general application.

I do not think that either under the Constitution of the United States or The British North America
Act or the Commonwealth Constitution has countenance been given to the notion that the legislative
powers of one government in the system can be used in order directly to deprive another
government of powers or authority committed to it or restrict that government in their exercise,
notwithstanding the complete overthrow of the general doctrine of reciprocal immunity of
government agencies and the discrediting of the reasoning used in its justification. For that reason
the distinction has been constantly drawn between a law of general application and a provision
singling out governments and placing special burdens upon the exercise of powers or the fulfilment
of functions constitutionally belonging to them. It is but a consequence of the conception upon
which the Constitution is framed. The foundation of the Constitution is the conception of a central
government and a number of State governments separately organized. The Constitution predicates
their continued existence as independent entities. Among them it distributes powers of governing
the country. The framers of the Constitution do not appear to have considered that power itself
forms part of the conception of a government. They appear rather to have conceived the States as
bodies politic whose existence and nature are independent of the powers allocated to them. The
Constitution on this footing proceeds to distribute the power between State and Commonwealth and
to provide for their inter-relation, tasks performed with reference to the legislative powers chiefly
by ss. 51, 52, 107, 108 and 109.

In the many years of debate over the restraints to be implied against any exercise of power by
Commonwealth against State and State against Commonwealth calculated to destroy or detract from
the independent exercise of the functions of the one or the other, it has often been said that political
rather than legal considerations provide the ground of which the restraint is the consequence. The
Constitution is a political instrument. It deals with government and governmental powers. The
statement is, therefore, easy to make though it has a specious plausibility. But it is really
meaningless. It is not a question whether the considerations are political, for nearly every
consideration arising from the Constitution can be so described, but whether they are compelling.

A truism that has been invoked is that the possibility that a power may be abused is no reason for
restricting the power by construction. Doubtless it formed a proper objection to the view now
completely discredited that an agency of one government was not in that character amenable in any
degree to a power of the other lest some exercise of the power might interfere with the due
performance of the functions of the agency. But as an objection it is not in point where the question
is whether an actual attempt to restrict or control the State in the exercise of a function forming part
of its executive power is or is not permitted by the Constitution.

The considerations I have just mentioned have been used in relation to the question what the federal
Government may do with reference to the States and the question of what a State may do with
reference to the federal Government. But these are two quite different questions and they are
affected by considerations that are not the same. The position of the federal government is
necessarily stronger than that of the States. The Commonwealth is a government to which
enumerated powers have been affirmatively granted. The grant carries all that is proper for its full
effectuation. Then supremacy is given to the legislative powers of the Commonwealth.

These two considerations add great strength to the implication protecting the Commonwealth from
the operation of State laws affecting the exercise of federal power. But they also amplify the field
protected. Further, they limit the claim of the States to protection from the exercise of
Commonwealth power. For the attempt to read s. 107 as the equivalent of a specific grant or
reservation of power lacked a foundation in logic. Accordingly the considerations upon which the
States' title to protection from Commonwealth control depends arise not from the character of the
powers retained by the States but from their position as separate governments in the system
exercising independent functions. But, to my mind, the efficacy of the system logically demands
that, unless a given legislative power appears from its content, context or subject matter so to intend,
it should not be understood as authorizing the Commonwealth to make a law aimed at the restriction
or control of a State in the exercise of its executive authority. In whatever way it may be expressed
an intention of this sort is, in my opinion, to be plainly seen in the very frame of the Constitution.

So far I have stated my opinion in an abstract and a general form and in this there is no little danger.
For the subject has no vocabulary of technical terms possessing a precise and settled connotation
and the use of expressions of indefinite and variable meaning is unavoidable. But the ground is by
no means new and my purpose is but to indicate the principles to which I adhere, before proceeding
to apply them to s. 48 of the Banking Act 1945.

In New York v. United States[136] Frankfurter J. said: "One of the greatest sources of strength of our
law is that it adjudicates concrete cases and does not pronounce principles in the abstract." The
actual decision of the present case can be no wider than the constituent factors contained in s. 48
require, however widely the principles which lead to it may be stated.

The factors in s. 48 which in my view govern the question of its validity are these. Its operation is
confined to States and authorities of States including, of course, local governing authorities. It is
based upon the existence of the banks mentioned in the first schedule of the Banking Act as well as
the Commonwealth Bank and possibly of other banks and the section assumes that, but for the
provisions it contains, the States and their authorities would, like other bodies and individuals, be at
liberty freely to choose amongst them. The duty to choose a bank or banks for the purpose of the
banking business of a State in fact belongs to the Treasurer of the State, as the Audit Acts of the
States show.

In these conditions s. 48 forbids the banks to do the business of the States unless the Treasurer of the
Commonwealth consents. Section 5 of the Crimes Act 1914-1941 operates to make the Treasurer
and any subordinate officer of the State guilty of the same offence as the bank if they should
procure the bank to disregard the prohibition.

There is thus a law directly operating to deny to the States banking facilities open to others, and so
to discriminate against the States or to impose a disability upon them. The circumstance that the
primary prohibition is laid upon the banks and not upon the States does not appear to me to be a
material distinction. It is just as effectual to deny to the States the use of the banks and that is its
object. This I think is not justified by the power to make laws with respect to banking.

I cannot see that it is to the point to argue that under s. 51 (xiii.) the Commonwealth might give the
Commonwealth Bank a monopoly complete, except for State banks, and that what s. 48 does is to
give a monopoly restricted to State business. That is only to say that instead of establishing a
monopoly with all its advantages and disadvantages shared by the whole community, States have
been singled out and deprived of the freedom of choice which the existing system afforded.

At bottom the principle upon which the States become subject to Commonwealth laws is that when
a State avails itself of any part of the established organization of the Australian community it must
take it as it finds it. Except in so far as under its legislative power it may be able to alter the legal
system, a State must accept the general legal system as it is established. If there be a monopoly in
banking lawfully established by the Commonwealth, the State must put up with it.

But it is the contrary of this principle to attempt to isolate the State from the general system, deny it
the choice of the machinery the system provides and so place it under a particular disability.
Whether the right to exercise such a choice is of great or of small importance to the States is not a
material matter for inquiry. It is enough that it forms part of the functions of the Executive
Government of the States in administering the finances of the States.

It may be conceded that the Financial Agreement under s. 105A of the Constitution and the adoption
of the system of uniform taxation of incomes place the finances of the States in a very different
position from that which they occupied when the Commonwealth was first established. Further,
these measures may well be supposed to lend such a provision as s. 48 the appearance of a corollary,
at all events from the point of view of a central bank. But these are considerations that cannot affect
the interpretation of s. 51 (xiii.). Section 105A cuts across the Constitution and, as it has been
construed in this Court, imposes upon the States absolute liabilities to the Commonwealth
enforceable against the revenues of the States. Extensions of constitutional power or supremacy may
explain, but they do not justify, further extensions.

In my opinion s. 48 of the Banking Act is void because an inseverable part of it is directed to control
or restrict the Executive Government of the States in the use of banks for the conduct of their
banking business.

The demurrer should be overruled.

McTiernan J.

It is necessary to decide the question whether s. 48 of the Banking Act 1945, an Act of the
Commonwealth Parliament, is within any of its specific powers, which are enumerated in s. 51 of
the Constitution.

I am of opinion that the submission made by counsel for the Commonwealth and the Treasurer that
s. 48 is within s. 51 (xiii.), one of those powers, is correct.

Section 48 is in these terms:--

             (1)

             Except with the consent in writing of the Treasurer, a bank shall not conduct any
             banking business for a State or for any authority of a State, including a local
             governing authority.
             Penalty: One thousand pounds.

             (2)

             Any consent of the Treasurer under this section may apply to all such business
             conducted by any particular bank or at a particular office of a bank, or to the
             business of any particular State or authority conducted by any particular bank or at
             a particular office of a bank.

             (3)

             Until a date fixed by the Treasurer by notice published in the Gazette, this section
             shall apply only in relation to banking business conducted for a State or for an
             authority of a State, including local governing authority, specified by the Treasurer
             by notice in writing, and, if an office of a bank is specified in the notice, at the
             office so specified.

Section 51 (xiii.) provides that the Parliament shall, subject to the Constitution, have power to make
laws for the peace, order and good government of the Commonwealth with respect to--"Banking,
other than State banking; also State banking extending beyond the limits of the State concerned, the
incorporation of banks and the issue of paper money."

Section 48 is addressed to banks: but its effect is to deprive the States of their power under State law
to select banks with which to conduct their banking business.

Although the section has this effect it is a valid law if it is within the power and is not contrary to
any provision of the Commonwealth Constitution.

The only words in the Constitution which cut down the meaning of "banking" are the words of the
exception in s. 51 (xiii.), "other than State banking."

The expression "State banking" does not include "banking business conducted for a State," which is
the subject of s. 48. The expression means banking conducted by a State. The word "State" signifies
the State as banker, not as customer. This is the ordinary meaning of the expression "State banking."
The words "also State banking extending beyond the limits of the State concerned" refer to the
ramifications of a State bank's business beyond the borders of the State to which the bank belongs:
those words show that State banking means banking carried on as an enterprise of a State of the
Commonwealth. In the Engineers' Case[137], Higgins J. gave this meaning to the expression "State
banking"[138].

The word "banking" in its ordinary and natural meaning covers banking business conducted by a
bank either for a government or private customers. As the banking transactions conducted by a bank
for a State are not within the exception, "other than State banking," they are included in the subject
"Banking," with respect to which the Parliament is authorized to make laws.

It would be contrary to ordinary rules of construction, and it would not be a legal interpretation of
the Constitution, to imply an exception of those transactions in addition to the express exception of
State banking, from the legislative power. It is evident from the language of s. 51 (xiii.) that it
includes power to make laws binding on the States, except to the extent that the power is negatived
by the words "other than State banking." This view was taken in the Engineers' Case[139], where
observations were made about s. 51 (xiii.): See the report[140].

The nature of the legislative power provides no reason for excluding the States from it. In this
connection, there is no discrimen which enables the Court to distinguish this legislative power from
others which obviously include power to make laws binding the States and affecting their activities.
Examples are "Trade and Commerce"--s. 51 (i.): "Currency, Coinage and legal tender"--s. 51
(xii.): "Weights and Measures"--s. 51 (xv.): "Bankruptcy and Insolvency"--s. 51 (xvii.):
"Patents"--s. 51 (xviii.).

For example in Attorney-General (N.S.W.) v. Collector of Customs (N.S.W.)[141], it was held that
the States were bound by the grant of the "Trade and Commerce" power. Griffith C.J. said that this
power "necessarily involves the power to interfere with the operations of the State Governments so
far as to make effectual any condition or prohibition imposed by the Commonwealth upon
importation"[142]. The conclusion reached in that case was approved in the Engineers' Case[143];
and it called forth this comment, which was made in the reasons for judgment: "A more drastic
interference than that case sanctions can hardly be imagined. It was an insistence on money being
applied from the State Treasury for the purposes of the Commonwealth Treasury as a condition of
the State being allowed to import steel rails from abroad for use on its railways. Some difference of
opinion occurred as to the nature of the duty, but none as to the primary validity of the
interference."[144].

Referring to the power conferred by s. 51 (xvii.), Higgins J. said in the Engineers' Case[145]:
"Suppose that under the common law--or under express State legislation--the Crown has priority
over all other creditors, it is argued that a federal law as to bankruptcy, enacting that Crown debts
are to be paid pari passu with other debts, would not bind the State!" His Honour refuted the
limitation of power involved in the supposition.

The States are not even totally exempt from laws made under the "Taxation" power, s. 51 (ii.). In
South Australia v. The Commonwealth[146], it was decided by four justices that the Commonwealth
Parliament was authorized by that power to pass s. 31 of the Income Tax Assessment Act 1942. That
is the crucial enactment in the plan for uniform taxation. The section says that a taxpayer shall not
pay any tax imposed by State law on the income of any year in respect of which tax is imposed by
federal law until the taxpayer has paid the federal tax or has received from the Commonwealth
Commissioner of Taxation a certificate notifying him that the tax is no longer payable.

These are instances of Commonwealth Acts which interfered with the States. I cannot think that it is
a graver interference with the States to prohibit a bank from conducting any banking business for a
State unless the bank has the consent of the Commonwealth Treasurer to do so.

Section 48 does not apply to the Commonwealth Bank, or to any State bank. The Commonwealth
Bank is the central bank or central reserve bank of Australia. It is also authorized to conduct general
banking business. None of the banks to which s. 48 applies is a central bank. The banks to which it
applies are private trading banks.

Section 12 of the Commonwealth Bank Act 1945 provides:--"The Commonwealth Bank shall, in so
far as the Commonwealth requires it to do so, act as banker and financial agent of the
Commonwealth."
The effect of s. 48 is that the Treasurer of the Commonwealth is able, by declining to give any
consent under the section, to tie the States and the authorities mentioned in it, to the Commonwealth
Bank if they are unwilling to make their banking arrangements with a State bank.

It was sought to show by reference to ss. 8 and 9 of the Commonwealth Bank Act 1945 that the
result of placing the States in that position might be Commonwealth control of State expenditure.
Whatever the bank, the limits of a State's accommodation would not be always fixed by its own
desires. But the vice attributed to s. 48 is that it is an interference by the Commonwealth with the
States, and that the interference is inconsistent with the federal structure of the Constitution. The
answer to that contention is that no implication of a restriction upon the exercise of Commonwealth
legislative power is permissible if it is "formed on a vague, individual conception of the spirit of the
compact" and is "not the result of interpreting any specific language to be quoted, nor referable to
any recognised principle of the common law of the Constitution"--Engineers' Case[147]. If s. 48 is
within s. 51 (xiii.) and is not contrary to any express provision of the Constitution, it is valid even if
it interferes with the freedom of the States to select bankers and arrange loans or overdrafts, and it
could be used as a fulcrum to compel a State to adjust its financial programme to Commonwealth
financial policy. There is no implied prohibition against the exercise of the power granted by s. 51
(xiii.), to its fullest extent, that being ascertained by ordinary rules of construction.

In the Engineers' Case[148], there is this statement--"But possible abuse of powers is no reason in
British law for limiting the natural force of the language creating them. It may be taken into account
by the parties when creating the powers, and they, by omission of suggested powers or by
safeguards introduced by them into the compact, may delimit the powers created. But, once the
parties have by the terms they employ defined the permitted limits, no Court has any right to narrow
those limits by reason of any fear that the powers as actually circumscribed by the language
naturally understood may be abused."

It is obvious from the language of s. 51 (xiii.) that it includes power to make laws affecting the
States.

Section 48 compels a bank to which it applies to have the Treasurer's consent before it may transact
banking business for a State or certain other public bodies. Section 7 compels the bank to be in
possession of an authority granted by the Governor-General before it may transact banking business
in Australia for any body at all. The bank is compelled to be in possession of the latter authority and
the Treasurer's consent before it may conduct any banking business for the States and the other
public bodies. There is no attack upon s. 7: this section interferes with the freedom which a State
has under its own law to select its banker. It limits the range of choice to banks which are licensed.
If the right of the States to make arrangements for the conduct of their banking business without
interference by Commonwealth law is saved by the Constitution, then s. 7 is open to much of the
criticism directed against s. 48. Section 7 affects all bank customers, including States: s. 48 is
limited to States and State authorities and local government authorities. If s. 48 is bad but s. 7 is
good, the invalidating circumstances must be, not merely that s. 48 is an interference with the
States, but that it makes the conduct of banking business for States and local government authorities
subject to a condition that does not apply to the conduct of banking business for other customers.

It would be an illusory protection of State rights to ascertain the permitted limits of Commonwealth
legislative power by a rule which would not authorize a law which applies only to the States but
would authorize the law if it bound the States and everybody else indiscriminately.
Section 31 of the Income Tax Assessment Act 1942 is in form addressed to a taxpayer: but
notwithstanding the form, the section interferes with the States, just as s. 48, although in form
addressed to a bank, interferes with the States. Leaving aside the State authorities and local
government authorities, the States only are affected by the command which s. 48 addresses to the
banks, just as the States only are affected by the command which s. 31 addresses to the taxpayers.
The latter section virtually destroys the power of the States to collect revenue by imposing income
tax. The section was held to be valid because it is within an enumerated or specific power, as the
Court held, and is not contrary to any express provision of the Constitution. Section 48 interferes
with the exercise of the power which each State had under its own State law to make such banking
arrangements, as it thinks fit, for State purposes. The decision of the question whether it is void or
not is governed by the same principles as that upon which s. 31 was upheld. It is valid if it is within
one of the enumerated powers and is not contrary to any express provision of the Constitution.

The American decisions are not authorities where the question is whether the Commonwealth
Parliament is competent to pass a law touching the activities of the States. In the Engineers'
Case[149] there is a warning against using the American decisions to decide a question of that
nature. The warning is in these terms--"But it is plain that, in view of the two features of common
and indivisible sovereignty and responsible government, no more profound error could be made
than to endeavour to find our way through our own Constitution by the borrowed light of the
decisions, and sometimes the dicta, that American institutions and circumstances have drawn from
the distinguished tribunals of that country."

In that case the Court departed from the principles in those decisions and enunciated a principle for
the interpretation of the Commonwealth Constitution. The principle is stated in these terms: "The
Act 63 & 64 Vict. c. 12, establishing the Federal Constitution of Australia, being passed by the
Imperial Parliament for the express purpose of regulating the royal exercise of legislative, executive
and judicial power throughout Australia, is by its own inherent force binding on the Crown to the
extent of its operation. It may be that even if s. V. of the Act 63 & 64 Vict. c. 12 had not been
enacted, the force of s. 51 of the Constitution itself would have bound the Crown in right of a State
so far as any law validly made under it purported to affect the Crown in that right; but, however that
may be, it is clear to us that in presence of both s. V. of the Act and s. 51 of the Constitution that
result must follow. The Commonwealth Constitution as it exists for the time being, dealing
expressly with sovereign functions of the Crown in its relation to Commonwealth and to States,
necessarily so far binds the Crown, and laws validly made by authority of the Constitution, bind, so
far as they purport to do so, the people of every State considered as individuals or as political
organisms called States--in other words, bind both Crown and subjects. The grant of legislative
power to the Commonwealth is, under the doctrine of Hodge v. The Queen2(1883) 9 App. Cas. 117,
at p. 132., and within the prescribed limits of area and subject matter, the grant of an authority as
plenary and as ample ... as the Imperial Parliament in the plenitude of its power possessed and could
bestow, a doctrine affirmed and applied in a remarkable degree in Attorney-General for Canada v.
Cain1(1906) A.C. 542, at p. 547.. The nature and principles of legislation (to employ the words of
Lord Selborne in R. v. Burah2(1878) 3 App. Cas. 889, at p. 904.), the nature of dominion self-
government and the decisions just cited entirely preclude, in our opinion, an a priori contention that
the grant of legislative power to the Commonwealth Parliament as representing the will of the whole
of the people of all the States of Australia should not bind within the geographical area of the
Commonwealth and within the limits of the enumerated powers, ascertained by the ordinary process
of construction, the States and their agencies as representing separate sections of the territory. These
considerations establish that the extent to which the Crown, considered in relation to the Empire or
to the Commonwealth or to the States, is bound by any law within the granted authority of the
Parliament, depends on the indication which the law gives of intention to bind the Crown. It is
undoubted that those who maintain the authority of the Commonwealth Parliament to pass a certain
law should be able to point to some enumerated power containing the requisite authority. But we
also hold that, where the affirmative terms of a stated power would justify an enactment, it rests
upon those who rely on some limitation or restriction upon the power, to indicate it in the
Constitution"[153].

It has been said that the banks to which s. 48 applies are private trading banks: and that the
Commonwealth Bank is given the functions of a central bank. A central banking system is set up by
the Commonwealth Bank Act 1945 and the Banking Act 1945: See Parts III. and VII. of the former
Act and Part II., Division 3, of the latter Act.

In a central banking system, the central bank regulates the volume of credit "and the trading banks
are responsible for distributing that credit amongst different industries": s. 166, Report of the
Australian Royal Commission on Banking (1937).

This specialization of functions may make it necessary to limit the powers of the trading banks. It is,
I apprehend, a reason for the control which s. 48 places upon the trading banks. "But the efficient
operation of a central banking system requires some limitation upon the powers of the trading banks
in the general interest of the community. It may be in the interest of any trading bank, influenced by
considerations of profit and liquidity, to expand or contract credit at a time when the general interest
requires different action": s. 532 of the above-mentioned Report. The expansion or contraction of
government credit by the trading banks could more than anything else upset any regulation of credit
made by the central bank.

In s. 164 of the Report it is said that the volume of credit would be affected "by the trading banks
allowing their ratios to vary within wide limits." Other factors affecting the volume of credit are
also mentioned. The relation between the central bank and "the governments" is stressed in s. 581 of
the report as a very important factor in determining whether the central bank has adequate power to
change the policy of the trading banks in the matter of the expansion or contraction of credit.

In s. 143 of the Report it is stated: "From 1912 the Commonwealth Bank held the Commonwealth
Government account, and by 1920 those of most of the States. By doing so the Bank was better able
to avoid the dislocations which might be associated with large government operations in the money
markets and with any lag of revenue behind expenditure."

Sir Ernest Musgrave Harvey, Deputy Governor of the Bank of England, said in the course of the
evidence which he gave to the Committee on Finance and Industry: "Then another function which I
think it is essential should be performed by the Central Bank is that it should conduct the main
banking business of the State." He proceeded to point out that the State collects and distributes vast
sums and that "the incidence of the receipts and the payments of the State is necessarily unevenly
distributed." He also said that unless the central bank was the banker for the "State" there could be
"violent oscillations of credit which would create great disturbances in the value of money from day
to day." The advantage of the "State" having the central bank as its banker was summed up by Sir
Ernest Harvey in these words: "If, however, the" (banking) "arrangements" (of the State) "are
entrusted to the Central Bank, the Central Bank has notice beforehand exactly as to the amounts
which have to be provided. It can lay its plans to ensure that the State shall have the funds it
requires, and moreover, that when those funds have been distributed they may be re-absorbed in an
orderly and gradual manner without causing undue disturbance, and without leaving a flood of
suddenly manufactured credit to disturb the value of money and possibly the value of the monetary
unit measured internationally." The word "State" in this evidence applies to a State in the general
sense of the term. Sir Ernest Harvey's evidence, in principle, applies both to Commonwealth and
State financial operations.

The report of the Committee is in accordance with the evidence which Sir Ernest Harvey gave on
the relation of a central bank to the government and the necessity of its being the government's
banker: "In practice the tasks which have been imposed upon the Central Bank make it imperative
that it should hold the account of the Government, for the financial operations of Government are
conducted on a scale so great as seriously to derange the money market unless special measures are
taken to counteract the inconveniences which result from the inflow of revenue or the temporary
easiness which results from interest and dividend payments. This task ought to devolve upon the
Central Bank in virtue of its general function as guardian of the money market, and does in fact
devolve upon it when it carries the Government account."

In Central Banking, a work by M. H. De Kock, Deputy Governor of the South African Reserve
Bank, it is said at p. 64: "Central banks everywhere operate as bankers to the State, not only because
it may be more convenient and economical to the State, but also because of the intimate connection
between public finance and monetary affairs. The State is the largest receiver of revenue and the
biggest disburser of expenditure in any country, while the central bank is charged with the duty and
responsibility of controlling or adjusting credit in the national economic interest. As the manifold
financial activities of the State can easily interfere with money-market conditions and exchange
rates and with the credit policy of the central bank, the banking operations of the State can best be
centralised in the central bank." This author said at p. 63: "In many countries the central bank keeps
the accounts not only of the Central or Federal Government, but also of the Provinces or States."

It is a reasonable conclusion to draw from the views of these authorities about public finance and
government banking business and their possible effects on the stability of credit and the value of
money, that the transactions which a Government needs to have with a bank in order to carry on its
financial operations, is a special branch of banking business, and that a trading bank is not a suitable
bank to conduct those operations in a country where there is a central bank. All the reasons given by
these authorities why the central bank should conduct the main banking business of the government
apply to the banking business of the Australian States and of State authorities and local government
authorities in Australia. The finances of all these bodies are public finances: their financial
operations may be all classed as government financial operations. They receive and expend vast
revenues and expend very large amounts of borrowed money. The receipts and expenditure of the
States and the bodies mentioned in s. 48 constitute a very large proportion of the public finance of
this country.

It follows from the view that the banking transactions of a government are a particular branch of
banking, suitable to be conducted by a central bank, rather than a trading bank, that s. 48 is a law for
regulating the conduct of particular banking transactions and that the substance of the law is not a
regulation of the States or the other authorities mentioned in the section. The subject of the section
is the banking business which it describes.

The contention is made that s. 48 discriminates against the States or is aimed at the States.

If discrimination is fatal to a federal law, it would be necessary to define its meaning and to examine
the limits of the power under which it would be claimed that the law was passed.
The contention misses the principle upon which the section is founded. Section 48 contains a
complete category of banking business which is proper to a central bank, rather than a trading bank.
Section 48 gives power to the Treasurer, if recourse is not had to State Banks, to secure that the
banking business included in the category will be diverted to the central bank when it is expedient to
do so. The selection of the banks and the banking business to which the section applies is founded
upon banking considerations which are in accordance with views widely, if not universally, held as
to the proper division of business between the central bank of a country and its trading banks.
Section 48 introduces a control over the trading banks' acceptance of government banking business
which has the object of enabling the central bank to exercise its functions effectively. I am of
opinion that s. 48 is in substance a law with respect to the subject of banking and is within the
legislative power contained in s. 51 (xiii.) of the Constitution.

Section 48 does not infringe upon any right reserved to the States by any provision of the
Constitution.

In regard to s. 107 of the Constitution, it is said in the Engineers' Case[154]: "But it is a
fundamental and fatal error to read s. 107 as reserving any power from the Commonwealth that falls
fairly within the explicit terms of an express grant in s. 51, as that grant is reasonably construed,
unless that reservation is as explicitly stated."

Section 5 of Part I. of the Financial Agreement provides in the last paragraph: "Notwithstanding
anything contained in this Agreement, any State may use for temporary purposes any public moneys
of the State which are available under the laws of the State, or may, subject to maximum limits (if
any) decided upon by the Loan Council from time to time for interest, brokerage, discount, and
other charges, borrow money for temporary purposes by way of overdraft, or fixed, special, or other
deposit, and the provisions of this Agreement other than this paragraph shall not apply to such
moneys."

Sub-section (5) of s. 105A of the Constitution, which authorizes the making of the Financial
Agreement, says that every agreement made under the section shall be binding upon the
Commonwealth and the States who are parties to it "notwithstanding anything contained in this
Constitution." The rest of the sub-section is not material at present. The provisions of s. 5 of Part I.
of the Financial Agreement are therefore binding on the Commonwealth, notwithstanding anything
contained in the Constitution. The borrowing of money by overdraft signifies a transaction between
a State and a bank: and a State may borrow from a bank by any of the other means mentioned in the
provision of the agreement. It stipulates the means whereby a State may borrow: but it does not give
the State a constitutional right to approach any banker from whom a State might have got an
overdraft when the agreement was made. The provision prescribes the means by which a State may
borrow: it has nothing to say about the bank from which the State is given leave to borrow. Section
48 does not eliminate all banks: it does not defeat or impair the right which is given by the provision
of the Financial Agreement to borrow for temporary purposes.

In s. 133 of the Report of the Australian Royal Commission to which I have referred, this statement
is made about borrowing by the States by means of overdraft, for temporary purposes: "In October,
1929, treasury-bills were issued in Australia instead of a public loan, but at the end of the year a
total of £2.5 m. was outstanding. In December, 1930, this sum had increased to £9 m. At a
conference between the Commonwealth Bank and the trading banks in that month it was decided
that future banking accommodation to the Governments should be provided only by treasury-bills
issued under the authority of the Loan Council. Both Commonwealth and State Governments had
previously borrowed money for temporary purposes by means of overdrafts either from the
Commonwealth Bank or from trading banks. To the banks which held them, treasury-bills at this
time were merely short-term government securities, but in June, 1931, a step was taken which
altered their significance for the trading banks. In accordance with the Premiers' Plan, government
deficits continued to be financed by treasury-bills ... At this date, (30th June 1931) the balance
outstanding amounted to £20.6 m."

The emphasis which was laid in argument on the right of a State to put its revenue in any bank it
pleases, overlooks the substantial matter that a government has recourse to a bank to finance its
operations because revenue lags behind expenditure and there is a need to borrow money on a large
scale for public works. A State could look after its cash without the assistance of a bank. When the
nature and incidence of the financial operations of a government are considered the examples of
hypothetical federal laws which were given in argument in order to impugn s. 48 appear to be
irrelevant. One example was a law forbidding a bank to conduct banking business for a brewery
without the licence of the Treasurer. I do not know of any expression of an opinion that it is a
function of a central bank to conduct not only the banking business of governments but also of
breweries. There is no point in the example. The reasons which justify s. 48 have no application to
the banking business of a brewery. The other example of a hypothetical law was a law forbidding
banks to transact any banking business for the members of a prescribed religious denomination
without the Treasurer's consent. Membership of the religious denomination does not place the
banking transactions of persons who belong to the denomination in any sensible category of
banking. The law might well be regarded as a law for the persecution of the members of the
denomination because of their religious belief rather than a law for the regulation of a branch of
banking.

For these reasons, I am of opinion that the demurrer should be allowed.

Williams J.

The questions raised upon the argument of the demurrer and the material sections of the Banking
Act 1945, and in particular s. 48, have been fully set out in the preceding judgments, and I shall not
repeat them. The first question is whether s. 48 of the Banking Act is legislation with respect to
State banking within the meaning of the exception in s. 51 (xiii.) of the Constitution. The origin of
the placitum is s. 91 (15) of The British North America Act 1867, which gives the Parliament of
Canada exclusive legislative authority over "banking, the incorporation of banks, and the issue of
paper money." The additional words "other than State banking, also State banking extending beyond
the limits of the State concerned" have been incorporated in the placitum. In Tennant v. Union Bank
of Canada[155], Lord Watson, in delivering the judgment of the Privy Council, said that banking is
"an expression which is wide enough to embrace every transaction coming within the legitimate
business of a banker." This statement was recently repeated by Lord Porter in delivering the
judgment of the Privy Council in Attorney-General for Canada v. Attorney-General for
Quebec[156]. These citations show, if authority is needed, that the legislation authorized by the
placitum is legislation with respect to the business of banking. The bodies which engage in the
business of banking are the banks. It would not be an ordinary use of language to say that the
customers of the banks engage in such a business. The customers carry on some other business of
their own, and it is the business of the banks to provide one form of facility which enables their
customers to carry on such businesses. The States would not be concerned (that is, interested) in any
real sense in the business of banking other than in the business of banks which were their agencies.
There would be no reason why the States as customers of independent banks should not be subject
to general laws made by the Commonwealth Parliament relating to the conduct of banking business.
There would be even less reason why, if the States as customers were not subject to such laws in the
case of accounts in their own territories, they should not also be exempt in respect of accounts
which they opened in other States when those other States as customers were exempt within their
own territorial limits. In my opinion the expression "State banking" in the placitum does not refer to
the States as mere customers of banks, but to banks constituted and controlled by the States.

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

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

I must give effect to the principles for the construction of the Constitution laid down in the
Engineers' Case[157]. It is pointed out that "Laws validly made by authority of the Constitution,
bind, so far as they purport to do so, the people of every State considered as individuals or as
political organisms called States--in other words, bind both Crown and subject"[158]. But the
Parliament of the Commonwealth is only authorized by s. 51 to make laws with respect to the
enumerated subjects (1) for the peace, order and good government of the Commonwealth, and (2)
subject to the Constitution, and there arises from the very nature of the federal compact, which
contemplates two independent political organisms, each supreme within its own sphere, existing
side by side and exerting divided authority over the same persons and in the same territory, a
necessary implication that neither the Commonwealth nor the States may exercise their respective
constitutional powers for the purpose of affecting the capacity of the other to perform its essential
governmental functions. Therefore a federal law which purports to bind the States must be
examined to ascertain whether it is really a law for the peace, order and good government of the
Commonwealth with respect to one of the enumerated subjects, or a law which, under colour of
such a purpose, is really a law the purpose of which is to interfere with such functions. As the Privy
Council has pointed out in relation to the Canadian Constitution in Attorney-General for Alberta v.
Attorney-General for Canada[159], each case must be determined as it arises for "no general test
applicable to all cases can safely be laid down." Dixon J. has pointed out in West's Case[160] that
there are two reservations to the principle laid down in the Engineers' Case[161] that the powers of
the Parliament of the Commonwealth under s. 51 must be construed as extending to the States. "The
first reservation is that in the Engineers' Case4(1920) [1920] HCA 54; 28 C.L.R. 129. the question
was left open whether the principle would warrant legislation affecting the exercise of a prerogative
of the Crown in right of the States. The second is that the decision does not appear to deal with or
affect the question whether the Parliament is authorized to enact legislation discriminating against
the States or their agencies."

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

Three recent cases in this Court relating to the exercise of the defence power during hostilities
illustrate the operation of the principle. In the Uniform Tax Case[163], the Income Tax (Wartime
Arrangements) Act 1942 was held to be valid by the majority of the Court. That Act in form
discriminated against the States because it conscripted into the service of the Commonwealth the
taxation staffs of the States and acquired for the Commonwealth the offices in which the State
Income Tax Departments were carried on. The purpose of the Act was to create a Commonwealth
Income Tax Department to collect taxation levied by the Commonwealth, a large part of which was
required to prosecute the war. The loss of the services of these staffs and possession of these
premises by the States was likely to hinder the carrying on of the governmental functions of the
States, but this hindrance was of the same character as the disturbance which was being caused to all
sorts of businesses from the Commonwealth having to conscript employees holding important
positions in such businesses and to take possession of convenient premises in which they were being
carried on in order to prosecute the war. There was nothing in the Act which attempted to prevent
the States from utilizing the services of other officers less experienced, and securing other premises
less convenient to carry on the same governmental functions. The convenience of the States, like
that of individuals, had to give way to the overriding necessity of the prosecution of the war. In
Victoria v. The Commonwealth[164], and Victoria v. Foster[165], on the other hand, where the
Commonwealth sought to direct the States as to the remuneration, holidays and hours of work of
public servants who were not conscripted by the Commonwealth, but continued to be employed by
the States upon work relating to the essential governmental functions of the States, the legislation
was held to be beyond the ambit of the defence power and therefore invalid.

The effect of s. 48 is to deprive the States and their authorities of the use of banking facilities
available to the general public. Its purpose is to give to the Treasurer of the Commonwealth the
power to dictate to the States where they shall bank their public moneys. It is plainly in pith and
substance legislation aimed at giving directions to the States as to the manner in which they shall
exercise part of what the Privy Council has called in James v. The Commonwealth[166]; and in
Abitibi Power & Paper Co. v. The Montreal Trust Company[167], their sovereign powers.

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

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

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

Demurrer overruled with costs. Declare that s. 48 of the Banking Act 1945 is void. Defendants to
pay costs of action.

Solicitor for the plaintiff: T. C. Trumble.

Solicitor for the defendants: H. F. E. Whitlam, Crown Solicitor for the Commonwealth.

Solicitors for the interveners: A. J. Hannan, Crown Solicitor for South Australia; P. G. B. d'Arcy,
Crown Solicitor for Western Australia; F. G. Menzies, Crown Solicitor for Victoria.

[1] [1920] HCA 54; (1920) 28 C.L.R. 129, at p. 150.

[2] [1946] USSC 13; (1946) 326 U.S. 572, at p. 592 [90 Law. Ed. 326, at p. 339].

[3] [1911] HCA 19; (1911) 12 C.L.R. 321.
[4] [1938] HCA 9; (1938) 59 C.L.R. 170.
[5] [1942] HCA 14; (1942) 65 C.L.R. 373, at pp. 424, 425.
[6] [1931] HCA 1; (1931) 44 C.L.R. 492.
[7] [1931] HCA 34; (1931) 46 C.L.R. 73.
[8] [1931] HCA 36; (1931) 46 C.L.R. 131.
[9] [1914] HCA 82; (1914) 19 C.L.R. 381, at p. 392.
[10] (1819) 17 U.S. 316 [4 Law. Ed. 579].
[11] [1824] USSC 39; (1824) 22 U.S. 738 [6 Law. Ed. 204].
[12] (1819) 17 U.S., at p. 422 [4 Law. Ed., at p. 605].
[13] [1829] USSC 27; (1829) 27 U.S. 449, at p. 469 [7 Law. Ed. 481, at p. 488].
[14] [1914] HCA 83; (1914) 19 C.L.R. 457.
[15] [1904] HCA 1; (1904) 1 C.L.R. 91, at p. 111.
[16] [1906] HCA 94; (1906) 4 C.L.R. 488.
[17] [1920] HCA 54; (1920) 28 C.L.R. 129.
[18] [1904] HCA 1; (1904) 1 C.L.R. 91, at p. 111.
[19] (1942) 65 C.L.R., at p. 422.
[20] [1920] HCA 54; (1920) 28 C.L.R. 129.
[21] (1920) 28 C.L.R., at p. 153.
[22] [1920] HCA 54; (1920) 28 C.L.R. 129.
[23] (1920) 28 C.L.R., at pp. 156, 157.
[24] [1925] HCA 30; (1925) 36 C.L.R. 170.
[25] (1925) 36 C.L.R., at pp. 184, 216, 217, 229.
[26] [1937] HCA 26; (1937) 56 C.L.R. 657, at p. 682.
[27] [1920] HCA 54; (1920) 28 C.L.R. 129.
[28] Ante, p. 1, at p. 23.
[29] (1937) 56 C.L.R., at p. 687.
[30] (1942) 65 C.L.R., at p. 431.
[31] (1921) 2 A.C. 91, at p. 119.
[32] (1819) 17 U.S., at p. 436 [4 Law. Ed., at p. 609].
[33] [1829] USSC 27; (1829) 27 U.S. 449 [7 Law. Ed. 481].
[34] [1869] USSC 163; (1869) 75 U.S. 533 [19 Law. Ed. 482].
[35] (1869) 75 U.S., at p. 547 [19 Law. Ed., at p. 487].
[36] [1870] USSC 24; (1870) 78 U.S. 113 [20 Law. Ed. 122].
[37] (1819) 17 U.S. 316 [4 Law. Ed. 579].
[38] (1870) 78 U.S., at p. 127 [20 Law. Ed., at pp. 126, 127].
[39] [1869] USSC 163; (1869) 75 U.S. 533 [19 Law. Ed. 482].
[40] [1939] USSC 60; (1939) 306 U.S. 466 [83 Law. Ed. 927].
[41] [1870] USSC 24; (1870) 78 U.S. 113 [20 Law. Ed. 122].
[42] [1937] USSC 170; (1937) 302 U.S. 134 [82 Law. Ed. 155].
[43] [2008] USSC 14; (1938) 304 U.S. 405 [82 Law. Ed. 1427].
[44] [1938] USSC 139; (1938) 304 U.S. 439 [82 Law. Ed. 1448].
[45] [1939] USSC 103; (1939) 307 U.S. 277 [83 Law. Ed. 1289].
[46] [1946] USSC 13; (1946) 326 U.S. 572 [90 Law. Ed. 326].
[47] [1920] HCA 54; (1920) 28 C.L.R. 129.
[48] [1920] HCA 54; (1920) 28 C.L.R. 129.
[49] [1908] HCA 26; (1908) 5 C.L.R. 789.
[50] [1908] HCA 28; (1908) 5 C.L.R. 818.
[51] [1946] USSC 13; (1946) 326 U.S. 572 [90 Law. Ed. 326].
[52] (1819) 17 U.S. 316 [4 Law. Ed. 519].
[53] [1870] USSC 24; (1870) 78 U.S. 113 [20 Law. Ed. 122].
[54] [1942] HCA 14; (1942) 65 C.L.R. 373, at p. 423.
[55] (1946) 326 U.S., at p. 575 [90 Law. Ed., at p. 330].
[56] [1921] USSC 177; (1921) 257 U.S. 66 [66 Law. Ed. 131].
[57] [1933] USSC 66; (1933) 289 U.S. 48, at p. 57 [77 Law. Ed. 1025, at p. 1028].
[58] [1934] USSC 70; (1934) 291 U.S. 619 [78 Law. Ed. 1025].
[59] (1946) 326 U.S., at p. 582 [90 Law. Ed., at pp. 333, 334].
[60] (1946) 326 U.S., at p. 584 [90 Law. Ed., at p. 335].
[61] (1946) 326 U.S., at p. 585 [90 Law. Ed., at p. 335].
[62] (1946) 326 U.S., at p. 586 [90 Law. Ed., at p. 336].
[63] (1946) 326 U.S., at p. 587 [90 Law. Ed., at p. 336].
[64] (1946) 326 U.S., at p. 587 [90 Law. Ed., at p. 336].
[65] (1946) 326 U.S., at p. 588 [90 Law. Ed., at p. 337].
[66] [1920] HCA 54; (1920) 28 C.L.R. 129.
[67] [1937] HCA 33; (1937) 57 C.L.R. 327, at pp. 343, 344.
[68] [1946] USSC 13; (1946) 326 U.S. 572 [90 Law. Ed. 326].
[69] [1946] USSC 13; (1946) 326 U.S. 572 [90 Law. Ed. 326].
[70] [1937] HCA 26; (1937) 56 C.L.R. 657, at pp. 668, 669.
[71] [1914] HCA 83; (1914) 19 C.L.R. 457.
[72] [1914] HCA 83; (1914) 19 C.L.R. 457, at pp. 470, 471.
[73] [1920] HCA 55; (1920) 28 C.L.R. 436, at p. 451.
[74] [1920] HCA 54; (1920) 28 C.L.R. 129, at p. 158.
[75] [1920] HCA 54; (1920) 28 C.L.R. 129.
[76] (1947) A.C. 33, at p. 43.
[77] (1939) A.C. 117, at p. 130.
[78] [1870] USSC 24; (1870) 78 U.S. 113 [20 Law. Ed. 122].
[79] [1939] USSC 60; (1939) 306 U.S. 466 [83 Law. Ed. 927].
[80] [1946] USSC 13; (1946) 326 U.S. 572 [90 Law. Ed. 326].
[81] [1937] HCA 26; (1937) 56 C.L.R. 657, at pp. 674, 681-683, 687-688.
[82] [1938] HCA 30; (1938) 60 C.L.R. 111, at pp. 125-126.
[83] [1914] HCA 73; (1914) 19 C.L.R. 298.
[84] [1931] HCA 1; (1931) 44 C.L.R. 492.
[85] [1931] HCA 34; (1931) 46 C.L.R. 73.
[86] [1945] HCA 41; (1945) 71 C.L.R. 29.
[87] (1947) A.C. 33.
[88] [1914] HCA 83; (1914) 19 C.L.R. 457.
[89] [1942] HCA 14; (1942) 65 C.L.R. 373, at p. 442.
[90] [1942] HCA 39; (1942) 66 C.L.R. 488, at p. 515.
[91] [1926] USSC 17; (1926) 269 U.S. 514, at p. 523 [70 Law. Ed. 384, at p. 392].
[92] [1931] USSC 141; (1931) 283 U.S. 570, at p. 575 [75 Law. Ed. 1277, at p. 1281].
[93] [2008] USSC 14; (1938) 304 U.S. 405, at p. 428 [82 Law. Ed. 1427, at p. 1441].
[94] [1904] HCA 1; (1904) 1 C.L.R. 91.
[95] [1906] HCA 94; (1906) 4 C.L.R. 488.
[96] [2008] USSC 14; (1938) 304 U.S. 405 [82 Law. Ed. 1427].
[97] [1939] USSC 60; (1939) 306 U.S. 466 [83 Law. Ed. 927].
[98] [1946] USSC 13; (1946) 326 U.S. 572 [90 Law. Ed. 326].
[99] [1920] HCA 18; (1920) 28 C.L.R. 1.
[100] (1938) 304 U.S., at p. 419 [82 Law. Ed., at pp. 1436, 1437].
[101] [1905] USSC 184; (1905) 199 U.S. 437 [50 Law. Ed. 261].
[102] [1939] USSC 60; (1939) 306 U.S. 466 [83 Law. Ed. 927].
[103] [1946] USSC 13; (1946) 326 U.S. 572 [90 Law. Ed. 326].
[104] [1926] USSC 17; (1926) 269 U.S. 514 [70 Law. Ed. 384].
[105] [1931] USSC 17; (1931) 282 U.S. 216 [75 Law. Ed. 304].
[106] (1938) 304 U.S., at p. 419 [82 Law. Ed., at p. 1437].
[107] (1946) 326 U.S., at p. 582 [90 Law. Ed., at p. 333].
[108] (1946) 326 U.S., at p. 580 [90 Law. Ed., at p. 332].
[109] (1946) 326 U.S., at p. 586 [90 Law. Ed., at p. 336].
[110] (1946) 326 U.S., at p. 587 [90 Law Ed., at p. 336].
[111] (1946) 326 U.S., at p. 587 [90 Law Ed., at p. 336].
[112] [1908] HCA 26; (1908) 5 C.L.R. 789.

[113] [1908] HCA 28; (1908) 5 C.L.R. 818.
[114] [1920] HCA 54; (1920) 28 C.L.R. 129.
[115] (1920) 28 C.L.R., at p. 155.
[116] (1942) 65 C.L.R., at p. 447.
[117] Ante, p. 1, at p. 22 et seq.
[118] [1920] HCA 54; (1920) 28 C.L.R. 129.
[119] (1942) 66 C.L.R., at p. 515.
[120] [1942] HCA 14; (1942) 65 C.L.R. 373.
[121] [1943] HCA 37; (1943) 68 C.L.R. 87.
[122] [1944] HCA 37; (1944) 69 C.L.R. 476.
[123] [1942] HCA 39; (1942) 66 C.L.R. 488, at pp. 506-507.
[124] (1943) 68 C.L.R., at p. 106.
[125] (1942) 65 C.L.R., at p. 469.
[126] [1939] USSC 60; (1939) 306 U.S. 466 [83 Law. Ed. 927].
[127] (1883) 9 App. Cas. 61, at p. 74.
[128] (1946) 326 U.S., at p. 580 [90 Law. Ed. 332, 333.]
[129] (1939) 306 U.S., at p. 477 [83 Law. Ed., at p. 931].
[130] (1938) 304 U.S., at pp. 426, 427 [82 Law. Ed., at pp. 1440, 1441].
[131] (1946) 326 U.S., at p. 590 [90 Law. Ed. 338].
[132] (1946) 326 U.S., at p. 587 [90 Law Ed., at p. 336].
[133] [1920] HCA 54; (1920) 28 C.L.R. 129.
[134] [1920] HCA 54; (1920) 28 C.L.R. 129.
[135] [1946] USSC 13; (1946) 326 U.S. 572 [90 Law. Ed. 326].
[136] (1946) 326 U.S., at p. 575 [90 Law. Ed., at p. 329].
[137] [1920] HCA 54; (1920) 28 C.L.R. 129.
[138] (1920) 28 C.L.R., at p. 162.
[139] [1920] HCA 54; (1920) 28 C.L.R. 129.
[140] (1920) 28 C.L.R., at pp. 158, 162, 166.
[141] [1908] HCA 28; (1908) 5 C.L.R. 818.
[142] (1908) 5 C.L.R., at p. 833.
[143] [1920] HCA 54; (1920) 28 C.L.R. 129.
[144] (1920) 28 C.L.R., at pp. 158-159.
[145] (1920) 28 C.L.R. at p. 164.
[146] [1942] HCA 14; (1942) 65 C.L.R. 373.
[147] (1920) 28 C.L.R., at p. 145.
[148] (1920) 28 C.L.R., at p. 151.
[149] (1920) 28 C.L.R., at p. 148.
[150] (1883) 9 App. Cas. 117, at p. 132.
[151] (1906) A.C. 542, at p. 547.
[152] (1878) 3 App. Cas. 889, at p. 904.
[153] (1920) 28 C.L.R., at pp. 152-154.
[154] (1920) 28 C.L.R., at p. 154.
[155] (1894) A.C. 31, at p. 46.
[156] (1947) A.C. 33, at pp. 41, 42.
[157] [1920] HCA 54; (1920) 28 C.L.R. 129.
[158] [1920] HCA 54; (1920) 28 C.L.R. 129, at p. 153.
[159] (1939) A.C. 117, at p. 129.
[160] (1937) 56 C.L.R., at p. 682.
[161] [1920] HCA 54; (1920) 28 C.L.R. 129.
[162] [1920] HCA 54; (1920) 28 C.L.R. 129.
[163] [1942] HCA 14; (1942) 65 C.L.R. 373.
[164] [1942] HCA 39; (1942) 66 C.L.R. 488.
[165] [1944] HCA 16; (1944) 68 C.L.R. 485.
[166] [1936] UKPCHCA 4; (1936) A.C. 578, at p. 611.
[167] (1943) A.C. 536, at p. 547.
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