HIGH COURT OF AUSTRALIA

                                                   Bank of N.S.W.

                                                           Vs.

                                                The Commonwealth

            Latham C.J.(1), Rich(2), Starke(3), Dixon(4), McTiernan(5) and Williams(2) JJ.

                                                   11 August 1948

LATHAM C.J.

1. In these five actions referred for trial to the Full Court the Commonwealth Parliament.
Introduction. (at p149)

2. The Act does not apply to State banking, but, with this exception, it would, if put into full
operation, give a monopoly of banking in Australia to the Commonwealth Bank of Australia
constituted under the Commonwealth Bank Act 1945. The 1947 Act applies to fourteen named
companies carrying on banking business in Australia. Eight of these companies are incorporated in
Australia, three in England and three elsewhere. They are called "private banks" in the Act. (at
p150)

3. The Act provides means for the acquisition of shares by the Commonwealth Bank in any private
bank by agreement or, in the case of the Australian banks, by compulsion; for the management of
Australian banks by directors chosen and appointed by joint action of the Commonwealth Bank and
the Treasurer of the Commonwealth; for the taking over by the Commonwealth Bank of the
business in Australia of any of the banks by agreement or by compulsion; for the acquisition by the
Commonwealth Bank of the assets of any private bank in Australia and elsewhere by agreement or
by compulsion; for transfer of liabilities of the banks to the Commonwealth Bank; for the payment
of compensation as determined by a Court of Claims; for the prohibition of the carrying on of
banking by any of the private banks upon notice given by the Treasurer; and for the taking over of
the staffs of the plaintiff banks by the Commonwealth Bank. The operation of all the provisions of
the Act depends upon some action by the Commonwealth Treasurer in giving a notice to a particular
bank or approving a recommendation or agreement made by the Commonwealth Bank. (at p150)

4. This legislation is valid only if it is legislation with respect to a subject matter with respect to
which the Commonwealth Constitution gives power to the Commonwealth Parliament to make laws
and if it does not infringe any relevant constitutional prohibition. The plaintiffs contend that the Act
is not legislation with respect to any such subject matter and, in particular, that it is not authorized
by the powers which the Constitution, s. 51, vests in the Commonwealth Parliament to make laws
with respect to: -

       "(xiii.) 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:"
       "(xx.) Foreign corporations, and trading or financial
       corporations formed within the limits of the Commonwealth:"
       "(xxxi.) The acquisition of property on just terms from any
       State or person for any purpose in respect of which
       the Parliament has power to make laws:"
       "(xxxix.) Matters incidental to the execution of any power
       vested by this Constitution in the Parliament or in
       either House thereof, or in the Government of the
       Commonwealth, or in the Federal Judicature, or in
       any department or officer of the Commonwealth." (at p151)

5. It is contended for the plaintiffs that the fact that the legislation applies to banks does not make it
legislation with respect to "banking" and that it is not a law on that subject; that s. 51 (xx.) does not
apply to banking corporations, and that it does not authorize in the case of any corporation the
making of laws prohibiting the carrying on of business by the corporation or controlling the manner
of carrying on such business; that the acquisition of shares and assets for which the Act provides is
for various reasons not acquisition of property for a purpose in respect of which the Commonwealth
Parliament has power to make laws; that the acquisition is not upon just terms; that the provisions
with respect to the Court of Claims oust the jurisdiction conferred by the Constitution upon the High
Court, and are therefore invalid; and that the provisions under which the Commonwealth Treasurer
at his arbitrary will can prohibit a bank from carrying on banking business are not authorized by the
Constitution. (at p151)

6. It is also argued for the plaintiffs that the provisions with respect to the acquisition of shares and
assets and the prohibition of carrying on banking business infringe s. 92 of the Constitution, which
provides that "trade, commerce and intercourse among the States, whether by means of internal
carriage or ocean navigation, shall be absolutely free." (at p151)

7. The plaintiffs further contend that the Act is invalid as interfering with the performance of
essential governmental functions by the Governments of the States in relation to the management,
custody and control of public moneys, and that it is invalid as being inconsistent with provisions of
the Financial Agreement between the Commonwealth and the States (see Financial Agreement Act
1944, Schedule) to which overriding effect is given by s. 105A of the Constitution. (at p151)

8. The 1947 Act deals only with certain specified banks - but they are all the private banks which in
fact carry on business in Australia. No bank can carry on business in Australia without the authority
of the Governor-General: Banking Act 1945, ss. 6, 7. Accordingly, the 1947 Act, if put into full
operation, together with the lastmentioned Act, enables the Commonwealth through the Treasurer
and the Commonwealth Bank to control or to conduct the whole of the banking business of
Australia except in the case of State banks. (at p151)

9. The Act, if put into full operation, provides for the nationalization of banking, but the questions
before the Court are not to be determined by any opinion with respect to the merits or demerits of
such a policy. Such opinions have nothing to do with any of the legal questions to be decided by the
Court, which are whether the legislative provisions which the Banking Act 1947 contains are within
the constitutional powers of the Commonwealth Parliament, and not whether the policy which they
represent is wise or prudent or desirable. (at p152)
10. The constitutional validity of a statute, it should be observed at the outset, cannot be determined

by the fact that Parliament desires or hopes to attain a particular object by the legislation (see South

Australia v. The Commonwealth [1942] HCA 14; (1942) 65 CLR 373, at p 412 and cases there

cited), but by what the law actually enacts. Thus in the present cases the questions are whether the

particular provisions of the Act are valid. It is not a general question as to whether the

Commonwealth Parliament has power by some means or other to acquire a monopoly of banking

(other than State banking) for a corporation controlled or controllable by the Commonwealth. The

question of power must be separately considered in relation to the particular means adopted in the

Act; for example, the acquisition provisions, the prohibition provisions - are these specific

provisions within power or beyond power? Another operation of the Act, if valid, is to enable

directors appointed by the Governor of the Commonwealth Bank and approved by the

Commonwealth Treasurer to control Australian banks. Is such legislation valid? Another operation

of the Act, if valid, will be to prevent some or all of the private banks from carrying on any banking

business in Australia. Is such legislation valid? These are examples of the actual operation of the

Act. It is such particular and precise matters which have to be considered in relation to the

provisions         of                         the                     Commonwealth

Constitution.

"Private bank" means a body corporate the name of which is set out in the First Schedule: 1947 Act,

s. 5. These corporations are divided in that schedule into three classes: Part I., private banks

incorporated in Australia (eight banks); Part II., private banks incorporated in the United Kingdom

(three banks); Part III., private banks incorporated elsewhere (three banks). (at p152)

11. In the first of the five actions now before the Court all the private banks incorporated in
Australia (Part I. of First Schedule) are plaintiffs. Shareholders and directors are also parties (except
in the case of the Queensland National Bank Ltd., which is in liquidation) who sue on behalf of
themselves and all other shareholders on any register in Australia of the bank, and other
shareholders who sue on behalf of themselves and of other holders of shares on any register outside
Australia of the bank. (at p153)

12. In the second action the banks incorporated in England are the plaintiffs. In the other three
actions the States of Victoria, South Australia, Western Australia and their respective Attornies-
General are plaintiffs. (at p153)

13. The defendants are the Commonwealth of Australia, the Treasurer of the Commonwealth and

the  Governor  of      the                    Commonwealth  Bank  of                     Australia.

Claims of the Plaintiff Companies. (at p153)

14. In the first and second actions (in which the Australian and English banks respectively are
plaintiffs) the plaintiffs claim declarations that the Banking Act 1947 is beyond the powers of the
Parliament of the Commonwealth, contrary to the Constitution of the Commonwealth, and void and,
alternatively, declarations that specified sections are void. There is also a claim for injunctions
restraining the Commonwealth Treasurer and the Governor of the Commonwealth Bank from giving
notices &c. which would bring the Act into operation. The claims of the English banks are
substantially identical with those made by the Australian banks, with certain omissions in respect of
sections which do not apply to the English banks, as, for example, ss. 17-19, purporting to authorize
the Governor of the Commonwealth Bank to appoint directors of a bank - a provision which is
limited to Australian banks. (at p153)

15. In the actions in which the States are plaintiffs claims are made that the Banking Act, or certain
provisions thereof, are invalid, and injunctions are sought against the Treasurer giving notices under
certain sections for the purpose of bringing the Act into operation. In the actions in which the States
of South Australia and Western Australia are plaintiffs a declaration is sought that certain provisions
of the Act are breaches of the Financial Agreement contained in the schedule to the appendix to the
amending Financial Agreement Act 1944. (at p153)

16. The plaintiffs applied for interlocutory injunctions in each action. Affidavits were filed in
support of the motions and in reply. The parties agreed that the motions for interlocutory injunctions
in each action should be treated as the trial of the action, and also that the actions should be heard
together. An order was made that the motions be treated as the trials of the actions and be heard
together upon the affidavits filed in the applications for interlocutory injunctions. Constitution of
Plaintiff Companies. (at p154)

17. The Australian banks are incorporated under the Companies Acts of the various States with the
exception of the Bank of New South Wales which was incorporated under the Bank of New South
Wales Act 1850. The English banks are incorporated in Great Britain - the Bank of Australasia
under a Royal Charter of 1834 as amended, the Union Bank and the English Scottish and Australian
Bank under the English Companies Act. (at p154)

18. The memoranda of association of the Australian private banks in all cases authorize the banks to
carry on the business of banking. There is to be found in either the memorandum of association or
the articles of all the plaintiffs express power in some form to sell the business and undertaking of
the bank - in some cases subject to ratification by the company in general meeting. The memoranda
of association also contain powers, in the case of all the Australian banks except two, to amalgamate
with other banks or to purchase the business of other banks. (at p154)

19. The memoranda of association of the plaintiff banks in several cases give power to carry on any
business which may conveniently be carried on with banking business and to carry on any business
of a financial character; that is, the plaintiff banks are not absolutely limited by their memoranda of
association to what is strictly banking business. In some cases there is express power to act as
executor or trustee and to enter into guarantees. (at p154)

20. The deed of settlement of the Bank of New South Wales provides that no corporation shall be a
shareholder. (at p154)

21. The articles of association of three of the plaintiff banks provide that no member shall hold more
than a fixed number of shares. In the case of the Bank of New South Wales the limit is 1/25th of the
paid up capital; in the case of the Commercial Banking Co. of Sydney and the Ballarat Banking Co.
Ltd. the maximum number of shares that any member can hold is 2,000. (at p154)

22. All the banks concerned in this litigation, Australian and English, have provisions in their
articles of association dealing with the voting power of members. In some cases one vote is given
for every five, or some other small number of shares, and there is a provision that no vote is given
beyond a certain fixed number. (at p154)

23. The articles of association of all the banks, Australian and English, contain restrictive provisions
with respect to the transfer of shares. In some cases the approval of a transferee by the directors is
required in the case of any transfer of shares: in other cases, only when the shares are not fully paid
or the company has a lien upon them. (at p154)
24. The articles of association of all the banks provide for the election of directors by shareholders.
Evidence. (at p155)

25. The evidence upon which the plaintiff banks relied was contained in affidavits of experienced
banking officers. (at p155)

26. The shareholders in the Bank of Adelaide, the Ballarat Bank and the Brisbane Bank are all on
registers which are kept in Australia. In the case of all the other banks, there are principal registers
and branch registers. Registers of these banks are kept at several of the State capital cities in
Australia and in some cases in London and New Zealand. The shares on the Australian registers
varied in number from sixty-eight per cent to ninety-nine per cent of the shares issued (figures as at
19th December 1947). There is nothing to prevent the registers outside Australia being closed at the
will of the shareholders or directors, with the result of bringing all the shares on to Australian
registers. (at p155)

27. The Australian private banks have nearly 1,600 branches in Australia, New Zealand and London
and many hundreds of agencies. These banks have about 1,038,000 customers' accounts. The
English private banks have about 500 branches and a large number of agencies. There are about
250,000 accounts in these banks. (at p155)

28. The customers of the private banks include several State Governments, and those banks hold
some hundreds of accounts of State Government Departments of one kind and another. In the case
of the State of New South Wales and the State of Victoria formal agreements have been made under
the provisions of State Audit Acts between the Governments and certain of the banks for the
conduct of the banking business of the State Government. Most of the private banks hold accounts
of State Savings Banks. (at p155)

29. The affidavits filed on behalf of the plaintiffs in the first two actions show that the plaintiff
banks are organized upon an Australian basis and that the members of their staffs are interchanged
between branches in the different States. The banks conduct a great deal of inter-State banking
business, the nature of which is explained under the following heads: -

       " (a) the collection and negotiation of inter-State Bills of
       Exchange, cheques and Promissory Notes,
       (b) the transfer of funds inter-State,
       (c) the establishment of inter-State credits,
       (d) the issue and negotiation of travellers cheques." (at p155)

30. Transactions of this character involve large numbers of communications between the branches
of a bank or the branches of one bank and the branches of another bank in different States and the
transmission of many documents across State boundaries. The nature of these transactions is stated
in detail in the affidavits filed on behalf of the plaintiffs. The amount of money dealt with in inter-
State banking operations carried on by the private banks is stated to be "of the order of 300,000,000
pounds per annum." (at p156)

31. The evidence for the plaintiffs shows that the conduct of modern business and, in particular, of
trade and commerce, requires for its normal operation the utilization of banking facilities. These
banking facilities in Australia are provided principally by the private banks. (at p156)

32. Inter-State and intra-State banking operations are not only closely associated, but are so
interwoven that it would be difficult to disentangle them and treat them separately. What begins as
an intra-State transaction may lead up to and develop into a inter-State transaction and vice versa,
and intra-State elements and inter-State elements may appear at several stages of the same
transaction. The funds of the banks are used indifferently for inter-State and intra-State transactions.
(at p156)

33. The affidavits filed on behalf of the plaintiffs show that at any given time thousands of
transactions are in progress which involve the transport or transmission of goods or funds in which
the banks are interested. The persons with whom these transactions are conducted will be in many
countries and will possibly be changing their residence from time to time. Upon these facts an
argument is founded that it would be difficult, if not impossible, to distinguish between assets and
liabilities which should be regarded as being situated in Australia and those which should be
regarded as being situated outside Australia (see definition of Australian assets and Australian
liabilities in s. 5 of the Act). (at p156)

34. In the affidavits filed on behalf of the plaintiffs in the actions in which the States are parties it is
stated that banking facilities are essential in order to enable a State to carry on and perform its
necessary governmental functions. The State Audit Acts provide for the appointment of banks by
the Governor in Council into which public moneys are to be paid and in pursuance of these
provisions a number of the plaintiff banks have been so appointed and they transact the banking
business of the States. As already stated, in the case of Victoria and New South Wales formal
agreements exist between certain of the banks and the Governments with respect to the public
accounts and the transaction of banking business for State Governments, and those Governments
maintain a large number of accounts with the private banks. (at p156)

35. There is a Commonwealth Savings Bank which is associated with the Commonwealth Bank.
The Commonwealth Bank is stated to be an active competitor for Savings Bank business with the
State Savings Bank of Victoria and South Australia and therefore, it is said, it would not be feasible
to appoint the Commonwealth Bank as agent for the existing State Savings Banks or for other which
might be established. (at p157)

36. In the action in which the State of South Australia is the plaintiff an affidavit directs attention to
the balance sheet of the Commonwealth Bank showing that the only assets available to pay
compensation to shareholders of the private banks consist of Commonwealth Government securities,
including Commonwealth Treasury bills and debentures, of the aggregate face value of about
500,000,000 pounds. No public loan for the purpose of paying compensation has been authorized by
the Loan Council in accordance with the Financial Agreement. In the State of South Australia there
is a State bank, but at present it operates on a rather small scale. The principal banking account of
the State is kept with the Commonwealth Bank. The affidavit records an objection to the State being
compelled to do all its business with the Commonwealth Bank for the reason that "if the Treasurer
of the Commonwealth were to give to the Council of the Commonwealth Bank a direction as to its
policy which affected prejudicially or sought to control the banking business of the State or any part
thereof, the State would be unable to avoid such prejudice or escape such control by transferring its
banking business to any other bank or conducting it by any other means." (at p157)

37. The State bank has made arrangements with the private banks and the Commonwealth Bank for
clearing-house facilities and providing moneys for customers at places where the State bank has no
branch or agency. The affidavit expresses the following opinion: "In order to enable the State to
perform its governmental functions it is essential that it should be able to have independence and
freedom from the control of any other Government, and any governmental instrumentality, and any
person or body of persons or any corporation, in the selection of a bank or banks which will act as
the bank or banks for the State." (at p157)

38. In the action in which the State of Western Aust ralia is the plaintiff the evidence for the
plaintiffs is similar to that in the case of the State of South Australia. There is a State bank in
Western Australia operating upon a small scale. (at p157)

39. The evidence for the defendants consists in the first place of an affidavit by Professor L. G.
Melville, Chief Economic Adviser to the Commonwealth Bank, a Fellow of the Institute of
Actuaries, and formerly Professor of Economics in the University of Adelaide. Professor Melville
has had extensive experience in relation to banking. He refers to the report of the Royal Commission
on Monetary and Banking Systems in Australia dated July 1937. He states that the Australian
banking system consists of the Commonwealth Bank and the Commonwealth Savings Bank, State
banks in New South Wales (the Rural Bank of New South Wales), South Australia and Western
Australia, State Savings Banks in Victoria and South Australia, private banks specified in the First
Schedule to the Banking Act 1947, and the Agricultural Banks of Queensland and Tasmania.
Reference is also made to pastoral and finance companies and building societies which carry on a
limited form of banking business but not the general business of banking, which have been
exempted by the Treasurer of the Commonwealth under s. 10 of the Banking Act 1945 from certain
of the provisions of that Act. (at p158)

40. Professor Melville refers to the fact that the number of banks in Australia has been reduced by
amalgamations and other means to ten since 1893, when there were twenty-three banks. Evidence as
to the increase of trade and commerce in Australia since 1893, as to the facilities provided by the
Post Office for transmission of money by money orders and postal notes, and a statement of opinion
that the Commonwealth Bank will, when the Banking Act 1947 is in operation, be capable of
providing full banking facilities without any adverse effects on Australian business were objected
to. This evidence is, in my opinion, inadmissible. (at p158)

41. With respect to the suggested difficulties in the way of determining the location of assets and
liabilities, Professor Melville points out that under ss. 40 and 41 of the Banking Act 1945 a weekly
statement of liabilities and assets within Australia is prepared and delivered to the Commonwealth
Statistician, no difficulties being experienced in practice in the performance of this obligation. But
the fact that there may, in some cases, be difficulties in determining the locality of assets or
liabilities cannot have any bearing upon the constitutional validity of the Act. (at p158)

42. The opinion is expressed by Professor Melville that the Commonwealth Bank will be able to pay
in cash any required amount of compensation and it is stated (as the fact is) that the Commonwealth
Bank has power to expand credit without any limitation depending upon the value of the assets held
by the bank at any particular time. The extent to which this power is exercised on particular
occasions will depend upon the policy adopted by the bank. (at p158)

43. It is further pointed out that the course of banking business is the same in inter-State as in intra-
State transactions. (at p158)

44. Much of Professor Melville's affidavit consists of argumentative material relating to the function
of banks in relation to the creation of credit, and expounding, in particular, the theory of central
banking. He expresses the opinion that the primary functions of the private banks are to borrow and
to lend and to recall credit. (at p159)

45. The working of exchange settlement accounts, whereby cheques drawn on the various banks are
cleared, is explained. The banks maintain exchange settlement accounts with the Commonwealth
Bank, and through these accounts inter-bank liabilities are adjusted. The transmission of funds by a
private bank from one State to another is generally effected through an exchange settlement account
in the Commonwealth Bank. (at p159)

46. Professor Melville explains the relation of trading banks to a central bank which is "a banker's
bank" controlling credit and monetary policy. Legal tender in Australia at the time when the
affidavit was sworn amounted to about 203,000,000 pounds, but the amount of credits in the deposit
accounts (excluding accounts of Governments and other banks) in all banks amounted to
1,560,000,000 pounds, the difference, 1,357,000,000 pounds, representing credit created by the
banks. This creation of credit was controlled by the Commonwealth Bank under the Banking Act
1945. The banks determined their policy in relation to making advances by reference to the amount
of their cash reserves, but the policy of one bank was necessarily affected by the policy of the other
banks, and the banking system as a whole was subject to a large degree of control by the central
bank. The banks were compelled under s. 20 of the Banking Act 1945 to maintain in special
accounts with the Commonwealth Bank amounts determined by the Commonwealth Bank under
that Act. In November 1947 the amount standing to the credit of the special accounts of the plaintiff
banks was 249,000,000 pounds. The Commonwealth Bank could, by requiring additions to or
permitting subtractions from the special accounts, exercise an effective instrument of credit control.
Under s. 27 of the Banking Act 1945 the Commonwealth Bank had the power of determining the
policy in relation to advances to be followed by private banks. This power had been exercised by
giving to private banks extensive and detailed directions with respect to the classes of advances to
be made and the matters to be taken into consideration in making advances. The degree of control
exercised by the Commonwealth Bank was illustrated by reference to a list of subject matters in
respect of which directions had been given to the private banks by the Commonwealth Bank. These
subject matters included the following:-

       "Construction of new buildings, alterations and additions to,
       and repair of existing buildings.
       Investments in shares, stock, &c.
       Retailers.
       Agricultural, pastoral and dairying production.
       Semi-governmental and local authorities.
       Advances to take up Commonwealth Loans.
       Purchase of real estate.
       Financing of hire purchase transactions and cash order
       businesses.
       Manufacturers.
       Advances to repay existing mortgages or retire debts which
       have not yet matured.
       Amusement and sporting activities.
       Advances for the purpose of meeting taxation commitments.
       Wholesalers, manufacturers' agents, and indent agents, selling
       and commission agents.
       Exports.
       Imports.
       Establishment of new businesses or purchase of an existing
       business.
       Ex-servicement.
       Fixed deposits.
       Speculative buying or holding of commodities.
       Production and exploitation of raw materials.
       Probate duties and payment of legacies.
       Transport (including aviation and shipping).
       Personal needs.
       Companies and/or their subsidiaries and persons resident
       outside the sterling area." (at p160)

47. Reference is also made to the fact that under s. 28 of the Banking Act 1945 the Commonwealth
Bank has power to limit the purchase by private banks of Government securities, and also, under s.
39, to control the rates of interest payable to or by private banks. (at p160)

48. Professor Melville explains how the central bank affects the amount of credit available by
issuing Australian notes, by financing Commonwealth and State Government operations, by
purchasing or subscribing to securities, by granting loans to customers and by acquiring overseas
funds. By the use of these means the Commonwealth Bank was able to regulate the volume of
money in the community and thereby facilitate and maintain not only trade and commerce, but also
production, manufacture and many other important activities of its citizens. (at p160)

49. The affidavit of Mr. G. M. Shain, Deputy Governor of the Commonwealth Bank, sets out the
history of the Commonwealth Bank and its functions as a general banker and as the Commonwealth
Savings Bank. (at p161)

50. Mr. S. G. McFarlane, Secretary to the Treasury, states in his affidavit that until 1930 the State
Governments obtained necessary temporary financial accommodation by overdraft from banks in
Australia, but that thereafter this banking accommodation (particularly for the purpose of financing
the Governments during annual lags in receipt of revenue) had in fact been provided by the issue of
Commonwealth Treasury bills. (at p161)

51. The affidavits in reply of the plaintiffs refer to the extent of inter-State operations and restate
that the private banks sometimes themselves become the owners of drafts and the pledgees of bills
of lading. The affidavit of Mr. S. J. Gandon in reply included the following paragraph: - "In each of
the countries in which it carries on business the plaintiff the Bank of New South Wales has
numerous and valuable rights against and is subject to numerous and substantial obligations in
favour of persons who are not customers of that Bank and which rights and obligations do not arise
out of any relation of banker and customer. From my knowledge of the nature of the businesses
carried on by the other private trading banks I am of opinion that the same is true of each of such
other banks." The banks own, or lease, for example, many buildings in the Commonwealth and
elsewhere. Accordingly, they have many rights and obligations as property owners. (at p161)

52. A further affidavit in reply was sworn by Professor Torleiv Hytten, Economist to the Bank of
New South Wales, Mr. Donald Henry Merry, Mr. A. J. Tyrer and Mr. G. R. Mountain. All these
gentlemen are experienced in banking and economics. The effect of their affidavit is that in their
opinion the essential function of trading banks is "to transact general banking business with the
public. The essential function, on the other hand, of a central bank is to exercise control over the
volume of credit. A central bank commonly acts as a banker's bank and as banker for the Central
Government. It is not an essential function of a central bank as such to transact general banking
business with the public." It was accordingly argued in the affidavit that a central bank in the true
sense necessarily involved the co-existence of other banks which were trading banks and that the
operations and functions of those trading banks were in substance and essence the same whether
there was a central bank or not. A central bank was only one of several means by which to influence
(inter alia) the volume of production, the flow of trade and the level of employment. Among other
such means were fiscal policy, including taxation and loan operations, price control, customs
regulations, &c. Accordingly, it was submitted that the abolition of independent trading banks
would not be a development of central banking, as Professor Melville was understood to suggest. (at
p162)

53. Upon this evidence Dixon J. made the order for trial before the Full Court and granted
interlocutory injunctions preventing the Act being brought into operation until judgment was finally
pronounced in the actions or until further order of the court.
Banking Act 1947.

       Part I. (at p162)

54. Part I. of the Act contains the following provision in s. 3: - "The several objects of this Act
include - (a) the expansion of the banking business of the Commonwealth Bank as a publicly-owned
bank conducted in the interests of the people of Australia and not for private profit; (b) the taking
over by the Commonwealth Bank of the banking business in Australia of private banks and the
acquisition on just terms of property used in that business; (c) the prohibition of the carrying on of
banking business in Australia by private banks." (at p162)

55. It is a practice in some countries to introduce statutes with a statement of the objects of the
legislature in making an enactment and an explanation of its general character. Such a statement is
useful for the information of legislators and of the public. Where, however, a Parliament, as in the
case of the Commonwealth Parliament, has only limited powers, the declaration of Parliament that a
law is enacted for the purpose of securing the stated objects cannot bring an enactment within power
if its operative provisions have no real connection with a subject with respect to which the
Parliament has power to make laws. Such a declaration is entitled to respectful consideration, but it
cannot be decisive upon a question of validity. Under a unitary constitution, a parliament may be the
judge of its own powers, but that is not the case under the Federal Constitution of Australia. (at
p162)

56. The validity of many of the provisions of the Act is challenged. These provisions must be
considered according to their own terms and their actual operation, and the belief of Parliament that
they would assist in achieving particular objects cannot in itself establish their validity, even if the
objects specified are themselves directly within parliamentary power. Each provision must be
considered in the context of the Act, independently of any such statement of objects - though such a
statement may suggest a connection between the legislation and a relevant subject matter: cf. for
example, Andrews v. Howell (1941) 65 CLR 255, at p 275 . These considerations become important
in relation to the power conferred upon the Federal Parliament by s. 51 (xxxi.) to make laws for the
acquisition of property on just terms for any purpose in respect of which the Parliament has power
to make laws. (at p163)

57. Section 5 contains various definitions. "Australian assets and liabilities" means assets and
liabilities situated, or deemed by law to be situated, in Australia. "Australian private bank" means a
private bank which was formed within the limits of the Commonwealth and the name of which is set
out in Part I. of the First Schedule. "Australian shares" means shares situated, or deemed by law to
be situated, in Australia. "Private bank" means a body corporate the name of which is set out in the
First Schedule.

       Part II. (at p163)

58. Part II. consists of s. 6, which is a declaration of legislative intention. It is in the following
terms: - "It is hereby declared to be the intention of the Parliament - (a) that if any provision of this
Act is inconsistent with the Constitution, that provision and all the other provisions of this Act shall
nevertheless operate to the full extent to which they can operate consistently with the Constitution;
(b) that the provisions of the last preceding paragraph shall be in addition to, and not in substitution
for, the provisions of section fifteen A of the Acts Interpretation Act 1901-1941; and (c) that this
section and section fifteen A of the Acts Interpretation Act 1901-1941 shall have effect
notwithstanding that their operation may result in this Act having an effect different, or apparently
different, in substance from the effect of the provisions contained in this Act in the form in which
this Act was enacted by the Parliament." This provision requires that the Act shall be interpreted as
far as possible so as to be valid, though parts of it may be declared to be invalid. Thus the Act is to
be construed upon a general presumption of severability. Each provision is to be given its fullest
possible valid operation, even though, by reason of the invalidity of other provisions of the Act, that
provision may have an effect which is different from that which it would have had if those
provisions had been valid. In Vacuum Oil Co. Pty. Ltd. v. Queensland [1935] HCA 9; (1935) 51
CLR 677 in considering the question of the severability of valid from invalid provisions of a statute,
Dixon J. said (1935) 51 CLR, at p 692 : "The statute will not operate upon the matters within the
powers of the legislature unless it is capable of applying to them in the same way and with the same
consequences to the persons and things affected." I call attention to the words "with the same
consequences." Section 6 (c) is directed to the exclusion of the principle there stated. Part I. has
declared its intention that effect shall be given to any valid provisions of the Act whatever the
consequences may be. But, nevertheless, one provision of the Act may be so dependent upon
another provision that the invalidity of the latter necessarily involves the invalidity of the former.
The Court cannot re-write a statute and so assume the functions of the legislature. (at p164)

59. Whatever view may be taken as to the severability of particular provisions, it is the first duty of
the Court to consider the validity of each provision of the Act which is challenged according to its
terms, construed in their context. Questions of severability - of necessary dependence of one
provision upon some other provision - arise only after questions of construction have been
determined. (at p164)

60. The provisions of the Act have been so drafted that they can be utilized separately or together in
varying combinations, the Commonwealth Bank or the Treasurer of the Commonwealth bringing
them into operation by taking specified action - giving a notice or making an agreement. The
compulsory acquisition of shares, the cesser of office of existing directors and the substitution of
other directors, the compulsory acquisition of assets and transfer of liabilities, and the prohibition
against a bank carrying on business, come into operation only when certain notices are given. There
is no provision which compels the giving of all of these notices or of any particular one of these
notices. (at p164)

61. Such notices may be given to one or more of the plaintiff banks or to all of them. (at p164)
62. They may be given at the same time or at different times. (at p164)

63. They may be given immediately or in the distant future. (at p164)

64. The validity of the Act must be considered in relation to all these possibilities, and not merely in
relation to the present position of the plaintiff companies in respect of shareholdings, of assets and
liabilities, or to the business which at the present time is carried on by them.

       Part III. Application of Act. (at p164)

65. Section 7 provides that nothing in the Act shall apply to State banking. This section is a
recognition of the constitutional limitation involved in s. 51 (xiii.) of the Constitution, which gives
to the Commonwealth Parliament power to make laws with respect to "banking other than State
banking: also State banking extending beyond the limits of the State concerned." In Melbourne
Corporation v. The Commonwealth (1947) 74 CLR 31 it was held that the words, "State banking,"
in this provision refer to the business of banking conducted by a State as a banker and not to
transactions between a State as a customer and a bank. In this Court the plaintiffs had to argue upon
the basis of accepting this decision. (at p165)

66. Section 8 provides that the Act shall extend to the territories under the authority of the
Commonwealth.

       Part IV. (at p165)

67. Part IV. is entitled "Expansion of Banking Business of Commonwealth Bank." It consists of four
Divisions: Division 1 - Preliminary; Division 2 - Acquisition of Shares in Private Banks; Division 3
- Management of Private Banks; Division 4 - Taking over of Businesses of Private Banks. (at p165)

68. Part IV. Division 1. Section 9 declares that the powers with respect to the acquisition of shares
in private banks and the management of private banks are conferred "for the purposes of facilitating
the control by the Commonwealth Bank of the banking business in Australia of private banks and
for the purpose of furthering the expansion of the banking business of the Commonwealth Bank."
(at p165)

69. If, as the defendants contend, the power of the Commonwealth to make laws with respect to
banking enables the Commonwealth to make laws in order to facilitate control of banking by the
Commonwealth Bank and of furthering its expansion, then s. 9 states purposes with respect to which
the Parliament has power to make laws. But, as already stated in relation to s. 3, the declaration by
Parliament of its purpose in making a law, though entitled to careful consideration and respect,
cannot be conclusive upon a question of validity. The law must really be a law with respect to a
subject matter with respect to which Parliament has power to make laws. The declaration by
Parliament that it has a particular purpose in view might, in some circumstances, operate to
invalidate a law (e.g., by reason of s. 92 of the Constitution), but it can never in itself establish the
validity of a law. The Court must consider the actual operation and effect of the actual provisions
contained in an enactment apart from any declaration by Parliament itself that in the opinion of
Parliament the enactment falls within some particular category. (at p165)

70. Section 10 of the Act provides that the provisions of Divisions 2 and 3 of Part IV. shall have
effect, notwithstanding anything in any other law, or in any charter or other instrument, which is
inconsistent with those provisions. So far as State laws are concerned, this section states only what
the position would have been if the section had not been included in the Act. A Commonwealth law,
if valid, prevails over any State law independently of such a provision as s. 10: see the Constitution,
s. 109. So also, a charter or other instrument cannot prevail against a valid Commonwealth law. But,
as will be seen, in some cases a Commonwealth law can have a valid operation only with respect to
matters the existence and characteristics of which depend upon State laws or charters or other
instruments. For example, the Act provides for the acquisition of shares in the plaintiff banks by the
Commonwealth Bank. But it is State law or English law which determines what a share in a
company is. (at p166)

71. Section 11 provides that it shall be the duty of the Commonwealth Bank to provide adequate
banking facilities for any State or person requiring them, to conduct its business without
discrimination, to observe ordinary banking usages, and not to divulge information except in
accordance with the law or customary practices and usages. (at p166)

72. Part IV. Division 2 - Acquisition of Shares. This Division provides for the acquisition of shares
in private banks by agreement or by compulsion. The provisions relating to agreement apply to all
private banks. The provisions for compulsion are limited to Australian private banks. (at p166)

73. Section 12 contains the provision for acquisition of shares by agreement. It provides that the
Commonwealth Bank may, subject to the approval of the Treasurer, purchase all or any of the shares
in any of the Australian or English banks at a price not less than the market price of 15th August
1947. (at p166)

74. Under the Commonwealth Bank Act 1945 s. 13, the Commonwealth Bank has power (inter alia)
to buy, sell, discount and rediscount bills of exchange, promissory notes and Treasury bills, to buy
and sell securities issued by the Government and other securities, and to buy, sell and otherwise deal
in foreign currency, specie, gold and other precious metals. Section 12 of the 1947 Act increases the
power of the Commonwealth Bank by allowing it to purchase shares in private banks with the
approval of the Treasurer. (at p166)

75. Section 13 contains the provisions for compulsory acquisition by the Commonwealth Bank of
Australian shares in Australian private banks. It provides that: - "Where the Treasurer is satisfied
that the majority in number of the shares in an Australian private bank are Australian shares, the
Treasurer may, by notice published in the Gazette, declare that, upon a date specified in the notice,
the shares in that bank which are Australian shares upon that date shall be vested in the
Commonwealth Bank." (at p167)

76. Sub-section (2) provides that a notice may be amended from time to time by substituting a later
date. Sub-section (3) provides that upon the date specified in the notice the shares in the Australian
private bank concerned which upon that date are Australian shares (see definition in s. 5) shall by
force of the Act be vested in the Commonwealth Bank. The effect of this section is that shares on
the Australian register of an Australian bank will on the date specified become vested in the
Commonwealth Bank so as to become the property of the Commonwealth Bank. (at p167)

77. Sub-section (4) provides that all other shares in that Australian private bank which, after the
specified date, become Australian shares shall, by force of the Act, upon the date when they become
Australian shares, be vested in the Commonwealth Bank. Sub-section (5) provides for freeing shares
vested in the Commonwealth Bank from trusts, mortgages, charges, &c. (at p167)
78. Section 14 provides, first, that the Commonwealth Bank shall be the "holder" of the shares in an
Australian private bank which have been purchased or acquired under Division 2 and, secondly, that
the Commonwealth Bank shall be "a member" of the Australian private bank in respect of those
shares. Section 14 (2) provides that the Commonwealth Bank may transfer any such shares to any
person, and that that person shall, for all purposes, be the holder of those shares and be a member of
the bank in respect of such shares. (at p167)

79. Section 15 provides for the payment by the Commonwealth Bank of fair and reasonable
compensation in respect of the acquisition of shares by the Commonwealth Bank under s. 13. (at
p167)

80. It is convenient to make some short comments upon these provisions before examining other
provisions with which they are associated. (at p167)

81. As already stated, the Treasurer is under no obligation to give a notice under s. 13 to all the
banks or to any particular bank. The legislation as enacted is of indefinite duration and action could
be taken with respect to one bank now and to other banks from time to time and possibly many
years later. (at p167)

82. The plaintiffs drew attention to the fact that the operation of s. 13 depends upon the Treasurer
being satisfied that the majority of shares in an Australian bank are Australian shares and it is
argued that the Treasurer may make a mistake in forming an opinion as to whether the majority of
shares are Australian shares. It was suggested that this possibility in some way affected the validity
of the section. No satisfactory argument, however, was presented upon this matter. The condition of
the operation of the section is that the Treasurer is satisfied as to a particular matter, and not that his
opinion on the matter is accurate in fact. (at p168)

83. It is further pointed out by the plaintiffs that it is possible (though doubtless improbable) that the
operation of s. 13 might not, in a particular case, result in the Commonwealth Bank becoming the
owner of a majority of shares in a bank or obtaining voting control. It is true that the Act must be
considered in relation to any possible operation and not upon any assumption as to the probable
proportions of Australian and other shares at the time when the power conferred by s. 13 is
exercised. But the particular possibility mentioned cannot affect the validity of the Act. If the
Commonwealth Bank did not have sufficient shares to control voting by shareholders, the only
consequence would be that the Bank could not, until it gained that control, do what only an effective
majority of votes could accomplish. But every share acquired would be a step towards control, and
if extending control of banking by the Commonwealth Bank is within Federal legislative power, the
fact that s. 13 does not, in all conceivable circumstances, place the Commonwealth Bank in control
of another bank uno ictu, does not place s. 13 beyond power. (at p168)

84. The date specified in the Treasurer's notice under s. 13 may be any date chosen by him now or
years ahead, and a later date may be substituted from time to time. These provisions would enable a
Commonwealth Treasurer to keep shareholders in what might be described as a state of suspended
animation for an indefinite period; but that fact does not constitute any objection to the validity of
the legislation. (at p168)

85. The provisions as to the shares becoming vested in the Commonwealth Bank, the
Commonwealth Bank becoming the holder of those shares and a member of the banking company,
and as to the power to transfer shares to "any person" raise questions as to the power of the
Commonwealth Parliament to exclude the operation of State legislation and articles of association
dealing with these matters. (at p168)

86. Part IV., Division 3 - Management of Private Banks. - This Division applies only to Australian
private banks and not to private banks incorporated elsewhere than in Australia. Under this Division
the Commonwealth Bank, with the approval of the Commonwealth Treasurer, may assume the
management of any Australian private bank through directors appointed by the Governor of the
Commonwealth Bank. (at p169)

87. Section 17 provides as follows: - "(1) Upon the date specified in a notice under sub-section (1)
of section thirteen of this Act (or, if that notice has been amended under sub-section (2) of that
section, upon the date specified in that notice as so amended), the directors of the Australian private
bank in relation to the shares in which the notice was given shall, by force of this Act, cease to hold
office." This is followed by a provision for compensation of directors for loss of office. (at p169)

88. It is pointed out by the plaintiffs that this provision operates upon a date specified in a notice
given under s. 13 (1), whether or not a majority of the shares in the bank are in fact Australian
shares, and whether or not any of the shares are in fact acquired. It is the giving of a notice under s.
13, and not the actual acquisition of shares, which brings s. 17 into operation. (at p169)

89. Section 18 provides as follows: - "(1) The Governor of the Commonwealth Bank may, with the
approval of the Treasurer, appoint directors of an Australian private bank the directors of which
have ceased to hold office under the last preceding section and may appoint one of the directors so
appointed to be chairman of directors. (2) The directors so appointed shall hold office
notwithstanding any lack of qualification or any disqualification arising under any law, charter or
other instrument." (at p169)

90. This provision is permissive and not mandatory in form - the Governor of the Commonwealth
Bank "may" appoint directors. But in fact, as the original directors would have ceased to hold office
by virtue of s. 17 (1), the bank would be left without any directors at all and, accordingly, with no
provision for management, unless the Governor of the Commonwealth Bank actually exercised his
powers under s. 18. The articles of association of the plaintiff banks provide for a share qualification
for directors, and State laws prevent undischarged bankrupts from holding office as directors.
Section 18 (2) excludes the operation of any such provisions. (at p169)

91. The powers of the directors appointed under s. 18 are defined in s. 19 as follows: - "(1)
Directors appointed under the last preceding section shall have full power to manage, direct and
control the business and affairs of the Australian private bank of which they are directors and, in
particular, shall have power - (a) to declare dividends; (b) to dispose of the business in Australia of
that Australian private bank to the Commonwealth Bank; and (c) to dispose of all or any of the other
business of that Australian private bank. (2) The exercise of any power under paragraph (b) or (c) of
the last preceding sub-section shall be subject to the approval of the Treasurer after the Treasurer
has obtained a recommendation from the Governor of the Commonwealth Bank. (3) Subject to the
last preceding sub-section, the exercise of any power by the directors of an Australian private bank
appointed under the last preceding section shall be in their sole discretion and shall not be subject to
any qualification, restriction or condition provided by or under any law, charter or other instrument
relating to the exercise of the powers of the directors of that bank." (at p170)

92. Section 21 deals with the intended result of the Commonwealth Bank becoming the sole
shareholder in one of the private banks (e.g., as in the case of the Bank of Adelaide, the Ballarat
Banking Co. and the Brisbane Permanent Building and Banking Co. Ltd., where all the shares are
Australian shares), or acquiring so many shares that the number of shareholders would be reduced
below the number required by the provisions of the relevant State Companies Act. The State
Companies Acts contain provisions imposing unlimited liability for certain debts of the company
upon shareholders if the number of shareholders falls below a specified number; for example, the
Companies Act 1928 (Vict.), s. 124, provides that in the case of a (non-proprietary) company if the
number of shareholders falls below five and the company carries on business for more than six
months while the number is so reduced, the members of the company during the time that it so
carries on business thereafter, having cognizance of the fact that it is carrying on business with
fewer than five members, shall be severally liable for the payment of the whole of the debts of the
company contracted during that time. State laws also provide, e.g., Companies Act (Vict.) 1928, s.
137 (4), that if the number of members of a company is reduced below a specified number the
company may be wound up by the court. (at p170)

93. Part IV. Division 4 - Taking over of Businesses of Private Banks. This Division provides that the
business in Australia or outside Australia of any private bank (Australian or English) may be taken
over by agreement (s. 22) and that the business in Australia of any of the private banks may, if an
agreement is not made in response to an invitation of the Treasurer be taken over by compulsion (s.
24) - with assets and liabilities as defined. (at p170)

94. Section 22 provides a carefully specified procedure for the purpose of making an agreement and
(sub-s. (8)) for the effect of an agreement made under the section. An agreement made under the
section has the operation and effect specified in the section, and therefore is to be distinguished
from an agreement made, for example, with a private bank through its directors (original or
substituted) which is not made as a result of the procedure prescribed by s. 22, and which, as will
appear, could not, as an agreement, bring about the results specified in s. 22 (8). (at p171)

95. Section 22 (1) provides that the Treasurer may, by notice given in writing to a private bank,
invite a private bank to make an agreement with the Commonwealth Bank not later than the date
specified in the notice for the taking over by the Commonwealth Bank of the business in Australia
of that private bank. (at p171)

96. It should be observed that a notice may be given under s. 22 (1) independently of any
acquisition of shares by the Commonwealth Bank, and that it may be given either before or after
nominee directors have been placed in control of a bank under Division 3 of Part IV. If the notice is
given after Division 3 has been brought into operation, the nominee directors would be the persons
to deal with the invitation of the Treasurer to make an agreement for disposing of the business of the
bank. (at p171)

97. Other provisions in s. 22 provide for the amendment of a notice. Sub-section (5) provides that
the Commonwealth Bank may, subject to the approval of the Treasurer, make an agreement with a
private bank for the taking over by the Commonwealth Bank of all the business in Australia of that
bank. Sub-section (6) provides that an agreement under the section "may be made with a private
bank, whether or not a notice has been given under sub-section (1)," but that if such a notice has
been given an agreement with a private bank shall not be made after the original or amended date
specified in the notice. Thus an agreement under s. 22 can be made only before or on the specified
date. (at p171)
98. Sub-section (7) provides that "an agreement under this section" may include provisions for the
taking over by the Commonwealth Bank of "any of the business, assets and liabilities outside
Australia" of a private bank. (at p171)

99. Sub-section (8) contains provisions with respect to the effect of an agreement made under the
section. It will be seen that this sub-section is a statutory enactment purporting to give an effect to
"an agreement made under this section" which, apart from statute, no agreement between the
Commonwealth Bank and a private bank could accomplish. (at p171)

100. Paragraphs (a) and (b) relate to Australian assets and Australian liabilities "subsisting" upon the
date of taking over of the business. Paragraph (b) provides, not only that the liabilities of the private
bank shall become liabilities of the Commonwealth Bank, but also that the private bank shall be
discharged from its obligations in respect of those liabilities. Accordingly, a depositor in a private
bank or any other creditor of the bank would, when these provisions came into operation, find that
instead of being a creditor of the private bank he had become a creditor of the Commonwealth Bank
and that the private bank owed nothing to him. No agreement between the Commonwealth Bank
and a private bank to which the creditor was not a party could bring about such a result. The
creditor is, without his consent, deprived by statute of his rights against the private bank, that bank
is released from its liabilities to him, and the Commonwealth Bank is substituted as his debtor. This
result depends upon the statute and not upon the agreement as such. The agreement has the effect, as
a consequence of the statutory provision, which is set forth in detail in pars. (a), (b), (c), (d) of s. 22
(8). (at p172)

101. Paragraphs (a) and (b) relate to assets and liabilities which are Australian assets and liabilities
whether they have a direct connection with banking transactions or not; for example, the buildings
in Australia owned by a bank would pass as Australian assets, and Australian liabilities of a bank for
rent of buildings occupied by the bank would pass as Australian liabilities. (at p172)

102. Paragraph (c) relates to assets which become Australian assets after the date of transfer. These
assets are vested in the Commonwealth Bank upon the date upon which they become Australian
assets but only if they are assets "which relate to banking transactions." Such assets might become
so vested from time to time at different dates. This fact has a bearing upon the question whether the
Court of Claims, which determines compensation, must determine compensation once and for all in
a single proceeding. (at p172)

103. Paragraph (d) corresponds in the case of liabilities to par. (c) in the case of assets. It provides
for the transfer of all the liabilities of the bank "which relate to banking transactions" which become
Australian liabilities after the date of transfer. The section provides (as in par. (b)) for the discharge
of the private bank from such liabilities. (at p172)

104. Section 23 provides for a taxation concession to a private bank and its shareholders in respect
of taxation upon incomes or profits in a case where an agreement has been made "under the last
preceding section." Thus if a company makes an agreement under s. 22 - which, as already pointed
out, is different from an agreement made apart from s. 22 - the bank and its shareholders receive a
benefit in respect of taxation. If, however, a bank declines to make an agreement and insists upon its
rights under the Act and proceedings are instituted for compensation, there is no such taxation
concession. This provision raises questions as to whether the terms of compulsory acquisition of
assets are just terms within s. 51 (xxxi.) of the Constitution. (at p173)
105. Section 24 contains the provisions for compulsory taking over of business, acquisition of assets
and transfer of liabilities. Its operation depends upon the giving of a notice under s. 22 (1) of the
Act. Such a notice specifies a date not later than which a private bank is invited by the Treasurer to
make an agreement with the Commonwealth Bank. (at p173)

106. Section 24 (2) provides that where a private bank to which a notice has been given under s. 22
(1) has not made an agreement with the Commonwealth Bank "under that section" before the
specified date the business in Australia of that private bank shall, upon the date of transfer (that is,
the day after the specified date: sub-s. (1)) be taken over by the Commonwealth Bank. "Taking over
a business" is not a technical legal term. When a business is taken over by agreement, the agreement
provides for the transfer of identified assets, including goodwill, perhaps for an indemnity against
business liabilities, and perhaps the agreement contains a covenant in restraint of trade. The
agreement may or may not contain provisions relating to the staff employed in the business. There is
a distinction between the assets of a business and the property of the person or company which
carries on the business: In re Th. Goldschmidt Ltd. (1917) 2 Ch 194, at p 197 . Where a statute
provides for the "taking over of a business" the effect depends entirely upon the terms of the statute.
In the present case s. 24, sub-ss. (4) to (8), expressly state what taking over the business of a private
bank means. Taking over the business of a bank does not terminate the juristic existence of the
company whose business is taken over, nor does it itself prevent the bank from continuing to carry
on business, including banking business. (But s. 46 (3) does, where the business of a bank is
acquired, prevent the bank carrying on banking business.) Sub-sections (4), (5), (6) and (7)
correspond to pars. (a), (b), (c) and (d) of sub-s. (8) of s. 22. Paragraphs (a) and (b) provide for
vesting of "subsisting" assets, transfer of subsisting liabilities, and the discharge of the private bank
from the liabilities taken over by the Commonwealth Bank. Under sub-s. (6) assets which relate to
banking transactions and become Australian assets after the date of transfer but before a date
prescribed in respect of a particular private bank become vested in the Commonwealth Bank upon
the date upon which they become Australian assets. Sub-section (7) is a similar provision with
respect to liabilities which relate to banking transactions. (at p173)

107. The prescribed date under sub-ss. (6) and (7) might be any date in the future. (at p174)

108. All the Australian assets "subsisting upon the date of transfer" are taken over (s. 24 (4)) and all
the "subsisting" Australian liabilities are transferred (s. 24 (5)). These provisions relate to all such
assets and liabilities, whether they "relate to banking transactions" or not. Assets which become
Australian after the date of transfer and before a prescribed date become vested in the
Commonwealth Bank under s. 24 (6) only if they "relate to banking transactions." Thus the bank
could continue in a non-banking business in Australia or elsewhere and could own assets of any
kind in Australia, provided that it was not attempting to carry on banking transactions. Sub-section
(8) of s. 24 applies to assets of a private bank which are not Australian assets, e.g., buildings or
other property in London or New Zealand, bills of exchange or deposits with other banks anywhere
in the world outside Australia. The section provides that the Commonwealth Bank may, at any time
after a notice has been given to an Australian private bank under s. 22 (1), require the private bank
to take such action as is necessary to vest in the Commonwealth Bank such assets (not being
Australian assets of the bank) as the Commonwealth Bank specifies. The application of this
provision does not depend upon any relation of the assets to "banking transactions" or even to a
business carried on in Australia. If valid, it enables the Commonwealth Bank, at any time in the
future, to require any of the plaintiff banks to transfer to the Commonwealth Bank any property
which it may own in any part of the world outside Australia. This section is the first of a number of
sections which provide for a penalty of 10,000 pounds a day for each day on which a contravention
occurs. (at p174)

109. Section 25 completes Division 4 by providing that the Commonwealth Bank shall pay fair and
reasonable compensation in respect of the acquisition of property by the Commonwealth Bank
under s. 24.

       Part V. - The Federal Court of Claims. (at p174)

110. Under this Part a Court of Claims is established in accordance with the provisions of the
Constitution with valid provisions for the appointment and tenure of judges &c. Section 33 provides
that the court shall have jurisdiction to hear and determine claims for compensation arising under
the Act. Section 34 provides, inter alia, that the judgment of the court shall not be subject to
prohibition, mandamus or injunction in any court on any account whatever. This particular
provision is invalid in so far as it seeks to exclude the jurisdiction conferred upon the High Court by
s. 75 (v.) of the Constitution to grant writs of mandamus, prohibition or injunction against officers
of the Commonwealth: see, for recent cases in which this matter has received consideration, R. v.
Connell; Ex parte Hetton Bellbird Collieries Ltd. [1944] HCA 42; (1944) 69 CLR 407 ; R. v.
Hickman; Ex parte Fox [1945] HCA 53[1945] HCA 53; ; (1945) 70 CLR 598 .

       Part VI. Assessment of Compensation for Shares. (at p175)

111. Division 1 provides for the keeping by the Commonwealth Bank of a register of rights to
payment of compensation in respect of the acquisition of shares and for notification of interests in
compensation by persons whose names are not on the register. Persons who do not give such a
notice can obtain compensation only in pursuance of an order made by the court: s. 40 (7). (at p175)

112. Section 40 provides that the amount of compensation payable shall, unless agreed upon, "be
determined by the court and not in any other manner." Where a person whose name is not upon the
register claims to be entitled, then under s. 40 (4) "the persons entitled to payment of compensation
in respect of the acquisition of these shares shall be determined by the court and not in any other
manner." The determination of the persons entitled to compensation is plainly a judicial act. Section
40 (5) emphasizes the intention of Parliament that only the Court of Claims shall deal with
questions of compensation, by providing: - "The amount of compensation payable, and the amount
payable to each person, shall be determined by the Court and not in any other manner and payment
shall be made accordingly." (at p175)

113. Sub-section (8) provides - "The payment of compensation by the Commonwealth Bank in
pursuance of this section or of an order made by the Court shall be a good and valid discharge to the
Commonwealth Bank." Part VI. - Division 2. Compensation in respect of the Acquisition of Assets.
(at p175)

114. Section 42 provides that such compensation shall be ascertained in accordance with Division 2
and "not in any other manner." Section 43 provides that a private bank the business of which has
been taken over by the Commonwealth Bank in pursuance of section twenty-four shall, subject to
Division 2, be paid such compensation as is determined by agreement between the Commonwealth
Bank and the bank. Such an agreement is subject to the approval of the Treasurer (sub-s. (2)). A
bank might refuse to make an agreement under s. 22 to sell its business to the Commonwealth Bank.
The Treasurer could then bring about the taking over of the business by the Commonwealth Bank
under s. 24. He could then give a notice under s. 13 (1) and displace the original directors (s. 17)
and place nominee directors in office (s. 18). Those directors could then make an agreement for
compensation under s. 43 (1) with the Commonwealth Bank with the approval of the Treasurer. (at
p176)

115. If no agreement as to compensation is made a private bank may make a claim in writing to the
Commonwealth Bank for compensation (s. 43 (3)). (at p176)

116. Section 44 deals with procedure. Where a claim for compensation is made the Commonwealth
Bank shall, as soon as practicable, serve a notice specifying how much the Commonwealth Bank is
prepared to pay (sub-s. (3)). That offer is deemed to be accepted unless within two months after
service the private bank requires the Commonwealth Bank to refer the claim to the court (sub-s.
(3)). If within six months after a claim is made the Commonwealth Bank does not serve a notice
specifying the amount of compensation which it is prepared to pay the private bank may require the
Commonwealth Bank to refer the claim to the court (sub-s. (4)) and the court then determines the
compensation which it thinks fair and reasonable (sub-s. (5)). Section 45 provides that the amount
of compensation determined by the court under s. 44 shall be payable by the Commonwealth Bank
to the private bank in full satisfaction of the claim to which the determination relates.
Part VII. Prohibition of the Carrying on of Banking Business by Private Banks. (at p176)

117. Section 46 provides in sub-s. (1) that: "Notwithstanding anything contained in any other law, or
in any charter or other instrument, a private bank shall not, after the commencement of this Act,
carry on banking business in Australia except as required by this section." The Banking Act 1945, s.
7, provided that a body corporate should not carry on business without an authority granted by the
Governor-General, and s. 8 provided that such an authority should be granted to all the banks which
are plaintiffs in these cases. Section 46 substitutes for the general authority to carry on banking
business given to the plaintiff banks under the Banking Act the limited authority conferred by s. 46.
The private banks are to carry on banking business only as required by s. 46. (at p176)

118. Section 46 (2) provides that each private bank shall,subject to s. 46, carry on banking business
in Australia and shall not "except on grounds which are appropriate in the normal and proper
conduct of banking business" cease to provide any facility or service provided by it in the course of
its banking business on 15th August 1947. Section 46 concludes with the provision: "Penalty: Ten
thousand pounds for each day on which the contravention occurs." If this provision applies to sub-s.
(2), then this penalty is incurred if the private bank ceases to continue to provide an existing facility
or service in respect of each day upon which it so ceases. (at p177)

119. Sub-section (3) provides that sub-s. (2) shall not apply to a private bank if its business in
Australia has been taken over by another private bank (e.g. as in the case of the Queensland
National Bank, the business of which has been taken over by the National Bank) or after that
business has been taken over by the Commonwealth Bank (e.g. - under ss. 19, 22, or 24). (at p177)

120. Sub-section (4) enables the Treasurer to prohibit the carrying on of banking business by any of
the plaintiff banks from a date selected by him. Sub-section (4) is in the following terms: - "The
Treasurer may, by notice published in the Gazette and given in writing to a private bank, require that
private bank to cease, upon a date specified in the notice, carrying on banking business in
Australia." Sub-sections (5), (6), and (7) refer to the specification of a date and the amendment of a
notice. Sub-section (8) provides that upon and after the date specified in a notice (original or
amended) the private bank to which the notice was given "shall not carry on banking business in
Australia." The effect of this provision is that the private bank (that is, the company) shall not, after
the specified date, do any act in Australia which falls within the definition of banking business. If it
does any such act, then the bank is liable to a penalty of 10,000 pounds for each day on which a
contravention occurs. Apparently, therefore, after the specified notice had been given, no banking
transaction could take place by or on behalf of the private bank to which the notice was given. A
direction by the Treasurer that the private bank should use its own name in a transaction so as
actually to conduct that transaction would not be a defence in a prosecution under the section. When
the specified date arrives the banking business of the private bank is completely stopped, and
whatever is done thereafter in relation to current and outstanding transactions cannot be done by the
bank or by any person on behalf of the bank if it can be brought within the description of "carrying
on banking business in Australia." A bank to which s. 24 (8) became applicable would be tempted to
act upon the view that the only prudent course would be to do nothing about anything. But it will be
seen that s. 60 requires certain action - also under a penalty of 10,000 pounds a day. (at p177)

121. Sections 46 (4) and (8) apply whether or not the business of a bank has been taken over by the

Commonwealth Bank, and whether or not any of the shares in a bank have been acquired by the

Commonwealth Bank. If the Treasurer should elect to give a notice under s. 46 (4) at any time

without exercising any of the other powers of the Act (and as to whether he would do so would

depend entirely upon his own discretion) the business of the private bank would stop, and it is

difficult to see that there would be any provision for carrying on current transactions. The bank

would still have its assets and all its liabilities, but would be unable to do anything which fell within

the description of banking business, e.g., it would be unable to repay a deposit except at the risk of a

penalty  of                    10,000                                              pounds.

Part VIII. - Protection of Rights of Persons Employed by Private Banks. (at p178)

122. This Part provides for the transfer of the staff of the private banks to the service of the
Commonwealth Bank unless those persons elect within a specified time not to be employed by the
Commonwealth Bank,: s. 49. The part contains provisions for the preservation of rights and also for
preventing alterations in terms and conditions of employment which it is presumably thought might
impose unreasonable obligations upon the Commonwealth Bank in the case of transferred
employees. Superannuation rights are also preserved.

Part IX. - General. (at p178)

123. Section 56 contains a provision relating to instruments very widely defined so as to include
contracts, bonds, guarantees, mortgages, &c. to which a private bank, the business of which in
Australia has been taken over by the Commonwealth Bank, is a party, under which any money is or
may become payable or any other property is to be or may become liable to be transferred to the
bank or by the bank. The provision applies to such instruments which are subsisting upon the date
upon which the business of the bank is taken over or which comes into existence later, but before a
prescribed date, with the exception of agreements between a bank and a director or employee. They
are to continue in full force and effect and the Commonwealth Bank is, by force of the Act,
substituted for the private bank as a party thereto. This provision would apply to agreements for
overdrafts, to bills of exchange, including cheques, and to all agreements to which the private bank
was a party. Under this provision, if the bank had made a contract, for example, for the erection of a
building, and the business of the bank were taken over, the contract would then become a contract
between the builder and the Commonwealth Bank for the erection of the building. (at p179)

124. Section 58 provides that: "Nothing in this Act shall require a State or person, being a customer
of a private bank the business of which in Australia has been taken over under this Act, to continue
as a customer of the Commonwealth Bank." (at p179)

125. Section 59 provides that "So far as is necessary for the purposes of assisting the operation of
any of the provisions of this Act," a private bank, and every director or person employed by a
private bank, shall permit an authorized person to inspect the property of the private bank and the
books &c. of the bank. Penalty: ten thousand pounds per day in the case of a bank; in other cases
one thousand pounds per day. (at p179)

126. Section 60 provides that a private bank and every director of and person employed by a private
bank shall do or join in doing "all acts or things which it is necessary or convenient to do for or in
relation to the operation of any of the provisions of this Act and, in particular, for or in relation to: -
(a) the taking over by the Commonwealth Bank under this Act of any of the business of that private
bank; (b) the acquisition by, or the transfer to, the Commonwealth Bank by force of or under this
Act of any shares in, or assets of, that private bank; and (c) the assumption by the Commonwealth
Bank by force of or under this Act of any liabilities of that private bank." If a private bank or a
person employed by such a bank fails to do or "join in doing" something which it is "convenient" to
do "in relation to the operation" of any of the provisions of the Act as required by the introductory
words of this section, the penalty is ten thousand pounds per day for the bank and one thousand
pounds per day for the defaulting director or person employed by a private bank. As already
suggested, if s. 46 (4) had been applied to a private bank, its directors and staff would need to be
careful in order to comply with s. 60 without aiding or abetting an infringement of s. 46 (8). (at
p179)

127. Section 61 provides that "The Commonwealth guarantees the payment of all compensation

payable  by  the  Commonwealth                      Bank  under  this  Act."

The Commonwealth Bank Act 1945. (at p179)

128. The Banking Act 1947 should be considered in conjunction with the Commonwealth Bank Act
1945 and the Banking Act 1945. (at p179)

129. Section 7 of the former Act provides that the corporate entity of the Commonwealth Bank shall
not be affected by the repeal of certain statutes and that the bank shall be preserved and continue in
existence under and subject to the Act. This is an explicit provision for the continuance in existence
of the Commonwealth Bank as a corporation. (at p180)

130. The Commonwealth Bank Act 1945, s. 25, provides that the bank shall be managed by the
Governor, but (s. 9) that the Treasurer shall be informed from time to time by the bank of its
monetary and banking policy and that in the event of any difference of opinion between the bank
and the Government with respect to such policy, the Treasurer and the bank shall endeavour to
agree, and that in the event of failure to agree the bank shall adopt and give effect to the policy
approved by the Government. (at p180)

131. Section 11 provides that the bank shall act as a central bank and (s. 12) that it shall, in so far as
the Commonwealth requires it to do so, act as banker and financial agent of the Commonwealth.
Section 13 confers power to regulate the note issue, to receive money on deposit, to borrow and
lend money, to deal in bills of exchange &c., and to buy and sell securities issued by the
Government of the Commonwealth and other securities. (at p180)

132. Section 17 provides that the Commonwealth Bank shall carry on general banking business, and
s. 18 imposes upon the bank a duty to develop and expand that business. (at p180)

133. Section 38 provides that the bank may, with the approval of the Treasurer, enter into an
arrangement with any other bank for the transfer to the bank upon agreed terms of the whole or any
part of the assets, liabilities and business of the other bank. This provision may be compared with
the more specific and detailed provisions of s. 22 of the 1947 Act, under which an agreement for
taking over the business of a private bank by the Commonwealth Bank may be made if the
Treasurer invites the bank to make an agreement under the section. The Commonwealth Bank Act
1945 does not contain any provisions authorizing compulsory, as distinct from consensual,
acquisition of the assets or business of another bank. (at p180)

134. The Commonwealth Bank Act places the control of the note issue in the Bank (Part VII.) and
contains provisions dealing with rural credits, mortgage bank business, industrial finance, housing
loans, and the Commonwealth Savings Bank. The Banking Act 1945. (at p180)

135. Section 6 of this Act provides that, subject to the Act, a person other than a body corporate
shall not carry on any banking business in Australia. Thus individual persons are prohibited from
carrying on banking business. (at p180)

136. Section 7 provides that a body corporate shall not carry on banking business unless it is in
possession of an authority in writing granted by the Governor-General. Thus corporations which do
not possess such an authority are also prohibited from carrying on banking business. Under s. 8 the
plaintiff banks are specified as being entitled to obtain an authority and they all possess such an
authority. (at p181)

137. Section 46 of the 1947 Act adds a third prohibition. It provides that the Treasurer may prohibit
the carrying on of banking business by any of the plaintiff banks. The result of this series of
prohibitions, if they are all in operation, is to confine banking business in Australia to the
Commonwealth Bank and State banks. (at p181)

138. Section 10 provides for exemptions from the Act as determined by the Treasurer in the case of
persons desiring to carry on banking business but not the general business of banking. Under this
section exemptions have been given to certain pastoral companies. (at p181)

139. The Banking Act 1945 also contains in ss. 11 to 15 provisions for the protection of depositors
which are administered by the Commonwealth Bank. Sections 16 to 22 provide for the
establishment of special accounts by private banks with the Commonwealth Bank of such amounts
as are from time to time determined by the Commonwealth Bank. (at p181)

140. Other provisions in the Banking Act 1945 deal with the mobilization of foreign currency,
foreign exchange, gold, the delivery of gold to the Commonwealth Bank, and control of the export
of gold. (at p181)

141. Section 27 provides that the Commonwealth Bank may determine the policy in relation to
advances to be followed by banks, and that each bank shall follow the policy so determined. Section
27 (2) provides that the Commonwealth Bank may give directions as to the classes of purposes for
which advances may or may not be made by banks, and that each bank shall comply with any
directions so given. Reference has already been made to the directions given by the Commonwealth
Bank in pursuance of this power. (at p181)
142. Section 39 provides that the Commonwealth Bank may, with the approval of the Treasurer,
make regulations making provision for the control of rates of interest payable to or by banks or to or
by other persons in the course of any banking business carried on by them. Under this provision the
Commonwealth Bank controls rates of interest on bank overdrafts. (at p181)

143. Section 51 provides that, "except with the prior consent in writing of the Treasurer after receipt
by him of the recommendation of the Commonwealth Bank, a bank shall not enter into any
arrangement or agreement for any sale or disposal of its business by amalgamation or otherwise."
Under the 1947 Act an agreement for such sale or disposal may be made under ss. 19 or 22, and
there may be a compulsory disposal under s. 24. (at p182)

144. The two Acts of 1945 have therefore already established a far-reaching control over the
business of the plaintiff banks, such control being exercised through the Commonwealth Bank.
Construction of Legislative Powers: Pith and Substance &c. (at p182)

145. Section 51 of the Constitution 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: - "(xiii) 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." (at p182)

146. It was argued for the defendants that the 1947 Act was valid because it related to and affected
banks and banking and therefore "touched and concerned banking" and was "relevant" to the subject
matter of banking. The plaintiffs, on the other hand, argued that the constitutional validity of
legislation should be determined by enquiring what was the "pith and substance" of the law; whether
the legislation had what was called "substantial impact" upon an authorized subject matter. (at p182)

147. The phrase "pith and substance" has been used in many cases where the validity of statutes has
come into question: e.g. Union Colliery Co. of British Columbia v. Bryden (1899) AC 580 ;
Attorney-General for Ontario v. Reciprocal Insurers (1924) AC 328, at pp 336-338 ; Gallagher v.
Lynn (1937) AC 863 ; Attorney-General for Alberta v. Attorney-General for Canada (1943) AC 356
; Attorney-General for Canada v. Attorney-General for Quebec (1947) AC 33 ; Attorney-General for
Alberta v. Attorney-General for Canada (1947) AC 503 . In the recent case of Prafulla Kumar
Mukherjee v. Bank of Commerce Ltd., Khulna (1947) LR 74 Ind App 23 a decision was based upon
what was regarded as the "pith and substance" of legislation passed under the Indian Constitution.
(at p182)

148. The Attorney-General contended that the cases in which reference was made to "pith and
substance" were cases in which it had been necessary to deal with the difficulties created by an
attempt in the Canadian Constitution (which had been repeated in the Indian Constitution) to
provide lists of legislative subjects which were exclusive of one another. A law might relate directly
to two subjects, one belonging to one legislature exclusively, and another belonging to another
legislature exclusively. This had often happened in Canada by reason of the over-lapping between,
on the one hand, Dominion legislative powers, and, on the other hand, the powers of the Provincial
Parliaments to make laws with respect to (inter alia) such subjects as "property and civil rights in the
Province" and "generally, all matters of a merely local or private nature in the Province": British
North America Act 1867, s. 92. As the grants were grants of powers described as exclusive, some
means had to be adopted for determining the predominant characteristics of a law so that it could be
assigned to one category rather than to some other category. This, it was contended, was really the
meaning of the pith and substance test, and it was inapplicable to the Australian Constitution
because exclusive powers had not therein been assigned to both Commonwealth and States. In the
case of the Commonwealth Constitution, it was argued, the only question arising with respect to the
validity of legislation was whether the legislation was a law "with respect" to a certain subject
matter; that is, it was said, whether it was a law which "touched and concerned" that subject matter.
If, for example, a law was a law with respect to banking, then it would be irrelevant that it might
also be a law with respect to some other subject - unless there was some express prohibition in the
Constitution against the Commonwealth Parliament dealing with that other subject. The defendants
contended that these propositions were supported by the cases in this court of Huddart Parker Ltd. v.
The Commonwealth [1931] HCA 1; (1931) 44 CLR 492 ; Meakes v. Dignan [1931] HCA 34;
(1931) 46 CLR 73 and the judgment of Holmes J. in Hammer v. Dagenhart [1918] USSC 131[1918]
USSC 131; ; (1918) 247 US 251, at p 279 (62 Law Ed 1101, at p 1109) where he referred to the use
of a Federal power as a "foothold" for legislation. (at p183)

149. There are in my opinion grave difficulties in the way of accepting the proposition that a law
which "touches and concerns" an authorized subject matter is valid unless it contravenes some
express prohibition to be found in the Constitution. (at p183)

150. An example of the difficulties which would arise from the adoption of such a principle is
readily afforded by the power of the Commonwealth Parliament to make laws with respect to
taxation. If all laws passed by the Commonwealth Parliament imposing taxes of any kind were held
to be valid, then the taxation power alone would enable the Commonwealth Parliament to pass laws
upon any subject whatever by imposing a tax upon specified acts or omissions. That this is the case
was recognized early in the history of the Commonwealth: see R. v. Barger [1908] HCA 43; (1908)
6 CLR 41, at p 77 per Griffith C.J., where it was pointed out that if the taxation power were
construed in the wide manner suggested "the Commonwealth Parliament might assume and exercise
complete control over every act of every person in the Commonwealth by the simple method of
imposing a pecuniary liability on everyone who did not conform to specified rules of action, and
calling that obligation a tax, not a penalty." (at p184)

151. Another example can be found in provisions which are directly relevant to the present cases.
Under s. 51 (xx.) of the Constitution there is power to make laws with respect to financial
corporations formed within the limits of the Commonwealth. Under s. 51 (xiii.) there is power to
make laws with respect to banking other than State banking. A State bank would almost certainly be
a corporation, and, if so, it would be a financial corporation. If pl. (xx.) were construed to mean that
the Commonwealth Parliament could pass any law whatever which touched and concerned financial
corporations, then the Commonwealth Parliament could make laws controlling State banks. The
result would be that the exception of State banking from the power conferred by pl. (xiii.) would
mean nothing. When the two provisions are read together it is a reasonable conclusion that pl. (xx.)
was not meant to reduce to complete insignificance the specific provision excluding State banking
from Federal legislative power. (at p184)

152. Thus the Constitution must be read as a whole, and each power conferred upon the Federal
Parliament must be read in the context of the words prescribing the other legislative powers of the
Parliament. (at p184)

153. The Constitution assigns only specific legislative powers to the Commonwealth Parliament. It
is a Federal Constitution, not a unitary Constitution. This has been emphasised again and again in
the judgments of this Court, and in no case more clearly than in the Amalgamated Society of
Engineers v. Adelaide Steamship Co. Ltd. (1920) 28 CLR 129, at p 150 where reference is made to
the conclusion "as to which this court has never faltered, that the Commonwealth is a government of
enumerated or selected legislative powers": see also (1920) 28 CLR, at p 154 : "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." Accordingly, no single
power should be construed in such a way as to give to the Commonwealth Parliament a universal
power of legislation which would render absurd the assignment of particular carefully defined
powers to that Parliament. Each provision of the Constitution should be regarded, not as operating
independently, but as intended to be construed and applied in the light of other provisions of the
Constitution. Thus an endeavour should be made to "reconcile the respective powers . . . and give
effect to all": Citizens Insurance Co. of Canada v. Parsons (1881) 7 App Cas 96, at p 109 . A recent
application of this principle is to be found in Melbourne Corporation v. The Commonwealth [1947]
HCA 26; (1947) 74 CLR 31 . If the fact that a statute "touched and concerned" a matter within the
power of the Commonwealth Parliament were held to be sufficient to establish its validity, there
would be no distribution of powers between Commonwealth and States - the Commonwealth would
have complete power of controlling by law all persons and things in Australia, subject only to such
prohibitions as the Constitution contains. For the reasons which I have stated, I am of opinion that
the Commonwealth Constitution should not be construed upon the basis that any legislation is valid
if it can be said to "touch and concern" one of the subject matters assigned to the Commonwealth
Parliament. (at p185)

154. Nor, on the other hand, am I of opinion that the phrase "pith and substance," in spite of its
frequent use by high authorities, solves any difficulties. It lends itself to emphatic asseveration, but
it provides but little illumination. It is a metaphorical phrase possibly derived from "pith and
marrow" in patent law. Wills J. in Incandescent Gas Light Co. v. De Mare Incandescent Gas Light
System Ltd. (1896) 13 RPC 301, at p 332 , said of the latter phrase: - "'Pith' is a great deal less than
the substance of the vegetable structure of which it is part, and 'marrow' a great deal less than the
substance of the animal structure of which it is part. Metaphors are very apt to mislead, as they are
seldom close enough to the things to which they are applied." The difference, if any, between "pith"
and "substance" is not explained. (at p185)

155. The distinction marked by the phrase is a distinction between "pith and substance" as
representing "primary object and effect" and incidental application to other matter: Attorney-
General for Canada v. Attorney-General for Quebec (1947) AC 33, at p 44 . The case of Prafulla
Kumar Mukherjee v. Bank of Commerce (1947) LR 74 Ind App 23 shows that there is no difference
between asking: "What is the pith and substance of a statute?" and asking: "What is its true nature
and character?" (1947) LR 74 Ind App, at p 43 . In Great West Saddlery Co. Ltd. v. The King
(1921) 2 AC 91, at p 117 it was said with respect to the construction of statutes for the purpose of
determining constitutional validity: "The only principle that can be laid down for such cases is that
legislation the validity of which has to be tested must be scrutinized in its entirety in order to
determine its true character." But there is no rule which will settle all cases. A question of ultra vires
"must be determined in each case as it arises, for no general test applicable to all cases can safely be
laid down": Attorney-General for Alberta v. Attorney-General for Canada (1939) AC 117, at p 129 .
(at p186)

156. A power to make laws "with respect to" a specific subject is as wide a legislative power as can
be created. No form of words has been suggested which would give a wider power. The power
conferred upon a Parliament by such words in an Imperial statute is plenary - as wide as that of the
Imperial Parliament itself: R.v. Burah (1878) 3 App Cas 889 ; Hodge v. The Queen (1883) 9 App
Cas 117 . But the power is plenary only with respect to the specified subject. In determining the
validity of a law it is in the first place obviously necessary to construe the law and to determine its
operation and effect (that is, to decide what the Act actually does), and in the second place to
determine the relation of that which the Act does to a subject matter in respect of which it is
contended that the relevant Parliament has power to make laws. A power to make laws with respect
to a subject matter is a power to make laws which in reality and substance are laws upon the subject
matter. It is not enough that a law should refer to the subject matter or apply to the subject matter:
for example, income tax laws apply to clergymen and to hotelkeepers as members of the public; but
no-one would describe an income tax law as being, for that reason, a law with respect to clergymen
or hotelkeepers. Building regulations apply to buildings erected for or by banks; but such
regulations could not properly be described as laws with respect to banks or to banking. (at p186)

157. It has often been decided that the motives of Parliament, and, as a general rule, the objects
which a Parliament seeks to achieve, are not relevant to questions of constitutional validity: see
cases cited in South Australia v. The Commonwealth (Uniform Tax Case) [1942] HCA 14; (1942)
65 CLR 373, at pp 424-426 . The operation and effect of a customs duty on certain goods is to make
the importation of those goods subject to the duty imposed. That is what the law does. The motive
of Parliament may have been to assist a particular industry or business. When validity is in question,
that fact is irrelevant. An indirect consequence of the law may be to ruin some other industry or
business. That fact also is irrelevant. (at p186)

158. Thus when a question arises as to the validity of legislation it is the duty of the Court to
determine what is the actual operation of the law in question in creating, changing, regulating or
abolishing rights, duties, powers or privileges, and then to consider whether that which the
enactment does falls in substance within the relevant authorized subject matter, or whether it
touches it only incidentally, or whether it is really an endeavour, by purporting to use one power, to
make a law upon a subject which is beyond power. Commonwealth Power as to Banking. (at p187)

159. In the first place, it is necessary to ascertain the meaning of the word "banking" as used in s. 51
(xiii.). (at p187)

160. The plaintiffs emphasised the fact that the word is "banking," not "banks." Banking, it is said,
means the performance of a function, which means that which is done in the actual conduct of
banking business. If there are no banker-customer transactions, then there is no banking. The power
authorizes laws, it is said, which really and substantially bear upon transactions or operations
between and characteristic of banker and customer, and no other laws. (at p187)

161. A separate power is given with respect to "the incorporation of banks." It is argued that the
separate mention of this subject shows that the word "banking" in pl. (xiii.) does not itself include
the subject of the incorporation of banks, although otherwise it might have been construed so as to
include that subject. This is a circumstance which is relied upon to support the argument that
"banking" is used in rather a narrow than a wide sense in s. 51 (xiii.). (at p187)

162. Attention is called to the word "also" in pl. (xiii.) which, it is said, emphasizes the point that
the incorporation of banks and the issue of paper money are not included within the word "banking"
as used in the placitum. (at p187)

163. The plaintiffs based an argument as to the meaning of "banking" in s. 51 (xiii.) upon the power
to make laws with respect to "State banking extending beyond the limits of the State concerned."
This power must be a power which is limited to the power of making laws dealing with banking
transactions which take place in more than one State. "Banking" can only be said to "extend," it is
argued, where there is an actual transaction which takes place in more than one State. If the power
to make laws with respect to "State banking extending" &c. were construed to authorize in relation
to State banking so extending such a statute as the Banking Act 1947 then it would be possible for
the Commonwealth Parliament to authorize the Commonwealth Bank to acquire all the assets of any
State bank whose operations extended beyond a single State, to put in new managers of its whole
business (intra-State as well as inter-State), and to prohibit it carrying on any banking business. It is
contended that such an intention cannot rationally be derived from the words used. Thus "banking"
in the phrase "State banking extending," must mean "banking transactions" - and not the acquisition
of banks, the management of banks or the prohibition of banking. It is argued that the word
"banking" should be given the same meaning when it appears as the initial word of pl. (xiii.). (at
p188)

164. Accordingly, it is contended that the power to make laws with respect to "banking" is a power
to make laws with respect to the relations between a banker and his customer, and not with respect
to the management of banks, the acquisition of shares in a banking company, the acquisition of
assets by or from banks, or the prohibition of banking. Upon this view of the meaning of the word
"banking" the following propositions are submitted by the plaintiffs: - (a) Acquisition of shares in a
bank, whether by another bank or a private person, is not itself a "banking" operation, and a law
with respect to such acquisition cannot be supported as being itself legislation with respect to
banking. (b) Acquisition of assets by a bank (e.g. the Commonwealth Bank) may be necessary in
order to establish and carry on a bank, but the acquisition of assets whether from a bank or not, is
not itself "banking," and cannot be made a subject of legislation under the banking power. (c)
Similarly, the taking over by a bank of the banking business or other business of another bank is not
itself a "banking" operation. (at p188)

165. The defendants conceded that there could be no "banking" without banking transactions. If an
establishment which was called a bank never did any banking business it would be impossible to say
that it was engaged in banking. But banking, it was argued, was essentially a business. It included, it
was contended, not only "over-the-counter" transactions with customers, but also the selection of
persons who should be allowed to conduct banks. It was under this power that the Banking Act 1945
was enacted to exclude individuals from banking, and to limit the carrying on of the business of
banking to corporations and to licensed corporations. The plaintiffs had not ventured to challenge
the validity of these provisions. It was pointed out that in Huddart Parker Ltd. v. The
Commonwealth (1931) 44 CLR 492 where this Court considered the trade and commerce power, it
was definitely held that under a power to make laws with respect to trade and commerce it was
competent to the Commonwealth Parliament to select the persons who should be permitted to
engage in such trade and commerce. These cases were impliedly approved by the reference of the
Privy Council to them in James v. The Commonwealth [1936] UKPCHCA 4; (1936) AC 578, at pp
627-629; 55 CLR 1, at pp 55-57 where the Transport Workers' Act, in relation to which they were
decided, was plainly held to be valid. The essence of this Act was that only licensed persons were
allowed to engage in particular operations in inter-State trade and commerce. Selection of
individuals means inclusion of some and exclusion of others. The reasoning which justified such
selection in the case of transport workers applied equally to banking and therefore authorized the
enactment of legislation which permitted some banks to operate and prevented others from
operating. (at p189)

166. It was also argued for the defendants that the subject of "banking" should be held to include the
determination of the powers of banking corporations, including the Commonwealth Bank, the
subject of the management and control of banks, and the determination of the policy to be pursued
by banks. (at p189)

167. Reference was made to English legislation with reference to the Bank of England, Canadian
banking legislation and United States banking legislation, all of which deal with some or all of the
subjects last mentioned as belonging to the same category of subject matter, namely laws with
respect to banking. (at p189)

168. The Attorney-General relied strongly upon the Canadian cases dealing with legislation of the
Province of Alberta which was declared to be invalid because it dealt with banking, which was a
subject of exclusive Dominion power: see British North America Act, s. 91 (15), whereby it is
declared that the exclusive legislative authority of the Parliament of Canada extends to "banking,
incorporation of banks and the issue of paper money." The Canadian decisions show, it was
contended, that the control of the creation of credit through a banking system was an important part
of banking: see In the matter of Three Bills passed by the Legislative Assembly of the Province of
Alberta 1937 (1938) SCR (Can) 100 . In that case it was held that a system of credit control, using
the same kind of methods of dealing with credit as were used by ordinary banks in dealing with
credit, was a financial system which amounted to banking within the meaning of s. 91 (15) of the
British North America Act. It was suggested in reply to the argument of the Attorney-General upon
this point that the decision of the Supreme Court of Canada was only a decision upon the residual
power of the Dominion Parliament. That, however, was not the case. It was held (1938) SCR (Can),
at p 117 that the "system of administration, management and circulation of credit . . . constitutes in
our view a system of 'banking' within the intendment of section 91." It was therefore legislation
upon a subject, viz., banking, which fell exclusively within Dominion power and it was for that
reason that the legislation was held to be invalid. (at p190)

169. The defendants further pointed out that the plaintiffs had not contended that the central banking
provisions contained in the Banking Act 1945 were not within Federal legislative power. Such
provisions were plainly valid, and this fact showed that a meaning must be given to the word
"banking" which was wider than that which would confine it to particular banker and customer
transactions. The subject of banking included a determination of general banking and credit policy.
(at p190)

170. The 1947 Act does not deal with central banking at all. The subject of central banking is
greatly emphasised in the evidence and arguments submitted for the defendant, but considerations
relating to central banking are of significance in the present cases only because they support the last-
mentioned argument, viz., that if "central banking," including determination of banking policy,
control of credit &c., is included within "banking," it is impossible to accept the plaintiffs'
identification of "banking" with "banking transactions between banks and customers." (at p190)

171. The plaintiffs sought to avoid this inclusion by denying that s. 51 (xiii.) was the source of the
power which was exercised in creating the Commonwealth Bank and in endowing it with powers.
(The Commonwealth Bank was created as a corporation without corporators - Heiner v. Scott
[1914] HCA 82; (1914) 19 CLR 381 ; Butterworth v. Commonwealth Bank [1916] HCA 68; (1916)
22 CLR 206 . This is impossible at common law, but I do not see why it should be beyond statutory
power to make a new kind of corporation.) The plaintiffs contended that the existence of the
Commonwealth Bank depended upon s. 51 (xxxix.) of the Constitution (the incidental power) and
not upon s. 51 (xiii.) (the banking power). It was argued that the incorporation of the
Commonwealth Bank and the assignment of powers to it was to be justified only by the reasoning in
M'Culloch v. Maryland (1819) 17 US 316 (4 Law Ed 579) that is, that the bank was created as the
financial agent of the Government and as part of the governmental system and that it could therefore
be given powers and functions which were not limited to the subject of "banking." (at p190)

172. The Commonwealth Bank might have been constituted and established as the financial agent of
the Commonwealth Government and as a government instrumentality, but in fact this is not what
was done when the bank was created in 1911. The bank was established under the Commonwealth
Bank Act 1911, and there is nothing in that Act about the bank acting for or as agent for the
Commonwealth. The bank was constituted with ordinary banking functions. The 1911 Act
contained no provisions such as ss. 8, 9, 11 and 12 of the Commonwealth Bank Act 1945 or any
provisions such as those of the Banking Act 1945 conferring powers upon the Commonwealth Bank
in relation to the control of credit and banking policy and the other matters, such as exchange
control, foreign exchange, special accounts, with which that Act deals. There is, in my opinion, no
reason for regarding the legislative powers conferred by s. 51 (xiii.) as inapplicable to the
Commonwealth Bank and applicable only in the case of banking conducted by other banks. The
validity of the Commonwealth Bank Act 1945 is not in question in these cases, but I can see no
reason why it should not be supported, if it were alleged to be invalid, more effectively under s. 51
(xiii.) than under s. 51 (xxxix.). But the question whether the legislation with respect to the
Commonwealth Bank depends upon s. 51 (xiii.) or upon s. 51 (xxxix.) does not appear to me to have
any direct relevance to the questions which have to be decided in this case. (at p191)

173. The 1947 Act contains no provisions with respect to central banking, and if it were put
completely into operation it would result merely in there being no central bank as distinguished
from other banks, but only the Commonwealth Bank and State banks. The State bank would be
beyond Federal control. Therefore there would be no central bank determining the policy of other
banks because there would be no other banks for it to control. (at p191)

174. In my opinion considerations as to central banking and all the evidence and argument as to
credit control are irrelevant in the present cases. Central banking is not a matter in issue in the
present cases. It is true that expansion or contraction of credit is the consequence of many banking
transactions. But expansion and contraction of credit is brought about also by other agencies than
the activities of banks, and the legislative power of the Commonwealth Parliament is not a power to
make laws with respect to the control of credit. In so far as Parliament can make laws with respect
to banking it can affect the volume of credit in the community. It can do the same thing by laws
with respect to taxation, borrowing, imports and exports, and (under the defence power) price
control; but the Commonwealth Parliament has not been given any power to make laws with respect
to the control of credit as a subject in itself. But I agree with the argument of the defendants that
"banking" includes central banking. If this be so "banking" cannot be given the limited sense of
banking transactions between banks and customers for which the plaintiffs contend. Determination
of banking policy and of systems of management are as essential to the existence of banking as are
transactions with depositors and borrowers. (at p192)

175. Both plaintiffs and defendants made reference to cases decided in the United States which had
some reference to the subject of banking, but in none of these cases was it necessary to formulate a
precise definition of banking in order to apply any constitutional provision upon that subject. The
power of Congress to make laws with respect to banking has been founded in the United States
upon the incidental power: M'Culloch v. Maryland (1819) 17 US 316 (4 Law Ed 579) . There is no
constitutional provision dealing with the subject of banking and the American authorities cited are
of little assistance in these cases. (at p192)
176. The provisions of the Canadian Constitution (s. 91 (15) ) which have already been quoted, are,
it would appear, the basis of the provisions in the Commonwealth Constitution. The controversies
which followed the decision in M'Culloch v. Maryland (1819) 17 US 316 (4 Law Ed 579) may well
have been the reason why, in the Canadian Constitution, and subsequently in the Commonwealth
Constitution, a specific power as to incorporation of banks was added to the power to make laws
with respect to banking. Similarly the special mention of the issue of paper money is probably
explained by the history of the paper money controversy in the United States: see Quick & Garran,
Annotated Constitution of the Australian Commonwealth p. 579. (at p192)

177. At this point it is convenient to notice the argument of the plaintiffs that the word "banking"
must be given a narrow construction because in pl. (xiii.) it is used in a sense which excludes
incorporation of banks. In my opinion little weight should be attached to such an argument. The
historical antecedents of the placitum to which reference has been made almost certainly explain its
form. But, it must be recognized, words are sometimes added in constitutions for the (generally
unsuccessful) purpose of preventing argument by making a definite provision with respect to a
particular subject, even though some overlapping may result. The words conferring legislative
power upon the Commonwealth Parliament should not be construed upon the basis of a hard and
fast mechanical rule that there is no overlapping between any of them. See, for example,
Constitution, s. 51 (xii.) - "Currency, coinage, and legal tender" - a very clear case of overlapping. It
was said concerning the Indian Constitution in Prafulla Kumar Mukherjee v. Bank of Commerce
(1947) LR 74 Ind App 23, at p 42 : "It is not possible to make so clean a cut between the powers of
the various legislations: they are bound to overlap from time to time": and see Attorney-General for
Canada v. Attorney-General for Quebec (1947) AC 33, at p 43 . (at p193)

178. It was strongly contended for the defendants that the essential characteristic of banking is the
creation of credit. See Punjab Co-operative Bank Ltd. v. Income Tax Commissioner (1940) AC
1055, at p 1072 . The defendants' contention was put in the following words: "The primary function
of a bank is granting and recalling credit." Undoubtedly a bank does deal in credit. Depositors have
credit by reason of their deposits and a bank, when it grants an overdraft, creates a credit in favour
of a customer, and when it lends money in any way it creates credit. Similarly, it affects the volume
of credit in the community by buying and selling securities and by other operations. But this means
no more than that, as Lord Simon said in Attorney-General for Alberta v. Attorney-General for
Canada (1947) AC 503, at p 517 : "The concept of banking certainly includes the granting of credit
by banks." The actual or potential creation of credit is a feature of all transactions which involve a
pecuniary element where the transaction is not conducted upon a cash basis. Any transaction which
creates an outstanding liability involves a creation of credit. The ordinary sale of goods on credit
creates a credit which did not previously exist. It cannot be said that wherever credit is granted or
recalled there is a transaction which is essentially a banking transaction. Creation of credit is not the
distinctive feature of banking as compared with other activities. (at p193)

179. In my opinion the contention of the defendants that banking is essentially a business is well
founded. A single transaction by an individual person who receives a deposit of money and
promises to repay it is not a banking transaction. Banking is a business. See the cases cited in Paget,
The Law of Banking, 4th ed., (1930) p. 5. In order to be a banker a man must "hold himself out as a
banker and the public take him as such": Stafford v. Henry (1850) 12 Ir Eq R 400 . If a man carries
on other businesses besides that of banking, and if the banking is only subsidiary to the other
businesses, he cannot be regarded as a banker: Re Shields' Estate (1901) IR Ch 172, at p 199 . (at
p193)
180. Banking began with the receipt of money subject to an obligation to make money available to
or according to the directions of the depositor. An establishment which does not deal in money
(using the term "money" to include legal tender and all forms of generally acceptable credit) as a
regular business and as its principal business would not be called a bank. An establishment which
did not deal with money belonging to other persons would not be called a bank. (at p194)

181. The essential nature of the relations between banker and customer was most clearly defined in
Foley v. Hill [1848] EngR 837; (1848) 2 HLC 28 (9 ER 1002) where it was held that a bank which
receives the money of a depositor becomes the debtor of a depositor "with a superadded obligation
arising out of the custom of bankers to honour the customer's drafts": see Attorney-General for
Canada v. Attorney-General for Quebec (1947) AC, at p 44 . The conduct of business upon this
basis is the central and distinctive feature of banking. Without it, in my opinion, there can be no
banking. Banking also includes the lending of money upon or without security if such lending is
associated with the business which I have specified. Money lending not so associated is not banking:
see Halsbury, Laws of England, 2nd ed., vol. 1, p. 782: - "A 'banker' is an individual, partnership, or
corporation, whose sole or predominating business is banking, that is the receipt of money on
current or deposit account and the payment and collection of cheques, drawn by or paid in by a
customer." It also includes "the business of making of advances or the granting of overdrafts to
customers." See Commissioners of The State Savings Bank of Victoria v. Permewan Wright & Co.
Ltd. [1914] HCA 83; (1914) 19 CLR 457 to the same effect. (at p194)

182. Accordingly, I do not agree with the contention of the defendant that the creation, expansion
and contraction of credit (though resulting in large measure from banking operations) constitute the
essence of banking. (at p194)

183. Banks which are corporations must have an internal organization as corporations and there
must be some definition of their powers. The Commonwealth Parliament may legislate upon these
subjects under s. 51 (xiii.) - banking and the incorporation of banks. (at p194)

184. A bank, in order to carry on business successfully, must have a policy with respect to deposits,
overdrafts &c. It must have managers and a system of management, a staff and offices. Further, in
order to carry on successfully, it must be able to invest its funds. All these subjects, in my opinion,
fall within the concept of banking as a business. They are naturally, and necessarily, involved in the
existence and legitimate activity of any banking business. A bank which omitted to deal with these
matters would soon find itself in difficulties. They are, in my opinion, all part of the every-day
business of banking. (at p195)

185. I agree with the argument of the plaintiffs that the acquisition of a share in a bank by any
person (whether a bank or not) is not itself a banking operation, and similarly that the purchase by
any person, whether a bank or not, of assets from a bank is not itself a banking operation and that
the taking over of the business of another bank probably would not be described as a banking
"transaction." But a law which controls such matters is a law dealing with the business of banking,
because such matters affect the conduct and control of the business and are things which may be
done from time to time in the course of the business of banking, although they are not banking
transactions between a banker and a customer. It is easy to give examples of laws which are laws
having a most immediate relation to banking and which are therefore laws with respect to banking,
though they do not deal with banker-customer relations as such. Among such laws would be a law
requiring a bank to have a certain minimum capital or to maintain a percentage of uncalled capital,
or a law prescribing the persons who may be allowed to hold bank shares, e.g. excluding bankrupts,
or a law preventing banks in certain circumstances from disposing of their assets, or a law
prescribing permissible forms of investment by banks. A law dealing with the management and
staffing of banks would be a law relating to essential elements in the business of banking though not
dealing with any transactions between any bank and any customer. (at p195)

186. The argument for the plaintiffs devoted a great deal of attention to the case of Tennant v. Union
Bank of Canada (1894) AC 31 where the Privy Council considered a Dominion Bank Act which
provided that a bank should have certain rights under and in respect of warehouse receipts taken as
securities in the course of its business - in effect that they should be negotiable instruments. The
Provincial Parliaments had exclusive power to legislate with respect to warehouse receipts under the
heading "property and civil rights in the Province." Under provincial law the warehouse receipts
were not negotiable instruments. It was held that the Dominion law was a law with respect to
banking (as to which the Dominion Parliament had exclusive power) and that it was valid. In the
reasons for judgment it was said that "banking" was "an expression . . . wide enough to embrace
every transaction coming within the legitimate business of a banker." (1894) AC, at p 47 The
plaintiffs used this statement as if it meant: "Banking consists entirely of 'transactions." But the
sentence quoted only states what is obvious - that the business of banking includes banking
transactions. No-one has ever disputed that proposition. It serves only to put one upon enquiry as to
what is the "legitimate business of a banker" and makes it clear that banking is a business. (at p196)

187. Under s. 51 (xiii.) the Commonwealth Parliament has (as the plaintiffs contend) power to make
laws with respect to transactions between banker and customer. But the power is, in my opinion, not
limited to such matters. This provision also covers power to make laws with respect to the powers,
and the limitation of the powers, to be exercised by persons or corporations engaging in the business
of banking, the management of banks, the acquisition of assets by banks, the "taking over" of one
bank by another bank, the disposition of assets by banks, the management of banks and what
persons shall be allowed to hold or retain shares in banks. (at p196)

188. I come now to the argument of the plaintiffs that the word "banking" in the phrase, "State
banking extending beyond the limits of the State concerned," cannot be fairly construed in the wide
sense just stated. I agree with the reasoning that such a construction would have the effect of
destroying the exception of State banking from Federal power. In my opinion, the power to make
laws with respect to "State banking extending" &c. must be given a limited construction so as not to
destroy that exception. The Federal power, in this case, must be limited by reason of the fact that
other State banking is beyond Federal power, and that the wide construction of "banking" in
"banking extending" would have the actual result of subjecting that other State banking to Federal
legislative power. Thus the Commonwealth power should not be held to include a power to prohibit
State banking extending &c. - for the reason that such a construction would defeat the reasonably
plain intention of the provisions with respect to State banking. The intention of these provisions is
that the States shall be free to set up State banks and that the Commonwealth Parliament may
remove obstacles to the operation of such banks in other States. Such a view gives, in my opinion, a
sensible and practical interpretation to the provisions with respect to State banking. But none of
these considerations appear to me to reflect back upon the interpretation of the general power to
make laws with respect to "banking." They are all associated with and dependent upon the nature of
State banking as being banking under State control, management and direction as distinct from
Commonwealth control, management and direction. These considerations have, in my opinion, no
relation to the interpretation of the general power to make laws with respect to "banking." Section
46. (at p197)
189. This section enables the Treasurer to prohibit the carrying on of banking business in Australia
by a private bank. The power may be exercised at any time, in respect of any one or more of the
banks, together or separately, and for any reason that may commend itself to the Treasurer - the
section does not require him to act upon any specified ground. The prohibition provisions of the
section (sub-ss. (4) to (8)) can be used quite independently of any other provisions of the Act - i.e.
independently of whether shares or assets have been acquired or whether the management of a bank
has been taken over under Part IV., Division 3. These provisions were attacked upon various
grounds as not justified by s. 51 (xiii.). (Separate arguments were based upon s. 51 (xx.) and s. 92.).
(at p197)

190. In the first place, the plaintiffs argued that the power to make laws with respect to banking is
really a power to regulate banking, and that the grant of such a power assumes the continuance, and
not the destruction, of the subject matter. (at p197)

191. The latter proposition was supported by reference to Toronto Corporation v. Virgo (1896) AC
88, at p 93 . The principle stated in Toronto Corporation v. Virgo (1896) AC 88, at p 93 that a power
to regulate "seems to imply the continued existence of that which is to be regulated," was applied
for the purpose of interpreting the Canadian Constitution in Attorney-General for Ontario v.
Attorney-General for the Dominion (1896) AC 348, at p 363 . This principle has frequently been
applied to municipal by-laws: see e.g. Melbourne Corporation v. Barry (1922) 31 CLR 174 and
Swan Hill Corporation v. Bradbury [1937] HCA 15; (1937) 56 CLR 746 . But, the legislative power
is not a power to "regulate" banking. It is a power to make laws with respect to banking, and this is
the most general form in which power can be given in relation to any subject matter. (at p197)

192. Next, under a plenary power with respect to a particular subject the legislature can prima facie
allow the subject to be uncontrolled or may control it to such extent as it thinks proper. "The plenary
power of legislation is not merely a power to regulate: it ranges from creation to destruction; it may
establish as well as prohibit": Harrison Moore, Constitution of the Commonwealth of Australia, 2nd
ed., (1910) p. 280. In the United States the power of Congress to "regulate commerce with foreign
nations and among the several States" has on very many occasions been held to extend "not only to
those regulations which aid, foster and protect the commerce, but (it) embraces those which prohibit
it": United States v. Darby [1941] USSC 49; (1941) 312 US 100, at p 113 (85 Law Ed 609, at p
616) and the long list of cases there cited. So also in Australia this Court has held that power to
make laws with respect to trade and commerce among the States enables the Parliament to prohibit
persons from engaging in such trade and commerce: Huddart Parker Ltd. v. The Commonwealth
[1931] HCA 1; (1931) 44 CLR 492 ; Meakes v. Dignan [1931] HCA 34[1931] HCA 34; ; (1931) 46
CLR 73 ; Australian National Airways Pty. Ltd. v. The Commonwealth [1945] HCA 41; (1945) 71
CLR 29, at pp 72, 77, 81 ; Melbourne Corporation v. The Commonwealth [1947] HCA 26; (1947)
74 CLR 31 where a particular prohibition of certain banking was held to be a law with respect to
banking. (at p198)

193. A further argument of the plaintiffs with respect to s. 46 was based upon the submission that
the power to prohibit banking conferred by s. 46 was an arbitrary power and that any power of
prohibition, if it existed at all, must be a power to prohibit only by reason of what were described as
"banking considerations" - considerations which could be said to be "relevant" or "germane" to
banking. Political considerations such as a policy of substituting public control of banking for
private control of banking were said to be irrelevant. In some cases, more particularly in the case of
subordinate legislative authorities, it may be proper, having regard to the character of the authority
and the nature of the subject matter, to construe a statute as not intended to confer a power to
prohibit: Toronto Corporation v. Virgo (1896) AC 88 ; Shire of Swan Hill v. Bradbury [1937] HCA
15; (1937) 56 CLR 746 . In some cases the character of the statute under which an authority acts is
such that the authority is limited to action on grounds which are relevant to a particular object or
purpose: Victorian Railways Commissioners v. McCartney (1935) 52 CLR 383 and cases cited in
Arthur Yates & Co. Pty. Ltd. v. Vegetable Seeds Committee (1945) 72 CLR 37, at p 66 . In others an
exercise of power is validly authorized only where it is exercised upon grounds which are relevant
to a subject upon a connection with which the validity of the statute depends - as in Shrimpton v.
The Commonwealth [1945] HCA 4; (1945) 69 CLR 613 . In the lastmentioned case it was held that
under a particular National Security regulation a purely arbitrary discretion could not be vested in a
Minister or a public officer, and that it must appear that the exercise of the discretion was based
upon considerations relevant to the subject matter which was relied upon for the purpose of
supporting the law - in the case in question the subject matter of defence. In that case the position
was that the Commonwealth Parliament had no power to deal with sales of land as such (which was
the subject matter of the regulations) unless there was sufficient connection between that subject and
the subject of defence. It was for this reason, and this reason only, that it was held that the discretion
conferred upon the Treasurer had to be exercised in relation to considerations of defence. If there
had been a general power in the Commonwealth Parliament to make laws with respect to land sales
no question as to the grounds upon which a discretion could be exercised would have arisen. (at
p199)

194. If a discretion given by a law is exercised fraudulently or dishonestly, then there is no true
exercise of the discretion: Arthur Yates & Co. Pty. Ltd. v. Vegetable Seeds Committee (1945) 72
CLR 37 . But a legislature with plenary power over a subject can provide - and frequently does
provide - for the operation of specific provisions in particular cases to depend upon an exercise of
discretion by a particular person. In Australian Commonwealth Shipping Board v. Federated
Seamen's Union of Australasia [1925] HCA 27; (1925) 36 CLR 442 at p 453 it was said that it was a
"well established parliamentary practice . . . to legislate conditionally on the exercise of discretion
by a person in whom the Legislature places confidence." In the 1947 Act the legislature has
expressed confidence in all Treasurers of the Commonwealth. The Parliament cannot be held to
have authorized a fraudulent or dishonest act, but I am of opinion that Parliament has placed no
other limitations upon a Treasurer's exercise of discretion in acting under the many provisions of the
1947 Act where action depends merely upon his own volition - or when his approval is required e.g.
ss. 12, 13, 18, 19 (2), 22, 24, 43 (2) and 46. If the power under s. 46 can be exercised only for what
is called "a banking reason," what is to be said of the various discretions conferred by the other
sections mentioned? In my opinion the argument of the plaintiffs that s. 46 is invalid by reason of
the power to prohibit being simply vested in the Treasurer without any provision as to the grounds
upon which he may act is not applicable in the case of a legislature making a law upon a subject as
to which it has plenary power. The legislature takes an obvious risk in enacting such provisions but
that is a matter for the judgment of the legislature itself.Public Control of Banking. (at p199)

195. There are other considerations more general in character which are, in my opinion, relevant to
the subject of banking in relation to the four sets of provisions attacked by the plaintiffs -

       (a) the acquisition by the Commonwealth Bank of shares in
       other banks;
       (b) the acquisition by the Commonwealth Bank of assets of
       other banks and the transfer to the Commonwealth Bank
       of liabilities of other banks;
       (c) the control of the management of banks;
       (d) prohibition of the carrying on of banking business by
       particular banks. (at p200)

196. I propose to consider generally whether legislation dealing with these subjects is included
within the power to make laws with respect to banking, reserving some of the details of the
provisions contained in the 1947 Act for later consideration. (at p200)

197. Under a power to make laws with respect to banking a legislature may determine the type of
banking which should be allowed and encouraged. The legislature can prefer one bank to other
banks and give one bank advantages which it denies to other banks. It can determine a policy with
respect to the conduct of the business of banking. (at p200)

198. The Commonwealth Parliament has chosen the Commonwealth Bank as its instrument for
establishing a system of public control of banking as distinguished from private control of banking.
The Parliament finds a field of banking occupied by the Commonwealth Bank, some State banks
and private banks. The State banks are beyond Federal power. But the Commonwealth Parliament
may make laws specifying the kind or kinds of other banks which are to be allowed to carry on
banking business. In the exercise of this power the Commonwealth Parliament provided in the
Banking Act 1945 means for determining how many banks there should be (ss. 6, 7 and 8) and for
the control in large measure of the business of private banks by the Commonwealth Bank, which is
under public control. (at p200)

199. In the 1947 Act there is a further development of this policy. In that Act Parliament has
expressed its decision that the Commonwealth Treasurer shall be given the power of getting rid of
the private banks so as to leave an open field for the Commonwealth Bank. The means adopted is to
enable the Commonwealth Bank to acquire either partial or complete control of the business of
private banks to such extent as is thought desirable from time to time. One of the well-known
methods of acquiring control of a business carried on by a company is the purchase of shares in the
company - if possible, ownership of all the shares in the company. This is one method adopted in
the 1947 Act (s. 12, acquisition of shares by purchase). But the Commonwealth Parliament has a
power to make laws for the acquisition of property by compulsion. This is another method adopted
in the Act (s. 13, compulsory acquisition of shares). A company which wishes to get rid of
competition and to extend its business may acquire the business and assets and take over the
liabilities of another company by agreement with that company. This method is made available by s.
19 and by s. 22. But the Commonwealth Parliament has powers of legislation and can make
statutory provision for acquiring property for any purpose, such as banking, in respect of which the
Parliament has power to make laws. This method of extending the area of operations and the
influence of the Commonwealth Bank is applied in s. 24. Few means of dealing with a company
which is a business competitor could be more effective than taking control of its management, if this
is possible. Private individuals cannot do this, but the Commonwealth Parliament has chosen this
also as one of the means of securing its objective, namely obtaining increased and possibly complete
control of banking other than State banking by the Commonwealth Bank: ss. 17, 18 and 19. Another
method of excluding competition is to stop by some lawful means the business of competing
enterprises. Under a power to make laws with respect to banking the Commonwealth Parliament can
determine whether and to what extent and by whom the business of banking shall be carried on. The
Parliament has exercised this power in s. 46, going further than had been done in the Banking Act
1945, ss. 6, 7 and 8. (at p201)

200. All these provisions (whether used together or piecemeal and whether applied to all or only to
some of the private banks) have a direct relation to the substitution of public for private control of
banking and, in my opinion, are laws with respect to the conduct of the business of banking and
therefore are laws with respect to banking within the meaning of s. 51 (xiii.) of the Constitution.
Constitution, s. 51 (xx.) - Financial Corporations. (at p201)

201. Before proceeding to examine some of the details of these provisions which may not be
justified under the general propositions which I have stated, or which may be invalidated by reason
of failure to comply with other constitutional provisions, it is convenient to refer to another source
of legislative power upon which the defendants rely, namely s. 51 (xx.) of the Constitution. This
placitum confers power upon the Commonwealth Parliament to make laws with respect to "Foreign
corporations, and trading or financial corporations formed within the limits of the Commonwealth."
(at p201)

202. Banking corporations are financial corporations. It is therefore argued for the defendants that
laws can be made with respect to banking corporations (and all the plaintiff banks are corporations)
under s. 51 (xx.). The contention of the defendants was that s. 51 (xx.) gave full power to make any
law upon any subject so long as it was a law which applied to and controlled the conduct of the
corporations mentioned in this paragraph of the Constitution. (at p202)

203. The judgments in Huddart, Parker & Co. Pty. Ltd. v. Moorehead [1909] HCA 36; (1909) 8
CLR 330 provide several alternative interpretations of this difficult provision. The one thing that is
clear about it is that the provision assumes the existence of corporations either under foreign law or
under some law which is in force in the Commonwealth. If the corporation is already formed it
derives its existence and its capacity from the law which provided for its formation: see the
quotation from Dartmouth College v. Woodward (1819) 19 US 518 (4 Law Ed 629) in the judgment
of Isaacs J. in Huddart, Parker & Co. Pty. Ltd. v. Moorehead (1909) 8 CLR, at p 394 : "Being the
mere creature of law, it possesses only those properties which the charter of its creation confers
upon it, either expressly, or as incidental to its very existence." Thus the existence and the powers
and capacities of any corporation to which s. 51 (xx.) applies depend upon some law other than a
law made under that provision. (at p202)

204. If the proposition submitted for the defendants were accepted, then the Commonwealth could
make any law at all for the control of the corporations mentioned. The position would then be that
the Commonwealth Parliament would have complete powers of legislation by way of direction or
prohibition with respect to anything that such corporations might do. As to all individual persons
and as to all other corporations (e.g. charitable, literary, scientific) the Commonwealth Parliament
would have powers only in relation to the particular subject matters included within the specific
provisions of s. 51 and other sections of the Constitution. But as to the corporations described in pl.
(xx.), the Parliament would be able to make any kind of law on any subject. Higgins J. in Huddart
Parker & Co. Pty. Ltd. v. Moorehead (1909) 8 CLR, at pp 409, 410 gave some illustrations of the
consequences of such a view. He said that if the view stated was right: - "the Federal Parliament is
in a position to frame a new system of libel laws applicable to newspapers owned by corporations,
while the State law of libel would have to remain applicable to newspapers owned by individuals. If
it is right, the Federal Parliament is competent to enact licensing Acts, creating a new scheme of
administration and of offences applicable only to hotels belonging to corporations. If it is right, the
Federal Parliament may enact that no foreign or trading or financial corporation shall pay its
employes less than 10s. per day, or charge more than 6 per cent interest, whereas other corporations
and persons would be free from such restrictions. If it is right, the Federal Parliament can enact that
no officer of a corporation shall be an Atheist or a Baptist, or that all must be teetotallers. If it is
right, the Federal Parliament can repeal the Statute of Frauds for contracts of a corporation, or may
make some new Statute of Limitations applicable only to corporations. Taking the analogous power
to make laws with regard to lighthouses, if the respondent's argument is right, the Federal
Parliament can license a lighthouse for the sale of beer and spirits, or may establish schools in
lighthouses with distinctive doctrinal teaching, although the licensing laws and the education laws
are, for ordinary purposes, left to the State legislatures." But, as his Honour said, these arguments
from inconvenience are not conclusive. (at p203)

205. In the present cases, however, it is not necessary to deal with all the questions which arise as to
the meaning of pl. (xx.). In these cases the Court is concerned with the subject of banking. Placitum
(xiii.) confers an express power with respect to banking including, of course, banking conducted by
corporations, and a further express power with respect to the incorporation of banks. Under pl.
(xiii.), therefore, a power (incorporation) exists in relation to banking corporations which does not
exist in relation to corporations mentioned in pl. (xx.). A banking corporation created under a law
passed under the powers conferred by s. 51 (xiii.) would be a financial corporation formed within
the limits of the Commonwealth. (at p203)

206. Any banking corporation carrying on business in Australia must be either a foreign corporation
or a corporation formed within the limits of the Commonwealth. If under pl. (xx.) there is therefore
complete power to pass any law of any description in so far as it is made applicable to banking
corporations, pl. (xiii.) in relation to "banking" would be required only for the purpose of giving
power to make laws with respect to individual persons carrying on banking business - which would
be a rather surprising result. (at p203)

207. There is, in my opinion, a decisive argument against the suggested interpretation of s. 51 (xx.).
It is, in my opinion, impossible to reconcile that interpretation with the provisions in pl. (xiii.)
relating to State banking. Upon that interpretation, if State banking were carried on by a
corporation, that corporation, being a financial corporation formed within the limits of the
Commonwealth, would be completely subject to any Federal law made under pl. (xx.). The result
would be that the exclusion of State banking from the banking power would be entirely deprived of
effect in all such cases. The Constitution should not be construed so as to bring about a result so
unreasonable if another construction is reasonably open. In my opinion such a construction is
reasonably open. The difficulties to which I have referred disappear if s. 51 (xiii.) is interpreted as a
special provision which provides for the whole legislative power of the Commonwealth Parliament
so far as laws with respect to banking corporations and banking are concerned. This is a proper
occasion for interpreting a provision "as excluding cases expressly dealt with elsewhere . . .
notwithstanding the generality of the words": John Deere Plow Co. Ltd. v. Wharton (1915) AC 330,
at p 340 . Upon this view pl. (xx.) should be regarded as not applying to corporations so far as they
are engaged in banking. Accordingly, in my opinion s. 51 (xx.) is irrelevant for the purposes of
determining the validity of any of the provisions of the 1947 Act.
Constitution, s. 51 (xxxi.) - Acquisition. (at p204)

208. Section 51 (xxxi.) of the Constitution provides that the Commonwealth Parliament may make
laws for "The acquisition of property on just terms from any State or person for any purpose in
respect of which the Parliament has power to make laws." In the 1947 Act the Parliament has
purported to exercise this power in relation to shares in the plaintiff banks and to assets of the
plaintiff banks. The Act also makes provision for transfer of liabilities from the plaintiff banks to
the Commonwealth Bank and discharge of the plaintiff banks from their liabilities in cases where
either s. 22 or s. 24 is put into operation. (at p204)
209. I propose to deal first with the subject of "acquisition" (that is, the question of what can be
acquired) and, secondly, with the subject of "just terms." (at p204)

210. The plaintiff banks have, by their memoranda of association, power to buy shares in other
banks and companies, to sell their businesses and to amalgamate with other banks. The defendants
argued that the provisions of the Act as to acquisition of shares and assets merely adopt provisions
of this type for the Commonwealth Bank, and that such provisions in the memoranda of association
of the plaintiff banks show a quite common and well-recognized feature of banking law. But this
argument ignores the compulsory elements in the Act. It may be within the power of the Federal
Parliament to give to the Commonwealth Bank the powers which the plaintiff banks, in common
with many other banks in other countries, may possess. But it is quite a different thing to arm the
Commonwealth Bank with powers of compulsory acquisition. A power of compulsory acquisition
as such is not itself a banking power. (at p205)

211. The power to make laws with respect to the acquisition of property is separated in the
Constitution from the other powers and such laws must be laws for the acquisition of property for a
purpose in respect of which the Parliament has power to make laws, and they must provide for
acquisition on just terms: Johnston, Fear & Kingham and The Offset Printing Co. Pty. Ltd. v. The
Commonwealth [1943] HCA 18; (1943) 67 CLR 314 . (at p205)

212. The power of acquisition of particular property does not depend in any way upon the purpose
for which that property is being used at the time of acquisition: for example, a factory might be
acquired in order to be used as public offices. I therefore cannot accept the arguments presented to
the court attacking the acquisition of assets because, it is said, they may not be in use for banking
purposes at the time of acquisition. (at p205)

213. I notice here an argument based on the powers conferred by the Act to purchase and to take
over by compulsion any business carried on by the plaintiff companies in Australia. The plaintiff
companies are at present engaged only in banking business, but they might enter into other forms of
business which are authorized by their memoranda of association. Under ss. 19, 22 or 24 such a
non-banking business could be acquired by the Commonwealth Bank either at the present time or at
any time in the future. Such provisions, it is submitted, have no relation to the subject of banking. I
have already referred to the fact that "taking over a business" is not a technical legal conception. If
the Commonwealth Bank takes over a business under the compulsory provisions of the Act, all it
gets are certain assets and certain liabilities, as specified in s. 24. The power to acquire the assets is
not affected by the nature of the business in which they are used when they are acquired. The
transfer of liabilities requires separate consideration. Similar considerations apply to the special kind
of agreement for which s. 22 provides. If a business is sold under the power conferred by s. 19 (2)
(b) or (c) the vendor decides what will be sold and upon what terms - the Act makes no provision on
these matters. (at p205)

214. It was also argued that the Commonwealth Bank would not need to use a great deal of the
property which it would acquire from the plaintiffs if the acquisition provisions of the Act were
applied. It has already been stated that the only business which the plaintiff companies in fact now
carry on is the business of banking and the property which the plaintiffs own, whether in the form of
land and buildings or chattels or investments, is property which has all been acquired by them in the
course of carrying on the business of banking. In my opinion there is no satisfactory ground upon
which it can be said that any particular part of that property could not possibly be used by the
Commonwealth Bank in the same way as it has been used by the plaintiff banks. Similar
considerations apply to property which may be acquired by the Bank in the future. It has not yet
been held that an acquisition of property by the Commonwealth will be invalid unless it can be
shown to a court that the property will certainly be used by the Commonwealth for some particular
purpose. The Commonwealth might validly acquire property for the purpose of destroying it - e.g.
land with buildings on it for the purpose of a rifle range, dangerous explosives in the possession of
persons of dubious loyalty. (at p206)

215. The Commonwealth may acquire property for the purpose of giving effect to a law with

respect to banking. I have already given reasons for my opinion that the legislative substitution of

public for private control of banking is a law with respect to banking and, accordingly, in my

opinion, the Commonwealth may make provision for the acquisition of property by the

Commonwealth Bank from the plaintiff banks or from a State or any other person in order to give

effect  to  the                   provisions  of  the  1947                                    Act.

Acquisition of Shares. (at p206)

216. There are, however, some details of the provisions relating to acquisition as to which particular
objections are made. These objections must be considered in the light of the fact that the
Commonwealth Constitution, s. 51 (xxxi.), confers power on the Commonwealth Parliament to
make laws for the acquisition of property from persons or States. When the Commonwealth
Parliament validly exercises this power the Commonwealth law prevails over any inconsistent State
law (Constitution, s. 109). Therefore a State law cannot prevent the Commonwealth acquiring
property; for example, a State law could not, by making property completely inalienable, prevent
the Commonwealth acquiring that property. Similarly, a State law could not exclude the application
of a Commonwealth law for the acquisition of property by providing that that particular property
should never become the property of the Commonwealth or of an agency of the Commonwealth
authorized by Commonwealth law to acquire it. (at p206)

217. But the Commonwealth Parliament can provide under this constitutional provision for the
acquisition only of that which is property; that is, it must take "property" as it finds it. The
Commonwealth, by acquiring property or providing for the acquisition of property, does not and
cannot change the nature and character of the property acquired. It can acquire from an owner of
property only the property which that person owned. (at p207)

218. The foregoing considerations are relevant to ss. 10, 13, 14 and 21 of the Act. (at p207)

219. It has already been stated that s. 10 makes no real change in the law so far as State laws are
concerned. It accomplishes in this respect no more than would be accomplished by s. 109 without
the separate enactment of the provisions of s. 10. Three of the plaintiff banks are established under
English law. The Commonwealth Parliament cannot affect the provisions of that law. But the
question as to the limiting effect (if any) of other laws upon the operation of a Commonwealth law
for the compulsory acquisition of property arises only in relation to the compulsory acquisition of
shares, and there is no provision for such acquisition in the case of shares in the English banks. (at
p207)

220. Section 13 provides for compulsory acquisition of Australian shares in Australian private
banks. It provides that, upon the Treasurer giving a notice, such shares shall become vested in the
Commonwealth Bank: s. 13 (1) and (3). The Companies Acts and articles of association under
which the plaintiff companies operate provide for the method of transfer of shares. The provisions
in all cases are to the effect that an instrument of transfer duly executed by a shareholder must be
produced to the directors. The Acts and articles of association do not contain any provision for the
transfer and vesting of shares by virtue of the Commonwealth statute. Accordingly, the provisions
of s. 13 to the effect that shares in the plaintiff companies shall become vested in the
Commonwealth Bank upon the happening of a certain event, namely the giving of a notice by the
Treasurer, are provisions with which the provisions of the State Act and articles of association are
inconsistent. But the latter provisions cannot take effect so as to prevent the operation of the
Commonwealth law. Accordingly, in my opinion, s. 13 contains provisions which are effective to
vest in the Commonwealth Bank shares in the plaintiff banks, even though the relevant Companies
Acts and articles of association contain what is intended to be an exhaustive statement of the means
of transferring shares so as to vest them in a transferee. (at p207)

221. Section 14 (1) of the Act provides that the Commonwealth Bank shall, for all purposes, be the
holder of the shares in an Australian bank which have been purchased or otherwise acquired by the
Commonwealth Bank under Division 2 of Part IV. of the Act and shall be a member of that
Australian private bank in respect of those shares. This provision applies both to shares purchased
by agreement under s. 12 and to shares acquired compulsorily under s. 13. In my opinion such a
provision is incidental to the acquisition of the shares. It makes the Commonwealth Bank the holder
of the shares and a member of the company without the necessity of registration under the State Act,
which registration might, in the case of several of the private banks, be refused at the will of the
directors. In The Commonwealth v. New South Wales [1923] HCA 34; (1923) 33 CLR 1 the Court
considered the acquisition of land under the Real Property Act (1900) (N.S.W.). It was held that the
Commonwealth could compulsorily acquire land (without any transfer as required by that Act) and
that the Commonwealth became the owner of the land without registration in pursuance of the Act.
It was the basis of the Act that the legal title to land depended upon registration, but,
notwithstanding the provisions of the Act which secured this result, the Commonwealth obtained
full rights of ownership in the land after compulsory acquisition. This reasoning, in my opinion,
establishes the validity of s. 14 (1) in relation to shares acquired by the Commonwealth Bank under
the Act. (at p208)

222. In the case of the Bank of New South Wales there is a provision which prevents the holding of
shares in the bank by any corporation. This provision must, for the reasons stated, yield to a
Commonwealth law providing for the acquisition of shares by the Commonwealth Bank, which is a
corporation. (at p208)

223. There are provisions in the case of several of the plaintiff companies which limit the number of
shares which can be held by a shareholder. These provisions cannot, in my opinion, prevent the
Commonwealth Bank acquiring under the Act any number of shares in any of the plaintiff banks.
They are provisions which, viewed in the light of the Commonwealth law, would have the effect of
preventing the operation of the Commonwealth law. Therefore the Commonwealth law prevails
over them. If State law or provisions in the memorandum or articles of association of a company
could make the Commonwealth or any Commonwealth instrumentality incapable of being a
shareholder the effect would be that it would be impossible for the Commonwealth to acquire shares
in the company under the power of legislation conferred by s. 51 (xxxi.) of the Constitution. No
such State legislation or memorandum or articles of association can prevent the application of a
Commonwealth law for acquisition of shares. (at p209)

224. A share in a company is described as a share in the capital of a company. The capital of a
company is expressed by a sum of money, but a shareholder does not become a part owner of
property owned by the company or of a balance of assets over liabilities. A share in a company,
regarded as property, consists of the rights to which the shareholder is entitled by reason of the
provisions of the articles and memorandum of association and any relevant statute: Borland's
Trustee v. Steel Bros. & Co. Ltd. (1901) 1 Ch 279, at p 288 . (at p209)

225. When the Commonwealth Bank acquires a share, that which it acquires is a share in a
particular company with a particular memorandum and articles of association to which effect is
given by a statute or charter to which the company and the shareholders are subject. The bank must
take the share, if at all, with the rights which it confers, and the obligations to which its holder is
subject, according to the relevant provisions of the articles &c. A power to acquire a share does not
give a power to alter the nature of those rights. It is true, as already stated, that no provisions in the
articles or memoranda of association or State law can prevent the Commonwealth acquiring shares
and becoming the owner of them and exercising all the rights which belong to the owner. But those
rights cannot be altered so as to give to the Commonwealth Bank, once it has become the owner,
rights which would not belong to it as a shareholder under the articles of association &c. (at p209)

226. It is now necessary to consider the effect of this conclusion in relation to various provisions
contained in the memoranda or articles of association of the plaintiff companies. (at p209)

227. There are provisions in the articles of association of the plaintiff companies which are of a
quite different character from those just mentioned. These are provisions which specify the rights
which belong to a person when he has become a shareholder in a company by virtue of his
shareholding and membership of the company. In some cases the voting power of shareholders is
limited. In, for example, the case of the Bank of New South Wales, shareholders have one vote for
every five shares which have been held for three months before the meeting at which it is proposed
to exercise the vote, and no voting is allowed in respect of any shares over the number of 1,000.
There are provisions of a similar nature in the case of several others of the plaintiffs, in some cases,
however, applying only where a poll is held. When the Commonwealth Bank acquires shares in a
bank in which the voting power of members is limited in the manner stated, the Commonwealth
Bank will, in my opinion, be subject to the same limitation of voting power as applied in the case of
other shareholders. The Bank will have only the same rights as any other shareholder holding the
same number of shares. (at p210)

228. In the articles of association of eleven of the plaintiff companies there are provisions to the
effect that the directors may decline to register a transfer of shares, in some cases, to any person of
whom they do not approve, while in other cases the power of the directors to decline to register
transfers is limited to cases in which the shares sought to be transferred are not fully paid or the
company has a lien upon them. Such provisions as these, for the reasons which I have stated, do not
prevent the Commonwealth Bank from becoming the owner of shares and a member of the
company. But it must still be the case that the Commonwealth Bank only becomes the owner of the
shares as they exist, and not of shares with rights different from those which attach to the other
shares in the company. (at p210)

229. Section 14 (2) of the Act provides that the Commonwealth Bank may transfer shares which it
has acquired "to any person" and that that person shall, for all purposes, be the holder of those
shares and be a member of the Australian bank in respect of those shares. This section was defended
not as giving a permission to the Commonwealth Bank to transfer shares as it thought proper
(subject to the articles of association of the company) but as giving a right to the bank to transfer to
any person, notwithstanding the articles. Section 14 (2) relates to transfer by the Commonwealth
Bank, and not to acquisition by the Commonwealth Bank. Where there are such restrictions on
transfers as those mentioned, this provision would give to the Commonwealth Bank rights of
transfer which would not attach to shares of the company owned by any other shareholder. Section
14 (2) is, in my opinion, not effective for that purpose. If the rights of transfer are prescribed by
State law or the memoranda or articles of association those are the only rights of transfer that exist
in the case of the Commonwealth Bank or of any other shareholder. Thus, if the Commonwealth
Bank becomes the owner of shares in the plaintiff companies, it is subject to the provisions of
articles of association to the effect that, for example, no transfer of shares can be made to a
corporation, or to a person not approved by the directors, or so that the transferee would hold a
number of shares beyond those permitted by the articles of association. Section 14 (2) cannot
override such provisions as these. Section 14 (2) is not legislation with respect to the acquisition of
shares and, in my opinion, there is no other power under which it can be supported. In my opinion s.
14 (2) is invalid. (at p211)

230. The Commonwealth cannot, in acquiring property from one person A, make a law which
deprives another person B of rights in respect of property owned by B. The Commonwealth might,
if B were subject to the legislative power of the Commonwealth Parliament, acquire proprietary
rights from B, but a law which, for example, takes shares from A, cannot deprive another
shareholder B of his rights in respect of shares which he, B, continues to own. If the Treasurer gives
a notice under s. 13 (1) the directors of a bank elected by the shareholders are displaced under s. 17
and, for the future, the directors will be persons appointed by the Commonwealth Bank with the
approval of the Treasurer: s. 18. Only Australian shares become vested in the Commonwealth Bank
under s. 13. Shares which are not Australian shares remain vested in other shareholders. Those other
shareholders have a right to join in electing directors by virtue of the articles of association of the
companies, and a right to have the companies managed by directors so elected. Sections 17 to 20, if
they are valid, abolish those rights. But, as I have said, a power to acquire property which is
exercised in respect of the property of a person A, does not include any power to destroy the rights
of B in respect of other property. In my opinion, therefore, ss. 17 to 20 would be invalid if they
were dependent upon s. 51 (xxxi.). But I have already given reasons for my opinion that a power to
make laws with respect to banking enables a Parliament to legislate upon the subject of the
management and internal regulation of and shareholdings in banks. Accordingly, the provisions with
respect to this subject are not, in my opinion, invalid by reason of the fact that they alter the rights
of shareholders whose shares are not acquired by the Commonwealth Bank. This reasoning applies
also to s. 19 (3), which provides that the exercise of the powers of the nominee directors of an
Australian private bank shall (subject to one exception specified in s. 19 (2)) be in their sole
discretion and shall not be subject to any qualification, restriction or condition provided by or under
any law, charter or other instrument relating to the exercise of the powers of the directors of that
bank. The directors must doubtless act honestly, but they are not compellable to pay any attention to
the wishes of the shareholders. They can manage the bank (s. 19(1)) at their sole discretion (s. 19
(3)). This is a most far-reaching provision in very unusual terms, but it does provide a method of
controlling banking business, and, in my opinion, is not outside the power to make laws with respect
to banking. (at p212)

231. Section 21 of the Act provides that: "Where the number of members of an Australian private
bank has, by reason of the purchase or other acquisition by the Commonwealth Bank . . . of shares
in that bank, fallen below the number specified in any law" &c. then that law &c. shall have no
effect. The laws referred to in this section are laws such as the Companies Act (Vict.) 1928, s. 124,
which provides that where the number of shareholders in a company falls below five the
shareholders who carry on the business of the company shall be liable for certain debts of the
company. (at p212)
232. If the Act were put into operation in the case of three of the plaintiffs (as the shareholdings
stand at present) the Commonwealth Bank would become the owner of all the shares in the
companies and, accordingly, these State Acts would operate. In the case of the other Australian
private banks the Commonwealth Bank might acquire so many shares that the number of
shareholders would be reduced below the minimum number required by State law. (at p212)

233. The provisions of s. 21 cannot be regarded as incidental to the acquisition of shares. They are
provisions relating to the creditors of a bank and the responsibilities of shareholders. The
Commonwealth Parliament might have allowed them to continue to operate unchanged, but the
Commonwealth Parliament has determined in s. 21 that such provisions shall not apply in the case
of the plaintiff banking companies. In my opinion this provision is a law relating to the organization
and control of banking business by defining the relations of a bank and of the shareholders of a bank
to the creditors of the bank, though it is not legislation with respect to acquisition of shares. It is, in
my opinion, legislation with respect to the conduct of the business of banking and should therefore
be held to be valid under s. 51 (xiii.) of the Constitution. Acquisition of Assets and Business. (at
p212)

234. The scheme contained in the Act for acquiring assets of banks as distinct from shares in
banking companies provides in s. 22 for such acquisition by agreement and in s. 24 for compulsory
acquisition. Under an ordinary agreement the effect of the transaction in creating rights or duties is
limited to the parties to the agreement and depends upon the terms of the agreement. But s. 22
provides that a particular effect shall be given to an agreement made under the section for the taking
over by the Commonwealth Bank of the business in Australia of that bank. (at p212)

235. The procedure of making an agreement under the section is carefully defined. It begins by an
invitation in writing given to the bank by the Treasurer inviting the bank to make an agreement not
later than a specified date for the taking over by the Commonwealth Bank of the business in
Australia of the bank. The date specified in the notice may be amended from time to time. Section
22 (5) provides that the Commonwealth Bank may, subject to the approval of the Treasurer, make
an agreement with a private bank for the taking over by the Commonwealth Bank of its business in
Australia. Section 22 (6) provides that an agreement under the section may be made with a private
bank whether or not a notice under sub-s. (1) has been given, but that if such a notice has been given
an agreement with that bank shall not be made after the date specified in an original or amended
notice. Sub-section (7) provides that an agreement under the section may include provisions for the
taking over by the Commonwealth Bank of any of the business, assets and liabilities outside
Australia of the private bank. (at p213)

236. It has already been stated that the "taking over of a business" involves acquisition of assets of
the business and generally some provisions as to the business liabilities of the person who has been
conducting the business. But an agreement for taking over a business made between private persons
cannot deprive of their rights the creditors of the former owner of the business. (at p213)

237. Section 22 (8) states what is to be the effect of an agreement "made under the section."
Paragraphs (a) and (c) of sub-s. (8) relate to assets, and no difficulty is created by a provision that a
bank owning assets may dispose of them by agreement. Paragraphs (b) and (d), however, relate to
liabilities, present and future. They provide that the effect of making an agreement under the section
shall be that the liabilities of the private bank become liabilities of the Commonwealth Bank and
that the private bank shall be discharged from its obligations in respect of those liabilities. Section
56 carries out this idea in detail. If the Commonwealth Parliament chooses to declare that the
Commonwealth Bank, which is the creature of the Parliament, shall become subject to certain
liabilities, it is difficult to see why it should not so provide. It is quite a different thing, however, to
provide that a private bank shall be discharged from its obligations in respect of its liabilities to
creditors. No agreement between such a bank and the Commonwealth Bank could bring about such
a result. The discharge of the private bank from liability means that the statute effects a compulsory
novation, with the result that the creditor of a private bank would find that, instead of having a
claim against a private bank, he would have no claim whatever against a private bank, but would
have a claim against the Commonwealth Bank. (at p214)

238. A law which makes such a provision is not a law for the acquisition of property. The
acquisition of property is a subject which is completely different from that of the transfer of
liabilities. The Commonwealth can acquire, for example, a factory or machinery, but the
Commonwealth has no power, because it acquires a man's factory or machinery, to provide that he
shall be released from his trade or other debts. A power to acquire property from one person does
not include a power to abolish the rights of creditors of that person. If the rights which the creditors
of such a person has are themselves property, those rights could be acquired (upon just terms) but
the Act contains no such provision in relation to creditors of the private banks. (at p214)

239. Accordingly, in my opinion the provisions for the discharge of the private banks from
liabilities which are contained in s. 22 (8) (b) and (d) (and repeated in s. 24 (5) and (7)) cannot be
supported as laws made under the power to make laws for the acquisition of property: s. 51 (xxxi.)
of the Constitution. (at p214)

240. But the provisions for discharge of the private banks from liabilities must be considered not
only in relation to the power to make laws with respect to acquisition, but also in relation to the
power to make laws with respect to banking. Is it a law with respect to banking to provide that the
customer of a bank shall no longer continue to have a claim against that bank for his deposit, but
that he shall have some different rights? (at p214)

241. Legislation of this character has been passed from time to time in emergencies. After the
banking crisis in Victoria in 1893 Acts were passed which varied the rights of creditors of banks as
well as the rights of shareholders. Depositors were compelled by this legislation to accept rights
which were different from the rights which they originally had. That legislation was passed because
of the insolvency or financial embarrassment of some of the banks. It would be difficult to deny to it
the character of legislation with respect to banking. In the case of the present Act the reason why the
rights of creditors of banks are altered is entirely different. The reason is that it is thought desirable
to put the Commonwealth Bank in possession of the business of the private banks, and accordingly
to take over, not only the assets of those banks, but also their liabilities, and thus compel the
customers of those banks to deal, at least at the beginning, with the Commonwealth Bank. The
general character of the legislation, however, in altering the rights of creditors of banks remains the
same, whatever the reason for passing it. In my opinion the provision for discharging the private
banks from liabilities upon a taking over of the business by agreement under s. 22 (or by
compulsion under s. 24) is valid, as being legislation with respect to banking under s. 51 (xiii.) of
the Constitution, though not as being legislation with respect to the acquisition of property under s.
51 (xxxi.). (at p215)

242. These provisions, it may be added, really provide for what amounts to an amalgamation of the
businesses of a private bank and the Commonwealth Bank, though they do not affect the continued
juristic existence of a private bank as a corporation. Legislative control of the amalgamation of
banks is a common feature of banking legislation in many countries. Amalgamation normally
involves some transfer of liabilities - by indemnity or otherwise. Such legislation contains
provisions requiring official permission before such amalgamation takes place, and provisions for
compulsory amalgamation in circumstances of emergency are not unknown. It is purely a question
of policy as to whether such amalgamation is desirable. Provisions for the amalgamation of banking
businesses by acquisition of assets (or of shares) with or without transfer of liabilities are in my
opinion within the power to make laws with respect to banking. (at p215)

243. The cases have been argued upon the basis that the amount of compensation payable for assets
acquired would be their total value less the liabilities of the bank from which they were acquired. I
see no provision in the Act which provides for a deduction of liabilities. If there were such a
provision it would be difficult to justify it under s. 51 (xxxi.) of the Constitution. If the
Commonwealth acquires property it must pay full value for it. The amount of the debts owed by the
owner of the property has nothing to do with the value of his property. The value of property is the
same whether the owner of the property is rich or poor, prosperous or insolvent. If, however, the Act
upon its true construction means that liabilities are to be deducted in assessing compensation but if
the provision for discharge from liabilities is held to be invalid, the result would be that the private
bank would still be subject to its liabilities. Then there would be no ground for deduction of
liabilities in assessing compensation, and the Commonwealth Bank would have to pay compensation
for all the assets of a private bank without any deduction for liabilities. The Court was informed that
the result would be that the compensation payable to all the private banks on this basis would (on
present figures) be about 800,000,000 pounds instead of about 100,000,000 pounds. Independently,
however, of the position as to assets and liabilities as it happens to exist today, it is plain that there is
such a great difference between (1) the taking over of assets and paying in full for them without any
deduction for liabilities, and (2) paying for them with such a deduction, that if the provision for
taking over liabilities, including as it does the provision for discharge of the private banks from
liabilities, is invalid, all the provisions for acquisition of assets should be held to be invalid because
the result would be so completely different from any intention which could reasonably be attributed
to the Parliament. (at p216)

244. But, for the reasons which I have stated, my conclusion is that the provisions with respect to
the acquisition of shares and assets and the transfer of liabilities should not be held to be invalid as
not being legislation either with respect to the acquisition of property or with respect to banking.
Just Terms. (at p216)

245. Sections 15 and 25 of the Act provide for fair and reasonable compensation for shares and
assets respectively, and the compensation is to be assessed by a court. Such provisions taken by
themselves prima facie comply with the requirement of just terms imposed by s. 51 (xxxi.) of the
Constitution as a condition to be satisfied by laws providing for the acquisition of property. (at
p216)

246. But there are positive provisions in the Act and certain suggested deficiencies in the Act which,
it is argued for the plaintiffs, will or may prevent the plaintiffs or their shareholders from in fact
receiving compensation which is fair and reasonable in all the circumstances. (at p216)

247. The Management Provisions in relation to Just Terms. When the provisions of ss. 17-20 have
been put into operation the Australian private bank will be under the control of nominee directors
with full power to manage, direct and control the business and affairs of the bank of which they are
directors and, in particular, with power (s. 19 (1) (b) and (c)) to dispose of the business in Australia
of the private bank to the Commonwealth Bank and to dispose of all or any of the other business of
the Australian private bank. Section 19 (2) provides that the exercise of either of these powers shall
be subject to the approval of the Treasurer after the Treasurer has obtained a recommendation from
the Governor of the Commonwealth Bank. (at p216)

248. Under s. 19 (3) the exercise of any power by directors appointed under s. 18 shall be in their

sole discretion "and shall not be subject to any qualification, restriction or condition provided by or

under any law, charter or other instrument relating to the exercise of the powers of the directors of

that                                                                  bank."

(a) The nominee directors can sell any of the assets of the bank; they can sell the whole business of

the bank - in each case for such price as they may think proper.

(b) Under s. 22 the nominee directors could respond to an invitation of the Treasurer by making an

agreement with the Treasurer for the taking over of the business of a private bank for a sum

determined  by  the  Treasurer                                   and  themselves.

(c) Under s. 24 the Treasurer could take action which would result in the Commonwealth Bank

taking over the assets of the bank and the liabilities of the bank without the consent of either the

original or the nominee directors, and, when this action had been taken, the directors (original or

nominee) could make an agreement with the Treasurer as to the compensation to be paid to the bank

in respect of the acquisition of those assets: s. 43. (at p217)

249. Thus nominee directors chosen by the Commonwealth Bank and the Treasurer could agree
with the bank and the Treasurer upon the price to be paid to the private bank for its property and
business and could also, after a compulsory acquisition, agree with the Commonwealth Bank and
the Treasurer upon the amount of compensation to be paid to the bank. (at p217)

250. It was argued for the plaintiffs that s. 19 (3) of the Act discharges nominee directors from all
obligations to shareholders, including their fiduciary obligations. I have given reasons for my
opinion that s. 19 (3) is valid, but that it does not authorize any fraudulent or dishonest conduct. It
was argued for the defendants that this provision referred only to some specific law &c. applying
only to a particular private bank: cf. Barry v. Heider [1914] HCA 79; (1914) 19 CLR 197, at p 205
where it was held by Griffith C.J. that a provision relating to "laws, rules and practice" did not
include the body of law recognized and administered by courts of equity. But the question whether
or not the nominee directors are effectively discharged by s. 19 (3) from their fiduciary and
statutory obligations to shareholders (including, it may be observed, shareholders other than the
Commonwealth Bank) is not very important in relation to the questions which arise in these cases.
Whatever view may be taken on that question, nominee directors would have at best a divided duty.
It is obvious that they would have been placed in their position in order to promote and protect the
interests and policy of the Commonwealth Bank. They take office as nominees of the
Commonwealth Bank and are put in office with an express power to dispose of the business to the
Commonwealth Bank. They might honestly regard themselves as doing their duty if, without being
dishonest, they made a good bargain with the Commonwealth Bank. Even if such directors acted
with the utmost honesty, they would be in an impossible position. They could not represent the
interests of both the Commonwealth Bank and of the private bank or its shareholders, who would
look for the return of their capital, and hope for a dividend, out of either the price to be paid if the
directors sold the assets, or the compensation to be paid to the bank if the Treasurer resorted to the
compulsory procedure of s. 24. (at p218)

251. The provisions with respect to management of the bank provide, by reason of s. 19, a means of
acquiring property. That being so, they must provide for just terms of acquisition. It cannot, in my
opinion, be said to be just that an authority with powers of compulsory purchase should appoint
managers of the property to be acquired with power to sell the property to the authority for a price
fixed by those managers and the authority. It is equally unjust that such managers should have the
power to bind the owner of the property as to the amount of compensation to be paid and to do this
by an agreement made between themselves and the acquiring authority. (at p218)

252. Accordingly, in my opinion, the provisions of Division 3 of Part IV., which bring about this
result, that is ss. 17-20, should be held to be invalid. (at p218)

253. In my opinion this conclusion does not affect the validity of any other part of the Act. In the
first place, it has no relation to any of the provisions, with respect to the acquisition of shares. The
management provisions, it is true, come into operation upon the giving of a notice under s. 13 which
declares that shares shall be vested in the Commonwealth Bank, but s. 17 merely utilizes that notice
for the purpose of specifying a date. Accordingly, the management provisions can be applied
whether or not any shares are actually acquired in pursuance of the notice and independently of
whether or not a majority of the shares is acquired. (at p218)

254. As far as assets are concerned, the provisions of s. 22 and s. 24 are not affected by the
invalidity of ss. 17-20. The only result would be that the actual, and not the nominee, directors
would be in office and they would be able to make agreements or not as they thought fit. As the
Treasurer need not acquire shares and therefore need not give the notice which would under s. 17
bring the management provisions into operation, the Act contemplates that action under s. 22 by
way of making an agreement could be taken by the original directors. Section 24 can operate
according to its terms even though the provisions of Division 3 as to management are invalid. (at
p219)

255. There is, however, another provision affecting the acquisition of assets which requires special

attention. Section 23 of the Act provides for a special taxation concession in cases of acquisition of

assets  by                 agreement  under  s.  22.

(a) That concession does not apply where an agreement is made otherwise than "under" s. 22; for

example, it would not apply if nominee directors disposed of the business of the bank in Australia or

outside Australia under s. 19. Such an agreement would not be an agreement under s. 22 and it

would not have the effect given to an agreement under s. 22 by sub-s. (8) of that section.

Accordingly, the taxation concession is allowed in the case of some agreements for sale of the

business of a bank and not in the case of other agreements for such sale.

(b)If the Treasurer gave an invitation under s. 22 and the directors (original or nominee) did not

agree upon the sale of the business and the Treasurer exercised the power conferred by s. 24, no

taxation concession would be allowable; that is to say, no taxation concession would ever be given

in a case of compulsory acquisition. (c) Again, nominee directors might, by declaring dividends out

of one fund rather than another, affect the amount of, or perhaps destroy, the benefit of s. 23 at their

own discretion. (at p219)

256. If the provisions as to nominee directors are invalid, objections (a) and (c) would disappear and
also objection (b), so far as nominee directors were concerned. But it would still be the case that a
private bank which made an agreement acceptable to the Treasurer under s. 22 would get the benefit
for its shareholders of s. 23; but that a bank which stood out and did not make an agreement, but
exercised its rights under the Act to obtain an assessment of compensation by the Court of Claims,
would not receive the benefit of s. 23. Thus a bank which agreed would be in a better position than
a bank which did not agree. Section 23 is part of the terms on which the assets are taken over in the
case of a bank that makes an agreement under s. 22. In my opinion it is not just that in the case of
other banks they should be excluded from such benefit simply because they are not willing to
accede to an agreement which is acceptable to the Treasurer and because they exercise their rights
under the Act of having compensation determined by a court. The result is that in my opinion the
provisions for compulsory acquisition of assets (s. 24) are rendered invalid. (at p219)

257. There were other objections to the provisions for compulsory acquisition of shares and assets

which, in my opinion, are not well-founded. (a) It was argued for the plaintiffs that if the nominee

directors made an agreement for the sale of the business of a bank the price paid would represent the

assets of a bank. If they sold at a low price, it was argued that this would diminish the amount of

compensation payable to shareholders whose shares had been acquired, and that it would also

depreciate the value of shares which were not Australian shares which had not been acquired, but

which might subsequently be acquired. For this reason, it was contended that if the provisions

relating to the appointment of nominee directors were invalid, the provisions for compulsory

acquisition of shares must also be held to be invalid. But the Court of Claims would not be bound

by any agreement made by nominee directors when it was determining the value of shares at the

time when they were acquired. The court would be under a duty to make up its own mind as to their

value, independently of any agreement made by nominee directors.

(b) There were various criticisms as to the taking over of assets which became Australian assets

after an original taking over, based upon the contention that no provision was made for

compensation in such cases. The acquisition provisions plainly contemplate acquisitions at different

times in the case of any bank: as to shares see s. 13 (4) and as to assets s. 24 (6), (7) and (8).

Shareholders are dealt with severally under ss. 37, 39 and 40 in respect of their claims. A claim for

compensation for assets is a claim in respect of particular specified assets - s. 43 (4): and the

compensation awarded would be payable only in respect of a particular claim as made: s. 45. These

provisions enable claims for compensation to be made and compensation to be assessed whenever

shares or assets are taken over. There is, in my opinion, nothing in the compensation provisions

which limits a shareholder who owns both Australian and ex-Australian shares or a bank to a single

proceeding  for  compensation.

(c) Section 46 (4) and (8) enable the Treasurer at will to close up a bank before and independently

of any acquisition of shares in the bank. It is argued that the Treasurer would, by taking such action,

affect very greatly the value of the assets of the bank because they would become assets held by a

condemned institution, and not assets in a going concern. If the prohibition power (s. 46) were

exercised, the banking business of the bank, it is true; would cease and there would be no such

business to be acquired under s. 24, but the value of the assets, it is argued, would be affected by the

prohibition, so that if the shares were subsequently acquired the shareholders would not get full

value. In my opinion this argument is not a good objection to the justice of the terms of acquisition

of either shares or assets. If s. 46 were applied against a bank, the bank could immediately dispose

of its property as it thought proper and obtain such a price for it as the market was prepared to give.

(d) It is further argued that the provisions of s. 46 enable the Treasurer to threaten a bank with

closure unless its policy conforms to his desires and, accordingly, to force a bank to adopt a

particular line of policy. This comment is well-founded, but it is an argument to be considered by

Parliament and the electors, and not by a court. (e) It was similarly argued that the threat of closing

a bank altogether could be used for the purpose of forcing a bank to accept a proposed price for its

business in preference to being put right out of business under s. 46 without any acquisition of assets

and therefore without any compensation therefor. This, like the last objection, is an objection that

the Act confers an arbitrary power on the Treasurer which may be used for the purpose of enabling

him to force banks into a course of action desired by him. This is the case if Parliament is prepared,
in relation to a matter as to which it has plenary power of legislation, to entrust arbitrary powers to

an individual. The responsibility is with Parliament and the legislation cannot, simply because it

contains  such  provisions,  be  set  aside  by  a                                               court.

(f) It is further argued for the plaintiffs that the payment of compensation to the private banks

(particularly if shares in all of them or the assets of all of them were acquired at about the same

time) would involve the payment of so large a sum of money that the value of money in the

community would diminish, with the result that the compensation would not be just. In my opinion

any court must assume that payment in money which is legal tender is sufficient to discharge any

pecuniary obligation. It would be a most difficult problem to determine how much inflation and

associated depreciation of the value of currency which might be apparent at one date as compared

with some other prior date was due to the payment of a large sum of money by way of

compensation to a particular bank or banks. But, apart from the practical difficulties of applying the

principle suggested, there is no authority for introducing any exception to the well-established

principle that a money obligation can always be satisfied by payment in legal tender. (at p221)

258. Section 24 (8) however, is open to an objection which, in my opinion, has more weight than
those which I have just considered. The assets of a bank in Australia might be acquired under s. 22
or s. 24. The whole business of the bank in Australia would then necessarily come to an end because
it and all the Australian assets would be taken over by the Commonwealth Bank; and see s. 46 (1),
(2), and (3). But the bank would still exist as a company. (Incidentally it may be observed that the
bank could still carry on some non-banking business in Australia with new assets). Some of the
banks have extensive businesses in New Zealand. After s. 24 had been put into operation in the case
of such a bank it could still carry on in New Zealand not only the business of banking, but also
some other business authorized by its present memorandum of association or by an amended
memorandum of association. But under s. 24 (8) the Commonwealth Bank might at any time require
the Australian bank to vest its New Zealand assets, whether they were associated with banking or
not, in the Commonwealth Bank, and the private bank would incur a penalty of 10,000 pounds for
each day on which it failed to take the necessary action to vest the desired property in the
Commonwealth Bank. This power of compulsory acquisition would be applicable in such a case to a
company doing no banking business and possibly no business at all in Australia just because, at
some time - it may have been many years previously - that company had carried on the business of
banking in Australia. In such a case the relation of the acquisition of the property to a purpose with
respect to which the Commonwealth Parliament has power to make laws - viz., banking in Australia
- is too tenuous and remote to support the law. In my opinion, therefore, s. 24 (8) is invalid. (at
p222)

259. But the invalidity of this provision does not, in my opinion, affect the validity of any other
provisions of the Act, because they will all work and operate according to their terms in exactly the
same way if s. 24 (8) is struck out of the Act. The question of the validity of s. 24 (8) may not be of
great importance to the banks because, in the case which I have put, the Australian private bank
could readily cease to be an Australian company by winding up here and another company could be
incorporated in New Zealand. Then s. 24 (8) would have no field of operation in relation to the
assets in New Zealand of the new company. But such a re-organization would take time, and the
possibility of making it does not affect the objection to the legislation. (at p222)

260. I summarize my opinion on this part of the case by saying that the provisions for the
acquisition of shares contained in Division 2 of Part IV. are not invalid by reason of any of the
objections to them which have been considered; that ss. 17-20 in Division 3 of Part IV. are invalid;
that s. 24 is invalid for reasons connected with s. 23; that, for another reason, s. 24 (8) is invalid; but
that the invalidity of these provisions does not make any other provisions of the Act invalid; but s.

25  is                      deprived  of  any                                    operation.

Court of Claims. (at p223)

261. It was not contended that the court was not validly constituted. (at p223)

262. Compensation is to be determined by the Court of Claims "and not in any other manner." This
provision is to be found in s. 40 (2), (4) and (5) with respect to shares, and in s. 40 (2) with respect
to assets. Section 40 (5) provides that the amount of compensation "determined by the court" (that
is, the Court of Claims) shall be payable by the Commonwealth Bank to the private bank in full
satisfaction of the claim to which the determination relates. There is a similar provision with respect
to compensation for shares in s. 40 (8). The result is that any jurisdiction of the High Court is
excluded in claims for compensation made against the Commonwealth Bank. Such claims are to be
determined by the Court of Claims in accordance with the Act, and not in any other manner. (at
p223)

263. The plaintiffs contended that these provisions were invalid because they excluded the
jurisdiction of the High Court in claims for compensation. The Constitution, s. 75 (iii.), gives to the
High Court original jurisdiction in all matters in which the Commonwealth or a person being sued
on behalf of the Commonwealth is a party. No statute can deprive the Court of this constitutional
jurisdiction. The plaintiffs argued that, in a claim for compensation against the Commonwealth
Bank, either the Bank was a person being sued on behalf of the Commonwealth, or the
Commonwealth itself was a party. If the provisions which had the effect of excluding the
jurisdiction of the High Court were invalid, then all the provisions relating to the Court of Claims
were invalid, there were therefore no provisions for compensation, and the whole Act was invalid.
(at p223)

264. The defendants in the first place sought to meet this argument by contending that the
jurisdiction of the High Court had not been really excluded by the Act because a writ against the
Commonwealth Bank for compensation could be issued in the High Court without the private bank
making any claim in writing to the Commonwealth Bank for compensation (s. 43 (3)) with the
result that a claim for compensation would never come before the Court of Claims (s. 44) so that the
action would simply proceed in the High Court. To this contention it was replied, and in my opinion
rightly, by the plaintiffs that such a claim would be demurrable because s. 42 provides that
compensation for assets is to be ascertained in accordance with Division 2 "and not in any other
manner." Thus it would immediately appear that the Act provides that no court other than the Court
of Claims should entertain a claim for compensation under the Act against the Commonwealth
Bank. Further, this argument for the defendants has no relevance to the case of shares, where the
procedure (s.40) is quite different from that under s. 43, which deals with assets. (at p224)

265. If any person were to sue the Commonwealth itself as a defendant for compensation in the
High Court, the Court would have jurisdiction, because s. 75 (iii.) of the Constitution gives
jurisdiction in any matter in which the Commonwealth is a party. No difficulty as to jurisdiction
would arise in such a case, but as ss. 15 and 25 of the Act place the obligation to pay compensation
most specifically only upon the Commonwealth Bank and not upon the Commonwealth, any action
against the Commonwealth itself for compensation would fail. (at p224)

266. Under s. 61 of the Act the Commonwealth guarantees the payment of all compensation payable
by the Commonwealth Bank under the Act. It is a matter for argument whether, in view of the
provisions of the Act placing liability for compensation expressly upon the Commonwealth Bank,
this section gives any right to any private bank or any shareholder to make any claim against the
Commonwealth. But if it does and such a claim were made the position would be that the private
bank or shareholder would sue the Commonwealth itself on its guarantee. The action would be an
action on the guarantee, and not a proceeding for assessment of compensation. Because the
Commonwealth was an actual party to the action the High Court would have jurisdiction in such an
action under s. 75 (iii.). Further, it may be pointed out that the Commonwealth, if it were held that
under s. 61 it guaranteed as between itself and a bank or a shareholder the assessed compensation
payable by the Commonwealth Bank, would not be subject to any liability under such a guarantee
until the amount of compensation had been ascertained in proceedings against the Commonwealth
Bank. (at p224)

267. The question, therefore, as to the effect of provisions which prevent proceedings for
assessment of compensation in the High Court could arise only if an action for compensation were
brought in the High Court against the Commonwealth Bank, and the Commonwealth was not a
defendant in the action. I deal first with the question whether the Bank in such a case would be "a
person being sued on behalf of the Commonwealth." (at p224)

268. In Quick and Garran, Annotated Constitution of the Australian Commonwealth, p. 773, the
view is expressed that s. 75 (iii.) in the relevant provision is limited to cases in which the
Commonwealth is the real defendant (in interest) but is represented in legal proceedings by the
Attorney-General, or some other Minister, or a nominal defendant, or a person such as the
Commissioner of Taxation: see Income Tax Assessment Act 1936-1947, s. 209. (at p225)

269. In the United States of America the Supreme Court has jurisdiction in all "controversies to
which the United States shall be a party" - Constitution of the United States, Art. III., s. 2. But this
jurisdiction can be exercised only if the United States consents: see Willoughby, Constitutional Law
of the United States, 2nd ed. (1929) vol. 3, pp. 1381, 1422. Judicial opinion as to the meaning of the
words "controversies to which the United States shall be a party" has varied. In the leading case of
Osborn v. Bank of the United States [1824] USSC 39[1824] USSC 39; ; (1824) 22 US 738, at p 857
(6 Law Ed 204, at p 232) it was said with reference to this provision: - "The jurisdiction of the court
depends not upon interest, but upon the actual party on the record. . . . In all cases where jurisdiction
depends on the party it is the party named in the record": see also United States v. Lee [1882] USSC
58; (1882) 106 US 196 (27 Law Ed 171) . On the other hand, later cases have adopted a different
point of view. In Louisiana v. McAdoo [1914] USSC 220[1914] USSC 220; ; (1914) 234 US 627
(58 Law Ed 1506) the point is said to be not who is the party on the record, but "the effect of the
judgment or decree which can here be rendered." But this test has not been uniformly applied in still
later cases: see Sloan Shipyards Corporation v. United States Shipping Board Emergency Fleet
Corporation [1922] USSC 91; (1922) 258 US 549 (66 Law Ed 762) . In that case the evidence
showed that the Government owned all the stock in a very large corporation which exercised
extensive powers of requisition and control of shipping &c. The Government was the only person
which could be interested in a judgment for or against the corporation (except, of course, the
opposite party). There was no consent on behalf of the United States to be sued. The court, however,
acted simply upon the facts disclosed upon the record, namely that the Shipping Board was the party
to the proceedings and that the controversy was not one to which the United States was a party. The
court accordingly assumed jurisdiction. (at p225)

270. In the Commonwealth Constitution the words used are not "a party to a controversy," but
"being sued on behalf of the Commonwealth." In the case of the United States Constitution there is
much to be said for the proposition that the court should look at the controversy, whatever it may
be, and ascertain who are the real parties to it, whoever or whatever may be the agents through
whom they act. But in the case of the Commonwealth Constitution the reference to the record is
much more direct. It is necessary only to find out who is actually being sued and then to ask
whether that person is being sued on behalf of the Commonwealth. In the case of the Attorney-
General or a Minister or a nominal defendant it would be easy to answer the question. He would be
sued, not in respect of any alleged personal liability, but in order to enforce a claim against a
Government. But in proceedings for compensation under the Act the basis of the claim is the
liability of the Commonwealth Bank itself, specifically imposed upon the Bank, and only upon the
Bank, by the statute. Any allegation with respect to any alleged liability of the Commonwealth
would be irrelevant in such an action and should be struck out of any statement of claim.
Accordingly, in my opinion, in such an action the corporation which was the defendant (the
Commonwealth Bank) would be shown by the record not to be a person being sued on behalf of the
Commonwealth and the action would not come within the provisions of s. 75 (iii.). (at p226)

271. The contrary view submitted for the plaintiffs is based on the contention that the
Commonwealth is financially interested in the question of compensation by reason of its guarantee,
and that therefore the Commonwealth Bank should be regarded as in some manner representing the
Government when action is brought against it for compensation. If then it "represents" the
Government, it should be held, it is argued, that the Bank is being sued on behalf of the
Government. This contention was supported by a further argument that when a principal debtor is
sued he is sued on behalf of his surety. I am not aware of any authority whatever for such a
proposition. (at p226)

272. The other argument for the plaintiffs was that the Commonwealth Bank is really a department
of the Commonwealth Government. This contention was supported by reference to a dictum of
Griffith C.J. in Heiner v. Scott [1914] HCA 82; (1914) 19 CLR 381, at p 393 . But the
Commonwealth Bank (which is a creation of statute) has never been so treated. Its receipts do not
go into consolidated revenue (see s. 81 of the Constitution), the administration of the bank has never
been entrusted to a Minister, the officers of the bank are not civil servants, and the accounts of the
bank are not part of the Commonwealth Budget. The bank may act as the agent of the
Commonwealth, but it can so act only when express authority has been given to it by the
Commonwealth. What the Commonwealth Bank does is not done by the Commonwealth, but by the
bank; for example, surely the Commonwealth could not be sued if the bank wrongly dishonoured a
cheque or if one of the bank's motor-cars injured a person by negligent driving. (at p227)

273. The Commonwealth Parliament has declared that the bank is a corporation and the Court must
on this, as on many previous occasions, accept that the bank (though it has no corporators) exists as
a new kind of juristic person. The Parliament has gone out of its way to declare the continued
existence of the bank as a corporation: Commonwealth Bank Act 1945, s. 7. The Governor, and not
any Minister, manages the bank: s. 25. The bank is treated as a separate person not subject to
ministerial control in the daily conduct of its business. Section 9 provides for consultation between
the bank and the Treasurer on policy in terms which, in my opinion, are inconsistent with the bank
having the characteristics of a Government department. Section 10 provides that the bank is
guaranteed by the Commonwealth. It is in the following terms: - "The Commonwealth shall be
responsible for the payment of all moneys due by the Bank but nothing in this section shall
authorize any creditor or other person claiming against the Bank to sue the Commonwealth in
respect of his claim." Here again the separation of the bank from the Commonwealth is emphasized.
I have difficulty in understanding how the Commonwealth can give anything like a guarantee to
itself. (at p227)

274. For these reasons it should not be held that the Commonwealth Bank is a department of the
Commonwealth doing banking business. In my opinion the objection of the plaintiffs based on s. 75
(iii.) of the Constitution fails. (at p227)

275. If, however, this objection is held to be good, it will result in striking out the words "and not in

any other manner" from ss. 40 and 43 of the Act. The result would be to make an important and far-

reaching change in the whole Act. Where Parliament provides that compensation is to be assessed in

a particular way and in no other way it appears to me that even such a provision as s. 6 cannot

entitle a court to uphold the law after striking out the limiting words. The result would be that the

enactment as left surviving would contradict the express original provision by allowing

compensation to be assessed by other tribunals than that specified. Such tribunals would include the

High Court, and also State courts. Accordingly, if it is held that the words "and not in any other

manner" should be eliminated as enacting an invalid provision, the whole of the provisions relating

to the assessment of compensation for both shares and assets should be held to be invalid - including

ss. 15 and 25, which provide only for compensation as assessed by the Court of Claims. There

would then be no valid provision for compensation and all the provisions for compulsory

acquisition          would  be  invalid.

Interest. (at p228)

276. It was argued for the plaintiffs that the compensation provisions of the Act with respect to both
shares and assets are not just because the court is not given express power to award interest on
compensation, the general power to give fair and reasonable compensation not empowering the
court to give interest. The defendants, on the other hand, argued that the court had power to award
interest if the payment of interest were necessary to make compensation fair and reasonable. In the
alternative, the defendants argued that the principle of the common law that fair compensation does
not include interest cannot be held not to amount to just terms. (at p228)

277. This question has been before the Court recently on several occasions and in different
circumstances. The decisions are conveniently referred to in Grace Bros. Pty. Ltd. v. The
Commonwealth [1946] HCA 11; (1946) 72 CLR 269 . All the decisions mentioned were given in
relation to particular cases which varied in circumstances, and no general rule has been
authoritatively determined by the Court. I do not repeat what I have said in several of these cases to
the effect that the conception of compensation does not in itself include any provision for interest.
Interest, in my opinion, is not part of compensation, but is interest on compensation. It is
recompense for delay in the payment of the compensation which represents the fair value of the
property acquired and so cannot itself be compensation. Thus in my opinion the Act does not, in
providing for fair and reasonable compensation, provide for payment of interest. (at p228)

278. The requirement of s. 51 (xxxi.) of the Constitution is that a law for the acquisition of property
must provide for just terms for such acquisition. The payment of compensation which fairly and
reasonably represents the value of the property satisfies this requirement. A complaint that
compensation has not been paid promptly is not a complaint that the amount of compensation is
inadequate. Payment for delay in payment of compensation would not be payment for the property,
but would be compensation for something other than the property or the loss of the property -
namely, for the loss of the use of the compensation moneys during the period from the time of
acquisition to the time of payment of the compensation. (at p228)
279. It would be a fair and reasonable thing for Parliament to make provision for such further
compensation - especially in the present cases, where the assessment of compensation would occupy
months in the case of a single bank, and possibly years in the case of all the banks. But the
Constitution does not, in my opinion, require as a condition of the validity of a law for acquisition
of property that compensation - in the form of interest or damages - should be paid to make up for
delay in paying compensation. Thus in my opinion the Act does not give jurisdiction to the Court of
Claims to award interest, but this fact does not invalidate the provisions for assessing compensation
for the property taken. Costs. (at p229)

280. It was further contended by the plaintiff that the compensation provisions were unjust because
the Court of Claims has no power to give costs. The defendants, on the other hand, argued that the
Court of Claims had inherent power to give costs. But in many cases it has been held that, as it was
put in London County Council v. Overseers of West Ham (1892) 2 QB 173, at p 176 there is no
"inherent or original jurisdiction in the Courts to deal with costs." The power of the Court of Claims
is a power to award fair and reasonable compensation - ss. 15, 25 - and such a power does not
authorize the creation by the court of a duty to pay any sum, by way of costs or otherwise, in
addition to the fair and reasonable compensation assessed by the court. Legislatures appear from
time to time to find great satisfaction in providing that particular tribunals shall have no power to
award costs, with the result that a man whose rights have been infringed may be deprived of any
real remedy because the expense of effectively litigating his claim may exceed what he can recover.
Similarly, a man may have to defend his rights against a completely false and unjustifiable claim,
and yet have no remedy for his expenses against a claimant who is without any merits whatever.
But, in spite of these considerations, it is difficult to hold that the absence of a power to award costs
(to either side) necessarily makes provisions for compensation unjust.
Section 92 - Freedom of Trade and Commerce. (at p229)

281. The plaintiffs contend that the whole of the Act is invalid because it offends against s. 92 of the
Constitution, which provides that "trade, commerce and intercourse among the States, whether by
means of internal carriage or ocean navigation, shall be absolutely free." (at p229)

282. The attack is directed against all the provisions for acquisition and against s. 46, which
provides for the prohibition at the will of the Commonwealth Treasurer of the carrying on of
banking business by any one or more of the plaintiff banks. (at p230)

283. It is argued that the object of the acquisition provisions is to put the banks out of business. The
business of the banks includes inter-State elements in arranging in State A to make funds available
in State B and in financing inter-State trade and commerce. Further, the business of the banks
involves a great deal of inter-State communication. Banking documents are transmitted between the
States and the facilities of posts and telegraphs are widely used. (at p230)

284. Section 46 purports to authorize a straight-out prohibition of banking business. (at p230)

285. There is no doubt that the provisions mentioned are directed towards putting the plaintiff banks
out of business or that, if put into operation, they will achieve that result. The question is whether
the Act is therefore invalid as infringing s. 92. (at p230)

286.  I  make  some  preliminary  observations.

(1) Section 92 does not prevent legislation with respect to inter-State trade and commerce. Section

51 (i) confers upon the Federal Parliament express power to make laws with respect to trade and
commerce among the States. The State Parliaments have a concurrent power to make such laws,

though the legislation of any one State cannot operate outside its borders. But, within its limits, the

power of the State is as plenary as that of the Commonwealth: James v. The Commonwealth [1936]

UKPCHCA 4; (1936) AC 578, at p 611; 55 CLR 1, at p 41 . Section 92 cannot therefore be

construed as meaning that inter-State trade and commerce is to be free from all legal control.

(2) Section 92 binds the Commonwealth and the States: James v. The Commonwealth [1936]

UKPCHCA 4; (1936) AC 578; 55 CLR 1 . Precisely the same rule applies to both Commonwealth

and States. If a State law is invalid as infringing s. 92, a law in the same terms would equally

infringe s. 92 if it were passed by the Commonwealth Parliament, and vice versa. The validity of a

law in relation to s. 92 cannot depend upon whether it is a Commonwealth law or a State law. Thus,

if any of the provisions of the Banking Act 1947 are invalid because they conflict with s. 92, then

no State Parliament could enact such provisions. They would be outside all legislative power

existing            in                                                        Australia.

(3) Section 92 is directed to laws made by the Commonwealth or States, and not to actions of

individuals. If a plaintiff complains of an act done by a defendant, he must show some infringement

of a right which he, the plaintiff, possesses. He may show an interference with his goods which is

prima facie a trespass because unauthorized by him. The defendant may contend that what he did

was authorized by a statute. But if the statute is invalid because it purports to authorize acts which

wrongly interfere with the freedom of inter-State trade and commerce, then the defence fails, the

plaintiff succeeds, and obtains damages for a breach of his common law right - not for an

infringement of s. 92. Section 92 operates to protect individuals, but does not give a cause of action

to individuals. No plaintiff would have a good cause of action merely upon an allegation that the

defendant had committed a breach of s. 92: see James v. The Commonwealth [1939] HCA 9; (1939)

62 CLR 339, at p 362 : see also Riverina Transport Pty. Ltd v. Victoria [1937] HCA 33; (1937) 57

CLR       327,  at  pp  341,                                             342  .

(4) Whenever a law authorizes a Government to acquire by compulsion property which is used or

which may be used for the purposes of a business which includes inter-State elements, the operation

of the law will or may obstruct and interfere with, and possibly put an end to, inter-State business of

the person from whom the property is acquired. An acquisition of his land may put an inter-State

trader out of business. Any acquisition of chattels whatever necessarily prevents the owner of these

chattels from selling them inter-State. But it has never been held that therefore s. 92 makes all

acquisition of property impossible. Section 51 (xxxi.) shows that such a proposition cannot possibly

be accepted, for if it were accepted the Commonwealth Parliament could not make any law for the

acquisition of property. Some other element than the mere acquisition of property must be found

before a legislative provision can be held to infringe s. 92. (at p231)

287. I do not propose to review the whole course of decisions upon the difficult provision contained
in s. 92. The consideration of s. 92 must now begin with James v. The Commonwealth [1936]
UKPCHCA 4; (1936) AC 578; 55 CLR 1 . I do not repeat the analysis of James v. The
Commonwealth [1936] UKPCHCA 4; (1936) AC 578; 55 CLR 1 which I made in Milk Board
(N.S.W.) v. Metropolitan Cream Pty. Ltd. [1939] HCA 28[1939] HCA 28; ; (1939) 62 CLR 116, at
pp 121, 127 - an analysis which is stated in summary form in Gratwick v. Johnson [1945] HCA 7 ;
(1945) 70 CLR 1, at pp 13, 14 . The proposition submitted for the plaintiffs was stated in the
following terms: "s. 92 is infringed whenever an individual or corporation is engaged in inter-State
trade, commerce or intercourse, and either by direction, prohibition or acquisition, with the object,
purpose or motive of effecting such a prohibition, the carrying on of such business by him or it is
forbidden." There is no doubt that, if s. 46 (4) is applied to a bank, it will stop the carrying on of the
banking business of that bank. The provisions as to acquisition of property are also plainly directed
towards this end: see s. 3 (c). (at p232)

288. The ownership of property does not itself constitute inter-State trade and commerce, and it
would seem to follow that a change in ownership of property by reason of compulsory acquisition is
not an interference with trade and commerce, though, as already stated, any acquisition of any
property from any person necessarily prevents him from using it for any purpose of trade and
commerce, including inter-State trade and commerce. This was the view taken in New South Wales
v. The Commonwealth (The Wheat Case) [1915] HCA 17; (1915) 20 CLR 54 . No definite opinion
as to this particular case was stated in James v. The Commonwealth (1936) AC 578; 55 CLR 1 . It is
mentioned in an historical survey with the comment that it "has never been expressly overruled"
(1936) AC, at p 618; 55 CLR, at p 47 . James v. The Commonwealth [1936] UKPCHCA 4; (1936)
AC 578; 55 CLR 1 does not over rule the Wheat Case [1915] HCA 17; (1915) 20 CLR 54 . The
reasoning in James v. The Commonwealth [1936] UKPCHCA 4[1936] UKPCHCA 4; ; (1936) AC
578; 55 CLR 1 does not condemn any and every expropriation of owners because it prevents the
expropriated owner using property in inter-State trade. Expropriation is held to involve a breach of
s. 92 only when it "is directed wholly or partially against inter-State trade in the goods, that is,
against selling them out of the State" (1936) AC, at p 630; 55 CLR, at p 59 . This view is in
accordance with James v. Cowan [1932] HCA 21; (1932) AC 542; 47 CLR 386 where it was held
that if it appeared from the terms of a statute that the acquisition of property was authorized by the
statute for a "real object" of restricting inter-State trade, then there was an infringement of s. 92. See
passages quoted from this case in James v. The Commonwealth (1936) AC, at pp 622, 623; 55 CLR,
at pp 51, 52 . It was also held in James v. The Commonwealth [1936] UKPCHCA 4; (1936) AC
578; 55 CLR 1 that a mere prohibition of inter-State trade and commerce was an infringement of s.
92: see James v. The Commonwealth (1936) AC, at p 633; 55 CLR, at p 61 where the Act in
question was held to be invalid for the reason that it prohibited such trade either entirely or partially.
(at p232)

289. Section 46 (4) and (8) can be used independently of any other provisions of the Act. (at p232)

290. The question of s. 92 may therefore be approached in relation to both acquisition of property
and prohibition of banking by considering two questions: (1) Is banking trade or commerce and, if
so, do the challenged provisions restrict the freedom of inter-State trade or commerce as explained
in James v. The Commonwealth (2) ? (2) If banking is not itself trade or commerce, but is an
instrument of trade or commerce, does the Act place such restrictions upon the use of the instrument
in inter-State trade or commerce as to impose a restriction upon inter-State trade or commerce
which is inconsistent with s. 92? Is Banking Trade or Commerce? (at p233)

291. The plaintiffs' argument on this question depends very largely upon the development of
statements to be found in various books on banking and in judgments as, for example, in the last
Alberta Case (1947) AC 503, at p 517 that bankers are "dealers in credit." Statements to this effect
made by leading authorities are to be found in In reference re Alberta Statutes (1938) SCR (Can)
100, at p 124 . (at p233)

292. The authorities in other courts to which reference was made do not give much assistance in the
endeavour to answer the question whether banking is itself "trade or commerce" as used in the
Commonwealth Constitution. The reference to this subject in English cases (apart from the
decisions on Canadian statutes) are incidental to the consideration of other questions in bankruptcy
law and the like, and can hardly be relied upon for the purpose of interpreting the Commonwealth
Constitution. (at p233)
293. The cases in the United States in which reference is made to banking do not include any
considered decision of the question whether banking is trade or commerce. In United States v.
SouthEastern Underwriters Association [1944] USSC 116; (1944) 322 US 533 (88 Law Ed 1440)
the Supreme Court overruled Paul v. Virginia [1868] USSC 79; (1869) 75 US 168 (19 Law Ed 357)
which was a decision of long standing to the effect that insurance was not trade or commerce. The
SouthEastern Underwriters' Case [1944] USSC 116[1944] USSC 116; ; (1944) 322 US 533 (88 Law
Ed 1440) exhibited great differences of opinion and accordingly provided both sides in these present
cases with arguments by way of more or less distant analogy. See the comment upon this case by
Thomas Reed Powell in (1944) 57 Harvard Law Review, p. 937, to which reference was made in
argument. (at p233)

294. The provision with respect to banking in the Canadian Constitution which has already been
quoted is much the same as that contained in the Australian Constitution. The decision In reference
re Alberta Statutes (1938) SCR (Can) 100 , which was relied upon by both sides, does not contain
any clear decision that banking is trade or commerce: see for example (1938) SCR (Can), at p 116
the statement of the Chief Justice that the machinery provided by the Act in its essential components
and features came under the head of "banks and banking" but, if not, then its subject matter was
embraced, within trade and commerce. What was held was that it was banking, and therefore
presumably was not trade and commerce. That it was banking was the ground of the decision. The
decision was not based on any proposition about the nature of trade and commerce. (at p234)

295. The argument of the plaintiffs is that a banker buys and sells credit and that for this reason
banking is trade and commerce. But a banker does not buy or sell credit in the same way as a trader
buys or sells goods. When it is said that a banker deals in credit the fact is that he receives deposits
which he engages to repay or that he lends or agrees to lend money. A loan transaction is a business
transaction, but is not therefore itself trade or commerce - unless all business transactions, from
building a house to pulling out a tooth, are to be described as trade or commerce simply because
they are business transactions. The fact that a business is carried on for profit or that an occupation
is pursued for profit does show that it is trade or commerce. (at p234)

296. The word "sale" is used in various metaphorical senses. When a man enters into a contract of
employment he is sometimes said to "sell his labour," but really there is no transaction of sale; the
contract is a contract of employment, not a contract of sale. Similarly, when a banker "deals in
credit" he makes loan contracts and does not sell anything. If he agrees in Victoria to make available
money by way of overdraft in New South Wales, he does not sell anything which passes across the
border between the States. The word "trade" is used in several senses. A carpenter is "a carpenter by
trade." But no-one would say that the craft of carpentry - as distinct from the sale and purchase of its
products - is trade or commerce. The trade and commerce to which s. 92 relates is "trade and
commerce among the States, whether by means of internal carriage or ocean navigation." The
reference is to something which can be carried by land or by sea. Inter-State trade and commerce is
concerned with movement of something from one State to another State. In the business of a bank
there are no "goods passing into or out of the State" - there is no passage across the border of
anything - which, it was decided in James v. The Commonwealth (1936) AC, at p 630; 55 CLR, at p
58 is what s. 92 protects. (at p234)

297. I notice, for the purpose of rejecting it, an argument for the plaintiffs that banking is inter-State
trade and commerce because inter-State banking transactions involve large use of the postal and
telegraph systems. If the use of correspondence inter-State gives a dealing between persons the
character of inter-State trade and commerce then the sphere of trade and commerce will be extended
so as to include advice by a mother to her daughter and lovers' greetings - if sent by inter-State post.
At this point a further argument for the plaintiffs may be noticed. In the case of Trinidad Lake
Asphalt Operating Co. Ltd. v. Commissioners of Income Tax for Trinidad and Tobago (1945) AC 1
it was necessary to interpret an income tax statute which provided that any resident person "who
transmits rent interest or income . . . to a non-resident person" should be deemed to be the agent of
the latter person. In pursuance of an agreement a New Jersey company declared a dividend payable
by cancellation of a claim against the company by a Trinidad company in an equivalent amount.
Both companies made entries in their books which recorded the transaction of set-off. It was held
that the transaction was a payment by the Trinidad company to the other company and that it
involved a transmission of revenue within the meaning of the statute. There is little difficulty in
arriving at the conclusion that the terms of the statute were intended to include such a case, but the
decision has no bearing whatever upon the question whether such a transaction is trade or commerce
or whether banking is trade or commerce. (at p235)

298. I therefore answer the question "Is banking itself trade or commerce?" in the negative.
Accordingly, in my opinion, the prohibition of banking authorized by s. 46 is not a prohibition of
any trade or commerce and therefore is not, for that suggested reason, rendered invalid by s. 92 of
the Constitution. Banking as an Instrument of Trade or Commerce. (at p235)

299. The next contention of the plaintiffs is that banking is an instrument of trade and commerce
and that the acquisition and prohibition provisions of the Act constitute an interference with it which
is an infringement of s. 92. I have already said that these provisions are intended to put an end to
banking by the private banks and that, so far as they are put into operation, they will accomplish this
object. (at p235)

300. I agree that banking facilities are, in these days, necessary for trade and commerce generally as
actually carried on, and for inter-State trade and commerce. Banking may be described as an
instrument which is used in inter-State trade and commerce. But the business of a banker, consisting
in receiving deposits, paying out deposits, lending money and associated transactions, provides
service of a financial character which is used in relation to all forms of human activity. A banker's
business serves the purposes not only of trade and commerce, but also of all kinds of financial
transactions which have nothing whatever to do with trade or commerce. A law which was directed
against the use of such facilities in inter-State trade and commerce, which had the "real object" of
restricting such trade and commerce, would be obnoxious to s. 92 for the reasons stated in James v.
Cowan (1932) AC 542; 47 CLR 386 and James v. The Commonwealth [1936] UKPCHCA 4; (1936)
AC 578; 55 CLR 1 . But the Banking Act 1947 is a general law dealing with the persons who
conduct financial transactions in a banking system, with no reference to the inter-State character of
any transaction. Such a law cannot be said to be "directed against" the use of banking in inter-State
transactions. The Act makes no reference whatever to inter-State transactions. The choice of the
banks to be prohibited from carrying on banking business "has no relation to . . . passage across the
border" - to use the words of Williams J. in Australian National Airways Pty. Ltd. v. The
Commonwealth [1945] HCA 41; (1945) 71 CLR 29, at p 109 . The Act does not prevent the
transportation of anything across State borders. It is true that it is intended to control the businesses
of private banks and, if though proper, to put them out of business. This, however, is to be done
without reference to any inter-State element in the business. (at p236)

301. The plaintiffs argue, however, that this fact is immaterial and that s. 92 prevents the closing by
legislative action of any business which is auxiliary to inter-State trade and commerce. I restate the
carefully-framed proposition which was submitted on behalf of the plaintiffs: - "Section 92 is
infringed whenever an individual or corporation is engaged in inter-State trade, commerce or
intercourse, and, either by a direction, prohibition or acquisition, with the object or purpose of
effecting such a prohibition, the carrying on of such a business by him or it is forbidden." (at p236)

302. In my opinion the plaintiffs did, as the defendants contended, really seek to set up again the
principle of W. & A. McArthur Ltd. v. Queensland [1920] HCA 77; (1920) 28 CLR 530 . In
McArthur's Case (1920) 28 CLR, at p 546 it was said: "Once determine what is comprised in 'trade,
commerce, and intercourse,' then, as the 'absolute freedom' extends to the whole of it, many of the
suggested difficulties vanish on the instant." It was then held that all the commercial arrangements
of which transportation is the direct and necessary result form part of trade and commerce - all the
mutual communings, negotiations, verbal and by correspondence, the bargain, the transport and the
delivery. (There was no dissent from this proposition in James v. The Commonwealth [1936]
UKPCHCA 4; (1936) AC 578; 55 CLR 1 . It was held in McArthur's Case [1920] HCA 77; (1920)
28 CLR 530 that s. 92 protected all of these elements from all governmental control by every
governmental authority to whom the command contained in the section was addressed. The
proposition of McArthur's Case [1920] HCA 77[1920] HCA 77; ; (1920) 28 CLR 530 was so stated
in James v. The Commonwealth (1936) AC, at p 619; 55 CLR, at p 48 : "Then there is the
conception enunciated in McArthur's Case [1920] HCA 77; (1920) 28 CLR 530 that 'free' means
free from every sort of impediment or control by any organ of Government, legislature or executive
to which s. 92 is addressed with respect to trade, commerce or intercourse, considered as trade,
commerce and intercourse" (1936) AC, at p 628; 55 CLR, pp 56, 57 . Lord Wright M.R. proceeds
(1936) AC, at p 629; 55 CLR, at p 57 : "Every step in the series of operations which constitute the
particular transaction, is an act of trade: and control under the State law of any of these steps must
be an interference with its freedom as trade." If s. 92 binds the Commonwealth, then it is equally
true that control under any Federal law must be such an interference. It is now settled that s. 92 does
bind the Commonwealth. Accordingly the adoption now of the doctrine of McArthur's Case [1920]
HCA 77; (1920) 28 CLR 530 would mean that inter-State trading and commercial dealings would
be immune from both Federal and State law: see James v. The Commonwealth (1936) AC, at p 629;
55 CLR, at pp 57, 58 . (at p237)

303. The Privy Council very clearly rejected the doctrine of McArthur's Case [1920] HCA 77;
(1920) 28 CLR 530 . Under that doctrine an infringement of s. 92 would take place in the case of
any law which controlled a business containing inter-State elements because if the law were not
observed the business would be interfered with, or possibly stopped altogether, or a penalty would
be incurred. Since James v. The Commonwealth [1936] UKPCHCA 4; (1936) AC 578; 55 CLR 1 it
cannot be maintained that the fact that a law which necessarily involves some control of inter-State
business and possibly, in the course of such control, an exclusion of some persons from such
business, is an infringement of s. 92. (at p237)

304. It is the duty of this Court to apply James v. The Commonwealth [1936] UKPCHCA 4; (1936)
AC 578; 55 CLR 1 and to follow the decisions which were approved in James v. The
Commonwealth [1936] UKPCHCA 4; (1936) AC 578; 55 CLR 1 and which have subsequently been
given by this Court. In my opinion it would be wrong, after James v. The Commonwealth [1936]
UKPCHCA 4[1936] UKPCHCA 4; ; (1936) AC 578; 55 CLR 1 to hold that a law controlling a
business, even though that business is directly related to and is even part of inter-State trade and
commerce, is necessarily an infringement of s. 92, and even though the application of the law may
render the carrying on of business by a particular individual impossible. I refer to the statutes which
were held in James v. The Commonwealth [1936] UKPCHCA 4; (1936) AC 578; 55 CLR 1 to be
valid. All of these statutes involve a control under law which (1936) AC, at p 629; 55 CLR, at p 57
"must be an interference with . . . freedom" in "trade." Among the statutes to which reference was
made are general price-fixing Acts (1936) AC, at pp 619, 620; 55 CLR, at p 49 : State marketing
and transport regulations (1936) AC, at pp 621, 622; 55 CLR, at pp 50, 51 : State laws of health and
sanitation (1936) AC at pp 624, 625; 55 CLR at p 53 : the Post and Telegraph Act 1901-1923 (1936)
AC, at p 625; 55 CLR, at p 54 : the Secret Commission Act 1905 (1936) AC, at p 626; 55 CLR, at p
54 : the Commerce (Trade Descriptions) Act 1905-1933 (1936) AC, at p 626; 55 CLR, at p 54 : the
Australian Industries Preservation Act 1906-1930 (1936) AC, at p 626; 55 CLR, at pp 54, 55 : the
Sea Carriage of Goods Act 1924 (1936) AC, at p 626; 55 CLR, at p 55 : the Transport Workers' Act
1928-1929 (1936) AC, at p 627; 55 CLR, at p 55 : Sale of Goods Acts (1936) AC, at p 629; 55
CLR, at p 57 : Bills of Exchange Acts (1936) AC, at p 629; 55 CLR, at p 57 : Acts relating to sea,
roadway or motor carriage (1936) AC, at p 629; 55 CLR, at p 57 and State or Commonwealth Acts
dealing with wharves or warehouses or transport workers (1936) AC, at p 629; 55 CLR, at p 57 : cf.
judgment of Evatt J. in R. v. Vizzard; Ex parte Hill [1933] HCA 62; (1933) 50 CLR 30, at pp 81, 82
. All these statutes prevent some transactions taking place in inter-State trade and commerce or
deprive them of effect if they do take place, and in some cases subject the participants to penalties.
Although they all operate to impose some degree of control and restraint upon inter-State
businesses, they were held to be valid. They are all either general Acts which apply to but have no
differential reference to inter-State transactions, or, if limited to such transactions, cannot be said to
be "directed against" them. I have difficulty in seeing how the proposition submitted for the
plaintiffs would allow the enactment of a general statute imposing penalties upon persons who sold
uninspected meat, or diseased meat, or other goods dangerous to health - or upon unqualified
persons who carried on the business of chemists and druggists. A business cannot exempt itself from
control by law by introducing inter-State elements into its transactions, and a law is not rendered
invalid by s. 92 because it applies to such transactions. If it is "directed against" such transactions it
is an entirely different matter. The Banking Act 1947 is not directed against inter-State banking. It is
a general law dealing with financial business as carried on by bankers. (at p238)

305. If it were now held that, because the Banking Act can be applied so as to prevent one or more,
or possibly all, of the plaintiff banks from carrying on banking business (banking being an
instrument used in inter-State trade and commerce), therefore the Act was invalid, it would be
necessary to overrule several decisions given by this Court. In each of these cases statutes subjected
the inter-State business of particular persons to restrictions and limitations and were such as possibly
to put them out of business. The statutes nevertheless were held to be valid. The cases decided
before James v. The Commonwealth (1936) AC 578; 55 CLR 1 and approved in James v. The
Commonwealth [1936] UKPCHCA 4; (1936) AC 578; 55 CLR 1 which were of this character were:
Willard v. Rawson [1933] HCA 12; (1933) 48 CLR 316 ; R. v. Vizzard; Ex parte Hill [1933] HCA
62; (1933) 50 CLR 30 ; O. Gilpin Ltd. v. Commissioner of Road Transport and Tramways (N.S.W.)
[1935] HCA 8[1935] HCA 8; ; (1935) 52 CLR 189 . After James v. The Commonwealth [1936]
UKPCHCA 4; (1936) AC 578; 55 CLR 1 cases in which legislation was upheld which either
restricted or put a stop to the inter-State business of some persons were: Riverina Transport Pty. Ltd.
v. Victoria [1937] HCA 33; (1937) 57 CLR 327 ; Hartley v. Walsh [1937] HCA 34; (1937) 57 CLR
372 ; Home Benefits Pty. Ltd. v. Crafter (1939) 61 CLR 70 ; Milk Board (N.S.W.) v. Metropolitan
Cream Pty. Ltd. [1939] HCA 28 [1939] HCA 28; ; (1939) 62 CLR 116 ; Andrews v. Howell [1941]
HCA 20; (1941) 65 CLR 255 . (at p239)

306. In my opinion all these cases would have to be overruled if the contention of the plaintiffs that
s. 92 prohibited interference by law with a business which contained inter-State elements or which
was an instrument used in inter-State trade and commerce were accepted. (at p239)
307. The plaintiffs naturally relied strongly upon the degree of approval given in James v. The
Commonwealth [1936] UKPCHCA 4; (1936) AC 578; 55 CLR 1 to Peanut Board v. Rockhampton
Harbour Board [1933] HCA 11; (1933) 48 CLR 266 . Such approval as was given was expressed to
be upon the basis only of a particular view of the Act which was accepted without further
examination by the Privy Council. It was said that "on the basis of that view (that is, a particular
construction of the Act as representing its true character) the principles laid down by this Board (in
James v. Cowan (1932) AC 542; 47 CLR 386 were applied by the Court," that is, by the High Court.
Such a statement is a very cautious and limited approval if, indeed, it is an approval at all. The other
reference to the Peanut Board Case [1933] HCA 11; (1933) 48 CLR 266 is (1936) AC, at p 630; 55
CLR, at p 59 where, with reference to burdens and hindrances upon inter-State trade which might
assume various forms, it is said that "One form may be a compulsory acquisition of goods, as in
James v. Cowan (1932) AC 542; 47 CLR 386 or the Peanut Case [1933] HCA 11; (1933) 48 CLR
266 if in truth the expropriation is directed wholly or partially against inter-State trade in the goods,
that is, against selling them out of the State." If the statute dealt with in the Peanut Case [1933]
HCA 11; (1933) 48 CLR 266 did provide for an expropriation which was "directed" wholly or
partially against inter-State trade in the goods, then the Peanut Case [1933] HCA 11[1933] HCA 11;
; (1933) 48 CLR 266 falls completely into line with the reasoning in James v. The Commonwealth
[1936] UKPCHCA 4; (1936) AC 578; 55 CLR 1 . The question whether the statute which was
under consideration in the Peanut Case [1933] HCA 11; (1933) 48 CLR 266 could properly be
construed as providing for expropriation "directed" against inter-State trade is not a question with
which the Privy Council itself dealt. Finally, as to the Peanut Case [1933] HCA 11[1933] HCA 11; ;
(1933) 48 CLR 266 Andrews v. Howell [1941] HCA 20; (1941) 65 CLR 255 is a decision directly
to the contrary effect and is in my opinion completely in accord with the decision in James v. The
Commonwealth [1936] HCA 32 ; (1936) AC 578; 55 CLR 1 . In Andrews v. Howell [1941] HCA
20[1941] HCA 20; ; (1941) 65 CLR 255 the Court considered a general marketing scheme which,
so far as expropriation of goods was concerned, was not distinguished, and, in my opinion, cannot
be distinguished, from that which was the subject of decision in the Peanut Case [1933] HCA 11;
(1933) 48 CLR 266 . But in Andrews v. Howell [1941] HCA 20; (1941) 65 CLR 255 the scheme
was not described as a marketing scheme which was "entirely restrictive of any freedom of action
by the producers." It was described as not being directed wholly or partially against inter-State
trade, but to the better disposal of the commodities in local and other markets. The regulations
establishing the scheme were held not to be obnoxious to s. 92. (at p240)

308. For these reasons I am of opinion that the provisions of the Banking Act 1947 do not infringe
s. 92 of the Commonwealth Constitution. In my opinion banking is not itself trade or commerce. It
is an instrument used by trade and commerce. The legislative control introduced by the Act is a
control which is not directed against any inter-State element in banking. It is a general provision for
the control of banking and is as valid as a general money-lending law. In my opinion the objections
based on s. 92 fail.

The Act in relation to State Governments. (at p240)

309. The Act is attacked as unduly interfering with and impairing the powers and functions of State
Governments and excluding them from necessary facilities for the conduct of governmental
business. The receipt, custody, management and control, and expenditure of the public moneys of
the States is a governmental function and an essential governmental function; that is, it is a function
the performance of which is necessary to the existence of the State as political organisms. This
proposition has been established by Melbourne Corporation v. The Commonwealth (1947) 74 CLR
331 where it was held that s. 48 of the Banking Act 1945 was invalid. This section provided that,
except with the consent in writing of the Commonwealth Treasurer, a bank should not conduct any
banking business for a State or for any authority of a State, including a local government authority.
(at p241)

310. The States may create State banks, but it is argued for the plaintiffs that State banks cannot
meet all government requirements. Such banks would not have the resources which are at the
command of the plaintiff banks and, further, it is argued that a State should not be compelled to
establish a State bank in order to maintain its independence of the Commonwealth. The effect of the
Act, the plaintiffs argue, is that in the case of States which have no State bank, the Government will
be compelled to do all its banking through a bank which is really controlled as to policy by the
Government of the Commonwealth: see Commonwealth Bank Act 1945, s. 9: Banking Act 1945, s.
27. (at p241)

311. It is contended that it is inconsistent with the maintenance of a Federal system of government
consisting of Commonwealth and States that the Governments of the States should be compelled to
conduct their financial operations through a Commonwealth bank. (at p241)

312. The Commonwealth Bank Act 1945, s. 25, places the day to day business of the bank under the
management of the Governor of the bank, and not under the management of the Government. The
Banking Act 1947, s. 11, provides that it shall be the duty of the Commonwealth Bank to provide
adequate banking facilities for any State to conduct its business without improper discrimination, to
observe obligations of secrecy &c. But in the case of a bank established under Commonwealth law,
all these provisions exist only at the will of the Commonwealth Parliament and can be altered by
that Parliament. Thus, in principle, the objection of the States which is now under consideration is
an objection, not merely to the particular provisions of the 1947 Act, but to any practical
compulsion upon the States to use an institution under the control of the Commonwealth for their
financial operations. (at p241)

313. The control of finance may be used in modern society so as to control nearly anything and
everything. If the States are to be subject to Commonwealth control in their daily finance, then, it is
argued, they lose all their independence as political organisms. Long term borrowing by the States is
controlled by the Loan Council under the Financial Agreement: see Financial Agreement as set out
in the Schedule to the Financial Agreement Act 1944, cl. 3 (8) and (9) and cl. 4. Short term
borrowing, however, is not so controlled, except in relation to certain maximum limits as to
discount, interest &c.: Financial Agreement, cl. 5 (1) and (9). (Similar provisions apply in the case
of the Commonwealth: see cl. 6 of the Agreement.) It is argued that the effect of the 1947 Act is to
place all short term financing of the States under the actual or possible control of the
Commonwealth Treasurer, and therefore to place State Governments themselves under the control
of the Commonwealth Treasurer. (at p242)

314. The defendants' reply to this argument is that if the Commonwealth Parliament has power to
create what may amount to a practical banking monopoly, the States must put up with it, just as they
must put up with many other things in respect of which power is given to the Commonwealth
Parliament. There are many subjects in respect of which the Commonwealth can use its powers so
as to create a monopoly in the form of exclusive Commonwealth control; e.g. bounties on the
production and export of goods, quarantine, currency, coinage, legal tender, certain industrial
disputes. The Commonwealth has exclusive powers with respect to customs and excise duties.
Legislation upon any of these matters may provide for control to be completely in Commonwealth
hands. In relation to all matters where the Commonwealth Parliament has power, the States are in
general bound by the laws of the Commonwealth. This was the decision in the Engineers' Case
[1920] HCA 54; (1920) 28 CLR 129 and the defendants contend that there is no reason why that
decision should be whittled down in the case of banking. (at p242)

315. The defendants further emphasize the exception of "State banking" from the Commonwealth
legislative power. This is an express exception in favour of the States which enables the States to
establish their own banks and to be completely free of any Commonwealth control in banking. This
express exception, it is argued, excludes any further implied exception in relation to this subject
matter. In reply to the arguments founded upon the Melbourne Corporation Case [1947] HCA 26;
(1947) 74 CLR 31 the defendants point out that s. 48 of the Banking Act 1945 dealt specifically and
particularly with the States and State authorities. (at p242)

316. In the Melbourne Corporation Case [1947] HCA 26; (1947) 74 CLR 31 it was held that a
system of Federal government, involving the co-existence of Commonwealth and States, involved
the continuance of the existence of the States as political entities not subject to any form of
Commonwealth control in respect of the discharge of their own lawful functions. The States may be
bound by some Commonwealth laws (Engineers' Case (1)) but, as governments, the States are
independent of the Commonwealth and are not subjects of the Commonwealth; and in respect of the
functions which are left to the States the Commonwealth has no power by means of legislation of
restricting the States in the performance of the normal and essential functions of government: per
Rich J. (1947) 74 CLR, at p 66 . Thus the Commonwealth Parliament cannot destroy, curtail or
interfere with the exercise of constitutional power by a State, and the management and control by
the States of their revenues and funds is a constitutional power of vital importance to them: per
Starke J. (1947) 74 CLR, at p 75 . The Constitution 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": per Dixon J. (1947) 74 CLR, at p 83 . Williams J. (1947) 74 CLR, at p 99 held
that s. 48 of the Banking Act 1945 was a law which discriminated against the States and their
agencies and was in substance a law which sought to give direction to the States as to the manner in
which they should exercise their executive, legislative, judicial or governmental functions and that it
was therefore invalid. (at p243)

317. The plaintiffs rely upon all these propositions in their challenge to the 1947 Act. (at p243)

318. The 1947 Act is general in its terms. It is quite different from s. 48 of the Banking Act 1945,
which dealt specifically and in a special manner, and in a discriminatory manner, with States and
State agencies. The 1947 Act cannot be said to be aimed at or directed against the States in this
manner. (at p243)

319. Further, the States are at liberty to use the Commonwealth Bank and, if they prefer not to do
so, they can establish their own banks. The intention of s. 51 (xiii.) is, I suggest, to give to the States
independence of the Commonwealth in respect of banking if they desire to have and to exercise
such independence. State banking is removed from Commonwealth control except in so far as it
extends beyond the limits of the State concerned. The Commonwealth legislative power in relation
to "State banking extending" should (as I have already said) be construed in the light of the prior
exception of State banking from Commonwealth control, and should be read as authorizing Federal
laws under which a State bank may extend its business from one State into another, even though the
other State might itself object to such extension. If the Commonwealth power of legislation with
respect to "State banking extending" &c. were held to include a power to prohibit "State banking
extending" &c. then, as a State bank of any magnitude could not carry on if it were limited in all its
transactions to transactions within the State, the result would be that the Commonwealth Parliament,
by exercising its legislative powers, could actually in practice abolish State banking upon any
substantial scale, notwithstanding the exclusion of "State banking" from Commonwealth legislative
power. I am therefore of opinion that the Commonwealth Parliament cannot, under the power to
make laws with respect to "State banking extending," either prohibit or substantially impede such
banking. To hold that such legislation is valid would, in my opinion, be inconsistent with the only
reason that can be suggested for excepting State banking from the power conferred by s. 51 (xiii.).
(at p244)

320. Thus I am of opinion that, by reason of this exception, the provisions with respect to State
banking contained in s. 51 (xiii.) make provision, of which the States are at liberty to avail
themselves, for independence of the States from Commonwealth control in respect of banking, and
that the principles stated in the Melbourne Corporation Case [1947] HCA 26; (1947) 74 CLR 31 do
not invalidate the Banking Act 1947.

Financial Agreement. (at p244)

321. It is contended for the plaintiffs that the Act is invalid because it is inconsistent with the
Financial Agreement between the Commonwealth and the States: see Schedule to Financial
Agreement Act 1944. Section 105A of the Constitution provides that an agreement made in
pursuance of the section shall be binding upon the Commonwealth and the States parties thereto,
notwithstanding anything contained in the Constitution of the Commonwealth or the Constitution of
the several States or in any law of the Parliament of the Commonwealth or of any State. Thus, if a
Commonwealth Act contains provisions inconsistent with a term of an agreement made in
pursuance of s. 105A of the Constitution, the Commonwealth Act is necessarily invalid. (at p244)

322. The Financial Agreement is an agreement made pursuant to s. 105A. Clause 5 (1) provides that
the States may, for any purpose, subject to any maximum limits decided upon by the Loan Council
for interest, brokerage &c., borrow moneys within the States from authorities, bodies, funds or
institutions (including Savings Banks) constituted or established under Commonwealth or State law
or practice. Clause 5 (9) has a more direct reference to the present case, because it deals more
specifically with borrowings from banks. Clause 5 (9) is as follows: - "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 sub-clause shall not apply to such
moneys." (at p245)

323. These clauses confer a right upon a State Government, subject only to the conditions
mentioned, to borrow money upon overdraft from banks. (at p245)

324. The plaintiffs contend that the principle stated in Stirling v. Maitland (1864) 5 B & S 840, at p
852 [1864] EngR 752; (122 ER 1043, at p 1047) in the following words is applicable: - "If a party
enters into an arrangement which can only take effect by the continuance of a certain existing state
of circumstances, there is an implied engagement on his part that he shall do nothing of his own
motion to put an end to that state of circumstances, under which alone the arrangement can be
operative." A recent case in which this principle was applied is Southern Foundries (1926) Ltd v
Shirlaw (1940) AC 701 . (at p245)

325. The plaintiffs contend that it is an implied term of the Agreement that the Commonwealth will
not do anything to render the right given by the quoted clause nugatory or to diminish or
prejudicially affect it. At the present time the States are able to go to a certain number of private
banks "in a private banking system" and make agreements for overdrafts. The Banking Act 1947
contains provisions which, so far as they are applied, will bring about the abolition of some or all of
the private banks. This, it is contended, is inconsistent with the implied term of the Financial
Agreement. (at p245)

326. The 1947 Act may be used and is plainly intended to be used for the purpose of diminishing
the number of banks. There is no express prohibition in the Financial Agreement against such
legislation. The plaintiffs disclaim any contention that the Agreement produces the result that no
Parliament, Commonwealth or State, could terminate the existence of a bank, but they found a
difficulty in stating with any precision any principle short of that proposition upon which they were
prepared to stand. The plaintiffs, in my opinion, have not shown how their argument on this point
can be accepted without conferring on existing banks a permanent guarantee that their existence will
never be terminated by any Commonwealth or State legislative action. Even a statutory
amalgamation would be impossible. But these propositions the plaintiffs disclaim. (at p245)

327. In my opinion the Financial Agreement does not contain any implication that the number of
banks is never to be decreased by legislative action. It provides only that the States (and the
Commonwealth) shall be entitled to obtain overdrafts from banks, that is, from such banks as there
are, from time to time. If the 1947 Act is put into full operation there will still be the
Commonwealth Bank and such State banks as now exist and as the States may decide to establish
hereafter. Accordingly, the States will still have the right to obtain by agreement overdrafts from all
such banks as exist. (at p246)

328. In the Melbourne Corporation Case [1947] HCA 26; (1947) 74 CLR 31 my brother Williams
and I expressed our opinion that s. 48 of the Banking Act 1945 was inconsistent with the Financial
Agreement, cl. 5 (9). That section prevented any State obtaining an overdraft from any bank without
the consent in writing of the Federal Treasurer. The Financial Agreement gives a right to a State to
arrange with banks for overdrafts subject only to the conditions specified in the Agreement. Section
48 was therefore in our opinion invalid because it imposed a condition upon the exercise of a right
which had been given to the States independently of any such condition. The 1947 Act, however,
does not affect this right in respect of any banks which may be in existence from time to time. (at
p246)

329. In my opinion, the objections of the plaintiffs based upon the Financial Agreement have not
been established as good objections to the validity of the Act.
Part VIII. (at p246)

330. Part VIII. of the Act provides for the protection of the rights of the staff of a private bank when
shares in the bank are acquired by the Commonwealth Bank and new directors assume office, and
for the transfer to the Commonwealth Bank of the staff of a private bank when the Commonwealth
Bank takes over the business of the bank. If the provisions for displacement of directors and
introduction of nominee directors are invalid, and the provisions for taking over the business of a
bank by compulsion are also invalid, the provisions of Part VIII. will not come into operation.
Conclusion. (at p246)

331. For the reasons which I have stated I am of opinion that the following sections of the Act are
invalid: - s. 14 (2) relating to transfer by the Commonwealth Bank of shares, ss. 17 to 20 relating to
taking over control of the management of Australian banks, and ss. 23 and 24 relating to the
acquisition of the assets of banks. Section 14 (2) is not a law with respect to acquisition of property,
and the other sections are laws with respect to such acquisition but in my opinion do not provide
just terms of acquisition. Declarations of invalidity should be made accordingly and appropriate
injunctions should be granted. The defendants should pay the costs of the plaintiffs. The parties will
be given an opportunity of being heard with respect to the terms of the judgments in the several
actions. (at p247)

RICH AND WILLIAMS JJ. These are five actions in which the plaintiffs claim that the Banking
Act 1947, hereinafter called the Act, or alternatively certain sections and parts of the Act, are
beyond the powers of the Commonwealth Parliament, contrary to the Constitution of the
Commonwealth and invalid. The important sections and parts of the Act are ss. 13, 14, 15, 17 to 21
inclusive, 24, 25 and 56 and Parts VI. and VII. (at p247)

2. The plaintiffs can be divided into three classes - (1) the eight private banks (that is banks carried
on for private profit) incorporated in Australia which are enumerated in the first part of the First
Schedule to the Act; (2) the three private banks incorporated in the United Kingdom which are
enumerated in the second part of the First Schedule to the Act; and (3) the States of Victoria, South
Australia and Western Australia. Joined as plaintiffs with four of the banks in the first class, namely
the Bank of New South Wales, the Commercial Banking Company of Sydney Limited, the National
Bank of Australasia Ltd. and the Commercial Bank of Australia Ltd., there is in each case a director
and shareholder suing on behalf of himself and all other holders of shares on any register in
Australia and a shareholder suing on behalf of himself and all other holders of shares on any register
outside Australia. Joined as plaintiffs with three of the remaining banks, namely the Bank of
Adelaide, the Ballarat Banking Company Limited, and the Brisbane Permanent Building and
Banking Company Limited, there is in each case a director and shareholder suing on behalf of
himself and all other holders of shares. The eighth plaintiff the Queensland National Bank Limited
is in voluntary liquidation and the liquidator is a co-plaintiff. No objection was raised to the form of
the actions so far as they are actions by a shareholder on behalf of himself and all other
shareholders, but it is impossible to say whether it would be in the pecuniary interest of shareholders
or not that their shares in the Australian Banks should be acquired under the Act, so that they cannot
be said to be numerous persons, having the same interest in the subject matter of the action within
the meaning of rule 8 of Order II. of the rules of this Court, and we do not regard the actions as
other than actions by the shareholders who are parties on their own behalf. (at p248)

3. Section 3 states that the several objects of the Act include - (a) the expansion of the banking
business of the Commonwealth Bank as a publicly-owned bank conducted in the interests of the
people of Australia and not for private profit; (b) the taking over by the Commonwealth Bank of the
banking business in Australia of private banks and the acquisition on just terms of property used in
that business; (c) the prohibition of the carrying on of banking business in Australia by private
banks. (at p248)

4. A statement of objects in an Act can operate like a preamble "as a key to open the meaning of the
makers of an Act and the mischiefs it was intended to remedy," Halsbury, Laws of England, 2nd ed.,
vol. 31, p. 461, but in the end the objects of the Act must be ascertained from its actual operation
and effect. (at p248)

5. Considerable care has been taken to leave to the sole and uncontrolled discretion of the Treasurer
the determination of the extent to which the relevant provisions of the Act shall be applied to the
private banks enumerated in the First Schedule. The Act is therefore capable of a complete or partial
operation depending on the extent to which the Treasurer chooses to exercise his discretion. It is not
an Act the necessary operation and effect of which will be to transfer the banking business of every
one of these banks to the Commonwealth Bank and to prohibit them all from carrying on banking
business in Australia. Further the operation of the Act is restricted to prohibiting the corporations at
present carrying on the business of banking in Australia for private profit from further carrying on
such business, and to the transfer of their businesses to the Commonwealth Bank, so that its
operation is not as wide as its objects indicate. But as the Banking Act 1945 prohibits persons other
than corporations carrying on banking business in Australia and corporations from carrying on such
business without a licence the objects of the Act can be achieved by refusing any further licences.
The complete operation of the Act will therefore have the effect in every practical sense of changing
the present banking structure of Australia from one in which the Commonwealth Bank of Australia
acts as a central bank and is in competition with the private banks in the general banking business
into one in which the whole of this general banking business shall be conducted by the
Commonwealth Bank subject only to such competition as may be provided by State Banks. This
purpose could be achieved either by the Commonwealth Bank taking over the businesses of the
private banks voluntarily or by compulsion, or possibly by the private banks being prohibited from
carrying on business which would force those seeking banking facilities to go to the Commonwealth
Bank, or partly by one or other of these means. (at p249)

6. The Act therefore contains provisions by which the business of the private banks at present
carrying on business in Australia may be acquired by the Commonwealth Bank and by which the
carrying on of the business of banking in Australia by these banks may be prohibited. Two methods
are provided by which the business of a private bank may be acquired by the Commonwealth Bank.
The first method, which is confined to the banks incorporated in Australia, is contained in Divisions
2 and 3 of Part IV. of the Act, and combines provisions for the voluntary or compulsory acquisition
of the shares of these banks situated or deemed by law to be situated in Australia with provisions for
the compulsory transfer of their management, direction and control from the directors appointed in
accordance with their memoranda and articles of association or other constating instruments
(hereinafter called regulations) to directors appointed by the Governor of the Commonwealth Bank
with the approval of the Treasurer. The second method which can be applied to all the plaintiff
banks is contained in Division 4 of Part IV. and provides for the voluntary or compulsory taking
over of their businesses in Australia by the Commonwealth Bank. The business is taken over by the
Commonwealth Bank acquiring all the assets of the private bank which are situated in Australia at
the date of acquisition and assets which relate to banking transactions and become Australian assets
after that date; and discharging the private bank from all liabilities which are situated in Australia at
the date of the acquisition and all liabilities which relate to banking transactions and become
Australian liabilities after that date, and by transferring these liabilities to the Commonwealth Bank.
(at p249)

7. The Act embodies, but with important variations, two methods which are now well recognized by
which one company may absorb the business of another - that is to say by the former company
purchasing the assets and undertaking to discharge the liabilities of the latter, or the former company
acquiring all or substantially all or at least sufficient shares in the capital of the latter to obtain a
controlling interest, that is to say at least sufficient shares to pass a special resolution. But the
important distinction between these methods of absorption and those provided by the Act is that
where shares are acquired the nominees of the Commonwealth Bank are placed in the management,
direction and control of the business and affairs of the private bank not by the Commonwealth Bank
exercising its rights as a shareholder but by the Act: and that in the case of the acquisition of assets
the private bank is discharged from its contractual liabilities and the rights of its creditors
compulsorily novated to rights against the Commonwealth Bank. (at p250)

8. The Act confers on the Treasurer the sole right to decide in his absolute discretion whether either,
and if so, which method of acquisition shall be applied to each of the Australian private banks and
the time of application, whether and when the businesses of each of the private banks incorporated
in the United Kingdom and elsewhere shall be taken over, and whether there shall be simultaneous
applications of the provisions of the Act to one or more or all of the banks or whether the Act shall
be applied to the banks one by one. Obviously the transfer of the businesses in Australia of the
plaintiff banks to the Commonwealth Bank is a task of great magnitude, and may explain the
presence in the Act of the method of acquisition provided for by Divisions 2 and 3 of Part IV.,
because by this method the separate business of each of the Australian banks can be continued as a
mere adjunct of the Commonwealth Bank for as short or as long a period as the Treasurer thinks fit.
But it is plainly intended that the business of each of these Banks may at some convenient future
time be taken over by the Commonwealth Bank, and s. 19 (1) (b) therefore authorizes the directors
nominated by the Governor of the Commonwealth Bank to dispose of the business in Australia of
each bank to the Commonwealth Bank with the approval of the Treasurer. Further it would seem
that the provisions of Division 4 of Part IV. may be applied to a private bank incorporated in
Australia after it has already been subjected to the provisions of Divisions 2 and 3 of that Part.
Indeed, unless this is done, the employees have no statutory rights to become employees of the
Commonwealth Bank. Ultimately the Commonwealth Bank can acquire the businesses of all the
private banks. (at p250)

9. But s. 51 (xxxi.) of the Constitution requires that laws for the acquisition of property shall
provide for the acquisition on just terms. The requirement applies whether the law authorizes the
Commonwealth or some person or corporation to acquire the property: McClintock v. The
Commonwealth [1947] HCA 39; (1947) 75 CLR 1 ; Jenkins v. The Commonwealth [1947] HCA
41[1947] HCA 41; ; (1947) 74 CLR 400 . Section 15 of the Act therefore provides that: "The
Commonwealth Bank shall pay fair and reasonable compensation in respect of the acquisition of
shares by the Commonwealth Bank under section thirteen of this Act," and s. 25 that: "The
Commonwealth Bank shall pay fair and reasonable compensation in respect of the acquisition of
property by the Commonwealth Bank under the last preceding section" (that is, section twenty-
four). Part V. provides for the constitution of a new Federal Court of Claims, and Part VI. for the
determination of claims for compensation in respect of the acquisition of shares and assets by that
Court and not in any other manner. (at p251)

10. Part VIII. gives a statutory right to persons employed by an Australian private bank to continue
to be employed by that bank after the date upon which shares in that bank have become vested in
the Commonwealth Bank, and a statutory right to persons employed by a private bank the business
of which is taken over by the Commonwealth Bank to be employed by the Commonwealth Bank.
(at p251)

11. Section 56 provides that upon the taking over of the business of a private bank by the
Commonwealth Bank, the Commonwealth Bank shall be substituted for the private bank as a party
to all instruments under which any money may be payable or property transferable to or by a private
bank. (at p251)

12. Section 61 provides that the Commonwealth guarantees the payment of all compensation
payable by the Commonwealth Bank under the Act. (at p251)

13. Prior to the Act, each of the plaintiff banks was carrying on business under the authority of s. 8
of the Banking Act 1945. This authority could only be revoked if the Governor-General was
satisfied that the bank had ceased to carry on banking business in Australia. Section 46 (1) of the
Act provides that "notwithstanding anything contained in any other law or in any charter or other
instrument, a private bank shall not, after the commencement of this Act, carry on banking business
in Australia except as required by this section." The existing authorities of the plaintiff banks are
therefore revoked, and s. 46 makes it unlawful for them to carry on business except to the extent
provided by the later sub-sections. In the meantime, each bank, however difficult it might be for it
to maintain its business in such circumstances, is nevertheless required by sub-s. 2 to carry on
business in Australia indefinitely and to provide any facility or service provided by it in the course
of its banking business on 15th August 1947. Each bank, except a bank the business of which has
been taken over by another private bank between this date and the date of the Act, must continue to
carry on business until (1) its business is taken over by the Commonwealth Bank (sub-s. 3); or (2)
the Treasurer by notice published in the Gazette and given in writing to a private bank, requires it to
cease upon a date stated in the notice carrying on banking business in Australia (sub-ss. 4 to 8). (at
p251)

14. It will be convenient at this stage to refer to s. 6 of the Act. This section conveys an intimation
to the Court that it is the intention of Parliament that every provision of the Act shall operate to the
full extent to which it can operate consistently with the Constitution. It intimates that the true
meaning of each provision is first to be ascertained in the context of the whole Act. Unless this
meaning is inconsistent with the Constitution, the provision is to have this meaning and operate
accordingly although every other provision of the Act should be totally inconsistent with the
Constitution and wholly invalid. If any provision of the Act is inconsistent with the Constitution, it
is nevertheless to operate to the full extent to which it can operate consistently with the Constitution.
But the Court is not a legislative but a judicial body. It cannot legislate; that is the function of
Parliament. It can only read down a provision which is in excess of power so that it will have an
operation consistent with the Constitution where the provision contains independent portions within
power which are severable, or the provision is capable of operating in a distributive manner in
respect of each and every part of the subject matter and its operation can be confined to those parts
which are within power: Pidoto v. Victoria [1943] HCA 37; (1943) 68 CLR 87 . When each
provision which is inconsistent with the Constitution has been examined and if possible read down
so as to have a residue of consistency or if this is impossible rejected, the Act is to be regarded as an
Act consisting of those provisions which are consistent with the Constitution still having their
original meaning and of the above residues, and this collation is to be the Banking Act 1947,
notwithstanding that what is left of the Act may result in the Act having a different effect in
substance from the true meaning of the Act as a whole. (at p252)

15. When the Act is construed in the light of the several objects set out in s. 3, particularly the third
object, and of this remarkable manifestation of parliamentary intention, it becomes clear that s. 46 is
intended to have an operation independent of the validity of any other provisions of the Act. The
Act therefore authorizes the Treasurer in his absolute discretion and in his own time to determine
the banking business in Australia of each of the plaintiffs with compensation by causing the
Commonwealth Bank to take over its business, or to close down its business without any
compensation, or to compel it to carry on business indefinitely. The Act can only be completely
valid if the Commonwealth Parliament can pass laws (1) prohibiting any banking business other
than the business carried on by State banks being carried on in Australia; (2) compelling any person
engaged in the business of banking to carry on that business indefinitely; (3) compelling any person
who has a contract with a bank carrying on business in Australia to novate that contract into a
contract with another bank carrying on business in Australia; (4) altering the regulations of any
corporation formed under the laws of any State carrying on the business of banking in Australia,
and taking the management, direction and control of its business and affairs out of the hands of the
directors appointed by the shareholders and placing them in the hands of the nominees of another
bank; (5) authorizing any bank carrying on business in Australia compulsorily to acquire shares in
any other bank carrying on business in Australia; (6) authorizing any bank in Australia compulsorily
to acquire the business of any other bank carrying on business in Australia. (at p253)

16. The defendants contend that the Act is authorized by the powers, separately or in conjunction, of
the Commonwealth Parliament to make laws, subject to the Constitution, for the peace, order and
good government of the Commonwealth wit respect to the subject matters enumerated in s. 51,
placita (xiii.), (xx.), (xxxi.), and (xxxix.). The text of these placita is as follows: -

(xii.) 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.

(xx.)       Foreign        corporations,  and         trading     or      financial

corporations formed within the limits of the Commonwealth.

(xxxi.) The acquisition of property on just terms from any State

or person for any purpose in respect of which the

Parliament            has      power           to              make       laws.

(xxxix.) Matters incidental to the execution of any power vested

by this Constitution in the Parliament or in either

House       thereof,       or  in         the         Government      of  the

Commonwealth, or in the Federal Judicature, or in any

department or officer of the Commonwealth. (at p253)

17. The defendants submit that a Federal law is authorized by the Constitution if it is relevant to,
that is to say if it touches and concerns, a specific matter on which the Commonwealth Parliament
has power to legislate, and that it is wrong to inquire whether the law is in its pith and substance or
true nature and character a law on one or more of the specific matters of Federal legislative powers
or is a law on a matter not transferred by the Constitution to the Commonwealth Parliament and
therefore exclusively vested in in the States. The test of pith and substance or true nature and
character of the law was first used by the Privy Council in order to decide whether a law was a law
upon one of the classes of subjects over which the Canadian Parliament has exclusive power under
s. 91 or the Parliaments of the Provinces exclusive power under s. 92 of the Canadian Constitution.
And in the recent case of Prafulla Kumar Mukherjee v. Bank of Commerce, Limited, Khulna (1947)
LR 74 Ind App 23 , where the same test was applied to the Government of India Act 1935, there
were three lists of powers, a Federal legislative list with respect to which the Federal legislature had
exclusive powers, a provincial list with respect to which the provincial legislatures had exclusive
powers, and a concurrent list with respect to which the Federal and provincial legislatures had
concurrent powers. But there is in the judgment of the Privy Council the specific statement that the
same test is to be applied however the powers are distributed between the parliaments in a federal
system. In Gallagher v. Lynn (1937) AC 863, at p 870 , Lord Atkin said: "These questions affecting
limitation on the legislative powers of subordinate parliaments or the distribution of powers between
parliaments in a federal system are now familiar, and I do not propose to cite the whole range of
authority which has largely arisen in discussion of the powers of Canadian Parliaments. It is well
established that you are to look at the 'true nature and character of the legislation': Russell v. The
Queen (1882) 7 App Cas 829, at pp 839, 840 , 'the pith and substance of the legislation.' If, on the
view of the statute as a whole, you find that the substance of the legislation is within the express
powers, then it is not invalidated if incidentally it affects matters which are outside the authorized
field. The legislation must not under the guise of dealing with one matter in fact encroach upon the
forbidden field." (at p254)

18. The cases have been argued at great length and with great care on behalf of the plaintiffs and of
the defendants. We only propose to deal with some of the more outstanding questions that have
arisen because, after careful consideration, we have reached the following conclusions: - (1) that on
the true construction of placita (xiii.), (xx.) (xxxi.) and (xxxix.) of s. 51 of the Constitution none of
the material provisions of the Act is authorized by these placita; (2) that on any construction, ss. 13,
14, 17 to 21 inclusive, and 24 are not authorized by these placita; (3) that if placitum (xxxi.) is wide
enough to authorize the acquisition of the shares or the taking over of the businesses, the
acquisitions fail because the Act does not provide just terms; (4) that the Act in all its material
sections is contrary to clause 5 (9) of the Financial Agreement and to s. 92 of the Constitution. We
shall proceed shortly to explain our reasons for reaching these conclusions. (at p255)

19. The complete validity of the Act must rest on the power of the Commonwealth Parliament to
select one person or corporation and confer on that person or corporation the sole right to carry on
the whole of the banking business in Australia other than the business carried on by State banks.
The conferment of such a privilege on one bank must be a partial exercise of a power to prohibit all
persons and corporations except State banks carrying on this business. The corporation selected in
the Act is the Commonwealth Bank, but it would be equally within power to select one of the
private banks. The defendants contend that this power of selection is conferred by pl. (xiii.) or
alternatively by pl. (xx.) of s. 51 of the Constitution. The only decision on pl. (xx.) is Huddart
Parker & Co. Pty. Ltd. v. Moorehead [1909] HCA 36; (1909) 8 CLR 330 . Very conflicting views of
the meaning of this placitum were there expressed. But there was agreement that the placitum does
not authorize the Commonwealth Parliament to create corporations but relates to legislation with
respect to corporations as existing entities. For the purposes of private international law, each of the
States of Australia is regarded as a foreign country in the courts of another State, so that bodies
incorporated in one State are just as much foreign corporations in another State as bodies
incorporated abroad. The language of the placitum indicates an intention to give the Commonwealth
Parliament power to make laws from time to time with respect to the conditions, subject to the
performance of which, corporations of all kinds created beyond Australia and trading and financial
corporations incorporated in Australia should be entitled to carry on business throughout Australia
or in any part thereof. It was contended that the power was sufficiently wide to enable the
Commonwealth Parliament to prohibit such corporations carrying on business at all in Australia.
But the power operates on such corporations as existing entities, and we think that it would be
inconsistent with a power to legislate depending on such a basis, particularly where corporations
formed within the limits of the Commonwealth are subject to the power to the same extent as
foreign corporations, to construe the power as wide enough to authorize the Commonwealth
Parliament simply to prohibit one or more or all of such corporations carrying on business in
Australia at all. It was also contended that the placitum would authorize the Commonwealth
Parliament to legislate directly to alter the regulations of such corporations, but since the power is
with respect to existing corporations and the regulations are part of their formation such legislation
would be beyond power. All that the Commonwealth Parliament could do would be to impose
conditions appropriate to the carrying on of a particular class of business which might require
corporations engaged in the business to alter their regulations in accordance with the law of the
place of their incorporation so as to be in a position to comply with the conditions. (at p256)

20. But it is unnecessary to pursue the meaning of the power because we are of opinion that is does
not apply to corporations whether created abroad or within Australia engaged in the business of
banking. Plactium (xiii.) contains an express exclusion of State banks from this head of power. It
was held in Melbourne Corporation v. The Commonwealth [1947] HCA 26; (1947) 74 CLR 31 that
"State banking" means banks constituted and controlled by States. The ordinary way to constitute
such banks would be to incorporate them. Such banks would be trading or financial corporations
formed within the limits of the Commonwealth. If pl. (xx.) was intended to apply to banks, the
Commonwealth Parliament would thereby acquire legislative powers over State banks from which it
is expressly excluded by pl. (xiii.). It was contended that the placita could be reconciled by implying
an exclusion of State banks from pl. (xx.), but to do this would require the insertion at the end of
this placitum of some such words as "other than trading or financial corporations formed within the
limits of the Commonwealth which are banks constituted and controlled by States the business of
which does not extend beyond the limits of the States concerned." We can find no justification for
such an implication, and in our opinion the placita can only be reconciled by applying the maxim
generalia specialibus non derogant, and by regarding corporations which are banks as placed in the
separate category expressly provided for by pl. (xiii.) and therefore as corporations outside the
generality of the classes of corporations referred to in pl. (xx.). (at p256)

21. The crucial matter is therefore to determine the meaning of pl. (xiii.). It authorizes the
Commonwealth Parliament to make laws with respect to (1) Banking other than State banking; (2)
State banking extending beyond the limits of the State concerned; (3) The incorporation of banks;
and (4) The issue of paper money. It thus contains four legislative powers. It is clear, of course, that
in a Constitution there may be considerable overlapping in the various heads of legislative power
and in the sub-heads contained in any head, but we can see no reason why a Constitution, like any
other statute or document, should not be subject to the general rule that every clause should be
construed with reference to the context of the other clauses of the Act, so as, so far as possible, to
make a consistent enactment of the whole statute and to give a meaning if possible to every part
thereof: Lamplugh v. Norton (1889) 22 QBD 452, at p 459 ; Canada Sugar Refining Co. Ltd. v. The
Queen (1898) AC 735, at p 741 ; A. Lewis & Co. (Westminster) Ltd. v. Bell Property Trust Ltd.
(1940) Ch 345, at p 348 . Accordingly when pl. (xiii.) gives a power to legislate with respect to
banking and a further power to legislate with respect to the incorporation of banks, the framers of
the Constitution could not have intended by the word "banking" to authorize laws with respect to the
incorporation of banks. The origin of the placitum is s. 91 (15) of the British North America Act
1867, which gives the Canadian Parliament exclusive legislative authority over "banking, the
incorporation of banks, and the issue of paper money." The additional words "other than State
banking, also State banking extending beyond the limits of the State concerned" have been
incorporated in the placitum. In Tennant v. Union Bank of Canada (1894) AC 31, at p 46 Lord
Watson in delivering the judgment of the Privy Council said that banking is "an expression which is
wide enough to embrace every transaction coming within the legitimate business of a banker." This
definition has been repeated in two recent judgments of the Privy Council: Attorney-General for
Canada v. Attorney-General for Quebec (1947) AC 33, at pp 41, 42 ; Attorney-General for Alberta
v. Attorney-General for Canada (1947) AC 503, at p 517 . It would seem therefore that Lord Watson
had taken the view that the words "incorporation of banks" authorized laws relating to the existence
of banks as corporate bodies while the word "banking" authorized laws relating to the conduct of
banking business. The word "banking" had been given this meaning by Lord Watson when s. 91
(15) of the Canadian Constitution was adopted with amendments in the Australian Constitution. The
amendments strengthen the view that the word was intended to have this meaning in pl. (xiii.)
because the only power of the Commonwealth Parliament over State banking is over State banking
extending beyond the limits of the State concerned. It has no power over the creation or regulations
or winding up of State banks. It can only make laws with respect to the banking transactions which
they carry on beyond the limits of their own State. The meaning given to the word "banking" by
Lord Watson is accordingly consistent with the meaning which the word must have where it occurs
in the expression "State banking extending beyond the limits of the State concerned." Laws with
respect to banking are not therefore laws which deal with the incorporation, regulations and winding
up of banks, but are laws with respect to the conduct of the business carried on by banks. (at p259)

22. It was contended that a power to make such laws was wide enough to authorize laws selecting
the persons or bodies to engage in the conduct of such business. But the Commonwealth Parliament
has the same power over the conduct by State banks of inter-State business as it has over the
conduct by other banks of their business whether intra-State or inter-State. If therefore the power is
wide enough to authorize the selection of banks other than State banks which alone may be allowed
to carry on intra and inter-State business, it must also be wide enough to authorize the selection of
the State banks which alone may be allowed to carry on inter-State business. But the
Commonwealth Parliament cannot suppress State banks, and it would be most unreasonable to
construe the latter power as a power to authorize some State banks to conduct business beyond the
limits of their own States to the exclusion of others and to prohibit all State banks from having
branches or even agencies anywhere beyond the limits of their own States, either within or without
Australia, or even from having dealings with one another. The use of the word "extending" assumes
and implies that State banks can lawfully extend and continue to extend their businesses beyond the
limits of their own States. The power must be a power to regulate the conduct of the inter-State
business of such banks. This power over this portion of State banking is of the same quality as the
power over the conduct of all banking business by other banks. The latter power is not therefore a
power to prohibit all or some corporations other than State banks engaging in the business of
banking, but a wide power to regulate the conduct of banking business. In Attorney-General for
Ontario v. Attorney-General for the Dominion (1896) AC 348, at p 363 Lord Watson said in
reference to the power in s. 91 of the Canadian Constitution to regulate trade and commerce that: "A
power to regulate, naturally, if not necessarily, assumes, unless it is enlarged by the context, the
conservation of the thing which is to be made the subject of regulation." He cited a passage in the
judgment of Lord Davey in Municipal Corporation of the City of Toronto v. Virgo (1896) AC 88, at
p 93 : "Their Lordships think there is marked distinction to be drawn between the prohibition or
prevention of a trade and the regulation or governance of it, and indeed a power to regulate and
govern seems to imply the continued existence of that which is to be regulated or governed." (at
p258)

23. For these reasons we are of opinion that s. 46 (1) and sub-ss. (4) to (8) are not authorized by pl.
(xiii.), and are totally inconsistent with the Constitution and incapable of being read down in
accordance with s. 6, and are therefore wholly invalid. Sections 13 and 24 are attempted exercises of
the power conferred on the Commonwealth Parliament by pl. (xxxi.) to make laws for the
acquisition of property. But property can only be acquired under this power for any purpose in
respect of which the Commonwealth Parliament has power to make laws. Laws providing for the
compulsory acquisition of shares in one bank by another bank and for the compulsory taking over of
the business of one bank by another bank are not in any sense a purpose of a law with respect to the
conduct of banking business. Sections 13 and 24 are therefore also wholly invalid. Sections 14 and
17 to 21 inclusive are, for reasons more particularly stated hereafter, laws which attempt to alter the
regulations of bodies incorporated under State legislation and are not laws with respect to the
conduct of banking business by such bodies but are company laws. Placitum (xiii.) authorizes the
Commonwealth Parliament to make laws with respect to the incorporation of banks. This power
would probably authorize s. 6 of the Banking Act 1945 which provides that only corporations shall
carry on banking business in Australia and would also probably authorize a law for the
incorporation of a particular bank. But the word used is "banks" and not the words "bank or banks"
and the phrase "a law with respect to the incorporation of banks" in its ordinary signification would
appear to point rather to a power to make a general law governing the incorporation, regulations and
winding up of banks. The banking power in the Australian Constitution is not, like the banking
power in the Canadian Constitution, an exclusive power. It is a concurrent power. Unless the
Commonwealth Parliament legislates with respect to the incorporation of banks, banks, like other
bodies, can be incorporated under State laws. If the Commonwealth wishes to legislate with respect
to the incorporation of banks and to occupy this legislative field, its legislation will prevail over
State legislation by virtue of s. 109 of the Constitution. Persons desirous of engaging in the business
of banking in Australia would then have to be incorporated under Federal law. But such a power
would not authorize laws altering the regulations of bodies incorporated under State laws. Sections
17 to 21 inclusive are therefore wholly invalid. Section 46 (2) may be regarded from two aspects.
Regarded as a law incidental to the taking over of the business of a plaintiff bank by the
Commonwealth Bank and intended to preserve that business in the meantime it might be valid. But
when the law for the taking over of the business fails, s. 46 (2) must fail also. Regarded as an
independent law s. 46 (2) must fail because a power to make laws with respect to the conduct of the
business of banking would not authorize a law compelling a person or corporation already engaged
in the business of banking to continue to carry on that business indefinitely any more than it would
authorize a law compelling a person or corporation to commence to carry on that business. Laws
with respect to the conduct of the business of banking are laws which operate on persons and
corporations while engaged in that business. (at p260)

24. We shall now discuss the validity of the Act on the basis that, contrary to our opinion, the
Commonwealth Parliament can under its power to make laws with respect to banking prohibit any
person or corporation from carrying on the business of banking, and therefore select one or more
banks and grant to it or them a monopoly of this business in Australia other than the business
carried on by State banks. On this construction of the power the Commonwealth Parliament must
also have power to prohibit State banks doing any business beyond the limits of their own States,
and therefore power to authorize some State banks to do business and to deny to others the right to
carry on business beyond such limits either anywhere or as prescribed. On this construction, subject
to the questions that arise with respect to s. 92 of the Constitution and the contentions of the States,
s. 46 (1) and (4) to (8) would be valid. But because a law may be made giving a monopoly to the
Commonwealth Bank, it does not follow that laws may also be made giving the Commonwealth
Bank power compulsorily to acquire shares in other banks whilst they are still permitted to carry on
banking business, or compulsorily to acquire their businesses, or authorizing the Governor of the
Commonwealth Bank to appoint his nominees as directors of such banks to direct, manage and
control their business and otherwise to alter their regulations. (at p260)

25. Questions immediately arise with respect to the validity of (1) ss. 13 and 14; (2) Division 3 of
Part IV.; (3) s. 24 of the Act. We shall proceed to deal with these questions. (at p260)

26. Questions (1) and (2). Section 13 (1), (2) and (3) authorize the Treasurer to give a notice which
will have the effect of vesting the Australian shares in an Australian private bank in the
Commonwealth Bank upon a date specified in the notice. This is a law with respect to the
acquisition of property. Such a law can only be valid provided that (a) the acquisition is on just
terms and (b) it is for a purpose in respect of which the Commonwealth Parliament has power to
make laws. The regulations of all the Australian private banks contain provisions authorizing the
directors in the exercise of their discretion to refuse to register any transfer of shares. The
regulations of two of these banks prohibit a corporation becoming a member. The nature of the
property in a share was described by Lord Russell of Killowen in Inland Revenue Commissioners v.
Crossman (1937) AC 26, at p 66 : - "A share in a limited company is a property the nature of which
has been accurately expounded by Farwell J. in Borland's Trustee v. Steel (1901) 1 Ch 279 . It is the
interest of a person in the Company, that interest being composed of rights and obligations which
are defined by the Companies Act and by the memorandum and articles of association of the
company. A sale of a share is a sale of the interest so defined, and the subject matter of the sale is
effectively vested in the purchaser by the entry of his name in the register of members. It may be
that owing to provisions in the articles of association the subject matter of the sale cannot be
effectively vested in the purchaser because the directors refuse to and cannot be compelled to
register the purchaser as shareholder. The purchaser could then secure the benefit of the sale by the
registered shareholder becoming a trustee for him of the rights with an indemnity in respect of the
obligations. In the case of the sale of such a share the risk of a refusal to register might well be
reflected in a smaller price being obtainable than would have been obtained had there been no such
risk. The share was property with that risk as one of its incidents." Unless a person who acquires a
share in a company becomes registered as the holder of that share he does not become a member of
the company or as it is sometimes said does not become the legal owner of the share in the sense
that he is entitled directly to exercise the rights conferred and is subject directly to the obligations
imposed upon the members of a company by the regulations. Until he is registered he is only the
equitable owner of the shares in the sense that the vendor who is registered is under certain fiduciary
duties towards him e.g. to exercise his vote and to dispose of any dividends as the purchaser shall
direct. The word "vest" when used with reference to the acquisition of property in shares would not,
if it stood alone, be sufficient to make the person who acquired the shares more than the equitable
owner with a right to apply to be registered as a member, if he wa eligible for membership under the
regulations, and thereby become the legal owner of the shares. A law under pl. (xxxi.) can only
authorize the Commonwealth Bank to acquire the property in the shares which the member of the
company has power to dispose of under its regulations, that is to say, the equitable title to the shares
and the same right that a purchaser of the shares who duly presented a transfer for registration
would have to become a member of the company. But it is obvious that the risk would be great that
the directors of the Australian private banks would refuse to register the Commonwealth Bank as a
member, even where the regulations authorized corporations to become members. Section 14, which
applies not only to shares compulsorily acquired under s. 13 but also to shares voluntarily purchased
under s. 12, therefore reinforces these sections and overrides the regulations of the company by
providing that the Commonwealth Bank shall become a member of the company, although the
directors refuse to consent and although the regulations provide that a corporation shall not become
a member of the company. Section 14 also authorizes the Commonwealth Bank to transfer any such
shares to any person and provides that the regulations of the company shall also be overridden in a
similar manner in favour of such person. We do not think that the section is authorized by pl.
(xxxix.). In Attorney-General for the Commonwealth v. Colonial Sugar Refining Co. Ltd. (1914)
AC 237, at p 256 Viscount Haldane L.C., in delivering judgment of the Privy Council, said that the
words of this placitum "do not seem . . . to do more than cover matters which are incidents in the
exercise of some actually existing power, conferred by statute or by the common law." In The
Commonwealth v. New South Wales (1923) 33 CLR 1 it was held that it was not incidental to the
compulsory acquisition of land under the Lands Acquisition Act 1906 to require the Registrar-
General of New South Wales to register a copy of the Governor-General's notification as if it were a
duly executed instrument of transfer under the Real Property Act (N.S.W.). It was pointed out that
the Commonwealth law itself gave a complete statutory title to the land independently of State law
and the Commonwealth could rely on that title if it wished; but that if the Commonwealth wished to
be registered as the proprietor of the land under the Real Property Act, it must comply with the
conditions imposed by State law. That case does not appear to have much bearing on the present
case because the Court was there dealing with the acquisition of tangible property, whereas a share
is intangible property consisting of legal rights and obligations, and it can not be incidental to the
acquisition of such property to alter its very nature by providing that it should have proprietary
rights extraneous to those comprised in the chose in action of the date of acquisition. So far as the
case has any bearing, it supports the view that the Commonwealth could not become a member of
an Australian bank otherwise than in accordance with the regulations of that bank. (at p263)

27. To be valid therefore s. 14 must be a law with respect to banking. It was urged that the
Commonwealth Bank by virtue of its right to vote at general meetings and in particular to
participate in the election of directors would exercise some control over the management of the
business of the private bank of which it was a member. But such control would be remote. The real
control of the business of a company resides in the directors (Gramophone & Typewriter Ltd. v.
Stanley (1908) 2 KB 89 ; Quin & Axtens Ltd. v. Salmon (1909) AC 442 ; Scott v. Scott (1943) 1
All ER 582 ). Section 14 is therefore supplemented by Division 3 of Part IV. which substitutes the
nominees of the Governor of the Commonwealth Bank as directors of the company in lieu of the
directors elected by the shareholders and confers on the new directors wide powers not given to the
directors by the regulations of the company. In an attempt to make ss. 13 and 14 and Division 3
laws with respect to banking within the meaning of pl. (xiii.) s. 9 provides that: "The powers
specified in Divisions 2 and 3 of this Part are conferred for the purpose of facilitating the control by
the Commonwealth Bank of the banking business in Australia of private banks and for the purpose
of furthering the expansion of the banking business of the Commonwealth Bank." But an acquisition
of shares in one company by another company is simply an investment by the latter company of part
of its funds in the capital of the former company. It does not in any real sense facilitate control by
the latter company of the business of the former company or expand the business of the new
shareholder. Division 3 would no doubt facilitate control by the Commonwealth Bank of the
business in Australia of private banks. It would give the Commonwealth Bank complete control of
the business of any Australian bank to which the Division may be applied. It is a control in
perpetuity because the nominee directors remain in office although the Commonwealth Bank may
have disposed of all its shares in the Australian bank. Shareholders and other persons having
proprietary interests in the Australian shares which are acquired by the Commonwealth Bank at the
same time as it obtains such control and whose interests are then converted into claims for
compensation would not be affected by such change of control, but the holders of ex Australian
shares might be gravely prejudiced by the change and particularly by the power conferred by the
division on the new directors nominated by the Commonwealth Bank to dispose of the business in
Australia to that bank. The rights of such shareholders would only be converted into claims for
compensation if and when their shares became Australian shares. Since this might never happen and
such conversion might never take place, the value of their shares might depend upon the
consideration for which the business will be disposed of to the Commonwealth Bank. (at p264)

28. In R. v. Registrar of Titles (Vict.); Ex parte the Commonwealth [1915] HCA 59; (1915) 20 CLR
379, at p 392 and in Commonwealth v. New South Wales (1923) 33 CLR, at p 55 Isaacs J. said that
an acquisition under pl. (xxxi.) includes both voluntary and compulsory acquisitions. An agreement
freely entered into between parties truly at arms length for a voluntary acquisition would contain
intrinsic evidence that the acquisition was on just terms, but it would be difficult to describe an
agreement made by the directors of an Australian private bank nominated by the Commonwealth
Bank for the sale of the business to the latter bank as a voluntary sale. A sale under s. 19 (1) (b)
might be made to the Commonwealth Bank by the latter bank acting under s. 38 of the
Commonwealth Bank Act 1945 or under s. 22 of the Banking Act 1947. In each case the sale would
have to be approved of by the Treasurer on behalf of both the vendor and the purchaser companies,
and this supervision of both parties would not be conducive to complete freedom of contract. We are
prepared to accept the submission of the defendants that there is nothing in ss. 10 and 19 (3) to
relieve the nominee directors from the ordinary fiduciary obligation of directors with respect to
property under their control. But it is an established principle of equity that a trustee should never be
placed in a position where his duty and his interest conflict, and such directors in their dealings with
the bank by which they were nominated would plainly be placed in this position. A sale by them of
the business of an Australian private bank to the Commonwealth Bank would not necessarily be a
sale on just terms. We are of opinion that Division 3 of Part IV., coupled with ss. 13, 14 and 46, is
intended to provide a method by which the Commonwealth Bank may control for a period and then
acquire the business of each Australian private bank as a going concern at an appropriate time.
Section 19 (1) (b) is therefore in its true nature and character legislation for the acquisition of
property by the Commonwealth Bank and must provide just terms for the acquisition, otherwise it is
invalid. For the reasons already given, we are of opinion that just terms are not provided, so that s.
19 (1) (b) does not comply with pl. (xxxi.) and is invalid. If it is struck out, Division 3 remains as a
law for the management and control of the Australian private banks being placed in the hands of
directors nominated by the Commonwealth Bank. Such legislation might be valid as an intermediate
step towards the final absorption of the businesses of the Australian private banks by the
monopolistic bank. But the power to legislate with respect to banking in its widest meaning could
not justify a law placing the nominees of one bank, whether an agent of the Commonwealth or not,
permanently in the management and control of the business of another bank. In our opinion
therefore ss. 17 to 20 of Division 3 are invalid. (at p265)

29. We are also of opinion that s. 14 and Division 3 of Part IV. are beyond the constitutional powers
of the Commonwealth Parliament on the ground that they are in their true nature and character
legislation altering the regulations of bodies incorporated under State laws, but the power to
legislate on this subject resides in the States. It might be a law with respect to banking to provide
that bodies incorporated under State laws desirous of engaging in the business of banking should
include in their regulations certain provisions which were reasonably required to safeguard the
interests of their depositors and other creditors as a condition of such bodies being authorized to
carry on the business of banking. It would be a law with respect to the incorporation of banks to
make a general law regulating the incorporation of all persons desirous of carrying on the business
of banking and requiring that they should be incorporated under this law. But a law which seeks
directly to alter the regulations of a body incorporated under State law simply because it is carrying
on the business of banking is not a law with respect to banking, but a law with respect to the
capacities and internal organization of corporations, that is to say a law on a matter exclusively
within the sphere of State legislative power. If such laws are authorized by the Constitution it must
follow that if any body incorporated under State laws is engaged in any business in respect of which
the Commonwealth Parliament can legislate e.g. in trade and commerce among the States, the
Commonwealth Parliament can make a law leaving that corporate body with the shell of its name
and incorporation under State law but substituting a completely new set of regulations for its
regulations made in conformity with that law. (at p265)
30. There is also, we think, a further objection to ss. 13 and 14, namely, that to give to the
Commonwealth Bank a power compulsorily to acquire shares in another bank is not a purpose in
respect of which the Commonwealth Parliament has power to make laws within the meaning of pl.
(xxxi.). The Commonwealth Bank was first established by the Commonwealth Bank Act 1911
which provided that the bank should be a body corporate with perpetual succession and a common
seal and with power to hold land and to sue and to be sued in its corporate name. This Act, after
having been amended on several occasions, was repealed and replaced by the Commonwealth Bank
Act 1945 which preserves and continues the corporate identity and existence of the Bank. But there
have never been any corporators. The word "incorporation" in pl. (xiii.) must be given its ordinary
meaning at the date of the Constitution. In English law it has always been of the essence of the legal
conception of a corporation that there should be a person in the case of a corporation sole or persons
in the case of a corporation aggregate to be incorporated. It would seem therefore that the
incorporation of the Commonwealth Bank must rest on pl. (xxxix.) and that the validity of the
incorporation, which has not been challenged, must depend on similar principles as those enunciated
in M'Culloch v. Maryland (1819) 17 US 316 (4 Law Ed 579) . It may be that as Griffith C.J. said in
Heiner v. Scott [1914] HCA 82; (1914) 19 CLR 381, at p 393 : "Probably the true effect of the Act
(that is, the Commonwealth Bank Act 1911) is a declaration that the Commonwealth may itself
carry on the business of banking under the name of the 'Commonwealth Bank of Australia.'" His
Honour then assumed that the power to incorporate banks in pl. (xiii.) was sufficient to establish the
legal existence of the corporation. But it is unnecessary to pursue the point because on either view
the purpose in respect of which the Commonwealth Parliament has power to make a law is the
incorporation of the bank. This law might confer upon the bank such ancillary powers of investment
and of engaging in other businesses as it is usual to confer on banks to enable them to carry out their
banking functions and compete with other banks. But these ancillary powers are not in our opinion
purposes in respect of which the Parliament has power to make laws within the meaning of pl.
(xxxi.). This placitum enables the Commonwealth Parliament to make a law for the acquisition of
property on just terms whenever the acquisition of property forms part of the effective exercise of
any of its legislative purposes. The only legislative purpose in the present cases is the incorporation
of the Commonwealth Bank. The Bank must have banking chambers and the necessary furniture,
stationery and other equipment to carry on business and a law might be made for the compulsory
acquisition of the real and personal property necessary for this purpose. But a power to invest the
funds of the Bank in shares in other companies including other banks would not make the
investment of these funds a legislative purpose of the Commonwealth. If it were a purpose, the
Commonwealth Parliament could, by conferring investment powers upon any body which it could
lawfully incorporate by a law made under s. 51 of the Constitution, confer power of the corporation
compulsorily to acquire shares in any company in which it was authorized to invest. By conferring a
power to invest in land Parliament could authorize the corporation compulsorily to acquire vast
areas of land not required to carry on its business. During the argument we were referred to the
practice of banks in other countries in carrying on the business of executors and trustees as ancillary
to the business of banking. If such a practice spread to Australia, it would be lawful for the
Commonwealth Parliament to empower the Commonwealth Bank to engage in such a business. If
such a power were a purpose of the Commonwealth it would be within the authority of the
Commonwealth Parliament to make a law for the compulsory acquisition by the Commonwealth
Bank of the businesses of all the trustee companies and thereby make the Commonwealth Bank the
sole corporation carrying on the business of executor and trustee in Australia. These illustrations are
sufficient to show that such powers are in no sense purposes within the meaning of pl. (xxxi.). The
purpose of a law made with respect to the incorporation of a bank is to incorporate the bank and to
equip it with the necessary property to carry on the business of banking. The object of including
powers in its charter to invest its funds and carry on certain businesses is to define some of the
ancillary activities in which the corporation may engage in the course of carrying on this business.
But they are not legislative purposes of the Commonwealth. For these reasons we are of opinion that
ss. 13 and 14 and Division 3 of Part IV. are not authorized by pl. (xiii.), (xxxi.) or (xxxix.) and are
wholly invalid. (at p267)

31. Question (3). Section 24 provides for the compulsory taking over of the business of any or all of
the private banks by the Commonwealth Bank. The taking over consists in the acquisition by the
Commonwealth Bank of all the assets of the private bank and the discharge of the private bank from
all its liabilities and the assumption of these liabilities by the Commonwealth Bank. The assets only
can be property within the meaning of pl. (xxxi.). The liabilities are not property within its meaning.
It was contended that a law for the assumption of the liabilities simultaneously with the acquisition
of the assets of a business would be justified under pl. (xxxi.) on the ground that just terms would
require that the owner of a business who was deprived of the assets should at the same time be
relieved from the liabilities associated with the assets. This contention, if carried to its logical
conclusion, would mean that where the amount of the liabilities exceeded the value of the assets, the
owner would not only lose his business but would become indebted to the acquirer for the difference
between the amount of the liabilities and the value of the assets. If the contention is sound, we can
see no logical reason why it would not also be just, upon the acquisition of premises in which the
business of a boarding house is being carried on or even the acquisition of a dwelling house, for the
law to discharge the owner from the tradesmen's debts and reduce the amount of compensation
accordingly. It is not unusual where a business is purchased for the contract to provide that the
purchaser shall discharge the liabilities of the business. But such a term rests on the agreement of
the parties. The purchaser in effect agrees at the request of the vendor to apply part of the purchase
money in paying some of the latter's debts. But just terms require that the legislation shall provide
for the payment to the owner of the business of the full equivalent in money for the value of the
assets of which he is deprived. He and not the acquirer should be given the discretion to decide
whether or not the latter should undertake the discharge of the liabilities of the business on his
behalf. The draughtsman of the Act appears to have recognized the difficulty of bringing a law for
the assumption of liabilities as an incident of the taking over of a business within the scope of pl.
(xxxi.), because s. 25 provides that the Commonwealth Bank shall pay fair and reasonable
compensation in respect of the acquisition of property under s. 24, and s. 42 refers to the
compensation payable in respect of the acquisition under s. 24 of the Act of the assets of a private
bank. These sections do not therefore expressly provide for the deduction of the amount of the
liabilities from which the private bank is discharged from the value of the assets, and the defendants
were content to submit that it was for the Court to decide to what extent the fact that the private
bank had been discharged from its liabilities should be taken into account in assessing the
compensation payable in respect of the acquisition of the assets. Unless this discharge is taken into
account the amount of compensation payable in respect of the acquisition of shares would be
determined on a different basis to the compensation for the taking over of a business because in the
former case the liabilities would be taken into account in assessing the compensation and in the
latter they would not. We have no doubt that it was the intention of Parliament that the amount of
the liabilities should be deducted from the value of the assets and that the balance should be the sum
payable for compensation. The presence of the words "in respect of" in ss. 25 and 42, the words
"fair and reasonable" in s. 25 and the reference in s. 42 to the taking over of the business, indicating
that the terms of the taking over are to be taken into consideration, suffice in our opinion to enable
the Court to give effect to this intention. But there is then the paradox that if the liabilities are to be
taken into account, the Act does not provide just terms because it does not provide for the payment
to the private bank of the full equivalent in money for the value of the assets taken. The private
bank is placed in the same position as it would be if the liabilities were secured on the assets and it
was merely the owner of the equity of redemption. (at p269)

32. The explanation of the paradox is that pl. (xxxi.) does not authorize the taking over of a
business, at any rate in the manner provided in the Act. The reason why the Act provides for the
discharge of the private bank from its liabilities and the assumption of these liabilities by the
Commonwealth Bank is that the liabilities consist substantially of the indebtedness of the private
bank to its customers whose accounts are in credit. The assets of the private bank also consist
substantially of the indebtedness to it of its customers whose accounts are overdrawn. One of the
several objects of the Act is to expand the business of the Commonwealth Bank. This object would
be advanced as the customers of each private bank became customers of the Commonwealth Bank.
The Act therefore seeks compulsorily to transfer the accounts of all the customers of the private
banks to the Commonwealth Bank. The Commonwealth Bank would only need the other assets of a
private bank, consisting substantially of the bank buildings and their contents and the services of its
staff, if the Commonwealth Bank is able to obtain this new business. The transfer of all these
accounts is effected by s. 56 of the Act which provides for the novation of all the contracts with the
private banks into contracts with the Commonwealth Bank whether moneys are payable under these
contracts by or to the private bank. The accounts of the customers with the private banks become
accounts with the Commonwealth Bank whether the accounts are in credit or overdrawn. The
section substitutes the name of the Commonwealth Bank for that of the private bank as a party to
every contract existing between the private bank and a third person, so that the contract becomes a
contract between the Commonwealth Bank and that person in lieu of the contract between the
private bank and that person. (at p269)

33. In every case the Act operates to discharge one contract and to substitute a new one. The
customers of the private bank are given no option of doing without a bank account or choosing a
new bank from those then carrying on business. They are recruited as customers of the
Commonwealth Bank. The customers include States which have accounts with private banks. It is
true that s. 58 provides that nothing in the Act shall require a State or person being a customer of a
private bank the business of which in Australia has been taken over by the Commonwealth Bank
under this Act, to continue as a customer of the Commonwealth Bank. But if a person can be
compelled to become a customer of a bank he can be compelled to remain a customer. The only
nexus with the business of banking is that one of the parties to the original contract is a private
bank. Because of this nexus selected members of the public are compelled to make a contract with
another bank. In Attorney-General for Canada v. Attorney-General for Quebec (1947) AC, at p 44
Lord Porter said: - "The relation between banker and customer who pays money into the bank is
stated in words which have ever since been accepted in Foley v. Hill [1848] EngR 837; (1848) 2
HLC 28 (9 ER 1002) , as 'the ordinary relation of debtor and creditor, with a super-added obligation
arising out of the custom of bankers to honour the customer's drafts.' No question of possession of
or property in the deposit arises. The obligation is mutuum not commodatum. Once the deposit is
made there remains only a debt due from the banker to the customer." If this nexus be sufficient, the
mere existence of a bank must afford a justification for a law compelling persons to lend their
money to a bank or borrow from a bank and otherwise to enter into such contracts with that bank as
the Commonwealth Parliament thinks fit. But the banking power on its widest construction is a
power to select the persons or corporations who are to engage in the business of banking and to
regulate the conduct of that business between such selected bankers and those members who choose
to become their customers. A person does not reach the threshold of the power until he starts to
bring about the relationship of banker and customer with a particular bank. Until then, he is beyond
its scope. A law which seeks to force a person into this relationship is a law with respect to this
person's liberty to enter into such contracts as he thinks fit. Such a law is beyond the scope of any of
the enumerated specific subjects of legislative power conferred upon the Commonwealth Parliament
by the Constitution and is therefore a law which continues within the exclusive powers of the States.
For these reasons we are of opinion that the provisions of ss. 24 and 56 with respect to the discharge
of a private bank from its liabilities and the assumption of those liabilities by the Commonwealth
Bank are totally inconsistent with the Constitution and incapable of being read down under s. 6 and
wholly invalid. We are also of opinion that the acquisition of the assets and the taking over of the
staffs of the private banks are so interlocked with the assumption of these liabilities by the
Commonwealth Bank that the whole of the provisions for the taking over of the business of a
private bank in the manner provided by the Act form part of one inseverable scheme, and that the
whole of ss. 24 and 56 are invalid. For similar reasons s. 22, sub-ss. (8) (b) and (d) are invalid. (at
p271)

34. Sections. 13 and 24 are laws for the compulsory acquisition of property. They must therefore
comply with the conditions of pl. (xxxi.). One of these conditions is that these laws shall provide
just terms for the acquisition of the shares and assets. Shares in an Australian private bank are
divided into two classes by s. 13. (1) Australian shares which presumably comprise all the shares on
the Australian registers of these banks. (2) All other shares which presumably comprise all the
shares on the registers of these banks outside Australia. Any of these shares which become
Australian shares after the date on which the Australian shares are vested in the Commonwealth
Bank become vested in that Bank upon the date upon which they become Australian shares. It was
contended on a number of grounds that the Act does not contain just terms for the acquisition of the
shares under s. 13 or the taking over of the businesses under s. 24, but we need only refer to two
which affect both methods of acquisition - (1) that the Act provides that the compensation shall be
assessed by the Federal Court of Claims and in no other manner, and that this infringes s. 75 (iii.) of
the Constitution which provides that in all matters in which the Commonwealth or a person suing or
being sued on behalf of the Commonwealth is a party the High Court shall have original
jurisdiction; (2) that the Act does not contain just terms because it does not authorize the Federal
Court of Claims to award interest on the compensation moneys from the date of the acquisition of
the shares or the taking over of the businesses as the case may be. (at p271)

35. Ground (1). The Commonwealth Bank was first incorporated by the Commonwealth Bank Act
1911. It was financed in its early stages by loans made out of consolidated revenue. It has never had
any corporators. The original incorporation of the bank has been continued by the Commonwealth
Bank Act 1945 which is the Act at present in force. It has important functions, duties and powers
under this Act and the Banking Act 1945. Both Acts were assented to on the same date. Section 11
of the Commonwealth Bank Act provides that the Commonwealth Bank shall act as a central bank.
By s. 13 (a) the Bank is empowered to regulate the note issue in accordance with Part VII. of the
Act. Section 12 provides that the Bank shall, in so far as the Commonwealth requires it to do so, act
as banker and financial agent of the Commonwealth. Part IV. provides that the Bank shall carry on a
general banking business. The Bank has a Rural Credits Department (Part VIII.), Mortgage Bank
Department (Part IX.) and Industrial Finance Department (Part X.). One half of the net profits
arising from the carrying on of the business of central banking and general banking are paid each
year into the National Debt Sinking Fund. Otherwise the net profits are retained by the Bank. The
Bank has important functions under the Banking Act 1945. It controls the payment of moneys into
and out of the special accounts by the private banks (ss. 20 and 21), the mobilization of foreign
currency (s. 23), advances and investments by banks (ss. 27 and 28), and with the approval of the
Treasurer may make regulations for the control of interest rates payable to or by banks or to or by
other persons in the course of any banking business carried on by them and discount rates charged
by banks or by any other persons in the course of any banking business carried on by them (s. 39).
Section 8 of the Commonwealth Bank Act 1945 provides that 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 25 provides that the
Bank shall be managed by the Governor. But the Governor is subject to the provisions of s. 9. This
section provides that (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 ultimate control of the monetary and banking
policy of the Bank is therefore vested in the Treasurer. The Governor of the Bank has wide powers
of management. But all these powers are vested in him for the purpose of carrying into effect the
monetary and banking policy of the Government. The Governor of the Bank is in an analogous
position to the Treasurer as that of a general manager of a company to the board of directors. The
control of the note issue is plainly a governmental function. Other functions such as the control of
the special accounts, advances, investments, and discount rates could be the function of an
independent central bank but are plainly made by ss. 8 and 9 governmental functions. Section 7
provides that the Bank may sue and be sued in its corporate name. Section 10 provides that the
Commonwealth shall be responsibile for the payment of all moneys due by the Bank but nothing in
this section shall authorize any creditor or other person claiming against the Bank to sue the
Commonwealth in respect of his claim. Persons who have claims against the Bank may therefore,
and in view of s. 10 probably must, sue the Bank and not the Commonwealth as the principal, and
the Bank may sue persons against whom it has claims as the principal. But it is not unusual for a
statute to provide that a corporate body which is an agent of the executive shall be the party to sue
and be sued in respect of the functions it is performing on behalf of the Crown. If such a body is
sued the question arises whether it is an agent of the Crown and entitled to claim the prerogatives,
privileges and immunities of the Crown. There is a valuable collection of the authorities on this
point in the judgment of Jordan C.J. in Skinner v. Commissioner for Railways (1937) 37 SR (NSW)
261, at pp 269, 270; 54 WN 108, at p 109 . To these authorities may be added three later decisions
of the Court of Appeal in Minister of Supply v. British Thomson-Houston Co. Ltd. (1943) KB 478 ;
Minister of Health v. Bellotti (1944) KB 298 and Tyne Improvement Commissioners v. Armement
Anversois Societe Anonyme (1947) 2 All ER, 363 ; and three later decisions of this Court: Grain
Elevators Board (Vict.) v. Dunmunkle Corporation (1946) 73 CLR 70 ; Chaff and Hay Acquisition
Committee v. J.A. Hemphill & Sons Pty. Ltd. [1947] HCA 20; (1947) 74 CLR 375 and Rural Bank
of New South Wales v. Shire of Bland [1947] HCA 28; (1947) 74 CLR 408 . The three decisions of
the Court of Appeal show that an Act may make a person or corporation the principal for the
purpose of suing or being sued by members of the public although that person or corporation is an
agent of the Crown. The problem whether a corporation is an independent entity or an agent of the
Crown must be resolved by a consideration of the purpose and effect of the particular Act by which
the statutory body is established and of any other Acts which relate to its corporate functions, duties
and powers. A corporation may be an agent of the Crown for some purposes and an independent
entity for other purposes. In Heiner v. Scott (1914) 19 CLR, at p 400 Isaacs J., Gavan Duffy J. and
Rich J. said: "We do not think the Act" (that is the Commonwealth Bank Act 1911) "constitutes the
Bank universally the agent of the Commonwealth in the sense necessary to make all its acts the acts
of the Commonwealth itself - in other words Sovereign Acts." But the Court was there concerned
with the question whether the Queensland Stamp Act, which imposed a stamp duty on every inland
bill of exchange payable on demand (including a cheque on a banker), was an interference with the
efficiency of an instrumentality of the Commonwealth, and therefore impliedly forbidden by the
rule (since exploded) laid down by this Court in D'Emden v. Pedder [1904] HCA 1; (1904) 1 CLR
91 . To come within the rule the appellant had to establish that the carrying on of the ordinary
business of banking by the Commonwealth Bank was an exercise of the executive power of the
Commonwealth. The remarks of their Honours, and similar remarks by Griffith C.J. (1914) 19 CLR,
at p 393 were on this question. In the present case it is a different problem. The problem is simply
whether the Commonwealth Bank is an agent of the Commonwealth or an independent entity, and it
can be an agent of the Commonwealth whether or not it is performing governmental functions in the
strict sense. Taking into account the provisions of the Commonwealth Bank Act 1945 and the
Banking Act 1945 already mentioned, we are of opinion that the Commonwealth Bank is an agent
of the Commonwealth. The absence of any corporators is the first significant circumstance. This
points to an intention on behalf of the Commonwealth to transmute a part of itself into the outward
form of a corporation as a convenient means of carrying on a Commonwealth activity. The
Commonwealth therefore created the Bank to act as its banker and financial agent and carry on the
business of banking. In the course of time the Bank has become more and more identified with the
Commonwealth. Since 1945 it has been subject to government control and has been performing
several functions which are governmental functions. Section 183 of the Commonwealth Bank Act
1945 provides that the property, income and operations of the Bank and of the Savings Bank shall
not be liable, and shall be deemed never to have been liable, to income tax or land tax under any law
of the Commonwealth, or to taxation under any law of a State to which the Commonwealth is not
subject. This section could only be valid with respect to State law if the Bank is an agent of the
Commonwealth. Even if the Bank is not an agent of the Commonwealth for all purposes it is in our
opinion clearly the agent of the Commonwealth for the purpose of the Banking Act 1947. The Act
handcuffs the Bank to the Treasurer. It is not the Governor of the Commonwealth Bank but the
Treasurer who decides whether and when to acquire the shares or to take over the business of one or
more or all of the private banks incorporated in Australia or the business of one or more or all of the
private banks incorporated elsewhere, so that the Commonwealth Bank is completely subject to the
dictation of the Treasurer in these matters. Even where the Act confers some initiative on the
Commonwealth Bank or its nominees as in ss. 18, 19 (b) and (c), 22 (5), 40 (2) and 44 (1), this
initiative can only be exercised subject to the approval of the Treasurer. Such subjugation is quite
inconsistent with the Bank being an independent entity. (at p275)

36. The next question is whether a proceeding against the Commonwealth Bank for compensation
under the Act is a matter in which a person is being sued on behalf of the Commonwealth within the
meaning of s. 75 (iii.) of the Constitution. The choice is between holding that a person being sued
on behalf of the Commonwealth is limited to a person who is appointed as a nominal defendant to
represent the Commonwealth or that a person is being sued on behalf of the Commonwealth where
that person was acting as its agent in the transaction out of which the claim arose. It was usual in
Australia before federation for the States to have Acts providing for the appointment of a nominal
defendant to be sued on behalf of the Crown. But there was never any Act so far as we know
providing for the appointment of a person as a nominal plaintiff to sue on behalf of the Crown. Such
an appointment would have been quite unnecessary because the Crown has always had the right to
sue in its own courts. The words were given the wider construction by Starke J. in the unreported
case of War Service Homes Commissioner v. Kirkpatrick and we are of opinion that his Honour was
right. The decision is in line with that of Phillimore J. in Graham v. Public Works Commissioners
(1901) 2 KB 781 , and the three recent decisions of the Court of Appeal already cited. Proceedings
for compensation under the Act are therefore matters in which a person, that is the Commonwealth
Bank, is being sued on behalf of the Commonwealth, so that this Court has original jurisidiction
under the Constitution of which it cannot be deprived by the Act. The provisions in Divisions 1 and
2 of Part VI., that the compensation shall be determined by the Federal Court of Claims and not in
any other manner are therefore invalid to the extent to which they prevent claims for compensation
being brought in this Court. (at p276)

37. The next question is whether the provisions of Divisions 1 and 2 can be read down so as to
confer on the Federal Court of Claims a jurisdiction under the Act concurrent with the jurisdiction
of this Court under the Constitution but exclusive of the jurisdiction of any other court. It was
contended that the Act could be construed as giving a claimant for compensation who failed to make
an agreement with the Commonwealth Bank a right to elect either to issue a writ in this Court
claiming compensation or to proceed in accordance with the Act and have the compensation
determined by the Federal Court of Claims. But we find it impossible to reconcile a right to claim
compensation in this Court with Divisions 1 and 2. These Divisions can only operate on the basis
that the Federal Court of Claims has an exclusive jurisdiction. For instance, s. 44 provides that
unless the Commonwealth Bank is required by the private bank to refer its offer of compensation to
that Court within a specified time the offer shall be deemed to have been accepted by the private
bank. There are also the provisions of ss. 40 and 45 which make a determination of the amount of
the compensation by that Court a condition precedent to the liability of the Commonwealth Bank to
pay compensation. To reconcile the Act with s. 75 (iii.) of the Constitution, Divisions 1 and 2 must
therefore be struck out of the Act altogether. Sections 15 and 25 would then be the only sections left
relating to compensation. If these sections could be construed as intended to create a right of action
independent of the particular manner of enforcing it prescribed by Divisions 1 and 2, just terms
would be provided because a shareholder or private bank could bring an action claiming
compensation in any competent court. But the view that the sections are intended to create
independent rights is full of difficulty. In the case of taking over a business there would only be one
large amount to be assessed. Even then an action based on s. 25 could be brought in the Supreme
Court of a State under the Judiciary Act 1903-1947, s. 39 (2) or in the Federal Court of Claims or in
this Court. In the case of claims arising out of the acquisition of shares, some of the amounts
claimed might be small and actions based on s. 45 might also be brought under s. 39 (2) of the
Judiciary Act in the inferior courts of the States. It could hardly have been intended that the Act
should operate so as to give rise to such a multiplicity of actions in so many courts. The failure of
Divisions 1 and 2 cannot impart to ss. 15 and 25 any greater effect than they were intended to have
if these Divisions had been valid. When the whole of the provisions of the Act relating to
compensation are considered, we do not think that the sections were intended to give a right of
action other than a right to have the compensation determined in accordance with Divisions 1 and 2
and not in any other manner. In other words the sections are introductory only to the operative
provisions which follow. For these reasons we are of opinion that the provisions of the Act for the
acquisition of the shares and the taking over of the businesses fail because the Act does not contain
any valid provisions for the payment of compensation. (at p277)

38. Even if this opinion is erroneous, and there is no constitutional objection to the Act providing
that compensation shall be determined by the Federal Court of Claims and in no other manner, there
is the second ground that just terms are not provided because that Court has no power to award
interest. It is empowered to determine the amount of compensation payable in respect of the
acquisition of the shares (s. 40 (1)) and of the assets (s. 42). In these sections compensation means
no doubt the same thing as fair and reasonable compensation in ss. 15 and 25. We have already
expressed the opinion that a Federal law for the acquisition of income-producing property must, in
order to provide just terms, empower the tribunal which is to assess the compensation to award
interest from the date the acquirer enters into possession, so that, if the law provides for the
assessment of "compensation," this word, read in the light of constitutional requirement, should be
construed as including such a power in its content (The Commonwealth v. Huon Transport Pty. Ltd.
[1945] HCA 5; (1945) 70 CLR 293 ; Marine Board of Launceston v. Minister of State for the Navy
[1945] HCA 42; (1945) 70 CLR 518 ). The same opinion has recently been expressed by the
Supreme Court of the United States in United States v. Thayer-West Point Hotel Co. [1947] USSC
11[1947] USSC 11; ; (1947) 329 US 585 (91 Law Ed 521) . But this opinion has not been adopted
by the majority of this Court who appear to think that we are bound by Swift & Co. v. Board of
Trade (1925) AC 520 and the very recent case of Newport Borough Council v. Monmouthshire
County Council (1947) AC 520 , to hold that, whatever may be the view in the United States, the
word "compensation" in English law does not connote more than the payment of the equivalent in
money of the capital value of the property taken. Accordingly, before interest can be awarded, the
Act must so authorize the tribunal charged with the duty of determining the compensation expressly
or by implication. The Act does not give an express right to the Federal Court of Claims to award
interest, and we do not think that the insertion of the words "fair and reasonable" before the word
"compensation" in ss. 15 and 25 would be thought sufficient by a majority of this Court to create a
right by implication. There is however an exception to the rule in Swift & Co. v. Board of Trade
(1925) AC 520 , which does appear to have the approval of a majority of this Court. The exception
is where there is a compulsory purchase of property of such a nature that, if it had been purchased
under a contract, the Court of Equity could have decreed specific performance. By analogy to the
general equitable rule under which a purchaser who takes possession is charged with interest on his
purchase money from that date until it is paid, the Court in assessing compensation can, in the
absence of a statutory prohibition, order the payment of interest on the amount awarded from the
date that the compulsory purchaser entered into possession. The point was taken that this power to
award interest is dependent upon the tribunal which is assessing the compensation being a court
invested with equitable jurisdiction. But in Inglewood Pulp & Paper Co. v. New Brunswick Electric
Power Commission (1928) AC 492 , where interest was awarded on this principle, the tribunal was
a judge of the Supreme Court of New Brunswick sitting as an arbitrator. He refused to award
interest. The relevant statute allowed an appeal upon any question of law or fact to the Appeal
Division of the Supreme Court. There was an appeal and the Appeal Division allowed the interest
refused by the arbitrator. The Privy Council upheld the Court of Appeal. In Monmouth County
Council v. Newport Corporation (1946) 175 LT 293 the tribunal was also an arbitrator and not a
court invested with equitable jurisdiction. But the case was not disposed of on that ground. In the
Court of Appeal (1946) 175 LT 293, at p 303 Lord Greene said: "On behalf of the county council it
was argued that interest could be awarded on the principle on which it is awarded by courts of
equity against purchasers who have gone into possession. This argument, in my opinion, cannot be
supported. There is no analogy between a statutory transfer of an area from one authority to another
(a thing which cannot be carried out contractually) and a contract of sale and purchase or a
compulsory purchase under, for example, the Land Clauses Act." (at p279)

39. It would seem therefore that the power to award interest does not depend on the tribunal being a
court invested with equitable jurisdiction but on the kind of property acquired. But it is by no means
certain that there is the requisite analogy between the relevant provisions of the Act and the terms of
a contract for the voluntary purchase of shares or of a business which would be capable of being
specifically enforced. Provisions that a purchaser should be registered as a member of a company
despite the articles of association, and that the vendor of a business should be discharged from his
liabilities could have no place in a voluntary contract. The assessment of compensation in respect of
either form of acquisition is likely to be prolonged. Shareholders deprived of their shares and banks
deprived of their businesses will have lost the right to retain possession of income-producing assets
in the meantime. Just terms will not therefore be provided unless the Federal Court of Claims can
award interest. In Johnston Fear & Kingham & The Offset Printing Co. Pty. Ltd. v. The
Commonwealth [1943] HCA 18; (1943) 67 CLR 314, at p 334 Williams J. said and we now repeat
that "terms to be just should be clear and not obscure." The draughtsman of the Act must be
presumed to have been aware of the conflict of opinion in this Court with respect to the power of a
tribunal to award interest, so that, to clarify the position and to ensure just terms, the Act should
have expressly empowered that Court to award interest. (at p279)

40. It was contended for the States that the Act is invalid because it infringes clause 5 (9) of the
Financial Agreement. Section 105A (5) of the Constitution provides that this agreement and any
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. The history of the agreement
appears in New South Wales v. The Commonwealth (No. 1) [1932] HCA 7; (1932) 46 CLR 155 . In
that case (1932) 46 CLR, at p 186 Starke J. said that the agreement "is part of the organic law of the
Commonwealth. It can only be varied or rescinded by the parties thereto. Nothing in the
Constitution or the Constitutions of the States can affect it or prevent its operation. It creates rights
and duties as between the Commonwealth and the States upon and in respect of which the judicial
power of the Commonwealth can be exerted." The agreement sets up an Australian Loan Council
consisting of the representatives of the Commonwealth (the Prime Minister or a Minister nominated
by him in writing) and of the States (the Premier or a Minister nominated by him in writing) to
regulate inter alia the annual borrowings of the Commonwealth and the States. Clauses 4, 5 and 6
relate to the future borrowings of Commonwealth and States. Clause 4 (1) provides, so far as
material, that except in cases where the Loan Council has decided that money shall be borrowed by
a State, the Commonwealth shall, subject to the decisions of the Loan Council and subject also to
clauses 5 and 6 of this agreement, arrange for all borrowings for or on behalf of the Commonwealth
or any State. Clause 4 (4) provides, so far as material, that moneys shall not be borrowed by the
Commonwealth or any State otherwise than in accordance with this agreement. Clause 5 relates to
borrowing by the States and clause 6 to borrowing by the Commonwealth. Clause 5 (1) to (8) gives
the States the right, subject to any maximum limits decided upon by the Loan Council from time to
time for interest brokerage discount and other charges, to borrow moneys within the State from
authorities, bodies, funds or institutions (including savings banks) constituted or established under
Commonwealth or State law or practice and from the public by counter sales of securities and to use
any public moneys of the State which are available under the laws of the State. (at p280)

41. Clause 6 (1) to (6) gives the Commonwealth a similar right to borrow moneys within the
Commonwealth and to use any public moneys of the Commonwealth which are available under the
laws of the Commonwealth. Clause 5 (9) provides that, 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 sub-clause shall not apply to such moneys. Clause 6 (7)
contains similar provisions in favour of the Commonwealth. Clauses 5 and 6 therefore confer upon
the States and Commonwealth respectively limited powers of borrowing money on their own behalf
which do not require the approval of the Loan Council, although the Loan Council can fix
maximum limits for interest brokerage discount and other charges. These powers fall into the two
classes, namely borrowings authorized by clause 5 (1) to (8) and clause 6 (1) to (6) and those
authorized by clause 5 (9) and clause 6 (7). It was contended that clauses 5 (9) and 6 (7) were not
intended to create contractual rights and obligations, but were in the nature of saving clauses
inserted in the agreement to make it clear that it was intended to except from its operation the
practice of the States and of the Commonwealth of using for temporary purposes any public moneys
which were available and of borrowing money by way of overdraft or fixed, special or other
deposit. We accept the opinion already expressed by the Chief Justice and Williams J. in Melbourne
Corporation v. The Commonwealth (1947) 74 CLR 3 that clause 5 (9) (and it necessarily follows
clause 6 (7)) create positive rights and obligations flowing from the agreement. It necessarily
follows from clause 4 (4) that the whole of the rights of the Commonwealth and of the States to
borrow are included in the agreement and that no such rights exist outside the agreement. There
would be a clear breach of clause 4 (4) if the States or the Commonwealth borrowed moneys by
way of overdraft in excess of the maximum limits decided upon by the Loan Council for interest
and other charges. Clauses 5 (9) and 6 (7) create rights to borrow for temporary purposes by way of
overdraft or fixed, special or other deposit and impose obligations on the exercise of these rights.
The introductory words "notwithstanding anything contained in this agreement" cannot have been
intended to except clauses 5 (9) and 6 (7) from the agreement altogether, because the sub-clauses
conclude by providing that "the provisions of this agreement other than this sub-clause shall not
apply to such moneys." The function of the introductory and concluding words is to make it clear
that the rights and obligations of the States and Commonwealth with respect to the kinds of
borrowings for temporary purposes described in the sub-clauses are wholly contained in these sub-
clauses. In Stirling v. Maitland (1864) 5 B & S 840, at p 852 (122 ER 1043, at p 1047) Cockburn
C.J. said: "I look on the law to be that, if a party enters into an arrangement which can only take
effect by the continuance of a certain existing state of circumstances, there is an implied engagement
on his part that he shall do nothing of his own motion to put an end to that state of circumstances,
under which alone the arrangement can be operative. I agree that if the company had come to an end
by some independent circumstance, not created by the defendants themselves, it might very well be
that the covenant would not have the effect contended for; but if it is put an end to by their own
voluntary act, that is a breach of covenant for which the plaintiff may sue." The proposition has
been applied in many subsequent cases. Two recent cases are Southern Foundries (1926) Ltd v
Shirlaw (1940) AC 701 and Greenhalgh v. Mallard (1943) 2 All ER 234 . In Shirlaw's Case Lord
Atkin said (1940) AC, at p 717 : "That proposition in my opinion is well established law. Personally
I should not so much base the law on an implied term, as on a positive rule of the law of contract
that conduct of either promisor or promisee which can be said to amount to himself 'of his own
motion' bringing about the impossibility of performance is in itself a breach." The proposition is, in
our opinion, directly applicable to clause 5 (9) and clause 6 (7) of the Financial Agreement. A
contract is construed by reference to the state of facts existing at the date when it is entered into. At
the date of the Financial Agreement there was a chain of banks carrying on general banking
business in Australia and the intention of clause 5 (9) and clause 6 (7) was plainly to give the States
and the Commonwealth the right to borrow moneys on overdraft from these banks. That right can
only continue to exist in any real sense so long as that banking structure is not destroyed by either
the States or the Commonwealth. Compliance with the proposition in Stirling v. Maitland [1864]
EngR 752; (1864) 5 B & S 840 (122 ER 1043) therefore requires that neither the States nor the
Commonwealth should of their own volition put an end to that state of circumstances. The Banking
Act 1947 violates the proposition. (at p282)

42. If the matter rested in contract the Act would be a grave breach of the agreement by the
Commonwealth: Magrath v. The Commonwealth [1944] HCA 14; (1944) 69 CLR 156 . But the
agreement derives overriding statutory force from s. 105A of the Constitution. It binds the
Commonwealth notwithstanding anything contained in the Constitution. Any exercise of legislative
power under s. 51 which is inconsistent with the agreement is to that extent invalid. There is
evidence that borrowings for temporary purposes by the States have in recent years been financed
by the issue of Treasury bills, and that the practice of borrowing money on overdraft from the
private banks is now in abeyance. But the rights created by clause 5 (9) cannot be destroyed by
disuse. Section 105A (4) provides that the agreement may be varied or rescinded by the parties
thereto. Unless and until clause 5 (9) is so varied or rescinded, these rights must continue to have
the same force and effect as they had at the date the agreement was made. The proposition in
Stirling v. Maitland (4) is directly infringed by s. 46 (1) and (4) to (8) of the Act. It is indirectly but
equally infringed by ss. 13 and 14, Division 3 of Part IV. and s. 24 of the Act. All these provisions
of the Act are therefore invalid. In view of this conclusion it is unnecessary to deal with the other
contentions of the States and we express no opinion upon them. (at p283)

43. Section 92 provides, so far as material, that trade commerce and intercourse amont the States
whether by means of internal carriage or ocean navigation shall be absolutely free. We adhere to the
opinion already expressed by Rich J. in Peanut Board v. Rockhampton Harbour Board [1933] HCA
11; (1933) 48 CLR 266, at p 277 and Williams J. in Australian National Airways Pty. Ltd. v. The
Commonwealth [1945] HCA 41; (1945) 71 CLR 29, at pp 107, 110 that the freedom guaranteed by
s. 92 is a personal right attaching to the individual. The same opinion has been expressed by several
judges of this Court; see for instance O'Connor J. in Fox v. Robbins [1909] HCA 81; (1909) 8 CLR
115, at pp 126, 127 ; Higgins J. (1909) 8 CLR, at p 131 ; Isaacs J. in R. v. Smithers; Ex parte
Benson (1912) 16 CLR 99, at p 113 in James v. South Australia (1927) 40 CLR 1, at p 32 and
particularly in James v. Cowan [1930] HCA 48; ; (1930) 43 CLR 386, at pp 418, 419 (a judgment
described by Lord Atkin in delivering the judgment of the Privy Council on appeal (1932) AC, at p
561; 47 CLR, at p 398 as a convincing judgment). In that case (1930) 43 CLR, at p 418 Isaacs J.
referring to the expropriation of goods by a State, said: "The question is, how has the personal right
of trading inter-State by the former owner been interfered with? That is a personal right, not a
property right." In the Peanut Case (1933) 48 CLR, at p 288 Dixon J. said: "The provisions operate
directly upon the individual grower's liberty of disposing of the peanuts he produces for sale." In O.
Gilpin Ltd. v. Commissioner for Road Transport and Tramways (N.S.W.) [1935] HCA 8[1935]
HCA 8; ; (1935) 52 CLR 189, at p 211 Dixon J. said: "Trade, commerce and intercourse among the
States is an expression which describes the activities of individuals. The object of s. 92 is to enable
individuals to conduct their commercial dealings and their personal intercourse with one another
independently of State boundaries." In James v. Commonwealth [1936] UKPCHCA 4; (1936) AC
578, at p 614; 55 CLR 1, at pp 43, 44 , Lord Wright, in delivering the judgment of the Privy
Council, said section 92 may seem to be, "a constitutional guarantee of rights, analogous to the
guarantee of religious freedom in s. 116, or of equal rights of all residents in all States in s. 117." He
referred to s. 92 as "the declaration of a guaranteed right" (1936) AC, at p 631; 55 CLR, at p 59 . It
is to be noted that His Lordship groups with s. 92 ss. 116 and 117, that the provision in s. 116 that
no religious test shall be required as a qualification for any office or public trust under the
Commonwealth is an express personal guarantee, and that s. 117 is also an express personal
guarantee. His Lordship would appear therefore also to have been of opinion that the freedom
guaranteed by s. 92 is a personal right. (at p284)
44. In our opinion a banker who carries on business in more than one State is engaged in trade,
commerce and intercourse among the States. It was said by Willes J. in Harris v. Amery (1865) LR
1 CP 148, at p 154 in a passage cited by Jessel M.R. in Smith v. Anderson (1880) 15 Ch D 247, at p
259 that banking is not strictly a trade. Presumably that was because his Lordship considered that
trade consisted of trafficking in goods, that is to say the buying and selling and exchange of goods.
But in a modern community it is clear, we think, that traffic in intangibles is just as much trade and
commerce as traffic in tangibles. In Brandao v. Barnett (1846) 12 Cl & Fin 786, at p 809 [1846]
EngR 983[1846] EngR 983; ; (8 ER 1622, at p 1631) Lord Campbell said that "there is no finding
that the exchequer bills . . . were in the possession of the defendants in the course of their trade as
bankers." In Foley v. Hill [1848] EngR 837; (1848) 2 HLC 28, at pp 43, 44 (9 ER 1002, at p 1008)
Lord Brougham made several references to a banker as a person carrying on a trade. He said that the
trade of a banker consisted of using the money which he received from his customers as his own and
trading with it. In Forget v. Baxter (1900) AC 467, at p 475 Sir Henry Strong, in delivering the
judgment of the Privy Council, said, in reference to the business of stockbrokers: "It cannot be
doubted . . . that the purchases and sales of shares by the appellants . . . in the ordinary course of
that business were operations of commerce." The same view has recently been expressed by
Frankfurter J. in the Supreme Court of the United States in Freeman v. Hewit [1947] USSC 4;
(1946) 329 US 249, at p 259 (91 Law Ed 265, at p 275) . In reference to a sale by a broker to a
purchaser in one State of securities owned by a person in another State he said: "Of course this is an
interstate sale. And constitutionally it is commerce no less and no different because the subject was
pieces of paper . . . rather than machines." In Bank of India v. Wilson (1877) LR 3 Ex D 108 cited in
W. & A. McArthur Ltd. v. Queensland [1920] HCA 77; (1920) 28 CLR 530, at p 547 it was held
that both a bank and a telegraph company were carrying on a trade within the meaning of the Acts
relating to inhabited houses. Pollock B. (1877) LR 3 Ex D, at p 120 referred to the meaning of trade
as including that of "an occupation; particular employment, whether manual or mercantile,
distinguished from the liberal arts or learned professions." The same view of the meaning of trade
was expressed by Sutherland J. in Atlantic Cleaners & Dyers Inc. v. United States [1932] USSC
115[1932] USSC 115; ; (1932) 286 US 427, at p 436 (76 Law Ed 1204, at p 1209) . He cited Bank
of India v. Wilson (1877) LR 3 Ex D 108 and also a statement by Mr. Justice Story to the same
effect. In Aristoc Ltd. v. Rysta Ltd. (1945) AC 68, at p 102 Lord Wright said, in a passage cited by
Rich J. in Australian National Airways Pty. Ltd. v. The Commonwealth (1945) 71 CLR, at p 71 :
"'Trade' is a very wide term: it is one of the oldest and commonest words in the English language.
Its great width of meaning and application can be seen by referring to the heading in the Oxford
English Dictionary. But it must always be read in its context." The power of Congress under the
Constitution of the United States is to regulate commerce with foreign nations and among the
several States. It was held in Paul v. Virginia [1868] USSC 79; (1869) 75 US 168, at p 183 (19 Law
Ed 357, at p 361) and several subsequent cases that issuing a policy of insurance was not a
transaction of commerce but in United States v. South-Eastern Underwriters Association [1944]
USSC 116; (1944) 322 US 533 (88 Law Ed 1440) these cases were overruled and it was held that
the business of insurance when conducted across State lines is part of inter-State commerce. A
number of definitions of the meaning of banking were handed in during the argument of which the
definition of a bank in the Imperial Dictionary cited in Russell on Banker and Customer in
Australia, 3rd ed. (1935), p. 52, is short and precise - "Bank. - An establishment which trades in
money; as establishment for the deposit, custody and issue of money, as also for granting loans,
discounting bills, and facilitating the transmission of remittances from one place to another; a
company or association carrying on such business." In In re Shields' Estate (1901) 1 IR 172, at p
198 Fitzgibbon L.J. said, in a passage cited with approval by Isaacs J. in Commissioners of the State
Savings Bank of Victoria v. Permewan, Wright & Co. Ltd. [1914] HCA 83[1914] HCA 83; ; (1914)
19 CLR 457, at p 471 : "In my opinion, the essence of the trade, business, or calling of a banker, is
not primarily or essentially to be found in the mode in which he disposes of the money which is
deposited with him, but in the mode in which he receives the money of others. If he keeps open
shop for the receipt of money from all who choose to deposit it with him; if his business is to trade
for profit in money deposited with him for the purpose, he answers the description of a 'Banker'." In
Punjab Co-operative Bank Ltd., Amritsar v. Commissioner of Income Tax, Lahore (1940) AC 1055,
at p 1072 Viscount Maugham, in delivering the judgment of the Privy Council, said: "In the
ordinary case of a bank, the business consists in its essence of dealing with money and credit." It
seems to be clear that in Citizens Insurance Co. of Canada v. Parsons (1881) 7 App Cas 96 the Privy
Council would have considered banking to be within the regulation of trade and commerce, that is
within Class 2 of s. 91 of the British North America Act, if banking had not been specifically
mentioned in Class 15 of that section. The powers of the Canadian Parliament in relation to the
regulation of trade and commerce and in relation to banking are each powers over the whole subject
matter. The first power is not, like the corresponding power in s. 51 (1) of the Australian
Constitution, confined to trade and commerce with other countries and among the provinces. There
is therefore a reason why particular aspects of trade and commerce over which it was intended that
the Commonwealth Parliament should have power irrespective of their overseas or inter-State
character should be specifically enumerated. This may explain the presence of the specific powers
with respect to insurance and trade marks, in addition to the power with respect to banking, in s. 51
of the Australian Constitution. These powers do not appear in s. 91 of the Canadian Constitution,
but they have been held in certain aspects to be within the trade and commerce power (Attorney-
General for Canada v. Attorney-General for Alberta (1916) AC 588 ; Attorney-General for Ontario
v. Attorney-General for Canada (1937) AC 405 ). There is no reason therefore why laws with
respect to banking, insurance and trade marks should not be trade, commerce and intercourse within
the meaning of s. 92 simply because they are specifically enumerated in s. 51 and may not fall, so
far as they are trade and commerce with other countries and among the States, within s. 51 (1). But
it was contended that inter-State banking was not trade, commerce and intercourse within the
meaning of s. 92 because that section contains the words "whether by means of internal carriage or
ocean navigation." It was submitted that these words indicated that the section was confined to trade
and commerce in the sense of traffic in goods because only goods could be carried by land or sea.
This construction of the section really seeks to read the word "whether" as "if" or "provided." The
submission was discussed and disposed of in the joint judgment of Knox C.J., Isaacs J. and Starke J.
in McArthur's Case (1920) 28 CLR, at pp 549-550 and there is nothing in the subsequent cases to
throw any doubt on the correctness of the views there expressed. In R. v. Smithers (1912) 16 CLR,
at p 118 Higgins J. said: "It is curious that the section seems to overlook the possibility that a man
may walk across the border into another State, as well as be carried 'by internal carriage or ocean
navigation'; but these words must be merely meant to exhaust all kinds of carriage, if there be
carriage. If not, they qualify the words 'trade' and 'commerce' as well; and a State might, then,
impose a duty on, or obstruct the passage of, cattle driven over the border: a result which would be
absurd." (at p287)

45. All the plaintiff banks except the Ballarat Banking Co. Ltd. and the Brisbane Permanent
Building & Banking Co. Ltd. are engaged in transactions of inter-State banking. These transactions
consist principally of (a) the collection and negotiation of inter-State bills of exchange, cheques and
promissory notes; (b) the transfer of funds inter-State; (c) the establishment of inter-State credits;
(d) the issue and negotiation of travellers' cheques. These transactions seldom involve any
movement of money between States in the sense of the physical transfer of bank notes or coin from
one State to another. The transactions are usually financed through accounts which the banks keep
in each State with the Commonwealth Bank known as exchange settlement accounts. The effect of
the payment of a cheque drawn by A on his bank in Sydney in favour of B in Melbourne is that A's
deposit account is reduced or his loan account increased, B's deposit account is increased or his loan
account reduced, the exchange settlement account of A's bank is reduced and the exchange
settlement account of B's bank is increased. But the same legal results flow from the transaction as
though the amount debited to the payer and credited to the payee had been sent from Sydney to
Melbourne in the form of notes or coin. This appears clearly from the recent decision by the Privy
Council in Trinidad Lake Asphalt Operating Co. Ltd. v. Commissioners of Income Tax for Trinidad
(1945) AC 1 . In that case a resident in the United States owed money to a company in Trinidad in
which he was a shareholder. The company became indebted to him for a dividend of the like
amount. It was agreed that the one debt should be set off against the other, and the transaction was
effected by each party making corresponding entries. It was held that there was an actual payment
and receipt of the indebtedness on either side, and therefore a transmission of revenue from Trinidad
to the United States. Lord Wright said (1945) AC, at pp 10, 11, 12 : - "Was there, then, such a
transmission? No actual money passed. If the dividend had been transmitted by a banker's draft sent
by the appellant to Barber it could not have been questioned that the dividend had been transmitted,
but the two companies might do their own banking transactions between themselves and dispense
with the intervention of banking facilities. The transaction involved the sending to Barber by the
appellant, and receipt by Barber from the appellant, of the dividend. This was effected by the
agreement that payment should be made by cancellation of the debt for goods supplied. This method
had been mutually agreed before the dividend was declared. The agreement was carried out by each
party making corresponding entries in its books. These were not merely book-keeping entries. They
represented the actual receipt of the dividend by Barber, and the actual payment of it by the
appellant to Barber, and concurrently, the actual receipt by the appellant from Barber of payment of
his debt for goods supplied . . . There is actual, not merely notional or constructive payment of the
indebtedness on either side . . . Since 1902, the transmission of funds has become still more
divorced in the minds of business men, and even of lawyers, from the idea of any material
embodiment. No document is necessary. Two companies separated by the ocean may orally agree
over the wireless telephone that the debt of one may be set against a debt of the other and both
cancelled. The only evidence or material embodiment of the transaction may consist of entries in the
books on each side made in pursuance of their agreement, but what has happened is, if so intended,
equivalent to a receipt of money, in Lord Lindley's words, and a receipt of anything by a person who
is at a distance from the sender involves a transmission." (at p288)

46. In James v. The Commonwealth (1936) AC, at p 630: 55 CLR, at p 58 Lord Wright said that the
freedom guaranteed by s. 92 is "freedom as at the frontier or, to use the words of s. 112, in respect
of 'goods passing into or out of the State.'" His Lordship then proceeded to explain what that meant
and said (1936) AC, at p 631; 55 CLR, at p 59 : "As a matter of actual language, freedom in s. 92
must be somehow limited, and the only limitation which emerges from the context, and which can
logically and realistically be applied, is freedom at what is the crucial point in inter-State trade, that
is at the State barrier." His Lordship was discussing an Act which prohibited the plaintiff entirely
without a licence or if a licence was granted partially from delivering dried fruits for carriage into or
through another State to a place in Australia beyond the State in which the delivery was made, and
his remarks, like the remarks in any other judgment, must be read in the light of the particular facts.
We do not understand his Lordship to mean that s. 92 only protects the actual passage of goods or
persons from one State into another. Section 92 refers to trade commerce and intercourse among the
States. A contract for the sale of goods by A to B to be delivered in Melbourne is just as much a
transaction of trade and commerce among the States whether A's goods are sent from Sydney to
Melbourne subsequently to the contract or A has a supply of the goods available in Melbourne and
makes the delivery out of these goods. A contract between A in Sydney and B in Melbourne by
which A agrees to deliver goods to B in Sydney in exchange for goods to be delivered by B to A in
Melbourne is a transaction of trade and commerce among the States. Where a bank has a fund in the
form of an exchange settlement account in Melbourne available to make a payment to B in Victoria
on behalf of A in Sydney the transfer of credit from A to B is just as much an inter-State transaction
as it would be if actual money was sent from Sydney to Melbourne to make the payment. To carry
out such transactions something tangible for instance documents, or intangible for instance
telegraphic messages, must cross State boundaries and such documents or messages are essential
elements of the transaction and make it one of trade and commerce among the States. It is true that
in a modern community, as the evidence in the present cases proves and as Lord Wright pointed out
in the Trinidad Case (1945) AC1 , the principal means of payment and exchange is not legal tender
in the shape of notes and coin but bank credit or bank money as it has been called, and that payment
by bank money is a matter of book entries involving a debit in one bank to the account of the debtor
and a credit in the same or another bank to the account of the payer. But as Duff C.J. said in
Reference re Alberta Statutes (1938) SCR (Can) 100, at p 116 money as commonly understood is
not necessarily legal tender. Any medium which by practice fulfills the function of money and
which everbody will accept in payment of a debt is money in the ordinary sense of the word even
although it may not be legal tender. The banks are engaged in moving money or its equivalent bank
credit about intra-State and inter-State for reward whether the movement is effected by the transfer
of actual money in the shape of notes or coin from one place to another or by means of cheques or
other documents or telegraphic transfers and subsequent debits and credits in customers' accounts.
In Huddart Parker & Co. Pty. Ltd. v. Moorehead (1909) 8 CLR, at pp 405, 406 Isaacs J. said: "the
increase in the formation of corporations for all kinds of business enterprises, commercial, industrial
and financial, is one of the most notable characteristics of modern life. They are incorporated in one
State, and can take the capacity to trade in all, and the freedom of inter-State trade introduced by the
Constitution increased the likelihood of their doing so." (The words italicized must refer to s. 92). It
is evident that his Honour thought that all the corporations he mentioned, commercial, industrial and
financial, would, if they were carrying on business in more States than one, be engaged in trade,
commerce and intercourse among the States within the meaning od s. 92. In our opinion the plaintiff
banks other than the two mentioned are in their inter-State business engaged in such trade,
commerce and intercourse. (at p290)

47. Section 46 (4) authorizes the Treasurer to give a notice which will have the effect of prohibiting
a private bank carrying on any further banking business after the period fixed in the notice has
expired. It will then be unlawful for the bank to carry on the business of banking either intra or
inter-State. Divisions 2 and 3 of Part IV. and s. 24 have the same effect. They operate after an
interval or immediately to strip the banks of their undertakings and thereby deprive them of their
power to carry on the business of banking either intra or inter-State. From our reading of the cases,
and particularly the two decisions of the Privy Council, we understand that legislation
Commonwealth or State infringes s. 92 where it operates directly and not merely incidentally to
burden, hinder or prevent persons or corporations engaging wholly or partially in trade or commerce
across State boundaries. (at p290)

48. We also understand that discrimination is not the test and that such legislation may infringe the
section although it operates in restraint both of intra and inter-State trade. In the Peanut Case (1933)
48 CLR, at p 275 Rich J. pointed out that the reasons given by the Privy Council in James v. Cowan
[1930] HCA 48; (1930) 43 CLR 386 "make it quite plain that compulsory acquisition may directly
operate to interfere with the freedom of inter-State commerce." The question is in each case one of
fact. Section 92 invalidates the infringing legislation and gives to the person or corporation
aggrieved the right to treat the legislation as null and void and to sue for a declaration to this effect.
It also gives such person or corporation the right to treat any other person or corporation as a
wrongdoer whose conduct would only be justified if the legislation were valid. If the legislation
operates directly to hinder burden or prevent all trade both intra-State and inter-State, the question
arises whether the legislation can be read down so that it can operate with respect to intra-State trade
although it is invalid with respect to inter-State trade. Section 46 (4) to (8) of the Banking Act 1947
is legislation which in fact operates directly to prevent the private banks continuing to carry on
either intra-State or inter-State trade. It is therefore legislation which infringes s. 92. But it is not
legislation which is capable of being severed in its operation. The notice authorized by the section is
an inseverable notice which can have one effect only, namely to make it unlawful for a private bank
to carry on banking business in Australia at all. It is impossible without resort to legislation to
convert such a notice into a notice which will only make it unlawful for a private bank to carry on
intra-State business. The acquisition of the undertaking of a private bank is in a similar position.
The assets and liabilities and staff of the bank are completely taken over by the Commonwealth
Bank, and no means are provided by which the private bank could be left with those assets and
liabilities employed in the inter-State business and sufficient staff to carry on this business and the
balance of the assets and liabilities and staff could be taken over by the Commonwealth Bank. Two
of the private banks are doing no inter-State business and the inter-State business of the other
private banks only amounts to about ten per cent of their banking business in Australia. It was
therefore contended that the amount of inter-State business included in a total prohibition of the
banking business in Australia of a private bank would be relatively insignificant so that the
prohibition of inter-State business would be a mere incidental and indirect and remote consequence
of the total prohibition. But with these two exceptions the inter-State business of each of the private
banks is substantial, the Act operates directly on this business, and the operation of the Act cannot
be converted from a direct to an incidental operation by a mere calculation of percentages. The
present percentage of ten per cent is higher than the corresponding percentage in Vacuum Oil Co.
Pty. Ltd. v. Queensland [1934] HCA 5; (1934) 51 CLR 108 . (at p291)

49. It seems to us that the prohibition of the inter-State business would only be an incidental
consequence of the total prohibition if, as the defendants contended, s. 92 does not confer a personal
right on individuals to engage in trade and commerce among the States. The defendants contended
that s. 92 is not concerned with the right of an owner of goods to sell them out of the State, and
therefore is not concerned with the ownership of such goods prior to, at the time of, or subsequent
to the passage of the goods across State boundaries. Accordingly the Commonwealth and State
Parliaments legislating within their constitutional powers can select the individuals who are to
engage in inter-State trade. But they must not place any hindrance, burden or restriction on the free
passage of the goods of such individuals across State boundaries. It was claimed that this contention
is supported by the decision of this Court in New South Wales v. The Commonwealth (The Wheat
Case [1915] HCA 17; (1915) 20 CLR 54 . In that case the Wheat Acquisition Act 1914 (N.S.W.)
authorized the Governor by notification published in the Gazette to declare that any wheat therein
described or referred to was acquired by His Majesty and that upon such publication the wheat
acquired should become the absolute property of His Majesty and the rights and interests of every
person in the wheat at the date of such publication should be converted into a claim for
compensation. The Act constituted a Board which was authorized on behalf of the Government to
sell or dispose of any wheat acquired under the Act at such times, at such prices and on such terms
of payment as might be thought fit. Some of the wheat acquired under the Act had been sold to
purchasers in Victoria and it was contended that to acquire this wheat would contravene s. 92, but
the contention failed. Griffith C.J. said that s. 92, so far as it relates to commerce, might be
paraphrased thus (1915) 20 CLR, at p 68 : "Every owner of goods shall be at liberty to make such
contracts for the transportation of goods from one State to another as he thinks fit without
interference by law. It follows that as soon as he ceases to be the owner of goods the section ceases
to have any operation so far as those goods are concerned. When the wheat in New South Wales
became the property of His Majesty, the Sovereign, as the new owner, had the exclusive right of
disposing of it. If the Government desired to export it to another State they were free to do so.
Whether they did or did not, their power of disposition was not interfered with." (at p292)

50. The comment on this case by Lord Wright in James v. The Commonwealth [1936] UKPCHCA
4; (1936) AC 578; 55 CLR 1 was that it had never been expressly overruled which can hardly be
said to be an approval of the case. If it was rightly decided it must be on the ground stated by Lord
Atkin in James v. Cowan (1932) AC, at pp 558, 559; 47 CLR, at p 396 that legislation which has for
its primary object such matters as defence against an enemy, prevention of famine, disease and the
like, is directed primarily to such matters and does not infringe s. 92 because incidentally inter-State
trade is affected. The acquisition by the Commonwealth Bank of the business of one bank or the
businesses of a number of banks or even of all the banks carrying on the business of banking in
Australia would not come within the instances given by Lord Atkin. There is no suggestion that the
private banks are carrying on business in a way that is a menace to the common welfare. On the
contrary s. 11 of the Act imposes on the Commonwealth Bank a duty to carry on in the future the
business of banking in the same manner as it is at present being carried on by the private banks. The
defendants' contention appears to us to be substantially in line with the view of s. 92 expressed by
Griffith C.J. in the passage cited. But in James v. Cowan (1932) AC 542; 47 CLR 386 Lord Atkin
said that their Lordships would not be prepared to assent to it stated in the simple form which
commended itself to Griffith C.J. It is plain from James v. Cowan (1932) AC542; 47 CLR 386 that
the cases in which the Commonwealth or the States can exercise their powers of acquisition so as to
deprive an owner of his right to sell his goods inter-State are limited. It would seem that Lord
Wright found some difficulty in justifying the instances given by Lord Atkin. Such legislation
would seem to be based on the principle that in cases of grave emergency the maxim salus populi est
suprema lex can override s. 92, a point which the Privy Council in James v. The Commonwealth
(1936) AC 578; 55 CLR 1 treated as reserved until it arose, and which was not upheld by this Court
in Gratwick v. Johnson [1945] HCA 7; (1945) 70 CLR 1 . (at p293)

51. It is clear to us that Lord Wright thought that the Peanut Case [1933] HCA 11; (1933) 48 CLR
266 was rightly decided. He said (1936) AC, at p 623; 55 CLR, at p 52 : "James v. Cowan (1932)
AC 542; 47 CLR 386 was followed and applied by the High Court (Evatt J. dissenting) in Peanut
Board v. Rockhampton Harbour Board [1933] HCA 11; (1933) 48 CLR 266 in which the Wheat
Case (1915) 20 CLR 54 was distinguished. The producers of the peanuts, it was held, were
prevented by the Act from engaging in inter-State and other trade in the commodity. The Act
embodied, so the majority of the Court held, a compulsory marketing scheme, entirely restrictive of
any freedom of action on the part of the producers; it involved a compulsory regulation and control
of all trade, domestic, inter-State and foreign; on the basis of that view, the principles laid down by
this Board were applied by the Court." He said at (1936) AC, at p 630; 55 CLR, at pp 58-59 : "But it
has become clear from the various decisions already cited that such burdens and hindrances may
take diverse forms, and indeed appear under various disguises. One form may be a compulsory
acquisition of goods, as in James v. Cowan (1932) AC 542; 47 CLR 386 or the Peanut Case [1933]
HCA 11; (1933) 48 CLR 266 if in truth the expropriation is directed wholly or partially against
inter-State trade in the goods, that is, against selling them out of the State." In James v. Cowan
(1932) AC 542; 47 CLR 386 the plaintiff's goods were acquired to prevent him exercising his
personal right to sell them inter-State. In the Peanut Case (1933) 48 CLR 266 the peanuts were
acquired to deprive each individual grower of his personal right to sell his peanuts intra-State or
inter-State. The Peanut Board was selected by the Queensland parliament as the sole body entitled
to engage in inter-State trade in peanuts just as the Banking Act 1947 authorizes the Treasurer to
select the Commonwealth Bank as the sole body entitled to engage in inter-State trade in banking.
In James v. The Commonwealth [1936] UKPCHCA 4; (1936) AC 578; 55 CLR 1 the individual
owners of dried fruits including the plaintiff in South Australia were entirely prohibited without a
licence or if a licence was granted partially prohibited from selling their goods out of the State. In
the case of James v. Cowan (1932) AC 542; 47 CLR 386 the executive act of the Minister and in the
two later cases the legislation infringed s. 92 because individuals were deprived of their personal
rights guaranteed to them by s. 92. The plaintiffs would not have had any locus standi to maintain
the actions if their personal rights had not been infringed. Admittedly freedom of intercourse among
the States means that individuals are to be free to pass from State to State, and it would be strange if
freedom of trade and commerce does not mean that individuals are to be free to engage in inter-
State trade when freedom of intercourse means that individuals are to be free to pass from State to
State. (at p294)

52. The contention under discussion is in our opinion opposed to the recent decision of this Court in
Australian National Airways Pty. Ltd. v. The Commonwealth [1945] HCA 41; (1945) 71 CLR 29 .
The legislation there in question operated directly to prohibit any persons engaging in the business
of carrying passengers and goods by air for reward across State lines and to grant a monopoly of
this business to the Australian National Airlines Commission. Such carriage was held to be trade
and commerce among the States within the meaning of s. 92. Some members of the Court, including
Williams J., expressed the opinion that the Commonwealth Parliament could, in the exercise of the
legislative power conferred by s. 51 (i.) to make laws with respect to trade and commerce among
the States, select the persons or corporations to engage in any activity of trade and commerce among
the States, and could therefore grant a monopoly of the inter-State carriage of persons and goods to
the Commission. It seemed to Williams J. that this necessarily followed from the decision of this
Court in Huddart Parker Ltd. v. The Commonwealth [1931] HCA 1; (1931) 44 CLR 492 . In that
case it was held that legislation which required shipowners and stevedores in certain ports to give
preference in employment in loading and unloading ships engaged in inter-State and overseas trade
to members of the Waterside Workers Federation of Australia was a valid exercise of the trade and
commerce power. No question of s. 92 arose in that case. In the first place it was then assumed that
the section did not bind the Commonwealth. In the second place the transport workers legislation
there in question did not infringe the section. The section does not invalidate legislation regulating
the operations of inter-State trade. There is no suggestion that sections such as ss. 27 and 39 of the
Banking Act 1945 which regulate the trade of banking infringe s. 92. The section invalidates
legislation which deprives individuals of their freedom to trade in more States than one. There was
nothing in the transport workers legislation to prevent wharf labourers passing from one State to
another and seeking work in as many States as they liked. There was also nothing in the legislation
to prevent shipowners sailing their ships from any ports in one State to any ports in another State.
But in the Australian National Airways Case [1945] HCA 41; (1945) 71 CLR 29 in spite of the
opinion that s. 51 (i.) standing alone would authorize the Commonwealth Parliament to create a
monopoly in inter-State carriage by air, the Court was unanimously of opinion that legislation for
that purpose infringed s. 92. The only difference between the legislation in the Australian National
Airways Case [1945] HCA 41[1945] HCA 41; ; (1945) 71 CLR 29 and the material provisions of
the Banking Act 1947 is that the earlier legislation was directed wholly against persons other than
the Commission engaging in inter-State trade, whereas the present legislation is directed only
partially against the private banks engaging in inter-State trade. But the intention in each case is to
create a monopoly, in the earlier case in inter-State trade, and in the present cases in both intra-State
and inter-State trade, and s.92 is, for the reasons already given, infringed in each case. The
difference between the two Acts is explained by the difference in the ambit of the trade and
commerce power and that of the banking power, the former being limited to trade and commerce
among the States and the latter extending to all banking either intra or inter-State. It would be quite
impossible for any bank engaged in inter-State business not to be also engaged in intra-State
business, so that if legislation which operates directly but indiscriminately to prevent a bank doing
any business in Australia does not infringe s. 92 in its operation upon inter-State trade, it would
seem to follow that legislation based on pl. (xiii.) and other placita of similar ambit, for instance
(xiv.) and (xx.), would not be subject to s. 92. But we agree with respect with the opinion of Isaacs
J. in Huddart Parker & Co. Pty. Ltd. v. Moorehead [1931] HCA 1; ; (1931) 44 CLR 492 already
cited that legislation under pl. (xx.) is subject to s. 92, and it necessarily follows that legislation
under pl. (xiii.), if banking be trade and commerce, as in our opinion it is, must also be subject to
the section. As we have already said, two of the plaintiff banks are not at present engaged in inter-
State banking, but an Act which operates directly to prevent an individual ever engaging in inter-
State trade must be void whether he is at the moment engaged in such trade or not. It may be that he
would not have a sufficient interest to challenge the Act until he desired to engage in such trade. But
it is unnecessary to pursue this point because the two banks in question are entitled to succeed on
other grounds. (at p296)

53. We have not yet referred to ss. 59 and 60 of the Act. These sections state that their purpose is to
assist the operation of the provisions of the Act. The only provisions of the Act which could require
the assistance of these highly punitive sections are those relating to the compulsory acquisition of
the shares and the businesses of the private banks. They could not form part of any scheme of
voluntary bargaining. They are therefore incidental to and inseverably bound up with the operation
of provisions which we have already held to be invalid and as such are in our opinion also invalid.
(at p296)

54. For these reasons we would give judgment for the plaintiffs in all five actions. In the actions by
the eight private banks incorporated in Australia and by the States of Victoria, South Australia and
Western Australia we would declare that ss. 13, 14, 17 to 21 inclusive, 22 (8) (b) and (d), 24, 56, 59
and 60 and Parts VI. and VII. of the Banking Act 1947 are invalid with consequential relief. In the
action by the three private banks incorporated in the United Kingdom we would declare that ss. 22
(8) (b) and (d), 24, 56, 59 and 60 and Parts VI. and VII. of the Act are invalid with consequential
relief. (at p296)

STARKE J. Motions to this Court for interlocutory injunctions in each of five actions which the
parties agreed to treat as a trial of the action and which by order of 15th January 1948 were directed
to be so treated and heard together upon affidavits filed in the said actions and upon such further
affidavits or evidence as the Court or a Justice might allow. And it was also directed, pursuant to the
Judiciary Act 1903-1947, that the cases be argued before the Full Court and that all questions
involved in or arising upon the trials be referred for the consideration of the Full Court. (at p297)

2. The plaintiffs in one action are banking companies incorporated in Australia whose names are set
forth in the first Schedule, Part I, to the Banking Act 1947 and individuals in representative
capacities; in another action the plaintiffs are banking companies incorporated in the United
Kingdom but carrying on business in Australia whose names are set forth in the first Schedule, Part
II, and individuals in representative capacities and the other three actions are brought by the States
of Victoria, South Australia and Western Australia respectively. (at p297)

3. In each action the plaintiffs claim a declaration that the Banking Act 1947 is beyond the powers
of the Parliament of the Commonwealth, contrary to the Constitution and void, and alternatively
that various sections of the Act are void for the same reasons and ancillary relief is also claimed. (at
p297)

4. The objects of the Act are stated in s. 3 and envisage apparently the nationalization of banking in
Australia. England, it was said, had nationalized the Bank of England (9 & 10 Geo. 6, c. 27), the
coal industry (9 & 10 Geo. 6, c. 59) and the States might have nationalized banking within the limits
of their territories. (at p297)

5. But the Parliament of the Commonwealth is not omnipotent as is the English Parliament nor has
it a general authority to make laws for the peace, order and good government of the Commonwealth
in the like manner as the States have to make laws for the peace, order and good government of
their several territories. The Constitution enumerates the powers of the Commonwealth and within
the framwork of those powers must be found the authority of the Commonwealth to enact the
Banking Act 1947. (at p297)

6. The main features of that Act are the provisions made for the acquisition by agreement of shares
in banking companies incorporated in Australia or in the United Kingdom, the compulsory
acquisition of shares in banks incorporated in Australia, the management of banks incorporated in
Australia, the acquisition by agreement of the business of the banking companies set out in the first
Schedule to the Act whether incorporated in Australia, United Kingdom or elsewhere, the
compulsory acquisition of the business in Australia of those banks and the provisions prohibiting the
banks from carrying on business in Australia. (at p297)

7. Subject to the Constitution (see s. 51) the Parliament of the Commonwealth has power to make
laws for the peace, order and good government of the Commonwealth with respect to: - (at p298)

8. The acquisition of property on just terms from any State or person for any purpose in respect of
which the Parliament has power to make laws (s. 51 (xxxi.)). (at p298)

9. Banking other than State banking; also State banking extending beyond the limits of the State
concerned, the incorporation of banks, and the issue of paper money (s. 51 (xiii.)). (at p298)

10. Foreign corporations, and trading or financial corporations formed within the limits of the
Commonwealth (s. 51 (xx.)). (at p298)

11. Matters incidental to the execution of any power vested by this Constitution in the Parliament or
in either House thereof, or in the Government of the Commonwealth, or in the Federal Judicature,
or in any department or officer of the Commonwealth (s. 51 (xxxix.)). (at p298)

12. The constitutional validity of the Banking Act 1947 was referred to these powers. (at p298)

13. The commerce power was not called in aid (cf. Toronto Electric Commissioners v. Snider
(1925) AC 396, at p 409 ). (at p298)

14. Unlike the trade and commerce power conferred upon the Parliament of Canada by the British
North America Act 1867, the power is limited to trade and commerce with other countries and
among the States. And it was also said that banking was not trade or commerce, a contention that,
incidentally, denied that the Banking Act 1947 in any way infringed the constitutional guarantee that
trade, commerce and intercourse among the States should be absolutely free (Constitution, s. 92). (at
p298)

15. The Constitution is an instrument of government in general terms and, as Higgins J. said in
Attorney-General for New South Wales v. Brewery Employes Union of New South Wales [1908]
HCA 94; (1908) 6 CLR 469, at pp 611, 612 : "although we are to interpret the words of the
Constitution on the same principles of interpretation as we apply to any ordinary law, these very
principles of interpretation compel us to take into account the nature and scope of the Act that we
are interpreting - to remember that it is a Constitution, a mechanism under which laws are to be
made, and not a mere Act which declares what the law is to be." The Constitution must not,
therefore, be cut down by "a narrow and technical construction" but given a "large and liberal
interpretation" (See Edwards v. Attorney-General for Canada (1930) AC 124, at pp 136, 137 ;
British Coal Corporation v. The King (1935) AC 500, at p 518 ). (at p298)

16. The legislative power of the Parliament of the Commonwealth is not, however, to make laws for
the peace, order and good government of Australia but to make laws with respect to enumerated
subjects but, within the appointed limits, the Parliament is supreme. Its powers also are subject to all
the limitations imposed by the Constitution. Those limitations may be found in the Federal system
itself (Melbourne Corporation v. The Commonwealth [1947] HCA 26; (1947) 74 CLR 31 or in
some express provision of the Constitution such as s. 92. (at p299)

17. The extent of the constitutional powers relied upon in support of the Banking Act 1947 must
now be examined in the light of these considerations and of judicial decisions. The acquisition
power. (at p299)

18. Upon this power are founded the main sections of the Banking Act 1947. It is this power, and no
other, that authorized the acquisition of property though the acquisition must be for a purpose in
respect of which the Parliament has power to make laws (See Johnston Fear & Kingham & The
Offset Printing Co. Pty. Ltd. v. The Commonwealth [1943] HCA 18; (1943) 67 CLR 314, at pp 317,
318, 325 ). (at p299)

19. The acquisition power is, however, large and extensive, for property is "nomen generalissimum
and extends to every species of valuable right and interest including real and personal property"
(See Minister of State for the Army v. Dalziel [1944] HCA 4; (1944) 68 CLR, 261, at p 290 ; and
cf. Australasian United Steam Navigation Co. Ltd. v. The Shipping Control Board [1945] HCA 45;
(1945) 71 CLR 508 ). And under this power I see no objection to the acquisition of a business being
carried on - a going concern, to use an expression of business (cf. Governments Stock and Other
Securities Investment Co. v. Manila Railway Co. (1897) AC 81, at p 86 ; Palmer, Company
Precedents, Part I, 14th ed., (1931) p. 459). But the power is not, in itself, wide enough to include
the taking over of liabilities. Vendors and purchasers provide in their agreements how and in what
manner the liabilities of a going concern are to be discharged. It appears to me, however, that the
incidental power (Constitution, s. 51 (xxxix.)), which is not a limitation or restriction but rather an
enlargement of power, warrants legislation providing how and in what manner the liabilities of a
going concern taken over should be discharged. The incidental power is not limited to such
measures without which the granted power would fail but covers all appropriate means conducive or
adapted to the end to be accomplished (cf. Julliard v. Greenman [1884] USSC 87; (1884) 110 US
421, at pp 440, 441 (28 Law Ed 204, at pp 211, 212) ). Provisions for the discharge of the liabilities
of a going concern are not, I venture to think, essential to the justice of the terms provided for the
acquisition of the concern. And it is not the constitutional requirement of "just terms" that authorizes
the taking over of liabilities. Liabilities might be discharged out of the moneys obtained for the
concern. (at p300)

20. An obligation, however, is imposed upon the Parliament to provide "just terms" for the
acquisition of property. But the obligation to provide such terms, it is now recognized in this Court,
is "a legislative function . . . and the Constitution does not mean to deprive the legislature of all
discretion in the matter" (McClintock v. The Commonwealth [1947] HCA 39; (1947) 75 CLR 1, at
p 34 ). The law must not be so unreasonable as to terms that it cannot find justification in the minds
of reasonable men. "Just terms" do not require a disregard of the interests of the public or of the
Commonwealth (See Grace Bros. Pty. Ltd. v. The Commonwealth [1946] HCA 11; (1946) 72 CLR
269, at p 291 ). (at p300)

21. Ultimately, it is the function of the Courts to determine whether "just terms" have or have not
been provided. (at p300)

22. And "just terms" require that a party whose property is acquired shall have the pecuniary
equivalent of the property acquired (Australian Apple and Pear Marketing Board v. Tonking (1942)
66 CLR 77, at p 85 ; Johnston Fear & Kingham & The Offset Printing Co. Pty. Ltd. v. The
Commonwealth (1943) 67 CLR, at pp 323, 324, 327 ). Thus the Judicial Committee have said, in
respect of a claim for compensation payable to the owner of land resumed, that the party, whose
property is acquired, is entitled to receive the sum which a prudent purchaser would have been
willing to give for the property sooner than fail to obtain it (Pastoral Finance Association Ltd. v.
The Minister (1914) AC 1083 ). "The ascertainment of value is not controlled by artificial rules. It
is not a matter of formulas, but there must be a reasonable judgment having its basis in a proper
consideration of all relevant facts" (cf. Standard Oil Co. of New Jersey v. Southern Pacific Co.
[1925] USSC 120; (1925) 268 US 146, at p 156 (69 Law Ed 890, at p 895) ). "Just terms" may well
be provided by means of a pool but whether "just terms" have been provided by that method
depends upon the character of the pool provided (cf. Nelungaloo Pty. Ltd. v. The Commonwealth
[1947] HCA 58; (1948) 75 CLR 495 ). Again, in considering the justice of the terms provided the
method of ascertaining the value of the property acquired may be considered. A party whose
property is compulsorily acquired is entitled to a fair ascertainment of its value and not an arbitrary
fixation by the authority acquiring the property (Johnston Fear & Kingham & The Offset Printing
Co. Pty. Ltd. v. The Commonwealth [1943] HCA 18; (1943) 67 CLR 314 ; McClintock v. The
Commonwealth (1947) 75 CLR, at pp 25, 26 ). And, further, it has been said in this Court that "just
terms . . . involve, as a matter of elementary fairness, the payment . . . of interest" on the ascertained
value of the property until payment (The Commonwealth v. Huon Transport Pty. Ltd. (1945) 70
CLR 293, at pp 306, 307 ). Scrutton L. J., in his dissenting judgment, said in Swift & Co. v. Board
of Trade (1924) 93 LJ KB 529, at p 535; 40 TLR 424, at p 429 "the owner of property seized does
not receive full compensation, if he loses the property in one year and only receives the value of the
property at the time of loss five years afterwards." (at p301)

23. Doubtless, under the acquisition power, the Parliament can provide for payment of interest on
unpaid compensation but it is, in all cases, a matter of construction of the particular legislation
whether it has done so and if not whether "just terms" have been provided. (at p301)

24. Next the acquisition must be for a purpose in respect of which the Parliament has power to make
laws. The only powers relied upon in support of the Banking Act 1947 were the banking power
(s.51 (xiii.)) and the foreign corporations and trading or financial corporations power (s. 51 (xx.))

coupled  with      the                 incidental  power  (s.                      51  (xxxix.)).

The banking power. (at p301)

25. It relates, of course, to the business of bankers but it was said that the power implied the
continued existence of the activity and was indeed but a power to regulate and govern it (cf. Toronto
Corporation v. Virgo (1896) AC 88 ). The form of the section was relied upon in support of this
view. State banking is excluded from the power. This means the business of banking engaged in by
a State as banker and not the transactions of a State as the customer of a bank (Melbourne
Corporation v. The Commonwealth [1947] HCA 26; (1947) 74 CLR 31 ). The banking power,
however, also extends to State banking beyond the limits of the State concerned. These words, it
was said, imply the continued existence of inter-State activities on the part of a State bank which the
Parliament of the Commonwealth may regulate and govern but cannot suppress. The word "also," it
was suggested relates that construction of the power over inter-State transactions back to the subject
of banking itself in the constitutional power. (at p301)

26. Again, it was also suggested that the express power to incorporate banks contained in the
constitutional power, as an extension or addition to the banking power, indicated that the
incorporation of banks is not included within the subject of banking. And this supported the view
that the banking power was a power to regulate and govern banking and not to suppress it. (at p302)

27. But I am unable to accede to this construction of the Constitution. (at p302)

28. State banking is excluded from the banking power but States have no power to legislate with
respect to transactions in banking extending beyond the limits of the State concerned. It was a
special case and the power is therefore conferred upon the National or Federal Parliament. (at p302)

29. But this limited power over State banking does not control or in any way restrict the banking
power, rather it extends that power. (at p302)

30. The express power to incorporate banks was adopted, I should think, from the British North

America Act 1867, s. 91 (15). In the Constitution of the United States no power in express terms is

given to Congress to incorporate banks yet such a power was deduced by inference or implication

from the Constitution (McCulloch v. Maryland (1819) 17 US 316 (4 Law Ed 579) ). Possibly it was

to avoid the necessity of such inferences or implications that the express power was inserted both in

the      Canadian                      and         Australian                          Constitutions.

Abundans cautela non nocet. (at p302)

31. In any case the power does not control or restrict the banking power. (at p302)

32. Subject to the Constitution, including the limitation in the banking power itself, the banking
power extends over the entire subject. It is plenary and Parliament may embrace within its
legislation whatever is necessary or appropriate to a complete and effective banking system. The
power, as I have already said, "extends not only to those regulations which aid, foster and protect
banking and the choice of persons engaging in it : it also embraces the making of rules which
prohibit it" (Melbourne Corporation v. The Commonwealth (1947) 74 CLR, at p 69 and cases there
cited). (at p302)

33. In the recent decisions, Attorney-General for Alberta v. Attorney-General for Canada (1939) AC
117, affirming (1938) SCR (Can) 100 and Attorney-General for Alberta v. Attorney-General for
Canada (1947) AC 503 in which Alberta social credit legislation was considered, the question was
whether the legislation was invalid. In the former case an Act respecting the taxation of banks was
declared invalid in the Privy Council because it was part of a legislative plan to prevent the
operation within the Province of those banking institutions which were carrying on business under
the authority of the Parliament of Canada. In short the legislation was inconsistent with the
Dominion legislation which prevailed. (at p302)

34. But in the Supreme Court of Canada the Social Credit Act which was the basis of the plan was
also declared invalid because it was legislation in relation to banking which was exclusively
assigned to the Parliament of Canada under the British North America Act 1867. The Judicial
Committee did not deal with this Act for reasons stated in the report of the case (1939) AC 117, at
pp 127, 128 . (at p303)

35. In the latter case the Judicial Committee declared the Alberta Bill of Rights Act, which provided
for loans involving an expansion of credit, invalid because it was legislation in relation to banking
exclusively assigned to the Dominion Parliament. "Legislation which aims at restricting (credit) or
controlling this practice must," said the Lord Chanceller, Lord Simon, "be beyond the powers of a
provincial legislature." (at p303)

36. It was said that this decision does not necessarily require the banking power in the British North
America Act to support it for the general power of the Dominion (Act s. 91) to make laws for the
peace, order and good government of Canada in relation to all matters not coming within the classes
of subjects exclusively assigned to the legislatures of the Provinces equally supports it. That may be
true, but the Judicial Committee rested its decision upon the banking power and not upon the
general power. And the reasoning is an exposition of the banking power. (at p303)

37. Still, legislation under the acquisition power must have some real connection with and afford
some reasonable and substantial basis for the conclusion that it is for a purpose in respect of which
the Parliament has power to make laws, for example, in the present case that the legislation has a
real and substantial connection with banking (Victoria v. The Commonwealth [1942] HCA 39;
(1942) 66 CLR 488, at p 508 ; Reid v. Sinderberry [1944] HCA 15; (1944) 68 CLR 504, at pp 515,
516 ; Australian Woollen Mills Ltd. v. The Commonwealth (1944) 69 CLR 476, at pp 490, 491 ).
"These questions affecting limitation on the legislative powers of subordinate parliaments . . . in a
Federal system are now familiar . . . It is well established that you are to look at the 'true nature and
character of the legislation' . . . 'the pith and substance of the legislation.' If, on the view of the
statute as a whole, you find that the substance of the legislation is within the express powers, then it
is not invalidated if incidentally it affects matters which are outside the authorized field. The
legislation must not under the guise of dealing with one matter in fact encroach upon the forbidden
field" (Gallagher v. Lynn (1937) AC 863, at p 870 ).
The foreign corporations and trading or financial corporations power. (at p304)

38. This provision of the Constitution s. 51 (xx.) does not give any power to incorporate companies
(Huddart, Parker & Co. Pty. Ltd. v. Moorehead [1909] HCA 36; (1909) 8 CLR 330 ). Isaacs J. was
of opinion that it gave to the Commonwealth Parliament power to regulate the conduct of the
corporations in their transactions with or as affecting the public (see(2)). Higgins J. regarded it as a
power to legislate with respect to corporations as corporations. (at p304)

39. The capacities and faculties of these corporations are unalterable by the Commonwealth (1909)
8 CLR, at p 395 . The power is, as are all the powers granted by s. 51, subject to the Constitution.
(at p304)

40. It is an independent power complete in itself. And, in my opinion, the power authorizes the
Commonwealth to govern and regulate the operation of these companies but would not authorize the
suppression of all such corporations or the nationalization of their activities. Thus, the carrying on
business in Australia by these corporations might be prohibited absolutely or except upon certain
conditions and the exercise of their powers in Australia might be regulated and so forth. Moreover,
the Constitution must be construed as one whole document (James v. The Commonwealth [1936]
UKPCHCA 4[1936] UKPCHCA 4; ; (1936) AC 578, at p 613; 55 CLR 1, at p 43 ) and it may well
be that this corporation power is confined to corporations that are not within the banking power. (at
p304)

41. Be this as it may, this power does not, I think, support the Banking Act 1947. The banking
power is the appropriate power and the one upon which reliance must be placed. It is unnecessary,
therefore, to refer again to this corporation power. Limitations upon power. (at p304)

42. The limitations upon Federal constitutional power, which have been relied upon in this case,
may now be examined. The States. (at p304)

43. "The federal character of the Australian Constitution," I said in Melbourne Corporation v. The
Commonwealth "carries implications of its own . . . the government of Australia is a dual system
based upon a separation of organs and of powers. The maintenance of the States and their powers is
as much the object of the Constitution as the maintenance of the Commonwealth and its powers.
Therefore it is beyond the power of either to abolish or destroy the other" (1947) 74 CLR, at p 70 ;
"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" (1947) 74 CLR at p
74 ." (at p305)

44. Three of the States contend that the Banking Act 1947 curtails their constitutional powers in a
substantial manner and interferes with the exercise of those powers. But I shall return later on to this
contention. Freedom of Trade. (at p305)

45. Trade, commerce and intercourse among the States, whether by means of internal carriage or
ocean navigation, shall be absolutely free. (at p305)

46. So s. 92 of the Constitution prescribes but judicial decisions have much weakened its operation.
(at p305)

47. It is now settled, I think, after some fluctuation in opinion, that s. 92 is an inhibition addressed
to the Parliaments of the Commonwealth and the States preventing them from legislating so as to
interfere with the freedom prescribed by the section. It gives no rights to the citizens of the
Commonwealth except the right to ignore and if necessary to procure the assistance of the judicial
power in resisting any such legislation (James v. South Australia [1927] HCA 32; (1927) 40 CLR 1,
at p 31 ; James v. The Commonwealth [1939] HCA 9[1939] HCA 9; ; (1939) 62 CLR 339, at pp
361, 362 ; James v. The Commonwealth [1936] UKPCHCA 4; (1936) AC 578; 55 CLR 1 ). Still the
freedom is not limited "to freedom from legislative control; it must equally include executive
control" (James v. The Commonwealth [1936] UKPCHCA 4; (1936) AC 578, at p 628; 55 CLR, at
p 56 ). But, doubtless, the expression trade, commerce and intercourse "describes the activities of
individuals. The object of s. 92 is to enable individuals to conduct their commercial dealings and
their personal intercourse with one another independently of State boundaries" (O. Gilpin Ltd. v.
Commissioner for Road Transport and Tramways (N.S.W.) [1935] HCA 8; (1935) 52 CLR 189, at p
211 ). It was said, however, that s. 92 relates only to the passage of goods or visible tangible things
and persons across the borders of the States and is wholly inapplicable to intangible things or
commercial intercourse across State borders. And it was claimed that the addition of the words
"whether by means of internal carriage or ocean navigation" in s. 92 supported this view. And so,
also, it was claimed that the opinion of the Judicial Committee in James v. The Commonwealth
[1936] HCA 32; (1936) AC 578; 55 CLR 1 was based upon this assumption. (at p305)

48. But I am unable to agree with the argument. (at p306)

49. Trade, commerce and intercourse among the States includes, in my opinion, not only the sale of
tangibles but also of intangibles by a person in one State to a person in another State and also the
transportation from one State to another of goods or persons and commercial intercourse whether by
air, telegraph, telephone, wireless or other means. This, I think, accords with the view taken in the
United States of America under the power in the American Constitution to regulate commerce with
foreign nations and among the several States and with the Indian tribes. The word "intercourse" in s.
92 is as applicable to commercial intercourse as to personal intercourse. Indeed, in the basic case in
the United States, Gibbons v. Ogden [1824] USSC 18; (1824) 22 US 1, at pp 189, 190 (6 Law Ed 1,
at p 68) Marshall C.J. said: "Commerce, undoubtedly, is traffic, but it is something more; it is
intercourse. It describes the commercial intercourse between nations, and parts of nations, in all its
branches, and is regulated by prescribing rules for carrying on that intercourse." It may be that the
word "intercourse" found its way into s. 92 of the Australian Constitution through some such
source. (at p306)

50. James v. Cowan (1932) AC 542; 47 CLR 386 dealt with the nature of the freedom prescribed by
s. 92 but not with the subject of that freedom. (at p306)

51. And the addition of the words "whether by means of internal carriage or ocean navigation" are
"not descriptive or limiting; they are to prevent limitation" (W. & A. McArthur Ltd. v. Queensland
[1920] HCA 77; (1920) 28 CLR 530, at p 550 ). (at p306)

52. The decisions of the United States Courts are not authoritative upon the interpretation of the
Australian Constitution. Thus the power given to Congress to regulate commerce has repeatedly
been declared, as to those subjects which require a general system of uniformity of regulation, to be
exclusive. In other matters, admitting of diversity of treatment according to the special requirements
of local conditions, the States may act within their respective jurisdictions until Congress sees fit to
act; and, when Congress does act, the exercise of its authority overrides all conflicting State
legislation (The Minnesota Rate Cases: Simpson v. Shepard [1913] USSC 200[1913] USSC 200; ;
(1913) 230 US 352, at pp 399, 400 (57 Law Ed 1511, at p 1541) ). (at p306)

53. No such doctrine exists in Australia. The powers of the Commonwealth and the States within the
limits of their constitutional powers are concurrent, but when the law of a State is inconsistent with
a law of the Commonwealth the latter prevails (Constitution, s. 109; James v. The Commonwealth
(1936) AC at p 611; 55 CLR, at p 41 ). Still, what is "commerce" has been thoroughly explored in
the United States of America and what is trade and commerce under the Australian Constitution are
indistinguishable descriptions of the same thing. And before "commerce" can be inter-State it must
be "commerce." (at p307)
54. Much light is thrown upon the whole subject in the judgments of the Supreme Court of the
United States and by text writers and others upon the commerce power in the Constitution of the
United States (See, for instance, Willoughby on The Constitutional Law of the United States, 2nd
ed. (1929), vol. 2, pp. 721-777; Willis on Constitutional Law pp. 281-304; Judson on The Law of
Interstate Commerce, 2nd ed. (1912); Prentice & Egan on The Commerce Clause of the Federal
Constitution; Constitution of United States (Annotated) to January 1938 complied pursuant to
resolutions of the Senate and the House of Representatives). (at p307)

55. The extent of the commerce power in the United States is well illustrated in a recent case before
the Supreme Court of the United States (United States v. South-Eastern Underwriters Association
[1944] USSC 116; (1944) 322 US 533 (88 Law Ed 1440) ). The question was whether the business
of entering into contracts in one State insuring against the risk of loss by fire of property in others
was in itself inter-State commerce. There were numerous decisions of the Court that insurance was
not commerce. But these decisions were overruled. The majority of the learned Justices accepted the
general description of "commerce" given by Marshall C.J. in Gibbons v. Ogden (1824) 22 US, at pp
189, 190 (6 Law Ed at, p 68) . And even those Justices who did not agree with the disposal of the
case made by the majority of the Court, in view of the prior decisions of the Court, agree that the
business in question in that case did constitute "commerce." (at p307)

56. Thus Frankfurter J. (1944) 322 US, at p 583 (88 Law Ed, at p 1474) : "The relations of the
insurance business to national commerce and finance . . . afford constitutional authority for
appropriate regulation by Congress of the business of insurance." (at p307)

57. And Jackson J. (1944) 322 US, at p 585 (88 Law Ed, at p 1475) : "The doctrine that insurance
business is not commerce always has been criticized as unrealistic, illogical, and inconsistent with
other" decisions. "As a matter of fact, modern insurance business, as usually conducted, is
commerce; and where it is conducted across State lines, it is in fact inter-State commerce. In
contemplation of law, however, insurance has acquired an established doctrinal status not based on
present-day facts. For constitutional purposes a fiction has been established, and long acted upon by
the Court, the states, and the Congress, that insurance is not commerce" (1944) 322 US, at pp 587,
588 (88 Law Ed, at p 1477) . (at p308)

58. Stone C.J. was more cautious: "The numerous and unvarying decisions of this Court . . . have
never denied that acts of inter-State commerce may be incidental to the business of writing and
performing contracts of insurance, or that those incidental acts are subject to the commerce power.
Our decisions on this subject have uniformly rested on the ground that the formation of an insurance
contract, even though it insures against risk of loss to property located in other states or moving in
inter-State commerce, is not inter-State commerce, and that although the incidents of inter-State
communication and transportation which often attend the formation and performance of an
insurance contract are inter-State commerce, they do not serve to render the business of insurance
itself inter-State commerce" (1944) 322 US, at p 567 (88 Law Ed, at p 1465) . (at p308)

59. In Nathan v. Louisiana [1850] USSC 7; (1850) 49 US 73 (12 Law Ed 992) the Supreme Court
of the United States held that a person engaged in buying and selling foreign bills of exchange was
not engaged in "commerce" but in supplying instruments of commerce and that a State tax on his
business was not an infringement of the constitutional power of Congress to regulate "commerce."
(at p308)

60. Despite this authority the decision in the Insurance Case (1944) 332 US 533 (88 Law Ed 1440)
suggests that in the United States the business of banking as usually conducted would now be
regarded as commerce or as involving acts or transactions in commerce which if conducted across
State lines would be inter-State commerce. Prentice & Egan The Commerce Clause of The Federal
Constitution (1898), at p. 48. comment upon the case: "To say that an inter-State bill of exchange is
merely evidence of the transfer of title to personal property located in another State is not only to
ignore the fact that money, as the circulating medium, is essential to all commerce." (at p308)

61. It is true that in the Australian Constitution the trade and commerce power, the banking power
and the insurance power are separately enumerated but that does not exclude banking and insurance
from the inhibition of s. 92 that trade, commerce and intercourse among the States shall be
absolutely free if the business of banking and insurance conducted across State lines be trade,
commerce or commercial intercourse. Among their multifarious functions bankers finance the sale
and purchase of goods and of commerce in general and they also issue, buy, sell and discount bills,
often against mercantile documents, transmit moneys and provide credits and engage in commercial
intercourse. Such transactions and acts, if conducted across State lines, fall within the general
description of trade, commerce and intercourse among the States, already stated. It is not every
transaction and act of bankers that belongs to inter-State trade but in Australia bankers do a
considerable business across State lines. It would be "unrealistic and illogical" to deny the character
of inter-State commerce to business so conducted. (at p309)

62. And it is that trade, commerce and intercourse that s. 92 requires shall be "absolutely free." But
that means "freedom as at the frontier" or in other words across State boundaries. It must be free
from all restraints, hindrances, obstructions, interferences and devices of every kind employed to
interfere with that freedom. Those restraints, hindrances and interferences may take many forms
such as customs and border duties, prohibitions of every kind, compulsory acquisitions of property
directed against inter-State trade, compulsory marketing schemes entirely restrictive of freedom of
action on the part of producers and the elimination of the business of inter-State transportation as
such in favour of a State undertaking and so forth (James v. Cowan (1932) AC 542; 47 CLR 386 ;
James v. The Commonwealth [1936] UKPCHCA 4; (1936) AC 578; 55 CLR 1 ; Peanut Board v.
Rockhampton Harbour Board [1933] HCA 11; (1933) 48 CLR 266 ; Australian National Airways
Pty. Ltd. v. The Commonwealth [1945] HCA 41[1945] HCA 41; ; (1945) 71 CLR 29 ). (at p309)

63. The actual restraint or burden may operate while the property is still in the State of origin
(James v. The Commonwealth [1936] HCA 32; (1936) AC 578; 55 CLR 1 ). "In every case," it was
said in James v. The Commonwealth (1936) AC, at p 631; 55 CLR, at p 59 "it must be a question of
fact whether there is an interference with this freedom of passage." But the question of fact is, like
some other matters of fact in the law, for the Court and not for the jury. The difficulties that arise in
the application of s. 92 to legislative and executive action arise, I think, at this point. James v. The
Commonwealth (1936) AC, at p 619; 55 CLR, at p 48 denied that the freedom prescribed by s. 92
was "freedom from all governmental control extending over the whole of any transaction which is
treated as having the characteristic of inter-State commerce" and substituted "freedom as at the
frontier" as the true criterion (1936) AC, at p 630; 55 CLR, at p 58 . (at p309)

64. In O. Gilpin Ltd. v. Commissioner for Road Transport and Tramways (N.S.W.) [1935] HCA 8;
(1935) 52 CLR 189 Dixon J. examined many cases decided in this Court and summed up his own
opinion in the following proposition: - "But, given an act or transaction which falls within the
conception of trade, commerce, or intercourse among the States and a restriction or burden
operating upon that act or transaction, it appears to me that it must be an infringement upon the
absolute freedom guaranteed by sec. 92 unless the restriction or burden is imposed in virtue of or in
reference to none of the essential qualities which are connoted by the description 'trade, commerce,
and intercourse among the States'" (1935) 52 CLR, at p 206 . (at p310)

65. It is not therefore "every regulation of commerce or of movement that involves a restriction or
burden constituting an impairment of freedom. Traffic regulations affecting the lighting and speed
of vehicles, tolls for the use of a bridge, prohibition of fraudulent descriptions upon goods, and
provisions for the safe carriage of dangerous things, supply examples" (1935) 52 CLR, at p 206 (Cf.
Home Benefits Pty. Ltd. v. Crafter [1939] HCA 12; (1939) 61 CLR 701 ; R. v. Connare; Ex parte
Wawn [1939] HCA 18[1939] HCA 18; ; (1939) 61 CLR 596 ; R. v. Martin; Ex parte Wawn [1939]
HCA 39; (1939) 62 CLR 457 ). (at p310)

66. That proposition of my brother Dixon runs counter, I believe, to several decisions of this Court,
notably, Ex parte Nelson (No. 1) [1928] HCA 33; (1928) 42 CLR 209 , and what are known as the
transport cases (R. v. Vizzard; Ex parte Hill [1933] HCA 62; (1933) 50 CLR 30 ; O. Gilpin Ltd. v.
Commissioner of Road Transport [1935] HCA 8; (1935) 52 CLR 189 ; Bessell v. Dayman (1935) 52
CLR 215 ; Duncan v. Vizzard [1935] HCA 43; (1935) 53 CLR 493 ; Riverina Transport Pty. Ltd. v.
Victoria [1937] HCA 33; (1937) 57 CLR 327 ; and to Hartley v. Walsh [1937] HCA 34; (1937) 57
CLR 372 and Milk Board (N.S.W.) v. Metropolitan Cream Pty. Ltd. [1939] HCA 28[1939] HCA 28;
; (1939) 62 CLR 116 ). And it is opposed to the generalization which is, I think, the prevailing view
in this Court that the legislation must be scrutinized in its entirety and its real object, true character
and real effect - its pith and substance - in the particular instance under discussion must be
determined (James v. Cowan (1932) AC 542; 47 CLR 386 ; Peanut Board v. Rockhampton Harbour
Board [1933] HCA 11; (1933) 48 CLR 266 ; Milk Board Case (1939) 62 CLR, at p 153 ). Or
perhaps to express the matter more shortly that legislative or executive action is obnoxious to s. 92
if it restrains or interferes with the freedom of trade and commerce among the States in some real
and substantial manner. But the freedom guaranteed by s. 92 is not an unrestricted privilege to
engage in business or to conduct it as one pleases. Unfortunately this generalization has led to many
opposite conclusions of "fact" in this Court. On the one hand it is claimed that the Peanut Case
[1933] HCA 11[1933] HCA 11; ; (1933) 48 CLR 266 has the approval of the Judicial Committee
and on the other that the Transport Cases have that approval. (at p311)

67. Neither claim is, I think, beyond question. The passage in James v. The Commonwealth (1936)
AC, at p 623; 55 CLR, at p 52 is guarded and not a clear and definite approval and in Gratwick v.
Johnson [1945] HCA 7; (1945) 70 CLR 1, at pp 17-19 will be found my reasons for thinking that
the Judicial Committee did not express approval or disapproval of the actual decisions in the
Transport Cases. (at p311)

68. Nelson's Case [1928] HCA 33; (1928) 42 CLR 209 may be compared with Tasmania v. Victoria
[1935] HCA 4; (1935) 52 CLR 157 , and the Peanut Board [1933] HCA 11; (1933) 48 CLR 266 and
the Air Line Cases [1945] HCA 41; ; (1945) 71 CLR 29 with Hartley v. Walsh [1937] HCA 34;
(1937) 57 CLR 372 and the Milk Board Case [1939] HCA 28; (1939) 62 CLR 116 . (at p311)

69. The Transport Cases including Willard v. Rawson [1933] HCA 12; (1933) 48 CLR 316 are
applications of the generalization. But if all the States legislated or acted in like manner then
freedom of inter-State transportation would be greatly hampered. I think the Transport Cases were
wrongly decided, they were not mere traffic regulations as I regard Willard's Case [1933] HCA 12;
(1933) 48 CLR 316 but a burden imposed directly and immediately upon the transport or movement
of passengers and goods whether engaged in domestic, inter-State or other trade and commerce. The
Banking Act 1947. (at p311)
70. Turning now to the Banking Act 1947. Part I. of the first Schedule sets out the names of eight
banks incorporated in Australia which I shall refer to as the Australian banks, Part II., three banks
incorporated in the United Kingdom which I shall refer to as the English banks, and Part III., three
banks incorporated elsewhere which I shall refer to as the foreign banks. These banks, often in
Australia called "the trading banks," are referred to in the Banking Act as private banks though the
Australian and English banks, at all events, are public or chartered companies. And these banks
have carried on the banking business of Australia for many years, one, at least, I believe, for more
than one hundred years. (at p311)

71. In 1911 the Commonwealth Bank was established by the Act 1911 No. 18 and it was authorized
to carry on, and has from its establishment carried on, inter alia, a general business of banking. But
it is now governed by the Commonwealth Bank Act 1945 (1945 No. 13). (at p311)

72. The Banking Act 1947 makes provision for: - (1) The purchase or acquisition by agreement of
all or any of the shares in the Australian and English banks by the Commonwealth Bank subject to
the approval of the Treasurer.(2) The compulsory acquisition of Australian shares in Australian
banks. (at p312)

73. Section 13 (1): "Where the Treasurer is satisfied that the majority in number of the shares in an

Australian private bank are Australian shares, the Treasurer may, by notice . . . declare that, upon a

date specified . . . the shares in that bank which are Australian shares . . . shall be vested in the

Commonwealth                                                        Bank."

"Australian shares" means shares situated, or deemed by law to be situated, in Australia. (at p312)

74. All other shares in that Australian bank which . . . become Australian shares are vested in the
Commonwealth Bank upon the date upon which they become Australian shares.

(3) The management of Australian banks. (at p312)

75. Upon the date specified as already mentioned the directors of the Australian bank in relation to
which the notice was given, cease, by force of the Act, to hold office and the Governor of the
Commonwealth Bank may with the approval of the Treasurer appoint directors in their stead. (at
p312)

76. Directors so appointed have full power to manage, direct and control the business and affairs of
the Australian bank of which they are directors and, in particular, have power to: -

(a) declare dividends;
(b) dispose of the business in Australia of that Australian
bank to the Commonwealth Bank;
(c) dispose of all or any of the other business of that Australian
bank. (at p312)

77. Further the Commonwealth Bank is for all purposes the holder of the shares which have been
purchased or acquired under the Act and shall be a member of that Australian bank in respect of
those shares.(4) The taking over by agreement with the Commonwealth Bank of the business in
Australia of any of the Australian, English or foreign banks mentioned in the Schedule.(5) The
compulsory taking over by the Commonwealth Bank of the business in Australia of any Australian,
English or foreign bank already mentioned which has not made an agreement for the taking over of
its business. (at p312)
78. And provisions are made for taking over Australian assets and liabilities, vesting assets,
novating liabilities and discharging the bank taken over from its obligation in respect of those
liabilities. "Australian assets" means assets situated, or deemed by law to be situated, in Australia
and "Australian liabilities" means liabilities situated, or deemed by law to be situated, in Australia.
(6) Compensation for property compulsorily acquired and the setting up of a Federal Court of
Claims with jurisdiction to hear and determine claims for compensation under the Act. (at p313)

79. The Commonwealth Bank, the Act provides, shall pay fair and reasonable compensation in
respect of the acquisition of shares by the Commonwealth Bank (s. 15). (at p313)

80. The Commonwealth Bank, the Act also provides, shall pay fair and reasonable compensation in
respect of the acquisition or taking over by the Commonwealth of the business in Australia of any
bank (s. 25). (7) Prohibition of the carrying on of banking business in Australia by the Australian,
English or foreign banks. (at p313)

81. Notwithstanding anything contained in any other law, or in any charter or other instrument, a
private bank shall not, after the commencement of this Act, carry on banking business in Australia
except as required by the Act (s. 46). (at p313)

82. But the Act requires each bank to carry on until the Treasurer by notice requires it to cease
carrying on banking business in Australia. (8) Protection and continuation in employment by the
Commonwealth Bank of the staff of banks taken over pursuant to the Act. (9) And there is a
declaration of legislative intent with respect to the divisibility or separability of the provisions of the
Act (s. 6). (at p313)

83. It provides a rule of construction that the legislature intended the provisions of the Act to be
divisible. (at p313)

84. But it is not, as has been said, an inexorable command and the presumption may be "overcome
by considerations which make evident the inseparability of its provisions or the clear probability
that the invalid part being eliminated the legislature would not have been satisfied with what
remains." "The presumption in favour of separability does not authorize the Court to give the
Statute an effect altogether different from that sought by the measure viewed as a whole" (R. v.
Poole; Ex parte Henry [1939] HCA 19; (1939) 61 CLR 634 ; cf. Williams v. Standard Oil Co. of
Louisiana [1929] USSC 23[1929] USSC 23; ; (1929) 278 US 235, at p 242 (73 Law Ed 287, at p
309) ; Railroad Retirement Board v. Alton Railroad Co. [1935] USSC 107; (1935) 295 US 330, at p
361 (79 Law Ed 1468, at p 1482) ;Carter v. Carter Coal Co. [1936] USSC 93; (1936) 298 US 238,
at pp 312, 334 (80 Law Ed 1160, at pp 1189, 1201) ; Attorney-General for Alberta v. Attorney-
General for Canada (1947) AC 503, at pp 519, 520 ). (at p313)

85. The several objects of the Act and the purpose of the powers in Divisions 2 and 3 of Part IV. of
the Act are stated in ss. 3 and 9 and are designed, I suppose, to relate the provisions of the Act to
some constitutional power. In the end, however, these provisions must find constitutional warrant in
some one or more of the enumerated powers conferred upon the Parliament of the Commonwealth
by the Constitution. And that warrant is found, so it is contended, in the acquisition power and the
banking power together or separately and the incidental power. Acquisition of Shares. (at p314)

86. The authority to acquire shares and to take over businesses of the trading banks by agreement
raises no difficulties. The Act confers upon the Commonwealth Bank the capacity so to acquire
shares and to take over businesses and there is nothing to prevent the proprietors or owners agreeing
to sell if they so desire upon agreed terms. But the purchaser - the Commonwealth Bank - can, in
such cases, stand in no better position than any other purchaser; it must take what the proprietor or
owner has and be subject to the memorandum and articles of association or other regulations of the
banking company. A compulsory purchase authorized under the Constitution stands in a somewhat
different position for no provisions in the regulations of the company prohibiting or restricting
alienation can prevail against the statutory authority. Still, in my opinion, such a purchase does not
in itself entitle the purchaser to ignore all the regulations of the banking company. The right the
purchaser acquires is a share in the capital of the company freed from all trusts, mortgages, charges,
liens, interests and other obligations affecting those shares (s. 13 (5)), and the incidental rights to be
exercised in accordance with the regulations of the company. (at p314)

87. The complete title to the shares is acquired upon the vesting thereof in the Commonwealth (cf.
The Commonwealth v. New South Wales [1923] HCA 34; (1923) 33 CLR 1, at pp 27, 28 ). And the
Act vests the shares in the Commonwealth Bank but, in my opinion, the regulations of the banking
companies govern the right of the Commonwealth Bank or its nominees to go upon the share
register as members: if they desire the advantages of registration by the banking company then they
must comply with the regulations of the company governing registration (cf. The Commonwealth v.
New South Wales (1923) 33 CLR 1 ). Thus, if authority were given to directors enabling them for
instance to refuse any transferee of whom they did not approve, then ordinarily the Courts would
not interfere with the exercise of their discretion unless the authority were exercised capriciously
and wantonly. In short, the Parliament of the Commonwealth cannot, under the banking power,
ignore the internal structure and regulations of the trading banks and shape that structure and those
regulations as it pleases. Legislation of that character would relate to companies or corporations, as
Higgins J. might have said, and not to banking (cf. Huddart, Parker & Co. Pty. Ltd. v. Moorehead
(1909) 8 CLR 330 ). (at p315)

88. Consequently s. 14 of the Banking Act 1947 is not a valid exercise of power. (at p315)

89. Still the compulsory acquisition of shares and of the businesses in Australia of the trading banks,
including inter-State banking, is within the plenary power of Parliament under the acquisition,
banking and incidental powers, but only if the purpose of the acquisition is banking, that just terms
are provided for the acquisition and that trade, commerce and intercourse among the States is
absolutely free. The purpose of the acquisition of the shares is to facilitate the control by the
Commonwealth Bank of the banking business in Australia of the banking companies and for the
purpose of furthering the expansion of the banking business of the Commonwealth. It was pointed
out that the acquisition of the shares in a company was one method of acquiring the business or the
control of the business of that company. Under the Banking Act, however, it is to be noticed that the
acquisition of shares in the Australian banks may be piecemeal. Shareholders in the Australian
banks are not bankers and shareholding cannot be described as banking though it does enable those
holding shares in banks to exercise, through their holdings, subject to the regulations of the banks,
some control over their operations. Nationalization and control of Australian banking was, it was
said, the aim of the provisions relating to the acquisition of shares and other property, but that
control was already established under the Banking Act 1945. Therefore the real aim and object of
the Act, it was contended, is not for any purpose of banking but for the purpose of acquiring for the
Commonwealth the profitable business of selected Australian banks. The provisions for the
management of the banks, the astounding penalties imposed by such sections as 24 (8), 46 (8), 59
and 60, and the case of Melbourne Corporation v. The Commonwealth [1947] HCA 26; (1947) 74
CLR 31 were referred to in support of this view. Doubtless the Court must ascertain the purpose of
the acquisition but that purpose must be discovered from the words of the Act and any relevant
surrounding circumstances and not by any other means. The argument has something of truth in it
but I put it on one side partly because the Court properly assumes the integrity of the legislative
body and presumes in favour of the validity of legislation until its violation of the Constitution is
clearly established and partly because of the provisions for compensation contained in the Act. Just
Terms. (at p316)

90. And that leads to the inquiry whether "just terms" are provided in the Banking Act 1947 for the
acquisition of shares in the Australian banks. It was contended that the Act makes no provision for
interest from the date of acquisition to the date of payment. It would not be just that the
Commonwealth Bank or any other body should at one and the same time enjoy the benefits flowing
from the acquisition of the shares, for instance, of profits earned in the business and those flowing
from unpaid compensation moneys. And yet it is plain, I think, in an acquisition under the Banking
Act 1947 that some considerable time must elapse in this case between the acquisition of the shares
and the assessment of compensation. It is clear, I think, that the acquisition power in the
Constitution enables the Parliament to make provisions for interest. That such a provision is just
there can be no doubt. But what is provided is that the bank shall pay fair and reasonable
compensation in respect of the acquisition of shares by the Commonwealth Bank. The compensation
is given in respect of the acquisition of the shares. Interest cannot be allowed as compensation.
There is nothing in the Act to attach an allowance of interest to it (Swift & Co. v. Board of Trade
(1925) AC 520 ; Newport Borough Council v. Monmouthshire Borough Council (1947) AC 520, at
pp 561-563 ; cf. Marine Board of Launceston v. Minister of State for the Navy (1945) 70 CLR 518
). (at p316)

91. The equitable principle stated in International Railway Co. v. Niagara Parks Commission (1941)
AC 328 has no bearing upon the present case, for specific performance would be an inappropriate
remedy in the circumstances of the case (cf. Marine Board of Launceston v. Minister of State for the
Navy (1945) 70 CLR, at p 529 ). (at p316)

92. This question has been considered in America and "just compensation" has there "a
constitutional connotation." It entitles the property owner to receive interest from the date of the
taking to the date of payment as part of his just compensation. However, as Lord Sumner remarked
in Swift's Case (1925) AC 520 the law of other countries has no bearing on the case. Ordinarily,
even in the United States, provision for payment of interest must be "affirmative, clear cut and
unambiguous." It is not enough that the terms might be construed to include interest (United States
v. Thayer-West Point Hotel Co. [1947] USSC 11[1947] USSC 11; ; (1947) 329 US 585 (91 Law Ed
521) ). "Just terms" in the present case require that a right to interest should be given and not some
merely discretionary authority to award interest. (at p317)

93. I should add that the Court of Claims established under the Banking Act 1947 is given
jurisdiction to hear and determine claims for compensation arising under the Act. It has no
jurisdiction other than that conferred upon it by the Act; it has no inherent or equitable jurisdiction;
it has no jurisdiction to award interest. (at p317)

94. Consequently, "just terms" have not been provided by the Banking Act 1947 for the acquisition
of shares in the Australian banks and the provisions for their acquisition are therefore invalid. (at
p317)

95. It was also said that "just terms" had not been provided because no provision was made for
shareholders' costs in asserting their claims for compensation before the Court of Claims. But that is
not a matter affecting justice as a term of acquisition and is no breach of the acquisition power. (at
p317)

96. And here it is convenient to dispose of an argument presented by the States that the Act does not
provide "just terms" for the acquisition of shares or the businesses in Australia of the trading banks.
It was said that the banks are possessed of assets of the value of many millions of pounds which the
Commonwealth acquires but must provide the full pecuniary value thereof as compensation for the
owners. And that the Commonwealth can only discharge that obligation by means of loans, the issue
of Treasury Bonds or of paper money by the Commonwealth Bank or out of the assets acquired. But
this must involve further inflation of a depreciating currency and a ruinous fall in the value of
money. These economic considerations are not, I think, matters that concern the Court or which it
can consider. The Court cannot investigate the value of the lawful currency of Australia. The
Commonwealth Bank, as any other body, may discharge its obligations in lawful currency. If it does
so that is a good discharge of its obligations. Doubtless, a depreciated or depreciating currency
entails great hardships but the Court cannot alter, amend or mitigate the law relating to the currency.
The argument is untenable. Management of Private Banks. (at p317)

97. The provisions for the management of the Australian banks and their relation to the provision of
s. 13 for the acquisition of shares in those banks next fall for consideration. (at p317)

98. Upon the notice given under s. 13 and the vesting of shares pursuant to the section, the directors
of the Australian banks affected by the notice cease to hold office; new directors may be appointed
by the Governor of the Commonwealth Bank, with the approval of the Treasurer, in their place
notwithstanding any lack of qualification and the directors so appointed have full power to manage,
direct and control the business and affairs of the Australian banks of which they are directors and in
particular have power to declare dividends, dispose of the business in Australia of that bank to the
Commonwealth Bank and to dispose of all or any of the other business of that Australian bank. The
scheme is a connected whole which cannot, notwithstanding s. 6 of the Act, be severed. The
presumption of severability established by that section is overcome by the evident inseparability of
the provisions themselves. The invalidity of s. 13 relating to the acquisition of shares brings down
the provisions relating to the management of private banks but the invalidity of the provisions for
the management of private banks would likewise bring down the provisions relating to the
acquisition of shares. (at p318)

99. Ordinarily those holding shares may, through and by means of their shareholdings, remove
directors and appoint others in their place. But that flows from their rights and voting power
incident to the ownership of the shares and the regulations of the particular company. Here the
directors are removed and others appointed in their place compulsorily without any exercise of
shareholding rights. But, as I said before, the constitutional powers with respect to the acquisition of
property, and banking and the incidental power together or separately do not authorize the
Parliament of the Commonwealth to ignore the internal structure and organization of the trading
banks and shape that structure as it pleases. (at p318)

100. Shares may be acquired by agreement or compulsorily and if so the rights attaching to those
shares may be exercised in accordance with the regulations of the bank. It is another matter,
however, when those rights are not exercised but the Parliament removes directors, appoints new
directors in their places and gives them full control of the business. In my opinion, that is not a law
with respect to banking but a law with respect to the internal structure and organization of
corporations or banks, which is a matter for regulation by the incorporating authority. (at p318)

101. But if these provisions can be supported under the constitutional powers already mentioned,
then they raise in another form the question whether "just terms" have been provided for the
acquisition of property of the Australian banks. The substance of the matter is, as already appears,
that the directors of Australian banks are removed from office and control is given to directors
appointed by the Governor of the Commonwealth Bank with the approval of the Treasurer with
power to dispose of the business in Australia of any Australian bank to the Commonwealth Bank.
Further the directors appointed pursuant to the Act are also authorized "to dispose of all or any of
the other business of that Australian" bank. (at p319)

102. In my opinion, these provisions constitute an acquistion or attempted acquistion of the property
of Australian banks. By this means, Australian banks and their shareholders are deprived of any
bargaining power through their own directorate and the Commonwealth Bank may acquire the
business in Australia of any Australian bank upon terms agreed between the directors appointed
under the Act and the Commonwealth Bank. And "all or any of the other business of that
Australian" bank may be disposed of by the directors appointed under the Act at amounts or values
fixed by themselves. But, in my opinion, the Australian banks and their shareholders are entitled to
a fair ascertainment of the value of their property and not an arbitrary fixation by the authority
disposing of or acquiring that property. (at p319)

103. In my opinion, the provisions of part IV., Division 3, Management of Private Banks are invalid
because "just terms" of acquisition have not been provided in accordance with the constitutional
requirement. Taking over of Businesses. (at p319)

104. The provisions for taking over the business of the Australian, English and foreign banks in Part
IV., Division 4 fall here for consideration. (at p319)

105. Postponing for the moment any observations upon the provisions of s. 22, especially sub-s. (8),
and s. 23, I come to s. 24 which provides for the taking over in Australia of the business of banks
just mentioned. (at p319)

106. Standing alone, I should be prepared to say, as already indicated, that the acquisition and
banking powers and the incidental power conferred upon the Parliament by the Constitution
authorize it to legislate for the acquisition and taking over as a going concern the businesses in
Australia of banking companies and of all or any assets and liabilities in connection with such
businesses. But I am unable to agree that these powers enable the Parliament to legislate so as to
effect a novation of the obligations and contracts of the banking companies with their creditors.
Legislation that the Commonwealth Bank shall pay, satisfy and discharge all the liabilities of the
banking companies, indemnify and keep them harmless in respect of such liabilities is one thing but
legislation that the banking companies shall be discharged from those liabilities and that they shall
become the liabilities of the Commonwealth Bank or of any other institution is another. Yet, that is
precisely the effect of s. 24, sub-ss. (5) and (7). (at p320)

107. The constitutional powers of the Parliament do not enable it to convert the creditors of the
banking companies into creditors of the Commonwealth Bank or any other institution and create the
relationship between them of creditor and debtor. And the provisions with respect to the liabilities of
the banking companies cannot, I think, be severed from the rest of the section. And these
constitutional powers also require that legislation for the acquisition of property shall provide "just
terms." As in the case of provision for the acquisition of shares in Australian banks so in the case of
taking over the business in Australia of the banks, already mentioned, no provision is made for the
payment of interest from the date of acquisition of the business to the date of payment. A profit-
earning business or concern is taken over and vested in the Commonwealth Bank. It is not just that
the Commonwealth Bank or any other institution should at one and the same time enjoy the benefits
flowing from possession of the property taken over and those flowing from possession of purchase
or compensation money. (at p320)

108. A strange provision is found in s. 23 of the Banking Act 1947. Where an agreement has been
made by any private bank under s. 22 relief is given from tax upon incomes or profits but if no
agreement has been made then the banking companies which have not agreed are not relieved from
tax upon incomes or profits. It obviously was passed for the purpose of putting pressure upon the
banking companies. It was not suggested, during the long argument of this case, that it involved any
contravention of the constitutional provision requiring "just terms" in respect of the acquisition of
property. Therefore, I pass it by. "Just terms" have not been provided for the taking over of the
businesses of the Australian, English and foreign banks. For these various reasons the provisions of
s. 24 of the Banking Act 1947 fail and are invalid. (at p320)

109. Here, I would add, in relation to s. 22 of the Act that I see no objection to an agreement
between the Australian, English and foreign banks and the Commonwealth Bank for the acquisition
of the business of any of those banks as a going concern but I do not think that sub-s. (8) (b) and (d)
can novate the liabilities of the banks, without the agreement of creditors as sub-s. (8) (b) and (d)
provide.Compensation. (at p321)

110. Another attack has been made upon the validity of the Banking Act 1947 connected with the
Federal Court of Claims and the assessment of compensation. (at p321)

111. The Constitution, s. 75, provides that in all matters in which the Commonwealth or a person
suing or being sued on behalf of the Commonwealth is a party the High Court shall have original
jurisdiction. The jurisdiction so conferred upon the High Court cannot be taken away or withdrawn
by the Parliament. It is a constitutional provision in the same position as the provision contained in
s. 75 (v.) in relation to mandamus, prohibition and injunction (See R. v. Commonwealth Court of
Conciliation and Arbitration; Ex parte Brisbane Tramways Co. Ltd. [1914] HCA 15; (1914) 18 CLR
54 ). (at p321)

112. The compensation under the Banking Act 1947 is payable by the Commonwealth Bank (See ss.
15 and 25, Part VI., Divisions 1 and 2). And it is argued that the Commonwealth Bank is but an
agency or instrumentality of the Commonwealth and consequently that the High Court has original
jurisdiction in any claim for compensation against the Bank because that would be a matter in which
the Commonwealth was a party or the Bank was being sued as a party on behalf of the
Commonwealth. Consequently, it is said that the Banking Act 1947 is invalid in attempting to
withdraw that jurisdiction and providing that claims for compensation shall be determined and
ascertained by the Federal Court of Claims and in no other manner. (at p321)

113. In 1925 in an unreported case the question was whether the War Service Homes Commissioner,
a body corporate established under the War Service Homes Act, was a party suing on behalf of the
Commonwealth. I held that he was, because he was but an agency of instrumentality of the
Commonwealth (War Service Homes Commissioner v. Kirkpatrick (1925) Unreported ). The fact
that the Commissioner was a body corporate did not prevent him being an agent or instrumentality
of the Commonwealth (Repatriation Commission v. Kirkland [1923] HCA 18; (1923) 32 CLR 1, at
p 15 ). And the fact that the Commonwealth was not a party on record did not exclude the original
jurisdiction conferred upon this Court by s. 75 (iii.) in matters in which a person suing or being sued
on behalf of the Commonwealth was a party. I adhere to the view I took in Kirkpatrick's Case
(1925) Unreported . (at p322)

114. Considerable light is thrown, as Higgins J. said in R. v. Murray; Ex parte The Commonwealth
[1916] HCA 58; (1916) 22 CLR 437, at p 467 upon s. 75 (iii.) by the Constitution of the United
States and decisions given in relation to its provisions. Under that Constitution judicial power
extends, inter alia, to "controversies to which the United States shall be a party." The United States
may not be sued in the courts of that country without its consent. That position is met in Australia
by the provisions of the Judiciary Act 1903-1947 (Baume v. The Commonwealth [1906] HCA 92;
(1906) 4 CLR 97 ); Pitcher v. Federal Capital Commission [1928] HCA 44; (1928) 41 CLR 385 ).
But in cases in which the United States can be sued "the question whether the United States is in
legal effect a party to the controversy is not always determined by the fact that it is not named as a
party on record, but by the effect of the judgment or decree which can be rendered" (See
Constitution of the United States (Annotated) published pursuant to resolutions of the Senate and
House of Representatives, p. 478). (at p322)

115. It was, no doubt, because of certain American decisions, said Higgins J., that in s. 75 (iii.) of
the Australian Constitution the words were added, "or a person suing or being sued on behalf of the
Commonwealth" (R. v. Murray; Ex parte The Commonwealth (1916) 22 CLR, at p 468 ). (at p322)

116. And, in my opinion, if the Commonwealth Bank be an agency or instrumentality of the
Commonwealth in relation to its function and in particular in relation to the acquisitions the subject
of the legislative provisions in the Banking Act 1947, then the original jurisdiction of this Court in
respect of claims for compensation is established and cannot be taken away as the Banking Act 1947
enacts. That it is such an agency or instrumentality is manifest, I think, from the Commonwealth
Bank Act 1945 (No. 13 of 1945), the Banking Act 1945 (No. 14 of 1945) and the Banking Act
1947. (at p322)

117. In 1911 "a Commonwealth Bank, to be called the Commonwealth Bank of Australia," was
established without corporators (Act No. 18 of 1911). Its existence is continued by the
Commonwealth Bank Act 1945, s. 7. It is managed by a Governor appointed by the Commonwealth
government and its monetary and banking policy is subject to political and governmental direction.
(at p322)

118. The capital of the bank was twenty million pounds provided in part out of moneys provided by
the Commonwealth (See Act No. 15 of 1924, s. 5). But its capital is now governed by the
Commonwealth Bank Act 1945. That of the General Banking Division is the aggregate of sums
provided from the capital and reserve fund of the Commonwealth Bank and other sums transferred
from the General Banking Reserve fund and from profits transferred from the General Banking
Division to capital account. One half of those net profits is payable to the National Debt Sinking
Fund. The property, income and operation of the Bank are not liable and shall be deemed never to
have been liable to income tax or land tax under any law of the Commonwealth or to taxation under
any law of a State to which the Commonwealth is not subject (Commonwealth Bank Act 1945, s.
163). Many other functions are also exercised by the Commonwealth Bank under that Act with
respect to rural credits, mortgages and industrial finance. (at p323)
119. But I shall not go into all the details of the powers and functions of the Bank which may be
found at large in the Acts, already mentioned, for what I have said is enough, I think, to establish
that the Commonwealth Bank is an agency or instrumentality of the Commonwealth. (at p323)

120. The provision in the Banking Act 1947 giving the Federal Court of Claims exclusive
jurisdiction in respect of claims for compensation cannot, therefore, operate to oust the jurisdiction
of the High Court under s. 75 (iii.) of the Constitution. The consequence is that the whole of the
provisions of the Act for the assessment of compensation in respect of the acquisition of shares and
assets are invalid for the presumption of severability is overcome by the nature of the provision
itself. (at p323)

121. Compensation is to be assessed by the Federal Court of Claims and not in any other manner.
The Court cannot rewrite that provision and give it an effect entirely different, namely, that
compensation may be assessed by the High Court. And the invalidity of the provision for the
assessment of compensation necessarily, in my opinion, brings down in its train the provisions for
the acquisition of shares in Australian banks and the taking over of the business of the banking
corporations mentioned in the Act for there is then no provision under which the compensation
provided for in ss. 15 and 25 can be assessed. The Act is explicit that the compensation shall be
assessed by the Federal Court of Claims and in no other manner.Prohibition of the Carrying on of
Banking Business. (at p323)

122. The provisions of Part VII. of the Banking Act 1947 also require consideration. (at p323)

123. Those provisions prohibit the carrying on of banking business in Australia by any of the
Australian, English and foreign banks mentioned in the Schedule. (at p324)

124. The question is whether those provisions contravene the constitutional requirement of s. 92 that
trade, commerce and intercourse among the States shall be absolutely free. (at p324)

125. It appears to me that the provisions are so connected and linked up with the provisions for the
acquisition of shares and businesses of private banks that they necessarily fall with those provisions.
The presumption of severability raised by s. 6 of the Act is overcome, to my mind, by
considerations and consequences that make evident their inseparability. They are in their nature
ancillary to the acquisition of the shares and businesses of the banks dealt with in earlier sections of
the Act. And putting into operation the provisions of Part VII. of the Act would reduce to chaos the
trade and commerce of Australia unless the businesses of the banks were compulsorily acquired or
the banks under pressure agreed to make them over to the Commonwealth. (at p324)

126. A court is not required to attribute such an intention to Parliament if another construction is
open. (at p324)

127. Let it be assumed, however, that the provisions of Part VII. are severable from the other
provisions of the Act. Then the Australian, English and foreign banks are prohibited from carrying
on banking business in Australia except as required in Part VII. and those banks are required to
carry on until the Treasurer gives notice requiring them to cease. The notice may be given to all or
any one or more of the banks. Already, I have expressed the opinion that the business of banking as
usually conducted is part of the trade and commerce of Australia and when conducted across State
lines forms part of trade, commerce and intercourse among the States. The Banking Act 1947
prohibits all such business on the part of the banks, domestic, inter-State and foreign. And it is not
possible to divide the business of banking into compartments; it is one whole and nation-wide. (at
p324)

128. Yet the Banking Act 1947 prohibits the whole of that business irrespective of "such matters as
defence . . . prevention of famine, disease and the like" reserved for consideration in James v.
Cowan (1932) AC, at p 559; 47 CLR, at p 397 . "The object of s. 92, is," as I said in the case of
Australian National Airways Ltd. v. The Commonwealth (1945) 71 CLR, at p 78 , "to maintain
freedom of inter-State competition - the open and not the closed door - absolute freedom of inter-
State trade and commerce." (at p324)

129. In my opinion, the Banking Act of 1947 closes that door and excludes the banks from the
business of inter-State banking in Australia. That, I think, is inconsistent with the provisions of s. 92
of the Constitution, and with the reasons of their Lordships of the Judicial Committee in James v.
Cowan (1932) AC 542; 47 CLR 386 ; James v. The Commonwealth (1936) AC 578; 55 CLR 1 and
of this Court in Peanut Board v. Rockhampton Harbour Board [1933] HCA 11; (1933) 48 CLR 266
and Australian National Airways Ltd. v. The Commonwealth [1945] HCA 41; (1945) 71 CLR 29 .
(at p325)

130. Incidentally, the provision of Part VII. of the Banking Act 1947 standing alone and severed
from the other provisions of the Act would result in the banks and their shareholders being deprived
of their property without any compensation whatever. That also tends to support the view I have that
Part VII. cannot be severed from the provisions of the Act relating to the acquisition of shares and
the business of the banking companies. (at p325)

131. Part VII. of the Banking Act 1947 is invalid and, in my opinion, brings down in its train the
connected or linked provisions relating to the acquisition of shares and the businesses of the banking
companies.
Protection of Staff. (at p325)

132. The invalidity of the various provisions of the Banking Act of 1947, already mentioned, render
the provisions of Part VIII. of the Banking Act 1947 inoperative and it is unnecessary, therefore, to
further consider them.
General. (at p325)

133. The provisions of Part IX., General, likewise become inoperative but ss. 59-62 necessarily fail
with the provisions of the Act which are invalid.
The States. (at p325)

134. All that remains for consideration is the contention of the States that the Banking Act of 1947
curtails in a substantial manner the exercise by them of their constitutional powers and functions and
also contravenes the provisions of the Financial Agreement scheduled to the Financial Agreement
Act 1944 (No. 46 of 1944) which obtain constitutional force under an amendment to the
Constitution now appearing in s. 105A of that instrument. (at p325)

135. In my opinion, the contentions are untenable. (at p325)

136. If the Parliament of the Commonwealth has power to enact the Banking Act of 1947 no
constitutional power or function of a State is curtailed or impeded. The States can, through their
own banks, provide their own financial facilities or resort to the general banking system otherwise
established. The Melbourne Corporation Case [1947] HCA 26; (1947) 74 CLR 31 is distinguishable
because there the States were subjected to a particular direction. (at p326)

137. The Financial Agreement Act contemplates the borrowings by the States from various
institutions, including banks, and gives some flexibility in the working of that Agreement. But that
it imposes any constitutional restriction upon the Commonwealth to maintain financial institutions
as they existed at the time of the agreement and so to keep them that the States should not be
hindered or inconvenienced in their arrangements with financial institutions is a hopeless
construction, I think, of the Agreement and hopeless also, I think, as a business arrangement. (at
p326)

138. Summarizing my conclusions the following provisions of the Banking Act 1947 are invalid: -
Part IV., Division 2, except in so far as it provides for the acquisition of shares by agreement.

       Part IV., Division 3, the management of banks, is wholly invalid.
       Part IV., Division 4, taking over of businesses of banks, is invalid except

so far as it provides for the acquisition of such businesses by agreement.

Part VI., assessment of compensation is wholly invalid.
Part VII., is wholly invalid.
Part VIII., protection of rights of persons employed by private banks, is

inoperative.
Part IX., is inoperative except in so far as the provisions thereof can be applied to the acquisition of
shares or businesses by agreement and in any case ss. 59, 60 and 62 are invalid. (at p326)

139. Declarations should be made accordingly and ancillary relief granted by way of injunction. (at
p326)

DIXON J. The purpose of all these five actions is to obtain a decision that the Banking Act 1947 or
its more material provisions are unconstitutional and void. "Unconstitutional" means beyond the
powers which the Constitution affirmatively grants to the Commonwealth Parliament or contrary to
the restrictions or limitations which the Constitution imposes upon them. (at p326)

2. The Banking Act 1947 is an enactment of sixty-two sections conferring a variety of powers,
sometimes upon the Treasurer, sometimes upon the Governor of the Commonwealth Bank, and
sometimes upon the Commonwealth Bank itself, and containing a number of auxiliary and ancillary
provisions and provisions dealing with matters consequential upon the exercise of one or other or all
of the powers. The Act is evidently the product of much ingenuity and resource upon the part of
those who drew it. The result is a measure of anything but a simple description, one that seems
rather to exploit the possible uses of Federal power than to try to exclude any constitutional
questions except such as arise necessarily from the character of the banking power or from the
presence of s. 92 in the Constitution and are therefore inseparable from any pursuit of the end in
view. (at p327)

3. It is usual in dealing with the constitutional validity of a statute to begin with some account of the
manner in which it is constructed and what it provides, in order to show its relation to legislative
power and what are the constitutional questions to which its nature and characteristics give rise. But
to do this adequately with respect to the Banking Act 1947 would mean a prolonged examination,
not simply of its general plan, but of the nature and specific features of a number of powers and of
their interaction, both necessary and possible, and, what is worse, of the combinations in which they
might conceivably be called into use. I shall therefore do no more than state at this point the chief
objects pursued by the main parts of the Act and, when I come to deal with particular questions of
validity turning upon the character of specific provisions, I shall then describe them so far as may
seem necessary. Otherwise I shall assume that the text of the statute when studied has, or will have,
told its own somewhat intricate story. The principal objects to which the provisions of the Act are
addressed may be indicated briefly. In the first place, its application is confined to a list of what it
calls "private banks," an expression meaning the corporations or companies carrying on banking.
The list comprises all the institutions carrying on business in Australia which are commonly called
trading banks. These private banks, as the Act calls them, are divided into those incorporated in
Australia, those incorporated in the United Kingdom and those incorporated elsewhere. The
Commonwealth Bank is authorized to purchase by agreement shares in a bank incorporated in
Australia or in the United Kingdom. The Treasurer must approve. Shares in an Australian bank so
purchased are, by force of the Act and in spite of anything the articles of association may say, vested
in the Commonwealth Bank, which thereupon becomes a member of the company. This is the first
operative provision (ss. 12, 14, 10). Next, the Treasurer is enabled to publish a notice in respect of
any bank incorporated in Australia that on a named date the shares situated in Australia shall vest in
the Commonwealth Bank. The consequences are twofold. On the expiry of the notice shares then on
the Australian register, or afterwards coming upon it, vest in the Commonwealth Bank which, as
before, becomes a member of the company, notwithstanding the articles of association. At the same
time the directors are removed and nominees of the Governor of the Commonwealth Bank,
approved by the Treasurer, take the place of the directors and assume all the powers of the company
(ss. 13, 14, 10, 17-19). In the third place, provision is made for the purchase by the Commonwealth
Bank by agreement or, in default of agreement, compulsorily, of the business in Australia of any
private bank. The acquisition is the consequence of a notice by the Treasurer, upon whose discretion
the exercise of the power depends. The acquisition of the business in Australia includes assets and
liabilities which have or afterwards obtain a situation in Australia. The transfer of non-Australian
assets may be required. A private bank is prohibited from carrying on banking business in Australia
when its business is thus acquired (ss. 22, 24, 46 (1)-(3)). Fourthly, the Treasurer is armed with a
discretionary power to forbid a private bank from carrying on banking business, a power that is
independent of any acquisition of assets or shares. Fifthly, a provision is made for compensation for
the acquisition of shares or assets (ss. 15, 25, 37-41, 42-45). A Court of Claims is set up with
exclusive jurisdiction over claims for compensation (ss. 26-36, 40 (2) and (5), 42). Seventhly, there
are elaborate provisions respecting the staff of banks whose business or shares are acquired, the
general purport of which is to continue the officers in the employment of the Commonwealth Bank
without prejudicing the rights accruing to them in their former service (ss. 47-55). (at p328)

4. A governing consideration in an examination of the validity of the provisions by which the
purposes indicated by the foregoing summary are worked out must be that the powers are all
conferred in terms which insure that each of them is exercisable independently of every other power
and that each of them is exercisable against any one bank to the exclusion of other banks. At the
same time, each power may be exercised simultaneously against all the Australian banks and, except
for the acquisition of shares and concomitant replacement of directors, against all the English banks.
Again, the powers of prohibiting the carrying on of banking business, of acquiring shares and
displacing directors and of taking over the business may, as I think, be exercised cumulatively in
relation to a private bank or one or more of these powers may be exercised and not the others.
Further, the Act does not concern itself with any question of time. It contains nothing which would
make it impossible to put all the powers into execution against all the banks at once or to defer
doing so indefinitely or to allow any interval to elapse between dealing with different banks or using
different powers against one bank. It will be seen therefore that for a court that must consider the
powers which the Act describes and not any intention as to their use that may be entertained on the
part of the Executive it is not enough that a power conferred by the Act, exercisable by itself, would
find support in the Constitution. Its validity must also be examined on the footing that it is exercised
in combination with others. And e converso it would not be enough if the conclusion were that, by a
simultaneous use of certain of the powers given by the Act, a government monopoly of banking
might be set up and an orderly transition from the present system accomplished, and that such a
thing might be within power. It would still be necessary to consider the validity of the provisions on
the footing that the powers were exercised separately and the banks were dealt with piecemeal. (at
p329)

5. The Act cannot be supported simply on the footing that it is one to accomplish the immediate
setting up of a governmental monopoly in banking and otherwise to do no more than to provide for
matters incidental to that purpose, that is to say, to provide the means by which an object of such a
character might be effected and the dislocation and disturbance that might otherwise attend the
change avoided. For in point of law the provisions of the Act, if valid, would make other courses
possible and authorize the pursuit of other ends. (at p329)

6. Of the foregoing considerations the last is more material to the justification of the provisions of
the Act under s. 51 (xiii.) of the Constitution; but, for my part, it is not upon that paragraph that my
decision depends. Speaking generally, however, they are considerations which must in different
ways affect the question of the constitutionality of this or that provision of the Act. (at p329)

7. The attack upon the validity of the Act is supported by contentions which are of two descriptions.
Some of them are so fundamental, that if sound, they would annihilate the Act independently of its
detailed structure. Others depend upon the manner in which the Act is constructed, and some of
these involve a question of the operation of s. 6, which declares an intention that the provisions of
the Act shall be separable. I have formed the conclusion, for various reasons the greater number of
which may be thought to be of the second description, that certain cardinal provisions of the Act
cannot be upheld as valid, namely s. 13 (3) and (4), ss. 17-19, s. 24, ss. 39 and 40, ss. 42-44 and s.
46 (4)-(8). The source of their invalidity lies in s. 51 (xxxi.) or s. 92 of the Constitution. I shall set
out with some fullness the reasoning by which I have been led to adopt this conclusion, and I shall
explain the consequences upon some other provisions. The result of my opinion is the failure of the
more essential parts of the Act, as distinguished from incidental or subsidiary provisions. In these
circumstances any expression of my opinion on the many contentions raised which do not enter into
the grounds of the conclusion I have just stated can form no part of my ratio decidendi. I shall
therefore not embark upon any full examination of these contentions ; but I think that, before taking
up the matters which govern my ultimate decision, I should say something about certain of the more
basal grounds upon which the plaintiffs impeached the Act and why I have not accepted them. (at
p330)

8. Although s. 51 (xx.) of the Constitution was relied upon by the Commonwealth as an alternative
source of power in itself sufficient to sustain much of the Act, it is evident that the legislation
primarily rests upon par. (xiii.) of s. 51, combined, of course, with par. (xxxi.) to sustain the
expropriation of shares or assets, and with ss. 71, 77 (1), 78 and 79 to sustain the erection of a Court
of Claims. The sufficiency of s. 51 (xiii.) for this purpose is denied, and if the denial were well
founded, the Act could only be supported by the very widest interpretation of par. (xx.). The
considerations advanced for a limited construction of par. (xiii.) are of two sorts. There are general
considerations found in the nature of the subject matter, banking, and in the place it takes in the
social and commercial organization of the community. Then there are particular considerations
arising from the context, that is to say, from what the paragraph is expressed to cover besides the
form of the exception, and the terms employed. Banking describes a well-understood activity which
in one form or another has been found in modern times to be indispensable to the needs of any
highly organized western community. It is not a business or operation that calls for suppression or
restriction. Support, guidance, regulation, and superintendence might be necessary. But it would be
contrary to common sense to suppose that banking would be the subject of total prohibition. Then,
beginning thus, the argument goes on to maintain that banking depends on a consensual relation
between banker and customer. That is its essence, so it was contended. Such were the general
considerations adduced. Upon the terms of the paragraph itself a number of points was made. First,
the word is "banking," not "banks" - the activity, not the bodies carrying it on - a word, it was said,
descriptive of a continuing activity to be governed, not stopped. "State banking" too suggests
continuity; "extending" necessarily implies a continuing subject, proper for recurrent regulation. A
second point was that the very idea of excepting "State banking" implied an assumption that it
would exist as part of a system of banks. A third point was that the addition of "the incorporation of
banks" and the use of the word "also" showed clearly that the word "banking" does not describe a
legislative subject matter extending to the incorporation of the banks that carry on the activity.
Accordingly "banking" is not used as the name of a wide field of legislation extending from the
establishment of the bodies to act as bankers to the suppression of all but government banking.
Rather it refers to the exercise of a trade or business to be regulated. Then reliance was placed upon
the addition to the power of the subject of the "issue of paper money," governed likewise by the
word "also." The deduction drawn from this was that banking was conceived as depending on the
relation of banker and customer and therefore as not necessarily extending to the issue of bank
notes. (at p331)

9. From all this the conclusion was drawn that the legislative power over banking is, so to speak, to
govern the thing "salva rei substantia," and does not authorize the suppression of banking, either
totally or with the exception of government banking. Another conclusion drawn was that banking
depends on a consensual relation and, further, that the transactions are between subject and subject
as distinguished from government and subject. I shall not go into the applications which were made
of these propositions in order to show that the provisions of the Act relating to the acquisition of
shares, the replacement of directors, the acquisition of assets, the taking over of liabilities and the
prohibition of the carrying on of banking business fell outside the power. It will suffice to say that,
according to the contention, nothing but a power to suppress banking completely would authorize
the bestowal upon the Treasurer of an unlimited and possibly arbitrary discretion to close any or all
trading banks; that the compulsory transfer to the Commonwealth Bank of liabilities to customers
and of their accounts is inconsistent with the consensual character ascribed to the relation of banker
and customer and so is the provision as to trading banks carrying on business pending acquisition.
(at p331)

10. It must be acknowledged that the cumulative weight is considerable of the matters upon which
reliance is placed as evidence that the banking power is not a wide one. I do not know that the
weight is diminished by the history of the paragraph, which seems to have been taken, save for a
reference to State banking, from s. 91 (15) of the British North America Act 1867. It may be
suspected that not much consideration was given to the material expressions borrowed. The form of
the Canadian clause was doubtless in part the result of the experience of the neighbouring Union.
Under the American Constitution the power to incorporate banks had been founded upon
implication. The issue of paper money was there a contemporaneous question, one which was
agitated for some years after 1867. It well may be that the framers of the Australian Constitution
instinctively assumed that banking would not form a subject of prohibition, that it would be carried
on by trading banks and that the relation of banker and customer would remain consensual. The
assumption perhaps accounts for the form and content of par. (xiii.). But the assumptions made in
framing a power and the restrictive intentions which it expresses or embodies are two very different
things. (at p332)

11. To my mind the argument is answered by the principles of constitutional interpretation which
this Court adopted early in its history and from which, I believe, it has never intentionally departed.
(at p332)

12. They are well expressed in a passage from the judgment of O'Connor J. in the Jumbunna Coal
Mine, No Liability v. Victorian Coal Miners' Association (1908) 6 CLR 309, at pp 367, 368 which I
shall quote: - "Where it becomes a question of construing words used in conferring a power of that
kind on the Commonwealth Parliament, it must always be remembered that we are interpreting a
Constitution broad and general in its terms, intended to apply to the varying conditions which the
development of our community must involve. For that reason, where the question is whether the
Constitution has used an expression in the wider or in the narrower sense, the Court should, in my
opinion, always lean to the broader interpretation unless there is something in the context or in the
rest of the Constitution to indicate that the narrower interpretation will best carry out its object and
purpose." (at p332)

13. The foundation of these principles is expressed by Higgins J. in Attorney-General for New

South Wales v. Brewery Employes Union of New South Wales [1908] HCA 94; (1908) 6 CLR 469,

at pp 611, 612 where he says, "although we are to interpret the words of the Constitution on the

same principles of interpretation as we apply to any ordinary law, these very principles of

interpretation compel us to take into account the nature and scope of the Act that we are interpreting

- to remember that it is a Constitution, a mechanism under which laws are to be made, and not a

mere Act which declares what the law is to be." His Honour proceeds to quote from Story,

Commentaries,  2nd  ed.,  s.  455:

"While, then, we may well resort to the meaning of single words to assist our inquiries, we should

never forget, that it is an instrument of government that we are to construe" (1908) 6 CLR, at p 612

. (at p333)

14. The purpose of the enumeration of powers in s. 51 is not to define or delimit the description of
law that the Parliament may make upon any of the subjects assigned to it. Speaking generally, the
legislative power so given is plenary in its quality. The purpose of the enumeration is to name a
subject for the purpose of assigning it to that power. The names or descriptions employed are
usually of the briefest kind. It is true that certain powers do involve a description amounting almost
to a formal definition; examples are pars. (iii.), (xxiv.) and (xxv.), (xxxv.), (xxxvii.), (xxxviii.) and
(xxxix.). But more often they are the most general names of general topics. (at p333)

15. To borrow the words of Gray J. delivering the opinion of the Supreme Court in Juilliard v.
Greenman [1884] USSC 87; (1884) 110 US 421, at p 439 (28 Law Ed 204, at p 211) : "the
Constitution . . . by apt words of designation or general description, marks the outlines of the
powers granted to the National Legislature; but it does not undertake, with the precision and detail
of a code of laws, to enumerate the subdivisions of those powers, or to specify all the means by
which they may be carried into execution." (at p333)
16. The power with respect to banking seems to me a plain example of the designation of a broad
subject without any indication of the means by which it is to be dealt with or of the existence of
limits upon the description of laws to be made with respect thereto. To say that it is not a question of
what limits there may be upon the description of legislation but of the definition of the subject to
which they may be addressed, and that continuance is an attribute of the subject, is not, I think, a
satisfactory answer. For the question is whether there should be extracted from the word "banking"
and its content an intention that, among other things, it should continue, that it should remain
consensual, or that it should be a matter between subject and subject. Such an intention narrows the
definition of the subject in a way which reduces the area, not of relevance, but rather of legislative
discretion or policy. Of course "banking" describes an activity which is carried on and in that sense
continues. But no-one would feel that it was anything but an ordinary use of the word to say that a
statute declaring that banking should no longer be carried on was a law about banking. It is as easy
to explain the addition of the words "also . . . the incorporation of banks and the issue of paper
money" as made to remove any doubt and to insure that those subjects were included as to infer an
actual intention that "banking" should have a restrictive or narrow construction. (at p334)

17. For the reasons I have indicated, I am unable to accept the view that the word "banking" should
have ascribed to it anything but the wide meaning and flexible application of a general expression
designating, as a subject of legislative power, a matter forming part of the commercial economic
and social organization of the community. I see no sufficient reason for importing into it any of the
three limitations suggested, viz., (1) confining the power to laws for the governance of a continuing
activity, to something that does not go beyond regulation, (2) the limitation of the conception of
banking to transactions entirely consensual, and (3) to transactions between subject and subject. (at
p334)

18. While I reject this view, it does not follow that I am prepared to say that all that the Banking Act
1947 contains can be supported under the legislative power with respect to banking conferred by
par. (xiii.) of s. 51, that is, of course, aided as to acquisition by par. (xxxi.) and as to the Court of
Claims by Chapter III. of the Constitution. To give an example, there are peculiar difficulties with
respect to the acquisition of shares, if s. 13 (2), (3) and (4) and s. 14 (1) are severed from the general
plan and considered on their own basis. Again, with respect to more than one provision arguments
were advanced that depend upon the supposed possibility of its applying to distinct businesses or
transactions outside banking or to effect purposes said to be irrelevant to the banking power upon
any construction that might be placed upon it. But these contentions I find it unnecessary to
examine. Indeed, in the course of the elaborate argument, which covered a wide field and dealt
piecemeal with the whole Act, very many points were made and contentions advanced that I am
relieved from even mentioning by the conclusion I have reached. (at p334)

19. While I reject the limitations it was sought to place upon par. (xiii.), I shall not attempt to state
affirmatively what is the extent of the power it confers. To give an inclusive and exclusive definition
of such a conception as banking is almost impossible. Dr. Walter Leaf begins his little book on the
subject by saying that it is quite impossible; that the theory and practice of banking have varied
from age to age and still vary from country to country. He does, however, bring himself to give a
definition of English banking and defines a bank in terms of its deposit business, saying that a bank
is a person or corporation which holds itself out to receive from the public deposits payable on
demand by cheque. It will be noticed that here the emphasis is not upon the economic function
fulfilled, but upon the description of business done, or, if it preferred, of the service performed.
Whatever may be the indispensable characteristics of banking, it seems probable that, for the
purpose of par. (xiii.), they should be sought rather in the relations between banks and those who
use them than in a more abstract consideration of the true economic nature of the contribution made
by banking to the monetary system and public finance of a country by banks. It is, however, enough
for me to say that I do not adopt the reading of par. (xiii.) contended for, and that I find no ground
for holding that if the Act must rest upon that power, and upon par. (xxxi.) in its application to par.
(xiii.), it would fail in all its substantial provisions because of the insufficiency of par. (xiii.) to
support it. (at p335)

20. I turn to another contention which, if valid, would annihilate all the substantial parts of the Act.
It is that the statute is invalid because its operation will produce an undue interference with the
administration of State Governments. This attack was supported by the States who are plaintiffs:
South Australia, Western Australia and Victoria. In an able argument counsel for Victoria took as an
example the constitutional and statutory provisions of that State governing the course of financial
administration. A consolidated public revenue and appropriation therefrom by law are required by
the Constitution. The Audit Act provides for the payment of moneys forming part of the public
revenue into banking accounts by all officers receiving such moneys. Under a contract between
Victoria and the trading banks they provide banking facilities for the State to keep its public
accounts and they allow interest on balances. The public account is fed by receivers of revenue and
collectors of imposts and their receipts amount to 55m. pounds per annum. The accounts of
receivers number some 300 and of collectors some 400. Further, to enable Victorian State servants
to carry on particular departments or operations for which they are responsible, 700 advance
accounts exist. These figures were given for the purpose of emphasizing the importance of the part
played by the private banks in the State's financial administration. Counsel maintained that the
operation of the Banking Act 1947 was calculated to defeat the course of administration pursued by
the States with respect to the receipt and disbursement of money and to close to the States all
banking facilities except such as might be provided by the Commonwealth Bank. This, it was said,
amounted to an undue interference with or substantial curtailment of the performance by a State of
its functions of government. Such an interference or curtailment, counsel contended, was invalid,
even although it was attempted by a law which in point of subject matter might otherwise be
connected with Federal power and even although the law did not discriminate against the States. It
constrains the States to submit their funds to a Commonwealth agency, the Commonwealth Bank.
Section 11 (a) was treated as illusory and no safeguard. A specific point was made of the operation
of s. 24 (5) and of s. 46 (4) respectively. One transfers the States' credits at the trading banks to the
Commonwealth Bank without the States' consent; the other would disable the State from operating
by cheques upon the States' funds lying at the trading bank. It was said that the Banking Act 1947
was as much an attempt to control the States in reference to the use of banks in the administration of
public moneys and public finance as was s. 48 of the Banking Act 1945, held void in Melbourne
Corporation v. The Commonwealth [1947] HCA 26[1947] HCA 26; ; (1947) 74 CLR 31 . (at p336)

21. No doubt, from the point of view of the States, no distinction can be seen between the effect
which s. 48 of the earlier Act was calculated to produce upon the performance of State functions
and that which would result from the exercise of the Treasurer's powers under the Banking Act
1947. In some ways, indeed, the position of the States might seem worse under the later Act. For it
might be possible to set up and use State banks as part of the banking system that now exists in a
way which might not be practicable if there were no trading banks. But a question whether the
Commonwealth has gone beyond power by interfering with State functions cannot be determined by
reference only to the consequences upon the States which Federal legislation in fact produces.
Enactments of quite different descriptions may result in the same embarrassments to the States. (at
p336)
22. Section 48 of the Act of 1945 dealt specifically with the use by the States of the existing
banking system. The Act of 1947 contains powers under which the existing banking system may be
terminated and replaced by a government system. To forbid trading banks to bank for the States and
to abolish trading banks are two different things, and the validity of a law for the one purpose must
depend on different considerations from those governing the validity of a law for the other purpose.
It is only by confining attention to the similarity of the consequences to the States, that it may seem
that the test of validity ought to be the same. (at p336)

23. I do not propose to discuss again the grounds upon which we based the decision that s. 48 of the
1945 Act is invalid. They are stated in the report of Melbourne Corporation v. The Commonwealth
[1947] HCA 26; (1947) 74 CLR 31 , and further discussion will make them no clearer. Indeed, I
should have thought that the root principle was made clear enough in the passages in West v.
Commissioner of Taxation (N.S.W.) [1937] HCA 26; (1937) 56 CLR 657, at pp 681-683, 687, 698,
699 , directing attention to it and that for the rest it was but a question of the specific application of
the principle. The reason why I am unable to accept the argument advanced for the States under this
head appears from a passage, part of which I shall repeat, from my reasons in the Melbourne
Corporation Case [1947] HCA 26; (1947) 74 CLR 31, at p 84 : - "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." (at p337)

24. It is necessary for the purpose of the argument of the States to assume that the validity of the
main provisions of the Act could be made out were it not for the effect it would produce upon the
States. For otherwise there would be no point in it. That means, however, but for the position of the
States, the question how and by what agencies banking may be carried on would be within the
province of the Commonwealth Parliament. Once that question is settled for the whole community,
the banking system which results is that which must serve the banking needs of the entire country.
(at p337)

25. It is open to the States, at all events in contemplation of law, under the exception of State
banking, to provide for their own needs. But even if that were not so, the States would be bound to
take the banking system as any general law, made in the exercise of Federal power, left it. Just as
when the Federal Government desires to use or take advantage of anything the nature or character of
which is determined by an exercise of the exclusive power of the State, it must take it as it finds it,
so the States, when they avail themselves of services or facilities regulated or determined by Federal
law, must accept it as part of the system enjoyed by the whole community. Such things are a
consequence of the distribution of powers and stand apart altoghether from some exercise of
legislative power which singles out the States or which operates specially to impede them in their
functions. Section 48 of the Act of 1945 discriminated against States and in that way singled out the
States in order to curtail their freedom in using the general banking system. No doubt without
discrimination laws applying to States may operate against them in such a way that it must be
beyond Federal power to enact them. That is perhaps shown by the discussion in New York v.
United States [1946] USSC 13; (1946) 326 US 572 (90 Law Ed 326) . But it is a question which lies
outside such a case as the present where the law relates to the form to be taken by part of the
established organization of the community affecting all alike. The variety of ways in which, as the
Act is constructed, the powers might be exercised make a reservation necessary. Conceivably it
might be possible to employ some of the powers, s. 46 (4)-(8) for example, for the purpose of
requiring a bank, which upon compliance would be left untouched, to cease to transact State
Government business. If such a use of them were made the principle of the Melbourne Corporation
Case [1947] HCA 26; (1947) 74 CLR 31 would be encountered. But such an hypothesis, arising as
it does only upon the form of the powers, does not go to the validity of the Act generally. (at p338)

26. For the reasons I have stated, I think the attack upon the substance of the enactment as an
invasion of State functions fails. (at p338)

27. Somewhat analogous considerations appear to me to affect another independent ground taken
for impugning the Act, a ground to which I next turn. It is based upon the Financial Agreement of
1927 (reprinted in consolidated form in Commonwealth Statutes 1944, p. 169). Section 105A of the
Constitution gives the Financial Agreement paramountcy. By it the States submitted to the control
of the Loan Council with respect to public borrowing. But the practice of borrowing upon overdraft
for temporary purposes had been followed and had been found necessary in the ordinary course of
the administration of government finances. By clause 5 (9) (a clause with which clause 6 (7)
corresponds in the case of the Commonwealth) it is provided that a State may, amongst other things,
borrow money for a temporary purpose by way of overdraft or fixed or other special deposit. This,
it is contended, secures to the States a right as against the Commonwealth to borrow money on
overdraft for temporary purposes and imports the existence of banks and a system of banking.
Accordingly, it is said, the Commonwealth may not defeat the right by abolishing the system.
Reliance is placed upon the judgments of Latham C.J. and Williams J. in Melbourne Corporation v.
The Commonwealth (1947) 74 CLR 31, at pp 62, 63, 101 , as showing that the States obtained by
means of the clause a constitutional right to go to a private banker for an overdraft without the
consent of anyone. That being established, so counsel contend, it makes no difference whether the
impairment or denial of the right takes the form of a prohibition upon a bank doing business for a
State without the consent of the Commonwealth Treasurer, as under s. 48 of the Banking Act 1945,
or a prohibition upon a trading bank doing business at all, as under s. 46 of the Banking Act 1947,
or a total destruction of the private banks. (at p339)

28. The argument depends upon the interpretation of the Financial Agreement and the effect to be
ascribed to it. I think that the argument imports into the agreement more than was intended by the
parties to it. The agreement doubtless assumes a banking system to which the States, and for that
matter the Commonwealth might resort to borrow by way of overdraft. But I do not think that it
implies, much less expresses, anything as to the form the system is to take. If the clause confers
upon the States any constitutional right, as against the Commonwealth, to borrow by way of
overdraft, I should put it no higher than a right to seek an overdraft from whatever banking
institutions are from time to time provided or permitted by law and are conducting banking
business. (at p339)

29. Two further grounds of attack were made which, if sound, while they would not affect s. 46 (4)-
(8) unless held inseverable, would otherwise bring down all that matters of the Act. They both
depend upon the requirement of s. 51 (xxxi.) that compulsory acquisition must be upon just terms.
The first of them arises from the failure of the Banking Act 1947 to indicate in any way the source
of the compensation moneys, which, it is said, must amount to 100m. pounds at least if all the banks
are to be compensated. The Financial Agreement makes the consent of the Loan Council necessary
for it to be done by borrowing and an examination was made by counsel of other resources lawfully
open with a view of showing that nothing but an expansion of the note issue or an equivalent
expansion of credit would make payment of the compensation possible. This, it was argued, would
mean a considerable depreciation of the money in which compensation was paid. The value of the
assets would be estimated as at a time before the depreciation and the monetary expression of the
compensation would at once be deprived of its value. I do not think that it is an answer to this
argument to fall back upon the nominalistic principle, according to which English law disregards all
fluctuations in the "value" of money expressing or measuring an obligation. We are concerned with
just terms of acquisition and if it were true that the terms of acquisition necessarily involved the
valuation of assets in terms of money which would lose its value as a result of the very transaction
involved in compensating the owners, I should have thought the constitutional requirement had not
been fulfilled. It seems to me that the scope of the nominalistic principle of our law does not go
beyond questions concerning the discharge of obligations expressed in money. The money of
account measuring an obligation, because it is the money denominated, is conclusively identified by
the nominalistic principle with the money which at the time of payment suffices to discharge an
obligation of the stated amount, or to ascertain it for the purpose of discharge, without any regard to
changes in exchange value or purchasing power. Just terms do not mean that compensation must
necessarily stand at one end as an obligation fixed in monetary expression so that all that need be
inquired into is what money at the other end will discharge an obligation so expressed. That is to
separate the steps by which just terms are afforded; indeed, in strict logic it means that justice is
satisfied by the assessment of an amount independently of the question whether the actual payment
is commensurate with the deprivation suffered. (at p340)

30. Nor do I think that it is correct to say that courts cannot inquire into such matters. There are few,
if any, questions of fact that courts cannot undertake to inquire into. In fact it may be said that under
the maxim res iudicata pro veritate accipitur courts have an advantage over other seekers after truth.
For by their judgment they can reduce to legal certainty questions to which no other conclusive
answer can be given. In the Banco de Portugal v. Waterlow & Sons Ltd. [1932] UKHL 1; (1932)
AC 452 an example is to be found of a judicial inquiry into the effect of an increased issue of notes.
(at p340)

31. But to support the conclusion that a statute providing for compensation does not afford just
terms because an assessment of compensation would necessarily be followed by a discharge of the
compensation in depreciated money, it surely is not enough to suggest as a matter of argument that,
because of the existing condition of statute law, no course is legally open but to increase the note
issue, and then to appeal to common knowledge as to the effect upon the "value" of money. It
would, I should imagine, be necessary completely to satisfy a court of the legal, factual and
economic considerations which made it inevitable that the very transaction involved a substantial
depreciation of the money in which, as at an anterior time, compensation was to be expressed, so
substantial as to violate any conception of the justice of the terms. In my opinion no sufficient
foundation has been established for the support of the argument. (at p341)

32. The second ground upon which the statute was impeached for failure to provide just terms of
acquisition as required by s. 51 (xxxi.) is that the Court of Claims is unable to award interest upon
the compensation, or to give costs. Once an award of compensation has been made the judgment or
order of the Court will carry interest calculated from the date when it is pronounced. But it is
contended that, as the Act is drawn, the amount assessed as compensation cannot include or carry
interest calculated from the date of acquisition upon the value of the assets acquired. Upon this
footing it is claimed that, over a very long period, the Commonwealth Bank may be left in
possession both of the business of a private bank and of the purchase money. For it need pay
nothing on account of compensation before the amount is assessed. Thus the profits of the business
would belong to the Commonwealth Bank and yet, so it is said, no liability for interest in the
meantime is imposed and none can be imposed by the Court of Claims. Thus, it is asserted, there is
a failure to provide just terms and all the provisions for compulsory acquisition must fail. The
jurisdiction of the Court of Claims is simply "to hear and determine claims for compensation" (s. 33
(1)). When shares are acquired or businesses taken over, the right given is simply to compensation
or fair compensation (ss. 15, 25, 40, 42, 44). In Swift & Co. v. Board of Trade (1925) AC 520 the
House of Lords made it clear that compensation and interest upon the value of the property acquired
from the date of possession are two different things. A bare right to compensation does not imply
interest in the meantime. Where the principles of equity apply to a compulsory acquisition, as they
do when a notice to treat is given in respect of land and the acquiring authority enters into
possession, these principles may give interest on unpaid "purchase money," that is compensation,
even if unascertained. But that is because the relation of vendor and purchaser is established and
specific performance might be decreed. A difference exists, however, between compensation for the
loss of property and interest as compensation for the time occupied in assessing the loss. That is
pointed out by Lord Cave L.C. and by Lord Sumner (1925) AC, at pp 533, 548 . (at p341)

33. But under the Fifth Amendment of the Constitution of the United States, which provides that
private property shall not be taken for public use without just compensation "it has consistently been
held that the Fifth Amendment's reference to 'just compensation' entitles the property-owner to
receive interest from the date of the taking to the date of payment as a part of his just
compensation": United States v. Thayer-West Point Hotel Co. [1947] USSC 11; (1947) 329 US 585,
at p 588 (91 Law Ed 521, at p 525) . Nevertheless, in the United States the word "compensation"
has no prima-facie meaning that covers interest. "The fact that 'just compensation' includes interest
in the eminent domain setting does not necessarily mean that the term must be given the same scope
in other situations . . . in the absence of constitutional connotations, 'just compensation' is not a term
of art so far as interest is concerned" (1947) 329 US, at p 589 (91 Law Ed, at p 526) . The
contention on the part of the plaintiffs is that in our s. 51 (xxxi.) "just terms," like "just
compensation" in the United States Constitution, imposes a requirement that cannot be fulfilled
unless interest is given upon compensation from the date when possession is taken by the acquiring
authority until compensation is actually paid. But, at the same time, it is contended that in
conformity with the view taken in the House of Lords and with the natural meaning of the word
"compensation," the right to compensation given by the Banking Act 1947 and the jurisdiction
conferred to determine claims for compensation does not authorize an allowance of interest. It was
suggested for the Commonwealth that the dilemma thus constructed was not complete, because the
acquisitions authorized by the Act would fall within the cognizance of a Court of Equity as
transactions in respect of which relief by way of specific performance might be given. But the
answer made to this suggestion seems to be correct, namely, that first the Court of Claims has no
equitable jurisdiction, secondly the instantaneous acquisition of property and immediate vesting of a
right to compensation obtainable by prescribed steps leaves no room for the remedy of specific
performance and thirdly that the case would not be within the competence of a jurisdiction in equity.
In this Court the questions how far interest can be given as or upon "compensation" and what is the
bearing of s. 51 (xxxi.) upon statutory provisions for "compensation" and "recompense" in that
connection are matters that have been much discussed, and varying opinions have been adopted. (at
p342)

34. It is enough to refer to the consideration of the subject in The Commonwealth v. Huon Transport
Pty. Ltd. [1945] HCA 5; (1945) 70 CLR 293, at pp 303-305, 307-311, 315, 323-329, 333-338 ;
Minister of State for the Navy v. Rae [1945] HCA 6; (1945) 70 CLR 339, at pp 348, 349 ; Marine
Board of Launceston v. Minister of State for the Navy [1945] HCA 42; ; (1945) 70 CLR 518 and
Grace Bros. Pty. Ltd. v. The Commonwealth [1946] HCA 11; (1946) 72 CLR 269 at pp 281-283,
286, 293, 296, 300 . (at p343)

35. I shall not repeat the views I expressed in those cases. In the United Stated the answer that
would be given to the argument advanced for the plaintiffs is that in the setting in which the word
"compensation" occurs in the Banking Act 1947 it has a "constitutional connotation": if, therefore,
justice demands interest in the circumstances, the word covers it. There is much to be said for
making the same answer here under s. 51 (xxxi.). But on the whole, in view of the less flexible
meaning of which in English law, judging from the decision in Swift's Case (1925) AC 520 the
word seems capable, I prefer the answer which I suggested in the Huon Transport Company's Case
(1945) 70 CLR, at p 326 . The passage is as follows: "Our Constitution, when it refers to 'just
terms,' is placing a qualification on the legislative power it bestows to acquire property
compulsorily. But it is, I think, difficult to say that it makes it necessary for the legislature to give
more than the full content of 'compensation', as compensation is understood in English law, and we
know from the House of Lords that a right to interest on the amount payable for the thing is not
always or necessarily included. Section 51 (xxxi.) has not the effect of transferring into our
Constitution the Fifth Amendment, nor all the glosses placed upon it." (at p343)

36. On either view, however, the argument fails. (at p343)

37. The further point is made that the terms are unjust because the Court of Claims cannot award
costs. I am not altogether satisfied that an award of costs is beyond the powers of the Court. But in
any case I cannot think that such an omission would bring the statute into necessary conflict with s.
51 (xxxi.). (at p343)

38. From these more general grounds of attack upon the Banking Act 1947 as a whole, or upon the
substantive or operative parts of it, I shall now pass to the consideration in detail of some grave
difficulties which three sets of provisions respectively raise. They are contained in (1) Part IV.,
Divisions 2 and 3; (2) Part VI., Divisions 1 and 2; and (3) Part VII. I shall deal in that order with the
provisions in question. (at p343)

39. In Divisions 2 and 3 of Part IV. of the Banking Act 1947 elaborate provision is made enabling
the Treasurer to set in motion machinery for vesting in the Commonwealth Bank the Australian
shares of an Australian Banking company, for displacing the directors in favour of nominees of the
Commonwealth Bank, and for entrusting the latter with the entire conduct and management of the
company, including the disposal of its business. From these provisions and from the possible uses in
relation to them of s. 22, s. 46 (4)-(8) and ss. 43 and 44, a pattern of powers results which may
fairly be described as intricate. It is aimed at enabling the Commonwealth Bank by means of
nominees to assume control of the business of an Australian bank without necessarily invoking the
power for compulsorily acquiring the business, which would mean an assessment of the
compensation for the whole undertaking. The exercise of these powers would necessitate dealing
directly with the shareholders as such, some, presumptively the greater number, by acquiring their
shares and compensating them, others perhaps as contributories in an ultimate liquidation. (at p344)

40. I have formed the opinion that the provisions are bad because they would enable the Treasurer
and the Commonwealth Bank to defeat the constitutional requirement imposed by s. 51 (xxxi.) that
the acquisition of property shall only be upon just terms. This conclusion, the grounds for which I
shall now state, would, if it were not for s. 6, affect with invalidity not only Division 3, but also the
more important of the provisions of Division 2. For an examination of the provisions of the two
Divisions shows that they form an interconnected plan in which the compulsory acquisition of
shares is necessarily accompanied by the replacement of the directors with nominees. But s. 6 must
be applied, and out of its application some further questions arise with which I must afterwards deal.
In stating why I think that these provisions amount to a law for the acquisition of the property
comprised in the business of a bank against which the Treasurer may direct them, I shall begin by
describing the effect of the provisions. (at p344)

41. They relate only to an Australian private bank, an expression which by definition means one of
the bodies corporate named in the First Schedule: s. 5. A condition of the operation of the
provisions upon such a banking company is that the Treasurer is of opinion that a majority of the
shares is situated in Australia: s. 13 (1) and s. 5. In fact the very great majority of the shares of each
of the Australian private banks is at the present time upon the Australian share register and therefore
situated in Australia, a proportion ranging from seventy-five per cent in the case of the Bank of New
South Wales to the whole in the case of the Bank of Adelaide, the Ballarat Banking Co. Ltd. and the
Brisbane Permanent Building and Banking Co. Ltd. But one curious feature of the Banking Act
1947 is that it is so drawn that not only may any of the powers it is expressed to confer be exercised
singly and moreover in relation to one bank alone, but they are of indefinite duration, so that the
time when any one of them is called into operation may be indefinitely postponed. In point of law,
therefore, whatever may be the intention of the Executive as to the time and manner of the exercise
of powers, the present state of facts cannot control any question of the operation and validity of the
statute. It is not perhaps a matter of much importance because, although the opinion of the Treasurer
that a majority of shares is situated in Australia is not examinable, it is hard to suppose that he
would form such an opinion erroneously. Being satisfied of the fact, he may publish a notice in the
Gazette vesting in the Commonwealth Bank all the Australian shares in the Australian private bank
as from a specified date. Any date may be chosen, neither a minimum nor a maximum length of
notice is prescribed. In any case the Treasurer may from time to time amend his notice by naming a
later date: s. 13 (1) and (2). When the date arrives all the Australian shares are, by force of the Act,
to be vested in the Commonwealth Bank: s. 13 (3). Further, the Commonwealth Bank is to become
the shareholder for all purposes and is to be a member of the banking company, notwithstanding any
provisions in that company's articles or charter: s. 14 (1) and s. 10. It has been pointed out that
before the notice takes effect it may have ceased to be true that a majority of shares is situated in
Australia and that nevertheless the notice would operate to vest such shares, if any, as continued to
be situated here. (at p345)

42. But, again, that does not seem to me to be of much importance. On the other hand, a provision is
made for the possibility of shares that are situated out of Australia, when the notice takes effect,
afterwards obtaining an Australian situation. Upon that happening the shares at once vest in the
Commonwealth Bank. Upon the vesting of shares the Commonwealth Bank becomes the
shareholder and a member of the company in respect of the shares, notwithstanding any provisions
of the articles of association or charter: s. 14 (1) and s. 10. Compensation is, of course, to be paid
for the shares that vest in the Commonwealth Bank: s. 15 and ss. 37-40. (at p345)

43. The directors and officers of a private bank are required, under heavy penalty, to do and join in
doing all acts or things necessary or convenient to do for or in relation to the acquisition under the
Act of any shares in a private bank: s. 60 (1) (b). This doubtless would cover the placing of the
Commonwealth Bank on the share register. The provision overruling the articles in the foregoing
respects would be not unimportant practically because all the private banks have articles restricting
or qualifying the right of transfer, either by interposing the discretion of the directors or by limiting
the number of shares that one member may hold or, in the case of the Bank of New South Wales, by
confining membership to natural persons. (at p346)

44. Another provision that would be necessary if the private bank in which the shares are acquired is
to carry on business as a separate entity, is s. 21, which purports to exclude the operation of so much
of the State Company law as attaches consequences to the number of members falling below a
specified figure, e.g. the liability of the continuing members after six months to the debts of the
company and the liability of the company to winding up, which under Victorian law arises when the
number of members falls below five. Upon the day the gazetted notice has fixed for the vesting of
the shares the directors of the company go out of office, receiving compensation: s. 17. Thereupon
the Governor of the Commonwealth Bank, with the approval of the Treasurer, appoints directors in
their place, including a Chairman: s. 18. They hold office notwithstanding any lack of qualification
or any disqualification: s. 18 (2). But they are removable by the Governor of the Commonwealth
Bank with the approval of the Treasurer: s. 33 (4) of the Acts Interpretation Act 1901-1941. In the
directors so appointed is placed full power to manage, direct and control the business and affairs of
the private banking company: s. 19 (1). The exercise of any such power is to be in their sole
discretion: it is not to be subject to any qualification, restriction or condition provided by or under
any law, charter or other instrument relating to the exercise of the powers of the directors of the
private banking company: s. 19 (3). There is some dispute as to the extent of this exclusion, that is
to say, whether it excludes the principles or rules of law and equity which control directors in the
exercise of their powers or only written enactments and provisions of the company's charter or
articles. It is a point of small moment, I should think. For, in any case, a very full statutory
discretion is given to the nominee directors in the exercise of statutory powers as wide as, and
perhaps even wider than, the company's corporate powers. Short of dishonesty it is difficult to see
on what ground they could be controlled. But perhaps the words "or other instrument" make it
proper to understand the exclusion as operating only upon what may be called the lex scripta of the
company and not upon the lex non scripta, though the distinction must in some respects be difficult
to maintain. Theoretically it may remain necessary that they should remember the shareholders and
the creditors in making their decisions, but practically they would be a body of administrators
appointed by and removable by the Treasurer and the Governor of the Commonwealth Bank in
combination and designated for a provisional task which, humanly speaking, they could hardly be
expected to consider otherwise than as one to be executed in furtherance of governmental policy.
The wide general power with which the nominee directors are invested is followed by a particular
statement of three specific powers, viz., (a) to declare dividends; (b) to dispose of the business in
Australia of the Australian private bank to the Commonwealth Bank; (c) to dispose of all or any
other business of the Australian private bank. As the general power invests the nominee directors
with what seems to be the full capacity of the banking company to which they are appointed, the
particular powers probably add nothing; but apparently they are, as so often, mentioned specially to
avoid any doubt. It will be noticed that a combination of the second and third of the powers would
cover the disposal to the Commonwealth Bank of the entire business of the private banking
company both within and beyond Australia. Further, if any of the Australian private banking
companies should develop an additional and separate business falling outside the conception of
banking, as it is suggested they might do in some events arising from the operation of the Act, then,
unless the powers were read down artificially, they would cover that business. The nominee
directors would, I think, be subject to s. 22 so that, if a notice were given to the private banking
company inviting it to make an agreement with the Commonwealth Bank for the taking over by the
latter of the business of the former, the nominee directors might comply with it within the specified
time or might, by failing so to agree, deprive the shareholders of the taxation benefits which under s.
23 ensue from agreeing. An argument to the contrary was based on the apparent incongruity of s. 22
(8) (c) and (d) and of s. 22 (7) with the words of s. 19 (1) (b) "the business in Australia." But
exactly the same words occur in s. 22 (1) and (5) to which s. 22 (8) is epexegetical. Further, sub-par.
(c) of s. 19 (1) covers a provision under s. 22 (7), even if the general power is not enough. There
seems to me to be no incompatibility between the direction in s. 19 (2) requiring the approval of the
Treasurer after a recommendation of the Governor of the Commonwealth Bank and that in s. 22 (5)
requiring the approval of the Treasurer. The latter is of general application and includes all banks,
English as well as Australian and is concerned with the purchaser's side. Any other view of the
relation of s. 19 (1) (b) and (c) would exclude ss. 23 and 49 et seq. from an agreement made
thereunder. The nominee directors might also be encouraged to make an agreement by a notice
under s. 46 (4) to cease carrying on banking business. Further, under s. 43 (1) the nominee directors
might agree on the compensation for the taking over of the business or under s. 44 (3) they might
fail to require the Commonwealth Bank to refer the claim to the Court of Claims and conclude the
private banking company by a course of inaction which, assuming the provision to be valid, causes
the Commonwealth Bank's offer to be deemed to have been accepted. (at p348)

45. From the foregoing account of the material provisions of Divisions 2 and 3 of Part IV. and the
relation thereto of ss. 22, 46 (4) and 43 (1) and 44 (3), it will be seen that a notice by the Treasurer
under s. 13 (1) operates to set in motion a process which expropriates the shares localized in
Australia and at the same time displaces the authority over the affairs of the company, not only of
the directors chosen by the shareholders, but of the shareholders themselves. It places all the
property and all the activities of the company under the supreme control of the nominees of the
Treasurer and the Bank and leaves them in entire control indefinitely with complete powers of
disposition and complete power to bind the company as to the recompense it will receive for its
assets. The corporate entity of the company remains and in it the legal property in the assets
continues to reside. Shareholders are entitled to dividends if the nominees see fit to declare any. In a
winding up, if there be one, shareholders remain entitled to participate as contributories. But in all
other respects the beneficial enjoyment and control of the undertaking has been placed in the hands
of agents of the Commonwealth, or of the Commonwealth Bank if the distinction is insisted on and
in this matter can be clearly maintained. The purpose of removing the directors appointed by the
shareholders and replacing them with nominees of the Treasurer and of the Governor of the Bank is
that agents of the Commonwealth may take command of the undertaking of the banking company
and carry it on in the public, as opposed to private, interests pending decisions, in which they will
play a part, concerning the acquisition of the assets by or their disposal to the Commonwealth Bank,
the settling of the amount of compensation or the purchase price, and the transfer of the staff. The
purposes of the whole operation authorized by Division 3 appear to me to be public. No doubt there
is no interference with the ultimate right of the shareholders as contributories in a winding up to
receive as a component of the distributable surplus so much profit as may have been earned under
the regime of the nominees and as they have not chosen to distribute as dividend. But that and the
legal conceptions involved in the continuance of the corporate existence of the banking company as
the repository of the title to the undertaking is all that is left. In other words the undertaking is taken
into the hands of agents of the Commonwealth so that it may be carried on, as it is conceived, in the
public interest. The company and its shareholders are in a real sense, although not formally, stripped
of the possession and control of the entire undertaking. The profits which may arise from it in the
hands of the Commonwealth's agents are still to be accounted for and in some form they will be
represented in what the shareholders receive. But the effective deprivation of the company and its
shareholders of the reality of proprietorship is the same. It must be remembered that complete
dispositive power accompanies the control of the assets which passes to the nominees. It is as if an
intending purchaser were enabled to put a receiver in possession of an estate and also to take a
power of sale in the receiver's name, remaining however accountable, until he pays the purchase
money, for the rents and profits, which nevertheless he may apply towards the upkeep of the
property and, subject thereto, accumulate. (at p349)

46. Upon consideration I have reached the conclusion that this is but a circuitous device to acquire
indirectly the substance of a proprietary interest without at once providing the just terms guaranteed
by s. 51 (xxxi.) of the Constitution when that is done. (at p349)

47. I take Minister of State for the Army v. Dalziel [1944] HCA 4; (1944) 68 CLR 261 to mean that
s. 51 (xxxi.) is not to be confined pedantically to the taking of title by the Commonwealth to some
specific estate or interest in land recognized at law or in equity and to some specific form of
property in a chattel or chose in action similarly recognized, but that it extends to innominate and
anomalous interests and includes the assumption and indefinite continuance of exclusive possession
and control for the purposes of the Commonwealth of any subject of property. Section 51 (xxxi.)
serves a double purpose. It provides the Commonwealth Parliament with a legislative power of
acquiring property: at the same time as a condition upon the exercise of the power it provides the
individual or the State, affected with a protection against governmental interferences with his
proprietary rights without just recompense. In both aspects consistency with the principles upon
which constitutional provisions are interpreted and applied demands that the paragraph should be
given as full and flexible an operation as will cover the objects it was designed to effect. Moreover,
when a constitution undertakes to forbid or restrain some legislative course, there can be no
prohibition to which it is more proper to apply the principle embodied in the maxim quando aliquid
prohibetur, prohibetur et omne per quod devenitur ad illud. In requiring just terms s. 51 (xxxi.)
fetters the legislative power by forbidding laws with respect to acquisition on any terms that are not
just. (at p350)

48. In my opinion the provisions of s. 13 (1) and ss. 17, 18, 19 amount to an indirect means of doing
what the paragraph does not allow. (at p350)

49. It may be true that a probability amounting nearly to a certainty exists that if a notice under s. 13
(1) takes effect at least a majority of shares in the banking company against which the provision is
employed will vest in the Commonwealth Bank. But unless all the shares so vest, interests will
remain outstanding in the other shareholders which are sufficient to exclude the answer that
substantially the undertaking passes to the Bank as shareholder under s. 13 (3) and therefore that
what is done under ss. 17-19 does not matter. Nor is this point met, as it appears to me, by saying
that once the nominee directors are established in office they may close the share registers abroad
and place the shares upon the Australian register and so give the shares a situation in Australia, in
consequence of which they will vest in the Commonwealth Bank pursuant to s. 13 (4). The
nominees are not compelled to do so and they may prefer not to do it. At all events until they do so
there will be outstanding interests that make it useless for the Commonwealth to attempt to "lift the
veil" which the distinct personality of the private bank as a corporation places between the
shareholders and the ownership of the undertaking. The foregoing examination of ss. 13 (1), 17, 18
and 19 is concerned with their operation in placing agents of the Commonwealth or of the
Commonwealth Bank in control of the undertaking and arming them with powers. From that point
of view I think they amount to an attempt to defeat the operation of s. 51 (xxxi.). But the powers of
disposition given by s. 19 are themselves open to independent attack under s. 51 (xxxi.). They are
exercisable in favour of the Commonwealth Bank. When they are so exercised the Commonwealth
Bank will acquire the Australian business of the private banking company in respect of which s. 13
(1) has been invoked or perhaps the whole undertaking of that company. It will do so on terms
agreed between the nominees whom the Governor of the Commonwealth Bank has appointed with
the approval of the Treasurer. Further, if the Treasurer gives a notice under s. 22 (1) and, whether
before or after that notice, the nominees are appointed in consequence of a notice given under s. 13
(1), the nominees may make an agreement under s. 22 (5), or they may suffer an acquisition under s.
24 (4) and agree on the compensation under s. 43 (2), or fail to request a reference to the Court of
Claims under s. 44 (3) and so accept the offer of the Commonwealth Bank. I cannot see how the
powers of the nominees under s. 19 can be reduced by any process of interpretation based on s. 6 so
as to avoid all or any of those positions. (at p351)

50. In my opinion each of them involves a conflict with s. 51 (xxxi.). (at p351)

51. In each case the amount payable by the Commonwealth Bank for the assets of the private bank
is left to the judgment of the nominees of the Commonwealth Bank. However high may be the level
to which their legal duty may be raised, even if they be treated as full fiduciaries for the creditors
and shareholders, it is all left to their judgment. In every case the acquisition by the Commonwealth
Bank should, in my opinion, be regarded as on the side of the company an involuntary disposition.
For it would, I think, be quite wrong for the purposes of s. 51 (xxxi.) to separate out the steps by
which it is accomplished and exclude from consideration the compulsory superseding of the
company's directors chosen by the shareholders and the substitution of nominees of the Treasurer
and the Governor. The fact that these officers may be free to act according to their own discretion in
disposing of the company's assets or in binding it to an amount of purchase money as compensation,
appears to me to be nothing to the point. They are not agents appointed by the company. Any
relation of agency on behalf of the company is compulsory and the work of statute. Their
appointment would have been against the authentic will of the company. In substance they are
agents of the Commonwealth armed by statute with power to bind the company. I think that the
powers conferred by s. 19 involve a conflict with s. 51 (xxxi.). (at p351)

52. An argument was advanced to the effect that s. 19 (1) (b) and (c) might be held bad and severed
from the rest of the section and from Division 3. This contention must encounter the difficulty that
the general words of s. 19 necessarily enable the nominees to dispose of the assets of the private
bank and the further difficulty that it is under them that the nominees would bind the private bank to
an amount of compensation. No doubt sub-s. (2) of s. 19 provides a cogent argument against the
doing under the general words of the very thing mentioned in paragraphs (b) and (c) of sub-s. (1).
But those paragraphs relate to disposing of the business in Australia and the business elsewhere as
going concerns. (at p351)

53. I cannot see how by any manipulation the general power in s. 19 (1) can be so reduced as to
include no power of disposing of any assets to the Commonwealth Bank or any other organ of the
Commonwealth and no power of agreeing upon purchase money pursuant to s. 22 or binding the
private bank in respect of compensation under ss. 43 and 44. (at p352)

54. Further, if s. 19 were eliminated by some application of s. 6, the nominees would still be
directors and enjoy whatever powers the constating instruments of the particular company gave its
directors. These, in the case of most of the Australian banks, are of the widest description. (at p352)

55. It appears to me to follow that s. 18 must also be treated as bad and as it is quite impossible to
treat the removal of the directors under s. 17 as independent of their replacement by nominees under
s. 18, s. 17 must fall also. The fate of s. 20 is doubtless immaterial but obviously it cannot survive
the invalidity of ss. 17-19. (at p352)
56. A curious and difficult question then arises concerning the operation of s. 6 in respect of s. 13. It
is a question which turns in some measure upon the source of the positive power which,
independently of the limitation expressed by the requirement of just terms, would support Divisions
2 and 3. (at p352)

57. So far I have discussed the validity of Division 3 upon the assumption that, but for a conflict
with that requirement, it would or might amount to an exercise of the legislative power of the
Commonwealth. Division 2 contains in s. 13 an acquisition of property, namely shares, which of
course must be supported under s. 51 (xxxi.) or not at all. But s. 51 (xxxi.) is itself dependent upon
other legislative powers, in the sense that the acquisition upon just terms "with respect to" which it
authorizes the making of laws must be for a purpose "in respect of which the Parliament has power
to make laws." Now, if the provisions of s. 13 and ss. 17-19 had not been in conflict with the
requirement of just terms or any other similar general limitation or check upon legislative power
and their validity had depended only upon their falling under some head of affirmative power, I
think that I should have felt no great difficulty. For, if it were possible to take them together and
consider them as forming an entire plan, coherent and connected, then I think that, having regard to
the interpretation of s. 51 (xiii.) I have adopted, I would hold that together s. 13 and ss. 17-19 were
enacted for the purpose of that power and were therefore justified by s. 51 (xiii.) and (xxxi.) in
combination. The reason for such a conclusion is that the provisions appear to be directed to
establish a control of a banking business or businesses by, in effect, government nominees and as a
concomitant of that control to acquire the Australian shares in the bank affected. The same notice on
its gazettal under s. 13 (1) accomplishes at one blow a double purpose. It displaces the directors and
thus removes all control by the agents of the shareholders, and for that matter all control by the
shareholders themselves; at the same time it vests the Australian shares in the Commonwealth Bank.
The purpose of so vesting the shares cannot be to give control through the voting strength they
confer. For under ss. 17-19 all control by the shareholders and their chosen directors ceases. The
nominees take charge and shareholding ceases to carry with it any means of affecting the
management of the business or the choice of those whose responsibility it is. A shareholder from
then on has no more significant place than a debenture-holder, if a place as significant. The
Australian Banks are, as the heading of Part I of the First Schedule indicates, all incorporated in
Australia, some under the law of one State, some under the law of another. It is not clear to me why
s. 13 (1) was framed so as to require that the Treasurer should be satisfied that a majority of the
shares are situated in Australia before he exercised the power it gives him. But I suppose it was felt
that the acquisition of a majority of shares gave moral support for the steps prescribed by ss. 17-19.
Perhaps also it facilitated the transition and led to less disturbance among investors. Constitutionally
it does not seem to matter whether the Australian shares taken were a minority or whether no shares
at all were taken. The reason could not have been in order that through a majority of shares control
of the business of the company might be obtained. For in the first place a majority would not give
control or even influence over the conduct of the business having regard to the articles or charter of
most of the Australian Banks and, what is decisive, control was given by ss. 17-19 and in a manner
inconsistent with the possession of shares or membership continuing to have a bearing upon any
such question. But the acquisition of the Australian shares in a bank to which ss. 17-19 is applied
would be a natural corollary and would form a relevant part of the plan, the whole of which would
form a purpose for which laws could be made under par. (xiii.) of s. 51, and so under par. (xxxi.).
What is material is that the basis of the plan is the control effected by ss. 17-19. That gives not only
the foundation upon which the plan is based in point of purpose, but also that upon which it is
justified as an exercise of affirmative constitutional power, by which I mean legislative power
considered for the moment independently of just terms. Conclude, however, that ss. 17-19 are void
as conflicting with just terms, as in my opinion they do. Then what becomes of the plan as an
integral part of which s. 13 derived its constitutional support? Plainly it disappears. Section 13
stands as a mere acquisition of shares. It loses its place and its purpose as a concomitant of a change
of control over the undertaking and must assume a new character. If it can be supported now as
directed to an end within s. 51 (xiii.) and therefore one for which the legislative power of
acquisition may be exercised, it must be in virtue of this new character. The relevance of a bare
acquisition of shares to a power to make laws with respect to banking and for the acquisition of
property for that purpose was sought in more than one possible relation. Influence upon policy:
information as to policy: investment: these were some of them. I am not disposed to deny that in
some circumstances these purposes may suffice to bring an acquisition of bank shares under this
power. But in all cases where it is sought to connect with a legislative power a measure which lies at
the circumference of the subject or can at best be only incidental to it, the end or purpose of the
provision, if discernable, will give the key. Here it is only by shutting out Division 3 from view that
it could be supposed that any of the suggested purposes was contemplated by Division 2. In its full
setting to ascribe to s. 13 the purpose of providing the Commonwealth Bank with a suitable
investment for its funds would be absurd. No less absurd would it be to attribute a purpose of
placing it in the position of a shareholder in order to acquire information, to vote at meetings, or to
influence the directors. The truth is that in its context there was only one real ground upon which s.
13 was relevant to the power and that ground has failed with the context. Can s. 6 not only require
that provisions, although prima facie interdependent, should be construed as divisible and be
separated accordingly, but also supply a new scope and object to the separated provision, a new
purpose or relevance or, in other words, place it upon a fresh constitutional basis? It is to this
question that I referred when I said that there arose concerning the operation of s. 6 in respect of s.
13 a curious and difficult question. My answer to it is that if s. 13 is to be segregated from ss. 17-19
in obedience to s. 6, it still remains necessary to refer it to the same constitutional basis of power. It
is not open to ascribe fresh purposes to it, find another possible relevance to the subject. To do so
would mean giving the provision a new operation for the purpose of saving it. It will be necessary to
discuss a similar question more fully at a later point in this judgment where it is more convenient to
deal with it. In the meantime, it is enough to say that s. 6 makes the fact that it would receive a
different operation not inconsistent with severance: but that is altogether another thing. In my
opinion s. 13 (3) was not enacted either to enable the Commonwealth Bank to vote at meetings, or
to receive or obtain the information to which a shareholder is entitled about the business of the
company or otherwise to influence the conduct of the business by the directorate chosen by the
shareholders. Nor was it enacted to provide an investment for the Commonwealth Bank. It was
enacted as part of a plan aimed at the immediate control and ultimate absorption of the business and
has no other constitutional purpose relevant to power. It must therefore fail with the plan. To place
s. 13 (3) on any other basis would amount to "transforming it into one to which the Legislature has
not given its assent," to use the words of Duff J. in delivering the reasons of the Privy Council in
Attorney-General for Ontario v. Reciprocal Insurers (1924) AC 328, at p 346 . (at p355)

58. I am of opinion that s. 13 is void and, of course, s. 14 (except so far as it relates to shares
purchased), s. 15 and s. 16 have no basis but s. 13. It follows that Part IV., Division 2, except s. 12
and so much of s. 14 as relates to it, is invalid. I shall not stop to consider what remains of s. 14, for
it hardly arises for separate consideration. (at p355)

59. I shall proceed to deal with the validity of Part VI., Divisions 1 and 2, as they are affected by s.
75 (iii.) of the Constitution and, as part of the same matter, I shall go on to consider what
consequences ensue from a conflict between those Divisions and s. 75 (iii.). (at p355)
60. The Court of Claims is erected by Part V. as a superior court of record in which is vested part of
the judicial power of the Commonwealth. The Parliament has created it pursuant to s. 71 of the
Constitution and has defined its jurisdiction pursuant to s. 77. The jurisdiction of the court is to hear
and determine claims for compensation under the Act (s. 33 (1) of the Banking Act 1947), a
jurisdiction which covers, not only the ascertainment of the amount of compensation in respect to
the shares or assets acquired, but the determination of the question who are entitled to be paid as
interested parties (cf. s. 40 (4)-(8) and s. 38 (1) of the Banking Act 1947). (at p355)

61. Both the ascertainment of the amount of, and the decision of the title to, compensation are thus
treated as matters to be dealt with under the judicial power; and, whatever views may be held about
the necessity of so treating the former of these two questions, there can be no doubt that the latter
forms a claim of right which constitutionally cannot be determined conclusively without recourse to
the judicial power. (at p355)

62. The power to define the jurisdiction of a Federal Court which is given by s. 77 (1) of the
Constitution is confined to the nine matters of original jurisdiction enumerated in ss. 75 and 76.
There can be no doubt, however, that claims for compensation are covered by the enumerated
matters. The nine matters are not mutually exclusive categories and any given claim of right may
fall within more than one of them. If a claim for compensation is not within s. 75 (iii.) as a matter in
which the Commonwealth or a person being sued on behalf of the Commonwealth is a party, and
that in the view I take is one of the cardinal questions in this part of the case, it would at least be a
matter arising under a law made by the Parliament, namely under the acquisition provisions of the
Banking Act 1947. But it is an aim of Part VI. to confine to the Court of Claims the entire
jurisdiction to determine claims for compensation under the Act and much care and, indeed,
ingenuity have been expended to secure that object. Section 77 (ii.) contemplates laws defining the
extent to which the jurisdiction of a Federal Court shall be exclusive, but it is careful to limit the
power to make such a law so that the Parliament may exclude only the jurisdiction of State Courts
and not the jurisdiction of other Federal Courts. In the absence of any power positively to exclude
the jurisdiction of other Federal Courts, which in effect means the High Court, for there is no other
relevant Federal Court, the Act has been drafted with a view first to give claims for compensation a
character placing them outside the descriptions of matters mentioned in s. 75, which confers original
jurisdiction on the High Court, and second to provide a procedure for making and settling claims
which will ensure that they do not get into the High Court. What is relied upon as placing claims for
compensation outside the jurisdiction conferred by s. 75 (iii.) upon the High Court is that the
liability to pay compensation is imposed upon the Commonwealth Bank in the first instance and not
upon the Commonwealth itself, which is made liable only as a guarantor (ss. 15, 25, 40 (7), 45 of
the Banking Act 1947 in combination and s. 61). (at p356)

63. The procedure which, if valid, would, in the case of claims for compensation for the acquisition
of assets, operate to ensure that the claims could not be put forward in the High Court, is prescribed
by ss. 43 and 44. These provisions are governed by s. 42, which says that compensation in respect
of the acquisition of assets shall be ascertained in no other manner. The effect of ss. 43 and 44 is, in
default of agreement, to require the private bank to make a claim in writing to the Commonwealth
Bank in response to which the latter must serve a notice specifying the amount of compensation
which it is prepared to pay. Then, unless within two months the private bank requires the
Commonwealth Bank to refer the claim to the Court of Claims, the private bank is deemed to have
accepted the offer and compensation will be payable to the private bank by the Commonwealth
Bank according to the tenor of the notice. When the Commonwealth Bank is required to refer the
claim to the Court of Claims it is to forward the claim to that court which must determine the
compensation it thinks fair and reasonable. When the acquisition is of shares another procedure is
provided, but the curial part of it is less specific. A compensation register is to be made up by the
Commonwealth Bank from the share register of the private bank. Persons claiming interests not
shown for the time being by the compensation register may, within two months of acquisition, give
a notice and then the persons entitled to payment of compensation in respect of the acquisition of
the shares affected must be determined by the court and not in any other manner. If a person
claiming an interest who is not on the compensation register has failed to give a notice he is not to
be entitled to compensation except in pursuance of an order of the Court of Claims. If no notice is
given in respect of any shares the person on the compensation register is to receive the
compensation. But in every case the amount of compensation must, unless agreed upon, be
determined by the Court of Claims and not in any other manner (ss. 38, 39 and 40). It is in this way
that an expropriated bank or shareholders must proceed for the recovery of the compensation for
which it is constitutionally necessary to provide, if the power to make laws with respect to the
acquisition of property on just terms is to be validly exercised. The acquisition is accomplished not
by the Commonwealth Bank, but by the Treasurer as the responsible Minister. His notice under s. 13
(1) or s. 22 (1) divests the shares or assets and vests them in the Commonwealth Bank as a separate
juristic person (s. 13 (3) and (4) and s. 24 (2), (4) and (6)). (at p357)

64. The principal liability for compensation is imposed upon the Commonwealth Bank. That
liability in default of agreement can be quantified and enforced in the Court of Claims and not
otherwise. The liability of the Commonwealth considered as another legal entity may be ultimate,
but it is to be secondary only. The question is whether this arrangement of the constitutionally
indispensable responsibility for compensation can place the claim of the expropriated bank or
shareholder outside the jurisdiction conferred by the Constitution upon the High Court in all matters
in which the Commonwealth or a person sued on behalf of the Commonwealth is a party. As it is
beyond the power of the Parliament to withdraw any matter from the jurisdiction conferred by s. 75
an enactment in so far as it attempts to do so must be invalid. The question stated depends primarily
upon the interpretation of s. 75 (iii.). What is covered by the expression "the Commonwealth"?
What is contemplated by the words "a person suing or being sued on behalf of the Commonwealth"?
By the use of these expressions does the third paragraph of s. 75 intend to give a jurisdiction
confined to matters in which the Crown exercising (through the Governor-General) the Executive
power of the Commonwealth is itself a party, whether suing or sued in the name of the King or by
the Attorney-General or some other officer or nominal party authorized for the purpose as a matter
of procedure? Or, on the other hand, does the paragraph intend to place within the jurisdiction of the
High Court all matters in which a claim of right is made by or against any part of the central
government of the country in its executive department including the corporate and other agencies by
which it is administered? Are the words "person suing or being sued on behalf of the
Commonwealth" meant to cover not merely procedural representative but also officers and agencies
(whether corporate or not) of the Commonwealth suing or sued as such in respect of causes of
action enforceable by or against them in their official or governmental capacity? (at p358)

65. It appears to me to be much more a question of what the jurisdiction was intended to embrace
than a matter depending upon the characterization of the Commonwealth Bank as an agency of the
Crown enjoying, as such, the Crown's privileges and immunities. It is true, of course, as a matter of
logic that whatever meaning may be attached to s. 75 (iii.) its application to a claim against the
Commonwealth Bank must depend on the relation found to exist between that corporation and the
Executive Government of the Commonwealth. But that is not the same thing as inquiring whether
the corporate entity is established for the use and service of the Crown, so that, for example, its
occupation of property, if not that of the Crown itself, is for the behoof of the Crown, or so that
those whom it employs are the servants of the Crown for whose torts the corporation is not
responsible as the master, or so that debts due to the corporation are to be preferred in an
administration of assets to which the common law rules of priority apply. Our familiarity with
questions of this kind will naturally lead us to find an analogy in them and to seek for assistance in
the formulas applied and in the considerations relied upon in the ever lengthening line of cases
dealing with such questions. But beyond mentioning Metropolitan Meat Industry Board v. Sheedy
(1927) AC 899 ; City of Halifax v. Halifax Harbour Commissioners (1935) SCR (Can) 215 ;
Skinner v. Commissioner for Railways (1937) SR (NSW) 261, at pp 269, 270 for the discussions
and citations they contain, I shall not pursue the analogy. Such questions depend in the end upon the
intention ascribed to the legislature establishing the corporate agency. It is within the province of the
legislature to say whether the body it forms shall or shall not be suable for the torts of the persons
employed in its work: to say whether it is or is not to enjoy this or that immunity or privilege of the
Crown. It is true that the text of an enactment seldom contains any statement of intention, express or
implied, upon the matter and that the solution is, mote often than not, found in what the legislature
has done in erecting the body, furnishing it with powers and subjecting it to control. But the
question here depends upon the meaning and operation of an unalterable constitutional provision
which the intention of the legislature cannot affect. Once the meaning and scope of the
constitutional provision is ascertained its application depends on the legal situation, as it exists, of
the corporate entity said to form part of, or an agency of, the central government. But, perhaps,
before discussing the meaning of s. 75 (iii.), it is better to state shortly what is the position of the
Commonwealth Bank. It took its existence from ss. 5 and 6 of the Commonwealth Bank Act 1911,
which stated simply that a Commonwealth Bank to be called the Commonwealth Bank of Australia
was thereby established, and that the Bank should be a body corporate with perpetual succession and
a common seal and might hold land and might sue and be sued in its corporate name. Now it is
governed by the Commonwealth Bank Act 1945 (No. 13), but that Act preserves the Bank and
continues it in existence so that its corporate identity shall not be affected (s. 7). There is a Governor
of the Bank and a Deputy Governor, who are appointed by the Governor-General in Council. The
Bank is managed by the Governor and he directs what duties the Deputy Governor shall perform
(ss. 23, 25 and 26). An Advisory Council is set up to advise the Governor with respect to the
monetary and banking policy of the Bank and with respect to such other matters as the Governor
may refer to it. The Advisory Council consists of the Secretary to the Treasury, the Deputy
Governor, two other respresentatives of the Treasury appointed by the Governor-General in Council,
and two officers of the Bank appointed by the Treasurer on the recommendation of the Governor (s.
29). The Bank's officers are organized as a Commonwealth Bank Service to which appointments are
made by "the Bank" (Part XIII.). By s. 8 it is declared that it shall be the duty of the Commonwealth
Bank, within the limits of its powers, to pursue a monetary and a banking policy directed to the
greatest advantage of the people of Australia and to exercise its powers under the Commonwealth
Bank Act 1945 (No. 13) and the Banking Act 1945 (No. 14) in such 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.
By s. 9 the Bank is required from time to time to inform the Treasurer of its monetary and banking
policy. If there is difference of opinion between the Bank and the Government as to whether that
policy is directed to the greatest advantage of the people of Australia the Treasurer and the Bank
must endeavour to reach agreement; but if they do not, then 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, whereupon the Bank must give effect to that policy. The functions
of the Bank cover a wide field. It is the Central Bank and financial agent of the Government (Part
III.). It prints, issues and controls the notes which form the currency of the country for any
denomination above two shillings and are of course expressed in the name of the Commonwealth
and made legal tender throughout Australia (Part VII.). It carries on general banking business.
Distinct divisions of the Bank are established and treated almost as separate entities with their own
capital funds and accounts. Thus there is a Rural Credits Department to make advances in
connection with the production and marketing of primary produce (Part VIII.); a Mortgage Bank
Department to make loans upon the security of land used for agricultural or pastoral pursuits to
those engaged in primary production (Part IX.); and an Industrial Finance Department to lend
money and give assistance and advice for the establishment and development of industrial
undertakings, particularly small undertakings (Part X). The General Banking Division is, moreover,
charged with the function of lending money at the lowest practicable rates of interest to individuals
and building societies for the erection and purchase of homes and for the discharge of mortgages on
homes. (at p360)

66. There is an express declaration that the Commonwealth Bank shall not be liable to Federal land
or income tax or to any State taxation to which the Commonwealth is not subject (s. 183). Under the
bankruptcy law there is no preference to Crown debts in virtue of the prerogative and, except for
land and income tax, the Crown has no statutory rank above ordinary creditors; but s. 187 of the
Commonwealth Bank Act 1945 gives a preference to the Commonwealth Bank in the winding up of
other Banks. (at p361)

67. The powers of regulation and control of monetary policy and affairs taken by the Banking Act
1945 (No. 14) are for the most part vested in the Commonwealth Bank. It exercises the function of
stepping in to protect depositors if there is reason to fear the failure of a trading bank (Part II.,
Division 2): of directing the amount of the increase in assets of a trading bank that must be lodged
with the Commonwealth Bank as a special account (Part II., Division 3): of acquiring compulsorily
from trading banks excess balances of foreign currency (Part II., Division 4): of acquiring gold and
of licensing the sale or export of gold (Part IV.): of regulating interest rates charged by banks (Part
V.): and of making recommendations to the Treasurer as to the exercise of his power to allow or
disallow an amalgamation of banks or a reconstruction (s. 51). (at p361)

68. Although the Commonwealth Bank is declared to be a body corporate there are no corporators. I
see no reason to doubt the constitutional power of the Federal parliament, for a purpose within its
competence, to create a juristic person without identifying an individual or a group of natural
persons with it, as the living constituent or constituents of the corporation. In other legal systems an
abstraction or even an inanimate physical thing has been made an artificial person as the object of
rights and duties. The legislative powers of the Commonwealth, while limited in point of subject
matter, do not confine the legislature to the use of existing or customary legal concepts or devices,
that is, except in so far as a given subject matter may be defined in terms of existing legal
conceptions, as perhaps in some respects may be the case in, for example, pars. (ii.), (xii.), (xiv.),
(xvii.), (xviii.), (xxiv.) and (xxv.) of s. 51. The matter was considered to some extent in Heiner v.
Scott [1914] HCA 82; (1914) 19 CLR 381, at p 393 where Griffith C.J. said: "I pass by the question
whether in the nature of things it is competent for the Commonwealth Parliament to declare that
such an abstraction dissociated from any material persons shall be regarded as a corporation, and
will assume that it is, and that the Bank is a real entity cognizable by law. Probably the true effect of
the Act is a declaration that the Commonwealth may itself carry on the business of banking under
the name of the 'Commonwealth Bank of Australia'". Isaacs J., speaking for himself and Gavan
Duffy and Rich JJ., said (1914) 19 CLR, at p 400 : "We do not think the Act constitutes the Bank
universally the agent of the Commonwealth in the sense necessary to make all its acts the acts of the
Commonwealth itself - in other words Sovereign Acts. In respect of sub-s. (c) of s. 7 (cf. s. 17 (2)
and s. 13 (b) of the present Act), its personality is kept distinct from that of the Commonwealth. In
respect of some of its functions and obligations, it may or may not be identified with the
Commonwealth - a matter for possible future consideration." (at p362)

69. Both in respect of its powers or its purposes and its executive control the Commonwealth Bank
was then differently constituted. But the difficult conception of an organ sometimes acting as part of
the Commonwealth and sometimes not is to be explained less by the manner in which the
Commonwealth Bank was constituted than by the conditions the learned judge had in mind as
necessary or sufficient to give immunity to the operations of a Federal governmental agency. It is
indeed an illustration of the difference in the legal purposes for which an examination of the relation
between a governmental agency and the executive government may be necessary and of the fallacy
of supposing that the question lies in the characterization of the agency rather than in determining
the scope and operation of the principle, or the meaning and extent of the category, the application
of which is in controversy. (at p362)

70. Here the attributes of the Commonwealth Bank as an agency of the Federal Government, though
unusual, are clear enough. If it is to be compendiously described, it is an organized service of
government given a separate legal personality, in virtue of which it owns property, incurs duties and
obligations and enjoys rights, set up as the banking and monetary authority of the country and
charged with the functions of currency control, central banking, exchange control and ordinary
general banking, together with some superadded responsibilities of providing financial aid to
production and industry, and placed under the administrative direction and authority of its chief
officer, to whom is given a greater degree of independence than the permanent head of a
department, but who is bound ultimately to carry out the policy prescribed by his responsible
Minister. (at p362)

71. The matter comes back to the question whether such an organ is within the scope of the
expression "the Commonwealth or a person sued on behalf of the Commonwealth." The
"Commonwealth" means the central Government of the country. It is perhaps strictly correct to say
that it means the Crown in right of the Commonwealth. But it must be borne in mind that the dual
system of government, which is of the essence of federation, involves a legal recognition of the
distinct existence of the component polities. It would be difficult otherwise to accomplish a
distribution among them of defined powers and authorities by means of a supreme law enforceable
by the courts. (at p363)

72. The Constitution sweeps aside the difficulties which might be thought to arise in a federation
from the traditional distinction between, on the one hand the position of the Sovereign as the
representative of the State in a monarchy, and the other hand the State as a legal person in other
forms of government (see per Cairns L.J. in U.S.A. v. Wagner (1867) LR 2 Ch 582, at pp 593, 594
and goes directly to the conceptions of ordinary life. From beginning to end it treats the
Commonwealth and the States as organizations or institutions of government possessing distinct
individualities. Formally they may not be juristic persons, but they are conceived as politically
organized bodies having mutual legal relations and amenable to the jurisdiction of courts upon
which the responsibility of enforcing the Constitution rests. It is from this point of view that the
interpretation of s. 75 must be approached. Moreover, the nature of the instrument in which the
provision is found is not to be ignored. It is devoted, even in the judiciary chapter, to broad
propositions in the field of government and it is hardly likely to concern itself with peculiarities of
procedure. The purpose of s. 75 (iii.) obviously was to ensure that the political organization called
into existence under the name of the Commonwealth and armed with enumerated powers and
authorities, limited by definition, fell in every way within a jurisdiction in which it could be
impleaded and which it could invoke. (at p363)

73. Section 75 (iii.) cannot be read without s. 75 (v.) which, it is apparent, was written into the
instrument to make it constitutionally certain that there would be a jurisdiction capable of
restraining officers of the Commonwealth from exceeding Federal power. There is the strongest
presumption that in using the expression "or person suing or being sued on behalf of the
Commonwealth" the framers of the Constitution were not concerned with the Attorney-General or
any other officer by or through whom the Crown might come or be brought into court. In s. 75 (iv.),
referring to the States as parties, there is no concern on this procedural topic. But what they were
concerned with was amenability to the jurisdiction of persons in whom causes of action were vested,
or against whom causes of action lay, but in their official capacity only and as agencies or
emanations of the Commonwealth. This view is completely confirmed by the history of the
provision, which explains, if indeed it does not illuminate, the whole matter. The source of s. 75 lies
in Article III., s. 2, of the Constitution of the United States. So much of Article III. as supplied the
basis of par. (iii.) of s. 75 runs: "The judicial power shall extend to . . . controversies to which the
United States shall be a party." The doctrine that a sovereign government cannot be impleaded
without its own consent had a firm hold in America and was applied at once to the United States
itself. Moreover, by what to us may seem a paradox, the procedure by way of petition of right was
rejected as belonging only to a monarchical, and not to the republican, form of government. It was
necessary that the consent to suit should be granted by an enactment of the legislative organ of
government. As Congress made no general law conferring rights of suit against the United States
outside the Court of Claims, the question whether a cause of action put in suit amounted to a
controversy to which the United States was a party usually presented itself as a claim that no action
lay, made by the defendant or party impleaded, or perhaps made on the intervention of the United
States Attorney-General. In consequence of the Eleventh Amendment corresponding questions arose
as to what amounts to a suit against a State. It is perhaps a somewhat striking illustration of the
difference in the British outlook upon government immunity from suit, that this Court treated s. 75
as involving liability on the part of the States to suit and for reasons which would apply equally to
the Commonwealth: Commonwealth v. New South Wales [1923] HCA 23; (1923) 32 CLR 200, at
pp 213-216 ; cf. Werrin v. The Commonwealth [1938] HCA 3; (1938) 59 CLR 150, at pp 165-168 .
In the United States the general doctrine that the servant or agent of the executive government is
personally liable and may be sued in respect of any act or omission on his part not justified by law
and that the directions or authorization of the Government afford him no protection was treated as a
correlative of the immunity of the United States from suit, sufficiently mitigating the harshness of
the operation of the doctrine of immunity. But naturally this gave rise to a readiness to admit
proceedings against officers and agencies of the United States in respect of claims in which they had
little or no personal interest but in which the United States was deeply interested as the party really
affected. A celebrated case was that in which the Arlington estate was recovered in ejectment by
General Robert E. Lee's son claiming as devisee of his grandfather, G. W. P. Custis. The United
States claimed the land, which formed the national cemetery, under a title consisting of a tax sale
certificate, held in the event to be void. Notwithstanding a suggestion filed by the Attorney-General
alleging that the land was held, occupied and possessed by the United States, ejectment was
successfully maintained against the officers controlling the land, the United States not being a party
upon the record. Four of the justices took the view that once it was made to appear, by the
interposition of the Attorney-General, that possession and occupation was that of the United States
and the defendants named on the record held only as officers of the United States, it was not
competent for the Court to proceed to judgment in what was in truth a proceeding against the United
States. Five took the view that as the United States could not be joined and as its title was void, the
defendants in actual occupation could not resist the action on the ground of the official capacity in
which they held: United States v. Lee [1882] USSC 58; (1882) 106 US 196 (27 Law Ed 171) . In
Osborn v. Bank of the United States [1824] USSC 39; (1824) 22 US 738, at p 857 (6 Law Ed 204,
at p 232) Marshall C.J. had said, after referring to "controversies to which the United States is a
party": "It may, we think, be laid down as a rule which admits of no exception, that, in all cases
where jurisdiction depends upon the party, it is the party named in the record." But to this
proposition experience showed that it was hardly possible to adhere: see Minnesota v. Hitchcock
[1902] USSC 117; (1901) 185 US 373, at p 386 (46 Law Ed 954, at p 962) . Thus suits to restrain
the Secretary of the Interior from acting in a particular way in the execution of his office have been
held to be suits against the United States: Oregon v. Hitchcock [1906] USSC 89; (1906) 202 US 60
(50 Law Ed 935) ; Naganab v. Hitchcock [1906] USSC 114[1906] USSC 114; ; (1906) 202 US 473
(50 Law Ed 1113) . And so have suits against officers of the United States to restrain the use by
them in the course of their duties of articles belonging to the United States alleged to be
infringements of patents: Belknap v. Schild [1896] USSC 29; (1896) 161 US 10 (40 Law Ed 599) ;
International Supply Co. of New York v. Bruce [1904] USSC 152; ; (1904) 194 US 601 (48 Law Ed
1134) . But it is clear that great difficulty has been experienced by the courts in America in
maintaining a distinction between cases in which the suit is against the official in respect of acts for
which he is himself responsible to the plaintiff and those in which it is sought to affect the interests
of the United States by suing him in his official capacity. The distinction must rest upon the
conception that, although in both cases the cause of action is necessarily against the officer or agent
who is the defendant on the record and therefore depends upon actual or threatened wrongful acts or
omissions on his part, in the one case the complaint is against him personally while in the other he
"represents" the government. Where the defendant on the record denying jurisdiction was not an
individual but an incorporated agency of the United States, or of a State, the question of its
amenability to suit wore a double aspect. Is the agency of such a character as to share in the
immunity of the United States or of the State? Had the legislature made it suable and waived the
immunity? (at p366)

74. It is not to be expected that in the practical decision of cases these two questions would be kept
clearly separate. But now it is definitely laid down that it is not enough that a corporate agency has
been created by Congress for the execution of some governmental purpose or power, even if the
usual authority to sue and be sued in the corporate name is omitted: congressional intention must be
interpreted in the light of congressional policy, seen in a course of legislation which is uniformly
against denying to the citizens a remedy against such an agency, and also in the light of
contemporary opinion: Keifer v. Reconstruction Finance Corporation [1939] USSC 44[1939] USSC
44; ; (1939) 306 US 381, at pp 388-391 (83 Law Ed 784, at p 790) . But the courts seem to have
assumed that a corporate agency set up by statute may be so much a department of government that,
unless a positive indication of a contrary intention is found, it shares in the immunity: see
Annotation, 83 Law. Ed., at pp. 796, 797. (at p366)

75. From all this it is apparent that when the framers of the Commonwealth Constitution took up the
study of the Constitution of the United States with a view to modelling upon it the new Australian
instrument of Government, and reached the clause in question, the first difficulty they must have
encountered was to say how stood suits against officers and agents of the United States. We may be
permitted to know as a matter of history that what is now s. 75 (iii.) appeared in its present form in
the draft Constitution presented at the Convention of 1891 and that before it so emerged it had gone
through the hands of Sir Samuel Griffith who had before him the report of the Judicial Committee
over which Inglis Clark J. presided. (at p366)
76. Anyone who takes Article III. of the American Constitution and acquaints himself with the
difficulties that arose under it and the manner in which they were dealt with by the Supreme Court
and Congress and then compares it with Chapter III. of our Constitution will at once see that the text
of the latter is the outcome of much knowledge of the judicial exegesis by which judicial power of
the United States has been defined. The addition of the words "or a person suing or being sued on
behalf of the Commonwealth" appear appropriate to ensure that the jurisdiction over matters in
which the Commonwealth is a party should not be limited to cases in which the Commonwealth is a
party on the record and to ensure that on the contrary it covered officers and agencies of the
Government sued or suing in their official or governmental capacity such as those whose position
had been the cause of so much trouble in the United States. The idea of the immunity of the
Commonwealth was probably rejected altogether (cf. Commonwealth v. New South Wales [1923]
HCA 23; (1923) 32 CLR 200 ) but, in any event, s. 78 was introduced enabling the Parliament to
confer rights of suit; and there could be little doubt that the Commonwealth would have no such
privilege. The framers of the Constitution, concerned as they would be with giving a sufficiently
wide jurisdiction, could not but perceive the possible limiting effect of the American case law. At all
events, the purpose of providing a jurisdiction which might be invoked by or against the
Commonwealth could not, in modern times, be adequately attained and secured against colourable
evasion, unless it was expressed so as to cover the enforcement of actionable rights and liabilities of
officers and agencies in their official and governmental capacity, when in substance they formed
part of or represented the Commonwealth. (at p367)

77. It may be true that the restrictive interpretation or application of the conception of the "United
States" arose in America from the fact that to widen it would be to enlarge an unjust immunity or
privilege. Indeed, Frankfurter J. for the Court in Keifer's Case [1939] USSC 44; (1939) 306 US 381,
at p 388 (83 Law Ed 784, at p 788) , speaking of the principle that the United States could not be
sued without the consent of Congress, said: "But because the doctrine gives the Government a
privileged position, it has been appropriately confined. Therefore, the Government does not become
the conduit of its immunity in suit against its agents or instrumentalities merely because they do its
work." But however it may be explained, the result held a lesson for the Australian Constitution
makers. (at p367)

78. There is no reason to treat the words in question as anything but an endeavour to ensure that, for
the purposes of the jurisdiction, the conception of the Commonwealth included the agents and
instrumentalities of the Commonwealth suing or being sued in their official or governmental
capacity and so "on behalf of the Commonwealth." In my opinion so understood the provision
covers the Commonwealth Bank as a corporate agency of the Commonwealth, appointed, as it has
been, to take over the assets of the private banks and correspondingly to meet the claim for
compensation for the acquisition. That it is so appears to me inevitably to follow from the
description of its nature and functions that I have already given. Much support for this conclusion is
contained in one well-known opinion in the Supreme Court of the United States to which I shall
give a reference. It is the judgment of Story J. in Briscoe v. Bank of Kentucky [1837] USSC 7;
(1837) 36 US 257, at pp 342-345 (9 Law Ed 709, at pp 742-744) . The persuasive authority of that
great lawyer's view may be lessened by the fact that he was a dissentient, but this part of his opinion
appears to me to be convincing and is much in point. It is to be remembered that the majority
decision has been held to mark the beginning of a period of deviation from the broad interpretation
established by Marshall C.J.: see Willoughby, Constitutional Law of the United States, 2nd ed.
(1929), vol. 1, p. 134; Wright, Growth of American Constitutional Law, pp. 51 and 61. (at p368)

79. For these reasons I think that the jurisdiction which the Constitution gives to the High Court
embraces claims for compensation for the acquisition of shares pursuant to s. 13 or of assets
pursuant to s. 24, notwithstanding that the primary liability to pay compensation is imposed on the
Commonwealth Bank and only the secondary liability on the Commonwealth by name. (at p368)

80. I have dealt with the effect of s. 75 (iii.) somewhat fully because the consequences upon the Act
of the conclusion I have adopted that a claim for compensation falls within the jurisdiction bestowed
on this Court by that provision are in my opinion far-reaching. This arises from the fact that under
the Constitution any provisions for the acquisition of property must be void unless they are
accompanied by a valid provision affording just terms and from the further fact that for some reason
the Act is most explicit in making the ascertainment of compensation dependent exclusively either
upon agreement or upon proceedings in the Court of Claims. A provision making compensation, in
default of agreement, exclusively dependent upon the judgment of the Court of Claims cannot be
valid when the Constitution places a claim for such compensation within the jurisdiction of the High
Court and, unless the chain of consequences which is thus set up is interrupted at some point by
severance, it must mean that the acquisition provisions are destroyed by the invalidation of the
compensation provisions constituting the just terms constitutionally indispensable to valid
acquisition. (at p368)

81. Whether there can be a severance and at what point of the relevant provisions of the Act
depends upon the legal operation of s. 6 of the Act and its application to the structure of the portions
of the Act that are in question. Whether one provision of an enactment may survive the invalidation
of another is a matter sometimes controlled by the Constitution, as for example, if an attempt were
made to authorize the acquisition of property without validly providing just terms, or, in a law
imposing taxation, to deal with some other matter or to create a Federal court consisting of judges
appointed for a term of years or otherwise than by the Governor-General in Council. But if the
possibility of severance is not negatived or controlled by the Constitution, it becomes a question of
interpretation how far the invalidity extends beyond what in itself is obnoxious to the Constitution,
that is to say, how far the invalidity extends into apparently connected provisions which would not
of themselves necessarily be invalid. For this reason, no doubt, s. 6 is framed as a statement of
intention and not as a command addressed to the Court. The question of interpretation is whether,
after the extent to which the intended operation of the enactment is invalid has been ascertained, it is
nevertheless the expressed will of the legislature that the whole or any part of the rest of the
intended operation of the enactment should take effect by itself as a law of the Commonwealth. In
so stating the question I have preferred to speak of the two parts of the intended operation of the
statute rather than of portions of its provisions capable and incapable of valid enactment. The latter
way of stating the matter suggests that the problem is one of separating clauses or expressions. But
more often than not, when a statute or statutory instrument goes beyond the Constitution the
question for the Court is whether a provision too widely or generally expressed should be confined
in its operation to so much of the subject it is capable of covering as is constitutionally competent to
the legislature, or, as it is sometimes said, whether the general words are to be read and applied
distributively: see Jenkins v. The Commonwealth [1947] HCA 41; (1947) 74 CLR 400, at p 403 ;
Dawson v. The Commonwealth [1946] HCA 41; (1946) 73 CLR 157, at pp 178, 181, 186 ;
Australian National Airways Pty. Ltd. v. The Commonwealth (1945) [1945] HCA 41; 71 CLR 29 ;
Fraser Henleins Pty. Ltd. v. Cody [1945] HCA 49; (1945) 70 CLR 100 ; Shrimpton v. The
Commonwealth [1945] HCA 4; (1945) 69 CLR 613, at pp 628-630 ; R. v. Poole; Ex parte Henry
[1939] HCA 19; (1939) 61 CLR 634, at pp 650-652 and the authorities cited in these cases. (at
p369)

82. In many jurisdictions where legislation is subject to the doctrine of ultra vires, statutory
provisions are found governing the principle to be applied in deciding the extent to which the
invalidity of part of an enactment or of its intended operation affects the remainder. In the absence
of such a provision the rule is that legislation which by a general collective expression covers
objects some of which are and some of which are not within the scope of the power of the
legislature, the whole must be considered bad. For although the test is one of intention, it cannot be
presumed that Parliament gave its assent to a partial operation of its enactment. Thus unless
Parliament has said otherwise, a uniform general rule including persons or matters some of which
are outside the competence of the legislature must fall as a whole because there is no warrant for the
introduction of unexpressed exceptions and limitations and only thus could the provision be given
the more restricted operation. Further, if the invalid portion consists in or contains provisoes,
qualifications, exceptions or conditions affecting the operation of the other provisions severance is
impossible. In the same way the invalidity of a clause which would operate by way of relief,
compensation or alleviation brings down the provisions to which it has this relation. All these
matters were considered to be incompatible with the supposition that the provisions were meant to
receive an independent or distributive operation or, at all events, they were thought to tend too
strongly against such an assumption. It was not to be assumed that connected or associated
provisions were enacted as separate expressions of the will of the legislature. No severance could be
effected unless an inference that the provisions are not to be interdependent can be positively drawn
from the nature of the provisions, from the manner in which they are expressed or from the fact that
they independently affect the persons or things within power in the same way and with the same
results as if the full intended operation of the legislation had been valid. See per Isaacs J. in R. v.
Commonwealth Court of Conciliation and Arbitration; Ex parte Whybrow & Co. [1910] HCA 33;
(1910) 11 CLR 1, at pp 53-55 and in Roughley v. New South Wales [1928] HCA 48; (1928) 42 CLR
162, at pp 186, 187 ; and per curiam in Newcastle & Hunter River S.S. Co. Ltd. v. The
Commonwealth [1921] HCA 31; (1921) 29 CLR 357, at pp 369, 370 : see too Vacuum Oil Co. Pty.
Ltd. v. Queensland (No. 2) [1935] HCA 9; (1935) 51 CLR 677 . (at p370)

83. The practice of introducing what are called "severability clauses" into legislation became
common in the United States, where much consideration has been given to their operation and
effect. See particularly Williams v. Standard Oil Co. of Louisiana [1929] USSC 23; (1929) 278 US
235 (73 Law Ed 287) ; Utah Power & Light Co. v. Pfost [1932] USSC 108; (1932) 286 US 165, at p
184 (76 Law Ed 1038, at p 1048) ; Addison v. Holly Hill Fruits Products [1944] USSC 110[1944]
USSC 110; ; (1944) 322 US 607, at pp 618, 619 (86 Law Ed 1488, at p 1497) ; Railroad Retirement
Board v. Alton Railroad Co. [1935] USSC 107; (1935) 295 US 330, at p 361 (79 Law Ed 1468, at p
1482) ; Carter v. Carter Coal Co. [1936] USSC 93; (1936) 298 US 238, at p 312 (80 Law Ed 1160,
at p 1189) and the Annotation to Williams' Case [1929] USSC 23[1929] USSC 23; ; (1929) 278 US
235 (73 Law Ed 287) and an article by Robert L. Stern, (1937) 51 Harvard Law Review, p. 76. (at
p371)

84. The effect of such clauses is to reverse the presumption that a statute is to operate as a whole, so
that the intention of the legislature is to be taken prima facie to be that the enactment should be
divisible and that any parts found constitutionally unobjectionable should be carried into effect
independently of those which fail. To displace the application of this new presumption to any given
situation arising under the statute by reason of the invalidation of part, it must sufficiently appear
that the invalid provision forms part of an inseparable context. The general provision contained in s.
15A of the Acts Interpretation Act 1901-1941 produces this effect, as does s. 46 (b), which similarly
deals with severance in subordinate legislation. (at p371)

85. But in applying s. 15A and s. 46 (b) the courts have insisted that a provision, though in itself
unobjectionable constitutionally, must share the fate of so much of the statute, regulation or order as
is found to be invalid, once it appears that the rejection of the invalid part would mean that the
otherwise unobjectionable provision would operate differently upon the persons, matters or things
falling under it or in some other way would produce a different result. This consideration supplies a
strong logical ground for holding provisions to be inseverable, whether the prima-facie presumption
be in favour or against severability. It is important where there is no statutory clause like s. 15A and
it is important in using s. 15A. For the inference in such a case is strong that provisions so
associated form an entire law and that no legislative intention existed that anything less should
operate as a law. (at p371)

86. Further, where severance would produce a result upon the persons and matters affected different
from that which the entire enactment would have produced upon them, had it been valid, it might be
said with justice that unless the legislature had specifically assented to that result, contingently on
the failure of its primary intent, it could not amount to a law. The purpose of s. 6 is to carry further
in the case of the Banking Act 1947 the rule that provisions are to be considered severable and
general words distributable. After some study of par. (a) of s. 6, I remain unable to perceive clearly
how it extends the rule established by the decisions under s. 15A. The fact that it is not a general
law governing all statutes but is a particular provision of the Banking Act itself doubtless
strengthens its effect. The Court has gone very far as a result of s. 15A and in spite of the difference
in form of par. (a) of s. 6, I doubt whether the paragraph in any way extends the operation of the
rule of construction as we have applied it. Paragraph (c) of s. 6, however, is a very distinct extension
of the doctrine of the Court. At first sight it may seem to express the somewhat disconcerting
intention that the Court, having ascertained at what points the Act as passed offends against the
Constitution, should then undertake the task of reframing it from the fragments that might remain.
But a closer examination of the paragraph shows that it does not attempt an inadmissible delegation
to the Court of the legislative task of making a new law from the constitutionally unobjectionable
parts of the old. The point at which the paragraph applies is in effect when it is found how much of
the Act is necessarily inconsistent with the Constitution. Then, if it appears that the Act, with those
parts excised, would have a different effect in substance, the paragraph declares that that
consideration shall not be enough in itself to displace the application of the directions or statement
of intention contained in s. 15A. or in par. (a) of s. 6. It does not assume to require the Court to give
to any provision a different meaning or even operation from that which it possesses as it stands in
the statute read as a whole. What it is concerned with is the consequences which the same
immediate operation resulting from the fixed meaning of the Act will produce upon acts, matters
and things it covers. Section 6 (c) may be said to express an intention that, however much
amputation and excision may be necessary, what is left of the Act shall be law, but it does not say
that it shall be submitted to plastic surgery. In any case s. 6 is a declaration of intention that provides
a guide in ascertaining whether any given provision is, according to the true meaning of the
enactment, conditional upon the valid operation of another. But in the nature of things it cannot be
more than a guide. In the end the extent to which any part of the enactment held to be bad is
inoperative must depend upon the real intention of the legislature in relation to the particular
situation resulting from the invalidity found to exist. (at p372)

87. The manner in which the Act is constructed creates peculiar difficulties in relation to the place
of the intended exclusive authority of the Court of Claims over claims for compensation. It is
convenient first to take compensation in respect of the acquisition of assets which is governed by
Division 2 of Part VI. (at p372)

88. The very definite and emphatic statement in s. 42 that the compensation payable in respect of
the acquisition under s. 24 of the assets of a private bank shall be ascertained in accordance with
that Division and in no other manner expresses a positive intention of excluding all other
procedures. Section 45 is then expressed so as to impose a duty upon the Commonwealth Bank to
pay the compensation assessed by the Court of Claims at the same time giving a discharge to all
concerned upon payment. Section 43 (1) and (2) deal with the possibility of an agreement being
made as to compensation. Then s. 43 (3) and (4) and s. 44 provide for the course to be taken in the
absence of agreement. As will be seen from sub-s. (3) of s. 44, that course is devised so as to make
it impossible for the private bank to escape the Court of Claims, except at the expense of having
imputed to it an agreement in the terms proposed by the Commonwealth Bank and approved by the
Treasurer. It was suggested on the part of the Commonwealth that if s. 42 were held invalid as in
conflict with s. 75 (iii.) a notional severance of Division 2 might be effected after sub-s. (2) of s. 43.
The suggestion was that at that point the claimant should be treated as entitled to invoke the
jurisdiction of the High Court instead of proceeding under sub-s. (3) to make a claim in writing to
the Commonwealth. The difference between such a mode of severance and simply excising Division
2 altogether is not appreciable. For all it does is to leave the sub-sections authorizing agreement and
their only effect is to place a condition upon the freedom to agree which would otherwise exist, a
condition that the Treasurer must approve. The objection to the suggestion is that it is plainly
inconsistent with s. 42 and with the real meaning s. 43. It is not a removal of an invalid provision
but a reshaping of the provision in the hope of validating it. Section 42 not only provides that
compensation shall not be ascertained in any other manner, but it also provides imperatively that it
shall be ascertained in accordance with the Division. No excision will reconcile such a provision
with s. 75 (iii.). To introduce the alternative of proceeding under s. 75 (iii.), it would be necessary
completely to rewrite s. 42 with a consequent change of the policy and operation of the Division.
The truth is that the draftsman determined that he would state exhaustively how claims were to be
dealt with so that no alternative choice should be left open. He therefore expressed his intention in a
form and with a completeness and definitiveness that give neither place nor means for the
application of the general intention in favour of severance. For the Commonwealth it was also
contended that all s. 75 (iii.) could require is that an exception, so to speak, from Division 2 be
made in favour of the jurisdiction of the High Court. In that I cannot agree. To write such an
exception into the Division is impossible. That would be to amend, not sever, the provision. I think
that Division 2 is void with the exception of s. 43 (1) and (2). But the cheif argument of the
Commonwealth upon this matter was that Division 2 might be notionally deleted from the Act,
because, if that were done, s. 25 would then confer a sufficient general right to compensation
recoverable by suit in the ordinary courts. (at p374)

89. To my mind this argument gives a new meaning and a new immediate operation to s. 25. That
section as it stands in the Act must be read with Division 2 and, so read, does not mean to invest the
private banks with a cause of action by which they may recover compensation. It is a general
declaration of the obligation of the Commonwealth Bank to pay compensation in the manner
thereinafter provided. It is the subsequent provisions which give the right, and the only right the
private bank is to have is that of obtaining compensation by agreement (whether actual or imputed
under s. 44 (3)), or by a reference to the Court of Claims under s. 44 (5). To find in s. 25 the
creation of an actionable right is to ignore the fact that Division 2 clearly shows that it has no such
meaning. To change the meaning of s. 25 by reinterpreting its language is just as inadmissible as a
rewriting of its text. Some suggestion was made that once a provision was pronounced ultra vires
you ignored its existence and its terms for the purpose of interpreting the rest of the Act. In this way
you were to proceed to attach a meaning to s. 25 only after you had eliminated Division 2, not only
from the Act, but from judicial consideration. But it is quite wrong to suppose that you construe the
valid portions of an Act as if the invalid portions do not exist. The latter are as much an expression
of the intention of the legislature as the former. You should first obtain the meaning of every part of
the instrument containing the complete expression of the will of the legislature by reading and
construing the whole. Only then do you proceed to decide whether the legislature has gone beyond
its powers. Construed as an integral part of the whole Act, s. 25 amounts to no more than a general
statement for the purpose of making it clear that the acquisition of the assets by the Commonwealth
Bank is in the character of a purchaser liable to pay compensation. In this way it is introductory to
the provisions of Division 2. We are not here dealing with a gift in a will of property to a legatee
definitively made over to him and then subjected to a superadded direction controlling the extent of
his enjoyment and the devolution of the interest. Doctrines such as govern the consequences upon
such a gift of the invalidity of the superadded directions have no place whatever in the construction
of an Act of Parliament. Nor could they have any application to a connected series of provisions
dealing with a liability to compensation and the exclusive method of ascertaining and enforcing it. If
any analogy is to be sought elsewhere in the law it might well be in the many authorities which say
that when an enactment creates an obligation and specifies the remedy or the procedure to be
pursued, it means that ordinary proceedings are not open. (at p375)

90. But again, the truth is that the emphatic proposition in s. 42 that compensation is to be
ascertained in no other manner than according to Division 2 governs the meaning and effect of s. 25
and makes it impossible to substitute a new and alternative meaning for s. 25. In short to do so
would produce a different law from that to which the legislature gave its assent. (at p375)

91. Section 6 (c) authorizes a severance notwithstanding that what remains may then have a
different effect. But it does not, and, indeed, without an unconstitutional delegation of legislative
power to the judiciary it could not, say that when a new meaning producing a new operation is
indispensable to the validity of a provision that meaning shall be assigned with a view to saving it.
By "effect" as used in s. 6 I do not understand the paragraph to mean a change in the immediate
operation of a provision. There is, I think, a wide difference between giving a provision a new
meaning resulting in the creation of rights, duties, powers, capacities or immunities of a kind
uncontemplated by the legislature and the removal of other provisions, which if valid, would or
might have produced indirect or consequential effects upon the enjoyment of rights, duties, powers,
capacities or immunities independently created by the clause to be severed from the invalid
provision. Paragraph (c) of s. 6, in speaking of a different effect doubtless refers to the latter case.
The terms of the paragraph do not support the idea that a different effect may be given by attaching
a new meaning to the clause it is sought to sever in order that it should survive. (at p375)

92. I am therefore of opinion that the provisions of the Act relating to compensation for the
acquisition of assets are ineffectual. It follows that s. 24 of the Act is void. (at p375)

93. It is unnecessary after the foregoing discussion to say very much about the provisions governing
the compensation for the compulsory acquisition of shares. I have already discussed them in relation
to s. 51 (xxxi.) of the Constitution. They are not precisely the same but they contain the same vice as
the provisions relating to compensation for assets. Indeed, in some respects it is exhibited even more
strikingly. For s. 40 deals in separate sub-sections; (a) with the compensation payable to persons
whose names the Commonwealth Bank has placed on the compensation register when no other
claim has been notified with respect to the same shares; (b) with the claims of persons whose names
have not been placed upon the compensation register but who have given notice of a claim to an
interest in the shares acquired; (c) with the amount of compensation payable in respect of shares
where such claims have been notified and the amount payable to each person. As to each of these
matters s. 40 states emphatically that it shall be determined by the Court of Claims and in no other
manner. Section 40 (7) excludes all claims by persons not on the compensation register who have
not notified them under s. 39, unless under an order made by the Court of Claims. It is apparent that
unless a claimant is upon the compensation register he must establish his claim in the Court of
Claims and by no other procedure may he do so. It is impossible to desert the whole of Division 1 of
Part VI. and attribute to shareholders and persons interested in shares a statutory cause of action for
the recovery of compensation independently of the compensation register and of notice. Yet it is
only on such a footing that s. 40 can be treated as a divisible provision the invalidity of which does
not affect the acquisition provisions. Section 15 corresponds in the case of shares to s. 25. It does
not mean to give an actionable right to compensation. Read as part of the Act its meaning is that the
Commonwealth Bank shall pay compensation in respect of the acquisition of shares in the manner
afterwards prescribed. A different meaning cannot be placed upon it because s. 40 is invalid. (at
p376)

94. I am therefore of opinion that s. 40 is invalid and that provisions for the compulsory acquisition
of shares must fall with it. That means that at all events s. 13 (3), (4) and (5) must be ineffectual. (at
p376)

95. An examination of Division 2 of Part IV. will show that the invalidity of s. 13 (3) and (4)
involves the validity of the consequential provisions contained in s. 14 (1) (except perhaps in its
application to acquisition by agreement), s. 15 and s. 16 (with the like exception). Section 14 (2)
cannot be supported for many reasons. A similar examination of s. 24 will show that no case can be
made for saving any of its sub-sections from the fate of sub-ss. (2), (4) and (6). (at p376)

96. At this point it is desirable to combine the conclusions I have just expressed with those I stated
with respect to the conflict of provisions contained in Part IV., Divisions 2 and 3, with the
requirement of just terms of acquisition imposed by s. 51 (xxxi.) of the Constitution. The result of
the combination is that, except for s. 12 and the possibility of s. 14 (1) and s. 16 being valid in their
application to a voluntary acquisition under s. 12, the whole of Division 2 of Part IV. is invalid and
Division 3 is invalid. Section 24 is invalid. Part VI. of course fails. It also follows that s. 46 (3)
fails. I should perhaps say that the reference in sub-s. (3) of s. 46 to a private bank taking over
another private bank is for the purpose of a particular absorption, one that has been effected, and it
can be neglected. (at p377)

97. Section 46 (4)-(8) contain a power of prohibiting banking which, on the face of the sub-sections,
shows no apparent dependance upon the acquisition provisions of the Act. (at p377)

98. I shall therefore now pass to a consideration of the validity of s. 46. (at p377)

99. Part VII. of the Banking Act 1947, which consists only of s. 46, is entitled: "Prohibition of the
carrying on of banking business by private banks." The part applies to all private banks whether
incorporated in Australia, in the United Kingdom or elsewhere. The section is constructed upon a
curious plan. It begins by a general prohibition laid on all private banks against carrying on banking
business in Australia; but the prohibition is followed by the words "except as required by this
section" (sub-s. (1)). Next, there immediately follows a command laid on every private bank,
"subject to this section," to carry on banking business in Australia (sub-s. (2)). Then follow two
alternative provisions directed to prescribing how the obligation to carry on banking business shall
terminate. One alternative consists in sub-s. (3) which provides in effect that the obligation to carry
on shall not apply to a private bank after its business has been taken over by the Commonwealth
Bank. That refers to a taking over by agreement pursuant to s. 22 (5) or compulsorily under s. 24
(2). The other alternative is contained in sub-ss. (4)-(8). These provisions empower the Treasurer,
by a notice, to require a private bank to cease upon a date he specifies to carry on banking business
in Australia. The period of the notice must not in the first instance be more than two months, but the
Treasurer may by an amendment of his notice extend the time. Sub-section (8) then expressly
forbids the private bank after the date or amended date specified to carry on banking business in
Australia. It will be noticed that sub-s. (8) expresses a particular prohibition which might have been
thought to be contained in the general prohibition of sub-s. (1). The first of the two alternatives to
which sub-s. (2) is subject and which therefore, so to speak, take up the general prohibition, is
almost nullified by the invalidation of s. 24. But of course the nullification is not complete because
the alternative covers the contingency of a voluntary agreement under s. 22 (5) as well as
compulsory acquisition under s. 24. Upon the view I have already expressed, that s. 24 is invalid as
one of the consequences of the conflict of Division 2 of Part VI. with s. 75 (iii.) of the Constitution,
sub-s. (2) of s. 46 will prevent sub-s. (1) from taking effect unless either an agreement is made
under s. 22 (5) or a notice is given under sub-s. (4) of s. 46. In the latter event, however, on the
expiry of the notice or amended notice, as the case may be, sub-s. (8) will operate specifically upon
the private bank concerned. The expiry of the notice results under sub-s. (4) in a prohibition which
may be included in the expression in sub-s. (2) "subject to this section." If so it is a contingency
which, as a matter of words, might release the operation of sub-s. (2) and so bring into operation
sub-s. (1). But apparently it is intended in such a case that sub-s. (8) shall be the source of the
prohibition, and not sub-s. (1). It is not, I think, a matter of any importance because it is exactly the
same "law" whether a notice under sub-s. (4) brings into play sub-s. (1) or sub-s. (8) or both. It is a
law which enables the Treasurer by a notice or notices to make it a penal offence for any or all
private banks to carry on the business of banking in Australia after a given date or dates. The
grounds upon which the Treasurer is to proceed in deciding whether and when he will give any and
what notices are not defined or in any way limited. (at p378)

100. As in my opinion the provisions for the acquisition of shares in and of the assets of a private
bank are ineffective, a question at once arises whether this conclusion does not also involve the
validity of s. 46 (4)-(8) (and of s. 46 (1) if and so far as it takes effect by the use of s. 46 (4)). This
question depends upon the declaration contained in s. 6 of a legislative intention that all provisions
of the Act other than those found to be inconsistent with the Constitution shall operate to the full
extent they may under the Constitution and that such intention shall have effect notwithstanding it
may result in the Act having a different effect in substance from that it would otherwise have
produced. To isolate s. 46 (4)-(8) and give them an operation quite independent of the compulsory
acquisition provisions would, indeed, give the enactment a different effect in substance from that
which, it may be supposed, was contemplated. For it would enable the Treasurer to close any or all
of the private banks, but not to take over the businesses. Extraordinary confusion and disturbance, if
not worse, would no doubt be caused by the use by itself of such a power to close up even one large
bank, to say nothing of the result if it were applied at the same time to all. (at p379)

101. But it must be remembered that, as s. 46 is drawn, even although the whole Act were upheld as
valid, it would nevertheless be open to the Treasurer to invoke the power which sub-ss. (4)-(,)
purport to give him. (at p379)

102. It may be assumed that it was outside the contemplation of anybody that the private banks
should be closed, not only without compensation, but without any arrangement in respect of the
bank officers and staff and without any provision for continuance of the customers' accounts and
without any other transitional arrangements. Yet it is a thing that s. 46 on its terms unmistakably
permits. In these circumstances I am of opinion that s. 6 should be put into effect and that s. 46 (4)-
(8) (and sub-s. (1) if and so far as dependent on sub-s. (4)) if otherwise valid should accordingly be
considered severable. (at p379)

103. But so considered these provisions must be regarded as standing alone and that means as bare
authorities to the Treasurer by a notice or notices given whenever and for whatever reason he thinks
fit to stop any private bank or all private banks from carrying on banking business within the
Commonwealth. So regarded the provisions at once provoke the question whether they are
consistent with the constitutional guarantee of the freedom of inter-State trade, commerce and
intercourse. (at p379)

104. In considering this question it may not be unimportant to notice the widely varying
applications of which the power conferred by s. 46 (4)-(8) is capable. It may be used to close one
bank, which may be large or small. That may or may not be followed by the closing of another or
others. If it is, the intervals of time may be short or, on the contrary, may be spread over years. The
purpose for closing one bank may be entirely different from that for which another is closed. On the
other hand, by notices given about the same time, the Treasurer may close all the private banks upon
one day. This, coupled with the operation of s. 7 of the Banking Act 1945, would mean that all
banking would be forbidden except by the Commonwealth Bank and the State Banks. (at p379)

105. Now, the existing system of private banking maintains an Australia-wide business upon which
its whole structure rests. It sustains with respect to the transfer of money or bank credit the greater
part of the commerce of the country. Branches and agencies of the various private banks are
distributed over the Commonwealth and there are few towns or centres in which one or more of
them is not represented. The volume of the banking transactions which cross State lines is, of
course, widely different with different banks, and that is said to be true also of the proportion which
in number or value inter-State transactions over a period bear to the whole business done. But the
total quantity for all banks is very large, although the proportion in money is said to be but ten per
cent of the amount involved in all transactions. If it matters it appears that there are constant
changes in the funds made available in the various States, the excess of advances over deposits in
one State being supplied or supported by resources in other States. In the daily course of business
the private banks (with two minor exceptions) regularly transfer funds among the States, establish
credits across State boundaries, and collect cheques, bills of exchange and promissory notes drawn
and lodged in one State and payable in another, and of course they negotiate such instruments.
There have been placed before the Court elaborate descriptions of the many different kinds of inter-
State transactions the private banks carry out, considered both from the banks' side and from the
customers' side, that is an essential part of his commercial dealings. But it is enough to say that, as
common knowledge might suggest, this material confirms in detail what seem to be the essential
conclusions. These are that the business of the private banks necessarily includes: - (a) the constant
inter-State transmission of funds and transfer of credit; (b) constant business communication and
intercourse among the States; (c) the regular use for the purposes of inter-State transactions of
instruments of credit and of title to goods and their inter-State transmission; (d) the integration of
inter-State banking transactions with the entire business of the bank to form a system spreading over
the Commonwealth without regard to State lines; (e) the furtherance of commercial dealings by
inter-State traders in goods by performing an indispensable part in such transactions. (at p380)

106. The first question for decision is whether the trade, commerce and intercourse to which s. 92
gives freedom covers matters of the foregoing description. It is said that the protection s. 92
provides extends to the transfer from one State to another of nothing but commodities and persons.
Intangibles are said not to be covered. In my opinion this is an unwarranted limitation upon a
constitutional provision that was intended to guarantee freedom from restriction to a braod category
of interchange, converse and dealings between States in the affairs of life. (at p380)

107. It was part of the purpose of s. 92 to remove from the possibility of legislative and
governmental restriction activities conducted across State boundaries and to do so rather because of
their inter-State character than of any special claim to immunity from interference that particular
activities might have except their inter-State character. To say figuratively that the purpose was to
enable Australians to disregard State boundaries and not simply to give an immunity from
interference to buying, selling and journeying makes clear the point, even if the statement may be
inadequate and open to objection otherwise. Those who introduced s. 92 into the Australian
Constitution did so in the full light of American experience. In s. 51 (i.) they coupled the word
"trade" with the word "commerce," which stood alone in the United States Constitution to define the
subject matter of the power of Congress to regulate commerce with foreign nations and among the
several States. Not content with the expression "trade and commerce" for the purposes of s. 92, they
there added the word "intercourse." (at p381)

108. It has been said that "trade" strictly means the buying and selling of goods. That, however, is a
specialized meaning of the word. The present primary meaning is much wider, covering as it does
the pursuit of a calling or handicraft, and its history emphasizes rather use, regularity and course of
conduct, than concern with commodities. "Intercourse" was doubtless added because of the view,
now no longer open in the United States, that commerce might not extend to intercourse that was
not concerned with business profit or pecuniary gain and because of the degree to which the right of
the citizen to access to every constituent part of the Union had been rested on implication. Icannot
think that the essential content of the expression "trade commerce and intercourse" in s. 92 is any
less than is included in the conception of commerce in the modern American view of the commerce
power. I am not speaking of the spread of that power over an immense field of activities that are
incident to commerce. It is the central conception expressed in the word to which I refer. It covers
intangibles as well as the movement of goods and persons. The supply of gas and the transmission
of electric current may be considered only an obvious extension of the movement of physical goods.
But it covers communication. The telegraph, the telephone, the wireless may be the means
employed. It includes broadcasting and, no doubt, it will take in television. In principle there is no
reason to exclude visual signals. The conception covers, in the United States, the business of press
agencies and the transmission of all intelligence, whether for gain or not. Transportation, traffic,
movement, transfer, interchange, communication, are words which perhaps together embrace an
idea which is dominant in the conception of what the commerce clause requires. But to confine the
subject matter to physical things and persons would be quite out of keeping with all modern
developments. The essential attributes which belong to the conception should determine the field of
human activities to which it applies. To place among the essential attributes the requirement that
there should be goods for sale or delivery or a man upon a journey, is to mistake the particular for
the general, the concrete example for the abstract definition, and to yield to habits of thought
inherited from a more primitive organization of society. (at p382)

109. The words "trade, commerce and intercourse" are not naturally susceptible of such a
reactionary interpretation. The very manner in which they are combined would carry, even to a
mind unfamiliar with their background, an intention to include all forms and variety of inter-State
transaction whether by way of commercial dealing or of personal converse or passage. An
understanding of what lies behind the choice of expression confirms the natural impression
produced by the language itself. In the long history of the interpretation of the commerce clause in
the United States tendencies have been disclosed from time to time to deny the inclusion within it of
transactions which relate only to the payment of moneys, such as insurance (Paul v. Virginia [1868]
USSC 79[1868] USSC 79; ; (1869) 75 US 168 (19 Law Ed 357) ) or as inter-State bills of exchange
considered as subjects of intra-State sale (Nathan v. Louisiana [1850] USSC 7; (1850) 49 US 73 (12
Law Ed 992) ). But these tendencies have been considered anomalous: cf. Willoughby,
Constitutional Law of the United States, 2nd ed. (1929), par. 441 pp. 744-746 and par. 435, p. 741;
Willis, Constitutional Law. pp. 284, 285, and now the basis of such a distinction has been swept
away: United States v. South-Eastern Underwriters' Association [1944] USSC 116[1944] USSC
116; ; (1944) 322 US 533 (88 Law Ed 1440) ; Polish National Alliance of United States of America
v. National Labor Relations Board [1944] USSC 102; (1944) 322 US 643 (88 Law Ed 1509) ;
Prudential Insurance Co. v. Benjamin (1946) 328 US 408 (90 Law Ed 1342) ; Robertson v.
California (1946) 328 US 440 (90 Law Ed 1366) ; Freeman v. Hewit [1947] USSC 4; (1947) 329
US 249, at pp 258, 259 (91 Law Ed 265, at p 275) . So far from Engel v. O'Malley (1911) 219 US
128 (55 Law Ed 128) containing anything to the contrary I think that a close reading of the
judgment of Holmes J. (Particularly at (1911) 219 US, at pp 138, 139 (55 Law Ed, at pp 136, 137) )
will show that he clearly implies an opinion that the transmission of money by a bank from one
State to another is inter-State commerce. (at p382)

110. In my opinion a large part of the business of banking, if transacted across State lines, involves
trade, commerce and intercourse among the States. The presence in the Constitution of s. 51 (xiii.)
affords no reason for treating the trade and commerce power conferred by s. 51 (i.) as inappropriate
to baking transactions if they are carried out with other countries or among the States. Section 51
(xiii.) was placed in the Constitution because it was desired that the subject of banking as a whole
should fall under Federal legislative authority: not because it was considered that so much of baking
as involved transactions with other countries or among the States could not fall under s. 51 (i). (at
p383)

111. Again, I am unable to see that the parenthesis in s. 92 of the words "whether by means of
internal carriage or ocean navigation" militates against the conclusion that transactions in
intangibles are covered by the provision. These are words of extension, not of restriction. Their
purpose would be expressed if they were written "although by ocean navigation and not by internal
transport" or "by land or sea." (at p383)

112. The contention made that what is commonly called a transmission of money or credit by a bank
involves no movement, no interchange, nothing occurring across State lines, but merely the
reduction of credit in one place and an increase in another, seems to substitute an analysis - and one
of doubtful adequacy - belonging to monetary theory for the common understanding of the course
business takes and the complexion which the law places upon it. But for myself I should think that if
these interdependent and significant phenomena occurred in different States, involving, as they
must, communication between the States, it would be enough. Nor do I see that it is anything to the
point to consider the function of banking in providing and regulating the medium of exchange
chiefly employed in the Anglo-American world, bank money or credit. That is a consequence of the
relation of banker and customer. But whether, from the standpoint of the fulfilment of that vital
economic function, the banking transactions that are important as inter-State trade, commerce and
intercourse are regarded as falling under the category of cause, of result or of accompanying
circumstance, nevertheless, as between the parties to them, they continue to possess the
characteristics which give them the complexion of trade, commerce and intercourse among the
States. (at p383)
113. For the reasons I have stated, the subject matter of the prohibition authorized by s. 46 (4)-(8) of
the Banking Act 1947 appears to me to be comprised within s. 92 so far as the business consists of
inter-State transactions. (at p384)

114. The operation of s. 46 (8) (or s. 46 (1)), when the power given by s. 46 (4) is exercised in
relation to all private banks, is to suppress all banking except that carried on by the Commonwealth
Bank or by State banks. There is, of course, no discrimination between inter-State business and
intra-State business. The whole business, intra-State, inter-State and foreign, is prohibited. But the
prohibition directly imposed upon the conduct of any banking business, except under Government,
is direct and the direct prohibition includes in its operation all inter-State banking business. (at
p384)

115. In James v. The Commonwealth [1936] UKPCHCA 4; (1936) AC 578, at pp 630-633; 55 CLR
1, at pp 58-61 to which we have all given close and repeated study, the test laid down for the
application of the constitutional guarantee of freedom contained in s. 92 amounts to freedom of
what constitutes trade, commerce and intercourse to pass from one State to another. It is described
as freedom as at the frontier or border, the crucial point in inter-State trade. But that freedom may
be impaired by a prohibition, restriction or burden, the application of which is not at the border but
at some prior or subsequent stage in the course of inter-State trade, commerce and intercourse. This
is explained by reference to cases arising in this Court which include the following examples: - (1) a
legislative declaration by a State that stock and meat in a State are to be held for the purposes of and
kept for disposal of the Crown in aid of supplies for the armed forces (Foggitt, Jones & Co. Ltd. v.
New South Wales [1916] HCA 28; (1916) 21 CLR 357 ; Duncan v. Queensland [1916] HCA 67;
(1916) 22 CLR 556 ; cf. James v. The Commonwealth (1936) AC, at p 618; 55 CLR, at p 47 ; (2) a
State statute and an order thereunder the combined effect of which was to fix a proportion or quota
of a product and forbid the marketing in Australia of any greater quantity: James v. South Australia
(1927) 40 CLR 1 ; James v. Cowan [1930] HCA 48; (1930) 43 CLR 386 ; James v. Cowan (1932)
AC 542; 47 CLR 386 ; cf. James v. The Commonwealth (1936) AC, at p 622; 55 CLR, at p 51 ; (3)
the expropriation under the same statute of parcels of the product in the hands of a producer so as to
prevent him selling them in defiance of the quota fixed (1936) AC, at p 622 ; (4) a State scheme for
the compulsory marketing of a product, acquiring the product, restricting freedom of action on the
part of producers and involving the compulsory regulation and control of all trade, domestic, inter-
State and foreign [1934] HCA 5; (1934) 51 CLR 108; cf (1936) AC, at pp 623, 624; 55 CLR, at p
52 ; (5) the imposition by a State on an importer of petrol of an obligation to buy locally a
proportion of power alcohol, petrol which is not produced in Australia, being imported into the
State sometimes directly from abroad and sometimes immediately from another State [1934] HCA
5[1934] HCA 5; ; (1934) 51 CLR 108; cf (1936) AC, at pp 623, 624; 55 CLR, at p 52 ; (6) a State
law requiring payment of a higher licence fee for a licence to sell wine from another State than for a
licence to sell wine produced in the State concerned [1909] HCA 81; (1909) 8 CLR 115; cf (1936)
AC, at pp 616, 617; 55 CLR, at p 46 . (at p385)

116. Thus freedom as at State boundaries has no narrower meaning than that there shall not be
imposed prohibitions, restrictions and burdens preventing, impeding or prejudicing the passing from
State to State of what amounts to trade, commerce and intercourse. Lord Wright evidently regarded
this as an application of the word "free" that was limited by context and subject matter. Yet I think
that a ready assent to the limitation would have been given by all the judges who have sat in this
Court, notwithstanding that from the beginning they have given such diverse effects to s. 92. Indeed,
I believe that each would have claimed that the proposition was the point from which he began.
Perhaps Isaacs C.J. would have amended it by adding the word "control"; an unfortunate word of
such wide and ambiguous import that it has been taken to mean something weaker than "restraint,"
something equivalent to "regulation." So to understand it amid the copia verborum and vigor of
expression Isaacs C.J. was accustomed to employ where his opinion was strong is natural enough.
But it is perhaps worth remark that no actual decision or order given or made applying s. 92 to the
facts of a case seems to be based on any very extended meaning of the notion of restraint or burden
or, for that matter, on a wide or distributive interpretation of "trade, commerce or intercourse." This,
I imagine, is the explanation of Lord Wright's apparent hesitation to express any greater
disagreement with the actual decision in W. & A. McArthur Ltd. v. Queensland (1920) 28 CLR 530
than is involved in describing it as a doubtful exception to the statement that their Lordships'
construction of s. 92 is not inconsistent with any decided case (1936) AC, at pp 631, 632; 55 CLR,
at pp 59, 60 . What, as it seems to me, the judgment in James v. The Commonwealth [1936]
UKPCHCA 4; (1936) AC 578; 55 CLR 1 has corrected is the error of applying the conception of
freedom where there was no real burden upon and no real obstruction to passing from one State to
another or dealing across State lines and in addition the failure to recognize that regulation of trade,
commerce and intercourse is compatible with freedom of inter-State passage or converse. (at p385)

117. The view that what is preserved by s. 92 is freedom as at the frontier might suggest that the
protection is against obstructions, burdens or disadvantages which operate against inter-State
transactions in a special manner because, whether in form or in substance, there is a differential
treatment of domestic and inter-State transactions, or because what is done has a greater significance
or importance for inter-State commerce. To limit s. 92 to freedom from laws discriminating against
inter-State commerce was an interpretation which at one time proved attractive and it had strong
support. But that cause was lost at an early stage of the struggle which expediency has so long
sustained with such varying fortune against the apparently inflexible terms in which the framers of
the Constitution chose to express a policy regarded, it is said, as basal to the federation. It seems
now to be rejected of all men. Barton J. said as early as Duncan's Case [1916] HCA 67; (1916) 22
CLR 556, at p 585 that if the restriction of inter-State trade is included in the direct operation of an
Act the fact that intra-State trade is also more or less affected does not diminish the restriction and
that if the State legislature could make a burden apply alike to all the people of Australia as well as
the people of the State, still the considerations affecting the case would not differ. The decision of
the Privy Council in James v. Cowan (1932) AC 542, at p 555; 47 CLR 386, at pp 393-394 is quite
inconsistent with the doctrine, and in James v. The Commonwealth (1936) AC, at p 628; 55 CLR, at
p 56 , Lord Wright rejected it. He said: "An Act may contravene s. 92 though it operates in
restriction both of intra-State and of inter-State trade." In the United States another step has recently
been taken which brings the American doctrine whereby the commerce clause operates to confer a
freedom against State restriction even closer to the operation given to s. 92. The opinion in which
the step is taken deals also with discrimination. It is that of Frankfurter J. for the Court in Freeman
v. Hewit [1947] USSC 4[1947] USSC 4; ; (1946) 329 US 249, at p 252 (91 Law Ed 265, at pp 271,
272) . His Honour said: - "In two recent cases we applied the principle that the Commerce Clause
was not merely an authorization to Congress to enact laws for the protection and encouragement of
commerce among the States, but by its own force created an area of trade free from interference by
the States. In short, the Commerce Clause even without implementing legislation by Congress is a
limitation upon the power of the States. . . . In so deciding we reaffirmed, upon fullest
consideration, the course of adjudication unbroken through the Nation's history. This limitation on
State power . . . does not merely forbid a State to single out inter-State commerce for hostile action.
A State is also precluded from taking any action which may fairly be deemed to have the effect of
impeding the free flow of trade between States. It is immaterial that local commerce is subjected to
a similar encumbrance. It may commend itself to a State to encourage a pastoral instead of an
industrial society. That is its concern and its privilege. But to compare a State's treatment of its local
trade with the exertion of its authority against commerce in the national domain is to compare
incomparables." (at p387)

118. It would be surprising if the Australian express enactment were less effective and narrower
than the American implication which it was intended, as a positive provision, to replace. No doubt a
law that applied only to inter-State trade might be seen to impose a burden upon it, while if it had
applied uniformly over the whole field of trade it might have worn the appearance of a mere
regulation. But that is another matter. (at p387)

119. To describe the characteristics necessary to render a law obnoxious to s. 92 there has been
much use of figurative expressions. It has been said that the law must be "pointed at" inter-State
commerce, "directed against it," "inimical to it," "hostile to it" or "antagonistic to it," or that it must
"hit at" inter-State commerce. I have never been certain what these expressions connote when so
used. Indeed, sometimes the question whether a law does or does not impair the freedom of inter-
State commerce seems to be brought down to a choice between a dyslogistic and a eulogistic epithet
to describe the same legislative provision. (at p387)

120. The expressions that I have mentioned, however, appear capable of three meanings. They may
mean that the law must discriminate against inter-State commerce. If so, they lay down an erroneous
test. They may mean that the application of the law to inter-State commerce must be direct and its
operation prejudicial, whether or not the law also includes intra-State commerce. If so, the
expressions add nothing in explanation or elucidation of s. 92; indeed, their use but tends to confuse
the question. Thirdly, they may mean that there must appear an actuating purpose on the part of the
legislature to injure inter-State commerce. If so, it is the doctrine of which Isaacs C.J. said that it
imported the necessity of a legislative mens rea. With that description it may be dismissed from
consideration. But once it appears that trade, commerce and intercourse among the States is a
concept within which fall inter-State transactions in the common course of banking, then the
intention of the legislation to prohibit a portion of inter-State commerce, unless carried on by
government agency, becomes undeniable, and surely such an intention is hostile to inter-State
commerce, that is unless the fact that it may still be carried on by or under government saves its
freedom. (at p388)

121. I cannot see how to close up every bank but a government bank leaves inter-State banking free.
(at p388)

122. It has appeared to me that to say that a given branch of inter-tate commerce can be carried on
only by government, so that it may be under governmental control, is inconsistent with the
proposition, which I understand to be established, that inter-State trade shall be free of
governmental prohibitions, restrictions and burdens whether they be legislative or executive in
character. (at p388)

123. To take the volume or flow of inter-State banking business independently of the freedom of
private banks to transact it, and make the inquiry whether the law closing them has a purpose or a
necessary tendency to reduce the volume of flow is, I think, to raise an irrelevant consideration. It
is, moreover, a consideration of an economic and not a legal character. But it is one that has no basis
of fact. For, so far as it is possible to speak confidently of hypothetical events, to close the private
banks, not taking over their businesses as going concerns, but abruptly terminating them, must
interrupt the flow of inter-State business and cause its total suspension. Not only that, but it would
cause a dislocation the recovery from which would not be likely to be rapid. It would be impossible
to say whether and when the volume had been restored and to assess its quantitative relation to the
volume of the business that otherwise would have been done. It is an irrelevant consideration,
because s. 92 treats inter-State traffic and intercourse, not as a mere economic phenomenon, but as
an activity, and as such sets it free for people to engage in. Juristically it is doubtless true that s. 92
does not confer private rights upon individuals: at all events so I decided in James v. The
Commonwealth (1939) 62 CLR, at pp 361, 362 . It may perhaps also be true that its purpose is not
the protection of the individual trader. But it assumes that without governmental interference trade,
commerce and intercourse would be carried on by the people of Australia across State lines, and its
purpose is to disable the governments from preventing or hampering that activity. (at p388)

124. It appears plainly, as I think, from the passage in James v. The Commonwealth (1936) AC, at p
623; 55 CLR, at p 52 that in the opinion of their Lordships a compulsory marketing scheme under a
Government board restricting the freedom of action of producers and compulsorily regulating and
controlling all trade in a commodity, whether intra-State, inter-State or overseas, involved an
impairment of the freedom of inter-State trade. From this conclusion more than one consequence
follows. In the first place, it means that the transfer of the marketing of the commodity, that is to
say, of the whole trade in the commodity, from the ordinary channels used by individuals to a
Government board is an interference with freedom of inter-State trade. Next, it necessarily follows
that a consideration of the question whether this will or will not influence the volume of traffic
across the border in the commodity is beside the point. Again, it is inconsistent with the view that a
measure may be good because its purpose or object is to increase the volume or value of a trade,
including trade with other States, considered apart from the freedom of people to engage in the
trade. For the object of the marketing scheme in question was to increase the sales of the commodity
and the returns to the producer. Lastly, their Lordships' view of such a marketing scheme does not
appear to give room for the contention that s. 92 leaves it always open to the legislatures to
determine by whom operations of inter-State trade may lawfully be conducted. (at p389)

125. No doubt s. 92 leaves open the regulation of trade and commerce, at all events until regulation
is pressed to the point of impairing true freedom of inter-State commerce. And there can be even
less doubt that a regulation of some other subject will not collide with s. 92 simply because inter-
State trade or commerce may be affected consequentially and indirectly. The freedom of inter-State
trade, commerce and intercourse which s. 92 assures supposes an ordered society where the mutual
relations of man and man and man and government are regulated by law. (at p389)

126. But there has not been worked out a logical distinction between the restrictions and burdens
which may not be imposed upon inter-State commerce and the directions which may be given for
the orderly and proper conduct of commerce. It is this which I think accounts more than any other
consideration arising from s. 92 for the widely divergent conclusions that have been reached as to
the application of the provision in specific cases. I am aware that it has been said that in s. 92 "trade,
commerce and intercourse" have now been interpreted as meaning something less than "trade and
commerce" mean in s. 51 (i.) and "free" as meaning "subject to reasonable restrictions" and
"absolutely" as meaning "subject to qualifications." But be that as it may, it nevertheless remains
undeniable that all trade and commerce must be conducted subject to law and this means
compliance with a multitude of regulatory directions. I do not, for example, desire to cast any doubt
upon the validity of laws directly regulating banking in the interests of security, reliability,
efficiency, uniformity of practice and so on. (at p389)

127. But my decision upon s. 92 is confined to its effect upon s. 46 (4)- (8), which authorize a direct
and absolute prohibition. No such questions, therefore, arise. Nor am I concerned with the effect of
s. 92 in relation to expropriation. That, I think, turns on another and different set of considerations.
As a test of the validity of prohibition of carrying on a trade it was said that surely consistently with
s. 92 a law might be made providing that no bankrupt, no soldier, no person under twenty-five, no
barrister, should engage in commerce. The examples seem to me to throw no light upon a complete
prohibition of a branch of commerce, excluding everyone from it except a government undertaking.
Some of the examples relate to capacity, others to the incidents of a profession. The personal
incompetence, under the law, of classes of people by reason of status or the like to trade stands apart
altogether from restraints or restrictions upon inter-State commerce. They are but examples of
special positions in which, in an ordered community, the law of persons may place individuals. The
law of persons and of status, like the law of property, of contract and of tort, is assumed by a
guarantee of freedom of inter-State trade. Section 46 (4)-(8) stand, in the view I have formed of the
validity of ss. 13, 17-19, and 24, as bare prohibitions of so much of banking as forms part of trade,
commerce and intercourse, excepting only government banks. These sub-sections are, therefore, in
my opinion, in conflict with s. 92. (at p390)

128. It was contended that this did not spell total invalidity for the sub-sections in question but that,
by construction of law, inter-State banking might simply be withdrawn from their operation. This, it
was claimed, is a proper effect of s. 6. (at p390)

129. Speaking generally, the operation of s. 92 is to give immunity from an enactment applying
generally to commerce rather than to destroy the enactment. But that is on the ground that the
enactment, as more often than not is the case, has a distributive application to all transactions falling
within its terms. In this case, however, s. 46 (4)-(8) deal with a business as an entirety. There is one
notice in the case of each bank. It must be expressed to apply to a business considered as a unit or
entirety. Sub-section (8), and if it is in point sub-s. (1), then forbid the carrying on of any such
business. I cannot see how, even with the aid of s. 6, any intention can be discovered to deal
piecemeal with component parts of the business or, to state it more accurately, with descriptions of
transactions by which the business is made up. (at p390)

130. The notice required by sub-s. (4) could not be moulded to that end consistently with the sub-
section. The purpose is to close up a bank's business, not to dismember it. (at p390)

131. I am therefore of opinion that s. 46 (4)-(8) are void and that, if and so far as s. 46 (1) would
otherwise take effect in consequence of a notice under s. 46 (4), it also is void. (at p391)

132. I have said nothing about s. 59 and, having regard to the conclusions I have reached, there is
little to be said about it. It expresses its own purpose in its opening words: "So far as is necessary for
the purpose of facilitating or assisting the operation of any of the provisions of the Act". This
purpose ceases to have any significance when it is decided that s. 46 (4)-(8) and substantially the
whole of Part IV., Divisions 2 and 3, and s. 24 are invalid. Section 60 is a fortiori. Part V., dealing
with the Court of Claims, becomes otiose. Part VI., dealing with compensation, is substantially bad,
and Part VIII. ceases to have an effective existence, even if theoretically s. 6 may save the validity
of some sub-sections contained in it. Section 46 ceases to have any effect because sub-s. (1) is
dependent on sub-s. (3) or upon sub-s. (8). Counsel for the plaintiffs at the end of his reply asked
that the court should not pronounce an order finally without allowing the parties to speak to the
form of relief after delivering the reasons of the members of the Court for judgment and to this
course the Commonwealth had no objection. I shall not therefore now formulate definitely the relief
which I should be in favour of granting. (at p391)
133. I think that it is neither necessary nor desirable to examine every provision of the Act without
regard to its real bearing upon the validity of provisions that really matter or upon the interest which
entitles the plaintiffs to sue and to say whether each such provision is independently valid, if s. 6
makes it severable, or whether in spite of s. 6 it is inseverable or on its own terms its operation fails.
(at p391)

134. I am disposed to think that it would be enough if the declaration of right were confined to what
I would regard as the pivotal sections of those which I consider bad together with some of the more
important of those obviously sharing the same fate. (at p391)

135. I would continue the interlocutory injunction contained in the orders of 15th December 1947
and make it permanent. It would, I think, be enough to declare invalid s. 13 : Part IV., Division 2
(except in relation to voluntary purchase): Division 3 : s. 24 : Part VI. : ss. 46 : 59 and 60 and for
the rest to reserve liberty to apply. The plaintiffs should have the costs of the suits. (at p391)

MCTIERNAN J. As I am the sixth member of the Court to state his opinion, I do so as briefly as
possible. (at p391)

2. The primary question is the interpretation of s. 51 (xiii.) of the Constitution of the
Commonwealth. (at p391)

3. The conclusion on this question which I think is required by settled principles governing the
interpretation of the Constitution and the statements of authority bearing upon the interpretation of
s. 51 (xiii.) in particular, is that this provision is a grant of plenary legislative power which extends
to the whole subject of banking, that is, the economic activity described by that name and all its
adjuncts, subject to the reservation made in regard to State banking, that is, banking by a State-
owned bank. (at p392)

4. The reservation may make it necessary to imply limitations upon the powers to legislate with
respect to "State banking extending beyond the limits of the State concerned" in order to preserve
the immunity given to State banking which does not extend beyond State limits. The limitations
might be implied from the connection between State banking beyond and State banking within the
legislative powers. But such limitations could not logically apply to the powers to legislate with
respect to "banking other than State banking." Even if the word "extending" imports survival, that
is, it is not merely descriptive of the part of State banking placed under the control of the national
Parliament, it would not follow that the power granted to legislate with respect to banking
conducted by banks which are not owned by any State is any less than plenary power. (at p392)

5. This plenary power is of course subject to anything in the Constitution restricting the powers of
the Parliament. (at p392)

6. The term "banking" is a statement in outline of the subject matter of the power. It must be given
an ample not a narrow meaning. (at p392)

7. The grant of power to legislate with respect to banking naturally extends to such matters as the
ownership and management of banks and the control of banks and banking. The purposes in respect
of which Parliament has power to make laws include the limitation of the number of banks, the
selection of banks to carry on banking, the licensing of banks, the prohibition of the carrying on of
banking by any bank, the conversion of private ownership or management of any bank into public
ownership or management. These observations, of course, do not apply to State-owned banks. If
Parliament should seek to accomplish any of these purposes by the acquisition of property from any
person, the acquisition could not be made under s. 51 (xiii.) : it could be validly made only under s.
51 (xxxi.) : it would not be valid unless it was made upon just terms. It would also be a condition of
the validity of the acquisition that it was made for a purpose in respect of which the Parliament has
power to make laws. If the acquisition is an appropriate means of effectuating or furthering any of
the above mentioned purposes it would satisfy that condition. (at p393)

8. It follows from this interpretation of s. 51 (xiii.) that a law which prohibits any bank from
carrying on banking is a law with respect to banking. The motive of Parliament, if that could be
ascertained, for enacting the law is irrelevant to the question whether or not the law is within this
legislative power. If, however, the prohibition were made to depend upon some condition, the law
might not be a law with respect to banking. The question whether or not it would be a law of this
description would be tested by considering its effect and operation. The provisions of s. 46 relating
to prohibition contain no such condition. Section 46 (1) is a law with respect to banking. Section 46
(2) and (3) are constitutinally justified by the plenary nature and extent of the power vested by s. 51
(xiii.) in the Parliament. Section 46 (4) is also constitutionally justified by s. 51 (xxxi.). The
Parliament has power to make a law prohibiting any bank from carrying on banking. It can confer
power upon the Treasurer to accomplish any object within its legislative power. That is an attribute
of plenary legislative power. In s. 46 (4) Parliament has not purported to confer upon the Treasurer
power to do anything which Parliament has not the power to accomplish. The extent of the powers
conferred depends upon the interpretation of the Banking Act. Section 46 (4) is in substance a law
with respect to banking. (at p393)

9. Section 51 (xiii.), aided if necessary by s. 51 (xxxix.), supports the establishment of the
Commonwealth Bank. (at p393)

10. Sections 12 and 13 of the Banking Act 1947 provide respectively for the purchase and
compulsory acquisition by the Commonwealth Bank of shares in a "private bank." The validity of
either of these sections is not to be finally tested by the principle whether the acquisition of shares
by the Commonwealth Bank is necessary for or incidental to the carrying on of its banking business.
To determine their validity finally by that test is to overlook s. 51 (xxxi.) of the Constitution. This
grant of legislative power extends to the making of a law with respect to the acquisition by the
Commonwealth Bank of shares (because they are "property") on just terms from any shareholder in
a "private bank" for any purpose in respect of which the Parliament has power to make laws. Such
purposes are obviously wider than the purposes of any bank. The public control of the banking
business of a "private" bank is a purpose in respect of which the Parliament has power under s. 51
(xiii.) of the Constitution to make laws. It is within the discretion of the Parliament to select any
appropriate authority, for example the Treasurer or the Commonwealth Bank, as the agency to
exercise such control. The acquisition of shares in a "private bank" by the Commonwealth Bank is
an appropriate means of initiating and extending control by the Commonwealth Bank of the banking
business of the private bank. Consequently the acquisition is warranted by s. 51 (xxxi.) : but it is
necessary that the acquisition should be on just terms. (at p394)

11. The Parliament has power under s. 51 (xxxi.), (xxxix.) and (xiii.) to enact the provisions of ss.
12, 13 and 14 (1). Section 14 (1) is necessary to make the acquisition effective for the purpose
which constitutionally justifies it. (at p394)

12. Section 14 (2) purports to confer upon the Commonwealth Bank a right to transfer any acquired
share. This right is not incident to the shares in all the companies. The power of the Parliament
under s. 51 (xxxi.) is to acquire shares with the incidents only which attach to them under the
constitutions of the companies respectively. It is not within the powers of Parliament to add a right
to the bundle of rights which constitute an acquired share. But subject to this principle, the
Parliament can authorize the Commonwealth Bank to transfer an acquired share to a nominee to
hold the share for it and to act for it as a member of the company. Section 14 (2) is justified by s. 51
(xiii.) but not by s. 51 (xxxi.). (at p394)

13. The acquisition of the business of a "private bank" by the Commonwealth Bank is, in my
opinion, an integral part of the plan for the management of the "private bank" devised in ss. 17-20
of the Banking Act 1947. Their effect is as follows. The directors appointed under the Constitution
of the company are compulsorily retired; power is conferred upon the Governor of the
Commonwealth Bank to appoint directors in their place; these directors are given "full power to
manage, direct and control the business and affairs of the . . . bank" and in particular to dispose of
the business of the bank to the Commonwealth Bank. The purposes for which these powers are
conferred are declared to be "facilitating the control by the Commonwealth Bank of the banking
business in Australia of private banks" and "furthering the expansion of the banking business of the
Commonwealth Bank." Any dispositive powers over the assets of the "private bank", which the
statutory directors would derive from their general statutory powers or the particular power to
dispose of the business of the bank, could hardly be exercised for the purpose of furthering the
expansion of the Commonwealth Bank in any way other than by disposing of the assets or the
business of the "private bank" to the Commonwealth Bank. This is not to say that it is necessarily a
scheme to enable the Commonwealth Bank to get assets of a "private bank" or its business at less
than value. Section 19 (3) would not relieve the statutory directors of any fiduciary obligations
which would arise from the circumstances. But I cannot agree that an acquisition by the
Commonwealth Bank of any property from a "private bank" by the machinery devised in these
sections of the Act is within the conception of acquisition upon just terms. I think that, in order to
come up to that standard, independent approval of the terms of sale would be necessary. Sections
17-20 are, in my opinion, invalid for the above reasons. (at p395)

14. But I do not deny that the conversion of the management of "private banks" into management by
directors appointed by an appropriate public authority is a purpose in respect of which the
Parliament has power under s. 51 (xiii.) to make laws. (at p395)

15. Section 21 is, in my opinion, a law with respect to banking. (at p395)

16. The taking over of the business of a "private bank" by the Commonwealth Bank involves the
acquisition by the latter bank of the assets used in the business and the taking over of the liabilities.
None of the "private banks" carries on any business in Australia other than the business of banking
or services incidental to it. The Parliament has power to convert the ownership and management of
any "private bank" from private to public ownership and control; and to expand and strengthen the
Commonwealth Bank. The taking over of the business of "private banks" is a means which is
logically appropriate to accomplish those objects. It follows that the Parliament has power under s.
51 (xxxi.) to make a law for the acquisition of the assets on just terms from the "private bank" by
the Commonwealth Bank. The liabilities of the business of the "private bank" are not property of the
bank. Section 22 (8) (b) and (d) and s. 24 (5) and (7), which make liabilities of the "private bank"
liabilities of the Commonwealth Bank and discharge the "private bank" from those liabilities are
laws with respect to banking and are authorized by s. 51 (xiii.). It may be that those provisions
could be justified on the ground that they are incidental to the execution by Parliament of its
legislative power to acquire the assets. Provisions somewhat analogous to s. 22 (8) (b) and (d) are to
be found in the laws passed by the legislature of the United States of America: see United States
Code, 1946 Edition, Title 12, Banks & Banking. Sections 34 and 34 (a) of that statute prescribe
what is the effect of the consolidation of banks on the property and choses in action of a bank
consolidating with another bank. (at p395)

17. If the Court of Claims is validly given exclusive jurisdiction to determine claims for
compensation against the Commonwealth Bank under ss. 15 and 25 respectively, then, subject to the
questions about interest and costs, there could be no doubt that the compulsory acquisition of shares
under s. 13 and of property under s. 24 would be on just terms. The concessions in respect of
taxation made by s. 23 are limited to voluntary purchases. But that cannot alter the result that
compulsory acquisition is on just terms if any bank whose property is compulsorily taken is entitled
to recover fair and reasonable compensation in respect of the acquisition. The provisions of the Act
giving exclusive jurisdiction to the Court of Claims raise questions under s. 75 (iii.) of the
Constitution. These questions are whether a claim against the Commonwealth Bank for
compensation under s. 15 or s. 25 is a matter in which the Commonwealth or a person sued on
behalf of the Commonwealth is a party. I agree with the opinion of the Chief Justice on these
questions. (at p396)

18. It is within the legislative power to incorporate a bank and make it an agency to carry on
banking for the executive government, the Crown being in effect the banker, or to give the bank
authority to carry on banking on its own behalf, the corporation being the banker. In my opinion the
Commonwealth Parliament has followed the latter course. Section 11 of the Commonwealth Bank
Act 1945 says that the Commonwealth Bank shall act as a central bank. A central bank is not
necessarily a branch of the executive government. Section 12 provides that the Commonwealth
Bank "shall in so far as the Commonwealth requires it to do so, act as banker and financial agent of
the Commonwealth." It is common practice even for a privately owned bank to be the banker and
financial agent of a government. Section 17 provides that the Commonwealth Bank shall carry on
general banking business. The Crown is not the banker of the customers of the Commonwealth
Bank. The bank has a Note Issue Department: Part VII. The privilege of issuing notes is one also
which might be granted to a privately owned bank. Section 43 provides that the notes shall be legal
tender. This character could be given to notes issued by a privately owned bank. None of these
circumstances could justify the conclusion that the Commonwealth Bank is a branch of any
Commonwealth department. The provisions of Part V., relating to the management of the
Commonwealth Bank, are strong to show that it is not a corporation under the Crown. Indeed s. 9
takes it for granted that the Commonwealth Bank is not a branch of a department of State of the
Commonwealth and accordingly provides a means for surmounting a crisis resulting from the
general independence of the executive government which the bank has under the Commonwealth
Bank Act. (at p396)

19. In regard to the questions of interest and costs, I am of the same opinion as the Chief Justice. (at
p397)

20. It follows that the Banking Act 1947 contains valid and effective provisions for the enforcement
of the liability imposed upon the Commonwealth Bank by ss. 15 and 25 and that any acquisition,
either of shares in a "private bank" or of its property by the Commonwealth, would be "on just
terms." (at p397)

21. I agree with the Chief Justice that s. 24 (8) is not justified by any grant of legislative power to
the Parliament. (at p397)
22. The arguments for the plaintiffs that the Banking Act 1947 is an unconstitutional interference
with the rights reserved to the States by the Constitution are answered by the statement of principle
in the judgment of Dixon J. in Melbourne Corporation v. The Commonwealth [1947] HCA 26;
(1947) 74 CLR 31, at p 84 . The Banking Act 1947 is a general Act in the sense that the alterations
which its operation would make in the present legal framework of banking would affect the States
and everyone else in the same way. In this way its operation differs from that of s. 48 of the Banking
Act 1945 which was declared in the above case to be invalid. (at p397)

23. The Banking Act 1947 is not inconsistent with the Financial Agreement. There is no express
stipulation in the agreement that the system of banking existing at the time it was made should not
be altered by either Federal or State legislation and it is, in my opinion, impossible to imply such a
stipulation from the terms of the agreement. (at p397)

24. I am of opinion that the Banking Act 1947 does not violate s. 92 of the Constitution. On this
question I agree entirely with the reasons of the Chief Justice and respectfully adopt them. If the
principles laid down in James v. The Commonwealth [1936] UKPCHCA 4; (1936) AC 578; 55 CLR
1 are applied, I think that the argument for the plaintiffs on this question must be rejected. (at p397)

25. Section 51 of the Constitution makes trade and commerce on the one hand and banking on the
other hand different heads of power. If banking is trade and commerce as plaintiffs' counsel argued,
the Commonwealth could create a bank under s. 51 (i.) to operate within the territorial limits
mentioned in this provision. Compare Australian National Airways v. The Commonwealth (1945)
71 CLR 29 . Section 51 (i.) would give power to the Parliament to control banks operating across
State lines and inter-State banking and do other things in respect of banks and banking which
counsel for the plaintiffs argued could not be done under s. 51 (xiii.). They argued that this placitum
does not give power to Parliament to create a bank, and that the source of this authority is s. 51
(xxxix.). (at p398)

26. Banking is not, in my opinion, trade, commerce or intercourse. Banks provide aids to these
activities but banking itself is not one of these things. It is not the buying, selling, bartering or
exchange of any commodity, or transportation or communication. Section 92 would of course
nullify any legislative restriction on banking depending for its operation on the relation of any
banking transaction to trade, commerce and intercourse among the States. (at p398)

27. To say that credit is transmitted across a State border is to speak figuratively. Credit is not a
commodity or a physical thing. It is not like a message sent by wire or by wireless which could be
intercepted. A banker resorts to the post office or other means of communication between the States.
If that circumstance attracts the application of s. 92, then any business which is spread over State
lines could claim the protection of s. 92 against both State and Federal legislation. Section 92 binds
the Commonwealth and the States. If the Banking Act violates s. 92, it is difficult to see how, for
example, s. 6 or s. 7 of the Banking Act 1945 could survive an attack on the ground that it violates
s. 92; another example is legislation providing for bank holidays; this might be bad for interference
with the freedom of trade, commerce and intercourse among the States on those days. (at p398)

28. I think that the only declaration which should be made now is that ss. 17-20 inclusive and s. 24
(8) of the Banking Act are invalid. (at p398)

ORDER
BANK OF NEW SOUTH WALES AND OTHERS, No. 42 OF 1947 v. THE COMMONWEALTH
OF AUSTRALIA AND OTHERS.

Declare that the following provisions of the Banking Act 1947 are invalid: - Part IV., Division 2,
except in so far as it relates to the voluntary acquisition of shares and without prejudice to the
question whether s. 14 (1) is valid in relation thereto: Part IV., Division 3, ss. 24, 25, 37 to 45
inclusive, 46, 59 and 60.

       Order -
       (a) that the defendant the Treasurer and any Minister of
       the defendant the Commonwealth of Australia or any member of
       the Executive Council for the time being acting or
       purporting to act for or on behalf of the Treasurer of the
       Commonwealth of Australia be restrained from publishing or
       causing or permitting to be published any notice pursuant to
       sub-s. (1) of s. 13 of the Banking Act 1947;
       (b) that the defendant Hugh Trail Armitage and every other
       person for the time being entitled by law or purporting to
       exercise the powers of the Governor of the Commonwealth Bank
       of Australia be restrained from appointing or purporting to
       appoint any person a director of any of the plaintiff
       companies;
       (c) that the defendant the Treasurer and any Minister of
       the defendant the Commonwealth of Australia or any member of
       the Executive Council for the time being acting or
       purporting to act for or on behalf of the Treasurer of the
       Commonwealth of Australia be restrained from giving or
       causing or permitting to be given any notice pursuant to
       sub-s. (1) of s. 22 of the Banking Act 1947;
       (d) that the defendant the Commonwealth Bank of Australia
       its officers and servants be restrained from requiring any
       of the plaintiff companies to take any action pursuant to
       sub-s. (8) of s. 24 of the Banking Act 1947;
       (e) that the defendant the Treasurer and any Minister of
       the defendant the Commonwealth of Australia or any member of
       the Executive Council for the time being acting or
       purporting to act for or on behalf of the Treasurer of the
       Commonwealth of Australia be restrained from publishing or
       causing or permitting to be published in the Commonwealth
       Gazette any notice pursuant to sub-s. (4) of s. 46 of the
       Banking Act 1947; and
       (f) that the defendant Hugh Trail Armitage and every other
       person for the time being entitled by law or purporting to
       exercise the powers of the Governor of the Commonwealth Bank
       of Australia be restrained from authorizing any person to
       act under s. 59 of the Banking Act 1947.

Defendants to pay costs of plaintiffs including reserved costs, if any.
THE BANK OF AUSTRALASIA AND OTHERS, No. 43 OF 1947 v. THE COMMONWEALTH
OF AUSTRALIA AND OTHERS.

Declare that the following provisions of the Banking Act 1947 are invalid: ss. 24, 25, 37 to 45
inclusive, 46, 59 and 60.

       Order -
       (a) that the defendant the Treasurer and any
       Minister of the defendant the Commonwealth of
       Australia or any member of the Executive Council
       for the time being acting or purporting to act
       for or on behalf of the Treasurer of the
       Commonwealth of Australia be restrained from
       giving or causing or permitting to be given any
       notice pursuant to sub-s. (1) of s. 22 of the
       Banking Act 1947;
       (b) that the defendant the Commonwealth Bank of
       Australia its officers and servants be restrained
       from requiring any of the plaintiff companies to
       take any action pursuant to sub-s. (8) of s. 24 of
       the Banking Act 1947;
       (c) that the defendant the Treasurer and any Minister
       of the defendant the Commonwealth of Australia or
       any member of the Executive Council for the time
       being acting or purporting to act for or on behalf
       of the Treasurer of the Commonwealth of Australia
       be restrained from publishing or causing or
       permitting to be published in the Commonwealth
       Gazette any notice pursuant to sub-s. (4) of s. 46
       of the Banking Act 1947; and
       (d) that the defendant Hugh Trail Armitage and every
       other person for the time being entitled by law or
       purporting to exercise the powers of the Governor
       of the Commonwealth Bank of Australia be
       restrained from authorizing any person to act
       under s. 59 of the Banking Act 1947.

Defendants to pay costs of plaintiffs including reserved costs, if any.

THE STATE OF VICTORIA AND ANOTHER, No. 44 OF 1947 v. THE COMMONWEALTH OF
AUSTRALIA AND OTHERS - Judgment in the same terms as in Action No. 42 of 1947.

THE STATE OF SOUTH AUSTRALIA AND ANOTHER, No. 47 OF 1947 v. THE
COMMONWEALTH OF AUSTRALIA AND OTHERS - Judgment in the same terms as in Action
No. 42 of 1947.

THE STATE OF WESTERN AUSTRALIA AND ANOTHER, No. 48 OF 1947 v. THE
COMMONWEALTH OF AUSTRALIA AND OTHERS - Judgment in the same terms as in Action
No. 42 of 1947.
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