FEDERAL HIGH COURT JUDGMENT

Otago Daily Times, Issue 26848, 12 August 1948, Page 5

FEDERAL HIGH COURT JUDGMENT

Restraining Order Issued

LENGTHY LEGAL BATTLE ENDS

New Zealand Press Association—Copyright

Kec. 10 p.m. ' SYDNEY, Aug. 11. Vital sections of the Australian Banking Act, of 1947, affecting the taking over of trading banks and compulsory acquisition of their assets by the Commonwealth Government, were to-day ruled invalid by the Full High Court. This means that, subject to appeal, the Commonwealth Government cannot proceed with its plan to nationalise private trading banks under the present Act. The Government now has to consider whether it will appeal to the Privy Council, prepare new legislation, or drop its nationalisation proposals.

After giving the court’s judgment, the Chief Justice, Sir John Latham, read the order restraining the Commonwealth from putting its legislation into effect. Costs in all cases were awarded against the Commonwealth.

All six judges found that various sections of the Act were void. The court unanimously held that Sections 17 to 20. authorising the Commonwealth Bank to take over the management of Australian banks by displacing the present directors and appointing new ones, were invalid. With the exception of Mr Justice McTiernan, the court held that the provisions for the compulsory acquisition of the assets of banks (Sections 24 and 25) were invalid. Sir John Latham held that these provisions were invalid only because they did not provide just terms of acquisition.

With the Chief Justice and Mr Justice McTiernan dissenting, it was also held that the following provisions were invalid: —

First, compulsory acquisition of shares in Australian banks (sections 13 and following). Secondly, compensation provisions (sections 37 to 45). ’ Thirdly, provisions entitling the Commonwealth Treasurer to prohibit the carrying on of banking business by a bank (section 46).

Consequently, Justices Sir George Rich, Sir H. E. Starke, Sir Owen Dixon, and Mr Dudley Williams held that certain penalty* provisions (section 59 and 60) were invalid. Sir John Latham said in the judgment that the Act did not apply to

State banking, but with that exception it would if be put into full operation, give a monopoly of banking in Australia to the Commonwealth. The legal questions were whether the legislative provisions of the Act were within the constitutional powers of the Commonwealth Parliament, and whether the policy they represented was wide, prudent or . desirable. A declaration by Parliament of its purpose in making a law could not be conclusive upon the question of validity. Under section.22 a creditor without his consent could be deprived by Statute of his rights against a private bank. It would mean that the bank had been released of its liabilities to him and that the Commonwealth Bank had been substituted as his debtor. If the Act were put completely into operation it would result in there being no central bank, but only the Commonwealth and State banks.

“The Parliament of the Commonwealth is not omnipotent as is the English Parliament, nor has it general authority to make laws for the peace, order and good government of the Commonwealth as have the States foi their territories,” said Sir H. E. 'Starke. The Constitution enumerates the powers of the Comomnwealth and within the framework of those powera must be found the authority of the Commonwealth to enact this Act.” He saw no objection to the acquisition of business, but the Commonwealth power was not wide enough to include the taking over of liabilities. Dealing with banking power he said he could not accede to the construction which the Commonwealth Government had placed upon the Constitution.

Sir Owen Dixon said that the Act was evidently a product of much ingenuity and resource. It could not be supported simply on the footing that it was one to accomplish the immediate setting up of a Government monopoly in banking, for in point of law, the provisions of the Act, if valid, would make other courses possible and authorise the pursuit of other ends. "In a joint judgment, Sir George Rich and Mr Williams said that the Act could only be completely valid if the Commonwealth Parliament could pass laws prohibiting banking business other than business by State banks, or compelling any person engaged in banking to carry on that business indefinitely. Parliament could not suppress State banks, and it would be most unreasonable to construe its power as being able to authorise some State banks to carry on business beyond the limits of their own States to the exclusion of others

Mr Justice McTiernan said that only Sections 17 to 20 were held by him to be invalid and then only because they empowered newly-appointed directors to dispose of the business of a private bank to the Commonwealth Bank and did not secure that the sale would be within constitutional requirements to lust terms. His conclusions were in ine with those of the Chief Justice, except on the question of giving tax Concessions in the case of voluntary purchase by the Commonwealth Bank of a private bank, and not in the case of compulsory purchase.