Commonwealth v Bank of New South Wales
Encyclopedia
Commonwealth v Bank of New South Wales (1949) 79 CLR
497; [1950] AC 235 - popularly known as the Bank Nationalisation Case - was a Privy Council
decision that affirmed the High Court of Australia
's decision in Bank of New South Wales v Commonwealth
, promoting the theory of "individual rights" to ensure freedom of interstate trade and commerce. The case dealt primarily with Section 92 of the Australian Constitution
government of Ben Chifley
announced in 1947 its intention to nationalise private banks in Australia
. It achieved this process by passing the Banking Act 1947. The policy proved very controversial, and the Bank of New South Wales
challenged the constitutional validity of the law. The High Court found specific provisions of the law were invalid and struck them down. The Commonwealth government appealed the decision in the Privy Council.
endorsed the previous High Court decision in adopting the individual rights approach. Provisions of the Commonwealth law prohibited private banks from carrying out interstate business banking. Interstate banking transactions under the law were thus not "absolutely free" and hence in violation of Section 92 of the Constitution. The Lords argued that a simple legislative prohibition of interstate trade and commerce would be constitutionally invalid, but a law seeking to regulate or prescribe rules as to the manner of trade and commerce would not necessarily be in breach of Section 92. In addition, the act was held to be not an act with respect to banking, and therefore invalid under s51(viii), the banking power.
The High Court of Australia
also looked to the provision's unconstitutionality with respect to s51(xxxi) the "acquisition of property on just terms" provision
, (made famous in the Australian Movie, The Castle
). The problem with acquisition arose out of the Act's sections detailing the appointment of new directors for all private banks with the power to control, manage, direct and dispose of assets of those banks. The court held, per Dixon J at 348-51 that this was a "circuitous device to acquire indirectly the substance of proprietary interest."
In addition, the High Court also examined the unconstitutionality of the compensation mode set up, to provide shareholders with the chance to gain compensation in respect of their holdings. The act set up a "Court of Claims" which the High Court held, at 368 to be repugnant under s75(iii) of the Constitution as it effectively ousted the jurisdiction of the High Court. In addition, due to its unconstitutionality the act provided no valid provision for compensation for the acquisition of shares or assets.
This case showed the Australian judiciary's power to strike down legislation due to its unconstitutionality - it was important due to the many grounds of the constitution it covered.
Commonwealth Law Reports
The Commonwealth Law Reports are the authorised reports of decisions of the High Court of Australia. The CLR are published by the Lawbook Company, a division of Thomson Reuters...
497; [1950] AC 235 - popularly known as the Bank Nationalisation Case - was a Privy Council
Judicial Committee of the Privy Council
The Judicial Committee of the Privy Council is one of the highest courts in the United Kingdom. Established by the Judicial Committee Act 1833 to hear appeals formerly heard by the King in Council The Judicial Committee of the Privy Council (JCPC) is one of the highest courts in the United...
decision that affirmed the High Court of Australia
High Court of Australia
The High Court of Australia is the supreme court in the Australian court hierarchy and the final court of appeal in Australia. It has both original and appellate jurisdiction, has the power of judicial review over laws passed by the Parliament of Australia and the parliaments of the States, and...
's decision in Bank of New South Wales v Commonwealth
Bank of New South Wales v Commonwealth
Bank of New South Wales v The Commonwealth 76 CLR 1, also known as the Bank Nationalisation Case, is a notable case of the High Court of Australia.-Background:...
, promoting the theory of "individual rights" to ensure freedom of interstate trade and commerce. The case dealt primarily with Section 92 of the Australian Constitution
Constitution of Australia
The Constitution of Australia is the supreme law under which the Australian Commonwealth Government operates. It consists of several documents. The most important is the Constitution of the Commonwealth of Australia...
Background
Comfortable in government after two strong election wins, the LaborAustralian Labor Party
The Australian Labor Party is an Australian political party. It has been the governing party of the Commonwealth of Australia since the 2007 federal election. Julia Gillard is the party's federal parliamentary leader and Prime Minister of Australia...
government of Ben Chifley
Ben Chifley
Joseph Benedict Chifley , Australian politician, was the 16th Prime Minister of Australia. He took over the Australian Labor Party leadership and Prime Ministership after the death of John Curtin in 1945, and went on to retain government at the 1946 election, before being defeated at the 1949...
announced in 1947 its intention to nationalise private banks in Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
. It achieved this process by passing the Banking Act 1947. The policy proved very controversial, and the Bank of New South Wales
Westpac
Westpac , is a multinational financial services, one of the Australian "big four" banks and the second-largest bank in New Zealand....
challenged the constitutional validity of the law. The High Court found specific provisions of the law were invalid and struck them down. The Commonwealth government appealed the decision in the Privy Council.
Decision
The Privy CouncilPrivy council
A privy council is a body that advises the head of state of a nation, typically, but not always, in the context of a monarchic government. The word "privy" means "private" or "secret"; thus, a privy council was originally a committee of the monarch's closest advisors to give confidential advice on...
endorsed the previous High Court decision in adopting the individual rights approach. Provisions of the Commonwealth law prohibited private banks from carrying out interstate business banking. Interstate banking transactions under the law were thus not "absolutely free" and hence in violation of Section 92 of the Constitution. The Lords argued that a simple legislative prohibition of interstate trade and commerce would be constitutionally invalid, but a law seeking to regulate or prescribe rules as to the manner of trade and commerce would not necessarily be in breach of Section 92. In addition, the act was held to be not an act with respect to banking, and therefore invalid under s51(viii), the banking power.
The High Court of Australia
High Court of Australia
The High Court of Australia is the supreme court in the Australian court hierarchy and the final court of appeal in Australia. It has both original and appellate jurisdiction, has the power of judicial review over laws passed by the Parliament of Australia and the parliaments of the States, and...
also looked to the provision's unconstitutionality with respect to s51(xxxi) the "acquisition of property on just terms" provision
Section 51(xxxi) of the Australian Constitution
Section 51 of the Constitution of Australia is a subsection of Section 51 of the Constitution of Australia providing that the Commonwealth has the power to make laws with respect to "the acquisition of property on just terms from any State or person for any purpose in respect of which the...
, (made famous in the Australian Movie, The Castle
The Castle (film)
The Castle is a 1997 Australian comedy film directed by Rob Sitch. It starred Michael Caton, Anne Tenney, Stephen Curry, Sophie Lee, Eric Bana and Charles 'Bud' Tingwell. The screenwriting team comprised Sitch, Santo Cilauro, Tom Gleisner and Jane Kennedy of Working Dog Productions.The Castle was...
). The problem with acquisition arose out of the Act's sections detailing the appointment of new directors for all private banks with the power to control, manage, direct and dispose of assets of those banks. The court held, per Dixon J at 348-51 that this was a "circuitous device to acquire indirectly the substance of proprietary interest."
In addition, the High Court also examined the unconstitutionality of the compensation mode set up, to provide shareholders with the chance to gain compensation in respect of their holdings. The act set up a "Court of Claims" which the High Court held, at 368 to be repugnant under s75(iii) of the Constitution as it effectively ousted the jurisdiction of the High Court. In addition, due to its unconstitutionality the act provided no valid provision for compensation for the acquisition of shares or assets.
This case showed the Australian judiciary's power to strike down legislation due to its unconstitutionality - it was important due to the many grounds of the constitution it covered.