Dohnert Muller Schmidt & Co, Re; Attorney-General (Cth) v Schmidt

High Court of Australia|1961-07-01|Before: Windeyer JJ, Cth Kitto J, Starke J

High Court of Australia Dixon C.J. Fullagar, Kitto, Taylor and Windeyer JJ. Dohnert Muller Schmidt & Co, Re; Attorney-General (Cth) v Schmidt [1961] HCA 21

ORDER Question in case stated answered: Sections 13C and 13D of the Trading with the Enemy Act 1939-1957 are valid laws of the Commonwealth.

In an application by the Attorney-General of the Commonwealth under s. 13D of the Trading with the Enemy Act 1939-1957 Cth Kitto J., at the request of the parties, stated this case under s. 18 of the Judiciary Act 1903-1960 reserving for the opinion of the Full Court the question whether ss. 13C and 13D of that Act are valid laws of the Commonwealth. The matters of law and fact that are relevant may be best stated chronologically. At the outbreak on 3rd September 1939 of the war with Germany Döhnert Müller Schmidt & Co. were a trading concern established at Leipzig in Germany and carrying on business as woolbuyers in Germany, in Australia and elsewhere. The proprietors of the business were George Döhnert and Arthur Müller who both lived in Germany and Wilhelm Schmidt who seems perhaps to have had a double residence, in Germany and in Sydney. All three were German by nationality. The Trading with the Enemy Act 1939 was assented to six days after the outbreak of war. Section 13 (1) of that Act authorized the Minister administering the Act (Customs) on forming any of certain specified opinions about a person, firm or corporation to apply to the High Court for the appointment of a controller of the person, firm or corporation. The sub-section proceeded: "and the High Court shall have power to appoint such a controller for such time and with such powers and subject to such conditions as the Court thinks fit, and the powers so conferred may include any powers of controlling, conducting, continuing, discontinuing, extending, restricting or varying the business and operations of the person, firm or corporation". Upon an application made in pursuance of this provision in respect of Döhnert Müller Schmidt & Co., Starke J. on 16th December 1939 made an order appointing a named person controller of the business of that firm during the then present state of war or until further order of this Court. The order then enumerated a number of specific powers which the Court thereby conferred upon the controller: the powers were directed to the carrying on of the business but covered also the closing and winding up of the business. The controller was empowered to control and take possession of the real and personal property of the firm and to control the business operations of the firm and secure that none of the property of the firm should pass directly or indirectly to enemy subjects. The controller was required to give security that he would duly account etc. and it was ordered that he should pass his accounts before the proper officer of the Court and pay any balance certified to be due from him as the Court or a Justice should direct. In pursuance of the order, the controller appointed thereby took over the business of the firm in Australia but he conducted it only for the purpose of winding it up. He realized the assets, and under directions given by the Court, probably from time to time, he paid into Court the moneys he received as controller after deducting his costs, charges and expenses. Moneys and investments (including interest) thus arising now form a fund of moneys in Court governed by 0.72, rr. 6 and 7, which derive respectively from those adopted by S.R. 1935 No. 48 and S.R. 1941 No. 122. The legal nature of such a "fund in court" and the obligation of the Crown is explained in New South Wales v. The Commonwealth [No. 3] [1] .

On 9th July 1951 a notification was published in the Commonwealth Gazette that the formal state of war with Germany was terminated as from noon on that day. The notification said among other things that the Australian Government reserved the right to retain any money or property subject to control by virtue of Trading with the Enemy legislation or Enemy Property legislation.

On 6th November 1952 the Trading with the Enemy Act 1952 (No. 77 of 1952) was assented to and came into operation. By that Act the provisions were inserted the validity of which is now in question. Section 13C (1) provided that by virtue of the section but subject to s. 13D there should be vested in the Controller of Enemy Property appointed under the National Security (Enemy Property) Regulations, to put it briefly, all moneys and investments representing moneys from time to time standing to the credit of the High Court of Australia Suitors' Fund as a result of payments into Court by controllers appointed by the High Court under the Act. A similar vesting was made by s. 13C (1) of the possession of books and accounts in possession of the High Court relating to businesses etc. in respect of which the Court had appointed controllers. Section 13D, subject to which s. 13C (1) is expressed to operate, confers jurisdiction on the High Court to order payment or transfer to the Controller of Enemy Property of moneys investments books or accounts to which s. 13C (1) applies and provides that except in pursuance of such an order no such payment or transfer shall be made. Sub-section (2) empowers the Court to direct that money or books be retained in court or be paid out or transferred subject to conditions and to provide for costs. The application must be made by the Attorney-General of the Commonwealth: (sub-s. (3)). Section 13E (1) provides that moneys received by the Controller of Enemy Property in pursuance of an order under the last preceding section shall be paid into the Enemy Subjects Trust Account referred to in the National Security (Enemy Property) Regulations. Sub-section (2) makes a corresponding provision with respect to investments and requires that the account be credited with an amount determined by the Treasurer to be the value of the investments. The Controller of Enemy Property is of course an official and must not be confused with the controller of the firm's business appointed pro hac vice by the order of Starke J. The Controller of Enemy Property was established by the National Security (Enemy Property) Regulations and those regulations have been kept in force by s. 15A (1) of the Trading with the Enemy Act 1939-1957. Regulation 9 of the Regulations directs that the Controller shall pay any moneys received by him under the Regulations into the Trust Account known as the Enemy Subjects Trust Account established by the Treasurer under s. 62A of the Audit Act 1901-1950. That means in effect that the moneys are placed to a separate head of the Trust Fund and may be expended only for the purposes of such fund or under the authority of an Act: ss. 60 and 61. By s. 15A (3) of the Trading with the Enemy Act (a provision inserted therein by Act No. 75 of 1947 which came into force on 1st January 1948; cf. s. 4 of No. 1 of 1957) the power to amend the regulations was declared to include power to make amendments to give effect to art. 6 of an Agreement on Reparation from Germany etc. concluded at a Paris Conference on Reparation as of 21st December1945. That Agreement which is annexed to the case stated was attested by the signature of the Australian Delegate on that date.

Article 6 deals with German external assets and provides that each signatory government shall, under such procedures as it may choose, hold or dispose of German enemy assets within its jurisdiction in manners designed to preclude their return to German ownership or control and shall charge against its reparation share such assets (net of taxes, liens, administrative charges and the like). As a result of S.R. 1952 No. 24 and S.R. 1953 No. 30, reg. 16A (1) (a) of the National Security (Enemy Property) Regulations empowers the Treasurer for the purpose of enabling effect to be given to art. 6 of the Agreement on Reparation from Germany by order to vest in the Controller any property belonging to an enemy subject or otherwise included in the expression German enemy assets in art. 6.

A consideration of the foregoing provisions makes it clear enough that if an order is made under s. 13D (1) of the Trading with the Enemy Act 1939-1957 for payment or transfer of the moneys at the credit, in this matter, of the Suitors' Fund so that effect is thereby given to s. 13C and they are dealt with under s. 13E, the moneys will be applied as German external assets according to art. 6 of the Agreement on Reparation from Germany. It is in these conditions that the constitutional validity of ss. 13C and 13D is attacked.

The attack appeared to take two forms. First it was said that, at all events at this date, no affirmative constitutional power could be invoked to support the provisions of ss. 13C and 13D, that is to say, considered independently of the restrictive effect of s. 51 (xxxi) of the Constitution. But then it was further said that under ss. 13C and 13D there was an attempted acquisition of property which could only be authorized by a law under s. 51 (xxxi) and there was no compliance with the condition of that power that there must be just terms.

If first we put aside par. (xxxi) of s. 51 altogether and consider on that footing whether s. 13C and s. 13D are within the subjects of the legislative power of the Parliament the answer would seem to be clear enough that the provisions do lie within the subjects of Commonwealth legislative power. The provisions of s. 13 of the Trading with the Enemy Act when enacted in 1939 were very plainly within the power conferred by s. 51 (vi) to make laws with respect to the naval and military defence of the Commonwealth or at all events were incidental to that power. The consequential question as to what should be done at the end of hostilities with moneys or other property arising from or held under the measures taken in relation to enemy property and business was necessarily a matter to be determined under the same power or as one incidental to the subject matter. And that is true also of the application of enemy property by the Commonwealth in combination with other Allied Powers by way of reparations. It is a narrow and uninformed reading of the power over defence which at this day does not extend the subject matter over measures adopted for the settlement of the relations between the enemy and its subjects on the one hand and the Commonwealth and its Allies on the other hand in reference to the termination of hostilities and of the state of war. All this was decided in Roche v. Kronheimer [1] , a decision which has not been weakened by later decisions or made any the less certain by the experiences of a second war and its consequences. Of course s. 13D must be referred to s. 76 (ii) of the Constitution but there seems to be little difficulty in that once there is a matter arising under a law made by the Parliament, such as s. 13 and s. 13C. It was not suggested that it was outside judicial power. Cf. Reg. v. Davison [2] . It may fairly be said therefore that if ss. 13C and 13D are ultra vires, it must be because of par. (xxxi) of s. 51. That provision was much discussed in Bank of N.S.W. v. The Commonwealth [3] ; the following passage may perhaps be quoted as introductory or descriptive generally of the nature of the question. "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.": per Dixon J. [1] . The decisions of this Court show that if par. (xxxi) had been absent from the Constitution many of the paragraphs of s. 51, either alone or with the aid of par. (xxxix), would have been interpreted as extending to legislation for the acquisition of land or other property for use in carrying out or giving effect to legislation enacted under such powers. The same decisions, however, show that in the presence in s. 51 of par. (xxxi) those paragraphs should not be so interpreted but should be read as depending for the acquisition of property for such a purpose upon the legislative power conferred by par. (xxxi) subject, as it is, to the condition that the acquisition must be on just terms. In Minister of State for the Army v. Dalziel [2] Starke J. puts the point succinctly, although doubtless too absolutely [3] : "That section" (s. 51 (xxxi)) "confers upon the Commonwealth power to make laws with respect to the acquisition of property upon just terms from any State or person for any purpose in respect of which the Parliament has power to make laws. And the decisions of this Court construe this power as a limitation upon the legislative power of the Commonwealth to acquire property except upon the terms mentioned (Andrews v. Howell [4] ; Australian Apple & Pear Marketing Board v. Tonking [5] ; Johnston Fear & Kingham & The Offset Printing Co. Pty. Ltd. v. The Commonwealth [6] )." It is hardly necessary to say that when you have, as you do in par. (xxxi), an express power, subject to a safeguard, restriction or qualification, to legislate on a particular subject or to a particular effect, it is in accordance with the soundest principles of interpretation to treat that as inconsistent with any construction of other powers conferred in the context which would mean that they included the same subject or produced the same effect and so authorized the same kind of legislation but without the safeguard, restriction or qualification. But two observations must be made. First, it is necessary to take care against an application of this doctrine to the various powers contained in s. 51 in a too sweeping and undiscriminating way. For it cannot have much to do with some of the subject matters of power upon the very terms in which they are conferred. The other observation is that the principle does not apply except with respect to the ground actually covered by par. (xxxi) of s. 51. For example, no one would doubt that, under the power to make laws with respect to bankruptcy, property of the bankrupt may be sequestrated and property of others which has been left in his order and disposition may be vested in the Official Receiver and that s. 51 (xxxi) has no bearing on the matter. At the same time, if a law was made under which a piece of land was acquired for a Bankruptcy Office, s. 51 (xxxi) would govern the legislation and not s. 51 (xvii). It must be borne in mind that s. 51 (xxxi) confers a legislative power and it is that power only which is subject to the condition that the acquisitions provided for must be on just terms.

(1921) 29 C.L.R. 329. 2. (1954) 90 C.L.R., at pp. 368, 369. 3. (1948) 76 C.L.R. 1. 4. (1948) 76 C.L.R., at pp. 349, 350. 5. (1944) 68 C.L.R. 261. 6. (1944) 68 C.L.R., at p. 289. 7. (1941) 65 C.L.R. 255. 8. (1942) 66 C.L.R. 77. 9. (1943) 67 C.L.R. 314.

But that does not mean that property can never pass to or become vested in the Commonwealth or its officers except under a law made in pursuance of s. 51 (xxxi). The scope of s. 51 (xxxi) is limited. Prima facie it is pointed at the acquisition of property by the Commonwealth for use by it in the execution of the functions, administrative and the like, arising under its laws. It is perhaps not easy to express in a paraphrase the extent of the operation of s. 51 (xxxi) and thus to define its full scope and application but it is at least clear that before the restriction involved in the words "on just terms" applies, there must be a law with respect to the acquisition of property (of a State or person) for a purpose in respect of which the Parliament has power to make laws. The expression "for any purpose" is doubtless indefinite. But it refers to the use or application of the property in or towards carrying out or furthering a purpose comprised in some other legislative power. It covers laws with respect to the acquisition of real or personal property for the intended use of any department or officer of the Executive Government of the Commonwealth in the course of administering laws made by the Parliament in the exercise of its legislative power.

How much further it goes may not perhaps be settled but it does not affect acquisition by way of forfeiture or penalty or for the purpose of provisional tax (Commissioner of Taxation v. Clyne [1] ), by the condemnation of prize or indeed anything which lies outside the very general conception expressed by the phrase "use and service of the Crown". Perhaps it is desirable to remark that we are not here concerned with the question whether s. 51 (xxxi) applies to legislation for the transfer of property by A to B and is not concerned only with the acquisition by the Crown in right of the Commonwealth or by agencies of the Commonwealth. Cf. McClintock v. The Commonwealth [2] .

(1958) 100 C.L.R. 246. 2. (1947) 75 C.L.R. 1, at p. 23.

Section 13C is directed to vesting in the Controller of Enemy Property moneys etc. which are in Court as a result of payments in by controllers appointed by the Court under e.g. s. 13. Section 13C is subject to s. 13 which makes an order of the Court necessary. But the vesting in the Controller of Enemy Property does not do more than leave the ultimate disposition of the moneys etc. vested subject to the operation of s. 13E. As appears from what has been already said that means that the moneys or property will be applied in pursuance of inter-Allied engagements in or towards the satisfaction of claims upon Germany for reparations. The whole subject is altogether outside the scope of s. 51 (xxxi). It follows that the two sections are valid and the question in the case stated should accordingly be answered: The ss. 13C and 13D of the Trading with the Enemy Act 1939-1957 are valid laws of the Commonwealth.

In this case I agree with the judgment of the Chief Justice, and I have nothing to add.

I agree fully with the reasons and conclusions of the Chief Justice.

It is of some interest to observe that s. 13C of the Trading with the Enemy Act is not only concerned with "moneys" representing the proceeds of property belonging to former German subjects; its operation extends to "all moneys standing to the credit of the High Court of Australia Suitors' Fund" and, consequently, to such part of those moneys specified in s. 13F (1) (a) (i.e. property rights and interests to which sub-par. (1) of par. 2 of art. 14 of the Treaty of Peace with Japan applies) as may be found in the Suitors' Fund. By s. 13F (3) provision is made for the final disposition of the moneys specified in that section. It is, I think, proper to have these matters in mind when considering the respondent's objection to ss. 13C and 13D. Substantially s. 13C purports, subject to the ensuing section, to vest the moneys the subject of this particular application in the Controller of Enemy Property together with, of course, all other moneys within the description contained in sub-s. (1) (a) of that section. As s. 13F is concerned with the ultimate disposal of that portion of the moneys which, by virtue of ss. 13C and 13D and otherwise, has found its way into the Enemy Subjects Trust Account which may be described briefly as the former property, rights and interests of Japanese nationals which on the first coming into force of the Treaty of Peace with Japan were subject to the jurisdiction of the Commonwealth (see s. 13F (1) (a) and Treaty of Peace with Japan - art. 14, par. 2 (1)) no question has been raised directly concerning the validity of that section. But if ss. 13C and 13D are invalid they will (apart from the provisions of s. 15A of the Acts Interpretation Act) have no effect concerning any moneys whatever standing to the credit of the Suitors' Fund. In this connexion it is of some importance to notice that the Treaty of Peace with Japan to which the Commonwealth was a party was concluded on 8th December 1951 and that the Treaty was approved by the Treaty of Peace (Japan) Act 1952. This Act came into force on 10th April 1952 and the Trading with the Enemy Act 1952, which introduced ss. 13C to 13F inclusive, received the Royal Assent and came into operation on 6th November 1952. Paragraph 2 (1) of art. 14 of the Treaty provided that subject to the provisions of sub-par. (II) each of the Allied powers should have the right to seize, retain, liquidate or otherwise dispose of the property rights and interests of Japan and Japanese nationals which on the first coming into force of the Treaty were subject to its jurisdiction, whilst sub-par. (IV) stipulated that the right to seize, retain, liquidate or otherwise dispose of property as provided in sub-par. (I) above should be exercised in accordance with the laws of the Allied power concerned, and that the owner should have only such rights as might be given to him by those laws.

It will be seen from a perusal of ss. 13C and 13F that they operate, inter alia, to appropriate the former private property of Japanese nationals and to extinguish forever the interests, if any, which they had retained after the war-time appointment of a controller under the earlier provisions of the Act. So understood the respondent's contention must be taken to characterize these impugned sections and the related provisions as a law with respect to the acquisition of property within the meaning of par. (xxxi) and, in the absence of just terms, as invalid. But the decision in Roche v. Kronheimer [1] is authority for the contrary view. In that case the provision immediately under attack - reg. 20 of the Treaty of Peace Regulations - authorized the Minister of State for Trade and Customs to make orders vesting in the Public Trustee the property, rights and interests belonging to German nationals and specified in sub-reg. (1) of reg. 20. This regulation had been made pursuant to a statutory provision which authorized the Governor-General to make such regulations and do such things as appeared to him to be necessary for carrying out and giving effect to the provisions of Part X (Economic Clauses) of the said Treaty. Pursuant to the Treaty the Allied and Associated powers were to be at liberty to retain and liquidate the property held in their respective territories of German subjects and the expropriated owners were to look for compensation to their own Government. In the result both the Treaty of Peace Act 1919 and reg. 20 were upheld as valid exercises of the power to make laws with respect to the naval and military defence of the Commonwealth. "The termination of hostilities by the imposition of terms of peace and the enforcement of those terms" were, in the unanimous opinion of the members of the Court within the ambit of the defence power. This is clear authority for the proposition that ss. 13C and 13D may have a valid operation at least with respect to property of the character described as s. 13F (1) (a).

The present case, however, is directly concerned with moneys which represented the proceeds, with accumulations, of the realization of assets which formerly belonged to German subjects. Accordingly, the moneys in question do not fall within the purview of s. 13F. But if ss. 13C and 13D are valid an order may be made directing that they be paid to the Controller of Enemy Property who, upon the receipt thereof, will be bound by s. 13E to pay them to the credit of the Enemy Subjects Trust Account. What is ultimately to happen to such moneys is not specified by the Act and the reason for this is reasonably apparent. It is that, although a state of war no longer existed in 1952 between the Commonwealth and Germany, a Treaty of Peace had not been concluded and the final destination of the former property in this country of German subjects had not yet been the subject of any international agreement to which Germany was a party. But on 21st December 1945 the Paris Conference on Reparation had recommended for signature an Agreement on Reparation from Germany, on the Establishment of an Inter-allied Reparation Agency and on the Restitution of Monetary Gold and this agreement was signed by eighteen nations, including Australia but not including Germany, on 15th March 1948. It is unnecessary to refer in detail to the provisions of this agreement beyond saying that it allotted to each nation by way of reparation percentage shares of the aggregate of former German assets held by them. Pursuant to the Rule for Accounting for German Enemy Assets approved by the Inter-allied Reparation Agency on 21st November 1947 each Signatory nation was charged with the estimated value of the assets specified in cl. 5 of Pt II which were within its jurisdiction on 24th January 1946 though liberty was given to exclude from the charge the assets in individual cases that might be thought to fall within the provisions of Pt III (F) and (G). It is clear that the carrying out of this agreement was bound to require much adjustment between the contracting nations and, no doubt, it was for this reason that the Trading with the Enemy Act 1952 introduced the new sub-s. (3) of s. 15A of the Principal Act. The object of this provision was to extend the power to amend the National Security (Enemy Property) Regulations (which had been continued in force by the Trading with the Enemy Act 1947) in order to make it possible for regulations to be made for carrying out or giving effect to the Agreement referred to (the new sub-section referred to the Agreement on Repatriation from Germany but this error was corrected restrospectively by the Trading with the Enemy Act 1957). Regulations pursuant to this new provision were, in fact, made in 1952 (Statutory Rules 1952 No. 24) and 1953 (Statutory Rules 1953 No. 30) an express purpose of which, inter alia, was to create powers to enable effect to be given to the Agreement. How far it has now been carried into effect does not appear but this is of no significance in the case. Nor is it, in my view, of any significance that in the case of former German assets provision was made for their disposition, not by a treaty of peace, but by an Agreement to which Germany was not a party.

The argument of the respondents tends to take the provisions of ss. 13C and 13D in isolation and then to characterize them as a law with respect to the acquisition of property within the meaning of par. (xxxi). But this, it seems to me, is a highly artificial approach to the problem. To me the provisions appear as no more than integral, though minor, legislative elements in a general scheme concerned with the seizure of enemy property during time of war, its custody and management during that time and until its final destination should be determined by international treaty and the carrying into effect of the Commonwealth's international obligations with respect to it. There is, of course, clear authority for the proposition that the original seizure operated to remove the property of enemy subjects from the control and beneficial ownership of the enemy. "At the termination of the war fresh considerations will arise; and whether the enemy will recover the beneficial ownership will depend upon the arrangement made at the conclusion of Peace and upon the terms of any Order-in-Council" (or appropriate legislation) "made with those arrangements in view" (per Russell J. in In re Münster (Enemy) [1] ; and see Bank Voor Handel en Scheepvart N.V. v. Administrator of Hungarian Property [2] ). Since the original seizure in the present case a controller has been appointed, he has sold the enemy property and paid the proceeds into Court. All this has been done under statutory authority and all that ss. 13C and 13D, standing alone, purport now to accomplish is a transfer of the proceeds from the Suitors' Fund to the Enemy Subjects Trust Account. These considerations, I think, make it quite impossible to take those provisions in isolation and then to characterize them as a law with respect to the acquisition of property. Having regard to the effect of the original seizure, that is to say, a seizure by virtue of which the beneficial ownership of the original owner was suspended indefinitely and the property, or its proceeds, were to be held at the disposition of the Commonwealth at the end of the war, it might have been thought, consistently with the respondent's argument, rather more appropriate to attack the legislation which authorized the seizure as a law with respect to the acquisition of property. But to hold that it constituted a law for which constitutional justification could be found only in par. (xxxi) and that enemy property could validly be seized only under legislation which provided compensation to the expropriated owners would, in my opinion, be the height of absurdity. In my view the true character of ss. 13C and 13D is discoverable only by regarding them as a subsidiary provision in a general scheme for the administration and final disposal of enemy property and, as such, completely outside par. (xxxi).

(1920) 1 Ch. 268, at p. 278. 2. (1954) A.C. 584, at pp. 608, 609, 620, 621, 628. Windeyer J.

I concur in the judgment of the Chief Justice. I agree too with the additional observations of my brother Taylor.

On 25th August 1961 counsel for the applicant sought an order that the respondents should pay the applicant's costs of the case stated or alternatively that the costs of the applicant be paid out of the fund in court. This application was opposed by counsel for each respondent, who contended that the costs of all parties should be paid out of such fund.

The Court ordered that the costs of all parties of the case stated should be paid out of the fund.

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Judgment (24 paragraphs)

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