New South Wales v Commonwealth (No 3) [1932] HCA 12

sec. 15a - Andit Act 1902 (N.S.W.) (No. 26 of 1902), secs. 5, 17-21, 30.

Sec. 15 of the Financial Agreements Enforcement Act 1932 is expres empower the Treasurer of the Commonwealth, during the curren¢ proclamation under sec. 7 of that Act, to require the chief executive offi

*The Financial Agreements Enforce- ment Act 1932 provides, by sec. 15, that "(1) At any time during the currency of any proclamation, the 'Treasurer may serve, or cause to be served, upon the chief executive officer in Australia of any corporation carrying on the business of banking, a notice in writing requiring that officer (a) to render forthwith to the Treasurer or to an authorized person a return of the amount of the balance standing to the credit of the State to which the pro- clamation relates, in the books of the corporation, whether upon fixed deposit, current account or otherwise, specifying the amount of the balance standing to the credit of the State under each of

é those heads; and (6) to pay Treasurer or authorized person fo with, or within such period. « is specified in the notice, the who that amount or such part of it specified by the Treasurer in the m and thereafter to pay to the or authorized person, within or to an amount specified in the any further moneys subseq| ceived by the corporation

of the State. Treasurer or authorized pe be a good discharge to the corp of its obligation to pay the s

to the State, and, upon thereof to the Treasurer or person, the corporation

'Australia of any bank to furnish "'a return of the amount 6f the balance standing to the credit of the State" referred to in the proclamation, and,

within a stated period, to pay the amount of such balance to the " authorized person" indicated, as well as any further moneys subsequently received by 'the bank on account of the State, to be applied towards the discharge of any liabilities of that State that may have accrued under the Financial Agreements between the State and the Commonwealth,

Held, by Rich, Starke, Dixon and McTiernan JJ. (Gavan Duffy C.J. and Avatt J. dissenting), that these provisions constitute a valid exercise of the power conferred upon the Commonwealth by sec, 1054 of the Constitution.

Held, further, by Rich, Starke, Dixon and McTiernan JJ., that even if otherwise the section would receive a construction which would extend its application to moneys beyond the Commonwealth power sec. 15a of the Acts Interpretation Act 1901-1930 would confine its operation to those within that power and preclude an interpretation which would result in its invalidity.

In addition to ordinary revenue the State of New South Wales deposited with its bankers moneys received by it under certain statutes and orders of Court for specific purposes and to meet particular claims, such as, for example, estates administered by the Master-in-Lunacy, the Public Trustee and the Registrar of Probates respectively, and claims by suitors and litigants. 'The accounts were kept by the banks under various descriptive headings, moneys deposited being allocated to the relevant accounts upon the receipt, subsequent to payment in, from the State of a "distribution sheet," and by an agreement between the State and the banks the accounts were treated as one account, _ withdrawals being permitted from any account, whether in debit or otherwise, provided the combined account was in credit, interest being allowed by each 'of the banks on any amount held by it in excess of £100,000. The banks stated that they had not been informed, and were unaware, that any of the moneys deposited by the State were " trust' moneys.

Held, by Rich, Starke, Dixon and McTiernan JJ., that such moneys were received by the Crown in right of the State in a fiduciary capacity so as to

specifically the property in equity of the suitors or others concerned, but went into the general resources of the State; and that, accordingly, the sums credit of the bank account were attachable under sec. 15 of the Financial

Agreements Enforcement Act 1932. person in pursuance of this section

any proceedings include moneys deposited by any person sr. (3) Any moneys received - _as security for the supply of goods, the jureroranauthorized person - _ performance of services or the carrying ce of this section shall be out of any work, and (6) that the con- as if they were moneys ditions on which the moneys were by him. undec or by virtue of deposited have been fulfilled, the ons of section seven of this Treasurer may refund those moneys, ee) eee eencie tn and any refund so made shall, as section, tween the person making the deposit is satisfied (a) that any and the State, be deemed to have

d to him or to an authorized been made by the State."

By a writ of summons, to which the Commonwealt Honourable Joseph Aloysius Lyons as Treasurer of the Commo wealth, the Commonwealth Bank of Australia, the Bank of
South Wales and the Commercial Banking Co. of Sydney Ltd. y

Act 1932 was ultra vires the Commonwealth Parliament and y invalid; (2) a declaration that certain notices in writing, 9th April 1932, caused to be served by the Commonwealth Tr pursuant to sec. 15 of the said Act upon the chief executive in Australia of the Commercial Banking Co. of Sydney Ltd. the Bank of New South Wales respectively, corporations ca on the business of banking, requiring such officers (a) to forthwith to the Commonwealth Bank of Australia, being authorized person within the meaning of the said Act, a return the amount of the balance standing to the credit of the State New South Wales in the books of the two first-named ban respectively, whether upon fixed deposits, current account otherwise, specifying the amount of the credit balance under of those headings, and (b) to pay to the Commonwealth B Australia forthwith the whole of such amounts, and therea pay to such bank within a period of two months any further mont subsequently received by the said two first-named banks respectiy on account of the State of New South Wales, were invalid; orders restraining (a) the Commercial Banking Co. of Sydney Ltd and the Bank of New South Wales from paying such moneys tot

South Wales and (c) the Commonwealth Treasurer from acting any way under the notices in question or either of them or wl sec. 15 of the Act; (4) an order directing the respective ban repay to the State of New South Wales all moneys paid to Commonwealth Bank of Australia in pursuance of such notice either of them ; and (5) orders for ancillary relief. '

Tn an affidavit filed on behalf of the State in support of of motion referred to hereunder, Thomas Dwyer Kelly, the expent

mt to the State Treasury, deposed (inter alia), sub- a ly, (1) that moneys and accounts of the said State, and the public accounts, and of the officials and corporations of | Crown in right of the State of New South Wales were yeing, and had for many years past been, kept with the Bank

; (2) that an agreement made between the Colonial Treasurer the State and the said banks provided (inter alia) that "of the tal daily net credit balance of the Treasurer's General Banking ecount in bothbanks . . . £200,000 - ie., . . . £100,000, th each bank - shall be held free of interest. The balance with each mk in excess of £100,000 to bear interest at the rate of two pounds yer centum, per annum, subject to the bank's right of determination t seven days' notice." Such agreement was expressed to commence n 17th October 1931, was terminable by three months' notice,

was "applicable to all government departments including the ey Harbour Trust, the Miners' Accident Relief Board, and 'similarly constituted bodies" ; (3) that in places in New South where the banks in question had no branches, public officers e State had accounts with other banks ; (4) that the Colonial er had received letters dated 11th April 1932 from each of he banks in question which, after referring to the receipt by the spective banks of the notice above referred to, proceeded: "In ew of this notice, the bank will be unable to pay cheques drawn n Government accounts presented after the receipt of the notice, d will return such cheques with the answer ' Refer to drawer' . The notice . . . has made it necessary that all credits lished at the request of, and on account of the Government; tmental or otherwise, be cancelled, and I hereby give you accordingly"; (5) that a notice as above had been sent by ommonwealth Treasurer to all other banks. carrying on business South Wales; (6) that in the course of his duty he had from returns furnished by the banks in question a statement cash balances of the Colonial Treasurer's Accounts as on

il 1932 (annexure " B''), which was as follows :- - XLVI. w

ar New Sours Waxes THe Common- WEALTH [No. 3].

Creprr BataNces Special Deposits Accounts... «= «ssw 222,862,056 Sydney Harbour Trust Fund .. 02. we eee 47,156 Government Railways Fund .. 0 -. 0 «ssw 581,787 State Transport (Co-ordination) Fund se ae oy 32,374 Road Transport and Traffic Fund... wee 88,358

Metropolitan Transport Trust - General Fund aA * 210,354 Newcastle and District Transport Trust - General Fund .. 3,234 Supreme Court Accounts .- ' an ca 482,586 Commonwealth Treasury Bills (Sydney) Accout ae 16,110,000

Deir BALANCES Consolidated Revenue Account 1 LS a ee General Loan Account... + a Ga or Loans Expenditure Suspense este! ot ad Shufanssi_anlant Closer Settlement Account. . oo ty oe IRs yaioas fee epmttratial Wording Ascoearer eerie

purposes, and advances to be recovered ee ee 11,560,169 Grain Elevators Freight Suspense Account. . - 45,128 Metropolitan Water, Sewerage and Drainage Board are

Account .. 2 OP SS Sea Grafton-Kyogle to South Brisbane Ballwey Advance

Account .. - oe oe me 175,000 Coal Purchase ere Asap fd went 13,974 London Remittance Account .. a - . 296,375 Amounts not brought to account - .. .. 1,107,860

• showing a total net cash balance sinsath fapatte of £85,589 ; ( for very many years past the accounts referred to in (6), supra, been treated as one account for the purpose of utilizing the aggr credit balance and so enabling money to be withdrawn from any

credit balances on certain special public moneys accounts of offi established for the receipt of moneys the destination of which

right of New South Wales, and of persons and corporationsrepr the Crown in such right, extended over the whole of New South Wa and the effect of the notices in question was to hamper s the discharge of the functions of the Crown in right of New

Wales and to cause it substantial losses. In a " short explanation concerning the accounts referred to" in (6), supra, furnished by Kelly an annexure to his affidavit (marked "C'"') he stated (inter alia) that the Special Deposits Accounts included amongst other moneys, trust 'moneys of which the State Treasurer was, by statutory obligation, _ a trustee and custodian, some of the trust moneys included being, "eg, the Bankruptcy Suitors Fund (Act No. 25 of 1898), Bankruptcy 'Unclaimed Dividend Fund (Act No. 25 of 1898), Municipal Council of Sydney Sinking Fund (50 Vict. No. 13), Testamentary and 'Trust Fund (Perpetual and Permanent Trustee Companies' Acts), "Unclaimed Moneys, Security Deposits lodged by tenderers and contractors ; also included in such Special Deposits Account were the funds of the Government Insurance Office, and if the Office were ented from operating on such funds it would be difficult to ualize the serious effect not only upon the Office but upon the (iovernment itself; that in respect of the Sydney Harbour Trust Fund, the Government Railways Fund, the Metropolitan Transport st General Fund, the Newcastle and District Transport Trust Fund, trust moneys also were paid into such Funds and

funds being in nowise the property of the Government, and the account being operated upon only in pursuance of an order or decree of the Supreme Court under rules 288 and 289 of the olidated Equity Rules of 1902; (6) the Colonial Treasurer's in-Lunacy Account, the whole of the money in such account

ng the property of persons and patients under the Lunacy Act or whom it was held in trust by the Master-in-Lunacy (vide secs. 130 and 131 of the Lunacy Act of 1898 (N.S.W.) ); (c) the Colonial ; 's Public Trustee Account, all moneys paid into such account without exception moneys collected in respect of various and clients, which were trust moneys and did not belong to the rnment ; (d) the Colonial Treasurer's Prothonotary's Account, g moneys paid into Court by litigants under statutes or orders

of Court, and being moneys belonging either to litigants or to priv t persons held in suspense for various reasons ; and (e) the Colonis Treasurer's Registrar of Probate Account, the moneys paid into such account being wholly trust moneys belonging to decea estates paid in by order of the Probate Judge whose order required before any money could be paid out to any person interes

Affidavits by the managers of the head offices of the B; of New South Wales and the Commercial Banking Co. of Sydney

of "Amounts not brought to account"; that as between the Government as customer and each of the banks as banker all

each bank so long as the whole account at such bank, on such com bination, was in credit ; that the practice, which was of many ye standing, was for the State Treasury to pay into each bank towa the end of each banking day a considerable sum of money to the credit of the Government generally and subsequently to supply eae bank with a distribution sheet specifying the different Government accounts to which the sum so paid was to be allocated and respective amounts to be credited to each account; that o moneys were paid in direct by Government officials to the credit of the various accounts ; that all moneys received as above by bank were received as moneys of His Majesty the King in of the State of New South Wales, the banks not being informe by the Government or the Treasury or the officials paying in such moneys as to whether the whole or any part were trust mone and the banks did not know how such moneys were dealt w in the Government's books; that there was only one Spe Deposits Account in the books of each bank and neither of banks had been informed or knew that such account represen or included the accounts referred to in the annexure to Ke affidavit; that so far as the other accounts referred to in

were concerned neither of the banks had been informed 'knew that any of the moneys paid into such accounts were moneys; that the State Treasurer had no account with either styled "The Trust Account"; that the various accounts e drawn upon by cheques only, no order of Court or other rity being produced to either of the banks.

the parties that the hearing of the motion should be ed as the trial of the action, subject, so far as the Bank of South Wales and the Commercial Banking Co. of Sydney Ltd. were concerned, to the order of the Court being a declaration ly as to validity or invalidity, or to such injunction as the might grant being of such a nature as the banks would be le to give effect to.

Browne K.C. (with him Berne), for the plaintiff. The decision of he Court in New South Wales v. The Commonwealth (No. 1] (1) ily goes so far as to declare Part II. of the Financial Agreements

ce Act 1932 to be valid, and does not affect the validity otherwise of sec. 15, which is in Part III. of that Act. The ion is invalid because its terms are wide enough to include not only the ordinary revenue of the State but also moneys held by the State on trust. Although there is not any account with the e's bankers styled "The Trust Account," it is obvious that a umber of the accounts, e.g., the various accounts included in the e Court Accounts, &c., are trust accounts in the sense that moneys are paid into such accounts. As such trust moneys re not the property of the State, they cannot be attached by the umonwealth ; and, to the extent at least that the section purports to confer power to attach such trust moneys, it is invalid. The pro adopted in regard to payments into and withdrawals rom the various accounts is in accordance with that prescribed

the relevant Acts and regulations made thereunder, Rules of and more particularly the Audit Act 1902, sees. 5, 18, 19-21. Public Trustee Act 1913-1923 and regulations thereunder,

the State to provide the means to pay cheques drawn on the trust account. The State is a trustee for such money, is liable to pay it as a trustee, and the banks are equally liable to make money available (Lyell vy. Kennedy (1) ). Sec. 15 deals with moneys of that kind which are not the property of the State; the section cannot be made to apply to a part only of the moneys but must apply either to the whole of the money " standing to the eredit of the State " or to none at all.

Ham K.C. (with him E. M. Mitchell K.C. and Nicholas), for defendants the Commonwealth and the Commonwealth Treasurer. This Court decided in New South Wales v. The Commonwealth [No. 1] (2) that the Commonwealth Parliament has power to pass a law requiring debtors of a State to pay their debts to 1 Commonwealth instead of to that State so that the receipt of such money would have the effect of liquidating the State's debts to the Commonwealth. Such power extends also to moneys | by the State to a bank. Apart from the particular terms of Audit Act the fact is that, although moneys might come into hands of State officers impressed with a trust, if those State officers under the law pay those moneys into the bank the property in th moneys passes to the bank and thereafter the relation between the bank and the State is that of debtor and creditor, and immediately the State officers have, under the law, parted with th

the duty of a private trustee, and is, therefore, distinguishab because the State has no obligation as trustee to keep trust money apart from its own. A cestui que trust can only take ac against a private trustee if the latter has acted unreasonably in the disposition of the funds, whereas as regards the State the right 0

'the cestui que trust is secured by the credit of the State. The a reement between the State and the banks provides that interest ull be paid to the State by the banks on all moneys held in excess 0 £100, 000, and also that the State shall be entitled to draw against a credit in the combined account irrespective of whether the accounts are in credit or in debit, which is evidence that either the State nor the banks regarded the moneys in such accounts \s being trust moneys. The State can pay trust moneys into its own eeount and utilize them in any way in which it is authorized to use e moneys. The Court is no more concerned under sec. 15 to behind the relationship existing between the State and its bankers n it was to go behind the relationship existing between a subject the State when considering Part II. The relationship between banks and the State is that of debtor and creditor, or banker nd customer: the property in the money that is deposited in 1¢ banks passes to the banks and thereafter the obligation of wh bank, apart from the cashing of cheques, is that of a debtor at mon law. It follows, therefore, from the decision in New South v. The Commonwealth [No. 1] (1), that by whatever power - er under sec. 105a (3) of the Constitution alone or under Chapter 'of the Constitution, together with sec. 51 and incidental powers, lon or concurrently - the right of the Commonwealth to attach debts 'to the State in respect of present claims can be supported, there 'no reason in law which would prevent the application of that ple to debts due to the State in respect of money lent. A vestui que trust of the State is unable to " trace " his moneys because e Audit Act the State is authorized to pay such moneys into

the rule in Devaynes v. Noble (Clayton's Case) (2) does not

There is nothing in any of the Acts referred to on behalf of te which affects the position between the State and its bankers ed by the Audit Act, particularly secs. 5, 18, 19,21. The object of separating the State account into a number of y accounts is for convenience of accountancy and audit. The standing to the credit of the State's account at the banks under the Audit Act, secs. 19 and 21, have been properly

moneys are properly attachable. Alternatively, if the constitutional power of the Commonwealth is limited to the attachment of moneys due to the State in its own right, then sec. 15 of the Finanei

limited to such moneys (Acts Interpretation Act 1901-1930, sec. 154 Macleod v. Attorney-General for New South Wales (1) ).

Teece K.C. (with him J. A. Ferguson), for the defendants Bank of New South Wales and the Commercial Banking Co. Sydney Ltd. As to whether sec. 15 of the Financial Agreem Enforcement Act 1932 is valid or invalid does not concern the defend banks. The banks have no knowledge that any of the mon

dissect the moneys deposited with them so as to ascertain what and what are not, trust moneys. The use of the words " balane

the bank's customer. The relation of the banks with the State i that of debtor and creditor: there is no privity between a cesttl que trust and the banker. The banks could not comply with notice or order directing them to pay over to the Commonwealt

quantum thereof. The Legislature could not have intended an impossibility ; therefore the words of sec. 15 should be gi their natural meaning - not a restricted meaning under sec. : of the Acts Interpretation Act, which would, in effect, be n a new piece of legislation.

[Evarr J. referred to Australian Railways Union v. Victoria Railways Commissioners (2) and Huddart Parker Ltd. vy. The Commonwealth (3).]

(1) (1891) A.C. 455. (2) (1930) 44 C.L.R. 319. (3) (1981) 44 CLR. 492.

g of which the Legislature must be deemed to have a

accounts, they are as between banker and customer treated e account. The State regards all moneys which come to its

the moneys to the banks. The agreement between the State the banks refers to the State's account with the banks as "' The urer's General Banking Account."

eet, for the defendant the Commonwealth Bank of Australia. bank is not concerned one way or the other with the validity ity of sec. 15 of the Financial Agreements Enforcement Act it is simply the agent of the Commonwealth for the receipt "such moneys as may be paid in. The bank, therefore, submits yany order the Court deems fit.

K.C., in reply. The Court will have regard to all the The moneys are received by the State and the banks in a y capacity as trustees, and the persons beneficially entitled moneys so banked have the right to trace such moneys (In re 's Estate; Knatchbull v. Hallett (1) ). The provisions of the us Acts and regulations as regards the banking by the State of received relate to procedure only, and not to the ownership ch moneys (Public Trustee v. Hutt River Board (2) ). No right State to borrow money from various accounts and to treat all nts as one, whether for the purpose of convenience, interest or can destroy the right of beneficiaries to follow up by rights (Sinclair v. Brougham (3) ). The persons entitled to the trust ds have the first claim to the moneys standing to the credit of the te's account (In re Hallett's Estate). As the State's moneys e banks are "mixed" funds and the banks are unable to between them, none of the moneys are attachable.

(1) (1880) 13 Ch. D. 696. (2) (1915) 34 N.Z.L.R. 753. (3) (1914) A.C, 398,

e natural meaning of the words is consistent with the system H- C. or A.

Although for the purpose of convenience there are New Sours

opinion that sec. 15 of the Financial Agreements Enforcement / 1932 is invalid.

Ricu J. My brothers Starke, Divon and McTiernan and I th that the section is valid and that the action should be dism The action will be dismissed, and the costs of the Bank of New South Wales, the Commercial Banking Co. of Sydney Ltd. and the Commonwealth Bank of Australia will be paid by the plaintiff. The reasons of the Court will be given at a later date.

The following written judgments were delivered : - Gavan Durry C.J. anp Evarr J. We have already stated in full our reasons for holding that the whole of Part IT. of the Financial Agreements Enforcement Act is invalid (1). For the same reasons, w are of opinion that the whole of sec. 15 of the Act is invalid, and that a declaration should be made to that effect.

Sec. 15 (1) purports to enable the Treasurer of the Commonwea during the currency of a proclamation under sec. 7, to require bank to pay to the Treasurer the amount of the balance standii to the credit of the State in the books of the corporation and further moneys subsequently received by the bank on account of the State. The moneys so paid are to be applied towards discharge of any liabilities of the State which have accrued the Financial Agreements. A proclamation may be issued 0 after a resolution of the Houses of Parliament pursuant to sec. or sec. 6. Thus the substantial effect of sec. 15 is to bring additional moneys into charge as a result of those sections coming into operation. Upon the construction which a majority of this Court has placed upon sec. 105a of the Constitution, there can be no doubt that s a provision would be within the powers of the Parliament if it: limited to moneys belonging to the State which it might (without

¢ change in proprietary right) apply in the liquidation of its It is said, however, that sec. 15 actually extends to ys which are not the property of the State and for that reason

n support of this view of the meaning and application of sec. 15, vision contained in sub-sec.5is relied upon. Thissub-section to contractors' deposits. The money deposited by a tor with the State does not remain specifically the property e contractor, or at any rate it does not usually so remain. he State simply incurs a liability to repay an equivalent amount f money when the conditions have been fulfilled. Whether -sec. 5 does not go too far in attempting to enable the Treasurer Commonwealth to settle the liabilities existing between the and the contractor is another question. It is a question which not require consideration because sub-sec. 5 is clearly severable the remainder of the section. our opinion sec. 15 is valid. Even if otherwise it would receive ction which would extend its application to moneys beyond reach of the Commonwealth power, see. 15a of the Acts Interpreta- Act 1901-1930 would confine its operation to those within that and preclude an interpretation which would result in its ilidity.. N s have been served under see. 15 upon the Bank of New h Wales and the Commercial Banking Co. of Sydney, the *s at which the public accounts of the State are kept, requiring | to pay to the Treasurer of the Commonwealth the amount balance standing to the credit of the State. The public count is kept in many sub-accounts or divisions, but for a very e they have been treated as one account for the purpose of the aggregate balance and thus enabling money to be vn from any of the accounts for any lawful expenditure h the account is applicable although that particular it may be in debit. So on llth April 1932, the day on +h the notices were served, the aggregate balance of both banks of the State was £85,589, obtained by setting off debit in various accounts amounting to £40,333,156 against credit in others amounting to £40,418,745. Among the accounts

connected with the administration of "funds" for answ particular claims, and the State contends that these contain tr moneys in which the State has not the beneficial property. A eo spicuous instance is given in the Supreme Court Accounts. 1! accounts include the Colonial Treasurer's Master-in-Equity Accou

Treasurer's Public Trustee Account, the Colonial Treasur Prothonotary's Account, and the Colonial Treasurer's Regi of Probate Account. The total amount to the credit of Supreme Court Accounts on 11th April 1932 was £482,586, a is said that the various litigants and others in respect of whor moneys were paid in so as to create this amount are entitled am them to this credit as specific property. This contention does m appear to us to be consistent with the arrangement made by t State with the banks by which the amounts at the credit of accounts is included in the aggregate amount at the State's a for the purpose of drawing on other accounts, nor with the eonditia of the accounts which shows an aggregate balance of £85,58! an amount less by £396,997 than the total amount at credit of t Supreme Court Accounts. But, in our opinion, the contenti ill founded. The Crown in administering justice and other performing its sovereign functions receives moneys from the subjec not as trustee of those specific moneys, but in the exercise of i powers of government. The subject is entitled to repayment equivalent amount of money, and he relies upon the whole cr the State as his security. The specific money paid is not segreg but loses its identity in the general funds of the Treasury. truth is obscured by the fact that for the convenient and ordet administration of the finances of the State, as well as for the secuti of the subject, it is necessary to maintain in the Treasury dit accounts of the receipts and disbursements in relation to separate purpose and to keep corresponding bank accounts, al that this is provided for by law. But it does not follow that doctrines of equity which enable a cestui que trust to fas moneys received by the trustee in his fiduciary capacity and treat any bank account into which they go, or any sort of propé

to which they are transformed, as trust property specifically, or

ibject to a charge in favour of the trust, apply to the moneys by the Crown. The Crown is not liable for the moneys but is liable only to repay money of the same amount; d this is so notwithstanding the fact that statutory obligations exist requiring a separation in account and an appropriation 1 account of moneys so that they may ever be ready against e fulfilment of the Crown's obligations. Although the inapplic- to the Crown of the doctrines of equity relating to tracing of trust moneys arises rather from the nature of the which the Crown occupies as a sovereign exercising the s of government than from statutory enactment, yet the Act appears clearly to recognize that the existence of "' funds " e Treasury and accounts for special purposes impresses no ¢ moneys with any equitable charge or other right of property of the subject but leaves the actual moneys at the credit e Crown its property to be dealt with according to law. Sec. of the Audit Act 1902 enacts that the Consolidated Revenue count, the General Loan Account, the Trust Account, the Special sits Account and such other accounts as the Treasurer may shall be kept in such bank, or banks, as the Treasurer may in direct ; sec. 19 provides that the several accounts of the nent in any Bank shall, for interest purposes, be considered e account. It may be observed that, if part of the moneys ned in the one account and so dealt with were the specific y of others, it would be a statutory invasion of private right treat them as available credits for the purpose of keeping down rest or debits in other accounts. Sec. 21 enacts that all moneys d into any bank by the Treasurer to any account under the it Act shall be deemed to be public moneys, and to be lent by is Majesty to the bank. Again this looks in the same direction s all moneys as " public" including " trust moneys " tion of " public moneys "' - see. 5) and as all alike resulting wn debt. It is true that sec. 30 speaks of moneys coming possession or under the control of a person in the Public ice by virtue of his office or employment for or on account of, r the use or benefit of, any other person. But the directions

retains his full and absolute right in respect of such an amo money against the Crown, the actual money paid to the offic goes to a public account and ceases to be itself the specific propert of that person.

In the case of relations between subject and subject the fiduci character of one person or the proprietary right of the other lea¢ Courts of equity to require that the exact moneys paid over o obtained shall be dealt with, shall be identified, and shall } appropriated so as to remain the identifiable property of th beneficial owner. But it has always been considered by of equity that the highest form of security for trust was an investment upon the public credit of the country, an conformably with this view moneys received by the Crown properly be conceived as represented no longer by specific proper retaining its identity and charged with an equity in favour of f subject, but as transformed into an obligation of the State to an equivalent sum. Accordingly rule 286 of the Equity provides that all moneys paid into Court in any estate, suit proceeding in equity shall forthwith be deposited in such ban may for the time being be named by the Government of the Stat in that behalf to the credit of the State Treasurer at the rate of inte from time to time arranged between the Court and the State Treas This means that the moneys lose their identity but the State pro the interest and incurs an obligation to repay them. It also meal that a distinct and separate account shall be kept by the Stal the purpose of answering the obligation and separating the liabili and the credits to answer it from other accounts, but not for t purpose of enabling the specific funds to be traced as prope specie of the subject: compare rule 288.

Again, under sec. 38 of the Public Trustee Act 1913 moné payable into the Public Trustee's Account by the Public are deemed to be the property of His Majesty for the purpose the Act, and are recoverable in like manner as money due to 1 Crown is recoverable. Secs. 39 to 42 provide for the due accoun for moneys received and the separateness of the Public Tru accounts. Under regulations promulgated on 3rd January

ed to the credit of an account called " The Colonial Treasurer's

lying to the credit of the account are allowed interest at rate as may from time to time be arranged between the Colonial er and the Public Trustee computed on the daily balance of he account, but they may be placed on deposit for a fixed period ith the Colonial Treasurer at interest. It might have been possible 'the Public Trustee to deal with trust funds altogether indepen- ntly of the Treasury, but when the course was taken of making account a Treasury account, it followed that the Treasury became, t the custodian of specific funds to be followed as identifiable y in its hands, but the acknowledged debtor of the trust, interest for the investment with it of the moneys. These vations apply also to moneys paid under the Lunacy Act 1898, sec. 130, whether to the Consolidated Revenue or to a trust and also to the Colonial Treasurer's Registrar of Probate ;, Which appears to represent moneys paid into Court under rs made in the probate jurisdiction. accounts which were said to contain moneys impressed a trust or equitable interest are contained in special deposit counts. They include the accounts mentioned in sees. 102 (1) (6) and 105 of the Bankruptcy Act 1898, although it might been thought that these accounts would now stand in the e of the State Debt Commissioners (see sec. 9 of the State Debt nd Sinking Fund Act 1904). Similar principles apply to these Moneys at the credit of the Testamentary Trust Fund hed under the Trustee Companies' Acts, sec. 20 or sec. 21, to be invested with the Treasury. This is true also of the m "lodged as a trust fund with the Colonial Treasurer " at interest f r sec. 4 of Act No. 13 of 1886. The Special Deposits Account es the Compensation Insurance, the Fire and Marine Insurance, eral Accident Insurance and the Treasury Guarantee Funds. funds could not in any event be regarded as the proceeds of ty or money held in a fiduciary character, but they are at interest with the Treasury: see sec. 4 of Act No. 18 A number of other accounts are kept at the banks which

'Trustee Account " in the Bank of New South Wales. Capital y

received by the Public Trustee in that capacity are to be H.C. or A.

represent "funds" established under various statutes for publ purposes. These are "funds" set apart, not to answer claim the subject against the Crown, but some expenditure belonging the administration of government or of some incorporated instrumer of the State. A recent example is the State Transport (Co-ordinatior Fund established under secs. 25 and 26 of Act No. 32 of 1931. "funds " belong to the State in its own right.

In our opinion the action fails and should be dismissed.

The defendant banks should receive their costs from the p)

Srarke J. In this action the State of New South Wales claim a declaration that sec. 15 of the Financial Agreements Enforcemen Act 1932, and notices given by the Commonwealth pursuant to thi section, are invalid, and also orders restraining the Commonwealth Bank of Australia, the Bank of New South Wales, and the Com Banking Co. of Sydney Ltd. from acting under the said no under sec. 15 of the Act.

This Court has already decided that the Parliament of

stitution to enforce against the States the Financial Agreeme scheduled to the Financial Agreement Validation Act 1929 (Ni 1929) (New South Wales v. The Commonwealth [No. 1] (1) ). States are subjected by the Constitution to the legislative p of the Commonwealth to enforce and execute the Agreement. national power is paramount and may be exerted against th property, moneys, and revenues of the States in whatever fon they exist, and wherever found. (Cf. Commonwealth of Virginia State of West Virginia (2).) And it should be remembered ' this authority can be exerted by the whole power of the Commo wealth, legislative, executive, and judicial. Under the legi power to enforce the Financial Agreement, the Parliament | enacted the Financial Agreements Enforcement Act, which prov that certain revenue and other funds of any State in default unt the Agreement shall be paid to the Commonwealth in and satisfaction of the liabilities of that State under the Agre Under sec. 15 the Treasurer of the Commonwealth may also Te i

r some authorized person, the amount of the balance standing to

account, or otherwise, or such part thereof as he specifies. ys standing to the credit of a State in the books of a banker the State constitute prima facie a debt payable by the banker to State, and the provision of sec. 15 is, on its face, undoubtedly within the legislative power of the Commonwealth as interpreted 'this Court. But it is insisted that moneys standing to the credit the State with its bankers may be, and are in fact in this case, sed with trusts or interests in favour of persons or bodies than the State and its agencies. Nothing in the power ed upon the Parliament to make laws for the carrying out ithe parties thereto of the Financial Agreement authorizes a law payment of moneys or the transfer of property to the nmonwealth other than the revenue, moneys, or property of tate, or its agencies. The power does not authorize the Parliament make laws directing the payment of money or properties belonging ivate citizens or other bodies or corporations, in and towards tion of the obligations of a State under the Financial reement.

A broad legal distinction, however, exists between the relation banker and his customer and the relation between the customer and those who pay him moneys (Union Bank of Australia vy. Murray-Aynsley (1) ; Thomson v. Clydesdale Bank Ltd. (2) ). y for repayment of funds which can be traced or followed a banker's hands arises only where it can be shown that there knowledge on the banker's part, not merely that the fund was from the customer, but knowledge that the payment was pplication of the fund-made in violation of the customer's ity and obligation.

the Government of New South Wales pays to its bankers, the

• of New South Wales and the Commercial Banking Co. of y Ltd., towards the end of each banking day a considerable money to the credit of the Government generally, and quently supplies its bankers with a distribution sheet specifying

Ps a (1898) A.C, 693. (2) (1893) A.C. 282, Nl 'XLVI. 18

credit of the State in default, whether upon fixed deposit, Ww New Sourit Wates v:

of the moneys are trust moneys in the hands of the Government o how the moneys from time to time standing to the credit of the Government are treated in the books of the Treasury. All tl accounts as between the Government and its bankers are treate as one account so that withdrawals from any account, though it be in debit, are permitted by the banker so long as the account ta as a whole is in credit. Further, by agreement between the Gov ment and its bankers the total daily net credit balance of the gen f banking account with each banker exceeding £100,000 bears i at the rate of two per cent per annum, subject to the banker's ri of determination at seven days' notice. Facts such as these wholly insufficient to impress moneys standing to the credit of th Government in its account with its bankers. with any trust 01 equitable interest in favour of any private citizen or other b Indeed, it would be wholly impossible for the Government busi to be carried on if facts such as these were sufficient to put the banker upon inquiry as to the sources from which the Goyernn obtained the moneys paid into the banks or the purposes to whic those moneys should be applied. But the relation of the Gov ment to those from whom it collected or received moneys mu! also be considered. It has been said that the Crown alw recognizes equitable interests but that there is no jurisdiction 1 enforce a trust against it (Pryce-Jones v. Williams (1); Hodg Attorney-General (2); Robertson, Civil Proceedings by and agai the Crown, pp. 482-485) ; but I assume that such trusts or int can be established against the Crown or the Government of South Wales under the Claims against the Government and

Suits Act (No. 27 of 1912). "*The guiding principle is, that' trustee cannot assert a title of his own to trust property. Tf h destroys a trust fund by dissipating it altogether, there rem nothing to be the subject of the trust. But, so long as the tr

(1) (1902)-2 Ch, 517, at p. 520. (2) (1839) 3 Y. & C. 342; 160 ER. 73

erty can be traced and followed into other property into which it has been converted, that remains subject to the trust. A second inciple is, that if a man mixes trust funds with his own, the whole ill be treated as the trust property, except so far as he may be le to distinguish what is his own,' that is, that the trust property es first" (In re Hallett's Estate (1) ). And funds impressed with such trust or charge or interest in the hands of the State, and \id or purporting to have been paid to the Commonwealth pursuant Financial Agreements Enforcement Act, would, 1 apprehend, n in the hands of the Commonwealth subject to the same , charges or equitable interest notwithstanding anything ined in the Act. It is clear, I think, that moneys paid by the tate into its banking accounts which were collected or received the following accounts do not fall within these principles : olidated Revenue Account, General Loan Account, Loan

Drawing Accounts, Grain Elevators Account, Grafton-Kyogle y Account, Coal Purchase Account. All such accounts ent the ordinary revenue and expenditure accounts of the e itself or loans raised by it. Again, the moneys collected or d from various State agencies and paid into the general g account of the State do not fall within these principles: nment Railways (Act No. 30, 1912, and amending Acts) ; ey Harbour Trust Fund (Act No. 1, 1901 - Act No. 46, 1928); olitan Transport Trust Funds (Act No. 18, 1930); State n Co-ordination Fund (Act No. 32, 1931); Closer Settle- ent Fund (Act No. 38, 1928). All such accounts merely represent e moneys of the State in the hands or under the control of its But I shall refer later to a provision in some of the that if any money in a fund has been received on trust then be dealt with in accordance with such trust without ition of Parliament.

he Government Insurance Act 1927-1930 enables the Government South Wales to carry on the business of insurance and direct mium and other moneys received shall be paid into the

Ww New Sours Wares v Tue Common- WEALTH (No. 31.

Special Deposits Account at the Treasury. But, though the Act contemplates the separation of the insurance funds of the Government. from its other funds, still it creates no trust in favour of insurers. The business is the business of the State and the moneys collected or received in that business are State moneys. i This brings me to some special accounts, namely, (1) Supreme Court Accounts including Lunacy and Probate Accounts; (2) Public Trustee's Account ; (3) Special Deposits Accounts ; (4) trus moneys referred to in the terms of Acts such as the Sydney Harbour Trust Act 1901-1928 (No. 1 of 1901 - No. 46 of 1928), sec. 76 (2). No particular words are necessary to create a trust. All that is necessary to establish the relation of trustee and cestui que trust is to prove that the legal title to property or money is in one person, and the equitable or beneficial title in another (Hardoon v. Belilic ; (1) ). But cases of trust must be distinguished from cases of lo A customer pays money to the credit of his account with a ba The banker becomes a debtor for the amount, but he is not a trustee (1) The Supreme Court Accounts are the moneys of suitors trustees paid into Court, but a Court assumes no fiduciary chara and is not a trustee for the suitors or persons who pay the mone into Court, though such moneys are under its control and or The receipt or collection of such moneys by the Court is an exercise of the judicial function of the State and not an assumption of fiduciary character. The payment of the moneys under Rules of Court, or otherwise, to the credit of the State or the State Treasure at interest arranged with the State Treasurer, is but using

Neither the Government nor the Court thereby assumes any fiduci character, but the suitors and others have thus at their back credit of the State for the purpose of meeting any claim or established as to the moneys under the control or order of the Co

Under the Public Trustee Act (No. 19 of 1913 and No. 13 of 19 the office of Public Trustee is created. He is authorized to act

same powers, duties and liabilities, and is subject to the control orders of any Court as a private person acting in the same capacity. He may invest moneys in his hands in various forms of security. It is thus clear that he has a fiduciary character, and "is seised or possessed of considerable property upon various trusts. Under reg. 5 of the Regulations of 1930, made pursuant to the Public Trustee Act, " all moneys received by the Public Trustee in that pacity shall be banked each day to the credit of an account called 'The Colonial Treasurer's Public Trustee Account ' in the head office of the Bank of New South Wales." And in reg. 25 provisions are made for payment of interest on capital moneys lying to the credit of 'this account. By sec. 38 of the Act it is provided that " moneys in or payable into the Public Trustee's Account . . . shall be med to be property of His Majesty for the purposes of this Act, nd shall be recoverable in like manner as money due to the Crown recoverable." As already stated, the State accounts in the Bank lew South Wales are treated as one account, but in this account is a subdivision styled the Colonial Treasurer's Public Trustee ecount in which is credited various moneys collected in respect of trusts from various clients. It is questionable whether the Trustee Act contemplated the merging of a Public Trustee ecount into the general banking account of the State so that awals from any account in debit are allowed if the whole nt in combination is in credit. But I pass this by. The ions of the Act and Regulations destroy the character of paid into the Public Trustee's Account as trust moneys vhich can be identified and followed into the hands of the Crown. They, in truth, involve a lending of moneys to the State at interest,

Special Daposita Account - This account includes a variety of such as deposits on contracts, tenders, the Municipal Council ey Sinking Fund (Act No. 13, 50 Vict.), unclaimed dividends other moneys. But in none can it be said, so far as the facts

before us, that the State holds the money in any fiduciary pacity upon any specified trust or trusts. The obligation of the

(4) Trust moneys referred to in the terms of Acts such as the Sydney Harbour Trust Act 1900-1928, sec. 76 (2). In my opinion no trust is impressed upon the Harbour Trust Fund, which con: sists of rates, loan moneys, fines, &c. It can only be expended for the purposes for which the same are appropriated by Parliament, and sec. 76 simply enables an expenditure from the fund in certaii cases without appropriation.

Finally I must add that sec. 15a of the Acts Interpretation Ad 1901-1930 resolves many of the objections taken to sec. 15 of th Financial Agreements Enforcement Act. "Every Act, whether passed before or after the commencement of this section, shall be read and construed subject to the Constitution, and so as not to exceed the legislative power of the Commonwealth, to the intent that where any enactment thereof would, but for this section, have been construed as being in excess of that power, it shall neverthele be a valid enactment to the extent to which it is not in excess of that power." Assume that the language of sec. 15 of the Financial Agreements Enforcement Act plainly and unequivocally includes moneys of persons or bodies other than the moneys, revenues, property of a State or its agencies, still, the Acts Interpretation is "a legislative declaration of the intention of Parliament that, if valid and invalid provisions are found in the Act of Parliament, however interwoven together, no provision within the power of Parliament shall fail by reason of such conjunction, but the enactm shall operate on so much of its subject matter as Parliament lawfully have dealt with" (Newcastle and Hunter River Stea Co. v. Attorney-General for the Commonwealth (1); Austral Railways Union v. Victorian Railways Commissioners (2); Hudd Parker Ltd: v. The Commonwealth (3) ). Consequently, sec. 15 would thus be confined in its application to so much of the bala standing to the credit of the State as was within the limits of thi constitutional authority of Parliament. But, as already indicated, none of the funds to which our attention has been called in thi case are, on the facts proved, beyond the reach of the constitution ni power of the Parliament. :

(1) (1921) 29 C.L.R. 357, at p. 369. (2) (1930) 44 C:L.R., at p. 38 (3) (1931) 44 C.LLR., at pp. 512-513,

McTiernan J. This is an action in which the plaintiff, the State , [New South Wales, claims a declaration that sec. 15 of the Financial Enforcement Act is ultra vires the Parliament of the nwealth and invalid, and a declaration that certain notices | writing, dated 9th April 1932, caused by the Treasurer of the ommonwealth to be served pursuant to the above-mentioned upon the executive officers respectively of the defendants Bank of New South Wales and the Commercial Banking Co. if Sydney Ltd., are invalid. The plaintiff also claims consequential , namely (inter alia) orders restraining the above-mentioned g companies and their executive officers respectively from g to the defendant the Commonwealth Bank of Australia the

receiving any part of such moneys without the consent of the The proclamation having been issued in relation to the tiff, the State of New South Wales, under sec. 7 of the Financial ements Enforcement Act 1932, these notices required the executive rs of the Bank of New South Wales and the Commercial Banking

h Bank of ciate as an authorized person within the meaning e Act (sec. 4) a return of the amount of the balance standing e credit of the plaintiff, and to pay to the Commonwealth Bank 'alia forthwith the whole of such amount, and thereafter iy to it within a period of two months any further moneys juently received by them respectively, on account of the tiff (sec. 15 (1) (a), (b) ).

it was submitted on behalf of the plaintiff that upon the true truction of sec. 15 it extended to moneys standing to the it of the State in which some person may have the beneficial r Upon that construction it was contended that sec. 15 law which purported to make available property other than a State for the satisfaction of its liabilities under a Financial nt mentioned in the Act, and was, therefore, not authorized 105a or any other provisions of the Constitution of the monwealth. Whether, upon its proper construction, sec. 15 to moneys in which some other person has an interest

and for whom the State is a trustee or to whom it stands in some other fiduciary relationship, it is clear that the section does apply to moneys standing to the credit of the State with a banking corporation which the State may lawfully apply to its own purposes. These purposes would include, if the State saw fit so to apply such moneys, the satisfaction of any liability to which it is subject under any of the above-mentioned Finan Agreements. If the operation of the section were, upon its true construction, limited to the character last above-mentioned, it would clearly be a valid exercise of the legislative powers of the Commonwealth (New South Wales v. The Commonwealth {No. 1} (1) ). I agree that, by force of sec. 154 of the Acts Interpretation Act 1901-1930, the section should be read so as not to exceed the legislative power of the Commonwealth, if upon the construction of the language which the Legislature has used, it has the ¥ operation contended for by the plaintiff. Having regard to object and purpose of the Financial Agreements Enforcement Ad, in my opinion the language in which sec. 15 is expressed doe not require the construction that Parliament intended to empower the Commonwealth to ensure the payment to it of any mon standing to the credit of the State to answer its liability und a Financial Agreement, other than the moneys which the Stat might lawfully draw and disburse for its own purposes. Upon this construction it is not necessary to apply sec. 15a of the Ae Interpretation Act 1901-1930 to hold the section to be valid. I not think that sub-sec. 5 of sec. 15 of the Financial Agre Enforcement Act demonstrates that it was the intention of Parli that sec. 15 should have the wide operation which was conten for by counsel for the plaintiff. The relationship which would arise between the person depositing money with the State for th purposes mentioned in the sub-section and the person making deposit would be debtor and creditor, not trustee and cestui trust or bailee and bailor. Upon the fulfilment of the condi mentioned, the money would be due from the State to the depos upon the footing of debtor and creditor. The question,

remains open, whether the Commonwealth may legislate to auth

'Treasurer to determine the rights of the depositor vis-d-vis the

e in the manner provided by sub-sec. 5. The invalidity of

ec. 5 would not invalidate sec. 15 entirely, as it is severable m the rest of the section.

'The question remains whether the money standing to the credit of

plaintiff in the Bank of New South Wales and in the Commercial

ing Co. of Sydney Ltd. to which the notices were directed, was

it was contended by the plaintiff that these moneys were not subject : the power for the reason that they were earmarked with certain usts or charged with certain equitable interests in favour of other

The issues raised by this contention may be determined by inquiry into the true nature of these funds in the hands of the banks and in e hands of the State. By sec. 17 of the Audit Act 1902 of New outh Wales, the Treasurer of the State, whose official designation | the Colonial Treasurer, "' may agree with any bank or banks upon such terms and conditions as he may think fit for the receipt, ustody, payment, and transmission of public moneys, . . and or the making of advances, and as to the charges ridpeini the e, and the interest payable by or to the bank or banks upon or advances, and generally for the conduct of the banking ess of the State." Pursuant to this authority and acting on of the Government of New South Wales, the Treasurer made ? ' 'agreement, which was expressed to commence on 17th October 1931, with the Bank of New South Wales and the Commercial ul Co. of Sydney Ltd. It provided (inter alia) that of the daily net credit balance of the " Treasurer's General Banking count " in both banks £200,000 (that is, £100,000 with each bank) ill be held free of interest, the balance with each bank in excess £100,000 to bear interest at the rate of two per cent per annum, yject to the bank's right of determination at seven days' notice. Public moneys," for whose "receipt, custody, payment and smission," the Treasurer is authorized by sec. 17 of the Audit to make such an agreement, are defined by sec. 5 of that Act nelude "all revenue, loan, trust, and other moneys whatsoever, ceived by, for, or on account of the State, and all moneys and fees

declared by this Act to be public moneys." In the books of one: or both of these banks there are accounts of the Treasurer styled respectively as follows : "' Consolidated Revenue Account," " General Loan Account," and other accounts as set out in annexure "B" to the affidavit of Thomas Dwyer Kelly, the expenditure accountant to the Treasury of the State of New South Wales. It appears by this affidavit that for very many years, such of the above-mentioned accounts as are in each bank respectively, have been treated as on account for the purpose of utilizing the aggregate credit balance and so enabling money to be withdrawn from any: of the accounts for any lawful expenditure to which the account is applicable although it may be in debit. On 11th April 1932 the total ne cash balances in the above-mentioned banks, respectively, in Sydne to the credit of the plaintiff State were £63,007 and £22,582. 0) the same date, however, for example, in the Bank of New South Wales the Consolidated Revenue Account was in debit £10,451,654 while the "Special Deposits Account' was in credit £17,589,709 and the "Supreme Court Accounts '' were in credit £482,586. The result was that on that date the maximum sum which could bi drawn by the plaintiff against either of the two last-mentione accounts was only £63,007, the amount of the total net cash balance in that bank on that day. For the Bank of New South Wales it was further deposed that a practice had been followed for many years in pursuance of which the Treasurer pays into that bank | towards the end of each banking day, a considerable sum of money to the credit of the Government generally, and subsequently supplies - the bank with a distribution sheet which specifies the different Government accounts to which the sum so paid in is to be allocated and the respective amounts to be credited to each account. For the Commercial Banking Co. of Sydney Ltd. it was deposed that all moneys paid into that bank to the credit of any of the above- mentioned accounts of the State in its books are paid in by the Treasurer or some officer of the State. It is further deposed that _ all the moneys which are paid to either bank to the credit of any of the above-mentioned accounts are received by the banks respectively _ as moneys of His Majesty in the right of the State of New South Wales, and no information is given by or on behalf of the Governm

the Treasurer, or the officers paying in these moneys, whether whole, or any part of them, are trust moneys in the custody 0 Government, and that neither bank has any knowledge how such moneys are dealt with in the books of the Treasury or of the tment of the Government from which they are received. For the State of New South Wales it was explained that the " Special its Account" includes (inter alia) a number of accounts ed under various statutes, e.g., Bankruptcy Suitors Fund, ptey Unclaimed Dividend Fund (Act No. 25, 1898), Municipal il of Sydney Sinking Fund (Act 50 Viet. No. 13), Testamentary and Trust Fund (Perpetual and Permanent Trustee Companies' Acts). It also includes the Compensation Insurance Fund, Fire and Marine e Fund, General Accident Insurance Fund, and Treasury ntee Fund. As to these four funds last mentioned, it was tated that they belong to the Government Insurance Office of the iff and the expenditure from these funds is limited to the

pl es of the Government Insurance Act 1927-1930. It was also d that the Treasurer is by statute a trustee and custodian of the

eys in all the above-mentioned accounts which are included in ie Special Deposits Account. It was further deposed on behalf of State of New South Wales that the " Supreme Court Accounts "" d olonial Treasurer's Master-in-Equity Account, Colonial 's Master-in-Lunacy Account, Colonial Treasurer's Public [rustee Account and Colonial Treasurer's Prothonotary Account and the Colonial Treasurer's Registrar of Probate Account. Payment ut of these accounts is governed by the following Statutory Rules d statutes respectively - rules 288 and 289 of the Equity Rules sec. 130 of the Lunacy Act 1898, Public Trustee Act 1913 (as ended by Act No. 13 of 1923) and the Regulations made thereunder,

the Common Law Procedure Act 1899 and the Rules made thereunder, the Wills, Probate and Administration Act 1898 and the Rules de thereunder. For the Bank of New South Wales and the ercial Banking Co. of Sydney Ltd., it was deposed that. all unts specified under the heading " Supreme Court Accounts "

ned by the Colonial Treasurer, and they are all drawn upon s authorized by him, and that neither bank was informed it know whether the amounts standing to the credit of

such accounts are trust funds or whether any particular amounts which are paid in to such accounts from time to time are tru funds. It was further deposed that no order of any Court is produced nor is any notice of such an order given to the bank before any moneys are withdrawn from any such account, but cheques ar drawn upon these accounts by persons authorized by the Treas and these cheques are paid by the bank without the production of any order of the Court. Moreover, the practice has been to m a transfer from one of such accounts to some other account of th plaintiff upon written direction to that effect by an autho official. The submission made on behalf of the plaintiff, particular! with reference to the moneys in the Special Deposits Account and the Supreme Court Accounts, that they are trust moneys paid into the banks by the Treasurer asa trustee and are impressed with a trustin the hands of the bankers, is, in my opinion, quite inconsistent wit the practice deposed to by Mr. Thomas Dwyer Kelly, which has bi followed for many years, under which the Treasurer operates upon the balance of all the accounts in combination and applies moneys so obtained indiscriminately for the purposes of the Govern ment. I think that this practice was in conformity with law, t that the moneys paid by the Treasurer into the Special Depo Account and the Supreme Court Accounts and the other accounts are not in the bank earmarked with any trust or subject to a y equitable interest. When the moneys paid into these accounts

in these terms: '" The Consolidated Revenue Account, the Loan Account, the Trust Account, the Special Deposits Accou

and such other accounts as the Treasurer may open shall be kept r such bank or banks as the Treasurer may in writing direct." Sec. 19 provides: '' The several accounts of the Government in any bank for interest purposes, be considered as one account." Sec. 21 is in these terms: " All moneys paid into any bank by the Treasurer, by any such person as aforesaid, to any account under this Act, sha be deemed to be public moneys, and to be lent by His Majesty to

persons or body corporate to whom or to which such bank belo It may be noted also that sec. 17, under which the Tres

de the agreement with the banks, refers to the "' receipt, custody, ment, and transmission of public moneys." The result, in my is that the Bank of New South Wales and the Commercial g Co. of Sydney Ltd. receive the moneys paid by the Treasurer into the accounts which have been mentioned, as moneys the property of the King in right of the State of New South Wales, which were by the State to the banks respectively. When the actual of the Treasury and the banks in respect of Government s is considered with the provisions of the Audit Act, it es quite clear that the balance of the moneys standing to the of the State is the ostensible property of the State available the satisfaction of the obligations of the State, whether voluntarily involuntarily, as a result of the exercise of the powers of the monwealth under sec. 15 of the Financial Agreements Enforce- Act 1932. Whether, if it appeared that some subject of the te of New South Wales had an equitable charge or other interest on or in the balance, this circumstance would disentitle the monwealth to exercise the power given by sec. 15 and take the fund subject to the charge or equitable interest, or otherwise, is not a matter which I think requires decision, for upon the question

to the relationship of the Treasurer representing the State to he persons from whom the money in these accounts was received or as to who are entitled to receive payments out of these accounts, 'Tagree with the joint opinion of my brothers Rich and Dizon and the opinion of my brother Starke. The receipt of these moneys

y the Treasurer does not constitute the State a trustee of them,

d the effect of the Acts and statutory rules relating to these counts is not to constitute the State a trustee of specific moneys so that the persons above mentioned can claim that specific eys in the accounts are earmarked with a trust in their favour or that the aggregate moneys in an account with which such specific oheys were mixed is subject to a charge. In this view the moneys ed by the Treasurer were not, in effect, divested of their of trust funds or freed from any charge by sec. 21 of the Act 1902. Forthwith upon their receipt by the Treasurer they e part of the public moneys of the State, and the persons d to be paid out of the Accounts which have been mentioned

Action dismissed. Costs of the defendants 1 Commonwealth Bank of Australia, the B of New South Wales and the Com Banking Co. of Sydney Ltd. to be paid b

Solicitor for the plaintiff, J. B. Clark, Crown Solicitor for N South Wales. Solicitor for the Commonwealth and the Commonwealth Treasur W. H. Sharwood, Commonwealth Crown Solicitor. Solicitors for the Commonwealth Bank of Australia, Allen, All & Hemsley. : Solicitors for the Bank of New South Wales, Allen, Allen d Hemsley, and Perkins, Stevenson & Co. i

Solicitors for the Commercial Banking Co. of Sydney Ltd., Dibh Parker & Parker.