State Bank of NSW v Commonwealth Savings Bank of Australia [1986] HCA 62;

State Bank of NSW v Commonwealth Savings Bank of Australia [1986] HCA 62; - HCA 1986 case summary — Zoe

[19]

The features of the legislation which led his Honour to his conclusion may be briefly stated. First, the absence of corporators was significant. In this respect Kitto J. agreed with the observation of Rich and Williams JJ. in Bank of N.S.W. v. The Commonwealth ("the Bank Case") [1948] HCA 7; (1948) 76 CLR 1, at p 274, that that circumstance pointed to a conclusion that the intention of the Parliament was to give the Commonwealth "the outward form of a corporation as a convenient means of carrying on a Commonwealth activity". Second, it was the duty of the Board of the Banking Corporation in exercising its powers of control over the affairs of the Bank to ensure that its policy was directed to the greatest advantage of the people of Australia and had due regard to the stability and balanced development of the Australian economy. Third, the Board did not have the final say as to policy. It was required to inform the Government from time to time of its policy and in the event of a difference of opinion between the Government and the Board as to whether the policy conformed to the statutory direction, the Commonwealth Treasurer and the Board were to endeavour to reach agreement and failing agreement the Governor-General, acting with the advice of the Federal Executive Council, could by order determine the policy of the Bank. Fourth, the members of the Board, with the exception of the Secretary to the Department of the Treasury, were appointed by the Governor-General and were remunerated as the Governor-General determined. Fifth, the net profits of the Trading Bank, determined after payment of income tax, were either to go back into the system or to be paid to the Commonwealth. Finally, a point that seemed to his Honour to provide a strong indication "of the substantially government character of the Trading Bank" was that the accounts and financial records of the Bank were subject to inspection and audit by the Auditor-General and report by him to the Treasurer. Taking all these considerations into account, Kitto J. concluded that the Trading Bank was being sued as the instrument or emanation by which the Commonwealth operated in the field of general banking and was therefore sued "on behalf of the Commonwealth" within the meaning of that expression in s.75(iii) of the Constitution. It may be noted that Barwick C.J., without finding it necessary to decide the point, expressed a personal preference for regarding the matter as one in which the Commonwealth itself was a party (p.336). In Maguire v. Simpson [1977] HCA 63; (1977) 139 CLR 362 Mason J., at pp 397-398, likewise preferred the wider view of the word "Commonwealth" and Jacobs J., at pp 405-406, and Murphy J., at p.407, seem also to have been of that opinion. See also Crouch v. Commissioner for Railways (Q.) [1985] HCA 69; (1985) 59 ALJR 831, at pp 834, 839; [1985] HCA 69; 62 ALR 1, at pp 6-7, 14-15.

[22]

6. The Board is the governing body of the Bank and, subject to the Act, has power to determine the policy of the Bank in relation to any matter, and to control the affairs of the Bank (s.9(1) and (2)). It is the duty of the Board, within the limits of its powers, to ensure that the policy of the Bank is directed to the greatest advantage of the people of New South Wales and has due regard to the stability and balanced development of the economy of the State (s.9(3)). Part III (ss.13-35) outlines the general banking functions of the Bank. It is invested with all such powers as are necessary for the purpose of carrying on general banking business (s.13(3)). Section 15 defines the liquidity level to which the Bank must conform. The payment of all moneys due by the Bank in respect of its general banking business is guaranteed by the Government of New South Wales ("the State Government") and the Consolidated Revenue Fund is appropriated accordingly (s.16). The Bank may borrow money from time to time but only with the consent of the Treasurer (s.22). The due repayment of money borrowed and due payment of interest and other charges relating thereto are guaranteed by the State Government, and the Consolidated Revenue Fund is appropriated accordingly (s.25). Contract notes and transfers in relation to debentures and inscribed stock issued by the Bank under the Act are exempt from stamp duty (s.27). A proportion of the net profits derived by the Bank from its general banking business, determined in accordance with the formula set out in s.30 of the Act, is payable each year by the Bank to the Treasurer for payment into the Consolidated Revenue Fund. The Court was informed by counsel in the course of argument that the proportion of net profits so payable during the last year amounted to 73 per cent. Furthermore, the Treasurer may require the Bank to make advance payments of its liability in this regard at such times and in such amounts as he determines (s.30(3)). The remainder of the Bank's profits in any year is to be credited to a Reserve Fund of the Bank for meeting any loss or deficiency in connection with its general banking business and any deficiency in that Fund at the end of a financial year shall be made good from the Consolidated Revenue Fund which is appropriated accordingly (s.30(7) and (8)). The Bank may make use of the services of any employees of a government department or statutory body provided that it has the approval of the department or body concerned and of the relevant Minister (s.35).

[26]

10. It is common ground between the parties that the words "the Commonwealth, or a person suing or being sued on behalf of the Commonwealth" in s.75(iii) of the Constitution have the same meaning as the similar words in s.38 of the Judiciary Act. It follows that the observations with respect to the meaning of the constitutional phrase that are to be found in the Bank Case, in Inglis and more recently in Crouch provide relevant guidance to the construction of the Judiciary Act, including the related phrase "a State, or any person suing on behalf of a State". Counsel for the appellant, Mr Hulme, argued that to satisfy the description the entity must be one of which it can be said that in the matter out of which the action arises either (a) it was or acted as an organic part of that broad structure of executive government by which the affairs of the State are governed, as distinct from it being merely a participant, albeit a participant having a public character, in such affairs or (b) it was or acted as an organic part of that broad structure of executive government by which what are properly to be regarded as governmental activities of the State are carried on. Mr Hulme relied heavily on the statement by Dixon J. in the Bank Case, at p.358, to the effect that the application of s.75(iii) to a claim against the Commonwealth Bank must depend on the relation found to exist between that corporation and the executive government of the Commonwealth. This statement became the launching pad for a submission that ultimate control of the corporation by the executive government was of fundamental importance, save in those rare cases such as the Ombudsman and the Auditor-General where identification with the structure of government and freedom from government control went hand in hand. This submission provided the basis for distinguishing the decision in Inglis because, notwithstanding the presence of features common to both the appellant and the Commonwealth Trading Bank the latter was ultimately subject to executive control in the field of general policy while the appellant was not. The question of control is obviously an issue of central importance to a resolution of the present case. But we think that Mr Hulme places rather too much emphasis on the statement by Dixon J. It led him to draw more support than is warranted from cases dealing with Crown immunity. The constitutional conception is a broader one, as Dixon J. himself recognizes later in his judgment when his Honour says that in s.75(iii) the framers of the Constitution were concerned with

At a glance

Court

Decision date

Before

Source

Judgment (44 paragraphs)

State Bank of NSW v Commonwealth Savings Bank of Australia [1986] HCA 62; (1986) 161 CLR 639 (28 October 1986)

Parties

Legislation Cited (3)

Cases Cited (8)