The following minute has been forwarded to me by the Comptroller-General of Customs for advice:

In 1918 an 'Alien Committee' was appointed to consider and report, inter alia, as to the 'Action to be taken with regard to property held by aliens in the Commonwealth or in the hands of the Public Trustee on account of aliens'. In paragraph 57 of its report of 10.12.1918 the Committee enunciated the principle of the desirability of 'the conversion of all those assets into cash wherever practicable', and recommended that:

(XXXII) All real and personal property in the Commonwealth belonging to enemy subjects to be vested in the Public Trustee under section 91(1) of that Act (Trading with the Enemy Act) with power to realise or not as he deems expedient. (This was subsequently adopted by the Cabinet with the substitution for the last three words of 'the Minister directs'.)

2. On 19.5.1919 the Acting Comptroller-General submitted to the Minister that it would be preferable if possible to vest enemy property as a whole in the Public Trustee without attempting to specify details and that this course would cover cases where action had not been taken to notify property to the Public Trustee. With the Minister's concurrence this minute was referred to the Acting Secretary, Attorney-General's Department, who on 24.6.1919 supplied a draft general vesting order, but advised that:
   
   

   It is extremely doubtful whether this order is valid, and it may be held that the Act contemplates a separate order in each individual case.
   
   I suggest, therefore, that in addition to making this order, an order be made in each case where your Department is advised that there is any property belonging to an enemy subject.⁽¹⁾

3. The general vesting order, in accordance with the draft supplied by the Acting Secretary, was completed by the Minister on 25 June 1919, and was published in Commonwealth Gazette No. 83 of 3 July 1919.
4. In consequence, however, of the opinion given by the Acting Secretary, Attorney-General's Department on 24.6.19, the order was not acted on, especially as it has, generally speaking, been found practicable to make a specific vesting order against each 'enemy subject or German national' with whose estate this Office has dealt.
5. Subsequently a law case arose in the Supreme Court of Queensland between the Union Trustee Company of Australia Ltd, and Hubert Gladstone Deacon as plaintiffs, and the Attorney-General of the Commonwealth, the Public Trustee for the Commonwealth, the Attorney-General for the State of Queensland and others as defendants for the determination of certain questions arising out of the will of William Mitchner, Allora, and the question of the validity of the general vesting order was raised with the result that the Full Court of the Supreme Court of Queensland held this general vesting order to be valid. Subsequently, in an appeal to the High Court of Australia, its validity was not questioned. The judgment of the Supreme Court of Queensland was delivered on 12 December 1921, and the judgment of the High Court of Australia on 21 June 1922 (Crown Solicitor's advice A3055 of 11.7.22).
6. This judgment has a most important bearing on the whole of the work of this Clearing Office since its inception in regard to the settlement of debts under Article 296 of the Treaty of Versailles.
7. In Opinion No. 327 dated 8.7.1922 regarding a claim made under Article 296 in connection with property vested in the Public Trustee by order dated 11.12.1919 the Crown Solicitor who had been asked for advice regarding the validity of that order, in view of Germany's threat to bring the matter before the Mixed Arbitral Tribunal, stated that:
   

   Before the date of that order a general order vesting in the Public Trustee all property in Australia of enemy subjects had been made on 29 June 1919.

   The Full Court of the Supreme Court of Queensland in Mitchner's case held this order to be valid and its validity was not questioned in the recent appeal to the High Court.

   The general vesting order was made before the Peace Treaty with Germany was signed and I think must be taken to have been ratified by paragraph 1 of the Annex to section IV of the Treaty.

8. This, it is assumed, may be reasonably taken as an expression of opinion of the general effect of the general vesting order in question and is in accordance with what the Crown Solicitor had previously advised in regard to specific orders, notably one made, also on 25.6.1919 against Carl Unteutsch who had lodged a claim through the Clearing Office against Harringtons Limited. In that opinion (No.397 dated 29.9.1921) the Crown Solicitor said that:
   

   ... the effect of the vesting order was to vest all property in the Commonwealth belonging to Carl Unteutsch in the Public Trustee, and to leave him (Unteutsch) wholly without such property and also without any legal or equitable rights in regard thereto. In other words, the Public Trustee became owner of the property in his place subject, of course, to the Trading with the Enemy Act.

9. The Crown Solicitor went on to indicate, further that the Public Trustee had been substituted as creditor in the place of Carl Unteutsch, and that when the Treaty came into force on 10.1.1920 Carl Unteutsch had no claim against Harringtons Ltd, as Harringtons Ltd owed him nothing at that time. The position as at 10.1.1920, the date of the ratification of the Treaty was that 'technically Carl Unteutsch has no claim under Article 296 of the Peace Treaty as he is not an enemy creditor'.
10. Similar consequences flow from the general vesting order dated 25 June 1919, so that technically, as at 10 January 1920, German claimants had no claim under Article 296 of the Peace Treaty against reputed debtors in Australia, as the whole of the rights of the German claimants had been vested in the Public Trustee by the general vesting order dated 25.6.1919, and there were no longer any debts for settlement under Article 296.
11. Had this position been fully appreciated at the time of the establishment of the Clearing Office, it is possible that some modification of the general vesting order would have been sought, that vesting order having been made, as a matter of fact, three days before the Treaty of Peace with Germany was signed at Versailles on 28 June 1919. Alternatively, it might have been decided not to establish a clearing office at all, because if a clearing office was established it could be only a creditor clearing office, a development which would appear to be outside the scope of Article 296 of the Treaty.
12. In the light of the general vesting order, and the views which have been expressed by the Crown Solicitor, it would appear that the position which has now developed may fairly be stated to be that:
    
    1. there was no power to collect interest in accordance with clause 22 of the Annex to Article 296 of the Treaty of Versailles;
    2. there was no justification for admitting debts and interest thereon to Germany under Article 296 of the Treaty;
    3. no payments should have been made out of collections from Australian debtors to Australian claimants;
    4. the whole of the moneys collected should have been regarded as liquidation moneys to be eventually accounted for under Article 297 (h) of the Treaty;
    5. had the general vesting order been regarded as valid there would now be no indebtedness on the part of the Australian Clearing Office to the Central British Clearing Office in respect of the balance which is now being claimed by the central organisation in London.
13. Questions of the very greatest importance arise out of the judgment of the Full Court of the Supreme Court in Queensland, and of the High Court of Australia, and decision is necessary as to-
    
    1. the extent, if any, to which this Clearing Office has acted wrongly in the past; e.g. in the direction referred to in paragraph (12);
    2. what action is necessary to validate what has been done, and to legalise future procedure.
14. As regards property vested in the Public Trustee under the Trading with the Enemy Act on the grounds that it belonged to 'enemy subjects' and the owners of which have subsequently been found to have been 'German nationals' at 10.1.20, the Secretary, Attorney-General's Department has been asked to draft forms with a view to obtaining a direction from the Governor-General under section 9D of that Act to make such property subject to the charge established by clause 20 of the Treaty of Peace Regulations in accordance with clause 4 of the Annex to Article 297 of the Treaty.
15. Similarly it may be found that a retrospective direction may legally be sought from the Governor-General to settle under Article 296 of the Treaty all matters which, but for the general vesting order of 25.6.1919 would have fallen under that Article.

    As an alternative it may be legally practicable retrospectively to revoke partially the general vesting order of 25.6.1919 with a view to releasing from the scope thereof transactions which, but for the general vesting order, would have come within the range of Article 296-provided such release will restore the transactions to the classes covered by Article 296. A proposal for making regulations to permit of the partial revocation of vesting orders is now before the Secretary, Attorney-General's Department.

    It is necessary to mention, however, that a direction in the terms indicated would establish a distinction between cases which fall under the general vesting order and cases which have already been contested on the strength of specific orders.

16. Pending further instructions I am not submitting for completion by the Controller of the Clearing Office any schedules of-
    
    1. 'Admissions' or 'Contests' to Germany;
    2. authorities to pay claims to British nationals resident in Australia;

    but as regards (a) it must be borne in mind that if it be held that the Clearing Office is on a legal basis; or it be placed-should such be found necessary-on such a footing, some additional interest may have to be provided by the Office.

17. It is submitted that the matter be referred to the Secretary, Attorney-General's Department, for an expression of his views.

The general vesting order above referred to is an order made on 25 June 1919, by the Minister for Trade and Customs under the Trading with the Enemy Act 1914-1916 vesting 'in the Public Trustee all property, real or personal (including all rights, whether legal or equitable, in or arising out of property, real or personal), belonging to or held or managed for or on behalf of any enemy subject, and the right to transfer such property'.

In view of the decision in Mitchner's case and of the subsequent proceedings in the High Court ⁽²⁾ and of clause 1 of the Annex to Part X Section IV, there appears to be no doubt that the order is valid and effectual. The order, therefore, vests in the Public Trustee, inter alia, debts due by Australian to German nationals including debts to which Article 296 would have applied had the Public Trustee not been interposed by the vesting order. By force of the order debts of the last-mentioned class are payable to the Public Trustee as constituted under the Trading with the Enemy Act and they do not become clearing house debts.

Even had the general vesting order not been made, the same result would havefollowed the specific vesting orders which were made at the same time as the general vesting order.

I am confirmed in this view by the provisions of paragraph (d) of Article 297 which declares to be final and binding, except as regards the reservations laid down in the Treaty, all exceptional war measures or measures of transfer as between the Allied and Associated Powers and their nationals on the one hand and Germany and her nationals on the other hand.

With regard to propositions contained in sub-paragraphs (a) to (c) of paragraph (12) of the above minute, I agree with the position as therein stated. The disposition of the money (sub-paragraph (d)) depends upon the Trading with the Enemy Act and the directions if any given under section 9D. The statement contained in subsubparagraph (e) is a matter of fact depending upon the amount by which the operation of the vesting order would have affected the general indebtedness of the Australian Clearing Office.

It would appear that the Clearing Office has acted wrongly in the past to the extent to which it has admitted, as clearing office debts, debts affected by the general vesting order or the specific vesting orders.

In order to validate what has been done, it is suggested that the best course to follow is (o obtain directions from the Governor-General under section 9D of the Trading with the Enemy Act covering the action that has been taken.

[Vol. 19, p. 254]

(1) Opinion not found.

(2)In re Mitchner; Union Trustee Co. o f Australia v. Attorney-General for the Commonwealth 1922 St. R. Qd. 39; Public Curator (Qd.) v. Union Trustee Co. of Australia Ltd 31 C.L.R. 66.