The Secretary to the Department of the Treasury has forwarded for advice the following memorandum:

The following is a copy of a letter which I have received from the Governor of the Commonwealth Bank dated 27th December, 1922, on the above-mentioned subject:

I have to acknowledge receipt of your letter of 22nd instant, No. 22/29678 in the above regard.

I would suggest, however, that the amount to defray initial expenses, £500, should for the time being be provided by the Treasury instead of being obtained by way of overdraft from this Bank.

My reason for making this suggestion is that at the moment the constitutional position is somewhat obscure as to the power of the Commonwealth Treasurer to give such guarantees without the specific knowledge of Parliament. This position has come about owing to the recent High Court decision in the Wool Tops case,⁽¹⁾ and when in Melbourne recently I discussed the matter with the Solicitor-General, Sir Robert Garran, who, I understand, intended to go fully into the matter. Pending further advices it would, therefore, appear desirable that the Treasurer should refrain temporarily from giving guarantees to the Bank, and should provide funds such as these from their own resources.

I shall be obliged if you will take the matter up with the Solicitor-General and advise me of his views at the earliest possible opportunity.

2. The above-quoted letter raises the question as to the power of the Treasurer to authorise the Bank to grant an Overdraft and to guarantee the Overdraft on behalf of the Commonwealth Government.
3. Will you kindly favour me with your advice on the matter.

The decision in the Wool Tops case is to the effect that the Executive Government of the Commonwealth has no power, apart from the Constitution itself or some statutory authority, to enter into agreements for the payment of money.

In the present case the giving of a guarantee by the Treasurer would amount to an agreement to pay to the Bank the amount of the overdraft in the event of the Pool failing to extinguish it.

It is, I think clear that nothing in the Constitution itself authorizes the giving of the guarantee in question, and there appears to be no statutory authority therefor.

The Fruit Pool is not a statutory pool and there appears to be no authority for the expenditure of money by the Commonwealth, in respect thereof.

The Commonwealth Bank Act appears to contain no provision for the payment to the Bank by the Commonwealth of any moneys in pursuance of such a guarantee.

The Commonwealth Government can only expend such moneys as have been appropriated by Parliament and for the purposes approved by Parliament.

In my opinion a guarantee such as that contemplated in respect of the Fruit Pool would have no legal force or effect.

There appears to be no legal objection to the Bank granting the overdraft in question (see section 7(d) of Commonwealth Bank Act 1911—1920), but, in my opinion, the Treasurer has no power, on behalf of the Commonwealth, to guarantee the overdraft.

[Vol. 19, p. 363]

(1) The Commonwealth v Colonial Combing, Spinning & Weaving Co Ltd (1922) 31 CLR 421.