Opinion Number. 1509


conversion of pre-federation state securities securities issued by nsw and victoria prior to federation: commonwealth compulsory adoption and conversion of debts of states : effect of state legislation: referral of power

Key Legislation


The Secretary to the Treasury

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

The Hon. A., his wife B., and Captain C., were the holders, at the time of the passing of the above Act, of certain 3 interminable Inscribed Stock issued by the States of Victoria and New South Wales.

The solicitors for the persons named have taken objection to the conversion of this Stock on the ground that the Stock was issued long before Federation, and have threatened litigation in the matter.

Will you be good enough to advise in regard to the objection taken, and suggest the nature of the reply which should be sent to the solicitors.

It is claimed by the solicitors for the persons named that ‘the loan in which the money was invested was issued long before Federation and consequently it cannot be insisted that the stock be converted.’ They do not, however, offer any arguments in support of this statement.

The securities concerned were issued by the colonies of New South Wales and Victoria, and were originally purchased before 1900. It is apparently contended that, as the securities were issued before the establishment of the Commonwealth, the Parliament of the Commonwealth cannot enact legislation providing for their compulsory conversion.

It is possible that this contention is based on the view expressed by Isaacs and Rich, J.J. in Ex parte Walsh (37 C.L.R. 36) that the Commonwealth Parliament cannot enact legislation under the immigration power in respect of immigrants who arrived in Australia before the establishment of the Commonwealth. This view is set out in the judgment of Isaacs, J., (at p. 81) in the following terms:

If the subject matter exists at any time in the life of the Commonwealth, it matters not how or when it first came into existence, ‘Banking’, for instance, may be regulated irrespective of whether a bank arose before or after 1901. But it is the operations of banking subsequent to, and not the operations of banking prior to, the establishment of the Commonwealth, which are within the domain of Federal legislation. Those subsequent to the proclamation of the Commonwealth (see covering section IV) may be controlled prospectively, or, at the will of Parliament, retrospectively by Commonwealth law. Those prior to that moment were, and remain, outside the sphere of the constitutional power of the Parliament.

On the whole, I think this statement of the law supports the validity of the Commonwealth Debt Conversion Act (No. 2) because that Act does not affect operation prior to the establishment of the Commonwealth but deals with the conversion of existing loans.

The securities concerned were issued in pursuance of legislation enacted by the Parliaments of the Colonies of New South Wales and Victoria, and it may be assumed, I think, that the Parliaments of the States of New South Wales and Victoria could have enacted legislation for the compulsory conversion of the securities.

The procedure actually followed, however, was as follows:

In pursuance of section 105A of the Commonwealth Constitution the Commonwealth and the States entered into agreements under which the Commonwealth:

  1. took over the public debts of the States;
  2. arranged for the voluntary conversion of all but a small proportion of the securities issued in respect of those debts; and
  3. enacted legislation providing for the compulsory conversion of the remainder of those securities.

In the Agreement relating to the compulsory conversion of the remaining securities it is provided as follows:

  1. In this agreement the terms ‘existing securities’ and ‘new securities’ have the same meaning as in the said Act (the Commonwealth Debt Conversion Act 1931).
  2. NOTWITHSTANDING anything in the above-recited Debt Conversion Agreement or in the said Act contained, every holder of existing securities which have not been converted into new securities in accordance with the provisions of the said Act shall, notwithstanding that any holder of those existing securities may have signified or may signify dissent, be deemed to have made an application in accordance with section 9 of the said Act for their conversion into new securities, and they shall be deemed to be so converted accordingly:
  3. PROVIDED that nothing in this clause shall apply to Commonwealth Treasury Bills issued to a Bank in Australia with the approval of the Australian Loan Council or to securities issued with the like approval to such a Bank in exchange for such Bills.

  4. The Government of the Commonwealth will take the necessary action to submit to the Federal Parliament any legislation necessary to carry out and give effect to this agreement.

This Agreement was approved by the Parliaments of the Commonwealth and of the States of New South Wales and Victoria, and the Commonwealth Debt Conversion Act (No. 2) 1931 was enacted in terms identical with the terms of the Agreement.

In my opinion, the effect of these State Acts is to authorise the Commonwealth Parliament to legislate in accordance with terms of the Agreement, and for that purpose to transfer to the Commonwealth Parliament the powers of the State Parliaments to legislate in the manner specified.

I am of opinion, therefore, that, in so far as the Commonwealth Debt Conversion Act (No. 2) applies to securities forming part of the public debt of the States of New South Wales and Victoria (including securities issued before the establishment of the Commonwealth) that legislation is expressly authorised by the Parliaments of those States and is within the powers conferred on the Commonwealth Parliament.

It is possible that the objection now raised is based on the definition of the term ‘existing securities’ in the Commonwealth Debt Conversion Acts.The position in regard to stock issued before the establishment of the Commonwealth might have been clearer if reference had been made in the definition to colonies the predecessors of States, but, in view of the terms used in the long titles of the Acts and in the various enacting provisions, it appears to be clear that Parliament intended to legislate with respect to the whole of the internal public debts of the Commonwealth and the States.

I suggest that the solicitors should be informed that the Treasurer considers that the objection taken by them cannot be sustained, but that, if they desire that the question should be referred for consideration by the Attorney-General’s Department, the Treasurer will be prepared to do this upon receipt of a statement setting out in detail the grounds upon which the objection is based.

[Vol. 25, p. 631]