I refer to your memorandum dated 23rd July, 1946. The question whether the banking and insurance powers of the Commonwealth contained in s 51(xiii) and (xiv) of the Constitution are wide enough to authorize legislation to regulated the relations (either generally or in respect of provident funds) of employers and employees engaged in banking or insurance business has never been judicially determined. Some assistance may, however, be obtained from the decisions of the High Court in the case Australian Steamships Ltd. v. Malcolm (19 C.L.R. 298). In that case the question whether the trade and commerce power (s 51(i)) extended to the reciprocal rights of the employer and employee was discussed. The validity of the Seamen’s Compensation Act 1911 was upheld.

The matter is not by any means free from doubt, but I think there would be some possibility of the High Court holding, on the authority of Malcolm’s case, that the power to legislate with respect to banking and insurance includes power to regulate the relations of employers and employees engaged in banking or insurance.

There may be a difficulty in that legislation with respect to provident funds has less bearing on the service provided by banks and insurance companies than has legislation with respect to seamen’s compensation on the service provided by shipowners. A further possible difficulty is that the meaning (as at Federation) of the expression ‘navigation and shipping’ (to which the trade and commerce power is expressly declared to extend) included the subject of seamen’s compensation. I do not think that the expression ‘banking’ or ‘insurance’, as understood at the time of Federation, included the reciprocal rights of bankers or insurers and their employees with respect to provident funds. However, I feel that this difficulty is not of great importance.

Turning to the question on whether provident funds are essentially a form of insurance and may be regulated in pursuance of the insurance power, I point out that insurance is the act of insuring against loss or damage by a contingent event. Any provident fund which is a form of insurance would therefore, fall within the power. It would however, be necessary to consider the rules of each provident fund to ascertain its true nature. It would be possible for a provident fund to be established which was not a form of insurance as, for example, if all the contributions to the fund were made by the employer and none by the employee. Further, unless the rights of the subscribers to the fund were founded on contract and did not merely depend upon the voluntary bounty or goodwill of the employer, it would not be a case of insurance.

I doubt if it would be possible, or advisable to attempt to control provident funds through the Income Tax Assessment Act. That Act is capable of use only where contributions are made by the employer. In such a case, the fund would not be a provident fund in the true sense and it would not, I assume, be desired to control it. The only cases in which it is desired to exercise control are, I take it, where contributions are made by the employees and in those cases it would be possible to use the direct power with respect to insurance.

I have also been asked to advise with respect to the (Imperial) Truck Act 1831. The effect of that Act is that the entire amount of the wages earned by or payable to a workman must be actually paid to him in coin, and not otherwise. Any payment made by delivery of goods or otherwise than in coin is illegal and void. Payments may, however, be lawfully made by an employer to third party at the instance of the workman. The Imperial Act is in force in South Australia and similar Acts are in force in New South Wales, Queensland, and Western Australia. So far as I can ascertain there is no similar legislation in Victoria or Tasmania. I do not think the Truck Act affords any assistance in this matter. I feel certain that in all cases it would be found that the employees had authorized the making of any deductions from their salaries which were to be paid to provident funds.

[Vol. 37, p. 352]