Opinion Number. 1849

Subject

BANKING
APPEAL TO PRIVY COUNCIL FROM DECISION OF HIGH COURT IN BANK OF NSW V COMMONWEALTH (1948): JOINT OPINION OF J.D. HOLMES AND B.P. MACFARLAN RELATING TO SEVERABILITY OF s 46 OF BANKING ACT 1947: APPLICATION OF COMMON LAW PRINCIPLES, s 15A OF ACTS INTERPRETATION ACT 1901 AND s 6 OF BANKING ACT 1947 TO SEVERABILITY OF s 46 OF BANKING ACT

Key Legislation

CONSTITUTION s 74: ACTS INTERPRETATION ACT 1901 ss 2(1), 15A: BANKING ACT 1947 ss 6, 46

Date

THE BANKING ACT 1947
JOINT OPINION

We have been asked to prepare a memorandum of the arguments which we think could be put advantageously for the appellants and of the appellants’ attitude generally on the questions of the severability of Sec. 46(4)–(8), from the remainder of the Banking Act, 1947, in the light of the decisions of the justices of the High Court and of the arguments already put.1

On the 26th November, 1948, the Privy Council granted to the appellants special leave to enter and prosecute appeals against ‘an order of the High Court of Australia dated the 11th day of August, 1948 in so far as such order declares that Sec. 46 of the Banking Act 1947 is invalid.’ The terms of the order granting special leave also reserved certain liberties to the respondents to the appeal, the general effect of which will allow them to raise, inter alia, the argument that Sec. 46 of the Banking Act is so interwoven with other provisions of that Act which involved inter se questions, that it is only possible for the Privy Council to deal with the whole Act as an entirety and this it is forbidden to do by the terms of Sec. 74 of the Constitution. It therefore becomes of importance for the appellants to be prepared to rebut any such arguments that may be advanced on behalf of the respondents; such arguments therefore will not arise as part of the appellants’ case but will only arise in the appellants’ case in reply if and so far as they are made necessary by the course pursued by the respondents.

The appeal although expressed to be against the whole of the declaration of invalidity of Sec. 46 is in reality against only subsecs. 4 to 8 of that section, that is, the parts which empower the Treasurer to prohibit private banking by any of the firms named in the schedule.

Five Justices of the six who sat on the hearing before the High Court found in favour of the Commonwealth Government on the issue of severability. Starke J. alone dissenting.

Section 46 is as follows:

46 (1.)  Notwithstanding anything contained in any other law, or in any charter or other instrument, a private bank shall not, after the commencement of this Act, carry on banking business in Australia except as required by this section.

(2.)  Each private bank shall, subject to this section, carry on banking business in Australia and shall not, except on grounds which are appropriate in the normal and proper conduct of banking business, cease to provide any facility or service provided by it in the course of its banking business of the fifteenth day of August, One thousand nine hundred and forty-seven.

(3.)  The last preceding sub-section shall not apply to a private bank if its business in Australia has been taken over by another private bank or after that business has been taken over by the Commonwealth Bank.

(4.)  The Treasurer may, by notice published in the Gazette and given in writing to a private bank, require that private bank to cease, upon a date specified in the notice, carrying on banking business in Australia.

(5.)  The date specified in a notice under the last preceding sub-section shall be not more than two months after the date upon which the notice is published in the Gazette.

(6.)  The Treasurer may, from time to time, by notice published in the Gazette and given in writing to the private bank concerned, amend a notice under sub-section (4.) of this section (including such a notice as previously amended under this sub-section) by substituting a later date for the date specified in that notice (or in that notice as so amended).

(7.)  That later date may be a date either before or after the expiration of the period of two months referred to in sub-section (5.) of this section.

(8.)  Upon and after the date specified in a notice under sub-section (4.) of this section (or, if that notice has been amended under sub-section (6.) of this section, upon and after the date specified in that notice as so amended), the private bank to which that notice was given shall not carry on banking business in Australia.

Penalty: Ten thousand pounds for each day on which the contravention occurs.

The problem of severability may be regarded from three different points of view, namely the points of view of

(a)  The Common Law.

(b)  The Acts Interpretation Act 1901–1941 Section 15A.

(c)  The Banking Act of 1947, Section 6.

We shall deal with each of these points separately.

At the hearing of the application for special leave the common law was mentioned by Lord Wright as a possible justification for regarding Sec. 46 as severable. Most of the common law relating to this point has been developed in England in cases where the courts have been considering the effect of what remains of subordinate legislation where certain parts have been declared invalid. It would seem that the principle to be deduced from these cases is that primarily the relation of the various sections of an enactment to one another is a relationship of inter-dependence and that before severance is permitted it must appear clearly that the legislature or the subordinate law making authority intended what remained, after a declaration of invalidity of a part, to continue.

The rules formulated by the Courts have been cited in Maxwell on Interpretation of the Statutes, 9th edn., p. 303 and in Halsbury ‘Laws of England’, Vol. 26, sub nom title Public Health and Local Administrations, para. 1291 and cases cited in Note S. We have mentioned that these cases relate chiefly to the severance of parts of by-laws but there seems to be no difference in the principle applying to the severance of a by-law and the severance of an act of Parliament: (see The Owners of the S.S. ‘Kalibia’ v. Wilson, 11 C.L.R. 689, per Isaacs J. at p. 713; King Gee Clothing Co. Pty. Ltd. v. Commonwealth, 71 C.L.R. 184 per Dixon J. at p. 195.)

The application of the common law rule of severance to the Commonwealth Constitution has been considered in a number of cases decided by the High Court. In The King v. The Commonwealth Court of Conciliation and Arbitration, ex parte Whybrow, 11 C.L.R. 1 at p. 54, Isaacs J. said as follows:

What is needed, if possible, is a working test of separability which will be applicable not merely to an Act imposing judicial functions, but to all classes of enactments. I do not see any reason to differ from the mode of approach suggested by the learned Chief Justice, so far as this case is concerned, but I think the test may be universally stated in the words of Shaw C.J. in Warren v. Mayor Charlestown (1). Speaking of different parts of the same act, respectively constitutional and unconstitutional, that very learned Judge says:- ‘If they are so mutually connected with and dependent on each other, as conditions, considerations or compensations for each other, as to warrant a belief that the legislature intended them as whole and that, if all could not be carried into effect, the legislature would not pass the residue independently, and some parts are unconstitutional, all the provisions which are thus dependent, conditional or connected, must fall with them’.

At pp. 26 and 27 of the same case, Griffith C.J. stated the test in very similar terms. The following are further cases where the High Court has considered and applied this rule of severability:

The Federated Amalgamated Government Railway & Tramway Services Association v. The N.S.W. Railways Traffic Employees’ Association 4 C.L.R. 488, at p. 564.

The Owners of the S.S. ‘Kalibia’ v. Wilson, 11 C.L.R. 689, per Griffith C.J. at p. 697 and per Isaacs J. at p. 713.

Osborne v. The Commonwealth, 12 C.L.R 231, per Isaacs J. at p. 367, and p. 368.

New South Wales v. The Commonwealth, 20 C.L.R. 54, per Isaacs J. at p. 83.

Waterside Workers Federation of Australia v. Alexander, 25 C.L.R. 434, per Isaacs and Rich JJ. at p. 465 et seq.

(In this last case the common law rule of severability was applied to sever provisions of the Commonwealth Conciliation and Arbitration Act 1904–1915.)

The effect of the cases decided in the High Court before 1930 is summarised and discussed by Dr. Anstey Wynes in ‘Legislative and Executive Powers in Australia (1936)’ p. 46 et seq.

In applying these principles to the provisions of Sec. 46 subsecs 4 to 8 it is, in our opinion, clear that if these subsections were enacted as a separate Act and if no other parts of the Banking Act had ever been enacted the Treasurer could successfully and completely take the action which is authorised by the terms of those subsections. In our opinion there is no reference either in substance or in words in those subsections to any of the earlier provisions of the Act in such a way as to link them together or to make the subsections dependent upon the operation of any other part of the Act. It follows therefore that in our opinion if the common law principles of severance as set out and referred to in the cases cited above are applied to the Banking Act, Sec. 46 is completely severable from the other provisions of the Act.

The present Sec. 15A of the Acts Interpretation Act 1901–1941 was substituted in 1937 for a section of the same number previously inserted by Act No. 23 of 1930. There is, however, no material difference in our opinion between the terms of these two sections, and Sec. 15A as now appearing is set out as follows:

15A.  Every Act shall be read and construed subject to the Constitution, and so as not to exceed the legislative power of the Commonwealth, to the intent that where any enactment thereof would, but for this section, have been construed as being in excess of that power, it shall nevertheless be a valid enactment to the extent to which it is not in excess of that power.

Sec. 2(1) of the Acts Interpretation Act provides that the Act as amended from time to time is, unless the contrary intention appears, to apply to all Acts of the Commonwealth Parliament. This would of course include the Banking Act of 1947. To make the point abundantly clear, Sec. 6(b) of the Banking Act of 1947 specifically provides that Sec. 15A is to apply.

Two classes of cases are envisaged by Sec. 15A and these have been described by Evatt and McTiernan JJ. in R. v. Burgess ex parte Henry, 65 C.L.R. 608 at p. 689 in the following words:

Two types of case present themselves under provisions such as secs. 15A and 46 (b) of the Acts Interpretation Act, provisions which require that an entirely artificial construction shall be placed on a statute found to be invalid in part in order to save so much of it as might have been validly enacted. In one type it is found that particular clauses, provisos or qualifications, which are the subject of distinct or separate expression, are beyond the power of the legislature. In the second type, a provision which, in relation to a limited subject matter or territory, or even class of persons, might validly have been enacted, is expressed to apply generally without the appropriate limitation, or to apply to a larger subject matter, territory or class of persons than the power allows. In the first case, the question usually is whether the operation or effect of the remainder of the Act upon the persons of things to which it would apply would be changed if the clauses, provisos and qualifications held bad were excised. In other words, in such a case the right question to ask may be whether liabilities or rights of a different tenor, measure or nature would result. In the second case, the question may simply be whether the legislature intended the provision to have a distributive operation or effect. That is to say, did it intend that the particular command or requirement expressed in the provision should apply to or be fulfilled by each and every person within the class independently of the application of the provision to the others; or were all to go free unless all were bound?

No question of the second type of case to which Their Honours refer arises here as it is not sought in any way nor was it argued to limit the operation of Sec. 46 only to intra-State transactions.

In R. v. Poole ex parte Henry, 61 C.L.R. 634 at p. 649 Dixon J. expressed the view, which in our opinion is correct, of the effect of Sec. 15A. His Honour at that page said:

The view established in the United States is that such enactments reverse the presumption that the legislature intended its will on any particular matter as expressed in a statute to operate in its entirety and had no intention that something less should be law. The presumption is reversed so that legislation, found partially invalid, must be treated as distributive or divisible, unless it appears affirmatively that it was not part of the legislative intention that so much as might have been validly enacted should become operative without what is bad. If the valid provisions unqualified and unaffected by the invalid provisions would operate in a different manner upon the persons whom they would govern, or the events or conduct they would regulate, then they are shown to be inseparable.

It would therefore appear that the operation of this section is to create a presumption of independence, that is to say, validity in those sections other than the ones which are deliberately struck out by the order of the Court. This view in our opinion is in line with the view expressed by the Privy Council in Shell Co. of Australia v. Federal Commissioner of Taxation (1931) A.C. 275, at p. 298, where Their Lordships said:

Their Lordships find themselves in agreement with Isaacs J. ... when he says that ‘unless ... it becomes clear beyond reasonable doubt that the legislation in question transgresses the limits laid down by the organic law of the Constitution, it must be allowed to stand as the true expression of the national will.’

In Australia National Airways Pty. Ltd. v. The Commonwealth 71 C.L.R. 29 at p. 92, Dixon J. when speaking of the same provision said as follows:

But that provision has, in effect, introduced a rule of construction whereby unless an intention affirmatively appears to the contrary, the provisions of a statute are to be taken as independent of one another and not interdependent. The application of the provision is seldom easy, but it is illustrated by a number of decisions of this Court, a collection of which will be found in Fraser, Henleins Pty. Ltd. v. Cody, and it is further elucidated by the industry expended in the United States upon the exposition of similar clauses. But I think little help is to be gained from abstract discussions of the effect of severability provisions. As a practical conclusion, it comes back to the manner in which the intention of the legislature is to be ascertained, that is to say, the presumptions to be made. My view, which I repeat, is that such severability clauses ‘establish a presumption in favour of the independence, one from another, of the various provisions of an enactment, to which effect should be given unless some positive indication of interdependence appears from the text, context or subject matter of the provisions.’

Other cases in which the terms of this section have been considered are Victorian Chamber of Manufactures v. The Commonwealth 67 C.L.R. 413; Pidoto v. Victoria, 68 C.L.R. 87; particularly per Latham C.J. at p. 108 et seq: Fraser, Henleins Pty. Ltd. v. Cody, 70 C.L.R. 100, particularly per Dixon J. at pp. 126, 127, (this case at p. 127 contains an important collection of cases on the point): King Gee Clothing Co. Pty. Ltd. v. The Commonwealth, 71 C.L.R. 455: Dawson v. The Commonwealth, 73 C.L.R. 157: Jenkins v. The Commonwealth, 74 C.L.R. 400: Anstey Wynes (ibid) at pp. 51 et seq.

Applying the principles set out in these cases to Sec. 46 we are of opinion that it is abundantly clear that even if the common law rule did not operate to sever Sec. 46, Sec. 15A of the Acts Interpretation Act 1901–1941 would.

Sec. 6 of the Banking Act is in the following terms:

6.  It is hereby declared to be the intention of the Parliament—

(a) that if any provision of this Act is inconsistent with the Constitution, that provision and all the other provisions of this Act shall nevertheless operate to the full extent to which they can operate consistently with the Constitution;

(b) that the provisions of the last preceding paragraph shall be in addition to, and not in substitution for, the provisions of section fifteen A of the Acts Interpretation Act 1901–1941; and

(c) that this section and section fifteen A of the Acts Interpretation Act 1901–1941 shall have effect notwithstanding that their operation may result in this Act having an effect different or apparently different, in substance from the effect of the provisions contained in this Act in the form in which this Act was enacted by the Parliament.

It is to be noticed that this section states the intention of the legislature in enacting the Banking Act and contrary to the usual manner in which the general declaration of intention is expressed it is specifically stated in the enacting part of the statute and not in the preamble. It is therefore a separate and substantive part of the Act and must be given weight accordingly. In our opinion the section is within the Constitutional power of the Parliament as a definition section, and we think that subsections (a) and (b) call for no special comment. In relation to subsection (c) it is clear that having regard to the doctrine of the separation of powers which has been declared by the High Court to exist in relation to the judiciary (see Huddard Parker v. The Commonwealth, 44 C.L.R. 492, per Dixon J. at p. 511 et seq.) the Parliament cannot require or delegate to the High Court the duty of legislating. This proposition has been affirmed by several justices of the High Court when considering the operation of Sec. 15A. We are of opinion that if Sec. 6(c) is meant to apply to a case where a particular section in an Act has meaning ‘A’ but where after it has been subject to the scrutiny of the Court and certain other sections have been declared to be invalid, the particular section may then have meanings ‘X’ or ‘Y’ or ‘Z’ each of which is different and there is no indication in the section as to which one is to be the meaning, it would be invalid. This would be so because in determining whether the true meaning was to be ‘X’ or ‘Y’ or ‘Z’ the Court would be really legislating. If however Sec. 6(c) were intended to apply to a case where after the declarations of invalidity, which we have assumed, the remaining section could bear only one possible meaning, then in our opinion it would be valid, because the Court would not be presented with any choice and would therefore not be required to legislate. If Sec. 6(c) bears the more extended meaning then we are of opinion that it could be read down by the true operation of Sec. 15A of the Acts Interpretation Act and that accordingly it would bear only the more restricted meaning of the two illustrations we have instanced above. Accordingly in our opinion Sec. 6(c) is valid.

1 Bank of NSW v Commonwealth [1948] HCA 7; (1948) 76 CLR 1.