The Commonwealth Bank Act, 1945, makes provision in Part X for the establishment of an Industrial Finance Department of the Commonwealth Bank of Australia and by ss. 95 and 96 specifies the functions and powers of that Department. Purporting to act in pursuance of these provisions, the Bank, through the Industrial Finance Department, has engaged on an extensive scale in the conduct of hire-purchase business by the methods usually employed by the various finance houses engaged in this business, that is to say, the chattels in respect to which the transaction is to take place are acquired by the Bank and then sold under a true agreement of hire-purchase to the ultimate purchaser, or in some instances, to dealers. The question for consideration is whether this type of business is authorised by the Act and, if authorised, is within the Commonwealth’s legislative powers.

The Commonwealth’s power to make laws with respect to banking conferred by s. 51(xiii) of the Constitution in our opinion authorises the conduct by the Commonwealth Bank of Australia of the functions of lending money on security or without security for the purposes set out in s. 95 of the Commonwealth Bank Act 1945, since the lending of money is an accepted feature of the business of banking (State Savings Bank of Victoria v. Permewan Wright & Co. Ltd., 19 C.L.R. 457 at 470–1; Melbourne Corporation Case, 74 C.L.R. 31 at 63, 65; Banking Case 76 C.L.R. 1 at 194). It follows that Part X of the Act is within the scope of the Commonwealth’s legislative power.

But the functions and powers set out in ss. 95 and 96 do not in our opinion extend to the conduct of hire-purchase business involving the purchase, hiring and sale of chattels; none of the matters set out in these sections could embrace hire-purchase and, indeed, the specific reference to the purchase, acquisition, sale and disposal of shares and securities would appear clearly to negative any power to purchase, acquire, sell or hire chattels.

Further, ‘distributors, retailers and individual purchasers’ are not ‘industrial undertakings’ within s. 95 of the Act.

It is no doubt true that hire-purchase business is commonly described as ‘finance’ and companies engaging in such business are referred to as ‘finance companies’, but this does not derogate from the principle, now established beyond question, that hire-purchase business is not moneylending and that hire-purchase transactions carried out by a purchase, hiring and sale of chattels, do not constitute mortgages or bills of sale (Elsey & Co. Ltd. v. Palmer—Jones & Proudfoot Notes on Hire-Purchase Law at page 99; In re George Inglefield Ltd. (1933) Ch. 1; Transport & General Credit Corporation v. Morgan (1939) Ch. 531 at 552; Austin Distributors Ltd. v. A.H. Paterson Car Sales 65 C.L.R. 118; Metropolitan Discounts Ltd. v. Bowra Radio & Electrical Co., 18 A.L.J. 88). The form of the transaction is its reality. It is not proper to regard the substance of the transaction as the lending of money and the form but an inconsequential circumstance.

Finally it is to be observed that the conduct of hire-purchase business has never been and, apart from the instant circumstances, is not now an accepted function of banking. Insofar as the content of the constitutional power with respect to banking must be determined by reference to the meaning of the word ‘banking’ as understood in the year 1901, the right conclusion, in our opinion, is that there was not present in the connotation of the word in 1901 any element which, by a process of expending application (e.g. as in R. v. Brislan; Ex Parte Williams, 54 C.L.R. 262) could embrace hire-purchase transactions. The lending of money is the only element in that meaning to which the present activity could be claimed to be referred and we have already indicated our view that there is a radical difference in substance between money-lending and the conduct of hire-purchase activities. These considerations in our opinion exclude the conduct of hire-purchase business from the scope of the Commonwealth’s power with respect to banking.

We therefore answer the questions asked in the case for opinion as follows:

(a)  Part X of the Commonwealth Bank Act, 1945, is within the power of the Commonwealth Parliament.

(b)  The conduct by the Commonwealth Bank of Australia of hire-purchase business by the acquisition of chattels and their disposal under hire-purchase agreements is:

(i)  Not authorised by Part X of the Act, and

(ii)  Not capable of being authorised by a Statute of the Commonwealth Parliament based upon the power to make laws with respect to Banking.

(c)  As the conduct of hire-purchase business by the methods referred to is beyond the authority conferred by Part X, whether or not it is also more than the Commonwealth’s constitutional power, in the circumstances of the present case proceedings to restrain the continued conduct of such business can be taken by a private person only with the fiat of an Attorney-General, which from a practical point of view means an Attorney-General of one of the States (Pharmaceutical Benefits Case 71 C.L.R. 237)

[Vol. 60, p. 217 and Vol. 60, p. 218.]