Opinion Number. 476

Subject

COMMONWEALTH BANK WHETHER HAS PRIORITY AS CREDITOR : DISTINCTION BETWEEN INSTRUMENTALITY AND DEPARTMENT OF COMMONWEALTH

Date
Client
The Treasurer

The Treasurer has asked for my opinion as to whether the Commonwealth Bank of Australia has any right to priority of payment as against ordinary unsecured creditors other than State Governments.

It is well established that the Crown has, by virtue of its prerogative, a right of pri-ority of payment as against a subject. See New South Wales Taxation Commissioners v. Palmer [ 1907] A.C. 179; and Attorney-General for New South Wales v. Curator of Intestate Estates [1907] A.C. 519.

In the case of In re Harrold Brothers, Insolvents: Ex parte the South Australian Railways Commissioner 1900 S.A.L.R. 11, Mr Commissioner Russell held that a debt due to the South Australian Railways Commissioner was a Crown debt. Although this decision is not a binding decision, I think that it is probable that it would be upheld if the question came up for reconsideration in a higher court.

The management and maintenance of railways were at the time of and prior to the establishment of the Commonwealth recognised as functions of government in Australia, and the Railway Departments, notwithstanding that their management is in some cases vested in Commissioners who are free to a considerable extent from govern-mental control, may be considered to be Departments of the State, and the classing as Crown debts of debts due to them rests on the basis of their being in fact Departments of the Crown.

The Commonwealth Bank is in a different position to the Railway Departments of the States, as it carries on functions which have not before in Australia been recognised as functions of government, and it is more widely separated from the Commonwealth Government than the Railway Commissioners are from the State Governments. The Commonwealth can advance money to the Bank and the Bank can advance money to the Commonwealth, and either may be the debtor or creditor of the other, and the moneys of the Bank are not moneys of the Commonwealth and can be expended with-out appropriation by the Parliament of the Commonwealth. There are further differences, but the above are sufficient to show that the Bank has an existence separ-ately from the Commonwealth.

The Bank, although it may be a Commonwealth instrumentality, cannot in my opinion be considered to be an actual Department or branch of a Department of the Commonwealth Government. I do not see, therefore, any ground on which a right of priority on its part could be based. The Bank must, I think, be taken to be in the same position for this purpose as other corporations carrying on the business of banking.

I am of opinion that the Commonwealth Bank, as regards debts, stands in the same position as an ordinary creditor and has no right of priority as against other creditors.

[Vol. 10, p. 463]

  1. This opinion is unsigned in the Openion Book, but it is attributed to Mr Hughes
  2. * See also Openion No. 508.