COMMONWEALTH IMMUNITY FROM STATE LAWS: COMMONWEALTH BANK WHETHER COMMONWEALTH BANK IS SUBJECT TO STATE LAWS REGARDING UNCLAIMED BALANCES IN CURRENT ACCOUNTS: GENERAL BANKING BUSINESS DISTINGUISHED FROM SAVINGS BANK BUSINESS: POWER OF STATES TO LEGISLATE WITH RESPECT TO BANKING: WHETHER COMMONWEALTH HAS POWER, BY REGULATION, TO EXEMPT COMMONWEALTH BANK FROM STATE REQUIREMENTS
CONSTITUTION, s. 51 (xiii): COMMONWEALTH BANK ACT 1911, s. 51
The following memorandum has been forwarded to me with a request for advice:
The following copy of a letter received from the Governor, Commonwealth Bank, Sydney, under date the 19th instant, is forwarded for your consideration. I shall be glad to receive advice in the matter, as soon as possible:
Under the Commonwealth Bank Act provision is made regarding unclaimed deposits in the Savings Bank Department, but no similar provision exists in respect of unclaimed balances in the general banking department. In several of the States, for instance in Victoria and Western Australia, State legislation exists under which all unclaimed balances held by companies or banks are from time to time handed over to the State Government.
We shall be glad if you will ascertain from the Commonwealth Solicitor-General whether the Commonwealth Bank would be affected in any way by such State legislation as regards unclaimed balances in the general banking department, and, if so, what steps he would suggest to overcome the difficulty. No doubt any difficulty that should arise could be overcome by passing Regulations in regard to the disposal of unclaimed balances in the general banking department.
As the Bank has now been conducting operations in its general banking department for a little over six years, the time has now arrived when this question has become one of practical importance, and we shall therefore be glad to have the Solicitor-General's advice as early as possible.
It does not appear that in relation to its ordinary banking business the Commonwealth Bank can claim immunity from State law under the doctrine of the immunity of instrumentalities. See the judgment of Griffith C.J. in Heiner v. Scott 19 C.L.R. 381 at p. 393 in which he says: 'In my opinion the carrying on of ordinary banking business is not a function of the executive Government of the Commonwealth conferred by the Constitution', and, on p. 394:
For these reasons I am of opinion that the operations of the Commonwealth Bank, as between itself and its customers, are not the discharge of a function of the executive Government of the Commonwealth, and that no privileges can be claimed in respect of them.
Powers J., in the same case, p. 402, draws a distinction between savings bank business and 'trading banking business'. He says:
The Bank is, in my opinion, constituted by the Act a Commonwealth instrumentality to carry out savings bank business-a governmental function in Australia-and possibly other government business, but under sec. 7 (c) of the Act the power to receive deposits on current account in its trading banking business is only given to it as a trading bank, and not to carry out any governmental functions.
There is no express authority in the Constitution which authorises the Commonwealth to engage in 'trading banking business' and its liberty to do so depends upon the fact that it is not prohibited by positive law. Tacit permission to engage in banking business does not restrict the right of the States to legislate as regards all persons who engage in such business nor exclude the Commonwealth Bank from the operations of any such legislation.
I am, therefore, of opinion that the Commonwealth Bank is, so far as regards ordinary banking business, subject to the requirements of State laws in relation to unclaimed balances standing at current account.
I am further of opinion that it is not competent for the Commonwealth to make Regulations exempting the Bank from those requirements.
[Vol. 16, p. 131]