Case: Melbourne Corporation v The Commonwealth [1947] HCA 26 ; (1947) 74 CLR 31
Outcome: referred to
The critical question is whether Mr Siminton can be said to have carried on any banking business at relevant times. "Banking business" is defined in s 5 of the Act to mean "a business that consists of banking within the meaning of paragraph 51(xiii) of the Constitution ." Section 51(xiii) does not contain the phrase "business of banking". It confers power on the Commonwealth Parliament to make laws with respect to "banking". This word, has, however, been treated by the High Court as referring to "the business of banking". In Melbourne Corporation v The Commonwealth [1947] HCA 26 ; (1947) 74 CLR 31 at 69 Starke J said: "Banking, within the meaning of the Constitution , relates to the business of a banker and covers all those various functions which a banker undertakes. But his main functions appear to be the taking of deposits and current accounts, the issue and payment of bills and cheques drawn on him and the collection of bills and cheques for his customers." Williams J (at 97) held that the legislation authorised by s 51(xiii) "is legislation with respect of the business of banking." Rich J (at 64-5) referred to and relied on the construction placed on the word "banking" by Isaacs J in Commissioner of State Savings Bank of Victoria v Permewan, Wright &amp; Company Limited [1914] HCA 83 ; (1914) 19 CLR 457: "While the word 'banking' is sometimes used in a colloquial and crude sense to mean the payment of money to the credit of a customer's account at a bank, the word in its normal and ordinary signification denotes the business of banking. Some assistance in defining 'banking' can be obtained from the Bills of Exchange Act 1909-1936. In this Act the word banker includes a body of persons, whether incorporated or not, who carry on the business of banking, and though banking is not defined in this Act it seems reasonable to believe that one legislative interpretation of the word would be the business carried on by a banker. In the case of Commissioners of State Savings Bank of Victoria v Permewan, Wright &amp; Company Limited Isaacs J ... said: 'the fundamental meaning of the term' (banking) 'is not, and never has been, different in Australia from that obtaining in England. Various writers attempt various definitions, more or less discordant and many of them referring to functions that are now very common and convenient, and even prominent, as if they were indispensable attributes. The essential characteristics of the business of banking are, however, all that are necessary to bring the appellants within the scope of the enactments' (s 83 of the Victorian Instruments Act 1980 and s 88 of the Bills of Exchange Act 1909 ) 'and these may be described as the collection of money by receiving deposits upon loan, repayable when and as expressly or impliedly agreed upon, and the utilisation of the money so collected by lending it again in such sums as are required. These are the essential functions of a banker as an instrument of society.' 50 In Australian Independent Distributors Ltd v Winter [1964] HCA 78 ; (1964) 112 CLR 443 the High Court was called on to determine whether a friendly society was carrying on "the business of banking" contrary to s 7 of the Act. The Court quoted the passage from the judgment of Isaacs J in Permewan Wright which Rich J had incorporated in his reasons in Melbourne Corporation. The Court treated what Isaacs J had said as constituting a "definition" of the "business of banking" (at 455). The Court continued: "If that definition is applied to the present case, as we think it should be, it is apparent that the second of these essential characteristics is absent. The power to lend money conferred on the Society by Rule 7 was limited to the making of loans to its members to enable them to acquire land or buildings to be used for residential or business and residential purposes and in fact none of the Society's moneys was used for the making of loans for that or any other purpose." The second essential characteristic which was found to be absent was the lending function. The society had not made any loans. For this reason, the Court held that the trial judge had been correct to hold that the society had not carried on the business of banking and had not, therefore, contravened s 7 of the Act.