## Facts

- The Commonwealth enacted the Banking Act 1947 (Cth) to nationalise specified private trading banks and concentrate banking in the Commonwealth Bank.
- The Act provided for acquisition of private bank shares (by agreement or compulsion), replacement of directors, transfer of banking business and assets to the Commonwealth Bank, and restrictions preventing private banks from continuing banking once the scheme operated.
- The Act established a special Court of Claims to determine compensation.
- Private banks, including the Bank of New South Wales, challenged the Act’s constitutional validity.
- The High Court held key provisions invalid on multiple constitutional grounds, including the interstate trade guarantee (s 92), the just-terms requirement for acquisitions (s 51(xxxi)), and the protection of the High Court’s original jurisdiction where the Commonwealth is a party (s 75(iii)).
- The Commonwealth appealed to the Judicial Committee of the Privy Council.

## Issues

1. Whether, and to what extent, the Privy Council could hear the appeal given constitutional limits on appeals involving “inter se” questions of Commonwealth–State power (s 74).
2. Whether the Act’s effective prohibition of private banks’ interstate banking infringed the constitutional requirement that interstate trade and commerce be “absolutely free” (s 92).
3. Whether the scheme effected an acquisition of property other than on “just terms,” including through its compensation arrangements (s 51(xxxi)).
4. Whether the Court of Claims impermissibly displaced the High Court’s original jurisdiction in matters involving the Commonwealth (s 75(iii)).

## Decision

- The Privy Council held that s 74 prevented it from entertaining the appeal to the extent it turned on “inter se” limits of Commonwealth and State constitutional powers.
- The Privy Council nonetheless proceeded on issues it considered severable from the barred field, including the validity of the Act under s 92.
- The Privy Council dismissed the Commonwealth’s appeal and left in place the High Court’s orders invalidating the nationalisation scheme.
- On s 92, the Privy Council agreed that the Act’s restrictions were not a mere regulation of interstate banking but an effective prohibition of private banks’ interstate transactions, contrary to the requirement that such trade be “absolutely free.”

## Legal Principles

- Constitutional limits on appellate jurisdiction may require an appellate court to decline “inter se” federal–state power questions while still determining separable issues that do not require deciding those limits (s 74).
- The guarantee that interstate trade and commerce be “absolutely free” is infringed by legislation that prohibits or substantially impairs participation in interstate trade, as distinct from legislation that regulates the manner of trading (s 92).
- Where a scheme amounts in substance to compulsory acquisition, the Constitution requires “just terms”; a compensation process that is invalid or ineffective may contribute to a finding that the scheme fails that requirement (s 51(xxxi)).
- Parliament cannot create a tribunal that, in practical effect, substitutes for or ousts the High Court’s constitutionally conferred original jurisdiction in matters involving the Commonwealth (s 75(iii)).

## Conclusion

The Privy Council dismissed the Commonwealth’s appeal and affirmed the invalidation of the Banking Act 1947’s bank nationalisation scheme, holding that its effective prohibition of private interstate banking contravened the constitutional guarantee of absolutely free interstate trade, while also recognizing constitutional constraints on the Privy Council’s ability to decide “inter se” Commonwealth–State power disputes.


Commonwealth v. Bank of New S. Wales, [1950] A.C. 235 (P.C. 1949)