## Facts

- After World War II, the Commonwealth enacted the Banking Act 1945 (Cth) and the Commonwealth Bank Act 1945 (Cth) to concentrate government banking business in public institutions, particularly the Commonwealth Bank.
- Section 48 of the Banking Act 1945 (Cth) prohibited private banks, without the federal Treasurer’s written consent, from conducting any banking business for a State or any State authority, including local governing authorities.
- The Treasurer notified the City of Melbourne (a municipal authority of Victoria) that he proposed to apply s 48 to it, which would effectively compel the City to move its banking business away from its chosen private bank unless consent was granted.
- The City alleged it had a right or privilege to deal with a banker of its own choice and that s 48 would deprive it of that freedom by placing State authorities under federal control over banking arrangements.
- The Commonwealth defended s 48 as supported by the Constitution’s banking power.

## Issues

1. Whether the City of Melbourne had standing to challenge the validity of s 48 based on an adverse effect on its rights or material interests.
2. Whether s 48 was supported by the Commonwealth’s constitutional power over “banking,” notwithstanding the constitutional exclusion of “State banking” except in specified circumstances.
3. Whether an otherwise valid federal law is invalid if it discriminates against States or substantially impairs their capacity to function as governments under implied limits arising from the federal structure.

## Decision

- The High Court (Full Court of six justices) upheld the City’s standing because the Treasurer’s proposed action would deprive it of the ability to choose its banker.
- By a 5–1 majority, the Court held s 48 invalid.
- The majority accepted that s 48 dealt with “banking” in subject matter, but concluded it was unconstitutional because it imposed a special disability on States and State authorities and impaired their independent functioning within the federation.
- One justice dissented, taking the view that a bona fide law on banking within an enumerated power should stand absent an express constitutional prohibition.

## Legal Principles

- Commonwealth legislative power is subject to implied constitutional limits derived from the federal structure requiring the continued existence and effective functioning of the States as governments.
- A Commonwealth law may be invalid where it:
  - singles out States or State authorities for special burdens or disabilities not imposed on others; and/or
  - significantly impairs, curtails, or weakens the capacity of States or their agencies to carry out governmental functions.
- The characterization of a law as falling within a head of power (here, “banking”) does not end the inquiry if the law’s operation is incompatible with the Constitution’s federal structure.
- A State authority has standing to challenge a federal law where the law’s operation adversely affects its rights or material interests in a concrete way (here, the practical loss of freedom to choose banking arrangements).

## Conclusion

The High Court invalidated s 48 because it targeted States and State authorities by denying them ordinary banking facilities available to others and subjected their financial arrangements to federal executive permission, thereby contravening implied limits protecting State autonomy within the federal system.


Melbourne Corp. v. Commonwealth, 74 C.L.R. 31 (High Ct. Austl. 1947)