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Thursday, 3 March 1932


Mr SCULLIN (Yarra) .- This is the principal machinery clause of the bill. I suggest that there is such a close relation between clauses 5 and 6 that some reference to clause 6, and the amendments proposed to be made to it, might be permitted in discussing the present clause. I am opposed to this clause, because it provides what I consider to be an unnecessary method of securing money from a State. I do not desire to traverse all the ground that I covered during the debate on the second reading of the bill; but under this clause an extraordinary method of recovering money due by a State is provided. Some honorable members seem to have the idea that the last Government attempted to recover the money with respect to which the New South Wales Government had made default, and it having failed, it was necessary to bring down this extraordinary legislation. That is an entirely erroneous impression.


Mr Maxwell - ls the right honorable gentleman referring to the clause as proposed to be amended?


Mr SCULLIN - The amendments proposed in this clause make practically no difference to my argument, and the amendments proposed in clause 6 make no substantial difference to it; they do not remove my objections to both clauses.


Mr Gregory - How would the right honorable member make a State Government stand up to its obligations?


Mr SCULLIN - The last Government issued writs against the New South Wales Government. There was some criticism as to the delay that occurred; but there was no unnecessary delay. My Government had a new situation to grapple with. After it had gone a certain distance with its legal proceedings, the Premiers Conference was held. At that conference, seven governments, including the Government of New South Wale3, were represented. The Premier of New South Wales attended the gathering, and discussed for weeks the .plan for financial rehabilitation, in which he joined. The various governments agreed unanimously to effect economies for the purpose of balancing their budgets, and then we launched the scheme for the conversion of bonds amounting to over £500,000,000 with respect to our internal debts. 1 submit that it would have been ridiculous for the Commonwealth Government to proceed with its litigation while the Premiers Conference was in progress, or during the period when attention was being directed to the internal conversion loan. My Government merely marked time while it was conferring with the various State Governments, because we hoped that the Premier of New South Wales would give effect to the plan. It is true that Mr. Lang, who, I believe, discussed, the plan earnestly, wanted the interest rates scaled down to 3 per cent. ; but he accepted the best terms he could get. That indicated to my Government that to that extent the Lang plan had been modified, and that the Premier of New South Wales was willing to fall into line with the rest of the governments of Australia in regard to the conversion loan. Therefore, my Government did not push on with the legal proceedings against New South Wales.

Before we made the appeal in connexion with the conversion loan, the Premiers Conference appointed a special sub-committee, consisting of the Prime Minister, the Premier of New South Wales, and the Premier of South Australia, to endeavour to overcome the difficulties created by the default of New South Wales. The sub-committee met, in conjunction with the Chairman of Directors and the Governor of the Commonwealth Bank and the commissioners of the Government Savings Bank of New South Wales, because another outstanding matter was the closing of the latter bank. It was agreed to co-operate, so far as possible, in order to bring about the rehabilitation of the finances of Australia. My Government did not push on with the proceedings against New South Wales when that stage had been reached. Even in private litigation the delay often runs into months, and it is not fair criticism of the last Government to say that it allowed months to go by without taking steps to deal with the Government of New South Wales. Up to that stage, we had pressed on with our writs with as much determination as any other government could have displayed; we were determined to recover the money that was owing. I was glad to have the approval of the present Attorney-General (ifr. Latham), who admitted that every possible step was taken by my Government. In similar circumstances, I would again push on with an action in the court in the ordinary way. Do honorable members realize that in seeking to attach the revenues of the State by legislation of this kind we are doing a thing such as caused war between America and Great Britain? We have ample power at present to take all necessary action to recover. A good deal of use has been made in this debate of Sir Edward Mitchell's valuable book What Every Australian Ought to Enow. I wish that the Government had studied the book a little more closely in certain aspects. Had it done so it would have realized that there was no need for legislation of this kind. On page 35 of the book the author refers to the proceedings taken by the Commonwealth last year to recover money from New South Wales, and says -

Assuming the action had not been settled I will point out the effective remedies which were available to enable the Commonwealth to obtain preferential payment. . . and, at the same time, if it thought fit, to obtain an effective injunction against the State of New South Wales and against its Ministers of State, to prevent any repetition of the further defaults which Mr. Lang was then publicly threatening.

I do not suggest that we should do everything that Sir Edward Mitchell advises, but I say, unhesitatingly, that it is entirely wrong for this Parliament and Government to assume in advance that any government would defy a decision of the High Court, or that any responsible Minister of a sovereign State would put himself in the position of being found guilty of contempt of court, as he would do if he proceeded along a certain line of action in defiance of a judgment of the High Court. In those circumstances I think it is wrong for us to talk at this stage about what will be the next step after judgment is obtained. But Sir Edward Mitchell makes very clear what would happen after a judgment had been obtained in the High Court. He describes the clauses in the agreement which make the State liable faithfully to perform its obligations, and adds that

After a judgment in the High Court the Commonwealth could obtain a certificate pursuant to section65 of the Federal Judiciary Acts and duly serve that certificate upon the Treasurer of New South Wales under section 66 of such act. Such Treasurer would then be under the statutory obligation, imposed by that section, to satisfy judgment out of moneys legally available.

I speak earnestly on this subject because these are the steps which my Government began' to take last year, and which this Government started to take this year. While we have no right to assume that any government or Minister would defy the High Court, for that is to assume that the party so doing would be guilty of the greatest disobedience of the law that any person or government could be guilty of, there are many ways in which we could act in the event of such disobedience. After stating that, under section 109 of the Constitution, our law would prevail over a

State law dealing with the same subject, Sir Edward Mitchell says -

When Mr. Lang, as I understand he did, publicly stated that the State of New South Wales would not pay the interest on its maturing public debts, and also did refuse to pay the Commonwealth, after the latter, in pursuance of its obligations, under the Financial Agreement, paid such interest, then a clear case would exist for a mandatory injunction against the State of New South Wales and against the officers of such State and persons acting under the authority of such State, under section 60 of the said Judiciary Acts.I think the term " Officers " in such section would be held to include Ministers of State . . .

Sir EdwardMitchell then quotes a Privy Council case to support his contention, and mentions the provisions of sections of our own Constitution in which officers of the State are referred to as Ministers and Ministers as officers of the State. Proceeding, he then goes on to say that -

Section60 of the Federal Judiciary Act appears to have been carefully framed so as to ensure that an injunction against the State should be as effectively enforced as against subjects, whether corporations or individuals. It appears to recognize the difficulty of enforcing, in certain respects, an injunction fullyagainst a sovereign entity and, for that reason, gives specific power to make the injunction against the State and against all officers of the State and persons acting under the authority of the State, and then power to enforce the injunction specifically against any such officers and persons.

I can see no reason why that last specific provision should be cut down so as to relieve an officer who happened to be the Premier or Treasurer, or any other highly-placed Minister of State, from suffering the ordinaryconsequences of contempt of court, if he were guilty of wilful disobedience of the injunction . . I can hardly visualize all the members of the Ministry, especially the AttorneyGeneral, flouting a mandatory order made against each of such Ministers in the State under section 60. Nor can I see how a Premier or other Ministers of State against whom such an injunction had been made under section 60, and who wilfully did execute acts in disobedience of it, could continue to act as a responsible adviser of His Majesty's representative in that State. Nor even if he advised such executive acts.

The Crown must obey the law, and it would be impossible for the King's representative to retain as an adviser a Minister who counselled the doing of executive acts in disobedience of an injunction against a State and such Ministers. There may be no modern precedent, but precedent is hardly required. On principle the matter seems clear, for what would any alternative view necessarily involve? That His Majesty's representative in a State should join or, at least acquiesce in executive acts which were in direct disobedience of a man datory order of the High Court made against such State and its Ministers of State.

That would certainly amount to a direct violation of the duty of His Majesty and his representative in every British Dominion to obey the law. Everything I have said is consistent with the Commonwealth or other party enforcing such repayment, and with the High. Court, on any such proceeding, making all reasonable allowance for Ministers bona fide attempting to carry out an injunction without dislocating government operations and providing for the same in any such order.







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