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Wednesday, 19 May 1915

Mr HUGHES (West Sydney) (AttorneyGeneral) . - Before dealing with some of the further points which have been urged, I desire to supply the Committee with details of the information which I gave generally on Friday, but which I promised to supplement. I ask the permission of the Committee to hand in the matter, so that it can appear in Hansard. I do not want to read it all, as it is very voluminous.

Sir Robert Best - What is the purport of it?

Mr HUGHES - It is a summary of metallic contents, values, and destination of products of the Broken Hill Silver, Lead, and Zinc Mining and Treatment Companies, and other mining and smelting companies throughout the Commonwealth, compiled from official reports and balance-sheets of the respective mining companies, covering twelve months' operations in each case. The first table deals with silver lead concentrates; the second table deals with zinc concentrates; the third table deals with copper ores; and there is a general summary of the returns. This shows that the gross value of minerals exported, controlled by German influence and capital, amounts to - Lead, £1,825,871; zinc, £4,753,160; and copper, £2,237,604; making a gross total of £8,816,365. In addition to this, not less than 50 per cent, of the metallic lead produced in Australia has been controlled by the Lead Convention, which was completely under the control of the Germans, and that, of course, increased the proportion of the Australian metallic products which were controlled by Germans. That left under British control 27 per cent., and under foreign control 73 per cent.

Mr Joseph Cook - Are you able to say whether we took out all the gold, or is there gold in addition ?

Mr HUGHES - I read the figures from the fourth table. If the right honorable member will look at the returns carefully, he will see that the last sheet but one is a summary. I submit that this information, which the Department has gone to considerable trouble to obtain, ought to be placed at the disposal of honorable members. I gave a statement broadly on Friday, and said that I would supply the details, and I now ask permission to do that.

Mr Watt - Will this information go into Hansard?

Mr HUGHES - Yes, if I may put it







The returns speak for themselves. The sources of information, and all matters in connexion therewith, are stated. The statistical returns for the State of New South "Wales, prepared by the Mines Department, and sot forth on the last page, may he taken as a check on the others. So far as lead and zinc are concerned, that State practically covers the whole of the metal products of Australia. I shall he very glad to answer any questions relating to this matter, but I would like to be permitted now to pass on to something else.

Mr Watt - What year does that return cover ?

Mr HUGHES - Twelve months' output in each case. The exact dates are stated in the second column. The figures are taken from the last balance-sheets available, but the years of the companies do not all terminate in the same month. There is a footnote stating that the output of each mine is not to be assumed to be that stated in the return, because some mines send their output to be smelted at other mines, but for our purposes this point is negligible. But it is not to be assumed that the importance of a mine can be gauged entirely from the return.

I come now to the broad question with which the Bill deals. The Leader of the Opposition argued that the Bill ought not to go further than is necessary to protect our interests. I quite admit it; but the question is, how far it is necessary to go to do this. The right honorable member made the general statement that, so long as we control an industry and benefit by it, there is no reason why enemy capital should not be invested in it. In ordinary circumstances, substituting the term "foreign capital" for "enemy capital," I should say that was a. sound proposition. In our present circumstances I not only dissent from it, but assert that if we accepted such a principle, we should lend ourselves to a course of conduct that would result in pouring into the coffers of Germany after the war the profits of that capital which she has invested in this country. Although she could not get it during the war, she would get it after the war, when she will want it, as we all shall, very much indeed. I am, therefore, totally opposed to a dictum that enemy capital can now, with benefit to Australia, be permitted to engage in profitable enterprise. The position of the Government is that now is our opportunity to enable Australian enterprise to be developed by Australian and British, and not German, capital. This is our position. I submit it is a sound one.

I am never tired of emphasizing the extent to which German control of the metal industry went, and still goes. Honorable members may think I have become obsessed by the idea, and perhaps

I have; but it is not only excusable but necessary, in the circumstances in which we find ourselves, to point out the systematic and complete manner in which Germany has proceeded for many years to secure control of the metallic trade, not only of this country, but of the world. To prove this, let me quote from the Lloyd-Zeitung, the official organ of the Norddeutscher-Lloyd, published in Berlin. In the issue of the 22nd June, 1913, appeared an article by Professor Robert Liefmann, of Freiburg, in which, after pointing out the extent to which this control had gone, and the amount of capital invested in the industry, he stated -

There remains, therefore, the trade in copper, lead, and zinc, as also in silver, tin, mercury, antimony, and aluminium. There are in the principal producing and consuming countries a small number of firms who control this trade, and some of whom are standing in very close relations to each other. They are, for the most part, private firms; but even in those cases where they have formed into companies, their capital, as a rule, remains in a few hands, and is not introduced at the exchanges. That is the reason why there is little known about the internal affairs of these concerns and of their mutual relations. In Germany, the centre of this very wealthy and influential trade is, as we have said above, Frankfort-on-Main, in which city its two leading representatives - the Metallgesellschaft and the firm of Beer, Sondheimer, & Co. have their seats.

He explains how these great firms have secured this control, and shows how in America, as in other countries, they have taken upon themselves the national cloak of the country, and states -

In America as well as in Germany this participation of the great metal firms in foreign mining enterprises by-and-bye assumed such proportions that their own capital did no longer suffice, and foreign capital had to be invited to a great extent. In both countries the same very modern measures for the attainment of this object were taken, that is to say, participation and promoting companies were established. The former had for their object the taking over of the stocks of existing mining companies, and to control the latter by right of possession of the shares (controlling companies), whereas the latter have to provide the capital for new enterprises, and thus undertake the financing of these. In both cases there was obtained: 1, an equal distribution of the risk, inasmuch as the stocks were allotted to a special company, whose principal shareholder was the metal firm which backed it, but did not hold itself responsible for any debts of the daughter company; 2, in this manner, foreign capital could be attracted without the metal firm losing the control over the producing companies, and this was done (a) by letting the promoting company take over only the minority of the mining companies' shares, and keeping the majority to themselves, so that the whole capital of the controlling company was issued without the metal firm losing the control over the producers; or (6) the promoting company only got the majority of the mining shares, so that the minority of its own shares could be issued in public, and the metal firm still retained the control over the mines, but reduced its need for capital.

Of the daughter companies, for whose liabilities no responsibility is taken by the Metallgesellschaft, the Australian Metal Company stands out as a type. In the number of the same journal issued on 8 th July, the same writer says -

Lastly, there belong to the Merton Concern two more companies which bear testimony to the international character of the Concern by their very name, viz., the African Metal Company and the Australian Metal Company, of London and Melbourne. These two companies are sub-companies of the Metallgesellschaft and of Henry E. Merton and Company, and transact for the latter firms the purchase and sale of metals in Africa and Australia. They are, therefore, agencies which were given the titles of independent companies chiefly for legal reasons. I have not been able to ascertain whether they in their turn are partly interested in the production enterprises of the Merton Concern, but that may be taken for granted with some certainty.

In the number of 22nd July, to show that the object was to attract local capital, but at the same time to keep control in the hands of the German company, the same writer points out -

Not a single one of these enterprises being in the hands of the public, there had to be created a company, on the basis of the substitution of securities, whose securities could be issued to the public. This company might have been given a minority of the securities of all the various enterprises, and its entire capital might then have been issued. That would have been for the public who bought the shares a capital investment company about the development of which the managers of the Concern need not have troubled any further. But considering their great capitalistic powers, it was a matter of course that they should secure the decisive influence also in those enterprises to which the public were admitted, and for this reason the Berg- und Metallbank and the Schweizerische Gesellschaft fur Metallwerte were established as controlling and promoting companies to the main companies of the Concern.

These words, written a year before this dreadful war broke out, attracted no attention, and struck no responsive chord in the minds of Australian or British enterprise, yet, nevertheless, they were a plain declaration of the existence of a state of affairs absolutely incompatible with that commercial control which Britain had long boasted of possessing, but which was slowly slipping from her grasp. He adds these words -

All this has not only tended to promote the numerous manufacturing . industries of Germany, such as the great electrical industry, which depends, to a large extent, upon the supply of copper and lead, or the chemical industry, which requires these and other metals, or the precious metal industry, &c, all of which carry on a large export trade, but the numerous German enterprises abroad are strengthening the prestige and importance of Germany and her economical life in those countries. We may, therefore, be justified in attracting the attention of the general public to this hitherto little noticed branch of German enterprise.

That is the position, as plainly stated by a German writer eighteen months ago. It shows clearly the extent to which German control had gone, and the way in which it had been built up. And it disposes completely of the contention of my right honorable friend, that so long as enemy capital can be used for the benefit of Australia it should be regarded as welcome. I say that it cannot be used for the commercial benefit of Australia now without resulting in the commercial and national benefit of Germany, and to the national and commercial disadvantage and detriment of Australia, the Empire, and our Allies at the end of the war. Therefore, the Bill aims at severing every thread that binds this country to Germany, and at breaking every fetter that links individuals in this community to enemy subjects.

I come now to the particular arguments addressed to the clause. As paragraph & of sub-clause 1 leaves wide room for doubt whether a company in which one share was held by a German would be an enemy company within the . meaning of the Bill, I suggest that the paragraph should be altered to read - " In which an enemy subject has, in the opinion of the Attorney-General, an interest."

Mr Glynn - That amendment would overcome a great many objections, but I think that the words " or the Court " should be inserted, as the question may come before a Court.

Mr HUGHES - If a matter affecting a contract to which an enemy subject was a party, or was for the benefit of the enemy, came before the Court, the inter pretation of /paragraph b would not arise; but, if the case concerned a contract to which one of the parties was, not an enemy subject, but a company in which an enemy subject had shares, the question whether the contract came under the clause would, as the Bill stands, be determined by the fact that an enemy subject had an interest in the company < We have considered at some length the difficulty of determining the extent of interest which might be regarded as dangerous, and I think honorable members are agreed that it would not be sufficient to speak of a " controlling " or a "substantial" interest. But if we say, " has, in the opinion of the AttorneyGeneral, an interest," we have a provision sufficiently elastic to insure the practical administration of the measure without narrowing its application. I shall be glad if the legal members of the Committee will give me the benefit of their opinions on the suggestion, either now or later.

Sir Robert Best - Would the honorable gentleman treat all contracts uniformly? Is this provision to apply to every enemy contract ? Under the Bill as it stands, only some contracts would go before the Attorney-General.

Mr HUGHES - I think that the question whether the interest of an enemy subject in a contract is such as to make the contract an enemy contract ought to be determined by the Attorney-General. As to whether sub-clauses 2, 3, and 4 should be retained, and, if so, whether a party to a contract should file a copy of it with the Attorney-General of the Commonwealth, or with some other authority, I would remind honorable members that we must deal with this subject in a practical way. It is not my desire that the measure shall open up a profitable field for litigation, in which the members of my honorable profession may browse comfortably, even in times of drought. Whether a contract is or is not an enemy contract is a question which must be capable of being determined in some definite, economical, and speedy way, and its determination must, therefore, be left to a defined authority. Any one who has had experience of Ministerial office knows that it is easiest for a Minister to have as few questions of this kind as possible left to his determination. But I am not sure that it would not be best for the commercial community to have the determination of this question left to the Attorney-General. If it were left to the determination of a Judge in Chambers, the decision of the Judge of the Supreme Court of one State might differ from that of a Judge in another State. The case of 2'he King v. Snow was recently decided in Adelaide, after a trial which lasted for some time, it being held that there was no case against Mr. Snow. Yesterday, in Melbourne, Judge Eagleson, sitting in another case, said that he did not agree with the South Australian decision. Now, whatever opinion may be held as to whether the Attorney-General should be the authority to (decide whether a contract does or does not come within the scope of the measure, all must desire uniformity in practice. I do> not think there is any doubt upon that point, and I ask honorable members to consider it. I also ask them to consider the position of a man in Great Britain who is party to an enemy contract within the scope of this Bill. To whom has he to apply? To a Judge in a British Court? If so, the Judge in a British Court might decide upon principles quite other than those accepted by a Judge in Australia. That would be most undesirable. The argument for uniform treatment appears to me to be very strong. But I am entirely impartial in this matter, and I leave it to honorable members to say which method we shall have. Certitude and uniformity are necessary, as I have shown, but expedition is also necessary. A man who wishes to enter upon other contracts will be anxious to know whether he is free to do so. There should be no litigation or danger of it. I am justified, therefore, in taking up this perfectly fair position: The clause will remain as it is printed, but if the Chambers of Commerce of the various States, upon fair consideration of the position, prefer that the matter shall be dealt with in some other way than by reference to the AttorneyGeneral, I will give every consideration to their representations, and insert the necessary amendment. But there must be a consensus of opinion. If these bodies in the various States differ upon the point one must) exercise one's judgment; but if these Chambers of Commerce, through their mouthpieces, indicate that they prefer to leave the matter to a judicial tribunal, their desires should certainly be, and will be, listened to. This will clear up the point at issue between us, and I ask the Committee now to direct their attention to paragraph b, and see whether the suggestion that I have put forward to amend it is desirable. I am at a loss to understand the point taken by the honorable and learned member for Kooyong, that there should be one and not two classes of procedure for contracts falling under clause 3, because there are not two procedures. There is but one procedure. First of all, the Bill says that enemy contracts are null and void. There is an end, then, of all enemy contracts; but a man may ask, " Have I an enemy contract?" It is important he should have this point determined. If one is told that he can get 3d. a head for wallaby scalps, he wants to be in the position of knowing -whether the scalp that he has in his possession is a wallaby's scalp, otherwise, when he comes along and claims 3d. for the scalp that he displays, he may be told, " That is not a wallaby's scalp, it is a cat's." Certitude in the matter is essential. Instead of a man going about with untold riches in his bag, he may find that he has nothing. Instead of having an enemy contract he may have a contract that binds him. There is no opportunity of going to law to determine the matter, because the Court cannot determine it unless it hears the other side, and there may not be any other side available - the other side may not be able to appear. To leave the matter to the parties, and only annul contracts upon application by a party, would be most unwise, and totally opposed to the principle of the Bill. The ties of commerce are very strong. A man with a benefit under a contract might let it continue, and, keeping his candle of patriotism under a bushel in order that he might make a profit, at the termination of the war take the benefits from the contract. We cannot allow individual caprice to determine a great question. It must be determined by this Parliament on a settled principle, namely, that for the good of the nation it is necessary that we should sever all contractural relations with the enemy. And this principle must apply automatically. The only question is - How is a man to know whether it applies in the case of his contract? He is to know by going to some dulyappointed person, and asking, " Is thi3 a contract to which this measure applies. Yes or no ? "

Mr Joseph Cook - That only states the trouble. It does not solve it. The question still is, " What is for the good of the country?"

Mr HUGHES - This is like the riddle of the Sphinx, but in this case a man will get some one who can answer him, and I submit that that some one should be one who can answer quickly, and upon some definite and fixed principle uniform to all. As the result of telegrams I sent to them recently, I have had from the Premiers of the various States, except Mr. Holman, a statement definite and sufficient that they will introduce the necessary complementary legislation. I wrote to Mr. Holman some months ago, and he promised to cooperate cordially. I have sent him a copy of the Bill, which he has acknowledged, but he has not yet sent me a statement in regard to it.

Mr Watt - Is there any assurance that the phraseology of the State Bills will be the same as that of the Commonwealth measure?

Mr HUGHES - That is the idea. I showed the Bill to all the Premiers who were in Melbourne recently, except Mr. Earle, the Premier of Tasmania, and they were quite agreeable. I explained the measure to Mr. Earle, and he has agreed to pass the necessary legislation. Mr. Holman in his letter to me said that he was keenly desirous of helping us in this matter, and Sir Alexander Peacock, Premier of Victoria, has authorized me to say that the Legislature of Victoria will pass complementary legislation.

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