CHIFLEY AND THE BANKS 1947:

WILL WE EVER KNOW WHAT REALLY

HAPPENED?

‘You can never know what really happened. Each side tells its own story’.

Ben Chifley to Paul Hasluck 1950/51, reproduced in Hasluck’s The Chance of Politics, Melbourne,

1997, page 40

Denis Lenihan

August 2014

1

Contents

Introduction! ! ! ! ! ! ! ! ! ! 3

Institutional biographies

- the Labour Government ! ! ! ! ! ! ! 6

- the private banks ! ! ! ! ! ! ! ! ! 9

- the Commonwealth Bank ! ! ! ! ! ! ! 12

- the Melbourne City Council !! ! ! ! ! ! 15

- the Liberal Party ! ! ! ! ! ! ! ! 18

- the Legislative Council of Victoria ! ! ! ! ! 20

- the High Court of Australia ! ! ! ! ! ! ! 23

- the Melbourne Establishment ! ! ! ! ! ! ! 24

The Events of 1944-1947 ! ! ! ! ! ! ! ! 26

Conclusions and Observations! ! ! ! ! ! ! 56

What the Historians Said ! ! ! ! ! ! ! 65

Sources and acknowledgements ! ! ! ! ! ! ! 73

2

Introduction

In 1947, the Melbourne City Council challenged in the High Court two aspects of the Banking Act 1945. One aspect concerned section 48, not then in operation, but due to enter into force on 1 August of that year. In effect, it required State governments and authorities holding accounts with private banks to transfer those accounts to the Commonwealth Bank or to State banks. The other apparent aspect concerned sections 18-22 of the Act, which required the private banks to hold in special accounts with the Commonwealth Bank such sums as that Bank might specify, the object being to control the supply of money.

The details of the case are dealt with below.

Chifley’s biographer, L F Crisp records that - evidently before the case started - Chifley

! let it be known quietly in the appropriate quarter that if the private banks sought to ! emasculate essential provisions of the the 1945 Acts, on whatever pretext or behind !! whatever “front”, he would go to the limit to sustain the basic purposes of the legislation.

The challenge to sections 18-22 was dropped on the day the case started, 15 July. Crisp continues:

! Chifley received information that this was done because of the unwilllingness of certain of ! the ! private bank leaders (who “violently disagreed with their colleagues”) to challenge !! these provisions at the same time in the light of the Treasurer’s known determination to ! maintain the leading principles of his Acts at all costs. After all, Labour and Chifley ! would not be in office for ever - and perhaps not even for long. Then would be time ! enough to emasculate his Acts.(1)

Further detail is given by Dr H C Coombs. Drawing upon an account given to him by William Charles Taylor, a close friend of Chifley and a member of the Commonwealth Bank Board from 1941-45, Coombs confirms Crisp’s view that it was the challenge to sections 18-22 rather than to section 48 which greatly concerned Chifley. Following Crisp, Coombs quotes Chifley’s speech to the Parliament in 1945 to the effect that “immobilising” the reserves of the private banks was in the Government’s view essential to the management of the economy. On Taylor’s account to Coombs, Chifley indicated to the private banks that if the challenge to section 48 were successful, he would accept the decision if the challenge to sections 18-22 were withdrawn and the banks undertook not to challenge them in the future. While the challenge to these sections was withdrawn, as noted, the banks were not prepared to give the undertaking sought; and it was this refusal which prompted Chifley to seek nationalisation. (2)

These two accounts of Chifley’s dealings with the private banks aroused my curiosity some years ago, and since then I have intermittently sought to find confirmation among the records of the various players - institutional and personal - in the relevant events which occurred between 29 May, when the Melbourne City Council writ was issued, and 16 August, when Chifley announced the Cabinet decision made that day to nationalise the private banks. Direct confirmation has proved impossible to find, but inferences pointing towards confirmation may be drawn from the relevant events; indeed some of those events make no sense unless there had been dealings of the kind described by Crisp and Coombs. What has also been confirmed

3

is some agreement among the various individuals concerned - politicians at various levels, lawyers and bankers - to keep the whole matter secret. As an example, the reasons for the decision, on the day the proceedings began, or the day before, not to proceed with the apparent challenge to sections 18-22, are not recorded or in some cases not referred to in the files of the Council, the written histories of the Commonwealth Bank or the private banks, the available contemporary correspondence of the most senior officers of those banks, the records of the Commonwealth Treasury and the Commonwealth Attorney-General’s Department, and the relevant histories, biographies and autobiographies of the times, which were consulted during the search. It is a reasonable inference that there was not only some agreement among the Council, the Melbourne-based private banks (or at least the National Bank) and their lawyers (they had the same firm of solicitors) to make the decision, but also a further agreement to keep the reasons for it secret. The same would appear to be true of the discussions generally between the Government, undertaken I believe by Taylor on Chifley’s behalf, and the private banks.

It is likewise a reasonable inference that the action taken in October 1947 by the Victoria Legislative Council to deny the Labor Government supply, on the basis that the people of Victoria were entitled to decide at an election whether or not they supported bank nationalisation, was also the result of some agreement among the private banks and the opposition conservative parties. Again, secrecy surrounds the details.

The search has also shown that the whole matter, culminating in the nationalisation decision, may have originated at least in part from a mistake arising from the way in which the Council’s writ was worded, which caused the Government to believe that sections 18-22 were being challenged in their own right, which was not the case. It was three weeks before this misapprehension was corrected by the issue of the statement of claim, arguably too late to prevent it from taking root, not only in the Government but also among others, including bankers, and the media.

As the matter was acted out not by individuals acting alone, but as representatives of institutions, this article begins with short descriptions of the relevant institutions which also identify the relevant representatives. It then moves to a narrative of the events which took place from 1944 to 1947, which essentially concludes in August 1947 when the nationalisation decision was taken, and proceeds to draw some inferences or conclusions from those events. There is an appendix on the way in which historians have treated the events, which raises some troubling questions.

Brief Chronology of Relevant Events

! ! ! ! ! ! 1945

August: The Commonwealth Bank Bill (1 August) and the Banking Bill (3 August) assented to. Sections 18-22 of the latter, which came into effect immediately, required the private banks to deposit with the Commonwealth Bank such sums as that Bank might specify. Section 48 of the Act, which was to come into effect on a date to be fixed, in effect prevented state authorities from banking with the private banks.

24 September: the Associated Banks (Victoria) engaged Barwick KC for an opinion on the Banking Act 1945

4

28 September and near that date: the private banks notified the Commonwealth Bank that in complying with sections 18-22 ‘acquiescence or compliance on [their] part with any requests from you is not to be taken to import any contract with your Bank in terms of the Act’.

! ! ! ! ! ! 1947

28 March: Chifley announced that section 48 would come into force with regard to 190 state authorities (including the Melbourne City Council) on 1 August

April-May: Melbourne City Council engaged Barwick KC for opinion on Banking Act 1945

28 May: High Court writ issued by Melbourne City Council; it claimed that ‘Section 48 of the Banking Act 1945 is invalid’ and that ‘the Banking Act 1945 by reason of the provisions of Sections 18 to 22 thereof is invalid’

19 June: Council Statement of Claim lodged, making it clear that sections 18-22 were not being challenged in their own right, but as tax measures, thus by the operation of Section 55 of the Constitution rendering the rest of the Act invalid

15-16 July: High Court hearings, at which Barwick announced that Section 55 argument would not be pursued

13 August: High Court decision declaring invalid section 48 of the Banking Act 1945

16 August: Cabinet decision on nationalisation taken and announced

1 October: Victorian Legislative Council denied the Cain Labor Government supply for the first time

Notes

(1) L F Crisp: Ben Chifley, Melbourne, 1963, pages 324-5(2)H C Coombs: Trial Balance, Melbourne, 1981, pages 115-6

Note on Labor/Labour: the official title of the ALP was by 1915 the Australian Labor Party (see Weller and Lloyd: Federal Executive Minutes 1915-1955, Melbourne, 1978, page 17, footnote), but it took many years before this became the accepted spelling. Crisp uses ‘Labour’ in the Chifley biography, as does the Hansard in the 1940s, although Coombs in his autobiography uses ‘Labor’. This paper uses ‘Labor’ except where quotations differ.

Note on biographies: unless otherwise indicated, biographies of the noteworthy people mentioned are contained in the excellent Australian Dictionary of Biography adb.anu.edu.au/A complete list of the entries drawn upon is in the bibliography.

5

The Labor Government

When the Curtin Government took office in October 1941, it brought with it a settled policy towards the Commonwealth Bank and the banks generally which had been developed over many years. ‘From the earliest Labour policy platforms of the 1890s onwards, there had been demands for a national or people’s bank - impliedly an institution to carry rigorous competition with the private banks to the point of extinction’.(1) As soon it was able to do so - that is, it had a majority in both houses of the Parliament - the Fisher Labor Government created the Commonwealth Bank in 1912.

The Commonwealth Bank began and continued for many years essentially as a savings bank, although ‘nationalisation of banking’ became Party policy in 1919. Efforts by the Scullin Government in the early 1930s to widen the Bank’s activities were frustrated by the Senate. The Party records of the time illustrate its views. Thus a sub-committee of the Federal Executive (which included the Treasurer, E G Theodore) suggested in February 1931

! (a) That the Government be requested to make the necessary arrangements with the ! Commonwealth Bank to make available additional credits for the purpose of rehabilitating ! industry and providing remunerative employment for our people.! (b) That in providing for financial stabilisation the principle of equality of sacrifice be rigidly ! adhered to.

(c) That adequate action be taken to reduce the burden of interest upon the community. (2)

The Party Conference resolved in 1931 that if the current negotiations between the Government and the banks failed, ‘the Government is to proceed immediately to give effect to the Party’s Platform in connection with banking and currency’. In June 1931, the Federal Executive

! recognises that the Commonwealth Labor Government’s monetary policy has been thwarted by ! the banks and a reactionary Senate, thereby creating widespread industrial stagnation and ! unemployment and leading to a collapse of National finance. (3)

In 1936, the Conference adopted a report which had been prepared by the Parliamentary Party Caucus concerning banking. It included the following:

Under ‘Principles’1. The direction and control of nationalised banking to be vested in the Commonwealth Bank

operating under powers and responsibilties defined by the Commonwealth Parliament.

Under ‘Plan of Action’1. The operations of the Commonwealth Bank to be removed from and made entirely independent of

private banking interests and free from sectional influences or constraint.2. The abolition of the Commonwealth Bank Board, and the re-establishment of the original method of

control as set up at the time the Commonwealth Bank was founded.3. Expansion of the Bank’s business as a trading bank, with branches in all centres, in vigorous

competition with the private banking establishments.4. A statutory provision that the banking of all public bodies shall be reserved for the Commonwealth

Bank.

6

More radical motions - declaring banking to be a government monopoly, the absorption by the Commonwealth Bank of all private banks, giving branches of the Commonwealth Bank when established the sole right to ‘credit expansion by cheque system’ - were defeated. Item 4 of the ‘Plan of Action’ was the trigger for the events of 1946 and 1947 leading to the attempted nationalisation of the private banks. (4)

The conduct of the private banks during the depression years and indeed the Commonwealth Bank also, then under a board, was criticised not only by the Labor Government but also by the Country Party, so that after the Coalition Lyons Government was elected in 1934 it established a Royal Commission into Banking. One of its members was Chifley, at that time out of Parliament. Despite its conservative majority, the Royal Commission in its report made a number of recommendations which were in those times radical: to select from Crisp’s summary, ‘a considerable increase in the central banking functions and powers of the Commonwealth Bank’; ‘[t]he private trading banks should be licensed so that a decisive sanction would lie with the Commonwealth Bank and Government to enforce observance of statutory and central bank requirements’; and ‘[t]rading bank credit should be controlled by requiring the deposit in the Commonwealth Bank by each trading bank of variable mimimum percentages of the deposits of its customers...’. (5)

The Royal Commission recorded in its report that ‘We have not entered into the arguments for and against the nationalization of banking in Australia’. It had received no evidence from political organisations, and little from individuals, either for or against nationalization. Its view was that a strong central bank should regulate privately-owned trading banks. There was a terse footnote: ‘Mr Chifley dissents’.

A section entitled ‘Dissent, Reservation and Addenda by Mr Chifley’, one of several by various members of the Royal Commission, set out the case for nationalization. In 23 paragraphs over seven pages, Chifley argued that banking was unique in that it affected most aspects of the community, so that the general good should be the aim of the banking system; but the profit motive wrongly dominated the banks’ activities, as his review of recent economic history claimed to show. Chifley also argued for limitations on the profits of trading banks, quoting figures which showed that in the period from 1910 to 1929 the total profits of the trading banks represented an annual average of 13.97 per cent on paid capital and 8.24 per cent on shareholders’ funds. (6)

When the Curtin Labor Government took office in October 1941, the Prime Minister said that ‘in banking policy we shall be guided by the recommendations of the Royal Commission, which was never sought by the Australian Labour Party, but which no one except the Labour Party ever seems to have read.’ (7) He also said (later, in 1943) that the Party policy of nationalisation would not be applied while the war lasted. Using the war-time National Security Regulations, Chifley as Treasurer announced that several of the recommendations of the Royal Commission were to be applied, including that the banks’ surplus funds were to be transferred to the Commonwealth Bank on terms to be determined by him. (8)

The advent of the Curtin Government was soon followed by pressure from the Party generally and also from the Caucus to implement the policy concerning banking. The 1942 Conference drew the Government’s attention to the Party’s policy on banking, credit and insurance, and in December 1942 the Caucus added its weight with a request that the policy on banking and finance be implemented. The 1943 Conference reiterated earlier decisions but did not specifically mention bank nationalisation. (9)

7

There the matter rested until 1944, when the Government began to develop more permanent proposals which eventually took form in the Banking Bill 1945 and the Commonwealth Bank Bill 1945.

Notes

(1) Crisp, Chifley, page 166(2)Patrick Weller and Beverley Lloyd (eds): Federal Executive Minutes 1915-1955 (Melbourne

1978), page 155(3) Patrick Weller (ed): Caucus Minutes 1901-1949 Volume 3 1932-1949 (Melbourne 1975), pages

164-6(4)Weller and Lloyd, Federal Executive Minutes, pages 140-2(5)Crisp, Chifley, page 170(6) Report of the Royal Commission appointed to inquire into the Monetary and Banking Systems at

present in operation in Australia, and to report whether any, and if so what, alterations are desirable in the interests of the people of Australia as a whole, and the manner in which any such alterations should be effected. August 1937 A digital copy is available online from the National Archives: http://recordsearch.naa.gov.au/scripts/Imagine.asp The nationalization paragraph is no 669, and Chifley’s Dissent etc is at pages 262-8

(7)Crisp, Chifley, page 173(8) ibid(9)Crisp, Chifley, page 176

8

The Private Banks

There were in 1944 nine private trading banks, as that term is commonly understood - that is, leaving aside the Commonwealth Bank, then owned entirely by the Commonwealth Government; the Bank of New Zealand, from 1945 owned entirely by the New Zealand Government, and two very small banks, one French and the other Chinese, part-owned or owned entirely by the governments of the two countries. The nine banks were as follows, with their balance sheet totals in 1944 shown in millions of pounds:

Bank of New South Wales! ! ! 202 Commercial Banking Co of Sydney! 91National Bank of Australasia! ! 84Union Bank of Australia! ! ! 83Bank of Australasia! ! ! ! 80English, Scottish and Australian Bank! 70Commercial Bank of Australia! ! 70Queensland National Bank! ! ! 23Bank of Adelaide! ! ! ! 15

It might help contemporary readers to know what happened to these banks, none of which now exists by the name shown. The Bank of New South Wales merged with the Commercial Bank of Australia in 1981, and in the following year became the Westpac Banking Corporation. The National Bank of Australasia took over the Queensland National Bank in 1948, and in 1981 merged with the Commercial Banking Co of Sydney to become initially the National Commercial Banking Corporation of Australia and from 1984 the National Australia Bank Ltd. In 1951, the Bank of Australasia and the Union Bank of Australia merged to form the Australia and New Zealand Bank Ltd, and in 1970 took over the English, Scottish and Australian Bank. Finally, in 1979 the ANZ took over the Bank of Adelaide. The nine banks of 1944 had thus become by 1981 three banks: Westpac, the NAB and the ANZ. (1)

Of the nine banks in 1944, three - the Union Bank, the Bank of Australasia and the English, Scottish and Australian - were English banks, incorporated there, having their head offices in London and majorities of English shareholders. As noted, all later merged to become the ANZ.

The other relevant geographical consideration was that in the middle 1940s the headquarters of the Wales and the Commercial Banking Co of Sydney were in Sydney, and the headquarters or Australian headquarters of the five next-largest in Melbourne. The number in Melbourne in 1877 was such that they had formed a group known as the Associated Banks - similar groups existed in Brisbane and Adelaide in the 1940s - which in 1954 became the Australian Bankers’ Association. No such group was evidently thought necessary in Sydney at that time. The banks were still then largely, as they were originally, state-based; the Wales had a man in Melbourne, and some of his relevant correspondence with the Sydney general manager has survived and will be considered below. The National had in 1947 - there is no apparent evidence of the arrangement earlier - a man in Sydney, but if any other bank had a representative in Sydney or Melbourne, any correspondence with Australian head office does not seem to have survived.

9

Some useful correspondence between the Australian managers of the three English banks and their London head offices has survived and is drawn upon later.

The dominant figures in the banks at that time were the general managers. In Sydney, because of the Wales’ market leadership, its General Manager T B Heffer, tended to speak at least to his Melbourne counterparts as the voice of the two Sydney banks. His predecessor, Sir Alfred Davidson, who was General Manager from 1929 until 1945, had been the dominating figure in Australian banking in his time. Heffer’s counterpart at the Commercial Banking Co of Sydney was Cholmondeley Darvall. The principal figure in Melbourne was L J McConnan, the Chief Manager of the National Bank of Australasia and at some of the relevant times the Chairman of the Associated Banks (Victoria). As his biographer records, he was a foundation council member of the conservative Institute of Public Affairs, and met regularly with Ian Potter, a trustee of the Liberal Party, and the Party leader Robert Menzies. In Adelaide Oscar Isaachsen as General Manager of the Bank of Adelaide was also influential. (2) Heffer, McConnan and Isaachsen had each joined his bank at a young age and worked his way up.

The board of the National Bank in particular is worth dwelling on. The long presence and influence of the Clarke family on the Legislative Council of Victoria is noted later in the section dealing with that body. The family had a similar presence and influence on the National Bank and a predecessor and a successor. The founding father, William John Turner Clarke (died 1874) had a large share in the Colonial Bank of Australasia, to the extent that it became known at one time as ‘Clarke’s bank’. In 1870 he became the governor of the bank, that is the chairman of the board.

Two of his sons, Joseph (1834-1895) and William John (1831-1897), later Sir William, baronet, likewise had large shareholdings in the Colonial Bank, and both served as governor, William for 20 years. Both also contributed their own funds to the Bank when it was forced to close its doors in 1893. Sir William’s son, Sir Rupert Clarke (1865-1926) also became governor of the bank, but resigned in 1901 when charges were imposed for keeping current accounts. Sir Rupert’s son, also Sir Rupert (1919-2005), became a director of the National Bank, as it had by then become, in 1955 and stayed in that position until 1992, becoming vice-chairman in 1978 and chairman in 1986.

The elder Sir Rupert had two half-brothers, one of whom, Sir Frank Clarke (1879-1955) (not a baronet) became a director of the Colonial Bank and then in 1918 when it merged with the National Bank, a director of that bank also. He remained a director until 1955 and was for a time vice-chairman; he was also for many years a member of the Legislative Council of Victoria and in that capacity played a crucial role in the events of 1947. There was thus a Clarke on the board of the Colonial Bank and its successors the National Bank of Australasia and the National Australia Bank for the greater part of the period from 1870 until 1992.

The other members of the board in 1947 were also establishment Melbourne and in addition Brisbane, reflecting the National’s link with Queensland. The chairman (from 1943 until 1959) was Harry Douglas Giddy, a partner in a firm of chartered accountants and a member of the Melbourne and Royal Melbourne Golf clubs, among others. Other members included Frederick Ewen Loxton, at that time Chairman of the Queensland National Bank; David York Syme, the chairman of the Melbourne Steamship Co who would sit on the board for 33 years; Harold Gordon Darling, the Chairman of BHP; Sir Clive McPherson, the Managing Director and Chairman of the pastoral house, Younghusband Ltd; Sir George Coles, the Chairman of G J Coles Ltd; and Sir Douglas Forbes, a former General Manager of the Queensland National Bank and chairman (1937-47) of the Associated Banks of Queensland (3).

10

Perhaps reflecting the different bases of the two banks’ sources of income and major customers in the 1940s, the Wales’ boards tended to be dominated by knighted representatives of pastoral interests, if the occupations of its presidents (as the chairmen of the board were called) are any guide. Thus the president from 1945 until 1950 was Sir Frederick Tout, solicitor and pastoralist; his successor from 1950 until 1952 was Sir Martin McIlrath, merchant and pastoralist who had been a director since 1940. The tradition was continued by Sir Colin Sinclair, pastoralist and former politician, president from 1952 until 1954, who was succeeded by Sir Leslie Morshead, soldier and businessman. Another director at this time (from 1932 until 1950) was Hubert Fairfax, grazier and company director.

Notes

(1) Details of the banks in 1944 are taken from S J Butlin: Australia and New Zealand Bank, Melbourne, 1961, pages 420-1; while their subsequent histories are taken from a document entitled History of Banks in Australia since 1944, compiled by Margaret Bailey, Archivist, Reserve Bank of Australia, 1988-1995, a copy of which was given to me by her successor, Virginia MacDonald. There were also at that time some small State banks but as noted later they were not ‘banks’ under the Banking Act 1945.

(2)Thomas Baker Heffer (1885-1950) was born in Blenheim New Zealand and joined the Wales there in 1903. Apart from service in the First World War, he spent the rest of his working life at the bank, becoming general manager in 1945. (See L Sharon Davidson and Stephen Salsbury: Australia’s First Bank: Fifty Years from the Wales to Westpac, Sydney 2005, page 40) For Davidson, as well as his ADB entry, see also C B Schedvin: ‘Sir Alfred Davidson’ in R T Appleyard and C B Schedvin (eds): Australian Financiers - Biographical Essays, Melbourne, 1988.

(3)Details of the Clarke directors are given in the section on the Victoria Legislative Council below; for Giddy and Loxton, see Who’s Who in Australia 1947.

11

The Commonwealth Bank

The Commonwealth Bank was established in 1912 by the Fisher Labor Government. Its creation seems to have been brought about at least in part by the difficulties private banks encountered in the preceding decade - the panic, as Blainey calls it. Twelve banks closed in six weeks in 1893, some of them never to re-open. The ‘path of reform’, Schedvin noted, ‘was to establish a public bank that would compete against the private banks, keep the government accounts and provide other financial services to the government, act as custodian of the savings of the people, and avoid the presumed hazards of profit-seeking private banking.’ (1) The new Commonwealth Parliament had been given the constitutional power to make laws regarding ‘banking, other than State banking; also State banking extending beyond the limits of the State concerned, the incorporation of banks, and the issue of paper money’. (section 51 (xiii)).

‘This will be a bank belonging to the people’, Fisher declared in his second reading speech, ‘and directly managed by the people’s own agents.’ The bill provided for ‘a general banking business’ and ‘a savings bank business’, and that was all that seemed to be intended, there being no mention of any powers which a central bank might have. (2) It had no power to issue paper money until 1920. It did have the Commonwealth Government’s accounts and by 1920 it also had the accounts of the four smallest state governments. Its main responsibility, however, was ‘to develop a nation-wide savings bank system that would act as a means of unifying the new federation’. This turned out to be a slow process because of resistance from the States: eventually Tasmania, then Queensland (1920) and New South Wales and Western Australia ( both 1931) were taken over, and by 1950 the Commonwealth Bank had nearly 63% of savings bank deposits. Victoria and South Australia remained state-controlled. In view of the later controversy in 1947 concerning the requirement that local government authorities in effect bank with the Commonwealth Bank, it is also worth noting that in February 1947 - before the requirement came into effect - ‘the Bank was already handling local government business at 160 locations’. (3)

Like the Bank of England, the Commonwealth Bank was administered by a Governor, and at least initially there was no board. The first Governor was Sir Denison Miller (1912-23) who had on appointment been number two in the Bank of South Wales. In 1924 further legislation - by the conservative Bruce-Page Government - changed the nature of the bank and put it under the control of a board. The Treasurer, Sir Earle Page, his biographer records

! did his best to convert the Commonwealth Bank into a fully fledged central bank, giving it an ! independent board of direcors and control over note issue. Unfortunately he failed to get the ! private banks to take the crucial step of agreeing to deposit private funds with the bank, and ! thus had to be satisfied with a half-loaf.

The board strongly resembled the boards of the private banks. Indeed Sir Clive McPherson in the period 1933-58 was successively a director of the National Bank, a member of the Board of the Commonwealth Bank, and then a director again of the National Bank. The first chairman (1924-6) was Sir John Garvan, financier, and he was succeeded by Sir Robert Gibson (1926-34), businessman and financier, who had been one of the original members of the board and who ‘assumed tactical responsibility for the bank’s policy during the early 1930s’. The last chairman before the 1945 legislation did away with the board, at least temporarily, was Sir Claude

12

Reading (1934-45), a businessman who had been first appointed to the board in 1927. There were some exceptions: Maurice Duffy (member 1930-45) had been an accountant and union official (he ‘held very moderate views’ his biographer records); Sir Henry Sheehan, Secretary to the Treasury and member of the board 1932-38, and Governor 1938-41; and L F Giblin (member 1935-42), political economist. In Chifley’s time as Treasurer he appointed W C Taylor, a Sydney solicitor and ALP member, and Dr H C Coombs, then Director of Rationing and later the last Governor of the Bank in its original form (1949-60).

It is perhaps a measure of the extent to which the power in the Bank shifted from 1924 to 1945, while the Board lasted, that Gibson and Reading were the better-known and dominant figures rather than the Governors Sir Ernest Riddle (1927-38) and Sheehan. By contrast, the dominant figures in the private banks at this time were the general managers.

The Bank’s fate under future Labor Governments was decided by its conduct towards the Scullin Labor Government during the depression years, and in particular in 1930 and 1931. In May 1930 a bill sought to establish a Central Reserve Bank under a board, and a Commonwealth (Trading) Bank under a Governor. A hostile Senate turned it down. Scullin came more and more under the influence of Gibson, despite his opposition to the Government’s economic plans, and he was reappointed as Chairman in August 1930. A delegation from the Bank of England under Sir Otto Niemeyer visited Australia to report on the economy; its prescription, Crisp observes at page 49, ‘was ruthlessly deflationary’. Early in 1931 the Board of the Bank resolved that it would actively co-operate with the trading banks and the governments of Australia in supporting industry and restoring employment ‘subject to adequate and equitable reductions in all wages, salaries and allowances, pensions, social benefits of all kinds, interest and other factors which affect the cost of living’. The trading banks took a similar line. (4)

As Schedvin notes, ‘the Bank won this contest’ and the Premiers’ Plan of June 1931 included reductions of 20% in wages, salaries, pensions and the like, as well as reductions in bank interest. (5)

The Lyons Government as noted appointed a Royal Commission in 1935 and it produced its report in 1937. There matters rested throughout the remainder of the Lyons Government (until 1939), the first Menzies Government (1939-August 1941) and the Fadden Government (August-October 1941). One bill got to the Parliament, but did not progress; there seems to have been little enthusiasm for reform, and much opposition, especially from the private banks.(6) Not until the advent of war and the coming to power of the Curtin Government were there any further major developments. They form part of the subsequent narrative. During the period with which we are concerned, the Bank acted essentially as a go-between for the Government and the trading banks. (7)

Notes

(1) Geoffrey Blainey and Geoffrey Hutton: Gold and Paper 1858-1982: A History of the National Bank of Australasia Ltd, Melbourne, 1983, chapter 10; Boris Schedvin: In Reserve: Central Banking in Australia 1945-75, Sydney, 1992, page 47

(2)House of Representatives Hansard, 15 November 1911(3) Schedvin: In Reserve, pages 22-3 and 75..

13

(4)For Niemeyer, see Susan Howson, ‘Niemeyer, Sir Otto Ernst (1883–1971)’, Oxford Dictionary of National Biography, Oxford University Press, 2004; online edn, Jan 2008 [http://www.oxforddnb.com.ezproxy.londonlibrary.co.uk/view/article/31501, accessed 23 May 2013]

(5) Schedvin, In Reserve, page 53(6)The Commonwealth Bank Bill 1938 received its second reading in the House of

Representatives on 6 December 1938, having been introduced by the Treasurer, R G (later Baron) Casey; it was largely concerned with the recommendation of the Royal Commission regarding the establishment of a mortgage bank as part of the Commonwealth Bank; it also dealt with other minor recommendations such as the appointment of directors, but it specifically did not deal ‘in any way’ with the trading banks, the recommendations concerning which were to be dealt with at ‘a later stage’. The Bill appeared on the Notice Paper for the House for 1939 but not in the Hansard. Crisp (Chifley, page 173) quotes Giblin (The Growth of a Central Bank) as saying that ‘The case for the banks, formally made to the Government, gives a very unhappy impression. It is marked by distortions of the judgments of the Commission, partial statments of fact, and evasion of the arguments put forward by the [Commonwealth]Bank.’ See also Bob White and Cecilia Clarke: Cheques and Balances - Memoirs of a Banker, Melbourne 1995, page 12: “The strength of the trading banks’ opposition, and the approach of the 1939-45 war, delayed legislation which would have given effect to the Commission’s findings’. Butlin quotes from a draft 1939 bill which contained a version of sections 18-22 of the 1945 legislation, requiring the private banks to keep a reserve of deposits with the Commonwealth Bank: ‘Australian Central Banking 1945-59’ Australian Economic History Review, XXIII, Number 2, September 1983, page 98

(7) In presenting his Budget to the Parliament on 25 September 1941, Fadden announced that ‘I have asked for and obtained a firm undertaking from the [trading] banks’ which included inter alia ‘The trading banks will make available by way of deposits with the Commonwealth Bank all surplus investable funds accruing in their hands i. e. all funds over and above those necessary to met the overdraft requirements of the public in accordance with the advance policy laid down by the Commonwealth Bank...’ ; this undertaking became under the Curtin Government a requirement in the National Security Regulations.

14

The Melbourne City Council

In its Statement of Claim of 19 June 1947 to the High Court against the Commonwealth and the Commonwealth Treasurer, the Melbourne City Council described itself thus:

! The Plaintiff is and was at all material times a body corporate constituted by an Act of ! the Governor and Legislative Council of New South Wales passed in the sixth year of ! the reign of Queen Victoria intituled ‘An Act to incorporate the Inhabitants of the ! Town of Melbourne’ as amended by an Act of the Parliament of Victoria intituled ‘The ! Melbourne and Geelong Corporations Act 1938’ and as such capable of suing by and ! under the name style and title of the ‘Lord Mayor Councillors and Citizens of the City ! of Melbourne’

The Claim went on to say what the Council was empowered to do and the undertakings it carried on, including ‘the Fish Market’ and ‘a Refrigerator’; what properties it controlled and maintained; and the various Acts and regulations it administered, including ‘the licensing and control of hackney carriages and motor omnibuses within the Metropolitan area’. In the course of such activities, ‘the Plaintiff receives sums of money upwards of [pounds] 1,800,000 per annum and makes payments....amounting to a similar sum’. Further, ‘...the banking business necessary and incidental to the Plaintiff ’s activities is and has for some years been conducted for the Plaintiff by the National Bank of Australasia Ltd...’

Under the 1938 Act referred to, the Council had in 1947 33 councillors in 11 wards, elected for three years but in such a way that a third of them retired each year. The Lord Mayor, who apparently alone of the councillors received an allowance, was himself a councillor and was elected by his fellow councillors. The Council resembled in many ways the Legislative Council, in that councillors once elected tended to stay elected and to serve for many years. Many were unopposed at elections: in the 1947 election, nine of the 11 candidates were unopposed, as was the mayoral candidate, Francis Connelly, who had been mayor for the previous two years. Because of a restricted and grossly inequitable franchise and qualifications for candidates (as with the Legislative Council - see below), only ten members were from the Labor Party. (1)

Of the 1947 councillors, details are available for length of service for 24. The average was 20 years, with at the top end Sir Harold Smith (1890-1983) having served or to serve for 44 years, from 1921 until 1965. Like the other two knights then on the Council, he had been honoured because he had served three successive one-year terms as Lord Mayor. Three other councillors had been elected in the 1920s, 12 in the 1930s and eight in the 1940s. One succeeded his father and another was succeeded by his son. It is hardly necessary to say that all 33 were men.

Further details are readily available for 12 councillors, by coincidence five Labor members and seven not. Two were in their seventies, four in their sixties, five in their fifties and only one in his forties. Some background on each group will give the flavour.

The five Labor members were William Barry (1899-1972), Patrick Leslie Coleman (1895-1975), Thomas Hayes (1890-1967), John Joseph Holland (1877-1955) and William Richard Hunt. Barry was a member of the Legislative Assembly, and Coleman, Hayes and Holland members of the Legislative Council. Such membership gave them sufficient income and time to be unpaid

15

councillors.(2) Barry, Hayes and Holland were previously of working-class occupations, while Coleman was an accountant and then a publican, and Hunt a solicitor.

The other non-Labor councillors in addition to Sir Harold Smith were Francis Connelly (1895-1949), James Disney (1896-1952), Sir Thomas Nettlefold (1879-1956), Oliver John Nilsen (1884-1977), Robert Henry Solly (1883-1968) and Sir George Wales (1885-1962). The three knights had previously been Lord Mayor, as Connelly was in 1947 and Disney was to become in 1948; both completed three years in that office, and were thus knighted. Six of the seven were businessmen, the exception being Smith who was a medical practitioner. Nilsen and Solly were both to become Lord Mayor but only for one year. Disney was a foundation member of the Liberal Party and from 1940 to 1946 he was a member of the Legislative Council, where until 1943 he sat opposite his father, a long-standing Labor member. Wales was also briefly a member of the Legislative Council.

The two councillors who had most to do with the High Court challenge were Connelly and Solly. The Lord Mayor in 1947, Connelly was a successful businessman and had been elected to the Council in 1934 as a ‘non-Labor’ representative. Politically ambitious, he was more of a party man than some of his colleagues, standing unsuccessfully three times as a candidate for the Victorian Legislative Assembly (once as a Nationalist, once as an ‘Independent United Australia Party’ candidate and once as an independent). Connelly’s club memberships were confined to various sporting clubs; and his entry in the Australian Dictionary of Biography contains no mention of his role in the banking case. Knighted in 1948, he was seeking Liberal preselection for the Senate at the time of his death the following year.

While Solly also warrants an entry in the Australian Dictionary of Biography, his role in the High Court case is likewise not considered worthy of mention. Another successful businessman, he was a councillor from 1934 until 1968 and Chairman of the Finance Committee from 1943 to 1953. Although elected as an independent candidate, he was a founder member of the (non-Labor) Civic Group in 1940, and Lord Mayor in 1953-4. His club memberships were like Connelly’s confined to various sporting clubs and the Royal Automobile Club of Victoria, while among his qualities were ‘grave demeanour and measured tread’. His role in the banking case, and Connelly’s role, will be considered in more detail below.

As with the Legislative Council, the Melbourne City Council in the 1940s was composed at least in part of rotten boroughs which ensured that the conservative side of politics dominated the membership and the conduct of its affairs.(3)

Notes

(1) The Victorian Local Government Act 1928, as amended by the Melbourne and Geelong Corporations Act 1938, provided that every person aged 21 who was ‘the owner or occupier of property in the municipal district whether consisting of one or more tenements of the rateable value of Twenty pounds at the least shall be qualified to hold the office of councillor of the city of Melbourne or the city of Geelong’ (section 5). The basic wage in Melbourne in 1948 was five pounds seventeen shillings per week, which provides an indication of the relative wealth required to be a councillor. The same legislation set out the requirements for electors, which likewise penalised the poor but gave greater rewards for the rich, especially rich landlords. Thus a person aged 21 and who was ‘liable to be rated in respect of any property’ was entitled to vote; if property was worth less than fifty pounds, the elector got one vote; between fifty and one hundred pounds, two votes; and over one hundred pounds, three votes. A person who lived in a property worth less than five pounds was not entitled to vote, unless there was a house on the property and such a person resided

16

there. In a provision applying only to Melbourne and Geelong, landlords who owned property, in respect of which some other person as occupier got the votes, also got votes - one if the property was less than one hundred pounds, and two votes if it was worth more. Lest this led to very wealthy landlords getting large numbers of votes, the limit was three (Second Schedule).

(2) In 1870 - the first of the Australian colonies to do so - the Parliament of Victoria passed An Act to provide for reimbursing Members of the Legislative Council and of the Legislative Assembly their expenses in relation to their attendance in Parliament. Each member was entitled to ‘receive reimbursement of his expenses in relation to his attendance in the discharge of his Parliamentary duties at the rate of Three hundred pounds per annum.... provided that no member whilst in the receipt out of the Consolidated Revenue of an official salary or any annual payment shall (to the amount of such salary or payment) be entitled to receive such reimbursement as aforesaid’. See foundingdocs.gov.au/item-sdid-21.html The Act itself may be seen at http://www.austlii.edu.au/au/legis/vic/hist_act/aatpfrmotlcaotlateirttaip1415/

(3) The Council itself was an unreliable source of information, even as to its historical membership: in response to an inquiry concerning councillors in 1947, an email dated 2 December 2005 from Nadine Gaffney, Team Leader Corporate Information Services, City of Melbourne named only 16 - fewer than half. The Australian Dictionary of Biography, the website of the Parliament of Victoria and the records of the Melbourne Argus - available through the Trove database from the National Library of Australia - are more reliable.

For the councillors named above, in alphabetical order, Barry, Connelly, Disney, Nettlefold, Nilsen, Smith, Solly and Wales have ADB entries. For the others,Coleman, Patrick Leslie: http://www.parliament.vic.gov.au/re-member/bioregfull.cfm?mid=974Hayes, Thomas: http://www.parliament.vic.gov.au/re-member/bioregfull.cfm?mid=1137Holland, John Joseph; http://www.parliament.vic.gov.au/re-member/bioregfull.cfm?mid=1160; see also http://www.kensingtonassociation.org.au/did-you-know/did-you-know-jj-holland/; neither website mentions Holland’s time as a Councillor; his son, Kevin, took over his father’s parliamentary seat in 1956, following J J Holland’s death, holding it until 1967, and again like his father served as a Melbourne City Councillor (1951-75); http://www.parliament.vic.gov.au/re-member/bioregfull.cfm?mid=1161

17

The Liberal Party

Teasing out the connections and associations between the principal banking, local government and state government players in the events of 1947 and 1948 with which we are concerned is often a matter of inference rather than evidence. The same is true to a greater degree when one tries to go a step further and identify the associations as they extended to the national arena, and in particular to the Liberal Party, the major player in the Opposition from its foundation in 1944-45 and in the coalition in government after the 1949 elections. The Party clearly benefited from the decisions Chifley and his government took at that time, in particular the decision in 1948 to nationalise the trading banks. Is it possible to establish the degree to which the Party was aware of and indeed influenced the moves made by the banks, the Melbourne City Council and the Government of Victoria?

Questions of this kind translate into questions about individuals and their relationships, and the central figure is Robert Menzies, leader of the Liberal Party from its foundation and from 1949 Prime Minister. To the extent that it possible to speak of Melbourne in the 1940s as having an establishment, Menzies was a prominent figure in it. Born in 1894, he had been admitted to the bar in 1918 (QC 1929) and had entered the Parliament of Victoria in 1928, where he remained, at various times holding ministerial rank, until 1934 when he was elected to the Commonwealth Parliament. There too he became a minister, and in 1939 Prime Minister as head of the United Australia Party (UAP). He resigned in 1941 having lost the confidence of most of his ministers, but resumed leadership of the UAP in opposition in 1943 before the formation of the Liberal Party, ‘in whose gestation’, his biographer in the Australian Dictionary of Biography notes, ‘Menzies’ influence was the most prominent’. (1)

An important player in Victorian politics and public policy from the early 1940s was the Institute of Public Affairs (IPA), which ‘represented primarily the fear that Labor’s political dominance during and after the war would mean the triumph of socialism and a serious challenge to individual initiative’. (2) It describes itself today as ‘ an independent, non-profit public policy think tank, dedicated to preserving and strengthening the foundations of economic and political freedom. Since 1943, the IPA has been at the forefront of the political and policy debate, defining the contemporary political landscape.’ (3) Many of its founding fathers were, like Menzies, members of the Melbourne establishment; most were businessmen. Some like Sir Walter Massey-Greene were former members of the UAP, while others such as F E Lampe, Herbert Taylor and Sir Arthur Warner joined the Liberal Party. Sir George Coles and Harold Gordon Darling were on the board of the National Bank of Australasia, of which Leslie McConnan was the General Manager. Other prominent founding fathers were Sir Charles Booth, Sir Herbert Gepp, Geoffrey Grimwade and Cecil McKay. Such associations as existed would have been strengthened by common membership of Melbourne clubs (Menzies belonged to the Australian and Savage Clubs), not forgetting the Melbourne Cricket Club. (All those named in this paragraph have entries in the Australian Dictionary of Biography, which mention their association with the IPA.)

Other members of the Melbourne establishment known to have been close to Menzies in the 1940s were Ian Potter the stockbroker, and Cecil (Peter) Looker, who was in Potter’s firm and had been Menzies’ private secretary when he was Prime Minister during the war. (4)

Some relationships are documented. McConnan’s biographer in the Australian Dictionary of Biography records that in the 1940s he ‘met regularly with (Sir) Ian Potter, the prominent

18

stockbroker, and (Sir) Robert Menzies’.(5) Another source has this association dating from the late 1930s, the meetings taking place in McConnan’s offices. Further, Menzies appointed Potter a trustee of the Liberal Party when it was established and he ‘remained one the party’s fund raisers for the next 30 years’. (6) In March 1945, when the Chifley Government was about to introduce its banking bills, Potter and ‘other financiers from Sydney and Melbourne’ arrived in Canberra and ‘spent the day in conference with Menzies and his Liberal colleagues’. (7) On the day in August 1947 that the Government’s decision to nationalise the trading banks was announced (a Saturday)

! ...Potter met with McConnan to plan the trading banks’ response. McConnan became the ! leading figure in the attack on the Chifley government’s proposals and Potter was engaged as ! a strategist and publicist. His talents were also used to contain ever present tensions between ! the Melbourne and Sydney banks during their successful battle against the government. (8)

Potter was knighted by the Menzies Government in 1962 ‘for public service’.

The fullest biography of Menzies thus far - by A W Martin - is unfortunately silent on most of the names mentioned here; some appear only en passant, notwithstanding that there is in Chapter 1 of Volume 2 discussion of the formation and influence of the Victorian IPA.

Notes

(1) A. W. Martin, 'Menzies, Sir Robert Gordon (Bob) (1894–1978)', Australian Dictionary of Biography, National Centre of Biography, Australian National University, http://adb.anu.edu.au/biography/menzies-sir-robert-gordon-bob-11111/text19783, accessed 9 November 2013.(2) A W Martin: Robert Menzies, A Life Volume 2, 1944-1978, Melbourne, 1999, page 4(3) See its website www.ipa.org.au/about (4)Looker has an entry in the ADB; for Potter, www.asap.unimelb.edu.au/bsparcs/aasmemoirs/

potter.htm(5) D. T. Merrett, 'McConnan, Sir Leslie James (1887–1954)', Australian Dictionary of Biography,

National Centre of Biography, Australian National University, http://adb.anu.edu.au/biography/mcconnan-sir-leslie-james-10916/text19391, accessed 9 November 2013.

(6)Leon Glezer: ‘Sir Ian Potter and His Generation’, in R T Appleyard and C B Schedvin (eds) Australian Financiers: Biographical Essays (Melbourne 1988), page 405

(7) A W Martin: Robert Menzies, A Life, Vol 2, page 20(8)Glezer page 405; May has Potter and ‘Ron Grover of the National Bank’s economic

department’ visiting McConnan that evening (A L May: The Battle for the Banks, Sydney, 1968, page 14); McConnan, Potter and Looker went into business together in 1953, subscribing to the firm of Australian United Underwriting Co Ltd (The Argus, Melbourne, 13 June 1953, www.trove.nla.gov.au)

19

The Legislative Council of Victoria

The Legislative Council of Victoria in 1947 in many ways resembled the original nineteenth-century institution which had been established 91 years previously. As the website of the Victorian Parliament itself says, the Council at this time was ‘a bastion of wealth and privilege’. (1) For the purposes of electing members of the Council (all of them with the prefix ‘Honourable’ and the post-nominals MLC), the State was divided into 17 provinces, each returning two members. In 1947, 31 members had been born in or before 1900, and the other three in or before 1908 - an age structure reflecting the qualifications then required of candidates, who had to be at least 30 years of age and had to own property worth at least two hundred and fifty pounds. The franchise too was restricted - to property owners, graduates and members of certain professions such as clergymen. More than half the Victorian electorate was unable to cast a vote for members of the Council. Not until 1950 were these restrictions removed. Not until 1979 were the first women elected.

The effect of the restrictions may be seen in the 1945 and 1946 election figures. In the elections for the Legislative Assembly in 1945, 1,276,949 people were on the roll; 1,019,063 were eligible to vote in the 51 contested seats (from the total of 65 seats) and 88% did so. In the 1946 Council elections (which were held separately until 1961), 17 of the 34 seats became vacant but only 12 were contested. This was an improvement on the previous election in 1943, when only four of the 17 seats were contested. Members were elected for six years; half retired every three years. Although voting was compulsory (from 1935), of the 517,727 on the roll in 1946, 393,907 were eligible to vote in the contested seats but only 74% did so.

The political party composition of the Council in 1946 unsurprisingly showed a large majority of non-Labor. The ALP had only six members, there was one independent, and the remaining 27 were non-Labor, variously described; some of these such as Sir George Lansell ‘averaged about a comment a year and had little commitment to party’ according to the Australian Dictionary of Biography.(2) The occupations of the members were similarly skewed: 13 were farmers, and 12 businessmen. No fewer than 12 - more than one-third - were knighted then or later; more detailed research might well show that some were ennobled at times and in circumstances suggesting that political favours were being paid or repaid. Two were further elevated to become knights of the Order of the British Empire.

As noted, 31 of the 34 members had been born in or before 1900. In 1947, three were over 80, five between 70 and 80 and 11 between 60 and 70; the remaining 15 were under 60. The oldest member in 1947 was William Haslam Edgar (1858-1948) who had been first elected in 1904 and except for the period 1913-17 remained a member until his death, aged 90. Members once elected tended to be re-elected, and some never faced an opponent. Sir George Goudie, who was first elected in 1919 for North-Western Province and who was a member until his death in 1949, never contested an election. Sir William Angliss represented Southern Province for 40 years and ‘was usually unopposed’. Sir Gordon McArthur held his seat in South-Westerm Province for 34 years. In 1947, only ten members had been elected in the 1940s; three had been members for more than 40 years, and a further six for between 30 and 40 years. Six of the members in 1947 died in office and several others appear to have left only because they obtained other appointments. Archibald McDonald Fraser (1896-1979) resigned to become a County Court judge, while Percy James Clarey left in 1949 to become the Labor member for Bendigo in Canberra.

20

Not until 2002 did Labor achieve a majority in the Council. Attempts by the Labor Government in 1936 and 1937 to reduce the Council’s powers to restrict bills, including money bills, ‘met with very limited success.’

At the extreme, some members treated the Council as an antipodean House of Lords, so that inheriting the Clarke baronetcy meant virtually inheriting a seat for the Southern province. The influence of the Clarke family on the National Bank and its predecessors, over several generations, was noted above in the section dealing with the private banks. It is illuminating to re-visit them when dealing with the Council.

The first baronet of Rupertswood, Sir William Clarke, represented Southern Province in the Council from 1878 to 1897. He was succeeded by Sir Rupert Clarke who also took his father’s Southern Province seat which he held from 1897 until 1904. His widowed father having married again, Sir Rupert had two half-brothers, Russell and Frank. Both were elected to seats in the Council: Russell took what was virtually the family seat in the Southern Province from 1910 until 1937, while Frank variously represented a number of provinces from 1913 for 42 years until his death. From 1917 until 1923 he held a number of ministerial portfolios, becoming in 1923 President of the Council, a position he held for 20 years. In 1926 he was knighted (KBE). Although the baronetcy continued (the current baronet is the fourth) the association between the family and Council did not extend beyond 1955. Sir Frank was to play a crucial role in the events of 1947 as they involved the Council.

Cases of sons succeeding fathers were not confined to the Clarkes. Sir Gilbert Chandler succeeded his father Alfred as a representative of the South-Eastern Province in 1935, and spent 38 years in the Council.

It is plain that many - perhaps most - seats in the Council in 1947 were the antipodean equivalents of the rotten and pocket boroughs of Great Britain and Ireland in the eighteenth and nineteenth centuries. The franchise, the qualifications for candidates and the party influence were such that the electorates were effectively in the hands of a minority. While none was as bad as Old Sarum in Wiltshire in 1831 (three houses, seven voters, two members of Parliament) or Dunwich in Suffolk, most of which had fallen into the sea, William Cobbett would have recognised the Victorian legislative landscape, as would Gilbert and Sullivan:

Sir Joseph Porter: I grew so rich that I was sentBy a pocket borough into Parliament. I always voted at my party's call, And I never thought of thinking for myself at all. I thought so little, they rewarded meBy making me the Ruler of the Queen's Navee! (3)

Such abuses did not cease in Great Britain and Ireland until the Reform Act was passed in 1867, while the Council’s practices proved to be more durable: it was not fully reformed until 2006.

Notes

(1) The website (www.parliament.vic.gov.au) has been changed and this phrase no longer appears.

21

(2)Kevin Peoples, 'Lansell, Sir George Victor (1883–1959)', Australian Dictionary of Biography, National Centre of Biography, Australian National University, http://adb.anu.edu.au/biography/lansell-sir-george-victor-7033/text12235, accessed 9 November 2013.

(3) For Cobbett, see Ian Dyck, ‘Cobbett, William (1763–1835)’, Oxford Dictionary of National Biography, Oxford University Press, 2004 [http://www.oxforddnb.com.ezproxy.londonlibrary.co.uk/view/article/5734, accessed 8 Nov 2013]; and for Sir Joseph Porter, see Gilbert and Sullivan: HMS Pinafore (1878)

The Namier-like research about the Legislative Council was carried out by the author, drawing on the Parliament of Victoria website and the following:

Browne, Geoff: Biographical Register of the Victorian Parliament 1900-84, Melbourne, 1985Who’s Who in Australia 1947 and subsequent editionsWright, Raymond: A People’s Counsel: A History of the Parliament of Victoria 1856-1990, Melbourne, 1991

22

The High Court of Australia

The High Court which heard the Melbourne City Council case in 1947 comprised the Chief Justice, Sir John Latham, and Justices Dixon, McTiernan, Rich, Starke and Williams. Fuller details of them are available in their Australian Dictionary of Biography entries, but in the present context the following information is relevant.

Latham, Dixon and Starke were from the Melbourne bar, and the other three from the Sydney bar. That McTiernan had been Rich’s associate, that Dixon had been Starke’s pupil and that Menzies had been Dixon’s pupil indicates some of the connections which existed and which bear upon this paper. Latham and McTiernan had been active politicians on or shortly before their appointments. Latham had been Commonwealth Attorney-General and had held other Ministerial posts in the Bruce (1928) and Lyons (1932-34) conservative governments. McTiernan had been Attorney-General in the Storey-Dooley (1920-22) and Lang (1925-27) NSW State Labor Governments, and was elected to the Commonwealth Parliament in 1929. He and Evatt had been appointed in 1930 in an attempt by the Scullin Labor Government to redress the Court’s conservative bias.

All six were in 1947, or were to become, knights, that being the normal ex officio honour for High Court judges in that era. KCMG was the earlier going rate (Rich 1932, Starke 1939, Dixon 1941); those coming later had to make do with a KBE (McTiernan 1951, Williams 1954); Latham was already GCMG on appointment. That tradition has continued, the normal ex officio honour for a High Court judge now being AC, Companion of the Order of Australia.

In 1947 there was no retirement age for judges, as there was to be after 1977 when age 70 was determined by referendum to be sufficient for judges of federal courts. It was a matter for them when they retired. Rich (born 1863) was at 84 the oldest judge, followed by Starke (76), Latham (70), Dixon (61), Williams (58) and McTiernan (55). Of the group, only Williams was under 70 when he retired, with Rich at 87 being at the other extreme. Rich had been on the Court for 34 years in 1947, Starke for 27, Dixon for 18, McTiernan for 17, Latham for 12 and Williams for seven years.

Of the six, only two - Rich and McTiernan - had been appointed by Labor Governments.

23

The Melbourne Establishment

Members of some of the institutions described (the private banks, the Melbourne City Council, the Liberal Party, the Legislative Council of Victoria and the High Court) also together formed the Melbourne establishment in the 1940s. It warrants more detailed study than it has received, and that it can receive here. The Oxford English Dictionary describes ‘the establishment’ as ‘a social group exercising power generally, or within a given field or institution, by virtue of its traditional superiority, and by the use esp. of tacit understandings and often a common mode of speech, and having as a general interest the maintenance of the status quo’. One of its sources was the journalist Henry Fairlie who used the term in The Spectator in 1955 and emphasised that ‘The exercise of power in Britain (more specifically, in England) cannot be understood unless it is recognized that it is exercised socially.’

A major problem in writing about the Melbourne establishment in the 1940s is that much relevant information has not been recorded - or at least not recorded in the relevant Australian Dictionary of Biography entries. Thus while we know of McConnan’s clubs, social and sporting, Darling’s clubs did not arouse his biographer’s curiosity (notwithstanding that he ‘enjoyed golf ’). The same is true of Syme, made worse by his biographer thinking it worthy of record that he belonged to the Melbourne Rotary Club. Some possible sources of influence - membership of orders such Freemasons, for example - are also poorly recorded. According to the website http://www.lodgedevotion.net/devotionnews/education-editorial-articles/famous-australian-freemasons/large-list-of-notable-and-famous-australian-freemasons Menzies became a Freemason in 1910 (an improbable date - he was only 16 at the time), and Mr Justice Starke of the High Court was also in the order. The Martin biography of Menzies does not mention this aspect of his life. Most of his conservative predecessors as Prime Minster - Barton, Reid, Cook, Bruce and Page - were also Freemasons, as was his immediate successor, Fadden.

Those reservations having been made, what can reasonably be said? One striking fact which perhaps differentiates the Melbourne and London establishment in those days was the open nature of the Melbourne group, in the sense that membership could be achieved on merit. There was an old money group - the Darlings, the Clarkes, the Symes - but the nouveau riche like Sir George Coles also got in, as did Menzies and McConnan who rose wholly on ability. There were some nice gradations. The old money men on the board of the National Bank of Australasia evidently took the view that McConnan was ‘staff ’ and he was thus not invited to join the Board on retirement. In Adelaide, by contrast, Oscar Isaachsen ascended from general manager of the Bank of Adelaide to board member on retirement and eventually chairman.

The social aspects of power and influence were exercised through Melbourne institutions such as the Melbourne Club (McConnan, Grimwade, Menzies, Latham, Frank Clarke, McArthur), the Australian Club (Latham, Starke, Grimwade, McConnan) and the Athaneum Club (Coles, Nettlefold). Sporting clubs offered further opportunities, particularly the Royal Melbourne Golf Club (McConnan, Coles, Grimwade) and the Melbourne Cricket Club (Connelly, Nilsen, Solly, Menzies, Coles). Family connections also helped the wheels to turn. Menzies was the godfather to Sir Harold Smith’s second child, the Duke of Gloucester having been godfather to the first. One of Darling’s daughters married Sir Robert Law-Smith, who became a director of the National Bank of Australasia in 1959 and Chairman in 1978. A founding father in 1931 of the United Australia Party (a predecessor to the Liberal Party) and a member of the Melbourne Club, Sir Robert Knox, married a Clarke. Another founding father and fellow-member of the

24

Melbourne Club, Staniforth Ricketson, was part of a cabal with Menzies and four other businessmen (not identified) known as ‘the Group’.

Knighthoods were readily granted. As noted, the Institute of Public Affairs was in effect an establishment study group.

An illuminating example of the Melbourne establishment at work comes from Latham’s entry in the Australian Dictionary of Biography. He had by the early 1930s been a Minister in two conservative Commonwealth Governments. The entry takes up the story.

! It was evident by 1933, however, that he had set his sights on the post of chief justice of the ! High Court and that the only remaining obstacle was the reluctance of Sir Frank Gavan Duffy ! to vacate that post. It was predicted that Duffy's son would be appointed to the Supreme Court ! of Victoria, Duffy himself would retire, Latham would take his place, and the ambitious young ! Victorian attorney-general, (Sir) Robert Menzies, would replace Latham in Kooyong and ! succeed him as attorney-general in Canberra. All these things came to pass. Latham retired ! from politics in 1934 and was appointed G.C.M.G. He was made chief justice on 11 October ! 1935.

It is plain from this paper that the Melbourne establishment was also anti-democratic. Both the Legislative Assembly and the Legislative Council in Victoria, and the Melbourne City Council, were in the 1940s elected on restricted franchises or by electors with multiple votes, and restrictions were also placed on candidates. The situation was so bad with the Legislative Council in Victoria as to warrant the description of rotten boroughs, candidates being elected and re-elected without opposition, so firm was their hold on their seats.

It is also plain from this paper that when the interests of the Melbourne establishment were threatened by the Chifley Government’s 1945 banking legislation, it swung into action not only to defeat the immediate threat to the status quo but it also took advantage of the opportunity to defeat the Chifley Government itself.

25

The Events of 1944-1947

The institutional actors having been identified and characterised, we may now turn to the events of 1944-1947 in which the same actors came into close contact with each other in discharging their various roles. It is convenient to deal with individual years.

1944

The Regulations under which the Government had made its decisions on banking were due to expire when the war ended, and in 1944 Chifley began to plan for more permanent measures. He appears to have done this on two fronts, the first with the Treasury and the Commonwealth Bank, and the second with a ‘small non-official’ committee convened by William Taylor (who had been appointed by Chifley to the Board of the Commonwealth Bank) of ‘Labour men and others, including one or two of the younger economists like S J Butlin...to work on the outlines of permanent banking reform in the light of wartime experience and foreseeable post-war needs’. (1)

In September, in what looks likely in retrospect to have been a calculated leak to get a reaction, the Government released some details of the proposals it was considering. Essentially these were that the wartime regulations would be continued in permanent legislative form. If the Government was in fact in search of a reaction, it certainly got one. It was led by McConnan of the National Bank of Australasia, who ‘hit back at once’ as he described it and made a statement which included the suggestion that the possible aim of the Government was to ‘ensure political control over industry and the individual’. ‘He believed’, Blainey and Hutton suggest, ‘that only a loud outcry could force the government to modify its banking plans’, and his method of achieving this was ‘a joint statement of protest..sent to every customer of every bank’. (2) Some banks supported McConnan, but in a foretaste of later events, the two Sydney banks, notably the Wales, were against him. `Sir Alfred Davidson, the General Manager of the Wales’, White and Clarke note, ‘was concerned that if the banks acted without real knowledge of the government’s intentions, the government could cut the ground from under their feet’. These differing reactions surfaced at a meeting in Melbourne in October 1944 of the general managers of eight of the nine major banks. (3)

McConnan did not regard the lack of agreement among the banks for a general response to the Government as preventing the National Bank from proceeding on its own. On 27 October, Blainey and Hutton record, he ‘requested all managers ... to address envelopes and prepare a brief letter to every customer’; and on 13 November all bank customers were sent a copy of a 600-word leaflet prepared by head office, which was widely publicised. The Commercial Bank of Australia, the Bank of Adelaide and in due course the E S & A Bank followed the National’s example. Even the Wales joined in, in January 1945. (4)

A copy of a circular sent by McConnan to ‘Manager and other Members of the Staff ’ on 1 November 1944 survives in the Reserve Bank Archives, and might be taken to convey the flavour of the arguments then being put forward. ‘The aim of the whole business’ it was argued was not the banks (awarded an initial capital in the circular) themselves, but ‘control of the people’s money in the Banks, so that it will be invested and/or spent to suit purely political

26

ends’. The circular went on to argue that the Government had no mandate for the action it contemplated and that depositors had shown ‘their complete confidence in the Trading Banks as places where they can leave their surplus cash and savings with the utmost safety.’ Some of the claims attracted the ire of an anonymous Commonwealth Bank officer at the time, who made notes on the circular. McConnan claimed that it was telling that when the war started, the trading banks had deposits of 326 million pounds, as against the Commonwealth Bank’s 51 million pounds; the marginal note records that McConnan’s figures for the Commonwealth Bank did not include savings bank deposits. McConnan also claimed that in June 1939 the tradings banks had advances of 312 miliion pounds, as against the Commonwealth Bank’s 19 million. The marginal note recorded that this was because the Commonwealth Bank had refrained from competition with the trading banks. (5) McConnan also made a number of radio broadcasts.

The December 1944 statement by Joseph Ewing, the General Manager of the E S & A Bank, addressed to ‘customers and other associates’ is along similar lines. ‘PERMANENT POLITICAL CONTROL OF BANKS MEANS PERMANENT POLITICAL CONTROL OF THE FINANCIAL ACTIVITIES OF EVERY INDIVIDUAL DEPOSITOR OR BORROWER’ the statement read (capital letters in original). The Life Offices’ Association for Australasia also contributed a joint statement which was evidently then sent by the general manager of each of the ten offices to its customers. The undated version sent by J T Campbell, General Manager and Actuary of the National Mutual Life Association of Australasia Limited, expressed doubts about the Commonwealth Bank being brought under political direction from ‘any Government’. A reasonable inference is that without directly saying so the circular was an indication from the life offices of their fear that ‘political control’ of the banks might shortly be followed by political control of the insurance industry also. (6)

The campaign seems to have attracted little attention, despite the claim at by Blainey and Hutton that ‘mail bags filled with protests arrived often at Canberra’. (7) Two questions on the issue were directed to the Acting Prime Minister, Frank Forde, at the end of November 1944. In his replies he referred to the ‘wild and frenzied propaganda disseminated by the private banking institutions in their efforts to induce the public to withdraw their support for this Government’, and gave an assurance that ‘borrowers, depositors and genuine clients of the banks have absolutely nothing to fear’. He noted also that ‘the private banks in Australia have no knowledge of what the Government’s proposed legislation will be.’ (8) ‘The public at large’, Crisp observes, ‘remained unmoved by the issue’.(9)

! ! ! ! ! ! 1945

In January 1945, the Cabinet considered on seven occasions the two bills drafted under Chifley’s direction dealing with banking reforms: the Banking Bill and the Commonwealth Bank Bill. Some Ministers, Crisp records, were in favour of immediate nationalisation of the private banks; ‘Chifley, however, prevailed’. Crisp also makes the highly significant observation that ‘All the evidence points...to Chifley’s having decided, on the basis of experience of the war-time banking controls and of confidence in the constitutionality of so doing, simply to enact the central banking controls already in operation under regulation’.(10) On 19 and 20 February, the bills were considered by Caucus and were approved, a motion for nationalisation of the trading banks having been lost. (11)

The Banking Bill required banks to be licensed; if they were unable to meet their obligations, they were obliged to notify the Commonwealth Bank which might then take over the bank in

27

question. The controversial special accounts provision was preserved under which each private bank was required to lodge a certain proportion of its deposits with the Commonwealth Bank. According to Schedvin, this ‘fulfilled two requirements: the need to use reserves in a crisis, and the ability to adjust reserve requirements to smooth seasonal and cyclical fluctuations.’ (12) All of the wartime special accounts (amounting to 223 million pounds) were retained, and the Bank could require these to be increased. The bill also continued another wartime regulation which required bank advances to comply with Commonwealth Bank policy. Wartime control of interest rates by the Bank was likewise continued. Finally, the bill provided that except with the consent of the Treasurer, a bank was not to conduct any banking business for a State or for any authority of a State, including a local government authority. This was the famous section 48, later challenged by the Melbourne City Council and found by the High Court to be unconstitutional, which triggered the move to nationalisation.

It is worth considering section 48 in a little more detail. As noted, under section 51 (xiii) of the Constitution, the Commonwealth had power to make laws with respect to ‘Banking, other than State banking’, so that if a State or a local government authority was banking with a State bank, the Commonwealth could not disturb that arrangement. There were in 1947 five such banks: Rural Bank of New South Wales, State Savings Bank of Victoria, Rural and Industries Bank of Western Australia, State Bank of South Australia and Savings Bank of South Australia. Further, so far as the Banking Bill was concerned, they were not in the list of institutions specified as banks, so they were not banks to which the legislation applied. (A more paradoxical effect of the bill was that it did not specify the Commonwealth Bank as being a bank). It is not clear how useful these ‘banks’ would have been to local government bodies which needed access to cheque accounts and other facilities, particularly given that the geographical reach of some would have been limited. By forbidding trading banks from conducting business with the States or their authorities, the Commonwealth was in effect requiring the great majority of these public bodies to bank with the Commonwealth Bank. As noted, the Commonwealth Bank had had for many years the accounts of the four smallest State governments, and in 1946 negotiations were in progress with the NSW and Victorian Governments, both at that time Labor Governments. Also at that time the Commonwealth Bank had local government business at 160 branches. (13)

As well as being Labor Party policy, the desirability of the Commonwealth Bank being the banker for local government authorities was the policy of the Bank itself, even under the Boards which ran it. Schedvin quotes the Acting Chairman of the Board giving evidence to that effect to the Royal Commission in 1936. (14) Ironically, Chifley opposed its inclusion in the bill, but was overruled by the Cabinet. He did so, Crisp observes, for practical reasons. Many country towns did not have a branch of the Commonwealth Bank, and the Bank itself was reluctant to have customers forced upon it; many local government bodies had loans from the private banks which would be difficult to unravel at short notice. The best Chifley could do was to get the power to give exemptions from the requirement in cases where there was no Commonwealth Bank branch. (15) (In fact, as we shall see, he initially gave a general exemption by providing that the section would not come into operation until a date to be fixed).

The Commonwealth Bank Bill established the Bank as a central bank. It was required to ‘pursue a monetary and banking policy directed to the greatest advantage of the people of Australia’. The Board was abolished, replaced by an Advisory Committee of officials, and in the event of a conflict between the Government and the Bank, the Government’s view was to prevail - which was consistent with the Labor Government’s view that in the last analysis it was responsible for the national economic policy. In another departure from past practice, the Bank was also required ‘to develop and expand its general banking business’, even at the expense of the private banks.

28

Schedvin gives a good account of both bills, which he describes as ‘Taken together, [they] were revolutionary in intent and contained the specific means for the effective incorporation of the banking system within the apparatus of government.’ He feels it necessary to add, however, that ‘The proposals were derived from a theory of economic depression that was, simply, incorrect in the Australian context.. the proposed legislation was a gross overreaction. It was motivated by political prejudice rather than a detailed analysis of the country’s financial and monetary needs...’ It might reasonably be argued in response, however, that the detailed analysis said to be absent had in fact been carried out by the Royal Commission of the mid-30s; that the central parts of both bills had been tried and tested during the war; and that some of Schedvin’s own analysis, notably his emphasis on central banks recognising and using ‘the market’, is reading history backwards. (17)

The bills received their second reading in the House on 9 March 1945. Chifley repeatedly referred to the recommendations of the Royal Commission in explaining the provisions in the bills, and concluded by saying:

! We have experienced important changes in our economic system, and the requirements of ! monetary policy are becoming more exacting. The bills which have been brought down, are ! designed to adapt the banking system to the changing conditions and to provide the ! Commonwealth Bank, as leader of the banking system, with adequate powers to serve the ! national interest.

Leading for the Opposition in reply on 22 March, the shadow Treasurer and Leader of the Country Party, Arthur Fadden, began by claiming that ‘it is abundantly clear now that the intention of the Government is to implement in no uncertain manner the first step essential to the carrying out in their entirety of its plans for the socialization of the means of production, distribution and. exchange, namely the nationalization or socialization of banking and credit control’. The later parts of his speech dealt more with the provisions of the bills, and he concluded by moving that the Board be maintained; that the Bank be split up into constituent parts with separate management; and that the Trading Bank be treated in the same way by the Central Bank as the other trading banks. His proposals were unsuccessful, and it was not until 1959 that the Reserve Bank was established as a quite separate institution from the Commonwealth Banking Corporation.

The Commonwealth Bank Bill was assented to on 1 August, and the Banking Bill on 3 August, except for section 48, which was to come into effect on a date to be notified.

The private banks had not of course been inactive. On 24 September Garfield Barwick KC was briefed by the Associated Banks (Victoria) via Malleson Stewart and Co (the Melbourne firm which were the solicitors for the National Bank) to provide an opinion on the Banking Act 1945; he provided his opinion on 27 December 1945 (18) It will be dealt with below.

Consideration was also being given to other steps the private banks might take. The General Manager of the Wales, Thomas Heffer, told his Relieving Inspector in Melbourne on 5 July 1945 that in his opinion there were three tasks before the banks with regard to the banking legislation: ‘to give what help we can in ensuring the return of the Menzies Government at the next elections’; ‘to draft a new Commonwealth Bank Bill repealing the two Acts that are to be passed’; and ‘the banks will have to come out with a positive statement of what they are prepared to do for Australian finance in the post-war period’. He thought further that ‘the banks will have to come together’. As to the second task, Heffer said that the Wales’ Economic

29

Department would draft a new bill when it was ‘clear of the work connected with the passage of the two Bills’. (19)

After the acts came into effect, the wartime balances held by the Commonwealth Bank for the trading banks were duly transferred to the new Special Accounts and an additional call was made by the Bank in September 1945. In responding, the trading banks felt it necessary to add the following:

! We desire to say that we are most anxious to co-operate with your Bank to ensure the ! continuance of our present harmonious relations. You will appreciate, however, that our duty to ! our shareholders, customers and staff compels us to record that acquiescence or compliance on ! this bank’s part with any requests from you is not to be taken to import any contract with your ! Bank in terms of the Act.

This was Heffer’s letter of 28 September 1945. The other banks responded in very nearly the same terms in letters ranging in date from the same day until 20 November 1945. (20) It is a reasonable inference that one or all of them took legal advice before responding. Copies of the letters were sent by the Bank to the Attorney-General’s Department in Canberra (21) but the Bank itself made no response to them. The letters were remembered in Canberra and as we shall see became part of the Government’s justification in 1947 for the nationalisation decision.

It is worth noting here that on Crisp’s persuasive account ‘If the private banks had settled down and worked harmoniously within the 1945 banking legislation, Chifley would never have moved for their nationalization’. (22) He himself said as much and none of his colleagues and advisers at the time (of whom Crisp was one) had any doubt. Coombs made a similar comment:

! I do not believe that Chifley would have contemplated nationalisation if he had not believed ! that the Banks would not co-operate in the working of the controls established by the 1945 ! Act...’ (23)

To return to Barwick’s legal advice delivered in December: while a copy of it does not seem to have survived, on Marr’s account ‘Barwick advised that it [the Banking Act] could be challenged...in particular [he] identified constitutional weaknesses in section 48...’ Marr also has McConnan in January 1946 drawing the attention of the other banks to Barwick’s opinion, but ‘Nothing came of it’. (24) It is however possible to reconstruct Barwick’s opinion (or at least some of it) from correspondence in April 1947 between the Melbourne City Council and its solicitor Tom Trumble of the Melbourne firm of solicitors, Malleson Stewart & Co., which were also the solicitors for the National Bank.

In his letter of 24 April 1947 to the Council, Trumble said that ‘When the Banking Act was passed my firm obtained an Opinion from Mr Barwick K.C. of the Sydney bar for certain clients and one of the matters referred to counsel was the validity of Section 48.’ He went on to explain Barwick’s argument - subsequently accepted by the High Court - that Section 48 was invalid because it was ‘an unwarranted attempt to control purely governmental functions of states’ and thus contrary to Section 107 of the Constitution which preserved State powers at the time of the establishment of the Commonwealth unless they were affected by the Constitution. He added that in view of Barwick’s argument ‘it would be competent and more appropriate for a State authority to be the party to approach the Court’, rather than a bank; but that no action should be taken with the Court until Section 48 came into effect. That was the extent of the opinion quoted; there was no mention of any possible challenge involving

30

sections 18 to 22 of the Act and Section 55 of the Constitution. What the other ‘matters referred to counsel’ might have been, we will presumably never know. (25)

It is worth noting however that in subsequent correspondence with Heffer (see the letter of 30 May 1947 quoted from below) McConnan, in referring to the Council ‘attacking’ sections 18 to 22, said that it was ‘no doubt doing so in the light of the advice Barwick gave the Banks some months ago’ and went on to refer to the possibility of the Act (rather than only Section 48) being declared invalid. These aspects would accordingly seem to have been included in Barwick’s opinion. Why Trumble failed to mention them in his 24 April letter is not clear.

1946

In summary, very little happened in 1946 with regard to section 48 of the Banking Act 1945 so far as the private banks were concerned. It remained unproclaimed, as the Commonwealth bank made progress with opening new premises so as to be able to take over accounts for government and semi-government bodies.

Contemporary bank correspondence shows that while Heffer was interested in making banking an issue in the 1946 elections, the consensus which eventually prevailed was to leave matters as they were for the time being. In June 1946, the General Manager of the Commercial Bank, P F Gordon, who was at the time Acting Chairman of the Associated Banks (Victoria), wrote to Heffer to say that the attitude of the Melbourne banks was that ‘any proposed action should be deferred until after the elections, when, if a change of Government occurs, we should press for amendments to the Acts backed by the various opinions we have obtained’. Heffer concurred initially, but in August he asked his Inspector in Melbourne to ‘sound out McConnan and Gordon on the question of the possibility and desirability of the trading banks persuading the Liberal and Country Parties to make an issue of the banking legislation in the forthcoming election campaign.’

Neither McConnan nor Gordon was enthusiastic. McConnan thought that if any action were taken, ‘the Labour Party people would say that it was being done at the behest of bankers, who were helping to provide campaigning funds’, while Gordon considered it preferable to rely on Menzies’ promise to amend the legislation. (26) The Liberal and Country parties were equally unenthusiastic, and as May notes, they ‘considered that banking was pretty much a dead issue’, so that ‘no reference whatsoever to banking appeared’ in Menzies’ election policy speech. (27) This outcome was a tribute to the way in which Chifley had handled the matter, but as argued later it may also have led him into thinking that he could do the same with the nationalisation issue.

Notes for 1944-1946

(1) Crisp, Chifley, page 176(2) Blainey and Hutton: Gold and Paper 1858-1982, pages 224-6 (3) White and Clarke: Cheques and Balances, page 13(4) Blainey and Hutton, Gold and Paper, page 226; and R F Holder: Bank of New South Wales - A History, Volume Two 1894-1970 (Sydney 1970), page 878(5) Records in the custody of Reserve Bank of Australia (RBA) Archives, S-d-55(6) ibid; the records of Garfield Barwick KC, as he was at the time, show that he was retained in 1947 by the Life Offices’ Association, and in 1949 by the Council of Fire and Accident

31

Underwriters ‘in all courts and jurisdictions...with particular reference to any Commonwealth legislation attempting to nationalise insurance’; Barwick Papers, National Archives of Australia (hereafter NAA), Sydney, file M3924/1 (7) Blainey and Hutton, Gold and Paper, page 226(8)House of Representatives Hansard 28 and 30 November 1944.(9)Crisp, Chifley, page 182(10) Crisp, Chifley, page 178(11) Weller, Caucus Minutes, pages 349-51(12) Schedvin, In Reserve, page 56(13) The Attorney-General’s Department identified the State ‘banks’ in a letter of 20 June 1947

to the State Crown Law authorities in Perth, who had sought confirmation that the Rural and Industries Bank of Western Australia was able to conduct banking business for local government authorities; as to the extent to which local authorities went or planned to go to State ‘banks’, the Commonwealth Bank reported to the Treasury on 24 July 1947 that of the 191 authorities listed to be specified on 1 August, 133 had provided no information as to their intentions, 46 had transferred their accounts to the Commonwealth Bank or were intending to do so, and only 12 were intending to go to State ‘banks’ (Note for File by F H Wheeler); both documents are on Treasury file Banking Bill 1945 Clause 48, NAA, Canberra, A571, 1945/1908. Butlin (‘Australian Central Banking 1945-59’ page 145) notes that at that time ‘the Rural Bank of New South Wales had not then sufficiently developed general banking functions to be appropriate’, while ‘the State Savings Bank of Victoria would also have needed to develop further before it could take over state business, which, it appeared, it did not want’. It is worth noting that the State Bank of South Australia had been a private bank and would thus under the special accounts provisions have had to deposit a percentage of its funds with the Commonwealth Bank, as well as being subject to section 48; both these consequences were averted when the Playford Liberal Government made it a state bank in 1945 (see P. A. Howell, 'Playford, Sir Thomas (Tom) (1896–1981)', Australian Dictionary of Biography, National Centre of Biography, Australian National University, http://adb.anu.edu.au/biography/playford-sir-thomas-tom-15472/text26686, published in hardcopy 2012, accessed online 2 April 2014). I am grateful to Associate Professor Howell of Flinders University for bringing this to my attention.

(14) Schedvin, In Reserve, page 74(15) Crisp, Chifley, pages 180-81(16) Schedvin, In Reserve, pages 70-71(17) Butlin gives a fuller account of the two bills in ‘Australian Central Banking 1945-59’, pages

102-111; he notes at page 113 that ‘On the whole, the opposition probably damaged its case in the eyes of uncommitted voters - it had no hope of influencing Labor supporters and no need to convince its own - by the extreme position it adopted’.

(18) Barwick Papers, NAA, Sydney, file M3924/12(19) Westpac Historical Services, Sydney, file 78-58 2214(20) NAA, Canberra, Treasury file 1958/465 Part 3 Banking Act 1945 - General(21) Butlin: ‘Australian Central Banking 1945-59’ pages 124-5(22) Crisp, Chifley, pages 323-4(23) Coombs, Trial Balance, pages 115-6(24) David Marr: Barwick (Sydney 1992), page 54(25) Public Record Office of Victoria, VPRS 3183, Town Clerk’s Correspondence Files II, file

48/2589. Clearly the files from Malleson Stewart and Co dealing with the case would have been invaluable for this paper. With the ready agreement of the Melbourne City Council, as the client, (letter of 14 August 2008 from Dr Kathy Alexander, Chief Executive Officer), I approached Mallesons Stephen Jacques, as Malleson Stewart has now become. By email of 2 December 2008, Julie Turner, Partner, informed me that ‘our client files do not go this far

32

back. I have also had someone have a look at our archives of our own firm history but unfortunately nothing relevant has come to light.’

(26) Westpac Historical Services, files GM302/257 and GM102/30(27) A L May: The Battle for the Banks (Sydney, 1968), page 8

! ! ! ! ! ! 1947

1947 was the critical year for present purposes and thus merits detailed study of the various sources, which is best done from April to August by month.

Preparations for the transfer of semi-government (and government) accounts from the private banks to the Commonwealth Bank continued in January and February, and were discussed at a meeting between the Governor of the Commonwealth Bank, H T Armitage, and the Associated Banks (Victoria) in Melbourne on 26 February. As to the municipal accounts, the Governor said that ‘the Commonwealth Treasurer was pressing strongly for action’ and that out of 350 branches of the Bank it had municipal accounts at 160 points. The Bank had provided the Treasury with a list of the municipal authorities at points where the Bank did not have the business, but where it felt that it could provide at least the same facilities as the trading banks. The matter now rested with the Treasurer. The Governor added that he had warned the Treasurer of the possible political consequences - he expected strong opposition from the Melbourne and Adelaide City Councils - but the Treasurer had taken the view that these were his responsibility. (1) Blainey and Hutton also record that in conversation around this time with the Governor regarding section 48, McConnan said that ‘certain barristers doubted whether Section 48 was constitutionally valid’. (2) No doubt the Governor conveyed this information to Canberra in case it was not already aware of it.

The Superintendent of the Bank of Australasia (as the General Manager was then known), A R L Wiltshire, wrote to his London Manager the following day reporting on this conference. He told Armitage that some of the existing government accounts were unprofitable, including Victorian Railways and the Victorian Department of Education. (3) A few months later, the General Manager of the Union Bank (another precursor of the ANZ Bank), W H Thomas, told his London Manager that the Victorian Government accounts were shared among all the trading banks in Melbourne, and those held by the Union Bank were not profitable. (4) Blainey and Hutton observe that while Victorian rural shires had banked with the National for nearly ninety years, ‘some had been carried by the bank for decades’. (5)

On Friday 28 March, Chifley announced that section 48 would be proclaimed later that year when adequate Commonwealth Bank facilities existed. Three months’ notice would be given to enable the necessary adjustments to accounts to be made. (6)

April

The records of the Melbourne City Council (7) indicate that the matter was first raised on 8 April at a meeting of the Finance Committee, of which Councillor Solly was the Chairman. He brought the matter up and ‘briefly outlined details of [banking] legislation as given to him by Mr McConnan of the National Bank of Australasia and stated that on the opinions obtained by the National Bank of Australasia the order was considered to be ultra vires.’ Action was already under way, however, as the Committee Clerk indicated to the Town Clerk that he had notified Solly that the Town Clerk was preparing a report. The Deputy Town Clerk also recorded on

33

the same day that the City Solicitor (Trumble) had spoken to him following the Town Clerk’s conversation with Trumble, who asked that he be formally approached by the Town Clerk for ‘an expression of opinion’. The Town Clerk obliged on 14 April, seeking from Trumble ‘a written statement on the lines of our discussion’; and more surprisingly ‘...advice as to the procedure which the Council might follow on the question of compliance with the provisions of the legislation or ignoring such legislation’.

In his reply of 24 April, as noted, Trumble quoted at length from Barwick’s opinion that section 48 was invalid. Trumble went on to say that while it would be competent for a bank to approach the Court, in view of the argument that would be used - the section was an invasion of the rights of the States and State authorities - ‘it would be competent and more appropriate for a State authority to be the party to approach the Court’. He added however that no approach should be made to the Court until section 48 came into effect.

On 29 April, the Town Clerk suggested to Solly that the Committee should take no action but await developments and without making any report to the Committee. It is not clear what happened to this advice, which was overtaken by events.

Some consideration was also being given in April to action by the trading banks. On 10 April, Heffer wrote to his Inspector, Melbourne, saying that

! We, in Sydney, had not contemplated going beyond a joint letter from all Banks to the ! Commonwealth Bank running somewhat as follows

! “Referring to Section 48 of the Banking Act 1945 we are advised by eminent Counsel that this ! section of the Act is invalid. Accordingly we feel obliged in the interests of our shareholders to ! reserve all legal rights.” (8)

As the Inspector’s reply is not available, it is not possible to say what was evidently proposed by the Melbourne banks, other than to say it looked likely to have been something stronger than writing a letter. It may be that it was at this time that the Associated Banks in Melbourne initially vowed to fight section 48, but later retreated. As McConnan later described it:

! When Chifley made his announcement that he was going to implement this Section of the Act, ! I well recall, at a meeting of the Associated Banks, how every man round the table protested ! violently and urged fight in any way we could, even going so far as to say that the Banks would ! financially support anyone who desired to attack the proposal in the High Court - a great ! display of fighting courage, but most of it has vanished since there seems to be a possibility of ! an adverse effect on the Banks! (9)

May

On 1 May Chifley wrote to some 190 State authorities - those for which the Commonwealth Bank could now provide the necessary facilities - quoting section 48 and indicating that he proposed to specify ‘on or about 1st August 1947’ as the date from which ‘a private bank will not be able legally to conduct business on behalf of any local governing authority specified in the notice’. One recipient of the letter was the Melbourne City Council. On receipt of the letter the Lord Mayor noted on the covering sheet ‘Left in hands of Chairman [of the Finance Committee] and Town Clerk to report to Council requesting authority to take any action considered necessary’.

The Committee’s report to the Council of 12 May recommended that

34

! the Council record its objection to the application of the provisions of the Act to the City of ! Melbourne, and that the Finance Committee be authorised to make representations to the ! Treasurer for the exemption of the Council from such provisions, and to take all other steps ! which the Committee may consider necessary with the object of enabling the Council to ! continue its existing banking arrangements.

The Council agreed with the recommendation on the same day, and Solly as Chairman of the Finance Committee ‘directed that the City Solicitor be instructed to obtain the opinion of Counsel as to the steps which the Council might take with the object of having the validity of the Act tested.’ This action the Town Clerk took the following day when he spoke to Trumble, who advised that following Chifley’s decision it was now competent for the Council to take legal action with the object of testing the validity of the Act. He suggested further - and the Town Clerk agreed - that advice be obtained from Barwick and Coppel KC, a Melbourne silk. The same day - 13 May - the Town Clerk wrote to Chifley, using a draft which had been approved by Trumble, recording the Council’s decision and making ‘formal application...for the exemption of the Council from the provisions of the Act’. Chifley in turn replied on 23 May saying that he could not see his way clear to exempt the Council.

The Town Clerk also recorded that on 14 May he conferred with Wreford, the Chief Inspector, and Webb, Victorian Manager, of the National Bank, informing them of the Council’s decision; he sought and received an assurance from them that in the event of the Council going ahead it might rely upon the Bank’s ‘fullest’ co-operation ‘in every way except the payment of costs’.

Trumble replied to the Town Clerk on 16 May, enclosing Coppel’s opinion on the procedure to be followed in challenging Section 48, which need not detain us here, and noting that he had sought ‘a more extended opinion’ on Section 48 from Barwick ‘than that previously given by him when the matter was referred to him as one of a number of matters raised by the Banking Act’. Trumble also referred to the question of counsel, urging the merits of Barwick and Coppel and indicating that he had had Barwick put on a special retainer (of one guinea, on 14 May, the Barwick Papers show). He added

! It is absolutely vital if Section 48 is to be effectively challenged that the case should be ! conducted with the highest degree of skill for it involves the most intricate constitutional ! questions and called for advocacy and constitutional experience of the highest order. It would ! therefore in my opinion be a calamity if some other municipality should bring the matter before ! the Court and that it should be indifferently handled by some other counsel. This however ! could only happen if the Council delays coming to a determination as to whether it will ! proceed.

The Barwick Papers show that Trumble acting on behalf of the Council engaged Barwick on 26 May to provide advice on the Banking Act, but no date is shown for the delivery of any opinion. It may be the engagement was absorbed by the later agreement not only to provide advice but to appear for the Council in the various proceedings.

McConnan was well aware of what was happening. ‘We have quite some hope’ he told Heffer on 21 May,’ that the Melbourne City Council will test the validity of the action. We are in close touch with their Finance Committee, who are up in arms, and also with their Solicitor, Mr Trumble of Mallesons... I understand if the further opinion [from Coppel] is reasonably satisfactory the probabilities are that the Council will proceed’. (10)

35

On 27 May, the Acting Town Clerk conferred with Solly who authorised Trumble to issue a writ along the lines of Trumble’s letter of 16 May. The Town Clerk had on 15 and 16 May prepared a report for Solly on the position which then obtained; but Solly did not wish this report to be circulated to members of the Finance Committee, which is on its face a curious move given Solly’s decision to have the writ issued.

The writ, against the Commonwealth and Chifley as Treasurer, was issued the following day. The Council’s records show that Trumble told a Council officer on the telephone, ‘they are going further’ than challenging Section 48 - three sections of the Act dealing with special deposits ‘are definitely invalid and thus bring the whole Act down’. This was not only Barwick’s latest advice but advice ‘from all sorts of Counsel (to which he has not previously made reference)’. The three sections referred to - in fact five - were 18 to 22.

By letter dated 28 May, the Deputy Crown Solicitor in Melbourne notified the Crown Solicitor in Canberra of the writ, which included the following (11):

3. THE Plaintiff claims

(a) against both defendants

(i) A declaration that Section 48 of the Banking Act 1945 is invalid

! ! (ii) A Declaration that the Banking Act 1945 by reason of the provisions of ! ! Sections 18 to 22 thereof is invalid

The Sydney Morning Herald report on 29 May recorded that ‘A declaration is sought that Section 48 and Sections 18 to 22 of the Banking Act 1945 are invalid’. On the same day, following telephoned advice from the Assistant Crown Solicitor, an Assistant Secretary in the Treasury, F H Wheeler, notified Chifley of the claim, in the terms set out above. (12)

Thus both sides in the action and the media were given by Trumble the erroneous and perhaps indelible impression that an attack was being made directly on sections 18 to 22 of the Act.

Heffer had on 27 May replied to McConnan’s letter to him of 21 May. He said that ‘In N. S. W. the Councils are very disturbed by [Chifley’s] edict. They are taking Counsel’s opinion with a view to legal action if thought desirable....’ (13) There is no reference in subsequent correspondence to this opinion. McConnan responded in turn on 30 May i.e. after the writ had been issued. It deserves quoting at length (14):

! You will have noted from the press that Melbourne City Council have issued a writ against the ! Commonwealth Government.

! The Council are customers of ours, and the Chairman of the Finance Committee consulted ! with us once or twice in the early stages, when we promised any support that we give in the ! event of the Council’s deciding to take action. We heard nothing further from them until we ! knew of the issue of the writ, and I think I can say quite definitely that we have not sponsored ! their actions in any way, not have we prompted them to press their case to the extent to which ! they are doing so. I refer to the fact that as well as attacking Section 48, they are, as a second ! string to their bow, attacking Sections 18 to 22, which relate to special deposit accounts, no ! doubt doing so in the light of the advice Barwick gave the Banks some months ago, of which ! advice Malleson, Stewart & Co, the Council’s Solicitors, are of course aware. So far as the

36

! Victorian Banks are concerned, the City Council is following this course without urging or ! guidance from us, thought no doubt we and the Banks as a whole will be charged with being a ! party in some way or other to the action.

! I mention all this because I can quite see that the Council’s action can bring about at least a ! peculiar state of affairs, and I am just not sure what it might mean to the banking world. If the ! Act is declared invalid,and according to Barwick’s opinion there is a very good chance of this ! happening, whether we will be better off or worse off is a matter for conjecture. However, none ! of us here feel that we can or should do anything about the matter. The City Council is ! determined to have its fight on Section 48, and no doubt is entitled to fight it the way it thinks ! best.

The letter needs to be considered against McConnan’s other correspondence and other contemporary developments, and will be discussed further below.

June

Heffer replied to McConnan on 2 June 1947, saying that he and Osborne,the General Manager of the Commercial Banking Company of Sydney, were ‘seriously disturbed’ by the news about Sections 18 to 22.; and that if they were declared invalid ‘there is a possibility that the Government may seize the opportiunity to say that the Commonwealth Bank can no longer pay interest on balances in Banks’ Special Accounts’. Both he and Osborne thought that McConnan ‘should use every endeavour’ to dissuade the Council from its proposed course.(15)

The meetings in Canberra to consider the Commonwealth’s position began on 4 June with a gathering of officials from the Attorney-General’s Department, the Treasury and the Commonwealth Bank. At that point they were proceeding on the basis that as stated in the writ Sections 18 to 22 were being directly challenged. The Secretary of the Attorney-General’s Department, Professor K H Bailey, said that his Department was satisfied that the sections were valid. It was suggested that as the Council had no interest in the special accounts, it might not succeed in its application; further, the sections were severable from the rest of the Act and could not therefore affect the validity of Section 48 or any other part of the Act. There were some interesting individual observations. Perhaps having had some indication of which way the wind was blowing in Parliament House, Wheeler was recorded as saying that he ‘was strongly of the opinion that every device the Commonwealth can employ should be used to avoid a decision on Sections 18 to 22 in the action brought by the Melbourne City Council’. Bailey ‘did not think that a case against Section 48 could be sustained’. (16)

A meeting of the Commonwealth Bank’s Advisory Council in Sydney on 6 June with Bank and Treasury officers present also considered the Council’s writ. It was ‘considered’ that it would be ‘more dignified’ for the Treasurer to postpone action regarding all the local authorities concerned, pending the hearing of the High Court action, as ‘It was not impossible that precipitate action might tend to prejudice the case with the High Court.’ It was agreed that ‘every effort should be made to non-suit the Melbourne City Council in its action against sections 18 to 22 of the Banking Act 1945’.

A further meeting took place in the Prime Minister’s room in Canberra on 11 June. Apart from Chifley, also present were the Attorney-General, Dr Evatt, Bailey, the Solicitor-General, H F E Whitlam, Tait KC, Commonwealth Bank representatives and the ubiquitous Wheeler, who made a note which has been preserved. This meeting too was under the misapprehension that Sections 18 to 22 of the Banking Act were under direct challenge. Evatt observed that while the sections were severable from the rest of the Act, the Commonwealth should welcome the

37

challenge and not argue irrelevancy because of severability. The Treasury and the Bank put the contrary view that ‘it might be wise to avoid a decision on the sections by arguing severability because the banks were not a party to the litigation’ and that any challenge to them ‘should be permitted only on overt action by the trading banks’. (17)

Chifley and Evatt were eager to face the challenge, however, and made the point that ‘now is a good time to meet any such challenge’ - a point hard to decipher over 60 years later. In the event the important decisions were that the Commonwealth was to proceed under Section 48 as originally intended; and that no steps were to be taken to avoid the challenge to Sections 18-22, but if the banks decided ‘to run for cover’, the Commonwealth should not seek to stop them. Note the assumption that the banks were conducting the litigation: there was a reference elsewhere in the record of the meeting to the banks inducing the Melbourne City Council to alter the basis of the writ.

In his letter of 11 June 1947 to the Council, the question of Sections 18-22 became clear when Trumble explained that the enclosed draft Statement of Claim rested upon two arguments. The first was that section 48 of the Banking Act ‘is void because it interferes with States in the execution of their Governmental functions...’ Barwick’s view of section 48 was set out at greater length in Trumble’s letter of 28 April. As will be seen, the High Court accepted this argument. The second argument dealt with sections 18 to 22 of the Act which as noted related to the special deposits which the trading banks were required to make with the Commonwealth Bank. Barwick’s advice on this point was that

! these provisions are in substance what they purport to be in form, a compulsive demand for the ! handing over to the Commonwealth, in guise of the Commonwealth Bank, of money, the ! property of a subject, not to be held in any sense by the Bank as a bailee, but available to it for ! its own and therefore for the Commonwealth’s use and profitable enjoyment. In Mr Barwick’s ! opinion this compulsive demand satisfies all the elements of a tax.

Trumble added that counsels’ opinions furnished by Dr Coppel and a Mr T W Smith agreed with Barwick’s view, as they did with his view on the consequences in terms of section 55 of the Constitution, which provides that in Trumble’s words

! laws imposing Taxation shall deal only with the imposition of taxation and any provision therein ! dealing with any other matter shall have no effect. If, therefore, Sections 18 to 22 must be ! construed as laws imposing Taxation, Section 48 will become of no effect.

In other words, tax laws could not be accompanied by laws on any other matters; if they were, all the non-tax matters had no effect.

Trumble added that if the second argument were to succeed,

! it need not permanently invalidate Section 48 - it would be open to the Commonwealth to ! re-! enact Sections 18 to 22 as a separate measure and the rest of the Act as a separate ! measure, and is this were done Section 55 would, of course, have no further effect.

In summary, Barwick’s view was that section 48 was inherently unconstitutional, whereas sections 18 to 22 were not; they were of no effect only because they kept bad company from a legislative point of view, and if the two sections and their company were separated, there would be no problem.

38

Assuming this to have been the full extent of Barwick’s opinion, supported by others - especially the Melbourne silk, Coppel, upon whom the Melbourne banks appear to have placed considerable trust - it is not difficult to see why it aroused so little enthusiasm among the trading banks. Any favourable High Court decision about sections 18 to 22 and section 55 of the Constitution might have been a triumph for a constitutional lawyer; but given that the effect would have been only temporary, as the provisions could be re-enacted separately, mounting such a case would have little appeal to the practical men who ran the trading banks. As to the argument that section 48 was inherently unconstitutional, it is plain from the contemporary correspondence of the trading banks that at least some of the government and semi-government accounts they held were not profitable; the loss of such accounts might therefore have been a blessing.

It is relevant to note here that on Crisp’s account (there is no record of such a decision in Weller’s chronicle of Caucus decisions), before it went off for the winter recess at the beginning of June Caucus had ‘authorised the Cabinet...to take whatever steps were necessary following upon the announcement of the High Court’s decision’ in the Melbourne City Council case. (18)

Account needs to be taken of two other events which can be assumed to have taken place around this time, only one of which can be timed and even then only approximately. The first has been mentioned at the beginning of this piece: in Crisp’s words, ‘Chifley...let it be known quietly in an appropriate quarter that if the private banks sought to emasculate essential provisions of the 1945 Act, on whatever pretext or behind whatever “front”, he would go to the limit to sustain the basic purposes of that legislation’.(19) Chifley’s messenger in this exercise was almost certainly William Taylor, a Vice-President of the NSW Branch of the Labor Party, a solicitor, a former member of the old Commonwealth Bank Board and thus known to bankers, and one of the executors of Chifley’s will. Taylor’s account to Coombs, also reproduced above, does not name him as the messenger but his knowledge of what happened and his background make him by far the most likely candidate. On his account, it will be remembered, Chifley

! sent a message to the Banks through private channels saying in effect, that he was not ! concerned about Section 48, and that he would accept the decision of the Court without demur ! if the challenge to the special account was withdrawn and he received an assurance that the ! Banks would not challenge it in the future. But failure to provide that assurance must be ! interpreted as ‘a declaration of war’...the Banks were unwilling to provide the assurance...That ! unwillingness was the weight on the scale which turned Chifley’s mind to nationalisation...(20)

The second event is recorded by Marr (Barwick at page 55):

! [Chifley] had warned the Solicitor-General, Professor Ken Bailey, to consider the possibility of ! nationalisation if the Melbourne City Council’s challenge succeeded. Bailey called in the young ! assistant parliamentary draftsman John Ewens.

! ‘It was in the autumn of 1947; I can remember the sun streaming through the windows of ! Bailey’s office as I faced them. He told me some circumstances could well arise in which the ! government would nationalise the banks. He asked me if I would think about how it could be ! done. For the moment I did not take him seriously.’ (21)

The misapprehension that Sections 18-22 were being directly attacked persisted from 29 May, when the writ was issued, until 19 June when the Statement of Claim was delivered to the Commonwealth. This made it plain that the Sections were not being directly attacked, but as they amounted to taxation, the rest of the Act, including Section 48, was by operation of

39

Section 55 of the Constitution invalid. It seems likely that Chifley’s warning mentioned by Crisp and Coombs was delivered during this time.

Trumble wrote to the Town Clerk on 11 June about the draft Statement of Claim, then under consideration by Barwick who was in Melbourne at this time (22). Some of the legal argument has been considered above but the remainder is also important. Trumble said his reason for including the Section 55 argument in the writ was

! not because the Council has any interest in attacking the whole Act, but because it seemed ! advisable to use every argument available for the purpose of destroying Section 48, and if the ! Court would not sustain a direct attack on Section 48, it might be compelled to find that the ! whole Act was invalidated.

! On further consideration it becomes clear that it is not necessary to make an attack on the ! whole Act. The argument based on Sections 18 to 22 being laws imposing taxation is equally ! good for the purpose of finding that Section 48 is of no effect. It is distinctly preferable that the ! argument based on Section 55 should be limited to attacking the particular section that the ! Council complains of, rather than for the Council to be making a wholesale attack on the Act.

Having noted that Sections 18-22 were severable and could be re-enacted separately, and that thus ‘the Section 55 argument may not be worthwhile in the long run’, Trumble made the point that the Section 55 argument ‘has great importance from another point of view’, which was if the matter went to the Privy Council. Taking the Section 48 argument to the Privy Council would require a certificate from the High Court; but the Section 55 argument would not.

Trumble’s point about confining the Council’s attack to Section 48 rather than the whole Act seems to have been well-made but was not reflected in the draft Statement enclosed with his letter. The draft and the Statement as delivered read in the relevant parts as follows:

12. The Banking Act 1945, or alternatively section 48 thereof, is beyond the powers of the Parliament of the Commonwealth of Australia, contrary to the provisions of the Constitution of the Commonwealth and is void.

13. Alternatively to paragraph 12 hereof sections 18,19,20,21 and 22 of the Banking Act 1945 constitute a law imposing taxation and by reason thereof and of section 55 of the Constitution section 48 of the said Act is of no effect.

Thus while paragraph 13 reflected Trumble’s approach, paragraph 12 claimed - albeit as an alternative - that the whole Act was void, which on the face of it is quite inconsistent with his approach. As we shall see below, it was a clause seized upon by Chifley to justify the decision to nationalise the banks.

After the issue of the writ became known, McConnan and Heffer felt it necessary to let the Commonwealth Bank know of their reactions to it. On 12 June McConnan saw in Melbourne the Secretary of the Bank, Ernest Richardson, and gave him a message for the Governor which comprised the following:

- the Banks had not inspired public opposition to the enforcement of section 48; at the same time they did not discourage it;- the Melbourne City Council did confer with its Bankers (National Bank) in the early stages of

its consideration of of its position; nothing was done to discourage the Council from proceeding with a challenge to Section 48;- it came as a ‘complete surprise’ to the Banks when the writ was issued to find that in addition

to challenging Section 48 the Council had also challenged Sections 18 to 22;40

- three of the Banks had expressed ‘strong disapproval’ of the Council’s action in relation to Sections 18 to 22; the others ‘do not know quite how to view the matter’;-McConnan had ‘gone so far’ as to discuss with the Council’s solicitors (who were also

solicitors for the National Bank and the Associated Banks) the wisdom of the Council’s action; the solicitors had taken the view that they would failed in their duty to their clients had they not included the Sections 18 to 22 challenge; while the reasons had been explained to McConnan, he could not recall them in detail except that they related to a possible ground of appeal;-McConnan said that he had ‘no objection’ to the Prime Minister being informed of the first

four points, but not the fifth. (23)

The first four points were duly passed to the Treasury on 17 June.

On 13 June, Heffer rang the Commonwealth Bank and asked that ‘the Governor be assured that his Bank was not connected with the issue of the Writ by the Melbourne City Council in any way whatsoever. Further, he was strongly opposed to the action and personally felt very annoyed at its initiation’. (24)

Among the other banks to express concern were the Union Bank and the E S & A Bank. The General Manager of the Union Bank in Australia reported to London on 19 June that the sections 18 to 22 action was taken without reference to the trading banks and some misgivings were being felt, particularly by the Sydney banks (which feared that it might lead to no interest being paid on bank deposits with the Commonwealth Bank). He added - prophetically - that a successful outcome might lead to the reopening of the banking legislation. He also referred to a recent memorandum from McConnan as Chairman of the Associated Banks (see below) which included the comment that while the Council persisted in its present attitude there was ‘nothing we could do about it’. (25)

Wilson of the E S & A Bank had also reported developments to London, and in a letter dated 19 June the Chairman of the London Board, Sir Frederick Young, said that he was ‘very disturbed’ by the Council’s action and blamed the solicitors for the Associated Banks, who should be rebuked or lose their appointment. (26)

The delivery of the Statement of Claim on 19 June was accompanied by a letter from Trumble to the Crown Solicitor in which he inquired ‘whether the Treasurer is prepared to undertake that pending trial of this Action he will refrain from specifying the Plaintiff as an authority of a State to which Section 48 of the Banking Act 1945 shall apply’. He concluded by saying that ‘Unless such an undertaking is given I will be compelled to take out a motion for an Interlocutory Injunction’.

The Statement of Claim and Trumble’s letter were considered at a meeting of officials on 20 June and then at a meeting attended by Chifley, Evatt and officials on Saturday, 21 June. It was noted that the ‘new feature’ in the Statement of Claim was that Sections 18-22 were not being ‘challenged as such’, but only in that they offended against Section 55 and therefore the rest of the Act was null and void. It was decided to press ahead with an application to the Court on 23 June for an immediate hearing. A reply dated 21 June was sent to Trumble, refusing the request for an undertaking and seeking support for the forthcoming application for an immediate hearing so that those affected might know their legal position. (27) There was no motion by Trumble for an injunction.

The 23 June hearing resulted in the hearing on the case being set down for 15 July. The Commonwealth had sought to set 30 June as the date, but the High Court considered that the

41

States should be given an opportunity to intervene and thus set a later date. The delay would also have suited the Commonwealth Bank, which had expressed to Wheeler on 19 June ‘considerable concern’ at the timetable, mainly on the basis that an early hearing ‘involves a significant danger of the Commonwealth losing the case because of inadequate preparation’. (28)

McConnan had in the meantime been busy trying to calm his colleagues down. As noted he had prepared a memorandum following discussions with Trumble which he circulated to his colleagues. His letter to Heffer of 18 June drew his attention to the point in the memorandum that ‘the validity of Sections 18 to 22 is not being attacked’, but that because of their implications and Section 55 of the Constitution, the rest of the Banking Act was invalid (29). He was somewhat more frank in his letter of 24 June to Harry (presumably Giddy) referred to above. Having referred to the Sections 18-22 argument, he said that

! This has frightened some of my brethren, who think that the Government might bring down a ! new and more vicious Act. There is, of course, that risk, but I do not see how we can avoid ! being subject to such a danger, and I certainly know of no reason why we should beg the City ! Council to refrain from attacking the Act in respect of the effect on Sections 18 to 22. Wilson of ! the E S & A Bank is bitterly opposed to the Council’s action, the two Sydney Banks, as usual, ! have got frightened and think we ought to do something to try and stop the Council, and ! Wiltshire told me a few days ago that he had a cable from his London Board saying that ! concerted action should be taken to endeavour to get the City Council to withhold their hand, ! presumably in this particular regard.

! For my own part, I am totally opposed to trying to influence the City Council in the matter. ! They and their legal advisers have got their own particular job to do, and from the outset we at ! least did not discourage them from taking action. However, to appease the boys,I had a talk to ! Tom Trumble, who, as you know, is acting for the Council, and set out the story as per the ! enclosed memorandum. As I have had no comment from them, I am inclined to think they will ! let the matter rest.(30)

Just as McConnan complained about Wilson, so did Wilson complain about McConnan, describing his attempt to get the Council’s solicitors to see reason as ‘a very half-hearted affair’. Wilson claimed also in the same letter to Sir Frederick Young in London that when he had spoken strongly on the matter at a meeting on 30 May, no other general manager ‘lifted a finger to support me’. (31)

There was an exchange of letters on 25 June between the Crown Solicitor and Trumble. The Crown Solicitor (whose letter was dictated by J M Mason KC) noted that Sections 18 to 22 were challenged in the Statement of Claim as infringing section 55 of the Constitution, and sought similar particulars as to what provisions of the Constitution were said to be infringed by the Banking Act or alternatively by section 48. The somewhat tart response from Trumble said that the defendants were (quoting a technical legal point) not entitled to further particulars; and in any event the relevant provisions were matters of legal argument ‘and it is not customary to give particulars in advance of what legal argument will be put to the Court’.(32)

A striking omission from all this activity in June is the City Council itself. The Town Clerk’s file is silent after Trumble’s letter of 11 June, save for a note made on 20 June following a call from Trumble that day bringing the Council up to date, including what was apparently his decision to have counsel briefed in Brisbane to oppose the Commonwealth’s application for an early hearing.

42

Representatives of the Attorney-General’s Department, the Treasury and the Commonwealth Bank met in Canberra on 30 June with Windeyer KC to prepare the Commonwealth’s case. One of the more surprising decisions reached was that ‘It was agreed that Section 48 might be regarded as an ‘instalment of nationalisation’ and as such it would not be outside the Constitutional powers of the Commonwealth’.

July and August

McConnan’s letter of 18 June (above) did not reassure Heffer, who responded on 1 July that it gave him ‘considerable concern’. He went on (33):

! We share the belief of the Governor of the Commonwealth Bank and the Prime Minister that ! in the event of the Banking Act being upset it is possible that the militant element of the ! Labour Party might press for soemthing more objectionable than the present Act.

! I confess that I cannot see what can be done about the matter except for you to maintain ! pressure on the City Council in the hope that they may weaken in their resolve to bring ! Sections 18 to 22 into their case.

In early July the Labor Party councillors on the Melbourne City Council made a belated and unsuccessful attempt to get the Council to withdraw from the case. Councillor F P Williams moved on 7 July that the Council’s decision of 12 May, authorising the Finance Committee to do whatever was necessary to continue the existing banking arrangements, be rescinded, and no further action be taken. According to a report in the Melbourne Herald of 7 July, Cr Williams questioned the ‘expensive litigation’ which had been begun without going through the normal channels, particularly the Council’s legislative committee, and this had indicated that there had been some ‘secret haste’. Solly argued that the question was sub judice, while the Lord Mayor said he preferred to get legal advice before making a ruling. In any event, the motion was defeated by 17 votes to 7.

On the same day, McConnan in his capacity as Chairman of the Associated Banks (Victoria) wrote to the Governor of the Commonwealth Bank about the High Court action. Following discussion at the monthly meeting the previous Friday, it had been decided that McConnan should write to the Governor confirming McConnan’s discussion with Richardson on 12 June ‘making it clear to you that the reported attack on the Act in respect of the effects of Sections 18/22 is made without our knowledge, and accordingly of course, without our support in any way’. (34)

On 11 July McConnan also wrote a revealing letter to Oscar Isaachsen, the General Manager of the Bank of Adelaide, during which he repeated much of what he had earlier said to Heffer and Giddy. Having explained his reluctance to approach the City Council, he said:

! However, I yielded somewhat, inasmuch as I wrote to the Governor of the Commonwealth ! bank, as per copy attached, on Monday last. As a matter of fact, judging from the developments ! here this week, my personal expectations are that the question of Sections 18 to 22 will be ! abandoned. I make this statement as a result of pretty close contact with certain legal ! authorities, but do not make this prognostication with certainty. I admit, however, that I hope ! my guess proves correct. (35)

As we shall see, ‘the question of Sections 18 to 22’ was abandoned a few days later at the hearing on 15 July. This letter is also the first indication that McConnan had changed his mind as to the desirability of this part of the case being abandoned.

43

Also on 11 July, Wilson of the E S & A Bank wrote again to Sir Frederick Young referring to the Associated Banks recent meeting and saying that McConnan was ‘not at all happy about writing the letter’. (36) Why this should have been so is explored further below.

The question of what McConnan’s state of mind was in writing the letter is made more uncertain by Heffer’s letter of 14 July to his Inspector in Melbourne, in response to the Inspector’s letter of 11 July which is not available. Heffer complained about McConnan’s letter to the Commonwealth Bank as going ‘much further’ than the agreed draft and that this should not have been done ‘without the authority of all banks’. There is, however, no suggestion in McConnan’s letter that he is writing on behalf of all banks, only the Associated Banks (Victoria). Heffer also adds the intriguing comment that he did not think that anyone was in a better position than McConnan to induce the Council to drop references to Sections 18/22 ‘and from what you say in your P. S. he is evidently at work on them’. (37)

The Hearing

The hearing took place in Melbourne on 15 and 16 July. Quite early in the proceedings, at page 7 of the transcript, Barwick said that it was not proposed to argue paragraph 13 of the Statement of Claim, that is the argument about Sections 18 to 22 of the Banking Act and Section 55 of the Constitution. He said that ‘the matter has been considered in this way - that that, of course would only be in the nature of a delaying submission..’ and added that ‘It is a source of some grief to me that I feel that I am not to argue it.’ Before he left Division 3 of the Act, which dealt with Special Accounts, he made the intriguing comment that

! questions that may touch the validity of Division 3 as distinct from its effect in relation to ! Section 55 would not be open in argument to this plaintiff in any view, and the plaintiff does not ! desire to enter upon that matter at all.

This sounds as if there may have seen some arguments about the invalidity of the special accounts provisions which the banks (but not the Council) may have been able to bring forward. But if this was so, we will never know what they were.

Barwick presented three lines of argument regarding Section 48. As the Chief Justice, Sir John Latham, later summarised them:

(1) s. 48 is not legislation with respect to banking; (2) alternatively, if s. 48 is legislation with respect to banking, it is legislation with respect to State banking, and for this reason is expressly excluded from the scope of the Commonwealth power conferred by s. 51 (xiii) of the Constitution; (3) alternatively, if s. 48 is legislation with respect to banking but is not legislation with respect to State banking, it is a law which is directed against an essential State Government activity, namely the custody, control and !disposition of government funds; it involves a form of what is called "discrimination," which is forbidden by the Commonwealth Constitution taken as a whole and is therefore invalid. (38)

Because of the likelihood that the Court would not give its judgement for some weeks after the hearing ended, the question had arisen as to what action the Government should take with regard to the decision that Section 48 would come into effect on 1 August. The question had been considered initially at the 4 June meeting of officials referred to above, when the ‘the legal officers were of the opinion that pending the hearing, the Melbourne City Council would almost certainly obtain an interim injunction to restrain the Treasurer from specifying them as an authority to which Section 48 is to apply’. Further, were this injunction to be granted, then other councils would almost certainly apply for injunctions, so it was considered that the

44

Treasurer ‘would be well-advised to suspend action under Section 48’ pending the High Court’s decision. If the Treasurer approved this suggestion, then all affected bodies would be so informed. While the file does not so indicate (39), Chifley apparently turned this suggestion down, because the question arose again after the hearings were completed. It may be that Chifley’s decision to take a hard line stemmed from the banks’ earlier decision not to agree to leave the banking legislation alone.

On 17 July, Chifley directed that the action proposed for 1 August should go ahead as arranged, including as to the Melbourne City Council. Bailey - who confidently predicted a favourable outcome from the High Court by a majority of 5-2 - thought that to include the Council in the 1 August action would be ‘inappropriate and undesirable’ and might well cause the Council to seek - and to get - an interim injunction. Bailey also thought that ‘the Treasurer might consider it inappropriate’ with regard to the other authorities affected to proceed on the basis of a favourable decision. (40)

Chifley stuck to his guns, however, including as to the Melbourne City Council but then relented and left it off the list; no reason is recorded on the file. Notices were sent to the banks, and on 30 July telegrams went out to the local government authorities which had earlier been notified reminding them of the need to change their banking arrangements by 1 August. On 31 July however, Barwick appeared before the Chief Justice in Sydney and applied to delay the implementation of Section 48. The Chief Justice adjourned the hearing until the folllowing day to enable all parties to be represented. He said during the proceedings, as to the action taken by the Commonwealth:

! I am astonished to see that this action has been taken when the matter is actually under ! consideration by the Full Court and that it is proposed to take steps under a particular view of ! the Act when it depends upon a decision of the Court whether or not that view can be regarded ! as right. (41)

On 1 August Barwick applied for an injunction on behalf of the Melbourne City Council and sought to extend it to cover all the local government authorities notified by Chifley’s letter of 1 May. The basis for his argument - eventually accepted by the Chief Justice - was that the status quo should be preserved until the High Court’s decision was known. The Commonwealth’s argument that the Melbourne City Council had no grounds to make an application, as it was not on the latest list, was not accepted, even though the Chief Justice initially made the same point. The Commonwealth’s case was adversely affected by the fact that its Counsel said repeatedly that because of the lack of notice, he had received no instructions on Barwick’s argument that the Melbourne City Council should be taken as representative of all the affected Victorian authorities. Initially the Chief Justice confined his order to the affected Victorian authorities, but when Barwick produced an application from the New South Wales Shire of Coreen, the Chief Justice extended the order to the affected New South Wales authorities also. (42)

In the last act of this little fiasco, another flood of telegrams was sent out to the affected councils on 1 August cancelling the previous telegrams, and a further notice appeared in the Commonwealth Gazette cancelling the previous notice.

On 4 August, Goode of the Union Bank had written to London noting that the sections 18 to 22 point was not argued in the recent High Court case - ‘I believe in deference to the Banks’ wishes’. (43)

45

The High Court handed down its decision on 13 August. In his judgement, the Chief Justice summarised Barwick’s first line of argument as follows:

! The argument is that s. 48 of the Banking Act simply picks out States and State authorities for ! subjection to a Commonwealth banking monopoly without any reason which can be described ! as a reason grounded upon any considerations relating to banking. In other words, s. 48, it is ! said, is really a law with respect to States and State authorities, controlling them in respect of ! their banking business, and is not a law with respect to banking.

He found that the argument ‘should not be accepted’.

As to the second argument, the Chief Justice said:

! The second argument for the plaintiff is that if s. 48 is a law with respect to banking it is a law ! with respect to State banking, and that the express terms of s. 51 (xiii.) of the Constitution! prevent the Commonwealth Parliament from making any law with respect to State banking. ! The contention that s. 48 is a law with respect to State banking challenges an assumption upon ! which s. 48 is based. Section 5 of the Act expressly provides that s. 48 shall not apply with ! respect to State banking. Section 48 expressly relates to the conduct of banking business by a ! bank (i.e. a bank authorized under Part II.—see s. 4) for a State. Thus s. 48 assumes that the ! conduct of banking business by a bank (not being a State bank—s. 5) is not "State banking." ! If this assumption is wrong, s. 48 is invalid as dealing with a subject expressly removed by s. 51 ! (xiii.) of the Constitution from Commonwealth legislative power.

He found that ‘This argument is plausible, but in my opinion it should not be accepted’.

The Chief Justice summarised the third argument as follows:

! The third argument of the plaintiff is that s. 48 introduces a degree of control of State ! banking activities which is forbidden by the Federal Constitution. The proposition !upon which ! the plaintiff relies is that the Commonwealth Parliament cannot, even under a legislative power ! expressly conferred upon it, make a "discriminatory" as distinct from a general, law, which is ! aimed at or directed against an essential governmental power or function of a State.

Having considered this argument and arrived at certain principles, the Chief Justice concluded as follows:

! The application of these principles in the present case brings about the conclusion that s. 48 of ! the Banking Act is invalid. The section requires the consent of the Treasurer to the conduct of ! banking business by a bank only in the case of States and State authorities, including local ! governing authorities. It singles out States and State agencies and creates a rule for them and ! for no others. It is in substance legislation about States and State authorities. It can fairly be ! described as being aimed at or directed against States—and it none the less falls within this ! disqualifying category because it is also aimed at and directed against what are called "private ! banks." On this ground, in my opinion, s. 48 is invalid.

He also noted that a declaration had been sought that the whole of the Act was invalid, but that it was not necessary to express an opinion as to the validity of any other provision.

Four of the other five judges agreed with the Chief Justice that the rights of the States and local governing authorities were encroached upon by Section 48, Sir Edward McTiernan being the dissenter. The States of South Australia and Western Australia supported the Melbourne

46

City Council, and Victoria supported the Commonwealth. No other local government authority appeared, and no bank. (44)

On the evening of 14 August, according to Crisp, Chifley attended a pre-arranged meeting with Ministers Evatt and McKenna, the Governor and others from the Commonwealth Bank, the Acting Secretary of the Treasury and F H Wheeler. After discussing ‘a number of current economic and financial issues already on the agenda’, ‘Chifley introduced an informal consideration of the implications of the Melbourne City Council decision’ including ‘whether it would be technically practicable to nationalise the banks’. But ‘he gave the question no special emphasis and indicated no immediate operational interest in the possibility.’ (45) Unusually, and sadly for the historian, Wheeler seems not to have left a note for file of this meeting.

The Canberra correspondent of The Age (Melbourne) published on Monday 18 August, in his account of the nationalisation decision, gave a quite detailed account of the Thursday evening meeting, down to identifying by name and title those attending. (His and Crisp’s names and titles agreed, save that the newspaperman had Minister Cameron rather than McKenna present, and he elevated the Acting Secretary of the Treasury to be the Secretary.) He too had Chifley asking for ‘opinions regarding the nationalisation of banking’ but went further than Crisp by saying that ‘when the conference dispersed at 7 pm it had been decided that the suggestions should be put before Cabinet’.

On 13 August, as the Council files show, Connelly wrote to both Trumble and Barwick. He congratulated Trumble on the result of the case and added

! In conducting this case on behalf of the Council, you applied yourself with a thoroughness and ! assiduity which warrants the fullest commendation from the Council, and I wish to express to ! you our admiration of the able manner in which you prepared details of the case which enabled ! such a brilliant exposition to be carried out by Mr. Barwick, K.C. The Council is very pleased ! with the judgment, and I desire you to accept our gratitude and thanks for the initiative and ! thoroughness displayed by you throughout the proceedings.

He wrote to Barwick in similar terms. The Town Clerk sent Barwick what seems to have been a telegram.

Trumble responded to the Lord Mayor on 15 August, in equally fulsome terms. Two sections warrant full quotation.

! The urgency of the matter was so great from the outset that it was not possible to give the ! Council a full considered opinion with regard to section 48 before the Council was obliged to ! make its decision to commence proceedings. I was only able to let the Council have at that ! stage an extract from Mr Barwick’s opinion on the Act generally at a time when Section 48 was ! more or less a minor consideration and it was gratifying to know that the Council was prepared ! to back my judgment.

! The Council was truly fortunate in securing the services of Mr Barwick KC who was indeed as ! you say brilliant in his presentation of the case. From more than one source I have heard that ! different members of the bench were deeply impressed with his argument, by which I mean not ! merely the substance of it but the manner in which it was put. From a professional standpoint it ! was a display of sheer artistry....

On Saturday 16 August, the Cabinet unanimously agreed to Chifley’s oral submission that the private banks be nationalised. His case is described by Crisp thus:

47

! Chifley summed up by saying that the Government could either swallow the decision and await ! an attack by the private banks on the vital sections of the 1945 Acts, or they could remove the ! challengers by nationalising the banks. (46)

Although it is out of sequence, it is convenient to mention here before the Melbourne City Council fades from the narrative the question of Trumble’s costs. The law’s delays evidently prevented him from writing to the Council on the question until June 1948. Although there is no supporting record on the Council’s files, he claimed that ‘at the outset in this matter I indicated that in the event of a successful issue counsels (sic) fees would not be allowed in full on taxation nor would an adequate allowance be made for my own costs’. This had proved to be the case and while the Court had ordered the Commonwealth to pay the Council’s costs, Trumble’s bill was ‘cut down heavily’ so that only 676 pounds 15 shillings and 10 pence had been allowed. Trumble considered that he should be allowed to retain this amount together with the sum of 600 pounds previously paid to him by the Council ‘on account of costs’. He enclosed an account which showed his ‘costs and disbursements’, including his own professional costs of 525 pounds, amounting to just over 1275 pounds; the balance due to the Council was thus one pound 12 shillings and five pence. The Town Clerk readily agreed. (47)

If this is not easy to follow, Solly also found it so. He is quoted in the West Australian of 21 October 1947 as saying that the case cost the Council 791 pounds, and found it necessary to add that ‘He repeated that no contribution to the fees had been made by the trading banks’.

October

On 1 October, again in Melbourne, the pattern of events leading up to the High Court’s decision on Section 48 - stemming essentially, as noted, from the actions of an undemocratic body elected on a franchise so restricted as to produce uncontested rotten boroughs or wards, and heavily influenced by the banks - was repeated in the Parliament of Victoria. On Tuesday 30 September the Legislative Assembly passed the Cain Government’s appropriation bill for the month of October. The following day it reached the Legislative Council, where the Liberal member, ex-President of the Council, director and future Vice-Chairman of the National Bank, Sir Frank Clarke, said that he would be asking the Council to reject the Bill on the basis that the Victorian public had a right to express its opinion on the bank nationalisation question. When the Government resigned, supply would be granted. ‘Various private banks’, Raymond Wright records, ‘had already offered the Liberal Party significant financial support in the event of an election fought on the nationalization issue’. The Council agreed by a majority of 19 to 13, the six members of the Labor Party who were present, four Liberals, and the three Independents comprising the minority, against the nine Liberals and ten Country Party members in the majority.

The process was repeated on 2, 3, 7 and 8 October, when the Government resigned and supply was granted. On 7 October an Assembly resolution to conduct a referendum on the powers of the Upper House was rejected by the Council; consulting the people was evidently desirable on some questions but not on others. Attempts by the defeated Government at the ensuing election to persuade the electorate that bank nationalisation was not its responsibility were unsuccessful, and the Labor Party had its worst result until that time, partly or even in large part due to the gerrymandered Assembly electorates. As Crisp notes, ‘Labour’s 474,000 votes had gained it only 16 seats (a quarter of the whole), while the Country Party alone won 20 seats with a total of a mere 166,000 votes’. (48) As with the Council, there were signs of rotten

48

boroughs in the Assembly: in the 1943 elections, only 51 of the 65 electorates were contested, rising to 54 in 1945 and 62 in 1947. (49)

Menzies certainly knew in advance of the move to block supply, as he warned the Liberal Party of Victoria on 30 September that it might backfire. After the election, as Martin notes, ‘Menzies, his earlier advice conveniently forgotten, was jubilant’, claiming that the bank nationalisation issue was the main cause of the Government’s defeat.(50) Blainey and Hutton record that ‘thousands of bank officers canvassed’ in the election, and that McConnan ‘was delighted: We have had a marvellous win in the first major round of the fight’. In a footnote on the same page, they also record that ‘The election was instigated largely by Sir Frank Clarke...’ (51)

As noted elsewhere, there was a widespread belief in the Federal Government that the private banks had been behind not only the Melbourne City Council challenge, but also the Legislative Council action. As the Minister for Health and Social Services, Deputy Leader of the Government in the Senate and one of the Government’s ‘big four’, Senator McKenna, put it during the debate in the Senate on the Banking Bill 1947:

! Finally, let me refer to Victoria. My friends opposite point to Victoria with great jubilation. ! What happened there was that the banks affected by this legislation, operating through their ! strategically placed agent in the Legislative Council, Sir Frank Clarke, who is vice-chairman of ! the National Bank of Australasia Limited, dragooned it into throwing out of office the ! government of the day, not on a controversy that affected the State or on any controversy ! between the Legislative Council and the Legislative Assembly. On an issue that did not concern ! that Parliament, and about which it could do nothing, the Legislative Council threw the ! Government of Victoria to the people. ...I repeat that the Government of Victoria was thrown ! out of office by the banks.

The final act of the events with which we are concerned took place in October and November, when the Banking Bill 1947 (the bank nationalisation bill) - which would have empowered the Commonwealth Bank ‘to take over the banking business at present conducted in Australia by private banks’, as Chifley’s second reading speech put it - was debated in the House of Representatives. The debate necessarily reviewed some of what had happened in the previous years; indeed the Government’s case rested upon these events.

Chifley’s Second Reading speech occupied six pages of Hansard - and that was before he began to deal with the provisions of the bill. He began with ‘Modern Policy on Banking’ as the heading had it (‘there is a very wide agreement today as to the purposes which a monetary and banking system should serve in a modern economy’ and he quoted from the 1937 Royal Commission Report) and proceeded to ‘The Labour View’:

! The Labour party has maintained for many years that, since the influence of money is so great, ! the entire monetary and banking system should be controlled by public authoriities responsible ! through the Government and the Parliament to the nation. On this principle the Labour party ! has held further that since private banks are conducted primarily for profit and therefore follow ! policies which in important respects run counter to the public interest, their business should be ! transferred to public ownership.

The echoes of his Dissent in the Royal Commission Report of ten years previously may be heard.

49

Having quoted examples from history of the policies of the private banks running against the public interest, Chifley then turned to ‘The Commonwealth Bank’ and having reviewed its record concluded that it ‘stands as a great justification of publicly-owned banking and demonstrates beyond question that a public banking institution is capable of being highly efficient, progressive and adaptable’. He then dealt with ‘War-time Experience’ and ‘Legislation of 1945’, under which heading he made the surprising claim that one of the ‘main objects’ of the 1945 Acts was ‘To reserve to publicly-owned and controlled banks the banking business of governments and governmental authorities’. This claim had not been reflected in Chifley’s own attitude to Section 48, as noted above, but the High Court decision had now become part of the justification for the nationalisation decision. After dealing briefly with ‘Opposition to 1945 Legislation’ (that from the private banks being another part of the justification) and ‘Legislation Endorsed by Electors’ (‘ a majority of the electors’ in 1946 approved giving the Government ‘full and effective control over monetary and banking policy in Australia’), Chifley dealt at some length with ‘Constitutional Issues’.

It had seemed quite clear, he said, that Parliament had in passing the Banking Act of 1945 made a law with respect to banking when it enacted Section 48. He repeated his claim that it ‘was regarded by the Government as an important part of the legislation’ and advanced the new argument that it was an important credit control measure. The High Court’s decision, however, showed that ‘full control of banking as sought under the 1945 legislation could not be secured without public ownership of banking’. All the circumstances surrounding that legislation had been re-examined, in particular ‘the constitutional basis of sections 18 to 22 of the Banking Act ...which were the crux of the control of credit’. If they were held to be invalid, it would be ‘disastrous’ and ‘a dangerous inflationary situation’ might arise. The same kind of credit control measures had been taken elsewhere and ‘are today an accepted part of central bank technique in many parts of the world’.

Chifley then attacked the banks directly. They had ‘always bitterly resented any attempt to place restrictions on their power to create or restrict credit’ and during the passage of the 1945 act ‘had fought these provisions with all the means at their disposal’. He referred to the letters which they had sent to the Commonwealth Bank in 1945, saying that compliance with the Commonwealth Bank’s requests or directions ‘is not to be taken to import any contract with your Bank in the terms of the Act’ as making it clear that ‘while they were submitting to the legislation for the time being, they were reserving the right to challenge it at a suitable opportunity’. This indication of the banks’ attitude ‘assumed greater significance when the special account system was challenged’ in the Melbourne City Council case, even though the challenge was withdrawn, and ‘still greater significance’ when the High Court decision made it clear that ‘a law with respect to banking could be held invalid on other constitutional considerations’. Chifley summed up this section of his speech thus:

! The position which confronted the Government was that while doubts had arisen as to the ! constitutional validity of its banking legislation, there was evidence that the private !banks were ! maintaining their hostility towards this legislation and were biding their time against a ! suitable opportunity to challenge it in the hope of throwing off the restraints they so strongly ! disliked.

In the final section of his speech - ‘Uncertainty of Economic Outlook’ - Chifley argued that the ‘highly unstable’ international economic situation meant that ‘the Government must have the necessary powers over banking and monetary policy...The Government would not be justified in gambling on the outcome of possible threats to the 1945 legislation’. He concluded by saying in effect that the banks had had their chance and had refused to take it:

50

! The structure of banking based upon the legislation of 1945 went part of the way towards the ! objectives which the Labour party had long advocated in regard to banking. At the same time it ! offered the private banks the opportunity to co-operate within a national system of banking, ! subject to overall control by the Commonwealth Bank, as they had, in fact, done during the war ! period. That position was never accepted without reservation by the private banks and now that ! the legal foundations of the system have been challenged the Government has decided to ! proceed with its long-standing policy of full ownership. (53)

Whatever its impact at the time, looking back after more than sixty years the speech is not persuasive. Unable to present his main reason for proceeding to nationalisation - that the private banks would not give him the assurance he sought as to no further challenge to the key provisions of the 1945 Act - Chifley was left to make the best of a bad job. His first argument - that Section 48 was one of the ‘main objects’ and ‘an important part’ of the 1945 legislation - is undermined by his own attitude to the provision and his readiness not to pursue it were the banks to give him the assurance he sought. (Geoffrey Bolton, as noted, called it ‘the least significant part’). While the constitutional validity of sections 18 to 22 may have been re-considered, there was no suggestion that they might be found to be unconstitutional; only that it would be ‘disastrous’ if this were so and that the Government ‘would not be justified in gambling on the outcome of possible threats’. It was an argument full of ‘ifs’ and ‘possibles’ fortified only by two-year old letters open to several different interpretations, and the recent court case as to which Chifley stopped short of saying that the banks had played a crucial role, which was surely a central plank of his case. The ‘legal foundations’ of the legislation had not been challenged, as he claimed. The argument that the banks had had their chance and refused to take it does not make sense when confined to the events mentioned in Chifley’s speech; it makes sense only in relation to his private offer, which he could not mention.

Menzies’ reply a week later, after a long burst of rhetoric (‘the most far-reaching, revolutionary, unwarranted and un-Australian measure introduced in the history of this Parliament’), made short work of Chifley’s legal arguments. He noted that Sections 18 to 22 were still in the Banking Act and had not been challenged, and he outlined the Section 55 argument including the fact that Sections 18 to 22 were severable. Rhetoric mingled with legal argument here and there, thus:

! When attention was drawn to the fact that this [Section 55] argument had been advanced, the ! Melbourne City Council said that it was not going to proceed on these lines, because, if it had ! succeeded, it would not invalidate sections 18 to 22.

This makes it sound as if the Council had in its writ made an error which it later corrected. As the analysis above shows, this was far from the truth. One wonders who drew attention to the fact, and how Menzies became aware of it. Menzies also claimed in relation to Sections 18-22 that ‘No one in the Government’s own legal department has expressed the slighest doubt of their validity’; that ‘they were not susceptible to challenge’; and further that ‘I say, with no hesitation at all, that no lawyer of any description has inspired, through any words of his, any doubt in the mind of the Government on that point’. Menzies could not have known that any of these statements was true, although from the papers of the Attorney-General’s Department drawn on above, in fact the first claim was true. On Menzies’ account, Chifley’s argument on this point was ‘bogus’ ‘entirely without foundation’ and ‘false’. While it is an entirely reasonable inference that Menzies was aware from McConnan of Chifley’s private dealings with the trading banks, he too felt unable to refer to them. He made no mention of Chifley’s direct criticism of the private banks and their recent conduct.

51

Chifley’s response in closing the debate also contained much rhetoric. If the challenge to Sections 18 to 22 did not mean anything, as Menzies claimed, why did the Council mention them in its statement of claim? Chifley also read out from the statement of claim paragraph 12

12. The Banking Act 1945, or alternatively section 48 thereof, is beyond the powers of the Parliament of the Commonwealth of Australia, contrary to the provisions of the Constitution of the Commonwealth and is void.

‘So, the whole act was challenged in that case, or alternatively, section 48’, Chifley continued. On its face that is correct, but as shown earlier, that paragraph, other than the reference to section 48, was part of the section 55 argument that was withdrawn. Chifley then read from the exchange of correspondence between the Crown Solicitor and Trumble on 25 June which mentioned sections 18 to 22; but again this was before the section 55 argument was withdrawn and was thus not to the point. Chifley concluded this part of his reply by saying that ‘That is a complete reply to the suggestion that sections 18 to 22 were not in the original case, and that it was not intended to challenge them.’ Menzies had made neither statement. (55)

A letter sent to McConnan by the Governor of the Commonwealth Bank, Armitage, in December 1947 revealed some of the feeling which existed between the Commonwealth Bank (and by implication the Commonwealth Government) and the private banks. Details of some ‘advices’ issued by the Commonwealth Bank to the private banks were leaked to the press. The subject of the advices is not clear from Armitage’s letter - which is all we have - and because of the date would not in any case directly affect the issues being considered here; but Armitage was moved to include the following comment, against the background of the nationalisation legislation (56):

! Without preaching a sermon, may I say that it seems to me that the lingering opposition and ! hostility of the Trading Banks to control by the Central Bank has contributed to no small extent ! to bringing about the present controversial legislation. As you know, in England the Trading ! Banks unhesitatingly and loyally follow the lead of the Bank of England and I have always been ! hopeful that in Australia the Banks would adopt the same attitude towards the Central Bank.

Notes for 1947

(1) RBA C.3.6.19.2 It is intriguing that the Governor was aware in February 1947 that the Melbourne City Council was strongly opposed to section 48, as it was not until April (see below) that the Council formed a view. Given that the Governor’s source may well have been McConnan, does this suggest that the developments set out below had their source some months earlier?

(2)Blainey and Hutton, Gold and Paper, page 228(3) ANZ Group Archive, A/99, 28 No 22, letter 182(4)ANZ Group Archive, U/140/9, letter of 19 June 1947(5) Blainey and Hutton, Gold and Paper, page 228; White and Clarke note (Cheques and Balances p

15) that ‘The business of the Government of New South Wales had been substantially with the Bank of New South Wales since its foundation in 1817 and was, of course, extremely valuable to the Bank’. Not all parts of it were ‘extremely valuable’ however: they also say on the same page that when the Commonwealth Bank said in February 1947 that initially it would be taking over the NSW Government Main Revenue and Trust Accounts, leaving the Bank with the Departmental Accounts, Heffer was moved to complain that the Commonwealth Bank would be ‘taking the cream and leaving us with the unprofitable residue’.

52

(6)Argus 29 March 1947; trove.nla.gov.au(7) Public Record Office of Victoria, VPRS 3183, Town Clerk’s Correspondence Files II, file 48/2589; unless otherwise indicated, references below to correspondence to or from the Council (eg with its solicitors, Malleson Stewart and Co), or internal Council communications, are taken from this file, or from two other relevant files in the Public Record Office: VPRS 8910 City Council Minutes, and VPRS 8945 City Council Finance Committee Minutes.(8) Westpac Historical Services, file GM102/30; the reference may have been to Barwick’s opinion of December 1945(9) National Australia Bank Archives, A681, 22; the letter is dated 24 June 1947 and addressed to ‘Dear Harry’; from its tone and content it might have been sent to Harry Giddy, then Chairman of the Bank’s Board, who appeared to have been visiting London; the letter will be referred to again later. (10) National Australia Bank Archives, A686, 22(11) NAA, Canberra, Treasury file A571, 1945/1908(12) ibid; for Wheeler, see John Farquharson, 'Wheeler, Sir Frederick Henry (1914–1994)', Obituaries Australia, National Centre of Biography, Australian National University, http://oa.anu.edu.au/obituary/wheeler-sir-frederick-henry-1567/text1630, accessed 21 June 2013; ‘in the post-war years,’ Crisp records (Chifley, page 258), ‘F H Wheeler in particular, ...rose rapidly to a very special place in Chifley’s confidence’; one indication of this is a copy of a letter Chifley wrote to Wheeler on 16 December 1947 from New Zealand, beginning ‘Dear Fred’ and concluding ‘Best wishes for Christmas and the New Year to yourself, Mrs Wheeler and family, and thanks for all your hard work and consideration during the year’ (Papers of Sir Frederick Wheeler, National Library of Australia, MS8096)(13)Westpac Historical Services file GM102/30(14) National Australia Bank Archives A686, 22(15) Westpac Historical Services file GM102/30(16) Unless otherwise indicated, material dealing with Commonwealth Treasury correspondence and internal notes is taken from NAA, Canberra, Treasury file A571, 1945/1908 (17)H F E Whitlam, then Crown Solicitor, was the father of E G Whitlam, later Prime

Minister. Against the possibilities that (a) Whitlam senior knew of the back channel approaches to the banks described by Coombs and Crisp and (b) that he had mentioned them to Whitlam junior, I wrote to E G Whitlam on the point in October 2008; his prompt reply referred me to the forthcoming Hocking biography, which ‘traces my father’s participation in the bank nationalization case but she does not mention “informal discussions between the Government and the banks”.’

(18)Crisp, Chifley, page 326(19) ibid, page 324(20)Coombs, Trial Balance, page 115(21) This is not, with respect, the clearest passage that Marr ever penned. Another account,

also deriving directly from Ewens, shows that the meeting took place in Ewens’ office with Chifley and Bailey being the only others present. See http://www.qualtrough.org/articles/articles-australia/jqewans.html, an article on Ewens’ life by Elizabeth Feisst, ‘much of it’, she writes, ‘compiled from the preface of the book Essays in Legislative Drafting, edited by David St L Kelly (Adelaide, 1988)’, published in honour of Ewens’ 80th birthday.

(22)Barwick, A Radical Tory, page 55(23) RBA S-a-2408(24) ibid(25) ANZ Group Archive, U/140/9(26) ibid, E/49/6(27) NAA, Canberra, Treasury file A571, 1945/1908(28) ibid(29)National Australia Bank Archives A686, 22

53

(30) ibid(31) ANZ Group Archive, E/49/6(32)NAA, Canberra, Attorney-General’s Department file A432/82, 1947/625(33)Westpac Historical Services file GM102/30(34) RBA S-a-2408(35) National Australia Bank Archives A681, 22(36) ANZ Group Archive, E/49/6(37)Westpac Historical Services file GM102/30; McConnan essentially disappears from the

chronology at this point, so it should be noted here that in 1951, after a decent interval, he was - not unreasonably - knighted by a grateful Menzies Government. Marr suggests that the decision not to argue the sections 18-22 aspect was made after Barwick arrived in Melbourne (Barwick, page 55), but Barwick told Clyde Cameron this was wrong (see Appendix A).

(38) The transcripts of both days are at NAA Canberra, Attorney-General’s Department file A432, 1947/625, Attachment; there is a summary of the exchanges at pages 65-6; this file has been digitised and is available on-line.

(39)NAA, Canberra, Attorney-General’s Department file A432/82, 1947/625(40) ibid(41) ibid(42) ibid; the case and relevant contemporary documents illustrate Barwick’s skill as a

barrister; his papers at NAA Sydney show that in May 1947 he was in conference with the NSW Local Government Association; and the detailed account rendered on the Melbourne City Council by Trumble (Council file VPRS 3183, 48/2589) showed that fees had been paid to his Sydney agents Allen Allen and Hemsley, a leading firm of solicitors, ‘for negotiations with and attendances on New South Wales Local Government Association eliciting its support, preparing proceedings for injunction to prevent specifying of Councils before judgment given and conducting same’.

(43)ANZ Group Archive U/140/9(44) Melbourne Corporation v Commonwealth (1947) 74 CLR 31; [1947] HCA 26 (13 August 1947)Barwick had another gnaw at the bone when he was Chief Justice, and the State of Victoria argued that it should not have to pay Commonwealth pay-roll tax on State public service wages, invoking the Melbourne Corporation principle that the Commonwealth could not ‘single out’ States. All seven judges found against it, and Barwick essentially re-argued the Melbourne Corporation case. Having noted some of Sir Owen Dixon’s comments in that case, Barwick said that they ‘followed, in my opinion, because such a law was not in substance a law with respect to banking: but on the contrary, had the States and the banking of their funds as its subject’ - that is, his first argument in 1947. He went further, claiming that ‘That, in my opinion, is the real ground of and, in any case, the only acceptable ground for, the decision in Melbourne Corporation v. The Commonwealth’, which sets aside his second and third arguments in 1947. Victoria v Commonwealth (“Payroll Tax Case”) [1971] HCA 16; (1971) 122 CLR 353(45) Crisp, Chifley, page 326(46) ibid, page 327(47)Council file VPRS 3183, 48/2589(48)Crisp, Chifley, page 333(49) Contemporary reports from Melbourne Argus - trove.nla.gov.au; Raymond Wright: A

People’s Counsel: A History of the Parliament of Victoria, Melbourne, 1992; and http://www.parliament.vic.gov.au/about/the-history-of-parliament/elections-since-1856; the figures for the 1950 election, taken from Wright page 184, show the extent of the gerrymander more clearly: Labor 45.3% of the vote, 24 from 65 seats; Liberal and Country Party 40.7% of the vote, 27 seats; Country Party 10.6% of the vote, 13 seats.

54

(50)Martin, Robert Menzies, Vol 2, page 77(51) Blainey and Hutton, Gold and Paper, page 231(52) Senate Hansard, 24 November 1947(53) House of Representatives Hansard, 15 October 1947(54) ibid, 23 October 1947(55) ibid, 11 November 1947(56) Letter from Armitage to McConnan 12 December 1947; National Australia Bank Archives

55

Conclusions and Observations

This section seeks to bring together some of the threads in the previous parts of the paper, to draw some conclusions and to make some observations.

As foreshadowed in the introduction, the search for some direct confirmation of the Crisp/Coombs accounts of back-channel dealings between the Chifley Government and the private banks was unsuccessful. No relevant reference or document could be found in a range of records. This is not of course to say that none exists; all that can be said at the moment is that the present search failed. Some future researcher may find in some obscure file the historical equivalent of a smoking gun. Another possible source is the relevant recollections of the children of those who were involved at the time and to whom some relevant information was disclosed. The best service the present paper might render to Australian history would be to prompt such recollections.

The accounts by Crisp and Coombs are of course in themselves direct evidence of what happened between the Government and the banks in 1947. This direct evidence receives support from inferences which can reasonably be drawn from the events of that time. Before discussing these, it is important to note that while there is no evidence that the two ever met - apart from at the Banking Royal Commission to which McConnan gave evidence - the shots on the Government side were called almost entirely by Chifley, mostly without recourse to Cabinet; and while it is common to describe ‘the banks’ as opposing section 48, the evidence reproduced here shows plainly that it was McConnan and the National Bank leading the charge, often against the opposition of the other private banks - particularly when sections 18-22 came into play.

It is also worth noting that unlike the subsequent bank nationalisation case, of the other interested parties - the banks, the States, the many other local government bodies - only three of the six States intervened, two joining the Council in its action and one joining the Commonwealth. No bank and no local government body intervened; and only eight of the 190 or so other councils affected wrote to the Council in support of its claim, together with four associations of councils and three miscellaneous bodies, including the Douglas Social Credit Movement of Victoria. While any number could play (subject to being able to show an interest), few did. Perhaps this is hardly surprising. Councils had nothing to lose were s 48 to be enacted, save the right of most to select their own banks.

The sequence of events outlined earlier suggests that what started off early in 1947 as a minor legal challenge was transformed in May-June to a major political event, although it took some months before its dimensions became clear. Chifley made it clear to ‘the banks’ through Taylor that he would not put up with an attack on Sections 18-22 and sought from them an undertaking that they would desist. It is not known to whom Taylor spoke but the probability is that it was McConnan or perhaps a Board member at the National Bank, under conditions of strict secrecy. McConnan’s closeness to Menzies and Potter would have ensured that they would have been promptly drawn into consideration of the political aspects. One initial conclusion clearly was that no attempt should be made by McConnan - despite the urging of his banking colleagues - to dissuade the Council from going ahead with the Sections 18-22 challenge. What caused the change of mind early in July - leading to the withdrawal of that challenge at the July 15 hearing - can only be a matter of speculation. Crucially, however,

56

Chifley received no undertaking that these sections would not be challenged in the future, thus providing an opportunity for him to take more drastic action; ot perhaps more accurately, in view of his reported comments, obliging him to take such action. How much on the other side - the Melbourne establishment side - was careful preparation and planning, and how much the taking of opportunities as they arose, we may never know. The establishment’s actions it forcing the Cain Government to an election later in 1947 - using the bank nationalisation issues as a pretext - showed careful preparation and planning. That the move was led by Sir Frank Clarke in the Legislative Council - director and future Vice-Chairman of the National Bank, Liberal member and former President of the Council, holder of a seat there since 1913, scion of the Melbourne establishment - seems entirely appropriate.

It is worth emphasising that McConnan’s banking colleagues plainly thought that he had the power to influence the City Council and its lawyers; they repeatedly urged him to do so. His repeated view to them was that he should not interfere with the Council’s case; not that he was unable to do so.

Two historians (L Sharon Davidson and Stephen Salsbury) go further than most and assert that (having described how Heffer was a defeatist who would not oppose the 1945 legislation)

! ...the fight against Chifley’s drive to seize local government accounts for the Commonwealth ! Bank went by default to the National Bank of Australasia, which held some of the accounts of ! the Melbourne City Council. The National’s Leslie McConnan arranged with Melbourne City ! Council to mount a legal challenge and engaged Garfield Barwick, a leading King’s Counsel, to ! represent the City of Melbourne in the struggle. (1)

In 2008, I enquired of Dr Davidson whether the two authors had come across any direct evidence of the arrangement. She responded that ‘The short answer is no’, and went on to say that ‘That part of the book was written by my late collaborator, Stephen Salsbury’ (2)

Coombs suggests that ‘Some [banks], probably a majority, would have been willing to give Chifley the assurance that he sought. But it was withheld.’ He goes on to note Issachsen’s statement in 1949 that ‘there was no possibility of the Banks challenging the 1945 legislation’, on which he comments that ‘It is difficult to see what the Banks gained by their refusal in 1947 to declare publicly their willingness to accept the control provisions of the 1945 Act as they did two years later...’ (3) Although no direct evidence was found, the previous sections of this paper lend support to Coombs’ suggestion that a majority of banks would have been willing to accede to Chifley’s request. Chifley’s difficulty with the banks’ attitude in 1947 might be explained, at least in part, by McConnan’s dominance of his colleagues, and the Melbourne establishment and party political influences brought to bear on him, urging that his eyes be kept on the larger prize of the downfall of the Government.

The files of the Melbourne City Council support the view that the nature of the matter changed in May-June. At the beginning of the case, they are full of notes by the Town Clerk and his Deputy as to what is happening; by the end - including the crucial decision not to proceed with the sections 18-22 arm - there are no records. Arguably this reflects the diminished influence of the Council staff and the increased influence of Solly and the Lord Mayor, who were apparently careful not to record their involvement. The tone of the exchanges between Trumble and Connelly after the High Court victory confirms the impression that Trumble was running the show with the Lord Mayor’s approval: ‘it was gratifying to know’, he wrote to the Lord Mayor after the High Court decision,’ that the Council was prepared to back my judgment’, while Connelly expressed the Council’s gratitude and thanks for Trumble’s ‘initiative and thoroughness’.

57

It is also worth noting how little the full Council and the Finance Committee had to do with the case. The full Council considered the matter only twice: on 12 May 1947 when it accepted the recommendation of the Finance Committee and authorised that Committee to take further action; and on 7 July, when an unsuccessful attempt was made to reverse the 12 May decision. The Finance Committee considered the matter only once: on 5 May, when it recommended to Council that it object to section 48 and the Committee be authorised to take all other steps considered necessary. Neither body considered let alone agreed to the major extension of the case to embrace sections 18-22. Even given that the Council may have had a great deal on its plate, and perhaps the Finance Committee likewise, this nonetheless seems an extraordinarily light-handed approach to a matter which was not only very serious but would have cost the Council a good deal of money in legal fees had it lost the case, and adversely affected its reputation.As to Chifley, from what is known it seems plausible to draw the following picture of his approach to the whole matter. Being initially under the misapprehension that sections 18-22 were directly under attack, and having learned early on from Taylor that the banks would not be shifted from their position, he formed the view that they might well demolish or seek to demolish the banking legislation brick by brick, section by section; as he said in his second reading speech on the bank nationalisation bill, the section 48 case had shown that laws with respect to banking could be successfuly challenged on other grounds. Hence the alternative of nationalisation. He felt confident that in moving to nationalise the banks, he would have the support of the Cabinet and the Caucus; in fact both supported him unanimously. He would also have weighed his previous encounter with the banks in 1945. A summary of the banking legislation had been released, which caused much huffing and puffing on the part of the banks but which had come to nothing. The legislation had passed, and the extent of the Government’s victory over the banks was such that at the succeeding election the banking question had disappeared from view. Why should he not be able to do the same again?

Chifley’s unanimous support from Cabinet and Caucus looks at first glance like a tribute to his strength (4), but it also masked a weakness: his dominance over his colleagues was such that it was difficult for them to disagree with them. ‘I had a feeling towards the end’, the journalist Don Whitington told the broadcaster John Thompson, ‘that the friendly, tolerant, easygoing Chifley that we’d all known for years was showing a tendency, if not to arrogance, at least to a supreme self-confidence and a tendency rather to ignore any criticism.‘ Bill Taylor echoed the thought: ‘One trouble was that his colleagues backed him even if they felt he was wrong. His charm was his danger. In the finish he became so powerful in his party, in his Cabinet, that even if colleagues disagreed with him, they didn’t care to say so, because they respected him so much and because his judgement had always been so good’. As did Coombs: ‘I think that towards the end of his life as Prime Minister he did suffer, perhaps, not so much from personal vanity as from lack of opposition and criticism from his colleagues. Indeed, I have said to him on occasions that the only opposition or criticism he got was from his officials, which was not enough’. (5)

Chifley’s unsuccessful attempt to bring section 48 into effect before the High Court announced its decision - against the advice of the Attorney-General’s Department - would seem to have been an example of the ‘supreme self-confidence’ to which Whitington was referring.

It is also possible that by letting McConnan know that unless the banks agreed to leave the banking legislation alone, he would ‘go to the limit’ to preserve it, Chifley delivered himself into the hands of the banks and through them his political opponents. McConnan and his immediate colleagues would have realised that ‘going to the limit’ would have meant

58

nationalisation and together with the Melbourne establishment would have been hopeful if not confident that they could defeat the Chifley Government on that question. Why should they refuse such an opportunity by undertaking not to attack the banking legislation? That some of them - Sir Oscar Isaachsen for one - could say in 1949 that the legislation would not be challenged simply meant that by that time there was no need for any further challenges.

Another participant in the events of the 1940s was S J Butlin, who left a number of accounts of what happened. In Australia and New Zealand Bank, after noting that in 1945 there had been a push in the Labour Party for immediate nationalisation, resisted by Chifley, he went on to say of the August 1947 nationalisation decision:

! A major factor in this decision was the belief, widely held outside as well as inside the Labour ! Party, that the private banks planned a succession of challenges to the 1945 legislation. ! Whether this was so or not scarcely mattered - there was some bourbonism among a section of ! Australian banking whose less cautious statements lent support to that view - but what did ! matter was the patently genuine conviction of Chifley and other Labour men that no effective ! central bank control would be accepted by the trading banks. To Chifley, especially, after his ! strong stand against the left wing of his own party, attempting to persuade them to strong ! control rather than nationalisation, there seemed no further reason to compromise on a policy ! in the ultimate rightness of which he himself believed. (6)

Butlin made these statements with some authority: in the years leading up to the 1945 Banking Acts, he had been a member of ‘a small non-official committee of Labour men and others’, convened by Taylor, ‘to work on the outlines of permanent banking reform’. (7)

As to Chifley’s nationalisation decision, it is reasonable to conclude from his instructions to Ewens in the autumn of 1947 to prepare the bank nationalisation legislation, and from his obtaining approval from Caucus in mid-1947 to take whatever steps were necessary following from the High Court’s (then future) decision, that Crisp was right in asserting that ‘All the evidence, and the nature of the man himself, pointed to its being rather a typically deliberate decision’ rather than ‘suddent pique’. (8). It is disappointing and depressing that historians such as Martin should persist with the pique explanation (see Appendix A).

On Coombs’ account of events, Chifley clung to the plan he had had Taylor put to the private banks. Early in 1949 - when the nationalisation legislation was en route from the High Court to the Privy Council - he saw Chifley and recorded that ‘He had perhaps come to accept defeat on this issue as almost inevitable or alternatively hoped still for an outcome in which nationalisation would have been traded for the acceptance of the Special Account and related provisions of the 1945 legislation.’ (9)

Shortly after he became Prime Minister in 1997, Tony Blair invited to 10 Downing St his predecessor, Margaret Thatcher, for the first of a series of private meetings. A contemporary commentator records that ‘One of the pearls of Thatcherite wisdom that Blair would often repeat to his aides was the dictum: “always leave yourself a way out””. Chifley had on this occasion not done so: having threatened the nuclear option of nationalisation, when his bluff was called he had no way out and thus had to press the button. (10)

_________________

Menzies (in the debate on the nationalisation legislation (11)), Barwick (in discussion with Clyde Cameron - see Appendix A, note (3)) and historians such as Davidson and Salsbury (12) have argued that the extent of the control established over the private banks by the 1945

59

legislation was such that nationalisation would have made little effective difference. This is not persuasive. As the section 48 case showed, and as Chifley pointed out during the nationalisation debate, it was possible for aspects of the 1945 legislation to be successfully challenged on non-banking grounds.(13) Barwick’s regret about being unable to argue the sections 18-22 aspect before the High Court might have concealed another such ground. Given the ‘genuine conviction of Chifley and other Labour men’ as Butlin put it, that the private banks would not accept central bank control - Armitage put much the same point to McConnan in December 1947 - it would from their point of view be only a matter of time before further challenges were made. Whether this attitude justified the nationalisation decision is moot; but to some extent it explained it. There was also another argument used by Chifley in the nationalisation debate and referred to earlier: the influence of money was so great that ‘the entire monetary and banking system should be controlled by public authorities responsible through the Government and the Parliament to the nation’. Further, ‘private banks are conducted primarily for profit and therefore follow policies which in important respects run counter to the public interest’.

As I write this, in the London summer of 2014, the world in general and Europe in particular are recovering from what has become known as the global financial crisis. As many commentators have pointed out, it would be better described as the global banking crisis, as it was brought on by banks and bankers who acted in hugely irresponsible ways and brought nations to their knees. Worse, despite loud cries of alarm then and later, little seems to have been done to ensure that it cannot happen again. Some of the same bankers, apparently dismissed in disgrace, have turned up again, as have some of the poisonous products peddled by banks which helped to bring on the crisis. Governments seem unable or more likely unwilling to take on the banks. While banks in Chifley’s time may have been conducted primarily for profit, it is clear that banks in modern times have been conducted for the self-enrichment of the bankers themselves, to an obscene degree. Arguably the effects of the crisis were blunted in Australia partly by the controls imposed on the private banks by the 1945 legislation of the Labor Government and continued by the Coalition Menzies Government after 1949, so that the controls effectively became bi-partisan.

From the point of view of what happened in Australia in 1945-47 so far as the banks were concerned, there are two ironies in what is happening now in some European countries, including the United Kingdom and Ireland. The first is that some banks got into such trouble that they had to be partly or fully nationalised, bailed out by those governments which some banks and bankers affected to despise when they ruled the roost; the second is that rather than keeping those banks within public ownership and thus reducing the risk that if returned to private ownership they will make the same mistakes again, governments are looking anxiously to return them to the private sector.

____________________

Much has been made - especially in the trading banks’ histories - of the Chifley Government’s decision to nationalise the banks and how it was an occasion of shock and awe. Looking backwards from the 21st century, when nearly all the former government-owned enterprises have been privatised, this seems understandable. But an examination of contemporary practices in the postwar world, both in Australia and elsewhere, tells a different story. In two necessarily long paragraphs - such was the Chifley Government’s record in nationalising enterprises, or in creating government-owned enterprises - Crisp notes what happened:

! In the years from 1944 to 1949 [Chifley] was the prime mover (or one of the prime movers) in ! the re-establishment on a peace-time basis of a Commonwealth Shipping Line, the

60

! establishment of a Stevedoring Industry Board to direct that waterside industry, the founding of ! a public aluminum ingot industry, the constitution of a public whaling industry and the ! provision for a public monopoly of atomic energy raw materials. His Government legislated for ! nationalised television under the Broadcasting Control Board, joint Commonwealth-State ! governmental supervision of the N.S.W. coal industry (with power vested in the Joint Coal ! Board to enter directly the mining and open cut branches of the industry) , the launching as a ! national enterprise of the Snowy Mountains Hydro-Electric Scheme, and the compulsory ! acquisition (along with other British countries) of the private overseas telecommunications ! linking Britain and the Dominions. It also enacted that nationalisation of internal and ! Australian-owned sections of overseas aitlines, and finally the nationalisation of ‘the key of the ! citadel’ - the private banks.

! In addition, using the financial predominance of the Commonwealth Government, Chifley ! concluded a Commonwealth-State Housing Agreement which gave an enormous filip to public ! housing and a War Service Land Settlement Agreement which led to some breaking-up of large ! estates for settlement by returned soldiers. He took an active part in fostering and offering ! Commonwealth financial aid to State developmental projects ranging from water supply ! developments in the South-West of Western Australia and the harnessing of the North-Eastern ! coastal rivers of Queensland. (14)

Nationalisation was not in those days confined to Labor Governments. Crisp quotes a Chifley speech in the Parliament on 2 June 1949 when he pointed out to an Opposition speaker that Canberra was ‘a socialised community. Every service he uses here is socialised.’ (15) Further, the Liberal Premier of South Australia, Thomas Playford, had as noted socialised that State’s largest bank and he likewise nationalised in 1946 the Adelaide Electric Supply Co Ltd (16); the Bruce-Page Government had socialised the ‘A’ class broadcasting stations; a Victorian Liberal Government had socialised the electricity undertaking which operated throughout the State. Clearly nationalisation or socialisation aroused as little attention - except the banks - as privatisation of state enterprises does now.

Nationalisation was a world-wide postwar trend. The Attlee Government in the United Kingdom nationalised the Bank of England, the iron, steel and coal industries, established the National Health Service and created two more state-owned airlines to add to the British Overseas Airways Corporation (BOAC - nationalised 1939); they were in time taken over by BOAC which became British Airways in 1974. It was privatised in 1987. British railways were nationalised in 1948 and not privatised until the 1990s. French commercial banks were nationalised in 1945 and not privatised until the 1980s.(17) France’s air transport companies were nationalised in the same year into Air France and not effectively privatised until the Air France-KLM merger in 2004.

Finally, in New Zealand, the Reserve Bank had been fully nationalised in 1936 (previously it had been owned two-thirds by the Government) and the Bank of New Zealand in 1945, not to be privatised again until 1992 when it was bought by the National Australia Bank. There was a remarkable nationalisation in 1953 when the conservative governments of New Zealand and Australia jointly purchased Tasman Empire Airways Ltd (TEAL). The New Zealand Government bought out the Australian share in 1961 when Air New Zealand was formed; it took over in 1978 the state-owned internal airline National Airways Corporation (NAC - created 1945). Although privatised in 1989, Air New Zealand got into difficulties in 2001 and the Government purchased 80% of its shares.

There is no record of any roof having fallen in when these various enterprises were nationalised.

61

____________

Counterfactuals in history (‘what if..’ questions, such as ‘what if the United Kingdom had not entered World War 1?’) are not currently fashionable (18) but it is hard to resist pondering a few in this context. What if there had been no challenge to sections 18-22? What if Chifley had accepted the eleventh-hour withdrawal of that challenge as sufficient and had not proceeded to nationalisation? In either case, what would then have been the outcome of the 1949 election in which the nationalisation issue played such a prominent part? As Crisp notes (19), the polls went against the Government in December 1947 and February 1948 - that is, after the bank nationalisation decision was announced, the legislation passed and the appeal made to the High Court. Despite the continuing publicity about the banks - the High Court’s decision was made on August 11, 1948, and the Privy Council’s decision in July 1949, with the reasons being published in October - they rose again as the months went on so that by September 1949 the Government stood at 50% and the Opposition parties at 48% - figures which were reversed in the December 1949 election.

Crisp argues persuasively that the crucial role played by the bank nationalisation issue in the election was not so much the issue itself - there were a number of influential issues in the election campaign, not least the promise by the Opposition of unrationed petrol - but the facts that ‘it galvanised the anti-Labour parties...to a degree unknown since 1931 - or perhaps even 1917’ and that they attracted huge amounts of campaign funds, not least of course from the banks themselves. (20)

On this analysis, it is at least plausible that had no attempt been made to nationalise the banks, for whatever reason, Labour may have won the 1949 election and the whole history of post-war Australia may have been different.

Notes

(1)Australia’s First Bank: Fifty Years from The Wales to Westpac, Sydney, 2005, page 44(2)Email of 28 August 2008.(3) Coombs, Trial Balance, page 116(4)As Crisp argues - Ben Chifley, pages 327-8(5) John Thompson: Five to Remember, Melbourne, 1964, pages 55-90; in private, Coombs was

much more critical of Chifley about the banking issue, referring to his ‘incompetent’ handling of it and his ‘ineptitude’; letter dated 9 April 1949 to Crisp re the draft of his biography of Chifley; Coombs papers, NLA, box 12. As to Taylor, one indication which simultaneously provides evidence of his closeness to Chifley, his wide contacts and Chifley’s pessismistic view of the banking nationalisation legislation is contained in a letter McConnan received in December 1947 from his Sydney Office (the signature is illegible). At this time the nationalisation legislation had been passed but a challenge had been made and was awaiting hearing by the High Court. The solicitor Telford Simpson (see Caroline Simpson, 'Simpson, Edward Telford (1889–1965)', Australian Dictionary of Biography, National Centre of Biography, Australian National University, http://adb.anu.edu.au/biography/simpson-edward-telford-11695/text20901, accessed 26 June 2013) had given McConnan’s correspondent the following information to pass on ‘in confidence’. It had come to Simpson from the former public servant and now businessman Dan McVey (see Derek Drinkwater, 'McVey, Sir Daniel (1892–1972)', Australian Dictionary of Biography, National Centre of Biography, Australian National University, http://adb.anu.edu.au/biography/mcvey-sir-daniel-11029/text19621, accessed 26 June 2013) who had recently driven Taylor home from a function. McVey had asked whether the PM was satisfied as to the

62

position in regard to the banking legislation. Taylor was reported to have replied ‘he has given it away’ and ‘stated that, although he [Chifley] believed the principle might stand legal test, many parts of it which were concerned with the implementation would probably be held to be invalid and the PM was reconciled to this’. (National Australia Bank Archives, letter dated 13 December 1947).

(6) Australia and New Zealand Bank, Melbourne 1961, pages 422, 428 and 429.(7) Crisp, Ben Chifley, page 176(8) ibid, page 331(9) Trial Balance, page 118(10) Andrew Rawnsley: Servants of the People: The Inside Story of New Labour, London, 2001, page

52(11) House of Representatives Hansard, 23 October 1947 pages 1287-8(12) op cit, page 45(13) It might be argued that Chifley’s point was proven by the outcome of the bank

nationalisation challenge. The High Court found that that Act was invalid because it ran foul of section 92 of the Constitution dealing with the freedom of interstate trade; and also of section 51 (xxxi), in that the mechanism proposed to acquire the banks’ property was not on just terms. Bank of New South Wales v The Commonwealth (1948) 76 CLR 1, [1948] HCA 7

(14) Ben Chifley, pages 251-2 Of these state enterprises, the Shipping Line became in time the Australian National Line and was privatised in 1998; the Stevedoring Industry Board became in time the Australian Stevedoring Industry Authority which was abolished in 1977; the need for a public aluminium ingot industry has long since disappeared, Australia currently being the world’s largest producer of bauxite and alumina, but the Australian Aluminium Production Commission (created 1944 jointly with the Tasmania Government) lasted until 1960; the public whaling industry seems to have disappeared into history; the public monopoly of atomic energy raw materials became in time the responsibility of the Australian Atomic Energy Commission (AAEC - created 1952) and then the Australian Nuclear Science and Technology Organisation (ANSTO - created 1987); nationalised television on the BBC model was never put into practice as television did not become technically feasible until the 1950s, when the Menzies Government established a mixture of national and licensed private stations, essentially the current system; the Joint Coal Board survived until 2002; the Snowy Mountains Scheme was implemented by the Snowy Mountains Hydro Electric Authority (SMHEA - created 1949) which was succeeded by the Snowy Mountains Engineering Corporation and Snowy Hydro Limited, the latter owned by the three Governments concerned; the international telecommunications services became the Overseas Telecommunications Commission (OTC - created 1946) which was absorbed by Telecom/Telstra in 1992; the internal government-owned airline was Trans Australia Airlines (TAA - created 1946), later Australian Airlines from 1986 until 1996, when it was sold to QANTAS, this being the overseas airline nationalised in July 1947 and which was privatised in 1992; the Commonwealth-State Housing Agreement was replaced in 2009 by the National Affordable Housing Agreement; and the War Service Land Settlement Agreement endured until 1981.

(15) ibid, page 250(16) To buy all the shares in this Company, Playford needed to borrow millions of pounds and

rang Chifley (with whom he got on very well) and put the request to him, without saying what the money was for; Chifley was notably unenthusiastic until Playford told him how the money was to be used; Chifley then agreed (Stewart Cockburn: Playford: Benevolent Despot, Adelaide, 1991)

(17) Coombs was in Geneva when the bank nationalisation decision was announced and on a subsequent official visit to Paris took the opportunity to talk to ‘bankers, officials and others’ about the nationalised French banking system. He found it to be politically a ‘non-

63

issue’, which he put down to the fact that the banks continued to operate in much the same way as before; ‘from the point of view of the client nothing had changed’. He accordingly wrote to Chifley to urge that this pattern be followed in Australia, rather than integrating the private banks into the Commonwealth Bank structure. On his return to Australia and his appointment as Governor (January 1949 - the Privy Council hearing took place later that year), Coombs had some success in persuading Chifley of the merits of the French approach, and had the Commonwealth Bank draw up some plans accordingly. (Trial Balance, pages 117-18; see also Crisp, Ben Chifley, page 337 footnote 12 - the principal expert adviser was clearly Coombs)

(18) See for example Richard J Evans: Altered Pasts: Counterfactuals in History (Boston, Little Brown, 2014)

(19) Ben Chifley, page 339(20) ibid, page 340

64

Appendix A: What the Historians Said

Most of the historians who deal with this episode in Australian history fall into error. The analysis above has shown that misunderstandings as the nature of the legal challenge made by the Melbourne City Council were rife from the time the writ was issued, not least because of the wording of the writ which sought ‘(i) A declaration that Section 48 of the Banking Act 1945 is invalid (ii) A Declaration that the Banking Act 1945 by reason of the provisions of Sections 18 to 22 thereof is invalid’. By the time the more detailed statement of claim was lodged - setting out that Sections 18 to 22 were being challenged not in their own right but because they amounted to taxation and thus invalidated the rest of the Act - the horse had bolted, arguably so far that it could not be retrieved. This misapprehension was carried over into most of the accounts of the episode. Some accounts solve the problem by not mentioning it.

In chronological order, the major accounts were thus (the references may be found in Appendix B following).

Blainey (1958, pages 228-9) has a special kind of muddle. Having noted that the Council had decided to challenge Section 48, he went on ‘It went one step further, and on legal advice decided also to challenge the validity of the vital sections on special accounts, the core of the entire legislation’. He then corrected himself: ‘[The Council] intended to argue that those Sections numbered 18 to 22 were taxation measures, and that under the Commonwealth Constitution (S.55) any law imposing taxation could not deal with any other matter. Therefore all other sections of the Act would be invalid, including Section 48, and would have to be resubmitted to parliament in a separate bill’.

Blainey then claimed that

! Although the Melbourne City Council apparently envisaged Sections 18-22 as a gamble and an ! indirect weapon, to be used only in an emergency, that fact was not made ! public....McConnan...again stood alone in refusing to request the City Council to abandon its ! appeal..McConnan, despite his pugnacity, was genuinely nervous that the government might ! retaliate. He was relieved when the Melbourne City Council finally confined its challenge to ! the relevant Section 48.

There is no warrant in the records for the Council (or the banks) envisaging the Sections 18-22 argument as either a gamble or an indirect weapon. The statement about McConnan being relieved is accurate.

Crisp (1961, pages 324-5), following the writ, states that the Council claim ‘embraced the whole Act and also specifically the key credit control Sections 18-22’ and proceeds to discuss Chifley’s decision on nationalisation in the context of the banks challenging the credit control provisions.

Butlin (1961, pages 428-9) does not mention the Sections 18-22/Section 55 aspect, thereby weakening his subsequent claim that ‘a major factor’ in the nationalisation decision ‘was the belief, widely held outside as well as inside the Labour Party, that the private banks planned a succession of challenges to the 1945 legislation’. ( see below also - Butlin 1977)

May (1968, pages 9-10) follows Blainey.

65

Holder (1970) has the Council lodging ‘a writ with the High Court challenging the validity of the Act with particular reference to Section 48 and also to Sections 18-22, the special account provisions which were the key to the whole Act’.

Butlin (1977, but published 1983 page 146) quotes only from the writ, which he dates correctly as 28 May 1947 but wrongly describes as the statement of claim (footnote 73), thus

! ...the Melbourne City Council... initiated proceedings in the High Court seeking a ruling that ! not only was Section 48 invalid, but so also were Sections 18-22 (which incorporated Special ! Accounts requirements) and hence the entire Banking Act was unconstitutional.

Marr (1980) has it thus:

! It was unclear how wide the Melbourne City Council’s attack on the Banking Act would be. ! The first objective was Section 48, but McConnan was keen on a broad assault which would test ! the special deposit provisions of the Act as well. These were the core of the Act. They ! authorised the Treasurer to control liquidity by directing the private banks to deposit funds ! with the Commonwealth Bank. A successful assault there would cripple the legislation.

This is twice in error: not only was there no assault on Sections 18 to 22 of the kind suggested, but it was the Commonwealth Bank, not the Treasurer, which controlled the special accounts. The only mention of the Treasurer in these sections was in Section 22, which authorised the Bank to set the interest rates on the special accounts, with the approval of the Treasurer.

Coombs (1981, page 115) wrongly says that ‘The Melbourne City Council decided to challenge the validity of Section 48 and indeed to go further and challenge the Special Account provisions also’. Having noted the comments by Blainey and May that this was an indirect weapon and that ‘the Banks were in no way involved or sponsoring the challenge’, Coombs observes that ‘certainly this was not believed by Labor Party supporters nor by Chifley himself.’

White (1982, pages 122 and 191) is thoroughly confused as between the Section 48 legislation and the nationalisation legislation - that is the Banking Acts of 1945 and 1947. Thus she writes that ‘In July 1947 the federal Labor government got legislation through both Houses to nationalise all private banking throughout Australia’. In July 1947 neither House was in session. What happened in July 1947 was the High Court hearing of the Melbourne City Council case. Worse follows in the notes on this section on page 191, thus:

! G Barwick headed the legal team representing the banks while Evatt appeared for the ! government. Eventually, on 13 August 1948, the Full High Court invalidated section 48 of the ! Commonwealth Banking Act which compelled local government authorities to trade solely with ! the Commonwealth Bank. A protracted and costly federal government appeal to the Privy ! Council was unsuccessful.

If the Section 48 case is meant, the judgement was given on 13 August 1947; Barwick did not represent the banks, but the Council, and Evatt did not appear for the Government; nor was the case taken to the Privy Council. If the nationalisation case is meant, then that judgement was given on 11 August 1948 and Section 48 was not re-argued, having previously been found invalid.

Merrett (1985, page 73) omits any mention of the Sections 18-22/Section 55 aspect, which makes his subsequent account of the Government’s justifications for nationalisation somewhat unconvincing.

66

Bolton (1990, page 45) mentions only the Section 48 challenge (‘the least significant part of the 1945 legislation’) but adds that ‘[the banks] failed to provide Chifley with assurances that they would never challenge the critically important requirement to deposit part of their funds in a central special account’. This is one of the very few mentions by mainstream historians of the Taylor/Coombs suggestions concerning the back channel approach by Chifley to the banks.

McMullin (1991, page 246) follows Merrett.

Schedvin (1992, Chapter 3) is thoroughly confused about several aspects of the matter.

He notes in the Preface to his book (p xvii) that the relevant part for present purposes, Chapter 3, ‘...draw[s] on the material prepared by Professor Butlin and published posthumously ...As there was no reason to rewrite material that had been prepared by such an accomplished hand, I have used certain passages with a minimum of change...‘ Schedvin is here referring to Butlin’s ‘Australian Central Banking, 1945-59’, Australian Economic History Review, September 1983, which was noted above.

To avoid confusion, it seems best to identify who wrote what: that is, which parts of Schedvin’s Chapter 3 were written by him and which by Butlin. This can readily be done by comparing Butlin’s work with the finished chapter. The results of this comparison are quickly arrived at: some short passages apart, there is very little of Butlin in Chapter 3. Butlin devotes 20 pages to the 1945 legislation, that is, the two Acts mentioned above, setting out and explaining the origins and effect of the more important sections; by contrast, he devotes less than a page to the 1947 challenge to Section 48. Schedvin’s treatment is quite different. Chapter 3 is of 28 pages, only 10 of which are devoted to the 1945 legislation and a further four to the challenge; the remaining 14 pages are concerned with the attempted nationalisation.

To begin with Section 48: Schedvin claims at page 70 that ‘Its inclusion can only be explained by the deep suspicion, even paranoia, with which Chifley viewed the private banks’. This is quite wrong. As noted, the provision had been Labor Party policy for ten years and was arguably also the policy of the Commonwealth Bank (as Schedvin himself notes at page 74); and Chifley had in fact opposed its inclusion in the Act but had been overruled by his Cabinet colleagues. Further, on Taylor’s account to Coombs, Chifley was prepared to accept the Court’s decision on Section 48 provided that the banks were to undertake not to challenge Sections 18-22. (1)

So what does Schedvin have to say about the legal process itself - Barwick’s opinions, the writ, the statement of claim, the hearings? His initial observation at page 77 on Barwick’s opinion is that ‘In [Barwick’s] view sections 18-22, the special account provisions, were also invalid because they amounted to [taxation]’ He notes the relevance of Section 55 of the Constitution, but then claims ‘If this view was sustained, the whole of the Banking Act would fail.’ As we have seen, these assertions are incorrect. Barwick never claimed that Sections 18-22 were invalid in the same way that Section 48 was invalid, and it was common ground that even if the Section 55 argument were accepted, the problem could be met by re-enacting Sections 18-22 as a separate measure - a point Schedvin himself makes, but a page later and out of sequence. To be entirely accurate, the claim about ‘the whole of the Banking Act would fail ‘ is also incorrect. Section 55 states

! Laws imposing taxation shall deal only with the imposition of taxation, and any provision ! therein dealing with any other matter shall be of no effect.

67

That is, in this context, Sections 18-22 would be preserved as laws imposing taxation; the rest of the Act would have no effect.

Schedvin also confusingly claims that ‘Barwick’s opinion on the special accounts power was extremely dubious, and it is interesting that no challenge has ever been made against them (sic).’ No argument is given, or legal authority quoted. One might reasonably have reservations about economic historians making legal judgements in the same way that one might have about lawyers making judgements on economic history: cobblers should stick to their lasts. Be that as it may, it will be plain from what is set out above that Barwick expressed no view about the ‘special accounts power’ in itself. To repeat, his only comment about the sections was that as they were laws imposing taxation, they invalidated the rest of the Act.

Schedvin is apparently unconscious of the fact that 12 pages after the comment as to Barwick’s ‘extremely dubious’ opinion, he records that the Commonwealth Bank obtained legal opinion which ‘raised doubts’ among other matters about ‘the right to make calls to special account’; although the lawyers expressed doubts about whether challenge to these powers would be successful. The Treasury is also said to have been ‘deeply concerned about aspects of the High Court decision’ although it is not clear whether this was the decision in the Melbourne City Council case or the Bank Nationalisation Case. No source or authority is quoted for any of these important assertions, and I could find no basis for them in the records of the Bank and the Treasury dealing with the Melbourne City Council case. (2)

White (a former CEO of Westpac) and Clarke (1995, page 16) follow Heffer’s misconceptions: ‘the Melbourne City Council advised that it would also challenge s18-22 of the 1945 Act...if these provisions were found to be invalid, the foundation of Chifley’s monetary policy could be jeopardised’.

Barwick (1995, pages 55-7) devotes two pages to the case, but most of them are taken up with an account of how he initially declined to present the case (despite having worked on it) because of a skiing engagement; an ensuing skiing accident in which he injured his knee but which enabled him to take the case; and how he travelled from the Snowy Mountains to Sydney and thence to Melbourne. His account of the actual proceedings is incomplete and thus misleading. There is no mention of the argument as to the Act not being about banking. Instead, he mentions only the successful argument about the Commonwealth seeking to control State banking. He mentions also ‘a second proposition’ which was that

! s 48 was textually inseverable, so that if the limitation on banking services for a State was ! constitutionally insupportable, the limitation on the local government authorities must also be ! invalid, even if there might possibly be power to control the banking activities of local ! government treated in isolation - a point it was unnecessary to argue or decide for then present ! purposes.

This argument does not appear elsewhere - in the Trumble correspondence, for example (but see the notes at the end of this chapter). There is no mention of the Section 55 argument. Barwick nods thrice: section 48 is said to be in ‘The Banking Act 1947 [which] was introduced by the Chifley Government and passed by Federal Parliament in that year.’ As noted, the act was the Banking Act 1945 which had been passed that year, but section 48 did not come into effect until 1947. Further, according to Barwick, ‘the court’s judgment was published on Friday 13 August’; in fact it was published on Wednesday 13 August. ‘On the Saturday, 14 August, [Chifley] announced the nationalisation of the banks’ Barwick continues. In fact it was Saturday 16 August. The imprecision about dates was contagious: in the Foreword to Barwick’s book, the then Chief Justice of New South Wales (later the Chief Justice of Australia) the Hon

68

A M Gleeson AC refers to the Commonwealth Parliament having enacted legislation to nationalise the banking system ‘in 1948’. In fact it was 1947. (3)

Martin (1999, pages 69-70) essentially follows Schedvin, although he does not mention the Section 55 argument. His account of Chifley’s actions before and after the adverse High Court decision is also inaccurate. Thus Section 48 ‘appears in hindsight to have been primarily an expression of Chifley’s obsessive distrust of the private banks...’ (compare Schedvin’s description above). There is the (by now usual) inaccurate statement that the legislation said that ‘all public bodies must transfer their accounts to the Commonwealth Bank...’ The ‘ostensible reason’ for the nationalisation decision was ‘to forestall further challenges in the courts to the 1945 legislation’ but ‘it was extremely doubtful whether serious legal grounds for any such action existed’. There is no indication of the source of this legal judgement. It leads to the erroneous conclusion that ‘pique is widely thought to have been a strong element in Chifley’s reaction’.

Day (2002, pages 454-5) likewise mentions only the section 48 issue but suggests that ‘while the Commonwealth Bank’s control of credit had not been challenged in the court case, there were real fears that it was vulnerable to such a challenge’ so that ‘rather than waiting for the challenge to be made, Chifley decided to settle forever the power of the Commonweaklth Parliament over the country’s economic management...he would nationalise the banks.’ This account somewhat oversimplifies what happened by leaving out the Sections 18-22/Section 55 aspect.

Davidson and Salsbury (2005, pages 44-5) likewise do not mention the Sections 18-22/Section 55 aspect, so that the ensuing discussion is wrongly shaped: the High Court’s 1947 decision is said to have ‘enraged’ Chifley and there is no mention of the Government’s apprehensions that further attacks might be made on the 1945 legislation. There is an engaging account of the further legal proceedings on the nationalisation legislation which does not mention the High Court at all, only the Privy Council.

Hocking (2008, pages 123-4) is the latest account by an historian, and arguably the most inaccurate. Writing of the postwar period, she claims that

! Buoyed by his success at the polls and determined not to repeat the errors of previous Labor ! administrations that had, in his view, weakened just when they should have acted, Chifley was ! moving ahead with a momentous proposal - unknown to all but his most trusted colleagues - to ! nationalise the private banks. In its resolution this issue would threaten to split the party once ! again, destroy the Chifley government and lead the Australian Labor Party into electoral ! wilderness for the next twenty-three years.

The previous Labor administrations are not identified. The most recent - Curtin’s, in which Chifley was a driving force - had hardly weakened, certainly not on banking reform. The second most recent - Scullin’s - lacked a majority in the Senate and was thus hamstrung. There is no evidence that at this time Chifley had any intention of nationalising the banks; as the discussion above shows, drawing largely on Crisp, quite the contrary. The intention developed only after the banks had rejected Chifley’s approach on the Sections 18-22/Section 55 issue.

The first of the more sweeping claims in the second sentence is beyond the scope of this paper, but one might note in passing that the Cabinet and the Caucus were unanimously behind Chifley on the nationalisation question, and that most historians put the split down to events that happened after Chifley’s death and the erratic way in which they were handled by his successor as leader, Evatt. As Crisp shows in chapters XX and XXII, what ‘destroyed’ the

69

Chifley Government and sent it into the electoral wilderness was in part bank nationalisation, in part petrol rationing and in part government fatigue.

Hocking then claims that for Chifley ‘national control of the banking system’ was ‘the core of Chifley’s democratic socialism’ which ‘had its roots in the failure of the 1944 referendum on postwar reconstruction to deliver greater Commonwealth powers, including over banking’ and was a continuation of his views as a member of the Banking Royal Commission. In fact, the 14 powers sought by the Commonwealth in the 1944 referendum did not mention banking (who then would have thought that the Commonwealth’s banking powers were inadequate?), although the eighth power sought had a tangential connection:

! (viii) the control of overseas exchange and overseas investment; and the regulation of the raising ! of money in accordance with such plans as are approved by a majority of! members of the Australian Loan Council (4)

The narrative continues:

! Nor would it have come to this, proposed to a stunned but rapturous Labor caucus, had the ! High Court not disallowed the Chifley Government’s earlier, tamer Banking and Commonwealth % Bank Acts 1945 (sic) which would have given the government control over monetary policy and ! cemented the position of the Commonwealth Bank as the central bank with the power to ! regulate the private trading banks.

The matter was hardly ‘proposed to’ the Labor Caucus, which could hardly have been ‘stunned’. The decision had been announced on 16 August 1947 and the Caucus did not meet until 16 September. As seen earlier, it was not the case that the two Acts ‘would have’ done the two things mentioned; they did in fact do them, as the High Court did not disallow the acts but only one section in one of them.

Hocking seeks to make this point in the next paragraph, but succeeds only in getting deeper into the mire. Thus the Melbourne City Council is said to have challenged the provision that ‘all government instrumentalities must bank only with the the Commonwealth Bank’; but as noted Section 48 did not do this because it could not - the Commonwealth’s power did not extend to State banks, for example. Then the reader is told that ‘The High Court’s decision in August 1947 to strike down the Act - on the grounds that it was not a law in respect to banking - a decision described by Evatt as “so bad as to be almost indefensible”, galvanised the Labor Party...’ Again, the High Court did not strike down the Act; and while Barwick put to the High Court the argument that the Act was not a law with respect to banking, no judge accepted it.

As with a number of other accounts, there is no mention of the Sections 18-22/Section 55 aspect; so that like them, this account presents an unconvincing justification for the nationalisation decision, with the ‘greatest inspiration’ being Chifley’s experiences during the depression. Given Whitlam’s great admiration for Chifley (see Whitlam’s The Whitlam Government, passim), it is especially unfortunate that Hocking’s inaccuracies should appear in her biography of Whitlam.

Some lawyers also fail to grasp what had happened..

Saunders (2001, page 471) has the case arising ‘from an attempt on the part of the Chifley Labor Government to nationalise the Australian banking system’. ‘The Corporation of the City of Melbourne...challenged the validity of the legislation on a series of grounds. The challenge was successful’. After explaining the details of the decision, she goes on: ‘Following

70

the decision in Melbourne Corporation, the government pursued its policy in less discriminatory form (Banking Act 1947 (Cth))...‘ This makes it sound as though the two Acts of 1945 and 1947 were all of a piece, and that the 1945 Act was declared invalid as a whole. Both implications are wrong.

Johnston (2003, pages 88-9) relying on Crisp has the banks being ‘disposed to take on the Act in the High Court, especially the credit restriction provisions’. He then describes section 48 thus:

! The Act ...also represented the first comprehensive measure to establish the Commonwealth ! Bank as a federal central bank. This was attempted by a limited measure imposed under s 48 of ! the Act. It required that, upon a declaration by the Commonwealth Treasurer, State ! Governments and statutory authorities should transfer, and in the future confine, their banking ! business to the Commonwealth Bank. That attempt foundered...

A comprehensive measure being attempted by a limited measure is hard to grasp, and the point about State banks might reasonably have been made.

This is a profoundly depressing litany of errors, not least because they are so widespread; one writer seems simply to have followed the other without consulting the sources.

Notes

(1) Schedvin quotes the Acting Chairman of the Commonwealth Bank Board, AF Bell, giving evidence to that effect before the Banking Royal Commision in 1936. It was still Bank policy in 1945. In an early draft of his book Trial Balance (not reproduced in the published version) Coombs quotes his predecessor as Governor of the Commonwealth Bank, H T Armitage, writing to the Secretary of the Treasury in January 1945 saying that ‘My own view is that all public authorities at points where we have a Branch should bank with us’ but it ‘should be a gradual and natural process not a sudden change brought about by law’. (Coombs Papers, National Library of Australia, MS802, Box 96)

(2) Schedvin makes two other errors which should be mentioned. On page 75 he claims that ‘the Melbourne City Council...divided its custom between the National Bank of Australasia and the Commonwealth Bank’. In fact, as the Council file 48/2589 shows, the Council had so divided its custom only until 1920, when the whole account was taken over by the National Bank. On page 76 is the assertion that ‘the Council filed a statement of claims (sic) with the High Court on 28 May’. It was the writ which was issued on 28 May. The statement of claim was not delivered until 19 June. Both dates are clearly identified in file 48/2589.

(3) In 1981 Barwick was interviewed on tape by Clyde Cameron for the National Library; the recordings and transcripts have since been made public (http://trove.nla.gov.au Sir Garfield Barwick and the Hon Clyde R Cameron reminisce); Barwick says there what he repeats in his book about the erroneous dates of the Court’s decision and Chifley’s announcement and denies Marr’s suggestion, noted above, that the decision to pursue the challenge only on section 48 was made after Barwick had arrived in Melbourne; as to his ‘second proposition’, he says that ‘we were able to fight the case’ on ‘what you could do with the states’ because the states and the municipalities ‘were all lumped together’; had this not been the case ‘we’d have had great trouble’; he also claimed that the decision ‘didn’t touch’ the Act and that there was ‘no real need to nationalise the banks’ as ‘all that [Chifley] wanted to do could be done under the banking law as it was’. (Sessions 16 and 83); Barwick might also have mentioned that - in one of the ironies of Australian history - in 1952 he was briefed by the

71

Sydney solicitors Clayton Utz to provide an opinion ‘In the estate of J B Chifley dec’d re Stamp Duties Act 1920/40’ (Barwick Papers, NAA Sydney, box M3924/1)

(4)The relevant legislation is the Constitution Alteration (Post.War Reconstruction and Democratic Rights) Act 1944. See http://www.aph.gov.au/binaries/library/intguide/law/docs/1944referendumbills.pdf

72

72

Appendix B: Sources and Acknowledgements

Archival Material

The archives of the three major private banks - which include their predecessor banks - were consulted during this exercise and while their staffs were generally very helpful, bank archives present particular challenges to reseachers - and presumably their archivists also, deriving from the way in which the original material was filed when created. Letters from general managers were kept in bound letterbooks, in simple date order, so that an informative letter about a bank’s attitude to an important issue can be found next to a response to a social invitation. As Blainey notes in Gold and Paper, Bibliography, ‘few replies to these letters have survived’. In some cases this does not matter, for example in exchanges of letters between McConnan and Heffer where one can read both sides; but in many cases one can only infer what prompted a particular reply. More than 50 years after the event, minutes of board meetings are still off limits, although some archivists helpfully inspected those from the relevant time and reported that they contained nothing of relevance - in itself curious, given the nature of the events being discussed in this paper. To be fair, however, Blainey found with the NAB Archives that ‘the minutes of the board of directors at head office and the advisory boards in Adelaide, Perth, Sydney, Brisbane and London....deal largely with advances...’

In accordance with the conditions of access to their records, the current (2014) archivists of the the three major private banks have read this paper and have made no objection to the use I have made of the material.

Late in the day, I consulted my friend Associate Professor Michael Hogan, Honorary Associate, Department of Government and International Relations, University of Sydney, who in turn consulted his friend, Ken Turner AM, formerly Associate Professor, Department of Government and Public Administration, University of Sydney, about this paper. Their helpful and robust criticism improved it considerably and I am very grateful to them. The paper nonetheless remains mine, warts and all.

CANBERRA

National Archives of Australia (NAA)

Glenda Lynch, Researching Australia, (glenda.lynch@work.netspeed.com.au) was of great help with both Archives and National Library material; she became accustomed to being sent down generally barren byways as well as fruitful highways.

Details of the Treasury and Attorney-General’s Department files consulted are given in the footnotes.

National Library of Australia (NLA)

Coombs Papers MS802Crisp Papers MS5243Wheeler Papers MS8096http://trove.nla.gov.au Sir Garfield Barwick and the Hon Clyde R Cameron reminisce

73

http://trove.nla.gov.au/newspaper

SYDNEY

National Archives of Australia

Garfield Barwick Papers, Series nos M3923, M3924, M3943. I am indebted to my son-in-law, Dr David Garrett, for his assistance in finding relevant papers.

Reserve Bank of Australia Archives (RBA)

The Archives contain the records of the Commonwealth Bank for the relevant period. Details of the records consulted are in the foornotes. I am indebted to Virginia MacDonald, the Archivist, for her assistance in 2008, including providing me with details of private bank archives, as well as a copy of Schedvin’s In Reserve: Central Banking in Australia 1945-75, Sydney, 1992

Westpac Historical Services

The Archives contain the records of (among others) the former Bank of New South Wales. I am indebted to the Manager, Kerriann George, for her assistance in 2008.

MELBOURNE

Public Record Office of Victoria

The Office holds the records of the Melbourne City Council, the relevant three files in the present context being: -VPRS 3183 Town Clerk’s Correspondence Files II (also referred to as 48/2589)-VPRS 8910 City Council Minutes-VPRS 8945 City Council Finance Committee Minutes

I am indebted to the researcher Seumas Spark (seumasspark@hotmail.com) for his assistance with this material, and also to Michelle Kardachi for an early copy of 48/2589.

National Australia Bank Archives

The Archives contain the records of (among others) the former National Bank of Australasia and the Commercial Banking Company of Sydney. I am indebted to the then Manager, Bernard M McGrath, for his assistance in 2009, as well as a copy of Blainey and Hutton: Gold and Paper 1858-1982: A History of the National Bank of Australasia Ltd, Melbourne, 1983

74

Australia and New Zealand Banking Group Ltd, Group Archive (ANZ Group Archive)

The Archives contain the records of (among others) the Bank of Australasia, the Union Bank of Australia Ltd and the English Scottish and Australian Bank Ltd. I am indebted to the Manager, Peggy Kennedy, for her assistance in 2009 when she was particularly busy.

Published Material

R T Appleyard and C B Schedvin (eds): Australian Financiers - Biographical Essays, Melbourne, 1988Australian Dictionary of Biography: entries for E G Theodore, John Curtin, Sir Alfred Davidson, Sir Leslie McConnan, Sir Oscar Isaachsen, David Syme, Harold Darling, Sir Clive McPherson, Sir George Coles, Sir Douglas Forbes, Sir Frederick Tout, Sir Martin McIllrath, Sir Colin Sinclair, Sir Leslie Morshead, John Fairfax, Sir Denison Miller, Sir Earle Page, Sir John Garvan, Sir Robert Gibson, Sir Claude Reading, Maurice Duffy, Sir Henry Sheehan, L F Giblin, Sir Ernest Riddle, James Scullin, Joseph Lyons, Sir Arthur Fadden, William Barry, Sir Francis Connelly, Sir James Disney, Sir Thomas Nettlefold, Oliver Nilsen, Sir Harold Smith, Robert Solly, Sir Alexander Wales, Sir Gordon McArthur, Sir Robert Menzies, Sir Cecil Looker, Sir George Lansell, Sir George Goudie, Sir William Angliss, Percy Clarey, Sir William Clarke, Sir Rupert Clarke, Sir Gilbert Chandler, Sir Thomas Playford, Sir John Latham, Sir Owen Dixon, Sir Edward McTiernan, Sir George Rich, Sir Hayden Starke, Sir Dudley Williams, Sir Robert Law-Smith, Sir Malcolm Knox, Staniforth Ricketson, Sydney Butlin, A R L Wiltshire, H T Armitage, E J G Wilson and Sir Frederick YoungMargaret Bailey: History of Banks in Australia since 1944, Sydney, Reserve Bank of Australia, 1995Sir Garfield Barwick: A Radical Tory: Garfield Barwick’s Reflections and Recollections, Sydney 1995Geoffrey Blainey and Geoffrey Hutton: Gold and Paper 1858-1982: A History of the National Bank of Australasia Ltd, Melbourne, 1983 (original edition 1958)Geoffrey Bolton: The Oxford History of Australia, Volume 5 1941-1988 The Middle Way; Melbourne, 1990Geoff Browne: Biographical Register of the Victorian Parliament 1900-84, Melbourne, 1985S J Butlin: Australia and New Zealand Bank,:The Bank of Australasia and the Union Bank of Australia Limited 1818-1951 Melbourne 1961------------: ‘Australian Central Banking 1945-59’, Australian Economic History Review, XX111, 2, Sept 1983, pages 95-192------------ and C B Schedvin: War Economy 1942-1945, Canberra, 1977Stewart Cockburn: Playford: Benevolent Despot, Adelaide, 1991H C Coombs: Trial Balance, Melbourne, 1981L F Crisp: Ben Chifley, Melbourne, 1963L Sharon Davidson and Stephen Salsbury: Australia’s First Bank: Fifty Years from the Wales to Westpac, Sydney, 2005David Day: Chifley, Sydney, 2002Richard J Evans: Altered Pasts: Counterfactuals in History, Boston, 2014John Farquharson, 'Wheeler, Sir Frederick Henry (1914–1994)', Obituaries Australia, National Centre of Biography, Australian National University, http://oa.anu.edu.au/obituary/wheeler-sir-frederick-henry-1567/text1630, accessed 21 June 2013;Elizabeth Feisst: article on John Ewens http://www.qualtrough.org/articles/articles-australia/jqewans.htmlGilbert and Sullivan: HMS PinaforeJenny Hocking: Gough Whitlam: A Moment in History; Melbourne, 2008R F Holder: Bank of New South Wales: A History, Volume Two: 1894-1970; Sydney, 1970

75

Peter Johnston: ‘The Bank Nationalisation Cases: The Defeat of Labor’s Most Controversial Economic Initiative’ in Lee H P and Winterton George (eds): Australian Constitutional Landmarks; Melbourne, 2003A W Martin: Robert Menzies: A Life, Volume 2 1944-1978, Melbourne, 1999A L May: The Battle for the Banks, Sydney, 1968Ross McMullin: The Light on the Hill: The Australian Labor Party 1891-1991; Melbourne, 1991David Marr: Barwick; Sydney, 1992David Merrett: ANZ Bank: A History of the Australia and New Zealand Banking Group and Its Constituents; Sydney, 1985Oxford Dictionary of National Biography (UK): entries for Sir Otto Niemeyer, William CobbettParliament of the Commonwealth of Australia website http://www.aph.gov.au/binaries/library/intguide/law/docs/1944referendumbills.pdf - details of the 1944 constitutional alteration act; also House of Representatives and Senate Hansards, online at http://www.aph.gov.au/Parliamentary_Business/Hansard/Parliament of Victoria website http://www.parliament.vic.gov.au/re-member/bioregfull: entries for J J Holland, Kevin HollandAndrew Rawnsley: Servants of the People: The Inside Story of New Labour, London, 2001 Cheryl Saunders: Melbourne Corporation Case (1947) in Michael Coper, Tony Blackshield and George Williams (eds): The Oxford Companion to the High Court of Australia; Melbourne, 2001Boris Schedvin: In Reserve: Central Banking in Australia 1945-75, Sydney, 1992John Thompson: Five to Remember, Melbourne, 1964University of Melbourne website http://www.asap.unimelb.edu.au/bsparcs/aasmemoirs/potter.htm; biography of Sir Ian PotterPatrick Weller and Beverley Lloyd (eds): Federal Executive Minutes 1915-1955 Melbourne, 1978 Patrick Weller (ed): Caucus Minutes 1901-1949 Volume 3 1932-1949 Melbourne, 1975Bob White and Cecelia Clarke: Cheques and Balances: Memoirs of a Banker; Melbourne, 1995Kate White: John Cain and Victorian Labor 1917-1957; Sydney, 1982Gough Whitlam: The Whitlam Government 1972-75, Melbourne, 1986 Who’s Who in Australia 1947Raymond Wright: A People’s Counsel: A History of the Parliament of Victoria 1856-1990, Melbourne, 1991

76