3rd Parliament · 4th Session
The Presidenttook the chair at 2.30 p.m., and read prayers.
– Referring to a question which I asked some time ago, I desire to know whether the Vice-President of the Executive Council is in receipt of further information concerning the treatment of applicants for old-age pensions in Western Australia?
– In Western Australia, 1,537 applications have been received, and 228 granted up to the 20th instant. In South Australia, 3,027 applications have been received, and 859 granted according to the latest advices. I may add that the officer intrusted with the administration of the law at the Treasury in Melbourne, istaking every possible action to facilitate the consideration of such applications.
– Is any reason given to account for the extraordinary delay in dealing with the applications in Western Australia ?
– I have received no fresh information on that point since it was last raised here.
-I beg to ask the Vice-President of the Executive Council, if steps cannot be taken to forward an adequate supply of Bills to the Federal Offices in the different States, soon, or immediately after they are presented to the Senate. I may mention that, on applying for some Bills at Hobart lately, I was told by the officers that they had only an office copy, and that other offices had none at all. I know that Senator Pearce has had a similar experience.
– The honorable senator cannot make a statement ; but he can give a reason for asking the question.
– I do not remember how a similar question was answered on a previous occasion; but, if the honorable senator will repeat his question on Wednesday next, I hope to be in a position then to make a statement on the subject.
Senator Sir ROBERT BEST laid upon the table the following paper : -
Manufactures Encouragement Act 1908 - Return of Bounty paid during the financial year ended 30th June, 1909.
asked the VicePresident of the Executive Council, upon notice -
Is it a fact that Commonwealth printing is now being done, through the State Government of Western Australia, in the Fremantle prison, by prison labour?
– The answer to the honorable senator’s question is as follows : -
Any Commonwealth printing executed by the State printer in Western Australia is done under an arrangement with the Western Australian Government, and this Government has no knowledge of the manner in which the work is carried out.
– Will the Minister take steps to ascertain whether Commonwealth printing is being done in the Fremantle prison by prison labour?
– I shall be very glad to bringthe inquiry under the notice of the Premier of Western Australia, with a view to getting the information desired.
Vice-President of the Executive Council, upon notice -
If his attention has been drawn to the notice issued in April last by the Naval Board (regarding boarding of vessels in time of war) reading “ Hobart south of the line Mount Nelson Gellibrand Point “ ? Is he aware that such limit is within four miles of the city, would expose it to be shelled by an enemy, and has been stated by experts as too close for safety 7 Will he have the limit extended?
SenatorMILLEN. - The answer to the honorable senator’s questions is as follows : -
The line mentioned indicates the location of the examination anchorage. . The examination steamer would approach vessels and examine them south of this line.
The line has been determined in accordance with regulations on the subject, and is considered by the Director of Naval Forces to meet all requirements.
– Can the Minister say whether the line was fixed by the Admiralty or by the Director of Naval Forces here?
– The answer discloses that the line has been determined in accordance with regulations; but whether these were drawn after consultation with the Admiralty or not I cannot say.
SenatorPULSFORD askedthe Minis ter of Trade and Customs, upon notice -
With regard to the financial agreement - Has the Government decided what change it will propose in the postal rates - whether it will bring the rate in the other five States down to that existing in Victoria, or bring up the Victorian rate to the level of that of the other States?
– The answer to the honorable senator’s question isas follows : -
As soon as the Financial Agreement between the Commonwealth and the States becomes law the Government will be in a position to submit a scheme of uniform postal rates, bringing the letter rates in the other five States down to that existing in Victoria.
Debate resumed from 12th August(vide page 2380), on motion by Senator Sir Robert Best -
That this Bill be now read a second time.
[2.39]. - When this measure was last before the Senate, I promised to consider the remarks made by Senator Pearce on a very important phase of it. Clause 14 provides for the insertion of a new provision - 87b - in the principal Act, and that’ deals with the avoidance of certain conditions attached to the sale of patented articles. In a very thoughtful speech, my honorable friend drew my attention to certain constitutional aspects of the matter. He directed special attention to three caseswhich he quoted. Before dealing with one case in particular, I should like to say that I have given considerable attention to this matter, and have been in consultation with the Attorney-General and the Secretary of his Department concerning it. I frankly admit that the constitutional question raised is by no means free from difficulty. The view that we take is this. According to the terms of the Constitution, section 51,
The Parliament shall, subject to this Constitution, have power to make laws for the pence, order, and good government of the Commonwealth with respect to-
Then paragraphxviii. provides that we have power to make laws with respect to - copyrights, patents of inventions and designs, and trade marks.
Subsequently, in paragraph xxxix, it is provided that Parliament has powertodeal with - matters incidental to the execution of any power vested by this Constitution in the Parliament or in either House thereof, or in the Government of the Commonwealth, or in the Federal judicature, or in any department or officer of the Commonwealth.
Therefore we have full power to deal as we think proper with the law with respect to patents of inventions and designs. The question arises whether the clause of the Bill to which attention has been directed comes within the sphere of patent law. If it does not, it is, of course, subject to the constitutional objection which Senator Pearce has raised. The first feature to be borne in mind is that the clause is taken from the English Act. Whilst I admit, of course, that our jurisdiction in that respect is not completely analogous - I do not suggest for a moment that our Constitution is an analogue of the British Constitution - at the same time the fact remains that the provision does not appear in connexion with alaw dealing with contracts, but is included in an Act dealing with patents.. That fact would seem to suggest that.it is reasonable to say that the provision comeswithin the sphere of patent law. The design and object of the clause is this: Wesay that a patent shall not be used in such a way as to be harmful to trade or industry. I contend that it . is within: our power to lay down the terms and conditions under which patents shall be issued. A patent is a grant of a privilege or concession on the part of the Crown. The- whole scheme of legislation on this subject bears out that fundamental view. It is, therefore, surely for the Crown to lay down the terms upon which the concession shall foe granted.
– The clause in question goes further.
– I submit that it does not. The clause is introduced with the object of preventing an abuse of a patent.
– lt specifies what contract of sale shall be made with regard to a patented article.
– It simply provides that the rights and .privileges conferred by patents shall not be abused, and therefore my contention is that it is properly part and parcel of patent law. If that view be accepted - I think that it is a correct view ; certainly it represents the view of the Attorney-General’s Department - then we are simply inserting a clause containing a condition affecting the issue of patents. Any person accepting a patent after the passing of this measure must accept it and deal with it subject to this particular condition. Just in the same way, when premises are leased, say, for a term of ninety-nine years, stringent conditions are generally laid down. If anybody subsequently becomes interested in the whole or part of that lease, he necessarily has to deal with it upon the terms that it contains. In the clause to which I refer power is taken under the terms of the Constitution to prevent abuses of patents.
– What is the abuse contemplated?
– My honorable friend will probably remember that some little time ago the attention of the Senate was directed to the fact that oppressive conditions were introduced into agreements relating to certain American bootmaking machinery. The Government, remembering that, and also being aware of the section introduced into the Imperial Act of 1907 for the purpose of dealing with the same contingency in the Mother Country, where the same company was enabled practically to control the boot trade through the use of its patented machinery - the Government, I say, being aware of the evil and abuse that existed, introduced into this Bill a provision with the object of removing it. Of course I am aware that in certain cases the High Court has declared the law very strongly against an invasion of the sphere of the States, No doubt the cases quoted by Senator Pearce went very far in that direction. 1 do not deny for a moment that this Parliament has jurisdiction only within the limits of the Constitution. But there is no attempt on the present occasion to go beyond those limits. We do not attempt to go beyond what may fairly be regarded sib patent law. As I have already pointed out, a similar provision forms part of the patent law of the Mother Country itself. If that view be correct, the clause is a good one. But under any circumstances, even if we were in doubt, I should think that we were justified in retaining the clause, recognising that the High Court has the ultimate power of deciding as to its validity or otherwise. I think the opinion is sound that it is properlycontained in the Bill. When we know that it is intended to cope with an evil, it is all the more necessary that we should include it. If, by any possible chance, it were declared to be invalid - and I do not admit that that is at all likely - what would follow would be, not that the Patent Bill as we pass it would be invalid, but only this particular provision. From every standpoint, I think that the Senate would Le justified in including it. Senator Pearce referred particularly to what is known as the “Phonograph Case” in which it was held that -
A patentee cannot, apart from contract, attach to the product of his manufacture any conditions which will inhere in the product when once it has passed into the hands of other persons.
That might be so under the existing law ; but I would point out that the present Bill has for its object the alteration of the law ; and we are here providing for the contingency of a contract.
– The honorable senator has not dealt with the Trade Union Label case, in which it was held that the power to legislate with respect to trade marks did not inferentially carry with it the power to attach industrial conditions to trade marks.
– Precisely. That was laid down also in the “Harvester Case,” in which it was decided that, under the power to tax, we had not the power to regulate the industrial conditions within a State
– The sale of goods is controlled by State law, and is very different from transactions under the Patent law.
-My honorable friend must understand that the contention I submit is that, whilst we can prescribe the forms and conditions whereon we shall issue patents, any one dealing in them must accept them, subject to the conditions which this Parliament prescribes.
– The difficulty is that this is not made a condition of the patent. It is an independent piece of legislation, intended to defeat certain kinds of contracts.
– We are given power, under the Constitution, to make laws “ with respect to patents,” and that extends our sphere in that connexion. We are laying down this particular condition, inhering it to a patent. We are prescribing this as part and parcel of the patent law. Every provision we lay down with regard to the issue of patents must regulate the terms on which they are to be issued.
-But the Bill does not say so. The clause referred to is in the same position, as if it were a provision in. an independent Act, declaring void and illegal certain species of contracts.
– Yes; but what I contend is that it is in relation to the patent law. I gave, as an instance, the case of where a man takes a lease of property. There are certain conditions laid down in the lease, and every one dealing with the property must deal with it subject to all the terms and conditions of the lease. So I say that, in this particular case, Parliament is given power under the Constitution, to make any laws it thinks proper with respect to patents. I submit that, being aware of a particular abuse of patents, we have a right to lay down conditions governing the issue of patents, with the design and object of remedying that abuse. I submit that that is the correct view to take of the matter; and, of course, as I have already said, even if there were a doubt on the subject, we should still be justified in including the provision referred to, becausethe evil is one which must be contended against. I think that the Senate will act wisely in including the provision.
Question resolved in the affirmative.
Bill read a second time.
– In accordance with a contingent notice appearing on the business-paper, I move -
That the Committee be instructed to consider amendments to the second schedule of the principal Act, with a view to striking out “ £5 “ in the third line and substituting “ £2,” striking out “£5 “ in the fourth line and substituting “£2,” and striking out “£2” in the fifth line and substituting therefor “ £1,” or any amendment thereof.
I submit this motion under the standing order which gives the Senate power to give an instruction to the Committee on a Bill to make amendments which might not be relevant to the Bill itself, but which are relevant to the principal Act. This is the only way in which I could bring such an amendment before the Committee. In asking the Senate to give this instruction to the Committee it is necessary that I should remind honorable senators that the present schedule of the principal Act provides for fees which in the aggregate amount to a considerable sum-. It must be admitted that they represent a considerable reduction in what it cost the patentee to patent an invention when the six separate State Acts were in operation. The total amount of fees provided for in the principal Act comes to , £13. The amendment I ask the Senateto instruct the Committee to consider is intended to bring our schedule of fees into line with the fees charged in the United States. Every honorable senator will agree that we do not wish to make money out of patent fees. To regard patent fees as a kind of tax would be to seek to make revenue out of what we really desire to encourage, namely, the inventive spirit of the people. As a matter of fact, we have been making money out of patent fees since the passing of the principal Act. In 1903-4 we made a profit from patents and trade marks of£636. In 1904-5 we made a profit of £1,264, and in 1905-6 the value of receipts over expenditure in connexion with the Patent Office amounted to£12,246. It willbe seen that we have been making a profit out of the operations of the Patent Office.
– There are exceptional circumstances which account for that. This year we contemplate that a loss of £2,700 will be incurred.
– The conduct of the Patent Office in 1906-7 resulted in a profit of£9,123in 1907-8 of £7,040, and last year of£2,417. This year it is anticipated that there will be a loss of£2,700.
– I do not know. At the present time the office rental is included in the expenditure. Patentees are thus called upon to pay the whole cost of the upkeep of the office, including even the charge for rental. I do not think that we desire to make a profit out of the Patent Office. It would pay the country to make a loss upon’ it so long as we gave patentees greater facilities to patent their inventions. We ought to make the fees which they are charged as reasonable as possible. I have no desire to labour this point. The question involved is merely one of opinion. This is not a party matter, but it is one of which every honorable senator should take an independent view. Everybody who desires to encourage the inventive genius of the people must recognise that £13 is a considerable tax to impose upon inventors. It must not be forgotten that some inventors have to spend hundreds of pounds in conducting . experiments and in purchasing material, and yet, on top of that expenditure, we charge them fees to the extent of .£13-
– How does that charge compare with the total fees which were formerly levied by the six States ?
– I have already said that when the principal Act was passed we effected a very great reduction in the fees which were previously charged by the various States. I understand that formerly those tees aggregated more than ,£100. If we adopt the fees which I propose that patentees should be called upon to pay, we shall bring the Commonwealth into line with the United States upon this matter.
– If we reduce the fees we may perhaps increase the revenue of the Department.
– That is so. I am sorry that the Government have privately intimated to me that they cannot accept the amendment. I trust, however, that the Senate will give the Committee the instruction which I propose.
Senator Sir ROBERT BEST (Victoria - Minister of Trade and Customs) [3.3]. - I shall be very glad if honorable senators will give this proposal careful attention, because, whilst we all sympathize with the view that our patent fees should be made as small as possible, consistently, of course, with the office paying its way, we are scarcely justified in incurring a loss in this connexion. I propose to show that it is estimated that during the current year we shall sustain a substantial loss upon the Patent Office. I shall presently account for what appears to be the excessive profit which has been derived from that source during previous years. The point which I wish to emphasize is that, with the exception of the United States, the fees which are charged by the Commonwealth are enormously below those levied by any other country in the world.
– And they ought to be. We wish Australia to offer more encouragement to investors than does any other country
– I do not” object to that proposition. I merely say that the fees which we at present charge are very reasonable, and are enormously below those levied by any other country with the exception of the United States. It will be observed that in the principal Act certain fees are specified. For instance, upon filing an application for a patent the fee is £1, upon acceptance of the complete specification £2 is charged, in connexion with the preparation of a patent for sealing- which involves a good deal of work, including a reference to expert examiners - a fee of £$ is charged. The last-named amount my honorable friend wishes to reduce to £2. Then, on the expiration of the seventh year of the period covered by the patent - that is to say, after the patentee has had the fullest opportunity to ascertain the commercial value of his patent - he has the option of declaring whether or not he intends to proceed further with it. If he finds that it possesses a commercial value he is asked to pay a fee °f ;£5 f°r its renewal. This amount Senator Pearce wishes to reduce to £2. Under the schedule of the principal Act, upon the notice of filing opposition to a patent a fee of £2 is charged, and this sum my honorable friend wishes to reduce to £1. As I have already mentioned, these fees total £13. For that amount an inventor can patent his invention throughout the Commonwealth and secure its renewal. In regard to the fee charged for sealing a patent, which Senator Pearce proposes to reduce from £5 to £2, I may say that the average sealings ‘ per year number about 1,315. Those which have been submitted for sealing purposes since the Act came into operation on the 1st June, 1904, total 6,758- an average of 1,315 per year. The revenue thus derived averages ,£6,575 annually. Last year out of 7,968 applications for patents all with the exception of 208 were completed up to the stage of seal ing. Taking the average to which I have referred, it is estimated that the loss which would be occasioned by the adoption of the amendment of Senator Pearce would be £3,945perannum. That is the amount of the loss which would be incurred by reducing the fee for sealing patents from £5 to £2. That loss, in conjunction with the estimated loss on the working of the Patent Office for the current year, namely, £2,703, would make the total anticipated loss £6,648.
– Can the Minister of Trade and Customs explain why there has been such a sudden drop in the revenue of the office, seeing that last year we made a profit of more than £2,000?
– Yes. In 1906- 7 the revenue from the office totalled £24,000 and the expenditure £15,000. The receipts in excess of the expenditure were £9,123. During the previous year the profit derived by the Commonwealth from the Patent Office was £12,246. The explanation of the anticipated drop is that the large revenues for those years were due to the number of applications for sealing which had been filed in the States in previous years, and also to the proclamation of the Commonwealth Trade Marks Act. The receipts for 1907- 8 were accounted for by reason of the same state of affairs regarding the issue of trade mark certificates. As regards the present year, the Commissioner reports that the revenue of the Patents and Trade Marks office is about normal, subject to a small annual increase, which is anticipated to take place. The loss shown on this year’s operations should not be a permanent one, particularly when the renewal fees come in. At the same time we are sailing very close to the wind. We have cut down our fees as much as we can, consistently with carrying on the work of the office without serious loss. We only want to make the office self supporting. If it could be established for a moment that we were making a profit, I should be only too glad to concede what my honorable friend has asked.
– In seven out of eight vears the office made a profit.
– In the past we made a profit, but it did not all go to the Commonwealth. Probably a large proportion had to be returned to the States.
– Does not the Minister think that if the fees were reduced, as proposed by Senator Pearce, there would ultimately be a gain made?
– No, because, in my opinion, the fees are exceedingly reasonable. In support of that statement, I propose to quote the renewal fees which are payable in various countries for the seventh to the fourteenth year of a patent. In the Mother Country, the amount payable is £77 ; in Austria, £73 10s. ; in Belgium, £33 5s. ; in Canada, £8 6s. 8d. ; in Cape Colony, £10 ; in France, £26 7s. 2d. ; in New Zealand, £10 ; in Norway, £23 3s. 9d. ; in Russia, £130 ; in Spain, £22 15s. ; in Sweden, £27 12s.1d. ; in the United States, nil ; and in Australia, £5. Prior to Federation, in New South Wales there was no renewal feepayable ; in Victoria there was a fee of £2 10s. ; in Queensland, £10; in South Australia, £2 10s.; in Western Australia, £10; and in Tasmania, £15. My honorable friends will see that in Australia generally a large reduction has been made. With regard to Senator Pearce’s proposal to reduce the opposition fee from £2 to £1, I think it would hardly be wise to do so, because if it would have any tendency at all it would really be to encourage a number of frivolous applications. Prior to Federation an inventor in Australia had to pay £91 10s. for a patent which now costs him £13. Let me now quote the total fees which are payable in other countries. That for which a man pays £13 in Australia he would have to pay £197 10s. for in Austria, £7 3s. 7d. in America, £82 in Belgium, £12 6s. 5d. in Canada, £35 in Cape Colony, £59 in France, £260 in Germany, £100 in Great Britain, £159 in Hungary, £27 13s. 4d. in India, £9 10s. in Japan, £17 10s. in New Zealand, £30 6s. 8d. in Norway, £233 9s. 2d. in Russia, £56 17s. 6d. in Spain, and £74 10s.5d. in Sweden. It will be seen that we have endeavoured to make a very large concession to patentees. We are hardlyjustified in incurring a loss in connexion with our patent office. I submit that the fees at present are fair and reasonable, and therefore should not be reduced.
. -I should be pleased if the Minister could see his way to withdraw his opposition. I think that this matter might be left for consideration in Committee. I should not care to express an opinion regarding the Minister’s figures without an examination of. them. Tt is desirable that honorable senators should have an opportunity to see the bearings of the figures. We are not to assume at once that the view put upon them by the Minister is the only one which can be submitted. He has spoken of a patent covering the whole of Australia. Suppose that hethrew in the desert of Sahara, what good would it do? The important point is not the number of square miles, but the number of people covered by a patent. If, in the United States, with a population of eighty millions, the fee is £7, the relative charge in Australia would be 7s., instead of £13. We cannot judge patent charges simply by the area of the country which the patent covers, nor should we be governed by a consideration of the extraordinary charges which were collected in Australia prior to Federation. Speaking on the second reading of the Bill and without a knowledge of the course which Senator Pearce proposed to take, I said that in my opinion a great deal of the prosperity of the United States was due to her remarkably advantageous patent law.I have held that belief for a great many years. Certainly all my sympathies go in the direction of exceedingly low patent charges, and 1 do not at all agree with the view that the Patent Office ought to be made self-supporting, because there should be a higher object in view.I suggest to the Minister that this is not quite the time when he should ask the Senate to decide this point . It could be better decided in Committee, after we had fully considered its bearings.
Senator Sir JOSIAH SYMON (South Australia) [3.20]. - Senator Pulsford has put the matter very fairly, and I think that the Minister might yield to the suggestion that this matter, involving the consideration of figures should be dealt with in Committee. There can be no doubt that patentees and intending patentees have derived very great benefit from Federation. That was one of the objects we had in view in promoting the union of the States. Prior to that event, one of the great obstacles to the encouragement of inventors was the fact that each State had its own patent law, with a scale of fees which had to be paid, no patent being of any value as a protection outside the boundaries of the State in which it was granted. All that, however, was remedied when the Commonwealth took over the control of the patent laws. I admit the great desirability of encouraging inventors. There is nothing more calculated to promote the prosperity of a country, particularly the manufacturing interests, and, of course, the agricultural interests, than the encouragement of inventors.I do not think that Senator Pulsford said one word too much when he declared that a good deal of the prosperity of America, the enormous impetus in the development of machinery manufactures, has been largely due to the liberality of its patent law, and to the encouragement which it has given to inventors. I am not quite sure, though, that I agree with him that the Department should be self-supporting, because there are many applicants for patents, if not patentees, who are utterly unable to pay any fees. We know that very many of the most famous and useful inventions have been discovered and brought into play by penniless inventors. We should remember that the inventors of some of the finest inventions which have been of benefit to humanity, reaped no advantage from them simply because of their poverty, and that the advantage went to those who, having the means, took over the inventions. At the same time I think that unless there is cause shown to the contrary we ought, as far as we can, to make the Department pay its way. But after what we have heard from the Minister, it is impossible for us to say whether it is likely to pay its way on a reduced scale of fees. It is perfectly inexplicable to me that after the Department has yielded a large surplus for some years, we should now be told that it is likely to show a deficit of £2,000 this year. I believe that in one year there was a surplus of as much as £12,000 ; and if that is a fact it shows that somehow or other a very heavy burden was placed on applicants for patents. I am unableto understand how the estimated deficiency for this year can arise. My honorable friend’s explanation does not throw any light on the reasons for the surplus in previous years. He says that it is on account of money returned to the States. But no fees had to be returned to the States.
– I think the honorable senator meant the accumulation of fees for sealing.
– We did not seal State patents. A State patentee was at liberty to apply for a Commonwealth patent, but the efficacy of State patents remained. The administration of the State Acts was transferred to the Commonwealth simply as a matter of convenience. A patentee was enabled to apply for a Commonwealth patent, but the new patent superseded the old one only as to the unexpired time. That did not involve any transfer of moneys received to the States. I should like to hear from the Minister some further explanation as to how the. surplus was arrived at. It would be wise to give honorable senators an apportunity in Committee of eliciting more complete figures. I should like to say a word or two for the consideration of Senator Pearce as to his suggested reductions of fees. I hope that he will further consider some of his suggestions. He proposes to reduce to £1 the fee of £2 on giving notice of opposition to a patent. Like the Minister, I consider that that is a strange way of encouraging inventors. By reducing the fee which a person who desires to oppose a patent has to pay before the opposition canbe entertained, we rather injure patentees. I think that that fee ought to be retained, because any one who has knowledge of the practice with regard to patents is aware that very often opposition is lodged by some one out of what I may call “ sheer cussedness,” and with a view of obstruction rather than because there is any well-founded ground for contending that the patent in question has not merits. T also invite attention to the £5 renewal fee. I confess that at present I do not see why it should be reduced.
– It ought to be increased very much.
– At the end of the seven years’ period - in some countries the term runs for fourteen years - if the patent were of no value it would not be renewed, and no fee would be paid. But if the patent were valuable, we may rest assured that the value would have been proved to be substantial and satisfactory to the patentee before he would pay the renewal fee. If it be worth his while to renew, I think, as at present advised, that £5 is not an excessive amount. It is a payment made by a patentee who is assured of the probable profitableness of his invention. I quite agree, however, that the fee of £5 paid for preparation for sealing might very well be reduced. The Minister contended that a great deal has to be done for the £5. All that I know of that is done is that the letters patent are printed on a piece of parchment, sealed, and handed to the patentee. The patent is issued on a printed form, and nothing is done except to fill up a few blanks, and affix the seal. I shall therefore assist my honorable friend, Senator Pearce, in his proposal to have the matter further considered in Committee, and I trust that the Minister will then be able, with the assistance of the officers of his Department, to give us further information as to how the surplus of past years was made up, together with further details relating to the estimated deficiency of £2,000 this year.
– I quite agree with Senator Symon as to the desirableness of giving to inventors all the benefits we can as cheaply as possible. The figures quoted by the Minister regarding the charges made do not put the question as clearly as might be wished. Different charges are madeat different stages in the issue of a patent. I have before me some figures which show the charges made at the various stages in various countries. In New Zealand the charges up to sealing amount to £2 10s., as compared with £8 in the Commonwealth ; but in that country the renewal charge is £15, as compared with our £5. In Great Britain the charges up to sealing amount to £5, and the renewal charge is £95. In Canada the charges up to sealing amount to £4 2s. 2d., and the renewal charge is £8 4s. 4d. In the United States the charges up to sealing are £7 3s. 9d., and there is no renewal charge whatever. The Minister has contended that we must obtain sufficient revenue to make the office self-supporting. I quite agree with him. But I also agree with Senator Symon, that when a man is struggling with a new invention we should relieve him, as far as possible, of fees, whereas when his patent has become a success, and he has made money out of it, we may very properly charge him a high fee for renewal. In the United States the policy pursued is rather curious. There, when a. patentee has made money out of his invention, they charge him nothing for renewal. I should like the fees in the Commonwealth to be made as cheap as they are in New Zealand up to sealing, and when a patentee asks for a renewal there is no objection to making him pay a good fee.
– The fee then paid may very well be regarded as a payment by results.
– Exactly, and at that stage we are also asking a man to make a payment which he can afford.
– Itrust that the Minister will reconsider his opposition to Senator Pearce’s proposal. We ought to give some attention to the fees to be charged to patentees. I find from the Budget papers that the revenue from patents for the year 1908-9 was £13,623, whereas salaries amount to only £9,394. There is, therefore, ample room for the payment of rent, still leaving a small margin of profit to the credit of the office. But there is a very large sum of £8,475put down as contingencies for 1909-10. I arn not satisfied about that item. I do not understand what “ contingencies “ cover. We ought to give the Minister an opportunity of explaining the matter in Committee quite apart from the question of reducing fees. Senator Pearce will, however, be well advised if he takes Senator Symon’s advice, and modifies some of his proposals. If he did that he would, I think, carry the Senate with him.
– I shall not move with regard to the two last items that I mentioned.
.- The time has gone by when we can afford to be indifferent to revenue. We must now conserve revenue in every possible way. It appears to me that the Minister has acted quite rightly in objecting to the proposed instruction being given to the Committee, because he has made up his mind that he is not justified in giving up the large amount of revenue involved. As he has no doubt about the matter himself, he was not justified in agreeing to the recommittal. The figures with which we have been furnished show that our Patent Act has been a success, and has accomplished the object for which it was passed. Why Senator Pearce should have suggested a reduction of the renewal fee I cannot understand ; because when a patent has been in force for a number of years, and a renewal is asked for, it shows that the invention is an exceedingly payable one. If a patentee cannot afford to pay £5 on getting the bit of parchment that protects him throughout the Commonwealth, he can afford to pay nothing. We all know that a barrister will not look at a brief even for a few minutes without a fee of £5, and in some cases of £50. We all know also that a little bit of parchment called a probate, with the seal of a Court affixed to it, is not issued without the payment of a fee which, in the case of an estate worth £100,000, amounts in this State to as much as £10,000.
– It has to be remembered that fees are charged which are not enumerated in the schedule.
– There is only one country in the world that is more liberal than we are with reference to the renewal fee. The United States makes no charge whatever. But Austria charges £19410s. for renewal of a patent, Belgium charges £82 5s. 4d., Canada £8 4s. 4d., Cape Colony £30, and France £39. Do honorable senators know what renewal fee Germany charges? There have perhaps been a greater number of chemical and scientific inventions in Germany than in any other country. The desire in Germany is to encourage inventors because it is known that the trade of the country has been enormously increased as a result of their encouragement, and yet they impose for renewals of patents a fee of £257 10s. Our honorable friends opposite are growling because here we charge a fee of £5. In Great Britain a fee of £95 is charged for a renewal of a patent ; in Hungary, £156 7s. 6d. ; in India, £25; in Japan, £17; in New Zealand, £15; in Norway, £28 14s. 2d. ; in Russia, £228 11s. 8d. ; in Spain, £56 12s.1d; and in Sweden, £73 9s. 4½d. The facts gathered from all parts of the world go to show that we have done what our honorable friends opposite desire, and now they think that we should do something more. They wish to be more than liberal and generous to a man who is given protection under the law at the expense of every taxpayer in the Commonwealth.
– Does the honorable senator not think that the community also derives some benefit ?
– Certainly I do, and that is why we have fixed the fees so low. I hope that this matter will not be discussed all over again in Committee.
– I join with those who hope the Minister will see his way to agree to the motion. I know that the honorable senator believed that to accept such amendments as are proposed would not be in the best interest’s of the Commonwealth. But perhaps the facts which have been submitted to the Senate since he spoke have been such as have induced him to change his mind on the subject. He should know that there can be no possible harm done by permitting the proposed amendments to be considered in Committee. I know of nothing which is of more importance to the general wellbeing of the community than that those who are possessed of inventive genius and capacity should be given every opportunity to secure patents for their inventions at the lowest possible cost. I think that it must be of advantage to the Commonwealth to enable inventors to secure patents for their inventions as cheaply as possible. Honorable senators who have referred to the high fees charged in other countries have not been able, so far as I could see, to show that there are any substantial objections to the very low fees charged in the United States. We know that no country in the world has derived greater advantage from the operation of its patent laws than has the United States, and the patent fees there are the lowest in the world. I again ask the Minister whether, after hearing the debate on the motion, he cannot see his way to consent to have the proposed amendments considered in Committee.
– I support the request to the Minister to let this matter be considered in Committee. I am as anxious as is any member of the Senate that the Government Departments shall pay their way. We can accept the Minister’s assurance that he desires to conserve the revenue, but there is something tobe said on the other side, and we can better consider the details of the matter in Committee. If it can be shown that by the adoption of the proposed amendments the revenue of the Department would be seriously affected, we need not agree to them; but if it is shown that the revenue will not be affected, the success of the operation of the patent laws of America must justify a favorable consideration of the amendments. Nothing can be lost by giving honorable senators an opportunity to consider the honorable senator’s proposal in Committee.
– Under the Standing Orders it is necessary that an instruction to a Committee shall be carried by at least fifteen affirmative votes. I shall therefore cause the bells to be rung before putting the question to the Senate.
– I declare the motion carried by not less than fifteen affirmative votes.
Clauses 1 to 3 agreed to.
Clause 4 -
After section fourteen of the Principal Act the following section is inserted : - “ 14A. - (1.) Any sum ordered by the Com missioner to be paid as costs may, in default of payment, be recovered in any Federal or Stale Court of competent jurisdiction, as a debt due by the person against whom the order is made to the person in whose favour the order is made. “(2.) This section shall apply to orders made before the commencement of this section as well as to orders made after its commencement.”
– I hope that the Minister will now agree to report progress.
– Why should I?
– I think it was understood all along that the Bill would be taken into Committee only formally today.
– I never heard of such a suggestion. The Bill has been on the paper for a fortnight. I made my second-reading speech upon it a fortnight ago.
– I was quite under the impression that the Bill would be taken into Committee only formally today. I have not with me some papers which I require to refer to, and am not prepared immediately to deal with certain matters connected with the Bill.
– I wish to ask the Minister whether there is any particular reason for making this clause retrospective. To do so may affect some rights which have already been acquired. I think this is a dangerous provision. I have no objection to the Commissioner being given the powers asked for in this clause from the time of the passing of the Bill, but he should not be given the power to demand fees, possibly from some one who was in no way responsible for their non-payment in the first instance.
– The clause has nothing to do with fees. It is merely intended to enable the lawyers to get their costs.
– It affects fees as well as costs. It refers to “ any sum ordered by the Commissioner to be paid as costs,” and that may be held to cover the list of fees to which I have already referred. In connexion with the registration of a patent, the Commissioner may have ordered the payment of a certain sum as costs. The costs may not have been paid, and in the meantime the patent may have changed hands three or four times. Under this clause the Commissioner, in such a case, would be given power to demand the payment of the costs from some one who was in no way responsible for them.
– That would not be the effect of the clause.
– Let us assume that an order has been made, and that there has been a purchaser of the patent.
– Why should not a man pay his just debts?
– I have never heard of a Billof this kind being made retrospective in its operation.
[3.56]. - My honorable friend, Senator Guthrie, has utterly misconceived the position. Under section 14 of the principal Act the Commissioner may do a number of things. For instance, he may summon witnesses, receive evidence upon oath, and require the production of documents. After a hearing he may award costs against any party to any proceeding before him. But it has transpired that whilst the Commissioner is able to award costs, no machinery has been provided for the purpose of enforcing their payment. This Bill supplies that omission. Surely there can be no reasonable objection urged to such a provision.
Senator Sir JOSIAH SYMON (South Australia) [3.58]. - It is also worthy of notice that the effect of this clause will merely be to bring the procedure under our Patent Act into harmony with that under the Commonwealth Trade Marks Act 1905. Section 99 of that Act provides -
Any sum awarded for costs by the Registrar or the Law Officer may, in default of payment, be recovered in any civil court of competent jurisdiction as a debt due by the person against whom the order is made to the person in whose favourthe order is made.
The first portion of the clause under consideration merely introduces a similar procedure into our patent system.
– I do not object to that.
– Exactly. My. honorable friend objects to sub-clause 2, which makes the operation of this provision retrospective. But I would point out to him that the clause merely provides machinery for enforcing the payment of debts under orders which are already in existence. It does not retrospectively impose any liability upon anybody. It merely enforces payment to-day on the part of the individual who was liable yesterday - a payment which could not previously be enforced, owing to the absence of the necessary machinery. By retaining the clause in its present form, no injustice will be done to anybody.
Clause agreed to.
Clauses 5 to 9 agreed to.
Clause 10 (Restoration of lapsed patents).
Senator Sir JOSIAH SYMON (South Australia) [4.0]. - We may take it, I presume, that the provisions of every paragraph of this clause are merely a reproduction of the provisions of the Imperial Act which is referred to in the marginal note?
Clause agreed to.
Clauses 11 to 13 agreed to.
Clause 14 (Revocation of Patents worked outside the Commonwealth).
– Honorable senators will recollect that upon the motion for the second reading of the Bill I spoke at considerable length upon this clause, and, with their permission, I would like to call attention to some statements which I then made. I do so in the hope that Ministers will afterwards see their way to allow progress to be reported, so as to permit of further time being devoted to the consideration of this provision. Upon the occasion to which I have alluded, I pointed out that in this matter a wide difference exists between the position occupied by Australia and that occupied by the Mother Country. Now, we all know that Great Britain stands at the head of the world’s manufacturing countries, and I have no complaint to urge because the Parliament of the United Kingdom has decreed that patents granted within its borders must, within a prescribed time, be worked there. I admit, however, that I am not satisfied as to the wisdom of the adoption of that course, and I am quite certain that it will not be in the interests of Australia if we decide to adopt a similar course. In speaking upon the motion for the second reading of the Bill, I called the attention of honorable senators to the position occupied by the United States in this connexion. I showed that an agreement has practically been completed between that country and Germany under which manufacture in either country will be regarded as sufficient. Consequently, patentees who have been granted patent rights in either of those countries will not be required to work their inventions within the country which has issued those patent rights. In this connexion, I desire to again read a communication which was recently received by a leading firm of patent agents in Australia, from Washington. It is as follows : -
In compliance with the request contained in your letter of 4th May, for information relative to arrangements entered into between the United States and Germany, in regard to the working of patents in such countries, I am sending you herewith a copy of the treaty which has been negotiated and which has received the approval of both the German Reichstag and the United States Senate. It awaits formal ratification by the exchange of copies by diplomatic officials and the proclamation of the President, before it will become effective.
I understand that efforts are being made to negotiate such treaties with all countries whose Patent Laws contain requirements as to manufacture. It is to be regretted that Great Britain rejected all such proposals, and it is not impossible that some retaliatory legislation will be adopted here in the near future. In fact, numerous Bills have been introduced into Congress, and it has only been by the determined efforts that at least one of these Bills has not become a law. The whole difficulty appears to have been stirred up by the recently-enacted British law.
The following is a text of the treaty which was signed at Washington on the 23rd February last, submitted to the Senate on 24th February, and ratified by that House on the 15 th of April : -
Article 1. The provisions of the laws applicable now existing or hereafter to be enacted of either of the contracting parties, under which the non-working of the patent, working pattern, design or model carries the invalidation or some other restriction of the right, shall only be applied to the patents, working patterns, designs or models enjoyed by the citizens of the other contracting party within the limits of the restrictions imposed by the said party upon its own citizens. The working of a patent, working pattern, design or mode] in the territory of one of the contracting parties shall be considered as equivalent to its working in the territory of the other party.
Article II. This agreement shall take effect from the date of its promulgation and remain in force until the expiration of twelve months following the notice of termination given by one of the contracting parties.
Article III. The present agreement shall be ratified and the ramifications shall be exchanged at Washington as soon as possible.
I ask honorable senators to consider the extraordinary position which will be created if every one of the thirty or forty countries within the British Dominions determine that a patent shall be invalid if it is not worked within the country of origin within a year or two of the patent rights being issued. Such a law would be the laughing stock of the world. In view of the sparse population of Australia, and of its lack of development in all sorts of directions, I think that a provision under which patent rights would be revoked, unless the patented article or process is manufactured or carried on within the Commonwealth within a certain period, would be eminently undesirable, however desirable it might be forty or fifty years hence. I hope that the Committee will reject the clause.
Clause agreed to.
Clause 15 agreed to.
Clause 16 (Improperly describing any office as the Patent Office).
– I wish to ask the Minister of Trade and Customs whether this provision is an exact copy of British legislation ?
Senator Sir ROBERT BEST (Victoria- Minister of Trade and Customs) [4.10]. - The provision in the English Act reads as follows -
If any person uses on his place of business or on any document issued by him, or otherwise, the words “patent office” or any other words suggesting that his place of business is officially connected with, or is, a patent office, he shall be liable on conviction under the Summary Jurisdiction Acts to a fine not exceeding £20.
Clause agreed to.
– I move -
That the following new clause be inserted : -
The second schedule of the Principal Act is amended by omitting the figure “5 “ in the third line and inserting in lieu thereof the figure “ 3,” and by omitting the figure “ 5 “ in the fourth line and inserting in lieu thereof the figure “8.”
It will be seen that on revision I have practically met the objections which were taken by honorable senators to my proposal in its original form. What I now propose is to make the charge up to the time of sealing £5, and the renewal fee £8. I do not propose to alter the total amount of the charges payable to the office, but merely to make things easier for an inventor up to the time of sealing. To Senator Guthrie I am indebted for a copy of The Australian Official Journal of Patents. It contains a scale of fees, which covers a full page, and which is not to be found in the Act at all, because it was made under the power to frame regulations. Some of these fees take effect before sealing, so that the schedule to this Bill does not disclose the real facts. For instance, on an application to amend a specification before sealing - a thing which frequently has to be done - a fee of £2 is payable. A fee of 5s. is charged for correcting a clerical error before sealing. Again, if an applicant asks for an enlargement of time to give a complete specification, if not exceeding one month, the fee is £1, if not exceeding two months it is £2, and if not exceeding three months it is ,£3. All this money has to be paid before the patent is sealed. After sealing, and before renewal, there is a scale of fees which may be charged for doing various things. Probably the Minister will say that not so many patents are renewed as are sealed, and that, therefore, a fee of .£8 is not an equivalent to the office. I submit that if that fee is not regarded as sufficient, it should be made even higher. My contention is that we ought not to collect revenue from inventors up to the time of sealing. On the contrary, we ought to encourage them up to that time, in order to enable them to get their patents on to the market. I feel sure that the Minister, though naturally inclined to adhere to his Bill, is in sympathy with my proposition. He certainly cannot say that, if adopted, it would make a serious inroad on the revenue. I may add that I have dropped the amendment of the opposition fee.
Senator Sir ROBERT BEST (VictoriaMinister of Trade and Customs) [4.16]. - As I said before, naturally our sympathies are in the direction of reducing the patent fees to a minimum consistently with making the office pay. I pointed out that, with the exception of one or two countries, Australia makes the lowest charge in the world. For £13 we are now doing what other countries charge as high as £250 for doing.
– But Senator Guthrie has proved that, up to the time of sealing, Australia charges the highest fee of any English-speaking community.
– I have no data before me to show whether that is so or not. For a charge of .£13, we give to an inventor a protection which, prior to Federation, cost ,£91 10s. On the operations of the office for the current year, we expect to make a loss of £2,703. My honorable friend picked out two or three years when a profit was made; I remind him that, whereas in 1903-4 we returned to the States £376, in 1904-5 we returned £[5,386 to them.
– Still the ‘ Commonwealth made a profit in that year.
– That may be so. I have explained that the large revenue for 1905-6 and 1906-7 was due to the large number of accumulated sealings of applications filed in previous years, and also to the proclamation of the Commonwealth Trade Marks Act ; and that the large revenue for 1907-8 was accounted for by reason of the same state of affairs regarding the issue of trade-mark certificates. In 1904-5, we returned to the States £5>38<5; in i9°5-6» -£6,388; in 1906-7, £4,700; in 1907-8, £2,973; and in 1908-9, £1,739. It is only now that we have arrived at normal conditions in the office1, and the estimated’, deficiency for this year is, I repeat, £2,703. Haying regard to the exceedingly low fees which are charged, we are not justified, I submit, in incurring an additional loss. Under the original proposition of Senator Pearce, the annual loss was estimated at nearly £4,000, and that, together with the estimated deficit for this year, would mean a total loss of £6,648. My honorable friend now proposes to reduce the sealing fee by £3, and to increase the renewal fee to £8. That would not go far towards making up the annual deficit. As a matter of fact, we have not received a renewal fee, because the Act has not been in operation long enough. The number of sealings averages 1,315, and the proposed reduction of the fee would involve a loss °f £3>945- In consideration of that loss, . my honorable friend proposes to increase the renewal fee by £3. We cannot say how many patents are likely to be renewed ; but the proposed fee would not by any. means compensate for the yearly loss which we should suffer in other directions.
– The Department would get more business.
– That is all problematical. My honorable friend will surely see that we are not justified in throwing away in a light and airy fashion nearly £6,000. Having regard to the total fee which was charged in Australia prior to the Federation, and the high fees which are now charged in other countries, I contend that honorable senators will not be justified in reducing the sealing fee. When the office is carried on at a profit, if that stage should be reached, it will surely be time enough for proposing a reduction in the fees.
– How many patents were reckoned in estimating thedeficit for this year?
– About i>32°-
– Is there not a number of renewals every vear?
– The Act came into operation only on the1st June, 1904.
– The renewal fees belong to the Commonwealth.
– They belong to the States.
– Not the renewal fees, surely?
– Whatever fees we collect in connexion with old applications do not belong to us. We do not get them.
– The Commonwealth must get them, because the whole administration of the patent law is under the Commonwealth.
– But we do not get the fees .
– We must get them. That is one of the elements of the mistake in the Minister’s calculation. The Commonwealth is administering the whole system.
– But the fees in connexion with the renewal of a State patent go to the States.
– Where does the Minister find authority for that?
– The renewal fees in connexion with patents granted by the States go to the States concerned. The first Commonwealth patent could not be renewed before the1st June,1911. I am, however, in full sympathy with the object which Senator Pearce has in view, and should be willing to agree to what he proposes if I thought we could afford it, and if the office would not be worked at a loss in consequence. Only a little while ago it was pointed out to me in connexion with some fees charged for various purposes under the regulations, that certain reductions should be made, and I did not hesitate to make them. With reference to the payment of fees to the States, it has now been pointed out to me that section 19 of the Patents Act 1903, reads -
On the date so specified- (a) the State Patent Acts of the State referred to shall so far as they have any relation to patents cease to be administered by the State and the Commonwealth shall thereafter administer the same so far as is necessary for the purpose of completing then pending proceedings and of giving effect to then existing rights, and the Commissioner shall collect for each State the fees to which it may become entitled pursuant to such administration.
– Does not that apply only to original applications not finally dealt with? It would not apply to renewals of State patents.
– Yes, it does.
– It is not very clear.
– That is what is done, as a matter of fact. Something has been stated about additional fees. I am told that in one case, the only one of its kind in over 14,700 cases lodged, and presenting very unusual features, the amount in fees was the largest ever paid in any one case, the cost to the applicant and opponents being£15 and £9 respectively. In this threeoppositions were lodged to the grant of letters patent. I think that what is proposed really means a substantial loss, to which, at this juncture, we are not justified in consenting.
.- I trust that the Chairman will put the proposed new clause to the Committee in two parts, so that those who are in favour of the reduction of the fees up to sealing may be able to vote for Senator Pearce’s amendment, whilst, at the same time, being free to vote for or against an increased fee for renewal. The Minister has tried to impress us with the idea that the fees charged in the Commonwealth are cheap, as compared with those in other countries. I do not deny that. In New Zealand, the fees amount to £17 10s., and, in England, to £100. But they are divided in such a way as not to bear very heavily upon a man who has taken out his patent. If the fees up to sealing are reduced, I am prepared to vote for an increase of the renewal fee. America is the only country in the world that charges no fee for the renewal of a patent. Why that should be so, I do not know. I should be prepared to vote for a renewal fee of £10, or even £12, which I think would be quite reasonable, but we should certainly make the initial fees as low as possible.
– I consider that, having in view the present state of our finances, we ought to hesitate before making the large reduction proposed. Of course, it is very nice to move to reduce fees. The member of Parliament who votes for such a proposition is likely to get himself a very good name. He may be called a “jolly good fellow,” and so forth. But we must have regard to things as they are, and I feel that tha
Commonwealth cannot afford’ the loss that would be involved in these amendments. It appears that the proportion of patents renewed to the number granted under the State Acts was about 20 per cent. If all the patents issued were renewed, or if even 70 or 80 per cent. of them were renewed, I could understand the position of those honorable senators who urge that the loss involved in reducing the initial fees could be made up by increasingthe renewal fees. But the revenue derived from renewals is not likely to be large. We should, therefore, do well to wait for a year or two, and see how the Act works. If it be found that the office is worked at a profit, I am sure that the Government would not desire that state of things to continue. It is merely desired that the Patent Office shall coverexpenses, and we should even be prepared for a small loss. But in these matters I prefer to trust the authorities in charge, and we ought not to rush into reductions without knowing how they will operate. We should be wise to follow the Government in this matter.
Senator Sir JOSIAH SYMON (South Australia) [4.35]. - What Senator McColl has said as to the percentage of renewals emphasizes the necessity of keeping the sealing fee as low as possible. I was not previously aware that such an enormous proportion of patents were not renewed. My honorable friend tells us that 80 per cent. are not renewed. If that be the case, it affords the strongest argument for making the fees on application as low as possible. The figures seem to me to show that the object of the patent law in encouraging people to make inventions is operating very strongly. We want it to operate strongly. It is operating strongly because, for every patent that is renewed, four are not, being, I presume, failures. The great object which we have in view is to tempt people to exert their intelligence and their inventive faculties in order that their patents may be made successful. Therefore, Senator McColl’ s argument is really a strong plea for the reduction of the preliminary fees. I was somewhat startled when the Minister urged that we could not rely upon the renewal fees, because, in respect of State patents, they had to be returned to the States. I ventured to take exception to that remark. My honorable friend then quoted, section 19, paragraph a, of the Patents Act 1903. Now, I venture to point out that that provision gives, so far as I can see, no express authority for the payment of renewal fees to the States. Every one of these renewal fees, with respect to patents granted by States, is apparently paid under the Commonwealth Act. “ Section 19 provides that -
On the date so specified- (a) the State Patents Acts of the State referred to shall so far as they have any relation to patents cease to be administered by the State and the Commonwealth shall thereafter administer the same.
How far? -
So far as is necessary for the purpose of completing then pending proceedings, and of giving effect to then existing rights..
That has nothing to do with a right of renewal arising a year or two after the Commonwealth Act came into operation. The money paid on renewal, and which has been collected with respect to State patents, would appear to be Commonwealth revenue. If such fees have been returned to the States, it looks like throwing away the Commonwealth revenue. The very definition of a patent supports my contention. A patent means -
Letters patent for an invention granted in the Commonwealth.
Wherever the word “ Patent “ is used throughout the Act, unless the words “ State Patent “ are employed, a patent under the Commonwealth Act is referred to.
– But it is the State patent that is being carried on, and the fee for the renewal of it is due to the State issuing the patent.
– On renewal the patent is granted by the Commonwealth. Section 19A referred to by the Minister does not warrant the payment to the State. I am in favour of an increase of the renewal fee. I consider it perfectly legitimate to increase that fee. If a patent is worth renewing, it might be worth the patentee’s while to pay a substantial fee for its renewal. I can understand that it might be well worth while to renew certain patents at a cost of hundreds of pounds.
– As against that, the American practice is not to charge for renewals.
– I should like to liberalize the law in every way. But if we are going to charge fees to cover the expenses of administration, it is better that we should have a payment by results than that we should impose fees before the utility of an invention is established. As Senator McColl has pointed out, no results follow from about 80 per cent. of the applications.
– Section 19 says - “ So far as is necessary for the purpose of completing then pending proceedings and of giving effect to then existing rights.” , The renewal would be giving effect to then existing rights.
– Even if that were so, the fee should be paid to the authority granting the renewal.
– No, because the Act says that the Commissioner shall collect for each State the fees to which it shall become entitled pursuant to such administration.
– The Act is being administered by the Commonwealth. The renewal of the patent is a renewal by the Commonwealth, and the patent is then a patent under the Commonwealth Act. I should like to ask the Minister if any of these fees for renewal have been handed over to the States?
– Yes, it is the practice to hand them over to the States.
– Can the Minister say how much has been handed over to the States in this way up to date?
Senator Sir ROBERT BEST (Victoria - Minister of Trade and Customs) [4.44]. - The Commissioner tells me that, taking last year - 1908-9 - in connexion with receipts under administration of the State Acts, as required by section 190 of the Patent Act 1903, there was returned to the States a gross sum of £1,739;a large proportion of that amount was for renewals. I cannot now give further particulars, but I shall only be too glad to have the figures taken out, in order to show what proportion of the gross amount is covered by renewal fees.
Senator Sir JOSIAH SYMON (South Australia) [4.45]. - I am obliged to my honorable friend for the information. Of course, I cannot expect him to analyze the figures now. I do not wish to enlarge upon that particular matter. I would suggest to Senator Pearce that he should be satisfied with a reduction of the £5 fee to £2, and then accept Senator Gray’s suggestion to increase the renewal fee to £12. I think that would be a fair adjustment. To reduce the fee paid since the Act came into operation by £3 would be to reduce it by more than half. If it is reduced by £2 the fee will then be £3, and I may tell honorable senators that probably that is about the usual fee for the parchment document with the incidental trouble connected with it. With a fee of £5 we should have charges up to the sealing amounting to £6, as against the United States charge of £7 3s. 9d. I am strongly in favour of the reduction of the present fee, which I think is exorbitant, and the Minister’s reasons against the proposed reduction, on the ground of the expense of administration, are not convincing, to my mind.
– I am prepared to accept Senator Symon’s. suggestion, and I, therefore, ask leave to amend the proposed new clause so that it will read as follows -
Proposed new clause, by leave, amended accordingly.
– I believe that the Patent Office should pay its way, but I also believe that the fees charged for the issue of patents should be as low as possible. I am not satisfied that there should be a revenue of £13,020 from the Patent Office; that salaries should be paid to the extent of £10,483, and that contingent expenses should be paid to the extent of £8,475. I would ask the Minister if he can say what these contingent expenses consist of?
Senator Sir ROBERT BEST (Victoria - Minister of Trade and Customs) [4.49]. - I can give the honorable senator particulars of the vote for contingencies. They are : Postage and telegrams, £330 ; office requisites, exclusive of writing paper, £110 ; writing paper and envelopes, £115 ; account, record, and other books, including cost of material, printing, and binding, £360; other printing, £6,750; travelling expenses, £140 ; stores, fuel, and light, £70 ; temporary assistance , £200 ; miscellaneous and incidental expenditure, £400.
– I think the vote for other printing might very well be reduced.
– It would not be recurrent?
– Yes, it is recurrent, of course. How can we pass any judgment on the amount required for that purpose?
Question - That the proposed new clause be inserted - put. The Committee divided.
Majority … … 7
Question so resolved in the affirmative.
Proposed new clause agreed to.
That the following new clause be inserted : -
The second schedule of the Principal Act is amended by omitting the figure “ 5 “ in the fourth line and inserting in lieu thereof the figure “ 12.”
That would increase the renewal fee to £12. Instead of proposing the other amendment suggested by Senator Pearce, we now propose to make the renewal fee £12. Seeing that we have reduced the fee for sealing a patent, and that the Patent Office must be made to pay its way, I think the Committee will do well to adopt my amendment.
Senator Sir ROBERT BEST (Victoria - Minister of Trade and Customs) [4.56]. - During the course of this debate, many honorable senators have declared themselves in favour of making the Patent Office pay its way. I am very much afraid, however, that even the adoption of the proposal of Senator Guthrie to increase the fee for the renewal of patents will not have the desired effect. With the exception of one or two countries, the renewal fees which are charged in other parts of the world are very large indeed. In the Mother Country the fee is £95, and in Germany, it is £257. If the object of the amendment is to make good the revenue which we have sacrificed under the new clause of Senator Pearce, it will scarcely achieve its purpose, seeing that renewal fees can be charged only once in every seven years.
– The Minister is scarcely accurate in making that statement.
– Of course, I am referring to the renewal fee in the case of each patent.
– Under this proposal, if a patentee is struggling with his invention, he will be penalized.
– I scarcely think that is so. When an inventor has had three, five, or seven years’ experience of his patent, he must know whether or not it has a commercial value. Having regard to the fact that the renewal fees in other countries are so much larger than our own, and that our Patent Office must be made to pay its way, I would suggest that the charge in this connexion should be increased to £15, payable in two instalments of £7 10s. each, at the end of the fourth and seventh year after the patent rights have been issued.
– Oh, no. Even £12 represents a very big jump.
– If the Committee will agree to make the fee £15, it will be a very low one, even then. I am merely anxious to give effect to the desire of honorable senators to make the Office pay its way. I am sure that it cannot be made to pay its way if we charge only £12 for the renewal fee. It is idle to suggest that the increased number of applicants will make good the loss of revenue which we must sustain as the result of our action this afternoon. At present, 1,315 applications for patents are sealed annually, and the Commonwealth will incur a loss of £2 upon each of these.
– But suppose there is an increase of 50 per cent. in the number of applications?
– Even that will not make up the deficiency.
– What is the percentage of renewals?
– We have not had any renewals yet. Under the circumstances, I would suggest that the renewal fee should be fixed at £15.
Senator Sir JOSIAH SYMON (South Australia) [5.2]. - My honorable friend, the Minister of Trade and Customs, has put his view before the Committee very clearly. ButI appeal to honorable senators not to sanction such a large increase in the renewal fee as he has suggested. We must pay some regard to the applicants whose applications are now going through the Patent Office. I would rather see the renewal fee fixed at£10, which would be equivalent to an increase of 100 per cent. Senator Gray, however, has suggested that it should be £12, and as he has had more practical experience of business than I have had, I am prepared to vote for that amount. But I am not willing to increase the fee by 200 per cent All the statements which have been made by the Minister of Trade and Customs in regard to the loss which the Commonwealth will sustain, consequent upon the reduction of our patent fees, are merely in the nature of conjecture. We ought not to levy an increased tax of 200 per cent. upon inventors whose applications for patents are now passing through the Patent Office.
Proposed new clause agreed to.
Title agreed to.
Bill reported with amendments.
Debate resumed from11th August (vide page 2265), on motion by Senator Sir Robert Best -
That this Bill be now read a second time.
– In discussing the motion for the second reading of this Bill, I am at a considerable loss to discover the principle which it embodies. Indeed, I was about to ask whether I should be in order in debating a measure which contains no principle. Under the Constitution, this Parliament is empowered to make laws for the peace, order, and good government of the Commonwealth in respect of lighthouses, lightships, beacons, and buoys. That charter further provides that -
On a date or dates to be proclaimed by the Governor-General after the establishment of the Commonwealth the following Departments of the Public Service in each State shall become transferred to the Commonwealth : -
Lighthouses, lightships, beacons, and buoys.
But under this Bill it is not proposed to take over a single lighthouse - not even a buoy. Further, no proclamation is to be issued.
– Of what use is it, then ?
– I do not know. The only powers conferred by the Bill are embodied in clause 5, which reads -
The following clause declares -
Where the Governor-General has entered into an agreement with the Governor of a State, or with any person, for the acquisition by the Commonwealth of any lighthouses or marine mark, any instrument or assurance for granting or transferring the lighthouses or marine mark to the Commonwealth accordingly shall, by virtue of this Act, and notwithstanding anything in the law of the State, be valid and effectual to vest the lighthouses or. marine mark in the Commonwealth according to the tenor thereof.
The next clause vests in the Minister power to erect lighthouses, to alter or remove lighthouses or marine marks, and to vary the character of any lighthouses, or the manner cf exhibiting lights therein. In passing this Bill I hold that we should be absolutely abrogating the powers conferred on us by the Constitution. That charter of government affirms that the Commonwealth shall take over the control of lighthouses.In moving the second reading of this Bill, the Minister of Trade and Customs told us that the Government had despatched an officer of the Commonwealth to the various States for the purpose of discussing the subject-matter of this Bill with the officers of those States. He further informed us that as the result of the inquiries by that officer, a schedule had been framed of the lighthouses which the States wish to retain, and of those which they desire to hand over to the Commonwealth. I do not think that the framers of the Constitution contemplated any such position. It is in the interests of Australia that its lighthouses, beacons, and buoys should be placed under one supreme control. But that is exactly what the Government do not propose to do. The only inference which can be drawn from this Bill is that the States will retain some lighthouses, beacons, buoys, and lightships. Paragraph 6 of clause 8 says -
Government, and any authority of a State having the control or management of any marine mark or of any lamp or light.
If the Commonwealth takes over the control of the 120 lights mentioned by the Minister of Trade and Customs, it will still leave the control of other lights to the States. Consequently, a very grave condition of affairs may arise. For instance, if the Commonwealth decides to erect a lighthouse alongside a State light, and orders the removal of the latter, the State authorities may please themselves as to whether they comply with that order.
– No, they cannot.
– Sub-clause 5 reads -
No person shall without reasonable cause (proof whereof shall lie upon him) fail to comply with a notice under this section.
That is, to make an alteration or to remove a light.
– Has the honorable senator read sub-clause 3?
– Yes. Sub-clause 6 contains this proviso -
Provided that nothing in the section shall render a State Government or any authority of a State liable to a pecuniary penalty under sub-section 5.
The States are to hand over to the Commonwealth the lights on the coast, and we are to have no control over them. I do not think that people ever imagined that the Constitution would be worked in that manner. The rest of this Bill deals with mere matters of regulation. If the Government intended to act in this way they ought to have told the Senate the class or situation of the lights about which it is proposed to enter into an agreement with the States.
– Surely that is a matter for Committee.
– In his secondreading speech the Minister mentioned a number of lights which are to be taken over, but did not tell us whether they were coastal lights or not.
– Indeed, I did.
– The honorable senator did not define what he meant by “coastal lights.”
– I did not use any other term.
– The honorable senator was asked to define the term, and even now we do not know what it means. The Bill does not provide that only certain lights shall be taken over. If the term cannot be defined, the better plan would be for the Government to tell us what arrangements have been made with regard to the lights to be taken over. We are told that a schedule of such lights has been prepared, and I contend that the Senate ought to have been supplied with that information. We should not abrogate our right under the Constitution, but should control all the lights on the coast.
– Including harbor lights ?
– Every light. We are asked to institute a system of dual control. That means that the Commonwealth will have to maintain vessels right round the coast for the purpose of attending to lighthouses, lightships, buoys, and beacons, and each State will have to maintain a Department for the purpose of looking after those left under its control. That will introduce an unsatisfactory state of affairs, and, of course, it will double the necessary cost. If we are to take over 120 lights, I presume that we shall have to take over the staffs of 120 lights. We shall leave some staffs with the State, and that will probably stop promotion to a number of men.
– Is that the rub?
– That is not the rub with me, but it is a point which I think should be considered. The Bill does not indicate what is intended to be done with the men. It does not indicate whether they are to be taken over and placed in the Public Service, or whether they are to be casual employes of the Commonwealth. I intend to vote against the second reading, because I do not see how it is possible to make the Bill satisfactory to the country, and I hope that honorable senators will follow my example.
– share the view which has been expressed by the last speaker. I am surprised at the Government bringing in a half measure which may not be availed of to its fullest extent by a timorous Government, such as themselves, in exercising their powers under the Constitution. This Parliament is invested with clear and distinct authority to take over lighthouses, lightships, beacons, and buoys.
– Who is to pay for them ?
– I have heardan honorable senator ask whether the Commonwealth is going to take over the lighthouses which are in the vicinity of harbors or under the control of harbor authorities. That would be a very fine line to draw. Unquestionably, we have the right to take over lightships. I have never seen a lightship except in the vicinity of a harbor or within a harbor. The same remark applies to beacons and buoys. Surely it is not the duty of the Government to submit a half measure when asking the Parliament to exercise a legislative power under the Constitution ?
– If the honorable senator could show how we could pay for them, the position might be different.
– We should be _ a faint and halting Senate if we were influenced by the paltry consideration which has been suggested by the honorable senator. We have authority to take over these things whenever they exist. It will place the Commonwealth in a most humiliating position to take over some of them and leave the others to the States.
– If we take over what the States have paid for, surely we should consider how we are going to pay for them.
– We have a Fusion Government, which is prepared to go on to the loan market t? finance any scheme which they favour. I object to the language of clause 5 of this Bill, because it gives to the Commonwealth Government an option to take over only those lighthouses, beacons, and buoys which a State Government are satisfied to concede to it. That is a wrong principle to adopt. If Ave say that the State Governments shall be consulted’, they will only allow to pass to our control those lighthouses, beacons, and buoy’s which are the most expensive ones to keep in order. The same thing has happened in the administration of the Postal Department. The law provides that some isolated post-offices may administer the Savings Banks of the States. The States avail themselves of that provision to the extent of allowing the most expensive branches of that institution to be carried on at the cost of the Commonwealth; but wherever a great saving can be effected by the use of their own officers in populous centres, they run their own Savings Banks. I believe that if clause 5 is passed in its present form, the States are likely to shoulder on to the Commonwealth, so to speak, only those lighthouses which are so situated as to involve a heavy expenditure for maintenance and repair. It is quite clear from the language of the Bill that the intention of the Commonwealth Government is not to take over all lighthouses, beacons, and buoys. Clause 8 provides that if the owner of any marine mark, or of any lamp or light, fails to do so and so, certain penalties shall fall upon him. It clearly implies that, after the measure has been passed, owners of some lights, beacons, and buoys will still exist. Clearly there will be divided control in the management of our lighthouses, beacons, and buoys. Why should we be asked to pass a half -measure when unquestionably we have authority to take over all these services and maintain them efficiently ?
– Does the honorable senator contend that we could take over river lights?
– Certainly we could take over a beacon, or a buoy, or a lightship in a river.
– A river within State territory ? .
– The Constitution places no limitation upon the legislative power of the Commonwealth in that regard. We should not allow the Bill to pass without entering a strong protest. If it were passed in a form to empower the Government to take over all lighthouses, beacons, and buoys, it would be a perfect measure. There is another peculiarity about this half-digested Bill. It provides that ships deriving a benefit from marine marks by being warned off dangerous places shall pay a certain sum to the Commonwealth. How is a clear distinction to be drawn between the amount which will be properly due to the Commonwealth and that which will be payable to private individuals or to States?
– There will be two lots of light dues.
– Yes. For instance, if along a given coast there is a Commonwealth light at one point, and a State light at another, is the owner of a ship to be called upon to say whether he obtained most benefit from the Commonwealth or the State light? It will be a mistake to have divided control as to a service which should be in charge of one authority. This measure is utterly unlike the Quarantine Act. When the Federal Parliament was passing that measure, it took power to ap- ply quarantine in its ‘ fullest sense within the limits of the Commonwealth. There was no half, measure to the effect that quarantine should be applied to persons and not to plants and animals. There was no qualification whatever. It was declared that the Quarantine Act should come into operation on a certain date, and there was no restriction as to the class of objects to. which it should apply. Why depart from that principle in this instance, by allowing the Government to take over only a portion of the lights, beacons, and buoys around our coast?
– The Bill is purely permissive. The Government need not take over any lights unless with the consent of the States.
– There is a clear dereliction of duty on the part of the Government in not properly carrying out paragraph
– Would the honorable senator advocate penalizing a State Government?
– If the Commonwealth Government requires the owner of a certain lighthouse to do a certain thing and he fails, I do not see why he should be liable to a penalty if a State Government which fails in precisely the same respect is to escape.
– The honorable senator would imprison the State Government, I suppose?
-I do not see a reason for differentiating between two classes of owners. What is proposed is entirely anomalous. If a State Government is to be allowed to refuse to take any notice of what the Federal Government requires, where does the Federal authority come in ? If the owner of a beacon or buoy happens to be a subordinate authority, it has to obey whatever requirements are made by the Federal Government. But if the owner happens to be a State Government, it is entirely exempt from penalty, and can simply say, “We have your notice, but we fail to recognise the utility of it, and therefore we entirely ignore it.” This seems to me to be a most unreasonable anomaly, and I trust that it will not be agreed to. I am sorry that the measure has been produced in so crude a state. Evidently it has not been well digested. There appears to me to be a clear intention on the part of the Government not to carry out the powers intrusted to us by the Constitution.
[5.32]. - My honorable friends who have addressed themselves to the second reading of this Bill have taken a somewhat unreasonable view of it. I feel that they have hardly given to the measure that consideration to which it is entitled. The position is very clear. We have under the Constitution the Tight to make laws in regard to -
Lighthouses, lightships, beacons, and buoys.
We have also power, according to section 69, to issue a proclamation, and by that means to take over lighthouses, lightships, beacons, and buoys.
– All lighthouses and lightships in harbors and elsewhere?
– I will deal with that point a little later on. Under section 69 we have taken over telephones and telegraphs, naval and military defence, and quarantine. The Senate has been a party to doing with respect to those services the same thing that we are proposing to do by means of this Bill.
– No; the Government did not enter into an agreement in regard to quarantine and the other services.
– My honorable friend evidently forgets for the moment. Under the Quarantine Act the terrible words that, as used in this Bill, give such a shock to my honorable friends, Senators Guthrie and Lynch, are also used. One would have thought, hearing my honorable friends, that such words had never been heard of before in Federal legislation. As a matter of fact, in half-a-dozen of our Acts similar language is employed. For instance, in the Quarantine Act it is provided that -
The Governor-General may enter into an arrangement with the Governor of any State in respect of all or any of the following matters : -
the use of any State quarantine station or other place as a quarantine station under this Act, and the control and management of any such quarantine station.
Any matters necessary or convenient to be arranged in order to enable the Commonwealth quarantine authorities and the State health or other authorities to act in aid of each other in preventing the introduction or spread of diseases affecting man, animals or plants.
That section was inserted in the Quarantine Act because it was recognised that there were difficulties in connexion with the taking over of quarantine stations. At the present moment I am making arrangements with the States for the purpose of taking over various quarantine stations. It is, therefore, clear that the words which have given such a great shock to my honorable friends opposite, with regard to lighthouses, follow a well-established precedent. Again, it was competent for us, under the terms of the Constitution, to take over matters relating to astronomical and meteorological observations. What did we do in that case? We entered into an arrangement with the States, using exactly the same words, and providing for the Governor-General entering into an arrangement with the Governor of any State for the purpose of taking over meteorological stations. Under the Census and Statistics Act we did precisely the same thing. The case of lighthouses, lightships, beacons, and buoys is exactly on all fours with those other cases.
– The Commonwealth controls all quarantine matters.
– It does not. That is where my honorable friend has completely misconceived the whole business. We have control over oversea quarantine where it relates to human beings, animals, or plants; but as regards animals and plants Inter-State quarantine is left in the hands of the States.
– The matter was not so explained when the Quarantine Bill was before Parliament.
– The matter was fought out ad nauseam. There are certain ocean lighthouses - that is to say, lighthouses used for ocean navigation. The States have, from time to time, requested us to take them over. If we issued a proclamation in the usual way, it would mean a considerably increased expense; because, as honorable senators can understand, there are certain harbor lights under the control of harbor boards and other authorities, and there are certain lights in rivers which are attended to by officers discharging other duties than merely looking after the lights in question. There is also a difficulty on account of the fact that there was no special Department in some States for controlling these matters. The language of section 69 of the Constitution, relating to the transfer of Departments by proclamation, is as follows -
On a date or dates to be proclaimed by the Governor-General after the establishment of the Commonwealth the following Departments of the Public Service in each State shall become transferred to the Commonwealth.
Amongst the Departments specified are -
Lighthouses, lightships, beacons, and buoys .
A proclamation applying to the whole of those matters might have been a source of very considerable trouble and friction, if not of litigation, (between the Commonwealth and the States. It was thought that as regards harbor, channel, and river lights, beacons and buoys-
– How are we to draw the distinction?
– That is just the point. The honorable senator is beginning to realize the difficulties.
– I see no need todraw any distinction.
– It is necessary to do so. The question arises as to which lights would come under the proclamation. The matter was discussed at three or four Conferences, and after consultation with the State authorities it was agreed that the Commonwealth should take over the coastal lights, and for the present leave the harbor and river and channel beacon lights and buoys to continue under the control of the State authorities. In these circumstances the clause to which I have referred was prepared, and a section similar to it appears in half-a-dozen of our Acts. We take power to enter into arrangements with the various State Governments as to the lights to be taken over. Dr. Wollaston was sent to the several States to discuss which lights it was desirable should be taken over, and if, in Committee, honorable senators desire to know which particular lights are to be taken over in each of the States.I shall be prepared to submit a list which has been made out. But I wish honorable senators to understand that it is not a final list. It has been prepared for a tentative purpose, and meets tentatively with the approval of the State authorities. The actual lights to be taken over will be the subject of subsequent arrangement, but the list which has been prepared will sufficiently indicate the character of the lights in each State which are to be taken over.
– Is it proposed to pay for them?
– They will, of course, be transferred properties in the usual way under the Constitution. The State Governments are willing that these lights should be transferred to the Commonwealth, and we are willing to take them over. It is thought that harbor or channel and river lights can be more conveniently managed and maintained by the State authorities under existing conditions.
– Why not take over the whole of them?
– The question is, have we the power?
– We have the power to take over all that may be included in the words of the Constitution, but when, by a mutual arrangement, we can take over certain large and important coastal lights, it is desirable that we should give effect to that mutual arrangement and avoid friction as regards other matters.
– Does the honorable senator not recognise that the State Governments will naturally desire to retain control of the least expensive lights, and to shoulder on to the Commonwealth thmore expensive lights?
– That is exactly what the State Governments will desire to do, and it is natural and proper that they should do so. I hope that the State Governments will be animated by the same desire as the Federal Government, to charge only the actual cost of upkeep, and probably something in addition to provide for a sinking fund to meet the cost of construction of lighthouses. It is estimated that the cost of maintaining some 120 lighthouses proposed to be taken over will be something like £60,000 per year. We have to ascertain the cost of maintenance of the lights we take over, and we have power to levy fees, for services rendered, on ships passing or deriving benefit from any lights or marine mark to recoup the expense to which we are put in maintaining the lights. Under the head of light dues; harbor dues, tonnage dues, and so on, the various State Governments now levy fees for the maintenance of lights and marine marks, and as we shall be relieving them of an expenditure of about £60,000 per year they will, no doubt, in their desire to encourage shipping, remit the dues they now charge to the extent of the liability of which we shall relieve them. I submit that there could not be a fairer “or more reasonable arrangement.
– This Bill will not cancel the power to issue a proclamation ?
– Not at all. We propose in this Bill to take the power to take possession of and control any lights that interfere with our lights, “and we prescribe that should any one fail to obey an order of the Commonwealth to remove any marine mark or ‘light, the Minister may take possession of the marine mark or of the lamp or light referred to in the notice. He may order it to be forfeited, or may do in regard to it, at the expense of the owner, anything which the owner was required by the notice to do. We take the power to suppress any light which would interfere with a Commonwealth light. Then we provide that -
Any expense incurred by the Minister under this section may be recovered by the Commonwealth from the owner as a debt due by the owner to the Commonwealth.
No person shall without reasonable cause (proof whereof shall lie upon him) fail to comply with a notice under this section.
Anyone who does fail to comply with such a notice is liable to a penalty of £50. We propose, further, to exempt the State Governments from that penalty. Honorable senators will admit that it would be grossly offensive to a State Government to mulct them in a penalty for an offence.
– That is only the money penalty. We can suppress one of their lights?
– Yes. We have full power to do that if a State light interferes with a Commonwealth light, or if, in our opinion, it interferes with navigation. Taking the extreme case of friction or difficulty arising with a State Government in this connexion, all we should have to do would be to issue a proclamation, and then we could take over the whole of the lights. My honorable friends will see that they have quite misconceived the design and object of the Bill, and that the Commonwealth will have the fullest protection under it.
– Why draw a distinction between a State Government and a Harbor Trust in the ownership of a marine mark ?
– We do not do so ; but in the acquisition of lighthouses, under clause 5, we look only to the State Governments, and not to Harbor Trusts, Marine Boards, or local institutions of that kind.
– The Minister proposes to penalize a Harbor Trust, and to exempt a State Government from a penalty
– The honorable senator is in error. Harbor Trusts and other local bodies of the kind are amongst the authorities of a State mentioned in clause 8. Under clause 8 it is provided that -
In this section “owner” includes a State Government, and any authority of a State having ‘the control or management of any marine mark or of any lamp or light :
Provided that nothing in this’ section shall render a State Government or any authority of a State liable to a pecuniary penalty under sub-section (5).
– Whom would we put in prison in the case of an offence by a Harbor Trust?
– Whatever body interferes with the Commonwealth order will be liable in the way I have stated.
– But the Minister proposes a special exemption if the offender is a State Government.
– Of course we do, because we refuse to insult a State Government by charging them, with an offence and mulcting them in penalties.
– Suppose a State Government defies the Commonwealth ?
– Then all we should have to do would be to issue a proclamation under the Constitution.
– The Government would nol do that, if only one State Government defied the Commonwealth?
– We might, or might not. But why should honorable senators look for trouble when there *is no prospect that any trouble will arise? The Premiers of the “various States have, at several Conferences, invited the Commonwealth to fake over the ocean lights. The invitation was repeated at the last Premiers’ Conference, held only the other day.
– I object to it, because it is saddling the Commonwealth with the most expensive portion of the system.
– That is a very proper thing for the State Governments to do.
– It is a very proper thing for us to reject.
– It is very proper far the State Governments to hand over to the Commonwealth the ocean lights, which are the .most expensive to maintain. We shall not suffer in any way, because we shall levy light dues to recoup the expense of maintaining the lights we take over. There might be some objection if this were a matter of taxation, but the dues levied will be merely charges for services rendered, and, as I have said, we have a right to expect that the State Governments will remit the dues to the extent of the liability of which we relieve them.
– We shall be asked, for instance, to take over a lightship in Torres Straits, which, at present, must be maintained from Brisbane at considerable expense, and the State Government of Queensland’ will continue to retain control of lightships, of marine lights, and marks in Moreton Bay, which can be maintained at very Tittle cost.
– It is difficult for me to say what should be done in a particular case. I can only lay down the general principle that the lights which are used by ships in ocean navigation are the lights which we propose to take over and be responsible for. We do not propose at present to interfere with harbor, river, and channel lights, beacons, or buoys.
– Would the Minister define Hobson’s Bay as a harbor?
– It would, no doubt, be considered a harbor. In Committee, I shall be only- too glad to give honorable senators illustrations by naming a number of lights that it is thought desirable we should take over.
Question resolved in the affirmative.
Bill read a second time.
In Committee :
Clauses 1 to 4 agreed to.
Clause 5 - (1.) The Commonwealth may enter into an agreement with the Governor of any State, or with any person, for the acquisition by the Commonwealth of any lighthouse or marine mark the property of that State or person. (2.) For the purposes of this Act, any lighthouse or marine mark vested in any authority of a State shall be deemed to be the property of the State.
– Perhaps this would be a convenient time for the Minister of Trade and Customs to supply the Committee with a schedule of the lights which the Commonwealth propose to take over from the States.
– I know that it is intended to take over the light at Cape Moreton. There are three other lights, within a few miles of each other, on Moreton Island, but the Government propose to have nothing whatever to do with them. Thus the question of a divided control will arise. At the present time all the men engaged on the four lighthouses in question are in the employ of the Queensland Government. But if the Commonwealth takes over only one of those lights, the position will be that the men engaged in that lighthouse will be Federal servants, whereas those employed in the other lighthouses will be State servants. I would further point out that, whilst it has been the practice hitherto for one vessel to carry stores to those lighthouses, under this Bill two will be required. I cannot understand how the measure will operate, except in the way of increasing expenditure. Apparently the only lights which the Government propose to take over are those which can be seen from the ocean. There is a light at Caloundra, another at Double Island Point, and a third at Fraser’s Island. Are these the only lights in Queensland which the Government propose to take over? I ask the Minister to supply us witha list of the lights on the Queensland coast over which the Commonwealth intends to assume control.
[6.0]. - In reply to Senator Turley, I wish to say that the States and the Commonwealth will surely be animated by a common desire to economically work the various lighthouses along our coast. Therefore, it may fairly be assumed that the fullest advantage will be taken of local opportunities for working those lights.
– But the men employed in one lighthouse will be Federal servants, whilst those engaged in other lighthouses will be State servants.
– A similar state of things exists in connexion with our quarantine arrangements. We have our own quarantine officers, and, in addition, we have State officers who are performing quarantine work. In the same way effect is given to the provisions of our Commerce Act, for the most part, by State servants, who are performing work for the Commonwealth.
– How many quarantine officers have we in Queensland?
– The fact remains that we have some ; it is immaterial how many. In connexion with quarantine matters, we propose to take over all those officers who are exclusively engaged on quarantine work. In precisely the same way we intend to take over those officers who are associated with the working of the lights over which we intend to assume control. I wish honorable senators distinctly to understand that I am not bound in any. way by the list of lights which I am about to submit as representing those which the Commonwealth proposes to take over. But in Queensland those lights are - Cape Moreton, Double Island Point, Sandy Cape, Lady Elliot Island, Bustard Head,’ Cape Capricorn, North Reef, Pine Islet, Flat Top Island, Dent Island, Cape Bowling -Green, Cape Cleveland, North Barnard Island, Low Island, Archer Point, Rocky Islet, Grassy Hill, Pipori Island, Claremont Island Lightship, Piper Island Lightship, Goode Island, Booby Island.
-Will the Minister tell us the lights in Tasmania which it is proposed to take over ?
– They are as follow: - Derwent, One Tree Point, Tasman Island, Eddystone Point, Swan Island, Goose Island, Kent Group, Low Head, Tamar Leading Lights, Mersey Bluff, Mersey Leading Lights, Ulverstone Leading Lights, Emu Bay, Wynward Leading Lights, Table Cape, Stanley, Currie Harbor, Cape Wickham, Cape Sorell, Macquarie Leading Lights, Maatsuyker, Bruni, and Butta Rock. In Western Australia we propose to take over the following lights : - Jarman Island Light, No.1 Bluff Leading Light Upper, No.2 Bluff Leading Light Lower, No. 1 Point Moore Upper Light, No. 2 Point Moore Lower Light, Rottnest Light, Bathurst Point, Rottnest Island, Woodman’s Point Leading Light, Bunbury Light, Cape Naturaliste, Cape Leeuwin, Breaksea Island, Point King. In South Australia we intend to assume control of the following lights: - Althorpe Island, Cape Banks, Cape Borda, Cape De Couodie, Cape Jaffa, Cape Jervis, Cape Northumberland, Cape Willoughby, Corny Point, Port Adelaide (Wonga Shoal), Lowly Point, Penguin Island (Rivoli Bay), South Neptune Island, Tipara, Troubridge, Middle Bank (Lightship). In New South Wales the lights which we contemplate taking over are : - Green Cape, Montagu Island, Point Perpendicular, Macquarie Head, Hornby Head, Sow and Pigs Shoal, Barrenjoey Head, Norah Head, Nobby’s, Point Stephens, Sugarloaf Point or Seal Rocks, Crowdy Head, Tacking Point,
Smoky Cape, South Solitary Island, Clarence River, Richmond River, Cape Byron, Fingal Head. In Victoria we propose to assume control of the undermentioned . lights:- Cape Nelson (Coast), Portland (Harbor), Port Fairy (Harbor), Warrnambool Harbor (Upper Light), Warrnambool Harbor (Lower Light), Cape Otway (Coast), Split Point (Coast), Port Phillip, Point Lonsdale, Port Phillip, Queenscliff (High Light), Port Phillip, Queenscliff (Low Light), Cape Schanck (Coast), Wilson’s Promontory (Coast), Cliffy Island (Coast), Cape Everard (Coast), Gabo Island (Coast). In the Northern Territory we propose to take over the Point Charles Light.
– I wish to limit the number of lighthouses and marine marks to be retained by the States to those which are situated in rivers or on river banks. In the case which has been cited by Senator Turley one set of officers will be called upon to keep a particular lighthouse in a state of efficiency whilst another set of officers will render similar service to each of three other lighthouses. The adoption of such a system must inevitably result in gross extravagance. The lights in places like Hobson’s Bay, Corio Bay, and Port Jackson should be under one control.
– It is questionable whether we have the power to take control of harbor lights.
– That matter can be decided hereafter. To effect my purpose I move -
That the word “ any,” line 4, be left out, with a view to insert in lieu thereof the word “ all,” and that the word “ lighthouse,” line 4, be left out, with a view to insert in lieu thereof the word “ lighthouses.”
The arrangement which I propose would suit both the State and Commonwealth authorities. It would certainly make for economy, and for maintaining in a state of efficiency all the marine marks around our coast. Under the Bill in its present form there will be a divided control over lights used in Moreton Bay and presumably over lights used in Hobson’s Bay. It is not a thing which should be allowed by the Bill. I have therefore submitted an amendment to exclude marine marks which are within rivers or on river banks, because they can be easily controlled and kept in order with shore appliances. Steamers will have to be employed to attend to the lighthouses, beacons, and buoys, under the Common wealth, and other vessels will have to be employed to attend to those under State control. My object in moving the amendment is to remove the possibility of dispute or friction hereafter, and to delineate as nearly as possible the spheres of action of the States and the Commonwealth with regard to marine marks.
– I hope that Senator Lynch will not press his amendment. I assume that the Bill embodies practically an arrangement between the Commonwealth and the States, and that at all times it will be possible for the former to take over, should experience demonstrate the necessity, any particular harbor lights. We need not trouble about leaving with the States authority regarding harbor lights. Nor do I see any particular reason why any honorable senator should be anxious to withdraw such authority.
– My entire object is to avoid the waste of good money.
– Surely the honorable senator can understand that experience will teach us whether it is necessary or desirable to take over harbor and river lights. I trust that he will not persist with his amendment.
Senator Sir ROBERT BEST (VictoriaMinister of Trade and Customs) [6.12]. - In my opinion, Senator Lynch is acting very unwisely. This Bill represents practically an arrangement with the States. There is a reasonable understanding with the States as to which lights should be taken over. But the honorable senator desires the Commonwealth to take over all lights except those in rivers or on river banks. In other words, he wants to lead the Commonwealth into the very trouble which we are seeking to avoid. His amendment would compel the Government to take over all harbor lights, and lights under the control of various State authorities except the lights in rivers and on river banks. We should be called upon to determine where a river commenced, what lights were on the river and which of them were associated with that river alone.
– The Commonwealth could have an arrangement with the States then, just as it has now.
– Why should the honorable senator seek to upset the present arrangement, which is eminently satisfactory ? It is quite useless for him to urge that either the States or the Commonwealth desire to increase the cost of upkeep. We have no such wish. The Bill embodies an arrangement with the States, and I appeal to honorable senators to allow it to be carried out.
– I remind Senator Lynch that this is a permissive Bill. It has been introduced in consequence of an arrangement having been made by the Commonwealth with the State Governments and Marine Boards to take over certain lights, some of which havebeen named. The honorable senator wants the Commonwealth to take over harbor lights. Take, for instance, Hobart. Under the Bill the Commonwealth proposes to take over the Derwent light, which is located at the mouth of the River Derwent, but not to take over any of the lights in the river up to Hobart, because they are not ocean lights. I take it that the proposal of the Ministry, and the desire of honorable senators generally, is to take over only ocean lights. That will provide a fair field for Federal control, and where no dispute is likely to arise between the Commonwealth and a State. I suggest to Senator Lynch that he ought not to press his amendment. I notice that clause 8 empowers the Commonwealth to take over marine marks in rivers, or, indeed, anywhere.
– Yes, if they interfere with our lights.
-No doubt that question will be considered when the clause is reached.
– The Minister has enumerated the lights which it is proposed to take over, and told us that the rest will be taken over by proclamation. I regard this Bill as only part and parcel of a navigation law. When we take control of navigation, we shall be responsible for leading lights, marks, and buoys in all navigable rivers. If the Commonwealth is to be responsible for the navigation of a ship in narrow waters, surely it should also be responsible for laying down the buoys and beacons to guide the ship, and for the control of the pilots. The advice which the Minister will get about laying down new buoys and erecting beacons and lighthouses will come from Commonwealth servants, and not from State servants. The Government did good work in trying to come to an arrangement with the States as to the lights to be taken over. But I think that they should now go one step farther, and say that, inasmuch as the Commonwealth will be responsible for navigation in every navigable water, it should also be responsible for the lights to guide navigators.
– Does the honorable senator want the Commonwealth to light up the Murrumbidgee ?
– And the Edward and the Darling?
– Why not? When the Navigation Bill is passed, the Commonwealth Government will exercise control over every man employed on a ship which is trading on any one of those rivers. We are to have control of the waterways, but not of the marks and beacons placed, or to be placed, thereon. This partial legislation ought to be held over until it can be considered more fully. Lighthouses are dealt with in the Imperial Merchant Shipping Act. The Minister has stated that, in regard to lighthouses, no doubt the Commonwealth will work in conjunction with the States. So far as quarantine is concerned, the Commonwealth has no officers, except the employes at the quarantine station in a State. The health officers are State officers working for the Commonwealth. If this Bill is left in its present form, it will be necessary for the States to maintain a fleet of ships to look after their lighthouses, and the Commonwealth will have either to enter into contracts with the States to maintain and provision Federal lighthouses, or to procure a fleet of ships, in which case Commonwealth ships and State vessels would be called upon to go over almost the same water. I object to the lighthouses being placed under divided control. It is just as necessary for the Commonwealth to take full control over lights, beacons, and buoys in rivers as it is to take control over the navigation of ships therein. If this Bill is passed as it stands, we shall have this peculiar position, that, while the Commonwealth will be responsible for determining the side of a channel on which a ship shall go, it will have no control over the buoys which indicate the position of that channel. I hope that honorable senators, will recognise the necessity of the Chairman being moved out of the Chair, so that the whole subject may be dealt with in a fresh Bill.
.- If the State officials, who are supposed to know their duty, and who act fearlessly, and zealously, have conferred with Federal officials, who act in a. similar way, surely they are in a better position to give wise advice than private senators can possibly be! Therefore, we ought to allow this proposal to pass and be content to learn from experience.
Question - That the word “ any “ proposed to be left out, be left out - put.
The Committee divided.
Majority … … 10
Sitting suspended from 6.30 to 7.45 p.m.
In Committee (Consideration resumed from 29th July, vide page 1777) :
Clause 3 -
Section 27 of the Commonwealth Conciliation and Arbitration Act 1904 is herebyrepealed and the following section is substituted in lieu thereof -
– On the hearing or determination of any industrial dispute an organization may be represented by a member or officer of any organization, and any party not being an organization may be represented by an employe of that party ; but no party shall be represented either directly or indirectly by counsel, solicitor, or agent, except with the consent of all the parties and by leave of the President.
Upon which Senator Henderson had proposed by way of amendment -
That after the word “counsel,” line 11, the word “ or “ be inserted.
– I am opposed to the amendment; but before proceeding to discuss it, I should like to know whether the author of this Bill is aware that a measure on similar lines is before another place?
– This Bill has been before the Senate for two years.
– But does the honorable senator know that there is a similar measure before the other branch of the Legislature?
– I am aware of that fact.
– The object of the amendment is to deprive the Conciliation and Arbitration Court of the assistance of the persons most competent to lay cases before it.
– That is egotism.
– It is an absolute fact, and no gibe can get rid of it. The intention is to deprive the Judge of the power of exercising his discretion if he wishes to obtain the assistance of counsel. It is frequently stated by honorable senators opposite that members of the legal profession belong to what they choose to call a “ union.” It is rather significant that the supporters of one kind of unionism are opposed to competent members of unions of another kind appearing before a Court established under Commonwealth law. Another point to be remembered is that owing to the relations between the Commonwealth and the States in industrial affairs important questions of law will necessarily arise with regard to which the Court will have jurisdiction. These questions, of a purely legal and technical nature, should be laid before the Court in the most competent manner possible, by trained counsel.
– What about lawyers who abandon their case, as was done recently in the Swinburne versus The Age suit ?
– We can deal with matters of that kind when they are properly brought under our notice. It must be within the knowledge of every member of the Committee that over and over again Judges of the highest eminence - even the Law Lords in England - call upon parties to provide counsel in order that the Court may have the benefit of hearing argument on questions of law. We are now building up a system of law affecting Constitutional relations in industrial matters between the States and the Commonwealth. In these cases, there are practically no legal precedents. We are laying down the law for the first time. Yet it is proposed to deprive the Court of the opportunity of hearing arguments from competent counsel. When the original Bill was under discussion, Parliament had cognisance of the fact that Constitutional questions would arise, and it was considered advisable to relieve litigants of the cost of employing counsel ; but it was also distinctly understood that if the President of the Conciliation and Arbitration Court, in the exercise of his discretion, required the assistance of counsel, he should not be deprived of that aid. What reason is there why the law should be amended in this respect? Why should we cast any reflection on the President of the Court in this manner? As no sufficient reason has been given for withdrawing from the President the power to exercise this discretion, and as prima facie the Court and the parties appearing before it should have the right to secure the assistance of counsel, I shall resist the amendment. We know enough of the history of the Court to be able to say that the President is not a man who would saddle litigants with unnecessary expense. No doubt nine-tenths of the questions coming before the Court will be questions of fact on which the parties will be able to assist the Court to a sound decision. But on questions in connexion with which the President as interpreter of the Constitution might require the assistance of counsel, we have no right to tie his hands.
Question - That the word proposed to be inserted be inserted (Senator Henderson’s amendment) - put.
The Committee divided.
Majority … … 1
Question so resolved in the negative.
Question - That the clause stand part of the Bill- put.
The Committee divided.
Majority … … 1
Question so resolved in the negative.
Title agreed to.
Bill reported with amendments.
In Committee (Consideration resumed from 26th November, 1908, vide page 2298, Vol. xlviii.) :
Clause 2 -
The words “ Joint Stock Company “ and “ Company “ in this Act mean any company now or hereafter formed or incorporated as a company in pursuance of any Act of Parliament of the Commonwealth or of any State or being otherwise duly constituted by the law of the Commonwealth or of any State and having a permanent paid-up or nominal capital of fixed amount -
divided into shares also of fixed amount;
held and transferable as stock; or
divided and held partly in one way and partly in the other, and formed on the principle of having for its members the holders of shares in such capital or the holders of such stock, and no other persons.
– I move -
That after the word “ incorporated,” line 3, the words “ or registered “ be inserted.
It is not intended that the operation of the Bill shall be confined to any particular class of companies. The object is to enable any company to make provision for a reserve fund, under the conditions set out in the measure.
Ido not see why we should limit the operation of the Bill to companies which have been formed or incorporated. A registered company has just as much claim to protection as have other companies.
– Before this proposal is put, I think it would be well if we had an explanation from Senator Walker in reply to some very cogent criticism of this clause which was offered by Senator Best when the Bill was before the Senate last session. Upon that occasion he pointed out that the scope of the measure exceeded the powers vested in this Parliament by the Constitution. I do not know what view he takes of the matter now, because events which have since transpired may have modified his opinion. But not only does Senator Walker not propose to limit the provisions of the Bill - he actually proposes to enlarge them.
– The honorable senator is not entitled to debate the principle which is contained in the Bill. The amendment under consideration is a very simple one.
– I am not discussing the principle of the Bill. I am merely pointing out that instead of its provisions being limited to the area which they covered last year, their scope has actually been extended.
– That is not relevant to the question which is before the Chair.
– I contend that it is absolutely relevant.
– How does the honorable senator make it relevant?
– It has been contended that the Bill in the form in which it was originally introduced exceeded the powers vested in this Parliament by the Constitution. But instead of limiting its provisions so as to bring it within those powers, Senator Walker actually proposes to extend them.
– Is the Chairman of Committees to interpret the Constitution ?
– I am not asking him to act as such. I am simply appealing to the Committee not to do anything which is unconstitutional. On page 2025 of Vol. XLVII. of Hansard, Senator Best is thus reported -
In the first place, its constitutionality is not quite clear. Section 51 of the Constitution Act provides -
The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to - (xx.) Foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth.
According to clause 2 of the Bill - the words “ joint stock company “ and “company” in this Act mean any company now or hereafter formed or incorporated as a company in pursuance of any Act of Parliament of the Commonwealth or of any State, or being otherwise duly constituted by the law of the Commonwealth or of any State, and having a permanent paid-up or nominal capital of fixed amount.
That clause exceeds the scope of the Legislative power which I have quoted, which confines Commonwealth operations simply to the companies therein specified.
– Has not paragraph 13 of section 51 a bearing on this matter?
– No; that deals with another matter. The scope of the Bill, I repeat, is not confined to foreign corporations and trading or financial corporations formed within the limits of the Commonwealth, but, of course its operations in that regard could be limited. In the second place, there is no demand for a measure of this kind at the present time. It contains a principle which is not only new and experimental, but also most debatable. The principle has not yet been incorporated in any companies law in Australia, and is unknown to British companies legislation; and, as I have said, it is largely experimental.
That quotation goes to prove that Senator Best who, as a representative of the Government, holds a leading position in this Chamber, held a very decided opinion last year regarding the constitutionality of this Bill, and of the clause which we are now discussing. But instead of Senator Walker endeavouring to bring its provisions within the limits of the Constitution, he proposes to make its constitutionality still more questionable. That being so, before we proceed to debate the merits or demerits of the clause itself, we are entitled to some explanation from the honorable senator - who, I presume, has fortified himself with authorities on this question - as to the constitutionality of the Bill.
– To me it is somewhat surprising to learn that Senator Givens is desirous of limiting the powers of this Parliament. Usually he is anxious to enlarge them as much as he possibly can. I may tell him, however, that neither the present Prime Minister nor Mr. G. H. Reid can see anything unconstitutional in this Bill.
– Has the honorable senator obtained their opinions upon it?
– I did not pay them for their opinions. But they have both told me that they can see nothing unconstitutional in the measure.
– That is merely an ex parte statement.
– So is the statement of the’ honorable senator himself. I intend to press my proposal to a division.
.- There are several very important matters connected with this Bill which ought to be brought prominently under the notice of honorable senators. In the form in which it was originally introduced last year-
– I would point out to the honorable senator that by carrying the motion for the second reading of the Bill, the Senate has already affirmed its main principle. Clause 2 relates to interpretation, and the honorable senator cannot, therefore, discuss the whole subject-matter of the Bill.
– But the amendment under consideration is one which extends very considerably the principle of the Bill.
– Upon that ground alone ‘I shall allow the honorable senator to proceed.
- Senator Walker proposes to extend the principle of this Bill to any company, thus making it, from my stand-point, much more objectionable than it was in its original form. I think that the Committee should pause before vesting in a company registered in any portion of the Commonwealth the power which it is proposed to vest in them. In speaking upon this matter last year, Senator Best pointed out that the chief danger to be apprehended from the Bill was that under the legal definition of “ net profits “ any company might use the funds of its clients to relieve itself of its liabilities.
– The honorable senator is now dealing with a principle which the Senate has affirmed.
– I am entitled to discuss the whole effect of the amendment, which seeks to apply the Bill to a class of companies which was not included in the original measure.
– The honorable senator is at liberty to do that, but he must not discuss the principle of the Bill.
– I do not intend to do so. But I propose to continue my remarks until I am ruled out of order. If Senator Walker’s amendment be carried, the pernicious principle of the Bill will operate over a much wider range-
– The alleged pernicious effect of the Bill.
– I intend to quote authorities with a view to showing that the principle embodied in the Bill is of a pernicious character. In this connexion I propose to cite the remarks of Senator Best.
– But he does not pretend that he is infallible.
– I am content to allow the Committee to judge whether or not the provision is a wise one.
– The Minister of Trade and Customs must vote against it.
– I do not care what he does. I am only concerned with discharging my duty as faithfully as I can. I repeat that Senator Best pointed out that’ under the legal definition of “ net profits” a company would be able to realize its assets, to designate them “net profits,” and then to apply them to relieving itself of its liabilities.
– The honorable senator must not discuss the principle of the measure. I ask him to read its preamble, which affirms the principle which has been accepted by the Senate.
– I propose to debate the amendment with a view to showing the evil which may result from extending the provisions of the Bill, and I intend to continue in that vein until I am ruled out of order. If Senator Best’s definition of “ net profits” be correct, what will be the effect of agreeing to Senator Walker’s amendment? We shall enable any number of ephemeral adventurers who may choose to come together, either in an insurance company, a banking company, or even a trust company, to start operations with a vast uncalled capital, and perhaps a paid-up capital amounting to little or nothing, and we shall allow them to relieve themselves of their liabilities out of their clients’ moneys. Is not that a most dangerous thing to allow ? Possibly there might not be any danger if this legislation were applied to a very stable financial corporation like the Bank of New South Wales, the Bank of Australasia, or another bank of similar standing. But by extending the operation of the Bill to all companies, as Senator Walker now suggests, we should allow its most dangerous feature to be made use of by the most suspected persons in the Commonwealth. In Australia we have had instances in which responsible companies, such as insurance companies, have got together with no capital, except what was sufficient to furnish a two-roomed office, and provide a bottle of ink and blotting pad, and a chair or two.
– Rather than have all this delay I am willing to leave out the words “or registered.” I thought that it was an advantage to insert the words, but if my honorable friend does not think so, I am quite ready to leave them out.
Amendment, by leave, withdrawn.
– This clause sets out that the Bill is to cover, not merely banks, but all companies. I ask Senator Walker to consider whether that is not outside the constitutional power of the Commonwealth, as laid down by the High Court in the recent case of Huddart Parker and Co. Generally speaking, that decision was to the effect that the Commonwealth had no jurisdiction over companies or corporations doing purely domestic business. When the Bill was last before the Senate I assumed that it dealt solely with banks, and to that extent might have come within paragraph xiii. of section 51 of the Constitution, which deals with banking. But from this interpretation clause it is quite clear that all companies are intended to be included. I do not propose to submit an amendment, but merely invite my honorable friend to consider the point I have raised. I do not suggest that we should postpone the consideration of the Bill, but that we should proceed until we reach a stage when, if necessary, the Bill could be recommitted for the purpose of recasting this provision.
– I think that the suggestion of Senator Millen is a very good one, and, therefore, I move -
That the clause be postponed.
– Does the honorable senator take Senator Millen ‘s advice in preference to that of Mr. Reid and Mr. Deakin?
– I obtained the advice of those gentlemen privately. I am not responsible if they occasionally, like other persons, are fallible. There is only one infallible man in the Chamber, and we all know who he is.
.- I think it well that Senator Walker should make further inquiry as to the constitutionality of any legislation we might pass in regard to any company formed in a State. If the operation of the Bill is confined strictly to banking companies, it is perhaps more than likely that we have jurisdiction over them in that capacity. But if it is to operate on any company in a State, for whatever purpose it may have been formed, I think it is highly questionable whether it would be constitutional.
– I am glad to get unexpected support for my view on this matter. I am very pleased that Senator Walker has agreed to postpone the consideration of the clause so that it may be further examined. I hope that he will come to the conclusion if he can that the Bill, if it is to become law, should be confined strictly to carrying out the objects which he has in view, and should not go beyond those objects. I believe that byandby a Commonwealth Government will have to introduce comprehensive banking legislation. I think that a measure on such an important subject should not be introduced by a private member of Parliament.
Motion agreed to.
Clause 3 (Creation of reserve fund) -
– It will save time if the Committee will consent to the deletion of this clause, and the insertion of the new clause which has been circulated, and which, I think, is sufficiently comprehensive to explain itself. I trust that honorable senators will see their way to accept my suggestion instead of amending the clause in the Bill line by line.
Amendment (by Senator Walker) proposed -
That the following new clause be inserted : -
From and after the passing of this Act it shall be lawful for any Joint Stock Company to form a reserve fund for the purpose of protecting its shareholders against their liabilities in respect of the uncalled capital(if any) and the reserve liabilities (if any) on the shares held by them in such company and to pay and to carry to the credit of such reserve fund according to the determination of the Company in General meeting sums out of the net profits of the Company made after the passing of this Act in any half-year or other period, and premiums from the sale after the passing of this Act of new shares and proceeds of sale of shares forfeited after the passing of this Act and sums (if any) representing the recovery after the passing of this Act of debts previously written off as bad. No transfer shall be made to the said reserve fund from any other reserve fund.
.- This provision contains the principle on which the Bill is based, and which to many of us is exceedingly objectionable.
It should be postponed for exactly the same reason as clause 2 was postponed, because, if it is passed we shall have the term, “Joint Stock Company” denned exactly as it was in the definition clause. Perhaps that is due to want of careful consideration on the part of Senator Walker. I think that the proper course would be for the honorable senator to re-draft the provision in view of the suggestions which were made to him regarding the previous clause.
– Cannot the honorable senator move an ‘amendment - for instance, the insertion of the words, “ or financial company “ after the word “ company “ ?
– I have not an amendment prepared. As I am opposed to the Bill, lock, stock, and barrel, it would be rather a work of supererogation’ on my part to try to improve it. That is a task which could be undertaken more gracefully by some honorable senator who is well disposed to the Bill. I suggest to Senator Walker that he should make any amendment which he thinks is required.
Amendment (by Senator Gray) proposed -
That the proposed new clause be amended by inserting after the word “ any,” line 2, the word “ Banking.”
– I accept that amendment.
– I suggest to Senator Walker that unless he has satisfied himself as to what the correct definition of “Joint Stock Company “ ought to be it would be better to allow the proposed new clause to stand in that regard than to alter it as now proposed. If the word “Banking” is inserted and it is found that that term is not sufficient - and I do not think that it is a clear definition - it will be necessary to recommit the Bill. I suggest to my honorable friend that he should allow the clause to pass as it is, and then after he has taken the advice of counsel he will know whether it is necessary to alter the term “ Joint. Stock Company.”
Amendment of the amendment, by leave, withdrawn.
– Our proceedings show how crudely this legislation has been considered. I should have imagined that Senator Walker would have secured the best advice available in the Commonwealth before he drafted his Bill. :
– The High Court has given a decision since the Bill was drafted.
– That is all the more reason why the Bill should have been reintroduced, as I contended some time ago.
– Would the honorable senator have supported the Bill then?
– I cannot say. I do not know what alterations of the old Bill were rendered necessary by the decision of the High Court. To put on a plaster here and a patch there is no way in which to approach the consideration of a serious subject of this kind. The proposed new clause is before the Committee in its entirety, and I intend to point out some of the dangers attached to this class of legislation. We have “now reached the crux- of the measure. What is proposed to be done? -In the case of incorporated banks it is proposed to vary the contract under which their charter was issued to them. That is a very serious thing for a private senator to undertake to do.
– It is not true with regard to some of the banks, to my. own knowledge.
– Is it true with regard to any of them?
– I am not aware of any.
– Their charters were given to them to enable them to carry on banking business in Australia under certain conditions.
– Some, not all.
– At all events, some of the banks to which this Bill would apply received their charters in order that they might carry on banking business under certain conditions. This clause proposes to relieve those banks of some of those conditions.
– By paying the money up at once.
– Would not that be a variation of the contract?
– I do not think so. In place of paying up a sum in the future, they would pay up at once.
– At all events, it is clear that it is proposed to relieve the chartered banks of certain conditions of their charters.
– A State law might vary the conditions, and a Commonwealth law can do the same.
– We may vary the conditions, but I am pointing out that by so doing we vary, the contract.
– If a man owes £100, what objection is there to his paying it at once instead of in fifty years’ time?
– I wish to show what the contract was which it is proposed to vary, and I want to show further the danger that will arise from the variation. Senator Walker’s object apparently is to safeguard the interests of banking directors and shareholders.
– And of the public.
– My anxiety is to safeguard the interests of the public.
– I am doing so in a better manner.
– Although Senator Walker has had plenty of opportunity for doing so, he has not pointed out a single merit in this clause, if it has any merit. He just rose and threw the clause on the table, asking us to accept it, without any explanation whatever.
– It is selfexplanatory.
– I propose to make up for that slight omission on his part. I shall show, from my point of view, what the clause really means, .and the honorable senator is perfectly welcome to show what it means from his point of view. The variation of contract which he asks the Committee to accept, is, in my estimation, an exceedingly dangerous one. Certain banking corporations in Australia received their charters, not from Australian Legislatures, but from the British Government. One of the conditions of those charters was that a certain proportion of capital « should not be called up, but should remain for ever uncalled, unless to save the bank from liquidation. Such were not the precise terms of the contract, but in plain language that is what was meant. What was the object of providing that a certain proportion of the capital should be uncalled? It simply meant that a specified amount of uncalled capital was to be held in a perpetual reserve, for which the shareholders were to be liable, as a security to the depositors, clients, and customers of the bank generally. I hold that that provision was an exceedingly wise one. It must be recollected that this was not put into the bank charters by the vile Labour party. It was inserted by some of the most conservative statesmen in the Mother Country, and by some of the most stable commercial people in the world. It will, therefore, be well for this Parliament to pause before it allows such a safeguard to be removed. As the banks are at present situated in Australia, their creditors have the security of the reserve funds, and also of the uncalled liability of the shareholders, in case of any. default. But if Senator Walker’s Bill becomes law, the creditors will have only the security of the bank’s reserve fund. They will have no recourse whatever to the shareholders.
– Where will the money be? The shareholders will have paid it up.
– The honorable senator never told us that.
– Senator Givens knew of that intention.
– The honorable senator ought to have explained what his clause really meant.
– I explained it in my second reading speech.
– The honorable senator is well aware the motion for the second reading of this Bill was allowed to go by default, as a matter of courtesy to him. No attention was paid to the matter at all, because every one thought that the Bill would go no further. There are senators in this chamber now who “voted for the second reading, but who, if they had considered that there was serious risk of the passage of the Bill, would have voted against it. I say so deliberately, with those senators looking me in the face.
– The second reading was carried by 17 to 9 votes.
– I am, however, getting away from the subject.
– Hear, hear !
– If I am dragged aside by interjections, the fault is not mine. I have no particular anxiety to kill the Bill, but I do desire, as a matter of duty, to give it the most serious consideration of which I am capable. I shall explain what I consider to be the special danger of the measure. Senator Walker says that, although we take away a part of the security of the customers of the banks, namely, the security of the uncalled capital of the shareholders, yet that security will still be there, because the money would have been .paid into a reserve fund.
– Hear, bear!
– But where would that money come from?
– From profits.
– It would comefrom net profits. Now this is exactly the point where the legal definition of net profits has to be considered. What is that legal definition? I confess to a certain amount of diffidence in expressing my view on this subject in a Chamber where we have such an array of legal talent. The opinion that I offer is, of course, subject to correction, because legal authorities often differ amongst themselves.
– Even Judges differ.
– That consideration removes some of my diffidence in offering an opinion.
– If lawyers were always unanimous, there would be no litigation.
– The legal definition of net profit is, the amount of money which is received and held by a corporation or an individual in any given period over and above the amount which that corporation or individual has paid away. It does not matter from what source the money is derived. How does that definition apply to this particular proposal? It means that the banking companies could sell their properties, and apply the proceeds to the purposes which Senator Walker has set forth.
– And call that net profit ?
– Yes. They could convert their reserve funds and call the proceeds net profit.
– Under this Bill they could not do so.
– Under the Bill they could not apply their reserves to such a purpose; but there is nothing to prevent them from converting their reserves and calling the result net profit. Then they could apply that net profit to reducing the liability of their shareholders. I have not the slightest doubt that Senator Walker is perfectly honest in his intention, but that is what his Bill means.
– As a banking authority, Senator Walker must know something about banking law.
- Senator Walker is very much concerned with the interests of the shareholders in the banks. My sole concern is with the interests of the customers and creditors of the banks. I consider that it would be a most dangerous thing if we removed one important safeguard which tends to insure the safety of the banks. I have a most vivid recollection of the suffering brought upon innocent people by the failure of banks in 1893 . Senator Walker’s provision that existing reserves are not to be touched has nothing to do with the issue. They can be used for the purpose of relieving the shareholders of liability nevertheless. I have before me the opinion expressed on this subject on a former occasion by a legal member of the Senate, namely, Senator Best, who is probably as capable a lawyer as we have here. I am fortified by his opinion that the legal definition of “ net profit “ is what I have stated. If that be so, the banks could sell their properties, convert all their reserves, and apply the proceeds for the particular purpose that Senator Walker has in view. They could relieve themselves of the liability imposed upon them by the charters under which they are carrying on their business. I say again that this proposal is unthinkably dangerous. It is the most audacious proposal that this Parliament has ever been asked to accept. Apart from the mere question of monetary liability, the portion of the uncalled capital which cannot be called up, as provided in the charters of the banks, gives an immense advantage in insuring their stability.
– Has not the uncalled capital sometimes been a delusion ?
– That is so, I am free to admit. Sometimes when the uncalled capital was required to be used it was not there. But let me point out where the safeguard comes in. If the honorable senator will go into the Library and consult some of the leading banking authorities, he will find that this view is borne out by them. The very fact that there is a large uncalled capital staring bank directors and shareholders in the face - a liability resting upon them in case of any default - always tends to make those shareholders and directors exceedingly cautious. Knowing the obligation resting upon them in case the bank makes default, they are exceedingly careful to conduct their business on safe lines. But if that safeguard be removed, we render it safe for these people, in their greed for enormous profits, to undertake the most risky business; they will be able to “go smash “ without any ill effects to themselves.
– Except losing their property.
– But if they got 20 per cent. for three or four years, they would not mind that.
– The mere fact of getting 20 per cent. for two or three years would not compensate shareholders for the loss of their property .
– If they got 20 per cent.for one year, and were enabled, through a rise in the value of their shares, to sell them for ten times their face value, it might suit them very well. What would be the effect of such profits? It would be that the shares would double and treble in value on the stock exchange, and shareholders who had pocketed 20 or 25 per cent. for two or three years and then sold their stock at double or treble its original price would not care what became of the bank afterwards.
– That is selfishness personified.
– And that is the motive behind all profit-making. A corporation has no soul. It considers nothing but profit. It is a remarkable fact that individuals of the highest integrity will in their corporate capacity do things characterized by the most despicable meanness, which they would not dream for a moment of doing in their private capacity. That fact has been commented upon by many of the bestknown writers. Under existing conditions shareholders in banks having a large uncalled liability are apt to very carefully scrutinize their accounts, to insist that they must be run on safe lines, and that as few risks as possible shall be taken. If this safeguard is removed in the way Senator Walker proposes, they will be encouraged to say, “ Let us plunge ; let us take a few risks. We can collar 25 per cent. dividends, and we shall have no ultimate liability.” There is a danger that such a policy would be followed if the safeguards were removed. Such a policy would almost inevitably end in disaster, and when the bank smashed incalculable suffering and hardship would be entailed, perhaps, upon widows and orphans amongst the shareholders. Why should such a state of affairs be brought about merely because Senator Walker wishes to safeguard the interests of the fat shareholders of banks?
– I think it is scarcely fair to say that I wish to safeguard wealthy shareholders of banks at the expense of other persons. I have no such wish at all.
– I can hardly say that Senator Givens is out of order.
– As I pointed out earlier in my remarks, I acquit Senator Walker of any personal desire to do any such thing. But that is what might follow if hisBill were passed. I am sure that if the honorable senator were seized with the enormity of the proposition he submits, he would be one of the first to repudiate it. We know that the mother of. even the most deformed infant is apt to consider her child the most sublime creature on the face of the earth, and Senator Walker, as the mother of this little legislative bantling, no doubt, regards it as the most perfect piece of legislation that could be proposed. As the law stands at present there is nothing whatever to prevent the shareholders of a financial institution building up the highest possible reserve in order to safeguard themselves and their customers ; but they cannot by doing so relieve themselves from ultimate liability in the event of disaster. They can build up reserve funds, invest them in Government securities, and adopt every other kind of safeguard, but according to Senator Walker they wish, in doing so, to be allowed to relieve themselves of the liability imposed upon them by the charters under which they have made their fortunes. I am opposed to that. I say that the limitations included in their charters were so included for very wise purposes, and we should not, without very serious consideration, attempt to tamper with them. Leaving the chartered companies for a moment-
-Who are not included in the Bill.
– The honorable senator says that these chartered companies are not included in the Bill. The interpretation clause has been postponed, and I do not know in what form the honorable senator will bring it up by-and-by. At present it is proposed that the Bill shall apply to - any company now or hereafter formed or incorporated as a company in pursuance of any Act of Parliament of the Commonwealth or of any State, or being otherwise duly constituted.
– By the law of the Commonwealth or of any State. It does not refer to British companies.
– These companies are carrying on business in Australia, and they cannot do so unless under a law of the State or of the Commonwealth. They, therefore, come under this Bill. Does the honorable senator mean to say that the Bank of New South Wales would not come under this Bill?
– It is an Australian bank, with an Australian deed of settlement.
– Which was given to it before we had a responsible Parliament in Australia.
– It dates back to 1 85 1, when we had a Legislative Council.
– I know that the honorable senator approves generally of what Legislative Councils have done in the past as the great champions of vested interests; but he now proposes to vary the contract entered into by the Bank of New South Wales at the time to which he refers. Leaving that part of the subject for the present, I wish to remind the Committee of the very serious danger that might arise under this measure in connexion with the formation of new companies with a very large uncalled capital. There are several banks in Australia at the present time that have not more than one-tenth of their capital called up. The remaining ninetenths is uncalled capital; and, if honorable senators will remember what I have said as to the definition of “ net profits,” they will see that these companies, if they were vicious enough to do so - and that there are vicious people in the community is proved by the necessity under which we are to continually legislate against them - might apply their clients’ money to relieving themselves of every farthing of liability. The danger would probably be greater in the case of new companies which might hereafter be formed, and the formation of which would be encouraged by the passing of this Bill. Companies might be formed practically without any capital at all. They might make a great splash, and claim that their capitalmounted to £1, 500,000, of which not more than £100,000 might be called up. If people were fools enough todo business with them, and some persons might be induced to do so to give them a start, these companies, under this Bill, would be in a position to use their clients’ money to pay up the whole of their £1,500,000 of capital, and they would be absolutely relieved of all liability. I hope that other members of the Committee will express an opinion on this question. I believe that Senator Walker has brought this measure forward without sufficient consideration from the point of view of the public. He has been so long and honorably associated with banks and banking people that he is desirous of placing them in a good position. That is perhaps a very natural desire on the part of the honorable senator, and I do not cavil at it. But I say that it is the business of the Senate to safeguard the interests of the whole of the people, and not merely those of a particular class who may be connected with banks or financial institutions as shareholders or directors. There are other matters raised by a later part of the clause with which I shall noi now attempt to deal. I ask Senator Walker to tell the Committee what answers he can give to the objections I have urged to the clause.
– There is some force in the contention of Senator Givens with respect to the restrictive effect of the clause. But, as against whatthehonorable senator has said, I pointoutthat the reserve liability, as he must know, is sometimes not equal in value to its nominalamount. If the provisions of this Bill were complied with in all cases, and, for instance, a reserve liability of£100,000 was represented by a reserve fund of that amount in the hands of trustees, the money could be secured at once in the event of a crisis, and the widows and orphans, to whom the honorable senator referred, would be saved all the trouble he has mentioned.
– What is the reply to my statement about net profits, and allowing capital to be taken out of reserves?
– I shall give the honorable senator a definition of net profits from Lindley on Partnership. At page 37 I find the following : -
Profits (or net profits) are the excess of returns over advances; the excess of what is obtained over the cost of obtaining it.Losses, on the other hand, are the excess of advances over returns ; the excess of the cost of obtaining over what is obtained. Profits and net profits are for all legal purposes synonymous expressions; but the returns themselves are often called gross profits; hence it becomes necessary to call profits net profits in order to avoid confusion. In the present treatise, however, the word profits will be used in the sense of net profits ; and the expression gross profits will be avoided as much as possible.
– That does not affect my definition of net profits.
– I have admitted that it is absolutely correct. Senator Givens has forgotten that in the first clause of the Bill it is proposed that -
This Act may be cited as the Commonwealth Companies Reserve Liabilities Act 1908.
The chartered companies to which he has referred are not Commonwealth companies, but British companies, and if they got into difficulty it is in Great Britain that the liquidation would take place. The honorable senator’s remarks on that subject were, therefore, not apposite. It seems to me that if honorable senators would take the trouble to read the clause they would see that it means exactly what it says. I hope I have made it clear to those who wish to understand the question, that the object is to enable the shareholders of a bank, or other financial institution, that is paying considerable profits, to decide that, rather than take the whole of the profits, they will put a portion of them to the credit of the reserve fund in the hands of trustees te meet certain liabilities.
– There is nothing to prevent them doing that under the existing law.
– The honorable senator will excuse me, there is, and that is the trouble. I cannot understand how any one can believe that an undertaking to pay a certain sum of money at an indefinite time is as good security to the creditor of a bank or other financial institution as would be money actually in the hands of trustees. I shall go through the clause, and make comments upon it as I go on. It provides that -
From and after the passing of this section it shall be lawful for any joint stock company to form a reserve fund for the purpose of protecting its shareholders against their liabilities in respect of the uncalled capital (if any) and the reserve liabilities (if any) on the shares held by them in such company and to pay and to carry to the credit of such reserve fund according to the determination of the company in general meeting-
So .that the directors cannot do it ‘ without the consent of the shareholders - sums out of the net profits of the company. Let us suppose that a company pays 10 per cent., while the profits would be sufficient to pay 12 per cent.
– A company might pay 10 per cent., even though its transactions showed a loss.
– If it did, its directors could not be honest. The accounts of these companies are audited and looked into carefully.
– What was the value of the audit in the case of some of the banks that smashed in 1893?
– The honorable senator must not ask me to be responsible for what some persons did in days gone by. I can speak with forty years’ experience of one institution, that has always taken care to pay dividends only out of what it earned, and to put any surplus to a reserve fund, or to the writing off of bad debts. I do not see why, because one or two unfortunate banks came to grief in days gone by, we should treat all these institutions as in the hands of dishonest persons. Many of the banks that came to grief in 1893 would have been prevented from smashing if they had been able to comply with such a provision as is contained in this BiU. So far from it being merely for the benefit of the shareholders it is largely for the benefit of the creditors. As I have already said, a company which paid a. 10 per cent, dividend and put aside 2 per cent, of its profits would, in thirty-one and a-half years, have ample funds with which to meet the whole of its reserve liability. Now, in the history of a bank thirty-one and a-haH years is a very short period. The clause states -
From and after the passing of this Act it shall be lawful for any joint stock company to form a reserve fund for the purpose of protecting its shareholders against their liabilities in respect of the uncalled capital (if any) and the reserve liabilities (if any) on the shares held by them in such company and to pay and to carry to the credit of such reserve fund such a sum out of the net profits of the company in any half-year or other period as shall be determined by the company in general meeting, and also the premiums from the sale of new shares-
When a bank requires new capital it is not an uncommon thing for it to issue new shares at a premium, and the amount thus realized is usually placed to the credit of the reserve fund. This provision will permit of that being done. The clause continues^ - and the proceeds of sale of forfeited shares or any portion or portions thereof respectively and such sums (if any) as represent the recovery of debts previously written off as bad.
I think that in itself the clause is sufficiently explanatory. I am glad that Senator Givens has spoken in a perfectly straightforward fashion, and without heat. I congratulate him upon his improvement, and I trust that he will withdraw his objection to the clause. If he will do so I promise to obtain the best legal advice upon it, and after a little more discussion to move that progress be reported, and that the further consideration of the Bill be deferred for a month. I admit that the measure is a little bantling, but it is a remarkable circumstance that so far only one man whomI have consulted has found fault with it, and that upon the ground that the institution with which he is associated does not require it. Yet that very institution suspended payment in 1893. Three advantages will flow from the passing of the measure. In the first place, it would make provision for meeting the reserve liabilities of companies, which would be an advantage to the shareholders. In the second place, it would confer an advantage upon the creditors of companies, and, lastly, it would compel trustees to invest their funds in Government stock, so that in the course of time they would hold in reserve a large amount of Government stock in lieu of having to go abroad to seek investments.
– So far I have not spoken upon this Bill during the current session, although I voted for its second reading last year. If, however, a vote were taken upon it now, I think that Senator Walker would find that a majority in this chamber are opposed to it. The provision which has been eliminated from the measure and that which it is now proposed to insert in it constitute its crux. I voted for its second reading, not because I entirely believed in it, but because I was prepared to hear debate upon its main principle. But now that we have reached the stage when we have to decide whether we will accept its provisions in detail, I feel bound to say that I cannot vote for them. I think that the Committee will be well advised if it decides to take a test vote upon this clauseTo prolong the discussion would not he very satisfactory to Senator Walker, when he knows that some of those who have been according the Bill a tentative support are not in favour of it. Of course, I recognise that it possesses some good features. To my mind its one fatal disadvantage is that it would do away with one of the safeguards of public credit in connexion with any limited liability company. In such companies the shareholders act the part of watch-dogs by keeping a keen eye upon the directors. The compelling motive which they have in this connexion is a desire, not merely to safeguard their profits, but also to safeguard themselves against being called upon to foot the uncalled liability which, under the Companies Act, they may be required to face. It is that uncalled liability which acts as a spur to the shareholders, and induces them to insure that the policy of the directors shall be a safe one. My great objection to the Bill is that it will take away that spur.
– That is the strongest point which can be urged against it.
– I am not satisfied that it would be a wise thing to sanction the establishment of a reserve fund, such as is contemplated by this measure, in lieu of the system which at present obtains. I shall resist the insertion of the clause asan indication that I do not intend to support the Bill any further. Of course,, if a majority are of a similar opinion it: will be an intimation to Senator Walker that he should withdraw the measure.
Senator Sir ALBERT GOULD (New South Wales) [9.22]. - The suggestion made by Senator Pearce regarding the wisdom of taking a test vote upon this, clause is an admirable one, because the object of the Committee must either be to pass a Bill which will be of »benefit to the community, or to reject a measure; which ought not to appear upon our statute-book. I think it is much more desirable to adopt the course which has been suggested than to fight the Bill time after time, thus delaying the pro.gress of business after honorable senators have made up their minds regarding it. But before the question is put, I should like to refer to one or two matters which have cropped up during this debate. In reply to Senator Givens, I would point out that there are some banks conducting business in Australia to-day which received their charters from the Home authorities. In. my judgment, any legislation which we mayenact will extend to them only so far as local matters are concerned, and so far as strictly local business is affected. Where, under a charter which has been granted to a bank carrying on business here by Great Britain, a man is liable to pay a certain sum of money, no legislation that we may enact will affect his responsibility as a shareholder to make up any reserve liability. If such a bank had to go into liquidation, the whole .of its shareholders would be liable to make up the reserve liability upon their shares, irrespective of any fund which might have been created in the Commonwealth. That fund, having been created, could be made applicable to the general payment of the bank’s debts. Such an institution would occupy no stronger position than it would occupy if the reserve fund had been built up in the ordinary way for the purpose of strengthening its hand in the conduct of its business and in the making of its profits. But take the case of - another bank which has derived its statutory power from one of the States of the Commonwealth. It would be able to take advantage of the protection which would be afforded by this Bill. If a sufficient sum of money were set apart to form a reserve fund to meet its reserve liability, its shareholders would be protected, and that fund would be available for the benefit of creditors generally- Senator Pearce has affirmed that the fact that a reserve liability attaches to the shareholders of certain companies makes them watch very keenly the manner in which the affairs of those companies are conducted. But, so far as I can judge - and I have had some experience in these matters- - such a consideration does not influence the average shareholder in any degree whatever. He is usually very keen to obtain affair amount of profit on his investment, but I do not think that he looks to the amount of the reserve liability which he is accepting when he purchases his shares.
– A large number of shareholders would not understand a balancesheet if they saw it.
– That is quite true. Again, there is a large number of companies in which the shareholders are not responsible for anything more than the unpaid amount of their calls. When once those calls have been paid up, they have no liability whatever. In such companies the shareholders certainly do not watch the directors keenly, because they fear their reserve liability. If they look keenly after the directors, that is because they want to get dividends. We have recognised this principle in our legislation regarding ordinary, companies. Again, with regard to certain mining companies established under the No Liability Acts, there is no liability upon a share. A man pays 5s. or 10s. on account of a £1 share, and when further calls are made he can, if he sees fit, snap his fingers at the directors, and decline to pay any more money. He is not subject to any liability under the .law.
– Everybody doing business with a no-liability company knows that fact, and takes that risk.
– Exactly, and any one doing business with a bank after this Bill is passed will be able to ascertain whether a fund is being built up to meet the reserve liability in case of liquidation. It comes to about the same thing. Suppose “that there is a liability of £100,000 distributed over 100 individuals, and that the company goes into liquidation. Out of that number only sixty or eighty may be capable of paying their reserve liability, and the balance will go into the Bankruptcy Court because they cannot manage to raise the money required of them. Under this BiU a certain proportion of the profits, instead of going to the shareholders, will be put on one side, in order to meet the reserve liability, and if, ultimately, a fund of £100,000 is built up, the creditors will be safe to that extent, and the money will have been taken out of the net profits. I understand that the difficulty which has occurred to the mind of Senator Givens is that the directors may sell and dispose of the whole of the properties representing what are termed the reserves, and bring them into the accounts as profits on the year. That is, I think, more imaginary than real.
– There is no doubt that they can do so.
– I doubt it extremely;
– T shall cite a case te show that they can.
– If the honorable senator can show that it is possible for the directors to do that, he will have to show that, in the face of the later provision in the proposed new clause -
No transfer shall be made to the said reserve fund from any other reserve fund.
Suppose that the directors take and dispose of the reserves.
– The directors of the bank can convert the reserves and call the proceeds net profits.
– No. If a test vote is taken, it will show whether we are prepared to accept the principle of this provision. If the principle “is accepted, and it Is considered that the clause does not sufficiently safeguard what we want to have safeguarded, then I am quite sure that Senator Walker will consent to have it recommitted for the purpose of seeing whether it is not possible to get over the difficulties which have occurred to honorable senators. Whether they are real or fanciful, they are difficulties which ought to be met and settled, if possible. If honorable senators are prepared to accept this principle, they should vote for the provision on the understanding that if it does not sufficiently safeguard the interests of possible creditors of an institution, then Senator Walker will consent to a re-committal, in order to obtain the desired safeguards.
.- I am glad that some further light has been thrown on this subject. I think that the last speaker is labouring under a very severe misapprehension with regard to the effect of this provision, if passed. He has put in a proviso which, I consider, is a very good one, and that is that the provision shall only be passed on the distinct understanding that if additional safeguards are found to be necessary they shall be provided. If time permitted I could cite different authorities to show that the whole of the present reserve funds pf a bank could be converted in the future, and the proceeds of that conversion called net profits, and devoted to those purposes. If this provision is embodied in the Bill, it will be essential to provide that no present reserve fund shall be converted. As things are at the present time, the customers and creditors of a bank have the security of the reserve fund, and also the security of the reserve liability of the bank shareholders. If, however, the Bill became law, they would have only the reserve funds to fall back upon, because the reserve liability of the shareholders would be gone.
– The equivalent would be there, though.
– Yes ; but it might have been taken out of the present reserves. Although the honorable senator said he was willing to accept my statement as to the legal definition of net profits as the correct one, he now disputes it.
– I read a definition from another book.
– I need do no more than quote one or two cases which Senator Best cited last year to show the danger of this provision.
– Did he not refer to mining cases?
– He quoted the legal definition of net profits. The penal disability which rests upon directors in case of default or mismanagement is one of the most valuable safeguards that we have. But the Bill will remove that.
– But under the Bill, will not a reserve fund be gradually built up to meet any claims upon the bank ?
– If we allow the directors of a bank to build up a fund we shall remove that penal restriction upon shareholders and directors which is now our best safeguard, and the uncalled capital of the bank might be a mere flea-bite as compared with its liabilities. If the bank failed, the customers would have the satisfaction of getting the flea-bite, but the shareholders and directors would escape scot free.
– Is the honorable senator bearing in mind that under the Bill there will be trustees appointed to supervise the building up of that portion of the trust fund ?
– I am. I admit that in the event of a bank failing, that fund would be absolutely intact. Every one knows that the reserve liability of a bank is a mere flea-bite compared with its liabilities to customers and creditors. In the event of the penal restriction being removed, what satisfaction would it be to clients and creditors to have a mere fleabite of a reserve fund intact, while the directors and shareholders went off scot free? This is a most dangerous provision to enact. Last year, Senator Best pointed out that, according to the legal definition; net profits is the surplus of what a man received in any one year, no matter from what sources, over and above what he paid away.
– That does not happen to be the definition in Lindley on Partnership.
– I propose to quote the case which Senator Best cited last year.
– If I remember rightly his quotations referred to mining companies.
– That does not matter.
– Every ounce of gold which is taken out of a gold mine leaves that mine an ounce of gold poorer, but that is not the case with trading companies, which keep up their capital.
– That may be; but there is nothing to prevent what I have stated from being done.
– Senator Best made the mistake of taking mining companies as his strong point.
– That has nothing to do with the legal definition of net profits. What are net profits? If a banking company disposes of valuable property which has fallen into its hands, the whole of the proceeds are net profits.
– What authority is there for that statement?
– The authority says that the excess of receipts in any one year, no matter from what source, over outgoings, is the net profit. Suppose that a bank carries on ordinary business, and converts into cash its reserves, which may be in freehold estate, or Government securities, then the proceeds are the net profits for that year.
– Not allowing for the cost?
– If the honorable senator has Senator Best’s authority for that statement, I should like to hear it.
– I shall cite the case for the information of the honorable senator.
– Does the honorable senator mean to say that if he lends me some money, and I repay it, that is profit?
– Yes. If I receive this year £1,000, no matter from what source, and my out-goings amount to only £900, I shall have a net profit of £100.
– If the honorable senator lends me £1,000 to-day, and I repay the. money to-morrow, will he have made that much profit?
– No; but that is where the legal definition of net profits comes in.
– The honorable senator is mistaken.
– The honorable senator said a while ago that he agreed with my definition. The net profit is the excess of a man’s receipts in any given period over his out-goings.
– What case did Senator Best quote as his authority?
– But for the interjections, I should have quoted the case. Speaking to the second reading of the Bill on the 5th November last, Senator Best said -
How profits are to be ascertained is a problem of very considerable difficulty. Sir Roundell Palmer, in dealing with that question in the9th edition of Palmer’s Company Precedents, page 735, after referring to both the single and double account system says : “ The system propounded by the Court of Appeal in Lee v. Neuchatel Comfany, 41C, D1; according to which, whenever the ordinary revenue of the company for any specified period exceeds the ordinary outgoings of the company for such period, the excess is to be regarded as profit available for dividend, even though the revenue be derived from a wasting property, v/hich, in the course of a few years will be exhausted, and even though the company has lost capital during the same period.
– That clearly refers to a mining company.
– It does not matter. The point is that that is the legal definition of “net profits.” Later on, dealing with the general principles laid down, particularly in the Neuchatel case, Palmer says -
It was held by the Court of Appeal, affirming the decision of Stirling, J. - (1) That there was not sufficient evidence of depreciation or loss ; (2) That if the property of the company was not deficient to make good its share capital, there was no obligation to make it good out of revenue; and (3) That, although the property was a wasting property, there was no obligation to make any provision for depreciation.
The law is further laid down by the same authority in the following terms : -
Accordingly if a company with a paid-up capital of £100,000 likes to buy, say, ten acres of coal for £100,000, and works one acre per annum, and, after paying expenses of raising the coal and of management has, say, £15,000 per annum in hand, that sum is profit available for dividends, and there is no obligation on the company to treat any part of it as capital ; and when at the end of ten years the coal has been worked out, and the £100,000 has disappeared, and the capital has thus been reduced to nil, we are not to regard this as a reduction of capital prohibited by the Act. Yet it is obvious that each half-year’s income includes a return to the company of part of its capital outlay, and, therefore, that the company each year pays dividends consisting in part of capital.
– Is it possible that that was a definition of mining profits only?
– The authority does not say so.
– I am glad that is not the principle on which the banks conduct their business.
– But if the honorable senator’s Bill became law the banks would be permitted to act on that principle. I am simply pointing out the legal acceptation of “net profit.” Of course, I admit that “ the law is a hass.” But I am not responsible for that.
– If “ the law is a hass,” and the honorable senator is responsible for making the law, where does he come in?
– The laws which I have been responsible for making have never been so described, although undoubtedly we are handicapped by the exertions of honorable senators opposite in our endeavours to preserve the law from that reproach. It has been suggested that what I have quoted applies to mining profits only. Let me now quote a Victorian case in which the same principle has been acknowledged - that of Phillips v. The Melbourne Soap and Candle Company, Limited, in which it was laid down -
It is only a matter of prudence, and not of law, whether or not dividends shall be paid when the assets of the company are of less value than the original capital. And so long as a company pays its creditors, there is no reason why, in an apparently flourishing concern, it should not go on and divide profits, though every shilling of the capital may be lost. This is entirely a question for the shareholders themselves to determine.
There is a statement of the law which was not applied to a mining company, but to a swap and candle company. Senator Gray may be able to give us an inkling as to the way in which such companies conduct their business.
– According to that definition if a company sells out all its stock in trade the proceeds are profits.
– Yes, they can call the proceeds net profit.
– I think I can quote cases where men have gone to gaol for doing that sort of thing.
– The banks prior to 1893 paid their shareholders dividends in years in which they made an absolute loss.
– Then they had no right to do so.
– Some of their directors went to gaol for it.
– They did not go to gaol ; they were elevated to Upper Houses and some of them received titles. They are now regarded as heroes of civilization, and when the honorable senator walks the streets of Brisbane they will pat him on the back as a friend of theirs. There is nothing under Senator Walker’s proposal to prevent the banks from converting their reserves and calling the result profit. They can sell their properties and their Government securities, and call the proceeds net profit. They can in this manner build up their reserve fund, and free themselves from liability. I trust that the Bill will go no further. But if the clause under discussion be carried, I shall take other opportunities of proposing additional safeguards.
Question - That the proposed new clause be inserted - put.
The Committee divided.
Majority …… 2
Question so resolved in the negative.
Proposed new clause negatived.
Senate adjourned at 10. 1 p.m.
Cite as: Australia, Senate, Debates, 26 August 1909, viewed 22 October 2017, <http://historichansard.net/senate/1909/19090826_senate_3_51/>.