ABSTRACT
IN order to appreciate the significance of the action taken by the Governor of New South Wales, Sir Philip Game, on May 13th, 1932, in dismissing from office the Lang administration, certain preliminary facts should be stated:
In October 1930, the Labour party, under Mr. Lang, was returned to power with a very large majority.
At that time the State of New South Wales, in common with the rest of Australia, was passing through a period of great depression, wool and wheat prices having collapsed.
In February 1931, at a Conference of State Premiers with the Federal Government, in which Mr. Scullin, the Labour Leader, was Prime Minister, Mr. Lang suggested that interest rates were too high, and proposed that the Australian Governments should refrain from paying interest to British bondholders ‘until Britain has dealt with the Australian overseas debt in the same manner as she settled her own foreign debt with America’. 1
At this time there was pending an appeal by the Lang Government to the Courts on the question whether the Legislative Council of New South Wales could lawfully be abolished without the approval of the electors at a referendum, the preceding Government 2 having amended the Constitution Act for the purpose of requiring such a referendum and of preventing the requirement itself from being amended without a like referendum.
On March 16th, 1931, the High Court of Australia decided by a majority of three Judges to two that a referendum was necessary. 3
Mr. Lang was, at this time, in a minority in the Legislative Council. The latter body had passed the Bill for its own abolition upon the assumption that approval by the electors at a special referendum was required by law and might not be given.
The Council rejected certain Government proposals, including a Bill for the purpose of reducing the rate of private interest to pre-war levels, the method of rejection adopted being to postpone consideration of the Bill for six months.
On March 23rd, 1931, after the Council had referred to a Select Committee of Inquiry the Government’s Bill amending the Industrial Arbitration Act, Ministers advised the Governor to appoint additional members to the Council. This advice was rejected 1 and the Governor then suggested to the Premier that perhaps he should dismiss the Ministry. However, on March 26th, he wrote to the Premier stating that ‘almost as soon as I was alone in a position to think quietly, it was borne in upon me that I should be entirely wrong if I were to ask you to surrender your Commission’. 2 The Governor added
‘You have tendered me advice which I cannot see my way to accept, but there is no reason why I should demand your resignation, or indeed, take any action. Were I to do so it would inevitably give rise, as you yourself agree, to a popular outcry that I was taking sides, and I cannot put the King’s representative in that position.’ 3
Mr. Lang resolved to appeal to the Privy Council against the High Court’s decision, but in the meantime was still desirous of further appointments for the purpose of carrying his various legislative proposals into effect.
On June 29th, 1931, the Governor wrote to Mr. Lang suggesting that the King’s example in convening a Conference over the Home Rule Bill should be followed in relation to the political struggle in New South Wales. Hestated that the Premier’s proposal to obtain funds by drastic taxation would not be accepted by the Legislative Council. The letter anticipated further requests by Mr. Lang for additional appointments to the Council, and stated:
‘I am, as you are aware, very loath to take what I consider, rightly or wrongly, the extreme step of overriding the Legislative Council by the appointment of a large number of additional members.’ 4
On June 30th the Premier replied, stating that:
‘Exercising my constitutional right, I requested you at our meeting this afternoon to place me in the position referred to in the aforesaid paragraph of your letter … but Your Excellency refused my request.’ 1
The Premier rejected the Governor’s suggestion of a Conference.
Further conflict between the Government and the Council followed, and, finally, on November 20th, 1931, the Governor appointed to the Council twenty-five Labour nominees upon the Premier’s recommendation. This number was not sufficient to secure the passage of Government Legislation.
At the General Elections for the Commonwealth in December 1931, Mr. Scullin, the Labour Prime Minister, met defeat, and Mr. Lyons’s Government 2 succeeded to office.
Early in 1932 the Federal Parliament passed legislation with a view to seizing the revenues of New South Wales for the purpose of meeting the interest liability of that State, which Mr. Lang was unable to pay but which, under the Financial Agreement, given constitutional sanction in 1929, was payable by the States to the Commonwealth for the purpose of transmission to bondholders overseas.
The validity of this special Federal legislation was unsuccessfully challenged by Mr. Lang in the High Court, the decision being announced on April 6th, 1932. The scheme of the legislation was to compel persons who owed taxes and other money to the State of New South Wales to pay their debts to certain Commonwealth agencies, such payment being made the only valid method of discharging liability.
Mr. Lang still resisted or evaded the Commonwealth scheme. For instance, he sought to prevent moneys being collected by the Commonwealth by adopting the expedient of delaying taxation assessments, and so preventing the creation of further debts upon which the Commonwealth Act might operate. This device produced no revenue for the State, but made it impossible for the Commonwealth to obtain the money expected from current taxation assessments. 1
The Commonwealth next acted upon a provision in the Financial Agreements Enforcement Act, 1932, by requiring the various trading Banks to pay over to the Commonwealth the amounts of balances standing to the credit of the State of New South Wales in order to apply these sums towards the discharge of State interest liabilities. Mr. Lang challenged this action, but the High Court decided against him on April 22nd, 1932. It also decided that the Commonwealth could seize, in addition to the ordinary revenues of the State deposited with its bankers, moneys received by the State under certain statutes and orders of Court for specific purposes, and to meet particular claims, e.g. estates administered by the Master in Lunacy and the Public Trustee.
Mr. Lang sought to counter these decisions by directing State officers to refrain from paying moneys into the trading Banks where the accounts of the State had been kept. 2
By this time it was plain that, unless drastic taxation expedients were immediately adopted, the State would be unable to pay its public servants, or meet the heavy expenses on account of social services, such as unemployment relief, child endowment, and widow’s pensions.
On May 12th, 1932, Mr. Lang introduced into the assembly a Bill which recited the Federal Financial Agreements Enforcement Act, and the necessity of imposing special taxation with a view to safeguarding New South Wales. The Bill imposed a tax on all mortgages at the rate of ten per centum of the total amount secured thereby, the tax being payable within fourteen days from the commencement of the Act. It was aimed mainly at the Banking and Insurance Companies, which, according to Mr. Lang, were endeavouring to prevent his obtaining a substantial reduction of interest on overseas loans, and to force him out of office by promoting the Commonwealth Enforcement Acts legislation.
The Mortgage Taxation Bill passed the Assembly by a large majority, and, as a result of the rallying of a number of former Labour supporters, was also carried in the Council in the early hours of Friday, May 13th, 1932.
On May 13th the Governor of New South Wales, Sir Philip Game, received a deputation from representatives of British companies holding New South Wales mortgages. The object of the deputation was to request that the Governor should refuse assent to the Mortgage Taxation Bill or reserve the Bill for the signification of the Royal Assent. 1
The Federal Government’s advisers, anticipating the passing of the Bill by the State Parliament, had drafted a Bill designed for the purpose of nullifying the State Bill, and, also on May 13th, forced it through all stages in both Federal Houses. This was the Financial Emergency (State Legislation) Act, No. 11 of 1932, calling itself an Act
‘for the peace, order, and good government of the Commonwealth with respect to Taxation, Insurance, Banking, Foreign Corporations, and Trading or Financial Corporations formed within the Limits of the Commonwealth’.
