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High Court of Australia |
NEW SOUTH WALES v. THE COMMONWEALTH - THE INCORPORATION CASE [1990] HCA 2; (1990) 169 CLR
482
F.C. 90/002
Constitutional Law (Cth)
High Court of Australia
Mason C.J.(1), Brennan(1), Deane(2), Dawson(1), Toohey(1), Gaudron(1) and
McHugh(1) JJ.
CATCHWORDS
Constitutional Law (Cth) - Powers of the Commonwealth Parliament - Law providing for incorporation of trading and financial corporations - Whether law with respect to corporations formed within limits of Commonwealth - The Constitution (63 and 64 Vict. c. 12), s. 51(xx) - Corporations Act 1989 (Cth), ss 114-125, 156-158.
HEARING
1989, October 3-5; 1990, February 8. 8:2:1990DECISION
MASON C.J., BRENNAN, DAWSON, TOOHEY, GAUDRON AND McHUGH JJ. The underlying question which is raised by this case is whether s.51(xx) of the Constitution empowers the Commonwealth Parliament to legislate for the incorporation of trading and financial corporations. The Corporations Act 1989 (Cth) ("the Act") so provides, but that Act has not been proclaimed and the Commonwealth has stated that Chs 2 and 5 will not be proclaimed if the Court decides that the Parliament does not have that power. The determination of the underlying question will provide the answer to two specific questions which have been reserved for the consideration of the Court concerning the validity of particular sections of the Act. Those questions are:3. Part 2.2 of the Act provides for the registration of companies. Division 1 (ss.114-125) of Pt 2.2 deals with incorporation by registration. Subject to the Act, any five or more persons or, where the company is to be a proprietary company, any two or more persons, associated for a lawful purpose may, by subscribing their names to a memorandum and complying with the requirements as to registration, form an incorporated company: s.114. Where the Australian Securities Commission ("the Commission") is satisfied that an application has been made in accordance with the requirements of the Act, it is required to register the company and to certify its registration: ss.120, 121. Subject to the Act, on and from the day specified in the certificate, the subscribers to the memorandum, together with such other persons as from time to time become members of the company, "are an incorporated company by the name stated in the memorandum": s.123(1). A company registered under Div.1 is to be capable of performing all the functions of a body corporate and of suing or being sued and is to have perpetual succession, a common seal and the power to acquire, hold and dispose of property: s.123(2).
4. Division 6 (ss.153-155) of Pt 2.2 of the Act deals with activities statements. The lodging of an activities statement is a prerequisite to the registration of a Division 1 company: s.153(1). The statement may state to the effect that the subscribers intend the proposed company to be dormant throughout a substantial period beginning at its incorporation: s.153(2). The statement, whether or not it states that the company is to be dormant, must state one or other of three alternatives: s.153(1)(e). The first is that the subscribers intend that, within three months after the date of incorporation or the period of dormancy, trading activities will be the whole or a substantial part of the company's activities: s.153(3). Trading activities are defined to include financial activities but not banking: s.9. The second alternative is that the subscribers intend that, within the same period, the company will carry on as its sole or principal business the business of banking (other than State banking not extending beyond the limits of the State concerned): s.153(4). The third alternative is that the subscribers intend that, within twenty-one days after the proposed company's incorporation or within the period of dormancy, persons other than the subscribers will be members of the company and have interests in it that together constitute a controlling interest in it: s.153(5). The Act goes on to provide for the lodging of activities statements annually and for the winding-up of any company which ceases to be either a trading or banking corporation, or for the cancellation of its registration which results in its dissolution: ss.156, 158. A trading corporation is defined to include a financial corporation: s.9.
5. Under Pt 2.1 of the Act, participation in the formation of an "outsize" partnership or association, otherwise than under the Act or another Commonwealth Act, letters patent or, subject to s.113, a law of a State or a Territory, is prohibited: s.112(1). A partnership or association is "outsize" if it is formed for gain, is capable of being incorporated under Div.1 of Pt 2.2 and, apart from professional or vocational partnerships of a specified kind, consists of more than twenty persons: s.112(2). The incorporation, or participation in the incorporation, of a body corporate under the company law of a State or Territory is prohibited if the body, on its incorporation, will be a trading corporation: s.113.
6. Section 51 of the Constitution provides that the Commonwealth Parliament
shall have power to make laws with respect to:
"(xx) Foreign corporations, and trading or
financial corporations formed within
the limits of the Commonwealth".
7. The power conferred by s.51(xx) is not expressed as a power with respect to a function of government, a field of activity or a class of relationships but as a power with respect to persons, namely, corporations of the classes therein specified: Actors and Announcers Equity Association v. Fontana Films Pty. Ltd. [1982] HCA 23; (1982) 150 CLR 169 at pp 181, 216, and The Commonwealth v. Tasmania (The Tasmanian Dam Case) [1983] HCA 21; (1983) 158 CLR 1 at pp 157, 202, 240, 269, 314. The Commonwealth contention is that the words "formed within the limits of the Commonwealth" serve merely to distinguish local trading or financial corporations from foreign corporations. No doubt the words do serve that function but their plain meaning goes beyond the mere drawing of that distinction. The expressions "trading or financial" and "formed within the limits of the Commonwealth" serve to restrict the classes of domestic corporation which can be the subject of Commonwealth power. To fall within one limb of the power, a corporation must satisfy two conditions: it must be formed within the limits of the Commonwealth and it must be a trading or financial corporation. To fall within the other limb, a corporation must be a foreign corporation, that is, a corporation formed outside the limits of the Commonwealth. The distinction based on the place of formation is obvious, but the basis of the distinction is formation. The word "formed" is a past participle used adjectivally, and the participial phrase "formed within the limits of the Commonwealth" is used to describe corporations which have been or shall have been created in Australia. (Clearly enough, the phrase is used to describe corporations formed after as well as those formed before federation.) The subject of a valid law is restricted by that phrase to corporations which have undergone or shall have undergone the process of formation in the past, present or future. That is to say, the power is one with respect to "formed corporations". That being so, the words "formed within the limits of the Commonwealth" exclude the process of incorporation itself. Such corporations are distinguished from corporations which have been or shall have been created outside the limits of Australia.
8. No doubt, as the Commonwealth submitted, the words "with respect to" in s.51 of the Constitution are words of wide import and par.(xx), being a grant of legislative power, "should be construed with all the generality which the words used admit": Reg. v. Public Vehicles Licensing Appeal Tribunal (Tas.); Ex parte Australian National Airways Pty. Ltd. [1964] HCA 15; (1964) 113 CLR 207, at p 225. But the generality imported by the words "with respect to" cannot expand a power over existing ("formed") corporations into a power to form corporations. The power conferred by s.51(xx) to make laws with respect to artificial legal persons is not a power to bring into existence the artificial legal persons upon which laws made under the power can operate.
9. Both precedent and history support this construction of the text of s.51(xx). In Huddart, Parker & Co. Pty. Ltd. v. Moorehead [1909] HCA 36; (1909) 8 CLR 330 the five members of the Court were unanimously of the opinion that the subject matter of s.51(xx) is confined to corporations already in existence and does not extend to the creation of corporations. That, they said, is the plain meaning of the words "formed within the limits of the Commonwealth". Obviously the legislative power of the Commonwealth could not embrace the creation of foreign corporations and, it was pointed out, if a distinction was intended between the power to legislate with respect to foreign corporations and the power to legislate with respect to trading or financial corporations, express words were to be expected. The words "formed within the limits of the Commonwealth" were, it was observed, inappropriate for this purpose. Such express words were to be found in s.51(xiii) which confers power to make laws with respect to "Banking ... also ... the incorporation of banks" and their absence in s.51(xx) indicated the limited scope of that paragraph. The Court resolved in unambiguous terms the meaning of the words in the paragraph, thereby removing any doubt on the matter which might have arisen from the earlier comments of Griffith C.J. and O'Connor J. in Jumbunna Coal Mine, No Liability v. Victorian Coal Miners' Association (1908) 6 CLR 309 at pp 334-335, 355.
10. In contesting the construction placed upon the words "formed within the limits of the Commonwealth" in Huddart Parker, the Commonwealth submitted that the judgments in that case were permeated by the reserved powers doctrine under which the legislative powers of the Commonwealth were interpreted restrictively upon the footing that certain powers were reserved by the Constitution to the States. This approach, which involved the interpretation of Commonwealth legislative power by reference to preconceptions of the extent of the residue of legislative power retained by the States, was categorically rejected in the Engineers' Case: Amalgamated Society of Engineers v. Adelaide Steamship Co. Ltd. [1920] HCA 54; [1920] HCA 54; (1920) 28 CLR 129.
11. Huddart Parker was concerned with the validity of ss.5 and 8 of the
Australian Industries Preservation Act 1906 (Cth). Those
sections prohibited
certain restrictive or monopolistic practices on the part of foreign, trading
or financial corporations. In
concluding that the relevant provisions were
beyond power, a majority (Griffith C.J., Barton and O'Connor JJ.) placed
reliance upon
the doctrine of reserved powers. But the question of the power
to legislate for the creation of corporations was determined by all
the
members of the Court by reference to purely textual considerations, quite
apart from the now discarded doctrine. Indeed, it
was the view of the
remaining members of the Court, Isaacs and Higgins JJ., concerning the
doctrine of reserved powers which was
to prevail in the Engineers' Case.
However, in Huddart Parker they reached the same conclusion upon the meaning
of the words "formed
within the limits of the Commonwealth" as the other
members of the Court. Isaacs J. was alone in dissent concerning the validity
of ss.5 and 8 of the Australian Industries Preservation Act, but upon the
question of the power of the Commonwealth Parliament to
provide for the
creation of corporations, he was unequivocal. He said, at p 394:
"The creation of corporations and theirSee also per Griffith C.J. at pp 348-349; per Barton J. at p 362; per O'Connor J. at p 371; per Higgins J. at p 412.
consequent investiture with powers and
capacities was left entirely to the States.
With these matters, as in the case of foreign
corporations, the Commonwealth Parliament has
nothing to do. It finds the artificial being
in possession of its powers, just as it finds
natural beings subject to its jurisdiction,
and it has no more to do with the creation of
the one class than with that of the other."
12. In Strickland v. Rocla Concrete Pipes Ltd. [1971] HCA 40; (1971) 124 CLR 468 this Court
dealt with the validity of certain
sections of the
Trade Practices Act 1965
(Cth). In considering
the scope of s.51(xx), it declined to follow Huddart
Parker, recognizing
that the
reserved powers doctrine played no small part in
the reasoning of the majority which led them to adopt a restrictive
interpretation
of that paragraph. But the rejection of the decision
in
Huddart Parker did not extend to the views expressed in that case concerning
the power of the Commonwealth to provide for the
creation of corporations. In
the leading judgment, Barwick C.J. (at p 488) made
the following observations
about Huddart Parker:
"The Court in the course of its judgment,It should be said with respect that the remarks contained in that passage are not entirely accurate. Clear references were made in most of the judgments in Huddart Parker to the power of the Commonwealth to create corporations under provisions other than s.51(xx): see per Griffiths C.J. at p 349; per O'Connor J. at p 371; per Isaacs J. at p 393; per Higgins J. at p 412. But in that passage Barwick C.J. casts no doubt upon the proposition that s.51(xx) does not confer power to legislate for the creation of corporations; indeed, he assumes that fact. No other member of the Court in Strickland v. Rocla Concrete Pipes Ltd. questioned the proposition.
decided that the expression in par.(xx.)
'formed within the Commonwealth' was apt to
include only corporations formed according to
the laws of the States. But in this it seems
to me their Honours were clearly wrong.
There are powers granted to the Commonwealth
as well as those left in residue to the
States to which the formation within the
Commonwealth of trading corporations might be
referable. There is s.122 granting
legislative power with respect to the
Territories. Section 51(i.) for instance has
been found a source of power to create a
trading corporation. See Australian National
Airways Pty. Ltd. v. The Commonwealth (No.2)
[1946] HCA 10; ((1945) 71 CLR 115). Corporations formed
under any power by the Commonwealth or under
Commonwealth legislation are clearly
corporations formed within the limits of the
Commonwealth. Had their Honours of the
majority in Huddart, Parker & Co. Pty. Ltd.
v. Moorehead included these corporations in,
rather than excluded them from, the ambit of
par.(xx.) some of the difficulties which
arise from their interpretation of par.(xx.)
might have become apparent."
13. Judicial opinion after the Engineers' Case accepted that the Commonwealth
had no power under s.51(xx) to make laws with respect
to the incorporation of
companies: Australian National Airways Pty. Ltd. v. The Commonwealth [1945] HCA 41; (1945)
71 CLR 29 at
p 57; Bank of N.S.W.
v. The Commonwealth [1948] HCA 7; (1948) 76 CLR 1 at pp
202, 255-256, 304; Insurance Commissioner v. Associated
Dominions Assurance
Society Pty.
Ltd. [1953] HCA 94; (1953) 89 CLR 78 at p 86. But cf. Kathleen Investments
(Aust.) Ltd. v. Australian
Atomic Energy Commission [1977] HCA 55; (1977) 139 CLR 117
at p
159. In Bank of N.S.W. v. The Commonwealth, at p 202, Latham C.J.
said of
s.51(xx):
"The one thing that is clear about it is that
the provision assumes the existence of
corporations either under foreign law or
under some law which is in force in the
Commonwealth."
14. Moreover, the history of s.51(xx) confirms that the language of the paragraph was not directed towards the subject of incorporation. That the Convention Debates may be used to establish the subject to which the paragraph was directed is made clear by Cole v. Whitfield [1988] HCA 18; (1988) 165 CLR 360 at p 385; see also Port MacDonnell Professional Fishermen's Association Inc. v. South Australia [1989] HCA 49; (1989) 63 ALJR 671 at p 683; [1989] HCA 49; [1989] HCA 49; 88 ALR 12 at p 31. And the draft bills prepared by the Conventions of 1891, 1897 and 1898 have long been considered a legitimate aid in the interpretation of the provisions of the Constitution: see State of Tasmania v. The Commonwealth of Australia and State of Victoria [1904] HCA 11; (1904) 1 CLR 329 at pp 333, 350.
15. The successive drafts of s.51(xx) before it reached the form in which it appears in the Constitution confirm that that paragraph is concerned with existing corporations and was not intended to confer power to legislate for their creation. The origin of s.51(xx) is to be found in s.15(i) of the Federal Council of Australasia Act 1885 (Imp.). The draft Bill presented to the National Australasian Convention held in Sydney in 1891 contained in cl.52 a power to legislate with respect to "(19) The status in the commonwealth of foreign corporations, and of corporations formed in any state or part of the commonwealth". It is apparent that this provision gave no power to make laws with respect to the incorporation of companies. The power was confined to the status of corporations. The word "formed", therefore, meant "which have been formed". Indeed, at that Convention the question was raised whether the delegates should amend cl.52(19) to deal with the incorporation of companies. Sir Samuel Griffith replied "I do not think we should. There are a great number of different corporations. For instance, there are municipal, trading and charitable corporations, and these are all incorporated in different ways according to the law obtaining in the different states. ... What is important, however, is that there should be a uniform law for the recognition of corporations. ... I think the states may be trusted to stipulate how they will incorporate companies, although we ought to have some general law in regard to their recognition": Convention Debates (Sydney 1891) vol.I, at p 686. The clause was adopted without amendment: Convention Debates (Sydney 1891) vol.I, at p 952.
16. Clause 50 of the draft Bill presented to the Adelaide Convention in 1897 conferred legislative power with respect to "XXII. Foreign corporations, and trading corporations formed in any State or part of the Commonwealth". The clause was no longer limited to laws with respect to the status of corporations and Commonwealth power over local corporations was restricted to trading corporations. But there is no reason to suppose that, by deleting the words "the status in the commonwealth of" and inserting the word "trading", those who drafted the provision intended to alter the meaning of the words "formed in". The clause was adopted with the addition of the words "or financial" after the word "trading": Convention Debates (Adelaide 1897) vol.III, p 1230. The clause in its final form appeared as s.51(xx) in the draft Bill presented to the Convention held in Melbourne in 1898, the words "within the limits of the Commonwealth" having been substituted for the words "in any State or part of the Commonwealth". It was adopted in that form: Convention Debates (Melbourne 1898) vol.V, at p 2531.
17. There is thus no ground for thinking that s.51(xx) was framed with the
intention of conferring upon the Commonwealth the power
to provide for the
incorporation of companies. Indeed, the history of the paragraph plainly
indicates that the draftsmen of the
provision did not contemplate that it
should confer any power otherwise than in respect of corporations already
formed. Contemporary
opinion, which was reflected in the decision in Huddart
Parker, is to be seen in the following passage from Quick and Garran, The
Annotated Constitution of the Australian Commonwealth, (1901), where the
authors say, at p 607:
"It would therefore seem that this provision
refers to companies created under State laws.
Such bodies, once launched, will come within
the control of Federal legislation. Under
this power it would probably be competent for
Parliament to convert a corporation created
by State authority into a Federal
corporation; to enlarge the scope of its
operations and business; to confer on a local
corporation certain powers which would be
beyond the jurisdiction of the States
Governments to grant."
18. The scheme of the Corporations Act is based upon an apparent acceptance of the view that the character of a company as a trading or financial corporation is to be determined by the nature of its activities, either actual or intended. It is unnecessary in this case to embark upon an examination of the authorities dealing with this topic - see, e.g., State Superannuation Board v. Trade Practices Commission [1982] HCA 72; (1982) 150 CLR 282; Fencott v. Muller [1983] HCA 12; (1983) 152 CLR 570 - but it may be observed that the limitation imposed upon the reach of s.51(xx) by the requirement that, in the case of domestic corporations, they be of a trading or financial character, would create undeniable difficulties if that paragraph were to be construed as extending to the incorporation of companies. The fact that the character of a corporation may vary, so that it may be at one time a trading or financial corporation and not at another, makes it less likely at least that s.51(xx) was intended to confer power upon the Commonwealth to incorporate companies over which its power of regulation might fluctuate, possibly without knowledge upon either side. The complexity of the Act in attempting to cope with that difficulty demonstrates the problem which stems from construing s.51(xx) so as to include a power to legislate for the creation of corporations within the confines otherwise imposed by that paragraph. But it is sufficient for our purposes to observe that such a construction is supported by neither the language of the provision, nor its history nor authority.
19. The questions reserved for the consideration of the Court should be
answered as follows:
1. Yes. All of them.
2. No. Neither of them.
DEANE J. This case raises for consideration the important question whether the legislative powers which s.51(xx) of the Constitution confers upon the Parliament extend to authorize the making of laws governing the incorporation of local trading and financial corporations. The answer to that question must, of course, be found in the words of the Constitution. It is those words - and those words alone - which constitute the compact made between the people of this country when, by referenda, they authorized the formal enactment of - or, in the case of the people of Western Australia, the proclamation of adherence to - the terms upon which they "agreed to unite in one indissoluble Federal Commonwealth". If the words of s.51(xx), construed in context in accordance with settled principle, extend to authorize the making of such laws, it is simply not to the point that some one or more of the changing participants in Convention Committees or Debates or some parliamentarian, civil servant or draftsman on another side of the world intended or understood that the words of the national compact would bear some different or narrower meaning. Nor is it to the point that to construe the words of s.51(xx) as extending to authorize the making of such laws would have the result that there is an added degree of overlapping between the grant of power contained in that paragraph and the grants contained in other paragraphs of s.51. It is well settled that the plenary grants of legislative powers which are contained in the first thirty-five paragraphs of s.51 are not to be constricted by ill- conceived attempts to prevent or confine overlapping between them.
2. Section 51(xx) in terms 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:"
3. In the context of s.51(xx), the word "foreign" and the phrase "formed within the limits of the Commonwealth" should, in my view, be construed as comprehensive alternatives. So construed, a "foreign" corporation is, for the purposes of the paragraph, one that is "formed" outside the limits of the Commonwealth. The restrictive words "trading or financial" apply only to local corporations. The legislative power which s.51(xx) confers with respect to foreign corporations is internally confined only by the requirement of the introductory words that laws made be "for the peace, order, and good government of the Commonwealth".
4. It was contended in argument that par.(xx)'s grant of legislative power with respect to foreign corporations could not extend to the making of a law governing the incorporation of foreign corporations. I do not accept that contention. Incorporation means the acquisition or conferral of corporate personality under the law. A plenary legislative power "with respect to" particular kinds of corporation extends, as a matter of mere language, to laws dealing with both the incorporation and the liquidation of such corporations just as a plenary legislative power with respect to "copyrights", "patents", "designs" or "trade marks" extends to laws dealing with the creation and extinguishment of those particular kinds of industrial property. It is true that it has often been said that comity among nations requires some local recognition of foreign corporations. Nonetheless, the circumstances in which, the extent to which and the procedures by which corporate personality is to be accorded under our system of law to foreign corporations are patently matters for our local law (see, e.g., Bateman v. Service (1881) 6 App Cas 386 at pp 389-390; Russian Commercial and Industrial Bank v. Comptoir D'Escompte de Mulhouse (1925) AC 112, at pp 148-149; Chaff and Hay Acquisition Committee v. J.A Hemphill and Sons Pty. Ltd. [1947] HCA 20; (1947) 74 CLR 375, at p 387). That being so, it appears to me to be plain that par.(xx)'s grant of legislative power with respect to foreign corporations cannot properly be confined to exclude the power to make laws defining the circumstances and establishing the procedures under and by which artificial entities invested with corporate personality under other systems of law may acquire or enjoy such personality under the law of this country. At least in that sense, a law providing for the local incorporation of "foreign corporations" is a law within the grant of power with respect to such corporations.
5. The argument that par.(xx)'s grant of legislative power "with respect to ... trading or financial corporations formed within the limits of the Commonwealth" should be construed as not extending to laws with respect to the incorporation of such corporations focussed upon the word "formed". The legislative power could not, so it was said, extend to authorize laws governing the formation of such corporations since, until they are formed, they do not exist as the subject-matter of the power. Any superficial appeal of that argument does not, in my view, survive close examination. One objection to it is that it fails to distinguish between the abstract subject-matter of the legislative power and concrete instances of that subject-matter. One might as well say that a legislative power with respect to locally manufactured motor vehicles would not extend to laws governing the local manufacture of motor vehicles or that the legislative power with respect to lighthouses does not extend to laws governing the erection of lighthouses since, until it is manufactured locally or erected, neither the locally manufactured motor vehicle nor the lighthouse exists as such. Another objection is that the argument fails to accord proper scope to the words "with respect to" in s.51 or to the settled principle which requires that par.(xx), which is a constitutional grant of plenary legislative power, be liberally, and not narrowly or technically, construed: "it should be construed with all the generality which the words used admit" (per Dixon C.J., Kitto, Taylor, Menzies, Windeyer and Owen JJ., The Queen v. Public Vehicles Licensing Appeal Tribunal (Tas); Ex parte Australian National Airways Pty. Ltd. [1964] HCA 15; (1964) 113 CLR 207, at p 225). In that regard, it is important to note that the basis of the argument is a reading of the word "formed" as meaning "which have already been formed at the time of application of the relevant law". That constrictive interpretation of the word seems to me to be quite unjustified. In the context of the use of the phrase "formed within the limits of the Commonwealth" in contradistinction to "foreign", the word "formed" is properly to be understood as representing a use of the past participle as part of an adjectival phrase which is without temporal significance. As Stephen J. pointed out in Mikasa (N.S.W.) Pty. Ltd. v. Festival Stores [1972] HCA 69; (1972) 127 CLR 617, at pp 660-661, such a merely descriptive use of the past participle is "common enough", it "is not the past tense ..., it is neutral in temporal meaning and applies equally to the future as to the past" (see, also, per Murphy J., Kathleen Investments (Aust.) Ltd. v. Australian Atomic Energy Commission [1977] HCA 55; (1977) 139 CLR 117, at p 159). When the word "formed" is so understood, it affords no basis for excluding the formation or incorporation within the limits of the Commonwealth of trading and financial corporations from the scope of the legislative power granted by the second limb of par.(xx). To the contrary, it tends to focus attention upon that aspect of the grant of power.
6. The other main argument in support of the exclusion of incorporation from the ambit of the legislative power was based on the suggested authority of Huddart, Parker & Co. Proprietary Ltd. v. Moorehead [1909] HCA 36; (1909) 8 CLR 330, disinterred and selectively dissected for the occasion. In that case, the Court (Griffith C.J., Barton, O'Connor and Higgins JJ.; Isaacs J. dissenting) held that the provisions of ss.5 and 8 of the Australian Industries Preservation Act 1906 (Cth) were ultra vires the Parliament. The basis of that decision was their Honours' conclusion that the grant of legislative power in s.51(xx) with respect to trading or financial corporations should be narrowly construed as excluding any general legislative power to regulate or control the actual conduct and activities of such corporations (see, in particular, per Griffith C.J. at pp 352-354; per Barton J. at pp 364-366; per O'Connor J. at pp 371-374; per Higgins J. at pp 413-414). That narrow construction of s.51(xx) and the actual decision in Huddart Parker were disapproved and authoritatively discarded by the Court in Strickland v. Rocla Concrete Pipes Ltd. [1971] HCA 40; (1971) 124 CLR 468. As was pointed out in Strickland (per Barwick C.J. at p 485), the judgments of Griffith C.J., Barton J. and O'Connor J. were all permeated by the doctrine of the reserved powers of the States which was "exploded and unambiguously rejected" in the Engineers' Case [1920] HCA 54; (1920) 28 CLR 129. The judgment of Higgins J. expressed a much less general, but nonetheless unacceptable, reserved powers doctrine. His Honour saw the absence of reference to intra-State trade or commerce in s.51(i) as indicating that the internal trade of a State was prima facie an "area" which was "forbidden to the Federal Parliament" (Huddart Parker, at pp 415-416). More important, his Honour's judgment was based on a since-discredited perception of a dichotomy between laws with respect to different subject-matters of legislative power which precluded the dual characterization of a particular law (ibid, at pp 410-411; Strickland, at p 510; The Tasmanian Dam Case (1983) 158 CLR 1 at pp 268-269). Not surprisingly, no direct attempt was made in the course of argument of the present case to reverse Strickland or to reinstate the decision in Huddart Parker or the discredited doctrines which it reflected. Instead, it was argued that it was possible to isolate, from the actual decision and from the reasoning upon which it was based, statements expressing a conclusion that the legislative power with respect to local trading or financial corporations conferred by the second limb of s.51(xx) did not extend to the making of laws dealing with the incorporation of such corporations. It was submitted that Huddart Parker survives as authority for that conclusion.
7. The question whether the legislative power conferred by the second limb of
par.(xx) extends to laws dealing with incorporation
was not directly involved
in Huddart Parker. It was dealt with in the judgment of the majority Justices
in the course of what Barwick
C.J. described in Strickland (at p 490) as the
"fundamental" error of "setting out to decide at one blow the full ambit of a
constitutional
power". Their Honours' conclusion that the legislative power
conferred by the paragraph did not extend to laws dealing with incorporation
flowed from a view that the second limb of par.(xx) conferred legislative
power only with respect to trading or financial corporations
formed under or
by the law of a State. The basis of the majority view in that regard was a
reading of the words "corporations formed
within the limits of the
Commonwealth" as meaning corporations "formed under State laws" (see per
Griffith C.J. at pp 348-349; per
Barton J. at p 362; per O'Connor J. at p
369; and per Higgins J. at p 412). That constrictive reading of those words
cannot be
divorced from the discredited doctrine of the reserved powers of the
State in the case of Griffith C.J., Barton J. and O'Connor J.
or the mistaken
perception of a dichotomy between laws with respect to different grants of
legislative power in the case of Higgins
J. Thus, the critical sentence in the
judgment of Griffith C.J. (at pp 348-349) reads: "The formation and regulation
of corporations
in general is one of the matters left to the States, and in my
judgment the words 'formed within the limits of the Commonwealth'
mean formed
under State laws" (emphasis added). Moreover, as Barwick C.J. pointed out in
Strickland (at p 488) in comments with which
McTiernan J. and Walsh J. agreed,
the conclusion of the majority Justices in Huddart Parker to the effect that
the expression "formed
within the limits of the Commonwealth" in par.(xx) was
apt to include only corporations formed according to the laws of the States
was "clearly" wrong. Regardless of whether the legislative power conferred by
the second limb of par.(xx) extends to incorporation,
there are other
legislative powers pursuant to which the Parliament might make provision for
the formation or incorporation within
the Commonwealth of a trading or
financial corporation:
"There is s.122 granting legislative powerIn these circumstances, what was said about incorporation in the majority judgments in Huddart Parker cannot properly be divorced from the reasoning which permeated them. The attempt to restore partial validity to those judgments must be rejected.
with respect to the Territories. Section
51(i.) for instance has been found a source
of power to create a trading corporation.
See Australian National Airways Pty. Ltd. v.
The Commonwealth (No. 2) [1946] HCA 10; ((1945) 71 CLR
115). Corporations formed under any power by
the Commonwealth or under Commonwealth
legislation are clearly corporations formed
within the limits of the Commonwealth. Had
their Honours of the majority in Huddart,
Parker & Co. Pty. Ltd. v. Moorehead included
these corporations in, rather than excluded
them from, the ambit of par.(xx.) some of
the difficulties which arise from their
interpretation of par.(xx.) might have become
apparent." (ibid)
8. The dissenting judgment of Isaacs J. in Huddart Parker was not affected by
acceptance of a formal reserved powers doctrine.
Nonetheless, his Honour
reached the conclusion (at p 394) that the "creation of corporations and their
consequent investiture with
powers and capacities was left entirely to the
States." Nor, in his Honour's view, did the second limb of par.(xx) confer
legislative
power with respect to the objects, powers, capital, internal
administration or liquidation of the corporations to which it refers.
All that
par.(xx) conferred was legislative power with respect to the external dealings
of such corporations with other persons.
In his Honour's words (at p 395):
"The power does not look behind the charter,In other words, par.(xx)'s grant of legislative power with respect to local trading or financial corporations does not extend to laws dealing with them as such, that is to say, with their existence, their essential features or their internal management as distinct from laws dealing with their external "conduct ... in relation to outside persons" (ibid, at p 396). A careful examination of Isaacs J.'s judgment discloses no acceptable reason for such a strangely distorted construction of the words of the second limb of the paragraph.
or concern itself with purely internal
management, or mere personal preparation to
act; it views the beings upon which it is to
operate in their relations to outsiders, or,
in other words, in the actual exercise of
their corporate powers, and entrusts to the
Commonwealth Parliament the regulation of
the conduct of the corporations in their
transactions with or as affecting the public"
(his Honour's emphasis).
9. Isaacs J.'s view that the Parliament's legislative power with respect to local trading or financial corporations did not extend to laws dealing with the internal procedures or management of such corporations clearly influenced his conclusion that incorporation was beyond the reach of par.(xx). "(F)ederal incorporation", his Honour wrote (at pp 393-394), "necessarily includes a granting of all capacities and the enactment of all ancillary provisions for internal procedure, even though these matters would otherwise be exclusively within State jurisdiction". While Isaacs J.'s conclusion that laws with respect to the internal management of local trading or financial corporations were beyond the ambit of a power to make laws with respect to such corporations was largely left as a matter of assertion, he did advance a number of related reasons for construing par.(xx)'s grant of power as not extending to incorporation. In particular, his Honour was influenced by the presence of the word "formed" in the paragraph and the consideration that a corporation is, by its nature, a legal conception existing only in contemplation of law. I have already expressed my reasons for rejecting the argument that the word "formed" should be construed as confining the reach of the legislative power to corporations which are already in existence at the time of application of the relevant law. The fact that the local trading or financial corporations to which par.(xx) refers are legal conceptions which are created by, and exist only in the contemplation of, law seems to me to support an expansive rather than a restrictive construction of a legislative power conferred "with respect to" such corporations. His Honour asserted (at p 393) that when "a power to create corporations ... was intended to be given it was expressly mentioned", referring to the "Banking" power (par.(xiii)). This assertion seems to me, with respect, to be little different from the fallacious view that the plenary grants of legislative power contained in s.51 should be read down so as to prevent overlapping and produce complete consistency between them. It is, in any event, simply wrong. Many of the grants of legislative power in s.51 include power to create corporations notwithstanding that incorporation is not "expressly mentioned". Thus, it has been held that the very first of those grants (i.e. with respect to inter-State trade and commerce), which contains no mention of either corporations or incorporation, confers legislative power to create a corporation (see Australian National Airways Pty. Ltd. v. The Commonwealth [1945] HCA 41; (1945) 71 CLR 29; Strickland, at p 488).
10. Isaacs J.'s judgment in Huddart Parker was that of a sole dissentient. His Honour's artificially restricted construction of par.(xx) as relating only to the conduct of corporations in their transactions with or as affecting the public has not been endorsed by any of the judgments in Strickland or subsequent cases. In my view, it is mistaken. To deny that laws dealing with the capacities, the capital, the internal management or the liquidation of local trading or financial corporations fall within the scope of a legislative power with respect to such corporations seems to me to involve a denial that the words of the constitutional grant of legislative power mean what they say. Once that conclusion is reached, Isaacs J.'s judgment offers no acceptable support for a conclusion that the legislative power conferred by par.(xx) does not extend to incorporation. To the contrary, much of his Honour's judgment is concerned with demonstrating the impracticability of separating legislative powers with respect to the powers, internal management and liquidation of corporations from a legislative power with respect to incorporation.
11. Reference should be made to two subsidiary arguments advanced in favour of the view that laws dealing with incorporation were beyond the ambit of par.(xx). The first can be shortly disposed of. It was to the effect that that view is supported by what was said in the course of the Convention Debates and by contemporary commentators (see, in particular, Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901), p 607 198 but cf. Sir Robert Garran, "Memoranda on Constitutional Questions", in Commonwealth Parliamentary Papers, (1934-1937) vol.II, p 73). The first answer to that argument is that the few brief references in the Convention Debates are far from compelling (see, e.g., Convention Debates (Adelaide 1897) vol.III, p 439) and one can point to contrary statements in early authority (see W. Harrison Moore, The Constitution of the Commonwealth of Australia, (1902), at p 148). The second answer is a more fundamental one. Reference was made to it at the commencement of this judgment. It is that it is not permissible to constrict the effect of the words which were adopted by the people as the compact of a nation by reference to the intentions or understanding of those who participated in or observed the Convention Debates (see Breavington v. Godleman [1988] HCA 40; (1988) 62 ALJR 447, at p 477; [1988] HCA 40; 80 ALR 362, at p 412).
12. The second subsidiary argument was, as I followed it, essentially an appeal to convenience. It was said that the words "trading or financial" in par.(xx) significantly restrict the corporations to which the grant of legislative power extended. That being so, it would be productive of difficulty and inconvenience to construe par.(xx) as conferring a legislative power with respect to the incorporation of those corporations only. One answer to this argument is that it assumes an unduly restrictive connotation of the phrase "trading or financial corporations" in par.(xx). As the judgment of a majority of the Court in Fencott v. Muller [1983] HCA 12; (1983) 152 CLR 570, at pp 601-602, makes plain, that composite phrase is not to be narrowly or technically construed. Indeed, reference to writings current at the time of Federation lends strong support for the view that the phrase "trading or financial corporations" in par.(xx) should be construed as being adequate to encompass companies formed for the purpose or engaged in the pursuit of profit as distinct from the special classes of company which were seen as falling outside the scope of ordinary company law (see, e.g., Lindley, A Treatise on the Law of Companies, 5th ed. (1889), p 10: "Companies formed for merely scientific, literary, artistic, or charitable purposes, and not with any view to the acquisition of gain or the avoidance of loss by themselves or their members do not fall within the scope of this treatise ..."). So understood, the exclusion from the scope of the legislative power of the special classes of corporation which are not, for relevant purposes, trading or financial corporations does not seriously impair the competence of the national Parliament to do that which Professor Harrison Moore saw (at p 148), in 1902, as being "of course" authorized by par.(xx), namely, "to make a Companies Law for the whole of the Commonwealth". In any event, there is a more complete answer to the argument of inconvenience based on the consideration that the grant of legislative power with respect to local trading or financial corporations does not extend to all corporations. It is that, while that consideration might well be seen by the Parliament as calling for restraint in the exercise of the legislative power, it does not provide any legal justification for denying the generality of a plenary grant of legislative power with respect to the designated class of corporation. If even further answer to an argument based upon the alleged inconvenience of uniform companies legislation in relation to trading and financial corporations be needed, it is plain enough. It is that the advantages of such national companies legislation with respect to such corporations seem to me overwhelmingly to outweigh the alleged inconvenience.
13. It follows from what has been said above that I am of the view that the
legislative power which the second limb of par.(xx)
confers upon the
Parliament with respect to local trading or financial corporations extends to
authorize the making of laws governing
the formation or incorporation of such
corporations. That is the effect of the words of the Constitution when they
are construed in accordance with the principles applicable to the construction
of a plenary grant of legislative power.
The argument to the contrary
propounds an unacceptably narrow and technical construction of those words and
attracts the criticism
expressed by Dixon J. in the Australian National
Airways Case (at p 81):
"It plainly ignores the fact that it is aDixon J.'s above comments were made in rejecting an argument that the legislative power with respect to inter-State trade and commerce, which contains no mention at all of corporations or incorporation, did not authorize the making of a law creating a corporation to conduct a transport service for inter- State trade. They are applicable a fortiori to the argument that the express grant of legislative power with respect to trading or financial corporations formed within the limits of the Commonwealth does not encompass the making of a law with respect to the formation within the limits of the Commonwealth of such corporations.
Constitution we are interpreting, an
instrument of government meant to endure and
conferring powers expressed in general
propositions wide enough to be capable
of flexible application to changing
circumstances. It confuses the unexpressed
assumptions upon which the framers of the
instrument supposedly proceeded with the
expressed meaning of the power. ... It is
only by importing a limitation into the
descriptive words of the power that such a
law can be excluded."
14. If the conclusion to which I have come had been reached by a majority of the Court, it would be necessary to embark upon an examination of the particular provisions of the Corporations Act 1989 (Cth) which are specified in the two questions before the Court. The conclusion of the other members of the Court that the legislative power conferred by par.(xx) does not extend to laws dealing with incorporation makes it unnecessary that I embark upon that exercise. Accordingly, I would answer the questions before the Court by saying that the sections of the Corporations Act 1989 to which they refer are within the legislative power conferred by s.51(xx) of the Constitution at least to the extent that they are laws with respect to the incorporation within the limits of the Commonwealth of trading or financial corporations.
ORDER
Answer the questions in the stated case as follows:(3) and (4) and sections 156 to 158 of the Corporations Act 1989 invalid insofar as they purport to apply to a company registered under Division 1 of Part 2.2 where the statement referred to in secion 153(3) or (5) whether or not the statement also states as mentioned in section 153(2)?
1. Are any of sections 114 to 125, section 155(1),
Answer: Yes. All of them.as laws with respect to trading and financial corporations formed within the limits of the Commonwealth within the meaning of section 51(xx) of the Constitution?
2. Are sections 112 and 113 of the Corporations Act 1989 valid
Answer: No. Neither of them.
The defendant to pay the plaintiffs' costs of the stated case.
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