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High Court of Australia Transcripts |
Last Updated: 8 May 2006
IN THE HIGH COURT OF AUSTRALIA
Office of the
Registry
Sydney No S592 of 2005
B e t w e e n -
STATE OF NEW SOUTH WALES
Plaintiff
and
COMMONWEALTH OF AUSTRALIA
Defendant
Office of the Registry
Perth No P66 of 2005
B e t w e e n -
STATE OF WESTERN AUSTRALIA
Plaintiff
and
COMMONWEALTH OF AUSTRALIA
Defendant
Office of the Registry
Adelaide No A3 of 2006
B e t w e e n -
STATE OF SOUTH AUSTRALIA
Plaintiff
and
COMMONWEALTH OF AUSTRALIA
Defendant
Office of the Registry
Brisbane No B5 of 2006
B e t w e e n -
STATE OF QUEENSLAND
Plaintiff
and
COMMONWEALTH OF AUSTRALIA
Defendant
Office of the Registry
Brisbane No B6 of 2006
B e t w e e n -
AUSTRALIAN WORKERS UNION
First Plaintiff
AUSTRALIAN WORKERS UNION OF EMPLOYEES QUEENSLAND
Second Plaintiff
and
COMMONWEALTH OF AUSTRALIA
Defendant
Office of the Registry
Sydney No S50 of 2006
B e t w e e n -
UNIONS NSW AND QUEENSLAND COUNCIL OF UNIONS
First Plaintiffs
PUBLIC SERVICE ASSOCIATION AND PROFESSIONAL OFFICERS’ ASSOCIATION AMALGAMATED UNION OF NEW SOUTH WALES AND NEW SOUTH WALES LOCAL GOVERNMENT, CLERICAL, ADMINISTRATIVE, ENERGY, AIRLINES & UTILITIES UNION AND ELECTRICAL TRADES UNION OF AUSTRALIA, NEW SOUTH WALES BRANCH AND NATIONAL UNION OF WORKERS, NEW SOUTH WALES BRANCH AND NEW SOUTH WALES TEACHERS FEDERATION AND QUEENSLAND TEACHERS UNION OF EMPLOYEES AND COMMUNICATIONS, ELECTRICAL, ELECTRONIC, ENERGY, INFORMATION, POSTAL, PLUMBING AND ALLIED SERVICES UNION – QUEENSLAND BRANCH (CEPU ELECTRICAL DIVISION)
Second Plaintiffs
and
COMMONWEALTH OF AUSTRALIA
Defendant
Office of the Registry
Melbourne No M21 of 2006
B e t w e e n -
STATE OF VICTORIA
Plaintiff
and
COMMONWEALTH OF AUSTRALIA
Defendant
GLEESON CJ
GUMMOW J
KIRBY J
HAYNE
J
CALLINAN J
HEYDON J
CRENNAN
J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON MONDAY, 8 MAY 2006, AT 10. 17 AM
(Continued from 5/5/06)
Copyright in the High Court of Australia
__________________
GLEESON CJ: Yes, Mr Solicitor for Western Australia.
MR MEADOWS: May it please the Court. On Friday afternoon I had taken the Court to Schedule 4, clause 24 of the Amendment Act to show that organisations that had been registered under the Act were continued and I was taking the Court to clause 30 of Schedule 1 of the Act as amended.
GLEESON CJ: What page of the print?
MR MEADOWS: It is at page 713, your Honour.
Clause 30 provides that the Commission may cancel the registration of an
organisation in certain
circumstances, and we would say not until after three
years because of the provision which I have taken the Court to, and if one
goes
down to clause 30(1)(c)(v), if:
the organisation is not, or is no longer, a federally registrable association.
So there is a three-year moratorium. At the end of that, the Commission could cancel the registration of an organisation and if no such application is made, then that organisation would continue to be an organisation for the purposes of the Act.
KIRBY J: Now, this is the federal organisation?
MR MEADOWS: Yes, your Honour.
KIRBY J: There are three structures: one is that there is an entirely separate federal and State organisation; another is that there is a federal organisation and a State branch which doubles up as a State organisation; and I think there is a third variant on this.
MR MEADOWS: I am dealing here with
federally registrable associations, which is a defined term, and the point is
that some of the organisations
which might have come
within the old Act, or
the Act prior to the amendment, may not be federally registrable associations
and therefore liable to have
their registration cancelled.
KIRBY J: But what business is it of the States if the Federal Parliament cancels a federally registrable organisation? You are only concerned if they start cancelling your organisation.
MR MEADOWS: The point of this, your Honour, is that this has its foundation now in the corporations power, as opposed to the industrial relations power, and if I could come to this point, I am working towards this. Furthermore, sections 26 and 27 of Schedule 1, which appears at pages 707 and 708, deal with the registration and incorporation of federally registrable associations.
KIRBY J: When you have conciliation and arbitration, according to the conventional idea of arbitration, for example, you need organisations. They do the battle before the arbitrator or the conciliator. Now, what is the foundation for these organisations? Is that retained?
MR MEADOWS: No, it now has its foundation in the corporations power as, opposed to section 51(xxxv), and this is - - -
KIRBY J: So there is not a dual constitutional support for it?
MR MEADOWS: No, there is not, and
that is our point, that now that the Commonwealth has moved away from reliance
on 51(xxxv), the constitutional
underpinning of the Act for a provision such as
section 783 and its associated provisions can no longer be characterised as
a law
with respect to any head of Commonwealth legislative power. That is
because the constitutional underpinning of the predecessor to
section 783
depended on the nature of the legislative power contained in
section 51(xxxv), and my learned friend, Mr Hutley, referred
to
Jumbanna and the cases following that, and I would refer in particular to
the R v Bowen; Ex parte AMWSU [1980] HCA 42; 144 CLR 462, and to
what Justice Gibbs said at pages 471 to 472, and this is at about
point 2 on page 471:
It was established early in the history of federation, by the Jumbunna Case, that it is incidental to conciliation and arbitration for the prevention and settlement of interstate industrial disputes to provide for the registration and incorporation of employees or employers. It followed from that decision, and is settled, that the Parliament has power to regulate the affairs of industrial organizations registered under the Act - - -
KIRBY J: The Industrial
Relations Commission continues – is it clear that there is not, for
the purposes of the continuing function of
the Industrial Relations Commission,
which is in a sense a creature of
section 51(xxxv) - - -
MR MEADOWS: This Act eschews any reliance on 51(xxxv) in this area.
KIRBY J: Does it seek to regulate the industrial organisations as corporations?
MR MEADOWS: That is the point that we are making that whilst it - - -
KIRBY J: Are they all corporations or are some of them - - -
MR MEADOWS: By virtue of their registration they are incorporated. If you look at 26 and 27 of the schedule that I have just taken you to, by virtue of registration there is incorporation. So what we are saying is that the constitutional underpinning is lost once reliance on section 51(xxxv) is disclaimed. Unlike the industrial relations power, the corporations power does not empower the Commonwealth Parliament to legislate for the establishment of a corporation for a particular purpose and to regulate its membership for that purpose. The authority for that, of course, is the Incorporation Case.
KIRBY J: That is because of the past participle in the grant of power, “formed”.
MR MEADOWS: It is and on the authority of the Incorporation Case the Commonwealth Parliament could not legislate to establish a corporation for a particular purpose, whereas under section 51(xxxv) it could because it was incidental to the conciliation and arbitration power.
GUMMOW J: It is only a question of 51(xxxix), is it not, Mr Solicitor?
MR MEADOWS: Yes, 51(xxxv) read with 51(xxxix).
GUMMOW J: Yes, but 51(xx) read with 51(xxxix), too.
KIRBY J: It cannot leap.
GUMMOW J: It would only be incorporation - - -
MR MEADOWS: It cannot be an incidental power.
GUMMOW J: Well, that is the question.
MR MEADOWS: Our submission is that it cannot be an incidental power to the corporations power to allow for incorporation for a purpose such as this and that the Incorporation Case stands for - - -
HAYNE J: Do I understand this then to be a challenge to what was an assumed premise of Mr Hutley’s argument. If you go to the transcript at 7470 and following, line 7470 of last day’s transcript, Mr Hutley’s argument took as an assumption, I think without conceding, that it was within power to regulate the means of bargaining between a constitutional corporation and its employees by regulating the industrial organisations. This is a challenge to that assumption, is that right?
MR MEADOWS: We take a step back from that. What we are talking about is the – well, you are right in saying that he proceeded on that assumption and, as I drew your attention to on Friday, if one goes to their submissions, it is consistent with the submission that I have put.
HAYNE J: I am not making some point that there is a concession or that it is taken off the table; I just want to understand where you are at. You are at that logically prior point?
MR MEADOWS: Yes, and, as I indicated on Friday, I think what I am saying may well be at odds with what Mr Hutley had taken as his assumption. It was an assumption only for the purposes of that argument, as your Honour has pointed out. So what we say is that whilst the provision for incorporation was supported by the exercise of the legislative power contained in section 51(xxxv), it cannot be supported by section 51(xx), and we say there is no other head of legislative power which is capable of supporting this provision.
May I now turn then to section 16 and the related sections. Before coming to terms with section 16 itself, we submit that it is important to appreciate the context in which the section appears. Section 16 purports to exclude certain State laws. What we submit is that the context tends to show that section 16 would be unnecessary if it merely indicated that other provisions of the Act were intended to cover the relevant field to the exclusion of other laws. Those provisions that we speak of are, first of all, section 17, which your Honours will find at page 25 of the Act. Section 17(1) and (3) provide that awards, workplace agreements and orders made under the Act prevail over State and Territory laws, awards and agreements, to the extent of any inconsistency.
Now, those provisions are similar in terms to the provisions in the Act as it stood prior to amendment, such as section 152(1) in relation to awards and section 170VR in relation to Australian workplace agreements. Your Honours will note that there are exceptions in subsection (2) but these are not the subject of challenge in these proceedings.
If section 16 were merely expressing an
intention that the Act deals with its subject matter exclusively, we would
submit a provision
in terms of section 17 would be unnecessary. For
example, a State law providing for the matters referred to in section 17,
we would
submit, would also be excluded by section 16(1)(a) and (b) of the
Act, being State or Territory industrial laws or “a law that
applies to
employment generally”. So section 17 has work to do independently of
section 16. Then ones goes, we would submit,
to section 18 and one
sees there a statement that:
Sections 16 and 17 are not a complete statement of the circumstances in which this Act and instruments made under it are intended to apply to the exclusion of, or prevail over, laws of the States and Territories or instruments made under those laws.
The Court will note that there is a note to that section which
points out that:
Other provisions of this Act deal with its relationship with laws of the States and Territories. For example, see clause 87 of Schedule 6.
If I could take your Honours to that, which is at
page 1079 of volume 2. Clause 87 appears in Subdivision E
of Part 7, Division 1
of Schedule 6 of the Act and that
subdivision makes provision for the transitional continuation of a common rule.
Clause 87, your
Honours will note, provides that:
Despite any other provision of this Act, this Subdivision is not intended to exclude or limit the operation of a law of Victoria that is capable of operating concurrently with this Subdivision.
So this would appear,
we would submit, to override any indication of exclusivity which might be found
in section 16 of the Act. If
I could also take the Court to
section 690 of the Act, which is volume 1 at page 503, where
there is a similar provision. Section
690 appears in Division 6 of
Part 12 of the Act. That division applies minimum conditions of employment
relating to parental leave
to persons other than “employers” and
“employees” as defined in sections 5(1) and 6(1) of the Act and
it
does so in reliance on the external affairs power. Section 690 provides
that:
This Division is intended to supplement, not to override, entitlements under other Commonwealth, State and Territory legislation and awards.
It provides an example of a provision of the Act not intended to exclude laws, that is State laws, despite section 16(1)(b). There are other provisions to similar effect and I refer to section 529 and section 638. However, I will not take your Honours to those provisions in detail.
So the effect of section 18 is that it
remains necessary to consider the particular terms of the provisions of the Act
other than
section 16 in order to determine whether those provisions are
intended to cover the relevant field. So you have the situation where
a State
law may not be excluded by section 16 of the Act but be excluded by some
other provision, and correspondingly, the State
law may appear to be excluded by
section 16 but other provisions of the Act may still be expressed to
operate without excluding the
State law. If I could turn then to
section 16 itself. Section 16(1) commences with the words:
This Act is intended to apply to the exclusion of all the following laws of a State or Territory - - -
GUMMOW J: What is the head of power that supports section 16?
MR MEADOWS: That is a good question, your Honour, without wishing to be rhetorical, but it can only be in aid of section 109, we would say. It certainly does not have as its foundation any head of power which would be found in section 51.
GUMMOW J: Section 109 is self-executed?
MR MEADOWS: We would say so, yes, and - - -
KIRBY J: But we have begun to see these provisions in federal legislation, as it were, speaking to the High Court and saying, just in case you think that this is not intended to do it we say it is intended to do it. I mean, they begin to proliferate.
MR MEADOWS: Yes, and perhaps encouraged by the Court, if I might say so, from what was said in the Native Title Case where the Commonwealth was effectively invited to express an intention to cover the field, but we would say not in the way that it has been done in section 16.
GUMMOW J: It all comes out of covering the field area of jurisprudence, I suppose?
MR MEADOWS: It does, your Honour, yes.
HAYNE J: Is it any more than an aid to construction of other provisions of the Act?
MR MEADOWS: It is to an extent, your Honour, but there are other areas where it purports to exclude State laws in circumstances where we would submit the Act does not cover the field or even enter into the field.
HAYNE J: I understand that point, and the expression of intention has a degree of complexity about it that might lead into internal difficulty in divining the intention, and I understand that point, but does one begin consideration of 16 with any larger thought than this is something that I take to account in reading the Act in understanding its operation?
MR MEADOWS: We would submit that you do, and you have to do that because of the way in which the section is expressed. It is expressed in a way where it purports to exclude State laws and it goes further than simply expressing the field or the area which this Act is designed to cover.
GUMMOW J: But you say 16 is invalid in various respects?
MR MEADOWS: Yes.
GUMMOW J: I am not saying you are right or wrong, but we have to find the root of the argument of the invalidity, and it seems to be that this is taking the covering the field test beyond what 109 permits.
MR MEADOWS: It purports to go further than section 109 in its operation would do.
GLEESON CJ: Is the proposition that it is one thing to express an intention to cover the field and another thing to purport to define the field?
MR MEADOWS: Yes, we would say that. We say that is what has happened here, and I will point to some examples of it, where even though the Act has not dealt with a particular area, section 16 purports to exclude State legislation which deals with that area.
GUMMOW J: We have had these problems with the telecommunications legislation from time to time.
MR MEADOWS: This is different from that, your Honour.
GLEESON CJ: Is this this line of country about a so-called bare attempt to exclude State laws?
MR MEADOWS: Yes, it is, and the most obvious - - -
GLEESON CJ: Which traces back to a judgment of Justice Evatt, as I recollect.
GUMMOW J: In Wenn.
MR MEADOWS: In Wenn, yes, and it also finds a manifestation in the Bayside Case.
GUMMOW J: Justice Evatt in West, I think.
MR MEADOWS: Yes, and then you have Wenn and then what was said in Bayside, which identified that as an impermissible area in which to go.
HAYNE J: Can I just go ahead to see where we are heading?
MR MEADOWS: Yes.
HAYNE J: You say there are operations of section 16 that on their face seek to exclude the operation of State laws where, as I understand it, in effect the federal Act otherwise is silent?
MR MEADOWS: Yes.
HAYNE J: So that the only intersection between federal and State law is to be found in section 16?
MR
MEADOWS: Yes, your Honour. I will take you to an immediate example.
If one goes to 16(1)(d), where there was an expression of an intention
to
exclude:
a law providing for the variation or setting aside of rights and obligations arising under a contract of employment, or another arrangement for employment, that a court or tribunal finds is unfair –
The only
provisions in the Act dealing with unfair contracts are sections 832 to 834
which your Honours will find at page 608.
GLEESON CJ: This has been a big issue in New South Wales in recent years, as you may know.
MR MEADOWS: I am sure it has, your Honour.
GLEESON CJ: There has been a lot of litigation about it.
MR MEADOWS: Yes. So sections 832 to 834 deal with unfair contracts, but only in relation to independent contractors. Your Honours will remember that these provisions are in fact a re-enactment of sections 127A to 127C of the Act as it stood prior to amendment, and these provisions were the subject of consideration in Dingjan’s Case. The point is that the power to set aside contracts is not exercisable in relation to contracts of employment between “employers” and “employees” as defined in section 5(1) and 6(1) of the Act. Rather, it is a power in relation to contracts with independent contractors.
Now, if one looks at 16(1)(d), it purports to exclude State laws which deal with unfair contracts of employment, and if I take your Honours to the Industrial Relations Act 1996 (NSW), one finds in Part 9 a provision dealing with unfair contracts.
KIRBY J: We have recently had three appeals argued on these provisions.
MR MEADOWS: Yes, but what we say section 16(1)(d) does is to purport to exclude the operation of those provisions and that is notwithstanding - - -
KIRBY J: There is a provision a little bit similar in Queensland, I think. I think we were told that in one of the cases.
MR MEADOWS: Yes, perhaps so, your Honour. I am not familiar with it myself.
KIRBY J: But in a sense this was what one might call State experimentation. It started with section 88F of the Industrial Relations Act or the Industrial Arbitration Act as it was called then.
MR MEADOWS: Yes, but my point is that the Act as amended does not deal with unfair contracts of employment, yet section 16(1)(d) purports to exclude a State law that does.
HAYNE J: Does the Act otherwise deal in any respect with enforcement of contracts struck between employers/employees?
MR MEADOWS: Certainly in terms of workplace agreements, but it does not allow for them to be set aside on the basis that they are unfair.
HAYNE J: Yes.
KIRBY J: But can it be said, if it be within power, that the purpose of this is to reduce the disparity from State to State and Territories because that is not good for the national economy and not good for corporations as a whole and that therefore this is a provision that is intending to get rid of these variations from State to State and that this is the machinery that is being used to do that?
MR MEADOWS: I suppose one can speculate that that might be why it is being done - - -
KIRBY J: There has in recent years been an attempt on the part of the Federal Parliament and government, and sometimes joint attempts, to reduce these disparities because they are economically inefficient so it is said.
MR MEADOWS: That may be, your Honour, but here the device that is being used is to exclude a State law where the Commonwealth has not sought to legislate in this area. The Commonwealth could have legislated to say a contract of employment shall not be set aside on the grounds that it is unfair, harsh or unconscionable.
KIRBY J: But then it would have to have a source in power, but assume that they said no corporation - - -
MR MEADOWS: If it was sheeted back to the employer or employee which is said to be the foundation of this legislation, maybe it did have legislative power, assuming the Commonwealth is right in its approach, but that means that whether this Act - this is the New South Wales Act - applies to employer or employee as defined, or employer or employee as undefined but generally, then that Act is sought to be excluded.
GUMMOW J: How does what was said in Bayside [2004] HCA 19; 216 CLR 595 at 627 through to 629 square with what you are submitting about section 16? I think you suggested it was consistent with your submission.
MR MEADOWS: Yes. I beg your pardon, what page was that, your Honour?
GUMMOW J: It was Bayside [2004] HCA 19; 216 CLR 595 at 627, paragraph 34 and following.
MR MEADOWS: Yes, it is consistent, we would submit, with our submission.
GUMMOW J: You say that section 16 is an instance of paragraph 37, what is being talked about there at page 268?
MR MEADOWS: Yes, your Honour.
HAYNE J: In that connection, is it important to have regard to provisions like section 351 of the Act, which provides that a workplace agreement that is in operation binds (a), (b) and (c)? That is the federal Act makes provision for the legal consequence attached to the particular kind of arrangement, using that neutrally, that it contemplates, and is there an intersection then between a provision like 351, an agreement binds (a), (b) and (c), and a provision of State law saying the agreement can be set aside, modified or varied if unfair, et cetera?
MR MEADOWS: There could clearly be an intersection with a workplace agreement, but the point, I suppose, is that in terms of the unfair contracts provision in the State Act, it goes beyond workplace agreements. Workplace agreements are agreements which are registered under this Act.
HAYNE J: Yes.
GLEESON CJ: If it were not for section 16(1)(d), what would be the scope under, for example, Industrial Relations Act 1996 (NSW) to recast a workplace agreement?
MR MEADOWS: The point about workplace agreements is that they are governed by section 17(1) and section 16(1)(d) is not necessary to protect a workplace agreement because it is protected by section 17(1).
KIRBY J: Many of these unfair contracts have been individual contracts between individuals, often company principals, directors and secretaries and so on, with the company which are subsequently said to be unfair. They have not entered the realm of workplace agreements and the hitherto machinery provisions that applied to them. They are just one-off contracts, though it is said in the employment context.
MR MEADOWS: Yes, that is so, your Honour.
KIRBY J: This Act bites at them by the general provisions of section 16(1)(d) but not by any substantive provision elsewhere in the Act.
MR MEADOWS: That is right, your Honour.
KIRBY J: The question you raise is: is that a valid law of the Federal Parliament?
MR MEADOWS: That is so.
KIRBY J: Is there any precedent in the past where a general provision of this kind has been upheld as sufficiently evidencing the will of the Parliament under section 109?
MR MEADOWS: We say not and, indeed, if one looks at what was said in the Native Title Case and subsequently, it is necessary for the Commonwealth to legislate with respect to a particular area.
KIRBY J: Can I just encapsulate what I understand to be your point? Your point is that it is not good enough to say, “We intend to be inconsistent and pass an inconsistent law”, you have to actually do it - - -
MR MEADOWS: Yes.
KIRBY J: - - - and then you can add a supplementary statement, “Well, it is our intention to cover the field by that provision”, but unless you have the provision, you do not have inconsistency within the constitutional expression.
MR MEADOWS: Well, there are accepted ways of doing it, like saying this Act applies in spite of any State law or this Act is the only law in relation to native title. These are ways it can be done, but you cannot - - -
KIRBY J: There has to be the Act in the first place.
MR MEADOWS: Yes, there has to be an Act in the first place.
KIRBY J: There has to be substantive provisions.
MR MEADOWS: Yes, and it is not permissible simply to single out a State law and say it does not apply.
GUMMOW J: In particular, looking at paragraph 16(1)(d) and looking at the New South Wales Act you referred us to, some of the operations of that New South Wales provision would not involve an exercise of concurrent legislative power by the State. There would be no Commonwealth power - - -
MR MEADOWS: Exactly, your Honour.
GUMMOW J: - - - perhaps that would touch an unfair contract between two individuals with no constitutional corporation, no interstate trade and so on.
MR MEADOWS: Between an employee and the State for example.
GUMMOW J: Yes.
MR MEADOWS: Another
illustration of the point I am making is to be found in section 16(1)(e)
dealing with:
a law that entitles a representative of a trade union to enter premises.
Now, your Honours will be familiar with the provisions of Part 15, Divisions 4, 5 and 6.
KIRBY J: You say we will be familiar with it, I think that is a little bit of an exaggeration. I once was familiar with the previous provisions.
MR MEADOWS: Yes.
KIRBY J: The previous provisions as - - -
MR MEADOWS: Well, these are the rights of entry provisions, if I might put it that way.
KIRBY J: In the past the industrial organisations registered under the Act had certain powers of entry as such, but that was propped up by the constitutional power and was incidental to the power under 51(xxxv). Now, do you tell us that in this case too that underpinning has been eschewed?
MR MEADOWS: There is a new provision in Part 15, 5 dealing with rights of entry under State occupational health and safety laws, whereas Divisions 4 and 6 are replications of what was in the Act when it was underpinned by section 51(xxxv).
KIRBY J: But that has now been removed. The underpinning is, and is only, the corporations power?
MR MEADOWS: It has and we say there are problems with that in the same vein as those to which I have already referred.
GLEESON CJ: Mr Solicitor, you had three main points.
MR MEADOWS: Yes.
GLEESON CJ: The first concerned Part 16 and section 783 and the second, which I thought you were still on, concerned the validity of section 16, an exclusion of State laws.
MR MEADOWS: Yes.
GLEESON CJ: The third concerned rights of entry, Part 15 Division 5.
MR MEADOWS: Yes, I am coming to that a bit later, but this - - -
GLEESON CJ: Right. I wanted to ask you this. You have said a couple of times in the last minute that a particular provision is an example of the kind of problem you are raising. I want to be sure that we have a comprehensive list of all the provisions in the legislation that you challenge on this ground of invalid attempt to exclude State laws, because if you merely say an example is section 16(1)(d) and another example is section 16(1)(e), that leaves us, at the end of the day, if we were attracted to your argument, knowing what you say are one or two illustrations of the problem, but we have to make orders to cover the entire problem. So at some stage before you finish, can you give us a comprehensive list of the provisions of which these are said to be examples?
MR MEADOWS: Can I say this, your Honour. First of all, we have sought to deal with that in paragraphs 23 to 39 of our written submissions - - -
KIRBY J: Yes, but can I repeat what I said, and I think Justice Hayne said, last week: we really do need all this brain power at the Bar table to spend a little of their time getting together a matrix which takes us through the comprehensive argument so that we can tick them off.
MR MEADOWS: To remove any doubt about it, your Honour, could I put in a note which identifies those provisions?
GLEESON CJ: Thank you.
HAYNE J: For my own part, I would be much assisted if that note became a joint note at some point so that we have a single set of documents that tells us what is in play.
MR MEADOWS: Yes, I am happy to arrange that, your Honour. Perhaps we could have seven days, your Honour, to do that?
GLEESON CJ: Yes, certainly. We are faced with a multiplicity of arguments, some of which may succeed and some of which may fail. If they all succeed, no problem. If they all fail, no problem. But if some succeed and some fail, we have to make orders at the end of all this.
MR MEADOWS: I appreciate that, your Honour. I was about to take your Honours to Part 15, which deals with rights of entry. There are three divisions - - -
KIRBY J: Could I just interrupt once more to ask, there were ILO treaties about union rights and rights of entry, they are not used in any way to underpin the constitutional validity of this part?
MR MEADOWS: That is right, your Honour. There is a simple reliance on section 51(xx).
KIRBY J: Were they relied on in the previous Act? There were ILO conventions which were relied on.
MR MEADOWS: Yes, but I do not think they related to rights of entry, your Honour.
KIRBY J: I see. Are they still relied on in the present Act in any way? Maybe that could be checked.
MR MEADOWS: In some areas, yes. Equal pay and conditions of employment have some reliance - - -
KIRBY J: And discrimination? There were some anti-discrimination conventions of the ILO as well.
MR MEADOWS: Yes. To come to my point, Division 4 deals with rights of entry to investigate suspected breaches; 5 deals with entry for occupational, health and safety purposes under State laws; and 6 deals with right of entry to hold discussions with employees. In respect of each of those rights of entry, the right of entry is conferred on an official of an organisation, that is, an organisation registered under this Act, who holds a permit or some other right of entry document.
If one looks at 16(1)(e), one sees an intention to exclude a State and Territory law “that entitles a representative of a trade union to enter premises”. A “trade union” is defined in section 4(1) at page 14 to mean “an organisation of employees”, et cetera, and it is not confined to an organisation registered under this Act.
KIRBY J: Would one not read that as an organisation of employees which is of federal concern and not an organisation of employees created, for example, under the Trade Union Act (NSW), if that still operates?
MR MEADOWS: In our submission, it is quite clear that “trade union” in this definition is much wider than an organisation under this Act, and includes employee associations registered under State and Territory laws.
KIRBY J: Well, (b) purports to make that clear in the definition of “trade union”.
MR MEADOWS: Now, the terms “employee” and “employment” in the definition - - -
HAYNE J: The point is taken out of play altogether by clause 2, Schedule 2. It is one of those listed items.
MR MEADOWS: That is what I was going to take your Honours to. It is used in its ordinary sense. Furthermore, in Part 15 of the Act which contains the provisions of the Act relating to the regulation of rights of entry by members of organisations, references to “employer”, “employee” and “employment” also have their ordinary meaning, and once again, one goes to clauses 2, 3 and 4 of Schedule 2 to discern that. So you have the situation where what section 16 purports to exclude is any law relating to a right of entry by a representative of a trade union even though this Act does not speak to rights of entry by officials of trade unions other than those that are officials of a registered organisation under this Act.
We would submit that the other provisions - and we will detail this in our note, this is 16(1)(a) through to 16(1)(c) – also clearly apply to laws which apply to employees and employers generally.
KIRBY J: Can I go back to Justice Gummow’s earlier question of 51(xx) plus 51(xxxix)? Can it be said that this provision dealing with trade unions that are not registered organisations is incidental to a determination of the Federal Parliament to make its regulation of the organisations effective and universal?
MR MEADOWS: This purports to exclude laws about trade unions that have nothing to do with the Commonwealth’s domain, if I might put it that way. We are talking about trade unions registered under State laws.
KIRBY J: But if you have a multiplicity of organisations barging into properties and that can only cause confusion and inefficiency, is this the purpose?
MR MEADOWS: That may be so, but not even the Commonwealth would suggest that you cannot have State trade unions in respect of matters not covered by Commonwealth law.
GLEESON CJ: Mr Solicitor for the Commonwealth, when Mr Meadows puts in his note within seven days about individual provisions to which he says this argument applies, we will need a note from you within seven days after that putting your argument in relation to each of those specific provisions, because it may be for all we know that Mr Meadows might contend that a particular provision that he has not yet mentioned is covered by the same type of argument and there might be an issue about that.
MR BENNETT: Yes, if your Honour pleases.
MR MEADOWS: I am conscious of the time restraints that I am under here, your Honour, otherwise I would be more elaborate. You are not encouraging me.
GLEESON CJ: No, I am not attempting to invite you to be elaborate.
MR MEADOWS: So then one of course
goes to section 16(4), which provides that the “Act is intended to
apply to the exclusion of”
such laws as are “prescribed by
regulations”. Now, there is no limit, we would submit, on the area of
regulation which
could be covered by virtue of subsection16(4), and effectively,
we would submit that it allows for the exclusion of the law of a
State by
regulation and no more, and that this is the view of the Commonwealth is
exemplified by regulations that have now been made
under the Act, and I refer to
the Workplace Regulations 2006 which I trust your Honours have access to.
If I could take your Honours
to page 24, Division 1 of
Part 1 in Chapter 2 deals with the exclusion of persons insufficiently
connected with Australia. The regulation
provides that:
For subsection 12(1) of the Act, a provision of the Act specified in an item of Table 1.1 does not apply to a person or entity specified in the item.
So what the Commonwealth has done here, the
Commonwealth Executive of course, is to pass a regulation which simply says that
a State
law, and I am dealing specifically with item 1 where it
says:
All provisions of the Act, other than:
(a) section 16; and
(b) any definition of general application in section 4, or another provision, that relates to section 16 –
is not to apply.
GUMMOW J: But that is not made in reliance upon 16(4), is it? This regulation, what regulation-making power is relied on?
MR MEADOWS: Well, in our
submission, it is made under subsection 12(1), which shows that
section 16 is intended to have an operation which
is independent of other
provisions of the Act. If one goes then to 1.2, one sees that in relation to
–and if I could go to
subclause (4) – and this is dealing
with termination of employment:
Subsection 16(1) –
this is a regulation under
section 16(4) –
does not apply to a law of a State of Territory (including a law relating to appeals) to the extent to which it relates to a termination of employment that occurred before the reform commencement.
HAYNE J:
You say that is a 16(4) regulation. Is it not a 16(2)(b)
regulation?
MR MEADOWS: Yes, I am sorry, it is, your Honour. I beg your pardon.
GUMMOW J: Regulation 1.4.
MR MEADOWS: Yes.
KIRBY J: If it is 16(2)(b) then that is just an ordinary machinery provision, is it not? You are still left with your argument that there is no substantive law to bump out the State unfair contracts laws but if there is a basis in the Constitution for that then 16(2)(b) merely allows a regulation to provide for transitional cases, which is what regulation 1.2(4) and (5) do and (5), for example, says it does not relate “to proceedings that commenced before the reform”.
MR MEADOWS: But what follows from that, your Honour, is that it is clearly the Commonwealth’s view that in respect of other contracts or proceedings, I should say, in respect of contracts subsequent to that, they are excluded.
KIRBY J: I think that is clear from the substantive provision.
MR MEADOWS: Yes.
KIRBY J: But you say if there is any doubt the regulations show the purpose clearly.
MR MEADOWS: We would submit so.
GUMMOW J: Before we leave 1.4, employer/employee - is that in the ordinary meaning or the meaning of the Act? I do not think the schedule will tell us, will it?
MR MEADOWS: Yes, if you go over the page to page 28, your Honour, you will see that those terms have their defined meaning.
GUMMOW J: Right. Well, 1.4 could be valid, could it not? It could be a valid exercise of power if you read down 16(4).
MR MEADOWS: If you read it down - - -
GUMMOW J: Yes.
MR MEADOWS: We say that in its terms that is not open.
My learned friend, Mr Jackson, will address further submissions in respect
of that
particular issue and perhaps given the time constraints I might move
then to the provisions of the Act dealing with rights of entry.
Our submissions
in respect of this particular provision are relatively short, but Part 15,
Division 5 regulates the right to enter premises under State occupational
health and safety laws. Such a law is defined by section
737 to
mean:
a law of a State or territory prescribed by the regulations for the purposes of this definition.
So far, regulation 15.1 of the Workplace Relations Regulations has prescribed three laws being the relevant legislation in Western Australia, New South Wales and Victoria. My learned friend, the Solicitor for New South Wales, omitted to refer to Victoria but there is legislation referred to in that regulation from Victoria. The details are set out in paragraph 42 of our submissions.
This is a new provision
that had no counterpart in the old Act and it restricts the exercise of rights
of entry under State laws
and it does so by, first of all, setting a number of
prerequisites to the right of entry. First of all, if I could just take
your
Honours to section 756 and to note that the limitation which was
provided for in Division 5 of Part 15 relates to entry by an official
of an organisation. It does not apply to other persons wishing to exercise a
right of entry under a State occupational health and
safety law; it is limited
to officials of organisations. Section 756 provides that:
An official of an organisation . . . must not exercise that right unless the official:
(a) holds a permit under this Part; and
(b) exercises the right during working hours.
There are
provisions earlier in Part 15 dealing with the obtaining of
permits.
KIRBY J: Who gives the permit?
MR MEADOWS: It is the Registrar.
KIRBY J: Can it be done quickly, if you have a mine disaster, for example?
MR MEADOWS:
Section 740 deals with the issue of permits:
An organisation may apply to a Registrar for the issue of a permit –
and there are certain criteria that have
to be met. It could take some time, I imagine, to obtain a permit. I imagine
the Act envisages
that those people who are with registered organisations who
are going to perform this function will apply for a permit in advance
and
maintain it.
KIRBY J: What happens at the moment, or under the previous law?
MR MEADOWS: There was no provision dealing with occupational health and safety laws.
KIRBY J: Does the Commonwealth have its own big team of health and safety inspectors?
MR MEADOWS: There is no coverage of occupational health and safety in this Act or in any other Act.
KIRBY J: So that is going to be outsourced or privatised, is it?
MR MEADOWS: I may be going too far saying that that there is no occupational health and safety laws enacted by the Commonwealth, but certainly State laws in this area are still intended to operate.
KIRBY J: But all they have to do is get a permit, is that it?
MR MEADOWS: Yes.
KIRBY J: That does not sound terribly burdensome.
MR MEADOWS: There are some quite restrictive provisions about people who can obtain permits, but leave that aside. One of the points, I suppose, that needs to be made at the outset that irrespective of the validity of section 755 in its entirety for practical purposes these provisions would require an official of an organisation to obtain a permit in order to enter premises under an occupational health and safety law in the circumstances envisaged in section 755.
KIRBY J: As I read the written submissions, the permits have a number of requirements and a number of them relate to not having any convictions and so on and I rather read between the lines that the object was to stop people who have had convictions for any violence or anything of that kind getting federal permits to go into places of accidents and so on, stirring things up. Is that a correct understanding of the objective?
MR MEADOWS: I think your Honour has put your finger on what this particular provision is about. It is about limiting the capacity of trade union representatives to enter onto sites involving the activities of a constitutional corporation, the Commonwealth and others.
KIRBY J: I am sure there are ILO conventions on this subject.
MR MEADOWS: Well, the point is though that the
foundation for this particular division is to be found in section 755 and
it refers to aspects
which are related to constitutional corporations. So, for
example, (1)(a), that:
This Division has effect in relation to a right to enter premises under an OHS law if:
(a) the premises are occupied or otherwise controlled by:
(i) a constitutional corporation; or
(ii) the Commonwealth –
So unless you
had a very discerning constitutionally-savvy trade union representative who
could tell that the premises were occupied
by a constitutional corporation, the
overall effect of this provision would be that the representative should have a
permit otherwise
they may fall foul of these provisions.
KIRBY J: Yes, but the complaint we heard last week was that virtually every enterprise is going to be a constitutional corporation and, therefore, that you do not have to be all that savvy. It is only going to be very small corner shops that are not going to be affected by this.
MR MEADOWS: Yes, but one would then have to know the extent to which the right of entry that was being exercised was going to interfere with some activity of the constitutional corporation which supported the operation of the law. Our primary submission here is that the connection between these itemised matters is too tenuous to support this particular law.
KIRBY J: But why?
MR MEADOWS: Well, for example, if one goes to premises that are occupied or otherwise controlled by a constitutional corporation, the right of entry that may be being exercised may have nothing whatever to do with the constitutional corporation that owns or occupies those premises. It may be to look at the compliance with occupational health and safety provisions by somebody who is working on that site who may not be a constitutional corporation.
KIRBY J: But if you focus on the trading and business activities of the corporation, as some members of this Court have said is the proper approach, then why would you not say that an aspect of their trading and business activities is being free from strangers coming in and stirring things up?
MR MEADOWS: I think you have just put your finger on - - -
KIRBY J: I mean, we have to face the fact that in this legislation this is being restricted but in other legislation, if the submission of the constitutional power is right, it can be made compulsory. The corporation must allow trade unions and must allow people concerned with industrial safety to come in. We have to look at how it operates not only in this legislation, but in possible future legislation.
MR
MEADOWS: The point is, your Honour, that these matters that are
referred to in subsection (1) do not refer to the trading activities of
a
trading corporation being adversely affected or interfered with. It simply
rests on the fact that the premises are occupied or
otherwise controlled by the
constitutional corporation. If one goes, say, to (1)(d), you will see that it
refers to if:
the right relates to requirements to be met by:
(i) a constitutional corporation or the Commonwealth in its capacity as an employer –
It does not necessarily have anything to do with the trading
activities or have any significant connection to the trading activities
of the
corporation. It may do, but it is not limited to that. If one goes further, if
one looks at (d)(ii), you will see that it
is sufficient to involve the
operation of this particular provision if:
the right relates to requirements to be met by:
. . .
(ii) an employee of a constitutional corporation or the Commonwealth –
So this is an example
of what Justice McHugh referred to in Dingjan’s Case
[1995] HCA 16; 183 CLR 323 at 370 where he referred to:
a law that does no more than make some activity of a s 51(xx) corporation the condition for regulating the conduct of an outsider - - -
KIRBY J: Given the
problem, if I can say so, in every case of a law with respect to and
characterisation and that that involves matters of
judgment and where the line
is drawn, but why is it not incidental to the trading and business activities of
a corporation to regulate
or seek to regulate matters such as the intrusion of
trade unions into the property or in other legislation the requirement that
trade unions shall come into the property to look at issues of safety and so
on?
MR MEADOWS: Because it is not necessarily related to the trading activities. That is the whole point of my argument, that if you look at section 755, it is not directed at the trading activities of trading corporations, either in a significant degree or in any degree; it is simply related to a connection with a trading corporation. So we would submit that when it talks about an employee of a corporation, and the rights relate to the requirements of an employer of a constitutional corporation, that may have nothing to do with the activities of the constitutional corporation. Likewise, with a contractor, which is (d)(iii) - - -
KIRBY J: Well, of course it has something to do with the activities. Employment is necessary for the making of the profits, which is the whole point of the trading activities. So it has something. The question is whether that something is enough in a power which is addressed to things and people, not to purposes.
MR MEADOWS: That really is my point. We submit it is not enough when you look at this list of factors which are said to be sufficient to underpin this particular law. I suppose in a way we are saying that it might be open to the Commonwealth to enact a law which requires the obtaining of a permit in some circumstances, but this law, or these provisions, have too tenuous a connection with constitutional corporations and the Commonwealth, we would say, in order to support the validity of them.
Perhaps if I could just complete my reference to Dingjan’s Case and perhaps simply refer to paragraph 56 of our written submission where we make this point and refer to the judgments of Justice Brennan at 338, Justice Dawson at 347 and Justice Toohey at 353 to 354 to like effect. If it please the Court, they are our submissions.
GLEESON CJ: Thank you, Mr Solicitor.
Mr Solicitor-General for Queensland.
MR SOFRONOFF: May it
please the Court. We wish to take up the observations of your Honours
Justice Gummow and Justice Hayne on the first day of
the hearing of
the appeal regarding the significance of the state of company law at Federation.
We wish to briefly look at that history
and submit that the history explains the
apparent brevity of the discussion at the Conventions relating to the
corporations power,
and, indeed, makes that discussion, despite its brevity,
intelligible.
We wish to use that history to identify the subject to which the language of subsection (xx) is directed, to place it into its historical context, indeed to seek to identify the mischief to which the language was then directed, and then we will seek to define the scope of the power in modern terms for present purposes. Finally, we wish to - adopting what we will have submitted - go to the issue of the characterisation of this law in terms of this statute, which we will submit is not a law with respect to corporations.
The members of the Court are undoubtedly aware of the general history of early corporations. Could I traverse that very briefly because relevantly we only have to start at 1864 with the first substantive Companies Act (Vic) which was replicated in other States. The earlier history, as your Honours know, begins with the development of joint stock companies which are really extended partnerships, not having limited liability and not having a corporate personality. Later comes the ability to incorporate either by royal charter or by special Acts of Parliament, difficult cumbersome processes, which while conveying the status of incorporation to joint stock companies and other companies did not necessarily convey limited liability.
Ultimately, in 1855 came an Act which afforded a simple means by registration to secure the two important advantages, incorporation and limited liability. That 1855 Act was described in the Law Times as a “Rogues’ Charter” and that description of it lay at the heart of a subsequent concern – indeed, to this very day – about the fact that corporations, given what they are, how they exist and how they can be easily made to cease to exist, carry with them advantages but also dangers.
The 1855 Act was repealed in the following year, and in 1862 came the first substantive English Companies Act which was adopted the following year in Queensland, 1864 in South Australia, the same year 1864 in Victoria, in 1869 in Tasmania, 1874 in New South Wales and Western Australia waited till 1893. I think we have caused to be delivered to your Honours’ associates a copy of the 1864 Victorian Act. Do your Honours have that?
GLEESON CJ: Yes, thank you.
MR SOFRONOFF: It is not necessary for us to make detailed submissions about that Act because it really furnishes the starting point, but it is interesting to note that the short title of that Act is the Companies (Trading 1864), and the long title, which your Honours will see if you have the same photocopy that I have at page 177, the fifth photocopy sheet, the Act was called An Act for the Incorporation Regulation and Winding up of Trading Companies and other Associations.
The statute prohibited the
formation of two kinds of companies without registration under the Act.
Your Honours will see that in
section 4: Companies formed for the
purposes of banking with more than a certain number of members, and companies
formed:
for the purpose of carrying on any other business that has for its object the acquisition of gain to the company –
or by its members, although your Honours will see that in section 5, “any five or more persons” “associated for any lawful purpose” could incorporate under the Act. So the scope of the Act was indeed wide. In the Queensland version, there was contemplated by the legislation even religious, charitable, scholastic and literary associations which are mentioned in a particular section.
HAYNE J: In an equivalent of section 21 of the 1862 Act in England?
MR SOFRONOFF: Yes, exactly the same.
HAYNE J: Because the English Act distinguished - - -
MR SOFRONOFF: Yes, it did, and the Queensland one has an analogue; Victoria does not, that I could find, for some reason.
HAYNE J: Well, because land - section 21 of the English Act concerned holding of land by, in effect, charitable and like corporations. You go to the Hansards in Victoria in the 1860s and land is the dominant subject matter; not surprising it did not receive separate treatment.
KIRBY J: That formulation of religious, charitable and so on explains the terms in which the referendum was put up to the Australian people which excluded those sorts of corporations, I think in 1911 or thereabouts, that you mentioned.
MR SOFRONOFF: It also explains the reference to those kinds of companies by Justice Isaacs in Huddart, Parker. While I am on that, it also explains why his Honour referred to mining companies differently because in Victoria until 1890 mining companies had their own statute.
GLEESON CJ: Why did he refer to manufacturing companies?
MR SOFRONOFF: I do not know, your Honour. Manufacturing companies, I do not know, your Honour, we have not - - -
GLEESON CJ: He said a purely manufacturing company is not a trading company.
MR SOFRONOFF: Yes, I cannot help on that. We have not been able to find a reason.
GUMMOW J: What is the section you refer to in the Queensland Act which is the equivalent of 21 of the 1862 UK Act, which does not appear in Victoria?
MR SOFRONOFF: I think it is 42, your Honour, but I will get it for you.
GUMMOW J: Could we have a copy of that?
MR SOFRONOFF: We will get a copy of the Queensland Act for you, your Honour. Your Honours, what is meant by “acquisition of gain” was considered in Ex parte Hargrove & Co (1875) 10 LR Ch App 542.
KIRBY J: You are not trying under the guise of this history to revive the reserve powers notion, are you?
MR SOFRONOFF: Absolutely not, your Honour. Absolutely not.
HAYNE J: Wash your mouth out with soap.
KIRBY J: I am just looking a bit suspiciously at you.
CALLINAN J: Well, Mr Solicitor, it has now been said I think by all or most Justices of this Court that history is relevant. This Court effectively adopted what Mr Robert Menzies said, that constitutional law is a mixture of history, politics and statutory interpretation, and this Court has accepted that I think - three Justices said it in Shaw - 211 CLR at 514, 515, and I had earlier said it in another case – four Justices saying - - -
MR SOFRONOFF: As your Honour the Chief Justice said in Singh, the historical context is important. Justice Deane referred to it and in Cole v Whitfield the Court dealt with it. Your Honour, I can give this undertaking: I do not wish to make any submission that the scope of Commonwealth power is limited by something that the States enjoy. My submission is directed to the scope of the Commonwealth power as interpreted within the terms of the Constitution.
CALLINAN J: Mr Solicitor I am surprised
that – I think this is right, I do not think anybody has referred to
what Chief Justice Latham said
in Melbourne Corporation v The
Commonwealth. At page 47 his Honour said:
No power is conferred upon the Commonwealth Parliament to make laws with respect to the subjects of full employment in Australia or the economic prosperity and welfare of the people of Australia.
If you go to the objects of this Act those are, effectively, the claimed objects of this Act - - -
MR SOFRONOFF: Exactly, your Honour.
CALLINAN J: - - - which run entirely counter to what Sir John Latham said.
MR SOFRONOFF: That lies, your Honours - - -
KIRBY J: You make the point in your written submissions that the submission of the Commonwealth is essentially the view that Justice Murphy alone has held concerning the power under section 51(xx) and that therefore, in a sense, we are faced with the question of whether once again Justice Murphy was prescient about the Constitution or whether the majority Justices have been right over the years.
MR SOFRONOFF: Yes. Your Honours will need to decide that.
KIRBY J: There is an irony in all this.
MR SOFRONOFF: What is that, your Honour?
KIRBY J: I am not here to answer your questions. Your Honours, could I get back to the dry law then?
GUMMOW J: What do we get from Sir George Jessel?
MR SOFRONOFF: Only this, your Honour; that what the Master of the Rolls decided was that the meaning is something obtained or acquired. It is not limited to pecuniary gain. His Lordship said that you would have to add the word “pecuniary” so to limit it and still less is it limited to commercial profits. The case before him concerned an insurance company, a mutual insurance company, where the participants contributed a premium which would cover loss in circumstances where reserve might be built up but where there was no profit sharing and his Lordship held that that was acquisition for gain. The point of my submission is that the expression contemplated a wide scope of companies doing things. I do not wish to be understood as seeking to narrow the scope of the meaning of the word “trading” and as your Honours have seen it permitted the incorporation of a company at the instance of five subscribers for any lawful purpose.
The Act also contemplated the incorporation of “deposit provident and benefit” societies - that is section 41. Your Honours will see that there was a special provision about publishing financial statements by banking and insurance companies but also provident benefit societies. There were, of course, in Victoria and in the other States special statutes relating to friendly societies and other bodies like that. The Act offered a simple method of registration to get the status of the body corporate at section 16. It offered limited liability, limited to the amount payable on shares or by guarantee - that is section 36 - - -
HAYNE J: At the choice of the corporators?
MR SOFRONOFF: At the choice of the corporators. The protection it offered to creditors was slight. The company had to keep a registered office - that is 37. It had to keep a register of members - that is 23. That is important because one of the problems with joint stock companies was that there was a fluctuating body of members whom it would be hard to sue. Your Honours have seen that banks and insurance companies had to publish basic financial statements. There was provision for the appointment of inspectors by the Governor-in-Council - that is section 54. A register of mortgages had to be kept – that is section 40 - but only by the company in its office and there was a procedure for winding up.
Your Honours, Lord Justice Lindley in the
4th edition of his book Law of Partnership, Including its Application to
Companies said this:
In the year 1825 the Bubble act was repealed, and from that time to the present the legislature has endeavoured by various means so to amend the law as to give free scope to a combination of capital, and at the same time to prevent injustice being done either to or by its subscribers.
GUMMOW J: What page are you reading from?
MR SOFRONOFF: Your Honour, I did not make a note of the page but I will - - -
HAYNE J: Page 6.
MR SOFRONOFF: Thank you, your Honour. That, your Honours, we would respectfully submit, is a good descriptive summary of company law in England and in Australia from then until now. In Victoria in 1890, just before the collapses that were about to occur and just before the Constitutional Conventions, a new consolidated Act replaced the 1864 Act. It is not necessary to go to that because it consolidated the first Act and brought into that Act the mining companies legislation, the life assurance companies legislation and the trustee companies legislation, otherwise it did very little to change the prevailing state of statutory company law.
HAYNE J: That was part of the general consolidation of 1890 and if you go to an Act like – I think it is the Banking and Currency Act, some name like that, you will see that it is contemplated that banking is a business that might be conducted by a company, an individual, a partnership.
MR SOFRONOFF: Yes. Indeed, your Honour, this Act, the 1864 Act and the 1890 Act contemplated that banks might be incorporated under it, although there were two things special about banks. One is the limit of no more than 20 persons could do business – that is section 4 – without incorporating, whereas companies formed for the acquisition of gain had – I am sorry, banks were 10 persons and other companies were 20. So they saw a distinction there and your Honour has seen the section relating to the publication of certain financial statements. So banks were always treated a little bit differently.
We then come to the important events of the 1890s, and
your Honours have indicated, of course, that you are familiar with the
history
of that. Sir Zelman Cowen in his biography of
Sir Isaac Isaacs said that 41 land and finance companies with
liabilities of £25
million collapsed in 1891 and 1892
alone – that is at page 27. May I read to your Honours
from a contemporaneous book published
in 1894. I think your Honours have
been given an extract from it. It is called Companies’ Work and Mining
Law in New South Wales and Victoria. The relevant passage is at
pages 1 and 2. At the foot of page 1:
The recent failures in the Australian colonies have been productive of much disaster; there has been considerable financial disturbance; and the credit, which is the basis of present monetary and industrial systems – upon which they can rest safely so long as it is represented by legitimate operations – has been rudely shaken. All workers in the community have suffered from the consequences. The humbler classes have suffered most, and none the less because their voices have not been heard. The savings of thousands of poor investors . . . Deluded by glowing statements of companies showing large or fair dividends, represented in some instances only by bogus profits, they have invested their savings, either as depositors or shareholders. Those who have attended meetings have been bewildered by conflicting statements as to figures, and the purport of balance-sheets, which they have been quite unable to grasp, and could not make the subject of comment.
The author of that, your Honours, Las
Mr Alfred De Lissa, who was a barrister practising in Phillip
Street in Sydney, and the book
was written in 1893.
KIRBY J: But why do we not infer from this history that this was the dawn of the rise of the corporation? We are now in its full sun, and that the power expands or contracts like the defence power in accordance with the needs of society in respect of corporations.
MR SOFRONOFF: Certainly it would because, as in a passage from Mr Barton’s speech in Parliament cited by the Chief Justice in Singh, Mr Barton had said that the Constitution is written not just for today but for a future, who knows how long it will be, difficult for men, sometimes necessarily precise in its language, sometimes necessarily vague. So I do not seek to make any submission to pin the meaning to 1900, your Honour.
KIRBY J: If I can say so, your written submissions face very accurately the problem that is presented by the case and did not attempt to gloss over the difficulty.
MR SOFRONOFF: Thank you, your Honour. Your Honours, could I make a point that is of interest when one comes to the Conventions and it is this. The premier of Victoria in 1891, Mr James Munro, attended that Convention and he had been the director of a bank which had under his directorship lent huge sums to relatives and friends of his for wild speculation, imprudent speculation, and in December 1891 he as premier appointed himself Agent-General to London and went there before the Shiels Government brought him back and he was subsequently ruined. So the scope of the trouble in the early 1890s was huge and it led to the enactment of the 1896 Victorian Act, a copy of which has been provided to your Honours.
I would make this submission, your Honours, that parts of the Companies Act 1896 is written in language that one might think is angry language. It added stringent safeguards to the statutory law of companies. Section 24 required the company or the directors to keep proper books of account. Sections 24 and 28 required audited statements to be published. Section 31 required auditors to be qualified and section 33 imposed a personal duty of care upon them. Section 33(4) provided for a penalty of imprisonment for wilfully false audits. Section 48 provided that dividends by payable out of profits only. Section 53 provided for the public registration of mortgages, failing which they could be attacked. Section 70 provided for the registration of foreign companies with a penalty for carrying on business without such registration.
HAYNE J: Is that the first registration of foreign companies?
MR SOFRONOFF: That is the first we found, your Honour.
GUMMOW J: It was ahead of the United Kingdom?
MR SOFRONOFF: I do not know, your Honour.
GUMMOW J: I think so.
HAYNE J: And followed a deal of litigation, I think, in Victoria and elsewhere concerning the winding up of particularly British incorporated bodies.
MR SOFRONOFF: Yes, your Honour, and the articles which we have provided your Honours copies of these references for – and I think your Honours have been furnished with copies; I will not refer to them today – deal with the history of foreign companies and how they affected business here and why it became important in due course to deal with them. The 1896 Act is the first Act that I have uncovered that specifically deals with them.
This Act also provided for the contents of prospectuses – 104. They were deemed fraudulent prospectuses if they omitted the statutory material, which is pretty tough law, we would submit, and imposed a personal liability upon directors and persons named in it in the modern style for issuing misleading prospectuses –that is 110 – imposed a personal liability on directors to take reasonable care – that is 116(2) – and created the offence of creating a fraudulent preference in 117.
In our submission, that
legislation enacted in the context of the history of those corporate collapses,
makes the discussion of the
Conventions, brief though it is, intelligible. If
your Honours would go to the booklet prepared by our learned friends from
New
South Wales, tab 4, on the first page at the foot your Honours
will see the clause in its then form relating to the status of companies
and
ironically it is Mr Munro who is advocating a wider power and
Sir Samuel Griffith, in the passage that your Honours have
already
seen, disagreed, and there matters are left. If we go to the next
sitting of the Convention at which this was discussed under tab
5,
Mr Barton now has placed before the Convention the wider form of words
– that is in the right-hand column:
So that the Commonwealth may have the power to legislate, not merely with regard to the legal status of corporations acting within the Commonwealth, but it may have power as far as it can legislate upon the general subject of these corporations, over the general subject of foreign corporations, formed in any part of a State of the Commonwealth, for the purpose of uniform legislation.
We would submit that it was not necessary for Mr Barton
or anybody else to say why it was thought to be desirable to have that power
because it was plain, it was common knowledge.
GLEESON CJ: He uses the expression it is a power to “regulate the mode in which they conduct their operations”.
MR SOFRONOFF: Yes.
GLEESON CJ: Do you embrace the New South Wales distinction between relations with outsiders in relation to - - -
MR SOFRONOFF: We put it differently, your Honour.
GLEESON CJ: I was just wondering where you would put unsecured note holders – insiders or outsiders?
MR SOFRONOFF: We would put them within power, your Honour, for reasons I will come to. Your Honour’s question last week, what about a law about oppression, we would put that within power.
HAYNE J: Do I read Mr Barton aright as equating foreign corporations with corporations incorporated in the States?
MR SOFRONOFF: Your Honour, in my submission, he was then because until recently, as we all know, a company formed in New South Wales could not be ordered to be wound up in Queensland, and much money was made by very junior barristers dealing with things like that. As far as the word “company” was concerned in the Companies Acts 1960 in Queensland, that meant a company incorporated in Queensland and one incorporated at the registry in Sydney was regarded as a foreign company.
If one goes then
to tab 6, this becomes historically interesting because in the passage that
your Honours have already been taken
to the placitum is introduced and Sir
George Turner, in the passage that I would invite your Honours to read,
talks about the necessity
to give power to the Parliament to legislate with
regard to them, and Mr Barton then makes a comment and he says:
we are indebted to my hon. friend, Mr Isaacs, who put it in its present form.
Your Honours, Mr Isaacs was Attorney-General of Victoria and was responsible or at least one of those responsible for putting forward the 1896 Act.
GLEESON CJ: Mr Isaacs had been excluded from the drafting committee.
MR SOFRONOFF: Quite, but notwithstanding
that, which happened for other reasons, he was well aware – the
submission that we make is that he
was acutely aware of what the necessity was
for empowering the Federal Parliament to legislate with respect to corporation.
Mr Deakin
further down says:
We distinguish them from banks on the one hand and trading corporations on the other. We want to include all limited companies because the class of companies I am speaking of deal with lands and with deposits, and they require to be carefully regulated.
Of course, everybody knew why, and hence the power is then voted upon without much further discussion.
GLEESON CJ: There are the unsecured note-holders.
MR SOFRONOFF: Yes. We would submit, your Honours, that just like cross-border labour disputes, corporate collapses have national ramifications or could. Indeed, the Premier of a State had been involved in one so how could one leave it to the States alone, and there was something special about companies – a number of things special – and we would seek to identify the special things about companies or some of them in this way.
First, they are artificial persons, and so they can be easily created and they can easily be made to cease to exist. They are created with the intention of incurring liabilities, but there is little or no liability in the persons who profit, the directors and the members, no liability except what statute imposes.
There is the limited liability of the corporation itself, limited it might be, to the $2 paid-up capital burden with debts. There is no recourse to the assets of members, directors, promoters except that which is given by statute. This entity raises capital from strangers, unlike partnerships, which are small bodies who deal face to face. They raise capital from strangers on the faith of printed matter that is widely disseminated. The persons who contribute, either as creditors or as members or prospective members, are induced to do so by persons of whom they have no knowledge except that which is published by those persons.
The profits and assets are held by an artificial person through the agency of controlling directors, held on behalf of the members – and we can say creditors – who may have no information, and foreign corporations may have no assets here and no real presence here beyond the presence of an agent while doing business and incurring liability. It can vanish more easily than a local company, and a question may arise in relation to it which law will apply, and there might be an inconsistency as to laws, whether interstate or indeed between England or some other country and here.
In our submission, section 51(xx) empowers Parliament to make a law directed towards an attribute of a constitutional corporation that makes that entity a constitutional corporation. None of the historical material suggests any hint that the words were intended to give the Commonwealth power to regulate generally the relationship between corporations and employees or prospective employees. What, we would submit, the power is directed towards is to make a law directed to something that differentiates the trading corporation, the financial corporation or the foreign corporation from an individual.
GLEESON CJ: Where does that leave the Trade Practices Act?
MR SOFRONOFF: It is directed to trading corporations in trade.
GLEESON CJ: But why is the trading activity of a trading corporation relevantly different from the trading activity of a sole trader or a partnership?
MR SOFRONOFF: It requires, we would submit, special treatment because of the particular disadvantages that those dealing with it in trade face.
GLEESON CJ: Why would it expose barristers, for example, to potential regulation if they became trading corporations as compared with their position as individual professionals?
MR SOFRONOFF: Because then we would seek to take advantage of limited liability and only the limited – principally limited liability. Having taken advantage of that, we should be governed in that trade, in the profit making, accordingly.
GLEESON CJ: But what would be the difference between a barrister in room one who traded under the name of W. Sofronoff Pty Limited and a barrister in room two who traded under the name of John Smith?
MR SOFRONOFF: The same difference between Mr Salomon and Salomon Limited: none, except that the law provides a technical difference.
GLEESON CJ: But the Commonwealth Parliament would, on your argument, have power to regulate the barrister in room one and not power to regulate the barrister in room two.
MR SOFRONOFF: No, your Honour. It may have power, depending upon the nature of the law, to regulate what the company barrister does by way of practice or trade. It would depend upon the law, whether the law related to some aspect of the practice that focused upon a corporate attribute.
KIRBY J: I do not see a difficulty with the division. Constitutional law is all about drawing lines and if you join the big league, which normally corporations are, and if you get the advantage of corporate existence of limited liability, then you come under a new constitutional regime. So what?
MR SOFRONOFF: It is technical but, in our submission, it is substantive as well. I do not mean technical in the sense of black letter law that is contrary to the spirit of the law. It is technical, but it is substantive. It is substantive because one takes advantage of aspects of company law that are helpful. I do not mean tax. I mean that there is limited liability, that one can operate in a particular way, that one can do - - -
GLEESON CJ: No, the question is a narrower one: what is it about the trading activities of a trading corporation that distinguishes a trading corporation from anybody?
MR SOFRONOFF: Your Honour, the trading activity may be identical between a person and a company.
GLEESON CJ: This is central to your argument, because on your argument the power is defined by reference to matters that distinguish constitutional corporations from others. What is it about trading that distinguishes a trading corporation from an individual?
MR SOFRONOFF: Your Honour, we focus upon the expression “trading corporation” as a composite phrase, a composite description, which exposes trading corporations in their capacity as such to legislation and the Trade Practices Act is, we would submit, at the extreme end of the scope of the power because it focuses upon them in trade, particularly as such, but the cases are now legion, beginning with the great dissent in Huddart, Parker, that one can legislate with respect to trading activities of trading corporations.
GLEESON CJ: What is it about foreign corporations that distinguishes them from other corporations?
MR SOFRONOFF: The same thing that distinguishes aliens from non-aliens, your Honour, that their position in the Australian community is different in obvious ways and may need different treatment. For example, the question was raised last week, could a law be passed prohibiting aliens from owning land? In my submission, depending upon the law, probably, yes, because land might be regarded by the Parliament as an important national resource that is not to be held by other than those who owe allegiance here. Some countries have a law that one cannot trade as a foreigner unless a local has 51per cent shareholding in the business. One can easily see why that might be a law that is proper and one can easily see that it would fall within the scope of the aliens power in the case of a person, corporations power with respect to foreign corporations, because other aspects engage upon the foreignness.
GLEESON CJ: But you would say, as I would understand it, that Parliament can say no foreign corporation may engage in resale price maintenance?
MR SOFRONOFF: Yes.
GLEESON CJ: How is the subject matter of that law directed to that which distinguishes a foreign corporation from others?
MR SOFRONOFF: Your Honour, unless one adopts Justice Murphy’s broader and open interpretation of the scope of the power, there will always be an abstract question that can be asked as to how a particular law, described in general terms, falls within or outside the power. Now, we do not want to run away from those questions but often it depends upon the precise law and some laws, we would candidly concede, will be difficult to place within or outside the power.
GLEESON CJ: If Parliament can say no foreign corporation may engage in resale price maintenance, why cannot it say all foreign corporations must give their employees at least three weeks holidays a year?
MR SOFRONOFF: The answer to that, your Honour, is that when one has regard to the history that I have rehearsed now, we concede that it is not evident that the power was placed into the Constitution in order to regulate what rent the company might pay or how it should buy land or how it should buy or what it should pay for plant or equipment or stock or how it should treat its employees or what it should pay them. What it was concerned with was the manner in which companies conducted themselves vis-à-vis trade and vis-à-vis those who came into contact with it in connection with their status as trading companies or foreign companies.
HAYNE J: Now, is that not just the inside/outside distinction that New South Wales advances?
MR SOFRONOFF: No, your Honour, because we would regard a law that was passed to ensure that directors were required to honestly deal with the profits of the company vis-à-vis shareholders as within power. I think our learned friends from New South Wales would say that is an inside regulatory law not within power but, plainly, a person becomes a shareholder on the invitation of the promoters, takes on a risk of capital and then might be abused in that risk by a variety of means which are peculiar to companies that cannot be employed to prey upon that person in a partnership or by means of a sole trader who seeks a loan peculiar to companies.
HAYNE J: That invokes limited liability more than any other attribute of the corporation, does it not?
MR SOFRONOFF: Not just that, your Honour.
HAYNE J: No?
MR SOFRONOFF: No, because a company is regulated according to its rules, both the voluntary ones and those required by statute, and they can be abused, as the history of just and equitable ground of winding up has shown. So they are peculiar and so we do not invoke the distinction between internal and external because the body of national corporate law that this placitum addressed is broader than that.
GLEESON CJ: You reject what Justice Isaacs said at page 395 of Huddart, Parker v Moorehead, the words in italics?
MR SOFRONOFF: Your Honour, that is too narrow, in our submission, and could I say this about Huddart, Parker: it is not a very useful case for either side because, however one looks at it, the judgments of all of their Honours are infected by some view of constitutional interpretation that no longer holds true, even Justice Isaacs. Your Honour, with respect to Justice Isaacs, if your Honour would go to the foot of 405, in that paragraph and just over the page, one can see consistently with the history of which he was a participant with respect to the Victorian Act what he thought was contemplated by the power. Although he expressed it more narrowly in the passage to which your Honour referred, in our submission, it would now be regarded more widely.
GLEESON CJ: And you would also reject what Justice O’Connor said at page 334 as too narrow?
MR SOFRONOFF: Page 334, was it, your Honour?
GLEESON CJ: Yes, in argument.
MR SOFRONOFF: Yes.
GLEESON CJ: That is also too narrow in your argument, is it not?
MR SOFRONOFF: It is, because of the course of - - -
GLEESON CJ: Well, there go two of the founding fathers.
MR SOFRONOFF: But, your Honour, as your Honour observed the other day, it does not help to seek to divine the personal intention of the founding fathers, and we do not seek to do that, because there is no doubt that Sir Samuel Griffith’s view of the scope of Commonwealth power was entirely different from that of Justice Isaacs, and was at the Convention, one would hazard a bet; certainly was when both were members of the Court. So one can say they go - - -
GLEESON CJ: Well, it is a classic example of – we know in fact they all had different views.
MR SOFRONOFF: That is right, so I am not invoking the correctness of a view of Mr Barton or Mr Isaacs or Sir Samuel Griffith. What I seek to do is to look at the historical context in which the founders regarded the necessity for such a power as important. We give proper respect to the course of authority which has said that trading activities of trading companies are within power, and perhaps 80 years ago we could have argued it differently, but we cannot argue differently now, and so there will be inconsistencies. There will be inconsistencies and there will be some parts of the borders of the scope of the power which will need to await a particular case in order to determine.
GLEESON CJ: Is it fair to say that the argument for which you contend is substantially that adopted by Chief Justice Gibbs?
MR SOFRONOFF: And Justice Dawson, yes, and we seek to explain it, your Honours, to elucidate it. We try to do that. We do not apologise for the fact that occasional contradictions will arise. Occasional contradictions will arise and have arisen in the context of other powers with which this Court has had to grapple. But our submission is that this statute is outside power because this statute unabashedly expressly is a statute that regulates employment, terms of employment. It is not a statute that in any sense hinges upon, focuses upon, any attribute of a trading financial or foreign corporation as such. It merely invokes those entities as persons affected by the power and seeks to make a – it is, in our respectful submission, the classic case of a peg, as I think Justice Higgins called it in Huddart, Parker, or a switch, as Justice McHugh called it in Dingjan.
KIRBY J: In a sense, you can drive along for a while under the corporations power as it has been evolving, but in a sense this case presents the issue very clearly that the logic of the direction in which you are driving may have a very significant effect for the federation.
MR SOFRONOFF: It does, your Honour.
KIRBY J: And therefore you have to ask do we have to revisit the logic and reconsider some of the earlier thoughts that were put forward by Justices of the Court to put some checks on it which they saw in a way clearly at Federation, but which maybe we lost in the course of the federal story.
MR SOFRONOFF: Your Honour, we are not so pessimistic. In our submission - - -
KIRBY J: Well, Justice Gibbs’ and Justice Dawson’s view has not been the majority view.
MR SOFRONOFF: No, no, of course it has not, your Honour, but - - -
KIRBY J: And you are trying to, as it were, resuscitate that as the majority view because of the horror that the prospect of the corporation power unleashed does to the federal balance.
MR SOFRONOFF: Your Honour, our starting point is this. It is correct, in my submission, to say that a majority of Justices have either stated or have endorsed the view that a law expressed “a corporation shall” or “corporation shall not” is not necessarily a law under the placitum. That must be because you need something more. When I say a majority, eight in modern times and if we add the Court in Huddart, Parker, 12, who have either expressed that view or have embraced it by reference.
CALLINAN J: Mr Solicitor, I am intrigued by the fact that there are more than a dozen principal objects of the Act stated in section 3 and not one of them refers to corporations and every one of them refers to what is called industrial relations, with this qualification that the first one is concerned with economic prosperity which is the opposite of what Chief Justice Latham said in Melbourne Corporation, the opposite of what the Commonwealth had power to do. To say it is a law about corporations and the objects do not even mention them is intriguing to say the least.
MR SOFRONOFF: It is interesting, but it is also honest because the statue is not interested in corporations, it is interested in employees. If the Commonwealth’s argument is correct, then one can have a law that says no corporations shall sell petrol at a price higher than that published by regulations.
CALLINAN J: How can you omit reference to corporations when you have 13 or 14 principal objects?
KIRBY J: Yes, but corporations are now essential to prosperity and to suggest that after all we have gone through, after the taxation cases and everything else that the Commonwealth is not concerned with the economic prosperity of the nation, it would be the only nation-state in the world that was not concerned with that. We have to face the reality that the federation has gone a distanced since Chief Justice Latham wrote it.
CALLINAN J: But not with nationalisation and, indeed, that is the very object William Hughes said he had in mind when he introduced a second reading Bill for the referendum to acquire this power in, I think, 1912. He pointed to Germany. He said Germany’s been able to nationalise the railroads. If we get this power we will be able to do the same. Of course the people rejected it. You have to go to Hansard to see the second reading speeches for the Bill’s, for the referendum, you see what was in mind.
MR SOFRONOFF: Your Honours, one sees nothing that would justify a view that at least in 1900, and your Honours will decide what it means now, but at least in 1900 there was any concern which would have justified an interpretation of the scope of this power as extending to the ordinary things that a company does in common with everybody else - the rent it pays, the prices it pays or prices it charges - unless it is encompassed in a law that directs its attention to some attribute or activity of a company that is peculiar to it.
HAYNE J: Is that a commentary on the place that the corporation played in 1900 or is that a comment on the ambit of the power?
MR SOFRONOFF: It is a comment on the ambit of the power, your Honour, because the place that the corporation played in the 1890s is not much different from the place the corporation played in the 1980s when we have the same trouble.
GLEESON CJ: In the days when we had a Prices Justification Act what was the power on which that Act was based?
MR SOFRONOFF: Your Honour, I do not know. I would have to find out over lunch. I do not know. But we know that the - - -
GLEESON CJ: What was the date of that Act?
MR SOFRONOFF: I do not know that either, your Honour.
GLEESON CJ: Perhaps you could just give us a reference afterwards.
MR SOFRONOFF: We will find out. Your Honour will recall in 1974 the referendum sought by that government to obtain power over prices and incomes.
GLEESON CJ: I can recall the Commonwealth Government having a close interest in the prices being charged by all companies, which was an example that you mentioned a little earlier.
MR SOFRONOFF: Or, indeed, we could posit a law that provided that no company shall employ as a driver, a person who has had two drink driving convictions or more in the preceding year and, in our submission, equally, that would not be a law with respect to corporations. As your Honours have seen from our written submissions we rely upon those dicta that still require the Court to characterise the law as substantially a law in relation to the particular matters with which it deals. We acknowledge, of course, that a law might bear two or more characters but this law, in our submission, bears no character as a corporations law. It bears character as employment law.
KIRBY J: That is a broad sweep of an argument. There may be some that do and some that do not.
MR SOFRONOFF: There are some your Honour. The
Fontana like provisions, for example. That is right. Your Honours, we
derive some help from the article published by the Harvard Law Review
written by
Justice Higgins in 29 Harv L Rev 13. At page 13
his Honour had said:
the theory generally held at the time of our constitutional convention was that each State should be left to deal with its own labour conditions as it thought best. But an exception was made, after several discussions, in favour of labour disputes which pass beyond State boundaries and cannot be effectually dealt with by the laws of any one or more States.
In our submission, irrespective of what the Court determines in this case, one thing is clear and that is that labour relations or labour conditions, as Justice Higgins called it, was not regarded as a matter generally of interest to the Federal Parliament and, in our submission, properly understood did not fall within the placitum as it was then understood. Your Honours will interpret it as you will after hearing argument.
KIRBY J: But even you will not pretend that the 51(xxxv) power was really kept to interstate disputes. It became, through the paper dispute mechanism, a great power, a federal power, to deal with industrial relations but it had to be done through an independent arbitrator.
MR SOFRONOFF: Yes. Well, your Honour, that is an example of a power that we can see from the Convention Debates was regarded as a limited one to be applied in limited circumstances but which by the ingenuity of the advisers of employers and employees and by the accumulating learning from this Court and other Courts expanded.
CALLINAN J: And the Court was a great contributor to this.
KIRBY J: But it served a great national purpose and why would one not say, “Well, now we live in the age of corporate governance throughout the world, not just in our own country, and there is the power and the language is broad and it is focused on the corporation. Why is this not the time to provide or affirm the Federal Parliament’s power?”
MR SOFRONOFF: Your Honour, of course, that is an open view. Justice Murphy embraced it and to some extent Chief Justice Mason also did. It is an open view but, in our submission, it is not the preferable view nor the view that the Court should adopt.
KIRBY J: The drink driving case is the one that makes you pull back and no doubt there are many others that make you pull back and say, well - - -
MR SOFRONOFF: There is no limit, your Honour.
KIRBY J: But then the problem is finding an accurate discrimen.
MR SOFRONOFF: It is difficult, but it exists, in our submission.
KIRBY J: You acknowledge that in your written submissions, which I found unsettling.
MR SOFRONOFF: I am not allowed to ask questions.
HAYNE J: But the “no limit” proposition is one that makes assumptions about the social and political utility of passing a law “No corporation shall employ a driver who has conviction history such and such”. That is, it is a statement about the place of the corporation in society rather than a statement about the ambit of the power and thus you come back to 51(xx) and although there is, I think, considerable danger in trying to divide the world into persons powers and activities powers, all of those tags carry a lot of baggage. If 51(xx) is a power to make law with respect to identified kinds of juristic person, what is the defect in the law about drink driving?
MR SOFRONOFF: The defect, your Honour, is that it directs the force of the law, not upon anything that is interesting about the company, but upon other features entirely. It merely uses the person against whom the law is directed, the company, as the means to legislate upon a matter which may be quite extraneous to the interests of the company. It may not. It would depend on the law.
HAYNE J: But the contrast you draw is with the “no financial corporation shall raise money from the public, save on prospectus”, et cetera.
MR SOFRONOFF: Exactly. Why give a law with respect to companies because there is something special or different about companies, as there is about aliens, as there is, as was thought at the time about people of a special race. All of those things raised right concerns – right then and some regarded as wrong now – but right concerns because there were peculiarities attaching to those people. It needed special treatment that would not necessarily come within trade and commerce among the States or banking or anything else.
GLEESON CJ: I may have misunderstood them, but I have an impression that the views of Chief Justice Gibbs and Justice Dawson are very closely related to those of Justice Higgins in Huddart, Parker v Moorehead. Put aside the characterisation issue, where he said this is a power to make laws with respect to, what I will call for shorthand, constitutional corporations as such.
MR SOFRONOFF: Yes, that is right.
GLEESON CJ: Which is like the view that Justice Gaudron had of the aliens power, that is, it is a power to make law with respect to aliens as such, and she, as I understood it, said quite expressly that her view of the aliens power was different from her view of the corporations power.
MR SOFRONOFF: Yes. Her Honour observed in that case that the corporations power may be different, notwithstanding it is a persons power because aliens are people.
GLEESON CJ: But that is the idea behind your approach, is it not?
MR SOFRONOFF: It is.
GLEESON CJ: It is a power to make law with respect to trading corporations, if I can select one, as such.
MR SOFRONOFF: That is right, your Honour.
KIRBY J: Why does it not embrace employees? Why are they not now, in our understanding of corporations today, part of the corporation as such, they do the work, they make the profits, they are closely involved day by day? Why are they not part of the corporation? Why do we take another view that, well, it is the corporators and bondholders and others?
MR SOFRONOFF: Your Honour, one could posit a law governing - - -
KIRBY J: What was your answer?
MR SOFRONOFF: I was going to say one could posit a law governing employees of corporations which would be within power. I would have to think of an example that would be useful, but of course one could posit a law that is directed towards employees, but also directed towards features of corporations or trading corporations or foreign corporations that, on our construction of the placitum, properly attracts - - -
GUMMOW J: It will explain their claim for wages in an insolvency, or you prefer their claim to wages in an insolvency.
MR SOFRONOFF: Well, that is a perfect example. That is a perfect example, with respect, your Honour, because the positioning of wages in the scheme of priority in a winding up is referable to the position of companies and the necessity for their orderly winding up and, in the 1890s, the statutes.
HAYNE J: But you found like provision in the ordinary insolvency Acts, did you not?
MR SOFRONOFF: Well, there will be some things in common. If one winds up a company, it is not unremarkable that the voidable preferences provision was simply imported by reference from bankruptcy law.
HAYNE J: But the priority position given to employees’ wages was first found, I think, in Victoria in the Mining Companies Act and elsewhere is found in insolvency regulation for personal insolvency. So what is it about the company that makes this the example that you describe?
MR SOFRONOFF: Well, your Honours, there are in particular instances that we know about features that are common to companies and other traders. The good example is section 52 of the Trade Practices Act which is replicated in State statutes with respect to ordinary persons. But what we are concerned with is to determine a definition of the scope of the power which is apt in the case of a power that is directed towards described entities and which we know as lawyers are entities that bear particular characteristics that are of interest to legislators and not everything will fall, in our submission, within that rubric. We know that that is the view that has been adopted by so many judges, a dozen as we count them, because of the contention that has been expressed that a law - - -
KIRBY J: But many of them are earlier in the century, you see.
MR SOFRONOFF: Well, Chief Justice Barwick, your Honour - - -
KIRBY J: That is true, but his experience went back to the 1920s and 1930s.
MR SOFRONOFF: Does not mean it is wrong, your Honour.
KIRBY J: No, no, not at all, not all, but what I am saying is, your view of the corporation and therefore of the power smacks a little of a classist notion that there are the corporators and there is the capital and then there is the labour, but the corporation has developed in the course of the last century and employees are now an absolutely integral part. Most corporations have employees and just as the aliens power developed in the course of the century, as the Court said in Singh and Shaw, so one could take the view the corporations power has developed and that employees are now seen as part and parcel of the corporation for the purpose of the power.
MR SOFRONOFF: Your Honour, I am not sure that it is right to conclude that the influence of corporations in the 1890s as employers was not great. I know it has been said, but I am not sure that that is right. Our construction is not based with respect to this law upon a fear that this law gives a Commonwealth power over many, many employees. Our contention is based upon the proposition that if the principal submission of the Commonwealth is right, this law gives a Commonwealth power over so many things, not just employment, but so many things. Our contention must be right or wrong irrespective of whether, because of tax changes, people cease using companies very much and adopt a trust structure or some other structure. One can envisage the creation of a trading entity that is not a company and is not a natural person, but is something else.
KIRBY J: It seems unlikely in the global advance of the corporation.
MR SOFRONOFF: Of course, your Honour, but the point of my submission is that we are not here saying that the Commonwealth submission must be wrong because it would be awful to think the Commonwealth can legislate with respect to so many employees. Our submission is that this is a Parliament of enumerated powers and one has to give coherent meaning to placitum (xx), as indeed the other powers, and if one gives it the limitless construction that the Commonwealth places upon it, then one does not give effect to the choice of corporations as the object of that power, and our construction, in my respectful submission, does that.
Your Honours,
could I deal with the cases. I have already dealt with the passage I wanted to
read from Huddart, Parker at 405 to 406. In our submission, the
requirement for there to be discernible in a proposed law an attribute of a
constitutional
corporation to which the law is directed and which makes it such
an entity is evident in a number of judgments. It is evident in
the reasons of
Chief Justice Barwick in Strickland 124 CLR 468 at
489. Your Honours will notice at the foot of the page the paragraph
beginning “However”, that the Chief
Justice makes a reference
to Sir Samuel Griffith’s remark in Huddart, Parker and
gives a reference to page 345. There is no remark at page 345 of
Huddart, Parker. What, in my submission, his Honour was referring to is
Chief Justice Griffith’s remarks at 348, and that is the page at
which
the Chief Justice had said:
the question is whether the power to make laws with respect to “foreign corporations . . . extends to the governance and control of such corporations when lawfully engaged in domestic trade within the State. If it does, no limit can be assigned to the exercise of the power.
That seems to be right, because what
Chief Justice Barwick then goes on to deal with is the proposition
which is referred to with
approval so many times later that he observes:
that it does not follow either as a logical proposition, or . . . as a legal proposition . . . that any law which in the range of its command or prohibition includes foreign corporations . . . is necessarily a law with respect to the subject matter of s. 51 (xx.).
Justice Menzies at 507 raises
the question whether that could be so, your Honours will see in the
paragraph beginning halfway down
the page and over to the next page, but does
not answer it. It certainly does not give any support for the
Commonwealth’s
proposition in this case. Justice Walsh at 519, in
slightly different language – and we apprehend it can be read a
number
of ways, but your Honours will see the sentence:
They are laws in which the personality of those whom they bind is not significant as an element in the nature or character of the laws.
Justice Gibbs at 525 limited the discussion to the case before him, so he did not embark on that in that case.
In
Fontana [1982] HCA 23; 150 CLR 169 though, his Honour did. At 182
his Honour just above the quote from Huddart, Parker makes the same
point, and then there is the statement that we rely upon:
The words of par. (xx) suggest that the nature of the corporation to which the laws relate must be significant as an element in the nature or character of the laws, if they are to be valid.
Your Honours, he mentions
just at the foot of the page:
This does not mean that a law under s. 51(xx) may apply only to the foreign activities of a foreign corporation . . . It means that the fact that the corporation is a foreign corporation should be significant in the way in which the law relates to it.
We know of two laws
that obviously fall within that power. One is the Foreign Corporations
(Application of Laws) Act 1989 which provides which of two sets of laws
– the law of the place of incorporation or local law – shall apply
and, of course,
the Foreign Acquisitions and Takeovers Act 1975 which
obliges foreign corporations in some circumstances to get the Treasurer’s
approval to investment because issues of national
interest exist and it is the
attribute of foreignness that attracts the power.
HAYNE J: What distinguishes takeovers from employment?
MR SOFRONOFF: By foreign corporations?
HAYNE J: Just so.
MR SOFRONOFF: A foreign corporation may be able to control a business which, in the view of the Treasurer, it ought not be permitted to control because of the position of that business in Australia. It is directly related to trade, permitting the foreign company to trade in a particular field or not permitting it to trade in a particular field.
KIRBY J: But the German worker participation laws might require a German subsidiary working and operating here to provide for representation of employers on its board. So how do you reconcile that with your view of the scope of the federal power in Australia?
MR SOFRONOFF: I am not sure I have understood the example, your Honour.
KIRBY J: In Germany corporation law has gone the next step, along the lines that I was putting to you earlier, of recognising that the corporators are not the only people involved in the regulation of the company.
MR SOFRONOFF: Yes. Your Honour, as I acknowledged, one can posit a law that affects employees and which would be within placitum (xx). For example, a company trading in a particular field of operation may be operating in a way in which the employees are regarded by Parliament as having such an impact upon that trade as such that it passes a law directed to that trade and requires representation or something of that kind. I do not know - - -
KIRBY J: Essentially, I understand your submission is that that sort of case is affecting the corporation as such and therefore it fits within that circle, but when it comes to drink driving offences or the total salaries of, say, company directors, which we have to posit as something that the Federal Parliament could regulate under this sort of view of the corporations power, that that would go beyond the company as such.
MR SOFRONOFF: Yes.
GLEESON CJ: It would, I think, be consistent with your argument to accept, would it not, that Parliament would have power to enact a law saying companies must give their employees an opportunity to buy shares in the company or companies must provide for representation on the board of directors of workers?
MR SOFRONOFF:
Probably, your Honour. I would like to think about that, but probably.
Your Honours, Justice Stephen in Fontana of course analysed
characterisation at great length and we respectfully accept everything that
his Honour said, but while his language
was not as strong as the
Chief Justice’s or the language that we will see later from
Justices Wilson and Dawson, nevertheless
one can see at the foot of 194
that when he comes to characterise the Fontana statute he characterises
it as within power:
What it does is to forbid conduct which has for its purpose, and which in addition would have or be likely to have the effect, of causing substantial loss or damage to a corporation. To that may be added the fact that forbidden conduct is described, in the opening words of s. 45D(1), in terms directly relating it to the trading activities of corporations. Whatever other description might also be assigned to it, to fail to include as one characterization of it that of a law about corporations would seem to me to be to ignore the obvious. To describe it as a law with respect to trading corporations seems entirely apt; it does no more than recognize what is the manifest purpose and direct effect of the law. The connexion with corporations forms a crucial component - - -
GUMMOW J:
If I can just interrupt you for a second before we adjourn? This article in
19 FLR 245 which you have given us - - -
MR SOFRONOFF: The McQueen article, your Honour?
GUMMOW J: Yes. In footnote 20 there is a reference to a writing by Professor James Crawford, “The High Court and the Corporations Power” (1990) 3 ACL Bull – I am not sure what it stands for.
MR SOFRONOFF: Your Honour, I think that is the Australian Company Law Bulletin. It might have been published as an annexe to Paterson and Ednie.
GUMMOW J: It is useful to know what Professor Crawford thinks about this.
MR SOFRONOFF: We will see if we can find that, your Honour.
GLEESON CJ: Is that a convenient time, Mr Sofronoff?
MR SOFRONOFF: Certainly, your Honour.
GLEESON CJ: We will adjourn until 2.15
AT 12.44 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.17 PM:
GLEESON CJ: Yes, Mr Solicitor for Queensland.
MR SOFRONOFF: Thank you, your Honour. Your Honours, we found a copy of the article by Professor Crawford and I think it has been distributed to your Honours’ associates.
GLEESON CJ: Yes, thank you.
MR SOFRONOFF: The Prices Justification Act was passed in 1973 in reliance - - -
GLEESON CJ: Yes, based on the corporations power I assume.
MR SOFRONOFF: Reliance on the corporations power.
GLEESON CJ: The long title of the Act is An Act To make provision for the holding of Inquiries into Prices charged or proposed to be charged for the Supply of Goods or Services in Australia. It looks as though the possibility that you were raising as a spectre in your argument before lunch actually - - -
MR SOFRONOFF: Control of prices, your Honour?
GLEESON CJ: - - - came to pass about 30 years ago.
MR SOFRONOFF: Well, it addressed itself to that but, of course, as your Honour appreciates, it did not control prices. It provided for a system of notification.
GLEESON CJ: Yes, you had to justify them if you put them up from what they were previously.
MR SOFRONOFF: Well, as I recollect it, your Honour, you had to notify the Tribunal and not raise your prices until a notice period had passed. With respect to the control of prices, could I say this. Undoubtedly there are provisions that have been passed and could in the future be passed in reliance on the corporations power in its connection with trade that would affect the prices charged by a company for goods and services. Sections in the Trade Practices Act are examples of that and those sections, we would submit, in the Trade Practices Act are valid enough because what they seek to do is to restrain malicious trade, if I could call it that, liable to be harmful to the public and which trading companies are apt to engage in, experience tells us.
Whether the power would extend to a general statute like the Prices Justification Act simply to control prices is another question and much may depend upon the terms of the legislation and if asked in the abstract I would prefer not to answer that because it is not necessary in this case to address that. One thing is clear, in our submission, and that is that wages paid to workers and salaries paid is not a price necessarily engaged in in trade.
As Chief Justice Latham pointed out or observed in the Bank Nationalisation Case, the word “sale” is used in many contexts and is used metaphorically and is used sometimes in connection with a worker selling his or her labour, but that is not really a sale at all, that is wages. We would apprehend that a law that addressed itself to an employee in connection with trade might well be within power but a law such as this one which simply addresses itself to wages paid to employees by persons who happen to be constitutional corporations is outside the power.
We can test it in this way, your Honour. If we blue pencil the word “constitutional corporation” wherever it applies, the Act, except in the scope of its operation, does not change. The Act remains exactly the same Act except, of course, it does not apply to companies any more, but in its essence it is the same Act. There is nothing that constitutional corporations, trading corporations, financial or foreign corporations offer to this Act to imbue it with any part of their character. That is why, in our submission, this Act, whatever the limits otherwise of the power might be, is not concerned with subject matter that falls within subsection (xx).
GUMMOW J: Take the Petroleum Retail Marketing Franchise Act 1980. Do you remember that?
MR SOFRONOFF: No, I am sorry, your Honour.
GUMMOW J: It is a source of Federal Court legislation for years, Petroleum Retail Marketing Franchise Act 1980. Section 9 forbad a corporation as franchisor to enter into franchise agreement containing “unreasonably onerous” provisions. Now, you would say that was within power, I think?
MR SOFRONOFF: Probably, yes.
GUMMOW J: Why?
MR SOFRONOFF: Franchise is trade.
GUMMOW J: Yes.
MR SOFRONOFF: Franchise is trade and it aims at regulating exploitation.
CALLINAN J: There is a lot of franchising going on now, a lot more than in 1980?
MR SOFRONOFF: Yes.
CALLINAN J: As a means of trading?
MR SOFRONOFF: Yes.
GUMMOW J: Just explain to me what the line is?
MR SOFRONOFF: What the line is?
GUMMOW J: Yes, between workers and other people the company deals with.
MR SOFRONOFF: Your Honour, the only connection between workers and trade is that the workers might be engaged in trade. They need not necessarily be engaged in trade for the company, but in some respect I suppose it is right to say that every worker - - -
GUMMOW J: Power is not about trade, it is about trading corporations.
MR SOFRONOFF: I appreciate that, your Honour - - -
GUMMOW J: So that assumes something, does it not, about the nature of power. It is not a power about trading.
MR SOFRONOFF: Yes, it does.
GUMMOW J: It is a power about people – fictional people.
MR SOFRONOFF: It is a power about people who answer the description relevantly, “trading corporation”. If one were to legislate with respect to an employee, in a connection that has nothing to do with the attributes which a trading corporation possesses, either in its capacity as a company or in its capacity as a trader, but legislates merely by reason of the connection that the employee offers to the trading corporation because of employment, in our submission, that would not be a law within power because it would not be a law with respect to a trading corporation.
GUMMOW J: What about financial corporations?
MR SOFRONOFF: The same, your Honour.
KIRBY J: But is not the difficulty - - -
GUMMOW J: No, wait a minute. Can financial corporations be subjected to the same analysis that you bring to trading corporations by drawing out the word “financial”?
MR SOFRONOFF: Yes. Well, it is a relevant word because we know from the - - -
GUMMOW J: Drawing out of it the word “financial” and then seeking connections with that word, rather than with the composite head of power. That is what you are doing, I suspect.
MR SOFRONOFF: No. With respect, I am seeking to rely upon the composite expression. The composite expression has a number of characteristics, all of the characteristics which inhere in a corporation. They might not be unique to a corporation if they inhere in a corporation and the characteristic which we know from the authoritative cases of trade itself. So I do not seek to limit the power to trade.
GUMMOW J: The foreign corporations need not be trading corporations.
MR SOFRONOFF: No, they need not be but they are foreigners and their status as corporations both may offer something which will attract the attention of the legislature.
GUMMOW J: Like what?
MR SOFRONOFF: Like their capacity to be here and not be here and absent a law allow them to do business in a way which local companies are not permitted to do business. For example – an example will not assist but their status as people who are not resident here, who but for the application of statute might not have an office here, whom it would be difficult to sue here, whom it would be difficult to serve here, and so on. All of those would be well within the scope of - - -
GUMMOW J: They might be charging too much for their goods?
MR SOFRONOFF:
Well, your Honour, that is something that, in our submission, depending upon
the terms of the statute, might be within power, depending
upon the provisions
of the statute. But merely because it is a foreign corporation one can imagine
respects in which foreign corporations
differ in no way from local corporations
or indeed persons.
KIRBY J: But the grant of power is with
respect to a corporation. A corporation is a legal person; it has no blood or
bones. It can only
act through and involve human persons as officers or as
employees. So why permit the regulation of the officers but not the employees
who are vital to the day-to-day activity of the corporation?
MR SOFRONOFF: Your Honour, given the nature of corporations derived from their history, officers are an essential, as indeed are members, characteristic of their existence. Employees are not – there is nothing about employees that are inherently there whenever you see a corporation, even a trading corporation. Many companies do not have employees.
KIRBY J: Not many.
MR SOFRONOFF: I do not say most, your Honour, I just say many. Many private companies have no employees.
KIRBY J: It is just that your approach is what one might say a very pernickety and narrow and it is not the ample approach that has been typical of the way this Court has interpreted the heads of constitutional power. They are grants to be developed and used from time to time according to the necessities of different generations. You seem to want to cramp it all back and that just has not been the way it has been done.
MR SOFRONOFF: Your Honour, I would hope that no part of our case would be regarded as seeking to cramp the power. We would say this, that while it is, of course, true, with respect, to say that powers are to be regarded as wide and generous because of the nature of the document in which we find them - - -
KIRBY J: Think of alien.
MR SOFRONOFF: Yes, and the general terms in which they are expressed. That does not help us at the end of the day in defining the scope because it is a general statement and it is a question-begging statement. The Commonwealth relies upon the term “plenary” as though to describe a power as plenary brings everything within it that one wishes to. So one still has to - - -
KIRBY J: Well, do not worry about that as far as I am concerned.
MR SOFRONOFF: Yes, but one still has to define some limitation and, of course, as your Honour put to me this morning, that limitation might well be any law that has as the object of its command a company, and if that commends itself to the Court, so be it. Our submission is though that the selection of three classes of people for special treatment in section 51 brought with it the notion that there must be something special about those people that justified the interest of the national legislature, and their peculiarities assist, in our submission, with addressing the question whether a particular law is – characterises a law about those people or not.
So if one comes to this law, as I will in a few minutes, in our submission, its only link to the subject matter of the power is that the employees are to be the employees of those companies, and nothing inherent in the company is important in this Act.
Your Honours, I
was about to deal with Justice Brennan’s dicta in Fontana
[1982] HCA 23; 150 CLR 169 at 220. Earlier his Honour had expressly raised the
question whether a law that simply directs itself at a company is within power
and declined to embark on that, which demonstrates the point of course is a live
one, but at the foot of 220, when one examines what
his Honour actually
did, he characterised the statute in Fontana at the foot of 220 in this
way:
But does the provision affect the same subject matter as that which has been held in earlier cases to provide a sufficient nexus with the corporations power? The subject matter which the provision selects as the object of its protection is “the business” of the corporation. That was the subject matter to which Menzies J. referred in the passage above cited from his judgment in Rocla Pipes.
What one notices about that, in
my submission, is that what his Honour found as validating the law is that
the subject matter had
a sufficient nexus. His Honour might have concluded
that it had a sufficient nexus merely because it was addressed to corporations
in the way that it was, but his Honour found that in something greater, the
protection of the business of the corporation, something
that is absent in this
statue.
If I can take your Honours then to Tasmanian Dam
158 CLR 1. At page 118 the Chief Justice repeated his
dictum from Fontana at the top of page 118 and found that one of the
provisions which addressed itself simply to trading corporations was not within
power because, if your Honours go to about six lines above the quote at the
foot of the page:
In other words, for the purposes of the statute the character of the person who performs the forbidden acts is immaterial.
He then quotes the dicta from Justice Kitto and over the
page at 119, four lines below the quote:
Apart from s. 10(4), the connexion between ss. 7 and 10 and the topic of trading corporations is not direct and substantial – it is exiguous and unreal. It is apparent that the relationship between trading corporations and the operative provisions of s. 10 is merely incidental – the section is applied to trading corporations only in an attempt to use s. 51(xx) as a source of power which would not otherwise exist. The true character of the section is not that of a law with respect to trading corporations.
To the same effect is Justice Wilson at page 202.
KIRBY J: When you start using words like “the true character” or “it is not truly” or “it is not, properly understood,” then you have really reached the end of rational analysis.
MR SOFRONOFF: In my submission, respectfully not, your Honour, because what one reaches is the application of judgment. It is true that the Court and judges generally strive for as much as possible some objective test, but when one acknowledges, as we do, that the language of the Constitution is, as Mr Barton said in the passage quoted in Re Singh, sometimes very precise and sometimes necessarily very vague, when the words are very vague, then a calculus may not be discernable and the Court will have to apply judgment.
We would advocate that that is what has to be done and one can strive, as Chief Justice Gibbs and Justice Wilson and Justice Dawson did, to describe the scope of the power in the language that I have been quoting and one can criticise that as raising some questions as to what is meant by the words “special” or “sufficient”, but what that requires is an application of judgment, in our submission. If our construction is accepted, then one would look for something that is inherent in the status of the artificial person and all that the English and Australian law has brought to bear on that, the economic matrix and rules of those entities, as well as their status as trading entities and financial entities and foreign entities, and one can apply those dicta. When one applies it to this case, in our submission, this is not a law about companies, notwithstanding that it is addressed to companies.
HAYNE J: How does that work in the case of the kind considered in Fencott v Muller of the corporation, newly formed, not yet undertaking activities? If you say that trading activities, financial activities are an important element for validity, what consequence, if any, does that contention have in relation to the newly-formed corporation not yet engaged in any activity?
MR
SOFRONOFF: It would depend upon the law, but it has corporate status. It
is capable of being used for trading or financial purposes and,
depending upon
the particular law, the particular law may impinge upon the potentiality and if
it does it would be, in our submission,
within power. Justice Deane also,
in our submission, did not accept that a law merely directed to a corporation is
valid. At page
271, after rejecting the submission as to the invalidity of
the provisions in that case, at the foot of the page he said:
I would mention that nothing in the foregoing should be construed as suggesting that a law comes within the power conferred by s.51(xx) “simply because” it happens to apply to corporations of the kind described . . . Strickland v. Rocla Concrete Pipes Ltd. makes clear that that is not so.
Then he goes on to find that the provisions before him are not
such provisions. Then a few lines down:
I would also mention that it does not necessarily follow from the foregoing that every law which commences “a trading corporation shall” or “a trading corporation shall not” is a law with respect to trading corporations for the purposes of s. 51(xx). That is a question which does not arise in the present case and it is unnecessary to express any view in relation to it.
Justice Dawson though did express a view in relation to it
at 316. I would invite your Honours to read from the second-last paragraph
at 316 over to just before the quote from Strickland on 317. One then
comes to Dingjan [1995] HCA 16; 183 CLR 323. Justice Brennan in the
Tasmanian Dam Case did not address himself to the question that I am now
addressing, but he did in Dingjan at 337, just below the quote from the
reasons of Justice Stephen. He cited the Chief Justice’s test
and said:
Though I see no error in this approach, it leaves much to judicial impression from case to case -
which, of course, it does -
If the constitutional character be “significant” to the relationship with the law, it must be because the character of the corporation is the factor which attracts the operation of the law.
Could I ask your Honours to note the words “character
of the corporation”.
If that be so, I perceive no distinction between that test and a test of discriminatory operation.
KIRBY J: What page are you reading now?
MR SOFRONOFF: 183 CLR 337, your Honour. It is interesting, your Honours, to observe what Justice Brennan said in Cunliffe v Commonwealth of Australia 182 CLR, which of course dealt with aliens, at 316. At the top of 316 - - -
GUMMOW J: We looked at this last week.
MR SOFRONOFF: Well, I will not read it then, your Honours, but what - - -
GUMMOW J: We worried over this word “peculiarly”.
MR SOFRONOFF:
Yes, but my purpose in citing it is to show that what his Honour is
addressing by what he called his discrimination test is the need
to identify an
indicium which one can describe as a significant one for the purposes of the
law. Then Justice Dawson at the foot
of page 344 over to 345 repeated
what he had said in substance in Fontana and at 345 in the large
paragraph at about halfway his Honour observed that:
Because s 51(xx), unlike most other paragraphs of that section, describes the subject matter of the legislative power which it confers by reference to categories of persons, albeit artificial persons, a different approach is required in determining whether a law falls within its terms.
Your Honours, a case like Murphyores and a case like Fairfax say that a law that prohibits trade is a law with respect to trade and a law that prohibits trade except on condition remains a law with respect to trade. That must be right because the subject matter of the law, notwithstanding the existence of a condition, is trade. A law that imposes a tax on a transaction remains a law that is a taxation law notwithstanding that its effect or intention is to influence people to engage in some kinds of transactions in preference to others, but that is because there is no escaping from the conclusion that the law imposes a tax on a transaction, whatever its purpose might be.
Defence of course is different because the imposition of conditions upon people who wish to do things under the defence power requires that those conditions be appropriate to the purpose for which the powers conferred defence. As Justice Dawson observes with respect to corporations they are different too because they deal with persons and unless it were to be accepted that any law that had as its object of command a corporation as a valid law then one must find - - -
GUMMOW J: What about a trading corporation that shall not trade?
MR SOFRONOFF: Your Honour, that is no different, in my submission, from a law that - - -
GUMMOW J: If it is insolvent, for example.
MR SOFRONOFF: Could I leave the insolvency aside for the moment? That is, a law that simply says a company shall not trade unless it does something is simply a law with the interposition of an additional step that says a corporation shall or shall not and unless one admits of no limitation, in my submission, the dicta repeated over many years would not support such a law.
GUMMOW J: I thought you said that when we were looking at the trading power, section 51(i), as Murphyores decided, a prohibition upon trading was supported.
MR SOFRONOFF: But this is not a trading power, your Honour.
GUMMOW J: I realise that. It is the trading characteristic of the trading corporation which you have been stressing earlier today.
MR SOFRONOFF: Yes. But the law - - -
GUMMOW J: I asked you about it and now you seem to be retreating from it.
MR SOFRONOFF: No, I am not, your Honour. No. A law might say, and we would say such a law is not necessarily valid, a trading corporation shall or shall not depending upon the subject of the injunction. That may or may not be valid as we advocated in accordance with the authorities. A law that says a trading corporation shall not trade except on condition that something extraneous to trade or its status as a corporation is, in our submission, no different. All it does is interpose, for the purpose of facilitating reliance on the power, the trading aspect of the company in order to effect something that has nothing inherently to do with trading - - -
GUMMOW J: This is Barger’s Case again?
MR SOFRONOFF: No, your Honour, I am not - - -
GUMMOW J: I know you assume all - - -
MR SOFRONOFF: I do, because we are not speaking about tax and we are not speaking about trade and commerce power. We are speaking about a person.
GUMMOW J: Yes, but Murphyores talked about Barger’s Case as well, Mr Sofronoff.
MR SOFRONOFF: Yes.
GUMMOW J: You cannot slide out if it that way.
MR SOFRONOFF: No. The position we advocate is that trade and commerce is an activity which lies at the heart of any law that is within that placitum and a law which prohibits trade, the authorities say and we accept, is a law within that placitum. A law that prohibits except on condition is a law about trade. A law that prohibits a company from trading is not necessarily about a trading company. It depends on what the conditions are. Your Honour mentioned insolvency. That would be something that is inherent to the trading aspect of a company, the fact that it incurs liabilities and may incur - - -
GUMMOW J: It is true of sole traders as well.
MR SOFRONOFF: Certainly, your Honour. We do not advocate a position that the aspect has to be unique to companies, has to inhere in companies. It does not have to be unique.
GUMMOW J: It has to be inherent but not unique.
MR SOFRONOFF: Your Honour, there are aspects of companies that are inherent to them – and I addressed them this morning – and which are, in our respectful submission, the object of the need for a national corporations power. Could I take your Honours to Dingjan at 344. At the foot of 344 over to 345 Justice Dawson repeated the propositions that I have been addressing. Equally, Justice Toohey at page 353 - - -
HAYNE J:
Just back at 344 to 345 in Justice Dawson’s reasons,
his Honour cites Chief Justice Barwick’s caveat but
otherwise is
not the argument there set out founded upon eliding two radically
different propositions. A law directed to all persons is not a
law with respect
to trading or financial corporations – see
Strickland – and from that we seem to merge into the second
proposition found at point 6 or 7 on 345:
a law directed at trading or financial corporations or foreign corporations either exclusively or along with others is not necessarily a law upon the subject matter of those bodies.
Now, is there not a slide there?
MR SOFRONOFF: I would submit there is no slide there. There is a distinction between the two propositions and the first, of course, we would submit is completely uncontroversial, and nobody would argue that. The second, though, distinctly finds support in dicta, not just this one, but others, and in Strickland - - -
HAYNE J: You have Chief Justice Barwick’s caveats, I understand that - - -
MR SOFRONOFF: Yes. So his Honour
was not merely addressing himself to the precise reason why in that case the
laws were invalid because they were
addressed generally. So, in my submission,
the passage at 345 is not logically wrong for that reason. The passage to which
he refers
at 490:
Nor does it follow that any law which is addressed specifically to such corporations or some of them is such a law.
So what Chief
Justice Barwick was addressing and what Justice Dawson is addressing is that
proposition and they appear, we submit,
to accept it. Justice Toohey to a
similar effect at page 353 in the paragraph beginning on that page. In our
submission, your Honours,
the cases on subsection (xx) support the
argument that the law to be valid must operate on some aspect of the corporation
which is
inherent in it as a trading, financial or foreign body, corporate body,
owing its existence to legislation. In our submission, the
general authorities
also in relation to characterisation support that conclusion.
KIRBY J: What was the way you expressed it, must operate on some aspect of the, what – of the corporation?
MR SOFRONOFF: Of the corporation – of the entity which is special to it - - -
KIRBY J: That is not good enough because - - -
MR SOFRONOFF: Of course, your Honour, it can operate on other persons because of the effect on - - -
GUMMOW J: I thought we agreed it would have to be inherent.
MR SOFRONOFF: I was going to say – that is right, your Honour. Of course it may operate on outsiders with respect to their deleterious effect on the corporation. Is that what your Honour is putting to me?
KIRBY J: I just find it hard to get out of my mind that employees are, generally speaking, a very important part of the corporation, their cost factors. They are relevant to whether or not the corporation succeeds or perishes in the international and regional market. They are a vital part of the life of the corporation which is an inanimate object. They are absolutely, generally, the most important cost factor in the corporation’s operations.
MR SOFRONOFF: That is so, of course, your Honour, but so is almost anything: roads, price of petrol, price of accountants, price of lawyers.
CALLINAN J: Thirty per cent taxation, or more. Is it 30 or more? Anyway, it is something like that.
MR SOFRONOFF: I do not know, your Honour. I am not a company.
CALLINAN J: But it is very substantial.
MR SOFRONOFF: Why not then a law governing the price at which accountants or solicitors or others can charge corporations? We would submit, not on our construction but on the Commonwealth’s widest construction, why not? But plainly, in our submission, when one looks at the placita, all of them, and that they are in some fashion limited by reference to the subject matter, that would not be contemplated by a fair reading of the words and a law which attempted to do that would not be characterised properly as a law within those words, however general they are, as indeed they are.
Chief Justice Latham in the Bank Nationalisation Case
[1948] HCA 7; 76 CLR 1 at 186 – the earlier dictum of Chief Justice
Latham, your Honours, in relation to the sale of labour was at 234 but at
186
his Honour said in the middle of the page:
A power to make laws with respect to a subject matter is a power to make laws which in reality and substance are laws upon the subject matter. It is not enough that a law should refer to the subject matter or apply to the subject matter -
Then he gives an example of application.
He does not give an example of mere reference. To the same effect is
Justice Kitto’s
often quoted dictum in Fairfax
114 CLR 7: His Honour said about eight lines down:
it is a question as to the true nature and character of the legislation: is it in its real substance a law upon, “with respect to”, one or more of the enumerated subjects -
Your Honours, while it is true
that characterisation raises problems and there can be multiple characters of
any particular law, nevertheless
from time to time one can find a law that can
be characterised, whatever else it might relate to, as not in relation to,
relevantly
here, companies. There was such a law in Fontana. As
your Honours recall, the deemed involvement of the union in the activity
was struck down as a law that did not relate to corporations
- it was too remote
– although undoubtedly it bore upon the corporations and the remedies that
the corporation might obtain.
Could I take your Honours to the Act, and I will not seek to dwell in detail on the matters that have already been dealt with by my learned friends or by others to come. But if your Honours go to Part 7 at page 115, Division 1 establishes the Australian Fair Pay and Conditions Standard, the minimum conditions. They are directed to the rights of employees, whether they are employees of corporations or the other entities that are defined as employer in section 6. The trading, financial or foreign corporation offers nothing to the character of this law, in our submission, except that it happens to be one of the possible employers.
KIRBY J: There was a body under the retail price maintenance legislation, was there not? There was the prices justification body. How is this different from that?
MR SOFRONOFF: Well, one difference, your Honour, is that the essence of trade is sale, it has been said, and price and sale are the same thing, and consequently a law relating to prices might well, depending upon the law, fall within power, because it has as its subject matter the trade or the trading corporation. What this has is as its subject matter the employment contract of employer and employee, one of whom happens to be a constitutional corporation. But it might have – it has no other interest in the corporation, and the corporation if it were deleted from this Act and it applied only to the other persons, the legislation would not change its character one iota. To the same effect is division - - -
KIRBY J: But the essence of profitable trade is to keep your costs down and this body, the Australian fair pay and conditions body, is, as I understand it, a body which will fix the minimum wage and minimum ordinary hours of work and therefore affect the profitability of the corporation.
MR SOFRONOFF: Of course, your Honour, by a process of logical connection, there could be in a particular case a connection between a particular company’s financial state and what is done under these provisions. But so could many things – so could many things, including the prices at which services are offered by independent contractors or professionals, the terms upon which roads are permitted to be used, the terms upon which telephones are permitted to be used or the terms upon which computers are permitted to be owned.
KIRBY J: But they are all a bit more remote. We are talking about the actual cost structure of the corporation itself.
MR SOFRONOFF: Your Honour, they could be made not to be remote, in that respect, in the sense that it could have a shocking effect on a corporation, depending upon the nature of the controls that the Commonwealth would wish to exercise, if its broad view of the meaning of the provision is acceptable.
GUMMOW J: What do you say is necessarily inherent in a corporation, apart from its artificiality, as a fictional legal person created by the State on such terms as the State decides and treated by the State from time to time on such terms as the State decides?
MR SOFRONOFF: It is artificiality, certainly, but also it is what flows from that artificiality.
GUMMOW J: Exactly.
MR SOFRONOFF: What flows from it is its capacity to exist and cease to exist, the matrix – the legal and economic matrix that companies exist within, the shareholding structure, the necessity for binding rules – all of those things.
HAYNE J: But essentially it is the law giveth, the law taketh away, because it artificial.
MR SOFRONOFF: Yes.
HAYNE J: If that is so, what limit is there that is given by this notion of inhering in a corporation? Once you go artificiality, to the law gives or takes, that which is inherent seems at the moment to be anything that the law can give or take.
MR SOFRONOFF: Your Honour, it would depend on the law but we would respectfully remind the Court of what has been the focus of company law in Lord Justice Lindley’s statement over 100 years ago. The legislature has endeavoured by various means so to amend the law as to give free scope to a combination of capital and at the same time to prevent injustice being done either to or by its subscribers and that is because of the peculiar problems that corporations, because of their nature, present. It is not therefore anything such as how drivers employed by corporations ought to be licensed which would fall within our construction of the provision.
Those things are remote from companies, albeit that a State legislature could impose any condition upon the existence of – I will start again - a State legislature could impose any condition upon the use of the roads or upon the persons who are entitled to drive upon them. When it comes to asking the question whether this is a law with respect to trading corporations as such, in our submission, if one looks at a piece of legislation that affects the company, it is true, but in a way that is nothing to do with its nature as a trading company or a foreign company or a financial company, that is not a law within power. It is simply a law directed to a company and nothing more. The company lends nothing to the law. No part of the company’s character or indeed activities lends anything to the law.
Why then is it a law about companies except that it is directed to them. If that wide construction is accepted then so be it. Our argument is that there is a limitation and it has been accepted, although the courts have had difficulties in defining with precision the outer limits, but this is not a difficult case, in our submission, because this is a law - - -
GLEESON CJ: The difficulties seem to have arisen because what might be thought to be the most obvious possible meaning of paragraph (xx) is one for which nobody contends and that is that it is a power to make a Commonwealth companies law.
MR SOFRONOFF: But, your Honour, that is our contention.
GLEESON CJ: That is what Justice O’Connor said it was intended to mean. Mr Walker’s argument comes fairly close to that, but apart from that, that seems to be one thing that everybody is agreed on, that it is not just a power to pass a Commonwealth Companies Act.
MR SOFRONOFF: But, your Honour, that is really at the heart of our argument that it is a power to pass laws about companies.
GLEESON CJ: Hang on, everybody is agreed, are they not, that you cannot, under paragraph (xx), enact a law with respect to the incorporation of companies?
MR SOFRONOFF: Yes, quite. We are bound by that, yes. We have not sought to argue the contrary. But leaving that aside, what the law is about is about company law and we now accept trading activities of companies because of the line of cases - - -
GLEESON CJ: Well, on that most obvious meaning, the Trade Practices Act would be invalid.
MR SOFRONOFF: Yes, but as I have said, because of the line of cases starting with the dissent in Huddart, Parker, trading activities, but trading activities that in the examples that have been decided have a bearing upon a company either because those activities are prone to harm the company or the activity of the company is prone to harm others in trade. So that is a wider scope, but at its heart is company law. Your Honours, could I pass then to Part 8 at page 224. Part 8 concerns the entry into workplace agreements of different kinds and, again, if we subtract the constitutional corporation from that, then apart from the fact that it will not apply to those employees or those employers, the nature of the statute is not changed in the slightest.
Equally, Part 12 relating to minimum entitlements, although some of those provisions rely upon the external affairs powers as you have been informed and Part 9 is a little different in this respect. Part 9 begins at page 282. It defines “industrial action” which we can summarise as work to rule, strikes or lockouts. Then if one goes to 496 at page 347, 496(1) obliges the Commission to make an order that “industrial action stop” if it is about to happen or is threatened or is happening and if it is not protected action.
Now, two things we would submit about that. The first is that there is no necessary impact contemplated by that provision, but, more importantly, for the purposes of validity it depends upon its meaning upon the expression “protected action”. Industrial action must not be protected action. So that depends upon the meaning of “protected action” which your Honours will find at page 304, section 435.
Section 435 defines “protected action” relevantly as action that happens during a bargaining period subject to some conditions and they are conditions that depend upon the validity of Part 8. So 496 which relates to the stoppage of industrial action that is not protected action depends for its validity upon the validity of the earlier provisions which are the broad provisions that we have sought to criticise.
KIRBY J: The Commission referred to here is the Industrial Relations Commission?
MR SOFRONOFF: Yes. Section 496(2) is a Fontana-style provision.
KIRBY J: Under the 51(xxxv) powers in the former legislation there were, I think, provisions somewhat similar to this but leaving it to the discretion of the Commission.
MR SOFRONOFF: Yes, there was discretion, your Honour.
KIRBY J: Because it had to, being an independent arbitrator, under the Constitution.
MR SOFRONOFF: Yes.
KIRBY J: And now it is simply an obligation.
MR SOFRONOFF: Yes, it is bound to. Division 7, which begins at page 351, empowers the Minister to make a declaration terminating bargaining periods, and that of course falls with the earlier provisions, as do Parts 11 and 13. Could I seek the Court’s leave to amend our pleading to also include 13? Division 13 falls over consequentially if the earlier parts fall over. We will provide a draft pleading to include Division 13 to our learned friends and the Court.
GLEESON CJ: Thank you. You will gather from what we have said earlier that we attach a great deal of importance to knowing exactly what is contended to be the outcome of certain arguments.
MR SOFRONOFF: Yes. We are joining in what somebody called a matrix, your Honour.
GLEESON CJ: Thank you.
MR SOFRONOFF: I do not wish to add anything to our submissions in relation to Territories other than what is in our written submissions. Subject to that, your Honours, those are our - - -
CALLINAN J: Mr Solicitor, there is one matter I would like to hear you on, and I know you deal with it to some extent, or the detail of it. The history is set out in your submissions, but in a nutshell what do you say is the use that we can make of the repeated failed referenda designed to give the Commonwealth the power that it now says it can exercise?
MR SOFRONOFF: Your Honour, it is the historical context really.
CALLINAN J: Can we use it as an aid to construction in some way? I mentioned earlier today that it is now part of the jurisprudence of this Court that we can look at the history and if ever there is indisputed history it is what happened in the referenda and the people simply knocked back what is asserted can be done here now.
MR SOFRONOFF: And shortly after they had voted for this Constitution.
GLEESON CJ: And do you say – is that an aid to construction?
GUMMOW J: You had better think about what the Chief Justice - - -
MR SOFRONOFF: I should think about it, your Honours, because - - -
GUMMOW J: You had better think about what the Chief Justice said in Mulholland before you jump over the river, I think.
MR SOFRONOFF: May I give your Honours a note about that because - - -
GLEESON CJ: Yes. If you attempted to answer that it is an aid to construction, the next question you would need to address in covering your note is whether on that basis the meaning of the Constitution changed after the referendum failed.
MR SOFRONOFF: We will give the Court a note and endeavour to do it before the case finishes.
GLEESON CJ: Thank you.
CALLINAN J: One part I am interested in, in particular, as I referred to it this morning also, is that Mr William Hughes said you wanted this because it would be a vehicle for nationalisation. If he is right about that, nationalisation would destroy the Federation.
KIRBY J: But, of course, nationalisation is subject to section 92.
MR SOFRONOFF: There would be a section 92 obstacle.
CALLINAN J: Yes, but the amendments may well have operated, had they succeeded, to nullify section 92 or certainly to reduce it - - -
MR SOFRONOFF: We will give all of your Honours a note with respect to the use of the referenda.
GLEESON CJ: Thank you, Mr Solicitor.
Mr Solicitor for South Australia. Now, let us just have a progress check.
How are we running in point
of time, Mr Solicitor?
MR
KOURAKIS: If the Court pleases, I think we are doing well. I expect to
finish by the end of the day and a little bit tomorrow morning, which
is on time
from our point of view.
GLEESON CJ: Good, that is fine. We need not go into any more detail than that. Thank you. Yes, Mr Solicitor.
MR KOURAKIS: May it please the Court. The submissions that I will make will address the following: first, South Australia’s alternative submission as to the extent to which section 51(xx) enables the Parliament to enact laws regulating employment by trading and financial corporations. Before I go to the other two matters I should state briefly what that is because the alternative submission is alternative to both New South Wales, Victoria’s and Queensland’s. It is simply this that Parliament can only regulate employment that has a sufficient connection with the nature of trading and financial corporations as such, that is, in their capacity as trading and financial corporations, and as so stated, of course, recognises that - - -
GLEESON CJ: Could you repeat that?
MR KOURAKIS: Yes, that Parliament can regulate employment that has a sufficient connection with the nature of trading and financial corporations as such, that is, as trading and financial corporations their capacity as trading and financial corporations. So expressed, 51(xx) would enable the Parliament to regulate much of the employment engagements made by trading and financial corporations that the Commonwealth has accepted in paragraph 225 of their submissions that if that limitation is right, and has the width for which South Australia contends, then the Act cannot be read down in a way to make it work to those many employees who are no doubt engaged by trading and financial corporations on activities that are for the purpose of trade or incidental to trade or connected to trade and finance in some way.
GLEESON CJ: What is an example of an employee who is not employed in that way?
MR KOURAKIS: Your Honour, those examples are most readily found in corporations that engage in trade and finance only incidentally to other major purposes but sufficiently to come within the meaning of the term, and such organisations are most obviously municipal corporations. They engage persons who set rates, value land for rates, collect rates, organisations like the Red Cross - - -
GLEESON CJ: So if you assume, contrary to what was decided, but in the light of later decisions, that the St George County Council were a trading corporation, the power would enable regulation of the employment conditions of the people who sold refrigerators but it would not permit regulation of the employment conditions of the people who checked that swimming pool fences were of a sufficient height?
MR KOURAKIS: Yes.
GLEESON CJ: Or in the case of the St George County Council, people who check that the electricity lines are in order?
MR KOURAKIS: Yes, and of course, the Commonwealth could not regulate any of those activities if the corporation concerned had confined itself to those sorts of activities. The Commonwealth has no power to regulate the employment of persons engaged in those activities unless it happens that that corporation engages in sufficient trade or financial activity to bring it within the definition.
KIRBY J: It seems to suggest a nightmare of an administrative problem within a corporation. Now, this person falls on this side of the line and this person – it does not seem to be the way in which you construe an ample head of governmental power given to a nation by a Constitution which is expected to last indefinitely.
MR KOURAKIS: Your Honour, there are a number of answers to that which I will elaborate on later, but for now it is sufficient to say that tests like for the purposes of trade and commerce or trade and finance or connected to, incidental to are tests that could be given meaning without much difficulty. That it would create more work if the Commonwealth chose to regulate in that way goes without saying but that is an incident of many attempts by legislatures, Commonwealth or State, to regulate.
HAYNE J: But it gives force to what Sir Harry Gibbs said in Fencott v Muller 152 CLR - particularly at 588 where he spoke of:
the many and protean tests that have so far been suggested –
for what is a trading or financial corporation. His Honour went
on to say that, in his view, at that time it was:
impossible to hold that the meaning of s. 51(xx) is finally settled.
Now, true it is, I think, Chief Justice Gibbs’ views
in Fencott v Muller can be seen as standing apart but much of the debate
we have had assumes, perhaps rightly, that there is a single, settled, certain
content that can be applied to the expression “trading or financial
corporation” that hinges about activity.
MR KOURAKIS: Your Honour, that will be the first matter that I address when I come to the alternative submission. Simply put, the submission is that the term is not a term of art – essentially encapsulates or requires a factual inquiry, I will come to that in a moment. But the other two issues that I will address are the validity of section 117 of the Act that provides that the Commission can make an order in joining State industrial tribunals from hearing certain industrial matters. It is contended that impermissibly interferes with the administration of valid and operable State legislation by the tribunals the Parliament has committed the administration of the law to. It will require a consideration of the decisions of this Court in Ex parte Ryan and Austin’s Case.
Finally, I will deal with Schedule 6 of the Act, the transitional provisions. Those provisions rely on the conciliation and arbitration power, 51(xxxv), but South Australia contends that they are not within the power because the provisions impermissibly restrict the discretion of the arbitrators to vary the transitional awards that are maintained by the Act for the transitional period.
Your Honours, turning to the
corporations power question, in my submission, it is the judgment or conclusion
of Chief Justice Barwick
in
St George Country Council
[1974] HCA 7; 130 CLR 533 as to the meaning of trading and financial corporations
has now been accepted by this Court, that is, that it is not a term of art.
His
Honour the Chief Justice considered the relevant history and came to that
conclusion. His Honour’s consideration can
be found at pages 541 and 542.
I notice that your Honours have it although it was not on the list of
authorities. Your Honours will
see from the first full paragraph at page
541 that his Honour the former Chief Justice discusses the question and finds
that there
was no settled technical meaning, notwithstanding the multiplicity of
Acts that were, at the time of Federation shortly before, enacted
for the
incorporation of various sorts of corporations.
HAYNE J: But now do I read his Honour aright as saying no technical meaning, if you like, no legal meaning to the expression “trading corporation”.
MR KOURAKIS: Yes.
HAYNE J: What about the full constitutional text, “foreign corporations, and trading or financial corporations”? Does the portmanteau expression “trading or financial corporations” set apart corporations incorporated for the purpose of gain from those spoken of in the 1862 Act and the Queensland Act as pursuing charitable and other - - -
GUMMOW J: Section 21.
HAYNE J: Section 21 corporations?
MR KOURAKIS: They would, as a matter of fact. Once the factual inquiry is answered, the fact is that most of those corporations – corporations sole, religious corporations, charitable corporations – would be found not to fall within the definition. In my submission, there is just no legal learning, judicial decisions to support the notion that that compound conception, trading and financial corporations, had a settled meaning at the time.
GUMMOW J: No, the question is: is it not a yardstick to tell you what has been left out? It is a comprehensive expression.
HAYNE J: Leaving out, for example, municipal corporations; leaving out, for example, universities.
MR KOURAKIS: That was thought to be the result, but that is certainly not the limit of the connotation. We know now on the authorities as to what might be a trading and financial corporation that municipal corporations will come within it, as will charitable corporations, that, if that is the correct approach to construing the term, might otherwise have been left out of it. The RSPCA, the Red Cross, if the question had been asked objectively at the time of Federation, “Are they trading and financial corporations?”, it would have been said no, but that is simply a result of the factual content that you give – or the conclusion after a factual inquiry.
HAYNE J: You can see the development in the thinking most plainly I think by comparing St George [1974] HCA 7; 130 CLR 533 at 541 in Sir Garfield Barwick’s reasons and then what happens in Sir Anthony Mason’s reasons in Western Australia National Football League [1979] HCA 6; 143 CLR 190 at 233, where the idea of activity comes to take on greater prominence. Now, it may be right, it may be wrong, but it is focusing exclusively on trading corporations. It seems to segment the constitutional expression into its little bits and ascribe meaning to each little bit, add them together and say therefore. Now, is not the portmanteau expression “trading or financial corporation” notable for its generality and its generality defining what it is excluding?
MR KOURAKIS: Your Honour, they are terms of generality. It is not clear to me that your Honour’s submission is at all at odds with the contention that they are nonetheless not terms of art. Can I approach it perhaps in another way.
HAYNE J: Freud is alive and well, Mr Solicitor.
MR KOURAKIS: I am sorry, your Honour?
HAYNE J: I just said Freud is alive and well. Go on.
MR KOURAKIS: The constitutional debate in Adelaide that your Honours have been taken to on a number of occasions, in my submission, shows this. Clearly following the events of the 1890s it was decided that the Commonwealth should be given power to regulate more than just the recognition of corporations throughout the Federation, and that is understandable in terms - - -
GUMMOW J: They could not quite make up their minds as to precisely what it was, so they used some general words. That is something we are not unfamiliar with in looking at the product of the labours of the founding fathers, and one can understand why.
MR KOURAKIS: But what is shown is this, your Honour, that the most general words or word that could have been used is simply “corporations” because - - -
HAYNE J: But that would have brought with it the whole baggage of the Federal Parliament regulating the Archbishop of Adelaide.
MR KOURAKIS: Yes, precisely, with respect, your Honour. The only thing that inheres, or is peculiar to, intrinsic to corporations, if it had been left at that, is just their legal personality. No doubt, although that would then have allowed the Commonwealth to regulate the very activities that led to the crash, it carried with it the consequence that your Honour has observed. To deal with that, they dealt with it in a particular way, by adding the words “trading and financial” ahead of the word “corporation”.
Now, whatever subjectively they might have thought that would achieve or wanted it to achieve –and no doubt many of them had very different thoughts about that – once they settled on that expression, “trading and financial”, to cover corporations, it had a certain effect.
GUMMOW J: Wait a minute. They also used foreign corporation.
MR KOURAKIS: Yes.
GUMMOW J: I imagine, but I may be wrong, there were not many section 21 corporations, that is, charitable, et cetera, which were foreign corporations.
MR KOURAKIS: Probably so.
GUMMOW J: No.
KIRBY J: Why is not the generic description that fits them all – trading, financial, foreign – “business”? These are business corporations.
MR KOURAKIS: Yes.
GUMMOW J: That is what Sir Garfield was getting at, in a way, at page 541 of St George when he is talking about the power that these bodies could have on daily life throughout the country and the harm they could do to the community or the benefit they could confer on the community.
MR KOURAKIS: Yes. Trading corporations?
GUMMOW J: No, the whole of this class of corporations.
MR KOURAKIS: The class being trading and financial corporations?
GUMMOW J: And foreign corporations.
KIRBY J: As distinct from charitable and municipalities and archbishops and things like – they are very local and small, whereas these others are very important in economics, even at Federation.
MR KOURAKIS: Yes. Your Honours, the harm - - -
GUMMOW J: The reason why foreign corporations is so significant in a way is that you could raise money on the London market if you were going to incorporate there.
MR KOURAKIS: Yes.
GUMMOW J: Money was not to be raised on the local market in such exceptionally large sums, perhaps, as it could be on the London market. So you would go over there and float, you see, but then they are a foreign corporation here.
MR KOURAKIS: Yes, but, your Honours, the damage that they could cause as a consequence of their trading and financial activity, and it is that they focused on. That comes out of the very debate in 1897 in Adelaide.
KIRBY J: And the damage can be to their employees as well as to their shareholders. If they go broke, they go down the gurgler.
MR KOURAKIS: Yes, but the damage to their employees and to the community generally is a consequence of their trading and financial activity, and it is for that reason that the drafters fastened on those words.
HAYNE J: But the first manifestation of damage you find reflected in the colonial statute book is in the preference for employees’ legislation following mining companies going belly up in Victoria before the 1890s. The first legislation you find to protect people is directed to the position of employees, giving them I think it was a month or a fortnight’s wages as a priority payment in winding up.
MR KOURAKIS: Yes. Your Honour, that may well be so. That does not cut across in any way the submission I make that the focus of attention was the trading and financial activities, because of the damage they could cause, and the need for remedial legislation, if that was thought necessary, by the Commonwealth. Having fastened on that description, those words must be given effect in the construction of section 51(xx), and that, in short, is the effect of what his Honour Chief Justice Gibbs had to say in Fontana in the passage that your Honours have been taken to on a number of occasions. There the Chief Justice said the very existence of those words in the text – the text itself suggested that the trading and financial nature of the corporation should be a significant element in what attracts the law.
KIRBY J: Can you answer the question that still puzzles me: why, given the importance of the cost factors of employees, is the regulation of employment, in the context of corporations, not part of the regulation of business corporations or something incidental to the regulation of business corporations? In economics, an economist would laugh at this debate. He would say, “Of course it is. It is a major cost factor.”
MR KOURAKIS: Your Honour, I cannot answer that particular question any better than Mr Sofronoff has, but I want to make it clear that my submission, the alternative submission, accepts that the employment of workers engaged in the trading and financial activities of corporations can be regulated and, accordingly, on the alternative submission there is no distinction. No distinction of that sort needs to be justified.
KIRBY J: Let me get that clear. Does that just mean that within the corporation those who are only finance and managerial departments can be regulated by federal law, but those who are out there in the factory actually making the goods are not?
MR KOURAKIS: No, they can be too. This submission will only keep out of the Commonwealth power those employees, for example, of the RSPCA who go round and attend to sick animals or check battery hen farms and are not engaged in trade and finance; those employees of corporations that value land, set rates, collect rates; employees in public hospitals who deal with public patients; university researchers in research that is not connected with any trading or commercial activity of the university – and I am sure there are still some persons in that position.
So, your Honours, it is a limited argument, but nonetheless it is an argument that if South Australia is right about, the Commonwealth has accepted this particular legislation cannot be read down to accommodate that problem. So the problem will effectively arise where the trading activity is incidental to another usually regulatory or charitable activity of the corporation and where no connection can be found between the employment of the persons engaged on those charitable or regulatory activities and the incidental trading aspect of the corporation.
KIRBY J: So your submissions are much closer to the Commonwealth’s submissions?
MR KOURAKIS: Yes.
KIRBY J: They distinguish you significantly from the other State and Territory participants?
MR KOURAKIS: Yes. The Commonwealth’s submission is simply that - - -
KIRBY J: Eo nomine.
MR KOURAKIS: Well, your Honour, for reasons which are not clear, that there is some narrower – sorry, that simply South Australia’s proposition would apply to very few cases and they can be dealt with on a one-by-one basis in some way, but I will come to that later. Your Honours, can I take your Honours to Justice Stephen in Fontana [1982] HCA 23; 150 CLR 169. Can I take your Honours to page 190 and take your Honours to the analysis of the particular laws in that case in the middle of the page commencing “The law contained”.
Your Honours, the submission I want to make about that passage is that that analysis there of 45D will work for most laws, that is, an analysis of the elements of most laws preparatory to the characterisation process will find that the laws operate on persons and conduct. One can hardly contemplate a law that operates purely with respect to persons. It operates both on persons and conduct. Accordingly, all laws must be identified – those aspects of laws must be identified.
With respect, that is one of the reasons why I would make the submission that there is a danger in treating person powers completely separately and differently to powers which give the Parliament a power as to some sphere of social, economic or governmental activity, because if one is to match a law against a power, the law must be analysed. It will invariably be analysed in terms of persons and conduct at various levels of complexity. One then is to compare those elements of the law with the subject matter. One inevitably, to compare like with like, must at least think about the scope of the activities encompassed within the power, even if it is expressed as a power with respect to persons.
Your Honours, that is
plain from the reasoning of Justice Stephen that follows in the last
paragraph of 190 - I will not read it,
your Honours have been taken to
it. His Honour Justice Stephen relied on much more than just the fact
that the provision was directed
to a corporation. He found it important that it
concerned the trading activities of corporations and similarly at page 194,
the
paragraph commencing “If the task of characterization be
approached” shows that too, and that was read by Mr Sofronoff
a
moment ago. Can I take your Honours just over to 195? The first full
paragraph, the first sentence emphasises the approach I
have just described.
His Honour said:
The centrality of that connexion is emphasized, rather than diminished, by the fact that the prohibition which the law imposes is not addressed to corporations but rather to those who act with a purpose of harming them.
That makes it clear that his Honour Justice Stephen was looking at much more than just the fact that the legislation was protected at aiming corporations. Your Honours, the passage of Justice Brennan in Cunliffe has now been much cited and I will not take your Honours to it. Can I say this though, in our submission - and it appears in our submissions in reply - we say that that expression does not mean unique. It means rather distinctive of or intrinsic to a corporation.
GUMMOW J: Intrinsic?
MR KOURAKIS: Yes. Though a slight gloss on “inhere” but can I put it in this way, your Honours? The fact that a corporation engages in trading and financial activity - that is, is a trading and financial corporation - is what distinguishes it from corporations that do not. Similarly, the fact that a trading and financial corporation is a corporation is what distinguishes it from a natural person.
So when we put the submission that 51(xx) deals with trading and financial corporations as such, it has a similarity and is similar to the proposition put by his Honour Justice Brennan in Cunliffe as to aliens. A law will be a law with respect to a trading and financial corporation as such if it deals with the trading and financial activities of corporations or matters connected to them because it is those activities which distinguish trading and financial corporations from other corporations.
Similarly, if a law prescribes a corporate structure for trading and financial corporations it is treating trading and financial corporations as such because it is the corporate structure that distinguishes trading and financial corporations from natural persons.
GLEESON CJ: Can it regulate the way they deal with their shareholders?
MR KOURAKIS: Yes, trading and financial corporations.
GUMMOW J: Can it regulate the way they deal with their customers?
MR KOURAKIS: Yes, in trade and commerce.
GLEESON CJ: But not the way they deal with their employees?
MR KOURAKIS: In my submission, yes. On the alternative submission - - -
GLEESON CJ: On the alternative but not on this submission? You are on your main argument now, are you not?
MR KOURAKIS: No. Your Honour, the submission I am putting is the alternative submission.
GLEESON CJ: I see. So it can regulate the way they deal with some of their employees but not others?
MR KOURAKIS: Yes. For most trading and financial corporations the effect is that the Commonwealth can regulate the employment of all of their employees. There is no doubt that for many or for most that may well be so. There will be corporations though where it is not possible to say that a particular employee’s employment has any relationship whatsoever to the corporation as a trading and financial corporation.
KIRBY J: South Australia is a bit of a fly in the State ointment, is it not?
MR KOURAKIS: No. Your Honour, if someone does a count of the number of times I say “alternative” by the time I finish it will tell a story, but it is a true alternative. One only gets to it if the internal management approach of New South Wales is rejected, the 51(xxxv) carve-out approach of Victoria is rejected - - -
KIRBY J: I see. So you are charting a fallback position?
MR KOURAKIS: It is the last stand.
GLEESON CJ: Your argument is that the Commonwealth is hoist with its own petard. It has been so successful in persuading courts about the width of the expression “trading corporation” that we have ended up with the position that organisations may be trading organisations who have a large number of employees who have nothing to do with trade.
MR KOURAKIS: Yes, and that section 51(xx) does not extend to regulate those activities, and I will come to say a bit more about and give some examples of what the Commonwealth’s construction would lead to in terms of the sorts of activities it would regulate a little later.
Now, your Honours, just on the approach of construing 51(xx) as referring to corporations as such, I draw some support from the passage of Justice Stephen in Koowarta v Bjelke-Petersen and Others [1982] HCA 27; 153 CLR 168 at 209. Your Honours, the last paragraph, reading down into it a little, his Honour Justice Stephen said:
This requirement is more than a mere qualification of the power; it also predicates a character which laws made under par. (xxvi) must possess: they must be special laws, in the sense of having some special connexion with people of any race. It is true that the grant of power is not in terms confined to the making of special laws, but from the description of the laws which may be made under it – laws for those people of any race deemed in need of special laws, it follows that it is special laws and only special laws which fall within par. (xxvi). It cannot be that the grant becomes plenary and unrestricted once a need for special laws is deemed to exist; that need will not open the door to the enactment of other than special laws.
His Honour means special in the sense that they deal with the matter that has been deemed to require special laws. So the Parliament could not be heard to say the people of this race need special law X, we enact it. Having enacted it they now meet the description in (xxvi). We will now enact a host of other laws for which there is no special need because we will treat 51(xxvi) as a person power.
GLEESON CJ: I think to understand your alternative argument we need first to understand why it is that you accept that in the case of most employees and most corporations a law regulating their employment is a law with respect to corporations. Why do you accept that?
MR KOURAKIS: Your Honour, the argument for accepting it, contrary to the submissions that have been put before, is effectively that it is a law for the purposes of the trading and financial activities of the corporation and that has a sufficient connection with a trading and financial corporation as such.
GLEESON CJ: And in the case of a foreign corporation?
MR KOURAKIS: Your Honour, 51(xx) will enable a much wider regulation of foreign corporations than trading and financial corporations because what is intrinsic or distinctive about foreign corporations is that although incorporated in some place outside of Australia they are engaging in activities within Australia. So their corporate structure can be regulated again, because that is something instinctive about corporations when compared to natural persons, but the activity need not be a trading and financial activity.
The law need only be with respect to an activity conducted in Australia, and that is why the laws that can be justified with respect to foreign corporations are so much wider, no problem at all about a law as to whether they can own land or not, which of course has been a common form of regulation of foreign corporation – or once was a common form.
Your Honours, can I go to South Australia’s written submissions just to make some additional comments. Can I ask your Honours to go to paragraph 17. In paragraph 17 an attempt is made to explain the trading and financial corporations as such argument by reference simply to a merchant who is a natural person. On the Commonwealth’s approach, once the person is identified as a merchant, everything about them can then be regulated, including the place and location of their house, building regulations for their house – all of those would be laws, “a merchant shall”, “a merchant shall not”, but one would hardly, in my respectful submission, construe the power in that way. One would say that laws can be made with respect to merchants as such in their capacity as merchants.
Your Honours, at paragraph 42 we deal with the position of foreign corporations and make the submission really that I just made, that by reason of the wider description, the Parliament could make many laws with respect to foreign corporations that it could not with respect to trading and financial corporations.
At paragraph 47 your Honours will find South Australia’s submission, again as an alternative to Victoria’s, as to the way in which 51(xxxv) can be taken into account. It is simply that in construing 51(xx), and in particular deciding between the competing constructions that are at this stage relevant, South Australia’s alternative construction and the Commonwealth’s, in choosing between those on the basis that they are at least open textually, the context, that is, the context of 51(xx) within 51 and the existence of the other powers, is relevant in choosing between the two. Your Honours, as to the question of referenda which are dealt with - - -
HAYNE J: Just before you deal with that, can I take you back to the foreign corporations part of your submissions at paragraph 42.
MR KOURAKIS: Yes.
HAYNE J:
You will recall in Fontana Chief Justice Gibbs’
statement that:
It means that the fact that corporation is a foreign corporation should be significant in the way in which the law relates to it.
You
recall that proposition?
MR KOURAKIS: Yes.
HAYNE J: Do you say that his Honour was right or wrong there and, if right, what do you say he should be understood as saying?
MR KOURAKIS: We say he was right and because foreignness is the matter that must be significant, all its activities in Australia can be regulated, or at least it is hard to think of an activity that could not be, because what is significant is that it is incorporated in a foreign place but is conducting activities within Australia. Your Honours, that does not require, as the Commonwealth suggests, giving the word “foreign” two different meanings within the same section. The word “foreign” appears only once in the section. It is a reference to corporations incorporated outside of Australia. But it follows from that that the placitum is directed towards the activities of that foreignly incorporated person in Australia.
Your Honours, on the question of referenda dealt with in paragraph 49, if it is accepted to the extent that the context of 51(xx) within the other paragraphs of section 51 is important, the fact that those other placita or extensions of the placita were rejected at referenda is at least a reason for proceeding with caution in the way that his Honour Justice McHugh and Justice Kirby describe in Cheng, and that is as far as South Australia takes the relevance of referenda here.
Your Honours, if a referendum proposal was to extend 51(xx) to specifically and expressly say that the power extended to the regulation of the employment of employees of corporations and it was rejected, intuitively one would think that at least some regard would have to be had to that, at least for the purposes of hesitating before reading the section to have always contained the specific power that was rejected.
KIRBY J: I have referred to referenda in Durham Holdings, the fact that New South Wales does not have a just terms provision and though that was put up and in the one about the Hindmarsh Bridge, Kartinyeri, but the difficulty is that knowledge and understanding of the Constitution evolve over time and it may be that there are powers which would be put up at a given time which subsequent evolution of the doctrine make redundant and unnecessary. So the difficulty of referenda is that they may simply reflect a time capsule of the understanding of the need for the referendum.
MR KOURAKIS: Yes, and they proceed on an assumption about the meaning of the Constitution as it stands which - - -
CALLINAN J: But that is not my provisional view of it. I mean, section 128 is there. Why should the Court do what the people will not do under section 128? It almost seems undemocratic.
MR KOURAKIS: Your Honour, the fact that it is not just a plebiscite, that it is the people within that governmental or law-making capacity that decide, is a reason to, we say, have regard to it.
CALLINAN J: That throws into a doubt theories about the evolutionary movement of the words or the evolutionary changes in the meaning of the words in the Constitution. I said elsewhere that, except in popular culture, there are very few words that change meaning except over a very long period of time.
KIRBY J: “Subject of a foreign power” certainly changed meaning.
CALLINAN J: Not to me it did not, but it did to some of us probably. I mean, that is the evolutionary theory. Who is ringing the bells to tell you when a certain point has been reached?
MR KOURAKIS: Your Honours, South Australia’s submissions are necessarily hesitant, but the problem is difficult even in the case of legislation. Not a lot can be drawn from the fact that a measure was introduced but not passed, for example. At the same time your Honour’s observation about the importance of the people choosing through section 128 has an intuitive attraction.
CALLINAN J: All federal governments complain about section 128, but it was made difficult to change the Constitution. It is no good this Court wringing its hands about that and saying, “We can see this and we can see that. We are wiser than the people.”
KIRBY J: We just deal with cases.
MR KOURAKIS: Yes, and counsel. Your Honours, can I go to paragraph 55. Effectively, that is the start of the submission that it is trading and financial corporations as such. Your Honours, we have worked through the following paragraphs to illustrate the forms of employment that on the alternative submission could be regulated. On this alternative submission, there would be no difficulty about laws that restricted employment of persons with convictions or required their employment if those persons were to be engaged for the purposes of the trading and financial activity of the corporation.
Your Honours, at paragraph 60 we make the submission that I have already now made, that there will nonetheless be corporations, because of how the Court has approached the question of which corporations qualify as trading or financial corporations, that employ persons in activities other than their trading and financial activities. In paragraphs 62 through to 63 are examples of those.
GLEESON CJ: If you adopt this theory that in relation to some corporations there are some employees who can regulated and some who cannot – I put that elliptically – you get into an area of what in another context is called commingling, do you not?
MR KOURAKIS: If your Honour has in mind the problem where an employee is engaged in duties which are connected to the trade and finance and duties which are - - -
GLEESON CJ: Or might just be called upon. How could you regulate some employees but not others fairly, for example, just in terms of fairness?
MR KOURAKIS: Your Honour, there is no doubt that if this distinction is made, regulating the employment of corporations will be difficult for the Commonwealth for those sorts of reasons, but there is no reason to adopt the Commonwealth’s submission because it will be easier for them to regulate if the text, context and purpose arguments favour this distinction.
GLEESON CJ: That is why I said the first step is to understand exactly why it is you say they can regulate any of their employment.
MR KOURAKIS: Yes. It is to the extent that the employment has a relevant connection or a sufficient connection. A form of expression which encompasses, on this argument, a sufficient expression is employment for the purpose of the trading or financial activities.
GLEESON CJ: Indeed, I understand you to say in this alternative argument the Commonwealth can regulate almost all employment by corporations.
MR KOURAKIS: If it fits a test such as that or incidental to trading and financial activity, for example. No doubt that will be the case, but there are many employers – paragraphs 61 to 63 are examples. As I understand the Commonwealth’s concession at paragraph 225, if those exceptions stand because 51(xx) is read as trading and financial corporations as such, then it is not possible to read down this Act, and that no doubt reflects the difficulties that your Honour the Chief Justice has adverted to.
Your Honours, on the other hand, if the Commonwealth is right and they can regulate as to any activities of corporations once they qualify as trading or financial corporations, it means, for example, that the Red Cross and public hospitals and the persons providing health services in them can be subjected to general civil or criminal laws as to liability they incur in the provision of those services. That is so although the services are not connected in any way with the trading or financial activity that has brought the corporation within the definition and even though the Commonwealth would have absolutely no power to apply such laws to corporations and their employees providing the same services but not undertaking any incidental trading and financial activity.
Your Honours, that distinction, and drawing the line there, serves no rational purpose. If one is to approach the construction of 51(xx) in the hope of ending up with a construction that meets a rational purpose the Commonwealth does not. It can regulate activities that have nothing to do with the corporations as such just because they have some incidental activity although it can have no power to impose that regulation on others engaged in the same activity, but they cannot – that is, the Commonwealth would not be able to regulate their activities because they do not happen to engage in any incidental trading activity.
Going back to the very beginning and the use of the words “trading and financial corporation”, in my submission, plainly, subjectively, either an approach which allowed regulation of all corporations and all their activities would have been rational, in a sense – achieved a rational end – regulating the trading and financial activities of any corporation meets a rational end but to construe 51(xx) so that it allows the Parliament to regulate all the activities of just some corporations does not appear to result in any rational division or sharing of powers between the Commonwealth and the States, whatever difficulties it might cause for employers. Your Honours, they are South Australia’s submissions on the corporation question.
Can I turn to the question of section 117? Can I ask your Honours to bring up a schedule which South Australia has recently provided of sections like section 117 that have been a feature of conciliation and arbitration Acts in the past. Do your Honours have the schedule?
GLEESON CJ: I am not conscious of it?
MR KOURAKIS: It is headed “Legislative History of Power to Restrain State Industrial Authorities”.
GLEESON CJ: Yes, thank you. It is a three-paged document.
MR KOURAKIS: Yes. Your Honours will see section 117 which is in the Act as it now stands is the last of the provisions. Can I briefly deal with some matters of history, though. Your Honours, the provision as it stood in section (xx) and was first enacted was considered by this Court in R v The commonwealth Court of Conciliation and Arbitration; Ex parte The Engineers &c (State) Conciliation Committee (1927) 38 CLR 363. It was found to be a valid enactment supported by section 51(xxxv). Without taking your Honours to it, his Honour Justice Higgins from page 571 - - -
KIRBY J: Which case is this, I am sorry?
MR KOURAKIS: This is R v Commonwealth Court of Conciliation and Arbitration; Ex parte Engineers &c (State) Conciliation Committee (1927) 38 CLR. I was not going to take your Honours to it. I just make the point that his Honour Justice Higgins in that case considered a difficulty with the width of the section because it only allowed for the order to be made where the State was about to deal with an industrial dispute. Industrial dispute meant interstate industrial dispute. Plainly State tribunals were not going to have the authority to deal with those.
What was intended was that the Commonwealth Commission would be able to enjoin State tribunals from proceeding with a part of a dispute that was indeed an interstate dispute and hence your Honours will see the changes in section 20 particularly deal with that - the changes made in 1928. Those changes were in turn considered by this Court in 1929 in the case of Western Australia Timber Workers Union v WA Sawmillers’ Association [1929] ArgusLawRp 80; (1929) 43 CLR 185. It is in that case that his Honour Justice Isaacs, who is, I think, the first of the Justices of the Court to explain that section 20 did not provide for the exercise of judicial power.
At the same time his Honour Justice Dixon, as he then was, limited section 20 so that the Commission could only make orders enjoining State tribunals in those cases where the Commonwealth Conciliation and Arbitration Court had in fact take cognizance of a dispute so that the power was not at large.
Your Honours, in the Australian Timber Workers’ Union v Sydney Suburban Timber Merchants [1935] HCA 55; (1935) 53 CLR 665 at 672, the whole Court held that section 20 as it was enacted in 1930, the third of the provisions, did not involve or require the Arbitration Court to exercise judicial power. The States contend in their statements of claim that the present section 117 is an exercise of judicial power. That contention is abandoned and I do not seek leave to overturn that decision insofar as it would have touched on section 117 - - -
GUMMOW J: What paragraph is this in your written submissions?
MR KOURAKIS: In the written submissions it is around paragraph 90, your Honour, yes, starting from 94.
GUMMOW J: Well, which paragraphs are not pressed?
MR KOURAKIS: The paragraphs as to judicial power from 108, so the challenge proceeds purely on the Re Tracey; Ex parte Ryan provisions which are 95 through to 105, and then on the basis of infringing the Melbourne Corporation doctrine, paragraphs 106 and 107.
GUMMOW J: Do the other States take the same stance now as you do?
MR KOURAKIS: Yes. Your Honours, can I just stay with section 117 for a moment, and it is as convenient to deal with it on the document your Honours have before you. Your Honours, the Act now of course, other than with respect to the transitional provisions, is based on the corporations power and it is no longer the case that a matter before the Federal Commission will be a matter that involves disputing parties having lodged a log of claims and indeed, insofar as section 117 applies to matters that the Commission is hearing with respect to federal employers and employees, there will be no overlap at all between the persons who would be bound or will be bound by the Commonwealth Commission’s determinations and any State tribunal. That is because the effect of section 16 is to provide that with respect to federal employees, State industrial laws do not apply, and accordingly section 117 would have no work to do in that context.
So the position would be this. If the Commonwealth Commission under this Act was to sit to determine terms and conditions of employment for awards, which would of course be terms and conditions other than wages, terms and conditions that would apply in default of an agreement between federal employers and employees, it could restrain a State industrial tribunal that is hearing a matter with respect to non-federal employers and employees, natural employers and their employees, simply because in the matter the State tribunal is considering - something like hours of employment, breaks and the like will be considered at a time that the appropriate analogous terms and conditions for federal employees are being considered by the Commonwealth tribunal, the Commonwealth Commission.
Insofar, however, as section 117 applies to the transitional provisions, it will have a similar effect to the effect that it has had in the past and will, if it is read restrictively, continue to apply only to those matters that the Commission has cognisance of is dealing with as a result of an application to vary an award. Having said that about matters of construction and the scope of section 117 - - -
KIRBY J: Could I just ask you, on the little piece of paper you handed up, with the successive provisions in the federal law, I am not conscious that injunctions were issued by the Commission to the State Tribunals. Can you say anything about the practice? Is there anything in Mills or - - -
MR KOURAKIS: Your Honour, I have used the word “enjoin” perhaps loosely. The Commission simply makes an order, that is, the Federal Commission, that the State Tribunal was not to proceed. The reason that order is not a - - -
KIRBY J: That is the scheme of the present Act and the previous Act?
MR KOURAKIS: Yes, and the previous provisions.
KIRBY J: Have those powers been actually used?
MR KOURAKIS: Yes, your Honour, and the reason that it is not an exercise of judicial power is that the Commission plainly does not enforce those orders. They are a factum on which the legislation operates and it is the legislation that has the effect of prohibiting the State Tribunal from proceeding and - - -
KIRBY J: Does it actually prohibit it or simply say that anything that they do will have no effect?
MR KOURAKIS: It does both.
KIRBY J: Or both?
MR KOURAKIS: Yes, and if one wished to prohibit it, one would have to go to a court that could issue prohibition and perhaps an injunction to prevent it.
KIRBY J: I will have to look up the practice books. I was not conscious that those things were – I thought they were sorted out in the meetings of the heads of jurisdiction.
MR KOURAKIS: They may be less frequent, your Honour, with the advent of joint meetings between the State and Federal Commissions, but they have certainly been made.
GLEESON CJ: Well, in dual commissions.
MR KOURAKIS: Yes, that is right. Now, your Honours, the point that I make that is relevant to the challenges that are maintained about 117 is this, that it appears to proceed on the assumption that the State laws giving employees and employers a right to approach a tribunal to have the terms and conditions of employment set remain valid and operable, that is, the law is not expressed in terms that says employees have no right to go to a tribunal to have their contract of employment altered or to have the award under which they had been previously employed amended or changed in any way. That is not the way in which section 117 works. It does not extract the employees that have something to do with the dispute in the federal tribunal from the laws giving rights and obligations at the State level. Rather, 117 is simply directed towards the functioning of the industrial tribunal and the tribunal is told, effectively, do not administer the valid and operable State law.
KIRBY J: Does that relate to so-called Crown employees, State Government employees?
MR KOURAKIS: It could, it could.
KIRBY J: Even those engaged in the governmental functions of the State?
MR KOURAKIS: Not at the levels excluded, for example, in the Education Union Case for different reasons, but in terms of – State employees - - -
KIRBY J: But does the Act specifically expressly exclude State Government Crown employees?
MR KOURAKIS: Not at those high levels, no. With respect to the transitional provisions, teachers who are covered by a federal award continue to be covered by it and to the extent that they are not employed by corporations, employed by the Crown, then those teachers would not come within the federal regime, the substantial provisions of the Act.
KIRBY J: You said teachers covered by a federal award. Most teachers, I think, are covered by State awards, are they not?
MR KOURAKIS: No. South Australia were told they were federal, so that would suppose that there is probably somewhere else as well, but I think it is a federal award.
KIRBY J: I think in New South Wales they are covered by State awards, or they were.
MR KOURAKIS: Yes. Your Honour, it is simply to illustrate the point that Crown employees, employees not employed by a corporation, relevantly, or trading and financial corporation, are covered under the transitional provisions if they have had a federal award. If a State tribunal were to entertain an application from teaches, for example, if they wanted to shift back to a State award regulated system, section 117 is a source of power for the Commission to prevent the State Commission from hearing that application.
Whatever that means in terms of the general working of the Act, the challenge that we make is based on the form in which it is enacted, and that is to prevent the Tribunal from exercising a jurisdiction under a valid and operable law. It may have been enacted differently. It would have very different consequences. It is one thing to say that there are no rights to approach a State industrial tribunal, and that has certain consequences. That is quite different from effectively ordering a stay, as has been done here.
Your Honour, I am told that they have recently not been – teachers in South Australia were regulated federally. They have returned to the State system. I do not know when but insofar as I suggested they were federally regulated now, that is not so.
The passages in Re Tracey; Ex parte Ryan would be well known to your Honours. At one level - - -
GUMMOW J: The case was raised in argument in Truong, yes, but it seems to have escaped attention. Justice Kirby and Justice Callinan and I gave some attention to it.
MR KOURAKIS: Yes. Your Honour, it should have been dealt with like it was there dealt with. In my submission, what follows from the consideration of it in Truong is this, that at one level it is simply a question of power, that is, a question of whether a relevant Commonwealth power extends to denying a State court or tribunal jurisdiction or power to hear a matter and at that level what we say is that there is nothing in the corporations power that leads to the conclusion that it should extend to a law which allows that sort of attack on the administering or administration of State laws by State Executives.
There might be some powers where that is appropriate. A case of extradition is perhaps a good case in point in that external affairs involves, necessarily, extradition. The rule of specialty is, and has been, a well-known feature of extradition. It necessarily affects, if that rule is to be given force, the jurisdiction in the Australia Federation of State criminal courts and the power and the provision under consideration in Truong might be justified as within power for those reasons. There is nothing though about the text, context or subject matter of section 51(xx) that would lead to a similar conclusion with respect to the forms of orders and the results they have flowing from section 117.
GUMMOW J:
What do you say about the Commonwealth’s submissions in
paragraph 696, page 166:
The object of s 117 is to avoid the legal and practical disruption and potential embarrassment that would ensue if both the Commission and the State industrial authority purported to deal with the same matter.
That does not sound like a Melbourne Corporation
point.
MR KOURAKIS: Your Honour, the question of embarrassment, in our submission, needs to, with respect - - -
GUMMOW J: In the end, as the Commonwealth says, does it not, it is a 109 situation?
MR KOURAKIS: That presupposes that the law is valid. Whether or not it - - -
GUMMOW J: What? Are you saying it is beyond 51(xx), are you?
MR KOURAKIS: Yes. I do say that and - - -
GUMMOW J: That is not what is being said, is it, in your submissions?
MR KOURAKIS: Your Honour, in my submission there is - - -
GUMMOW J: I am just looking at your submissions. That is all.
MR KOURAKIS: Your Honour, the submissions proceed on the basis that - - -
GUMMOW J: On three bases, one is gone and the two that are left, Melbourne Corporation and some argument that Melbourne Corporation is supplemental to what was staring them in the face anyway under section 106. Is that right?
MR KOURAKIS: Your Honour, the submission, and there is a degree of overlap between them, is simply that it is not to be expected that it is within the power of the Commonwealth to interfere with, compromise the executive governmental functions of the States. There may be some powers that extend that far because of their context or subject matter but that is not the case with respect to section 51(xx) and the extent to which section 117 interferes with the administration of valid and not - - -
GUMMOW J: What paragraph of your written submissions does this address? You have to be clear about this. Sooner or later one has to write a judgment.
MR KOURAKIS: Your Honour, it must be said - - -
GUMMOW J: If you are putting something new, say so. Mr Hutley owned up the other day, right up front.
MR KOURAKIS: Your Honour, the Tracey limitation and the Commonwealth corporations limitation are put as absolute limitations in the submissions. I am acknowledging – and it is not in the submissions – that in certain circumstances, as I have said, the text, context or subject matter of a power may lead to the result that the Commonwealth can nonetheless legislate in a way that interferes with the State functioning. That particular question, that is, whether section 51(xx) goes that far, is not addressed there, but the submission I make now orally is addressed to that question.
If the Court pleases, the final matter that I wish to address the Court on concerns the transitional provisions in Schedule 6 of the Act. For that purpose can I take your Honours to volume 2 of the Act.
GLEESON CJ: How long do you think you will be on this point?
MR KOURAKIS: About 15 minutes.
GLEESON CJ: All right. Then we will adjourn until 10.15 tomorrow
morning.
AT 4.20 PM THE MATTERS WERE ADJOURNED
UNTIL
TUESDAY, 9 MAY 2006
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