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Constitutional Law

Topic 8 Corporations Power

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Corporations Power

• Power conferred under s 51(xx) to make laws “with respect to foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth”

• Historically the power has sought to preserve the reserved state powers doctrine.

• However, incremental developments in the head of power now give it a broad scope.

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Huddert Parker v Moorehead

• Griffith CJ: Commonwealth could prohibit a trading or financial corporation formed within the Commonwealth from entering into any field of operation, but could not control certain operations reserved to the States.

• Isaacs J: stated that s 51(xx) only applies corporations already formed, not to new corporations created after federation.

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Huddert Parker v Moorehead

• Isaacs J: favoured a broad reading of s51(xx) but attempted to put limits a list of domestic corporations: scholastic, religious, and other types of corporations.

• Isaacs J: Cth should not be able to regulate internal management of corporations but only dealings between corporations and other persons.

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Strickland v Rocla Concrete Pipes (1971)

• Keith Edgar William Strickland brought charges against Rocla Concrete Pipes Limited and others for offences against s 43 of the Trade Practices Act 1965-1969 (Cth).

• Strickland argued that Rocla contravened s 42 of the act by not providing copies of the agreements to the then Trade Practice Commission.

• The defendant, Rocla, argued that the Trade Practices Act did not apply to it as a constitution under s 51(xx).

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Concrete Pipes case

• Barwick CJ: Overruled Huddart Parker and displaced by the Engineers Case (p 795;[485][488] of case).

• Trade Practices law could be regulated by a grant of power in s 51(xx). However, wording has to be framed carefully to apply the power to trade practices law [490].

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• Barwick CJ and Menzies J judgments reject the notion that the corporations power should have boundaries or limits [490][511].

• However, the power should be dealt with on a case by case approach [490-491].

• Barwick CJ put some limitations down, stating that the power allowed for regulating and controlling trading and financial corporations [489-490].

Concrete Pipes case

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R v Trade Practices Tribunal; Ex parte St George County Council

• Issue was whether the St George Council was a “trading corporation” under s 51(xx).

• Introduces the “Purposes test” which is to determine the purposes for which the corporation was set up for.

• Activities test is raised but not adopted by the concurring majority of judges.

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St George County Council case• Menzies, Gibbs and McTiernan JJ in separate

concurring judgments held that it was not a trading corporation as its original purpose was to provide the essential service of local government (p796 of text).

• Barwick CJ and Stephen J, dissenting, preferred the activities test and held that the Council was a trading corporation because of its substantial trading (p 796 text).

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Adamson’s Case (1979)

• Brian Ronald Adamson alleged breach of the Trade Practices Act 1974 Cth s 45(2) following the WA League’s failure to release him from his existing contract, on the basis that he not be restricted from supplying his services.

• Issue was whether the WA Football League and its clubs were sporting organisations or trading corporations under s 51(xx).

• WA League argued that they were not a corporation under s 51(xx).

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Adamson’s Case – Activities test

• Adamsons case established the activities test which is used to determine applicability of s 51(xx) (p 797).

• Mason J [235]-[236] (with Barwick CJ, Murphy and Jacobs JJ agreeing): that trade was the main activity and the sport was part of the main activity of making money.

• Stephen J (dissenting): Any trading activities undertaken by the football league were not sufficient to make them "trading corporations" so as to fall within the scope of s 51(xx).

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Adamson’s Case- other issues

• Case raised in obiter whether trading or financial activities needed to dominant or only substantial part of the corporation.

• Trading activities of the club and league were the dominant activities of the corporations. Issue of dominant or substantial did not need to be addresses.

• Mason J [234]: “whether a corporation is a trading corporation is a matter of fact and degree.”

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Re Ku-ring-Gai Co-operative Building Society (No 12) Ltd

• The applicants, Ku-ring-gai, sought declaratory relief, under the Trade Practices Act 1974, in respect of loans issued as part of their operations, that they did not breach exclusive dealing provisions in s 47 of the TPA.

• The applicants were co-operative terminating building societies incorporated under the Co-operation Act, 1923 (NSW). The object of each was the raising of a fund so as to make loans to its members.

• Issues included whether the societies were “financial corporations under s 51(xx).

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Ku-ring-Gai case

• Deane J [642](p 800): Kuringai Building society were held to be within definition of financial corporations based on their financing activities using the activities test.

• Applicant were formed to carry on a business of dealing in finance and in fact carried on such a business, and accordingly, were financial corporations within the meaning of the phrase as used in s 51 (xx).

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State Superannuation Board of Victoria v Trade Practices Commission (1982)

• Issue of whether the State Superannuation Board of Victoria was captured by s 51(xx).

• Mason, Murphy and Deane JJ [305](p 800): Financial activities engaged in to provide superannuation made the Superannuation Board a financial corporation.

• Trading and financial activities are not mutually exclusive and can coexist.

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Fencott v Muller (1983) p 801

• Oakland Nominees Pty Ltd had not current activities. It was formed to facilitate a conveyancing transaction.

• Majority: Purposes test is still applicable where there are no activities have been engaged in.

• Referred to the corporation’s articles to establish its purpose and future activities.

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Actors Equity v Fontana (1982)

• The corporations power s 51(xx) could be used to restrict actions by picketers that caused harm to a corporation.

• The Court found that the provision was relevant as it was respect to activities with corporations.

• Gibbs CJ: A relatively narrow view of the scope of s 51(xx) as applicable to corporate activities directly related to constitutional corporations.

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Commonwealth v Tasmania (Tasmanian Dams Case) (1983)

• Issues included whether the World Heritage (Property Conservation) Act was valid under s 51(xx) and (xxix); and

• Whether the Hydroelectric commission set up under the act was a trading corporation.

• The Commission’s connexion with the state government of Tasmania was also brought into question.

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Commonwealth v Tasmania (Tasmanian Dams Case) (1983)

• Mason J: St George and original purpose test rejected. HEC and Tas link did not affect validity of s51(xx) to affect the HEC.

• Launceston case cited noting independent nature of the HEC.

• Policy role of the HEC to protect heritage. • Mason J [156]: Commission would sell electrical

power on a very large scale and therefore a trading corporation.

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Commonwealth v Tasmania (Tasmanian Dams Case) (1983)

• (p 803) Trading activities of the Commission were less prominent that in St George.

• Superannuation case pointed out that trading activities need not be dominant activities.

• Gibbs CJ dissenting: HEC true character was a governmental or public body precluded it from being a trading corporation under 51(xx).

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Re Dingjan; Ex parte Wagner (1995)

• Industrial Relations Act 1988 (Cth) sought to enliven the Corporations power.

• The corporations power was held to not be able to regulate the activities of the corporation in so far as they related to parties one removed from the corporation.

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New South Wales v Commonwealth (Workchoices Case) (2006)

• Majority: s 51(xx) extends at very least to the business functions and activities of constitutional corporations and business relationships; and

• The power extends to the persons by and through whom the corporations carry out those functions and activities and with whom they enter into business relationships.

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Workchoices (cont.)

• Majority [114]: cited Re Pacific Coal Pty Ltd case, Gaudron J: “s 51(xx) extends to activities, functions, relationship and the business of a corporation, the creation of rights and privileges of the corporation… and regulation of the conduct of employees and shareholders and other persons who can affect activities.”

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Workchoices (cont.)

• Majority [103]: refer to general principles of interpretation (Grain Poole).

• Distinctive character test not adopted by majority (p 816).

• Kirby J (dissenting): raised the issue that the states governmental law making power would be diminished if s 51(xx) was broadly applied