State of New South Wales & Ors v Commonwealth of Australia

[2006] HCATrans 215

[2006] HCATrans 215

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

First Plaintiff

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

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 THURSDAY, 4 MAY 2006, AT 10.16 AM

Copyright in the High Court of Australia

MR M.G. SEXTON, SC, Solicitor‑General for the State of New South Wales:   If the Court pleases, I appear with my learned friends, MR B.W. WALKER, SC, MR J.K. KIRK and MR I. TAYLOR, for the State of New South Wales in matter S592 of 2005.  (instructed by Crown Solicitor for New South Wales)

MR R.J. MEADOWS, QC, Solicitor‑General for the State of Western Australia:   May it please the Court, I appear with my learned friends, MR R.M. MITCHELL and MR D.J. MATTHEWS, for the State of Western Australia in matter P66 of 2005.  (instructed by State Solicitor for Western Australia)

MR C.J. KOURAKIS, QC, Solicitor‑General for the State of South Australia:   If the Court pleases, I appear with my learned friends, MR G.J. PARKER and MR S.A. McDONALD, for the State of South Australia in matter A3 of 2006.  (instructed by Crown Solicitor for South Australia)

MR W. SOFRONOFF, QC, Solicitor‑General of the State of Queensland:   May it please the Court, I appear with my learned friends, MR G.C. MARTIN, SC, MR R.W. CAMPBELL, MS S.E. BROWN and MR J.M. HORTON, for the State of Queensland in matter B5 of 2006.  (instructed by Crown Solicitor for the State of Queensland)

MR D.F. JACKSON, QC:   May it please the Court, I appear with my learned friends, MR A.K. HERBERT and MR N.J. OWENS, for the Australian Workers Union and the Australian Workers Union Employees Queensland in matter B6 of 2006.  (instructed by Sciacca’s Lawyers and Consultants)

MR N.C. HUTLEY, SC:   If it please the Court, I appear with my learned friends, MR N. PERRAM and MR B.L. JONES, for the plaintiffs in matter S50 of 2006.  (instructed by Jones Staff & Co)

MS P.M. TATE, SC, Solicitor‑General for the State of Victoria:May it please the Court, I appear with my learned friends, MR M. BROMBERG, SC, MR G.R. KENNETT, MR M.K. MOSHINSKY, MR S.J. MOORE and MR D.I. STAR, for the State of Victoria as plaintiff in matter M21 of 2006 and on behalf of the Attorney‑General for Victoria intervening in matters S592 of 2005, P66 of 2005, A3 of 2006 and B5 of 2006.  (instructed byVictorian Government Solicitor)

MR D.M.J. BENNETT, QC, Solicitor‑General of the Commonwealth of Australia:   If the Court pleases, I appear with my learned friends, MR R.R.S TRACEY, QC, MR H.C. BURMESTER, QC, MR J.L. BOURKE, MR S.B. LLOYD and MR S.P. DONAGHUE for the defendant in all matters.  (instructed by Australian Government Solicitor)

MR W.C.R. BALE, QC, Solicitor‑General of the State of Tasmania:   May it please the Court, I appear with my learned friend, MS S.K. KAY, for the Attorney‑General of the State of Tasmania intervening.  (instructed by Solicitor‑General of Tasmania)

MR. T.I. PAULING, QC, Solicitor‑General for the Northern Territory:   May it please the Court, I appear with my learned friend, MS S.L. BROWNHILL, for the Attorney‑General for the Northern Territory intervening.  (instructed by Solicitor for the Northern Territory)

MR S.J. GAGELER, SC:   May it please the Court, I appear with my learned friend MR G.C. McCARTHY, for the Attorney‑General of the Australian Capital Territory intervening.  (instructed by Australian Capital Territory Government Solicitor)

GLEESON CJ:   Yes, Mr Solicitor for New South Wales.

MR SEXTON:   If the Court pleases. This is a case about the division of legislative power under the Constitution between the Commonwealth Parliament and the Parliament of the States. It raises the question ‑ ‑ ‑

KIRBY J:   Is that quite right?  Is it not about the extent of the power of the Federal Parliament?

MR SEXTON:   Combined with section 109, your Honour, it is a question about division, we would say.

KIRBY J:   It sounds to have the ghosts of the reserve powers clanking ‑ ‑ ‑

MR SEXTON:   No, there is no suggestion of that, your Honour. Your Honours, it raises the question whether the Commonwealth can legislate under section 51(xx) of the Constitution, the corporations power, to regulate activities that would have been generally considered in 1901 and for most of the century that followed to be beyond the powers of the Commonwealth. The case arises out of a ‑ ‑ ‑

GUMMOW J:   That is a debatable proposition, if I may say so.

MR SEXTON:   I will be taking your Honour to the cases.

GUMMOW J:   No, I am not talking about the cases. I am talking about historical method and the construction of section 51(xx), and we had better get to it straight away, I suppose. What worries me a little in the States’ submissions is twofold. Firstly, we are trained to think of our system as a continuous one, so that pride, if you like, in continuity can telescope a need for perception of historical difference, point one, and point two, when you come to the Constitution and you are construing 51(xx) we need to know, I think, as a starting point at any rate, what this phrase meant at the time, and we do not just see that, it seems to me, from the Convention Debates. A lot would have been understood but did not have to be said.

HAYNE J:   A lot of that is reflected in the statute book of the time, most notably from 1850 forward.  You cannot just stop the inquiry at Grant on Corporations in 1850.

MR SEXTON:   But we do not say, your Honours, that of course what was the situation in 1901 or earlier will necessarily govern the construction today, but what we do say is that this legislation would have been considered beyond Commonwealth power for most of the last century since Federation.  Now, that may be because it has not been sufficiently analysed, but our proposition is that it is very much of an open question for this Court that it is not governed by preceding decisions of the Court.

KIRBY J:   Well, to some extent the Commonwealth ‑ ‑ ‑

GUMMOW J:   Well, at some stage we will need to know where in 1900 in the scheme of things building societies statutes fitted in, friendly societies, provident societies, the trade union Acts and so on and so forth, insurance company Acts, banking company Acts.  This phrase is as much significant for what it excluded as for what it included, if you see what I mean, and you do not solve that I think by doing what was done in some cases, by looking at what Grant said in 1850, because there was enormous activity between 1850 and 1900.  The economy was growing enormously.

Then you have to ask yourself what did trading corporations do in 1900.  Salomon’s Case had just arrived in the 1890s.  The one‑man trading company was a new phenomenon.  It is not new to us, but it was then.  Now, notions of ultra vires were hugely important.  They are not important to us any more in the ordinary company law as a result of recent legislation.  Where did that all fit in, in the perception of these people drafting these words in the 1890s?  They are the sort of concerns I have and I just flag them to you at the beginning.

MR SEXTON:   Your Honour, the case arises out of amendments made to the Workplace Relations Act 1996 towards the end of last year and many provisions of the amended legislation are challenged by the plaintiffs in these proceedings. As your Honours will be aware from the written submissions the States, the Territories and the trade union parties have essentially divided the legal issues for argument amongst themselves – New South Wales will go first and I propose to take the Court to the legislation in outline and then to the Court’s major decisions on the corporations power to make good the submission that its ambit is still an open question. My learned friend, Mr Walker, will then make submissions as to the scope of the corporations power in the context of the amended legislation.

Your Honours, before I go directly to the legislation, can I say that, as your Honours would be aware, the amendments involve a basic change to the basis of federal industrial relations legislation.  From 1904 Commonwealth legislation provided for a system by which minimum terms and conditions of employment were determined by an independent tribunal exercising powers of compulsory conciliation and arbitration in respect of industrial disputes extending beyond the limits of one’s State.  The Conciliation and Arbitration Act 1904 and its successors including, until these amendments, the Workplace Relations Act, were enacted pursuant largely to section 51(xxxv) of the Constitution. The amendments remove, from the Australian Industrial Relations Commission, the task of prevention and settlement of interstate industrial disputes by conciliation and arbitration. Instead, the legislation seeks to prescribe directly conditions of employment regardless of the existence of such a dispute.

It cannot do so, of course, under section 51(xxxv) and it purports to do so in reliance on other heads of power but principally section 51(xx). Now, can I take your Honours to the legislation itself. I think your Honours have the two white volumes.

GLEESON CJ:   Yes, thank you.

MR SEXTON:   If I can take your Honours first to the hinge, in a sense, on which the legislation largely turns which is the definitions in sections 5, 6 and 7 of the legislation which are on pages 16, 17 and 18 of volume 1 of that print.  Your Honours will see that section 5(1) defines an “employee” as:

an individual so far as he or she is employed, or usually employed, as described in the definition of employer in subsection 6(1), by an employer, except on a vocational placement. 

The clause as described in the definition of “employer” in section 6(1) seems to be curiously placed there before rather than after employer, but we are assuming that it is simply incorporating a reference to section 6(1).  That provides that “employer means” and then there are six categories of definition and the first is:

a constitutional corporation, so far as it employs, or usually employs an individual –

“Constitutional corporation” is defined in section 4 at page 6 as:

a corporation to which paragraph 51(xx) of the Constitution applies.

Subparagraphs (b) and (c) of that definition refer to employment by the Commonwealth or a Commonwealth authority and there is no challenge to those, nor to paragraph (d) which relies on the trade and commerce power.

GUMMOW J:   There is no challenge by New South Wales.  Is there any challenge by any other plaintiff?

MR SEXTON:   By any party, no, your Honour.

GUMMOW J:   That is (b), (c) and (d)?

MR SEXTON:   Yes, (b), (c) and (d), that is right.

GUMMOW J:   Thank you.

MR SEXTON:   There is, as your Honours will know from the submissions, challenges to (e) and (f) which rely on the territories power.  For completeness I should mention section 7 which has a definition of “employment”, but it is derivative from 5 and 6 to mean the employment of an employee by an employer.

GUMMOW J:   There is no definition of “employ”?

MR SEXTON:   There is not, your Honour, no.  One assumes, therefore, that one is thrown back to the common law essentially in terms of notions of employment in a contract of service.  Your Honours might note, however, that in section 6(2):

a reference to employer has its ordinary meaning . . . if the reference is listed in clause 3 of Schedule 2.

So in clause 3 of Schedule 2, which is in the second volume – I will not take your Honours to it at the moment ‑ there are a list of provisions in which the term “employer” has its general meaning, that is, one that goes beyond the meanings that are set out in section 6(1), and amongst the provisions that are listed in the schedule are the provisions in Parts 15 and 16 of the legislation, to which I will come in due course, that deal with rights of entry and freedom of association.

Now, your Honours, a number of parts of the legislation rely essentially on the definitions in section 5 and section 6, that is, not the general meaning of “employer” and “employee” but the meanings that are specified in those provisions, and those parts of the legislation, therefore, rely for their operation on the definitions in section 5 and section 6, and particularly, therefore, from the point of view of this case, on the definition of an “employer” as a constitutional corporation.

Now, the first of those general parts is Part 7, which is at page 115 of the volume.  That part establishes what is called the Australian Fair Pay and Conditions Standard and it applies only to section 6(1) employers and their employees.  It is challenged by all the parties in this case on our side of the Bar table.  The standard provides for five minimum entitlements of employment:  wages in Division 2; maximum hours in Division 3; annual leave in Division 4; personal leave, which includes both sick leave and carer’s leave, in Division 5; and parental leave, which includes maternity, paternity and adoption leave, in Division 6.  Those can be enforced in the Federal Court or the Federal Magistrates Court under section 318 of the legislation and those conditions cannot be excluded by a workplace agreement or a contract, and that is provided for in section 173.

The power to alter and set minimum wages in the future is given to the Australian Fair Pay Commission which is established by section 20 of the legislation, which is on page 28 of volume 1.  Its general functions are set out in section 21, as your Honours will see, and its wage‑setting functions in sections 22 to 26.

An initial figure for the minimum wage is set by section 195 of the legislation, which is on page 138.  It is set at $12.75 an hour, but employees who were previously covered by a federal award or a State award or a State or Territory law will continue to have a minimal entitlement to those rates of pay, that is, the rates that they previously had, and that is provided by section 182, which is on page 126.  The Commission, that is, the Fair Pay Commission, can adjust the minimum wage under section 196 and may adjust pre‑existing minimum wages under section 216.  The Commission also has the power to revoke the pre‑existing rates and determine new ones under sections 217 and 214, subject to certain limitations.  Those are set out in sections 176, 177 and 190.

KIRBY J:   Who are the members of this Commission?  I do not want their names, but where are their qualifications?

MR SEXTON:   In section 20 there is a chairperson, your Honour, and four Commissioners.

KIRBY J:   They are not members of the Australian Industrial Relations Commission?

MR SEXTON:   That is so, your Honour.  Now, your Honours, just finally on Part 7, those pre‑existing rates which are adopted for the purposes of the part are known as preserved Australian Pay and Classification Scales, or APCS as they are described in the legislation.  New ones can be set by the Commission under section 214, but generally they cannot fall below the minimum wage that is set out in section 195.

GLEESON CJ:   Although the scheme of regulation is much more elaborate, is the essential question that arises in relation to Part 7 whether the Commonwealth Parliament could enact a law saying all constitutional corporations must provide their employees with at least three weeks annual leave?

MR SEXTON:   And other questions similar to that, yes, your Honour, which is what we say Part 7 does.

GUMMOW J:   But you would not dispute, would you, that the Commonwealth could pass a law with effect immediately upon incorporation under a State law that a trading corporation shall not trade unless it has a licence and its licence is going to require it to comply with a system like this?

MR SEXTON:   We would dispute that, your Honour.

GUMMOW J:   Well, that flies in the face of Murphyores, Fairfax, Breckler.

MR SEXTON:   Well, there are questions there of connection really, your Honour.

GUMMOW J:   Why cannot the Commonwealth say a trading corporation shall not trade, full stop, and then lift that prohibition by the acceptance of conditions?

MR SEXTON:   Well, in our submission, your Honour, there is a question of characterisation there as well as to what the nature of the law is.  We would say it is not a law about trading corporations. 

Your Honours, Part 8 of the legislation deals with workplace agreements and, again, it is a part that applies to employers within the 6(1) definition and their employees, and it is challenged therefore by all the parties, although there is a separate argument by some of the parties in relation to some provisions of Part 8 insofar as – or there is a question as to whether they apply to non‑6(1) employers, if I can call them that.

This part provides for six different kinds of workplace agreements that may be made by an employer and, if your Honours go to page 227, your Honours will see that on that page and the subsequent pages the various kinds of agreements are set out with an individual and it is then referred to as an “AWA” in section 326 and 327 with a number of employees and it is called an “employee collective agreement”.  In 328 and 329 with one or more organisations of employees, and there are further kinds of agreements in section 330 and 331.  In 330 it is described as an “employer greenfields agreement” where there is actually only one party in the sense that there is only an employer because there are no employees on the other side at that time. 

KIRBY J:   What does “greenfields” signify?

MR SEXTON:   That there are no employees yet; that the business, presumably, is starting up, your Honour.  In section 331, what is described as a “multiple-business ‑ ‑ ‑

GUMMOW J:   That appears in 329(1)(a), “the agreement relates to a new business”.

MR SEXTON:   Yes. 

CALLINAN J:   Without any workplace history of any kind.

MR SEXTON:   In that case, yes, your Honour.  Your Honours, workplace agreement comes into operation when it is lodged with the employment advocate and that is provided in section 347 on page 239.  There are lodgement requirements which are set out in sections 336 to 341, although a failure to observe them does not prevent the agreement coming into operation.  Section 347 also provides for how a workplace agreement ceases to be in operation.  It might be noted that an award has no effect while a workplace agreement is in operation, and section 349 provides for that. 

As to the content of workplace agreements, they have to include procedures for settling disputes and that is provided for in section 353, but if no such procedures are included, the agreement is taken to include the model process, which is set out for dispute resolution, which is set out in Part 13 of the legislation – I will not take your Honours to Part 13, but that procedure may involve an application to the Australian Industrial Relations Commission for the conduct of an alternative dispute resolution process although that can also be done by a separate person that is agreed on between the parties.

The five minimum standards that I referred to, which are set out under Part 7, prevail over a workplace agreement to the extent to which, in relation to an employee ‑ ‑ ‑

GUMMOW J:   Where do we see that, Mr Solicitor?

MR SEXTON:   Section 172, I think, your Honour.

HAYNE J:   Section 172(2).

MR SEXTON:   Yes, insofar as they provide a more favourable outcome for the employee and workplace relations must not contain what is described as prohibited content.  If your Honours look at sections 356 and following, your Honours will see there the prohibitions on prohibited content.

HAYNE J:   Do we need to be troubled about the regulations in this context?  Section 356 provides for specification.  Do we need to get into that?

MR SEXTON:   I do not think so, your Honour.  I think it is the principle of the operation of that part rather than the regulations themselves.  One matter that is, for example, proscribed by the regulations is termination for a reason that is harsh, unjust or unreasonable – it is regulation 8.5(5) – but I do not think your Honour needs to go to those at the moment.  As to variation of a workplace agreement, those provisions are set out in Division 8 of Part 8 and in relation to termination, Division 9 of Part 8.  It might be noted that – and this is really a combination of two provisions – that an AWA, that is, an agreement with an individual, can be offered as a condition of engagement and it takes precedence over any current collective agreement.  Sections 400(6) and 348(2) seem to have that result. 

Now, your Honours, it is convenient to perhaps take these parts in the sequence in which they follow in the legislation.  Part 9 deals with industrial action.  Again, it applies only to section 6(1) employers, their employees.  It is challenged generally by the parties.  If your Honours go to section 420 on page 282, your Honours will see the meaning of the term “industrial action” and it sets out a range of activities that fall within that description.  The activities that are referred to in section 420 are protected from legal action by reason of section 435 and section 447, subject to a range of exclusions, to which I will make further reference, during what is called the bargaining period. 

So the industrial action is protected in some cases during the bargaining period, and the meaning of “bargaining period” is set out in sections 427 and 428, when it begins and when it ends, but that period must be suspended or terminated by the Australian Industrial Relations Commission in some circumstances.  One of those which is set out in section 431 as an example is where one of the negotiating parties is engaged in what is called pattern bargaining.  It is defined in section 421 but broadly it is the action of seeking common wages or conditions for two or more proposed collective agreements beyond a single business. 

As I said, industrial action is protected during the bargaining period, assuming it has not been suspended, but not in all circumstances.  The exclusions are set out in section 436, which commences on page 305, and goes through to section 446 and also there is an exclusion in 434 in the previous division.  The net effect – and, for example, I use it as an example again, that industrial action in support of pattern bargaining claims is one of the excluded areas and that is section 439.  Now, assuming that the industrial action is not excluded and that it is protected, it nevertheless, if it is unilateral, that is, it is not in response to industrial action on the other side, requires at least three working days written notice under section 441(3) and (4).

GUMMOW J:   Does it expressly appear that tort law is excluded or does that just flow from the use of ‑ ‑ ‑

MR SEXTON:   If your Honour looks at 447 your Honour will see that:

no action lies under any law (whether written or unwritten) in force in a State or Territory –

Then there is an exclusion:

unless the industrial action has involved or is likely to involve:
(a)      personal injury; or
(b)      wilful or reckless destructions of, or damage to, property; or
(c)      the unlawful taking, keeping or use of property.

There is a further exclusion for defamation actions in subsection (2).

GLEESON CJ:   Thank you.

KIRBY J:   Is the overall effect of this that what began in the 1904 Act with the Commission – or then originally the court and then the Commission with general powers to fix all employment conditions save so‑called management prerogatives, then under the 1996 Act was cut back to the Commission having a more limited package of matters that it could deal with and now the Commission’s role has been further cut back and the new Fair Pay Commission has control of an even smaller group of core industrial matters and the rest are to be dealt with under agreements of various kinds at an enterprise or individual level.  Is that the general flow that is the history of a century of industrial relations law?

MR SEXTON:   Well, your Honour, it is certainly true that under this legislation the Industrial Relations Commission’s functions would be certainly different and significantly reduced from what they were under the previous history.

KIRBY J:   I realise that, but a few minutes ago you said they had some powers in relation to disputes?

MR SEXTON:   They do, your Honour, but ‑ ‑ ‑

KIRBY J:   I am just having difficulty seeing the overall structure because, after all, workplace and enterprise agreements did not come in with this Act.  It came in, I think, in 1993 and has been enhanced since then by various amendments to the present Act.

MR SEXTON:   Your Honour, this legislation imposes a much more general sense of terms and conditions in a way that the previous legislation did not.  The basis for the previous legislation was still the settlement of – as your Honour says, there could certainly be agreements but it was premised on the settlement of disputes in the Commission.

KIRBY J:   Well, not entirely.  There was also an invocation of the corporations power and also an invocation of the external affairs power.  So the process had begun but this is taking it the next step.  The point I am making is that it seems to be a continuation of a course that began in 1993, I think, and has been continued, but this is the next step.  Is that a fair characterisation?

MR SEXTON:   It is not really, we would say, the next step, your Honour.  It is a very different approach, the imposition of general conditions, at least in some areas – in fact in most areas – even though there is certainly scope for agreements, but there are many general provisions of the legislation which apply to all employers and employees if they come within its terms, and that is really what the point of the case is.

HAYNE J:   But we have moved from a focus on prevention or settlement of industrial disputes, that is to say we have moved from a focus in 2004 on industrial disputation to a focus on the specification and manner of agreement of terms of employment.

MR SEXTON:   In part, your Honour, that is so, and sometimes the specification is left to individual agreement but there are many overriding provisions in the legislation.

KIRBY J:   I suppose you are entitled to say, why did we have all those disputes, all those cases, all those battles about section 51(xxxv) if lurking in the background always ever ready was the corporations power?

CALLINAN J:   And the legal fiction of paper disputes?

MR SEXTON:   Yes.

CALLINAN J:   And if ever there is a legal fiction, it is that one.

KIRBY J:   All that intellectual energy of this Court over a century, so many cases.

MR SEXTON:   Quite so, your Honour.

KIRBY J:   When there was a solution just waiting in the wings.

GUMMOW J:   It was a question of political will, and that is not for us to debate, over time.

CALLINAN J:   Not just political will.  The people had a say in this in the referenda about it.  It is not a blank sheet of history.

MR SEXTON:   No, your Honour.

KIRBY J:   But it would not be the first time that powers have been found in the Constitution that our predecessors did not see.

GLEESON CJ:   Now, where were you taking us from Part 9?

MR SEXTON:   I am still on Part 9 actually, your Honour, but not for much longer.  I was going to say there is one further requirement for industrial action to be protected, unless it is in response to action from the other side, which is a protected action ballot, as it is called, which is provided for in Division 4 and, as Justice Gummow has noted, if all these conditions are satisfied, then there is protection that results in the form of immunity from civil action other than defamation, subject to again some limitations under section 447.

Industrial action is not to be taken under the legislation during the currency of a collective agreement or a workplace determination, which is something that is made by the Industrial Relations Commission under Division 8, if negotiations between the parties fail – and that is provided for in section 494 – otherwise pecuniary penalties or injunctions are applicable, and the same applies for AWAs, and that is provided for in section 495.  Generally, the Industrial Relations Commission must make orders against unprotected industrial action provided for in section 496.  This power is extended to action by employers and employees generally, that is, beyond the section 5 and 6 definitions, if the industrial action:

will, or would, be likely to have the effect of causing substantial loss or damage to the business of a constitutional corporation ‑ ‑ ‑

GUMMOW J:   Where do we see that, Mr Sexton?

MR SEXTON:   Section 496(2), your Honour.

GUMMOW J:   Thank you.

MR SEXTON:   Now, the following part, Part 10, is also of general application to section 6(1) employers and their employees and deals with the subject of awards.  Under section 4, if one goes back to the definition section, an award is either one made by the Commission under section 539, which is an award rationalisation made on the request of the Minister, or it is a pre‑reform award, that is, a pre‑existing award of the Commission binding only employers and employees within the 5(1) ‑ ‑ ‑

KIRBY J:   The Commission you are referring to is the old Commission?

MR SEXTON:   Well, and the still present Commission.  The Industrial Relations Commission I should call it, your Honour, to distinguish it from the Fair Pay Commission.  Now, your Honours, a rationalised award binds the employers, employees and organisations that it is expressed to bind under section 543, so it relies on sections 5(1) and 6(1) as well.  This part provides for terms that may be included in the award – section 513 – and matters that are not allowed – 515 and 517.  Matters, for example, that are not allowed are discrimination and preference – 517; rights of entry – 518; enterprise flexibility – section 519.

GLEESON CJ:   In the review of the Act that you have taken us to so far, is section 496(2) the first example we have seen of what I would call a Fontana Films ‑ ‑ ‑

MR SEXTON:   I think so, your Honour, yes.  There are others later.  If I can go to Part 12 of the legislation, which deals with minimum entitlements of employees, non-wage minimum entitlements, so there it is additional to those that are set out in Part 7, and in this case it deals with meal breaks in Division 1, public holidays in Division 2, and they are the subject of challenge in the basis of their reliance on sections 6(1) and 5(1).

GLEESON CJ:   We are still dealing with defined “employers” and “employees”?

MR SEXTON:   We are, in this case, yes.  There are respects, your Honour, in which this part goes beyond those definitions.  The other areas that are dealt with of minimum entitlements are in addition to meal breaks and public holidays which are the subject of challenge but these other areas are equal pay and termination, subject to some exclusions, and parental leave. 

In relation to the termination provisions, they are set out in Division 4 which starts on page 449, and your Honours will see that section 637(1) applies subdivision B to “an employee within the meaning of subsection 5(1)” and if one then goes to subdivision B, section 643, your Honours will see it limits the way in which termination on the ground of harsh, unjust or unreasonability can be challenged before the Industrial Relations Commission and that is the subject of challenge because of the reliance on the 5(1) and 6(1) definitions in the operation of section 643(1)(a) so it limits the circumstances in which that ground can be used in an application to the Industrial Relations Commission.

Now, your Honours will see, going back to section 637, that subsection (4) applies the 5(1) and 6(1) definitions to certain other grounds of termination in subdivisions C and D, the grounds of termination in C and orders by the Commission about failure to consult unions in D. Because they rely on the 5(1) and 6(1) definitions those are challenged also. There is no challenge, however, to the reliance by subdivisions C and D on section 51(xxix), the external affairs power of the Constitution. It relies on the Convention for the Termination of Employment and the use of that was essentially upheld in the industrial relations case. The same applies to Division 3, equal pay, and Division 6, parental leave, which rely on other international conventions.

CALLINAN J:   Mr Solicitor, can you answer a question for me?  You may not be able to do it now.  The Conciliation and Arbitration Act contained a provision, I think, right from the beginning, in the 1980s, it was 41(1)(b) which said that the Commission could cease to hear a dispute if it was in the public interest to do so or if a State industrial authority was handling it or could handle it satisfactorily.  You know the provision I mean?  I think it used to be 130, I just forget – or 128.

MR SEXTON:   I think there was such a provision, your Honour.

KIRBY J:   There certainly was.  It was a great source of work for the Bar and others.

MR SEXTON:   Not in my case, your Honour.

CALLINAN J:   What happened to that – I mean, you cannot answer it now obviously, but I would like to know what happened to that – when the Workplace Relations Act replaced the Conciliation and Arbitration Act.  I take it that provision, if there were any analogue of it in the Workplace Relations Act, has been repealed by this Act I would have thought.  Do not worry about it now, but if you can tell me later.

MR SEXTON:   I am coming in due course to some of the provisions of this legislation concerning State tribunals, for example, but I think that certainly it has not found its way into this legislation certainly, your Honour.

CALLINAN J:   I would just be interested in what happened in the Workplace Relations Act in relation to it.

KIRBY J:   That was a restraint provision.  This is an anti‑restraint.

MR SEXTON:   No, this is in a different – if your Honour Justice Callinan’s question goes to section 111, which is on page 69, your Honour will see that one of the powers of the Commission in paragraph (e) on the following page is to:

dismiss a matter or part of a matter on the ground . . . 

(ii)that further proceedings in relation to the matter are not necessary or desirable in the public interest ‑ ‑ ‑

CALLINAN J:   That is similar to what was 41(1)(d)(iii).

MR SEXTON:   I am sorry, your Honour?

CALLINAN J:   That is similar to what used to be section 41(1)(d)(iii) of the Conciliation and Arbitration Act but it eliminates what was paragraph (ii):

that the dispute or part has been dealt with, is being dealt with or is proper to be dealt with by a State Industrial Authority. 

MR SEXTON:   Well, there is no premise on the dispute in this case, your Honour.

CALLINAN J:   No, that is gone.  Anyway, we will find out later what happened to that in the Workplace Relations Act, if anything. 

MR SEXTON:   Yes.  We will have that checked, your Honour.

CALLINAN J:   Thank you. 

MR SEXTON:   Your Honours, can I go to Part 15 which is on page 534 of the legislation.  It deals with rights of entry.  This is a part where the references to “employer” and “employee” have their ordinary meaning as a result of clauses 2, 3 and 4 of Schedule 2.  I simply say that to your Honours without taking your Honours to it but Part 15 is one of the sections listed in the schedule.  The challenged provisions - there is some difference between the plaintiffs as to the provisions challenged - are in Division 5 which starts on page 551.  Your Honours will see there that the reach of the provisions is dealt with in section 755, sets out a series of circumstances in which this division is applicable in relation to a right to enter premises under an “OHS law”.  An OHS law, an occupational, health and safety law, is defined in section 737 on page 536 as:

a law of a State or Territory prescribed by the regulations for the purposes of this definition.

I will not take your Honours to the regulations but 15.1 of the regulations deals with those laws.  I think I am right in saying, your Honours, that there are only laws in New South Wales and Western Australia which meet the definition. 

GLEESON CJ:   Which is the regulation‑making power?

MR SEXTON:   The regulation‑making power, your Honour, is in section 846.  It is a general power but there are regulation‑making powers in other – scattered through the legislation as well in relation to particular provisions.  Now, in terms of the operative provisions of Part 15, under section 756, which is on page 552, your Honours will see that:

An official of an organisation who has a right under an OHS law to enter premises must not exercise that right unless the official:

(a)   holds a permit under this Part; and

(b)  exercises the right during working hours.

Then applications for a permit are made to a registrar under section 740 and grounds of refusal are specified in section 742 and the imposition of conditions is allowed by section 741.  There is special provision for an inspection of employment records in section 757 which requires 24 hours written notice. 

KIRBY J:   One suspects that there must be ILO conventions on this subject, rights of entry of union officials.  I am sure there are.  I think I have seen them.

MR SEXTON:   There may well be, your Honour, but of course they are not relied on in relation to this part.

KIRBY J:   They were not in the 1996 Act or 1993 Act?

MR SEXTON:   I do not think so, your Honour, no.  Now, your Honours, I was going to go to Part 16, which provides for freedom of association.  Again, in this part the references to “employer” and “employee” have their ordinary meaning specified by clauses 2, 3 and 4 of Schedule 2.  Divisions 3 to 8 of this part prohibit various forms of conduct by an organisation, that is, an organisation registered under the first schedule, which is in the second volume and deals with organisations.  Section 4(1) provides that that is how an organisation is defined.  But also its officers or the conduct when carried out with various purposes or intents, particularly relating to a person’s membership or non‑membership of an organisation, and that is provided for in sections 783 and 784.

Now, in relation to the various forms of conduct that are identified by the part, the reach of the provisions is dealt with in sections 785, 786 and 787.  If I go back in those, 787 deals with territories and Commonwealth places, 786 with the Commonwealth and its authorities and 785 with constitutional corporations, and this is another of the provisions that the Chief Justice referred to earlier which deal with the effect of actions upon a constitutional corporation in part in this provision.

The challenge that is made – Victoria challenges the entire provision of section 785(1). I think otherwise the challenge is made to paragraphs (d), (e) and (f) insofar as they rely on section 51(xx). Your Honours will see:

(d)conduct carried out with intent to adversely affect a constitutional corporation;

(e)      conduct that directly affects a person in the capacity of:

(i)an employee, or prospective employee, of a constitutional corporation; or

(ii)a contractor, or prospective contractor, of a constitutional corporation;

(f)conduct carried out with intent to directly affect a person in the capacity of:

(i)an employee, or prospective employee, of a constitutional corporation; or

(ii)a contractor, or prospective contractor, of a constitutional corporation ‑ ‑ ‑

GUMMOW J:   Is there any further explanation of this word “prospective”?

MR SEXTON:   I do not think there is, your Honour.  I think it is left to its ordinary meaning.  I do not think so, your Honour.  Your Honours, I wanted to go then to some specific provisions of the legislation apart from those operative parts.  If I mention briefly Schedule 1, which is in the second volume, it is the registration and accountability of organisations.  I will not take your Honours to that in detail.  It is the subject of challenge.

If your Honours look, however, just at clause 18, which is on page 692 of volume 2, your Honours will see that it allows for the registration of what is described as a federally registrable association of employers or employees or an enterprise association. They are then defined in sections 18A, B and C, principally by reference to a number of section 51 powers, including section 51(xx). If your Honours look, for example, at section 18B(2), it says:

A person is a federal system employee if the person is:

(a)      employed by a constitutional corporation –

and by reason of subsection (1):

An association of employees is federally registrable if:

. . . 

(b)      the majority of its members are federal system employees.

So that is the way in which section 51(xx) is used, for example, in relation to the registration of employee organisations. It might be noted that clause 18D purports to provide a method of reading down those three previous definitional provisions if they exceed legislative power.

CALLINAN J:   Mr Solicitor, if the legislation is invalid, what is the position then with respect to section 45D of the Trade Practices Act?

MR SEXTON: Section 45D, well, it is not affected by – I am sorry, your Honour is saying if this legislation is?

CALLINAN J:   Yes, I am asking you – it deals with employees and non‑employees of companies.

MR SEXTON:   Your Honour is asking the boycott provisions?

CALLINAN J:   Yes, secondary boycott.

MR SEXTON:   Yes.  Well, as your Honour ‑ ‑ ‑

CALLINAN J:   How could it stand if this legislation is invalid?

MR SEXTON:   Well, as your Honour is aware, at least in part, not entirely, the provisions at that time were upheld in Fontana in part and there is no challenge made to that.

CALLINAN J:   No, but we have to think of coherence in the law.

MR SEXTON: Well, your Honour, it may well be – and we do not say that there are not some provisions of the legislation that cannot be valid here. We have identified the ones that we challenge and we would say that the provisions – if your Honour is talking about provisions that I will just generally describe as having an effect on a constitutional corporation as opposed to a provision that is simply generally directed to employers who are constitutional corporations, but if your Honour is talking about the first; that is, actions that have an effect on constitutional corporations, there may well be some provisions, and there are provisions of other legislation – section 45D may be an example – that can be valid, but we would say that a lot of the provisions in this legislation, even of that general description, go beyond section 45D of the Trade Practices Act. 

Your Honours, I will simply say that Schedule 1 provisions a detailed regime for registration – I will not go through the various parts – amalgamation and withdrawal from amalgamation, demarcation disputes, rules of organisations, membership, election of officers, records and accounts, conduct of officers and employees and penalties for contravention of the provisions.

Your Honours, can I go to two particular provisions of the legislation and one is section 16, which is on page 23 of volume 1.  This provision, which is challenged on various grounds, says that the legislation is “intended to apply to the exclusion” of a range of State and Territory employment laws, including industrial laws as defined in section 4(1) which has both a broad definition, that is, laws applying to employment generally, and also identifies specific statutes in a number of the jurisdictions.  It says that it “is intended to apply to the exclusion of” those laws “so far as they would otherwise apply in relation to an employee or an employer” – that is in subsection (1) – but then it creates a non-excluded zone, if I can put it that way, within the general exclusion and that is provided for in subsection (2) and your Honours will see a list of non-excluded matters in subsection (3).

GUMMOW J:   Subsection (2) could not restrain the operation of 109 of the Constitution if it in fact operated.

MR SEXTON:   Section 109, if it was applicable, would operate, your Honour, yes.  As your Honour said, it would be questions of construction, but what subsection (2) tries to do is to then, as I say, create a non-excluded zone within the excluded area and one category your Honours will see in the non-exclusion zone is occupational health and safety, that is subsection (3)(c), but you will see that there is a note towards the bottom of page 24 that this does not mean that the permits necessary under Part 9 for entry under State and territorial occupational heath and safety legislation would not be necessary.

If your Honours note subsection 3(g) and (m), (g) is “the observance of a public holiday” and (m) is the regulation of associations of employers, employees and members of associations.  Clauses 2 and 3 of Schedule 2 give the wider meaning of the terms “employer” and “employee” in relation to those two matters, that is subsection (3)(g) and (m).  Subsection (4) allows State and Territory laws also to be excluded by regulation.

GLEESON CJ:   They are statements of intention.

MR SEXTON:   Yes.  As your Honour says, it sets out how the legislation is intended to apply in relation to the State laws that are specified.  There is some overlap in terms of the various provisions as to the specification of State laws, but in a general sense it picks up State and territorial employment laws using that term broadly, but subject to the matters that the provision attempts to then exclude from that aspect of its operation.

GLEESON CJ:   But insofar as there is a challenge to validity, it presumably is not a challenge to the validity of the intention?

MR SEXTON:   No.  No, it is a challenge to the section in its terms and in terms of its powers on which it relies.

KIRBY J:   These are provisions which ‑ ‑ ‑

MR SEXTON:   For example, one aspect of the challenge is its effect on the States, a Melbourne Corporation argument.

KIRBY J:   We have seen these provisions before, I think, in GPAO and other cases.  They are used in aid of section 103, are they not?

MR SEXTON:   Section 103?

KIRBY J:   Yes, or 109 rather.  They are used in aid of inconsistency.  You use them to draw an intention.

MR SEXTON:   I do not think these provisions are of that kind, your Honour.  There are provisions in Commonwealth legislation, as your Honour is aware, that are designed as far as they can to avoid inconsistency with certain State or territorial legislation.  There are, for example, in the Corporations Law, provisions of that kind.  This is, as the Chief Justice says, really a statement of intention as to the operation of the legislation in relation to State and territorial legislation in the employment fields. 

Now, your Honours, on something of the same subject, section 117 of volume 1 at page 76, allows the Full Bench of the Industrial Relations Commission to restrain a State industrial authority, as defined in section 4(1), from dealing with a matter that is the subject of a proceeding under the Act or under the first schedule before the Industrial Relations Commission. It is challenged by all of the plaintiffs, I think, except Victoria. I should note that it first appeared in a similar form as section 128 of the Industrial Relations Act 1988.

KIRBY J:   The Commonwealth says in its submissions that there have been provisions of that kind going back to the beginning.

MR SEXTON:   There have been earlier provisions, your Honour, yes, but they have never been the subject of argument or challenge.

KIRBY J:   Of course, in the beginning it was a court or thought it was a court.

MR SEXTON:   Yes, that is right. 

KIRBY J:   Until we enlightened them in 1956.

MR SEXTON:   That is so, your Honour.  Your Honour, can I refer very briefly to some other parts of the legislation without going to them in detail simply because they are the subject of challenge.  Part 23, which is on page 668, makes provision for the conditions of school‑based apprentices and trainees.  Its operation is based on sections 5(1) and 6(1) and that is the reason for the challenge.  Schedule 6, which is in the second volume ‑ ‑ ‑

KIRBY J:   What is the point you make about Part 23?

MR SEXTON:   Only to say that it is a subject of challenge because it relies on the definitions of “employer” and “employee” in sections 5 and 6, your Honour. 

HAYNE J:   Page 1006, I think.

MR SEXTON:   Yes, thank you, your Honour. Schedule 6 at page 1006 in the second volume - transitional arrangements for parties previously bound by federal awards - this schedule in fact relies on section 51(xxxv) and not on – as does most of the remainder of the legislation – other powers under the Constitution. Its key operative provisions are challenged only by South Australia. It provides for a system of transitional arrangements whereby employers who do not fall within section 6(1) and their employees will continue to be bound by a federal award that applies to them for a transitional period of up to five years.

Schedule 8, which is on page 1114 of the same volume, is challenged by all the States except for Victoria which does not have State awards.  Its operation is based on sections 5 and 6 and it substitutes a “notional agreement preserving State awards” for the original State award or the original State or Territory industrial law.  That is set out in clause 31.  The notional agreement ceases to operate when the employees are brought under the new system or after three years - clause 38(A) - and a similar system is instituted for employment agreements that had been entered into under a State or Territory industrial law.  It might be noted under clauses 15 and 35 that State industrial tribunals are prohibited from exercising any function in relation to these new notional instruments.

KIRBY J:   Who enforces that prohibition?  I am thinking of clause 7 of Schedule 8.  It tells the State industrial authorities they must not do certain things. 

MR SEXTON:   I do not see an enforcement provision at the moment, your Honour.  It may be that one would need to seek a remedy in the Federal Court, for example.  I do not think there is an enforcement provision in the legislation.  It just simply says “must not be exercised”.

KIRBY J:   Is that that provision that you took us to earlier about the Industrial Relations Commission having the power to stop ‑ ‑ ‑

MR SEXTON:   No.  This is a specific direction to State industrial authorities.

KIRBY J:   Yes, but I wonder if it founds the power of the Australian Industrial Relations Commission to prohibit the State tribunal.  Anyway, you can have a look at that.  It is not a big issue.

GLEESON CJ:   Why do some of these schedules have clauses and some have sections?

MR SEXTON:   I do not know the answer to that, your Honour.

GLEESON CJ:   Is it a printing mistake?

MR SEXTON:   I am told by my learned friends for the Commonwealth that originally some of them were introduced as separate legislation, therefore with sections instead of clauses, but I had wondered, your Honours. 

Can I mention one matter that is the subject of challenge but it is not in either of these volumes.  It was Part VIAAA, redundancy payments by small businesses, and it was part of the amending legislation but it was repealed.  It commenced operation on 14 December 2005.  It was repealed effective on 27 March 2006 by item 1 of Schedule 1 of the Amendment Act.  What it did was to render of no effect an obligation contained in any State law or award requiring a constitutional corporation with fewer than 15 employees to pay redundancy pay.

Now, it is challenged because of its reliance on section 51(xx) because it did have some operation for a particular period even though it is no longer in operation. It is contained at page 741 of the amending legislation, No 153 of 2005, but I do not need to take your Honours to it.

KIRBY J:   Is that the case that gained some currency in the media?

MR SEXTON:   I do not think so, your Honour.

KIRBY J:   People were dismissed and something was done.

MR SEXTON:   I do not think it was under those provisions, your Honour.

GLEESON CJ:   I am sorry, where can we most conveniently find this?

MR SEXTON:   Your Honours need to have the amending legislation, which was No 153 of 2005, and it is at 741.

HAYNE J:   And what is the live controversy about this?

MR SEXTON:   That it did have some operation and there is a challenge to its reliance on section 51(xx).

GUMMOW J:   It has to have some retained live operation by virtue of the Acts Interpretation Act.  Is that the point?

MR SEXTON:   Yes, your Honour.  In other words, that there could be a case within that period which could still be the subject of its operation.

GLEESON CJ:   But does the success or failure of the challenge involve any different considerations from those involved in relation to the challenge to Part 7, for example?

MR SEXTON:   Not in relation to constitutional corporations, but this particular schedule, that was its only definition of “employer”, so it does not have the other definitions that are set out in section 6, but it is encompassed within it.

GLEESON CJ:   Yes, I am only concerned about the fact that, whichever way a decision goes, it might be easy to overlook this.

MR SEXTON:   Yes.

GUMMOW J:   What is really being argued I think is that there was nothing to be preserved by section 8 of the Acts Interpretation Act on the repeal because there was no law.  Do you see what I mean?  So therefore there were no vested rights to be protected by section 8.

MR SEXTON:   Well, I understand there is an argument about that, your Honour, yes, but I just notify your Honours that there is a challenge.

GUMMOW J:   Do you challenge that?  You do not, do you?

MR SEXTON:   Yes, we do, your Honour.  It is challenged generally.

GUMMOW J:   Is it?

MR SEXTON:   Yes.

KIRBY J:   Is there a convenient schedule that identifies each of the challenges so that they can be ticked off?  You will remember that in Victoria v The Commonwealth 187 CLR 416 there were a lot of particular sections that were challenged, but I looked this morning and that took a year less a day to be delivered and in a sense I think the Court is entitled to look for the identification of the matters that have to be resolved and ways in which the general questions can be answered so that we do not get lost in the forest.

MR SEXTON:   There are such documents, your Honour.  I do not know if one has been filed.

HAYNE J:   Is that the consolidated index of issues arising from statements of claim that has I think been made available?

MR SEXTON:   No, I think there is another document which actually identifies the various ‑ ‑ ‑

HAYNE J:   At least for my own part, can the plaintiffs agree on a single document that will give us an index rather than have us running multiple indices?  There is, I thought, the start of an index which we have been given.  Now, if you want to abandon that, do, but can we end up with one, not seven?

MR SEXTON:   We will take that on board, your Honour.  The question was originally, I think, relating to nominating the sections of the legislation that have been challenged.

KIRBY J:   If some of them in a sense present the issue and are test sections, it may be that an efficient way could be found to deal with the others.

MR SEXTON:   Your Honours, can I just simply go to three other matters concerning legislation relatively quickly.  It has already been noted that there is a general regulation‑making power in section 846, which is on page 615 of volume 1, but there are provisions elsewhere in the legislation allowing for regulations to be made on specific subjects, for example, in section 16 excluding State or territorial legislation, in section 356 specifying prohibited content.  Now, there is some challenge to some of the specific regulation‑making powers, not to the general provision in section 846. 

Two other matters. Part 21, which is on page 625, refers to the matters referred by Victoria by the Commonwealth Powers (Industrial Relations) Act 1996. By that legislation Victoria referred to the Commonwealth Parliament a number of matters concerning employers and employees. Section 858 of the legislation says that if an employer falls within the section 6(1) definition, the general terms of the legislation are applicable rather than any power that is available under the referring legislation. So the challenge by Victoria is to the reliance on – and by others – the section 6(1) definition.

KIRBY J:   Would you remind me, was the Victorian referral of power confined to particular heads of power or was it in general terms?

MR SEXTON:   Well, it was in specific terms.

GLEESON CJ:   It contained exceptions.

MR SEXTON:   Yes, that is right, although it did provide a referral of powers but, as the Chief Justice said, subject to some exceptions.  Finally, just for completeness, your Honours, and it is not a section that is subject to the challenge, but if your Honours look at section 14 of the legislation on page 21, your Honours will see that it is a reading‑down provision.  It says:

(1)Unless the contrary intention appears, if a provision of this Act:

(a)would, apart from this section, have an invalid application; but

(b)     also has at least one valid application;

it is the Parliament’s intention that the provision is not to have the invalid application, but is to have every valid application.

KIRBY J:   Which section is that, I am sorry?

MR SEXTON: Section 14, your Honour, subsection (1) particularly. Now, your Honours, I was going to move to look at four of the major decisions on section 51(xx), take the Court to those, to consider briefly how the power has been dealt with by members of the Court in those cases. I was going to start, your Honours, with Strickland v Rocla ‑ ‑ ‑

HAYNE J:   Just before you do that, do we begin from the premise that this legislation takes a form radically different from any legislation hitherto considered by the Court?

MR SEXTON:  We would say so, your Honour.

HAYNE J:   I am not conscious of there being any dispute about that, namely that legislation in the form “A trading corporation shall”, “A trading corporation shall not” has not been directly considered by the Court.  What are we going to get out of the cases?

MR SEXTON:  Well, your Honour, what they contain is a range of views about the scope of the corporations power.  I was not going to dwell on them at length, your Honour, but I think it is important, we would say, to simply look at that range of views and some of the currents that have run through those cases.

KIRBY J:   There was a use of the expression “constitutional corporation” in the 1996 Act, I think, so what is the difference between the approach that was taken in that Act and the approach that has been taken in this Act?

MR SEXTON:   It is nothing like the generality of this legislation, your Honour.

KIRBY J:   But apart from the generality, was there some different drafting technique or embrace of federal law in respect of corporations under the previous 1993 or 1996 Acts that were not evident in this Act and you approach here?

MR SEXTON:   Except, I think, for one provision in that legislation, your Honour, most of the provisions that have been considered, for example, in Fontana and Dingjan, relate to, as I say, action that has an effect on, to just put it that way for the moment, a constitutional corporation.

KIRBY J:   At some stage if you would have a note prepared that indicates, if it be the case, that this is an entirely new way of using the power because I recollect that there is reference to the constitutional corporation in the previous Act and I think it was used in 1993.

MR SEXTON:   I think there was one provision of the legislation was the subject of the Industrial Relations Case which talks about enterprise agreements but I do not have the provision in front of me, your Honour. 

KIRBY J:   It was addressed in the Industrial Relations Case.

MR SEXTON:   I do not think the provision is set out.

KIRBY J:   No.

GLEESON CJ:   What are these four leading cases you would like us to look at?

MR SEXTON:   The first one is Strickland v Rocla 124 CLR 468.

KIRBY J:   You do not start with Huddart, Parker?

MR SEXTON:   I was going to say something very briefly about Huddart, Parker but I was not going to start with it, I thought that might be inviting trouble.

KIRBY J:   You thought there might have been a bit of State nostalgia.

MR SEXTON:   No, none of that, your Honour. 

GLEESON CJ:   Having regard to what happened to Huddart, Parker and Strickland that would involve what has been described as a process of exhumation. 

MR SEXTON:   Yes, “disinterred” I think Justice Deane said.  Your Honours, in Strickland, as your Honours well know, the question was the validity of provisions of the Trade Practices Act 1965 concerning anti‑competitive activities. It was actually held invalid by five members of the Court but all members of the Court were agreed that Huddart, Parker should be overruled. Chief Justice Barwick expressed some views on section 51(xx) with which Justice McTiernan agreed, and there were some views also expressed by Justices Menzies, Walsh, Gibbs and Windeyer.

Can I simply say about Huddart, Parker in the context of Strickland – and I will not take your Honours to it – but simply to summarise the judgments in Huddart, Parker there was really, we would say, no discussion of the scope of the power by Chief Justice Griffith and Justice Barton because of the way in which they approached the question ‑ ‑ ‑

GLEESON CJ:   Was there not a statement by Chief Justice Griffith in Huddart, Parker v Moorehead that if it was not for the doctrine of reserved powers the Commonwealth could use the corporations power to deal with industrial relations?

MR SEXTON:   There is, and various other things as well, your Honour, that is so, but apart from that negative stipulation those two Justices, we would say, did not really discuss the scope of the power ‑ ‑ ‑

KIRBY J: There is another way, apart from implied limitations, that one could put a limitation on paragraph (xx) and that is by reference to the coordinate and special and particular and historical power in paragraph (xxxv). It is not a way the Constitution has recently, nor hitherto, been interpreted, but at least, if this were just an ordinary legal document, you would say there is a special thing for industrial relations in (xxxv) that covers this particular field and therefore you are stuck with whatever power you have there.

MR SEXTON: Well, your Honour, we would say that there are limitations inherent in section 51(xx) as well.

HAYNE J:   It may be important to distinguish between industrial disputation and particular methods of resolving it and the subject of industrial relations which is not confined to disputation in particular methods of resolution.

MR SEXTON:   As between those two provisions, your Honour.

KIRBY J:   Except that the constitutional power does talk about prevention.

CALLINAN J:   Also the legal fiction of paper disputes has rarely made anything of an interstate character relating to industrial affairs within the ambit of Commonwealth power effectively, I mean, to start a dispute at the drop of a hat, serving a fabulous claim, log of claim.

KIRBY J:   At the time people thought that was a better kind of dispute than real fisticuffs.

CALLINAN J:   But that tends to make the distinction in interstate matters between industrial relations generally and industrial disputes illusory, in a real sense, in the real world.

MR SEXTON:   Your Honours, as I said, Chief Justice Griffith and Justice Barton in a general sense had little discussion of the scope of 51(xx).  Justice O’Connor talked about the imposition of conditions on recognition but within limits.  Justice Isaacs talked about transactions with or as affecting the public.  Your Honours, we will come back to that at some stage later in my learned friend, Mr Walker’s, submissions.  Justice Higgins again took a relatively limited view although he decided the case, of course, on the question of characterisation.

Now, in relation to Strickland v Rocla, I would simply quote from Chief Justice Barwick briefly to say that – and this is at page 489 and following, just over to the top of page 490 where he said that:

I ought to observe that it does not follow either as a logical proposition, or, if in this instance there be a difference, as a legal proposition, from the validity of those sections –

that is in Huddart,Parker –

that any law which in the range of its command or prohibition includes foreign corporations or trading or financial corporations formed within the limits of the Commonwealth is necessarily a law with respect to the subject matter of s.51(xx.).  Nor does it follow that any law which is addressed specifically to such corporations or some of them is such a law.  Sections 5(1) and 8(1) –

that is, of the legislation in Huddart, Parker under the Australian Industries Preservation Act 1906 –

in my opinion, were valid because they were regulating and controlling the trading activities of trading corporations and thus within the scope of s.51(xx.).

It goes on to say that that may not be the limits of the power, but does not further consider it.  I will not take your Honours to the other judgments to similar effect and all saying that the provisions that had been struck down in Huddart, Parker would be valid.

HAYNE J:   Now, is the underpinning of what Sir Garfield Barwick says in Strickland revealed by what he later said in St George County Council 130 CLR 533 at 541 where his Honour understood trading corporations as defined by what they did, that is, that the concept of a trading corporation – assumedly also the concept of a financial corporation – hinges about activities. Is that right?

MR SEXTON:   The question of what is a trading corporation, separate from what activities of it can perhaps ‑ ‑ ‑

GUMMOW J:   No, the question is what is a law with respect to a trading corporation?  That is the question.

MR SEXTON:   Yes.

HAYNE J:   You need a conception of trading corporations or more accurately you need a conception of the compound expression, “trading or financial corporations”, et cetera.  Now, is that conception one that is fixed, as Sir Garfield said in St George 130 CLR at 541:

If its nature was being sought, it was to be found in what it did.

MR SEXTON:   Your Honour, unless one has a corporation that trades, it will not be subject to legislation.

HAYNE J:   Because it is not instantly evident – to hark back to what Justice Gummow said at the start – that the conception of trading or financial corporation is a global conception.  From about 1862 forward, through into the early years of the 20^th century is to be identified in the activities of the corporation.  Rather, trading or financial corporations may – perhaps may not – be understood as a class of corporations identified by the purpose of gain – see the Companies Act 1862 section 4 – as distinct from other forms of corporation whose objectives were not the pursuit of gain.

It seems to me much of the argument of the plaintiffs in this case hinges upon the identification of activities as a necessary integer in the formation of an idea or conception of trading or financial corporations.  Now, if that is so, we need at least to look at, as Justice Gummow said earlier, what did these terms mean in those days?  What do they mean now, and that requires a very deep analysis of the development between at least 1862 – perhaps no earlier – through to the start of the 20^th century of company and corporation law.  The two were radically distinct company law and corporations law, and trading corporation is an expression that you find, for example, in the Victorian statute book, the 1864 Act and the like, but the premise has to be identified, Mr Solicitor, and at some point in your argument, or Mr Walker’s, you are going to have to tell us what you mean by “trading or financial corporations”.

MR SEXTON:   I do not want to put off your Honour’s question but it is going to be addressed by Mr Walker, your Honour. 

HAYNE J:   Yes.

MR SEXTON:   Your Honours, can I go briefly to Fontana Films 150 CLR 169.

GUMMOW J:   Just before you do that, there is some necessarily short discussion of all these matters in the opening chapters of Professor Gower’s well‑known book on modern company law.  It tends to be fuller in the earlier editions, but at page 6 of the first edition, he refers to bodies with special types of object to which financial profits of their members were only incidental and he instances friendly societies acts, provident societies, building societies and so on.  Now, I think they, in the 19th century, were companies which had quite complicated specific statutory regimes.  They probably were not trading or financial corporations.  Now, in other words, one really has to know what is being excluded and you can only work that out by knowing what the range was at that time, all of which would have been known to these gentlemen at these constitutional conventions, but it is not immediately apparent to us today. 

HAYNE J:   There is a raft of authorities built up during the late 19th century on those questions.  You can find it in books like 6th edition Buckley, 6th edition Lindley.  Some of it is in 1st edition Halsbury.  There is a lot of learning, a lot of homework too, I suspect, Mr Solicitor. 

MR SEXTON:   Your Honours, Fontana is at 150 CLR 169. The legislation is set out – it was the subject of the case – effectively on page 177 in the judgment of Chief Justice Gibbs. It is a case essentially about boycott activity. Your Honours will see that section 45D(1) of the Trade Practices Act, as it then was, is set out and the provision in contention was paragraph (b)(i) so that, in effect, the contention was whether the validity of a section providing that:

a person shall not, in concert with a second person, engage in conduct that hinders or prevents the supply of goods or services by a third person to a fourth person (not being an employer of the first‑mentioned person) ‑ ‑ ‑

GLEESON CJ:   You will find in the submissions of the Solicitor‑General for the Commonwealth on page 174, about a third of the way down the page, a contradiction of Sir Garfield Barwick’s proposition that has just been raised with you for comment by Justice Hayne. 

GUMMOW J:   Page 174.  You will see the Solicitor-General makes the point I was trying to make earlier.  A power must be read extending to laws prohibiting from trading. 

MR SEXTON:   What paragraph is that, your Honour?

GUMMOW J:   Page 174.

GLEESON CJ:   It is in the argument of the Solicitor‑General for the Commonwealth.

MR SEXTON:   I was just asking what paragraph. 

GUMMOW J:   It is about line 10 on page 174. 

GLEESON CJ:   He is trying to get away from the notion that the ambit of the power is confined by the concept of the trading activities of trading corporations. 

CALLINAN J:   Which I think is somewhat different from what Justice Gibbs said in Fontana.  I think his Honour did not conclude that that was so, but he said attention had to be paid to it and he abstained from defining the outer limits of the power but he said you did have regard to the nature of the activities in defining the power.

MR SEXTON:   Well, ultimately we would say it is a question of the connection between the power and the legislation, although obviously – I must say I just cannot find this reference, your Honour.

HAYNE J:   It is in 150 CLR 174, not the submissions - it is in the argument of Mr Byers.

GLEESON CJ:   We are talking about Sir Maurice Byers, not about the present Solicitor‑General.

HAYNE J:   Not reading him to you, Mr Solicitor.

MR SEXTON:   Right.  We were puzzled, your Honours.

GUMMOW J:  

The power extends to laws prohibiting the described corporations from trading, protecting them in their trade, and preventing others from injuring them.  None of this springs from the word “trading”, but from the words “with respect to” -

and then he refers to Redfern.

The words “trading” and “financial” describe certain types of corporation.  They do not refer to activities.

Now, that I think is the part of the argument that is put against you now, today, in this case.

MR SEXTON:   Well, your Honour, we will address that.  Your Honours, can I simply in relation to Fontana - I was at page 177 – indicate that that provision, (b)(i), which was premised on substantial loss or damage to the business of trading or financial corporation or of a body corporate that was related to that person, that the first clause, that is, substantial loss or damage to the business of the constitutional corporation was upheld. The second part of the clause was held to be invalid by three Judges and not considered by the others, and if one turns over the page, section 45D(5), a deeming provision about the conduct of the organisation, that was held to be invalid by all except Chief Justice Gibbs and Justice Wilson.

Your Honours, can I just say about the Tasmanian Dam Case 158 CLR 1 that the legislation in that case was unusual in that it – the legislation is set out at page 72 and ‑ ‑ ‑

GUMMOW J:   It has been said of the judgments that they may be the product of too much speed.

MR SEXTON:   Well, your Honours, there is a variety of findings in the ‑ ‑ ‑

GUMMOW J:   Like a month.

MR SEXTON:   I suppose there was some urgency about it.

GUMMOW J:   There was, because the application for an injunction was foregone I think on the basis that it would be dealt with on a final basis quickly.

MR SEXTON:  Yes, I think that is right, your Honour.  Can I just simply summarise by saying that Justices Mason, Murphy and Deane thought that the relevant provision, that is, section 10, which is set out at the bottom of 73 and on to 74, was valid.  Justices Dawson and Wilson thought it invalid.  Chief Justice Gibbs and Justice Brennan considered that section 10(4) by itself was valid, although Chief Justice Gibbs thought it was not applicable.  So that in a sense the deciding view was that of Justice Brennan.  That is set out on pages 240 and 241 of the report, where he says at the middle of 240 to be a law with respect to trading corporations:

the law must discriminate:  that is to say, it must be a law which operates to confer a benefit or impose a burden upon those persons ‑ ‑ ‑

GUMMOW J:   In what sense is “discrimination” being used there by Justice Brennan?  Treating like as unalike, is it?

MR SEXTON:  I think it is to single out these bodies because of their characteristics, differentiating characteristics.

HAYNE J:   Well, does his Honour mention characteristics?  That is a gloss you add to it, is it not?  What his Honour says is “discriminate”, in the sense of single out.  Yes?

MR SEXTON:   He does but, your Honour, we would say it is not ‑ ‑ ‑

GUMMOW J:   Single out from what?  There has to be a comparator involved, has there not?

MR SEXTON:   From bodies that do not have the differentiating characteristics.

HAYNE J:   Or simply from all persons.  That is, is this more than a Strickland v Rocla Pipes point, that an all-persons law may not suffice?

MR SEXTON:   Well, certainly that will not suffice, we would say.

HAYNE J:   And is his Honour making any point larger than that?

MR SEXTON:   We would say that he is, that there would be other laws as well, and indeed in this case he held that the laws were not – with the exception of section 10(4) – he held that – well, he did not consider but he did not say that those laws were valid.  He simply said it was not necessary to consider in this case.  That might suggest, however, that it was a matter of some doubt.

GLEESON CJ:   Did you want to make any comment on what Justice Deane said on pages 268 and 269?

MR SEXTON:   I doubt it, your Honour.  Does your Honour have ‑ ‑ ‑

GLEESON CJ:   The bottom of 268, top of 269.

MR SEXTON:   Well, we do not take the point that Justice Higgins did, your Honour.  If your Honours look at – and I will just include the Dam’s Case with this – if your Honours look at 241.  It is an unusual statute because it referred to conduct done for the purposes of the trading activities of a trading corporation but it then enumerated a series of activities, the chief of which was the building of the dam.  You will see at about point 2 Justice Brennan says:

The acts prohibited by sub-s. (4) are the acts referred to in sub-ss. (2) and (3), and the qualification “for the purposes of its trading activities” results in the affection of the trading activities of trading corporations.

We would read the word “affection” as meaning acting upon the trading activities of trading corporations, so that in effect his Honour is really there confining the legislation in this case to legislation that effectively acted upon the trading activities of trading corporations. 

Now, your Honours, the final case is Dingjan 183 CLR 323 which again is a case concerning the effect on a constitutional corporation. It is probably sufficient to look at page 323 which sets out the legislation. It is a case of whether ‑ ‑ ‑

GUMMOW J:   What this shows is that this use of the corporations power in this field goes back at least to the 1988 Act.

MR SEXTON:   Yes, your Honour, in terms of ‑ ‑ ‑

GUMMOW J:   It was taken further in 1993 Act.

MR SEXTON:   No, in terms of this kind of use of it of which there is some but not a great deal in the current legislation that is before the Court.

GLEESON CJ:   What do you understand to be the point of departure in this case between Justice McHugh on the one hand and Chief Justice Mason and Justices Deane and Gaudron on the other?

MR SEXTON:   Well, the basis was, in a sense, the connection – how substantial was the connection between the power and the activity that was sought to be regulated here, which was a contract between two non‑corporate bodies, but one of them was to supply wood, I think, to the corporation.  Justice McHugh took the view that the connection was not sufficiently substantial.  Three members of the Court thought that it was and four members thought that it was not.

GLEESON CJ:   Would Justice McHugh’s opinion have been different if these people had been supplying directly to the corporation?

MR SEXTON:   I cannot answer that, your Honour, but I suppose that the interposition of one other independent contractor may have caused him to come to that view.

GUMMOW J:   Have a look at page 371, the middle of the page:

But the jurisdiction conferred by s 127C(1)(b) is not dependent upon the contract having any effect on, or any other significance for, the corporation.

Is that what his Honour’s decision turned on?  Then he says at the bottom of the page:

I have no doubt that in some circumstances contracts that are unfair . . . can be brought within the scope of the power conferred by s 51(xx) even if the corporation is not a party to the contract.

Then he says over the top of 372 about line 6, “Neither s127C nor the Act gives any clue as to” how you would read it down.  It seems to be a combination of those two thoughts.

MR SEXTON:   As I say, your Honours, it is the kind of provision which occurs, or at least in terms of general style, in some parts of the new legislation, but in general that legislation is, of course, much more general in its operation and largely turns on those provisions in section 5 and section 6 rather than on this kind of provision.  Your Honours, Mr Walker will now deal with the scope of the power.

GLEESON CJ:   Thank you, Mr Solicitor.  Yes, Mr Walker.

MR WALKER:    May it please the Court, nothing in what we try to put to persuade your Honours to the view that section 51(xx), the corporations power, does not have a reach sufficiently far to authorise the enactment of this legislation is capable, as we put it, that is, it is certainly not intended to jeopardise the validity of enactments in the form of section 52 of the Trade Practices Act, obviously, nor provisions in the form of section 45D

So that at the outset there is nothing in what we seek to put which seeks to detract from the simple validity available from the face of section 51(xx) and the face of such legislation by observing that they are manifestly laws with respect to relevantly local trading corporations, bearing in mind that, for example, the first has a structure whereby the corporation is a relevant actor and the activities in question are to be in trade or commerce.

Naturally the form of such a law stated unremarkably by us to be clearly and uncontroversially valid does nothing to say that we have by shaping a law in that fashion reached the limit of the power and we are not going to engage in that kind of argument. But particularly in relation to a question addressed to my learned leader by Justice Callinan concerning section 45D, we should make clear at the outset of this part of our argument that we perceive nothing in the way we put the case which would cast the slightest adverse light on the validity of the law to the extent it was upheld in Fontana.

I will be coming to that and the implications of that a bit later in another context, but we certainly seek to do nothing in our attack on the validity of this statute as it is said to be based upon an invocation of section 51(xx) power. We say nothing to doubt the validity of laws addressed to all sorts of actors, apart from constitutional corporations themselves, fitting within the relevant nexus given by the words of empowerment, namely, laws with respect to constitutional corporations.

The Act enacts a scheme to regulate critical aspects of the employment relationship in this country.  Justice Hayne raised with my learned leader the question of a proper distinction to be observed, not merely semantic, with great respect, but potentially of great political as well as legal import, between industrial relations and industrial disputation.  The links between the two may be many and obvious but we, for our part, with respect, accept that there is a distinction.  In this part of our argument we will choose to describe this matter as the employment relationship, accepting that that is, of course, in order to effect the parliamentary choice concerning the regulation of industrial relations and certain aspects of industrial disputation.

GLEESON CJ:   Your argument means, does it not, that the law that says all constitutional corporations must give their employees at least three weeks holiday a year is not a law with respect to constitutional corporations?

MR WALKER:   In the end, yes, we will say that goes too far.

GUMMOW J:   Why do you say it in the end…..?

MR WALKER:   I have said it now at the beginning. I am going to have to make good quite a number of steps to make it persuasive rather than categorical. Yes, and that is why we emphasise at the outset this question of employment relationship and why the provisions of sections 5, 6 and 7 are at the heart, not only of the Act, but also of our attempt to expose a character it bears which shows that it cannot be based on section 51(xx). As your Honours appreciate, my part of the argument is in relation to section 51(xx). There are other heads of power being addressed by others and I will rarely refer to them.

The scheme in question imposes obligations; it grants, modifies and conditions liberties and permissions; it prescribes immunities and it creates rights.  It does so by provisions which include, as your Honours appreciate, penalties and offences.  The range of persons directly affected, that is, those persons whose conduct is regulated as well as those persons whose prospects may be affected by the regulation of that conduct, includes employers, using that as ordinary English, employees, trade unions, other persons with stipulated relations or connections that are to be found in provisions of the Act to which your Honours have now been referred both in the joint written submissions as well as in my learned leader’s exposition of it. 

The scheme, we submit, depends on the definition of the employment relationship in question.  It does so by the crucial provisions that your Honours have already seen of sections 5, 6 and 7 which, for reasons that may not be entirely obvious, are yoked together, if they were not already sufficiently done so by their own terms, by the definitions in section 4(1).  Thus, there is a rather oddly expressed definition of “employment” in section 4(1).  There are cognate definitions of “employer” and “employee” in section 4(1) and they lead you to sections 5, 6 and 7. 

That then becomes, in our submission, without any necessary concession in relation to our constitutional argument by reference to the exceptional ordinary meaning provisions to which my learned leader referred, it leads to this proposition, which we do not understand to be contradicted by anything so far written by the Commonwealth, that the relationship of employer and employee is the basal conception upon which the application of this Act and its provisions to a number of different actors – not merely employers and employees – then turns.

If we are correct in saying that it is attributes of that basal definition which show that 51(xx) is an inadequate basis, then, in our submission, the whole will come down, whether one sees the Act as a scheme or a set of schemes or perhaps a scheme with various sub‑schemes.  But others will address that argument of what happens if we manage to remove a sufficiently large stone from the arch. 

Section 6(1) reveals the heads of legislative power that are expressly invoked in the enactment of the Act. The arguments of others, as I have said, will address the heads of power suggested by paragraphs 6(1)(b), (c), (d), (e) and (f), not all of which, of course, are in play, as my learned leader has already told you. To an extent not only my argument but the argument of others, as your Honours have already read, necessarily address section 51(xxxv).

GUMMOW J:   Wait a minute.  Looking at section 6(1), you are directing yourself to paragraph (a)?

MR WALKER:   I am going to be addressing paragraph 6(1)(a), your Honour.

GUMMOW J:   Section 6(1)(a).  We were told that there was no complaint about (b), (c) and (d).

MR WALKER:   That is correct, and that there is argument about (e) and (f).

GUMMOW J:   And other parties are going to deal with (e) and (f).

MR WALKER:   That is right.  Now, it would be altogether inappropriate simply to wave aside paragraphs (b), (c) and (d).  They provide a context, but for present purposes I simply refer to them as being, in a form very familiar to your Honours, a record of what I will call the express invocation of heads of power, certainly by implication, but they are an express invocation of power.  Now, that does not mean this is where you find exhaustively the available powers, but my argument is based upon paragraph 6(1)(a) and it would appear there is this degree of common ground with the Commonwealth, that much of the point of this argument is correctly premised on the proposition that if 6(1)(a) be not available, the Act loses either all or practically all of its intended utility from the point of view of the Commonwealth.

Now, as I say, section 51(xxxv) cannot be forgotten. Of course it does not come into the argument as a source of legislative power relied on by the Commonwealth. It is, in our submission, neither more nor less than this. It is an omnipresent contextual element in any understanding of section 51(xx) with which my part of the address for New South Wales is concerned. It is not a source of implied prohibition any more than section 51(i) was a source of implied prohibition, and by way of looking forward to a set of judicial reasons upon which your Honours know we clearly rely, we recall the trenchant, brief and devastating way in which Sir Isaacs Isaacs disposed of the notion that there was an implied prohibition from the terms of section 51(i) which affected the interpretation judicially of the reach of section 51(xx) in Huddart, Parker v Moorehead in his dissenting reasons.

On the other hand, this Court does use the immediate context of section 51, as well as other matters of textual context, in construing heads of power in section 51, and in writing attention has already been drawn to the way in which the textual reference in section 51(xiii) was of course used in the reasoning about section 51(xx) to be found in the Incorporation Case, true, by reference to a rehabilitation – the disinterment and selective dissection, as Justice Deane put it – of Huddart, Parker v Moorehead but significantly a part of that decision supported by the reasoning of all of the Judges but particularly the reasoning of Sir Isaac Isaacs. 

So section 51(xxxv) is not to be forgotten. May we simply at this moment flag its role as follows. Much is made by the Commonwealth, and with impeccable pedigree so far as authority is concerned, of the requirement for this Court to construe the heads of power in a plenary fashion. The word, in our submission, “plenary”, is apt however to be misunderstood insofar as it merely suggests that the needle is to be pushed to the furthest part of the red part of the dial as one can find.

GUMMOW J:   I have never used the word myself ever in a judgment.

MR WALKER:   That is not, with respect, what “plenary” means.  Plenary has to do with the nature of a law-making body, a Parliament.  It is used in particular in the authorities which give rise to its oft repetition by reference to the Colonial birth of the Colonial legislatures and the nature of the legislature being brought into being by an Act of the Imperial Parliament.  “Plenary” does not do the work in question.  Your Honours will recall there was a reference in the otherwise exiguous discussion by Sir Owen Dixon in the Bank Nationalisation Case 76 CLR 1 of an available range of interpretations of section 51(xx). The reference is at page 330

His Honour there used a description which, in our submission, accords with an approach being taken on behalf of the Commonwealth but uses it in a context – I can only put this tentatively – which by no means suggests that Sir Owen supports the way in which the Commonwealth argues the point. First, there is no authority in this set of reasons, let alone in this page, in support of our argument. Second, it is not something I can say scotches the way in which the Commonwealth puts it. But your Honours will see that in moving in the course of his Honour’s discussion of 51(xiii), which he found relevantly to be applicable, the possible recourse to section 51(xx) is described by his Honour in words that hardly appear, with respect, as commendatory or promising of the prospect of such an argument. His Honour describes it, at almost exactly halfway down that page, as follows:

if the denial –

that is, the denial of 51(xiii) –

were well founded, the Act could only be supported by the very widest interpretation of par. (xx.).

There is no suggestion as a matter of judicial method why, as it were – forgive the colloquialism – muck around with (xiii) if the law requires the very widest interpretation of another power to be selected precisely because it is the very widest interpretation.  There is no suggestion of that at all.  As I say, it is a by‑the‑way, it is a passing reference, it is not authority, but, in our submission, it is indicative of the fallacy underlying the repetition of the word “plenary” as if that means look for the widest scope of the exercise of legislative power and that is what the High Court of Australia commands must be selected.  In our submission, that is simply wrong.

GUMMOW J:   What is being said at 330 and 331 is that 51(xiii) is talking about an activity, therefore, it was needed to point out expressly that incorporation was covered.

MR WALKER:    Yes, that is right.

GUMMOW J:   That tells you nothing about 51(xx), despite what was said about it in the Incorporation Case, because 51(xx) is talking about banks, so to speak.

MR WALKER:   Yes.  It uses the expression “incorporation”.  It appears to have been used in the Incorporation Case by reference to the historical antecedents, particularly in Huddart, Parker v Moorehead, your Honour.  It seems to have been used along the lines of when the draftsman meant to include “incorporation” they used the word.  It seems to have been no stronger than that, but they did use it contextually.

GLEESON CJ:   How did the question arise in the Bank Nationalisation Case?

MR WALKER:   Your Honour, I am not going to be able to answer that precisely or fully off the top of my head.  However, the question arose because there were corporations involved whose businesses were to be taken away and there was a corporation ‑ ‑ ‑

GUMMOW J:   Wait a minute, their shares were going to be taken away.

MR WALKER:   Their shares were going to be taken away, I am sorry, but, your Honour, the Chief Justice, I cannot at the moment say whether it extends to the question of the corporation which was to be the recipient ‑ ‑ ‑

GLEESON CJ:   Maybe you might like to come back to it.

MR WALKER:   May I come back to it.

KIRBY J:   I wonder why (xiii) and (xiv) were expressed in terms of an activity and (xx) in terms of persons or things?  I mean, there is also naturalisation and aliens, and they are in the one paragraph.  You have an activity and people.

MR WALKER:   It combines an activity and – yes, but your Honour cannot, however, expect me to give a useful answer to that.

KIRBY J:   The question is whether it is a deliberate differentiation or whether it is simply a matter of the drafting that probably went into Clark’s first draft.  He just wrote it down.

MR WALKER:   I am not sure that Clark’s first draft will assist here, your Honour.  The research has showed this beyond, we submit, any doubt whatever, that there are not to be found in the records now available to us any relevant discussions of style or form of expression, particularly at that level of abstraction now familiar in our constitutional arguments, namely, the difference between activities and persons in the heads of power listed in section 51. 

When one sees the material which has been assembled for your Honours in the supporting documentation supplied in folders, when one looks at the very slight Convention Debates about section 51(xx), to some of which I will be very briefly coming later, one thing is very clear: no thought was given to what might later be divined or sought to be divined by reason of it being a persons rather than activity power so‑called.

HAYNE J:   But what we do know is the place that corporations had in the economy as it developed in the latter half of the 19th century.  What we also have is the remarkably different place that the corporation has in the economy of today.  What we also have are the particular problems presumably present to the mind of the framers emerging from the 1890s boom and bust and the problems that find reflection in the law reports and in the statute book in dealing with companies incorporated for the purposes of gain and the problems encountered particularly in connection with foreign corporations, including within that corporations that have been incorporated either by charter or under Act in the UK.

MR WALKER:   Yes, we do.

HAYNE J:   Now, all of those things are known as presenting problems about a particular pair of species, perhaps trio of species, of a genus of juristic person.

MR WALKER:   Yes.  May I try and address some of that here and now, and this cannot be and is not in the temporal sequence suggested by some of your Honour’s observations concerning developments from the middle of the 19th century onwards.  However, we do know that by the early 1880s it was a topic, how shall I say, of such immediacy and importance that it actually managed to make the list of those things which under the Federal Council of Australasia Act 1885 could be the subject of legislative authority in that council. It is to be said that everything that reached that list can be seen historically and for the purposes of this Court’s understanding of the context in which the later Constitution was enacted to have achieved a level of eminence in the minds of those concerned with questions of governing then the colonies.

Your Honours will find that in tab 7 of the blue collection headed “CONVENTION DEBATES & RELATED MATERIALS” prepared by the State of New South Wales. On the second page of that extract one finds in section 15 some phrases, many of which of course have echoes in the Constitution, and item (i) which is in what might be called the B‑list:

Such of the following matters as may be referred to the Council, by the legislatures of any two or more colonies –

starting with the not unimportant matter, one would have thought, of “general defences” and including a number of other matters with echoes in the Constitution, about halfway down the print:

status –

I would stress “status” –

of corporations and –

a distinction which is redolent of the times –

joint stock companies in other colonies than that in which they have been constituted –

query the extent to which any foreignness was to be controlled other than Australian foreignness.

GUMMOW J:   I think the words are:

status . . . in other colonies than that in which they have been constituted –

and that is, I think ‑ ‑ ‑

MR WALKER:    It seems to be an inter‑colonial matter.

GUMMOW J:   Yes, and it is a reflection of what the Privy Council decided in a case called Bateman v Service (1881) 6 App Cas 386, an appeal from Western Australia about the status of a company incorporated in Victoria. That was a real problem.

MR WALKER:    Your Honours, I wonder if I may take the liberty of handing up some further material which it has occurred to us addresses in some measure descriptively some of the concerns that have been raised about the understanding, governmentally and commercially, of this question of corporations.

GLEESON CJ:   Is that a convenient time, Mr Walker?

MR WALKER:    If I may simply describe what this is – yes, of course, your Honour.

GLEESON CJ:   Yes, thank you.

MR WALKER:   The provenance of this article which for the record is by E. Hilton Young entitled “The Status of Foreign Corporations and the Legislature” (1907) 23 Law Quarterly Review, the first instalment commencing at page 151.

GUMMOW J:   Did this author leave any other footprint?

MR WALKER:   I have not found it yet, your Honour.  The other instalment at 290, but he has been, as it were, trodden on or used.  That is Professor Harrison Moore cites him and him alone in his 1910 volume which is included in the materials at tab 3.  Your Honours will find that citation – tab 3, page 470.  The footnote is 1, “As to foreign corporations, see”, and that is in the text a reference back to the considerations in relation to laws of status. 

Now, the article is useful because (a) its content and existence bespeaks as close in time as 1907, or at the earlier time of its preparation, a concern among imperially‑minded people, as the author clearly is, but also with an internationalist bent, of the real governmental concern presented by the march of corporations and companies with legal personality according to their place of incorporation or chartering abroad, abroad in colonies and abroad in what might be called truly foreign places.

It is significant because of the way in which the two theories of recognition of such corporations are broad, if I may use the word “corporations” to include corporations and other like creatures.  The debate between the two theories that the learned author expounds, clearly preferring the latter in the second instalment, is one which starts with the proposition that as things then stood such entities traded, did business, affected people, the denizens of other countries, by reason of some notion or principle of international comity. 

The way in which different countries had decided to regulate rather than leave that matter in that position, particularly bearing in mind insolvency and winding up, was clearly a lively and very important subject matter for how different polities – and he goes to the continent as well as to the United States – had dealt with the matter. That, in our submission, is some indication of the way in which the concern of those preparing the Constitution was with the effect that such corporations could have on the people with whom, as it were, they would have intercourse by way of business.

GLEESON CJ:   Mr Walker, tomorrow we are going to sit at 10.00 and adjourn at 4.00.  We will adjourn now until 2.15.

AT 12.49 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.16 PM:

GLEESON CJ:   Yes, Mr Walker.

MR WALKER:   Your Honours, if I could just give two references in the 1907 article to which Professor Harrison Moore had drawn attention.  Your Honours may have already picked up the reference at the foot of page 151, the very first page of the first instalment, to the top of page 152 which is a perhaps colourful way of describing something which has been referred to in a number of different places as to the historical development in, say, the 40 or 50 years preceding our Federation: 

The constant growth of the international activities of commercial companies, driven abroad by the denationalization of capital and trade –

that may be an early form of what is now called globalisation –

has forced it indeed to deal with alien corporations.

Then the author turns to deal with the various ways in which that had been done.  In the second instalment at page 293, where perhaps more normative expressions are being used by the learned author as opposed to descriptive, in the second full paragraph on page 293 there is a reference to a consideration which does bear some comparison with the model of law with which those arguing 51(xx) have been asked to deal over the years and today, “A foreign corporation shall not”, et cetera.  Thus, for example, says the author:

no theoretical reason can be given against the possession by every state of power to modify it –

“it” being the live and let live comity principle treating persons as persons if they have personality from a foreign legal system –

just as it might modify the position of foreign natural persons by legislating against some particular class, such as anarchists, or Jews.  Apart from the sanctions of public international law, the only restriction imposed upon a state is, that if in its legislation it disregards the fact that a foreign juridical person has a natural personal status, and a personal law . . . it will be legislating against the nature of things.

That is the human beings, individuals.  Then, in relation to a body, dropping down two sentences, he says:

Its legitimate sphere of action –

that is, the territory’s legislature -

is to regulate those relations of the foreign juridical person which concern third parties, the citizens whose interests it is its business to guard.

That, in our submission, does coincide with what can be picked up in the material your Honours have collected for you in relation to the Convention Debates in this country concerning, in particular, the first of the descriptions in 51(xx):  with respect to foreign corporations.  It goes on:

Particular interferences with internal administration, particular restrictions of capacity by the legislature are legitimate if they are necessary in the interests of citizens of the state.

Now, in our submission, the context in which that kind of description of the state of affairs as a matter of political science and law and legal theory 1907 can usefully be treated as a description, not of events just of the last seven years before the publication but of longer before then, certainly gives rise by the inclusion of foreign corporations in 51(xx) of this notion of relations between the corporation and of the people of the legislating territory.  That is a concern of externality in relation to the corporation.  With foreign corporations incorporated elsewhere and with their legal personality deriving from elsewhere, it makes sense that it is externality that is the concern.

HAYNE J:   By that you mean?

MR WALKER:   Dealings with others.

HAYNE J:   Exactly, and the others do not include the employees?

MR WALKER:   Yes, I do, but that does not ‑ ‑ ‑

HAYNE J:   That is an assumption rather than anything, is it not?

MR WALKER:   It is an answer to your Honour’s question.  I have to make it good by steps that I am about to take, and I was going to add to the answer, that is because unless they are relevantly outside or are affecting outside then they are inside, and for the reasons I am going to try and develop, as insiders they are like incorporation or creation itself one of the givens of the constitutional head of power, and I will come to that in a moment.

KIRBY J:   But one of the problems of picking up articles written in 1907 and construing our Constitution with regard to articles written then is that you are then reading a statement by this very learned author about States being able to modify and legislate against some particular class such as anarchists or Jews.

MR WALKER:   Or aliens.

KIRBY J:   I mean, we read our Constitution today with today’s eyes. We are not bound by the way people in 1900 or 1862 or any other earlier times saw those words.

MR WALKER:   Quite so, but the wisdom of a measure is for Parliament, whether we be within power is a matter for this Court.  Now, in our submission, the significance of passages of that kind, particularly as it is used by Professor Harrison Moore as an indication of the mischief in hand ‑ ‑ ‑

GUMMOW J:   Just a minute, Mr Walker.  Are you talking about the passage at 293, are you?

MR WALKER:   Your Honour, that whole article is referred to by Professor ‑ ‑ ‑

GUMMOW J:   I know that, but the particular passage is at page 293?

MR WALKER:   Yes, that is right, your Honour.

GUMMOW J:   It goes on to say:

Particular interferences with internal administration . . . are legitimate if they are necessary in the interests of the citizens of the State.

MR WALKER:   Yes, I think I had gone on to read that very passage, yes, your Honour.

GUMMOW J:   What about the workers who have the misfortune to work for this foreign corporation?

MR WALKER: Insofar as what might be called internal administration, all workers, or employees will do for present purposes, are related to the dealings with others by the corporation, then it is already clear in this country by section 75B’s validity in the Trade Practices Act, Fencott v Muller, that, of course, persons in the position of employee can be regulated directly by an act of the Commonwealth Parliament by reason of what they have done as an employee.

GUMMOW J:   They can be given rights and they can have liabilities imposed on them.

MR WALKER:   Because of the dealings ‑ ‑ ‑

GUMMOW J:   The wisdom of which will depend on the particular Parliament.

MR WALKER:   Quite, and the content of which we have nothing to say about except insofar as it moves away from what we submit is the scope of the power shown by the words of 51(xx) which has to do with the dealings of the corporation ‑ ‑ ‑

GUMMOW J:   Where does it say that?

MR WALKER:   It says that in the word “foreign”, which I will not spend much time on ‑ ‑ ‑

HAYNE J:   Yes, but again you said meant the constitutional expression, you take the whole of 51(xx) and you take it word by word, building up, injecting notions of internal versus external, where are they to be found, save by assertion, Mr Walker?

MR WALKER:   Your Honour, I have to take the whole, yes.

HAYNE J:   Yes.

MR WALKER:   But in answer to a question where is it in the whole that I locate the derivation of the meaning I am putting on the whole ‑ ‑ ‑

GUMMOW J:   No, this dichotomy between internal and external, it is just a mystery to me.  Now, there is an internal management rule that we learn about at law school, but that was to facilitate the position of third parties dealing with a corporation.

MR WALKER:   I am going to come very briefly to that in a moment in relation to what your Honour calls the mystery of inside/outside.  If it remains a mystery, then this part and this critical part of our argument fails.  It is inside as opposed to outside ‑ ‑ ‑

GUMMOW J:   Inside what?

MR WALKER:   Inside the corporation.

GUMMOW J:   Now, what does that mean?  We are talking about a legal fiction.

MR WALKER:   Yes.  Yes, quite.

GUMMOW J:   We are not talking about getting into someone’s digestion.

MR WALKER:   Exactly.

GLEESON CJ:   The view used to be taken that “corporation” meant the corporators assembled in general meeting.

MR WALKER:   No.  No, I do not mean that.  I mean the corporation as the separate juridical separate person given personality and existence by the system of law under which it is created which in the Incorporation Case has been held by this Court in a way utterly unchallenged by the Commonwealth to have the following consequences.

GUMMOW J:   Well, wait a minute.  There are corporations sole and corporations aggregate.  We are talking about corporations aggregate, are we?

MR WALKER:   We are probably talking about any corporations, anything that answers the constitutional description of corporations, the full range of which will require testing case by case but we certainly would not submit that it would exclude corporation sole – it may, but we certainly do not submit that.

HAYNE J:   That is to say a legal person separate from the persons composing it?

MR WALKER:   Yes.

HAYNE J:   Now, that might give you a notion of what is internal versus external, persons composing the corporation, the corporators.  Where do the workers fit in with that?

MR WALKER:   The workers fit in because where it is a corporation that gets this artificial or artefactual juridical personality, all conduct of a kind which might be described as business – I will come back to why “business” is an appropriate word to use for foreign corporations for people who are over here in Australia – or which comprise trading or being a financial corporation must be carried out by human agency.  Now, that is an axiomatic proposition but one which in our submission is the beginning of a proper analysis of what the adjectives and the nouns in 51(xx) mean by way of the scope of the power, and in answer to Justice Hayne, yes, of course, we accept that the whole has to be construed but unless we can, in answer to questions such as Justice Gummow, point to where in 51(xx) results for which we contend are supported then the argument is obviously a bad one.

We get the scope of the power from, first, the noun “corporations” and the Incorporation Case demonstrates why that is important.  It is a given of the existence of the legislative power that there be a corporation or corporations.  So the noun “corporations” together with the participial adjective or the adjectival participle formed produced the Incorporation Case reasoning.

GUMMOW J:   Adjectival participle?

MR WALKER:   I am not sure whether it is a past participle used adjectivally or an adjective of participial form, your Honour, one or the other.  It was grammatical, it was done that way, those were the words which were used.  Now, I am not saying context was not drawn on.  It was drawn on, 51(xiii), but those were the words used, in construing 51(xx) as a whole in context.

Now, the other words which our argument seeks to give proper weight to are of course “foreign”, “trading” or “financial”.  Now, “trading” or “financial” can usefully be treated as a portmanteau phrase although it is certainly not something which has no distinction between the two, that would be wrong, and certainly would be ahistorical bearing in mind the drafting history.

The drafting history shows that it was very – I will not take your Honours to the passages unless your Honours wish me to – shows very clearly that it was thought that the word “financial” would add something, although I confess it is difficult to understand whether in the debate it was thought that building societies would or would not be added by inserting the words “or financial”.

HAYNE J:   What it would do would be reflect the history - see the 1862 Act where there was a distinction between banking companies and other companies formed for the purpose of gain.  The drafter may well have thought that if you used the word simply “trading”, you do not cover the field.

MR WALKER:   That is right, but ‑ ‑ ‑

HAYNE J:   You have banking in the 1890s, particularly in Victoria.  You have all these curious corporations dealing in land and the like – put them together.

MR WALKER:   Yes, your Honour, particularly the Victorian experience is spoken about in the debates, as your Honours know.  Those companies taking deposits, like a bank, those companies alas collapsing like banks and those companies proceeding on the supposed security of land when to the horror of people the price could do down as well as up.  Now, it is clear from the Convention Debates that that was part of the mischief which was being looked at.  What is not so clear is what those who debated it, who of course are to be distinguished from those who made it – it is not clear as to what was thought to be included within the ambit of “financial”.  It is tolerably obvious that they thought that, if I might call it, those Victorian deposit taking companies would be covered, but it is not clear for example from the exchange about building societies as to whether it was thought they would be covered.

GLEESON CJ:   In 1901 was the Archbishop of Sydney a corporation?

MR WALKER:   I think so, I think so.

GLEESON CJ:   Well, that would explain why they did not just say corporations.

MR WALKER:   Yes, and the debates reveal – I think it was Mr Barton who reminded people or perhaps informed some people for the first time that there were many different kinds of corporations, not just municipal, but also corporations of the kind the Chief Justice has just noted.  Now, to return to what Justice Hayne was saying about the 1862 model of legislation which was such a watershed in the regulation of commercial conduct ‑ ‑ ‑

HAYNE J:   Taken up at once in the colonies.

MR WALKER:   Quite so.

HAYNE J:   See the Trading Companies Act (Vic) 1864.

MR WALKER:   The 1862 wording, as is well known, picked up descriptions which had already been used and which had already been the subject and then turned into the subject of case law, company association or partnership, particularly association gave rise to some interesting decisions, and said if the arbitrary figure of 20, hence the reference to corporators – we suggest that there is historical context to that, with respect – for the purpose of carrying on any other business that has for its object – that has for its object – the acquisition of gain by the company, association or partnership, or by the individual members thereof.  So contracts for joint investment might well be caught, depending upon whether they were associations or partnerships.

That of course was the trigger for an obligation to be registered with exceptions for companies formed under the Act, companies formed under some other Act - all that is patent, or in England there were the mines under the jurisdiction of the stannaries.  So that is a context which it can be seen was well understood by Convention attendees such as Mr Isaacs.  Your Honours have seen that with some obscurity he is attributed as the author of an amendment that seems to have removed the prefatory word “status” from the formulation of the power.  It is quite unclear, with respect, whether that is either an unlooked for or inaccurate or entirely correct tribute or barbed compliment which was being paid him in debate.  It is not clear.  It goes nowhere.  But in our submission his role, in any event, justifies turning to the way in which he described the mischief as he perceived it had been perceived in 1909.

If I could take your Honours briefly please to Huddart, Parker &Co Proprietary Ltd v Moorehead (1909) 8 CLR 330. The particular passage is at 405 to 406 – at the foot of 405:

Before the Constitution was framed it was common knowledge in Australia that the affairs of trading and financial corporations -

interestingly, he says –

whether formed in Australia or abroad, had been the cause of much business strain and anxiety, that the general public entering into contractual relations with them –

I interpolate this is the externality of the outside point -

as depositors, investors or shareholders, had unfortunately found the need of some powerful controlling authority to give greater security ‑ ‑ ‑

GLEESON CJ:   I am not sure why you would treat shareholders as external.

MR WALKER:   No, I do not describe them as external for all purposes at all, your Honour. The contractual relations that his Honour is there referring to leaves open the question of the extent to which any of the learning, including Sir Isaac Isaac’s conclusion and description in this case itself, would give scope to the Commonwealth Parliament entirely to alter, for example, the statutory contract between shareholders. So that reference to shareholders there is not one which one can see traced through in the way in which his Honour then determined to outline the operation of section 51(xx).

GLEESON CJ:   On your approach to the power, could the Federal Parliament legislate with respect to the dividends paid by corporations to their shareholders?

MR WALKER:   Apart, obviously, from other powers such as tax, your Honour is asking about?

GLEESON CJ:   Yes, under paragraph (xx).

MR WALKER:   Probably, yes.  I would define the payment of money away from the corporation to someone who is no longer holding it as anything other than a private individual as being within the dealings of the corporation with the investing or trading public in that fashion.  A dividend, yes, just as a loan to a member would be treated the same way.

GLEESON CJ:   Under your approach to the power, could the Commonwealth Parliament enact a law that said directors of trading corporations must act honestly for the benefit of the shareholders as a whole?

MR WALKER:   Because of the inevitable, or inherent, relation of that to the activities of the corporation – and if it were a trading corporation, the trading activities of the corporation – yes, and for the same reasons as section 75B of the Trade Practices Act was held valid in Fencott v Muller.

GUMMOW J:   Yes, but that poses the question, really.  These internal activities you are talking about have no object, purpose or life other than the external situation.

MR WALKER:   Yes, but the external situation is not necessarily all conduct of a kind which characterises the corporation as a constitutional corporation unless it be foreign.  So leaving foreign corporations aside, it is not the case that all conduct of a corporation, all instances of conduct of a corporation, is conduct which characterises it as a trading or financial corporation. 

Now, that leads me to return to a matter raised by Justice Hayne before the adjournment in directing a question to my learned leader which was then subcontracted to me.  The activities component of our argument, yes, does render very important the activities component of the test laid down by this Court for ascertaining whether a corporation formed within the limits of the Commonwealth is a trading or financial corporation. 

There is not a glimmer of suggestion in the Commonwealth’s argument in this Court that any of the cases perhaps referred to for convenience in Fencott v Muller on the way in which this test evolved and exists, not one of those cases is challenged in the slightest degree.  We would obtain from those cases and from the way in which one finds reference to their outcome in the last page, the closing passage of the joint reasons in the Incorporation Case, the following ‑ ‑ ‑

GUMMOW J:   I do not have that in my ‑ ‑ ‑

MR WALKER: I am sorry, your Honour? It is 169 CLR 482 at 503.

GUMMOW J:   The last paragraph at 502 is just assertion, as Professor Zines pointed out at the time.  There is no ground for thinking that it was framed with the intention of conferring the power to provide and no ground for thinking the opposite either.

MR WALKER: May I go further, your Honour. There is, with respect, in the quotation contained in that paragraph, how shall I say, an unfortunate truncation and omission. Your Honours will find it best if you turn to the Quick and Garran extract that is at tab 2 of our bundle of material. The second of those pages, page 606 of Quick and Garran’s Commentaries on the Constitution, item 196, “Trading . . Corporations”, your Honours will see the third and fourth sentences of the learned commentators reads as follows:

The Federal Parliament may legislate concerning trading corporations formed within the limits of the Commonwealth.  Such corporations may be both created and wound up under the provisions of Federal law; whilst foreign corporations cannot –

et cetera.

HAYNE J:   A necessary step in your argument is to reject the first sentence under that head.

MR WALKER:   Yes, that is why I am drawing it to attention because it is unfortunately omitted in this part of the Incorporation Case, but how can one omit it?  But it gets worse, but not so much with respect for the majority in the Incorporation Case as for Quick and Garran.  On page 607 there is the passage in which the nugget mined in the Incorporation Case appears and your Honours see just before the passage quoted by this Court there are the following two sentences, about half an inch under the heading “Formed”:

There is no express power vested in the Parliament to incorporate trading or financial companies –

and then there is obviously a conferre to section 51(xiii) which was prescient. 

Whether such companies could be created under the trade and commerce section is not clear.

History shows they can be.  That is a passage which rather leaves Quick and Garran in the position of having on one page said you can create, on another page saying you certainly cannot create under 51(xx) but perhaps you can under other provisions.  So there is a problem with that passage in the Incorporation Case.  However ‑ ‑ ‑

GLEESON CJ:   Uninstructed by authority, you could understand somebody thinking that the expression “formed within the limits of the Commonwealth” was simply in apposition to foreign. 

MR WALKER:   And Sir William Deane thought just that but he was ‑ ‑ ‑

KIRBY J:   Specially because of the ‑ ‑ ‑

MR WALKER:   He was in solo dissent.  There is, to repeat a phrase, not a glimmer of suggestion in the Commonwealth’s position in this Court that the Incorporation Case’s authority is under challenge.  We are bound to construct arguments based upon the anchoring points we can derive from the reasoning for decisions in this Court which are authoritative until they are overturned, and the arguments about their overturning depended upon a prior explicit and deliberate seeking and obtaining of leave.  None of that has happened. 

Now, that is why, with respect, when one considers the cases in question, what is said on the last page of the majority reasoning in the Incorporation Case is of real significance.  On page 503 there is a reference to two of the then most recent authorities, the Victorian State Superannuation Board Case and Fencott v Muller, and then – and this is responding favourably to an argument by the then Solicitor-General for South Australia, I think – their Honours said:

the limitation imposed upon the reach of s. 51(xx) by the requirement that, in the case of domestic corporations, they be of a trading or financial character, would create undeniable difficulties if that paragraph were to be construed as extending to the incorporation of companies. The fact that the character of a corporation may vary –

and that is the critical part­

so that it may be at one time a trading or financial corporation and not at another –

and we would interpolate, their Honours clearly mean and not at another time including a later time –

makes it less likely ‑

et cetera.  Now, it is that expression of a view of this Court’s authorities concerning how you attribute a trading or financial character to a corporation, namely, by looking at activities subject to the Fencott v Muller Case ‑ ‑ ‑

GUMMOW J:   How does all this square with the modern parliamentary practice of giving corporations the powers of natural persons? 

MR WALKER:   It squares in a way which is increasingly obscure, your Honour.

GUMMOW J:   In other words, what…..terribly large 100 years ago and later, ultra vires, is not there any more.  This passage seems to postulate it is all alive and well.

MR WALKER:   Yes.  Certainly your Honour has now raised again the ultra vires point.  Capacity will always be a question even if, by stipulation, capacity is that of a natural person.  After all, the capacity of a natural person is a question for inquiry and finding; it is not to be assumed to be as ample as one can imagine.  So ultra vires, one way or the other, it remains a live issue though it may not much cabin modern corporations. 

However, in our submission, it is clear from that passage in the Incorporation Case and by the reference to Fencott v Muller that the law in this country constitutionally is that for 51(xx) purposes a corporation which has not engaged in any trading activity, perhaps in any activity at all, will fall into what might be called the exceptional category that Fencott v Muller illustrated, the mere passive holder of certain rights, the sort of custodian or receptacle corporation which was in question in that case, whereupon, as the majority in that case determined, the law is that it may be attributed as having a trading character for constitutional purposes simply by reference to its charter.

Their Honours did not say “simply by reference to” but by elimination that is where one gets because there is nothing else.  Now, the question arose or would arise logically once you have obtained it in that fashion and query how many legal instruments have to pass after your incorporation without you doing anything for you to get that simply from a long grab bag list of powers that classically companies got and nowadays the natural person equivalency powers which will include, of course, a power to trade has never been attended to by this Court.

It has never been determined how long it needs to be.  In Fencott v Muller there were activities but they were not trading activities.  It was nonetheless held by the majority by reason of its charter to fall on that side of the line.  But we now know the answer to the question, well, once you have obtained your character in what I will call the Fencott v Muller manner, have you got it forever whatever else you do?  The answer, by the majority, in that passage in the Incorporation Case is, no, it may vary.  You may cease to have it, because ‑ ‑ ‑

GUMMOW J:   But you could say “No corporation shall trade unless”, could you not?

MR WALKER:   Your Honour, may I come back to that, and very soon?  That is a very important issue to which we need to make an answer.  May I just conclude what I wanted to say about the matter in response to Justice Hayne’s question?  Now, it follows from that that the law in the country, not challenged by the Commonwealth, that we are not permitted as it were to defend because that would be idle, there is no challenge to it, is that it is by activities that you know a corporation in this country to fit a constitutional category or not if it is one of the local constitutional corporations.  So “foreign” looks after itself.

You have the activity‑less company which has the Fencott v Muller charter badge given to it and then for all the others you have activities, and it is in our submission important to note that the law on activities is that it has never been the proposition that your sole activities must be trading or financial or both in order to be a constitutional local corporation.  That is false, utterly contrary to the law.

Indeed, it is not the law that most of your activities measured either by your capital, your revenue or deployment of your employees needs to be devoted to trading or financial activities in order for you to characterised as a trading or financial corporation, and that fact, that is, that fact of doctrine in this country, is at the very heart of our proposition that this Act proceeds by its use of the employment test I have started by noting to overgeneralise or have an excessively broad or inadequately discriminating basis for invoking section 51(xx). It does not bear the character of a 51(xx) law because it brings down on the heads of these corporations the whole of these schemes or this scheme simply by dint of there being employment.

Now, I need to flag that there is a qualification to that by reason of the expression “usually employs” in paragraph 6(1)(a) to which I want to come back separately.

KIRBY J:   In this very useful compilation, which I think was prepared by you, of the Convention Debates and related matter, the early drafts – and they go through Sir Samuel Griffith’s first draft and quite a number of them up to Charles Kingston’s draft and even beyond that, the draft quite well into the 1890s talked of the status in the Commonwealth of foreign corporations, or the status and rights, and then those words were taken out and the power was changed to be able to make laws with respect to a foreign corporation. Now, on the face of things that suggests a broadening of the matters which were granted to the Federal Parliament. Is that a fair inference to draw from the history of the development of the Constitution, or not?

MR WALKER:   Linguistically, I wish I could be so terse in relation to history, your Honour.  It is a bit more difficult.  May I take you in that compilation to tab 5.

KIRBY J:   Could I just mention for future that where this sort of material is provided, it is very useful to have the reference to where it comes from.  There is at the very beginning a list of six.

MR WALKER:   I think the index does all of that, your Honour.  I am sorry, your Honour means bibliographically, yes.

KIRBY J:   I am sorry?

MR WALKER:   Your Honour means bibliographically?

KIRBY J:   Yes, because if for example one wanted to sight the Kingston draft, I do not know what that comes from.  But anyway, move on.  We can track it down.

MR WALKER:   May we supply the reference?  I apologise to those involved.  There is a marvellous recently published compendium from which most of those ‑ ‑ ‑

GUMMOW J:   Professor John Williams’ book has it all.

MR WALKER:   That is right, exactly.  Your Honours will have recognised the typeface from that book.

GUMMOW J:   That would be the best was to get us into it.

MR WALKER:   Yes, it is Professor Williams’ compilation which is the source for, for example, those early drafts.

KIRBY J:   Which tab were you taking us to?

MR WALKER:   Tab 5.

KIRBY J:   What is called the Griffith first draft, that was actually ‑ ‑ ‑

MR WALKER:   That was an initiative in ‑ ‑ ‑

KIRBY J:   Andrew Inglis Clark prepared that, did he not?

MR WALKER:   I think your Honour is there referring to ‑ ‑ ‑

KIRBY J:   He was sick and could not be there and sent it up and ‑ ‑ ‑

MR WALKER:   That is a reference to the possibility, delicious in retrospect, of federating Queensland.

KIRBY J:   I see, that is a pure Queensland initiative?

MR WALKER:   Yes.

KIRBY J:   I follow.

MR WALKER:   Tried dividing it into three and allowing it to be divided into even more pieces.

KIRBY J:   It is a very big place.

MR WALKER:   Self‑governing, sort of.  Page 439, on the right‑hand column – now, this is 12 April 1897 – Mr Barton is going through, in effect, reporting to the no doubt eager members what the real workers had been doing and at the top of that right‑hand column he says:

It has so far been altered as to read –

and there your Honours will see the words which omit the status words.  Then he goes on to say that that does indeed expand it, not merely with regard to the legal status, and then some difficult words:

but it may have power as far as it can legislate upon the general subject of these corporations –

at which our hearts fall, but then it gets better –

formed in any part of a State of the Commonwealth for the purpose of uniform legislation.

Mr. HIGGINS:   Does that give power to exclude them from trading in the Commonwealth?

Mr Barton then says, and I cannot offer an explanation ‑ ‑ ‑

Not, I think, to exclude them, but to regulate –

that is, short of prohibition –

the mode in which they conduct their operations.

GLEESON CJ:   I think the next sentence might be ‑ ‑ ‑

MR WALKER:   Yes – “It is for the purpose of uniformity.”  Now, the bulldozer theory of legislative power, your Honours.  One of the next sittings on this point, tab 6, page 793, Sir George Turner, foot of the left‑hand column, in effect, says why are we stopping at foreign and trading corporations:

There are financial institutions which are not banking institutions ‑ ‑ ‑

GLEESON CJ:   Where is this, Mr Walker?

MR WALKER:   Tab 6 of the New South Wales compilation.

GLEESON CJ:   Thank you.

MR WALKER:   It is now 17 April 1897.  Sir George talked about going a step further, giving a power also to legislate with regard to financial institutions.  Now, whether that would truly cover the get rich quickly proprietary limited – give me your money I will buy land and give you a fixed rate of return – may be doubted and they, of course, had been the ones that had caused misery in Victoria and elsewhere.  Then Mr Barton says gnomically “I do not know”, meaning, I think, I am not so enthusiastic.  Sir George Turner says, “Building societies”, which I definitely offer as meaning that he thought they were financial institutions.  Mr Barton pours cold water on it and then there is this back-handed compliment to Mr Isaacs - at least that is how we suggest it might be read:

and really for the amendment, which is a desirable amendment –

I do not know whether that is the amendment of having taken status out or what or whether, as may be suggested, the word “financial” had been considered in committee –

we are indebted to my hon. friend, Mr. Isaacs, who put it in its present form. 

Mr. ISAACS:   I suggested the word for temporary consideration.

It does not get better.

GUMMOW J:   What time of the day was this, do we know?

MR WALKER:   That is right.

GUMMOW J:   After dinner?

MR WALKER:   That is right.  They were sitting parliamentary hours, so it may have been after lunch and after dinner. 

CALLINAN J:   But these things were not only considered at that time.  I think it is, with all due respect, a trite way of dealing with it.  These things were given earnest consideration after the debates and during the debates.  It really is an unjustified disparagement. 

MR WALKER:   Your Honour, with respect, I apologise for any note of disparagement.  We have in our written submissions, as your Honour knows, pointed out that the wording that resulted, resulted from the considerations of people whose standing deserves respect.

CALLINAN J:   A genesis of more than 10 years this constitution.

MR WALKER:   Yes.

KIRBY J:   I do not hold to the originalist approach, but I must say one always reads the Convention Debates with great respect.  I mean, the standard of the intellectual discussion, their knowledge of American precedents, it is really amazing.

MR WALKER:    Your Honours, it suffices for me to say about that point that it is not possible from those extracts – there really is nothing else on 51(xx), we have put it all in – to discern the extent to which the mischief of corporations needing to be dealt with and uniformly is one which by the text of section 51(xx) in the context of that discernment of mischief drives one or other of the choices that your Honours are able to make.

GLEESON CJ:   Mr Walker, there is one major change that has occurred over the 100 years since then, and I am not sure whether it helps your argument or hurts it or is neutral, but it has not received a lot of attention in the written submissions, I think.  A hundred years ago corporations would have been largely – not exclusively, but largely identified with big business.  We had Salomon’s Case, of course, and the effect of a one‑man corporation, but nowadays, largely as a result of tax‑driven changes, corporations operate in contexts that would have been quite unforeseen.

I do not imagine when any of these men – and they were men – went to the doctor they would have expected to get a bill from a trading corporation.  But this probably explains the figure of 85 per cent that is referred to in the explanatory memorandum and in one or two of the written submissions.  It is because corporations are now used so extensively, not only by big business but by small business, by professional people, that there has been this change in the context of their significance.  Where that leads, if it leads anywhere in relation to this argument, I do not know, but it is a fact.

MR WALKER:    It is a fact, and it may change.  A change of taxation policy may suffice, for example, to shrink the number of sole traders or small businesses who wish to take advantage or suffer the disadvantages of being incorporated.

GLEESON CJ:   Nowadays the trading corporation is the normal form of business structure – not the exclusive, not the only important one, but it is the normal form of business structure, I think, and I would guess that more than 90 per cent of trading corporations in number have only one or two corporators.

MR WALKER:    Your Honour, no doubt those statistics are available, if only by inference, from data as to tax.  We are not in a position to put contrary to an impression, and that is all we can confirm, an impression that a great deal of the business of the country is pursued through and probably much of the rest of it is pursued with, that is, if it is commerce involving two parties or more, corporations.  But what we cannot put, and I do not put, is that the expansion of the possible application of 51(xx) laws is some reason for caution in the interpretation of 51(xx).  That is a fallacy which we do not espouse.

It is clear from the very words of the Convention Debates to which I have now taken you that those who devised these words were aware of relatively recent change and there is no reason why we would suppose that they thought all changes that were going to occur had already occurred; to the very contrary.  The same is true of Sir Isaac Isaacs’ words when he had the extra perspective by 1909.  We do not say that the power as to its interpretation – I am now talking about interpretation, not characterisation – would be affected by the waxing or waning of the course to incorporation for the purposes of trading or conducting financial activities.  So it probably is a neutral one.

GLEESON CJ:   In relation to the current approach that is taken to the meaning of the expression “trading corporation”, where does a pure holding company fit in?

MR WALKER:   Your Honour, my proper first part to the answer has to be, that is going to depend upon the facts of the case that raises it.  Badging a company a holding company may not be an appropriate legal method of answering the constitutional question.  A holding company may be nothing other than what in another context is called a passive investor or a holding company may be a company the board of which has its tentacles everywhere, so that the holding company not only holds but manages.  Depending upon the huge variety of circumstances which might appear, it may well be that a holding company will be a trading corporation by dint of circumstances which in a proprietary sense stems simply from the ownership of shares, a holding company, but its conduct will be such as to show that it is trading.

It may well be that the nature of a so‑called passive investor will yield character as a trading corporation rather than as not if, for example, it is what is commonly known as a share trader, passive in relation to the management of the companies that it fleetingly holds equity in, sometimes to matters of minutes or hours only, but very active in what might be called the trading shares. So it is going to depend on factual circumstances. It certainly will not be the case that by holding shares in a company that trades you are thereby a trading corporation if you are a local corporation any more than as a matter of English – and the Constitution is written in English – I am a trader if I have a small parcel in shares in BHP which sells oil.

GLEESON CJ:   Suppose the company’s only activity consists in holding shares in Counsels’ Chambers Limited and it rents space in Counsels’ Chambers Limited to a barrister.  Is that company a trading company?

MR WALKER:   Probably not.  I do not think there is any authority on what I will call the gentlemanly occupation of deriving rent from the property you own being trade.

KIRBY J:   Do not forget you are interpreting it for constitutional purposes; you are not just taking it out of a Companies Act or some other provision.

GLEESON CJ:   What about the company whose name appears in fine print on the top of your doctor’s bill, is that a trading company?

MR WALKER:   It is probably not.  Again, it will depend upon the facts as to its connection with the conduct in question.

KIRBY J:   I do not see why not. 

MR WALKER:   It might be.

KIRBY J:   I mean, it is engaged in making money.

MR WALKER:   But people who lend money to banks are engaged in making money.

KIRBY J:   Yes, but if you look at what the doctors are doing and what their companies are doing ‑ ‑ ‑

MR WALKER:   Your Honour, I am sorry, I am not taking any point about doctors and trade – perish the thought – or barristers and trade.  I am simply saying it will depend upon the relation between that corporation and the doctor’s conduct as to whether it is a trading corporation.  It may well be.  It may well need to be for various other purposes related to the business affairs generally of that doctor and his or her family, but that is a different question.  We hope that is not an evasive response.  It is not intended to be.  We are trying to emphasise that badges will not necessarily do the trick. 

In Fontana 150 CLR 169 the extension in the definition of “corporation” that you will find, for example – at 178 you will find the statutory provision and there you will see that in 4(1)(d) holding companies was referred to and Justices Stephen, Mason and Aickin said invalid but severable.

GUMMOW J:   Where did they say that?

MR WALKER:   We maintain what we say – of course, you can see why in a statute that would be invalid, because it would cover cases where the thing that made you a holding company did not factually indicate you were trading and cases where it did, thus it must be invalid.

HAYNE J:   But, by hypothesis, that definition, paragraph (d), was identifying something that was not otherwise a constitutional corporation.

MR WALKER:   It looks like that except for the fact there is nothing to prevent a trading corporation from holding shares in another trading corporation.  In short, your Honour may be right as to a possibility but is not an inevitability of the way in which that is set out.

HAYNE J:   Yes.

GUMMOW J:   But they did not try and read it down, that is the real point.

MR WALKER:   No.  Severable because you could wipe it out.  They did not read it down internally, if I can use that word. 

GUMMOW J:   No, they did not read paragraph (d) down itself. 

MR WALKER:   No.  As your Honours, I think, already appreciate, we rely upon the approaches taken in the cases to which I was referring in a final, I hope, response to Justice Hayne’s question, we rely upon the fact that they are the law upon which one approaches the critical question in examining, that is, in seeking to characterise a law where 51(xx) has been invoked as the legislative authority, where you are characterising the corporation. 

GUMMOW J:   Have you said all you wanted to say about the Convention Debates?

MR WALKER:   Yes.

GUMMOW J:   Now, one possible explanation for the removal of status was an appreciation, not always manifest, of the United States situation which is difficult in the 1890s.  The commerce power did not yet have notions of commingling in it.  What they had to do was to invent the negative dormant commerce clause as one means, but they were having real trouble in coping with abusive corporate activities.

MR WALKER:   Yes, your Honour.

GUMMOW J:   Now, we are always told that these great and wise men, but are they great and wise to that extent?  We just do not know, I think.

MR WALKER:   We do not know, either by way of submission or otherwise, that is, we for New South Wales.

GUMMOW J:   In other words, the American Federation in the great period of development after the Civil War from the point of view of federal power was experiencing difficulties through the absence of the corporations power.

MR WALKER:   I think it is called a golden age or the age of the robber barons, according to your view.

GUMMOW J:   Exactly.

MR WALKER:   Yes, your Honour. Now, the Sherman Act we say is the kind of legislation which of course is empowered not only by reliance on 51(i) and not only on 51(i), but also on 51(xx), and it quintessentially fits, as does section 52 and as does everything considered in Strickland v Rocla, the scope of a power to legislate with respect to something that is a given, a corporation.  That means it is a given, it is created – that is the Incorporation Case.  The power does not extend to that which is the given.  The given precedes the exercise of the legislative power. 

The other part of the given – now, this is not covered by the authority of the Incorporation Case but we seek to apply it by parity of reasoning, and this I hope is the explanation of the mystery that Justice Gummow challenged me with.  The other part of the given deriving from the wording of 51(xx) is that these have to be at the time when you are considering the application of an Act legislated under 51(xx).  They have to be trading or financial corporations. 

Now, when I say “they”, I do not mean that they are the people with the immediate object of the law’s command or the law’s bounty.  I of course mean, as the cases we have expounded in our written submissions show, that it may simply be, as it were, the point of reference by which the conduct of others, sometimes at several removes, may be regulated by a 51(xx) law.  Laws to benefit constitutional corporations are as good as laws which forbid a constitutional corporation from doing something.  That last formulation is one that needs to be returned to because it is not just anything which may be prohibited to a constitutional corporation, we submit. 

Now, while at this point in the argument I should then go on to deal with a question of Justice Gummow’s.  Yes, we say nothing to challenge Murphyores and it follows from Murphyores that, depending on matters which need a case to argue – you need facts and a statutory text – and which may involve issues of sufficient or requisite connection, that a prohibition ‑ ‑ ‑

GUMMOW J:   But the prohibition is sufficient connection.

MR WALKER:   Quite so.  A prohibition with conditional licence is of course a method available – see Murphyores – under 51(i) and equally available under 51(xx) with respect to the activities of the corporation which are what we would call the characterising activities.  I need to insert again by way of emphasis that the characterising activities, the ones that make the corporation at the relevant time a trading or financial corporation if it is local, need not be, on the authorities binding in this case, activities which are the whole of, or even most of, the activities of the corporation.  So there will arise a question, in answer to the case Justice Gummow has asked us to consider, as to whether the terms of the prohibition are within the scope of 51(xx).  The example that Justice Gummow raised with us would be within the scope of the power. 

GUMMOW J:   Hence, the curiosity of the Incorporation Case.  The States give it birth and the Commonwealth can strangle it, but we do not have to decide that today. 

MR WALKER:   We would obviously wish to be heard as carefully as the issue would justify on behalf of our client if the Incorporation Case were to be challenged, but it is not.

GUMMOW J:   What that point does illustrate is the pitfalls that lie in a course of construction that involves drawing these near invisible lines through this paragraph.

MR WALKER:   Yes, your Honour.

GUMMOW J:   I mean, if the mere fixing upon the word “form” can give rise to all these curiosities, what about your line that does not even have any words attached to it?

MR WALKER:   It does, with great respect, your Honour.  It has “trading” and “financial” and “foreign”.  After all, you do not get to be a foreign constitutional corporation unless you are foreign, that being the given. 

HAYNE J:   Namely, formed outside.

MR WALKER:   Yes, and over here, because this is not a head of power to look at the commercial life of Tokyo.  It is over here is the mischief, over here and over rich, over here and over numerous in their corporators.  The combination of capital, that was the mischief that Sir Isaac Isaacs spoke of so colourfully in Moorehead.

GLEESON CJ:   What about over here and exploiting their workers?

MR WALKER: Section 51(xxxv) was of course available – and we use that not by way of implied prohibition, but in answer to the proposition that unless you included in an interpretation of 51(xx), there would be a gap in what one would expect of governmental powers of a kind which would be at least remarkable enough to give rise to a doubt whether the interpretation was correct. In our submission, one should not start with the idea ‑ ‑ ‑

GUMMOW J:   Why should the workers have to dispute and why should their dispute have to be solved by conciliation and arbitration?  Why can you not deal with these exploited workers simply by saying they have to have four weeks leave, full stop?

MR WALKER:   Well, you can and the Parliaments of the States can do that.

GUMMOW J:   No, no, why can you not do that under 51(xx)?  You do not, I think, answer that by referring to 51(xxxv).

MR WALKER:   No, I have not.  No, no.  No, all I am saying is by way of a preface we would, with respect, start by saying one does not justify that outcome, that is, an interpretation of 51(xx), to include a scope broad enough to stipulate for what would otherwise be the content of the employment contract between content employer and content employee.  One does not justify that interpretation by saying, as it were, that would be a useful power for the Commonwealth to have, which is, one can be forgiven for thinking, the use that is made of the constant repetition of the word “plenary”.

Now, I use 51(xxxv) in the course of trying to make good that prefatory observation, that is, the people who devised section 51 thought of what might happen with discontent employees and stipulated the way in which the power would be circumscribed in 51(xxxv) for the resolution of that dispute, if it not prevented, by conciliation and arbitration with the cases making clear that it was not for the Parliament of the Commonwealth to lay down what the resulting wage ought to be by way of resolving the dispute if the dispute was we want more money.  That was for the process of conciliation and arbitration ad hoc.

HAYNE J:   You could not, you say, under 51(xx) take out of the realm of disputation sweat shop conditions imposed by a foreign corporation?

MR WALKER:   Yes.  Now, I have yet to ‑ ‑ ‑

HAYNE J:   So that those have to be matters of disputation if they are to fall within Commonwealth power?

MR WALKER:   Yes.

HAYNE J:   Now, is this not precisely analogous to the kinds of excess that it was thought foreign corporations had engaged in and led to the adoption of 51(xx)’s reach towards foreign corporations?

MR WALKER:   No, it is not.

HAYNE J:   Then other than this internal/external notion which you have moved past for the moment, Mr Walker ‑ ‑ ‑

MR WALKER:   I am going to come – no, I promise, your Honour, I am about to go to it.

HAYNE J:   Of course.  Of course you are coming back to it.

MR WALKER:   And very promptly, your Honour.

HAYNE J:   Other than that, what else do we have on the table other than internal/external, Mr Walker?

MR WALKER:   I do not have lots of strings to my bow, no, your Honour.

HAYNE J:   I understand that.  I want to know how many and what they are.

MR WALKER:   The best way to nickname the one argument is to refer to – I cannot run away from, I am not going to – is refer to the inside/outside dichotomy and also to the given point, the fact that there is a constitutional given for trading and financial just as there is for formed corporation or foreign corporation.  Now, they are two aspects of the same argument, that is, that the power does not permit legislation to go back into – hence the inside – or to regulate – hence the given – that which is taken to be in existence and true of the persons the object or subject of this power before the legislation is made by exercise of it.

That follows ‑ of course follows – we use as an anchor point the Incorporation Case because it was not, one might think, an inevitability of history or legal reasoning that simply because “formed” was interpreted temporarily as it was that that necessarily meant you could do nothing about the form of the created thing, but certainly the result is, the choice was made in this Court, that the scope of 51(xx) did not extend so far.

Now, before I go there, and as an essential part of the step in our reasoning, I said I would come back to the use of the words “usually employs” in paragraph 6(1)(a).  There are words which suggest at first reading there may be something pro tanto going on in paragraph 6(1)(a):

employer means:

(a)a constitutional corporation, so far as it employs, or usually employs, an individual -

The notion that one can be partly constitutional and partly not is to be rejected as not a useful conception bearing in mind that it is the one indivisible person that may be the subject or reference point of a law.  So it probably only means something like if ‑ ‑ ‑

GLEESON CJ:   But that is not part of the definition of “constitutional corporation”.  That is part of the definition of “employer”.

MR WALKER:   It is.

GLEESON CJ:   You have to start off with the proposition that it is a constitutional corporation?

MR WALKER:   That is right, that is the given. “Constitutional corporation” is defined in section 4(1) in the now familiar fashion that requires the issue of a 78B notice every time the definition is in question or the application of the definition is in question. It simply means the corporation to which paragraph 51(xx) of the Constitution applies, presumably meaning within the meaning of the term as used in section 51(xx).

Now, the alternative form in this formulation is “or usually employs” and there is no definition of “usually” or, indeed, of “employs” relatively.  So it is ordinary English.  For someone who has never employed anybody it is not going to be able to be said to be a person who usually employs, does not at the moment but usually does.  It means there is previous experience, there is a track record.  Furthermore, it means that when one looks at that track record you can say, well, the usual case is it employs someone, at least one person, as opposed to, well, sometimes it does, intermittently it does, but mostly it does not, it is not usual for it to.

GUMMOW J:   We have been to this trap before, I think.  You have then to read the definition as doing some work in some section to see how it works.

MR WALKER:   This does work in every section where the expression, “employer, employee or employment” is used and they are ‑ ‑ ‑

GUMMOW J:   No, the phrase “so far as it employs”.  They are not in a vacuum.  They are tied to specific sections and it would help explain what the sections say.

MR WALKER:   Your Honour, we do not think, with respect, that anyone is going to make anything out of “so far as” in a way that throws any particular light on the constitutional question.  It is certainly, with respect, we accept that definitions are for use in other provisions, but the notion of “employer” is at the heart of the schemes in relation to the employment relationship regulation rather than necessarily the industrial relations regulation, which is the proper character of this law.

If one is talking about a corporation that usually employs, it contemplates a time, including the time at which this Act is supposed to be speaking effectively to it and binding it, where it is not employing, and one may think why does that matter because there will scarcely be a need for it to be bound by any of these, but of course what it shows is that there is an extremely tenuous connection between activities of a kind which might characterise the corporation as trading or financial or, if foreign, carrying on business and the corporation which is supposed to be the statutory employer.

That, in our submission, is yet another instance of how this Act has quite deliberately moved its sphere of operation away from the affectation of the characterising, constitutionally characterising activities of a corporation, so as simply to use the label “constitutional corporation” as the entrée into this elaborate scheme turning on employment relationship.  One example was partially raised this morning by the Chief Justice in discussing with my learned leader some aspects of section 496.  The Chief Justice asked about section 496(2), whether that was the first or the first referred to which might be said to have a Fontana provision.  It certainly does have a Fontana provision.  One finds that in paragraph 496(2)(b):

will, or would, be likely to have the effect of causing substantial loss or damage to the business of a constitutional corporation –

Could I draw to your Honours’ attention that subsection (2) relates to industrial action by non‑federal system employee, et cetera, and that under subsection (3) that elegant description of a non‑federal system person means an employee within what is teasingly called the ordinary meaning of that word – I am going to come back to that notion – but who is not covered by the definition of “employee” in subsection 5(1) – that is the one that spins off section 6 – and then in paragraph (b)

non‑federal system employer means a person who is an employer, within the ordinary meaning of that word, but who is not covered by the definition –

So where we get the Fontana is where the constitutional corporation is the victim, which of course is what is established by Fontana.  That is fine.  Whether it can survive masonry crumbling around it is a different thing.  That is a severance question that I am not addressing.  But look, with respect, at section 496(1), because it is by a far less sanctioned or canonical approach that that might be thought to fit within the notion of 51(xx) authorising laws to protect constitutional corporations.  It says nothing there directly – I stress directly – about deleterious effect, detrimental effect on a constitutional corporation.

May I go both backwards and forwards in the Act in order to give some more informative content though.  Section 420, starting at page 282 of the print, defines “industrial action” and for present purposes we suggest the provisions that your Honours would find of interest in this context are to be found in paragraph 420(1)(a) and I select words:

the performance of work by an employee in a manner different from that in which it is customarily performed . . . the result of which is a restriction or limitation on, or a delay in, the performance of the work -

Now, it may well be and, we respectfully submit, it is too large a step to treat that as a Fontana protection of a constitutional corporation provision, and that argument may be taken up by others following me.  Now, to go forward beyond 496, 496 is about orders, injunctions against industrial action.  To paraphrase, they are not available unless the industrial action is not protected action and, putting it broadly, protected action can be taken during a bargaining period and thus the jurisdictional fact set out in section 498(1) should also be looked at in case there is something here of a Fontana Films kind.  One there sees that the jurisdictional fact for the Minister’s termination of the bargaining period which has the effect of then this 496(1) injunction being available, indeed being mandatory, is that:

the industrial action is adversely affecting, or would adversely affect, the employer or employers . . . or employees –

and these, by the way, are cumulative requirements, and -

the industrial action is threatening, or would threaten -

and then you have people, and then in (ii) -

to cause significant damage to the Australian economy or an important part of it.

So that in Fontana Films sense it would appear to be paragraph 498(1)(b) that one is going to find the effect, if at all, and, in our submission, the use of that simply as a jurisdictional fact, then to permit an injunction with the attributes I have already referred to in 496 as informed by 420 to be granted, shows that this is a statute which clearly designedly has been drawn so as to go beyond what was regarded in Fontana Films as a necessary nexus in order for the statute to be within power.

Could I draw to your Honours’ attentions finally, as if to hammer home the point of detriment not being at the heart of the injunction power, the way in which an application may be made and acceded to under 496(4).  That order, which upon the relevant things being made to appear to the Commission is mandatory, may be made of the Commission’s own initiative.

There need not be an application by a person - see paragraph 496(4)(a) - who is affected or is likely to be affected.  What that shows, in our submission, is that this is a statute which, by the employment test, as we have called it, has set out to regulate relations which are by no means confined to those which might be called disputatious, whether prospectively by prevention, or currently or retrospectively in terms of conciliation or arbitration.  It reaches into more than that, hence, with great respect, the appropriateness of the question to us, what about a law in the form a constitutional corporation shall afford its employees three weeks holiday which I have already answered the Chief Justice, in the end we say, goes too far, and I shall return to that at the end in order to pull the threads together.

Your Honours, when a corporation is created, being the event or action which cannot be brought about or regulated by Commonwealth legislation under 51(xx), what is created is a legal person, be it in a foreign country or within the limits of the Commonwealth, who may thereafter, and by reason of its creation as an artificial person, act only through human agency.  The word “agency” is unfortunate, though hallowed in this area.  It has been used in one of the several ways in which one can use the word “agency”.  We are not talking about a principal/agent relation, rather talking about the fact that the corporation acts by human beings.  It may act by human beings at one remove by acting through a corporate subsidiary, for example, and ultimately by natural persons but, ultimately, it is by natural persons.

That is a necessity, inherent, intrinsic quality of a corporation which comes about at the same time as the event which the Incorporation Case says being a given is beyond the scope of 51(xx), a power whose framing takes as a given the elements in it.  We know that this is an Act, which by reason of “usually employs”, by reason of “employs”, being at the heart of paragraph 6(1)(a), is unlikely often to cover what I will call a Fencott v Muller trading corporation.

In any event, if it does, it would be then employing people who were engaging in activities other than constitutionally characterising activities, that could be the only way it would be a Fencott v Muller corporation.  Apart from that case, all the activities in question will be the activities which some of them will contribute to the constitutional character and some of them not.  All of them will be by human agency, ultimately, by officers or employees, perhaps in some cases by simple corporators but the corporators in those simple cases will be officers as well.

It is for those reasons, in our submission, that in the absence of any external element - that is, link to outside the created and thereby humanly acted for corporation – in the absence of any external link outside that, the givens in 51(xx) include the fact that you must have human agency which would be officers or employees.  The notion of inside and outside, and they are but colloquialisms for the purpose of argument, is by no means strange to the law on employment as it is now understood, exactly similarly with simple evolutionary changes of emphasis as it was understood in 1901. 

I am sorry, your Honours, I had hoped that some extracts that I will not be going into in much detail had been already made available to you, I apologise.

KIRBY J:   This is more 1901 material, is it?

MR WALKER:   No, it is this Court - if not up to the minute, very, very current, your Honour. 

KIRBY J:   I mean we did not interpret “citizen” or “subject of a foreign power” in terms of 1901 ‑ ‑ ‑

MR WALKER:   No, no, this is not old material, your Honour.  This is new material.  Your Honours are familiar with all of these, I just want to give you the references and I have given you the paper so that you will have conveniently just those references – we have not reproduced the whole cases.  So that when it comes to the distinction between “employee” and “independent contractor”, there is that inside/outside distinction where employment, master/servant, employment ‑ ‑ ‑

GUMMOW J:   Why is it an inside/outside distinction?  They both have contracts?

MR WALKER:   Your Honour, a managing director may have a contract.

GUMMOW J:   That is right.

MR WALKER:   There was a statutory contract between the corporators.  There is a contract of subscription where there was a subscription.  The fact that there is a contract is not, in our submission, a mark of it being outside in the sense that I have tried to explain, namely, these are the people with whom ‑ ‑ ‑

GUMMOW J:   I just do not know where the door is. 

MR WALKER:    ‑ ‑ ‑ the corporation has contact by reason of being foreign and over here in business or by reason of trading.  “Trading” is a word of external connection.  There is no trading internally within the company.  The trading is by the corporation and it is in ‑ ‑ ‑

GUMMOW J:   No, it has to be with respect to, Mr Walker, as we said earlier this morning.

MR WALKER:   Yes, it does your Honour, but, with great respect, it is the Incorporation Case that prevents that phrase from being given a connective power which allows all the attributes of the constitutional corporation to be regulated by Commonwealth Act, under 51(xx), I stress.

GUMMOW J:   You are an artificial person.  You cannot trade with anybody without some human actor.

MR WALKER:   Quite, and we say that ‑ ‑ ‑

GUMMOW J:   Now, the regulation of the contract of the human actor, why is that not with respect to this trading corporation?

MR WALKER:   Your Honour, repetition will not make it better.

GUMMOW J:   Otherwise it will be pretty soon insolvent and have to be wound up.

MR WALKER:   Of course it needs people by which it trades with others.

HAYNE J:   It is external to the juristic entity that the law recognises.

MR WALKER:   No, the trading or being financial is the given - like foreign or formed is the given and being the given, we are talking about once we are into the realm of those corporations where the activities test applies ‑ ‑ ‑

HAYNE J:   So you end with a different result for foreign corporations from the result you get for trading or financial corporations, do you?

MR WALKER:   No, not really.  There is a small collection of dicta in relation to foreign corporations which suggests that you would never end up with a different result at all, your Honour; that foreign corporations ought to be seen – the extra‑judicial material I have already drawn to attention ought to be seen as bodies which are the subject of the power because they are here.  They are here by their activities.  They are not here because they are incorporated here.  They are here simply by their activities.  So it is the activities of foreign corporations – corporations are not here other than by the presence of people doing things in their name here.

HAYNE J:   This notion of “here”, Mr Walker, really is just too sloppy.  Are you suggesting that the foreign corporations power does not permit a law saying no foreign corporation shall conduct any activity in Australia of any kind unless first registered?

MR WALKER:   No.

HAYNE J:   And thus the notion of “here” is simply sloppy talk.  We have to be much more precise.

MR WALKER:   With great respect, your Honour, I accept the stricture. It is because they were there, that is, in the colonies at the time the Constitution was being debated that the control, nationally uniform, including for exactly what your Honour has noted, keeping them out as well as regulating their conduct while they are in, was given. I accept, with great respect, it is not just because they are here. It is because they are either here or they wish to be here, that is, foreign corporations are not the subject of 51(xx) by way of some absurd exercise of exorbitant international or universal jurisdiction by the Australian Parliament. Rather, it is because for “the peace, order and good government of Australia” - see the covering words of section 51 - the government of Australia - foreign corporations, defined as foreign because they come from elsewhere – are the object of the power.

Now, in relation to foreign corporations, just as with trading and financial local corporations, the notion of business has been used in the cases - and these have been already collected in our written submissions.  Could I simply give your Honours some of the references?  In Strickland 124 CLR at 508 and 511 in relation to local corporations, and in Fontana – I will not take your Honours to the passages, I just want to give the references – again local corporations, 150 CLR at 184‑185 per Chief Justice Gibbs, noting the neat expression at 185 point 1, Justice Stephen at 195 point 8, Justice Mason at 203‑204, Justice Brennan at 221‑222 discerning a difference. In Dingjan 183 CLR, for example, see per Justice Gaudron at 364‑365.  In the Bank Nationalisation Case 76 CLR at 255 per Justices Rich and Williams there is a clear use of the language including the expression “entitled to carry on business” with respect to foreign corporations within the meaning of section 51(xx).

HAYNE J:   Foreign corporations, I take it, would extend to foreign religious corporations, foreign charitable corporations, foreign educational bodies, et cetera.

MR WALKER:   Yes, and as all those questions ‑ ‑ ‑

HAYNE J:   And notions of business are not necessarily an element in foreign corporations, are they?

MR WALKER:   Well, with respect, your Honour, the references that I have just given, most of them actually consider, with respect correctly linguistically, that business is not coterminous with trade or financial activities, and “business”, as Sir George Jessel said in 15 Ch D, whichever dictionary one goes to, can of course include, in context, the affairs and the manner of conduct of those affairs of non‑commercial entities.

Now, that is not to say that one can easily attribute to a foreign religious corporation business, but it may be therefore that that simply means - that reference by the way was to Smith v Anderson (1880) 15 Ch D 247 at 248, being a reference given by Mr Justice Mason in Fontana 150 CLR at 203 - that simply means that if it be not a foreign corporation of the kind that the debaters of the conventions were concerned with, namely, those doing business in the commercial sense in Australia, that “business” or some suitable word would be used for the conduct of operations or activities in Australia, which is what triggers the possible exercise of legislative power for the peace, et cetera, of Australia, in section 51.

Now, your Honours, it is in that sense, and in that sense only, that we have used the perhaps fraught expression or dichotomy “inside/outside”, that the corporation must be acting through human agency and that, unlike independent contractors who are plainly those with whom one is trading and carrying on commercial relations outside the corporation, employees might be seen for example in the way one sees in Hollis v Vabu, as representing the corporation, to use the language of the important passage with respect in Hollis v Vabu (2001) 207 CLR 21 at 37 to 39, and at page 49, paragraph 69, and footnote (124) per Justice McHugh.

The first passage of course is the majority reasons by the Chief Justice, Justices Gaudron, Gummow, Kirby and Hayne.  In our submission, the approach which is taken in that passage – we note the qualification, particularly in footnote (124) of Justice McHugh, that approach renders conventional and appropriate in drawing lines, important lines as Justice McHugh illustrated in his paragraph 69, and we submit that they are none the worse as lines to be drawn in constitutional interpretation.  They are, after all, lines laid down by the common law, which is an assumption of the common law.

GLEESON CJ:   To take an example that on your argument I would have thought would be unarguably internal, on that basis the Commonwealth Parliament could not rely on this paragraph to enact a law preventing majority shareholders from oppressing minority shareholders.

MR WALKER:   Well, if that were to be held within power, it would be only if, unlike the position between corporation and employer, unlike that position, this is a dispute between people in which the corporation is, as it were, an object of the dispute rather than a participant in it.  It is a dispute between two camps of investors, two camps of shareholders, and that would be a dispute ‑ ‑ ‑

GUMMOW J:   It is whether a resolution they passed can be impeached in court for contravening a law.

MR WALKER:   That will be the classic initiating event and object of the dispute, but the parties to the dispute will be several capitalists, shareholders.  Alternatively, the answer to the Chief Justice’s question is yes.

GLEESON CJ:   Because a possible point of view is that the awkwardness of this internal/external distinction is that it ends up producing the consequence, consistently with what you said earlier about the Trade Practices Act, where under the corporations power the Commonwealth can regulate contracts of sale made by corporations but not contracts of employment.

MR WALKER:   We submit that the difference between the two is not something that presents any difficulty at all.  The fact that your Honour can use expressions like that without being misunderstood at all is indicative of the appropriateness of that being a discrimen, if that be necessary.  What we say is special about employment is that at and by reason of the creation of the corporation it needs the human actors to act, and where does one draw the line?  Well, employment is a relation, master/servant in the old parlance, which, in our submission, is at least as critical for the conduct of the corporation by its human actors as the directors or the other officers, and certainly more critical than corporators. 

It is for those reasons, in our submission, that there is no invidiousness or difficulty in drawing the line and Hollis v Vabu is simply an example of how well‑established drawing that line is.  The very fact that State Parliaments thought it appropriate to abolish the distinction in certain circumstances and upon certain conditions between employment and independent contracting only, in our submission, shows the viability of that as an entirely acceptable line of demarcation. 

Now, the second context is one that has already been referred to by Justice Gummow and it is, of course, a bit like employee/independent contractor, vulnerable to changes in statutory treatment of it, but nonetheless there is the judge‑made law, the rule in Turquand’s Case, so we have given the reference by the hand up of Northside Developments v Registrar General (1990) 170 CLR 146, especially, but only by way of example, at 171 to 172 per Justice Brennan. At the foot of 171 his Honour goes through elementary but important propositions:

A company, being a corporation, is a legal fiction.  Its existence, capacities and activities are only such as the law attributes to it.  The acts and omissions attributed to a company are perforce the acts and omissions of natural persons.

Et cetera.  In our submission, that bespeaks the necessary conduct by persons who will include employees, preternaturally, we submit, of corporations who are trading or financial corporations or foreign corporations conducting their business or operations in Australia for the purposes of the statutory definition of “employer”.  That identity is what I have clumsily dubbed the inside rather than the outside relationship.

Finally, one has, in the context of the Trade Practices Act, the notion that there are things which, though they are clearly for the purposes of trade and commerce, are not in trade and commerce ‑ ‑ ‑

GUMMOW J:   Yes, but look at the bottom of 602.  I rather thought we might be spared this.  The phrase was introduced as a phrase of limitation in that particular section.

MR WALKER:   Your Honour, of course this does not inform constitutional interpretation.  It is an attempt to say that the notion that what I will call the internal communications – and that after all is the expression used by the majority at the foot of page 604 to the top of page 605 – as therefore not being in trade or commerce is one which illustrates the same difference.  The trade or commerce ‑ ‑ ‑

GUMMOW J:   No:

As a matter of language, a prohibition against engaging in conduct “in trade or commerce” can be construed as encompassing conduct in the course of the myriad of activities which are not, of their nature, of a trading or commercial character but which are undertaken in the course of, or as incidental to –

et cetera.

MR WALKER:   And that is at the beginning of a ‑ ‑ ‑

GUMMOW J:   Of course it is because they are construing it in this particular section.

MR WALKER:   Of course, your Honour.  What I am saying is it is at the beginning of a paragraph in which that as a possibility is considered and, as your Honour points out, for the reasons that they peculiarly adopt or, I should say, particularly adopt in the context of that statute, a different choice is made, and your Honours will recall, of course, the fine balance reference in the middle of page 603.

GUMMOW J:   Do not forget this is a law with respect to corporations and that was further contracted by the use of those words.  Without those words of contraction, it would have applied.  So that is why I thought you might have steered clear of Concrete Constructions. 

MR WALKER:   Your Honour, it is an authority which goes to the point of drawing a line between that which is in and not in trade and commerce by reference to what is called by the Court internal – their word, internal – communication between one employee and another at the work site for the purposes of doing the work which earns the company its money and the workers their wages, and perhaps exposes the one to liability for compensation to the other.  That was, nonetheless, not in.

Those are just three examples – and I do not suggest I have hundreds of others to hand – which show that the line that we have offered as being the natural outgrowth of the given approach shown in the Incorporation Case concerning the formation of the corporation is one which is not novel, not strange and which, in fact, is inherent in the nature of a corporation requiring human agents to perform its conduct.

Now, none of that is to say, of course, that there cannot be under section 51(xx) legislation enacted which (a) will directly impose obligations; (b) which could directly or indirectly sanction or require the conduct of employees, or for that matter officers. Part of the regulation, obviously enough, of a constitutional corporation in its trade and financial activities has to be the capacity to enlist by dragoonery or otherwise the lawful conduct of people, including employees, precisely because they act by human agency.

Nothing in our argument cuts across that elementary proposition for which, of course, Fencott v Muller stands in any event as authority, but what has been done in this case, in this Act is to step into the area of the employment relationship itself and, we stress, not insofar as or because the matters in question are all matters which stemming from relations between the corporation and the external world – the world external to the corporation with which it deals – affect the corporation either by way of rendering it liable to the outside world or render the outside world liable to behave towards it in a particular fashion.  Rather, without looking to the external world at all, there is an elaborate scheme to stipulate and regulate simply what we submit is clearly the internal relation of the employment between employer and employee.

Now, it cannot be that simply because the way in which that relationship is regulated the prosperity of a corporation might be thought in the wisdom of Parliament to be enhanced or detracted from, depending upon the nature or conduct of the corporation, that that is enough to satisfy what might be called the externality requirement that we offer as our argument and constitutional line because, in our submission, it would then simply suffice for Parliament in its wisdom to pass any law which might be thought to conduce to economic enhancement or improvement of the whole country and on the rising tide theory the trading corporations being boats in the water, protection for the corporation would be enough to have complete and utter control of the economy given under section 51(xx).

The reason why that cannot be done is that there is not sufficient nexus in the way that your Honours are familiar with from the case law we have already cited in our written submissions between such a rising tide theory of economic prosperity and trading in financial corporations on the other hand. 

Your Honours, I have already said all I wanted to say about the Incorporation Case. It is used, as your Honours appreciate, in the way we have put it as the anchor point concerning this notion of there being a given by the expressions used in section 51(xx). It would be disingenuous of us not to acknowledge, as your Honours will have recognised from our written submissions already, that the way in which we submit section 51(xx) should be understood, that is, the scope of section 51(xx), owes a great deal to the way in which that is expressed in two judgments in particular. Now, they are not the only ones, but they are certainly the two judgments in particular, and it is therefore appropriate that I take your Honours to those in order to utter such caveats and qualifications as are appropriate. The first is Huddart, Parker v Moorehead, but it is the dissenting judgment of course of Sir Isaac Isaacs.

KIRBY J:   He was not Sir Isaac Isaacs then.  I think we should just stick to the judicial titles.

MR WALKER:   I am sorry, your Honour.

KIRBY J:   He is just Mr Justice Isaacs.

MR WALKER:   I am sorry, your Honour.  At page 393 – this is not where the whole of it is picked up, of course, but this is to focus the attention.  At page 393 his Honour turns to the way in which he understands it, and this was, of course, radically at odds with the majority approach being the approach which was and remains, notwithstanding later disinterment,  utterly exploded.

GLEESON CJ:   Do you adopt that sentence in the middle of the page that says “a purely manufacturing company is not a trading corporation”?

MR WALKER:   No, I told your Honours I was going here partly to make clear caveats and qualifications, and that is one of them.

GUMMOW J:   What did Justice Isaacs think was the indicium of a trading corporation I wonder?

MR WALKER:   That is not covered in these reasons.  What was – I was about to say what we now know, perhaps that is putting it too optimistically.

GUMMOW J:   Well, you drop down a few lines, you see, domestic corporations.  So he has put foreign on one side.

MR WALKER:   Yes, and then you have this interesting list in terms of the juxtapositions.  You have:

municipal, mining, manufacturing –

it sounds as if it is an alphabetical thesaurus at that point –

religious, scholastic, charitable, scientific, and literary purposes, and possibly others more nearly approximating a character of trading –

Now, these are not words from which we can distil, with respect, what were the indicia in answer to Justice Gummow’s question.

HAYNE J:   You might have to go back to Sir George Jessel in 15 Ch D, I think, to understand the way in which trading was possibly being thought of here.

MR WALKER:   Yes.  One of the problems, of course, in using either judicial dictionaries or other dictionaries is that according to context “trading” and “trade” may denote quite different things.

HAYNE J:   Were banking or farming trading activities was, I think, part of the question that arose in Smith v Anderson 15 Ch D, was it not?

MR WALKER:   Yes.

HAYNE J:   You can see broad notions about trade, perhaps with or without a curl of lip, and trading.

MR WALKER:   That is right.  “Being in trade” is an expression that has an historical – and depending upon your vantage point, derogatory expression from times sensible linguistically to compare with the time of the Constitution’s writing, that that expression is not cognate with the word “trading”, we respectfully submit, when put in front of the word “corporation”.  We accept - and I do not think that in light of the authorities that one sees collected in Fencott v Muller it would be possible to put it any other way - that it is still not possible to set out a verbal template which can be reliably and exhaustively laid against every new fact situation to answer the question, is this a trading or financial corporation?

But, with respect, that is entirely in accordance with the proper approach to the interpretation of a constitutional power which leaves expressions – to use the old dichotomy – with a connotation and varying denotation.  There is no difficulty, in our submission, presented by the fact that there is a case‑by‑case determination without an attempt authoritatively to paraphrase the words which ought to remain themselves the guide to the existence of the power.

GLEESON CJ:   I presume it is the words in italics on 395 that you fasten on.

MR WALKER:   It is, yes, your Honour.

CALLINAN J:   It is hard to know what was in mind with the reference to a financial corporation at the time, really, when you have banks treated separately in section 51.  I do not know what financial – no doubt there were some around, but I cannot quite imagine what they would have been in.

GLEESON CJ:   Maybe building societies.

MR WALKER:   Building societies, we know, were specifically mentioned by Sir George Turner.

HAYNE J:   There were some corporations on the fringes of economic life in Victoria in the 1890s.

MR WALKER:   Yes.  These deposit taking land investment companies ‑ whatever they should be called ‑ so they invite ‑ ‑ ‑

KIRBY J:   Maybe co‑operative societies, Starr-Bowkett and things like that.

MR WALKER:   I am not talking about anything so socially disinterested and co‑operative as those.  I am talking about ‑ ‑ ‑

HAYNE J:   Nothing as regular.

GLEESON CJ:   There is a book called The Land Boomers which is very interesting about ‑ ‑ ‑

MR WALKER:   I am talking about fairly rapacious exercises.

CALLINAN J:   You would hardly think of a friendly society, for example, as being a financial ‑ ‑ ‑

HAYNE J:   Very friendly to the promoter.

MR WALKER:   Your Honour may be right, yes.

CALLINAN J:   There were plenty of them around at the time.

MR WALKER:   Yes.

CALLINAN J:   And a lot of other mutual sorts of societies and ‑ ‑ ‑

MR WALKER:   Those mutuals and co‑operatives ‑ ‑ ‑

KIRBY J:   Funeral societies.

MR WALKER:    ‑ ‑ ‑ may not have been within the purview of financial corporations as those who suggested that or agreed to it understood that expression.  However, it will be for this Court from time to time, when looking at the facts of an institution which may, if they still exist, be truly mutual or co‑operative in that old‑fashioned sense, as to whether they will be financial institutions.  We would respectfully submit they may well be.

GLEESON CJ:   But the critical question – I am not suggesting we are here to interpret Justice Isaacs’ words, but taking those words in italics that you fastened on, the critical question is whether the expression “transactions with or as affecting the public” comprehends transactions in the labour market.

MR WALKER:   Yes, and we say no, and one sees that for example on page 396 about point 7 and what his Honour there calls “a schedule of wages and hours” is the very example he uses to say, “That’s the sort of thing that would be in if I weren’t right”, and by extremely plain implication, “and that’s not right”.  So there is no doubt about what his Honour meant by that phrase.  Were this Court to adopt something in the nature of that phrase, of course there is a question as to what is meant by it.  We urge, for the reasons I have put and should not repeat, that the ‑ ‑ ‑

GUMMOW J:   Now, this is just assertion really, with great chutzpah – page 395 I mean.

MR WALKER:   Page 395?

GUMMOW J:   Yes. 

CALLINAN J:   There has been a lot of assertion in constitutional interpretation over the years – look at Robinson Crusoe.

MR WALKER:   Your Honour, one cannot but observe that there are assertions and then there are assertions which become ratio.  This is not one of the latter, so I may have to deal with it in its bare form.

GUMMOW J:   The power does not look behind the charter.

MR WALKER:   That is because of the reasoning he had already given on page 393 point 8 and 394 point 4, 5, but one has to be careful because the second sentence in that middle paragraph in 394 is another of the qualifications.  Since then it has been clearly established – and is certainly not challenged by New South Wales – in it is unchallengeable – but of course the Commonwealth can create corporations and trading corporations by recourse to powers other than 51(xx).

But read subject to that qualification, the passage that I have just referred to does supply reasoning which, with respect, leaves Mr Justice Isaacs’ steps in reasoning at 395 as more than mere assertion sprung from nowhere. 

GUMMOW J:   And then at the top of 394, you see.  For a person who says he is an enemy of Barger’s Case and so on:

I am unable, therefore, to accept the argument that what the Constitution has handed over to the Federal Parliament is simply the body of company law. That would include all the prohibitory and creative provisions contained in the State Statutes ‑ ‑ ‑

MR WALKER:   At the top of 395, your Honour, yes.

GUMMOW J:   So what.

MR WALKER:   Your Honours appreciate that ‑ ‑ ‑

GUMMOW J:  

All this, I think . . . has left to the States. 

You see this is the man who later wrote the Engineers’ Case.

MR WALKER:   Quite.  The “left to the States” in particular ‑ ‑ ‑

GUMMOW J:   He left on some road to Damascus at some stage.

MR WALKER:   The “left to the States” point in particular has shades of residuary legatee which is wrong, we accept.

GUMMOW J:   Exactly.

MR WALKER:   In the same reasons his Honour, after all, if I can find – yes, at 393 points 3 and following, had, with great respect, trenchantly disposed of an implied prohibition from 51(i) in a way that shows not a single trace of a residuary legatee heresy.  

CALLINAN J:   Mr Walker, present company excepted, practically every Judge of this Court has contradicted himself or herself at some time, and that ought to be frankly acknowledged.

MR WALKER:   Your Honour, for present purposes your Honour will appreciate that I am suggesting that there is not in reality contradiction between 393 and 395.

GLEESON CJ:   Well, Keynes once famously said, “When I am persuaded I’m wrong, I change my mind.  What do you do?”

MR WALKER:   Yes.  “Ignore the facts” I think is the only answer by someone disagreeing with him.  Your Honours, there is not, in our submission, the heresy ‑ ‑ ‑

GUMMOW J:   Anyhow, we were looking at 393 and he said, about two‑thirds of the way down, the power does not look behind the charter, and you took us back to 393, I think.

MR WALKER:   Yes.

GUMMOW J:   All concern is itself with purely internal management.  The reason for that is the implied prohibition theory at the top of the 395, is it not, left to the States?

MR WALKER:   Well, no, it is because of the words that follow the semi colon:

it would also include the power to alter the conditions of a company’s existence, which is equivalent to creation, and to annihilate the corporation altogether – which, I think is, equally with creation –

et cetera, and it is this part and parcel approach which is not to do with implied prohibition but which has to do with the fact that if creation is outside, then it is hardly to be supposed that creation being outside there can be extinction or functional extinction by Commonwealth control.  There can be Commonwealth prohibition of conduct with conditional licence but ‑ ‑ ‑

GUMMOW J:   Exactly, having that practical effect, so what are we talking about?

MR WALKER:   No, your Honour, the practical effect of conditional prohibition is not that the corporation ceases to exist or must alter its innards, so to speak, it is that it goes off and does something else if it does not wish to follow those conditions.

GUMMOW J:   Anyhow, this is important because this is the first introduction of this internal management idea and it seems to have such foundations as it does from the paragraph at the bottom of 394 over to 395.

MR WALKER:   The whole needs to be read in context but those ‑ ‑ ‑

GUMMOW J:   No, that sentence at 395 about point 7 draws together several ideas.

MR WALKER:   Yes.

GUMMOW J:   One is the charter, one is the internal management and the third is the personal preparation to act, whatever that is.

MR WALKER:   It views the beings upon which it is to operate in their relation to outsiders, a word that your Honours appreciate is the foundation of much of what we have put – we do not shrink from that – or, in other words, in the actual exercise of their corporate powers.  It is the exercise of their corporate powers which after all this Court says characterises them as a constitutional corporation, by operating here if they are foreign, by doing things which attract the character of trading or financial if they are local.  That is the given.

HAYNE J:   The hinge may be perhaps identified in the reference to Westlake and the then state of understanding in the area of private international law that ‑ ‑ ‑

MR WALKER:   As to, yes, what one could not do to a foreign corporation.

HAYNE J:   Questions of status were wholly fixed by the incorporating law.

MR WALKER:   Yes, and you trailed it around the world, certain things.  You may be subject to local insolvency regimes ‑ ‑ ‑

GUMMOW J:   That is absolutely right.

MR WALKER:   ‑ ‑ ‑ as to local assets.

GUMMOW J:   That is right, but that is being translated from choice of law to federal law by being hitched to the notion of the States, you see.  That is why Westlake is put in brackets.

MR WALKER:   We would protest this, that it is neither unknown nor, with respect, illegitimate in the understanding of the Constitution to draw upon legal conceptions pre‑existing the Constitution which inform the kind of subject matter being spoken about.

GUMMOW J:   But you are not talking about two foreign countries, you see; Westlake is.

MR WALKER:   No, of course not.

GUMMOW J:   This is now injected into the federal system.  The question is:  is that legitimate?

MR WALKER:   Yes, it is.  On the other hand, creation, your Honours, is something which is not left in the realm of the first decade of the last century where the States could with a straight face be described in private international cases in this Court as being foreign to each other.  We have the Incorporation Case in the current era which, in our submission, very plainly shows that the reasoning, and certainly those aspects of the reasoning upon which we rely from Mr Justice Isaacs’ dissent in Moorehead, is the correct approach to take to the scope of 51(xx) so far as creation is concerned.

It is what follows from that in his Honour’s reasoning, that being now, as it were, given a modern authoritative foundation, that ought to be regarded as ultimately persuasive in this case.

HAYNE J:   But even accepting all that Mr Justice Isaacs says and the premises, is there not a slide in what his Honour says to be observed between 395, point 5, “extraneous circumstances or events, whether trade, or finance, or contracts”, contracts extraneous to the juristic person, and the schedule of wages and hours statement at 396?

MR WALKER:   Yes, of course, there is, your Honour.  That is there is a move which explains in the way I tried to answer the Chief Justice earlier so as to provide by concrete example what it was or where it was being located that line between internal and external upon which, as your Honours know, so much of our argument depends.  That is not, in our submission, an inexplicable slide for the reasons I have already put, found in other and cognate or related areas of law, the difference between employment, independent subcontractor, the former being representative of the company, et cetera.

GUMMOW J:   Then looking at 396, lower down, you see, we come back to Westlake, really – about six lines from the bottom.  It talks about qualifications of directors, wages, et cetera:

It is a species of legislation appertaining to the Parliament whose creature the corporation is.

The same idea comes back.

MR WALKER:   Yes.  There is no avoiding it.  On the other hand, this was the reasoning – I am sorry, I will start that again.  His Honour’s conclusion and a deal of the reasoning may be seen to have received the approval, with the appropriate removal of anachronisms, of this Court in the Incorporation Case as to the creation point.  I cannot put it higher than that and that is where we have to leave it.

GLEESON CJ:   How long do you think you will require to complete your argument?

MR WALKER:   Your Honour, I need – if I may have the adjournment to complete some of the homework with a view to five minutes to finish.

GLEESON CJ:   I am sure the Solicitor‑General for Victoria is happy with that.  We will adjourn now until 10.00 am.

AT 4.22 PM THE MATTERS WERE ADJOURNED

UNTIL FRIDAY, 5 MAY 2006