State of New South Wales; State of South Australia; State of Western Australia v The Commonwealth of Australia

[1989] HCATrans 222

~

4

• ~

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S92 of 1989

B e t w e e n -

NEW SOUTH WALES

Plaintiff

and

THE COMMONWEALTH OF AUSTRALIA

Defendant

Office of the Registry

Adelaide No A32 of 1989

B e t w e e n -

THE STATE OF SOUTH AUSTRALIA

Plaintiff

and

THE COMMONWEALTH OF AUSTRALIA

Defendant

Office of the Registry

Perth No P24 of 1989

NSW( 2)

MASON CJ
BRENNAN J
DEANE J
DAWSON J

TOOHEY J

GAUDRON J
McHUGH J

B e t w e e n -

THE STATE OF WESTERN AUSTRALIA

Plaintiff

and

THE COMMONWEALTH OF AUSTRALIA

Defendant

Questions referred pursuant to

section 18 of the Judiciary Act

1903

ClT2/l/PLC 222 5/10/89

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 5 OCTOBER 1989, AT 10.20 AM

(Continued from 4/10/89)

Copyright in the High Court of Australia

MASON CJ: Yes, Mr Solicitor.

MR GRIFFITH:  Your Honours, yesterday we made the point

that the phrase"formed within the limits of the

Commonwealth"is apt and serves the purpose that

described the dichotomy between a .:orporation
formed elsewhere, being a foreign corporatio~ or a
corporation formed in the Commonwealth. It is

our submission that the words "formed within the

limits. of the Commonwealth" form an adjectival

phrase, the sole purpose of which is to contrast

with 'roreign'.' So we submit that the power is

precisely expressed to cover two direct categories

of corporations. Firstly, foreign corporations,

as the first category, and secondly, trading and

financial corporations formed within the limits

of the Commonwealth. In this context we submit the use of the word "formed" as an adjective is

wholly appropriate. The sole criterian, in our

submission, for determining whether a corporation is

foreign or domestic, is the place of its formation.

ClT2/2/CM	223	5/10/89
NSW( 2)

MR GRIFFITH (continuing):  The place of its business, or the

place of its shareholders are irrelevant. The words,

"formed within the limits of the Commonwealth", in
our submission, are the most precise way of
expressing the idea of a local, domestic or

Australian corporation.

McHUGH J:	Mr Solicitor, why did the CONSTITUTION not use the
words of the various COMPANIES ACTS, that is
'companies formed within the limits of the
Commonwealth"? What is your answer to Mr Davies'
point that t:re use of the word "corporation" involves
something that is existing, as opposed to a company?

MR GRIFFITH: Well, Your Honour, if the word ''companies" had been

used, Your Honour, then it would be necessary to

have further words indicating it was to be

incorporated companies which were included within the

power and not companies in the form of the expression

referred to by my learned friencl,Mr Davies, meaning

persons joined in an enterprize, whether incorporated

or not. It would be necessary for the definition

to go on if it were not to give to the Commonwealth

also power in respect of unincorporated companies,

that is partnerships.	We submit, Your Honour, it
could not stop there.	It would be necessary to have

a compendious phrase saying, "companies (which were

incorporated)" or "incorporated companies". In our

submission, Your Honour, the most direct expression is

to say "corporations", and we would reinforce that,

Your Honour, by the reference to which we will take

the Court in a moment, where it was indicated during the convention debate, Your Honour, that the concern was to contrast municipal corporations.

The first point I make is our answer to Mr Davies'

submission. We submit that the words, "formed

within the limits of the Commonwealth" are necessary

to give precise content to the word "foreign". We submit

that the clear inference is that a foreign corporation

is a corporation formed beyond the limits of the

Commonwealth, so to focus solely in the case of foreign

is on the place of formation and we submit that this

use of the expression makes it clear that a corporation

formed in the United Kingdom or another British dominion

is a foreign corporation for this purpose.

(Continued on page 225)

C1T3/1/FK	224	5/10/89
NSW(2)

MR GRIFFITH (continuing):  This point is something which

was of significance, given that most foreign

corporations doing business in Australia in 1900

were formed in England. This is stated, for example,

by Harris and Moore in the 1902 edition of the

Constitution of the Commonwealth of Australia at

page 148 and it would seem that, at the time of

Federation, such corporations, that is corporations

formed in England would not unambiguously be

regarded as foreign and to make good that point,

if I could hand to the Court copies of the Queensland

FOREIGN COMPANIES ACT 1895.

That Act really reflects the contrast between

the position expressed as far as the common law

colonial law was concerned to deal with foreign

companies in UNITED SERVICE INSURANCE V LANG by

Chief Justice Jordan, and also in the earlier

decision	BATEMAN V SERVICE in 1881 which we
referred to yesterday.	I am sorry, I omitted to

inform the Court yesterday that these cases were on our list of authorities, so the Court does have the

reports of these cases. The FOREIGN COMPANIES ACT

of 1895, section 2, in the interpretation provision,

defines "country of incorporation" as:

The country or state under the laws of which the company in question is

incorporated -

and defines "foreign company" as:

A ioint stock company or other company

or society incorporated according to the
laws of a country other than Her Maiesty's
dominions, and which under the laws of

the country of incorporation has perpetual

succession and a common seal.

In other words, even in 1895 for the purpose of the

laws of the colony of Queensland, a company

incorporated pursuant to the laws of England or

another of Her Maiesty's dominions, which would include,

no doubt, the other colonies, would not be regarded as

falling under the terms of this specific

legislation dealing with foreign companies.

(Continued on page 226)

ClT4/l/HS	225
NSW(2)

MR GRIFFITH (continuing): This form of ambiguous approach,

we submit, is reflected in what Justices Evatt and

McTiernan said in RV BURGESS; EX PARTE HENRY,

(1936) 55 CLR 608 and referred to by His Honour

the Chief Justice in KOOWARTA V BJELKE-PETERSEN,

(1982) 153 CLR 189. There His Honour Sir Harry Gibbs

set out the part of the judgment of Justices Evatt

and McTiernan, appearing at 55 CLR 684, where they

said:

It would seem that, in sec. 51 of the

CONSTITUTION, the phrase "external affairs"

was adopted in preference to "foreign affairs,"
so as to make it clear that the relationship

between the Commonwealth and other parts of

the British Empire, as well as the

relationship between the Commonwealth and

foreign countries, was to be comprehended.

We submit, Your Honours, that the contrast in

respect of "foreign corporation" and "corporation

formed within the limits of the Commonwealth" is

to make explicit that which otherwise might not be

clear: namely, that what was intended to be

comprehended was the dichotomy between foreign

corporations - that is, corporations formed outside

Australia which, of course, at the time of the

convention debates would be outside the geographical

limits of Australia: Australia then not being one

political entity - and the contrast of corporations

formed within Australia - within the Commonwealth. Of course, for this contrast, one can put on

one side for the moment the issue of the expression,

"trading or financial". It is the dichotomy between
foreign formed corporations - corporations formed

outside Australia - and those formed within Australia.

So, it is our submission that for those two reasons:

firstly, that in each case we say that the criterion,

both for foreign corporations and for non-foreign

corporations, is the same: namely, the place of

formation and, for the second reason, that it removed

the ambiguity which might otherwise

arise as to whether "foreign" intended to include

merely corporations other than those which were

incorporated in one or other of Her Magesty's

dominions, particularly the United Kingdom; that

this expression, in our submission, is a direct

expression dealing with the issue of place of

formation.

ClTS/1/DR	226	5/10/89
NSW(2)

MR GRIFFITH (continuing): That, of course, leads one,

as Your Honour Justice McHugh took me quickly

yesterday, to the approach of Justice Isaacs

in HUDDART PARKER V MOOREHEAD where, of course,

Justice Isaacs said, at page 394: "formed within the limits of the Commonwealth.

..... would be meaningless if the power of

creation, either in the first instances,

or by way of adding capacities were included.

Indeed, this follows from the nature of

a corporation.

He then refers to the fact that:

It is entirely a legal conception.

And refers to the decision of Chief Justice Marshall in DARTMOUTH COLLEGE V WOODWARD to say, quoting

His Honour the Chief Justice:

"A corporation is an artificial being,

invisible, intangible, and existing only

in contemplation of law. Being the mere

creature of law, it possesses only those

properties which the charter of its creation

confers upon it, either expressly, or as

incidental to its very existence."

And Justice Isaacs goes on to say:

The creation of corporations and their

consequent investiture with powers and

capacities was left entirely to the States.

It is our submission that that last statement

is a mere assertion by His Honour Justice Isaacs

and not a conclusion supported by the parts of

His Honour's judgment which I have just read.

We submit that you cannot assume, as did

Justice Isaacs, that the inclusion of this expression

confirmed the creation of corporations as being

matters left entirely to the States. We have

referred to two reasons as to why we say that

should not be so and to carry those reasons - - -

McHUGH J:  Yes, but your reasons are assertions themselves.

That is the problem with this section, is it

not, with this paragraph of the CONSTITUTION,
that it is open to - and reasonably open to

differing interpretations, the view in HUDDART

PARKER, the view that you put forward. But the

question is - and some people may prefer one to

the other, but why should the Court now depart

from HUDDART PARKER after all these years, that

being a meaning that was put on it, it has been

accepted for 80 years?

C 1T6/1 /ND	227	5/10/89
NSW(2)

MR GRIFFITH:	Your Honour, there are perhaps two questions there but, Your Honou~ it it is the case as
Your Honour puts it that there are two views fairly open which we would say would be putting
the plaintiff's assertions at their absolute highest, Your Honours, we say the open door which His Honour the Chief Justice referred to yesterday
which is open to us would then mean, Your Honour,
that by applying the conventional canons of
construction, taking a generous view as to the ambit of the power, Your Honour, in that circumstance the view for incorporation would be vindicated.
McHUGH J:	But why should you when it leads to an Act like

this?

MR GRIFFITH:	Your Honour, with respect the problems which have been articulated are not problems with respect
to the problems of incorporation.
McHUGH J:	No, but it just shows the problems about accepting

the interpretation that the Connnonwealth contends for.

MR GRIFFITH:  With respect, Your Honour, we would entirely

disagree. We say the problems arise from the

constitutional definition by reference to trading

or financial.

McHUGH J:  Yes, and that supports the view, does it not, that

HUDDART PARKER was right. That this was not a

general companies law. Why was not the Connnonwealth

given a general companies law, instead of having

specific power in respect of identified corporations?

MR GRIFFITH:  Your Honour, we say it was. That when one looks

to trading or financial corporations and adopts
the approach of having regard to the circumstance

that all but very, very few incorporated groups of

people engaged in incorporated activity are engaged

in business are engaged in trading activities, in

essence, Your Honour, one is covering almost the

entire field of joint stock companies.

McHUGH J: What about holding companies?

(Continued on page 229)

CIT7/l/CM	228	5/10/89
NSW(2)

MR GRIFFITH:  Your Honour, we would submit that holding

companies are covered also. That is a matter we

are intending to get to in our submissions, but

we would submit, Your Honour, that they are covered
within the definitions of being trading or financial

corporations and are within power and certainly,

Your Honour, the Act makes that quite clear in

Parts 6, 7 and 8 dealing with the issue of the

securities and futures industries, but we submit

they are covered within the definition of trading

corporations, and we say, Your Honour, that FONTANA

is in no way authority for the opposite, that the

two iudgments of the Court, the judgment of the

Chief Justice and the iudgment of Justice Stephen

which refer to that issue, in our submission, were

merely dealing with the compendious definition of
"holding company" which is included as the last

paragraph of a long definition of "companies" and

merely saying, Your Honour, that any company would

have already been included if it were going to be

a trading company and, therefore, there is no extra

conten~ in the last paragraph dealing with holding

companies.

Now, that is an approach of construction,

Your Honour, but, in our submission, if a holding

company is merely a holding company in respect of

trading or financial corporations, it, none the less,

Your Honours, is to be regarded as a trading or

financial corporation; that firstly may be by

reference to its activities when it could clearly

be characterized as a financial corporation or, ·

secondly, Your Honour, adopting a broader view, the

fact that that is what is in existence to do,

Your Honour, at the apex of a structure of trading

and/or financial companies, we submit, is sufficient

for characterization.

Now, that is a matter to be determined,

Your Honour, in a particular case as to whether that

view is right or wrong.	We say that it is and it
confirms the wide reach of this Act. If we are wrong

about that, Your Honour, it iust means that the

reach of the Act is a little bit narrower than we

thought. Similarly, if we are wrong on the view that

ordinary family trust companies or that sort are

included within trading or financial, the reach of

the Act is just a little bit narrower, but our

basic proposition, Your Honour, is that we would

say almost all, with few exceptions, of the numbers

of the corporations listed in the statistical

material we presented to the Court yesterday would,

in all probability, be regarded as trading or

financial corporations.

ClT8/l/HS	229	5/10/89
NSW(2)

That is why we have got this litigation,

Your Honour. Three States here are challenging

this litigation because it takes over practically

the entire field, namely the field of ioint stock

companies. Now, it is true, Your Honour, that within

COMPANIES ACT there are some little extras and

grafted on ~oint stock company regulations, such as

companies limited by guarantee, charitable companies

that may not be trading corporations, but that is

very much the periphery and, Your Honour, it was

almost said to the Court yesterday, that there would

be so little left, Your Honour, it is hardly worth

bothering about. That is one reason why we do not

pursue, as far as we can see it, this issue of

section 113 contrived inconsistency.	There is very
little left, in our submission.

That is the contemplation of the parties,

Your Honour. The Act intends to cover almost

everything and, we submit, in a practical sense, it

does. But, Your Honour, if I could take up the point

that Your Honour makes: it looks like the Act is too

complicated to be right. In our submission,

Your Honour, the complication arises from the

constitutional definition of "trading or financial",

and there have been a series of cases in this Court -

ST GEORGE, ADAMSON, FONTANA - dealing with the question

of having regard to definition by reference to

activities, and then FENCOTT, which dealt with the

more fundamental issue of characterization, is

looking at activities enough, particularly when you

have a company that is not yet engaged in trade?

Now, in our submission, Your Honour, FENCOTT

really underlines the basic issue of definition,

namely that the power is intended to have some

content - it is by reference to "trading or

financial" - we say FENCOTT is a very strong pointer

to the circumstance that it is a very broad power

indeed, as we suggested, dealing very much with nearlv

all ioint stock companies, those where the proprietors

or the subscribers, or the controllers, or the members,

are engaged in some profit-making activity for gain,

and, Your Honour, if there is a difficulty thrown up

by the cases I mentioned, or thrown up by the

structure of the Act, it arises from the constitutional

definition, and that arises whether or not one

is dealing with corporations so far as incorporation

is concerned or, what is conceded, Your Honour, the

content of placitum (xx) apart from incorporation

which we would say on any view includes dealing with

third parties, Your Honour, the sort of issue

covered in FONTANA, and we would submit, notwithstanding

Justice Isaac's iudgment, on any view must concern

itself with most, if not all, the matters of internal

management which can comfortably be picked up under any

view as the law in respect of trading or f inane ia l

corporations.

ClTS/2/HS	230	5/10/89
NSW(2)

MR GRIFFITH (continuing): In respect of that cover, it is

also necessary to engage in, if the power is to be

exercised, the formulation of a legislative scheme

which will provide for a definition which picks up companies within power, perhaps on a narrow basis, but which does not purport to pick up companies

which are not within power.

That is a problem for the legislation whether

or not it is dealing with incorporation, or merely

dealing with the regulation of existing corporations.

As to that issue, Your Honour, we submit that the

fact that there are practical difficulties that have

to be addressed in a sensible way is merely a

consequence of the CONSTITUTION, and as to that,

Your Honours Justice Brennan and Toohey in

Re TRACEY, 84 ALR 1 at page 33, made what we say

is the pithy observation:

In any event practical difficulties in

assessing facts cannot affect what is

essentially a question of jurisdiction.

So the complaint is as to the CONSTITUTION, and

in effect, Your Honour, we would submit that this

Act is so complicated it cannot be right: that this

is within power is equivalant to saying, "Really

what was the outcome of HUDDART PARKER? It looks

a bit complicated, the Commonwealth does not dare

exercise the power." But the power is there, in our

submission, Your Honours, and it is one to be

exercised. There are practical difficulties. We

say the Act seeks to deal with these practical

difficulties in a practical way; in a way which is

either directly within the heart of the power, or

necessarily incidental to it, and in the context of

our submission that almost all joint stock companies

would come within the ambit of the Act, we submit

that in a practical way the provisions of the Act

could work quite sensibly and comfortably, and it

is not in all that many cases one would expect to have

a corporation which was a trading corporation within

the meaning of the Act, particularly having regard

to the definition of FENCOTT, where one will get a

circumstance that it went dormant without wishing to

be wound up, and then coming within the sanction

provisions of the Act.

There are provisions there which we say deal

reasonably with that situation. It does not
automatically follow that a company which ceases

substantially to engage in trading activities will

be wound up, although there are provisions that

the commission, unless satisfied to the contrary,

will take action to wind it up. We would submit that

it could be satisfied of the contrary by being assured

ClT9/l/FK	231	5/10/89 ~
NSW(2)

that those involved with the company do still

intend to - it would be sufficient on the

broad view of FENCOTT - to abide by the wide

unlimited object provisions which are now provided

by the abolition of the doctrine of ultra vires.

And that may well, in a practical way, be sufficient

to ensure that comDanies would not be wound up.

But it is necessary to have provisions in the

Act so that one can sav, "I am reaciin2" the Act,

answering what was, in essence, two questions, but

then• has not been a transgression bevond power".

we would submit, Your Honour, that goes to the heart

of the matter, and that one cannot stand off and

sav, "This is very difficult", or as it might be put,

"It is difficult to say when a company is being

substantially enga2"ed in trading activities". We

submit that there is no more difficulty than that

than there is about the other asDect which I would

sav, in excise, whjch I hesitate to refer to by

analogy, where one might say, "An excise is a tax on goods"

It is not all that easy to say that, I know

Your Honour Justice Dawson says it is an expression

really without much meaning; but we would submit

that one can recognize it when one sees it and we

would submit, Your Honour, those who have to furnish
annual activities statements will have no difficulty

in knowing whether or not they can make the statement.

If they are in doubt, Your Honour, they can set

out the facts. It is then for the commission to determine

whether or not that is sufficient for the purposes of

the c~mm.ission exercising its discretion under the

Act, under section 157, and, Your Honour, even then

those who are in charge of the company have the right
to defend any action for winding up by saying, "Yes,

we are still within the constitutional definition",

because wind:ing up only follows if you cease to be a trading

or financLal corporation, and that is the constitutional

fact, and that is what will determine winding up, not

the activities statement, or a possible erroneous

opinion as to those who sign it.

(Continued on page 233)

ClT9/2/FK	232	5/10/89
NSW(2)

BRENNAN J:  Mr Solicitor, before you resume the even tenor

of your ways, if I could interrupt for a little

longer. The basic problem though is this, is

it not, that you are contending for a power to

incorporate corporations? Now, whatever that

power may mean, it has something to do with the

creation of an artificial person?

MR GRIFFITH:  Yes, Your Honour.

BRENNAN J: If the head of power upon which you rely is

expressed in terms of the characteristics of an artificial person which are required only

on creation, how does that extend to the power

to create?

MR GRIFFITH:  Your Honour, our basic approach to that is

to say that corporations are quite different

from people. They are the creatures of statute.

One can have various d~grees of incorporation,

for example in the provisions of the present

CORPORATIONS ACT there are provisions to incorporate foreign corporations to become registered companies

under the division of the CORPORATIONS ACT and

the definition of foreign companies in the

dictionary can include bodies which are

unincorporated in the foreign place where they

are. So one may have degrees.

It is our submission, Your Honour, and this

is to pick up similarly to Justice Isaacs in

DARTMOUTH COLLEGE V WOODWARD where he referred

to Chief Justice Marshall who had said in that case and also in another case to which we will

refer Your Honour that the corporation is an

artificial being. We submit, Your Honour, that

when one talks of incorporation one is merely

talking about the artificial being created by

statute with all its attributes, its rights and

obligations. And it is those collections of

things which constitute the corporation.

It is still the case under the COMPANIES

ACT, Your Honour, that a corporation, a company -

this is the same under the COMPANIES CODE,

Your Honour - the company is not separate from

the subscribers who form it. The Act still runs

an expression that those subscribers join together

and form the company. That is what it is comprised
of, Your Honour, and when a person becomes a

member he becomes a member of that company.

He does not have a ticket to say, "Well, you

own part of something else." He becomes part

of it although it does have, of course, the

incorporated status and perpetual accession,

et cetera.

ClTlO/1/ND	233	5/10/89
NSW(2)

But what Acts in respect of corporations are doing, Your Honour, are defining and in the

same breath giving content, in our submission,

to what is meant by incorporation. And we submit
that there is no broad division between creation,

so one has a corporate entity, and in the separate

aspect of giving content to that either as to

constitution in internal management where we

submit the Commonwealth clearly has power or

as to relationships with third parties where

we submit also the Commonwealth has power.

In our submission, they are all one and

the same thing, part of the definition of corporations.

So that, in our submission, Your Honour, that

one is talking is about a unity in respect of

a law in respect of corporations or a law in
respect of incorporated companies. That is the

aggregate of rights and obligations provided

for by applicable law. And we submit, Your Honour,

that there is no natural marking off between

the act of creation, where one has an empty shell,

and the putting of content into that shell.

They all constitute the law in respect of corporations.

BRENNAN J: That may be so and, indeed, if FENCOTT V MULLER

is right, one may say that the putting of the

content comes in one blow with the creation but

it seems to me to be a different problem if one

is looking to see what is involved in the creation

and the exercise of a power to create if that

power arise on a head which is expressed in terms

of something that is created.

MR GRIFFITH:	Your Honour, we say, firstly, as a matter of construction, if one adopts the approaches
to geographical distinction which we submit is behind the use of the expression "foreign corporations"
and "corporations formed within the Commonwealth",
Your Honour, one has answered the question, "What do those words mean?". It merely is to mark
off the geographical place.
that approach, Your Honour, our submission is And if one adopts
that one does not become concerned with the manner in which Your Honour puts it, that one can only
consider these attributes of whether bodies say trading or financial when one has a corporation
to which one can have regard to the considerations.

Your Honour, we would submit that if the

first answer is not sufficient the second answer is,

but that that issue is one which is determined
by the same law, that is the law which goes to

make up what that trading or financial corporation

is.

ClTl0/2/ND	234	5/10/89
NSW(2)

MR GRIFFITH (continuing):  I appreciate Your Honour might

respond there is an element of circularity

there as to which comes first but,Your Honour,

we would hope to avoid the circle by saying you

do not have to go that far. We say, Your Honour,

if you do go that far, well then the compelling

answer is that the body which can give content
must have the power as all we are dealing with is

an artificial being which is created by statute

to create, and that, in our submission, is

sufficient to give content in the power and,

Your Honour, we would say, thirdly, in any event,

Your Honour, it is a necessary consequence from

the power which is vested in the Commonwealth
Parliament to make laws with respect to corporation,
trading and financial corporations formed within

the limits of the Commonwealth, that this should

include the power to incorporate. Now I appreciate

the last point is perhaps put as being very much

the same sort of ascertion that Justice Isaacs,

we submit, made to the contrary, but we would submit,

Your Honour, that inasmuch as that is an ascertion,

it has a stronger base than Justice Isaacs.

Justice Isaacs, we would submit,Your Honour,

really introduced that conclusion unsupported by

his reference of the fact that it was supported

by a form within the limits of the Commonwealth.

And absent that support, Your Honour, we would say

that all the definitions of power would tend to point

the other way. I suppose our fourth answer to

Your Honour would be - - -

DAWSON J:  I do not understand that, Mr Solicitor. Why would

all definitions of power tend to point the other way?

MR GRIFFITH:  Your Honour, we would say that adopting the

canons of construction, which we submit are

appropriate to reading the various placita of

section 51 - - -

DAWSON J: What,you give them the broadest meaning that the

word will possibly bear? Is that what you are

saying?

MR GRIFFITH:	Your Honour, possible has to be regarded reasonably, but if two views are possible,Your Honour,
we say one inclines to the broader.

DAWSON J: That seems to me to be approaching a construction

of the CONSTITUTION with the preconception the
other way, the preconception which was

exploded in the ENGINEER's case. You do not

approach it with those preconceptions.

CITll/1/CM	235	5/10/89
NSW( 2)

MR GRIFFITH:  Your Honour, we did very briefly in the

early part of our submissions go to how we defined

the principles.

DAWSON J : And in any event when you look to the other hc::ads of power, .

you see they do deal with this thing in the
incorporation of the banks.

MR GRIFFITH: Your Honour, we deal with that in our submissions. DAWSON J: Well no doubt you do, I just did not understand - - -

MR GRIFFITH:  Yes. We say there is no problems about

incorporation of banks, because the power in respect

of banks is banking.

DANSON J: Maybe, but it demonstrates the difference between

companies formed and the incorporation of companies,

the formation of companies was well understood.

MR GRIFFITH:  Yes it was,Your Honour, but we submit, Your Honour,

that it was well understood in the context of making

it clear that it was intended to be a plenary power

conferred. Your Honour, was well it is our submission,

Your Honour, if the power was in respect of - let us

ignore foreign corporations and just say corporations -

if you had one paragraph saying foreign corporations

and another paragraph saying corporations, that would

include the power to incorporate. We say that would

necessarily be so. In our submission, Your Honour,

if one had a power saying trading and financial

corporations, that would include the power to

incorporate trading or financial corporations. It

is our submission, Your Honour, that when one has

the additional phrase" formed within the limits of
the Commonwealth" on the natural meaning it is

exactly the same result. We ask why't We say,

because that expression is entirely explicable by

reference to this necessity to mark off the

geographical limitation between corporations formed

elsewhere, whether within the Commonwealth within

the empire or not, and those which were formed within

Australia.

DAWSON J:  We really go over the same ground, but it is entirely

explicable because you are dealing with two like
things, namely foreigh corporations, that is
corporations formed outside Australia, and there
there is no question of dealing with the incorporation
of them, and corporations formed within the limits

of the Commonwealth, and again there is no question

of dealing with the formation of them. If it was

desired to do what you say, then you would have found

two separate powers; foreign corporations and

trading and financial corporations.

CITll/2/CM	236	5/10/89
NSW( 2)

MR GRIFFITH:  Your Honour, we did make the submission yesterday

that we submit that there is a power to deal with

the incorporation of foreign corporations for the

purposes of Australian law and what is more, we

say it has been exercised both by the COMPANIES

CODES and by our legislation.

MR DAWSON J: Yes, but it does not deal with the formation

of foreign companies.

MR GRIFFITH: Well,Your Honour, perhaps we are just chasing

in a circle if I engage that further, but we

submit,Your Honour, secondly, that if Your Honour

takes the view as to respect of foreign corporation
there is still no obvious reason, Your Honour,
other than we would submit to approach the issue

with some preconception, to limit what otherwise,

we would submit,on its own would be the clear power

with respect to corporations by excluding the power
of incorporation, particularly,Your Honour, as we

refer to the fact that if the power of incorporation

is withdrawn it becomes difficult to the point,

and we say, of almost practical impossibility to

say where are the points of demarcation of the

Coilllilonwealth power.

(Continued on page 238)

CITll/3/CM	237	5/10/89
NSW(2)

MR GRIFFITH (continuing):  None of the contentions made by the

plaintiffs, Your Honour, seek to answer the question,

"Well, if incorporation is withdrawn, what are the

limits of the power of the Commonwealth?" Now, I

suppose if one - - -

McHUGH J:  Mr Justice Isaacs said in HUDDART PA...~KER,

they are external activities. You take it as you

find it. The Commonwealth can deal with it as it

finds it. The Commonwealth finds a company operating

around the States -

MR GRIFFITH:  Your Honour, we say Justice Isaacs is plainly

wrong in that because one must be able to regulate

many, if not all, matters of constitution of the

company, even if one adopts that approach,

Your Honour, of dealing with third parties. So that,

although Justice Isaacs purported to say, "You can't

deal with internal management", we submit that it

must be that you can because matters such as paid-up

capital, protection of creditors, et cetera,

necessarily means that there is a power to become

involved with internal management in constitution
issues.

Your Honour, the contentions put against us merely say, "Well, on one view it is limited to

trading and financial activities but if there is a

wider view it doesn't include incorporation." Now,
in our submission, that is to escape the almost

impossible question to answer, "Well, what are the

limits if you exclude corporation?"

BRENNAN J: If you are driven to it, I suppose you adopt

FENCOTT V MULLER.

MR GRIFFITH:  It is not a matter of being driven to it,

Your Honour. FENCOTT, we submit, is a very useful

decision because it does indicate, when one has

regard to the abolition of doctrine of ultra vires

which occurred more or less retrospectively to

1 January 1984 in the COMPANIES CODES, we submit

that it is consistent with FENCOTT to adopt the

view that it is sufficient to be a trading or

financial corporation to be registered without a

restriction on your objects to exclude trading or

financial activities. Now, that is what we submit

is right in principle and, we would submit, consistent

with FENCOTT.

In fact, the CORPORATIONS ACT does not take a

view as broad as that to its reach because if that

view was taken then you would not need to have any

activity statements because a company would continue

to be a trading or financial corporation until such

time as it effectively limited its objects, in our

submission. Now, that may well be right but it is

ClT12/l/DR	238	5/10/89
NSW(2)

not the structure of the Act. But we submit that the

Act should not be criticized for taking a conservative
view as to power and seeking as much as it can to

sheet it down by reference to conventional articulation

by reference to activities of companies when they become active. That does not mean that the power

only reaches that far but we say that it means that

the Act does secure that you say, "I'm comfortably

within the power".

Possibly, Your Honour Justice Brennan, this

will be an appropriate moment to resume where I was. We made our two points of construction and then went

to Justice Isaacs' approach to this issue at

8 CLR 394. What I was going then to say - well,

Justice McHugh asked me at page 205 yesterday:

why did the CONSTITUTION place the words,

"fall within the limits of the Corrnnonwealth"?

What is your answer to what Mr Justice Isaacs

said about them?

He could have just as easily have said,

"foreign corporations" or "trading and

financial corporations".

We have submitted the two reasons that is not so.

We say, further, that Justice Isaacs is right to say they are meaningless; that because they are included

it means that one is confirmed in the view that

incorporation is left to the States. In addition

to the two points we have already made, we say: if

you look at it from the draftsman's point of view,

what he or she intended to do was include foreign
corporations absolutely and not merely foreign,
trading or financial corporations, and also wanted
to include non-foreign corporations which were

trading and financial corporations. That was the

task in hand.

(Continued on page 240)

C1Tl2/2/DR	239	5/10/89
NSW(2)

MR GRIFFITH (continuing):  Now, if what was provided was

foreign corporations and trading and financial

corporations, we submit that would be ambiguous.

Does this exclude trading or financial corporations

from the definition of foreign corporations? Does

this mean foreign corporations other than foreign
trading and financial corporations, plus non-foreign
trading and financial corporations, or does it mean
foreign corporations and trading or financial

corporations other than foreign corporations?

What was intended was to include foreign corporations

entirely, as an entire class, and Australian trading

and financial corporations as a class, that is
foreign corporations and non-foreign trading and
financial corporations.

Now, we say it would be clumsy to say foreign

corporations and trading and financial corporations
(other than foreign corporations), although that

means the same, in our submission. A power over

foreign corporations and trading and financial other

than foreign corporations, we submit, would, on its

ordinary meaning - must be regarded as including the

power to incorporate. In our submission, in essence,

the same thing is done here. We say there is a

direct expression that perfectly expresses in the

best possible way the geographical division sought

to be covered. There are two classes described and

we say that is all that the expression does. It

does not create an implication requiring, as for the
second class, to have some corporate existence to

which that operation attaches.

So we submit that really very much the best view

is the view for which we contend, namely "formed" is

merely regarded as being an adiectival description

as to place and nothing more. Now, as we have

already indicated, we would say even if it was put

against us, as Your Honour Justice McHugh did,

that there is two arguments, we would say that this

is where the canons of construction would indicate

that the provisions should be construed with all

the generality with which the words used admit,

and we would say that it is not necessary to say,

"Is this a possible construction?". We deny that.

We say it is not a question of possible. We say

it is the best construction but putting it at its

lowest, we say that the generality of the words admit

it and we submit that, in that way, the plaintiffs

cannot be regarded as going sufficient to iustify
the view for which they contend, namely to say that

this construction is not one which should be placed

by the Court, construing the CONSTITUTION, and

applying these canons of construction with which there

is no dispute.

DAWSON J:  I am not sure about that.

ClTlJ/1/HS	240	5/10/89
NSW(2'l

MR GRIFFITH:	Well, that is our submission, Your Honour.
DAWSON J:	I am not sure which canon of construction you are

applying. If the words have a possible

construction but an improbable construction which

is the broader, do you adopt it, necessarily,

because of a preconception you must give the

broadest possible meaning?

MR GRIFFITH:  Your Honour, it is a matter of judgment.

The canons of constructions are clear.

DAWSON J:	Well, that is iust what I am doubting.
MR GRIFFITH:	Your Honour, for brevity I did not take the

Court to the particular articulations which we

prefer as being the expression by members of this

Court as to the approach, but that is the approach for which we contend.

DAWSON J:  But that is an approach which says that you are

dealing with a CONSTITUTION, that you should not

take a paternitive view, you necessarily use the
broad expressions, talks in generalities, but that

does not really help you when you get to something

which may possibly be given a certain meaning but

has a more probable meaning the other way, the

possible meaning being the more generous one.

MR GRIFFITH:  Yes. Well, Your Honour, we have made that

clear our primary submission is that that is not

the case here.

DAWSON J:	Well, yes, but assuming it 1s.
MR GRIFFITH:	We say that we are ahead, or at least it is no

worse than even, Your Honour, putting it at its

very lowest. But, if one takes the view that it 1s
improbable, Your Honour, it becomes a matter of

judgment.

DAWSON J:  Yes, that is right, and the canons of construction

do not help.

MR GRIFFITH:  They help with judgment, Your Honour, but they

will not dictate judgment. At the end of the day,

Your Honour, if Your Honour is satisfied that the

better view, having regard to the canons of

construction to which we refer, is to take the narrow

view that incorporation is excluded, then that is a

decision that Your Honour should come to. We would

not cavil at that, but we do say, Your Honour, that

one has to go through this open door and think

about it.

DAWSON J:  The difference between us - I suspect you are saying,

although you are not really at the moment, that one should approach the construction of the power with the preconception that if there is a possible broader construction one sh o u 1 d ado p t i t .

ClT13/ 2/HS	241	5/10/89
NSW(2)

MR GRIFFITH:	Your Honour, I do not say that.
DAWSON J:	You do not say that.
MR GRIFFITH:	Now, can I say something I was going to say

in passing, Your Honour? Although there has

been no reliance upon the expression "reserve

powers" by any of the plaintiffs, we submit,

Your Honour, that sub silentio there is some

colouring of that approach representing -

BRENNAN J: That has always been applied to prevent reading

dow~ not to encourage reading up.

MR GRIFFITH:  Yes. Your Honour, what we say is that on

our side, Your Honour, we do not approach it

on the view of saying, "Well, if in doubt we

always win." That is not the approach for which

we submit.

McHUGH J: That is what it sounded like to me.

MR GRIFFITH:	Your Honours, everyone deals with layers of retreat because our first assertion, there
is no doubt and then the lowest we -

McHUGH J: That is a very bold proposition, no doubt.

MR GRIFFITH:	We have explained why we say that, Your Honour.
McHUGH J:	How did all the members of HUDDART PARKER who

were at the convention, and Quick and Garran
who were at the convention get it so wrong?

MR GRIFFITH:  Your Honour, perhaps they acted too

precipitately because Garran got it right in

the thirties.

McHUGH J:	I thought that was after 30 years in the department.
MR GRIFFITH:	Your Honour, one reason, and we can say that

of the majority of HUDDART PARKER if we are talking

about what it stands for or stood for, is

because of this approach about reserve powers.

I know Justice Isaacs did not rely on reserve

powers but none the less, Your Honour, you search

for a reason for his assertion, his confidence,

that these matters are left to the States, that

internal management is left to the States. And

it is not all that easy to explain, Your Honour,

other than saying, "Well, that was His Honour's
view."

Your Honour, to answer the question you

make, when one has the reducing level of submissions
saying, "Well, we are clear on this. We say

C lTl 4/1 /ND	242	5/10/89
NSW(2)

there is no doubt or if there is doubt it is

fairly clear we've got the balance of argument."

We say, Your Honour, retreating on that line,

it can be no worse than to say that it is an

open issue.

It is our submission, Your Honour, that

the canons of construction may be of assistance

at that point. If you go below the line and

get to the point of saying, "Well, it could be
argued your way but it looks pretty doubtful.",
then, of course, one moves to an area where the

canons. of construction are not going to haul

you up.	That is a matter of judgment for this
Court.	And, really, our submissions .go

no further than plotting, in our submission,

a point above the line or say, "Well, if you

get very close to the line, plus or minus", so

that there must be a number of uncertainty, the

genuine doubt area, then we say canons of

construction are useful for resolving that.

They are not an arbitrary rule but they are a

useful indicia of approach as to a power and we

did - - -

DAWSON J: All I was saying was that in trying to avoid

the preconceptions which you are warned against

by .the ENGINEERS' case, you might fall into the

error of adopting preconceptions that are just

as objectionable the other way.	And I do not
think you disagree with that.

MR GRIFFITH:  No, we were not seeking - we do not really

disagree with that, Your Honour.	We do not seek
to do that.	We would say, "Well, look at the
words.	We say this construction is, on any view,

fairly open." And we say, Your Honour, that

is sufficient. So that we would say that by

referring generally to these canons of approach

one can say at that point, "We win." If you

go into a declining area of uncertainty,

Your Honour, it is a matter of the judgment and

degree in accepting the lessons of history, including

HUDDART PARKER, for what it is worth, to which

I will address some remarks.

DEANE J:	One slight problem and it may not be of importance
but one slight problem with your approach to
the construction is that if you look closely
at the vaEious 1891 variations, it is quite
apparent that the word "formed" came into the
subsection in the sense of "already incorporated"
in that the first time it came in was about March
1891 where it said "the status in the Commonwealth
or in any State of foreign corporations and of
cor:pona t ions form in other states'.'. The "other"
was then dropped and "or part" or "in any part" was put in and then, finally, of course, the
reference to States was dropped.

ClT14/2/ND	243	5/10/89
NSW(2)

MR GRIFFITH:	Yes.
DEANE J:	But at that stage it is quite clear that "formed"

came in in the context of "already incorporated".

MR GRIFFITH:	Your Honour, we say that it could be regarded as geographical, because of course the power is
a concurrent one so "formed in the States" of course, even after Federation right up till now
that has continued and, as Your Honour points out,
the expression "part of the Commonwealth" was there, but then, of course, comes a matter of degree to which one gleans then from discussions as well as text, the obvious perception, Your Honour, that this included general power with respect to joint stock companies.

I accept Your Honour's warning against using

that, but - - -

DEANE J: In relation to that I noticed also that in the

earlier 1891 drafts it had corporations and companies,

and they dropped companies.	I do not know what
the significance of that is.

MR GRIFFITH:  Yes, Your Honour, because it is quite clear that

corporations was regarded as including joint stock

companies.

DEANE J: Well they also, at one stage, had joint stock companies.

MR GRIFFITH:  Yes.

DEANE J: Corporations then became corporations and companies.

MR GRIFFITH: Well that was the FEDERAL COUNCIL OF AUSTRALASIA

ACT had "joint stock companies". But, Your Honour,

we would refer to that in passing to answer Mr Davies'

point that what was sought to be identified, in our submission,

clearly, Your Honour, is what is constituted by

incorporated associations of people engaged in
business and the ancillary incorporated bodies,
the other ones Your Honour referred to from the early

editions of Lindley, which are also picked up by the

COLONIAL COMPANIES ACTS, but dealing with incorporated

companies only. It is clear, Your Honour, that these

words could drop out because there was an acceptance

that the word "corporation" covered those, whilst

excluding, as I said, municipal corporations, which

was one of the anxieties, and was intended, Your Honour,

one can say by picking up financial to include quasi-

banks, banks having been specifically dealt with at

placitum (xiii).

So one has an explanation as to why "trading" should be there, because that is intended to deal,

in effect, with joint stock companies, rather than	the additional Lindley-type ones, and 11:Einancial" to
make sure one got quasi-banks as well as actual banks
under the banking power.

ClTlS/1/FK	244	5/10/89
NSW(2)

I was going to go quickly through this material,

perhaps I will do so shortly, Your Honour, but we

accept the facts Your Honour referred to, and say

that they do not create any difficulties, but,

Your Honour, if whilst accepting what you do refer

to, could we also indicate that we do accept that

the approach in construction for which we contend

is supported when one has regard to the fact that the

power, in our submission, is intended to include,

by and large, all joint stock companies, the business

companies, and we have already made the point

yesterday that, we say the preponderance - it might

be close to Your Honour Justice McHugh's 99 point

something, but it does not matter much for our

submission whether it is only regarded as a very

high proportion, rather than almost all; it is

probably almost all - would seem to come within

the definition, particularly the sort of approach one,
we say, may derive from the authority of FENCOTT,

which, of course, we submit should not be overruled.

I have referred the Court generally to remarks

by members of this Court as to the broad reach of the

power in respect of trading and financial, and if I

could just give three references to this. Firstly,

Justice Stephen in ST GEORGE, 130 CLR at page 569,

I read out that passage yesterday; secondly,

Chief Justice Sir Harry Gibbs in FENCOTT, 152 CLR

at page 589, and also the reference I also gave yesterday

in ADAMSON of His Honour the present Chief Justice,

143 CLR at page 233 and at page 235.

We also made the point, in passing, that we

say this approach is confirmed by the difficulty, if

not the impossibility,of excluding int~rnal

management effectively from power, notwithstanding

the reasoning of Justice Isaacs.

(Continued on page 246)

ClT15/2/FK	245	5/10/89
NSW(2)

MR GRIFFITH (continuing):  We say that there are very few companies

left within the specific categories which would not

be covered by the reach of our law, and we say that was

always the position. The COMPANIES ACTS at

Federation dealt primarily with the run of the mill

companies, and all we seek to do is to do the same

thing.

Now, we do submit that on any view we must be

able to justify, under placitum (xx), a law which

provides no corporation shall trade without being

registered under a Commonwealth Act and then to

attach terms to that registration. And,

as we understood my learned friend, Mr Jackson,

conceded yesterday, we could have a law saying,

"No corporation shall trade unless it has a paid-up

capital of X dollars or Y dollars". We say in each

case the law is a law in respect of a corporation

formed within the limits of the Commonwealth and

we say it is difficult, once one concedes that,

to see a base to say the power excludes the power
to define the artificial being which is all the

corporation is, that is, to provide the additional

element for its incorporation.

By way of passing observation, we would say that

if we do not have power to provide for incorporation

the States could virtually empty the power by not

providing for the incorporation of companies. For

example, the State law in respect of enterprises
could develop the continental type of limited

partnership or some such thing and to take the - I

have forgotten the numbers from yesterday - 500,000

companies and only leave you with 200 or 300 of

the larger public companies as incorporated companies.

We submit that that is one theoretical factor which,

perhaps, reinforces this approach.

Before going to the pre-Federation history, may I pick up the inquiry Your Honour the Chief Justice made at the conclusion of yesterday's hearing and

that is Your Honour asked me what Chief Justice Jordan

meant in UNITED SERVICE INSURANCE CO LTD V LANG,

(1935) 35 SR(NSW) 487 at page 491 where he said

"a foreign corporation is not a corporation within the law of New South Wales." Here, of course, the

Chief Justice was talking in reference to New South Wales'

legislation and he was referring to the speech of

Lord Wrenbury in RUSSIAN COMMERCIAL AND INDUSTRIAL

BANK V COMPTOIR d'ESCOMTE DE MULHOUSE & ORS, (1925)

AC 112, at page 148 to 150, and if I could hand the

Court an extract of the headnote and those three pages.

Lord Wrenbury was dealing with section 1 of the

COMPANIES ACT 1908 which is in our volume of statutory

materials at page 71. That is the volume that is bound

rather than having binders. That provided:

ClT16/l/PLC	246	5/10/89
NSW(2)

No company, association, or partnership

consisting of more than ten persons shall

be formed for the purpose of carrying on

the business of banking, unless it is

registered as a company under this Act, or

is formed in pursuance of some other Act

of Parliament, or of letters patent.

And then had the limitation on 20 persons in respect of carrying on other businesses. So that is the standard prohibition of large partnership provisions.

In his speech at page 149, Lord Wrenbury says:

No objection arises by reason of the association consisting of more than ten persons, for the

word "formed" in s.l of the COMPANIES ACT,

1908, means "formed in this country," and

the association was in such a case "formed"

abroad by incorporation there.

(Continued on page 248)

ClT16/2/PLC	247	5/10/89
NSW(2)

MR GRIFFITH (continuing):  So we have an example of the

verb "formed" indicating place of formation. But,

at the foot of page 148, His Lordship said:

There is no question but that according

to private international law and according
to the comity of nations a foreign

corporation is for many purposes recognized

as a corporation here. It may sue and be

sued here in its corporate name. But

there is also no question but that a

corporation created under a foreign law is

not a corporation within our law. The

foreign corporation which establishes itself in trade in this country is an unregistered company within section 268 of

the COMPANIES ACT, 1908, and may be wound

up as an unregistered company. The

question which arises is whether the
association of persons which is in the
foreign country bound together by a nexus

of corporation is not in this country an

association of natural persons bound

together by a nexus of partnership but not

corporate.

Then, he refers to section 1 of the COMPANIES ACT,
a sentence I have read:

The question then is whether the association is not to be treated here as an association or partnership of natural persons whose

relations inter se are to be found in the

articles of association of the company and
are to be ascertained no doubt with

reference to the lex loci contractus, but

which is nevertheless an association whose

existence is not terminated by the death of
the foreign corporation, but continues for

the purpose of winding up its affairs so

far as this country has control over the

persons and the assets within its

jurisdiction.

Now, we submit that what Chief Justice Jordan is

really saying is, in his judgmen4 that it does not

follow from a requirement that a New South Wales

document that corporation shall ex{:cute deeds under their

common seal applies to foreign corporations which do

not possess their common seal and we say that the

comment that Your Honour the Chief Justice referred to

really reinforces what Chief Justice Jordan said

at the beginning of the paragraph at page 491 that:

The exact position of such a corporation in

NSW has never been very precisely defined.

And, that would seem to be, of course, consistent with

the BATEMAN decision which we referred to. If I could

ClT17/l/JH 248 5/10/89

NSW(2) '

give the Court a reference on early jurisprudential

controversy concerning the status of foreign
corporations; there is an article by E. Hilton

Young, "The Status of Foreign Corporations in the

Legislature", (1907) 90 Law Quarter_lyReview, page 151

and it is quite interesting to see that at

Federation, Harrison Moore - if I could take

Your Honours to part of the second 1910 edition

which is extracted in our volume of materials at

page 9 - that is the other volume, the one with the

black binders. This is the second edition of

Harrison Moore,	I am sorry, Your Honours, I am
incorrect, it is the first edition.	Your Honours

will remember that the plaintiffs have referred to the

second edition, I think, New South Wales in their

written outline of argument as confirming the

HUDDART PARKER approach. We submit that the first

edition of Harrison Moore is probably more useful on

this aspect because Harrison Moore, of course,

appeared as counsel in HUDDART PARKER and naturally
enough:inh~ssecond edition had to write up what that

decision held. But, on page 148 which is reproduced

at page 9 of these materials, under the heading: Foreign Corporations ..... or financial

corporations formed within the limits of

the Commonwealth -

he said:

(Continued on page 250)

C1T17/2/JH	249	5/10/89
NSW(2)
:MR GRIFFITH (continuing):

This subject of foreign corporations is of

especial importance in Australia, because

many of the most important trading and financial
companies and some mining companies are companies

formed in England, while of the companies formed

in the colonies large numbers carry on

operations in several colonies.

And he says:

The result is that there is much legislation in

the various colonies as to "foreign corporations."

Article xx, of course, authorizes the

Parliament to make a Companies Law for the

whole of the Commonwealth; and there is no
branch of the law in which a uniform law is

more desirable.

Now, that - perhaps why I have got this part open -

apart from the use or reference to foreign corporations

being important at Federation, we say that it is

significant that Harrison Moore seems to be quite

relaxed about accepting a general authority of the the Commonwealth which, we say, must be regarded as including generally what companies law include including corporation.

necessarily had to say after HUDDART PARKER.	One
picks that up on page 13 of these materials;

pages 470 and 471 of the second 1910 edition, where

this view of Harrison Moore	has been altered,
obviously, because of HUDDART PARK.ER.	To try -

one sees starting in the sentence five lines from

the bottom on page 470:

Next, in the case of companies formed within

Australia -

he attempts to do his best to distill a

a principle out of HUDDART PARKER and says:

Next, in the case of companies formed within

Australia, ie (it would seem) under the laws

of any State, the like definition of the

conditions upon which they may carry on

business throughout the Connnonwealth. Thirdly,
the control of the constitution and administration
of corporations formed within Australia for the
purpose of carrying on business in any part

thereof or elsewhere. The recognition, the

ClT18/l/DR	250	5/10/89
NSW(2)

field of operations, and the management, the

winding up and dissolution - all the inherent

qualities which distinguish the juristic

from the natural person, would thus be submitted

to federal law. But there the Commonwealth law

would leave it; and the actual carrying on of

business by the corporation, and the legal relations with outsiders to which it gives

rise - its property, its contracts, and its

liabilities - would be under the sole control

of the State laws.

Of course, this view is one which has not been

vindicated on the demise of HUDDART PARKER but it shows the problems that the author had in dealing with what was his first view, as we saw, in the

1902 edition at page 9, and the problem of

HUDDART PARKER shortly after he was involved in

arguing it, and I think successfully, for the plaintiff.

I indicated yesterday that one can see this

concern in respect to the status of foreign corporations

reflected in Harrison Moore and if I could take the

Court now to appendix 1 of our materials which is

this thin white volume, black bound? Appendix 1

constitutes a summary of what we see as the relevant

pre~ederation history of placitum (xx).	We set out
in paragraph 1:

Clause 52 of the draft Bill presented to the

1891 Convention -

which His Honour Justice Deane referred me to and

we note that that was based on:

section 91(15) of the BRITISH NORTH AMERICA

ACT which is in identical terms -

so one can see where it came from. Of course,

there are problems in the NORTH AMERICA ACT because

of the fact that the provinces are given express

power in respect of incorporation of provincial

companies.

DEANE J: What I referred you to was that in the earlier

draft it was'~ormed in any other State' - - -

MR GRIFFITH:	I am sorry, Your Honour.
DEANE J:	- - - which made it quite clear that "formed" meant
"already incorporated".

C1Tl8/2/DR	251	5/10/89
NSW(2)
MR GRIFFITH:	Yes.	I am sorry, Your Honour, that I

misrepresented what Your Honour had referred

me to, but yes. We then set out the equivalent

provision in the FEDERAL COUNeIL OE AUSTRALASIA

ACT of 1885 which, as we note it has joint stock companies, and then, in paragraph 2 one sees

Mr Munro ask :

why a similar provision should not be made -

as for banks -

in regard to the incorporation of companies.

And suggests, on the next page:

The registration or incorporation of companies.

Sir Samuel Griffith says:

I do not think we should. There are a great

number of different corporations. For

instance, there are municipal, trading,

and charitable corporations, and these are

all incorporated in different ways7 ....

Mr MUNRO:  But as to trading corporations!

Sir SAMUEL GRIFFITH: It is sometimes difficult

to say what is a trading corporation.

At the foot of the page Sir John Bray says:

We know what some of these corporations

are; and I think joint-stock companies might

be incorporated upon some uniform method.

And then he refers to South Australian law in

respect of banks. He says:

I think it is necessary, therefore, to

should have some uniform system of

incorporating banks.

have some uniform law ..... and I think we

Sir John Bray says that you can have quasi banks

and puts up the suggestion at the bottom of

page 3 that:

financial companies doing all the business

of banks should be dealt with in the same

manner.

So that seems to be where one gets the additional

adjective "financial".	The draft was agreed
to.	The 1897 convention, the draft provided:

C lT 19 /1 /ND	252	5/10/89
NSW(2)

Foreign corporations and trading corporations

formed in any State or part of the Commonwealth. Of course, that was an alteration because the

limitation to status had gone, one would suppose

by reason of the trend of the debate and thought

that there should not be a limitation merely

to status. And, secondly, rather than referring

to corporations formed in any State or part of
the Commonwealth or joint corporations and joint

stock corporation, it refers to trading corporations.

Mr Edmund Barton introduced this clause and at

page 5 one sees what he says:

So that the Commonwealth may have the power

to legislate, not merely with regard to the legal status of corporations acting within the Commonwealth, but it may have

power as far as it can legislate upon the

general subject of these corporations, over

the general subject of foreign corporations,

formed in any part of a State of the

Commonwealth, for the purpose of uniform

legislation.

There might be a bit of a problem with punctuation

or omission in that sentence but I think it is

possible to get its drift in any event. And

then Mr Higgins asks a question which Mr Barton

answers.

Sir George Turner came to the issue of

"financial" and says:

we have already given power to deal with

the question of banking, and we are now

giving power to deal with foreign corporations

and trading corporations. I fail to see

why we should limit the sub-section to trading

corporations.

And then he refers to:  financial institutions which are not banking
institutions -

and he says -

we should go a step further and give it

power also to legislate with regard to

financial institutions.

So he seems to regard the three powers as being

much the same notwithstanding the difference

of expression, the powers in banking institutions,
the powers in trading corporations, the powers

in financial institutions.

ClT19/2/ND 253 5/10/89

NSW(2) (Continued on page 253A)

Ther: there is some discussion about banks

and Mr Deakin says, towards the bottom of the
page:

We want to include all limited companies - And then at the next page there is an interesting

interchange -

Mr SYMON:	In the original Act corporations
simply are mentioned.	Why this difference?
Mr BARTON:	The reason of making the difference

was this: It having been seen that the
word "corporations", as it existed, covered
municipal corporations, the term was changed

to "trade corporations."

Mr SYMON:  Why not simply use the term

"company"? If you use that word it will

be well enough understood.

Mr BARTON:  Why not adhere to "corporation"?

That governs everything under the COMPANIES

ACT.

(Continued on page 254)

C1Tl9/3/ND	253A	5/10/89
NSW(2)

MR GRIFFITH (continuing):  Now of course we do not rely

on that as indicating what is meant by companies,

but what we say is what Mr Barton says is true.

That is what is meant by corporation. It can
cover what my learned friend Mr Davies referred to

as incorporated companies. That is, companies

which are governed under the COMPANIES ACT, Indeed,

it remains now that under the COMPANIES CODE the

definition of "company" means a company incorporated

under the Code. And that is what the reach of

corporatim.1 is, in our submission. Mr Symon says:

Why not leave out the word "trading"?

Mr Barton says:

Or add the word "financial 11 ?

That is moved by Sir Joseph Abbott. Mr Barton says:

Would it not be better to make it thus:

Any trading or financial corporation.

And then Sir Joseph Abbott introduces an amendment

agreed to, trading or financial. Now that was

adopted and renumbered and we now have a short

reference on page eight and nine to the State the New South Wales Parliament which, by and large; tended to have a more extensive debate on these

issues than did the other parliaments.	The Honourable
C.G. Reydon asked:

if it was intended that there should be a uniform

companies law throughout the different states?

The Honourable Edward Barton said:

To allow the passing of it!

Reydon said: 

he did not exactly see why a trading corporation

started in Sydney and trading in some particular

product or importation should come under the

general law rather than under the local law. And the answer is:

Well, it could trade throughout Australia, in a country in which trade will be free in all

its parts!

So that is perhaps another useful consideration as to

why there should intended to be an Australian-wide

power.

CIT20/l/CM	254	5/10/89
NSW(2)

And then page nine Mr Reydon said:

that if the sub-clause meant uniform company

law it was all right.

And Mr Barton said:

That is what is amounts to!

At the Sydney Convention there were no relevant

amendments. At the Melbourne Convention one sees

on page ten there was no recorded discussion and

the words:

"within the limits of the Connnonwealth" were

substituted for the words "in any State or

part of the Connnonwealth"

and the drafting amendments were agreed to without

relevant discussion. Now we of course accept all

the limitations which the several Justices of this

Court have articulated as to the use of this material.

We do note that the Royal Connnission on the CONSTITUTION

in 1929 reported:

that - ... it seems certain that (section 5l(xx))

was thought by members of the Convention to

confer power to pass a company law for the whole
of Australia as the term company law is
generally understood.

And we extract on page 11 part of the report written by Sir Robert Garran in papers presented

to Parliament extracted, in our book of

suppl.ementary materials - that is the one with the

binder on it rather than being bound - page 16. It

is not all that easy to date this document because

one sees on page 15 that these are papers presented

to ·parliament dated from 1934 to 1937, but the

memoranda appears at page 73.	We will refer to it
again in another context, but what Garran there

said was that:

There was very little debate on this clause in

the Federal Convention of 1897-98, but there

is good reason to believe that this clause

was intended to give the Connnonwealth Parliament

power in respect of what is known as "company

law", that is to say, such legislation as is

contained . the Companies Acts of Great Britain

and of the several Australian States.

In the draft CONSTITUTION of 1891 the clause was worded "the status in the Connnonwealth of foreign

corporations and of corporations fonned in any State or

part of the Conm:mwealth". The anission in the CONSTITUTION

of the -words "the status of" coupled with the retention in

substance of the other -words of the clause seems to mark the intention that the whole subject of foreign corporations and corporations in Australia was intended to be conferred.

CIT20/2/Cl1 255 5/10/89

MR GRIFFITH (continuing):  We note that the Joint Committee

on Constitutional Review in 1959 formed the impression

that it is uncertain what the founders intended.

That is included in our material also, but I will have

to give the Court a page reference in a minute.

BRENNAN J:  Were there any views expressed on this by

Sir Samuel Griffith in his letter to the Queensland

legislature in 1897?

MR GRIFFITH:  Your Honour, could I take that on notice and answer

Your Honour either in argument or by note, if otherwise?

BRENNAN J:	Yes.
MR GRIFFITH:	I am sorry, Your Honour, this report is not in our

material, so I do not know whether the Court would desire

us to furnish the report. We only intend to just refer

to that as being a passing observation that it is

uncertain what the founders intended. We should point

out, as Justice McHugh adverted to, that Carran had

possibly firmed up his views somewhat by the 1930s, and

I suppose it is a case of 40 years on, because in

Quick and Carran - he takes responsibility for

paragraphs 196 and 198 - he was a little bit confused

about his discussion on it and one picks this up on

page 6 of this volume of materials. In paragraph 196,

if it stood alone, one seems to see a similar view.

He says:

The Federal Parliament may legislate

concerning trading corporations formed within the limits of the Commonwealth.

Such corporations may be both created or

wound up under the provisions of Federal law.

We would not cavil at that, but then - I do not know whether it was a division of function between the two authors, but on any view article 198 seems to erode

from that position somewhat because it is there stated

that:

"Formed" is certainly capable of meaning

"formed under State laws."

We, of course, would agree with that, but we say that it does not exclude the capacity of the Federal Parliament under placitum (xx) to make provisions for formation under its authority, but the observations made:

It would have been unnecessary to declare

that the Parliament should have power to

make laws controlling corporations "formed"

by its own authority.

Well, we have made sufficient arguments to why we say

that that expression was appropriate and it was not

directed to the issue of whether or not the Commonwealth

ClT21/l/HS	256	5/10/89
NSW(2)

should not have power to incorporate. Then the

discussion refers to the banking power, by way of

contrast. It refers to the trade and commerce provision,

which is somewhat odd, and it has been put in argument

already, and we give particular references to the fact

that it is accepted that corporations may be formed

under other particular powers of the Commonwealth,

but then the conclusion is made:

It would therefore seem that this provision

refers to companies created under State laws.

Such bodies, once launched, will come within

the control of Federal legislation.

I think we have already said sufficient as to why we

disagree with that view, but then some support is drawn

from a reference to Todd's Parliamentary Government by

reference to the Canadian position and we find that

somewhat odd. We do take the Court briefly to some

Canadian materials, and there is some included in this volume, but we would say that the Canadian position

cannot really be regarded as determinative, being the

clear split between the provinces as to forming

provincial corporations and the federal parliament 1n

respect of other corporations under the Canadian

Constitution. But anxious not to put all this too high,

we say that clearly the change in wording, the dropping

of status, et cetera, to the 1897 draft, was intended

to be a significant expansion of Commonwealth power.

(Continued on page 258)

ClT21/2/HS	257
NSW(2)
MR GRIFFITH (continuing):	We say the debate on the 1897

convention proceeded on the basis the legislative

power of the Parliam:mt with respect to trading or

financial corporations should be no less than its

legislative power with respect to banking and

incorporation of banks, so as not to create

hiatus in the case of non-bank financial

institutions, and we refer to the language of

Mr Edmund Barton which we suggest got it right

as to what was conveyed by the words, "to cover	the general ambit of company law11 , but we accept
the remonstrations by various members of the Court
and we give reference in our contentions as to how
far one can take ruminations of this sort.
That is, we submit, material which certainly indicates, we would say, that most certainly one cannot
support the submission made against us·that the convention material would tend to support the
opposing view, and it is our submission, really,
that perhaps Garran's summary in the thirties is probably right; that there was an intention to
cover, broadly, company law, inasmuch as one can recover anything from that.

Returning now to our contentions. If I may take

as read, on the basis that it is all part of the

open door, our contentions in paragraph 4.1

from our contention, all grandmotherly stuff, and

similarly, if we could make the proposition we

make in paragraph 4.2 in respect of the banking

power, as it was referred to by Justice Dawson.

Perhaps we could say that our basic point on this is

that, of course there is a power of incorporation in
respect of banking because there the power under

placitum (xiii) was by reference to activity, rather

than to legal person. So that to make it clear

that including corporation,we know from reading the

debates,that was desired to be included, most

definitely. One can see why it is there.

We make the point, which I think I have already

made in passing, that BRITISH NORTH AMERICA ACT as it

then was had similar words and never thought to affect
the capacity of the Federal Parliament to incorporate
business corporations, even when there is no power

in respect of corporations. It is just under the

general peace order and good government. We do refer

to Hogg's Constitutional Law of Canada. That is

extracted in our supplementary materials, page 69 to 81,

and that would seem to be a most elegant and

comprehensive surrrrnary of the - elegant surrrrnary of the

position in Canada. The Canadian analogies really

do not take you all that far because of the circumstance

that it has been a direct implication of federal power

in respect of the federal power over corporations

ClT22/l/FK	258	5/10/89
NSW(2)

whilst accepting the concurrent power of provinces
in respect to provincial corporations, which, of

course, may be recognized in other provinces.

We submit that when one has regard to the

banking power, it is never thought to affect the

special capacity of the Parliament to create

corporations pursuant to other powers. We list

several examples under the conciliation and arbitration, trade and commerce or post and telegraphs power and would perhaps say in passing

that clearly the Commonwealth may provide for the creation of a regulatory corporation, such as the Australian Securities Commission, in respect of

the regulation of corporations and securities under

the CORPORATIONS ACT, and that is within power under

placitum (xx), so we say, placitum (xx) on any view

must support the power to create the Australian

Securities Commission, and indeed no State has issued

any writ challenging that Act at all. That Act has

already been proclaimed.

If I may basically treat our contention 4.3 as read, we say that no useful analogy is derived

from the two particular powers which deal with persons that are not artificial persons, namely, real persons.

We refer there to Chief Justice Marshall, again in

the BANK OF UNITED STATES V DEVEAUX, saying a

corporation is every respect a mere creater of the law.

This is much the same as what he said in the

DARTMOUTH COLLEGE case referred to in 8 CLR at page 394.

(Continued on page 260)

ClT22/2/FK	259	5/10/89
NSW(2)

MR GRIFFITH (continuing):  And, perhaps apposite to this

we make the short point that we would submit that

as a mere creature of the law it, in our

submission, should follow that a law in respect

of a corporation which is a mere creature of the

law which enables provision for internal management,

regulation of activities, et cetera, we submit it

should be a matter of necessary consequence that

such a corporation also should be able to be created

by such a law. We say it is of the essence of the

law with respect to corporations to provide for what
the creature is. So we do not accept the dichotomy
between coming into existence as an empty corporate

egg and then a separate legal regime to give content

to that.

In paragraph 4.4 of our contentions we say if

one wants apt analogies in respect of the placita of section 50 we would go more rather than to the person's powers, we would go to the capacity to

create copyrights and patents under placitum (xviii)

and perhaps a bit tongue in cheek we also would

say that perhaps to authorize a construction of

lighthouses would be a similar one under placitum (vii),

to use the lighthouse example. We refer again to

Harrison Moore - this time it is the second edition -
the statutory materials at page 11 where there

Professor Harrison Moore was dealing with copyrights,

patents, power, trade ira.rks, under placitum (xviii)

and at page 459 of his second edition at page 11

of, again, this volume of materials, he says:

The powers contained in article xviii are not exclusive; but the enactment of uniform

laws on the subjects for the whole

Commonwealth might well be regarded as a

law for each and every part thereof, so as

to exclude the grant of mere local rights
in copyrights, patents and trade marks for

the several States.

So that, what we say is, that Harrison Moore was

right to identify this power in 1910 and, of course,

it was one which was exercised very quickly,

COPYRIGHT ACT 1905, PATENTS ACT 1903 and 1906, and

TRADE MARKS ACT 1905, to cover the field of the

creation of and regulation of copyrights, patents and

trade marks. This was a power at Federation where

there were colonial laws and this is generally

discussed by Quick and Garran at page 593 to which

I will not take the Court but there was relevant

legislation if I could quickly just list the Acts.

the New South Wales is PATENTS ACT 1889,

TRADE MARKS ACT 1900; Victoria, PATENTS ACT 1865,

TRADE MARKS ACT 1864, TRADE MARKS REGISTRATION ACT 1876;

Queensland, PATENTS DESIGNS AND TRADE MARKS ACT 1884,

ClT23/l/JH	260	5/10/89
NSW(2)

South Australia, PATENTS ACT 1877, TRADE MARKS ACT 1892,

Western Australia, PATENTS ACT 1887,

TRADE MARKS REGISTRATION ACT 1884 and Tasmania,
PATENT LAW ACT 1858 - which is a very early Act,

MERCHANDISE MARKS ACT 1864.

Now, at Federation, a patent or trade mark, which

is a form of property interest, at law, was created

by State law and, of course, as Quick and Garran

say, it was clearly intended that this power should provide to the Cormnonwealth law for the creation of

patents. It was first exercised in 1903 for the
PATENTS ACT and that Act provided in section 7

that patentees under State Acts could apply for a patent under the Cormnonwealth:~CT and provided in

section 8 that no new application for patents could

be dealt with under the State Acts and that

provision remains in the 1952 PATENTS ACT, section 9,

and, of course, has never been challenged.

(Continued on page 262)

ClT23/2/JH	261	5/10/89
NSW(2)

MR GRIFFITH (continuing):  So that we would submit it is

analogous to say the power in respect of property

rights of patents and trade marks extends to

laws not only affecting patents and trade

marks created by State law but also to

laws for the bringing into existence of

those property rights. And, also, of course,

on the basis that that is to be the sole law

for their regulation, as well as the sole law

for their coming into existence.	So we do find
some analogy there.

In paragraph 5 we refer to appendix 1 and

there we give the citations I have referred to

as to the - of course, you cannot let history
confine natural meaning. And Justice Brennan

referred to COLE V WHITFIELD on that yesterday

and we, of course, accept that.

I have already referred to Harrison Moore's

first edition in our materials which I have already

read and to Quick and Garran which I have already

read, as is referred to in paragraph 6 of our
contentions.

Turning then to paragraph 7. 1, the issue of HUDDART PARKER, we there summarize our approach

to HUDDART PARKER. We say, firstly, the judgments

of the majority were permeated by the doctrine

of reserve powers and there is no need for us

to take the Court to the judgments in STRICKLAND
V ROCLA PIPES and the DAM case in dealing with
that issue, although I will refer in a minute

to the judgment of Justice Mason in the DAM case.

We say the dicta of Justices Isaacs and

Higgins are flawed by their approaches to

characterization. We say that Justice Isaacs'

search for restrictions on the power to establish

limitations other than those derived from the

doctrine of reserve powers - and we have already

criticized his approach of maintaining a distinction

between external and internal affairs and also

criticized his approach on this issue of construction

on page 394 of the report.

We say the approach of Justice Higgins is

flawed by his rejection of dual characterization.

To draw that together, to sort of go to sea for

a minute, we say that not only did STRICKLAND

disable the good ship HUDDART PARKER, we say

it confirmed it sunk with all hands. So that,

as we see it, our learned friends are seeking

to attach themselves to single pieces of what

they see as flotsam still afloat, 81 years later.

262   5/10/89

NSW(2)

The thrust of our contention is to say that

that is misplaced because it is really jetsam.

We say that HUDDART PARKER, in effect, by this

Court, should be regarded as sunk. It is another

thing, of course, to look afresh at the issue. Of course, the Court, we would submit, is free

to do that but we submit in the context of not

regarding HUDDART PARKER as looking at that view

from the background of 81 years of consistent

history which would need to be reconsidered were

the Court to come to a contrary view on the

corporation issue.

Our general submission about HUDDART PARKER

is that it was wholly overruled in CONCRETE PIPES.

the Chief Justice, at page 489, 124 CLR, said:

the reasoning of this Court in HUDDART,

PARKER & CO PTY LTD V MOOREHEAD was in

error and that it ought not be accepted

now by this Court.

Mr Justice McTiernan agreed at page 499.	At
page 510 and 511, Justice Menzies said:

HUDDART, PARKER & CO PTY LTD V MOOREHEAD

was decided by reference to doctrines of

constitutional interpretation different

from those which have been accepted since

the ENGINEERS' Case.

Justice Owen, at 513, said:

the decision in HUDDART, PARKER & CO PTY

LTD V MOOREHEAD should be overruled

and Justice Walsh also agreed at 515 with the

Chief Justice.

At page 522, Justice Gibbs said:

It is clear from the reasons given by

Griffith CJ, Barton J. and O'Connor J, that those learned Justices, who constituted

the majority, based their conclusions on

the doctrine of reserved powers which since

AMALGAMATED SOCIETY OF ENGINEERS V ADELAIDE

STEAMSHIP CO LTD (the ENGINEERS' Case) cannot

be accepted as correct. The other two members

of the Court, Higgins J. and Isaacs J.,

were sharply at variance in their opinions

as to the scope of par (xx) of s. 51. The

decision therefore -

in HUDDART PARKER -

cannot be treated as a binding authority -

C1T24/2/ND	263	5/10/89
NSW(2)

MR GRIFFITH (continuing): And, of course Your Honour

the present Chief Justice in the DAM's

case inl58 CLR 146 said it was overruled in

STRICKLAND and Your Honour there shortly then

analysed the defects in respect of HADDART PARKER.

What Your Honour said at page 147 in 158 CLR:

It is an unrewarding exercise to review all

that was said in HUDDART, PARKER about the scope

of the power. The judgment of Barwick CJ in

ROCLA PIPES is a complete refutation of the

decision in HUDDART, PARKER and of the reasoning

on which it was based.

Your Honour then briefly sunnnarized your criticism

of the judgments and then said:

So much for HUDDART, PARKER.

And we do adopt that sunnnary analysis which

Your Honour so trenchantly made.

McHUGH J: What do you say to the proposition that there are

two points in HUDDART PARKER.	The first proposition,
the main argument for the Commonwealth was:	we

have power to create corporations and therefore we

can create them subject to conditions. Now that

argument was rejected without any reference to the

doctrine of reserve powers, but then the Judges

went on to say, "Well, on the assumption that they

have got no power to incorporate, they have got power

to regulate, but they have not got power to regulate

companies in so far as it invo1·-~2s '::latters of
domestic trade, intrastate trade, ~ecause that

offends the doctrine of reserve powers. It is · only the second part that STRieKLAMD overruled. r

mean the passage at 489-490 in STRICKLAND it is

very difficult to see that Sir Garfield Barwick

was accepting the view of the corporations power

you put forward.

MR GRIFFITH: Although, Your Honour, he has in STRICKLAND

other following pages made trenchant criticism of

HUDDART PARKER, for example he said they should have

had regard more to the fact that the Commonwealth

can create other corporations and they might have

got it right.

McHUGH J:  I appreciate that. He accepted what Sir Samuel

Griffith said about a law which said no trading or

financial corporation shall.

MR GRIFFITH:  Your Honour, as explained by the present

Chief Justice in DAM's, that was in the context of

a mistaken view on characterization. That is

explicable.

CIT25/l/CM	264	5/10/89
NSW(2)

McHUGH J:  I appreciate that is the way-Sir Garfield Barwick

had that theory about characterization, but the

point is that he did not overrule or he did not

see himself as overruling HUDDART PARKER entirely.

MR GRIFFITH:  Your Honour, we would say that there is only

one judgment of the majority in HUDDART PARKER which
would seem to have adopted that two-step approach

Your Honour indicated and that only arguably, and

that is the judgment of the Chief Justice. Can I

make brief reference to the others in majority to say-

why . we say their judgments were permeated by

the doctrine of reserve powers, so we cavil at

the proposition which is put against us that the

case had this two-step approach.	We deny that,
Your Honour.

McHUGH J: It is difficult to say that about Mr Justice Barton's

judgment. He also seems to have decided plainly

on the question of construction.

MR GRIFFITH:  Your Honour, at page 361 Justice Barton in his

initial description of the statute provision said:

It is thus manifest that the real object of secs. 5 (1) (a) and 8 (1) is rightly or wrongly to enter for the purpose of those sections the domain of the domestic or

internal commerce of the States. That is a

legislative act not in terms or by implication

authorized by the commerce power in the

He then asked whether we can find elsewhere in
the federal charter some power which purports to
authorize such an operation and which can be read

as an exception to the prohibition on Commonwealth power in relation to intrastate trade or commerce.

He then discussed placitum Sl(xx) including the

power of incorporation, we submit, in that context.

McHUGH J: Yes, but at 362 he made it plain that it is a

question of construction.

MR GRIFFITH: Yes, Your Honour, question of construction

permeated by his approach on this reserve powers

issue that he had explained on 361. That is why

he explained it. He said "Look this is how I

approach it. This is out unless I am convinced it

is in. I am not convinced it is in, it is out".

And we say that is the wrong approach.

CIT25/2/CM	265	5/10/89
NSW( 2)

1:1R GRIFFITH (continuing):  We say that is the wrong approach.

We say he should have approached it with an open

mind, Your Honour, and formed a view. Now, with

the wisdom of hindsight it had these canon of

constructions and opened doors to help him along.

So that we say it is permeated with reserve powers.

Perhaps I could add, Your Honour, why we go to the

small print: at the end of the day, we submit, it

does not matter at all. It is for this Court to

determine what is right, and to say that it is a

matter of distilling out of semantic analysis of

this sort whether or not the Commonwealth has

power to incorporate corporations, we say, is not the issue before the Court but we have to address

it, Your Honour, because it is a submission piled

up against us that there is an authority of 81 years

that the States have acted upon, et cetera, et cetera.

We deal with it on that basis, Your Honour, but - - -

GAUDRON J: Leaving aside the question of HUDDART PARKER

having been sunk, do you accept that if it were not

sunk it would be authority?

1:1R GRIFFITH: Is Your Honour saying, "If HUDDART PARKER was

authority it was authority".

GAUDRON J:  I am asking is there really any basis for saying

that the question of formation forms part of the

ratio of HUDDART PARKER?

1:1R GRIFFITH: 

Your Honour, we say that that was not the

point for decision in HUDDART PARKER, but we do
accept that in argument it was put that if there

is a power to incorporate then we can do this and

that argument was dealt with in various ways. dual characterization". Justice Isaacs said, "I

approach it my way uninfluenced by reserve powers",

but we say - it really gets to the point,

Your Honour, of interesting articles on ratios in

cases but by and large our approach, Your Honour, is to say that it was not something which is part of

the ratio of the case but we do say, Your Honour,

when you throw out the second step, ~on any view,

one destroys the authority of the first step and I

was going to get to that in a minute.

At the end of the day, however approached,

Your Honour, we submit that this point cannot stand

as authority after the refutation of the reserve

powers approach on which HUDDART PARKER decision

turned. Of course, Your Honour, we would say,

incidental to that submission, one cannot pick up

numbers by having regard to a dissent or, for
example, having regard to a Justice who decided on

a discredited ground.

ClT26/l/DR	266	5/10/89
NSW(2)

DEANE J:	Mr Solicitor, there is a passage in Mr Justice Menzies'
judgment in STRICKLAND at page 511 which does not
help what you say in relation to section 113 of the
Act.  I am looking at the fourth last paragraph
beginning:

Further, it is hardly to be thought -

MR GRIFFITH: Really, we submit that that is no problem,

Your Honour, because if there is a State law providing

for the State incorporation of, say,a company, we

would submit that there could not be any difficulty

about Commonwealth law providing for recognition of

that outside the State.

DEANE J: It is the second sentence:

For instance,

His Honour says as if it is so obvious that:

could Parliament by a law under s. 5l(xx)

forbid the recognition in a State of a

company incorporated in that State?

MR GRIFFITH:  Your Honour, with respect, that issue does not

arise -

DEANE J: Is that not what section 113 does in one sense?

MR GRIFFITH:	What section 113 says is that you cannot get to first base, you cannot incorporate under the
State law because we provide completely for the
control of incorporation of trading corporations.
DEANE J:	I would have thought it was a little bit of flotsam from HUDDART PARKER that you cannot really ignore.
MR GRIFFITH:	It is pretty water-logged in our submission,

but, Your Honour, we would say that really what

Justice Menzies is doing there is - really in the

context that HUDDART PARKER has not been overruled

although it is a little bit shaky because it is

after the ENGINEERS' case - sort of doing his best

in a passing way, Your Honour, as he says to "content"

himself - higher in the page.

(Continued on page 268)

ClT26/2/DR	267	5/10/89
NSW(2)

MR GRIFFITH (continuing):  We submit that this discussion

by Justice Menzies, particularly in the context of
what happened in STRICKLAND with respect to HUDDART

PARKER, cannot be regarded as really preserving any

authority from HUDDART PARKER which we say cannot

escape what has happened to it in STRICKLAND, namely

that it has been refuted as authority. But may I get

the second leg in of my analysis of judgments on this

reserve powers two step approach.	We say Justice O'Connor,
similarly, should be regarded to Justice Barton.	At
page 368 Justice O'Connor said:

Contracts made in the course of trade and

commerce -

confined within the limits of one State -

are part of a sub~ect matter left by

the Constitution exclusively in the

hands of the State. If, however, those sections -

he is referring to the AUSTRALIAN INDUSTRIES

PRESERVATION ACT -

are invalid, it has now become a criminal

offence on the part of any corporation of
the class named to enter into contracts in

the course of that trade contrary to the
requirements of the Commonwealth Act
whatever the State law on the subject may be.

It must, of course, be conceded that such an interference with a State's control over its purely internal trade and commerce would be

in general outside the ambit of Commonwealth

power.

He then went on to consider whether placitum (xx) could

be construed so as to justify an interference with the State's control over its own internal commerce including

the question of incorporation.	So we say one can see
there also the reserve powers approach permeating the

approach to the first step and not ~ust something coming

in, we say, on the second step. Now, at page 348 the

Chief Justice's remarks are somewhat ambiguous.	He
there said:

In the case of foreign corporations it is

obvious that the Parliament cannot create

them. The formation and regulation of

corporations in general is one of the

matters left to the States, and in my

_iudgment the words "formed within the limits

of the Common we a 1th" mean formed under State laws.

Now, it is possible that in that second sentence where he says, "The formation and regulation of corporations

in general is one of the matters left to the States",

ClT27/l/HS	268	5/10/89
NSW( 2)

he is using a form of expression reflecting his

reserve powers approach and that could be a natural

meaning because we know from what the Chief Justice

said that iust reading the placitum hlmself he expressed

what we submit is the correct view as to its reach

which was one which His Honour could not accept because

of his reserve powers approach. But I suppose against
our contention it could be said that His Honour was

not referring to the reserve powers doctrine which

was decisive to, we say, his whole judgment, but he
was just making an assertion that formation and

regulation of corporations in general was not an

exclusive Commonwealth power.	It is not altogether
clear.

Now, if all he is saying is that, notwithstanding

placitum (xx) the States can continue to provide for
incorporation, well of course they can, subject, of

course to a valid Commonwealth law covering the field

and providing that they cannot validly. But perhaps

for the purpose of debate, Your Honour, one could say

that Chief Justice Griffith is equivocal on this.

Arguably his conclusion was not directly based on reserve

powers, but we tend to doubt it. Looking at the

judgments of the remaining two Justices, we say that

Justice Isaacs, in deciding that the placitum did not

extend to laws controlling the activities of trading

corporations, therefore found unnecessary to

decide whether the power extended for laws creating

corporations. So that within his own reasoning the

negative answer to that question was obiter.

We say, in any event his view should not be

regarded as part of the authority of HUDDART PARKER because he was in dissent and we say that should be disregarded in considering what the authority of the

decision is.

(Continued on page 270)

ClT27/2/HS	269
NSW(2)
MR GRIFFITH (continuing):	Now, Justice Higgins, in the majority's

judgment, in our submission, is wholly vitiated

by his erroneous view that a law can only have one

character :i 8 CLR, pages 410 to 411, and we would

contrast what Justice Menzies said in CONCRETE PIPES,

124 CLR at page 510, the passage before the passage

Your Honour Justice Deane took me and, also, of course,

the DAM's case, 158 CLR, for example, at page 151 to

152, the judgment of the present Chief Justice.

So, it is our submission that of the four majority

judgments in HUDDART PARKER, only the Chief Justice's

reasons are arguably unaffected by errors on reserve

powers doctrines. So, for that reason, we deny the

two-step analysis which is put against us.

Now, could we make an alternative submission about

HUDDART PARKER? We say that even if you take it that

there is a majority, say, three Judges, that decided
quite independently the reserve powers of placitum (xx)
did not extend to laws controlling corporate

incorporation then, we submit, any such decision

has been wholly deprived of authority as a result

of the decision in CONCRETE PIPES because if there

was a two-step approach, part one was to say
'~lacitun (xx) does not include a power to create,

corporations" and part two was to say - part one,

that is,"Having accepted that you can't create

corporations, it follows that the power does not

extend to laws controlling their trading activities"

and we had Justice Isaacs in dissent on this point.

Now, the purpose of making the finding in part one was to make the finding in part two.	CONCRETE PIPES
rejects part two.	We say then, part one becomes -

unnecessary for any part of the decision which still

stands and should not be regarded as binding authority.

Now, I might be accused of engaging in pedantry

in making that point but perhaps it reinforces our

basic submission that the answer is not to be found,

in our submission, by a closer reading and analysis

of HUDDART PARKER. In our submission, the answer is

to be found by reference to the issues and we say

the relevant issues are the propositions outlined in

our contentions.

It might be convenient at this stage, while we

are dealing with HUDDART PARKER, to pick up my
learned friend, Mr Jackson's reference to reliance

upon referenda as possible endorsements of

HUDDART PARKER. We, of course, would refer again to

the analysis we have just made of HUDDART PARKER and

say, "Well, you know, what is there to endorse?" But

we s~y, in any event, it is impossible to speculate

on the reasons why a particular amendment was rejected
especially where the precise question was not put up

by itself. This is a point made by Garran in his

ClT28/l/PLC	270	5/10/89
NSW(2)

parliamentary papers at page 16 of this book.

Justice Gaudron referred to the fact that there

had been some three unsuccessful referendums on

the conciliation and arbitration power before
the ENGINEERS' case in 1920 and one picked up

the text of those in the Acts which were annexed
to my learned friend, Mr Jackson's materials

attached to the REFERENDUM CONSTITUTION ALTERATION

ACT.	But perhaps it is useful to see Garran's
summary of this on page 16 of the materials.	In
the right-hand column he makes an observation
which, I suppose, if one gets too depressed by
the technical problems of defining "legislation within power" perhaps has some force. He says:

While this decision stands, it is

obviously impracticable for the Federal

Parliament to attempt to pass a uniform

company law for the Commonwealth.

Well, we have made some progress since because

the decision no longer stands, we submit, but if
the Court is against us on this issue of
incorporation, well then, it looks like the present

Parliament, driven by necessity, is a braver sole

than Garran would expect the Federal Parliament to

be.

(Continued on page 272)

ClT28/2/PLC	271	5/10/89
NSW(2)

MR GRIFFITH (continuing):  But then, in paragraph 2 he

deals with:

Proposed Constitution Alterations, 1911-1926.

On four separate occasions, bills to

amend the CONSTITUTION by conferring wider
powers with respect to corporations have

been passed by both Houses of the Federal

Parliament, and submitted to the electors. referendum, but it is not at all certain

that they would have been so defeated but
for the fact that they were on each

occasion submitted together with other

far-reaching amendments; for instance,

relating to trade and commerce, industrial

matters ..... which were, politically,

highly controversial.

And then he sets out the 1911, 1913, 1919 amendments.

It is not necessary for me to take the Court to them or to the 1944 amendments, the Court has the legislation, but one sees either on a permanent or

temporary basis the proposals in respect of a power

were certainly not on the simple issue, "Should the
Commonwealth have general power in respect of

corporations or to create corporations"? There are other controversial powers in respect of monopolies

and combinations; usually, there are other

controversial provisions in respect of reconciliation

arbitration power. But, we say that one cannot get

any comfort from that; I suppose one can say, "Well,

the same argument could have been put in STRICKLAND

if it had any force in it" because the proposed

amendments also dealt with the regulation and control of

corporations.

But, Your Honours, it is the CONSTITUTION that

falls to be construed not the decision in

HUDDART PARKER and we say, Your Honours, it also cannot

be said that the States have shown reliance on the

decision or dicta in HUDDART PARKER because all they

have continued to do is to continue to have concurrent

power so that to refer, as my learned friend
Mr Jackson does, to H.C. SLEIGH or PHILIP MORRIS,

we say is inappropriate because there the effect of

reopening a past decision would be to exclude the

relevant powers of the States to tax. Perhaps we

should mention in passing that there are other

examples of this sort of referendum and then decision

of the Court; in 1937 there was a referendum on

air navigation and that was followed by the AIRLINES

of New South Wales cases. In 1937 and 1946 there

were referenda in respect of section 92 and then came

COLE V WHITFIELD and Your Honour Justice Gaudron has

referred to the ENGINEERS case examples. Now, i~ ....

ClT29/l/JH	272	5/10/89
NSW( 2)

with the Corrrrnonwealth at pages 378-379,

Sir Robert Carran said:

In 1906 the High Court in the RAILWAYS

SERVICES case held that the application to State railway employees was an

interference with State instrumentalities

and, therefore, invalid. Three attempts

were then made by the Fisher Government

in 1911, 1913 and by the fourth Hughes'

Government in 1913 to give wide

industrial powers to the Federal
parliament. These were all carried in

Parliament and defeated at the referendum.

In 1920 in- the ENGINEERS -case the principle

of implied irrrrnunity of the States was

overruled and it was held that the

application of the Act to industrial

disputes in State railway services was

valid.

We feel that is all that we need say about my learned

friend's point as to that and we will not seek to

take the Court to his American authority on that

issue. In paragraph 7.2 of our contentions we
refer to what we say is the mere obiter referred to

in subsequent cases on this issue which appears in

paragraphs 6 and 11 of, I suppose I should not call

them Queensland submissions, but the submissions

for South Australia which were headed "Queensland"

and also paragraph 1 of the Western Australian

submissions and we say that they amount no more than

passing acceptance for the approach of HUDDART PARKER;

they are all merely obiter.

There is included in my learned friend's

reference a reference also to Chief Justice Barwick

in STRICKLAND at page 488. We would deny that this

falls in the same category as the other references,

indeed, we would say that the judgment of the

Chief Justice, as he was there, overruled in

HUDDART PARKER goes to support as that is where he

is dealing with the issue of suggesting that perhaps
the members of the High Court in HUDDART PARKER
ought to be more on the track if they had regard to
the capacity of the Corrrrnonwealth to create

corporations.

(Continued on page 274)

ClT29/2/JH	273	5/10/89
NSW( 2)

MR GRIFFITH (continuing):  In paragraph 7.3 of our

contentions, we make just a passing reference

to Justice O'Connor's reference to the possible

power to create corporations and note the two

clear expositions by Justice Murphy as to this

power. But they have already been referred to

in passing and I will not take the Court to them.

Paragraph 8. 1, if I may treat that as read

inasmuch as - this is perhaps one of our open

door submissions, although we do say, as we have

said already, that we do submit that although

not directly so expressed, there is a flavour
of reserve powers in our learned friend's

submissions. There is - of course it is not

articulated but we say that one must be sort

of rather cautious about the approach inherent

in their submissions.

Perhaps one example of that is that by and

large none of our friends' submissions addressed

at all. the question of the incidental power.

I think it was Your Honour Justice Dawson that

raised it yesterday. But we say that it is necessary

to engage in a proper and broad consideration of this issue of construction and not seek on

any point of dispute to define the narrowest

ground of reference so as to make the inquiry

an inquiry into what is in the heart of the power

in respect of a matter which we say, in any view,
could be justified, if not within the heart of

the power, under the incidental power.

BRENNAN J:  Do you rely upon any power other than

paragraph (xx)?

MR GRIFFITH:  Your Honour, for the purposes of this question,

no. It is agreed that it is limited to the

incidental power in placitum (xx) - incidental

picks up the incidental power, of course.	We
do not make a separate submission as to the incidental power itself under section 51. But,	Your Honour, we have excluded from the question
of inquiry the obvious support that these provisions
would get from the territories power if needs
be, from the banking power, from the insurance
power. That is by agreement, Your Honour.

BRENNAN J:  However it comes to be, the problem for our

consideration is whether or not paragraph 51(xx)

supports the provisions of the legislation which

is referred to in the stated case.

MR GRIFFITH:  So far as it applies to trading and financial

corporations, Your Honour, it is limited to that,

as we understand it.

C1T30/l/ND	274	5/10/89
NSW(2)

BRENNAN J:	Yes.
MR GRIFFITH:	So the Court is not being asked to say that

the section is wholly invalid, it is just being

asked whether the corporations power supports

it as it applies to trading or financial

corporations.

Your Honour, a similar issue will arise

in respect of the next part of the Act requiring

incorporation of State trading companies after

the prescribed date; they engage in business

and trading activities. But because the issues

are, as we see it, Your Honour, are very much

the same, we have narrowed to the essential issue

and, Your Honour, it is clear enough from the

form of the orders of His Honour the Chief Justice

handing the matter down that the parties'approach

is that there are two issues here: one, it is

common ground the issue of capacity to incorporate

by provisions in Commonwealth law, is the underlying

issue; and then, Your Honour, there is the second

issue of whether, if there is a capacity to

incorporate, this supports the legislation in

this form as it applies to trading and financial

corporations; but only as it applies to them.

DEANE J:	You are using that phrase in a special sense?
MR GRIFFITH:	Yes.
DEANE J:	In that the question is, company registered

under Division 1 of Part 2.2 - I mean, if one

took the view that a dormant company was not

a trading or financial corporation, the way you

are putting it would exclude consideration being

given to that?

(Continued on page 276)

ClT30/2/ND	275	5/10/89
NSW(2)

MR GRIFFITH:  The recital really gives the game away in that

the parties do decide, Your Honour, to have this

step one in HUDDART PARKER determined and then they

want to inquire of the Court, as it were, because

it is in dispute between them whether, if there is

a power to incorporate, whether they have done it

right this time. That is a separate issue from

absolute power.

DEANE J: All I was pointing out to you is that it is not as

easy as it would be if thecµestion were confined to

trading and financial corporations without raising
the question of what were trading and financial

corporations.

MR GRIFFITH: Yes, well, Your Honour, we do not want to make

it too hard but it was thought that that was a

narrow articulation. If by the end of the argument,

the view was taken that that was inappropriate it,

possibly, could be expressed in a different way.

DEANE J:	I would have thought, confined the way you put it we would only be concerned - question 1 is, "Does
subsection (xx) include legislative powers that
extend to controlling and corporation?". The way
the question is framed seems to require us to go
well beyond that and, as I say, decide, for example, whether a dormant company is a trading or financial
corporation.
MR GRIFFITH:	Your Honour, we threw up the first way as a

possibility but it did not find particular favour
because it smacked a bit of an advisory opinion

unrelated to the legislation. The second matter is,

Your Honour, there are integral provisions for

dormant companies here. Now, our final fall-back

position for them is that they are severable: one

can just strike them out and the provision for

incorporation remains. That is what we would invite

the Court to do if they were against us on

dormant provisions but perhaps that would not help	the public interest much but at least the rest of	the Act providing for companies which were not to
be dormant would be valid.

It is intended, Your Honour, to have a question

answered which enables one to say yea or nay on

the dormant provisions. We submit on the basis that

if it is nay on that, well then, it is a severance

issue. Your Honour, I am in a position to answer

Your Honour Justice Brennan's question on

Sir Samuel Griffith in his 1897 report to the

Queensland Parliament:  the answer is, no. We were

referring to the Western Australian submissions

dealing with the question of referendum and it might

be convenient now if I continue to give our response

to those submissions so that by reference to the

ClT31/l/DR	276	5/10/89
NSW(2)

Western Australian outline - if I could make some

passing connnents - we already made our submissions
in respect to HUDDART PARKER and my learned friends'
reference both to passing dicta in support and

also the dicta of Justice Murphy the other way.

As to my learned friend's submission in paragraph 2,
we have cavilled at the assertion that HUDDART PARKER

has stood for 81 years with no build-up of dicta.

At the moment can we put on one side my

learned friend's next assertion that:

there is no demonstrated disadvantage to the

Connnonwealth brought about by the lack of power to legislate for incorporation -

and go to the next sentence where my learned friends,

as other of the plaintiffs, refer to the "tortuous path". Now, at that point, we would merely repeat

what we said earlier that it is just a question of

dealing with the problems arising from power

rather than issue of construction dictated by the

fact that you will get a tortuous path if you accept

power. We say that the problem is there whether

or not a power of incorporation is accepted and

we have indicated our view that, firstly, the problem,

in a practical sense, is not all that great

however in regard to the considerations we have

referred to and, in any event, the problem is merely

the price which one pays for the constitutional

provision and I have referred to what Justice Brennan

and, I think, Justice Toohey said in TRACEY.

(Continued on page 278)

ClT31/2/DR	277	5/10/89
NSW(2)

MR GRIFFITH (continuing):  So that really covers up to the

last sentence of paragraph 2 of that contention.

We say, of course, HUDDART PARKER is not fairly open

either way, but perhaps that is all subsumed

in our general submissions about HUDDART PARKER

and the issue.

Looking to my learned friend's submissions

in paragraph 3 supporting HUDDART PARKER, we have

already made all the submissions we wish to on the

"form" means "already formed" point. As to

paragraph (b), we have made our point about banking

power not being analogous. As to paragraph (c),

we say we have demonstrated that one cannot say
that there is any support in this convention for
the view. In fact, we would submit to the opposite,

with the qualifications that we have made and which

were in our submissions.

As to the complexity point, well, that is really

to repeat again the points we make that that merely -

we say that it is not all that complex, but it is

derived from the limits on constitutional power - - -

MASON CJ:	Mr Solicitor, I do not think it is necessary to go through
these points one by one, and to indicate that you
have already dealt with something. You can take it
that in so far as your broad submissions have dealt
with matters raised by counsel on the other side
·the Court it aware that you are at issue.

MR GRIFFITH:  Yes. I thank Your Honour. Your Honour, I was

just going to make a short point there, that the

TAX ACT is complicated, but it is still the TAX ACT.

We say that it is a question for the discretion of

the legislature to decide how complicated. legislation is.

That cannot be an issue going to power. As to

paragraph (e), Your Honour, this is a new point that

we say is related to the sentence we left apart in

paragraph 2, when _he. said ,"There is no demonstrated advantage in my learned friend's submissions:' Then

there is a reference to analogous federal control.

As to that, Your Honour, we desire to take the

Court to a.ppendix 2 of our materials in this thin

volume, and, Your Honour, appendix 2 deals briefly

with incorporation of business corporations in

comparative federal systems, and we make the point

in that summary, if I could take the Court briefly

through it, that the United States Constitution is

silent as to the power of incorporation, that it is

the case that there are in the United States separate

State laws providing for incorporation, and in

paragraph 2 we make the point it is not surprising that

there is not a provision in the United States

Constitution - it is the thin volume, Your Honour:

Appendices to Contentions, Appendix 2.

ClT32/l/FK	278	5/10/89
NSW(2)

In paragraph 2 we make the point that the

absence of reference to corporations in the

United States Constitution is a natural

consequence of history, because the American

Constitution is older than the JOINT STOCK COMPANIES ACT

1844, and we note that when the Constitution was

drafted it was estimated there were fewer than two

dozen companies created by charter in America, and

that was regarded with some suspicion. As a result of

the decision in 1868, PAUL V VIRGINIA, it was held
that it was possible for, in effect, interstate

commercial enterprises to shop for the most

favourable state of incorporation.

In paragraph 4 we refer to the unseemly

competition which led to a lowest common denominator of regulation; reference to Brandeis in LIGGETT CO V

LEE:

Companies were early formed to provide

charters for corporations in states where the

cost was lowest and the laws least restrictive.

The states joined in advertising their wares.

The race was not one of diligence but of

laxity.

We refer then to the report of the Corporation Law

Reform Commission of New Jersey:

It is clear that the major protect:bns of
investors, creditors, employees, customers and

the general public have come, and must continue
to come, from Federal legislation and not from
state corporation acts .... Any attempt to

provide such regulations in the public interest

through state incorporation acts and similar

legislation would only drive corporations out of

the state to more hospital jurisdiction.

(Continued on page 280)

ClT32/2/FK	279	5/10/89
NSW(2)

MR GRIFFITH (continuing):  And we give some further citations

as to that element of competition.

So, in paragraph 5 we say the position has been reached, in America, that many provisions

relating to public and investor protection which

are conrrnonly found in our COMPANIES ACTS are in

the United States only in federal legislation.

That has been superimposed on State corporation

laws and there have been other major legislations,

some of which we mention.

There have been arguments made for the

enactment of a federal business corporation code

and we there refer to history from before the

First World War, during the depression, during

the 1970s, and in paragraph 7 we make the point

which we say now is one which can be accepted as

representing contemporary perception as to the

position in America and that is that it seems that

there is no doubt as to the power of congress to

enact a comprehensive business corporation code

under the Constitution and under the commerce

clause, and that would include, we would submit,

incorporation by way of implication from the conrrnerce

clause.

Paragraphs 8 to 12 give a brief sunrrnary of the Canadian position. We have already sufficiently

referred to that in passing and I only mention,

again, that the chapter of Hogg, Constitutional Law

of Canada, is extracted in our supplementary

materials and between our summary and Hogg there is

more than enough information in respect of that.

So far as the European conrrnunity is concerned,

we give that information, more · as background,

to indicate that there is a development of a

European company law which will, in effect, provide

an incorporation for the conrrnunity. And there is a

recent publication which is part of our supplementary

materials - this volume - conrrnencing at page 82,

to the end of that volume, being a bulletin of the

European communities dealing with the proposals for

the statute to the European company.

MASON CJ: What use are you asking us to make of this,

Mr Solicitor?

MR GRIFFITH:  Your Honour, that is merely to indicate that there

is a general acceptance as to the appropriateness, in

a federation -and we say the European community can be

regarded as this sort - of a power to provide for

incorporated trading bodies. In the case of the American,

Your Honour, we say it is more direct because one can,

we say, pick up a development to accept the power of incorporation and a move towards it, Your Honour, in

ClT33/l/PLC	280	5/10/89
NSW(2)

the public interest. It is put against us, Your Honour,

the public interest is to keep the status quo and what

we say is that when one sees the element of competition

between States, as has happened in America, that is not

a satisfactory solution.

Now, we also make another proposition, Your Honour,

as to this and that is that we say that it can be

demonstrated from materials receivable by this Court

which included, in our materials to the Court, that
there is a demonstrated disadvantage to the public
in retaining the present system and it is put

against us, Your Honour, that the balance is the

other way. We say it is demonstrable

that there is, at least, reasonable grounds to

suppose that the present scheme has not worked and

that is not a scheme, of course, depending merely

on State laws, it is the unifonn scheme under the

joint agreement between the Connnonwealth and the

States providing for a ministerial council to

oversee the law so that each State has surrendered

its independence as does the Connnonwealth under that

scheme to the body set up, the ministry or council

to regulate the whole.

Various criticisms have been made of that

scheme, Your Honour, and we will refer the Court

briefly to material indicating that that scheme

has broken down. So that when it is asserted, "You

should retain the status quo of HUDDART PARKER

because the present system has worked efficiently", we say we demonstrate that that is not so. That is

another point that we make.

Accepting Your Honour's invitation not to

reiterate points in response to observations which

have been covered in passing, it is none the less

necessary for us to make some connnents on the

propositions relied upon by my learned friend,

T33	Mr Davies, and if I could take the Court briefly to
those. Those are those headed "STATE OF QUEENSLAND V
THE COMMONWEALTH". .

We make the general observation that my

learned friend's point here is only one of, we would

submit, no higher than mild observation and we
would submit that on any view it could not be

regarded as determinative. But as we have indicated,

our submission is that if it is desired to have a law

in respect of those companies which are incorporated,

it would be insufficient to have a power by reference

to merely the description "companies". It would

be necessary to attach some qualifying adjective

such as "incorporated" to limit the control if it

were not to include the direct regulation of partnerships

and other non-incorporated business associations and

that being the case, we submit, it is just as apt

ClT34/l/PLC	281	5/10/89
NSW(2)

to regard the intention to cover, in effect, joint

stock companies, those engaged in trading or

financial activities, as being embraced within the

description "corporations" as much as being

embraced in the description "incorporated companies"

and we say that it could not be suggested that the

word "companies" could do the work because standing

alone that would provide the wider power, on any view,

in respect of non-incorporated business associations.

Now, we submit there is a similar fallacy in

approach in paragraph 2 of my learned friend's
contentions but I think at that point I would accept

Your Honour the Chief Justice's connnent that perhaps

we have said sufficient as to that issue as to why

we say that one cannot make an assumption of a

pre-existing entity.

As to the third point, by reference to

Your Honour Justice Brennan's two judgments, we say

this is not determinative of this separate issue of

whether "incorporation of trading corporations" is

a law with respect to trading corporations within the heart of that power or necessarily incidental to it.

We have already said sufficient to answer

paragraphs 4, 5 and 6 and also 7 and 8, and 9,

we have said sufficient. So, we would submit

that no outstanding issues remain on those

contentions.

So far as New South Wales' contentions on

incorporation is concerned, we say that the

assertion in paragraph 15 of New South Wales'

contentions is somewhat bold to assert as it does

in paragraph 15 on page 8, that:

Even taken at its lowest the material

advanced by Queensland supports the

conclusion that the language used .•...

was intended more probably than not to	leave the power to incorporate outside
s5l(xx).

We say that the material is demonstrated to be the contrary.

In paragraph 16 some comforts ought to be

obtained from the United States' law and we there

rely on our material in appendix 2 as

indicates that that is cold comfort, indeed.

Firstly, there is power to incorporate now, we

would say, within the federal legislature and the

American experiences demonstrate the unsatisfactory

nature of leaving it to State regulation.

ClT34/2/PLC	282	5/10/89
NSW(2)

It is probably not necessary to make a specific

answer to paragraph 17, and we have said sufficient

on this issue of interpretation and HUDDART PARKER

to deal with my learned friend's contention in

T34 paragraph 18.

Turning to the submissions of South Australia,

my learned friend, Mr Doyle, on the question of
incorporation in paragraphs 1 and 2 of his
contentions, it is our submission that it is not
appropriate to consider the question of whether

there is a power to incorporate predicated on the

view that it is necessary to characterize a

corporation as it springs up as being a financial
corporation at the moment of incorporation by reason
of the activities it carries on or, for that matter,
to refer to difficulties of what happens when it
ceases to carry on such activities. In our submission,

it is within power to provide, in the manner that we

have - and this is to go ahead somewhat to our

submissions on the form used in the legislation.

But we say that that is firmly within power or, on any view, within the incidental power.

So, on this issue of incorporation, we generally

submit that a law providing for incorporation of

trading or financial corporations is necessarily a
law with respect to trading or financial corporations
to the extent that we say that it is almost untenable

to assert that there is no power to incorporate unless,

as in HUDDART, you approach the issue on the basis
of assumptions pre-determinative of the contrary

result. Absent any preconceptions as to power,

we submit that a provision in respect of"incorporation"

or"trading or financial corporation"must be regarded

as a law with respect to such corporations.

_May we turn now to our contentions with respect to the statutory scheme. This is paragraphs 9 to 14

of our contentions. If I may take -

MASON CJ:  I think you partly dealt with that. For example,

paragraph 13 you have already dealt with that.

MR GRIFFITH:  Yes, Your Honour. I was just going to say, "May

I take those contentions as read".

MASON CJ: Yes, they have been read, certainly.

MR GRIFFITH:	I was not going to read them again, Your Honour. But we did desire to make some observations on the
scheme in the context of those contentions which are
there, particularly as to FENCOTT.
We say FENCOTT established that a corporation may be a trading or financial corporation before it
engages in any trading or financial activity, and that

ClT35/l/PLC	283	5/10/89
NSW( 2)

was the view of the entire Court. The Court has

been taken sufficiently to the judgment of four

of the Justices at page 602. If I could refer to

the Chief Justice Sir Harry Gibbs at page 589 to 590;

page 611, Justice Wilson;	and page 622-624,
Justice Dawson.

In the absent of trading activities, in

FENCOTT there are some differences in emphasis in
the judgments as to the extent to which the memorandum

of association or the objects clauses are themselves

themselves sufficient indicia of character. I

will not read again what the four Justices say at

page 602 but if I could refer in passing to the

Chief Justice at page 589 - 60 who referred to the

breadth of the objects clauses, repeated Lord Wrenbury's

lament that my learned friend, Mr Jackson, referred

to in COTMAN V BROUGHAM, to conclude:

The whole of the evidence as to the intended operations of the corporation is relevant.

And we say this is an approach which is lucidly supported by Your Honour Justice Dawson in your

judgment and also by Justice Wilson in his judgment.

Now, following FENCOTT, the State and Territory

uniform companies laws were amended in 1985 with

operation from 1984 with the intention of abolishing

the doctrine of ultra vires in its application to the

legal capacity of a company, and this appears in

section 66A to section 66D of the COMPANIES CODES.

We have the ACT COMPANY CODE in our materials book -

this one - page 233 to page 234, and one can pick

up there, I think it is from the CCH print, an

indication - page 232, one sees that the Act was

passed in 1985 but with effect from 1984. These

provisions are really re-enacted as sections 159

to 164 of the CORPORATIONS ACT.

So, there is nothing new in the CORPORATIONS ACT

in seeking to, in effect, abolish, so far as third

persons were concerned, the doctrine of ultra vires.

So, it follows that since 1984, though it is possible

to restrict the rules of a company relating to objects and powers to exclude trading or financial activities.

That could be done, for example, under section 68(1A)

of the COMPANIES CODE which appears on page 233 of

the materials.

(Continued on page 285)

ClT35/2/PLC	284	5/10/89
NSW(2)
MR GRIFFITH (continuing):

The rules of a company may contain an

express restriction on, or an express

prohibition of, the exercise by the company

of a power of the company.

A similar provision appears in section 162 of

the CORPORATIONS ACT.

That means that under the State Code, we

would submit, it is possible to register a

restriction to exclude trading or financial

activities, although under the terms of the

Act that will not have the effect of affecting

dealings by the company with outsiders but it

would still have various legal consequences.

Although this position is continued under

section 162 of the CORPORATIONS ACT, we would

submit that it is not possible to register under

section 162 rules of a company relating to

objects and powers to exclude trading or financial

activities because if that happened, we submit,

that by definition, you would not be a trading

or financial corporation and therefore you could
not be regarded as able to come under the Act.

It would be caught up in other ways because there

would be an inconsistency with any attempt to

comply with section 153(1)(e) as to an activities

statement. But as a matter of obvious operation

we submit that although it is impossible to have

such a restriction under State COMPANIES CODES

it is not possible to do so under the CORPORATIONS

ACT.

DEANE J:	What about the incorporation of the dormant company
which is proposed to be taken over, the change
of control, what is it that makes it necessary
that it have trading or financial?

MR GRIFFITH:	Your Honour, the scheme of the Act is to provide for the incorporation and regulation
of trading and financial corporations. In conformity
with usual business practice, the Act recognizes the practice of incorporating, if you like, shelf or dormant companies which will not be immediately activated but will be activitated as the time
arises, either by those who have subscribed together
to form the company, and wish to have it but not immediately engage in activities or by those
who buy it off the shelf, have it ready there,
walk in, want a company by 3 o'clock this afternoon.

In both those cases, Your Honour, whether

it is continued to be controlled by those who

incorporate it or in the case of a shelf company

C1T36/1 /ND	285	5/10/89
NSW(2)

will be passing that control to some other person,
Your Honour, the whole scheme of the Act is to

apply ancillary - incidental, if you like - to

the scheme for the creation and regulation of

trading and financial corporations, a convenient

mechanism to have your company available.

DEANE J: I can follow that. All I was asking you was,

is there anything in the Act that precludes the

incorporation under it of a dormant company with

no trading or financial powers?

MR GRIFFITH:	Your Honour, we say as a matter of necessary inference, because if -
DEANE J:	What, from the whole scheme of the Act?
MR GRIFFITH:	The structure of the Act, Your Honour, you

can only come off the shelf to be wound up or to engage substantially in trading activities

within 3 months. If you purport to exclude yourself

from the second, Your Honour, then your only

future is the first and we say that you have

got no future at all under the Act.

DEANE J:	I follow the answer but is the answer that there
is nothing express in the Act that would exclude
it, but it only comes from "they could not have intended this"?
MR GRIFFITH:	Your Honour, we say it is a necessary consequence

that - on this question, Your Honour, one assumes

that legislation is used bona fide lawfully not

by people intending to commit a fraud on it.

DEANE J:	No, what I really had in mind was it could be a very understandable approach for solicitors
to take the view, "Well, we'll incorporate all
our dormant companies under the Commonwealth
Act regardless  of what their activities are
going to be."
MR GRIFFITH:	Your Honour, that could be very sensible

and applying FENCOTT we would say that they could

do it, Your Honour, because unless they exclude

objects of trading or financial we say that is

sufficient so that would expect to be the appropriate

way in all but these exceptional scientific

charitable companies.

DEANE J:	But if they excluded trading or financial you
would expect somebody in the Commonwealth Companies
Office - or whatever it is going to be called -
to say, "No, you can't be incorporated."
MR GRIEF11Bi	You would, Your Honour, but if - you see, if it slipped

tfu:D_ugh it would _remain that: tbis._ __ corpo:r_atioff _can only remain

an inchoate thing on the shelf and if it comes off with that

provision in it, it would be impossible for the ccmpany, one

would suppose then, to have a true statement of intention.

ClT36/2/ND	286	5/10/89
NSW(2)

MR GRIFFITH (continuing): There could only be a statement

of intention that, really, would constitute an

offence under the Act and whether it was true or

untrue when made, Your Honour, the consequences of

the application of provisions of the Act are for

winding up.

The Act provides, we say, a reasonable scheme

to deal with that, if it happens, in the absence of - - -

BRENNAN J:  Arn I right in thinking that the Act contemplates

a memorandum without objects?

MR GRIFFITH: Yes, Your Honour. If you want to limit your

objects, you have to expressly register something

under 162.

BRENNAN J:	They do not have any objects at all.
MR GRIFFITH:	No, which was really my next point. Your Honour.

I "las going to say that that means you have

of a company which had not commenced trading, four of the Justices took the view that the obiects

to go a bit further than did four of the Justices in case

was the appropriate place which was sufficient-and

d~terrninative but perhaps I could deal with that

after lunch, Your Honour.

MASON CJ:  Yes, after lunch. We will adjourn now until 2. 15,

Mr Solicitor.

AT 12.50 PM LUNCHEON ADJOURNMENT

C1T37/1/SH	287	5/10/89
NSW(2)
UPON RESUMING AT 2.15 PM:

MASON CJ:	Yes, Mr Solicitor.
MR GRIFFITH:	Your Honour, shortly before lunch I indicated that

I was going to deal with the point made in paragraph 2

of my learned friend, Mr Jackson's, contentions that:

there was no demonstrated disadvantage

to the Commonwealth brought about by

the lack of power to legislate for

incorporation.

I overlooked doing that before I went to FENCOTT. May

I briefly give the Court some references to materials

which we say demonstrate to the contrary, not so much

demonstrate disadvantage to the Commonwealth, but

demonstrate disadvantage to the public interest. That

is contained in our book of materials, Supplementary

Materials, the one with the spine, and there are three particular documents we refer to. The first is the Senate Standing Committee on Constitutional

and Legal Affairs report of 1987 which appears extracts

on pages 18 to 32 and if I could give - indeed, the

whole of that part tends to support the view that the

present scheme was not performing in the public

interest, but if I could give particular references

to chapter 3, pages 24 to 26 of the book of materials.

Chapter 5 begins at page 27 and if I may refer briefly to - the only quotation I desire to read is on

page 28 of these materials where the Attorney-General for New South Wales, then Chairman of the Ministerial

Council, in his evidence in 1987 to the Senate committee

said - this is paragraph 5.4 extracted on page 66 of

the report, page 28 of the materials:

expressed his 'firm belief' that the

co-operative scheme should be replaced

by a national scheme. According to

Mr Sheahan:

... the world is passing by the co-operative

scheme. Our economy has changed considerably

since the co-operative scheme was established.

Three factors are obviously important:

financial deregulation

floating of the Australian dollar

the establishment of a national

stock exchange.

These changes increase national and

international commercial links and the

mobility of capital. The Australian financial

system is now more fluid and part of the larger world.

ClT38/l/HS	288	5/10/89
NSW( 2)

I cannot over-emphasise the importance of

this factor in my assessment of the deficiencies

of the sche m e. The scheme current 1 y g i v es us

the wrong tools for the job.

There is considerably more detail in these extracts of the report

which lead to the conclusion on page 31 of the extracted materials

by the committee that the co-operative scheme

has outlived its usefulness leading to their

recommendation which appears on page -

DAWSON J:	How is this put, Mr Solicitor? What has this got to do with anything?
MR GRIFFITH:	Your Honour, it is put that there is no

demonstrated disadvantage to the Commonwealth

brought about by the lack of power to legislate for

incorporation. We say that there is a clear public

interest demonstrated by this material which answers

that contention. It is a contention put against us,

Your Honour, to say - - -

DAWSON J:  The States Act and co-operative scheme is the

best scheme that could be devised but where does that

carry us?

MR GRIFFITH: 

Well, Your Honour, we would have thought the

point against us would not be carried very far but it
is put against us and we desire to put this material
in to answer it, Your Honour, to show that there is
a need for regulation in these matters in the way in
which the Act does it. It is put against us there

is no need, therefore, you should stick to

HUDDART PARKER.

DAWSON J: 

But, there are a thousand ways in which you can

regulate something and it does not run to one whit

to increase or decrease constitutional powers.

MR GRIFFITH:  Well, Your Honour, there is some force in what

Your Horiour says but_ it is put as a matter for the Court to

have regard to in deciding whether or not to, as it

were, follow HUDDART PARKER or to break adrift from

it. This is put as a factor the Court should put it

in balance in exercising a discretion there.

DAWSON J:  Well, it just seems to me that it is one thing to

look at convention debates but to look at tfie current

political debate is potentially misleading.

(Continued on page 290)

C1T39/l/JH	289	5/10/89
NSW(2)

MR GRIFFITH:  Your Honour, we would nine-tenths agree with

Your Honour, but that is the case put against us.

DAWSON J: Well, that seems to be my personal view, so there

you are.

MR GRIFFITH:  Yes. Could I just give page references to other

material to same effect. Pages 33 and 35 to 38 dealing

with the report of the Constitutional Conunission.

Firstly, the advisory conunittee and those references

then the final report pages 44 to 45. And then

the last document is a document issued by the

Attorney-General which is perhaps somewhat self

serving, which appears at page 48, and that is all

I desire to say on that point ..

Returning to the question of FENCOTT and how it

should be regarded after the abolition of the

doctrine of ultra vires, ~ would submit that some

propositions can be made. We say firstly a company

may be a trading or financial corporation on

incorporation before it has begun to carry on any

business. We say secondly that FENCOTT establishes

that a corporation may be characterized as a

trading or financial corporation when it is a shelf

company and it has been dormant from its incorporation.

And we say thirdly, during the period of dormancy or

being on the shelf, the company may be so characterized

that even though it cannot be determined whether it

is a trading corporation or a financial corporation,

or as the four Justices put in FENCOTT at 602,

"or which of these characters its future activities

may give it".

We wish to refer briefly to the discussion by

Zines in the second edition of his High Court and

the Constitution which is extracted on page 60 of

our supplementary materials.

(Continued on page 291)

CIT40/l/CM	290	5/10/89
NSW(2)

MR GRIFFITH (continuing):  In page 72, which is the left-hand

page reproduced on page 60 of the materials,

Professor Zines discusses in the last full

paragraph the alteration in respect of object

provisions and then concludes:

On the reasoning of FENCOTT V MULLER it

would seem that a company incorporated

under these new provisions, which had not

yet functioned and which had no

restrictions on its trading would be a

trading corporation.

And, we submit that that conclusion is an appropriate

extension if it be an extension consistent with the

reasoning in FENCOTT. In the context of the

CORPORATIONS ACT now providing for the incorporation
of trading or financial corporations we submit that
the approch to characterization built upon FENCOTT

in this manner is strong to the point of being

compelling. Under the uniform COMPANIES ACTS the

company may be formed for any lawful object but we

submit that the effect of the structure of the

CORPORATIONS ACT is that it is not in a practical

sense possible to exclude trading or financial

activities consistently with being embraced with the

scheme and we discussed with particularly

Justice Deane before lunch as to how we say that that

is implicit in the Act. So, we say that the regime

of the Act is it establishes one to provide a

mechanism for the incorporation of trading and

financial corporations and that, in effect, such a

company may only be formed and utilized under the

CORPORATIONS ACT if and when it comes to engage in

activities, whether they be trading or financial,

in accordance with the requirements of the Act that

it substantially engage in such activities. And, we

say as the regime is predicated upon its establishment for the purpose of trading activities which is defined

as we have seen to include financial activities it

must follow as the four Justices in FENCOTT were

prepared to infer from the circumstances of the

broad object provisions in the case of FENCOTT as a
necessary inference in conclusion that upon

incorporation under the CORPORATIONS ACT a company

which has not yet co1llIIl.enced trading activities must

be characterized as a trading or financial

corporation.

ClT41/l/JH	291	5/10/89
NSW(2)

MR GRIFFITH (continuing):  We say in these circumstances

it must be a lawful purpose for which it is

incorporated so that, in that way, we submit there

is, as the majority saw it, a good guide to the

point of being no better guide to its character.

After incorporation, of course, subscribers or

controllers, whether or not it spends a period dormant

or on the shelf, must intend to engage in trading

activities within a reasonable period after such

period of dormancy or being on the shelf. If the

company does not come to engage substantially in

trading activities and it is not a trading or

financial corporation, well then it will be wound up

under the winding up provisions. So we say, in those

circumstances, during the period it is on the

shelf it is immaterial as to whether or not

it is a trading or financial corporation, or possibly

both, or which it might be when it becomes active.

We say this is sufficient for characterization

as a trading or financial corporation. We submit

further that this necessary characterization is

supported by the scheme of the Act which ensures

that subscribers or controllers, at the time when the

company ceases to be dormant, must express an honest

intention to engage in trading activities, and we see

this as providing a statutory regime to provide for

evidence of the sort that Your Honour Justice Dawson

referred to in FENCOTT at page 624, as evidence of

the expressed intention of those who control the

corporation.

Justice Wilson at page 611 referred to it as:

In the case of a shelf company ..... evidence of the purpose of its acquisition -

and it provides evidence as to intended operations

of the corporation to which Chief Justice Gibbs

referred to at page 590.

Now possibly such evidence is necessary if

one regards the absence of limitation on objects as

sufficient, but this is the conservative mechanism

adopted by the legislation which, we say, does

ensure that the scheme remains within power, even

if excessively within power. If you put shelf

companies on one side for one moment, we submit

that the provisions for activities statement in

section 153 and 155 establish a regime which is,

if that be necessary, directly adapted to procure

direct and objective evidence to furnish indicia

of the characterization of a corporation which is

incorporated, but not yet active. That is particularly

provided for by the activities statement under

section 153(3)(a).

ClT42/l/FK	292	5/10/89
NSW( 2)

Our submission is that section 153(7) is not

a deeming provision, but merely a statutory

~lucidation of the fact that a person signing
the statement is making the relevant prescribed

statement of intention. As to that subsection,

when one looks at section 153(7),it merely deems

a subscriber to have stated that he or she had the

stated intention at the time of signing the statement.

When one looks at section 153(l)(d), it could be a

statement signed by various subscribers on different

days, but need only specify the date of first

signature. So that far from being a deeming provision

or deeming intention, which may not be true intention,

it is merely an elucidation of what must be stated

in the statement at any event, namely that there is an

intention; that is provided for separately, and also

a statement as to the appropriate date, which we

submit is certainly a provision which cannot be

attacked as an impermissible deeming provision.

It expresses a form of words which, in any event,

are incorporated in the prescribed statement.
A person signs to acknowedge at the time of signing
that person, as a subscriber, has the intention within
three months, thattrading activities will be the whole,
or a substantial part, of the company's activity.

The requirement, of course, comes under section 153(l)(b),

and even if subsection (7) were not there,

paragraph 153(l)(e) would require the statement to

include a form of words complying with subsection 153.

So, section 153(7) does not do much apart from

perhaps supplying a date, but we say it is certainly

not an impermissible statutory provision purporting to

deem an unchallengeable constitutional fact.

(Continued on page 294)

ClT42/2/FK	293	5/10/89
NSW(2)

MR GRIFFITH (continuing):  An incorrect statement, of course,

constitutes an offence under section 1308(2)

and possibly other provisions such as 1311(1)
and the penalty for persons prescribed under

section 1311(5) and for a body corporate under
section 1312. Provisions requiring truthful

statements and prescribing offences for breach,

we submit, a regime reasonably and appropriately

adapted to ensure disclosure of present intention

by subscribers or controllers in respect of

commencing trading activities. And we submit

this is comfortably within constitutional power.

So that evidence is available to determin the

issue and the issue still remains whether or not

it is a trading or financial corporation. And

that is the case even in respect of the provisions
of sections 156 to 158, the basic provisions

for the engaging of the winding-up provisions

and for winding up under those provisions do

not depend on whether or not the activities statement
has been given or is true, it depends upon the

ultimate fact of whether or not the company is

a trading corporation or a financial corporation.

Perhaps while referring to these provisions

we could make one passing observation that although
it is put that the procedures under the Act are

complicated, in our submission, when one looks

at what is involved in activities statements

it is not all that complicated at all. All that

is required is that there be a statement in the

case of a company which is not dormant or which

does not go on the shelf that trading activities

will be engaged in within three months. And

in the case of the annual return which every

company must file in any event there is an

additional form of words required as to what

is the trading position there. And we say that

in the context of the necessity to provide over

the regime within constitutional power to deal

with trading and financial corporations, whether

or not there is a power to incorporate, such

provisions are relatively simply and straight

forward and in the case of all but a few companies

should not cause the slightest difficulty as

to compliance.

Turning back to shelf companies, we submit

that whilst the company is on the shelf - and,

of course, shelf companies were recognized in

FENC0TT as the common enough form of mechanism

for companies to be incorporated to be available
for utilization, that whilst the company is on

the shelf we submit it is even then to be

characterized as a trading or financial corporation

and, of course, the four Justices in FENC0TT,

at page 602 said:

ClT43/l/ND	294	5/10/89
NSW(2)

It is immaterial whether it is a trading

corporation or a financial corporation or

which of those characters its future activities

may give it.

DEANE J:	But does it matter, on your argument?
MR GRIFFITH:	No, Your Honour, it does not.
DEANE J:	I mean, as I follow it, if you fail at the hurdle
of incorporation, that is really the end of the
matter.
MR GRIFFITH:	The Act in this form, yes, Your Honour.
DEANE J:	But if you get over that hurdle, why would you
adopt the approach of saying, "Is this a trading
corporation?"  I mean, that was the necessary
approach in FENCOTT V MULLER because there there
was a specific company but what we are concerned
about is not whether the dormant company is a
trading corporation or is likely to become a trading corporation, what we are concerned about
is whether the provision is within the reach
of a legislative power.

MR GRIFFITH: Quite so, Your Honour, and I was going to

go to that in declining orders of contention,

Your Honour.

DEANE J:	I would have thought it would be your starting
point.
MR GRIFFITH:	Your Honour, I will start from the other

end.

DEANE J:	But do not let me take you out of your course.
MR GRIFFITH:	Your Honour, what we seek to deal with is

what we see as a general tack saying, the first

step you cannot incorporate, the second step,

if you can, this mechanism of having shelf companies

and dormant companies does not comply with the

constitutional inhibitions.

DEANE J: But, I mean, it may be, to take the extreme case,

that a company with power to carry on trading

activities is not a trading corporation but it

does not follow that if the corporation power

does extend to incorporation that it does not

extend to regulating the activities of companies

with potential to trade.

(Continued on page 296)

C1T43/2/ND 295 5/10/89

MR GRIFFITH:  Your Honour really cuts across what I probably

would have taken several minutes to say and that,

of course, is our submission, Your Honour.

DEANE J:	I do not think flattery will get you far.
MR GRIFFITH:	It is not intended to be flattery, Your Honour, it just

lets me turn over another page. Your Honour, we

submit that it is clearly incidental.

DEANE J:	I was not suggesting in terms of incidental in that if you come to characterization of a law - later to
an entity - a law referring to it in its pre-birth
stage, for example, may well be.
MR GRIFFITH:	Yes, Your Honour, that is really our second

way of approach. If it can only come off the shelf,

if at all, for the purpose of being utilized

within the constitutional regime or wound up, we

say that is sufficient, Your Honour, to support

the legislation and you do not then have to worry

about characterizing it on the shelf. I would

not say it is an elegant sunnnarizing of what

Your Honour puts, but we accept the way Your Honour

put it and we would say, on a declining view,

Your Honour, that it would, on any view, be incidental

to the power to have provisions such as this sort.

Of course, though naturally incidental, it was really

recognized by inference oy the Court in FENCOTT.

Could we turn to the issue which we see as

being the central point of my learned friend's -
the Solicitor-General for South Australia -

submissions, which was really to make several

propositions but to then really get to the point

of saying, "For these reasons FENCOTT should be

overruled". Now, we submit that FENCOTT should

not be overruled and we sort of regard that as the

heart of the point bearing in mind the exchange
that my learned friend had on page 81 of the
transcript with Your Honour Justice Brennan. We say that when one has regard to FENCOTT,

firstly - I suppose perhaps it is not a submission

as to why it should not be reargued and overruled -

we say it is plainly right but, we submit that,

far from being in conflict with the reasoning in

the TASMANIAN DAM's case, as my learned friend

suggested in his submissions, it is either relied

upon in that decision or, on any view, it must be

regarded as not inconsistent with the reasoning.

In the DAM's case 159 CLR, Chief Justice,at page 117,

relies on FENCOTT. Justice Murphy, at page 179;

"Justice Wilson did not decide whether the

Electricity Commission was a trading corporation and

Your Honour Justice Dawson did not decide the

ClT44/l/DR	296	5/10/89
NSW(2)

question, did not necessarily agree with the

Chief Justice and we hope we can take the licence

from that that Your Honour would, from that aspect,
agree with the Chief Justice's approach so far
as application of FENCOTT was concerned.

The judgment of the present Chief Justice as page 155 to 157; that of Justice Brennan at page 240 and that of Your Honour Justice Deane at

292 to 293 contains nothing inconsistent with

FENCOTT and, of course, one really would not expect

that since the TASMANIAN DAM's case raised no

questions of a dormant or inactive trading corporation.

But the TAS:MANIAN DAM's case is one of those lines

of cases which, we say;perhaps, diverted the
underlying principle by having regard to this
question of activities and more or less owning
activities in regard to an active corporation.

FENCOTT, of course, is a recent case. It deals

with the precise point after full consideration and
all the Justices were unanimous on the point; all

seven Justices heard the case and we say that there

is no strong or any reason to overrule it.

Reference has been made to principles in

QUEENSLAND V THE COMMONWEALTH, particularly the

judgment of Justice Aickin, 139 CLR. We just note

in passing, at page 624 in the report at 139 CLR,

His Honour, in making the proposition about

manifest error - or saying the decision is

"manifestly wrong'as being a ground for overruling,
uses HUDDART PARKER as an example of manifest error.

He says, at the foot of page 624:

It is a case the rror in which was made

"manifest" by later decisions. In the same

category are HUDDART PARKER & CO. PTY. LTD. V

MOOREHEAD, overruled in STRICKLAND V ROCLA

CONCRETE PIPES.

Before the luncheon adjournment, we indicated

that we would take contentions 9 to 12 as read.

If we may extend that, if the Court pleases, to

extensions 13 or 14 to justify our contentions in

respect to the provisions.

(Continued on page 298)

ClT44/2/DR	297	5/10/89
NSW(2)

MR GRIFFITH (continuing):  We have already made the point in

passing that if there is any difficulty about the

dormancy shelf provisions, we say that they could

be regarded as severable in their entirety and

still leave the basic provisions in respect of

the incorporation of companies which will not be

dormant or on the shelf unaffected. The only other

aspect we desire to refer to on the issue of the structure of the Act and activity statements, is to refer briefly to the propositions made in

paragraph 5 in the submissions of my learned

friend,Mr Jackson,for Western Australia, in respect

of the question of statements of intention as

incorporators. We say that these provisions are

within power. That the requirement for statements
with penal sanctions attached are merely a regim:: to
ensure accurate and honest statements are made. If
there is a dishonest statement, not only is it an

offence, but in those circumstances the company

could and should be wound up and I could take the

Court to it but it is probably not necessary to the

manner in which we say that if it were ascertained

that there were intentionally dishonest statements

of intention given various winding up provisions including, if necessary, the just and equitable

ground under section 46l(k) could be engaged so the

company could be wound up merely for the reason

of the fraud in relation to these matters, but the

fact that the provisions could be abused by dishonesty,

in our submission, does not take the legislation

beyond power. Its operation must, none the less, be

regarded at the very least as being incidental, in

our submission, to power.

A company may remain incorporated under the Act,

we submit, even if a false activity statement is

given, only if it is in fact a trading or financial

corporation and if it is discovered that fraud

has been represented as that when it is not, perhaps

having regard to the extended FENCOTT principle,

well then provisions under the Act can apply to see	that it is wound up for breaching the provisions of
the Act. We say that here it is not an issue of the
subjective intention of the incorporators, it is
a matter of obtaining the best evidence as to what
is intended in respect of the corporation when it
engages in activities. Now we accept that it is
possible that such evidence is not necessary, that the
absense of restriction on registered objects is sufficient within the broad view of FENCOTT, but to
make assurance doubly sure the mechanisms of the Act
provide this evidence which we say is a reasonable
regime to ensure that the provisions of the legislation can be characterized as being laws with
respect to, in this case, the incorporation so far as

CIT45/l/CM	298	5/10/89
NSW( 2)

new companies are concerned, of financial or

trading companies. And that is all we wish to

say on the question of the operation of the scheme

provided under the Act.

Now we turn then to question 2. That is

covered by our intentions, paragraphs 15 to 17 on pages 9 to 10 of our contentions. Perhaps,again,

if Your Honours permit me to take leave and regard

these contentions as read, but may we refer to

paragraph 16.2 of our contentions which refer to

the fact that provisions limiting the size of

unincorporated partnerships or associations which

have as their object the acquisition of gain were

central to the operation of the JOINT STOCK

COMPANIES ACT 1844 (UK)" and have been included in

every general incorporation statute enacted in

Australia and the United Kingdom since.

And we sunnnarize that in appendix 3 of the

attachment to our contentions, which elucidates the

document of historical and sunnnary materials which

set out extracts of the various legislations

referred to in appendix 3 which is headed ttSunnnary

of Historical Precedents for the Prohibition of

Outside Trading Partnerships and Associations.

(Continued on page 300)

CIT45/2/CM	299	5/10/89
NSW( 2)

MR GRIFFITH (continuing):  If I may take the Court briefly

to that summary, Appendix 3, we note that:

Prior to 1844 there was not and had never

been any limit on the size of

partnerships or associations (except that

a statute of 1708 (7 Anne c.30) protected

the monopoly of the Bank of England by

prohibiting banking in England by more

than five persons in association).

And, indeed, special limitations on banking by

reference to particularly 10 have been carried

through the companies legislation and also carried
through some of the companies legislation within

Australia. As to the summarized history that we say usefully describes the development of the regulation

of incorporated partnerships, associations and

development of the joint stock company to the present

day, may we refer generally to Gower's Principles of

Modern Company Law, fourth edition, in particular

pages 22-57 which we have extracted at pages 1-19

of this volume of bound materials and I will not take

the Court in detail to that summary other than to

recommend it as very useful background reading,

particularly from chapter 3, History of Companies

from 1825 to the Present Day, commencing at page 10

to the end of the extract. But, in that chapter

commencing on page 10, Gower discusses the origins

of the Ker report by a chancery barrister

Bellenden Ker which one sees referred to on page 40,

extracted on page 11. The Ker report is then

included in pages 37-55 of our extracts, that is

included as part of the first report of the Select

Committee on Joint Stock Gompanies 1844; that was

the Gladstone report of 1844 leading to the

JOINT STOCK COMPANIES ACT 1844 which is set out at

extracts pages 56-60.

May I briefly read to the Court what Gower

refers to on page 11 of the extracted materials with

respect to the 1844 Act which, in effect, was the

first effective JOINT STOCK COMPANIES ACT and it

followed from the Ker report and from the Gladstone

report. Under the heading:

Gladstone's legislation of 1844 and 1845 - on page 41 of Gower, page 11 of our materials, he says:

The 1844 Act introduced three main principles

which have constituted the basis of our

company law from that time. In the first place it drew a clear distinction between
private partnerships and joint stock

companies by providing for the registration

ClT46/l/JH	300	5/10/89
NSW(2)

of all new companies with more than 25

members, or with shares transferable

without the consent of all the members.

So that, it is expressed as being the first of the

three main principles which constituted the basis

of company law that there should be a restriction

on the numbers of - size of a partnership or

association which may be carried on for gain without

using the joint stock form; in other words, without

using the incorporated company form. And, we say

that this is not just an integral part of the
regulation of companies, it is one of its basic

principles that laws in respect of incorporated

companies, we say laws in respect of ~orporations

which are trading corporations or trading and

financial, if you like, as the CONSTITUTION refers

to them, has as an integral, fundamental principle as part of the scheme in the public interest which

one can establish sufficiently merely from reading

Gower, the public interest vindicated by requiring

more than a certain number specified by the

legislation if they desire to carry on business in
private partnership for gain to do so only in the
form of being associated in the form of incorporated
company, is of the essence, in our submission, of

the regulation of corporations.

(Continued on page 302)

ClT46/2/JH	301	5/10/89
NSW( 2)

MR GRIFFITH (continuing):  We refer in paragraphs 2 and 3 to

these provisions and one will see in the right-hand

margin of appendix 3 we give page number references

which are references to pages in the historical

materials where there is extracts either to the

reports in Gower that I have referred to, and in

particular for the remainder of the volume to
particular legislation which carries through this

reg i me o f n e c e s s a r y 1 i mi t a t ion. In pa rag rap h 4 we

refer to the provisions in the 1856 JOINT STOCK

COMPANIES ACT which prohibited more than 20 persons

carrying on business in partnership, or any trade

having gain for its object. That appears on page 63.

The same pattern is repeated for the 1862 Act

and we set out section 4 on page 2, paragraph 5, of

the summary, which is also on page 67 of the materials,

and it was this section which Lord Justice James

referred to in SMITH V ANDERSON, to which the Court

already has been referred, 15 Ch D 247, 273,

when he said:

The Act was intended, as it appears to me,

to prevent the mischief arising from large
trading undertakings being carried on by

large fluctuating bodies, so that persons

dealing with them did not know with whom

they were contracting, and so might be put

to great difficulty and expense, which was

a public mischief to be repressed.

The same prohibitions,as we note in paragraph 6, are

to be found in the United Kingdom Companies Acts 1908,

1929, 1948, 1967, and we give page references for that.

We note that at page 90 to page 91 there is the

exception appearing in section 434 of the 1948 Act
for partnerships formed for the purpose of carrying
on business as solicitors, accountants,

stock exchanges and other purposes specified by the

regulations, and there we mention	the Companies
Act 1985 as similar provisions in respect of limiting

outside partnerships, save for the deletion of

reference to banking in pages 98 to 99 of the materials.

Turning to the Australian position, the

provisions of the English Act of 1862, which was

entitled An Act for the Incorporation, Regulation

and Winding up of Trading Companies and other

Associations, each of the Australian colonies except

Western Australia which modelled its legislation on

the JOINT STOCK COMPANIES ORDINANCE of 1858 - it

modelled its earlier Act on the Act of 1856 - followed

a similar form to the United Kingdom legislation and

we there set out various extracts of legislation from

the original Acts which are at the top of page 4 at

the end of paragraph 7 with page references to our

materials, to substantially identical provisions in

ClT47/l/HS	302	5/10/89
NSW(2)

the various colonial COMPANIES ACTS at the time of

Federation, set out in paragraph 8 with page references
and we there set out, not comprehensibly for all
States to date - I suppose we do actually, yes. It

is comprehensive. We set out the relative provisions

for the various States up to the time of the uniform

COMPANIES ACT with page references; we set out the

provisions of the uniform COMPANIES ACT at page 217,

and a reference to the COMPANIES CODE, section 33(3),

at page 223.

We note in paragraph 9 that section 33(4) of the COMPANIES CODE created an exemption from the

prohibition of section 33(3) in the case of a

profession or calling declared by the ministerial

council to be capable of being carried on by an
unincorporated partnership or association of not more

than a specified number of persons, and that appears on

page 223 of the materials. So we establish by that

summary and by reference to the various Acts which

are in the volume of statutory and historical materials

that what Gower states at page 11 of those materials

as being one of first of the three main principles

which have constituted the basis of our company law

have been translated through without a break in

colonial COMPANIES ACTS through to the present uniform

COMPANIES CODE and, indeed, as we have seen, the

similar provisions in section 112 of the

CORPQRATIONS ACT.

(Continued on page 304)

Cl T47 / 2/HS	303	5/10/89
NSW(2)

MR GRIFFITH (continuing):  In that context, it is our

submission that the provision must be characterized.

Whether or not it also may be characterized as

a provision with respect to the law of partnership

it must be characterized as a provision with

respect to the law of incorporated companies,

if you like, the law of corporations, the law

of trading and financial corporations, given

the limitation of the operation which is now

conceded, particularly by New South Wales in

its oral submissions, that the limitation of

section 112 is no wider than the constitutional

limitation.

BRENNAN J: What is the proposition, Mr Solicitor, is it

that if there be a power, the exercise of which
is apt to remedy a mischief, the power extends

to the remedying of the mischief?

MR GRIFFITH:  Your Honour, we say the power is directed

to the remedy of the mischief which forms the

basis of corporation law~ namely to ensure that
outside partnerships are carried on only in

incorporated form.

BRENNAN J: That is one of the incidental mischiefs that

the corporate law has remedied. One would think

that perhaps limitation of liability would at

least in modern day be a principal advantage

that is secured by the companies legislation.

MR GRIFFITH:  Your Honour, that is the advantage of the

proprietors of the business.

BRENNAN J: Quite.

MR GRIFFITH:	But the other pruvision is basically directed to the advantage of those dealing with the persons;
that was what it was directed to, Your Honour,
the reference to SMITH V ANDERSON. One picks
that up when reading Gower, Your Honour, it is
intended to deal with the public mischief of
those members of the public who engage in transactions with an amorphous numerous number of individuals
and when one reads Gower, Your Honour, one discovers
that the fact that they had unlimited liability
if not incorporated was a very negative advantage because of the practical difficulties of ever
effectively suing them all.

BRENNAN J: There are two propositions here, are there not,

one is that there is a mischief to be remedied,

their mischief consists in allowing a large number

of persons to be associated for trading purposes?

MR GRIFFITH:  Yes, Your Honour.

ClT48/l/ND	304	5/10/89
NSW(2)

BRENNAN J:  The second is that if that mischief is to be

put an end to, the better way of doing it is

by way of an incorporated body?

MR GRIFFITH:	Yes, Your Honour.
BRENNAN J:	Why is it that the prohibition against outsize corporations is not to be seen properly as standing
apart from the remedy that may be available for
those who desire to carry on trading activities in association?
MR GRIFFITH:	Your Honour, we say it is an integral part

of the law in respect of corporations.

BRENNAN J:  Yes, I appreciate that. I was just trying

to discover the reason why.

MR GRIFFITH:  Your Honour, because we say that the laws

in respect of, as it were, trading corporations

joint stock corporations, have as their bases

the imposition of a legislative scheme to provide

for the incorporation and regulation both of

internal management and dealing with third parties

in respect of Persons who have joined together

in business activity for the purpose of gain.

And that that aspect, so defined, Your Honour,
has, as its necessary ingredient, provisions
which provide that above a certain size, which

is determined by the legislature and we have

had a history that has ranged from 10 to 25

in the case of other than the prescribed professions,

that within that historical experience, Your Honour,

that is regarded as an integral part of the laws

with respect to the matter of power which is

the regulation of the corporate companies carrying

on business.

DAWSON J: Is that not unnecessarily complicated? Why

cannot you just say if you have powers to make

laws with respect to incorporation you must have

power to say when people are incorporated,

and that necessarily implies a power to prohibit?

(Continued on page 306)

C1T48/2/ND	305	5/10/89
NSW(2)

MR GRIFFITH:  Yes, Your Honour I was going to get to that,

but yes, that was unnecessarily complicated.

BRENNAN J:  And the power of incorporation - the power on which

you rely is a power which can be exercised to compel

people to do things.

MR GRIFFITH:  Your Honour, it does not compel them to do anything.

They do not have to engage in business in association

BRENNAN J: Quite.

MR GRIFFITH:  It is if they wish to engage in business

association, Your Honour, and we get back to the point

that companies law is merely a provision which provides

that those who associate,either as subscribers or
members of the company, they are the persons that are

incorporated as the company, now, Your Honour, if above

a certain number desire to associate for the purposes

of gain, well then, CORPORATIONS ACT vindicate the
public interests and have from their origins back to

1844, that if they desire to do so, if there is more

than a certain number fixed by the legislature, and

there has been variations made because of the necessity

it has been seen to allow more than that number in

respect of certain professions or calling, they must

incorporate.

BRENNAN J:  If I can just delay you by one other question; if

section 112(1) and (2) were a State law, and the

other provisions of the CORPORATIONS ACT were

an Act . ... . would there by any difference in

the operation from the operation which the Act would

have with sections 112(1) and (2) incorporated - - -?

MR GRIFFITH:  Your Honour, none at all in result. There are

provisions equivalent to section 112 in the State

law and we give a reference to them, Your Honour.

If section 112 is struck down, they will remain and

require incorporation. Now, Your Honour, in that

circumstance- jf section 113 is not struck down, well

then, the incorporation will have to be under our Act.

If section 113 is struck down the incorporation may

be under the State Act, but if it is, Your Honour,

the operation of Division 2, section 126 of the

CORPORATIONS ACT, 'i•.ould require those companies

registered under the State law to register after

the transfer date proclaimed under section 98 under the CORPORATIONS ACT if they are to carry on their business. So they will end up under our Act in any event.

BRENNAN J: Yes, I was not concerned about section 113 - - -

MR GRIFFITH:  I am sorry, Your Honour.

BRENNAN J:  - - - it was 112(1) and (2). At the moment I do not

see how one states the connect:bn between that and

ClT49/l/FK	306	5/10/89
NSW(2)

the power to provide for incorporation1 which brings it

within the power, but it may be as my orother

Dawson says, that it is just part o± it all -

MR GRIFFITH:  I had better keep going, Your Honour -

GAUDRON J: Well, whilst you are interrupted, I have some

difficulty with relating your answer to Justice Dawson,

with your earlier submission this morning, that the

word "corporation" served to make it clear that

there was not a general power with respect to trading

associations.

MR GRIFFITH:  Yes, Your Honour. I must elucidate. What I intended

by that, Your Honour, was to say that it was clear that

we did not have a general power in respect to

partnership law; that remains within the province of

the State. But what we say, Your Honour,as a

matter of characterization, a law with respect to

incorporations includes a law which reflects what

Gower refers to as the first basis principle of

company law, namely that above a certain size you
must come within the Act, and we say, Your Honour,

that a permissive form of company law which had no

coercive form of this sort would, in effect, not be

a company law. Certainly it would be company law

unlike any company law we have had since 1844, which - - -

DAWSON J:	At all events there is no basis on which you can say
that the law in respect to incorporation has to be
only facultative and cannot be compulsory.
MR GRIFFITH:	No.
DAWSON J:	The power must embrace a person.

MR GRIFFITH:  Yes, thank you, Your Honour, yes. I hope I have

answered Your Honour Justice Gaudron, I was

contrasting partnership - - -

GAUDRON J: Yes.

MR GRIFFITH:  - - - to indicate that we say that most firmly it

is within power for us to mark off the demarcation

as to when you can remain a partnership. Now, having

said that it is put against us, but then you could

proscribe right down to two partners under this

provision in respect of trade or callin~ That must

be beyond power.

ClT49/2/FK	307	5/10/89
NSW(2)

MR GRIFFITH (continuing): In our submission, this provision

is to be characterized by reference to its

historical role, which is one,as the side note

indicates, dealing with outside partnerships,

and we say, Your Honour, it is obviously read on

the basis that the ministerial power of prescription
is to be exercised by reference to prescribing

outsize numbers in respect of the professions or callings. When one has a look at the derivation

of these provisions going back to the UNITED

KINGDON ACT carried through the COMPANIES CODES

and looking at what has been comitted under

those, one has outside partnerships of scores or

even hundreds that are permitted in particular

professions such as solicitors, accountants and

brokers.

Now, Your Honour, we say power is not to be

tested by reference to the theoretical analysis

that a minister might fix upon two. If a minister

did gazette two for the calling of solicitor or

a cleaning person in government offices or something

like that, Your Honour, we say then it may be a

real question as to whether that exercise of the

power is within the constitutional power and if

the minister did, Your Honour, fix that,well then

there might be an argument that in so fixing it

he acted beyond power, because the action could

not be characterized as an action in respect to

a law relating to the provisions of corporations,

including provisions for outside partnerships,

but we submit, Your Honour, that is not the

position that arises here. There is a power which

reflects very much a history of 20 persons

in the normal case and reflects the emerging

capacity by a convenient and flexible means make

special and ordinarily excess provision in the case

of particular professions and that is all that the

section does, in our submission.

Now it is put by my learned friend,Mr Handley,and

in the propositions for the State of New South Wales,

that the issue is to be determined apart from

historical precedent, but we submit that that is

inappropriate to consider this issue apart from

historical precedent. It is historical materials

which demonstrate its origin as an integral and

essential part of the laws in respect of the

provisions for the incorporation of associations of

persons of a particular size into incorporated

companies and we refer again to what Gower has

to say in respect of that. And we say that it is

sufficient to support this section and section 113,

to say that they reflect the original and historical

structure of companies legislation to provide for

CITS0'/1/CM	308	5/10/89
NSW(2)

business partnerships above a certain size, to use

incorporation under a CO!1PANIES ACT as the mechanism

for carrying on business, and of course the number

of 20 is historically the usual number. We

say the introduction of provisions for flexibility

in respect of professional partnerships does not

alter the characterization.

We turn now to section 113. We say that if

our contention be accepted that section 51 (xx)

extends to the incorporation of trading corporations,

then section 113 validly prohibits all or part of an

activity which is at the centre of the power.

AUSTRALIAN NATIONAL AIRWAYS V THE COMMONWEALTH,

51 CLR 29 and BANK OF NEW SOUTH WALES V

THE COMMONWEALTH, 76 CLR l, are authorities

for the proposition, at least where there is a

power in respect of an activity,that the Commonwealth

might prohibit the activity altogether. The

question remains whether there is any different

result where the constitutional power, is one in
respect of persons rather than activities.

(Continued on page 310)

CITS0/2/CM	309	5/10/89
NSW( 2)

:t1R GRIFFITH (continuing):  We submit a modest approach on

this would be to equate an activity at the centre

of the power in respect of persons to an activity which is the expressed subject of power. So, for

example, it could be seen that the Commonwealth

could prohibit the trading activities of
trading corporations or allow those activities on

conditions and we say equally the Commonwealth can

prohibit incorporation of trading corporations

once the incorporation of trading corporations is

seen as the centre of power. So, this prohibition
could be absolute or might extend to particular

avenues for incorporation. Alternatively, we

submit, section 113 is a valid exercise of the

implied incidental power of placitum (xx) and that it

merely completes the scheme of the CORPORATIONS ACT
to provide a comprehensive regime for the

incorporation of trading corporations and for their

regulation.

DEANE J:  What do you say to Mr Handley's submission that

section 113 does not really do anything at all in the sense that at the moment of incorporation you

cannot tell whether for the purposes of this Act the

company is, as distinct from will be, a trading

corporation?

:t1R GRIFFITH:  Well, Your Honour, we say that section 113

should merely be regarded as reflective of the
remainder of chapter 2 of the Act which provides

for incorporation under the Act of trading or

financial corporations. Now, we say, Your Honour,

despite the difficulties in defining it they must

be capable of definition because the constitutional

power must be capable of being defined and effectively

applied. And, we submit, section 113 merely is a

reflection of that to say that if you include. it

within these parts of the Act well then you

incorporate under this Act and not under the State Act.

Now, Your Honour, the prohibition can go no further

than it may be effective by reference to the

constitutional power. If it be the case, Your Honour,

that a company incorporated without limitation on its
objects is for that reason to be characterized as a

trading or financial corporation, Your Honour, then

it would follow that the prohibition would attach to

persons who intended to incorporate - - -

DEANE J:	Assume that that is not so, that at the moment of
incorporation you cannot tell.
:t1R GRIFFITH:	Your Honour, if it is not so, it will become a

matter of evidence in any case as to whether or not

the incorporation is either on incorporation or at

some later time to be regarded as a trading or

financial corporation. Now, if it is incorporated

ClTSl/1/JH	310	5/10/89
NSW(2)

under the State Act, whether or not there is a

prohibition under section 113 and whether or not

the incorporation is in apparent breach of the

prohibition, as soon as it seeks to engage in trading

activities it must comply with section 126 and come

under the Connnonwealth Act. Now, Your Honour, if

those who are associating for the purpose of
incorporation wish to be coy about their activities or

to deny themselves the capacity to enter into

trading activities, Your Honour, then it could be

said they are not caught by the prohibition of

section 113. Now, if there is material, Your Honour,

which indicates that those who have joined together

to incorporate do have the intention of engaging in trading activities well then the application of the ordinary FENCOTT test will result in the corporation

being so characterized. Your Honour, we say that

then thereach of section 113 would depend upon the

appropriate characterization of the corporation; that

must become a matter depending on the particular
circumstances and the particular indicia which are

regarded as those indicia which determine that, be it merely from the objects or the absence of prohibitive

objectives, or being evidence of the intention of the

subscribers. But, Your Honour, we submit that that

has nothing to say about whether or not the

provision is within power. The question my learned

friend, Mr Handley, raised then effectively is, are

these persons who are not prepared to say anything

about their intention able to say they have not breached

section 113. Well, they may well, Your Honour, but it

does not get them very far because if, in fact, they

intend to engage in trading activities before they
put up their shingle first day they have to comply with

section 126 and come in under the next part of the Act.

DEANE J:  Well, does that mean that you say we do not have

to worry about whether section 113 has any content?

(Continued on page 311)

ClTSl/2/JH	311	5/10/89
NSW(2)

DEANE J (continuing) :  You see, one view' on FENCOIT, if the attack on it

be correct on that passage, is that it failed to

distinguish between the notion of what is a trading
corporation and the reach of a legislative power

with respect to trading corporations. Well now,

if that view be correct, and I am not suggesting

it is, it may well be that you would say a company

incoporated with power to trade is within the reach

of the legislative power but the mere fact that it

has a power to trade does not make it a trading

corporation. Now, if that view were taken,

section 113 would have no content because, except

in the very rare case that excluded other activities,

you would never know at the moment of incorporation

whether or not a company was a trading corporation

as distinct from, perhaps, whether it was in the

reach of the legislative power with respect to

trading corporations.

MR GRIFFITH:  WelJ., Your Honour, that fact may invite you to

reconsider whether or not that could be the case,

that the corporation could not be so characterized

then as a trading and financial corporation. But,

Your Honour, perhaps so far as a scheme of the

Act is concerned, retaining section 113 in those

circumstances would still complete the scheme of

ensuring that those that associate in excess of the

prescribed number, for the purposes of gain, to

engage in business activities must do so on terms

only that they register under the Act either on

Division 1, because the prohibition of section 113 prevents them, even if they wanted to, registering under the State Act or, if the prohibition does not

attach to them, for the reasons Your Honour explains
or for factual reasons, because when they do seek
to engage in activities, those activities are trading
activities within the Act, they then must come in
under Division 2 and they end up in the same point:

companies regulated under Part 2.2 of the Act.

We say that it is sufficient for the purpose of respect of the incorporation of companies which may	scheme of the Act to provide exhaustively in legislative section 113 to see it as completing the
be characterized as trading or financial corporations. question as to whether a company at that stage is.
We made submissions as to why we say it is. If it is not, Your Honour, it may be that section 113 would have little content but one perhaps could not
say that it has no content. If one had the clearest
of evidence, Your Honour, that these persons are
floating a public company for trading purposes, it may well be, Your Honours, a matter of applying any
characterization test the company, on formation, will be regarded as a trading or financial corporation.

ClT52/l/DR	312	5/10/89
NSW(2)

If that was the case, we would say section 113 would direct incorporation to be only under

Division 1 and not by originally under State law and

then transfer to Division 2. I suppose, Your Honour -

a matter of passing observation: if, in fact, a

company is going to be one of the run of the millcanpanies

engaged in trading activitie& if it engages in either

there is almost no motivation to seek to register

under the State Act in that you just do not have a

future there because of the operation of section 126.

So, we submit that so regarded, section 113 is a law either - directly characterizes the law with

respect to trading corporations or could be justified

as being incidental in respect of the exercise of

the corporations power. My learned friend, Mr Handley,

sought to characterize the law as a law with respect

to partnerships. We say that the historical material

referred to prevents that characterization as a

matter of characterization but, of course, the

question is not whether or not the law also may be

characterized as the law of partnership. We may

conceive that it does for the purpose of argument

but whether or not is the law characterized as a law

with respect to corporations? If it is, it is within

power and we submit it is not to the point; that

it also could be characterized with respect to

activity trading partnerships unincorporated that are

not within power.

(Continued on page 314)

ClT52/2/DR	313	5/10/89
NSW(2)

MR GRIFFITH (continuing):  So that for my learned friend

to make his submission on this point he has to
exclude the possibility of characterization as being

with respect to corporations power, not merely

make the point that it is to be characterized

also with respect to partnership. And we say that

my learned friend cannot, particularly having

regard to the historical justification for these

provisions, so make out the point either with

respect to section 112 or section 113.

My learned friend, the Solicitor-General

for New South Wales, indicated that it is not
intended by any of the plaintiffs to pursue
the point as to manufactured inconsistency.
We say that the Court should regard that as,
in effect, an abandonment of the argument and
without saying one can have a consent order on

these things, we would submit that on its face

there would seem to be no basis for a contention
that section 113 seeks to manufacture any

inconsistency; therefore the Court should take

the view, not that this is an issue left outstanding

and put on one side, but one which cannot, on

any view, we submit, result in section 113 being

regarded as invalid if otherwise within power.

We say the section exhibits substantial connection with the subject-matter and that once it be accepted that the power may be exercised to provide for incorporation, it follows that the power can

be exercised to provide that there shall only
be incorporation under this Act. And that is

whether or not there are some issues as to the particular reach of companies having regard to the argument which we made on the wide FENCOTT test of registration or non-registration of

restrictive objects.

New South Wales submitted that if the Conrnonwealth

lacks power to incorporate under section Sl(xx),

or has failed to do so validly, section 113 must

fall. That is probably so on the basis of severance,

we would conced~ but we would not concede that

it is impossible for us to pass a law proscribing

incorporation. But that would seem not to be

an issue which here arises because it would seem

that if we do lack the power to incorporate then

it could not be a severance of this provision.

GAUDRON J:  I do not follow that, Mr Solicitor, I am sorry;

You say withoat providing for incorporation at

all you could pass a law proscribing incorporation

undere another law?

MR GRIFFITH:  Your Honour, if we do not have power to - I did not make myself clear, so Your Honour .....

C 1T53/1	/ND	314	5/10/89
NSW(2)

if we do not have power then we cannot do it;

if we do have power but we have not done it

effectively then we could still do this,

Your Honour.

GAUDRON J: Without providing for incorporation?

MR GRIFFITH:	Yes.
GAUDRON J:	Would that :not be equivalent to reciting yourself

out of constitutional power?

MR GRIFFITH:  I do not want to recite myself out of

constitutional power, Your Honour. Your Honour,

we say that if we had power to provide the

incorporation of trading corporations we may

exercise that power to prohibit it. That is

the broad point of power that we just made.

DAWSON J:  The power to make laws with respect to incorporation

is a power to say not only how people should

incorporate but when they should incorporate

and not incorporate.

MR GRIFFITH:  Yes.:.::.

DAWSON J: That is what you say?

MR GRIFFITH:  Yes~ Your Honour. So that is - if we have

the power to regulate incorporation but we have

done it imperfectly here, we say that it does

not follow that a provision such as section 113
would be bad but the way it is here would seem

to be part of the scheme that we have don~ so
that probably it is inseverable and would fall.

Perhaps I got into a little bit of

trouble by volunteering that fall~back position

which seems to be a theoretical one here.

But we agree with what Your Honour Justice Dawson

said.

(Continued on page 316)

C1T53/2/ND	315	5/10/89
NSW(2)

MR GRIFFITH (continuing): As to section 113, we say that it

is not concerned with an incidental area of the power
but it is concerned with an area at the centre of
the power, or can be seen as a law better to secure

the Commonwealth system for incorporation and for

that reason we, of course, deny the contention made

that section 113 is a mere limitation on concurrent

State legislative power. We say that it does not

and cannot have that characterization.

Of course, there is no principle that

constitutional interpretation of Commonwealth law

may not, when it is within power, interfere with

the operation of a State law. So for those reasons,

we submit that section 112 and section 113 are within

power. We say that this characterization is not denied

merely because of provisions directed to persons.

Section 112 is directed to ensure that outside partnerships for gain for reasons of public interest are incorporated and we submit that it is within

power in respect of both provisions for them to

be directed to persons.	We say it is not surprising -
I have already said	that most incorporated companies

will be regarded as trading or financial corporations,

but we see no difficulty in respect of those few

corporations which do not intend substantially to
engage in trading activities in avoiding the reach

of sectionsll2 and 113.

The broadest approach of FENCOTT will not impinge

upon them if the subscribers do not intend to engage
in trading activities if they exclude trading activities
under section 37(1)(a) of the Codes - that is set out

in page 231 in our materials -and we would submit that

if it is a fact that those who are incorporating do

not intend to engage substantially in trading
activities, or to come within the ambit of the

constitutional definition of trading or financial

corporation, it must be that read properly and

interpreted and applied sensibly that the provisions

of the Act, including section 112 and particularly

section 113, would not require them to incorporate,

if they are going to incorporate at all, under the

Commonwealth Act, and this comes back to the point that

we discussed with Justice Deane earlier, that if it is

the case that there is no intention amongst those who

control the company to engage in trading activities,

therefore any activities statement will deny

intention, we would submit is a matter of obvious

interpretation and application of the Act.

Such a corporation, when incorporated, could not

be characterized as a trading or financial

corporation, or should not be, and therefore the

proscription of section 113 does not apply.

ClT54/l/HS	316	5/10/89
NSW( 2)

DEANE J: 

Except section 113 does raise a special pro~lem,

does it not, in that if one is unpersuaded by your
argument that subsection (xx) as a matter of language

extends to incorporation, there would then possibly

be an argument that the power with respect to trading
corporations extended to authorize a law prohibiting

corporations from becoming trading corporations unless - now that power, which is more limited that the one you

would argue for, might well authorize the prohibition
of corporations with power to trade trading and

becoming trading corporations?

MR GRIFFITH: 

Yes.

DEANE J: 

It may not go so far as section 113 and extend to

control of incorporation. I am probably being obscure,

but it seems to me there may be a border or a line

there that puts section 113 in a different category.

(Continued on page 318)

Cl T54/ 2/HS	317	5/10/89
NSW(2)

MR GRIFFITH: Well, there could be, Your Honour. T.nat might

be a matter for another day because one can see

from the chapeau to Your Honour the Chief Justice's

order referring these questior.sinto Court and there

has been indication by the Commonwealth that if -
and expected, I suppose, that within the judgments

one will discover whether or not the placitum (xx)

carries the power to incorporate; if it is held not
to carry that power well then it is agreed that

chapters 2 to 5 of the Act will not be proclaimed.

So, in other words, it is agreed that whatever

might be the issues as to theoretical powers for

internal management dealing with third parties

without the power to incorporate - - -

DEANE J:  Well, what does that mean? I mean, does it mean that

if at the end of the day one was not persuaded that
subsection (xx) conferred , at least the power with
respect to incorporation, that it is unnecessary to
consider whether it conferred power to say, "No
corporation will become a trading corporation within

the Commonwealth unless incorporated under a

Commonwealth law"?

MR GRIFFITH:	Your Honour, I think in the context of this legislation, the arrangements between the parties, that
that would be so in that it is agreed, Your Honour,
that if there is no power to incorporate it is an issue for another day and another Act insomuch as matters of registration and internal management are
concerned. It is not agreed, with respect, to the matters of take- over securities and futures which are expressed independently, we would say, of this issue
of incorporation and internal management.
DEANE J:	Except, what I was asking you about would be a

legislative power with respect to corporation

derived from subsection (xx)' indirectly.

MR GRIFFITH:  I follow that, Your Honour, but we would not

be seeking to vindicate section 113 because if we do

not get up on the first leg of the power to

incorporat~ well the~ the Act in this form we walk

away from, Your Honour, for chapters 2 to 5.

DEANE J:  Well, what I was really concered with, was can we

forget about that problem for another day if it is

arguable?

MR GRIFFITH:  Yes, Your Honour, I think that can be left on

the shelf because if that is the situation we

reach, Your Honour, we will not seek to have that

explored to justify section 113 because at that point,

Your Honour - - -

DEANE J:  Well, I was thinking more of other sections.

ClT55/l/JH	318	5/10/89
NSW(2)

MR GRIFFITH:  Well, Your Honour, in effect, if it is held

that there is no power to incorporate,

chapters 2 to 5 need not be considered further because

they will not be proclaimed.

DEANE J:  I think that answers me but all I was putting to

you was, on the assumption that a legislative power

with respect to corporations formed does not, as a

matter of language, embrace a direct legislative

power with respect to the incorporation of

corporations but it does, on the hypothesis I was
putting to you, embrace a legislative power to say
a corporation will not become a trading corporation

unless it is incorporated under our law and to enact

a law providing for incorporation.

MR GRIFFITH: 

If what Your Honour is saying is that you get

to the same result as if you have got power to
incorporate - - -

DEANE J: 

Well, it would not be the same result, no, but it

would, if it were correct, uphold the validity of a

large part of the scheme of this Act.

MR GRIFFITH:  Your Honour, we would not want to foreclose

Your Honour elucidating those aspects.

DEANE J : I understand that. I am just seeking your assurance that we do not

have to \'X)rry about that, tha:: we can put it to one side

in answering this particular question.

MR GRIFFITH:  Your Honour, it could well be regarded as part

of the answer to the question; that is the question

rather than incorporate one and I think perhaps it

was, Your Honour, the parties were thinking directly

rather than elliptically to coming to the issue of

vindicating particularly chapter 2 of the Act.

(Continued on page 319)

ClTSS/2/JH	319	5/10/89
NSW(2)

MR GRIFFITH (continuing):  Your Honour, if one can come

to vindicating chapter 2 ~y ~ different

mechanism which gets to the same result, that

would be of assistance to the parties so that
we would not wish Your Honour to feel forclosed

by the indication of the arrangement between

the parties. Perhaps it just really reflects

Your Honour, the way we sort _of tend to stick to our last and start at the beginning and think we are

working through to the only path to the next point.

I did indicate earlier that I wished to make some

passing remarks on holding companies. In FONTANA,

150 CLR 209, Your Honour the present

Chief Justice said:

Further reflection has confirmed in my mind the correctness of the view that the operative provisions to the extent to which they apply to par.(d) corporations are

ultra vires, because the holding companies

referred to are ex hypothesi outside s.5l(xx)

and s.122.

Justice Aickin agreed with Your Honour at page 215.

Justice Stephen at page 195 said:

Attention was drawn to the definition of

"corporation" in s.4. To the extent to which

it extends to holding corporations it is no

doubt in excess of power, such corporations may

not possess any of the qualities of

"constitutional" corporations; but this

offending part of the definition is clearly

severable.

Now, we would seek to explain Your Honour Justice Mason's

discussion of that issue by reference to the phrase

"ex hypothesi" of indicating that the last paragraph

was ultra vires because the previous paragraph

would include all those companies within power, so

that invalidity would follow as a matter of drafting.

The definition of corporation in section 9 of the

CORPORATIONS ACT which appears on page 2,182 of

the blue volume, lists constitutional corporations

(a), (b), (c), (d), (e), (f) and then says or (g):

a holding company of a body corporate of a kind

referred to in

the preceding paragraphs. If the point made by

Your Honour the present Chief Justice in FONTANA was

thatthe equivalent of (a) to (f) would include

a holding company which is a trading company in any

event, so that all constitution or corporations

are included before one gets to (g), well that is

CIT56/l/CM	320	5/10/89
NSW( 2)

an explanation of Your Honours remarks. We would

say that on any view FONTANA does not stand as

authority that holding companies cannot be regarded
as falling within placitum (xx) and we made
some passing submissions this morning that they

may easily be regarded as trading and financial

corporations, either by reference to their own

circumstances, say as a financial corporation

as a holding company,by reference to particular

circumstances may justify holding them as financial

or trading companies or, and this has not been
considered or determined by the Court, we say might

be so regarded merely because of their close

relationship with their subsidiaries which were

trading or financial companies, but in any event

we would submit that one may - it does not have

determined in this case, but just to indicate ambit of the reach of the CORPORATIONS ACT - we

would suggest that to regard holding companies

as being trading or financial corporations may

easily be regarded as incidental to the power and

to support that if we could just give a reference

of Your Honour the Chief Justice and Justice Deane

in REF.: EX PARTE F,	(1986) 161 CLR 376 at
391.

The Court does not have to determine this but

we do not wish to be thought to say that holding

companies are not included in Parts 2 to 5

We have indicated that they are included specifically

in subsequent parts.

(Continued on page 322)

CIT56/2/CM	321	5/10/89
NSW( 2)

MR GRIFFITH (continuing):  Your Honour Justice Deane referred,

I think, this morning to Sir Samuel Walker-Griffith's

draft of the successive state of the CONSTITUTION. I did not have an advantage of the copy of that at the

time, so that really I thought I was answering

Your Honour in respect to the FEDERAL COUNCIL OF

AUSTRALASIA ACT and the first draft, and Your Honour

picked me up on that, but Your Honour, looking at

that draft and I think my learned friend,Mr Doyle,

has a copy to hand up to the Court in reply,	inasmuch
as I understood Your Honour to suggest that the

reference in those drafts to the status of any State or foreign corporation and corporations formed in other States would tend to indicate that that draft was on

the basis that they were already formed, perhaps now,

having that draft before me, if I could indicate

to Your Honour, we would, of course, agree that a

power defined by reference to the status, particularly

in reference to an expression formed in other States,

would indicate, Your Honour, that they were corporations
either formed or to be formed elsewhere and not to

be formed by you.

Your Honour, we have no difficulty _about that. We say that that

is reflective of a provision dealing with sort
of status issues, that there is no need to make the

obvious comparisons with the provision of placitum (xx) in

which it -emerged which deleted status with its

history in the conventions and with the expression

"formed within the Commonwealth" rather than the

other draft expressions.

I am sorry that I was not quite ad idem with

Your Honour when I remonstrated over Your Honour's

suggestion. For those reasons, it is our submission
that the questions asked of the Court; the first

question should be answered, "none", and the

second question should be answered "yes".

If the Court pleases.

MASON CJ:	Thank you, Mr Solicitor.	Mr Solicitor for South Australia,
do you wish to reply first?

MR DOYLE:	If the Court pleases. Your Honours, I take it in
terms of Commonwealth eyes, this would be seen as
the time when the walking wounded make their
appearance.  We sew it up here in the good ship
HUDDART PARKER which seems to have sunk without a
trace, and for those of us who struggled ashore, we
found the Commonwealth canons of construction
shelling us in all directions, and it is only those
of us who have survived that waterlogged journey and then perilous struggle ashore that remain to
speak to the Court.
DEANE J:	Well, let us shorten the proceedings.

ClT57/l/FK	322	5/10/89
NSW(2)

MR DOYLE:	Well now, Your Honours, I thought the other analogy
was the light brigade that galloped into the blazing
cannons in the Crimean War, but undeterred by the
hopelessness of the task, they soldiered on until
not a man, or hardly a man of them was left, and so
perhaps that is the other analogy that is fitting.

Your Honours, my learned friend, through much of

his submissions, was obviously inviting the Court to

approach the matter on the basis that the power

was inherently a wide one, and then obviously seeked

to apply to it the principle that the power was to

be read largely and liberally. At an early stage of

his submissions he said, I think, words to the effect

that, these days "company" means an "incorporated

company". Can I just begin by making the point, well,

although to most people the word "company" may mean

an incorporated company, historically that clearly was not so and incorporated companies were but one

branch of what was seen as the law of companies.

Could I just remind the Court of what was said by

Lindley. This was in materials provided to the Court

by Mr Daviesi There was a little booklet of materials

provided. ~ is the sixth edition of Lindley, the

1902 edition,and I do not need to read to Your Honours from it, but at pages 7 through to 11 the author deals

with, what he calls, different sorts of companies

and when one runs through the classifications that

he gives, he begins with partnerships, and then

partnerships with more members than usual;
partnerships privileged by the Crown; corporations;
incorporatedpartnerships, and he goes on and on, but

the point which emerges clearly from those four or five

pages of Lindley is that "companies" was a relatively

broad field, one small part of which was the

incorporated company.

(Continued on page 324)

1T57/2/FK	323	5/10/89
NSW(2)

MR DOYLE (continuing): In my submission, that is important

because from that sort of proposition my learned

friend then went on to say something which I jotted

down at the time as this: "that it is a very

broad power dealing with all" and then I think he

said, "almost all joint stock companies". But,

again in my submission, the significant thing is

that the drafters did not use the broad word

"companies", they did not even use the slightly

narrower but still broad "trading companies",

what they selected was "trading corporations". In
my submission, in looking at the power as a whole

it is important to bear in mind that the draftsman

has selected what would have been only one part of

a much broader field and, in my submission, in

a general way that supports the view that the

power was not seen as such a wide embracing power

as my learned friend suggests. And, of course,

we also argue that the phraseology chosen suggests

that the intention was to refer to existing

corporations in the sense of those which gain their

life from some other source.

Just on that point and in that general connection: my learned friend referred to the

convention debates in the small book entitled,

"Appendices to Contentions for the Defendants".

I must confess to some unease because, on our part,

we started this hare runningwiththe convention

debates but I, at times, had the feeling that on
all sides we were perhaps moving from anything
remotely related to mischief to starting to read

the debates with a view to suggesting that is what

the words used mean. But, with that slight apology,

could I just invite Your Honours' attention to a

portion which my learned friend did read. It is at

page 7 of that book - a passage in the convention

debates - and there Mr Symon is recorded as asking:

Why not simply use the term "company"? If

you use that word it will be well enough And Mr Barton says:	understood.
Why not adhere to "corporation"? That governs everything under the COMPANIES ACT.

Now, in my submission, that is certainly consistent with the view that what he had in mind

was a power which would govern all those creatures

which were being brought into being and would
continue to be brought into being under Companies Acts.

In other words, he saw it as a power which would

operate on corporations coming into existence under

State Companies Acts and, in my submission, if this

ClT58/1/DR	324	5/10/89
NSW(2)

approach to the matter is relevant it is certainly

suggestive of the fact that he saw the power as one which would operate on things coming into existence

under companies Acts. That was why he chose

"corporations" because the reality was that everything

coming into existence under companies Acts was, in

1900, a corporation because the companies Acts

prohibited trading by associations other than through

the medium of the State incorporated company.

In that same area of the history of the matter,

my learned friend, in relation to section 112, said,
"section 112, or sections like it, and its historical

predecessors were an integral part of company law". In my respectful submission, that displays the same

flaw in his reasoning. The Commonwealth is not

legislating on the topic of company law. Certainly,

sections like section 112 were an integral part of

company law because company law was an area of law

dealing with a range of business associations.	What
the Commonwealth has is power in relation to trading corporations and, as I submitted inrur

submissions on Tuesday, it is our submission that one cannot reason by analogy and say, "Well, because this

sort of provision was common or integral for company

law that, therefore, it naturally falls within the

topic of laws with respect to trading corporations."

The two topics, or heads of power, in our respectful

submission, are quite different. That is our first

point.

Second point, just in relation to the word,

"formed". It was suggested, as I understood my
friend, that in our submissions we had sought to
use it in an unsound temporal sense, with respect,
we submit that is not so. We submit that "formed"

in the power embraces constitutions which, at any

moment, have been formed, are being formed, will be

formed but the stress is on the passive sense of

the word and the reference is to, as Your Honour

Justice Brennan put it yesterday, I think, a

corporation which has suffered the process of formation. That is the subject of the power.

(Continued on page 326)

ClT58/2/DR	325	5/10/89
NSW(2)

MR DOYLE (continuing): Putting it another and briefer

way, it could be said, in a shorthand way, it

is a power with respect to formed corporations;

they may be formed tomorrow; they may be being

formed right now; they may have been formed

yesterday; but it is a power with respect to

formed corporations. And we would respectfully

agree with what Your Honour Justice Brennan said

on that point yesterday.

Again, on the word "formed", my learned friend said its presence was explicable as

clarifying the meaning of the term "foreign"

and it was not in any sense to be read as

indicating a reference to existing corporations.

In our respectful submission, if there was seen
to be an ambiguity in the word "foreign", the
natural reaction of the draftsman would be to
do something about that word, in our respectful
submission, not to tack on an explanatory phrase

or clause elsewhere in the head of power with

a view to clarifying what in a sense we would

say he had left there, a continuing ambiguity

in the word "foreign". And if the problem was

as my learned friend suggests, surely the logical
thing would then have been to say, for instance,

corporations formed beyond the limits of the

Commonwealth or corporations formed externally

to Australia. In my submission it is a matter

of simple drafting approach.

If the problem was an ambiguity in the word

"foreign", the approach of the draftsman to the

solution is an odd one because he has left that

ambiguity there and he has put some words elsewhere
in the power which my learned friend suggests

then help to remove the ambiguity. But if it

really was an ambiguity in the sense that it

might be seen as referring to all corporations
outside Australia or it might be seen as referring

perhaps to corporations formed in one colony

or State and trading in another, then if there

is that ambiguity there, it remains, in our

respectful submission.

Bu 4 in truth, the answer to it all, in our

submission, is that had the power simply said

"foreign corporations" and "trading and financial

corporations", in truth, there would not have

been an ambiguity and the explanation for those

addition al words is the one we suggest, that they

indicate a reference to corporations which have

been formed.

Your Honours, in relation to some points

that were raised in argument yesterday, we submit

that our submissions do not by any means, necessarily,

C 1T59 /1 /ND 326 5/10/89

lead to the proposition that the power is

restricted to the trading activities of trading

corporations or, alternatively, to trading activities
vis a vis strangers or even, necessarily, to

the external activites of corporations. In other

words, we submit that our submission do not lead,

necessarily, to the conclusion of Justice Isaacs

in HUDDART PARKER that you take them as you find

them.

We accept that the power is a wide one and

we accept that it may well extend to non-trading

activities and it may well be so deployed as

to bear on or affect matters which could be

characterized as matters of internal management.

That does not have to be decided here today.

But the particular submission we do make is that our submissions as to the absence of power over

incorporation are not intended to and we submit

do not lead to the view that the power is then

confined to the trading activities or extenal

activities of the relevant corporations.

So it may well be that the power can be

used to provide, for instance, that any trading

corporation which engages in trade shall have

a paid-up capital of not less than $3 million;

it may well be able to go a step further and

provide, even in relation to a trading corporation

that has not begun to trade, but what it cannot

do is provide that a trading corporation shall

be formed with that paid-up capital because that

is then simply to go directly to incorporation.

And we do not deny that there may well, on our

approach, be some difficult lines to be drawn

and we have to accept that that would then flow

from reading the power as a wide - query how

wide - power in relation to formed corporations;

but we do not want it thought that our submissions

were intended to be an indirect way of saying

that the reach of the power was only trading

activities or external activities.

Your Honours, the next point:  my learned

friend, again, perhaps, doing what at time was

done on our side, argued by reference to symmetry

and said, "Well, in relation to foreign corporations

there is a power to incorporate them and therefore

as a matter of symmetry it can be said there

is the same power in relation to trading and

financial corporations." That was, in particular,

at paragraph 3. 1 of his outline.

C1T59/2/ND	327	5/10/89
NSW(2)

MR DOYLE (continuing):  Our respectful submission is that,

in truth, there is no power to incorporate foreign

corporations. The law may well validly provide that

a foreign corporation which wishes to carry on

business, own property, or be present in Australia

shall incorporate itself under the the local

Commonwealth Act but, in our respectful submission,

that is not to incorporate a foreign corporation, that is simply to require the foreign corporation

to form a local corporation if it wishes to do the

relevant things in this country.

DAWSON J:	You are still dealing with an existing entity.
MR DOYLE:	Exactly, Your Honour. We are still operating on an

existing foreign corporation and the power operates

by reference to it and so, in our respectful submission,

if symmetry comes into the scales at the end of the day,

we submit that it does not assist my friend.

Your Honours, my learned friend, in paragraphs 13 and 14 of his outline, submitted that

even if a corporation was not a trading corporation

at incorporation there was, nevertheless, power to

incorporate such a body on the basis, as he argues

under the Act, that it later must become one, and so

he said even if dormant corporations or shelf

corporations are not, in truth, trading corporations,

the Commonwealth can validly legislate for their

incorporation because it is within power to

legislate to incorporate such a body which must

become a trading corporation and it was in that

context that he referred to what was incidental to

the statutory regime and I took him to refer not so

much to the true incidental power as to what was

just incidental to the grant of power itself.

Could I make three or four points in relation

to that. First of all, picking up my earlier

submission~, as dormancy can be indefinite, in what

sense does he really say that such a body must become

a trading corporation? In truth, it can remain dormant

indefinitely. Secondly, in our submission, it is not,

in fact, true to say such a body must become a trading corporation. The true position is that if it does not

steps should and presumably will be taken to wind it

up but, in fact, one cannot say that it must become

one and it is, in my submission, an important

distinction because it is relatively easy to think,

"Well, this thing must become a trading corporation

in due course. Surely there is power to incorporate

it, although it is not one now", but in truth

of the matter is that one cannot say that. All one

can say is certain statutory procedures will come into

p 1 a y i f i t doe s not . And a 1 s o , i us t to t e s t s h i s

ClT6O/l/HS	328	5/10/89
NSW(2)

argument, one could say, "What is the magic of

dormancy?" If there is power to incorporate a

non-trading corporation which is dormant, the power

being said to exist because it must later become a

trading corporation, what is the difference between

that body and one which is active from day one, not

trading, but as to which one can still say, because of a statement by the subscribers, "After a certain period of being active as X, this is going to be a

trading body". In our respectful submission there

is no magic in dormancy and if you can incorporate

a non-trading corporation which is to be dormant but,

some time later, trading, then, in our submission,

it is very difficult to resist the argument that you

can incorporate any corporation, whatever it is going

to do from incorporation, as long as it is said that

later it will trade and as long as there are

mechanism to wind it up if it does not.

So that, in truth, in our submission, that

argument leads to the position where the power is

to incorporate anything at all as long as there is

a mechanism which is intended to ensure that later

and, on this argument indefinitely later, it begins to

trade, and, in our submission, if those consequences

are right they raise a very real question as to

whether that submission could be sound because the
law is then a law, as I put, to incorporate literally
any type of corporation as long as it later will
trade and, in our respectful submission, we would,

in any event, submit that it is not within power to

create something which is not in fact the subject of

the power simply on the basis that it will later

become one and so we would respectfully submit that,

in any event, the premise is not valid.

(Continued on page 330)

ClT60/2/HS	329
NSW(2)
MR DOYLE (continuing):	The next point, Your Honours, return

to the somewhat tired theme, in a way, of

FENCOTT V MULLER but, again, just to put it in a

slightly different way drawing on the points my

learned friend was making just before he completed

his submissions. Under section 161(1) of the

Commonwealth Act, a corporation has all the

capacities of a natural persoP. Under section 161(2)(b),

even if there is a restriction in the memorandum on

the powers and capacities of the corporation, that

restriction is ineffective and, furthermore, my

learned friend says, "Well, you couldn't, under

this Act, register a body with such restrictions".

Do Your Honours want to just look at that provision,

161(2)(b); section 161(1) gives the capacity,

section 161(2)(b) says that subsection (1) has

effect in relation to a company where there is:

an express or implied restriction .....

despite any such restriction or prohibition.

BRENNAN J:  Section 161(1) does not affect internal

management, does it?

MR DOYLE:	In what sense, Your Honour?
BRENNAN J:	It does not restrict, for example, shareholders' action to control the directors - - -

MR DOYLE:  No, Your Honour, no. So, does it not mean then,

Your Honours, that if FENCOTT V MULLER is right,

anything incorporated under this Act has to be a
trading corporation because even if, contrary to my

learned friend's submission, you can put a

restriction on its powers, they are to be disregarded.

So, if FENCOTT V MULLER is correct in its approach to

determining what is a trading corporation at

incorporation, anything under this Act has to be a

trading corporation because anything under this Act

has to have the capacities of a natural person and
they obviously include trade.	And, while that does

not prove, I acknowledge, that the reasoning in

FENCOTT V MULLER is wrong, it is indeed surprising to

find that the reasoning leads to the situation that

by endowing a corporation with all the capacities of

a natural person, every corporation has now become -

plus the removal of restrictions, every corporation

becomes a trading corporation. And, the same is true,

oddly enough, of companies incorporated under the

State codes because they have the same provisions -

I will just give Your Honours a reference to them -

section 37(1A) and section 67, I think it is, of the

eodes - so it means that every company under the State

eodes is also a trading corporation and cannot help

being so while the State Codes remain in this form.

Now, in our respectful submission, without wanting to

ClT61/l/JH	330	5/10/89
NSW(2)

go over all the ground again, there is something

wrong somewhere if that is the answer. And, just

in that same general area, I would like to just

again briefly make the point that if capacities make

it a trading corporation at incorporation then you

have that very curious result that once you have

passed the stage of incorporation and activities

begin, if you apply the activities test, then it is
obviously conceivable that the body that was

incorporated as a trading corporation almost

immediately ceases to be because trading activities

were not a sufficiently substantial part. But, let

us assume that trading activities are a sufficiently

substantial part, what happens if it does go quiet

or becomes dormant or goes on the shelf for a time?

Do we then say because it ceased under the activities

test to be a trading corporation, that it is, it is

not, or does the capacities test revive and make it,

while dormant, once again a trading corporation

because it is doing nothing?

BRENNAN J:  Is it right to describe FENCOTT V MULLER as a

capacities test, though, or does FENCOTT V MULLER

take a stand upon the constitution of the

corporation adopted by itself with its own objects?

MR DOYLE:  Well, Your Honour, in our respectful submission,

it appears to take a capacities test but I cannot

deny that it could be said that some significance was

seen in the fact that the body had adopted that

particular constitution. However, it does appear

that it was a constitution as to which one could say

little more than that there is the capacity to

trade an~ in our respectful submission, it would be

surprising if the true basis of it is that the mere

fact of its adoption was the significant thing.

(Continued on page 332)

ClT61/2/JH	331	5/10/89
NSW( 2)

MR DOYLE (continuing): It would be different, in our submission,

perhaps had it been a very narrowly expressed one then

one could see some force in the fact that it was

adopted.

BRENNAN J:  The distinction between the majorityandthe

minority in FENCOTT V MULLER really consists in the
material to which reference may be had in order to

determine the character of a corporation.

MR DOYLE:	Yes.
BRENNAN J:	On the one hand there is evidence of individual

intention, and on the other there is a corporate Act.

Well, here, under 161 we have neither, so I am not

sure that FENCOTT V MULLER is even relevant to the

consideration of 161.

MR DOYLE:	It may be, Your Honour, of course, that FENCOTT V MULLER does not really sustain, or cannot be built on in a
way in which it is sought to be built on, one assumes,
by the draftsman of this Act. If the corporate Act
is significant then absent some relevant corporate Act
then FENCOTT V MULLER could not be deployed.
Your Honours, the sixth point my learned friend said,
"Well, the plaintiffs cannot really refer to this
tortuous path that has to be followed, if that is a
problem with the scope of the power, that is a problem".
But in our respectful submission it is a recognized
approach to legal construction to say, "Well, if there are contending means, what are the consequences and impacts of adopting this particular construction?"
That is all we seek to do, and we submit that is a perfectly normal and legitimate approach, and we say
that if the Commonwealth power is as it is contended
to me, you do get some very odd results and a rather
tortuous scheme. It is not decisive, but what it does
suggest, in our submission, is that that is not how
the power is to be read.

The next point - a matter raised by Your Honour

Justice Deane when Your Honour said, "Are we concerned

with the question of whether a dormant corporation is a

trading corporation?"

(Continued on page 333)

ClT62/l/FK	332	5/10/89
NSW(2)

MR DOYLE (continuing):  In our respectful submission, the

Court is because, while our primary submission

is that there is no power to legislate with respect

to incorporation, then secondarily, we submit,

even if there is in relation to dormant and shelf
corporations in particular Parliament has provided

for the creation of entities which are not trading
corporations and are generally not trading

corporations and therefore has gone beyond power.

So we submit that it is necessary to address

that question. And, indeed, our submission is

that even if the activities statement states,

as mentioned in section 153(3)(a), that the

subscribers intend that within three months there

will be trading activities, we submit, as to

that, also, that that goes beyond power. But,

in particular, as to dormant and shelf corporations

we submit that on any view they would go beyond
power.

I have written a rather cryptic note here about something Your Honour Justice Deane said

right at the end but at the moment I cannot

understand my own cryptic note. It was related,

I think, to Your Honour's point that there may

be- although there is no power to incorporate,

that there may be power to say, nevertheless

if a corporation wants to become a trading

corporation then it has to acquire its corporate

status under Commonwealth law; so it operates

on existing corporations but requires them, as

soon as they become existing trading corporations,

to get their corporate status elsewhere.

In our submission, that is another issue

on a differently drafted Act but, in particular,

as to Division 1 companies - and perhaps I am

just making a tediously obvious point - Division 1 companies are created on the basis that there

is no previously existing trading corporation

and so even if there is something to be said

for Commonwealth power, coming at it that way,

it cannot be said in relation to Division 1 companies.

They are the only points for South Australia

in reply, if the Court pleases, but could I just

hand to the Court copies of the material that

my learned friend, Dr Griffith, referred to,
being material which does relate to the steps

leading to the adoption of the form of the head

of power in the 1891 form of the CONSTITUTION.

C1T63/1/ND	333	5/10/89
NSW(2)

MR DOYLE (continuing):  Your Honours, I have just been

told that apparently the extract from Lindley that

Queensland provided to the Court only went to

page 7. As it happens we had our own copies of

that part of Lindley that cover pages 7 to 11

and so I will also provide to the Court copies of

the sixth edition of Lindley which include the

pages I referred to. May it please the Court.

MASON CJ:  Thank you, Mr Solicitor. Yes, Mr Solicitor

for New South Wales.

MR MASON:  If Your Honours please. My learned friend,

Dr Griffith, argued today that the words "formed

within the Commonwealth" serve a purpose which is,

in part, to restrict the definition of foreign

corporation. Now, in part, my learned friend

the Solicitor for South Australia has responded to
the inappropriateness of that method of drafting

but it was part of the Solicitor for the Commonwealth's

argument that this was to cover a problem that was

otherwise seen to exist, namely that to make it

plain that foreign corporations extended to

English foreign corporations, and he referred to the

Queensland Act of 1895.

We would submit in response to that that that

of 11 foreign corporation." Indeed, even within the colonies	puts a wholly abnormal interpretation upon the concept
in the 19th century their courts were regarded as
foreign courts, their laws foreign laws for the
purposes of private international law and while the
CONSTITUTION, when referring to foreign corporations, makes it plain that it was pushing the limit out to
Australia, there was nothing else needed to be done,
in our submission, to contain those words. They
encompassed all corporations formed outside
Australia.

At page 202 yesterday my learned friend,

the Solicitor-General for the Commonwealth, suggested

that a family trust company, if not trading, could

be regarded as a financial corporation without

difficulty.

(Continued on page 335)

ClT64/l/HS	334	5/10/89
NSW(2)

MR MASON (continuing): Three brief reposts to thac we

submit that that submission in its bald form

ignores any substantial requirement in an activities

tesu secondly it ignores the approach to what

is a financial corporation adopted by the Federal

Court in the KU-RING-GAI COOPERATIVE BUILDING

SOCIETY COMPANY case, (1978)

22 ALR 621 at 624, line 15, the jud8Illent of the

Chief Justice; 642, line 25 Mr Justice Deane and

634, line 45, Mr Justice Brennan. In substance

we would submit that those passages suggest that

the heartland of a financial corporation is a body

involved with cormnercial dealings in finance.

And thirdly, we submit that such an approach is

inconsistent with the rejection by three Justices

of this Court in FONTANA FILMS of the idea that

a holding company, per se, can be within section Sl(xx).

This morning, my learned frien~ the Solicitor-General

for the Commonwealth,in an endeavour to meet the

argument that corporation was such a stage of

development that it had to take place before the

Commonwealth power existed, argued that in effect

there is a spectrum of legal regulation, formation,

internal management, external dealings, and that they

are all capable of being categorized as laws with
respect to corporations and he referred to the

provisions in the State Codes which are similar to

section 114 in the CORPORATIONS ACT, which refer

to members forming a company. And he said "Well

really you think of formation just as a stage in

a	progress of people coming together for a
business purpose".	We would say firstly, Your Honours,

that that is question beggin_g to rely upon the Code and

its predecessors which deal with the formation of

corporations as somehow or rather thereby providing

a dictionary for what is a corporation.

(Continued on page 335)

CIT65/l/CM	335	5/10/89
NSW( 2)

MR MASON (continuing): That dictionary, for constitutional

purposes, has to be found outside. Secondly, we

submit that corporations do not exist in nature

and one thing that was clear by 1900 was that a

corporation was a legal entity distinct from its

corporators. SULLIVAN's case had been decided in

1897. We have cases such as MACAURA, (1925) AC 619,

which really brings that point home, in our submission.

Indeed, a corporation can exist though its corporators

die.

May we just give the Court a reference to a book written in 1905 by C. T. Carr, "The General

Principles of the Law of Corporations" which

contains some interesting legal analysis. Your Honours,

reference was made this morning_ to provisions in the PATENTS ACT, particularly sections in that Act

which had gone unchallenged since its passage which

barred resort to State law in order to form a

patent. We would submit that the analogy is not an

accurate one compared to placitum (xx) because the

relevant placitum with respect to patents do not

speak of patents granted but simply of patents.

Two comments, if I may, about HUDDART PARKER:

the first is in relation to the suggestion that

Mr Justice O'Connor's judgment was coloured in the relevant respect by His Honour's view as to the

reserve powers doctrine. My learned friend drew

attention to the fact that, early in his judgment,

His Honour espoused that doctrine. May we simply

give the Court specific reference to 8 CLR 370 point

8, where His Honour said:

Bearing in mind these principles, I now turn to

the sub-section, but before considering its

language it may be well to advert for a

moment to the subject matter with which it

purports to deal.

So, His Honour stopped himself in midstream and

analysed the language in the way that supports the

State's position.

(Continued on page 337)

ClT66/l/DR	336	5/10/89
NSW(2)

MR MASON (continuing):  And, when His Honour, as it were,

returned to the reserve power stream, that is at

the bottom of page 370 and the very opening words

were, "Here we are met with an ambiguity" which

His Honour proceeded to resolve by reference to the

reserve power doctrine but the ambiguity only

arose after he had identified the subject-matter of

the power.

Your Honours, there was some discussion this

morning as to whether HUDDART PARKER, in the

relevant portion from which the States rely,

survived the analysis of this Court in STRICKLAND's

case and if-we may just return to two passages in

STRICKLAND itself which we would submit distinguished

or kept alive, even in that decision, the relevant

part of HUDDART PARKER. The first, Your Honours -

it is HUDDART PARKER, 124 CLR at 488 in the judgment

of the Chief Justice and it is the paragraph

commencing about point 3:

The Court in the course of its judgment,
decided that the expression in

paragraph (xx) "formed within the

Corrnnonwealth" was apt to include only

corporations formed according to the laws

of the States. But in this it seems to

me their Honours were clearly wrong. There
are powers granted to the Commonwealth as
well as those left in residue to the

States to which the formation within the

Commonwealth of trading corporations might

be referable -

and His Honour referred to section 122 and

section 5l(i).

There would have been no point, in our submission,

of referring to those other Commonwealth powers had

His Honour been of the view that the power existed

and remained in section 5l(xx). Mr Justice Walsh

agreed with the Chief Justice's remarks with

reference to HUDDART PARKER at page 515.

(Continued on page 338)

ClT67/l/JH	337	5/10/89
NSW(2)

MR MASON (continuing): At page 511, in the judgment of

Mr Justice Menzies, Justice Deane has referred

to the fourth-last paragraph on the page. May we drawn attention to the third-last paragraph of the page which proceeds on the same

supposition as the Chief Justice's and clearly,

and indeed more expressly, seems to proceed on

the basis that section 51(xx) cannot be the source.

In 130 CLR in the ST GEORGE case, there is

a passage of the Chief Justice at page 542 which,

in our submission, indicates that His Honour was

clearly of the view that incorporation stayed outside

of the power, and it is near the top of the page at

the beginning of the paragraph where His Honour said:

The qualification "formed within the

limits of the Commonwealth" is used,

in my opinion, in contrast to the word

"foreign". It serves to require local

incorporation, the locality being any

part of Australia.

Your Honours, my learned friend Dr Griffith said

this afternoon in effect that, "Well, if I get

into problems with dormant corporations or holding

corporations, they are severable. They don't affect

chapter 2 as a whole". That approach appears to be

connected with another remark he made in a different

context when he said, "If those who join together

to incorporate wish to be such-and-such". The

point we would wish to submit to the Court is that

when one looks at sections 121 and 123 it is not

the act of the corpora tors that creates the

corporation, it is the act of the Australian

Securities Commission, under statutory power,

in issuing a certificate of registration, which

is the matter which gives life to the body.

(Continued on page 339)

ClT68/l/HS	338	5/10/89
NSW(2)

MR MASON (continuing): This involves - if one accepts

for the purpose of argument that there is a problem

with dormant and holding companies, then there

are two detrimental consequences to the Commonwealth
case. The first is that there is - of necessity
there will be cases where there is a recital

into power by assertion and that point has been

made by my learned friend, Mr Jackson. I do

not wish to repeat it. And, secondly, my learned friend, the Solicitor for the Commonwealth, said, "Well, all right, if a few slip through, a few

strangers slip through, well, that is incidental

to allowing the 95 per cent of genuine trading

corporations in and therefore it is near enough."

We would submit, Your Honours, that that

involves a misconception as to a critical aspect

of constitutional facts and the need for those

to be satisfied before power can be validly given

in an Act to an administrative body.

May I just give the Court a reference to

two passages in ADAMSON's case, 143 CLR 190;

the first at page 227, where Your Honour

the Chief Justice read a short passage from an

earlier judgment of Mr Justice Dixon in HICKMAN's

case. Your Honour said, at 227 point 7:

"It is ..... quite impossible for the

Parliament to give power to any judicial or other authority which goes beyond the

subject matter of the legislative power

conferred by the CONSTITUTION."

And Chief Justice Barwick, in a lengthier passage

at 202 and 203 expounded upon the sole function

of this Court to determine matters of constitutional

fact.

In the specific area of recital into power

and the creation of corporations, there is a passage in the JUMBUNNA case that is, in our submission, of significant importance.

(Continued on page 340)

C 1T69 /1 /ND	339	5/10/89
NSW(2)

MR MASON (continuing):  Your Honours, I will be about three

minutes more, if I could indicated that.

MASON CJ:  Yes. We will continue, Mr Solicitor.

MR MASON:  Thank you. That is in 6 CLR 309. Your Honours

will recall it concerned the validity of the power

to create incorporated industrial organisations

under placitum (xxxv). But, the Chief Justice at

page 334 made a critical distinction. Near the

bottom of the page, His Honour said:

The Parliament has no independent power to

create corporations, except in the cases

specified in sec. 51 pl. xiii (banks) and,

possibly, in sec. 51 pl. xx. And, since

the powers and functions of every corporation

are limited by its constitution, it follows

that the parliament cannot confer upon a

corporation created by it powers or functions

for the exercise of which alone it could not

create a corporation. It could, however, I

think, create a corporation as a means to the
execution of an express power, and confer on it

such powers and functions as are incidental to

the execution of that power.

And, it was on that second basis, that everything was

okay in the JUMBUNNA case.

But that is, in our submission, a specific

application of the broader doctrine about reciting

into power which infects root and branch sections 121

and 123 and there is no question of any severance

and it is another example of streams trying to rise

higher than their source.

Your Honours, section 112 and the submission in paragraph 16.2 of the written submissions of the

Commonwealth that 112 was all right because it was

in relation to the establishment and maintenance of

an effective regime of financial protection for

persons dealing with private commercial associations.

(Continued on page 341)

C1T70/1/SH	340	5/10/89
NSW(2)
MR MASON (continuing):	We ask	the questions:

effective for whom? Does it mean that if enough

people do it there is a saving for money? Is

that really what is being said? It would appear

not. My learned friend says, "Well, if you look

at it historically, the mischief which led to
the predecessors of section 112 was the need
to protect outsiders dealing with large fluctuating

bodies; hence they would be required to incorporate

so at least you had a moving target to shoot

at." But that mischief can be and has been remedied

by matters other than incorporation. The

business nameslegislation, in effect, achieves

the same purpose, but the point proves too much.

What if the Commonwealth perceived that there

was a mischief of dentists or lawyers carrying

on their business in a certain way that it thought

needed to be stopped. Is it really being suggested

that the Commonwealth can say, "You must incorporate."

and then, now that we have got you, we will control

your activities.

In our submission, this sort of bootstrap

argument could not be acceptable. What it really

amounts to, in our submission, is the Commonwealth

trying to have resort to the discredited BARGER

doctrine, a stick that is usually used to beat

the States over the head when they challenge

Commonwealth legislation, because what the

Commonwealth is really saying, in our submission,

is the direct operation of the la~ is not

with respect to corporations but its motive is
to achieve some purpose, therefore you characterize

it according to its motive, therefore it is valid.

In our submission, that is an open door that

ought to stay open and lead to the invalidity

of section 112.

Finally, Your Honours, although in the end the point was not pressed in a way that is relevant,

my learned friend at one stage said, "Well,

section 113 may well be relevant because the

Commonwealth has got power to prohibit trading

corporations absolutely and therefore it can relieve

against the prohibition in any way it thinks fit."

(Continued on page 342)

ClT71/l/PLC 341 5/10/89

--NSW(2)

MR MASON (continuing):  We would submit that whatever be

the position with reference to an activities power

such as led to the dee is ions in MURPHYORES

and HERALD AND WEEKLY TIMES, you could never say

that there would be a power to prohibit where the

word "formed" is part of the characterization of

the power. How could a law with respect to

corporations formed be satisfied by law that

prevented the formation in the first place?

Now, if that is accepted, it may, indeed, cast

unfavourable light upon the general argument of the

Commonwealth that there is power to incorporate in

any event. I say no more about the point because

my learned friend conceded, in effect, that

section 113 is relied upon in this case as being

incidental to chapter 2 as a whole and if chapter 2

goes, for the reasons which have been put, so

does section 113. If the Court pleases.

MASON CJ: Yes, thank you, Mr Solicitor. Mr Jackson, could

I ask you how long you think your reply will - - -

MR JACKSON:	Ten minutes, Your Honour.
MASON CJ:	Very well, if it is convenient, we will take it now.

MR JACKSON:  Thank you, Your Honours. Your Honours, there are

a number of points with 'Which I wish to deal. The

first concerns the contention which was advanced

on behalf of the Conunonwealth that the power in

section Sl(xx) naturally comprehends the power to

incorporate. And we would say two things about

that: the first is that the notion that it naturally

comprehends the power to incorporate does sit rather

oddly with the fact that five Justices in

HUDDART PARKER V MOREHEAD thought that.it, equally,

naturally, did not, one of whom, of course, was

Mr Justice Isaacs. Your Honours will see from

page 6 of the material which contains the history

of the convention debates and the activities

appears to have been the person who put

section Sl(xx) in its last form.

Your Honours, the second point we would make about it

is this:  it is right to say, as our learned friends 'M'.)Uld say in

both their oral and paragraph 2 of the written submissions,

that the power under section Sl(xx) is a power to

make laws with respect to corporations of that

kind; the "that kind" being identified in their

submissions as being foreign trading and

financial corporations.

ClT72/l/PLC	342	5/10/89
NSW( 2)

MR JACKSON (continuing):  But, Your Honours, one must also

bear in mind that that is not quite the end of the
description of the corporations which are trading

and financial corporations, the provision goes on. And, Your Honours, it is important, of course, not

to blur the two issues involved in dealing with the

ambit of the powers under section 5l(xx); the first

issue, of course, being the meaning of the words

used -and, secondly, the ambit of laws which may be

made with respect to the matters so encompassed. a matter which is adverted to a number of decisions

but may I give Your Honours two references?

One, in THE COMMONWEALTH V TASMANIA, 158 CLR at 150,

where Your Honour the Chief Justice said in the

paragraph corrrrnencing two-thirds of the way down the

page that:

The argument presented in the present case

tends to obscure the difference between two

distinct and separate questions: (1) what

is the scope of the power; and (2) is

the law in truth a law with respect to the

subject-matter of the power, once its scope

has been ascertained. Characterization,

the name given to the process of arriving

at an answer to the second question, cannot

begun until the first question is answered.

And, Your Honours, to the same effect, are some observations, again of Your Honour, in FONTANA FILMS,

150 CLR at 207-208. Your Honours, underlying some

of the argument of the Corrrrnonwealth, in our
submission, is the fact that the cart is, in a sense,

put before the horse.

Your Honours, the next matter with which I wish

to deal is this. Our learned friend's submissions

assert that the expression "formed within the limits

of the Corrrrnonwealth" has no temporal significance.

means, formed at whatever time, that is already We would submit, Your Honours, that it does and it	formed at whatever time section 5l(xx) is to speak.
And it is, Your Honours, like the word "referred"
in section 5l(xxxvii) and section 5l(xxxvii' speaks of the power to make laws with respect to matters
referred ·to the Parliament of the Commonwealth.

ClT73/l/JH	343	5/10/89
NSW(2)

MR JACKSON (continuing): It would be difficult to say,

of course, that the Parliament could itself refer

and that then the matters would be one - or determine that a matter should be referred and it would then be deemed, in effect, to have been referred and, similarly,

the term "formed" in section 51(xx) is used in the

same temporal sense.

Your Honours, it was urged also that the expression

"formed with in" and the succeeding words -were simply to

indicate that the term "foreign" covered all companies

other than those which were formed within the limits

of the Commonwealth. Well, Your Honour, no doubt it

performs that function but it also performs another

function and that is that the company be one already

formed.

Your Honours, in relation to one matter which

appears in paragraph 4.3 of the submissions on behalf
of the Commonwealth, Your Honours will see there the

quotation, in effect, towards the end of the paragraph

from BANK OF UNITED STATES V DEVEAUX that:

A "corporation" is in every respect "a mere

creature of the law".

Your Hpnours, if I might just observe in passing, as

it were, that that being the nature of the corporation,
it lends some support in our submission to the

contention that the Commonwealth may not legislate

to create or to determine the structure of, as it

were, a company as distinct from regulating the

exercise of its powers.

Your Honours, the next matter to which I would

wish to turn is appendix 2 of the Commonwealth's

material which relates to the position in other

jurisdictions. Your Honours will see in it that

competition amongst the States in relation to the

reference is made to there having been in the

desirability of forming corporations in particular
States.	Your Honours, that might be the American
history and I say "might be" just at the moment.	I
will come back to it a little later.	But the

Australian history is, really, entirely different.

(Continued on page 345)

C1T74/1/SH	344	5/10/89
NSW(2)

MR JACKSON (continuing):  The only times when there appears

to have been competition amongst various jurisdictions

in Australia in relation to obtaining the formation

of companies within their own jurisdictions, appears
to have been when, in the Connnonwealth territories,

the financial arrangements which the Connnonwealth

has enacted for those territories have made the

territories more attractive places within which

to incorporate companies, and by that I mean two

instances: one is, of course,in relation to

Norfolk Island when the income tax arrangements there were

beneficial to those who wished to do so, and the

other was in relation to the Australian Capital

Territory when there was, I think, no stamp duty.

But the position in relation to the United States and the general satisfaction, as it were, with the situation or the degree of it, Your Honours may well

judge from perhaps a source which, I suppose itself

involves some assertion but Your Honours may regard it

as a satisfactory one and that is the decision of

the Supreme Court of the United States in the case

to which we referred earlier which is

CTS CORPORATION V DYNAMICS CORPORATION.

Your Honours, one further matter is that in

paragraph 7 on page 4 of that document there is the
contention that there now appears to be no doubt as
to the power of congress to enact a comprehensive
business corporation code under the connnerce clause

of the United States Constitution and a number of

articles are referred to. Well, Your Honours, that

may well be so but it would apply, of course, to the

connnerce clause, that is, the equivalent of

section Sl(i) and would not be a general provision

of the nature presently in question.

Your Honours, under the same topic, reference

was made to the report of the senate standing

connnittee. Your Honours, no doubt from time to

time, as with every other aspect of activity in

Australia, it is possible to say that it would be desirable for it to be regulated federally and,

indeed, the framers of the CONSTITUTION thought the

T75 same thing in relation to section Sl(xx). But the

regulation of the conduct of trading and

financial corporations is one thing that, in our

submission, was given to the Connnonwealth or the

power so to do. To say that, however, does not

really touch upon the question whether the power

also includes the power to regulate incorporation.

Your Honours, in the course of the argument

yesterday I had referred to the decision of the

Full Court of the Federal Court in TILLMANS BUTCHERS

and Your Honour Justice McHugh suggested that the

ClT76/l/PLC	345	5/10/89
NSW(2)

passage in relation to the meaning of "substantial"

in the judgment of Mr Justice Deane in that case

had been adopted by the Court. Your Honour, I

must say I thought that was so myself but we

have not been able to find it. What I think

Your Honour may have been - - -

McHUGH J:  I think it may have been adopted by a later

Full Court decision. It was a document case

I was in, LEON LAIDLEY.

MR JACKSON:  Yes. But, Your Honour, I was going to say

another part of the judgment has been adopted

of "likelihood" as distinct from

by the Court and that is in SHEEN V FIELDS meaning

"substantial" and, Your Honour, I think that was

what I was thinking of in any event.

Your Honours, could I just say one further

thing, and that is in relation to BANK OF NEW

SOUTH WALES V THE COMMONWEALTH, 76 ·cLR at

page 304. At page 304, Mr Just{ce Starke, in

the second last paragraph of his judgment, the

second line, said:

And, in my opinion, the power authorizes

the CotIDllonwealth to govern and regulate

the operation of these companies but

would not authorize the suppression of

all such corporations or the nationalization

of their activities. Thus, the carrying

on business in Australia by these

corporations might be prohibited absolutely
or except upon certain conditions and the

exercise of their powers in Australia might

be regulated and so forth.

T76 Your Honours, I mention that purely in

relation to an observation that was made by

Your Honour Justice Deane in the course of the argument a little earlier today and, Your Honours,

we would suggest that if it were held that

section 5l(xx) did not allow the CotIDllonwealth

to legislate for incorporation, that would be

so because the power under section 5l(xx) permitted

laws with respect to trading and financial

corporations formed within the limits of the

CotIDllonwealth and it would, with respect, seem

strange if that approach having been taken

it would then be held to permit the making of

laws which required ColIDllonwealth incorporation

in the first instance as a condition of trading.

Your Honours, the last thing I wanted to

do was this: reference was made to the FOREIGN

COMPANIES ACT in Queensland prior to Federation.

ClT77/l/PLC	346	5/10/89
NSW( 2)

There was, in fact, another Act which dealt with

the position of companies which were formed in

British Connnonwealth territories or parts of

Her Majesty's dominions. That is the British

COMPANIES ACT 1886 and, Your Honours, we have copies here for the Court which I will perhaps

hand to the Court.

MASON CJ:	Thank you.
MR JACKSON:	Your Honours, those are our submissions.
MASON CJ:	Thank you, Mr Jackson.

The Court will consider its decision in

this matter and adjourn until 10.15 am on

Tuesday next.

AT 4.39 PM THE MATTER WAS ADJOURNED SINE DIE

ClT77/2/PLC	347	5/10/89
NSW(2)