State of New South Wales; State of South Australia; State of Western Australia v The Commonwealth of Australia - [1989] HCATrans 221

•

'JA

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

NSW( 2)

MASON CJ
BRENNAN J

DEANE J

DAWSON J

TOOHEY J

GAUDRON J
McHUGH J

Perth No P24 of 1989
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

ClTl/1/PLC

105

4/10/89

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 4 OCTOBER 1989, AT 10. 16 AM

(Continued from 3/10/89)

MASON CJ: Yes, Mr Handley.
MR HANDLEY: Reflection overnight, Your Honours, encourages
us to withdraw paragraph 12 of our outline which
was the subject of some discussion with
Mr Justice Deane and Mr Justice McHugh yesterday
afternoon. Reflection on the text of section 112
confirms our view that the prohibition in
section 112 is no wider than the facility available
under chapter 2 to incorporate under federal
law. So the prohibition not being wider than the facility, we would respectfully withdraw
paragraph 12.
Your Honours, reflection on the subject-matter

of paragraph 12, however, threw up another matter

which we would seek to briefly refer to. Under
the State company law, at the moment, the minister
may vary upwards or downwards the maximum size
of a partnership formed to carry on some profession.
A similar power is granted to the federal minister

by section 112. One therefore could have a situation
where the State had fixed 200 as the maximum
permissible size of an accounting or legal partnership
and the federal minister fixed 100 or vice versa.
So that under federal law a partnership could
carry on business for the purposes of gain for
a particular profession, up to 100 in number,
under State law up to 200 in number.

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MR HANDLEY (continuing): In our submission, that example

rather highlights that each would be a law with
respect to partnerships.

BRENNAN J: That does not answer the question whether it is

also a law with respect to companies, does it?

MR HANDLEY:

Of course it does not, Your Honour, and thAt is

made very clear by, among other things, the
FDNIANA---case, in so far as it upheld the validity of

section 45D. I did not seek to sort of re-open
that established principle and I do submit that not
only would they be laws with respect to partnerships
but neither would be a law with respect to
corporations, or incidental to corporations, because
neither imposes any obligation on a corporation and
neither imposes any obligation incidental to an
obligation on a corporation.
I then come back to the way in which a majority of this Court characterized the law - section 45D(5)
in FONTANA FILMS as a law with respect to trade

unions. I made the submission yesterday that the
present case is really a fortiori to FONTANA FILMS

in this respect. Your Honours, yesterday I
indicated that we would be referring the Court to
authority that, where an intention to carry on
would not necessarily reach that conclusion.
business is found, the very first acts of business
activity represent the cormnencement of the business.
In that regard I would seek to make available

to the Court a decision of the Court of Appeal,
Lord Esher in RE GRIFFIN; EX PARTE THE BOARD OF

TRADE. The headnote explains what the case is
about and I am sorry, Your Honours, that the library
photocopier was not working too well yesterday
afternoon.

(Continued on page 108)

ClT2/l/DR	107	4/10/89
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McHUGH J:	What is this, the Law Journal, is it?
MR HANDLEY:	It is the Law Journal, yes, Your Honour

(1981) n0 LJQB, new series, of course:
If an isolated transaction, which f
repeated would be a transaction in a
business, is undertaken with the
intent that it should be the first of
several transactions, it is a first transaction in an existing business,
and if the business is one in which it
is usual and proper to keep books of
account, the omission to keep such
books with respect to the transaction
is a fact on proof of which the Court

must either refuse, suspend, or attach
conditions to a bankrupt's order of
discharge.

Going to the iudgment of Lord Esher which commanded
the assent of the other members of the court, at
page 237, left-hand column, the last paragraph on
the page:
Then it is said that he was guilty of
misconduct ..... in omitting to keep such
books of account as are usual and proper
in the business carried on by him. With

regard to the road contracts, I cannot,
without further evidence, say whether that is
or is not a business in which books of account
are ordinaryily kept. But if the bankrupt
was a builder, that is a business in which
I know beyond doubt that books are ordinarily

kept. The difficulty is as to whether he
had entered into business as a builder.
It was stated ..... that because there was
only evidence of one building transaction,
or, if he treated the cottage speculation
as a building transaction, only evidence

of two transactions, it was not proved
that there was a business. In my opinion,
to say that if only one or two transactions
can be proved, then, as a matter of law,
it cannot be said that they are transactions
in a buisness, is too drastic a statement.

I think that whether one or two transactions make a business depends upon the circumstances

of each case. I take the test to be this:
if an isolated transaction, which if
repeated would be a transaction in a business,
is proved to have been undertaken with the
intent that it should be the first of
several transactions, that is, with the
intent of carrying on a business, then it

ClT3/l/HS	108	4/10/89
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is a first transaction in an existing

business. The business exists from the
time of the commencement of that transaction
with the intent that it should be one
of a series -
and then he goes on to deal with the bankruptcy

point. Now, in our submission, Your Honours, for
that reason Mr Justice Brennan's question yesterday
to my learned friend Mr Doyle ought to be answered
that if you show that a trading or financial
corporation which was formed or going to be operated
with the intention of being a trading or financial
corporation, then its very first commercial activities
are sufficient to characterize it as a trading or
financial corporation, and that is certainly one
purpose, and one legitimate purpose, we would submit,
for which one can have regard to the intention with
which the company has been formed or acquired.
So there is no hiatus between the commencement of

business activity with that intention and the accrual
of Commonwealth power under placitum (xx). Yesterday,
at page 100 of the transcript -

BRENNAN J:

Mr Handley, can I just delay you for a moment?

If it be right to say that a single transaction plus intention equals characterization and one is endeavouring
to characterize a company prior to the first activity,
why is intention not sufficient?

MR HANDLEY:

Your Honour, we would answer that a number of ways;

first of all we would say - and this is a resort to
authority - that if activities is the test, no
activities, no characterization, but, Your Honour, the
gleam in the would-be builder's eye that he is going to
commence a buisness, does not mean that he is in
business until business activity has actually begun.
(Continued on page 110)

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MR HANDLEY (continuing):

The intention without the activity,

in our submission, remains nothing more than that
and, we would submit - one keeps on coming back to
the fact that if a characterization test is
"activities", then one must have activities and, in
deciding whether the activities are sufficient, one
can have regard to the intention with which those
activities have been commenced and undertaken, and
if, however, "purpose" is enough, then "purpose" is
enough. In other words, my answer to Your Honour's
question heads off any suggestion of inconvenience in the "activities" test because there is a hiatus
between a commencement of activity and Commonwealth
power, but beyond that one has to just fall back on
which is the right test.

McHUGH J:

But that is the point,,is it not?

Why is "purposes"

not a relevant test? I mean, if a building society
says we are going to convert into a bank, and people
take up shares in it, the people who took up shares
would say they were subscribing to a banking
corporation, even before it opens its doors for
business; before anybody stepped in the door. Surely
that is the same any time a prospectus is sent out,
people say, "I am investing in a media company"?

MR HANDLEY:

Yes, well, we would submit that the prospectus is,

itself - once a company has got to the point of
prospectus, it is carrying on sufficient
commercial activity to enable it to be characterized
as trading or financial , but, Your Honour, in the
context of a dormant company, in our submission, all
one can say of it is that is has the legal capacity
to be a trading corporation, or a financial
corporation, or some other sort of corporation, and
that the natural persons who control it have plans
for its future.
(Continued on page 111)

ClT4/l/FK	110	4/10/89
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McHUGH J:	But is that in accord with reality? Are there any statistics as to what are the percentage of
trading and financial corporations among the whole of the incorporated companies? One would
instinctively feel that it would be a very large
percentage, perhaps 99.5 per cent or something.
MR HANDLEY:	It depends how a family company of the kind

that used to be popular in the days of estate
duty, estate planning,for holding assets which

the family used but did not trade in: how you

would characterize such a company. We would venture to
suggest that if it really was purely an asset-
holding company of the type described by the
Solicitor-General for South Australia yesterday,

it would not be a trading corporation. But
undoubtedly, Your Honour, whatever the precise
boundary of trading or financial corporations,
and just whether family companies which are not
carrying on a business are trading corporations,
there is no doubt that a very substantial proportion
of companies ,one would think at least 80 per cent and possibly
90 per cent~ would be trading companies that are
actually trading.
Any one time,of course,there would be several

hundred companies sitting on shelves of accountants
and solicitors around Australia which are not doing
anything except sitting on a shelf. Without seeking
to, as it were, go over the whole ground,Your Honours,
we would point to the word "trading" in the
expression '-'tradi.ng corporation", as itself involving

activity. The very words themselves point to an

activities test. Not quite so important - not quite
so significant with financial, and not at all
significant with foreign. Secondly, except for the
purpose of reading placitum (xx) as a power wide

enough to enable companies to be incorporated, there
is no other imperative beyond stretching Commonwealth
power to cover dormant companies. (Continued on page 112)

CITS/1/CM	111	4/10/89
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MR HANDLEY (continuing): In so far as one sees placitum (xx)
as a power to regulate activity, it is amply
wide enough to regulate the trading and other
activities of trading and financial corporations
and foreign corporations without having to stretch

the power to cover dormant companies. The only
point of stretching the power to cover dormant
companies is to bring incorporation within its

reach. And if the words "formed with in the 1 imi ts
of the Commonwealth" have the effect for which
the States are contending there is no purpose
to be achieved, nothing is to be gained in terms
of the reach of Commonwealth power by broadening
trading corporations to include corporations
which have the capacity to trade or corporations
which may be intended at some stage to trade
but have not yet done so.
And bearing in mind the textual matters

to which reference has already been made, we

submit that II formed" means already formed. If
that is right then there is no purpose, nothing
is achieved in terms of the extended Commonwealth
power by widening the definition of "trading
corporations" to include corporations which are
inactive.

At page 100 yesterday, Your Honour

Mr Justice McHugh put to me that if power to
incorporate was not - at page 100, Your Honour
said:
Mr Handley, assuming against you that the
power extends to incorporation, it would be a very weak power if the Commonwealth
could not compel -

incorporation. We would submit that the recent
history of placitum (xx) indicates that it is
not a weak power at all and any weakness at this
part of the periphery of placitum (xx) does not

enable one to say that it is a weak power. After
all it reached the TASMANIAN DAMS and it did
so without, of course, relying upon any control
over incorporation.

(Continued on page 113)

C 1T6/1 /ND 112 4/10/89
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MR HANDLEY (continuing): The other point that we would draw

attention to at this stage is that in the other great
common law federations - United States and Canacfa -
responsibility for corporations is divided between the central government and the provincial or State
governments and this situation has gone on for a long
time without federal control being seen as weak and,
in particular, without federal control over
be federal corporations, ever since
incorporation. Incorporation is a matter for the course,
MARBERY V MADDISON - and there is a source of
provincial power to incorporate in Canada.

McHUGH J: But in India, Malaysia and Nigeria, which have

federal constitutions, the federal government has
exclusive power over corporation.

MR HANDLEY:

Yes. Well, the one thing that is clear is that

the Federal Government does not have exclusive power
over incorporations in this case in Australia, at
least it was not given it in terms. There is also
divided responsibility in the European Economic
by way of supplement to what fell from my learned
Community and I cannot comment about Switzerland.
friend, Mr Doyle, yesterday.
Your Honours, one of the curiosities about

FENCOTT V MULLER, if I may respectfully say so, is
that the section which was invoked by the plaintiffs
in that case against Oakland was section 52 of the

TRADE PRACTICES ACT. May I hand up the text of
section 5~ although it will not be exactly unfamiliar,

and another case to which I will be referring in
a moment. So far as Oakland is concerned, it
mattered not that it was held to be a trading
corporation unless its activities constituted trade
and commerce because section 52 only fastened
liability on Oakland for misleading or deceptive
conduct if that misleading or deceptive conduct took
place in trading and commerce.

Mr Justice Toohey's findings, in the Federal Court,

were that it had engaged in trading activities and,
meant that the way was open for a finding of
applying the activities test, it was a trading also
corporation. That finding, not only gave the
liability under section 52. This Court's decision
that it had not engaged in trading activities but was,
nevertheless, a trading corporation meant that,
although the Federal Court had jurisdiction over it,

it could not be liable under section 52. So it was a
Pyrrhic victory for the plaintiffs.

ClT7/l/DR	113	4/10/89
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We would submit, with respect, that

Mr Justice Toohey was correct in characterizing what

it had done as trading. In that regard we wish to
take Your Honours to THEOPHILE V THE SOLICITOR- GENERAL. The point is that Oakland had stepped
into the shoes of Scrid. Scrid had been carrying on
what was, undoubtedly, a trading business but the
corporate shell had been transferred to the purchasers

of the business and a new trustee was required. The
new trustee was Oakland. In our submission, if
Scrid had remained as the trustee of the family
unit trust, undoubtedly, what it did thereafter,
including its conduct attacked as misleading or
deceptive, would have been of a trading or business
character.

(Continued on page 115)

ClT7/2/DR 114 4/10/89
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McHUGH J:

But what is this leading to, Mr Handley, because

it only means that there was no other basis upon
which the decision in FENCOTT could be supported,
does it not?

MR HANDLEY:	I accept that, Your Honour.
McHUGH J:	And it still stands as an authority for the

purpose behind it?

MR HANDLEY:

I accept that, Your Honour.

The Court has

been asked to reconsider FENCOTT V MULLER on
this point and in doing so we wished to support
that submission by showing that, in our respectful
submission, Mr Justice Toohey was correct and
that 'What Oakland did could properly be characterized
as trading so that the activities test was satisfied

in that case. I appreciate the fact that there
are two reasons - - -

McHUGH J:	But it still leaves -
MR HANDLEY:	- - - the fact that we provide an alternative

reason for a conclusion does not necessary indicate
by no means that the stated conclusion is wrong.
But, Your Honours, I do submit that it does help
an attack on the decision to show that it was
right but the reasons perhaps went further than
were reasonably necessary and, especially - and
that is why we drew attention to the terms of
section 52 - - -

BRENNAN J:	The only relevant proposition of FENCOTT V MULLER for this case is the proposition that absent trading the corporation may none the less
be characterized as a trading corporation.
MR HANDLEY:	I accept that, Your Honour.
BRENNAN J:	So that if one establishes that there was trading,

all that means is that FENCOTT V MULLER is beside

the point.

MR HANDLEY:

Yes, Your Honour, but the Court might be prepared

more readily to review FENCOTT V MULLER if it
was persuaded that it was wrong - - -

BRENNAN J: 'nia.tthere is a thirteenth stroke of a crazy clock

which is not only itself discredited but casts
doubts on the other assertions?

MR HANDLEY: The thirteenth chime, yes, Your Honour. If it

were to be persuaded that it took too narrow
a view of the activities which would suffice
to characterize a corporation as a trading

corporation. And we seek to use Lord Esher's
statement as important here, that activities

ClT8/1/ND

11 5

4/10/89

do not just have to be looked at in the abstract
but that you can look at activities in the
knowledge of the intention with which they have

been carried out. And intention is certainly

relevant once activity has commenced, so that

you can characterize that activity. But we would
respectfully submit that absent activity, legal capacity - I mean, if you applied it to natural

persons, every person is born a trader because

we all have the capacity to trade. Why should
you apply a rule to corporations which would

be nonsense if applied to natural persons? Why
should not the law and the CONSTITUTION wait
until one sees purposeful activity or sufficient
activity regardless of purpose?
In that regard, if the Court did take too narrow a view of what constituted trading, that
may be perhaps of assistance in persuading the Court that it took too wide a view of what was
a trading corporation prior to activity commencing. Your Honours, in THEOPHILE V THE SOLICITOR-
GENERAL, a debtor had carried on business in
England, had left and the question was whether
the debtor continued carrying on business in
England although he was absent, the doors were
shut but the trade debt still had to be paid
and the House of Lords held that the debtor still

was carrying on business. And if I could just
pick up the point fairly briefly, at page 201,
the last paragraph:

(Continued on page 117)

ClT8/2/ND 116 4/10/89
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MR HANDLEY (continuing):

But the further argument still remains
open to the appellant that he was not carrying
on business in England within three months
of the presentation of the petition and
therefore was not a debtor within the meaning
of the Act. In a sense it is true that the
appellant was not actively carrying on business
within three months of the presentation of the
petition, but there is a series of cases .....
which in unbroken sequence have decided that
trading does not cease when, as the expression
is, "the shutters are put up," but continues
until the sums due are collected and all debts
paid.

And I need not trouble Your Honours with the rest of the speech of Lord Porter which develops that point
and analyses the authorities - - -

DAWSON J:	But there the company had carried on business.
MR HANDLEY:	Undoubtedly.

DAWSON J: In this case, FENCOTT V MULLER, the company never

carried on business.

MR-HANDLEY:

Yes, Your Honour, but it stepped into the shoes of

Scrid.

DAWSON J:	No, it did not.	It received the purchase price of the
shares.
MR HANDLEY:	No, Your Honour,	it was appointed the new trustee - - -

DAWSON J:	Of the purchase price of the shares in Scrid, which
were transferred to the purchaser.
MR HANDLEY:	Your Honour, as I read the facts, it was also paying

the trade debts of Scrid which remained with the trust.

DAWSON J: Yes, it did that, that is all?
MR HANDLEY:	Yes, well that is why I picked up THEOPHILE, Your Honour, because it was, in effect, winding up the
business, so far as the vendors were concerned,
collecting outstanding assets, and paying outstanding
debts, and that is exactly what Lord Porter said -
DAWSON J:	We need not continue it, but the business had been
transferred; the shares in Scrid carried in with
the lease; all that was left was some money.
MR HANDLEY:	Oh yes, no doubt about that, Your Honour, but it is

our submission that if Scrid had remained as the trustee

ClT9/1/FK	117	4/10/89
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and had just sold the assets to the Mullers and had
remained under the control of the Fencotts, what
Scrid did thereafter would be characterized,on
THEOPHILE's case,as still carrying on business. Now,
Oakland being put in as new trustee, in place of Scrid,
did the sort of things which, if done by Scrid, would
have amounted to carrying on business, and, in my
submission, in that background, Oakland itself was
carrying on business.
You can look at the trust, the underlying trust

and the underlying liabilities and see that that
background and the intention with which Oakland was
substituted for Scrid are sufficient to characterize
it as a trading corporation. That is our submission,
Your Honour, and I do not think I need develop it any further, but we do submit, with respect, that
Mr Justice Toohey was correct in characterizing
Oakland as a trading corporation because of its
activities. If contrary to our submission that
Oakland was a trading corporation because of its
activities, because it had trading activities, and if,
consistently with the majority view, there were no
trading activities, then we want to respectfully join
in Mr Doyle's submissions that the decision was
incorrect and should be reviewed, and I would seek to
only make a brief reference to that part of the
majority judgment at the bottom of 601 and the top
of 602 in FENCOTT V MULLER.
Before I go to that passage, on the hypothesis

that there was no trading activity, nevertheless
there was some activity; it was not a dormant company.
It was an assets company; a trust company; it was
active in the trust.
(Continued on page 119)

C1T9/2/FK	118	4/10/89
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MR HANDLEY (continuing): That was the purpose for which

the company had been acquired by its relevant
owners and its objects enabled it to act as such
a trustee. It is our submission that if one has
to characterize Oakland,and given that trading
had not taken place but that other activities had
taken place, you look at purpose, non-trading trustee;
objects, non-trading trustee; activities, non-trading
trustee; and in those circumstances we would
respectfully submit only one characterization is
open: that it was a trustee company. And the fact that somewhere down amoung the objects and not the
first two, and not the objects with which the
company was in fact acquired and brought into life
as an active corporation, are trading objects, in
our submission, cannot or should not have overcome
the fact that it was an active company and what it
was doing was not trading and its activity was
consistant with its purpose and with its objects.
At the bottom of page 601, the last few lines,

the Court made the point that the question then for
consideration had not arisen in ADAMSON's case and
then over the page the view is taken that the majority
judgments in ADAMSON -
did not suggest that trading activities are the
sole criterion of character.

Your Honours, another view of those judgments in
ADAMSON, and I say this with respect, would be that
they did say that activities was the sole test, but
more of that in a moment.
Absent those activities, the character of a corporation must be found in other indicia.

But there were some activities, so why look to other indicia when there are some activities.

While its constitution will never be completely irrelevant, it is in a case such as the present
where a corporation has not begun, or has barely
begun, to carry on business that its constitution,
including its objects, assumes particular
significance as a guide -

For the reasons enlivened by a reference to Lord Esher's
judgment, we respectfully accept and would adopt that
statement, but where you find that what it is doing is
acting as a non-trading trustee, and it has objects
which covered non-trading trusteeship, and that was
the purpose for which the Fencotts had bought it,
why, in our respectful submission, does one run ones
eye down the objects until one finds trading and then
characterize the corporation by reference to those
objects in contra:listinction to either more prominent

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objects and its current activities. Then in the
last sentence:
In the circumstances of the present case, there
is no better guide to its character than its
constitution -
With the very greatest respect,Your Honours, we would have thought that there was a better guide
than its subordinate objects, namely its current
activities,when that coincided with both its
objects and its purposes, the subjective purposes
of its corporators.

BRENNAN J: Is that assuming that the character of
corporation or the relevant character of a
corporation is to be determined according to its
dominant activity or whatever else might be the
appropriate criterian of characterization?

MR HANDLEY: Bearing in mind,Your Honour,the views predating
FENCOTT V MULLER that the corporation could be
characterized by its current activities, and we
would submit that poses no problems for Commonwealth
power except in this question of incorporation,
that there is no reason to stretch the language of
the CONSTITUTION just to catch dormant or quiescent
companies, but Your Honour, we would respectfully
repeat the submission that if there is such a thing
as a trustee company which does not trade, :in other
words if trading corporation is not going to swallow
up every corporation other than those which are- every private corporation, every non-charitable,

non-benevolent corporation- j£ every non-benevolent,
non-charitable corporation is to be a trading
corporation because of its capacity, well so be it,
although that is not how we would describe natural
persons.
(Continued on page 121)

CITl0/2/CM 120 4/10/89
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MR HANDLEY (continuing):

This one goes that far. If

one can have a private company which is not a trading
corporation because it merely holds family assets in
a passive way, then what is wrong with characterizing
a private trustee company as iust that and not as
being - because of its activities, its objects and
its purposes, why should you go searching in
the memorandum for trading obiects where there is
no current activity?

BRENNAN J:

That is not quite the point, is it? The first

question is whether or not activities is either the
exclusive or predominant criterion.

MR HANDLEY:

Yes.

BRENNAN J:

Now, if one adopts that proposition, one looks to see what the activities are but, if there be no

activities, the next question is, "Can one adopt any

other criterion?"

Your answer primarily is, "No",

but if the answer is, "Yes, you can adopt another criterion, whether it is purpose or intention, or the objects or capacities of the corporation'', why is

it that one would look to the predominant obiect or
purpose, or intention, as distinct from a subsidiary

one?

MR HANDLEY:

I would seek to answer Your Honour this way;

the course of asking this question of me Your Honour
said, "If there are no activities".

BRENNAN J:	Yes.
MR HANDLEY:	But there were in FENCOTT V MULLER.
BRENNAN J:	That may be so, but in terms of the principle that

is relevant for the resolution of this case, we are dealing with a dormant company where, ex hypothesi,
there is no activity.

MR HANDLEY:

Yes.

Your Honour, I would simply seek to answer

Your Honour this way, that if there was a head of
constitutional power such as traders, or
unincorporated traders, or trading individuals, it
would not occur to anybody that that should be
construed so as to cover the entire adult population
of Australia who were of sound mind and not bankrupt.
In our submission, mere legal capacity cannot
realistically be accepted as a test of what constitutes
a trading corporation for the sort of reasons we have
already given and which I do not wish to take

Your Honours back through. Now, I will not be much
longer, Your Honours, but I would seek very briefly to
show, or endeavour to show how the test applied in
FENCOTT V MULLER to characterize Oakland as a
trading corporation actually finishes up

ClTll/1/HS	121	4/10/89
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corresponding with the now discredited view 1n
ST GEORGE of Mr Justice Menzies and Mr Justice Gibbs
and the minority views in ADAMSON, because the
views that were re_iected by the minority in
ST GEORGE, as it were, who were on the side of the angels, and by the ma_iority in ADAMSON,
are the very views which one finds adopted by
the maiority in FENCOTT V MULLER because the
test in ST GEORGE applied by Sir Garfield Barwick

and Mr Justice Stephen was an activities test.

The test applied by Mr Justice MenHies 11

and Mr Justice Gibbs was a form for the purpose of
test and the same can be said about ADAMSON's case,

and what was put forward, we respectfully submit,
in both ST GEORGE and ADAMSON by those who took
a wider view of Commonwealth power was that
activities is the sole test and we would see~ to
very briefly take Your Honours back to - - -

(Continued on page 123)

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NSW(2)

McHUGH J:

But the basic proposition in FENCOTT is

introduced with the phrase "absent trading
activities", is it not?

MR HANDLEY:

I understand that, Your Honour, but why absent

trading activities? I mean, absent activities
is one thing but there were activities. Why
do you characterize an active corporation as
a trading corporation because it has got trading
objects or trading powers? There is a tension,
in our submission, between having - and we fully
accept this - having found, in ADAMSON that current
activities made you a trading corporation whatever
your purposes or objects were and, as I say,
except for making placitum (xx) reach back to
incorporation, that gives a very full and complete
scope for placitum (xx) power.
Anything that from time to time is a trading

corporation because of its activities is within
federal power. Nothing, if it is activities,

if it quiescent, it does not have to be federally
regulated; if it is doing something else which
makes it not a trading corporation then it takes

itself outside placitum (xx). I will just seek
to show that in these earlier cases activities
was postulated by those who took a broad view
of placitum (xx) as the exclusive test of
characterization as a trading or financial
corporation.

McHUGH J: Is not FENCOTT really saying that there just

were not enough activities to characterize them?
We might have got a different result altogether
in FENCOTT if it had been acting as a trustee, day in and day out, for several years engaging
in hundreds of transactions of a trustee nature.

MR HANDLEY:

That is where we would invoke Lord Esher's

remarks, Your Honour, because such activities
as had commenced in Oakland were commenced with

a purpose and with an object so far as the natural
persons were concerned and although, of course,
the Court had to look at Oakland at a very early
stage in its active life and its activities were
fairly rudimentary, nevertheless given the intention
one can see that although it had a capacity to

be diverted into trading activities at some
later stage, at that stage its activities with
its purpose, in our submission, enabled it to

be characterized. And then, since you could
use the activity test to characterize it, why
fall back on what is in some documents, in our
r~spectful submission?
The ST GEORGE case, 130 CLR 533, and I only

wish to pick out discrete sentences from the

C lTl 2/1 /ND	123	4/10/89
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judgment of the Chief Justice. But at 539, at
the end of the first paragraph, His Honour said:
However, as I will later indicate, the
description "trading corporation", in my
opinion, refers not to the purpose of
incorporation but to the activities of the
corporation at the relevant time.

And at 541, His Honour said, at about point 6
on the page - the word "accepted" is on the right-
hand margin, perhaps a bit further above that:
No doubt during and at the end of the
nineteenth centry, corporations were
classified for various purposes and, on
occasions, special rules made applicable
to corporations in one category which were not applicable to corporations in another. Trading corporations were both known and
referred to as such. But there does not
appear to have been any generally accepted
definition of a trading corporation. It
was assumed, I think, that such a corporation
could be identified by its activities.
If its nature was being sought, it was to
be found in what it did. It seems to me
that no assistance in the solution of the
present problem is to be derived from the
undoubted statement that, as at 1900, there
were trading and non-trading corporations
or that consequences were attached to such
descriptions or classifications.

(Continued on page 125)

C1Tl2/2/ND 124 4/10/89
NSW(2)

MR HANDLEY (continuing):

Mr Justice Menzies, &t~page 552,

took the opposite view on this question. At about
point 3 on the page:
It seems to me that trading corporations were
in 1900 a well-recognized classification of
companies.

I need not remind Your Honours of the rest of what
His Honour said. At page 562, Mr Justice Gibbs
said in the start of his last paragraph on that
page:
A trading corporation is one formed for the
purpose of trading.

So, the FENCOTT V MULLER approach actually involves
a reversion to the view, treated as rejected and
discredited in ADAMSON, that one characterized a
corporation by purpose for which it was formed.
Of course, it could have two cumulative tests:
activities, if there are any, and purpose, if there
are none. In our submission, that was not the way
in which those who had a broad view of placitum (xx)
saw the matter in ST GEORGE or in the FOOTBALL LEAGUE
case.
I now briefly go to the FOOTBALL LEAGUE case

in 143 CLR 190 at page 208, in the judgment of
Sir Garfield Barwick - the end of the very short paragraph, about point 5 on the page:
The only sure guide to the nature of the
company is a purview of its current activities .....
I remain of the firm conviction that for
constitutional purposes a corporation formed
within the limits of Australia will satisfy the
description "trading corporation" if trading is
a substantial corporate activity. Its
activities rather than the purpose of its incorporation will designate its relevant

character.

That is put up, in our submission, as an exclusive
test. At page 233 -

DEANE J: The next sentence is not irrelevant.

MR HANDLEY: It is not irrelevant, Your Honour? No, indeed, it

is not becaus~ both in ST GEORGE and in this case,
Sir Garfield Barwick said that the activity had to be intra vires. That, of course, goes without saying.

DEANE J: Does :i.r ri:-~1.ly? If purposes and objects are

irrelevant - - -

C1Tl3/l/DR	125	4/10/89
NSW(2)

:MR. HANDLEY: I did not say they were irrelevant, Your Honour.
DEANE J: Well then, what exactly are we concerned with?
FENCOTT V MULLER obviously departs to some extent
from what was said by the majority in ST GEORGE
and in ADAMSON, in that it says that both objects
and activities can be relevant and, in some
circumstances, decisive of the question whether the
corporation is a trading corporation or not.
Do you take it any further than that?

(Continued on page 127)

ClT13/2/DR 126 4/10/89
NSW(2)

MR HANDLEY:	Your Honour, it would be open to this Court to take the view that a corporation which traded
ultra vires was nevertheless within placitum (xx);
that by drafting documents which said that this
corporation shall not trade - I mean the ground rules
for this ultra vires concept have been swept away by
company law in this country in the last 20 years -
DEANE J:	I think I have side-tracked you, no doubt because I

have put it badly, but I can follow your attack on
FENCOTT V MULLER and that paragraph in which you
say it does not lie comfortably with some of the
statements in the earlier cases where, of course,
there was very close division, as there still was
in FENCOTT, but, what I do not quite follow is
why you say that what was said in FENCOTT V MULLER

is wrong, and that you get to, as it were, first base
by saying, "Oh, it was inconsistent", or, "It does
not lie well with what was said by some in the
earlier cases"; now, having got to that stage, why is
it that "objects" or "purposes" are irrelevant to
categorization?

MR HANDLEY:

I did not ever intend to put that objects and

purposes are irrelevant. I intended to say that
building on what Lord Esher said, that "intention"
and "purpose" and "object" are very important in
order to enable you to characterize early activity.
But, once the activity is built up, and one has
sufficient history to go on, then one just concentrates
on the present activity.

DEANE J:

I mean, take FENCOTT V MULLER, and take it at its

strongest against categorization, that is, say the
activity was simply the holding of shares; why is it
not relevant to look and see, well, there was a power
to act as trustee, there was a power to receive the
dividends, there was an obligation to account for the
dividends; all those things are relevant to whether
or not it should properly be characterized as a
financial corporation, and it is neither here nor there

with them in its capacity as trustee". That may or to·say, "It holds shares, received dividends, deals
may not be right, but what I am not clear on is
precisely what you say as to the relevance of the
objects of the company, and its powers.

MR HANDLEY: Well, Your Honour, we would submit that until there

is some activity, the objects are irrelevant.

DEANE J:

So that if you have a company incorporated with its

objects and powers limited to an unquestionable
trading activity, it would not be a trading
corporation?

MR HANDLEY:

Yes, Your Honour, bearing in mind the word "trading",

we would say it is not a corporation. "Trading
corporation" is a corporation that is trading.

ClT14/l/FK	127	4/10/89
NSW(2)

DEANE J:

So the relevance of its objects and powers would

simply be to control the significance of its
activities?

MR HANDLEY:	Yes, Your Honour.
DEANE J:	I follow that.

(Continued on page 129)

ClT14/2/FK	128	4/10/89
NSW(2)
MR HANDLEY:	Yes, Your Honour.	I was going to take

Your Honours now to what Mr Justice Mason, as he
then was, said at page 233 in ADAMSON, and
at about point 4 on the page His Honour indicates
a preference for the views of Sir Garfield Barwick
in the ST GEORGE case:
it is not necessary that a corporation
be formed for trading purposes and that
"the a c t iv i t i e s o f a co r po r a t i on a t the
time a law of the Parliament is said to
operate upon it will determine whether
or not it satisfies the ..... constitutional
description".

That is put, in our respectful submission, as an
exclusive test and His Honour goes on to make the
statement that:
"Trading corporation" is not ..... a term of
art or one having a special legal meaning
..... it is a description or label given
to a corporation when its trading
activities form a sufficiently
significant proportion of its overall
activities -

and, of course, Mr Justice Jacobs and Mr Justice Aickin
agreed with that view. Your Honours, I would only
wish to make one further point, subiect to any notes,
and that is this, that when Your Honour Justice Deane
referred to Lindley - - -

MASON CJ:	You are not right in saying that Mr Justice Aickin agreed with that view, are you?
MR HANDLEY:	I thought I was, Your Honour. I hope I - - -

MASON CJ:

He agreed with Mr Justice Stephen.

You have

failed to take into account Mr Justice Murphy.

MR HANDLEY:

Yes, I have, Your Honour.

I beg Your Honour's

pardon. Mr Justice Aickin agreed with Your Honour
in FONTANA FILMS, and that was - yes.
Yesterday afternoon at the close Your Honour

Justice Deane put to Mr Doyle Lindley on Companies
in the editions which straddled Federation and put the
point that everything was a trading corporation or
trading company which was not one of a special
category of charitable or public benevolent companies. We would wish to make this point about those comments; it is not a power with respect to companies.
ulacitum (xx) deals with corporations. St George
was not a company, the football leagues were not
companies, the superannuation trust was not a company.

ClTlS/1/HS	129	4/10/89
NSW(2)

It is a power with respect to corporations and, in our submission, that breaks any direct nexus with the sort of Lindley approach at the time of Federation.
Had it been, of course, a power with respect to companies, then the cases that Mr Davies took
Your Honours to which show that there can be
unincorporated companies, as well as incorporated
companies, would have enabled the power to be
characterized as wider so far as companies are
concerned, and reaching into unregistered,
unincorporated companies and supporting section 112
and section 113. At the same time, of course, there would have been problems in reaching the Tasmanian
Hydro Electricity Authority and the other non-company
corporations which have hitherto been held-and we do
not quarrel with that - properly held to be within
the reach of Commonwealth power under this placitum.

MASON CJ:

Mr Handley, it is not a point on which you have

addressed the Court, but can you throw any light on
what were the problems or difficulties of status
and recognition that faced, in a particular colony,
companies incorporated in another colony and, for that
matter, foreign companies as well?

(Continued on page 130)

ClTlS/2/HS	130	4/10/89
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MR HANDLEY:	I think I can pick this u~ Your Honour.	There

is a discussion in Mr Justice Isaacs'judgment and
Mr Justice Higgins' judgment in HUDDART PARKER
and Mr Justice O'Connor's judgmen½ and beyond that
and the confederation debate~ Your Honour, I cannot
throw any light on it.

MASON CJ:	Thank you.
MR HANDLEY:	I do not think I need take Your Honours to the

actual passages.

MASON CJ: No, there is no occasion to do that, thank you.

MR HANDI.EY: It is suggested that I did not answer a question

from Your Honour Mr Justice Brennan which has
been recorded in this fashion: '!f the purposes
test applies do you only look or why do you look
for the dominant purpose?" I think I would seek to
answer it in a way in which I ultimately answered
Mr Justice Deane, that absent activities , "purposes"
does not enable you to characterize the corporation
as other than inactive. Once activities commence,
of cours~ one can look at those activities with one's
focus sharpened by reference to purposes and objects.
Whether these are dominant or otherwise, one still
may be able to look at all the purposes, all the
objects and in that way conclude that the activities
are trading or are of a financial kind, or perhaps
are not, and that is the way we would seek to
answer it, but if the corporation is dormant that is
the only fair description of it, in our submission,
for constitutional purposes and one does not have to
go through the ordinary arid task of looking up
and down a memorandum in order to characterize
something when it is itmnediately characterizable as
a dormant corporation. If the Court pleases.

MA.SON :·cJ:

Mr Solicitor for New South Wales.

MR MASON:

Your Honours,New South Wales would adopt the

submissions by learned friend,Mr Davies,on behalf
of South Australia in relation to the general scope
of placitum (xx). It had been proposed that I would
put some submissions specifically directed at
section 113 and whether that section in its direct
preclusion of reliance upon State statute law
transgresses a constitutional prohibition.
Your Honours, without wishing to resile from the
proposition that section 113 may be invalid in
seeking to create a direct offence at the suit of
a person, further reflection suggest that given
the desire of the parties to this litigation that
the real issue will be addressed by the Court to
raise what really is a point that will ultimately turn
upon. whether there is a section 109 inconsistency
between the legislation and whether section 113

CIT16/l/CM	131	4/10/89
NSW(2)

can elucidate what perhaps applies from the rest

of the Act, even absent section 113. The decision
has been taken not to press tha~ a~ a s~P.arate
argument and that if chapter 2 is invalia
for any of the reasons that have been advanced, well
so be it. If it is valid then there is a question
as to what happens next and it is thought that it
is most appropriate that one should then consider
what happens with respect to State law in the light
of such a decision rather than arguing it as a
hypothetical issue at this stage.
(Continued on page 133)

CIT16/2/CM 132 4/10/89
NSW(2)

McHUGH J:

Does that mean section 113 is withdrawn in each

of the four act ions or only New Sou th Wales' ?

MR MASON: No.

Section 113 has been challenged already

on two bases, the characterization basis argued
specifically by my learned friend,Mr Handley,
and on the basis that it is really in terms
incidental to chapter 2 as a whole which, in
turn, raises the question raised by Mr Davies. Those two points stand but there is nct:pressed
any independent point other than those two.

DEANE J: Is there anything in the Act about whether the

Act applies to, for example, the incorporation
of a State training instrumentality?

MR MASON: Certainly not in section 113 which confines

itself to the company law of a State which is
defined in a not very helpful way back in
section 9.

DEANE J:	What if the State incorporated a company under
its own company law?

MR MASON: By statute? No, by - - -

DEANE J:	By ordinary -
MR MASON:	- - - reference to its own company law.

DEANE J:

Yes.

Or it made statutory provision for

incorporation under statute law? The chairman of the Public Service Board for the time being
and so on, the shareholders.

MR MASON:

There would be two issues - if section 113 alone

was raised against such action - we are assuming
that the State COMPANY CODE was not blotted out
by the general operation of section 109, but
stood - there would appear to be two issues that

wquld arise. One is whether'~ persod'perhaps

would apply to a State officer and - there was
a second answer I did have to Your Honour which
I cannot now bring to mind.

DEANE J: If we should not be concerned about it - - -

MR MASON:

I am sorry,

I have recollected it.

The question

remains but we do not seek to press it here as
to whether section 113 can be valid as a direct
command. It may be valid and certain earlier
cases have looked at sections such as this - WENN
is one, for an example - as an indication of an

intention to cover a field. A distinction seems
to be drawn with reference to some powers that
the Commonwealth may declare an intention to

C 1T17 /1 /ND	133	4/10/89
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dominate a field exclusively and may declare
that in terms by a section along the lines of
113 which precludes reliance upon State statute
law. Section 24(2), discussed in WENN's case
is an example of that.
The discussion suggests that the section

is not valid itself as a direct command but
may nevertheless be taken into account as part
of a valid, it seems, expression of the intention
that the rest of the Act will cover a particular
field.

DEANE J: Of course, on New South Wales' argument, already
advanced, section 113 would be simply inoperative,
would it not?

(Continued on page 135)

ClT17/2/ND 134 4/10/89

NSW(2) .

MR MASON:

Yes, on the two broad arguments that have been put.

DEANE J: So, validity would never really arise?

MR MASON:

No, and equally, if those two broad arguments are

rejected, then it would seem that it would be
better to look at where one stood at that stage
with reference to a general State company law rather
than trying to debate the matter in a hypothetical
stage.

DEANE J: It is a little bit hard to see exactly how we deal

with New South Wales' primary argument about

section 113, though. I mean, if it does not apply
to anything at all, what do we say at the end of the
day?

MR MASON:

Section 113 is locked into chapter 2 as a whole, in

our submission. It is referred to in 112(l)(c).
Standing alone it would clearly, in our submission,
be an invalid order in effect saying to a person,

"Disregard State law". It would be as invalid as a
Commonwealth directive to a State parliament saying,
"Don't pass the law in the first place", but,
because in terms it is part of a legislative scheme,
Your Honour, in our submission we are content to put
the argument on 113 as being based upon the invalidity
of the whole scheme , either for the placitum (xx)
basis or the characterization basis that has been
put. I hope that answers Your Honour's question.

DEANE J: Yes, it does answer my question.

MR MASON: If Your Honours please.

MASON CJ:

Yes.

Thank you, Mr Solicitor. Mr Jackson.

MR JACKSON:

May it please the Court, the issues with which I

wish to deal fall under two heads: the first relates
to incorporation and the second relates to the

validity of the Act assuming there is power to legislate for incorporation. May I deal with the
first of those matters now? Your Honours, under
that head, the question whether the Commonwealth
has power to legislate under section Sl(xx) to
permit incorporation of trading and financial

incorporations, two issues again arise. The first
is - and I shall say something about the order of
them in a moment - whether the decision in
HUDDART PARKER V MOOREHEAD should be followed even
if members of the Court were of the view that they
themselves IDUl.d, today, arrive at a different: conclusion?
The second is, assuming that the issue is

back in the melting pot, as it were: what decision

should be arrived at? Your Honour, different minds

C1Tl8/l/DR	135	4/10/89
NSW(2)

might take different views about whether one issue
should be dealt with before the other but the two
are related. Your Honours, what is submitted in
relation to what I have described as the first issue,
is that HUDDART PARKER V MOOREHEAD, whatever may
later have been seen as its defects in other aspects,
has been treated as settling and a settling against
the Commonwealth, the question whether section Sl(xx)
conferred a power to legislate for incorporation.
Your Honours, we would submit that if the

issue is one which might have been decided either way
the considerations against adopting a new view
outweigh those in favour of doing so. Your Honours,
could I turn a little more specifically to the
matters arising under that head? It is clear, in
our submission that, in HUDDART PARKER V MOOREHEAD,
all the members of the Court who were sitting took
the view that the terms of section Sl(xx) did not
confer on the Commonwealth a power to legislative
for the incorporation of trading and financial
incorporations. There was no dissent in the case
and I said, "All the members of the Court who were
sitting" and, of course, all the members of the
Court who were sitting were all the members of the
Court at that time.

(Continued on page 137)

C1Tl8/2/DR 136 4/10/89
NSW(2)

MR JACKSON (continuing):

Your Honours, what is noteworthy also,

in our submission, is that the doctrine of reserved
powers did not, we would submit, play a part in the
reasons leading to that conclusion; that the
conclusion, as to the meaning of section 51(xx),
as distinct from the ambit of some of the powers
which might be exercised pursuant to it, the
conclusion was arrived at by a process as orthodox
now, in our submission, as it was then.
Your Honours, I do not intend to go over the

passages that have been referred to by our learned
friends, but we would adopt the argument on that
point. Your Honours, the next matter is that the
decision in HUDDART PARKER V MOOREHEAD was given at
an early point after Federation. It was given, to
the extent to which it is germane, by a Court
comprised of persons who participated in the
convention debates and in the discussions leading to
Federation. It is, no doubt, correct historically
to say that the judgment was given at a time when
the doctrine of the ENGINEERS' case had not yet
been espoused, but the judgments were - unanimous
judgments in HUDDART PARKER V MOOREHEAD - unanimously
against the notion that there was a Cormnonwealth power to incorporate, and, Your Honours, again to the extent
to which it is germane, even Mr Justice Isaacs and
Mr Justice Higgins, who became part of the majority
in the ENGINEERS' case did not, in HUDDART PARKER V
MOOREHEAD, take the view that the Cormnonwealth could
legislate for incorporation.
Now, Your Honours, HUDDART PARKER AND COMPANY V

MOOREHEAD, of course, is not the only occasion on which the question has been dealt with by the eourt,
and after the ENGINEERS' case the same view was
treated as applicable, and, Your Honours, in that
regard - - -

McHUGH J: Could I just stop you?

MR JACKSON:	Yes.
McHUGH J:	Was this question of incorporation part of the ratio in the case in HUDDART PARKER, because the question at issue in HUDDART PARKER was whether or
not section 5 and section 8, which made it a
conspiracy for a trading or financial corporation -
made it an offence for a trading or financial
corporation to conspire to injure somebody in this trade, that was the issue?

MR JACKSON.

Yes, Your Honour.

Could I say how it arose was that

the way in which the Cormnonwealth, to support the legislation, argued its case, was to say that the
power given by section 51(xx) was a power which was a wide power. It started off as a power to incorporate

ClT19/l/FK	137	4/10/89
NSW(2)

and to do all other things - and I am paraphrasing
it rather than putting it exactly - to do all other
things which related to corporations of the kind
described in section 5l(xx).
Now, Your Honour, views perhaps differ a little

on what exactly is the ratio of a case, but the
manner in which the Court arrived at its decision
in the case was to say, in the first place, that the
argument advanced by the Commonwealth to sustain the
exercise of the power, was deficient in a number of

respects. One was that the power to incorporate,
which was put at the forefront of the Commonwealth
argument - the argument on that point was not
correct, and then, of course, the Court went on to

the other aspects of it. So, Your Honour, if one
takes the slightly larger view of what is the ratio

of the case, it was. If one takes the narrower view,
it was not.
But, Your Honour, the question whether it is

part of the ratio of the case is one which is, in
a sense, and I say so with respect, interesting, but
in the end the question is whether the doctrine, we
would submit, is one that has been accepted with the
passage of time, or, perhaps I can put it the other
way, the question is whether that doctrine should

now be departed from. Your Honours, what I was about
to say is that in cases after the ENGINEERS' case,
the view adopted in HUDDART PARKER V MOOREHEAD is a
view which has been treated as continuing to be
applicable and could I refer Your Honours to
AUSTRALIAN NATIONAL AIRWAYS V THE COMMONWEALTH, (1945)

71 CLR at page 57, BANK OF NEW' SOUI'H WALES V THE C(]vM)NWEAI.:rn:
Your Honours, I do not incenct co read from the
references but I will give Your Honours the references,
(1948) 76 CLR at pages 2.02, 255 and 304, and INSURANCE COH--ITSSIONER AND
ASSOCIATED DOMINIONS ASSURANCE PTY LTD, (1953) 89 CLR
at page 86.

(Continued on page 139)

ClT19/2/FK	138	4/10/89
NSW(2)

MR JACKSON (continuing):

Your Honours have been given

those references, I think, earlier.

MASON CJ:	Yes, we have.
MR JACKSON:	Your Honours, the only judicial observations

to the contrary of those in HUDDART PARKER V
MOOREHEAD are those of Mr Justice Murphy in the
two decisionsYour Honours have been referred
to already. And, Your Honours, so far as the stream of decision is concerned in the Court, with those exceptions, the observations of members
of the Court support the proposition that this
part of HUDDART PARKER V MOOREHEAD represents
the position in Australia.

DEANE J:	Mr Jackson, are there any statements in judgments
since STRICKLAND that assert that the decision
in STRICKLAND leaves unaffected the comments in HUDDART PARKER in so far as they relate to
incorporation?
MR JACKSON:	Your Honour, I think the answer to that is

"No". I am conscious of what was said - - -

DEANE J:

I just do not know.

I was not -

MR JACKSON:

Your Honour, we have not come across any

discussion of it - further discussion of it apart
from STRICKLAND and, Your Honour, I should say
that with the qualification that, of course,
the other aspects of HUDDART PARKER V MOOREHEAD
had a stormy passage in some of the judgments
in the TASMANIAN DAM case.

DEANE J:	I had been under the impression that in subsequent
cases, with the exception of Mr Justice Murphy,
the members of the Court had been very careful not to express any view on that aspect, subsection (xx).
MR JACKSON:	Your Honour, I cannot express a view on the

motivation for what does not appear but - - -

DEANE J:	I was not thinking of motivation I was thinking of a general impression.
MR JACKSON:	Your Honour, the short fact is, in our submission,

that the citations that have been given seen
to be all the aspects that deal with the cases.

DEANE J:

But they really beg the question whether a view

as to incorporation power formed in the context
of a wrongly constricted view of the overall
scope of subsection (xx) is affected when the
context changes and that constricted view is
abandoned.
139 4/10/89

NSW(2)

MR JACKSON: Your Honour, with respect. I do not really
beg the question or really, suggest that there
is a significant question remaining to be resolved.
One would have thought that after the ENGINEERS'
case, in for example the BANKS' case, one would
have thought that in that case, if there were
to be a significant issue raised about the ambit
of section Sl(xx), including the power to
incorporate, because there is some overlapping
in those aspects, one would have thought that
was a matter on which more hesitant views, perhaps,
would have been put forward by those of the members

of the Court who dealt with it. And, Your Honour,
our submission is - and I will come to an historical
reason for it in a moment, our submission is
that the members of the Court who dealt
in that case and in the other cases, have really
treated HUDDART PARKER V MOOREHEAD as deciding
this point.

DEANE J: But that does not seem to me to face up to the
problem. The problem is this, is it not, that
as this Act demonstrates with its artificiality,
the narrower the view one takes of the scope
of subsection (xx) in terms of legislative power
in relating to existing corporations, the weaker
is the argument that that power carries with
it. a power with respect to incorporation, because
the Act demonstrates the problems of limited
powers in relation to incorporation.
That being so, the scope of the legislative
power with respect to corporations which are
formed is, one would have thought, a necessary
starting point to whether or not the subsection
catches up a legislative power with respect to
incorporation? And in that sense forces us to
face up to how wide or how narrow is this reference
to trading or financial corporations.

(Continued on page 141)

ClT20/2/ND 140 4/10/89
NSW(2)

MR JACKSON:

Your Honour, I was not seeking to avoid that

really, as I do propose to deal with it a little.

DEANE J:

No, but, if that be right, you simply cannot isolate

the comments as to incorporation from HUDDART PARKER
and reinforce them by reference to other statements
made since STRICKLAND. We must face it at a proper
level of principle, and that is not said critically,
of course, Mr Jackson.

MR JACKSON:

No, Your Honour, I appreciate that.

The point

I would seek to make in answer to it, if I may, is

this: we would accept, I think, that the narrower
one treats the expression "trading and financial
corporations" in section 51 as being the less likely
it is that one would arrive at a conclusion that the
power comprehended by section 5l(xx) includes a
power to incorporate, and that would really come about

for two reasons. One would be that the - one would
be talking about a law with respect to trading and
financial corporations and if one said that a trading
corporation is that which trades and does nothing
else, then one would think that a law about that is
likely to be a law regulating its trading activities,
to take the narrowest view, if I could put it that
way.
On the other hand, Your Honours, there is a

second aspect to it too, and that is that one is not
just speaking about laws with respect to trading or
financial corporations, whatever that might mean.
One is speaking about trading or financial corporations
formed within the limits of the Commonwealth and it is
the second part of the expression, that is, "formed
within the limits of the Commonwealth", that plays
a very significant part in the determination of the
particular question, whatever view one might take
about the ambit of "trading and financial corporation".
So that, Your Honours, whilst, if one took the broadest
view, let us say, of the ambit of "trading and

financial corporation" - one might take the broadest
view of that - it still has to be something formed
within the limits of the Commonwealth and, Your Honours,
that essentially, in our submission, was the point that
was dealt with in HUDDART PARKER V THE COMMONWEALTH.
Your Honour, I was going on to say one thing, and

it was this, Your Honours, that one might really find
an historical basis for the fact that the Members of
the Courts after HUDDART PARKER V THE COMMONWEALTH
and after the ENGINEERS' case treated HUDDART PARKER
V MOOREHEAD as really having decided the point, and that is that HUDDART PARKER V MOOREHEAD has not just
been treated as settling the point by Members of the

Court. The electorate has voted on the question
whether the Commonwealth should have power to

Cl T21 /1 /HS	141	4/10/89
NSW(2)

incorporate companies on a total of five occasions
since HUDDART PARKER V MOOREHEAD and on none of those
has the proposal achieved either a majority of votes
or a majority of votes in a majority of States.
Now, Your Honours, some material which I would

like to give to Your Honours in that regard - and
Your Honours it consists of three documents. The
one to which I wish to go first is the document, the
first page of which is the REFERENDUM (CONSTITUTION
ALTERATION) ACT.

(Continued on page 143)

ClT21/2/HS 142 MR JACKSON, QC 4/J0/89
NSW( 2)

MR JACKSON (continuing): Your Honours will see the

REFERENDUM (CONSTITUTIOR-.ALTERATIONl.:.ACT. has attached
to it some notes and on the page which is numbered
81 Your Honours will see a continuation of the list

of referendum proposals. Of those,Your Honours,perhaps
I could indicate the ones which are germane for

persent purposes. They are the first, that is:
CONSTITUTION ALTERATION (LEGISLATIVE POWERS) 1910 -

the date of submission being 26 April, 1911•
The third one:
CONSTITUTION ALTERATION (CORPORATIONS) 1912 -

of 31 May, 1913.
If Your Honours go down the column headed "Date of
Submission'• to the first of the 1919 ones, that is:
CONSTITUTION ALTERATION (LEGISLATIVE POWERS) 1919
13 December, 1919 -

to the first of the 1926 referenda -
CONSTITUTION ALTERATION (INDUSTRY &'ID CO1:1MERCE) 1926

4 September, 1~26 - and then, Your Honours to the 1944 referendum -
CONSTITUTION ALTERATION (POST.:.WAR RECONSTRUCTION
AND DEMOCRATIC RIGHTS) 1944 -

Bill. Turning over from that,Your Honours, there is then an extract of some pages from Macmillan & Ors Australia's Constitution, and Your Honours will
see the result of the five referenda. Your Honours
I will come back to that after I have been to the
terms of them. There were sane difficulties in obtaining the

full exact copies of the documents that were put to
the electorate, but if I could come to a document
which is part of an extract from Sir John Quick's Legislative Powers, Your Honours will see at page
numbered 500 which contains the terms of the first
two referenda and there is a heading, Your Honours -
Proposed Constitutional Amendments Relating
To Corporations.

And if Your Honours have that page Your Honours will
see that it sets out the text of the first two, that
is, the referendum of the 26 April, 1911 which
proposed a new section 51 (xx) which was to be -

CIT22/l/CM	143	4/10/89
NSW(2)

Corporations including:-

(a) The creation, dissolution, regulation,
and control of Corporations;

(b) Corporations formed under the law of a
State

and it excluded various corporations -

including their dissolution, regulation and

control; and

(c) Foreign Corporations including their regulation

and con tro 1 .
Now, Your Honours, the fate of that proposal appears
in the table number 2.1 at page 25, paragraph (a)
in the first page of text extracted from Macmillan,
beside "19ll"it obtained a majority of electors in
one State and the National vote in favour was

39.42 per cent. The second proposal,Your Honours,
again appears on the same page as the first to which
I referred.
(Continued on page 145)

CIT22/2/CM 144 4/10/89
NSW(2)

MR JACKSON (continuing): It wa~ the proposal of_ 31 M:ly 1913.

It again

proposed a new section 5l(xx) in what I think are the
same terms as the 1911 proposal. If Your Honours
go back to the table showing the results, Your Honours
will see these numbered: there is 1913, the one
identified as ''B". _It obtained three States and
49.33 per cent of the electorate. There was, then,
Your Honours - it should be on the page following
the extract from Quick's Legislative Powers - a
proposal which did not, in the end, go to a referendum
in 1915. Your Honour& that is included for completeness
and Your Honours will see the copy of a proposed law
to alter section 51 -

MASON CJ:	Mr Jackson, I do not think we have that one.
MR JACKSON:	I am sorry, Your Honour, it should have followed

the extract from Quick.

MASON CJ: Yes, I think it may be out of place. It may be in

front of Quick. It is the one of the first page: A
Proposed Law?

MR JACKSON:	To alter section 5l(xx).
MASON CJ:	To alter section 51 of the CONSTITUTION?
MR JACKSON:	Yes. Then, Your Honour, the first paragraph of the proposed law should be:

This Act may be cited as CONSTITUTION ALTERATION
(CORPORATIONS) 191S-.

MASON CJ:

No.

(LEGISLATIVE POWERS) ACT 1919.

So we do not

seem to have that one.

MR JACKSON:

Your Honour, I will ensure

Your Honours have a

copy of that but it was in, for practicar purposes, the
same terms as the two previous - - -

MASON CJ: It is there, Mr Jackson.
MR JACKSON:	Thank you, Your Honour. Your Honours, it appears

to be, with perhaps inm1aterial differences, in the
same terms as the 1911 and 1913 proposals. It was
not put to the nation. Your Honours, could I go
then to the next one which is the 1919 proposal -
it should be on the next pige - CONSTITUTION
ALTERATION (LEGISLATIVE POWERS) 1919. Section 3
of that proposed law proposed that there be an
amendment of section 5l(xx) by putting in a new
section 51(xx) in the following terms - Your

Honours, if I could just say this. The section
would then read, of course:

ClT23/l/DR	145	4/10/89
NSW(2)

with respect to -
and one would go to:
Corporations, including -
(a) corporations formed under the law of a
State -

and, then -

(b) foreign corporations -

so that the ambit of the provision was increased by
making it a law with respect to corporations

including specified corporations. Now, Your Honours,
that, as Your Honours will appreciate by the date
of it, was a provision which was proposed, no doubt, in
consequence of the experience in the First World War
and it was to last, as Your Honours will see, for
a limited time. Section 6(l)(a), it was to:
remain in force -
(a) until the expiration of three years from
the assent of the Governor-General thereto; or -

until it was accepted at a referendum.

(Continued on page 147)

ClT23/2/DR 146 4/10/89
NSW(Z)

MR JACKSON (continuing): Now, Your Honours, the fate of that

appears, if I could go back to table 2.1,
in paragraph (a) beside 1919 and there were three
States in favour and the national figure for voting

was 49.65 per cent in favour. Your Honours,
undaunted by the results of the referenda, the
Commonwealth moved again in 1926 and Your Honours
will see the CONSTITUTION ALTERATION (INDUSTRY AND
COMMERCE) 1926 proposed law. Section 2(a) proposed to delete the present wording from
section 51(xx) and to insert instead the words:
"Corporations, including -
(a) the creation, regulation, control and
dissolution of corporations -

and so on. Your Honours, the fate of that referendum
appears at the top of page 26 of the table and it
obtained a majority in two States and that national
vote was 43.5 per cent. Finally, Your Honours,
there is the - - -

McHUGH J:

But the 1926 referendum throws up the issue.

In only

two of these have the people voted on the corporations
powers singly. In all the rest they were given a
block. In 1926 the great controversy was over the
arbitration issue.

MR JACKSON:

Well, Your Honour, if I may put it this way, that

is what tends to happen in referendums. Those seeking
to obtain the change of the CONSTITUTION, of course,
have the political means - that means the Commonwealth
and it can only mean the Commonwealth - have the
political means at their power to select the form
of which the referendum is to take. Now, Your Honour, if for political reasons it is determined that a group
will be got through together, or that there will be
an attempt to do that, then it will succeed or it will
fail. It is very difficult, Your Honour, if one is

political officials giving reasons for the failure looking at it other than from the point of view of

of a referendum - if one is looking at it from that point of view one can understand why they say, "Too
many things were put together".

McHUGH J:	But the point is in 1919, 1926 and 1944 it may mean that a majority of people were in favour of
the corporations power going to the Commonwealth. One does not know from the results of the referendum.

MR JACKSON:

Well, Your Honour, one does.

One knows they did

not.

McHUGH J:

That may be because people did not want the

arbitration power to go here or there.

ClT24/l/HS	147	4/10/89
NSW(2)

MR JACKSON:
Your Honour, that is possible, of course, but
the one thing one does know is - perhaps there are
a couple of things one knows - one is that there was
a perception at the time in 1911, 1913, 1919, 1926,
and I have not yet come to 1944, that the Commonwealth
did not have the power to deal with the incorporation

of :orporations and that, in various forms, the
proposition that it should have that power was put
to the nation on five occasions and on five occasions
it failed. Those are the things one gets from it
and, Your Honour, I will come to it in a moment, but
that is a factor which, in our submission, is one
of the factors which should lead to the conclusion
that there are some areas of constitutional law
which should be treated as settled. That is a point
that I am going to come to in a moment.
Your Honours, what I was about to do was to go
to the 1944 proposal.

(Continued on page 149)

Clt24/2/HS 148 4/10/89
NSW(2)

MR JACKSON (continuing):

Your Honours will see that the

proposal that was advanced in 1944 was by the
CONSTITUTION ALTERATION (POST-WAR RECONSTRUCTION
AND DEMOCRATIC RIGHTS) 1944 proposed law and
Your Honours will see that it proposed the
introduction of a new section 60A in which
subparagraph QXiv) was for a law with respect to:
companies, but so that any such law shall
be uniform throughout the Commonwealth.

And subsection G)proposed that the section would

be in force for a period of five years. Your Honours,
the fate of that was that it gained the majority in
two States and the overall national vote in favour
was 45.99 per cent.
Now, Your Honours, the fate of the referenda

and their result is not decisive, of course, but it
does provide, in our submission, considerable
historical justification for the view that
HUDDART PARKER V MOOREHEAD should be treated as
having settled the issue a long time ago.

GAUDRON J:	Was that because there are five or - - -
MR JACKSON:	Well, it is a factor, Your Honour.
GAUDRON J:	It is a factor.
MR JACKSON:	Yes.
GAUDRON J:	Because I see it was a referendum as to the

arbitration powers with respect to State railways.

MR JACKSON:

Yes, well, Your Honour, if it were - that is

why I prefaced what I said, Your Honour, by saying
that the fact of the referenda and their result is
not decisive but one is entitled, in our submission, to look at the fact that over a long period, knowing
what HUDDART PARKER V MOOREHEAD decided, the

Commonwealth endeavoured in a variety of ways to
obtain an alteration of the constitutional position
and no matter what sweeteners were put with the
proposal, no matter what obfuscations of the
proposal were put, there were other collateral
provisions each time the electorate, one assumes,
understood the proposals that were being put to them
and neither the carrot nor the curb was sufficient
to get a majority of electors or a majority of
States on any occasion.

McHUGH J:	It is one thing if this argument had been put to the Court in STRICKLAND but STRICKLAND has
altered the nature of the game.

ClT25/l/JH	149	4/10/89
NSW(2)

MR JACKSON:

Well, Your Honour, it is an argument, in our submission, that - perhaps I could put it another

way.	What I was going to say about it was, that

the referenda do not appear to have been referred

to the Court on previous occasions when the Court

was dealing with section 5l(xx) and, Your Honour,

no doubt, those of us who have appeared in various

cases and that, I suppose, must bear some

responsibility for it. It is, in our submission,

a factor that is one to which the Court have not been

able t~ see - has earlier been referred, part of the
reason being that in the ordinary references one

looks at do not quickly lead to the fact of them

having occurred.

Your Honours, what I was going to say further
was this, that one does need to look at to a degree
the relationship between the fact of the referenda
and, of course, the Court's function and we accept
that the Court has its function to perform and that
in doing so it is the final arbitor of the
CONSTITUTION. And, in an appropriate case it may be
that notwithstanding that an issue has been treated
as having been settled for years and not withstanding
that it may have been the reason for a referendum, or
one or more referenda, that it may yet be appropriate
to overrule it.
(Continued on page 151)

ClT25/2/JH	150	4/10/89
NSW(2)

MR JACKSON (continuing):

But, Your Honours, perhaps

next century the Court will be talking about
the now exploded doctrine of the ENGINEERS' case
in the forms of pyrotechnic discussion that
tend to be used in that area. But, Your Honours,
in our submission, it does the nation no good
for decisions of long standing to be overruled
just because the other of two views might be
taken if the matter were looked at afresh now,

Your Honours, particularly when those views have
been the subject of referenda.

Your Honours, there are some parts of

constitutional law, in our submission, which should be treated as having been settled and
section 128 does have some function in that regard.
Your Honours, the Court, we would submit, should
not be put in the position of, in effect, overruling
its previous decisions and overruling decisions
in referenda whenever one of the polities in
the Federation has, in effect, a new flush of
constitutional adverturism.

McHUGH J:

The Court did it in the INDUSTRIAL ARBITRATION

POWER case, the SOCIAL WORKERS case which had
stood almost as long and there had been a referendum.

MR JACKSON:

Yes, Your Honour.

I do not know that it had

quite the history of referenda that this has
and, Your Honour, it should, in our submission,

be a rare th i ng . I t should not be frequently,
with respect.
Your Honours, could I give to Your Honours

also - Your Honours will see, amongst the material
which we handed up a moment ago, that there are

two references. One is an extract from the
16 American Jurist, 2d series, and article 129

deals, first of all, generally, with the
use to be made of proceedings of conventions
and debates. That is at page 494. Your Honours,

if one goes on from that to page 497, at the
bottom of the principal text, the authors say:
Matters connected with the adoption or submision of proposed amendments are
often considered by the courts.

And then there is a discussion for the next 10 lines
or so about the extent to which the printed
arguments for and against the proposals can
be taken into account, Your Honours, and then,
about the middle of the paragraph:
And in determining the meaning of a state
constitution it is also proper to consider
the fact that the convention -

C 1T26/l	/ND	15 1	4/10/89
NSW(2)

and, Your Honours, in the context the authors
appear to be talking about the amending convention,
a system that exists in some of the States of
the United States -
it is also proper to consider the fact that
the convention considered a particular proposed
provision and then determined to reject
and omit it.

And then they go on to say, as Your Honours will
see, the second sentence after that:
But the rejection by a convention of amendments
to drafts of a constitutional provision
may not be conclusive on the interpretation.

And so on. And then the last sentence on that
page.
The rejection of proposed amendments by
the people when submitted to them for adoption
is signficant of their intentions on the
subject matter contained in the proposed
amendments regardless of what may be the
correct deduction to be drawn from the debates
in the constitutional convention.

Your Honours, could I also say - Your Honours
will see note 25 to that. It contains a reference

to a number of cases. Your Honours have amongst
the papers we gave you the decision of the Supreme

Court of Missouri in EX PARTE OPPENSTEIN - - -

BRENNAN J: Mr Jackson, what is the relevance of these
American treatises to our role in the construction
of the CONSTITUTION?

(Continued on page 153)

ClT26/2/ND 152 4/10/89
NSW(2)

MR JACKSON:	Your Honour, perhaps I should preface what I said about them by this -the use that Your Honours
can make of them is simply this: to support the
contention that we are advancing that one is entitled to take into account the constitutional history -
and by that I mean the constitutional political
history, using that in not a party sense, of course, but the history of amendments of the CONSTITUTION,
or proposed amendments, in determining whether for
the purpose of, for example, a, the looking at the meaning of the CONSTITUTION and, b, determining whether there is a settled meaning, looking at it from the point of view of deciding whether a case should be
reviewed, one can look at the legislative political
history in that sense.

BRENNAN J: Would that go beyond what this Court said in

COLE V WHITFIELD as to the role of the conventions?

MR JACKSON:	I think not, Your Honour.
BRENNAN J:	But it does raise the question of whether one

looks at the political history of an instrument which
is given by a people to themselves, as distinct from
an instrument which finds its origin in an Imperial
Act.

MR JACKSON:

Yes, but, Your Honour, the point I am talking about,

of course, is the point when one has gone beyond the donation of it by Imperial Act but it is the people,
themselves, who then have the right to determine
whether that CONSTITUTION should be amended. So
that, Your Honour, one is not looking at the same
point that one is looking at in that sense of

COLE V WHITFIELD. One really is looking at something
that is more American than British.

BRENNAN J:

So we are not, in fact, looking here at an

explosion of the doctrine of the ENGINEERS' case.

MR JACKSON:

Your Honour, I really wish I had not said that.

DAWSON J: Really, what it comes down to is, when you say that

you should not overturn a precedent lightly,
considering the interpretation of the CONSTITUTION,
this is a factor to be taken into account.

MR JACKSON:

Your Honour, that is the point I am seeking to

make and, Your Honour, if I could add to that, a
significant factor.

DAWSON J: It may be compelling.

MR JACKSON:	Your Honour, perhaps ·I will not chance my arm anymore in that regard.
BRENNAN J:	No doubt the great authority of the Supreme Court

of Missouri will buttress the argument that you are
putting.

ClT27/l/DR	153	4/10/89
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MR JACKSON: Yes. Your Honour, in EX PARTE OPPENSTEIN -
Your Honours have the reference to it - Your Honours
will see the relevant passage - - -

MASON CJ: Are you relying on the first proposition, are you?
The Court has no power to change the CONSTITUTION but
only to interpret it.

MR JACKSON: Your Honours, the particular passage I want to
refer to is at page 444, item [6] in the right

column. Your Honours will see in [6]VII, there is
a reference to what the constitutional convention
had done and then, Your Honours:
This substitute -

it said -
was rejected by a vote of 42 to 23. Three members were absent. The power to inspect and examine the ballots in "judicial proceedings"

would have been given by this amendment. The
convention rejected it.
It is clear from this that the constitutional
convention had before it, in the proposed
substitute section, the very question which
counsel discuss. This substitute would have
expressly given the authority now sought to be

exerted. When the convention defeated it, it
passed upon the question in this case. Its
intent could hardly have been more clearly
exhibited than by the vote upon the substitute
section.

(Continued on page 155)

ClT27/2/DR 154 4/10/89
NSW(2)

MR JACKSON (continuing): Your Honour, of course,the issue

is one which arises more frequently in the States
of the United States than it arises in relation
to the Constitution of the United States and that
is why Your Honours will see in note 25 references
to the decision of courts other than the Supreme
Court of Missouri which of cours~ is a leading
court in the United States, but one will see
other courts referred to, the decisions being to
the same effect.
Your Honours,could I move then to the next point with which I wish to deal and it follows on from
that which I have just been making and that is that

the question whether the terms of section 5Uxx)
confer or do not confer a power to legislate for
incorporation is one on which the Court might take
the view that different minds themselves might take
different views on the point. Your Honours, I am
putting that badly I think. What I seek to convey
is that if the issue were to be considered afresh,
it may be that members of the Court or a majority of
members of the Court would now take the view that
although it was a question which might be decided
either way, the way in which they would prefer to
decide it would be different from the way in which

it was decided by the C.Ourt in HUDDART PARKER V
THE COMMONWEALTH.
Your Honours that, in our submission, is a factor

which really, if it does anything, should lead to the
view that the decision is not one which should be
reviewed at this point. Your Honours, could I give
Your Honours a number of references in that regard:
firs~ to QUEENSLAND V THE COMMONWEALTH,(1977)
139 CLR 585, and I wanted to go first to page 603.
Your Honours, that case was one in which the members
of the court discussed the tests applicable to
determine whether a case, a decision, should or

should not be reviewed, and I wanted to refer
particularly to the observations of Justice Stephen
at page 603, and about point 6, Your Honours, His Honour
indicated the reasons which he adopted for taking
the view that although on the substance of the point
he would take a view different from that in the
earlier decision on the same point, he decided to
follow the earlier decision, and he said, amongst
other things:
The second relates to the nature of the subject- matter for decision; what was in issue was the
interpretation of the words of the section in
their context. There exis·ceu. no precedent cases
nor any settled principles of the law which

provided clear guidance. The case was very much

CIT28/l/CM	155	4/10/89
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one upon which different minds might reach
different conclusions, no one view being
inherently entitled to any pre-eminence as
conforming better than others to principle
or to precedent. In such a context phrases
such as "plainly wrong" and "manifest error",
which have gained currency in this field,
are merely pejorative.

(Continued on page 157)

CIT28/2/CM 156 4/10/89
NSW(2)

MR JACKSON (continuing):

Your Honours, at page 606, Your

Honour the Chief Justice said, at about point 7 on the page:
It seems to me then in 1975, as it seems to me now on further reflection,
that the arguments which support the view
thats. 122 should be construed according
to its terms and that it should prevail
are the stronger and are to be preferred.
This is not to say that the contrary opinion deserved to be described as wrong, incorrect or erroneous; it is merely to say that in
resolving what is by no means an easy question
I have found that one of the two proffered
solutions is more acceptable that the other.
Your Honour in that case, of course,

looked at the matter again, but what those two passages
tend to indicate when, in our submission, taken together,
is that one, and later cases to which I will come
are to the same affect, we would submit, indicate that
if an issue is one on which different minds might
take the opposing views, then if a particular
view has been taken in an earlier case, then that is a
factor which, generally speaking, should militate
against that beint reopened, even though the members
of the Court now, as it were, find themselves inclined
to a different view.

McHUGH J: But, Mr Jackson, if one were only concerned with the

question of incorporation, what is said in these and
other cases is no doubt very persuasive, but what
troubles me is the question of internal management
which is just hanging around somewhere there.
What is the position with the internal management?
If you came to the clear view that the Commonwealth

had power , notwithstanding what was said in
HUDDART PARKER, to deal with questions of internal
management, then it may be a factor which would require

you to reconsider the question of incorporation as
well, whereas if internal management was also outside
the Commonwealth's power, one might let them both stand
in accordance with the HUDDART PARKER doctrine.

MR JACKSON: Well, Your Honour, if Your Honour asks me first of

all, "Where is internal management?", Your Honour, it
is hanging around, I am afraid, and it is perhaps
hanging around in what may be another version of this
case - another part of this case.

McHUGH J:	One of the reasons Mr Justice Isaacs took the view he did about the corporations power was because he said,
"Well, if the Commonwealth has got power over internal
management then, in effect, they can destroy the
States' power over incorporation".

ClT29/l/FK	157	4/10/89
NSW(2)
MR JACKSON:	Your Honour, I	need to look at the passage

again, with respect, but I had rather had the
impression that what he was referring to was
if they had power over internal management - whatever
that quite means - but that was indicated, that there
was a wide view open for Commonwealth regulation.
Your Honour, our submission, may I say, is that the
Commonwealth does not have power to regulate the
internal management of a company directly, if I
can put it that way.

McHUGH J:	But what about a law which said that every foreign
corporation shall have local directors - - -
MR JACKSON:	Yes, Your Honour, I had not quite finished what I

was going to say.

McHUGH J:	I am sorry.
MR JACKSON:	Your Honour, I was really directing my attention

to trading and financial corporations: what I was going
to say, Your Honour, was this, that there seems no
doubt, in relation to foreign corporations. that the
power to deal with foreign corporations, if I can put it
loosely, is a power which permits the regulation of to the detail of reasons why one might find the
those foreign corporations in any way that the
particular corporations selected in section 5l(xx), the
question of foreign ownership is really as large a
question is 1901 and the years preceding it as it is
now, or as it has been off and on over the years.
So that- and perhaps the identity, to a degree, of the
persons who had foreign ownership and participation
in foreign things, participation by foreign companies
in Australia.
(Continued on page 159)

ClT29/2/FK	158	4/10/89
NSW(2)

MR JACKSON (continuin~):

Now, Your Honour, I am sorry, that

is a long-winded answer, but that really tells you
nothing about incorporation because ex hypothesi
that the foreign company is one form:d somewhere else.

DEANE J:	But what if the law was that it could only carry on
business in Australia through a locally incorporated subsidiary company that was amenable to local control?
MR JACKSON:	Well, Your Honour, prima facie that would seem to

be valid, and I may express the reason for saying
that, and that is that it would be akin to what was held

by the Court to be the case in MURPHYORES. What I mean
by that is that one would say, "Is the law a law
with respect to a foreign corporation?" and if the
law said, "A foreign corporation may not carry on
business in Australia", one would think that
inevitably is a law of that kind. If there were
a relaxation of the restriction by saying, "A foreign
corporation may not carry on business in Australia
unless it does so by a corporation which is registered
in Australia, or formed in Australia, or a subsidiary
in Australia", then that would perhaps be no more
than a relaxation of a prohibition which was within
power. Now, Your Honour, there may be areas where
it would go beyond being a law with respect to
foreign corporations and perhaps there is a slightly
fuzzy area at the edges, but prime facie the answer
would be "Yes, it would be a valid law", Your Honour.
Now, if I could go back from that to trading

and financial corporations, Your Honours, the - I
suspect I have lost the track a bit of what
Your Honour's question was now in relation to that.

McHUGH J:

I think you were going to say that there is a power

to control internal management in respect of foreign
corporations but not trading and financial
corporations. That is what I assumed your answer
was telling me.

MR JACKSON:

Yes, Your Honour.

The point I was going to seek

to make was this, that in relation to trading and
financial corporations that does not mean, of course,
that the Commonwealth power is absent in relation
to all aspects of their internal management. Could
I give Your Honour an answer a little by quoting an
example Your Honour put yesterday, and that was, I
think, could there be a Commonwealth law which said
that no trading corporation _may _ be formed unless
it has a paid-up capital of so many dollars. We
would submit, Your Honour, that would not be a law
with respect to trading corporations, if it is speaking

about the States. What the Commonwealth could do
would be to say that, "No corporation may trade

unless it has a paid-up capital of so much". So,

ClT3O/l/HS	159	4/10/89
NSW(2)

Your Honour, what I am really seeking to say is that
whilst the Commonwealth, in our submission, cannot
legislate directly upon, as it were, the internal
management of companies, that does not mean that the
Commonwealth has no powers that have - - -

McHUGH J: No, but once you make that concession, the
distinction between saying, "No corporation shall
trade without a paid-up capital of X dollars"and ''No
trading corporation shall be formed without a paid-up
capital of X dollars", it seems a very formalistic
distinction.

MR JACKSON: Well, with respect, Your Honour, it is not. It
may come back, in the end, to the question whether
that part of FENCOTT V MULLER, to which reference
has been made already, should be followed or not.
But may I come back to that?

McHUGH J: Yes.

MR JACKSON: I was about to go from QUEENSLAND V THE COMMONWEALTH
to H.C. SLEIGH V SOUTH AUSTRALIA, (1977) 136 CLR 475,
and in particular to page 501.

(Continued on page 161)

ClTJ0/2/HS 160 4/10/89
NSW(2)

MR JACKSON (continuing):

Your Honour the Chief Justice

said in the first new paragraph on the page that:

Generally speaking, the Court should be
slow to depart from its previous
decisions, especially in constitutional
cases where the overturning of past
decisions may well disturb the
justifiable assumptions on which
legislative powers have been exercised by
the Connnonwealth and the States and on
which financial appropriations, budget
plans and administrative arrangements

have been made by governments.
Well, Your Honour, one would think there was some
justification, if I could put it lightly, for the
view taken by the States that the consequence of the
history to which I have referred, they had
legislative powers in relation to incorporation.
And, Your Honour, I would refer also Your Honours to
the last paragraph on that page that:
A departure from these decisions can be
justified only in the event that the Court
is convinced that they are wrong.

And, Your Honour referred to the fact that there
was an:
inherent difficulty of determining what is
an excise -

and the difficulty was -
reflected in the shifts of opinion that
have taken place -

I am sorry, Your Honours, I am putting it badly.
Your Honour referred to the fact that it was

extremely difficult:
to say that a particular decision -

in that context -
is wrong, notwithstanding that the
reasoning on which it is based may not

appear to be persuasive. So far as the
present problem is concerned, nothing has
occurred since DICKENSON'S ARCADE ..... to
suggest that it was wrongly decided -

and so on. Could I give Your Honours also a reference
to GOSFORD MEATS PTY LTD V STATE OF NEW SOUTH WALES,
(1985) 155 CLR 368 at 411 where,speaking about the
word "excise", Your Honour Justice Dawson said
about a quarter of the way down the page:

ClT31/l/JH	161	4/10/89
NSW(2)

In my view, there is wisdom in the observation of Stephen Jin
DICKENSON's ARCADE ..... that there is no
ultimate truth which lies at the end of
any search for the meaning of the phrase
"duty of excise"; that ..... the word
excise "has never possessed, whether in
popular, political or economic usage,
any certain connotation and has never
received any exact application". This
makes it all the more important that when
there is doctrine which has been accepted
in this Court upon the subject it should be
observed and not undermined in subsequent

decisions. Not only is this required by
the ordinary principles of stare decisis,
but it is the more necessary when there is
no certain guide whether the answers to
the questions which arise are right or wrong other than the decisions of this
Court itself.
Your Honours, in RICHARDSON V FORESTRY COMMISSION,
(1988) 164 CLR 261 at 321, Your Honour Justice Dawson
again said in the last two lines on page 321,
after saying that he had the greatest difficulty in
deciding that the CONSTITUTION said something which he
thought it did not:
This Court has never held itself to be
bound by its own decisions and ultimately it
is the CONSTITUTION itself, and not
authority, which must dictate the answers
which we give.
Precedent must, however, have a part to

play, even in the interpretation of a
constitution. Considerations of
practicality make it necessary that the law

should, as far as possible, take a
consistent course. The constant
re-examination of concluded questions is
incompatible with that aim. That is why this
Court has adopted the practice of requiring leave to be granted before it will allow a previous decision to be re-argued.
(Continued on page 163)

ClT31/2/JH	162	4/10/89
NSW(2)

MR JACKSON (continuing): And, Your Honours, could I also

refer to, finally, on this point, PHILIP MORRIS
LIMITED V COMMISSIONER OF BUSINESS FRANCHISES,
the Court's decision on 24 August this year.
And, Your Honours, at the bottom of page 26,
in the joint judgment of the Chief Justice and
Your Honour Justice Deane, Your Honours said:

However, on the authority of -

trilogy of earlier cases -
the States have enacted laws imposing licence
fees calculated upon trading in an antecedent
period in businesses of liquor and tobacco
retailing and sale of petroleum products.

Your Honours went on to say, five lines down
page 27:
There are powerful considerations against
overruling the actual decisions in those
cases. Financial arrangements which are
of great importance to the governments of
the States -

and so on. And Your Honours go on to say:
The power of this Court to overrule its previous decisions would not be properly exercised to disturb those arrangements
unless, in the light of later insights into
the true meaning of the CONSTITUTION, obedience
to its terms or the interests of certainty
in those arrangements clearly demanded that
those decisions be reconsidered.

Your Honours, so that the point which I have
sought to make from those cases is that if the
issue is one on which different minds might fairly

t~ke different views and there is a course which
exists which follows one view, then the Court
should be reluctant to overturn it. It is a
factor which militates against reopening rather
than in favour.

Your Honours, the next matter with which

I wish to deal is still on the topic of the reopening
of the decisions but may I say something about

it before I go to it in more detqil. The particular
point with wfiich I wish to aeal is the structure
proposed to be established by the- legislation
which is now impugned.

C 1T32/l	/ND	163	4/10/89
NSW(2)

Your Honours, the submissions which we wish
should lead to the rejection of the proposal
to make about the structure have two aspects.

to depart from HUDDART PARKER V MOOREHEAD. The
second aspect of them is that they are an argument
in support of the contention that the actual
decision in HUDDART PARKER AND MOOREHEAD was
correct on this point, namely that the Commonwealth
does not have power to legislate for incorporation

under section Sl(xx). I want to deal with the
first aspect of it now and I will mention the
matters again when I come to the second.
Your Honours, in our submission, the Court

is entitled to take into account in determining

whether a previous decision of the Court should
be altered, is entitled to take into account
the results which are likely to follow from doing
so and if what will be brought about is something
which appears to be an unattractive regime -
and I will mention more specifically what I mean
by that, of course, in a moment - but if what
is likely to be brought into being is an
unattractive legal regime in which much of it
exists only to satisfy the need to, as it were,
keep pulling at the bootstraps that connect it
to constitutional power in lieu of an established
legal regime which is simple and intelligible
in its operation and has been followed for a
long time, then because there is an element of
discretion - I do not use that in any loose sense,
but because there is an element of discretion
in deciding whether to reopen previous decisions,
the Court should, in our submission, be influenced
against doing so if the result which is likely
to be brought about is one which is unpalatable

in that sense. Your Honours, could I proceed to seek to
demonstrate what I mean by that a little more
fully?

(Continued on page 165)

C 1T33/l /ND 164 4/10/89
NSW(2)

MR JACKSON (continuing): Your Honour, since HUDDART PARKER
V MOOREHEAD there has been an intelligible and,in
our submission, workable division of power between
the Conrrnonwealth and the States in relation to the
incorporation of companies and their conduct. If
one leaves aside cases where the Conrrnonwealth has
itself created corporations under powers other
than section Sl(xx) or has legislated for their
creation under section 122- if one leaves aside those cases_-it has been the laws of the States
which regulate the incorporation of companies by

those who wish to do so. The States have not had
any need to identify whether the company to be
incorporated has any particular character or is
being incorporated for any particular purpose
provided,I put in the background, that the purpose
is one which is lawful.
And,Your Honours, each of the States has legislated
extensively in relation to companies and the States
have gone to great lengths to discuss and to arrive
at uniform laws for all aspects relating to.the
prior to the 1961 uniform-COMPANIES ACTS, then the
incorporation and recognition of companies. · And,
uniform COMPANIES ACTS themselves and the present

COMPANIES CODES. Your Honours the role of the
Conrrnonwealth, on the other hand, has been different.
Whilst it may not provide for incorporation, it may
legislate in relation to trading or financial
corporations and regulate or control or prohibit their

activities. Your Honours, there may well be debates
about the extent of the Conrrnonwealth power or debates
about whether a particular case does or does not fall
on one or other side of the line but, in our
submission, the broad division has been established
for a long time.
The consequence of overruling HUDDART PARKER V
MOOREHEAD is,first,that there would then be a divided

system for the incorporation of companies. (Continued on page 166)

CIT34/l/CM 165 4/10/89
NSW( 2)

McHUGH J:	When you said "Divided as to incorporation", are
you talking about it as a matter of constitutional
power, not as a result of the same? This Act
prohibits the - - -
MR JACKSON:	I meant something slightly different, Your Honour.

What I meant was this; what happen would be that there would be a - first of all if I could go to
the particular Act, then to the constitutional

position. There would be a divided system for the
incorporation of companies; and what I meant by that,

Your Honour, was that whilst there would be the
prohibition upon the incorporation under a company
law of a State of a trading corporation - trading being defined to mean "trading or financial" in
section Sl(xx), and that prohibition existing by virtue
of section 113, there would yet need to be provision
in the States for incorporation of other companies.
Now, Your Honour, how many other companies may

be a matter of view, but there would undoubtedly be
companies which would, one would think, not be
trading or financial corporations, but there

" would need -

McHUGH J:

Do you know of any figures about what the proportion

of trading and financial corporations are? I
suppose there are some.

MR JACKSON:

Your Honour, I do not.

I suppose one of the

difficulties is in deciding what are. One would
need to look at every memorandum of association in
the case of companies that are not being used
at present. That is the position which would obtain
under the Act, and, Your Honour, a rather similar
position would seem to obtain as a matter of
constitutional power. Your Honours, perhaps it might
be a convenient time to mention - but I will come to
it a little more fully later - Your Honour mentioned
the position in India, Malaysia and, what was for a time

the position during democracy in Nigeria. (Continued on page 167)

ClT35/l/FK	166	4/10/89
NSW(2)

MR JACKSON (continuing):

Your Honour, each of the relevant

provisions, of course, gave a specific power to

incorporate to the central government. I mention
it now because in India there is, in fact, a divided
system but it divides it up by reference to the
types of companies in a manner I will come to in a

moment, Your Honours. Your Honours, the second
feature would be this: because of the need to be
within power and to remain within power and, because
there is no other reason for doing it, the system
which would come into being - and I am speaking of
the system contemplated by the legislation presently
in question - is one, pursuant to which the intentions
of the corporators and the intentions and activities
of the company have to be regularly regarded and
there has to be a system of reporting - a relatively
complicated system of reporting - established to
that end so that the company is a company which, it
is apparent, remains within power becausei if it does not,

then it is a company which has to be kil ed off when
it ceases to be a corporation which is a section Sl(xx)
corporation.
Now, Your Honours, the length of the terminal

illness may be a matter for the Commonwealth to
prescribe but it does have to be killed off in the
end once it ceases to be a corporation .....
Your Honours, there are some particular aspects of

that situation with which I wish to deal. The first
is that to provide a criterion by which the company
can be identified as a section Sl(xx) corporation,
the criterion which has been selected consists of
the stated intentions of the founders of it and
their intentions are conclusive of the character of
the company at the time of its incorporation because
the commission is required to register a company
which submits a proper registration application and,
Your Honours, that is regardless of the truth of
what is stated in there.

(Continued on page 168)

ClT36/l/DR	167	4/10/89
NSW(2)

MR JACKSON (continuing): The second is that when a company
ceases to be a trading corporation it must, in
effect, apply to wind itself up - that is apparent
from section 158 - or else the commission must
take the action necessary to bring the company's status as such to an end pursuant to section 156.
Your Honours, there may be incorporation

under the Act of a company which was never at
any time a company which is a trading corporation
and that can arise when the memorandum on
incorporation does not include trading objects
and the subsequent purchasers do not intend to
trade and then, of course, one has to have a
corporation which is wound up by virtue of
sections 155 to 157.
Your Honours, the character of a company may change once it is established and it may,
from time to time, move in and out of the classes
denoted by "trading corporation and financial

corporation". And, Your Honours, if one took,
for example, the case of a company which, for
example, was engaged in selling minerals, on any view that would be a trading corporation
but it may have sold all the minerals which it
has but simply wished to continue exploration
as a non-trading corporation.
In a case like that it would hav2 to register

afresh as a company under State law because
it would have to be wound up once it ceased trading
and the winding up provided for by section 459
is something that will end in the company being
fully wound up; that follows from the provisions
following section 513.
And that is so, Your Honours, even though

the company may be solvent and wish to continue

non-trading corporations. And the legal and
financial consequences of the enforced winding-up

may be dramatic in respect of contracts with
employees and third parties.

BRENNAN J: There is no power to reconstruct a company
otherwise than by way of winding-up?

MR JACKSON: No, Your Honour. Your Honours, there is also,
of course, no provision for the registration
in effect of holding companies of trading
corporations, if those holding companies are not
themselves trading corporations or do not themselves,
of course, trade.
168 4/10/89

MR JACKSON (continuing): Your Honours, in that regard, could

I give Your Honours a reference without going to the
particular passages, to those parts of the decision
of the Court in ACTORS AND ANNOUNCERS EQUITY
ASSOCIATION V FONTANA FILMS PTY LTD, (1982)
150 CLR at pages 195, 209 and 215 in which it was held
that that part of the TRADE PRACTICES ACT which was
expressed to be applicable to a holding company was
not a valid law under section 51(xx) in so far as it
applied to a holding company which was not a trading
or financial corporation.
So, the result would be, Your Honours, that

some corporations in a group of corporations might
fall under the Commonwealth regime while others would be incorporated under State law. Your Honours, would this be a convenient time?

MASON CJ:

Yes, Mr Jackson.

We will resume at 2. 15 pm.

AT 12.47 PM LUNCHEON ADJOURNMENT

C1T38/1/SH	169	4/10/89
NSW(2)

UPDN RESUMING AT 2.17 PM:
MASON CJ: Yes, Mr Jackson.

MR JACKSON: Thank you, Your Honour. Your Honours there are
two further matters with which I wish to deal under

this head. The first deals with the need for
contrivances, if I might use that expression, to
be employed to bring the provisions of the enactment
relevantly within power, and I wanted to refer
Your Honours to the several provisions dealing with
activities statements in that regard. May I go,
Your Honours, first to the need for activities statements in the first instance, which Your Honours
will find in sections 153(3) and 153(5) and
Your Honours will see that section 153(3) requires
the statement to state to the effect that the
subscribers intend that, within three months after
one of the specified days -
trading activities within the meaning of this
Act will be tpe whole or a substantial part
of the company's activities.

So that focuses upon the lodging of a statement of the intention of the subscribers,the subject-matter of that intention being as set out in the last two

lines of the subsection. And in subsection(S)of
section 153 there is stated the alternative and that
is that the statement may state that within one or
other of the periods specified
persons other than the subscribers will be
members of the company and have interests in
it that together constitute a controlling
interest in it.

That is that the controlling membership, if I might

contrive that phrase, will change. (Continued on page 171)

CIT39/l/CM 170 4/10/89
NSW(2)

MR JACKSON (continuing): Your Honours, that is at the

start. From there one then goes in the case
of a company of the latter kind, that is one
to which there has been a statement of the kind
referred to in section 153(5), one goes from
there to the need for further activities statements
and the first provision which is relevant to
that end is section 155(1). It provides that
where - and if I could take Your Honours to
paragraph (b):
the statement that was lodged for the purposes
of section 153 and relates to the company
states as mentioned in subsection 153(5) -

and Your Honours will see, if I could interpolate,
from the terms of paragraph (a), that the -
company is -

already -

registered under Division 1 -

And, Your Honours, it then provides that the
company must lodge a statement that complies
with this section and the statement to which
it refers is a statement of the nature referred
to in subsection (4), that is a statement:
whether or not the company or body intends
that, within 3 months after the specified

day, trading activities within the meaning
of the Act will be the whole or a substantial
part of the activities of the company or
body.

And, Your Honours, one thing to note in terms
of a comparison between the pre-incorporation
activities statement and the post-incorporation
activities statement, the further activities
statement contemplated by section 155 is that

the intention of the person in question has changed.
In the pre-incorporation statement, as Your Honours

will see, from 153(3) or (5), it is the stated
intention of the subscribers and, Your Honours, in the case of the further activities statement
it is the stated intention of the company.
(Continued on page 172)

C 1T40 /1 /ND	1 7 1	4/10/89
NSW(2)

MR JACKSON (continuing):

Your Honours, if I could pause at that

point, the activities statements seem to perform no

activities statements, and may I take
function other than to bring the company, or bring the annual
provision, within the constitutional power.
Your Honours to section 336. Your Honours will see
first from subsection (2) that the annual return of a
company is to include a statement that complies with
section 336, and from there, Your Honours, one goes
to subsection (4). It says that:
The statement shall state whether or not,
as at that day, trading activities ..... were the
whole or a substantial part of the company's
activities.

And, in paragraph (5) says also that:
The statement shall state to the effect that the company:
(a) intends trading activities -

and so on, or
(b) does not intend -

and so on.
And then, Your Honours, one goes to subsection (8) and it deals with the case - unlike the earlier

provisions of (4) and (51 it deals with the case
where the company is dormant at the start of the
specified day, and the statement must then state
in paragraph (a) that the company was dormant, and the
date on which it last became dormant, and paragraph (b):
If the dormancy day is more than 3 months
after the company was incorporated - state
whether or not trading activities within the
meaning of this Act were the whole or a

substantial part of the activities in which
the company engaged during the 3 months ending
on the dormancy day.
(Continued on page 173)

ClT41/1/FK	172	4/10/89
NSW( 2)

MR JACKSON (continuing): In (c):
if the dormancy day is less than
3 months before the day specified
under paragraph (3)(b) - state whether
or not the company intends that,
within 3 months after the dormancy day:
(i) the company will cease to be

dorman~ and
(ii) trading activities ..... will be the
whole or a substantial part of the company's
activities.
I hope Your Honours do not ask me to answer quickly
a question relating to the application of those
provisions in any particular case and I use them to
illustrate the need that is thought to exist to tie
it to the constitutional power. The fourth category
of provisions to which I was going to refer was this:
the elaborate provisions that one sees in the
enactment for terminating the existence of companies
which are not engaged in trading activities.

TOOHEY J: Just before you go to those, Mr Jackson, is any

attack made on section 336? It is not one of the
sections singled out within the questions reserved
for consideration.

MR JACKSON: Yes. Your Honour, I am afraid I iust cannot
give Your Honour an answer to that immediately in
the sense that I suspect that it is attacked but
it is not presently an issue, if I can put it that
way, Your Honour, not an issue in the questions
referred to the Court.

TOOHEY J: I iust wonder what the difference in terms of
incorporation was between section 336 and section 155.
They are both obligations that arise after

incorporation, were they not?

MR JACKSON: Yes.

TOOHEY J: They arise at different points of time.

MR JACKSON: Yes, they do, Your Honour. The reference to
section 155 is, I think, because of the question of
dormant companies in the first place, and that is
that the company becomes dormant and it continues
dormant by virtue of section 153(5) and section 155,
and, Your Honour, those were sufficient provisions
to surround the incorporation provisions, I think,
Your Honour.

ClT42/l/HS 173 4/10/89
NSW(2)
MR JACKSON (continuing): Your Honour, I think the answer to
what Your Honour put to me is that the provision, at am using it by way of illustration at the moment,
some point, may be in issue in the sense of the
Your Honour.

McHUGH J: Section 155 is tied up with the change in control
of the companies and aeals only with that issue.
Section 336 is at large.

MR JACKSON: Yes, it is, Your Honour, and applies - - -
McHUGH J: It applies to every company.

MR JACKSON: It applies also to the companies presently formed
under laws of the State that must now be registered
by virtue of section 126.

DEANE J: Mr Jackson, am I right that the definition of
trading activities includes financial activities,
but there is no definition of financial activities.

MR JACKSON: That is so, Your Honour.

DEANE J: So one assumes that trading and financial activities
equate to whatever might be thought to be the view
of trading and financial corporations - - -

MR JACKSON: Yes.
DEANE J: When somebody knows it. It is really impossible,
is it not, to say whether the whole or a substantial
part of the company's activities are trading or
financial activities?

MR JACKSON: Your Honour, that is correct and the problem is
compounded, in a sense, by the next point which I
wish to make and that is that the term "substantial"
itself is a term of some difficulty in application.
Your Honour, in that regard, the meaning of the

considered by Your Honour Justice Deane as a member term "substantial" in a sense, in the abstract, was
of the Federal Court in a case to which I would

refer Your Honours now: TILLMANS BUTCHERS PTY LTD
V AUSTRALIAN MEAT INDUSTRIES EMPLOYEES UNION, (1979)
27 ALR 367.

(Continued on page 175)

ClT43/l/DR 174 4/10/89
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DEANE J: Is this the punishment for having interrupted,
is it?

MR JACKSON: No, Your Honour, I was about to go there and
say that Your Honour's observations were enlightening
on the point.

McHUGH J;

I think this Court has approved of what

Mr Justice Deane has said about "substantial"
in this case.

MR JACKSON:

Your Honour, I think that - I was not quickly able to find that I am afraid.

But the particular
passage in - if I could go first to what was
said by Chief Justice Bowen is at page 374, at
the bottom of the page:
The word "substantial" would certainly

seem to require loss or damage that is more
than trivial or minimal. According to one
meaning of the word the loss or damage would

have to be considerable. However, the word
is quantitatively imprecise; it cannot be
said that it requires any specific level

of loss or damage. No doubt in the context
in which it appears the word imports a notion
of relatively, that is to say, one needs
to know something of the circumstances of
the business affected before one can arrive
at a conclusion whether the loss or damage
in question should be regarded as substantial
in relation to that business.

And at page 382 Your Honour referred to the word
"substantial" and said - the heading "substantial":
The word "substantial" is not only

susceptible of ambiguity: it is a word
calculated to conceal a lack of precision.
In the phrase "substantial loss or damage",

it can, in an appropriate context, mean
or nominal. It can also mean large, weighty
or big. It can be used in a relative sense
or can indicate an absolute significance,
quantity or size.
real or of substance as distinct from ephemeral

And Your Honour referred to the various difficulties
of it and then said, after the various citations:
In the context of s 45D(l) of the Act, the
word "substantial" is used in a relative
sense in that, regardless of whether it
means large or weighty on the one hand or
real or of substance as distinct from
ephemeral or nominal on the other, it would

C1T44/1/ND 175 4/10/89
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be necessary to know something of the
nature and scope of the relevant business
before one could say that particular actual
or potential loss or damage was substantial.
Your Honours, it is one thing to apply to the
activities of a body the question whether a particular
activity or part of its business is something
which is substantial but it is another, in effect,
to seek to apply it to the intentions of its

corporators. Your Honours, no doubt, if an issue
ultimately arose about whether a particular case
did or did not fall one or the other side of
the line, the Court would have to decide it,
but if one says that the test is whether the
subscribers intend that the particular trading
activities within the meaning of the Act will
be the whole or a substantial part of the company's
activities, one sees that the test that is being
applied is one which is likely to be productive
of considerable difficulties.
Your Honours, the final matter I want to mention under this head is that there will be
some trading corporations - that is trading
corporations within the meaning of section Sl(xx) -

which will not have trading activities as the
whole or a substantial part of their corporate

business. Your Honours, may I explain a little
more what I mean by that.
If one looked, for example, at the West

Australian football case, 143 CLR 233 - if
Your Honours look at about point 6 in the judgment of Your Honour the Chief Justice, Your Honour
said:

(Continued on page 177)

ClT44/2/ND 176 4/10/89
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MR JACKSON (continuing):
Essentially it is a description or label
given to a corporation when its trading
activities form a sufficiently significant
proportion of its overall activities as to
merit its description as a trading corporation.
Your Honours, it is clear of course that a
corporation may become a trading corporation, even
though it has activities which are other than those
of trading. It is clear also that a corporation
may be a trading corporation within the meaning
of section Sl(xx), even though in relative terms,
that is comparing its trading activities to its
overall activities, the trading activities are not
a substantial part of the company's activities, even
though they are sufficiently substantial in
themselves to merit its description as a trading
corporation, so that one could have a situation
where a trading corporation, as such, does not, at
the same time, have trading activities which are
either the whole or a substantial part of its
corporate business.
Your Honours, a corporation of that nature will
not be able, in our submission, to register under Division 1 because of section 153(3), which would require the corporators to say that the trading
activities would be the whole or a substantial part

of the company's business. They also would not be
able to incorporate under the law of a State because
of section 113, because it imposes a prohibition upon
the incorporation of a body corporate if it would
be a trading corporation upon incorporation. Nor, if
the corporation were already formed under State law, would it be able to carry on business by reason of
section 126 and in particular 126(b) and (d).

Your Honours, I am afraid I have taken a little
time in dealing with those aspects of the case, but
the purpose of doing so is this. There is, in our
submission -the Court has a decision to make in
deciding whether to reopen previous decisions of the
Court, and our submission is that the Court should
be influenced against doing it, when the result will
be to bring into being a new legal system, much of
which only exists in order to connect it to

constitutional power, if it does at all, and also
where it is obvious that the system which is to be
brought into being is one which is, in many ways,
much less workable than the existing regimes.
Your Honours, in relation to the question of departing from HUDDART PARKER V MOOREHEAD, may I
just say these things, in addition to what I have

CIT45/l/CM 177 4/10/89
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already said. The first is that the

decision has now stood for 81 years. There has not been
a build up of a build up, if I could put it that way,
of dicta in cases suggesting that the decision on this point was wrong. Indeed the dicta seemed to

be to the contrary. The decision, in our submission,
was one that was fairly open on the words of

section Sl(xx). Each of the States has established
substantial departments as companies offices, offices
of commissioners for corporate affairs and so on and
has maintained those offices since Federation.
(Continued on page 179)

CIT45/2/CM 178 4/10/89
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MR JACKSON (continuing): Your Honours, there is no compelling
need, in our submission, to change the decision
already arrived at. There is not, we would submit,
any demonstrated disadvantage to the Commonwealth
which has been brought about by the lack of power
to legislate for incorporation. Could I move from
that, Your Honours, to the question whether HUDDART
PARKER V MOOREHEAD is correct and, Your Honours, in
that regard we would simply say these things, that
section Sl(xx) puts trading and financial corporations
on the footing of foreign corporations in the sense
that they are corporations already formed and in

existence. We would submit that the use - -

MASON CJ: This ground has already been covered by Mr Davies,
has not it?

MR JACKSON: I was about to say, Your Honour, that there is
only one thing I want to say in addition to what he
has said and it is just this, that we would submit
that the words "formed within the limits of the
Commonwealth" in section Sl(xx) would be, as
Mr Justice Isaacs said in HUDDART PARKER at page 394,
meaningless if the power of creation, either in the first instance or by way of adding capacities, were included and that the words would be redundant, we
would submit, "formed within the limits of the
Commonwealth'' if the power of incorporation were
intended.
Your Honours, could I then move from that to

the question of the correctness of FENCOTT V MULLER.
Your Honours, in relation to that we adopt the
submissions which were made on behalf of South
Australia in relation to the desirability of

reconsidering FENCOTT V MULLER and may I also say

a number of things about it. The test of activities,
in our submission, allows for a relatively simple
situation in which corporations have a continuing

existence. They come under federal control in

relation to their behaviour if they are trading or financial corporations at any time. If at any time
they are not trading or financial corporations they
remain alive but not subject to the relevant federal
law. They do not have to be, for example, wound up.
Your Honours, on the other hand, the test in the

relevant part of FENCOTT V MULLER seems to mean that
the corporation is identified at birth if it has one
of the specified powers, but, Your Honours, some
difficulties then emerge once one applies, as well,
the activities test, because one asks, hypothetically,
of course, at what point does the activities test
come into play and in that regard if the corporation
is a trading or financial corporation at the time
of its formation by reference only, as it were, to
the powers which it has, amongst other powers, and

ClT46/l/HS 179 4/10/89
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if the activities test also applies, then, Your Honours,
if the company commences activities but the activities
are not those of a trading or financial corporation,
does it cease to be a trading or financial
corporation during that time?
What happens then when its activities include

activities which would characterize it as a trading
or financial corporation? Does it go back to being
one - if it ceases carrying on any business does
one then go back to saying that the memorandum or
its powers, or the statement of its powers, is the
statement of its character for the purposes of section Sl(xx)? Your Honours, there are some
difficulties if one applies both tests, and - - -

BRENNAN J: Is the difficulty any different from the difficulty
that is encountered if the activities should change
and we disregard the constituent documents of the
company?

MR JACKSON: No, Your Honour. The position which obtains,
if the activities change, so that it ceases to be
a trading or financial corporation, means simply that
a Commonwealth law which regulates - and I use the
term compendiously - the activities of a trading or
financial corporation will not apply to that body.

(Continued on page 181)

ClT46/2/HS 180 4/10/89
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MR JACKSON (continuing):

Now, Your Honour, that is the situation which

obtains now, if I can put it that way, and a body will
sometimes be subject to Commonwealth power and sometimes
not. But, Your Honour, that is really brought about by
the fact that the CONSTITUTION in section Sl(xx) does
select types of corporations as being the object of
the power, much as it does in section Sl(i) draw
a distinction which, perhaps, reformers might regard
as artificial, or economists might regard as

artificial, between different types of trade. But it
is a distinction, Your Honour, and it is a distinction

which is there. Now, Your Honour, all it means is that
in the respect of a corporation there is the possibility,
and, Your Honour, possibilities do not really come to
being all that much, but there is the possibility that
at some point a trading corporation will cease to
be a trading corporation but, Your Honour, one asks,
"So what?", the Commonwealth law will be a law with
respect to trading corporation.. If itis not a
trading corporation any more, they are out

BRENNAN J:

I just do not understand where the difficulty lies

in allowing the FENCOTT test to sink into the background
in favour of the activities test, with a consequent
variation in the character of the company, and the
variation that is affected by the change in activity
applying only the activities test.

MR JACKSON: Yes. Well, there is a difficulty in this sense,

Your Honour: if the company is one which is a
trading or financial corporation, upon formation by reference to its power -by reference to its objects
if I can put it that way -then it seems a little odd,
with respect, if what then happens to it is that it can
cease to be such a corporation almost immediately
because it engages in some activity, but the
activity is not that of trading or financial by way
of characterization of the activity.
Your Honour, one wonders why the corporation

has changed. It seems a curious thing to have happened.

Then, of course, one reaches the situation where, say,
the corporation has no activities. Your Honour, in
that case, one asks, 11·what is its characterization?"
It is not trading; it is not engaged in financial activities, but has it despite the fact that it does none of those things, become again, or remained, a trading or financial corporation merely because of the
powers which it might exercise? That is the position,
Your Honour. In our submission,there is a difficulty
in the application of both tests; one tends to
exclude the other with a qualification that I will
mention in a moment.

BRENNAN J: But the real problem is the adoption of any method of

characterization which allows for the variation of
the character in the life of the company.

ClT47/l/FK	181	4/10/89
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MR JACKSON:

Well, Your Honour, I suppose it would be

easier if there were not, but there is nothing,
Your Honour, in section Sl(xx) - and one has to
look at the CONSTITUTION, really, not an enactment
which it seeks to base itself on. There is nothing

corporation is not capable of changing its nature
or a character, in the sense of section Sl(xx).

really in section Sl(xx) to suggest that a leopard cannot change its spots, as distinct from
becoming a leopard skin, and so, we would submit,
really, that indeed if one looks at - I am speaking
a little more generally now - section Sl(xx),
bearing in mind two things; one is that the
foreign corporation, ex hypothesi is already formed;
the other being that in respect of the other
corporations, they are described by the use of the
expression "formed within the limits of the
Connnonwealth", that the division of power that is
contemplated by that is that the corporations which
are the object of it - all corporations already formed,
it is their activities - and one can use that in a
broad or narrow sense, but it is their activities
that are the subject of the Connnonwealth power.
But the Connnonwealth power operates on the conduct
of bodies formed dehors the Connnonwealth - dehors of
section Sl(xx), I mean.

(Continued on page 183)

C1T47/2/FK	182	4/10/89
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:MR. JACKSON (continuing):	And, Your Honour,	again I am

going a little more largely - that really is the
better view of the provision, in our submission,
giving it does not - - -

BRENNAN J: Does this lead to an argument that the scope of

51(xx) power is limited to the regulation of the
trading or financial activities of the company,
vis-a-vis their relationships with strangers?

:MR. JACKSON:

Your Honour, it does not really - perhaps I

misheard what Your Honour said. Did Your Honour
say that their trading or financial activities or
simply their activities vis-a-vis strangers?

BRENNAN J:

I coupled the two but it is difficult,

I should

have thought to have conceived of · trading or
financial activities which did not involved strangers.

:MR. JACKSON: Well, Your Honour, it may be that there are some

that involve strangers only in the sense of them
playing no part in events - no active part - but
what Your Honour says would generally be right.
But, Your Honour, the question of the regulation of the activities of the company - the trading or
financial corporation - is one that can come about,

of course, in such a way that it regulates a little
more than their activities in relation to other
persons although it depends how what one quite means
by that, Your Honour. As I said earlier, in answer
to Justice McHugh, one can conceive of a law, under
section 51(xx) saying that a trading corporation

may not engage in particular trade, for example,
unless it possesses certain qualities. One of them
might be its capital base, and so on. Your Honour,
no doubt a law would not be put in quite as crass
a fashion as that but that is the type of
thing; whilst it is right to say that it does
relate to the dealings with other people, it does not
actually touch the existing heart of regulating a particular trading activity. I am sorry, it is a

long answer to the question.

McHUGH J:

Mr Jackson, if section 113 is invalid, it may be

possible to have a system of dual registration or
incorporation just as we have in the industrial

field. I do not - it is hardly the answer to

what you have been putting but it just occurs to me that.

:MR. JACKSON: Well, Your Honour, one would, of course, have to

consider the application of section 126 then and section 126 would seem to prevent such a company carrying on business unless it became registered

under the Commonwealth Act. Your Honour, certainly
there - - -

ClT48/l/DR	183	4/10/89
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McHUGH J: It seems strange - well, I do not say it seems
strange, but you could have a situation where 95 per cent of a company's business is really
non-trading financially and only five per cent
trading and, therefore, it has got to be registered
under a Commonwealth Act; it cannot get registration
under the State Act, and if it ceases to trade for
any period, it has got to be wound up. It is a
fairly unsatisfactory state of affair.

MR JACKSON: Well, brought about, really - perhaps I could put
it this way, Your Honour: what that does tend to
indicate is that the identity of the polity which,
under the CONSTITUTION, has the power in relation
to the incorporation, is likely to be that which is
unrestricted by trying to identify the character
of the corporation. It should be the States rather
than the Commonwealth because, Your Honour, the
difficulties that come about are not really by
saying that you have to characterize corporations
as being trading or financial corporations, that
is something that is capable of being done.

(Continued on page 185)

ClT48/2/DR 184 4/10/89
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MR JACKSON (continuing):

The difficulties come about by

saying that the laws which the Commonwealth can
make under section Sl(xx) are laws with respect
to foreign corporations and trading or financial
corporations formed or which it may form under
section Sl(xx).
Your Honour, if I can just say that, that that factor, together with the other factors
under the Act, militates - perhaps I could put
it this way, Your Honour: the difficulty that
is demonstrated in trying to keep the bootstraps
tied militates against the view that there is
a Commonwealth power to incorporate.
Your Honours, I was dealing with FENCOTT

V MULLER. Your Honours, may I say a couple more
things about it. One is this, that if one looks
at the objects of a company which are widely
spread - in other words a company which has done
nothing but has objects which cover everything -
then the trouble with them is that, it is not
really that they tell you a lot but if they are
only objects and capacities, they do not really
tell one anything about what is the character
of a company; they say what characters it may
possess in the future; they say what activities
it may engage 1 in but they do not really tell
you anything about what it is actually doing.
Your Honours, I said that there was something

else I want to say about - one use that might
be made of the memorandum or the objects and
at least there is no doube some use which can
be made of them but it is limited, in our submission,
in this sense that if there is a situation where

a company is carrying on an activity, usually
the nature of the activity will be such that
it indicates, without too much difficulty, whether
it is a trading or a financial corporation.

It is, I suppose, possible that there will be

activities carried on by a company which are
capable of being or not being trading or financial
activities.
In those circumstances, it may be possible

to derive some assistance from the objects for

which the company is formed; it may be not too.
But it may be that if one had a company that was formed for one purpose only then it would
be possible to see if the activity was attributable
or referable to that purpose, whether it confirmed
or did not the view that might otherwise be formed
of the activities. It may cast a light on things,
Your Honours, without illuminating or perhaps sometimes without illuminating the result.

ClT49/l/ND	185	4/10/89
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Your Honours, we would submit, speaking
more generally, that on this issue the question
of the correctness of the view taken in iUDDART
PARKER that the more strained meaning of the
provision is to treat it as applying so as to

empower laws permitting incorporation. And we
would also submit, Your Honours, that the activities
test is the correct test to be applied.
Could I move then, Your Honours, to the

question of the provisions of the Act on the

assumption that the CORPORATIONS ACT - could
I turn to the provisions of the Act on the assumption

the Commonwealth has power to incorporate. And
there are a number of distinct issues which arise.

Your Honours, the first point is this:

namely that the CORPORATIONS ACT selects as the
criterion for incorporation the stated intentions
of the corporators whatever may be their actual
intentions.

(Continued on page 187)

ClT49/2/ND 186 4/10/89
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MR JACKSON (continuing):

Your Honours, could I

in that regard

take Your Honours very briefly to the provisions
of the enactment which are relevant. They are,
first section 114 which says that any five or two
or more persons -
may, by subscribing their names to a memorandum
and complying with the requirements as to
registration under this Division, form an
incorporated company.

From there one goes to section 153(l)(a) and section 153(l)(a) is the provision which requires the cormnission not to register the company unless
a written activity statement has been lodged.
One then goes to section 153(3), to which I have already taken Your Honours and Your Honours will see
that it requires that the subscribers state that

they have a particular intention. So too does
section 153(5) and section 153(7) then states that:
Where a statement is lodged for the purposes of this section, each person who has signed the statement shall be taken to have stated
in it that that person had, when signing the
statement, the intention described in it.

Your Honours, if I could go back from that then to
the two remaining relevant provisions, section 121(1)
says that:
On registering a company under this Division,
the Cormnission shall prepare a certificate under
its cormnon seal that complies with this section

and shall issue the certificate to the company. And section 122 makes that certificate conclusive
evidence that:
all requirements of this Act (other than

section 155) in respect of:
registration -

or -
matters preceding or incidental to the registration;
have been complied with;

and
the company is duly registered.

Your Honours, the point involved is a narrow one
and it is this. If one were to assume that the Act

CIT50/1/CM	187	4/10/89
NSW(2)

would be within power if it turned on the intention
of the corporators, it is outside power because it
turns, not on what was their intention, but on what

they state is their intention. Your Honours, in
that regard it is a case where, in our submission,
what is required or why the Act is invalid is
because it forms a trading or financial corporations
not on the basis of what the true facts are, but
on the basis of what a statement as to the facts is.
Your Honours, in that regard, could I refer
Your Honours to the THE QUEEN V LUDEKE: EX PARTE
AUSTRALIAN BUILDING CONSTRUCTION EMPLOYEES' AND
BUILDERS LABOURERS' FEDERATION (1985) 159 CLR 636, and at page 651 the members of the Court referred
to the principle stated by Mr Justice Fullagar in
the COMMUNIST PARTY case, that:
the validity of a law or of an administrative act
done under a law cannot be made to depend on the

opinion of the law-maker, or the person who is to do the act, that the law or the consequence of the act is within the constitutional power
upon which the law in question itself depends
for its validity.

Your Honours, the AUSTRALIAN COMMUNIST PARTY case,
which is 83 CLR 1, contains a number of references
to the same effect.

(Continued on page 189)

CIT50/2/CM 188 4/10/89
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MR JACKSON (continuing): Your Honours, at page 200, about
one-third of the way down the page, Sir Owen Dixon
said:
Again, prima facie no opinion of
the Parliament as to the actual
existence or occurrence of some matter
or event which would provide a specific
relation of the subiect of a law with
power can suffice to give the law that
relation.

At the bottom of page 205 Mr Justice McTiernan
expressed it pithily when he said:
The CONSTITUTION does not allow the
judicature to concede the principle
that the Parliament can conclusively
"recite itself" into power.

Your Honours, at page 224, Mr Justice Williams,
two-thirds of the way down the page in the new paragraph

commencing on that page, said:
Where the constitutional validity of
an Act is challenged, it is the actual
facts and only the actual facts which
count and the real question that arises
is as to the actual facts which are relevant
and the legal effect of those facts.

At page 258, Your Honours will see the observations of
Mr Justice Fullagar, about two-thirds of the way down
the page, which were referred to in REG V LUDEKE.

Now, Your Honours, those observations are illustrative,
in our submission, of the underlying principle that

a Commonwealth enactment must, in the end, depend
upon constitutional facts, as it were, which are

facts. There may be questions about onus of proof
and displacing the onus of proof and whether, as

in MILICEVIC V CAMPBELL, it is possible to reverse

the onus of proof. But leaving that aside, in the
end the way in which the present Act is framed is
one which assumes that corporations may be formed
based on stated intentions as distinct from actual
intentions and that, Your Honour, is something that,
in our submission, the Parliament cannot do. Could I, in particular, take Your Honours to

a case in which some discussion occurs of this point -
of the point, as it were, in relation to section 5l(xx)
and that is ACTORS AND ANNOUNCERS EQUITY ASSOCIATION
V FONTANA FILMS PTY LIMITED, (1982) 150 CLR 169.
Your Honours will see at the bottom of page 185
Chief Justice Gibbs, referring to the provision which
was then an issue, said:

ClT51/l/HS	189	4/10/89
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If the fact to be proved is a
"iurisdictional fact" - a fact which
much exist if federal power is to be
attracted - the question whether s.45D(S)
is valid involves the question with
both Mason J and myself left open in
MILICEVIC V CAMPBELL.
It is a fundamental principle that
"the Parliament cannot turn a law
which is not upon a subject matter
of legislative power into a law which
is upon such a subject matter by the
simple expedient of creating a statutory
fiction" -
and I would ask Your Honours to look at the remainder
of that page; and going on to the next page, at
the end of the same paragraph.

(Continued on page 191)

ClTSl/2/HS 190 i'.~/10/89
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MR JACKSON (continuing): And if Your Honours look at

page 223, in the third-last paragraph on the
page in the judgment of Your Honour Justice Brennan -
Your Honours, it is not on exactly the same point
but Your Honour appears to assume the correctness
of the proposition that constitutional facts
must be facts as distinct from assumptions about
them.
Your Honours, in our submission, the validity

of an Act such as registering a company under
the CORPORATIONS ACT cannot be made to depend
upon the opinion of the person seeking registration
and by doing that the Parliament has gone beyond
power, in our submission.
The second point with which we wish to deal

under the same general heading is in relation
to the reliance upon the subjective intentions

of the corporators. Your Honours, in this regard
it is made clear by the provisions to which reference

has already been made and I would simply mention
sections 153(3) and 153(5) in particular, that
the CORPORATIONS ACT makes it clear that the
right to have a company formed depends on those
intentions.

Your Honours, if one were to assume the

correctness of FENCOTT V MULLER on the point
of looking at the constitution of the company,
there is not, really, anything in FENCOTT V MULLER
which suggests that the matter to be looked at
consists of the subjective intentions of the
corporators. There is nothing in it to suggest
that the subjective intentions of the corporators
are determinative of the character of the corporation
as being a trading or financial corporation when
formed.
Indeed, Your Honours, such indication as

there is in the case rather suggests the opposite

because the Court took the view upon the evidence of what was to happen to the company that it

was not a trading corporation. The view of it
being a trading corporation came not from what
the corporators or those in control of it at
the time thought was appropriate but rather the
Court's view of its memorandum.
Your Honours, there is a difficulty,of course,

if one looks at the subjective intentions of
corporators because their intentions are not

binding on a company. They are intentions which
are not fixed and they are intentions which may

change from time to time. And in selecting

the subjective intentions of the corporators,
we would submit, an irrelevant criterion has
been selected.

ClT52/l/ND	191	4/10/89
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Your Honour Justice McHugh referred to an
instance of a prospectus being put out for. say,
a media corporation and, Your Honour,
it is possible, of course, to say, "This is a
prospectus for a media corporation.", but what
that means is that when the corporation is formed
and begins to trade it will be a corporation in the media area. And it is not, we would
submit, a media company at the time when a prospectus
is being put out to elicit shares in it; it will
become a media - or meaning by that, trading
corporation for the purpose of section Sl(xx),
in our submission, at a later time.
Your Honours, finally, in relation to these points, may I deal with the question of dormant

and shelf companies. Our submission simply is
that the CORPORATIONS ACT permits the formation of dormant or shelf companies which are not and
may never be trading or financial corporations.

(Continued on page 193)

C1T52/2/ND 192 4/10/89
NSW(2)

MR JACKSON (continuing):

Your Honours, if I could deal firstly

with shelf companies: section 114 authorizes the formation of companies without itself containing
any requirement as to their character - without
itself expressly containing any requirement as to
their character. Those provisions, or the words
"subject to this Act' pick up the provisions of
section 153. If one goes to section 153(5·), the
statement which it requires does no more than state
that the intention of the subscribers, that there
will be a change in the controlling membership during

the period of dormancy or 21 days. Now, Your Honours,
there is nothing in those provisions which creates
any nexus between them and trading or financial
corporations and, Your Honours, that is true in
relation to the dormant and shelf companies, in
our submission, if one looks through the various
provisions of the Act to which Your Honours have
already been referred.

DAWSON J:	Why would the incidental power not have some
relevance there? Incidental to trading or financial corporations to have regard to corporations which
may become, but are merely dormant - - -

MR JACKSON: Well, Your Honour, I suppose it is in the end a

question of drawing the line, but what one is saying
is that the law is a law with respect to trading or
financial corporations and one assumes for the
purpose that there is a power in:the Commonwealth to
legislate for the formation of trading or financial
corporations but, Your Honour, we would submit,
it is not to do that, to form a company, to allow
the formation of a company which may never trade and
in relation to which there is no case for saying
it will ever trade. All that might happen, for example,
to a shelf company, the section 153 ( 5) ones,
is that that conpany is formed, its ownership may
change, its ownership may not change, it may never
trade, no one may ever intend it to trade. Your Honour
it is just a company which has been formed.

DAWSON J:	Or it is formed with the capacity to trade; it is
put into abeyance for the moment; it is reasonable to
presume that if it does come out of abeyance it is
likely to trade, why is that not enough?

MR JACKSON: Well, Your Honour, it is reasonable to assume -

Your Honour, may I perhaps query the assumption that
that is behind that in a sense because it is not, with
respect, reasonable to assume that it will trade,

one does not know what will happen to it.

It may remain a shelf company forever. It may never
trade, it may trade and, Your Honour, one just has
a situation where the relationship between trading
activities, let us say for the moment, and the company
is, in our submission, so slight and just in the realms
of possibility that the law which one is talking about

ClT53/l/FK	193	4/10/89
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is really a law with respect to companies, and not
a law with respect to trading or financial
corporations.

DAWSON J: It is a law with respect to dormant companies.

MR JACKSON: W~].l, all right, Your Honour,it is a law with

respect co aurmant companies, or perhaps shelf companies
which may or may not become trading or financial
corporations.

BRENNAN J:

Mr Jackson,

may

the argument against you be that

if one looks at the nature of a company that
can acquire the status of a corporation under this
Act, it is one which is to have a memorandum of association which is to be subscribed by the
subscribers, that memorandum need not contain any
objects, but when it is formed it is going to have

all the capacities of a natural person, and the
statement that is made by the subscribers merely restricts to what it states the capacity that is likely to be exercised, and thereby one reads down
general capacities of the company conferred by 161
to what is stated in the statement by the
subscribers and that is enough to show that it is
a company that is a trading corporation.

MR JACKSON: Well, Your Honour, that demonstrates, in a sense,

we would submit, the inappropriateness of
FENCOTT V MULLER test, in a way.

BRENNAN J: Quite, yes. Given the inappropriateness of

FENCOTT V MULLER, of course, that is not sufficient.

(Continued on page 195)

ClT53/2/FK	19 4	4/10/89
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MR JACKSON: It also, with respect, Your Honour, seeks to

person and who acquires legal capacity on arriving
demonstrate it a bit. If one looks at a person - if
at, say, the age of 18, one could hardly say of
them, in any serious sense, that they were trading
because they had capacity to trade. Most people
of that age would not be financial in any sense,
Your Honour. What section 161 indicates, in our
submission, is this that the company may do the

things that a natural person would do. The mere
fact that one of the things that a natural person
may do is to engage in activities which are activities
which are trading or financial and would satisfy that
tes~ if one looked at the activities of a trading
or financial corporation for purpose of section 5l(xx),
does not mean that the company formed is a trading
or financial corporation.
Your Honour, could I perhaps say this also, that

if one takes the view that section 161(1) does have
the result that it sets out, in effect, however
many subdivisions of capacity one likes to have and
that amongst those one will find a power to trade,
then it follows, inevitably I suppose, that the
company is a trading or financial corporation -
assuming the FENCOTT V MULLER test is correct. But,
Your Honour, the FENCOTT V MULLER test did not really
seem to be saying that one looked at the company to
see whether the company could do anything. What the
test seemed to be was to say, "Look at the company. It has a number of objects and it has, certainly, a
number of powers - but the expressions are being
used in the context of companies. Amongst those
powers and objects are ones which could constitute constitute being a trading corporation or a financial
corporation."
Your Honour, the test in that case seemed to be

rather more than just to say, if it has the ability

to do something, therefore it is a trading or
financial corporation. But, Your Honour, the point
of section 161 largely, we would suggest, is that,
if what Your Honour put to me about it is right, it
really indicates that perhaps FENCOTT V MULLER should

be reconsidered. Your Honour, the other thing is that
that would have some strange results as a matter of
interpretation of the Act and in that regard,
Your Honour, the company, one would think, would be
a trading corporation - or every company formed would
be a trading corporation, of course - and that would
have the result that section 158(l)(a) would not
really have too much operation, Your Honour, because
the company, one would think, really would not cease
to be a trading corporation.

ClT54/l/DR 195 4/10/89
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Your Honour, perhaps I can put it this way:

the Act seems not to be framed on that basis. One
could, I suppose, work section 158(1) together with
section 161 but there would seem to be some
difficulties in doing so. Your Honour, when one came to section 156, such a company could only fall within
section 156 because of the deeming provisions of

section 157. Your Honour, it is a scatter-gun
answer to a question Your Honour has given me but
there are some difficulties with it, Your Honour,
and the thing that they do most is to demonstrate
that FENCOTT V MULLER should be - - -

DAWSON J: But the Act does proceed on the basis that a company
is either a trading company or not, does it not?

(Continued on page 197)

ClT54/2/DR 196 4/10/89
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MR JACKSON: Yes, Your Honour, I am sorry, it does proceed
on that basis, yes,it does.

DAWSON J: Because one can envisage a situation when one
is talking in terms of legislative power where
a company is not trading at the present, but one
cannot say that it is not a trading company nor it
is a trading company - I am thinking of dormant
companies where -one can say that it is a vehicle
or may be a vehicle which has the capacity of
becoming a trading corporation and in that sense
one may say that the legislative power extends
further than the Act seems to assume it does, but
the Act does proceed on a basis that it is one or
the other.

MR JACKSON: Well, one or a number of others, Your Honour,

there are several; it can be one, one or nothing
in effect.

DEANE J: But cannot a company be incorporated as a dormant
company under this Act without any power at all
or capacity to trade?

MR JACKSON:

Your Honour, it can be formed as a dormant

company, Your Honour, and then of course one can
have a restriction of section 162, is that - - -

DEANE J:	Which expressly precluded trading or financial
activities?

MR JACKSON:

Yes,

Your Honour, but if that happened then

in such a case, Your Honour, it seems a very odd
result for that to happen - - -

DEANE J:

As I read it,section 113 would not, because of that,
preclude a dormant company being incorporated under

State law.

Dormant company seems to be, if you take

the Act's view of what is trading and financial,

dormant company seems to be in a no-mans land where the

Commonwealth claims, but does not prohibit the State.

MR JACKSON:

Your Honour, I think that is right.

May I check

that at some point and give Your Honours a note

if I want to say any IIDre about it. Your Honour, I
said before that I would give the references to the
constitutions of the three countries Your Honour
Mr Justice McHugh mentioned. If I could go first to
Malaysia, the relevant provision is section 74(1)
of the 1957 Federal Constitution to be found in the

ninth schedule, item 8(c) of the Federal List is the
power in relation to companies and the words
"incorporation, regulation and winding up of companies"
are specified. In relation to the Constitut~on of India

CIT55/l/CM	197	4/10/89
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one goes first, Your Honours, to Article 246(1)
which refers to the seventh schedule which contains
the Union List in list one, and items 43 and 44 are
the relevant provisions. Item 43 refers to
"incorporation, regulation and winding up of
trading corporations including banking, insurance
and financial corporation, but not including
cooperative societies". Item 44 refers to
"regulation and winding up of corporations whether

but not including universities 11 • trading or not with objects not confined to one State
Your Honours, there is, if one looks at the

State List, which is list two in the seventh schedule,
item 32 in that gives the"States powers with respect
to the incorporation, regulation and winding up of
corporations other than those specified in the Union
List'.' And finally on that point in relation to
Nigeria, the 1979 Constitution of Nigeria, sections 4(2)
and 4(3), in the second schedule, Part 1, had an
exclusive litigation list, item 31 of which was
"incorporation, regulation and winding up of

companies". So far as Nigeria is concerned, it is
a certain academic interest at the present.

(Continued on page 199)

CITSS/2/CM 198 4/10/89
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MR JACKSON (continuing): Your Honours, in relation to other
countries may I just say another thing, and it is
this - can I refer Your Honours to - in relation to
the United States - CTS CORPORATION V DYNAMICS
CORPORATION OF AMERICA, (1987) 95 L Ed 2d 67, and
Your Honours will see at pages 85 and 86, amongst
other things, discussions of the business landscape
of the country and in particular at page 86 in the
first new paragraph in the right column:
It thus is an accepted part of the business landscape in this country for States to create corporations, to
prescribe their powers, and to define
the rights that are acquired by purchasing

their shares. A State has an interest in
promoting stable relationships -

and so on. Your Honours, that is a relatively recent
decision of the United States Supreme Court which
indicates a large and sophisticated regime in which
there is divided control of the incorporation of
companies. Your Honour Justice Deane observed to
my learned friend, the Solicitor-General for South
Australia, yesterday that there is, in effect,
a plethora of corporations which are trading

corporations - no doubt there are many. Your Honour,
one thing is this, that at the time when Lindley was
originally written, and I think Your Honour was
referring to one of the first editions of it - - -

DEANE J: I think it was the fifth and the sixth.

MR JACKSON: Yes, Your Honour. The fifth and the sixth
editions relate back, in effect, to what was first
written, and there seems to have been something of a
change in the habit of company conveyances, if I can
call them that, in that period because it seems to
have been in the latter part of the 19th century
that the more pernicious practice, as it was described,

of multiplying objects came about. Prior to that one

could look at the objects of a company and say, "This company will be X or Y", or perhaps "X and Y11 , but one
can see what the ma~or objects of the company were

likely to be. But, Your Honour, one should not
really reverse it by saying companies are trading
companies unless it appears otherwise, in our
submission.

One simply should recognize the fact that there are companies which may be capable of a number of
characterizations but one has to, in the end, see
whether they are trading corporations or financial

corporations. Those are our submissions.

MASON CJ: Thank you, Mr Jackson. Mr Solicitor for the
Commonwealth.

ClT56/l/HS 199 4/10/89
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MR GRIFFITH: If the Court pleases, the previous New South
Wales Government went into its last election with a
slogan "back to basics" and, to some extent, the
same description might be applied to our contentions,
of which the Court has a copy, although I suppose we
hope for a unanimous vote as a result of that.

DEANE J: That certainlv could not be applied to the Act
you are defenrling, Mr Solicitor.

MR GRIFFITH: No. Yes, Your Honour.

McHUGH J:
And that government got defeated too, did it not?
with a smile, but we are not looking for votes, although
seven ~udgments would be a satisfactory response,

MR GRIFFITH: Well, Your Honour, that is why I made the analogy
Your Honour.

(Continued on page 201)

ClT56/2/HS 200 4/10/89
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MR GRIFFITH (continuing):

Your Honour Justice Deane did

make a remark that was picked up by my learned
friend, Mr Jackson, as to the question of, "Well,
how many companies do come into these categories?"
or "What are the sort of other companies referred
to by Lindley?" It is rather difficult to get
figures as to that but there are some pointers
that possibly can be derived from the New South
Wales Corporate Affairs Commission Annual Report
1987, and also the National Companies and Securities

Commision Report for that year. And if I could
hand the Court extracts of figures which seem
to give some pointers of what might be the relative

numbers.

MASON CJ:

Thank you.

MR GRIFFITH: It is not all that clear where nowadays one

would find scientific companies characterized
or listed but appendix 3 on the second page of
the New South Wales report would seem to indicate
that there were some 959 section 66 companies

which would appear to be charitable by designation
although some of those could well be trading
charities and it may be a matter of almost natural
inference that most, or if not all, those companies
listed as public companies, proprietary companies,

non-exempt and exempt, were trading corporations.
Perhaps one's view could be influenced by the
extent to which one made assumptions as to whether
family trustee companies of the sort referred
to by Mr Handley would be characterized as trading
corporations. Perhaps that is a matter of opinion.
Our contention would be that by and large such
companies could be so characterized.
There are not all that many recognized and

recognized foreign companies and that includes,
of course, recognized foreign companies between

the States under the COMPANIES CODES, foreign
companies and foreign companies in liquidation.

The other annexure is from the NCSC's Annual

Report which indicates a breakdown by companies
limited by shares public and proprietary, those
limited by guarantee, no liability which, I suppose,
basically, would be mining companies which perhaps
by inference could be assumed to be trading companies
and unlimited companies which perhaps could be
assumed not to be although one is not sure about

that. But we would submit that it is a matter
of natural inference that the preponderance of
companies registered under the State COMPANIES
CODES might be expected to be trading or financial

companies. As to whether the percentage is

ClT57/l/ND	201	4/10/89
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in the order of 99 point something that
Justice McHugh suggested, one cannot be sure.

DEANE J: Of course the answer very much depends on what
you mean by "financial", does it not?
MR GRIFFITH: Yes, that is so, Your Honour. If you give
that a wide meaning it will be almost all companies.
If you give it a narrow meaning it will not be.

MR GRIFFITH: Your Honour, if you give "trading'' a fairly
wide meaning you probably pick up most things
in any event without getting to "financial".
We would suppose, Your Honour, the family trust
company, if not trading, could be regarded as

financial without much difficulty. And, of course,
on the broader view of FENCOTT, if one has a
company listed without a restriction on its objects,
as is enabled under the COMPANIES CODE since
1984, one could take the view that in the absence
of relative registered restrictions then such
companies could be characterized as trading or
financial or both.
And, of course, in FENCOTT, the majority of the Court was happy to say, "It does not matter
much if one does not say which they are, as long
as one can say one or the other".
If we may turn then to our contentions,

of which the Court does have a copy.

McHUGH J: No, I have not got a copy.

MR GRIFFITH:

They were distributed yesterday, Your Honour. Could I hand up another copy.

I regret that

Your Honour has not got a copy. I hope other
Justices are not in that position.

MASON CJ: I think the rest of the Court have copies.

MR GRIFFITH: There are three annexures of materials which

we have supplied to the Court which I do not
think the Justices have had an opportunity to

peruse yet. The first is an appendices to the
contentions which is a small document which sets
out a summary of, firstly, the pre-Federation

history of section Sl(xx). The second appendices
is a summary of incorporation of business corporation
as a comparative federal system, particularly
the United States, Canada and the European Community.

(Continued on page 203)

ClT57/2/ND 202 4/10/89
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MR GRIFFITH (continuing): The third is a summary of historical

precedents for the prohibition of outsize trading
partnerships, which arises in reference to our

submissions on the second question. As to the third
appendix, there is another volume of statutory and
historical material which is this bound volume which is picked up by reference to the summary which is in
the third appendix, and the remaining volume is a
volume of supplementary materials to which I will take
the Court to several parts during the course of our
submissions.
Our first submission is a general one and,

perhaps if I could ask to be excused for taking the
Court back to the basic proposition, but we submit

that this power should be regarded as an affirmative
grant of plenary legislative power, which must be
construed with all the generality with which the
words admit, and we refer in the first paragraph of
our contentions to Justice Deane's acceptance of
this in RICHARDSON V THE FORESTRY COMMISSION, 164 CLR 261
at page 307, and, of course, this approach is one very
much accepted, we would submit, by the decisions of
this Court and, if we a-ould ref er rnly further in
support of that to the judgment of Justice Brennan
in the TASMANIAN DAMS case, 158 CLR at page 220
to 22L There Your Honour Justice Brennan referred
to:
That canon of construction

that is after referring to JUMBUNNA -
ensures that the Parliament is enabled to
fulfil the object for which the power was

designed. The application of that canon
of construction to the affirmative grants of
paramount legislative powers gives the
CONSTITUTION a dynamic force which is
incompatible with a static constitutional

balance. The complexity of modern
commercial, economic, social and political

activities increases the connexions between
particular aspects of those activities and
the heads of Commonwealth power and carried an expanding range of those activities into the sphere of Commonwealth legislative
competence.

And, on the next page 222, Your Honour referred to the
fact that:
It is not the function of this Court
to strike some balance between the Commonwealth
and the States: that would be to confuse the
political rhetoric of States' rights with the
constitutional question of Commonwealth
legislative powers, the measure of which at any
time is not referable to the powers previously
exercised by the States.

ClT58/l/FK	203	4/10/89
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MASON CJ:	But you are pushing at a door that is already
open, are you not -

MR GRIFFITH: Precisely, Your Honour.

MASON CJ:	- - - because there have been no submissions here
that reflect any notion of States - - -
MR GRIFFITH:	Your Honour, we say that door being open, the

way is clear to the answer in this case, in our
submission, but it being challenged, Your Honour,
we submit - - -

MASON CJ:	I thought the submissions you had to make were submissions that were based on the textual
considerations that are involved in the paragraph.
MR GRIFFITH: Well, precisely, Your Honour, and we start	at

the text, Your Honour, and say, "Adopt this approach;
let us go to the text." and we go then, Your Honour,
to what we say are the words of the ..... ,

"with respect to" and rely upon their generality,

Your Honour. We submit as to that, Your Honour
that they are the words of the widest import and
require only a relevance to or connection with the subject assigned and, we wubmit then, Your Honour,
going to the text of paragraph 20 itself, that the
words of the paragraph should be regarded as
equivalent, Your Honour, to the expression, "with trading or financial corporations forrrEd within the limits of the Commonwealth", means the same thing,
respect to corporations". In our submission,
and that, we would submit, Your Honour, that it
could not be contended that a simple power to make
laws with respect to corporations would not include
the power to incorporate, and in the same manner,
Your Honour, we submit that it cannot be accepted
that the expression, "by reference to trading or
financial corporations formed within the

Commonwealth" do not have the same meaning.

As to that approach, Your Honour, if we would

firstly refer in passing to what Chief Justice Barwick

said in ADAMSON's case in 143 CLR at page 207 to page 208
Your Honour, he said:
In conformity with the principles of constitutional
construction,·the description "trading corporation"
in s. 51 (xx). ~ust be given -its full. eon tent, generously
rather than restrictively construed.

ClT58/2/FK	204	4/10/89
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MR GRIFFITH (continuing): And, Your Honour, in FONTANA FILMS here, Your Honour the Chief Justice, 150 CLR 169 at page 208 said of this power, under placitum (xx):

The power should be construed as a plenary power
with respect to the subjects mentioned free
from the unexpressed qualifications which have
been suggested.
Now, Your Honour, adopting that approach in turning to the words of paragraph (xx), in our submission, the

words "foreign", "trading and financial" are merely
descriptive of the character of the corporation which

are the subject-matter of the power. We submit that
the power is one with respect to corporations of
that character and, of course, we submit, it follows
that the power is not with respect to activities, it
is with respect to corporations.

McHUGH J: But, why did the CONSTITUTION place the words,

"fall within the limits of the Commonwealth"? What
is your answer to what Mr Justice Isaacs said about
them?

MR GRIFFITH:

Your Honour, we say it is to make the distinction

between foreign corporations and those formed within
the Commonwealth. It is as simple as that.

McHUGH J:

_ He

could have just as easily have said, "foreign corporations" for "trading and financial corporations".

MR GRIFFITH: Well, Your Honour, some form of expression had

to be used and when one goes to the convention
debates one can see the derivation of this expression,
in our submission, but it is merely, we submit,
Your Honour, a adjectival description to mark out
the distinction between foreign corporations and those

which are not foreign. Your Honour, we do intend to
address this issue that Your Honour the Chief Justice
answered as to the question of why there should have
been a reference to status of foreign corporations in
the original drafts. But, in our submission,

Your Honour, it is the appropriate construction of
this paragraph to see that the descriptions
"foreign" or "trading or financial" and "formed
within the Commonwealth" are merely for the point
of view of marking out the distinctions.

McHUGH J: Yes, but you have no power to incorporate foreign

corporations and there you find, in the very same paragraph, a provision talking about "trading and financial corporations". It is not as though it
was corporations generally, it is trading and
financial corporations.

MR GRIFFITH:

Can I say two things about that, Your Honour?

Firstly, we would say that there is a power to
incorporate foreign corporations in Australia. There

ClT59/l/DR	205	4/10/89
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is a power to recognize them in Australia; there is
a power not to recognize them, and there is a power
to require them to incorporate here as well as to
recognize the fact that - - -

McHUGH J: They would not be foreign corporations then, would
they, if they were incorporated here?

MR GRIFFITH: Well, Your Honour, in fact the provisions of
the CORPORATIONS ACT has a registration provision
which, in effect, brings foreign corporations within
the umbrella of the Act as being registered corporations

under the CORPORATION ACT. We would submit,
Your Honour, it is within the area of legislative
choice for the Australian Parliament to have provided
either. ·no provisions in respect of recognition of
foreign corporations; to provide a provision merely

for their recognition, or to provide a scheme
that involves registration under the Act, recognition
as corporatiors, pursuant to the Act, and regulations
on the terms on which those foreign corporations may
trade there. In fact, the third choice has been
that adopted in this case.
As to the second aspect of Your Honour's question:

we submit, Your Honour, when one goes through the
history of this clause through the convention debates,
one can see that the adjective "trading" was brought
in, Your Honour, basically, as far as one can see,
to separate them from municipal corporations. Then, during the course of the debates, the issue of banks
and the appropriateness of regulating banks and
quasi-banks was raised and there was amendment made
to include "financial". But, we would submit, Your
Honour, that the basic distinction to be made as a
result of perusal of the history of tJ:m::paragraph
is to see intendment to mark off municipal corporations
from those which would be within the ambit of the
corporations power.

BRENNAN J: Mr Solicitor, am I right in saying that your argument

is that the phrase, "formed within the limits of the
Commonwealth", and the word, "foreign", are a complete dichotomy which exhaust all categories of corporations?

MR GRIFFITH: Well, Your Honour, there could be things such as
statutory corporations that could be regarded as
corporations not included within the power.

BRENNAN J: Not included within that?
MR GRIFFITH: Yes, but for the purposes of the power, Your Honour,
one has a dichotomy, we would agree, Your Honour,
between foreign corporations and those which are not
foreign corporations which are described by reference to the place of formation: namely, within Australia.

ClT59/2/DR 206 4/10/89
NSW(2)

BRENNAN J:
Well then, does not that still beg the question
that if one is going to characterize or categorize
corporations by reference to the place of their
formation, one has to have a place of formation before
one can proceed to characterize corporations?

MR GRIFFITH: We would submit, not so, Your Honour. We would
submit that when one has foreign corporations,
Your Honour, one has corporations which are identified.
When one is seeking to identify the other form of
a corporation one says, "Its laws with respect
to corporations fall within the limits of the
Commonwealth", so the power is with respect to
corporations falling within the limits of the
Commonwealth and it is our submission, Your Honour,
that includes, naturally, the power to incorporate,
to provide for incorporation either exclusively or
concurrently. It need not be exclusive, Your Honour.
It can be concurrent and we would submit, Your Honour,
of course, it is not restricted to the question of
corporations that might be formed as a result of

authority under placitum (xx). There is power in
the other parts of the CONSTITUTION, Your Honour,
which we will refer to briefly to form corporations.
There is a co-extensive power in the States subject to the effect of any Commonwealth legislation

within power which affects that power. In STATE
SUPERANNUATION BOARD V TRADE PRACTICES COMMISSION,
150 CLR 305, the present Chief Justice,
Mr Justice Murphy and Mr Justice Deane said:
Like the expression "trading corporation",
the words "financial corporation" are not
a term of art; nor do they have a special
or settled legal meaning. They do no more
than describe a corporation which engages
in financial activities or perhaps is
intended so to do.

Your Honour the present Chief Justice in the FONTANA

FILMS case has, I think, in a passage which has been

referred to in passing in 150 CLR 207 referred to
the fact near the top of page 207:
The subject of the power is corporations -

of the kind described; the power is not
expressed as one with respect to the
activities of corporations, let alone
activities of a particular kind or kinds.

Then Your Honour refers to the approach of a liberal
construction of constitutional power, and then went on: Nowhere in the CONSTITUTION is there to be
found a secure footing for an implication

ClT60/l/HS 207 4/10/89
NSW(2)
that the power is to be read down so
that it relates to "the trading activities
of trading corporations" and, I would
suppose, correspondingly to the financial
activities of financial corporations and
perhaps to the foreign aspects of foreign
corporations ..... The competing hypothesis,
which conforms to the accepted approach to
the construction of a legislative power in
the CONSTITUTION is that it was intended to
confer comprehensive power with respect to
the subiect matter so as to ensure that all
conceivable matters of national concern

would be comprehended. The power should,
therefore, in accordance with that approach,
be construed as a plenary power with respect
to the subiects mentioned free from the
unexpressed qualifications which have been
suggested.
We suggest that there was a similar approach by
Your Honour Justice Deane in the TASMANIAN DAMS case,
if I could refer the Court to 158 CLR 269. In the
last paragraph of page 268 Your Honour commenced to
discuss the corporatins power and said towards the
bottom of page 268:
It is now well settled that the grant is
a plenary grant which, like the other grants

contained in s.51, must be given a liberal
construction. In particular, it must not
be read down by reference to any presumption that the various grarts of power contained in s.51 should be constructed as being mutually
exclusive.

(Continued on page 309)

ClT60/2/HS 208 4/10/89
NSW(2)

MR GRIFFITH (continuing):

And then, towards the middle

of page 269 Your Honour said:
Examination of the words and structure of
section 5l(xx) discloses no reason in
language or in principle of legal
interpretation why the power to
legislate with respect to trading
corporations should be given such a

restricted meaning. The paragraph
contains no mention at all of trading
activities. Three specified types of
corporation are made the subject of the
one grant of legislative power. It could
not be seriously suggested that the
power to legislate with respect to foreign
corporations should be confined to a power
to legislate with respect to their foreign
activities. Consistency would support the
approach that the power to legislate with
respect to trading or financial
corporations formed within the limits of the
Cormnonwealth should not be artificially
confined to the trading or the financial
activities of such corporations.
Nor, in my view, is there any reason in

logic or history for so confining the grant
of legislative power contained in
section 51 (xx).

And then Your Honour refers to the trading activities
at the East India Company and goes on over the next
page to say:
In my view, the legislative power conferred
by section 5l(xx) is not restricted to laws
with respect to trading corporations in
relation to their trading activities. It is
a general power to make laws with respect to

trading corporations.

Then, Your Honour deals with the issue of dual
characterization to say:
It suffices that the law "fairly answers
the description of a law 'with respect to'
one given subject-matter appearing in
section 51" regardless of whether it is,
at the same time, more obviously or
equally a law with respect to other
subject-matter.

And then goes on to give the example of cobblers and
to say:

ClT61/l/JH	209	4/10/89
NSW(2)

Likewise, a law which applies only to
trading corporations (identified by
reference to their character as such) and
prohibits them from engaging in certain
non-trading activities cannot properly be
characterized as a law with respect to the
trading activities of trading
corporations; it can, however, properly be
characterized both as a law with respect to
trading corporations and as a law with
respect to prohibited activities. Indeed,
the position is plainer in the case of the
trading corporation.
In our submission, with respect to the issue of the
incorporation of corporations, we say such a law may
be characterized as a law with respect to trading
corporations.
We do derive some general propositions from the

TASMANIAN DAM case and we would say particularly when one has reference to the judgments of Your Honour
the Chief Justice in that case and also Justice Deane
and the judgments of the Court constituting the
majority one sees two issues which arise. The first
is the question of what is the scope of the power and
the second is whether the law, in truth, is with
respect of the subject-matter of the power, in other

words, the issue of characterization. Now, dealing with
of paragraph 20 disclose no reason in language or in principle of any legal interpretation why the power to
the issue of the scope of the power and particularly
the corporations' power, we submit that the
legislate with respect to trading corporations should
be given any restricted meaning. Also, as we have
noted from the extract of Justice Deane's judgment
which we have just read, three specified types of
corporation were made the subject-matter of one grant

powers in respect of foreign corporations and and we submit that just as it cannot be said that the financial corporations are to be confined to foreign
activities or financial activities, it cannot be

limited in respect of trading activities. Of course,
paragraph 20 contains no reference to trading
activities and we submit that the TASMANIAN DAM decision
indicates that narrow interpretation fails to give
effect to the principle that legislative power
confirmed by the CONSTITUTION should be liberally
construed.
Now, we accept what Your Honour Justice Deane

said, that there is no reason in logic or history
to confine the grant of legislative power and, of
course, as Your Honour the present Chief Justice
pointed out in the TASMANIAN DAM decision at pages 149-150,
this approach is very rn..1Ch consistent with the view expressed by
Chief Justice Griffith in HUDDART PARKER, 8 CLR 348, absent
His Honour's reliance on the doctrine of reserved powers.

ClT61/2/JH	210	4/10/89
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MR GRIFFITH (continuing):

Now, of course, there are two

issues involved: one is the question of power;

the second is characterization. And the Court

here is involved with both those issues. But
whilst we are referring to the position, as we
say elucidated in the TASMANIAN DAM case, we accept
it as indicating that, firstly, a law on the
subject-matter of the Commonwealth power does
not cease to be valid because it touches or affects
the topic outside Commonwealth power or, of course,
because it had been characterized as a law upon the
topic outside power.
And, further, that it is - we submit, that

it is a question of the Court to conclude, adopting
the approach of construction which we have indicated,
as to whether or not a law may be truly characterized
as with respect to the particular power.
Now, as we have already been engaged upon

in our discussion with the Court, in our submission, to distinguish local trading or financial
the words "formed within the limits of the

corporations from foreign corporations. So that
a foreign corporation is a corporation, we submit,
formed beyond the limits of the Commonwealth.
The word "formed" here is used as an adjective
and not as a participle and we submit it has
no temporal significance as has been submitted
by Mr Davies and also has been submitted by other

of the counsel that has appeared. We submit
that it does not mean that have been formed.

Mr Justice Stephen, in MIKASA (NSW) PTY

LTD V FESTIVAL STORES, 127 CLR 660 to 661 referred to

this use of the participle. He was there dealing
with the question of - in section 66B(2)(d)(ii)
of the then TRADE PRACTICES ACT - the use of
the word "supplied" in connect ion with the phrase

"has sold or is likely to sell goods supplied

to him by the supplier". And at page 661
His Honour said:
"supplied" was used as the past tense of
the verb "to supply". It followed that
the sub-paragraph could only apply to cases
whether there had been an actual supply
of goods before further supplies were withheld.
Since the appellant had never supplied Mikasa
ware to the respondent the paragraph would,
on that view, be inapplicable.
In fact the form of the verb "supply"

used in this paragraph is not the past tense
but rather a common enough instance of the

C1T62/l/ND	2 11	4/10/89
NSW(2)

use of the past participle; it is neutral
in temporal meaning and applies equally
to the future as to the past.
In this context we would submit perhaps it does
not matter at the end of the day as to whether
one regards the past participle as being used
as a verb or as an adjective. We submit, in
either circumstance, it is clear that it has
no temporal significance.

BRENNAN J: Except that if it is used as it is necessarily
in the passive voice, it means that the thing to which it relates has been subjected to the process described.

MR GRIFFITH: Your Honour, we submit that a law with respect
to the creation of a corporation none the less
Your Honour is to be characterized as a law with
respect to that process, namely the process of
a corporation including its formation.

BRENNAN J: But you must say that a law providing for the
incorporation of a corporation is a law with
respect to a corporation formed?

MR GRIFFITH: Your Honour, the Chief Justice Sir Garfield Barwick
in ST GEORGE's case, at page 538,130 CLR, was
referring to this expression - 130 CLR at page 538
and he there said:
It should then be said that the expression

"formed within the limits of the Commonwealth"
is satisfied, in my opinion, by incorporation
under Commonwealth, State or Territorial
laws. The expression is not confined to
corporations existing at the date of the
commencement of the Commonwealth but includes
corporations whenever and however they have
been or may be so incorporated.

(Continued on page 213)

ClT62/2/ND 212 4/10/89
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MR GRIFFITH (continuing): At page 542, Your Honour, he said:

The qualification "formed within the limits of
the Cormnonwealth" is used, in my opinion, in
contrast to the word "foreign". It serves to
require local incorporation, the locality being
any part of Australia.

And we would submit,Your Honour, that that is the
appropriate construction of this expression, it
being used by way of contrast. And regarded as an
expression by way of contrast, in our submission

Your Honour, it forms an apt juxtaposition. You
have two classes of corporation. Firstly, foreign
corporation and secondly, you say, ''Well what is the
other class?", the other class is a class of
corporations that are formed within the limits of
the Cormnonwealth, also,of course,being required to
be trading or financial, but that is a different
aspect of the qualification. So regarded, by way of contrast,
to use the expression of the Chief Justice in
ST GEORGE, we will submit Your Honour, that it is

not appropriate to look to the element of temporal
movement which Your Honour indicated in your question
to me.

BRENNAN J: No, lest there be any misunderstanding, I did

not suggest a temporal element in the sense of an
event which is to occur in the past, or in the present

or in some future time. My question was whether or
not the object to which the law related was an
object which had suffered the process of formation?

MR GRIFFITH:

Your Honour, thank you for correcting me. We

would indicate,Your Honour,that there is also a contrast
there and that the appropriate approach is that
indicated by the Chief Justice,that merely one is
contrasting with the foreign element to identify
what it is that is not foreign that is within power,
and we would submit,Your Honour, in that circumstance

it is not apt to regard there being a confining
aspect of the expression of power to regard something
to be already in existence.
(Continued on page 214)

CIT63/l/CM	213	4/10/89
NSW(2)

MR GRIFFITH (continuing): We would submit, Your Honour,
that just as a power in respect of corporations
would, on its ordinary meaning, carry with it the
meaning of the capacity to incorporate, so in
respect of the expression "fall within the limits
of the Commonwealth", Your Honour, there is an
added expression to provide the contrast, not an
expression of limitation of what, otherwise, would

be within the power. In the same case, the
ST GEORGE case, Justice Stephen referred again
to this element of participle and the use of the
word "trading" at page 569 and he made two
remarks. Perhaps whilst I am referring to this page
I could refer to the other remark which is on this
page and that is dealing with the issue of whether
or not one can say that there is an equality of
meaning between concepts of trading, that of
carrying on business for a gain, that of carrying on
business for profit making, and the like, and at
130 CLR 569, Justice Stephen said:
As to s.419(1) it can no doubt be said
that there is a strong element of profit making present in the concept of trading and that this element will usually be
possessed by a trading corporation.
This is, perhaps, only because,
traditionally, in societies organized
upon capitalist lines, the undertaking
of trading activities has been left
substantially to private enterprise
rather than to government intervention;
in these circumstances the common
incentive for entry into those activities
has necessarily been the profit motive.
Hence the conduct of a trading activity has commonly come to be associated with
the gaining of profits, that being the
motive leading to the undertaking of

those trading activities.

(Continued on page 215)

Cl T6t~/ 1 /HS 214 4/10/89
NSW(2)
MR GRIFFITH (continuing): There have been remarks by other
Justices of this Court to similar effect indicating
that there is an analogy of meaning between the concepts
of gain, trading and profit making, carrying on business
and the like. But, as to the point of the use of
the participle, in the next paragraph His Honour says:
Since it is the activity carried on or
intended to be carried on that is described
by the participle "trading" it would not
matter -

So, His Honour there is, again, referring to
the concept that there is no aspect of temporal past significance in the use of the expression "trading".
His Honour Justice Murphy accepted this in

KATHLEEN INVESTMENTS (AUST) LID V AUSTRALIAN ATOMIC
ENERGY COMMISSION, 139 CLR 159 where, referring to
placitum (xx), he said:
The word "formed" ..... does not confine Parliament
to laws with respect to corporations which have
been formed. Past _participles are often used

to apply to the future as well as the past - and he referred to Justice Stephen in MIKASA.

McHUGH J: Mr Solicitor, will you just remind me of the situation -
what happens in the case of a company which is registered
in a State or incorporated in a State after this Act
commences and then decides to trade?
(Continued on page 216)

C1T65/l/SH 215 4/10/89
NSW(2)
MR GRIFFITH: Your Honour, it has no difficulties then. It

then registers under Division 2, Your Honour,
section 126 page 4,104 -

McHUGH J: Is that what 126 means - a body corporate that is
a company of the State or Territory? Does it mean
register? I thought it meant a State corporation.

MR GRIFFITH: No, Your Honour. It is a defined expression,

Your Honour, in the dictionary, page 2,154 -

McHUGH J: I appreciate that about company, but it is the

words "company of a State or Territory - - -

MR GRIFFITH: I am sorry. That is also in the definition
paragraph (b), Your Honour-

in relation to a State or Territory -

So a"company"in relation to a State or Territory means;
a body corporate that is a company for the

purposes of the company law of the State or
Territory;

McHUGH J: Yes, thank you.
MR GRIFFITH: "Company law" is defined too, Your Honour, -
in relation to a State or Territory, means
the law, or a previous law, of the State or
Territory relating to companies;
which basically means the COMPANIES CODE, so that
in Your Honour's postulation, Your Honour,that
body corporate, when it does after the transfer
day which is a date that can be proclaimed under
section 98, if it does in effect become a trading
corporation, Your Honour, then it is necessary for

it to register under the Act before it does so.
So that perhaps to use the example of Justic8 Deane
in respect of dormant companies, if a company were
to register as a company under a State Act and
remain dormant and then decide to become active as
a trading corporation, then the mechanism would be
registration under Division 2 of this Part.

:., (Continued on page 217)

CIT66/l/CM 216 4/10/89
NSW( 2)
MR GRIFFITH: Section 127 provides the mechanism for application

and following. We next submit that there is no
limitation on the power to make laws with respect
to trading or financial corporations to be derived
from the fact of the pre-existence of foreign

corporations. We say, firstly, that there is no
requirement for the scope of the power conferred by
the second limb of section Sl(xx) to correspond
precisely with the scope of the power confirmed by
the first. But, as we have already noted, it is
our submission that the effect of Part 3 in
section 133 to section 141 of the CORPORATIONS ACT is,
in any event, to provide for the local incorporation
of foreign corporations.
So that, in truth, there is no dichotomy between

the concept that you cannot provide for the
incorporation of foreign corporations because they
already exist and, because of the circumstance that
the local corporation must be incorporated under

a local law. Your Honour the Chief Justice referred

to the question of the recognition of foreign
corporations within Australia between the colonies
and may I hand the Court a bundle of extracts of
several cases which we aay are useful to indicate
what was the position in respect of the rules of
private international law - - -

MASON CJ:	Thank you.
MR GRIFFITH:	- - - in respect of recognition of companies

within the colonies. The first is an extract -
in fact the full judgment - of the advice of the
Privy Council in BATEMAN V SERVICE, (1881)
6 AC 386.

(Continued on page 218)

ClT67/l/DR	217	4/10/89
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MR GRIFFITH (continuing):

I apologize for this photocopy, but

background and we had not intended r.o put it it was originally just contained in our notes as
before the Court, but the citation is (1881) 6 AC 386,
There the Judicial Committee were considering with
the Western Australian JOINT STOCK COMPANIES ORDINANCE,
and the question was whether or not it applied to
foreign corporations, or companies incorporated out
of Western Australia, so far as they were properly
and lawfully carrying on business in Western Australia
and it was held, as a matter of construction, by the
Judicial Committee, that in the case of foreign
corporations, including as we would read it,
corporations of the other colonies, the provisions
of the Act did not intend to apply to those corporations.
But in the course of the advice delivered by
Sir Richard Couch at page 389 it was said:
But it was contended that the Legislature
of Western Australia had a right, if it
thought fit, to annex any kind of condition
to the·carrying on business in their own
territory, and that, by the construction

which should be put upon the Ordinance of
1858, it had enacted that unless a foreign
corporation, carrying on business in

Western Australia, complied with this
Ordinance and was registered according to
its provisions, its individual members
should be liable to be sued for its debts.
It was stated, and properly, that the real
question in the case was whether Western

Australian Legislature so enacted.

And the particular legislation set out on the next
page, and at the top of page 391 is recited what we
see as being the what would be the common law

position:

It is not to be presumed that there was an
intention, contrary to the comity of nations,
to prevent a foreign incorporated company
carrying on business at all in the colony,
because there would be so many difficulties
in the way of a foreign incorporated company
registering its members in accordance with
the provisions of this ordinance, that practically
it could not do so.

ClT68/l/FK	218	4/10/89
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MR GRIFFITH (continuing):

Then, at the final page of

the judgment they refer to the circumstance that:

This company, being duly registered
under the ordinance of the colony of
Victoria, and incorporated there, could
not be again registered as a company in
Western Australia.
So, that would seem to indicate what, we say, is
a reflection of the common law rule that, as between
companies registered in one colony, they could
trade in another; it was not essential for there
to be legislation to enable them to do so but
colonial legislation could be enacted to control
their activities and that seems to be recognized by
the decision of the Judicial Committee. It was also
stated by Chief Justice Jordan in UNITED SERVICE
INSURANCE CO V LANG, (1935) 35 SR (NSW) 491. We
have the single sheet extract of that page of the
judgment and there His Honour the Chief Justice at
page 491 said:
It is to be observed that so far as the law of NSW is concerned, the company in
question is a foreign company which owes
its status as a corporation exclusively to
foreign law. The exact position of such a
corporation in NSW has never been very
precisely defined. It is the practice, as
a matter of international comity, to recognise
the corporate character of such associations
..... to treat them as capable of trading
here ..... of suing here in their corporate
names, and of holding property here ..... and
to treat their members as possessing the
same immunities from liability as are
conferred on them by the law of the country
of their incorporation ..... They may be wound
up here as regards any assets within the

jurisdiction; but they cannot be dissolved
here:

and he refers to Westlake -
Power to dissolve is regarded as being exclusively a matter for the country in which
they were incorporated.

ClT69/l/JH	219	4/10/89
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MR GRIFFITH (continuing): The other extract is from the
judgment of two of the Justices in the CHAFF
AND HAY ACQUISITION COMMITTEE VJ.A. HEMPHILL
AND SONS PTY LTD, 74 CLR 375, and in particular
at page 385, Chief Justice Latham said:
If the committee is a legal entity

in South Australia as distinct from the
personalities of the natural persons who
constitute it, then it is by comity recognized
as a legal entity elsewhere. This principle
is well established in relation to foreign
corporations -

and he refers to BATEMAN V SERVICE. And then,
in the next extract from the judgment of
Justice Starke, at page 387, the next page, he
says much the same thing:
But it has long been settled that a foreign corporation may sue and be sued by its
corporate name in English courts ..... "It
is obviously only by a comity of nations,
in the strictest sense of the word, that
this recognition (of an artificial person)

can be g iv en" . The ex is ten c e of th is
artificial person depends upon the law of
the place of its creation but its capacity
is limited both by the law of its constitution
and by the law of the country where a given

transaction takes place. The right, however,
of such an entity to sue and be sued in
English courts "necessarily depends on the
extent to which recognition is accorded
to the law of such State".

And further over at the judgment of Justice Williams
at page 396, towards the foot of the page,
His Honour says:

·For the purposes of private international
law, South Australia is a foreign country

in the courts of New South Wales. In RUSSIAN
COMMERCIAL AND INDUSTRIAL BANK V COMPTOIR
D'ESCOMPTE DE MULHOUSE Lord Wrenbury 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 recongized as a
corporation here. It may sue and be sued
here in its corporate name".

ClT70/l/ND 220 4/10/89
NSW(2)
MR GRIFFITH (continuing): It is interesting that
BATEMAN V SERVICE was decided in 1881 and the
FEDERAL COUNCIL OF AUSTRALASIA ACT was passed in
1885 which had a provision in respect of the status
laws in respect of the status of corporations.
It might be convenient, if the Court pleases, if we went on to that tomorrow.

MASON CJ: Yes. I was going to as~ you what is meant by

Chief Justice Jordan's statement that a foreign
corporation is not a corporation within the law of
New South Wales? There is no need to answer it now,
Mr Solicitor, but I was just concerned to ascertain
what were the ramifications of that particular
statement?

MR GRIFFITH: Thank you, Your Honour.

MASON CJ: W~ will adjourn now until 10.15 am tomorrow
morning.

AT 4.21 PM THE MATTER WAS ADJOURNED
UNTIL THURSDAY, 5 OCTOBER 1989

ClT71/l/HS 221 4/10/89
NSW(2)

of paragraph 12, however, threw up another matter
which we would seek to briefly refer to.	Under

activity.	The very words themselves point to an
activities test.	Not quite so important - not quite

and another case to which I will be referring	in
a moment. So far as Oakland is concerned, it

it could not be liable under section 52.	So it was a
Pyrrhic victory for the plaintiffs.

of the business and a new trustee was required.	The
new trustee was Oakland. In our submission, if
Scrid had remained as the trustee of the family
unit trust, undoubtedly, what it did thereafter,

been carried out.	And intention is certainly
relevant once activity has commenced,	so that
you can characterize that activity.	But we would

be nonsense if applied to natural persons?	Why
should not the law and the CONSTITUTION wait

While its constitution will never be completely	irrelevant, it is in a case such as the present
where a corporation has not begun, or has barely begun, to carry on business that its constitution, including its objects, assumes particular
significance as a guide -

objects and its current activities.	Then in the
last sentence:

took the opposite view on this question.	At about
point 3 on the page:

I need not remind	Your Honours of the rest of what
His Honour said.	At page 562, Mr Justice Gibbs
said in the start	of his last paragraph on that
page:

with them in its capacity as trustee". That may or	to·say, "It holds shares, received dividends, deals
may not be right, but what I am not clear on is
precisely what you say as to the relevance of the
objects of the company, and its powers.

wquld arise.	One is whether'~ persod'perhaps
would apply to a State officer and - there was

DEANE J:	Of course, on New South Wales' argument, already
advanced, section 113 would be simply inoperative,
would it not?

of the case, it was.	If one takes the narrower view,
it was not.

DEANE J:	But that does not seem to me to face up to the
problem. The problem is this, is it not, that
as this Act demonstrates with its artificiality, the narrower the view one takes of the scope of subsection (xx) in terms of legislative power in relating to existing corporations, the weaker
is the argument that that power carries with
it. a power with respect to incorporation, because the Act demonstrates the problems of limited powers in relation to incorporation.

Honours, if I could just say this.	The section
would then read, of course:

political officials giving reasons for the failure	looking at it other than from the point of view of
of a referendum - if one is looking at it from that point of view one can understand why they say, "Too
many things were put together".

quite the history of	referenda that this has
and, Your Honour, it	should, in our submission,

be a rare th i ng .	I t	should not be frequently,
with respect.

would have been given by this amendment.	The
convention rejected it.

it was decided by the C.Ourt in HUDDART PARKER	V
THE COMMONWEALTH.

MR JACKSON:	Yes.
TOOHEY J:	They arise at different points of time.

DEANE J:	Mr Jackson, am I right that the definition of
trading activities includes financial activities,
but there is no definition of financial activities.
MR JACKSON:	That is so, Your Honour.
DEANE J:	So one assumes that trading and financial activities
equate to whatever might be thought to be the view
of trading and financial corporations - - -
MR JACKSON:	Yes.

already said.	The first is that the
decision has now stood for 81 years.	There has not been

existence.	They come under federal control in
relation to their behaviour if they are trading or	financial corporations at any time. If at any time
they are not trading or financial corporations they remain alive but not subject to the relevant federal
law. They do not have to be, for example, wound up.

corporation is not capable of changing its nature or a character, in the sense of section Sl(xx).	really in section Sl(xx) to suggest that a leopard cannot change its spots, as distinct from
becoming a leopard skin, and so, we would submit,
really, that indeed if one looks at - I am speaking
a little more generally now - section Sl(xx),
bearing in mind two things; one is that the foreign corporation, ex hypothesi is already formed;
the other being that in respect of the other
corporations, they are described by the use of the expression "formed within the limits of the
Connnonwealth", that the division of power that is
contemplated by that is that the corporations which
are the object of it - all corporations already formed,
it is their activities - and one can use that in a
broad or narrow sense, but it is their activities
that are the subject of the Connnonwealth power.
But the Connnonwealth power operates on the conduct
of bodies formed dehors the Connnonwealth - dehors of
section Sl(xx), I mean.

going a little	more largely - that really is the
better view of	the provision, in our submission,
giving it does	not - - -

under the Commonwealth Act.	Your Honour, certainly
there - - -

take Your Honours very briefly to the	provisions
of the enactment which are relevant.	They are,
first section 114 which says that any	five or two
or more persons -