The Corporations Powers

The Corporations Powers

S 51(xx) provides: The Parliament shall, subject to this Constitution, have power to make laws for the peace, order and good government of the Cth with respect to: [...] foreign corporations, and trading or financial corporations formed within the limits of the Cth; [...]

1.  What are the entities with respect to which Parliament may legislate?

2.  What kinds of legislation may Parliament make with respect to these entities?

1. Is the body regulated by s51(xx) a constitutional corporation?

1.1 Foreign corporation: not formed within Cth and has separate legal personality under foreign law

1.2 Trading corporations: Formed within the limits of the Cth, set up primarily to engage in trade. 3 tests:

1.2.1 Purpose of creation (nature determined by the purpose for which it was created). St George County Council (1974): local council not a trading corp because one of its functions was to supply electricity

·  Gibbs CJ: purpose not trade, but ‘for local government to provide an essential service to the inhabitants’

·  Menzies J: companies established to undertake public works for community benefit may not be trading corporations. A uni may have a bookshop and a church may run a charity shop, but this does not make them trading entities.

1.2.2 Predominant activity (current activities of corporation). Adopted by dissenters, Barwick, Stephen, St George

·  Barwick CJ: a trading corporation is a corporation whose ‘predominant and characteristic activity’ is trading in goods or services (524). The purposes for which a corporation trades are largely irrelevant. It is the company’s current activity that matters, not its original purpose.

·  Stephen: Current activities less important than intended activity

1.2.3 Substantial activity (favoured approach, are activities a ‘substantial’ or ‘not insignificant’ part of the company’s operations?). adopted by Mason, Murphy in Adamson’s Case (1979): WA and SA Aussie Rules leagues rules prevented player transfers without the consent of the player’s current club. Issue: whether the rules were in breach of the TPA in restricting trade. both held a trading corporation must have trade as a substantial part of its current activity, while not set up primarily for trade, it was a substantial part or operations (Merchandise, tickets, food, dividends)

·  Murphy: ‘as long as trading is not insubstantial, the fact that the trading is incidental to other activities does not prevent it being a trading corporation. Mason: preferred St George dissent

1.3 Financial corporations: definition adopted by Mason, Murphy, Deane in Superannuation Board Case (1982): ‘A company that trades in finance (e.g. borrows or lends money), as opposed to dealing in goods or services’. E.g Banks, building societies and broking firms

·  Deane J: a super fund for Vic public servants was a financial corporation as financial activities constituted a substantial part of its operations. Determining by if it engages in significant trading activity rather than comparison of its activities significantly lowered threshold.

·  Barwick: look beyond predominate activity, make judgement considering all future + current activities

·  Gibbs CJ, Wilson dissenters: purpose of the corporation was governmental, not financial

2. Does trade occur only within one state?

·  Huddart Parker v Moorehead (1908): early HC ruled s51(xx) didn't extend to corporations trading within a single state. This was overruled in Concrete Pipes, Huddart was wrongly decided, as it relied on reserved powers reasoning but was struck down breadth (not limited to constitutional corporations)

·  Strickland v Rocla Concrete Pipes (1971): did TPA (Cth) provisions on anti-competitive conduct apply to a corporation trading exclusively within Qld? intra-state trading corporations were within Cth power

3. is corporation covered by the act

·  S51(xx) is a power with regard to a particular type of entity. It is not a purposive power (like defence) or a power to regulate a specific activity. HC determines outer limits on a case-by-case basis

2.1 Creation and abolition

·  Cth lacks the power to legislate with respect to the incorporation of corporations.

·  NSW v Cth (Incorporation Case) (1990): cth enacted corporations act, a comprehensive scheme to regulate australian corporations: 6:1 The words ‘formed within the Cth’ refer to corporations already formed under state laws. States eventually referred their corporations power to the cth

·  Cth v Bank of NSW (Banking Case) (1948): Parliament may regulate the activities of corporations, but not ban them or remove their legal status.

·  Cth may incorporate corporations by relying on other heads of power, Keyzer: ABC is incorporated under s 51(v) conferring power to legislate for ‘postal, telegraphic, telephonic and other like devices’.

2.2 Distinctive character test (narrow view)

·  subject matter of the law must relate to ‘distinctive character’ of trading and financial corporations, not relations of corporations with contractors or employees.

·  Re Dingjan; Ex parte Wagner (1995): legislation enabling a tribunal to set aside ‘unfair contracts’ entered into by constitutional corporations was outside power 4:3. Toohey and mchugh: ‘it is a plenary power and the only test is sufficient connection – not sufficient here. Left scope open to uncertainty.

2.3 Object of statutory command test (wider view, preferred): constitutional corporation within the object of laws command cf. dingjan.

·  if law instructs a constitutional corporation to do or not do something, it is likely to fall within s51(xx). also supports laws aimed at protecting corporations from conduct intended/likely to cause them loss or damage.

·  Work Choices Case (2006): series of controversial amendments to the Workplace Relations Act 1996 (Cth). supported by s 51(xxxv) (conciliation and arbitration). But instead sought to rely on corporations power and regulate employers operating within a single state. Brought 85% of national workforce within federal jurisdiction. challenged on a number of grounds, including:

o  deals with internal relations of corporations with their workers, rather than their relations with external entities. rejected as unjustifiably limiting the plain words of the power ‘there seems every reason to treat relationships with employees as a matter external to the corporation’

o  The existence of a specific industrial relations power in s 51(xxxv) precludes using s 51(xx) for industrial relations purposes. rejected based on the Engineers doctrine (states don't have reserved powers) and multiple characterisation. (Preferred test is distinctive character)

o  Majority: Gleeson, Gummow, Hayne, Heydon and Crennan upheld legislation on a broad reading of s 51(xx). The law regulates constitutional corporations and is therefore within the power.

o  strong dissent: Callinan, Kirby: unless powers like s 51(xx) are limited federal balance will be destroyed.

o  Callinan: nothing in Constitution to suggest that the Cth’s powers should be enlarged, by successive decisions of this Court, so that the Parliament of each State is progressively reduced until it becomes no more than an impotent debating society. This Court too is a creature of the Constitution. [...] The Court goes beyond power if it reshapes the federation

o  Wide reading to 51(xx) but limited 51(xxxv) to irrelevance

2.4 Third parties

·  Actors and Announcers Equity v Fontana Films (1982): provision of TPA prohibited secondary boycotts of corporations (where action is taken against a corporation to stop it dealing with a third party who is the real target of the action). upheld on the basis that it regulates third party actions that are intended to cause corporations loss or damage.

o  Narrow view: regulating corporations activities. Gibbs: relied on federal nature of const and warned against giving Cth too much power to make any kind of law. Requisite connection required to limit this. broad interpretation woulfd have extraordinary consequences and may subvert the federal nature of the const.

o  Broader view: regulating corporations generally: gained momentum after influence of Mason J who dismissed the narrow view: ‘a constitutional grant of legislative power should be construed liberally and not in any narrow or pedantic fashion.

·  Fencott v muller: s51(xx) may extend beyond corporations to regulate conduct or behaviour of individuals

2.5 lack of sufficient connection

·  corporations power is now very broad and workchoices cemented this, but HC has occasionally been willing to strike down law for not being sufficiently connected.

·  Davis v Cth (1988): legislation sought to give the ABA a monopoly over certain words and symbols, including ‘200 years’. Held: s51(xx) would cover misleading use of corporate names or symbols, but granting a monopoly over ‘200 years’ beyond its scope.

·  Tas dam: cth prohibited hydro-electric-comission of Tas from building dam, even though building the dam was not a trading activity, as it was preparation to trading

Taxation, Appropriation and Spending Powers

1. Is the law valid? Does it fall within head of power?

·  S51(ii): Parliament shall, subject to Const, have power to make laws for peace, order and good gov of Cth with respect to: … taxation; but not so as to discriminate between States or parts of States. ‘concurrent’

o  Fairfax v Federal Commissioner of Taxation (1965): superannuation fund taxed unless they were invested in prescribed public securities. Purpose: investment incentive. Argued not a law ‘with respect to taxation’ as its purpose was unrelated to revenue. Rejected by HC parliament may use s51(ii) to regulate activities that normally fall outside Cth jurisdiction

·  s 90: duties of customs and excise power belongs exclusively to the Cth.

o  narrow definition helps prevent VFI

o  excise duties are levies on goods at any point of production/distribution connected to output

o  Peterswald v Bartley (1904): licence fee on brewers not an excise duty, as not related to output.

o  Dennis Hotels v Victoria (1960): distinction between licence fees and duties of excise. Fullgar, Kitto and Taylor, narrow approach: licence fee levied on retailers or consumers at the point of sale is not an excise duty, even if based on turnover (Has withstood numerous challenges)

§  Dixon CJ, McTiernan and Windeyer dissent: wide approach considering substance. licence fee would be passed on to consumers

o  Matthews v Chicory Marketing Board (1938): levy calculated by acreage planted sufficiently related to output to qualify as an excise duty. Vic law imposing the tax was struck down.

o  Capital Duplicators v ACT 1993): tax on retailers based on the production or distribution of the goods, rather than purely their sale, is an excise duty. (backdating)

o  Dickenson’s Arcade v Tas (1974): states may impose consumption taxes. Menzies, Gibbs, Stephen and Mason: followed Dennis Hotels literalist precedent Gibbs: immaterial that it had same effect as tax on retail. Barwick, McTiernan dissent: focus substantive affect not form

2. Must fulfil the definition of tax: ‘a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered.’

·  Matthews v Chicory Board (1938): Vic gov authority imposed tax on chicory cropped land and sold it to NSW buyer. Was an excise and prohibited under s90. Latham CJ tax is (Air Caledonie: not exhaustive):

1.  A compulsory exaction of money (AG NSW v Homebush: choice may exist on paper but not in practise. Storage of flour at own expense and risk meant it was cheaper to by own flour back at extortionate price.)

2.  By a public authority (a public authority is established by an act: Tape manufacturers v cth)

3.  For public purposes

·  HC has treated fees imposed on individuals that serve public interests as taxes (air caledonie)

·  Charge must not be for enforcement of pre-existing private liability (lutton v Lessels)

·  All funds raised by Cth must be paid into CRF. Funds may be appropriated ‘for the purposes of the Cth’ per S 81 as authorised by legislation: s83.

·  AAP Case (1975): AAP made tied grants to regional councils conditional on the councils implementing federal government policies. Challenged as funds were not being used for the ‘purposes of the Cth’ but for local government activities. Held: ‘purposes of the Cth’ are whatever purposes the Parliament chooses, wide interpretation.

·  Second Uniform Tax Case (1957), Dixon: by giving tied grants states under s 96, to states or local councils, the federal government may accomplish policy objectives outside normal powers of the Cth

o  HC: grants aren’t coercive because they don't have to accept grants

o  Quick and garran: intended to be used in cases of emergency  medicine not the daily food of the constitution. Conceived by framers as a transitional power, confined to supplementing state resources. Lane: exceeds powers; avoids prohibitions, damages federalism

·  Combet v Cth (2005): specificity required for s81. argued general appropriation for ‘departmental expenditure’ did not cover expenditure on advertising not mentioned in budget notes. rejected

o  Gleeson CJ: deferred to parliament on limits like majority: ‘parliament may decide how precisely to express appropriations. ‘One-line appropriations are valid’

o  McHugh, Kirby JJ dissent: appropriations must be precise enough to be meaningfully evaluated. (Kirby: would undermine transparency and accountability)

·  Pape v Commissioner of Taxation (2009) qualified APP broad approach. ‘tax bonus payments’ unsupported by head of power? HC: s81 covers spending related to cth purposes defined elsewhere in the const, not confined to s51,, but also s61 (executive’s power to respond to international challenges to Australia’s interests)

o  61, national interest, is a very broad power, extends to almost anything, in effect unlikely power will be limited following pape

o  HC has curtailed the scope of s 61 in Williams v Cth [

4.  Not a payment for services.

·  Air Caledonie v Cth (1998) Migration Act 1958 (Cth) instituted an immigration fee of to be collected from all passengers entering Australia by air. airline required to pay regardless of collection from passengers. P argued that fee was a tax and couldn’t be inserted into the Migration Act as the Act as it contravened s.55. HC held provision invalid: in order for a fee to be a ‘payment for services’, there must be an identifiable service rendered. The fee must be directly related to the provision of the service.

o  Conditions not satisfied: no service provided to citizens and fee paid by airlines, not passengers.

·  Cf. Airservices Australia v Canadian Airlines (1999): Compass leased planes from Canadian before liquidating. Airservices was a statutory corporation associated with Cth authority regulating air traffic services. Compass owed Airservices fees relating to lease. Following liquidation, Airservices imposed a statutory lien over the leased aircraft, forcing the lessors to pay outstanding fees or forfeit planes.