Commonwealth economic Powers Week 5, Module 2 S99 Limitation on Cth Power S51(20) Corporations Power

Preference and Discrimination . 99 Cth trade and commerce law shall not give preference to one state or part thereof over another state or part thereof . S51(2) Cth tax law shall not discriminate against states or parts of state . Preference means tangible commercial advantage (Latham CJ, Elliott) . Preference includes discrimination but discrimination does not necessarily include preference (Latham CJ, Elliott)

Preference . Uniform rule that varies in application because of local conditions does not necessarily mean unconstitutional preference (James v Cth) . Licence required if moving dried fruit interstate – licensing authorities only established in NSW, Vic, SA and WA (only places where commercial quantities of fruit growth at the time) – held offensive to s99 because Qld or Tas grower could not obtain a licence (James v Cth)

Discrimination . Cth income tax regs prescribing different notional values to stock held in each state – differences attempted to take account of actual value differences in different states – held offensive to s51(2): Cameron v FCT . CSR v Irving: Cth tax law exempting goods to extent State taxes paid on them held valid . Cth tax on poultry farmers – arrangement whereby some state egg boards could collect on Cth’s behalf, they would deduct tax from $ they would otherwise pay farmer – court split 3:3 on whether offensive to s51(2): Conroy v Carter

Preference . Elliott v Commonwealth . Cth regs providing for licensing of seamen, provision that unlicensed seamen should not work at ‘prescribed ports’ . Ports prescribed were Sydney, Melbourne, Brisbane, Newcastle and Port Adelaide . Government claimed these were the busiest Australian ports . Was the law contrary to s99?

Preference and Discrimination . Majority held no preference . Latham CJ s99 prevents Cth not from selecting locations as such, but selecting them because they are taken to be part of a state . Dixon and Evatt JJ (dissenting) Cth regs gave prescribed ports a tangible commercial advantage . Commissioner Taxation v Clyne: Cth law provided for zonal rebates depending on where taxpayer lived . Court questioned majority view in Elliott, but decided on other grounds

Is Preference and Discrimination Prohibited Absolutely? . Permanent Trustee v Commissioner State Revenue (2004) five justices claimed that discrimination or preference might be constitutionally okay if pertaining to a distinction that is reasonably appropriate and adapted to a proper objective – eg here Cth law merely trying to make state laws applicable beyond airport limits apply within airport limits – held okay

Is it an Absolute Prohibition? . Fortescue Metals Group Ltd v Cth (2013) . HC unanimously upheld constitutional validity of mining tax . Fact its actual operation differed across states (because it gave a rebate for state royalties paid, and these differed across states) didn’t make it discriminatory . Hayne Bell and Keane JJ doubted existence of exception allowing what is otherwise unconstitutional discrimination or preference based on argument it was ‘reasonably appropriate and adapted to a legit objective)([115-116])

Corporations Power s51(20) . Gives Cth power with respect to trading corporations and financial corporations, but not incorporation 2 issues (a) whether body being regulated is a ‘trading corporation’ (we won’t study financial corporations since there aren’t many any more that would not be trading corps) (b) to what extent can the Cth regulate trading corporations?

Question 1: Is it a Trading Corporation? . Trade here means the same as in 51(1) – overlap . Buying and selling are at the heart of trade (St George County Council) . Two tests used in the past – purpose test (was corp created for a trade purpose) and activities test . Purpose test fallen out of favour since corps no longer required to specify their purposes in detail in memorandum of association . Older case – St George County Council – held Council not a trading corporation, set up to provide public with utilities – might not be right today given use of activities test

Is it a Trading Corporation? . Activities test preferred . What are the organisation’s main activities, and does trading form a sufficiently significant part in order that the corporation can be called a trading corporation? (Adamson) . Compare Adamson (large AFL football club) with Hughes (suburban cricket club) – one held to be a trading corporation, one not . Question of fact and degree . Here club had significant quantify of finances from a range of activities, more like a business

Is it a Trading Corporation? . Court held can be trading corporation although the trade is carried out to finance a non-commercial activity . Hughes v WACA – suburban cricket club not a trading corporation, but WACA was . Quickenden v O’Connor (2001) – University held to be a trading corporation, 20% revenue was from trading activities . Red Cross is (E v Australian Red Cross Society) . Why do we care? Because Cth might try to have its legislation (eg Competition and Consumer Act 2010) apply to coy, coy might argue it is not subject to the law because Cth doesn’t have constitutional power to legislate with respect to them

Is it a Trading Corporation? . Tasmanian Dams – Gibbs CJ (dissenting) held Hydro Commission not a trading corp – carried out a public function of importance to state, nature was not trading . Mason J was trading corporation – massive scale – can be trading although carrying out activity in public interest

Question 2: To what extent can Commonwealth regulate trading corporations? . Early narrow view in Huddart Parker and Co (1909) tainted by reserved powers reasoning, have to read down power having regard to position of states . Griffith CJ power confined to capacity of corp, not activities . Higgins J Cth can’t regulate contracts of corps . Isaacs J Cth could only regulate external aspects . Cth govt attempts to stop anti-competitive practices by companies thrown out

Strickland v Rocla Concrete Pipes Ltd (1971) . HC over-ruled Huddart Parker and validated Cth’s competition laws . Confirmed Cth could regulate trading activities of trading corporations . Left open whether Cth’s powers were limited to trading activities only . Split the court in Actors’ Equity v Fontana Films where Gibbs CJ and Wilson J claimed power was limited to trading activities of trading corps, majority (Stephen Brennan Mason and Murphy JJ) disagreed, but found that the regulation must relate sufficiently to corps – here provisions relating to union liability for secondary boycotts too far removed from corp to rely on s51(20)

Cth v Tasmania (Tas Dams Case) . Tasmanian legislation authorised Tasmanian Hydro to build a dam in rural Tasmania . Cth Act made it illegal to carry out construction work in defined areas (included area where Tasmania wanted to build dam) . Tasmania argued Cth law invalid . Was Cth law supported by s51(20)? . Gibbs CJ Dawson Wilson JJ s51(20) confined to trading activities of trading corporations . Acts here preparatory to trade, not trade so Cth could not stop dam . Object of law was to stop dam, identity of entity building it really immaterial in how law was to apply (so Cth can’t rely on s51(20), dissenters say)

Majority – Tas Dams . Eg Mason J dissenters are too narrow – focus of s51(20) is on entities, not activities . Broad objective of s51(20) – allow Cth to regulate relations between coys and individuals, protect the public from coys . Read power in context – ridiculous if Cth could only regulate financial activities of financial corps, foreign activities of foreign corps, trading activities of trading corps . Read heads of power liberally, s51(20) extends to non-trading activities of trading corps . Deane and Murphy JJ agree with Mason J . Multiple characterisation okay with respect to law

Majority – Tas Dams . Brennan J for s51(20) to apply law must discriminate regarding corps eg only apply to corps – here it did, so valid s51(20) law . Thought Cth could regulate activities done for the purposes of trade . Summary of Tas Dams on s51(20) . 4 say Cth can regulate anything done for the purposes of trade . 3 say Cth can regulate trading and non-trading activities . 3 say Cth can only regulate trading activities

Re Dingjan; ex parte Wagner (1995) . Cth law allowing for certain contracts to be reviewed: (a) contracts involving a constitutional corp (b) those ‘relating’ to the business of a constitutional corp (c) those entered into by a constitutional corp for purposes of its business . Body reviewed contracts relating to a constitutional corp, and individuals . HC held (4:3) law invalid – too broad, could apply to contracts not involving constitutional corporations, so Cth could not rely s51(20)

NSW v Cth (2006) . Government seeking to encourage individual workplace agreements between employers and staff . Guarantee of minimum wage levels, annual leave, sick leave, carer’s leave, parental leave, max ordinary hours of work . Penalty rates not guaranteed . Reduced scope unfair dismissal laws . No right to collectively bargain, reduced ability to strike . Move to nationalise working conditions

Constitutional Issues . Cth primarily relied on s51(20) to support WorkChoices . Corporations employ 85-90% non-farm labour in Australia . Cth relied on territories power . Cth inserted provisions requiring that any recipient of federal $ offer individual workplace agreements to recipients . Could not rely on s51(35) – old conciliation and arbitration power – applied to allow Cth to provide machinery for resolution of industrial disputes, not individual bargaining

WorkChoices . HC 5:2 found legislation valid (Gleeson CJ Gummow Hayne Heydon Crennan JJ, Kirby and Callinan JJ dissenting) . Rejected external/internal distinction, no textual basis (p78) . Fundamental changes in place of corps in society occurred since 1901 (78-79) . There was a variety of reasoning Huddart Parker, and decision itself infected with reserved powers reasoning, so unreliable precedent (p84)

WorkChoices . Rejected states’ argument that founding fathers never intended s51(20) to apply to IR laws – a ‘mirage’ to pursue their intentions (97) . Cannot take into account failed referenda (which had sought to extend Cth power over IR)(100) . Unimpressed with ‘federal balance’ arguments – too vague and subjective (116-120) . Multiple characterisation okay . Cannot read one head of power down having regard to other heads

WorkChoices . Adopt Gaudron J’ test in Re Pacific Coal: S51(20) extends to regulation of activities, functions, relationships, and the business of a corporation, creation of rights and privileges belonging to such a corporation, imposition of obligations on it, and in respect of those matters, the regulation of the conduct of those through whom it acts, employees and shareholders and the regulation of those whose conduct is or is capable of affecting its activities, functions, relationships or business (114)

Dissenters (Kirby J) . Strange that Cth never realised it could use s51(20) to regulate IR until 2005 (186) . Can’t read heads in isolation (201) . If s51(20) allowed to be used in IR context, their focus will be on employer corp, at expense workers, ‘fair go’ won’t apply, s51(35) designed to enshrine fair go (216-217) . Concerned States’ role in IR being usurped, reduced to service agencies (226-227) . Admits federal structure can lead to inefficiencies and frustrations but necessary in a federal structure, object is to avoid concentration of power, HC should protect it (228-229)

Dissenters (Callinan J) . Founding fathers did not intend s51(20) to apply to IR (284) . Should take failed referenda into acc (299) . Engineers does not deserve reverence given to it (308) . Tired of giving the Cth ‘the benefit of the doubt’ (318) . Nothing in Const requires interpretation such that states reduced to ‘impotent debating societies’ (322) . Court goes beyond power if it ‘reshapes the federation’ (!)(322) . Would confine s51(20) to trading activs (334)