1990] constitutional interpretation in the corporations...

1990] Constitutional Interpretation in the Corporations Case

CONSTITUTIONAL INTERPRETATION IN THECORPORATIONS CASE

GEOFFREY KENNETI*

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1 INTRODUCTION

In the recent decision in New South Wales v Commonwealth1 (hereafterreferred to as the Corporations case), the High Court's interpretation of s 51(xx)of the Constitution frustrated the Commonwealth Government's attempt tocreate a single national system for the regulation of companies and securities2 bydenying the Commonwealth Parliament the ability to legislate for theincorporation of companies. Corporate existence, and the privilege of limitedliability which arises from it, flows from registration under applicablecompanies legislation.3 The Commonwealth's ability to displace Statecompanies legislation and bring all or most corporations within its schemewould therefore be significantly enhanced by the ability to legislate with respectto the incorporation of companies. The Corporations Act 1989 (Cth) was, forreasons mentioned below, a complex piece of legislation. However, any effort bythe Commonwealth to extend its control of corporate regulation without theability to control incorporation would be likely to generate a system wherebycompanies came into being by registration under a State Act, but were thenbound to conduct their affairs in accordance with Commonwealth legislation - asystem which might almost have been constructed by opponents of federalism inorder to demonstrate its absurdity.

While the consequences of the decision are perhaps less momentous than thethwarting of another Labor government's attempt to nationalise the banks, theyare nevertheless potentially far-reaching. Business people and others may pointto the superior efficiency and ease of attracting investment that would flow from

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BA (Hons), LLB (Hons) (ANU); Principal Research Officer, Department of the Senate,Canberra. The views expressed are those of the author and not necessarily those ofthe Department, any of its other officers or any Senator. The author wishes to thankMr Geoffrey Lindell for commenting on an earlier draft.(1990) 169 CLR 482.The scheme was contained in the following legislation: Australian SecuritiesCommission Act 1989; Corporations Act 1989; Corporations (Fees) Act 1989;Securities Exchanges (Application for Membership) Fidelity Funds Contribution Act1989; Securities Exchanges (Membership) Fidelity Funds Contribution Act 1989;Securities Exchanges Fidelity Funds Levy Act 1989; National Guarantee Fund(Reportable Transactions) Levy Act 1989; National Guarantee Fund (participatingExchanges) Levy Act 1989; National Guarantee Fund (Members of ParticipatingExchanges) Levy Act 1989; Futures Organisations (Application for Membership)Fidelity Funds Contribution Act 1989; Futures Organisations (Membership) FidelityFunds Contribution Act 1989; Futures Organisations Fidelity Funds Levy Act 1989;Close Corporations Act 1989; Close Corporations (Fees) Act 1989; CloseCorporations (Liquidators' Recovery Trust Fund Contribution) Act 1989; CloseCorporations (Additional Liquidators' Recovery Trost Fund Contribution) Act 1989.Companies Code s 35(4); Corporations Act 1989 s 123(1); H A ] Ford, Principles ofCompany Law (5th ed 1990) Ch 3.

224 Federal Law Review [VOLUME 19

a single system of company law.4 Those who take the presently unfashionableview that the market is not the answer to every problem may be concerned thatany attempt to remodel the corporate form, or to improve the people's controlover how interests in companies are accumulated and disposed of, is subject tothe need to secure the backing of six State governments as well as that of theCommonwealth.

At the time of writing, the Commonwealth Government, following extensivenegotiations with the States and the Northern Territory, has introduced a Bill foran Act to create a national scheme of corporate regulation based on the outcomeof those negotiations.s This article does not canvass those discussions or theiroutcome, but examines the Corporations case in an attempt to discern andcriticise the current state of interpretation of s 51(xx).

The case stated for the Court's decision concerned several sections of theCorporations Act; but it was not necessary for the Court to examine the sectionsin any detail. The judgments addressed the "underlying question ... whethers 51(xx) of the Constitution empowers the Commonwealth Parliament tolegislate for the incorporation of trading and fmancial corpomtions."6

Discussion will fall broadly into two parts. First, the question whether thepower granted in s 51(xx) is plenary with respect to the corporations mentionedin that paragraph will be discussed. This question did not need to be canvassed bythe majority in the Corporations case, because of the conclusion it reached onthe second part of the analysis; however, it serves as useful background to thecase and an affrrmative answer to it underpins the dissenting view of Deane J.Secondly, the question of what is a s 51(xx) corporation is discussed. Thisquestion, it is argued, lies at the heart of the matter for decision in theCorporations case and entails examination of case law and the history ofs 51(xx) as well as the words of the paragraph itself.

2 WHAT ACTIVITIES OF A CORPORATION MAY BE REGULATED?

The 1970s and early 1980s saw the corporations power rescued from thedustbin of constitutional history and given interpretations which made it a morepotent weapon of Commonwealth power than previously thought.7 In Actors andAnnouncers Equity Association v Fontana Films Pty Lu;l8 and Commonwealth vTasmania (the Franklin Dam case)9 the Court considered what activities of

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Eg "Interview with Mr A G Hartnell-Chairman of the Australian SecuritiesCommission" [1989] 7 C&SU 381, 382; Senate Standing Committee on Legal andConstitutional Affairs: The Role of Parlia~nt in relation to the National CompaniesScheme (1987) Chs 3, 5.See the Second Reading Speech on the Corporations Legislation Amendment Bill1990 by the Attorney-General, the Hon Michael Duffy MP: House ofRepresentatives, H Reps Deb 1990, 3663 (8 November 1990). The legislation hassince been enacted: Corporations Legislation Amendment Act 1990.(1990) 169 CLR 482, 495.See Striclcland v Rocla Concrete Pipes Ltd (the Concrete Pipes case) (1971) 124 CLR468; R v Trade Practices Tribunal; ex parte St George County Council (1974) 130CLR 533; Kathleen Investments (Australia) Ltd v Australian Atomic EnergyCommission (1977) 139 CLR 117; Actors and Announcers Equity v Fontana FilmsPly Ltd (1982) 150 CLR 169; Commonwealth v Tasmania (the Franlclin Dam case)(1983) 158 CLR 1.(1982) 150 CLR 169.(1983) 158 CLR 1.

1990] Constitutional Interpretation in the Corporations Case 225

trading corporations could be regulated by the Commonwealth under s 51(xx).Gibbs J in the Fontana Films caselO and Gibbs CJ, Wilson and Dawson JJ inthe Franklin Dam casell sought to limit the subject matter of the power overtrading corporations to those corporations' trading activities or activities closelyconnected with them; while Mason and Murphy JJ12 (and possibly Stephen J)13in the former case and Mason, Murphy and Deane JJ in the latter14 maintainedthat the power extended to cover any activity of a trading corporation. In bothcases Brennan J declined to endorse the wider view, but held that the power wentat least far enough to cover activities undertaken "for the purposes of trading".15

Deane J warned in the Franklin Dam case that his adoption of a wide view ofthe power did not necessarily entail a conclusion that the Commonwealth couldmake a law in the form "no trading corporation shall ...")6 However, theimplication of the wider view is clearly that, subject to general constitutionallimitations, any Commonwealth law directed at (as opposed to applyingincidentally to) corporations of the kinds described in s 51(xx) is valid)7

If the narrower answer above is adopted, the question whether the incorporationof companies may be regulated must be answered in the negative. If, on the otherhand, the power is plenary, questions arise as to what companies fall within theambit of s 51(xx).

Judges who took the narrow view argued that the fact that a body is as 51(xx)corporation must be "significant in the way in which the law relates to it"18 for alaw to be a valid exercise of the power. According to Wilson and Dawson JJ, ifa law did not "bear sufficient relation to" the characteristics which make a body as 51(xx) corporation it was not a law "with respect to" those corporations.l 9

Such a view cannot, with respect, be sustained. The power is one with respect topersons, not certain activities of those persons.20 The narrower view implies alimitation which is not spelt out in the Constitution:21 it cannot be reconciledwith settled principles of interpretation which require that grants of power beconstrued liberally and without implied restrictions.22

The narrow view runs into further difficulty if an attempt is made to apply itto other types of corporation mentioned in s 51(xx). As Mason J said:

It can scarcely have been intended that the scope of the power was to be limitedby reference to the foreign aspects of foreign corporations and the financial

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(1982) 150 CLR 169, 182.(1983) 158 CLR 1, 111 per Gibbs CJ; 201-202 per Wilson J; 316 per Dawson J.(1982) 150 CLR 169, 201-208 per Mason J; 212 per Murphy J.See his throwaway remark (1982) 150 CLR 169, 195.(1983) 158 CLR 1, 148-149 per Mason J; 119 per Murphy J; 269-211 per Deane J.Fontana Films (1982) 150 CLR 169, 218; FranJcJin Dam (1983) 158 CLR 1, 240241.(1983) 158 CLR 1, 272; cfHuddart, Parur &: Co Ply Ltd v Moorehead (1909) 8 CLR330, 348 per Griffith CJ.See eg L Zines, The High Court and the Constitution (2nd ed 1981) 87.(1983) 158 CLR 1, 316 per Dawson J.(1983) 158 CLR 1, 202 per Wilson J; 316 per Dawson J.Eg Fontana Films (1982) 150 CLR 169, 181, 216; Franklin Dam (1983) 158 CLR 1,148, 240, 269, 314. See also Koowarta v Bjelke-Petersen (1982) 153 CLR 168,209, discussing the power conferred by s 51(xxvi) with respect to people of anyparticular race.See eg FranJcJin Dam (1983) 158 CLR 1, 149 per Mason J; 269 per Deane J.See eg Fontana Films (1982) 150 CLR 169, 201 per Mason J.


aspects of fmancial corporations. And it would be irrational to conclude that thepower is plenary in the case of those corporations, but limited in the case oftrading corporations.23

The words of s 51(xx), it is submitted, confer on the Commonwealth a power(subject to general constitutional limitations) to make any law with respect tocorporations which fit the description in s 51(xx).

This question was not agitated in the judgments in the Corporations case. Themajority numbered in its ranks Dawson J, who had taken the narrow view in theFranklin Dam case; Mason CJ, who had taken the wide view; and Brennan J,who had not found it necessary to decide. They subscribed to a joint judgmentwhich did not resort to any argument that the reach of s 51(xx) was limited byreference to particular aspects or activities of the legal persons to which thepower relates. Indeed, the majority judgment emphasises that the power

is not expressed as a power with respect to a function of government, a field ofactivity or a class of relationships but as a power with respect to persons,namely, corporations of the classes therein specified.24

Deane J, consistently with his earlier views, described s 51(xx) as a "plenarygrant of legislative power".25

This does not mean that the question has been decided. However, sinceadoption of the narrow view would be one way to reach the conclusion that theCommonwealth cannot legislate for the incorporation of companies, the fact thatno member of the Court adopted such reasoning arguably suggests that thequestion would now be decided in favour of the wider view.

It is submitted that a consequence of adopting a view of s 51(xx) as a"plenary" power, governing legal persons and not restricted to their activities, isthat even if s 51(xx) does not allow control of incorporation it does authoriseregulation of how companies are constituted, their internal affairs and trade intheir shares. A power with respect to legal persons makes no meaningfuldistinction between internal and external features of those persons.

Professor Zines has pointed out that State control of incorporation andCommonwealth control of all other aspects of corporate life results in "an absurddivision of legislative power".26 He has also suggested that the absurdity of aresult might lead to questioning of whether the Constitution requires it.27 Theabsurdity in this case stems from two conclusions - that the Commonwealthmay regulate all internal and external relations of corporations and that it maynot control incorporation - both of which might therefore be questioned. Thefirst, it is submitted, is firmly based in a view of s 51(xx) as a "persons" power;the second, it will be argued below, is less clearly required by the Constitution.

If it is accepted that the power granted by s 51(xx) is "plenary ... with respectto the subjects mentioned",28 the question arises whether corporations not yet inexistence, or in the process of being formed, qualify as "trading and financialcorporations formed within the limits of the Commonwealth". This question lay

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FranJdin Dam (1983) 158 CLR 1, 149.(1990) 169 CLR 482, 497.Ibid 509, 512.L Zines, supra n 17, 89.Id.Fontana Films (1982) 150 CLR 169, 208 per Mason J.


at the heart of the argument in the Corporations case. The two elements of thedescription will be considered in turn.

3 "TRADING AND FINANCIAL CORPORATIONS"

A The Character ofNascent CorporationsThe frrst aspect of the question is whether a corporation in the process of

being formed can have a "trading" or "financial" character. Clearly, a corporationwhich does not yet exist does not trade or enter into financial transactions.However, this potential barrier to Commonwealth control would seem to havebeen overcome by the reasoning in Fencott v Muller,29 in which the situation ofa corporation which had been formed, but had as yet undertaken no activities,was considered. All members of the Court in that case agreed that both theobjects and the activities of a corporation were relevant to its character for thepurposes of s 51(xx),30 and a majority held that the objects of a corporation asevidenced by its constitution could be enough to make it a trading or financialcorporation}1 The majority in the Corporations case appeared to accept that "thecharacter of a company as a trading or fmancial corporation is to be determinedby the nature of its activities, either actual or intended."32

If an inactive corporation can have a trading or financial character, the "tradingand financial" part of the definition would not appear to be a barrier to a validCommonwealth law controlling incorporation. That is, if trading or financialcharacter is acquired by the presence of articles of association disclosing therequisite objects, there would appear to be no reason why a group of subscribersabout to form a company should not have that character at least once the articlesare drawn up. Whether the objects are those of a fully formed corporation or agroup of subscribers may be of evidentiary significance as to what the intendedactivities are, but cannot be determinative of trading or financial character. Evenif it is not possible to characterise a group of subscribers about to become acorporation as a trading or financial entity, as long as they acquire that characterat the moment of incorporation a law governing the process of incorporation is,it is submitted, a law with respect to trading and financial corporations.

B Practical DifficultiesThe limitation of the reach of s 51(xx) to domestic corporations of a trading

or financial character did figure, however, in the judgment of the majority.33Thedrafters of the Corporations Act found it necessary to construct a fairlycomplicated system of activities statements to bring existing and nascentcorporations within the coverage of the Act. Under s 153 of the Act, thesubscribers to a new corporation were required to file a statement setting out theintended activities of the corporation. If the intended activities were such as tomake the body a trading or financial corporation and satisfied various other

29 (1982) 152 CLR 570.30 Ibid 588 per Gibbs CI; 601-602 per Mason, Murphy, Brennan and Deane 11; 611

per Wilson 1; 622 per Dawson J.31 (1982) 152 CLR 570, 602 per Mason, Murphy, Brennan and Deane 11.32 (1990) 169 CLR 482, 503.33 Ill.


requirements, the Commission was required to register it,34 thus making it acorporation.3S Meanwhile, the incorporation under a State Companies Act of abody capable of being incorporated under the Commonwealth Act wasprohibited.36 The Act also provided for the lodging of annual activitiesstatements by companies and for the cancellation of the registration (and thusdissolution) of companies which ceased to be trading or fmancial corporations.37

This scheme was deemed necessary to deal with "[t]he fact that the character ofa corporation may vary, so that it may be at one time a trading or financialcorporation and not at another," a fact which the majority said "makes it lesslikely at least that s. 51(xx) was intended to confer power upon theCommonwealth to incorporate companies over which its power of regulationmight fluctuate, possibly without knowledge upon either side. "38 Thecomplexity of this part of the Act was seen as an example of "the problem"which stemmed from construing s 51(xx) so as to include the power to legislatefor the incorporation of companies.

The prospect of a corporation being created under Commonwealth law andlater, through a change in the mix of its activities, becoming a corporationoutside the scope of s 51(xx) is certainly a daunting one. There are at least threepossible results: the body could cease to be incorporated, at least underCommonwealth law; it could remain incorporated under Commonwealth law butbe outside the power of the Commonwealth to regulate; or it could remainwithin the Commonwealth sphere despite no longer being a trading or financialcorporation.39 The frrst result (and, to a lesser extent, the second) would producechaos, as there would be no way of knowing until afterwards when a corporationhad left the Commonwealth sphere. All of them are unsatisfactory.

To these considerations must be added the confusion that would arise in anycase from the fact that the Commonwealth Act could not cover all corporations.Quite apart from whether intended, as opposed to actual, activities are enough tobring a corporation within s 51(xx), there is the question whether trading orfinancial activities form a significant enough part of the corporation's activitiesto make it a trading or financial corporation.

The seriousness of these practical difficulties depends on the definition of atrading or financial corporation. Broadly, the narrower the definition - the moreexclusively a corporation must be devoted to trade or finance in order toqualify - the greater the difficulties.

In the Franklin Dam case it was necessary to decide whether the TasmanianHydro-Electric Commission was a trading corporation. Mason, Murphy, Brennanand Deane JJ held that it was, while Gibbs CJ and (probably) Dawson J decidedthat it was no1.4O The majority on this point applied the view which had foundfavour with majorities in R v Judges of the Federal Court ofAustralia; ex parte

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Corporations Act 1989 ss 120, 121.Corporations Act 1989 s 123(1).Corporations Act 1989 s 113.Corporations Act 1989 ss 156, 158.(1990) 169 CLR 482, 503.Cf L Zines, supra n 17, 85-86.(1983) 158 CLR I, 155-157 per Mason I; 179 per Murphy I; 240 per Brennan I;293 per Deane J; 116-117 per Gibbs CJ; 318 per Dawson J.


Western Australian National Football League (Inc)41 and State SuperannuationBoard v Trade Practices Commission,42 that a corporation could fall within thedescription if its trading or financial activities were "substantial" and a"significant part of its overall activities" notwithstanding that they might becarried out "in the course of carrying out its primary or dominant undertaking".43

The proposition that trading or financial activities must be the "predominant"activity of a corporation, or that they must be not only substantial but somehowdefinitive of the Geist of the corporation,44 was thus rejected.

In the light of these cases it is clear that a manufacturing corporation, or oneinvolved in primary production, which sells its products is a trading corporationprovided that such sale is an important activity of the corporation:45 so also, itwould appear, is a corporation which trades in services rather than goods.46

Moreover, it is irrelevant to the characterisation of a corporation whether itmakes a profit from its trading or financial activities: even a recreational orcharitable corporation which covered some of its costs' by, say, selling tickets forits activities, could well be a trading corporation. The phrase "trading andfinancial corporations" as presently interpreted would thus appear to cover thevast majority of corporations, and particularly of those corporations which mostrequire regulation-those which operate commercially.

Further, it is possible that the concept of a trading or financial corporationcould be given a wider meaning than that established in the cases. The currentlyaccepted meaning has been established against narrower ones rather than inresponse to attempts to broaden the concept. The "fact" that a corporation maymove in and out of the range of Commonwealth power is largely a product ofjudicial glosses on s 51(xx) rather than the words of the paragraph itself. Thereis much to be said for the formulation of Murphy J in the Franklin Dam case:

The constitutional description of trading corporations includes those bodiesincorporated for the purpose of trading and also those corporations whichtrade.47

In Fencott v Muller a majority was prepared to regard a corporation as withinthe scope of s 51 (xx) purely on the basis of its objects. It would, it issuggested, accord with notions of the liberal construction of constitutional grantsof power to hold that any corporation which trades or whose objects includetrading activities was a trading corporation for the purposes of s 51(xx), and toapply a similar test for financial corporations. A need might arise to makeexceptions for companies whose trading or financial activities were a shamentered into for the purposes of attracting a Commonwealth law. However, evenif such a need did arise, the Court would be able to judge against a reasonablyfirm standard instead of venturing into the trackless wilderness of what is"significant" or "substantial". The wide definition of "trading and financial"

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(1979) 143 CLR 190.(1982) 150 CLR 282.Ibid 305, 306.See the Franklin Dam case (1983) 158 CLR 1, 116-117 per Gibbs CJ.This position is supported by eg G J Lindell, "The Corporations and Races Powers"(1984) 14 FL Rev 219 at 242 and Sir Maurice Byers, QC, "Re: National Companiesand Securities Legislation - Opinion" in Senate Standing Committee on Legal andConstitutional Mfairs, supra n 4, 89, 94-95.R v Judges of the Federal Court (1979) 143 CLR 190, 209.(1983) 158 CLR 1, 179.


corporations suggested here would also appear to accord with the taxonomy ofcompanies used at the time the Constitution was drafted: as Deane ] pointed outin the Corporations case,48 treatises on company law at that time drew a basicdistinction between corporations engaged in the pursuit of profit and those not soengaged.

If the wide definition proposed here is accepted, the argument that aCommonwealth power to incorporate companies is productive of confusion hasmuch less force than would otherwise appear. The legal result of a companyformed under Commonwealth law leaving its sphere would still remain to beworked out. However, if the maintenance of trading or financial objects wasenough to keep a company within the scope of s 51(xx), the formalabandonment of those objects would at least provide an obvious signal that thepoint of departure had been reached. There would still be complexities involved;but it could be convincingly argued that these were no greater than thoseproduced by a cooperative scheme of regulation involving the Commonwealthand the States.

There is, as Deane] also pointed out, a "more complete answer to theargument of inconvenience".

It is that, while that consideration might well be seen by the Parliament ascalling for restraint in the exercise of the legislative power, it does not provideany legal justification for denying the generality of a plenary grant oflegislative power with respect to the designated class of corporation.49

It should be pointed out that the majority explicitly refrained from relying onthe argument of inconvenience, and expressed it not as relevant in itself but asevidence of the supposed intentions of the drafters of the provision.50 As such itsidesteps Deane ]'s argument However, the supposed intentions of the foundersare not a sound basis for interpreting the Constitution (see infra). The argumentas put by the majority is therefore hardly compelling, and its significance isfurther reduced if the interpretation of "trading and financial" suggested above isadopted.

3 "FORMED WITHIN THE LIMITS OF THE COMMONWEALTH"

If there is nothing in the expression "trading and financial" to prevent theCommonwealth legislating for the incorporation of companies, the next questionis whether the expression "formed within the limits of the Commonwealth"creates such a barrier. The majority in the Corporations case thought that it did.

A "Formed Corporations"The Commonwealth argued that the expression served only to distinguish

domestic trading and financial corporations from foreign corporations.51 Adistinction between foreign and domestic corporations is necessary in s 51(xx)because of the requirement that domestic corporations be of a trading or financial

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(1990) 169 CLR 482, 511-512. See also infra text at nn 95-118.Ibid 512.Ibid 503.This argument had been put by M Crommelin and G Evans, "Explorations andAdventures with Commonwealth Powers" in G Evans (00), Labor and the Constitution1972-1975 (1977) 24, 34 and Sir Maurice Byers, supra n 45, 90-91.


kind. The logical way to make this distinction is by reference to place offormation. The majority responded:

The distinction based on the place of formation is obvious, but the basis of thedistinction is formation. The word 'formed' is a past participle used adjectivally,and the participial phrase 'formed within the limits of the Commonwealth' isused to describe corporations which have been or shall have been created inAustralia. (Clearly enough, the phrase is used to describe corporations formedafter as well as those formed before federation.) The subject of a valid law isrestricted by that phrase to corporations which have undergone or shall haveundergone the process of formation in the past, present or future. That is to say,the power is one with respect to 'formed corporations'.52

The link between this proposition and the one immediately following, namelythat the process of incorporation is thus excluded from the reach of the power,requires, with respect, more than mere assertion. Given the wide import of thewords "with respect to" in s 51, it is not at all clear that a law directed at theformation of corporations is not a law "with respect to" "formed corporations". Itmight be argued that incorporation lay in the "incidental area" of the power, asdoes production to trade and commerce;53 but it is submitted that the regulationof how and in what form corporations come into existence bears sufficientrelation to the conduct of those corporations for such an argument not to benecessary.

It is arguable that a law regulating the circumstances in which, methods bywhich and forms in which corporations are created - indeed a law which by itsoperation forms corporations - operates quite directly on "formed corporations"and is thus a law with respect to them. Emphasising or reading in the word"formed" adds nothing, as a law governing the creation of corporations would inany case only be characterised as a law "with respect to corporations" byreference to the results of the process of formation: characterisation of the lawcreating the corporation proceeds retrospectively, as it were, from the formedcorporation. For the process of incorporation to be excluded fromCommonwealth power a further, more detailed limitation on the subject-matterof s 51(xx) must be inferred.

Deane J may have been alluding to this point when he objected that themajority position

... fails to distinguish between the abstract subject-matter of the legislativepower and concrete instances of that subject-matter.54

He compared-s 51(xx) to the legislative power with respect to lighthouses and tothe hypothetical example of a power with respect to locally manufactured motorvehicles, arguing that the majority position was equivalent to holding that a lawgoverning the erection of lighthouses or the local manufacture of motor vehicleswas invalid. While the individual lighthouse or vehicle does not exist at themoment of operation of such a law, a law governing its creation is obviously alaw with respect to lighthouses or motor vehicles as the case may be.

There is, however, a significant difference between a law governing theerection of lighthouses and the sections of the Corporations Act which were at

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(1990) 169 CLR 482, 498.Cf eg Grannall v Marriclcville Margarine Pty Ltd (1955) 93 CLR 55, 71; L Zines,su.pra n 11, 33.(1990) 169 CLR 482, 50S.


issue. Like all traditional Companies Acts, the Corporations Act did not simplygovern the incorporation of companies. Its provisions, if valid, would effect thatincorporation.ss It is registration under the applicable Act that makes a companya company: unlike a lighthouse, which has a physical presence and an acceptedidentity independent of its legal status, a company has no existence as such apartfrom that conferred by operation of the Act.s6 Allowing the Commonwealth apower to incorporate companies would thus amount to allowing it to create thesubject-matter of its power.

SucQ an ability would have similarities to the facility claimed by theCommonwealth, but denied by the Court, in Australian Communist Party vCommonwealth;57 namely, to recite itself into power by declaring a state ofaffairs to exist which would give it power to legislate. In that case the Courtheld that the determination of "constitutional facts" - facts upon whoseexistence depended the ability to legislate - must be for it to determine.s8 It isarguable that to allow the Commonwealth to incorporate companies would becontrary to the doctrine established in the Communist Party case, since thepower to create trading and financial corporations and the power to say what is atrading or financial corporation are one. A Commonwealth Act could then make,say, a family or a string quartet into a trading or financial corporation andproceed to regulate all aspects of its conduct.

The answer to this argument is that a power to incorporate companies wouldonly be a power to incorporate companies in the accepted sense of that tenn. Justas the Court can recognise a lighthouse for the purpose of determining whether alaw is one with respect to lighthouses,s9 it can tell a trading or financialcorporation when it sees one. It would thus be able to determine whether a lawincorporating bodies claimed to be trading or financial corporations was really alaw with respect to such corporations. A useful comparison is with the powerregarding invalid and old age pensions in s 51(xxiii). This power obviouslyincludes the ability to create its subject-matter: it cannot be used to create newvarieties of rights labelled as invalid and old age pensions because the Court iscapable of determining, according to the accepted meanings of those terms, whatis an invalid or old age pension. Similar comparisons could be made with thepower over copyrights, designs and trade marks in s 51(xviii).

To sum up, it is suggested that a law applying to the process of incorporationmay be able to be characterised as a law with respect to existing or formedcorporations. To argue the contrary is, arguably, not merely to restrict thesubject-matter of the power but to imply a restriction as to how laws may applyto that subject-matter, a position which would run contrary to modem principlesof interpretation.

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Corporations Act s 123(1). Cf Companies Code s 35(4).Isaacs J was clearly influenced by this consideration in Huddart, Parur & Co Pty LtdY Moorehead: (1909) 8 CLR 330. 394. However. he did not explain how it affectedhis reasoning. Similar concern. without explanation. can be found in W HarrisonMoore. The Constitution of the Commonwealth of Australia (2nd ed 1910) 470. andin a one-liner from the majority in the Corporation.s case: (1990) 169 CLR 482.498.(1951) 83 CLR 1.See eg (1951) 83 CLR 1. 258 per Fullagar I; R v Portus; ex parte McNeil (1961)105 CLR 537. 540-541.C/Communist Party case (1951) 83 CLR 1. 258.


Limiting the power to "formed corporations" would thus have no effect unlessthat expression is taken to mean that a valid law under s 51(xx) may only applyto a corporation which is in existence at the moment the law begins to operateon it. The power is thus one to make laws with respect to "corporations whichhave been formed before the laws made under this power begin to operate onthem" (which makes laws made under the power part of the definition of itssubject-matter, thus introducing an element of circularity), or perhaps"corporations formed by State law or by Commonwealth laws made underpowers other than this one". A reservation from the power such as this (theequivalent of "corporations, but not their incorporation") might be expected to bespelt out in the Constitution: importing it arguably amounts to implyingunwarranted restrictions on the power.

B TelnporalSignijlcanceThis leads to the second possible objection to the majority view, which is that

the expression "formed within the limits of the Commonwealth" does not have atemporal aspect and should not be seen as limiting the subject-matter ofs 51(xx) to existing or "formed" corporations. In this vein Deane J argued that

[i]n the context of the use of the phrase 'formed within the limits of theCommonwealth' in contradistinction to 'foreign', the word 'formed' is properlyto be understood as representing a use of the past participle as part of anadjectival phrase which is without temporal significance.60

In support of this proposition he cited the dictum of Stephen J in Mikasa(NSW) Pty Ltd v Festival Stores61 that the use of the past participle in thisdescriptive way is "common enough" and "is not the past tense ..., it is neutralin temporal meaning and applies equally to the future as to the past". Thisposition was also adopted by Murphy J in Kathleen Investlnents (Australia) Ltdv Australian Atolnic Energy COlnlnission.62

If the argument outlined above that a law governing incorporation isnevertheless a law with respect to "formed corporations" is accepted, the questionwhether "fonned" has a temporal aspect does not need to be answered for presentpurposes. If, however, that argument is not accepted, the question whether"formed" has a temporal aspect becomes crucial. Either corporations yet to beformed are within the subject-matter of the power or they are not. Neitherconclusion, it is submitted, is compelled by the words of the grant of poweritself: both the majority view and that of Deane J may reasonably be derivedtherefrom.63 Before falling back on the injunction to interpret the powerliberally, it is necessary to look further afield for guidance.

4 OTHER WORDS OF THE CONSTITUTION

A Foreign CorporationsOne argument raised against the inclusion in s 51(xx) of a power to

incorporate companies is based on the presence in the same paragraph of the

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(1990) 169 CLR 482, 506.(1972) 127 CLR 617, 661.(1977) 139 CLR 117, 159.Eg M Crommelin and G Evans, supra n 51,34.


power to make laws with respect to foreign corporations.64 The majority in theCorporations case summarised the argument thus:

Obviously the legislative power of the Commonwealth could not embrace thecreation of foreign corporations and ... if a distinction was intended between thepower to legislate with respect to foreign corporations and the power tolegislate with respect to trading or fmancial corporations, express words were tobe expected.6S

There are, it is submitted, two reasons why this argument should not beaccepted.

The fust is that the limitations on the Commonwealth's power over foreigncorporations are external to s 51(xx) and therefore not a sound basis for buildinglimitations into that paragraph. Since the adoption of the Statute of Westminsterit has been clear that the Commonwealth Parliament has had at least some extraterritorial legislative power over the subject-matters entrusted to it.66 A narrowview of the Statute of Westminster would hold that the Commonwealth couldnot legislate for the incorporation of foreign corporations because such a lawwould not have a sufficient connection with Australia: it would not be a law forthe peace, order and good government of the Commonwealth.67 On a broader(and, it is submitted, correct) view,68 the Commonwealth may pass any law itlikes with respect to foreign corporations, although it may well beunenforceable. On either view the limitation on legislative power does not derivefrom the distribution of powers in the Constitution. There are many otherpractical limitations on Commonwealth power. For example, theCommonwealth cannot effectively control the sale after export of goods exportedfrom Australia, the manufacture of goods imported into Australia or the handlingof goods in foreign ports; but it has never been argued that the trade andcommerce power therefore does not allow the Commonwealth to controlequivalent steps in trade between the States. Once this point is grasped,comparison with the power with respect to foreign corporations actuallysuggests a wider reading of the power with respect to domestic corporationsrather than a narrower one.

The second reason, outlined by Deane], rejects the contention that theCommonwealth cannot make laws governing the incorporation of foreigncorporations. Incorporation, he pointed out, "means the acquisition or conferralof corporate personality under the law."69 While comity among nations mightrestrict the scope for law-making, the conferral of corporate personality underAustralian law on foreign corporations is "patently" a matter for local law.

That being so, it appears to me to be plain that par. (xx)'s grant of legislativepower with respect to foreign corporations cannot properly be confined toexclude the power to make laws derming the circumstances and establishing the

64

6S66

67

68

69

See eg Huddart, Parlur & Co Pty Ltd v Moorehead (1909) 8 CLR 330. 362 perBarton I.(1990) 169 CLR 482. 498-499.Statute of Westminster 1931 s 3; Statute of Westminster Adoption Act 1942 s 3.R v Foster; ex parte Eastern and Australian Steamship Co Ltd (1959) 103 CLR 256.285 per Taylor I; 300 per Menzies I.(1959) 103 CLR 256. 306 per Windeyer I. For discussion see L Zines. "Nationhoodand the powers of the Commonwealth" in L Zincs (cd) ComlMntaries on theAustralian Constitution (1977) 1. 44-45.(1990) 169 CLR 482. 504-505.


procedures under and by which artificial entities invested with corporatepersonality under other systems of law may acquire or enjoy such personalityunder the law of this country.70

The incorporation of foreign corporations is, in that sense, withinCommonwealth power under s 51(xx). The absence of express wordsdistinguishing the powers over foreign and domestic corporations thus tends, ifanything, to the conclusion that the incorporation of domestic trading andfinancial corporations is within Commonwealth power.

B Power With Respect to BankingAnother argument raised against a Commonwealth power to incorporate

companies proceeds by analogy with s 51(xiii), which confers power to makelaws with respect to "Banking, ... also ... the incorporation of banks". Theexpress inclusion of a power of incorporation in s 51(xiii) and the lack of suchexpress provision in s 51(xx) suggests, the argument runs, that the latter powerdoes not include a power of incorporation.71

There are, however, other differences between s 51(xiii) and s 51(xx). Section51(xiii) is a power with respect to an activity, and it is doubtful whether itwould include the power to incorporate banks were it not for its expressinclusion. Section 51(xx), on the other hand, is a power with respect to persons,(probably) "plenary with respect to the subjects mentioned". A power withrespect to corporations, simpliciter, would clearly include the power ofincorporation aDd it requires clear additional definition to remove it. It shouldalso be noted that many other powers conferred in s 51 include power to createcorporations despite the absence of express mention of such power.72 It issubmitted, then, that the argument against the Commonwealth's power tolegislate for the incorporation of companies gains little weight fromcomparisons with s 51(xiii).

5 PRECEDENT AND HISTORY

The majority in the Corporations case argued that "precedent and history"supported its conclusion.73 It is hence necessary to examine, fust, the weight ofprior judicial dicta on the question whether the Commonwealth may legislate forthe incorporation of companies under s 51(xx), considered from the point ofview of precedent rather than the persuasive power of their arguments, andsecondly, the assistance to be gained from the successive drafts of s 51(xx) andtheir discussion in the Convention debates.

A PrecedentThe extent of the corporations power was fust considered in Huddart, Parker &

Co Pty Ltd v Moorehead,74 in which the five members of the Bench agreed thats 51(xx) did not give the Commonwealth the power to control the incorporation

7071

72

7374

Ibid 50S.HuddlJrt, Parleer & Co Pty Ltd v MooreMad (1909) 8 CLR 330, 363 per Barton I;393 per Isaacs J; Corporations case (1990) 169 CLR 482, 499.(1990) 169 CLR 482, 508 per Deane J. See eg Australian National Airways Ply LtdY Commonwealth (1945) 71 CLR 29, 58.(1990) 169 CLR 482, 498.(1909) 8 CLR 330.


of companies.7S Huddart, Parker must be treated with caution because themajority (Griffith CJ, Barton and O'Connor JJ) decided the case on the basis ofthe reserved powers doctrine which involved the interpretation of Commonwealthpowers according to assumptions that certain powers were reserved to the States:this doctrine was later "exploded" by the Engineers' case,76 and the decision inHuddart, Parker was expressly and unanimously disapproved on that basis inStrickland v Rocla Concrete Pipes Ltd (the Concrete Pipes case).77

The majority in the Corporations case sought to use Huddart, Parker asauthority by arguing that the views expressed in that case on the question of thepower to legislate for the creation of corporations were reached "by reference topurely textual considerations, quite apart from the now discarded doctrine",78pointing out that the minority (Isaacs and Higgins JJ) took a different view onthe reserved powers doctrine but not on the incorporation point. With respect,Huddart, Parker cannot be revived on this basis.

Companies Act matters were within the traditional legislative purview of theStates and would seem prime candidates for reservation under the reserve powersdoctrine. It is therefore difficult to avoid the conclusion that the views of themajority in Huddart, Parker on the scope of the power were contaminated by thatdoctrine. This impression is reinforced by the words of Griffith CJ, whoexpressed the view that, but for the supposed reserved powers, s 51(xx) wouldenable the Commonwealth to make any law in the form "no trading corporationformed within the limits of the Commonwealth shall ...". He describedformation as "one of the matters left to the States" and opined that "formedwithin the limits of the Commonwealth" meant formed under State laws.79

Higgins J decided the case on the equally discredited basis that the powersunder s 51 were mutually exclusive and must be construed so as to avoidoverlap.80 This position does not itself dictate a conclusion on the questionwhether s 51(xx) extends to the creation of corporations. His assertion that thepower does not so extend may therefore be separated from the various heresiespropounded in the case.

The judgment of Isaacs J was similarly untainted by fundamental heresy.However, his conclusion on the question of incorporation was clearly influencedby his view that s 51(xx) did not extend to regulation of the internal affairs ofcorporations (a view which, it was argued above, is incorrect). His view standswith that of Higgins J as very weak authority for the view that s 51(xx) doesnot extend to the incorporation of companies. This authority is further weakenedby the fact that the question of incorporation was not at issue. All of the dicta inHuddart, Parker on the question of incorporation are strictly obiter.

75

76

77

7879

80

Ibid 348-349 per Griffith CI; 362 per Barton I; 369-371 per O'Connor I; 393-394per Isaacs I; 412 per Higgins I.Amalgamated Society of Engineers v Adelaide Steamship Co Lid (1920) 28 CLR 129.The reference to instantaneous combustion was used by Barwick CI in StricJcland vRocla Concrete Pipes Lid (1971) 124 CLR 468, 485.(1971) 124 CLR 468, 484-485 per Barwick CI (with whom McTiernan I agreed onthis point); 507 per Menzies J; 512 per Windeyer I; 513 per Owen J; at 515 perWalsh J; 522-524 per Gibbs I.(1990) 169 CLR 482, 499.(1909) 8 CLR 330, 348-349. See also the Concrete Pipes case (1971) 124 CI.R 468,488 per Barwick CI.Ibid 410.


The cases of Australian National Airways Pty Ltd v Commonwealth81 andBank ofNew South Wales v Commonwealth (the Bank Nationalisation case).82also contain comments to the effect that the Commonwealth may not control thecreation of corporations under s 51(xx). These pronouncements also are notsupported by detailed argument and are not part of the reasoning in those cases.Latham CJ in the former case83 and Starke J in the Iatter84 appeared simply tobase the proposition on the supposed authority of the dicta in Huddart, Parker.Fullagar J, sitting as a single judge, later (again, obiter) adopted a similarposition on the authority of Huddart, Parker and the Bank Nationalisation case.85

In subsequent cases the Court has become less willing to pronounce onmatters which do not require resolution.86 It is true, as the majority said,87 thatthe judgment of Barwick CJ in the Concrete Pipes case did not cast doubt on theproposition that s 51(xx) did not include the power to legislate for the formationof companies. However, it is also true that he was not called upon so to do; andhis failure to challenge (or, it might be added, support) that proposition does notadd much weight to the majority's argument. He did describe the attempt to"decide at one blow the full ambit of a constitutional power" as one of the"fundamental errors" into which the Court in Huddart, Parker had been led by thereserve powers doctrine.88 A notable exception to the modem reticence wasMurphy J, who held that s 51(xx) allowed the Commonwealth to "make lawscovering all internal and external relations" of trading and fmancial corporations,including their creation and dissolution.89

The weight of authority, such as it is, is thus in favour of the view thats 51(xx) does not confer on the Commonwealth the power to legislate for thecreation of corporations. However, even if the Court considered itself bound byits previous decisions, the dicta noted above would hardly compel a decision inthose terms. Nor is a conclusion on the question of the formation of companiesdictated by the line of reasoning adopted in any of the previous cases.

B HistoryIt was argued by the majority that "the history of s. 51(xx) confmns that the

language of the paragraph was not directed towards the subject ofincorporation."90 This argument may be considered in two parts: first, inferencesderived from the successive drafts of the paragraph; and secondly, the debate onthose drafts at the various Conventions.

8182

838485

86

878889

90

(1945) 71 CLR 29.(1948) 76 CLR 1, 202 per Latham CI; 255 per Rich and Williams II; 304 perStarke I. The point was not discussed in the judgment of the Privy Council onappeal «1949) 79 CLR 497).(1945) 71 CLR 29, 57.(1948) 76 CLR 1, 304.Insurance Commissioner v Associated Dominions Assurance Society Ply Ltd (1953)89 CLR 78, 86.Eg the Concrete Pipes case (1971) 124 CLR 468, 490 per Barwick CI;Commonwealth v Tasmania (1983) 158 CLR 1, 241 per Brennan J; 272 perDeane I; 316 per Dawson I.(1990) 169 CLR 482, 501.(1971) 124 CLR 468, 490.Fontana Films (1982) 150 CLR 169, 212. See also Kathleen Investments (Australia)Ltd v Australian Atomic Energy Commission (1977) 139 CLR 117, 159.(1990) 169 CLR 482, 501.


Clause 52 of the draft Bill presented to the Sydney Convention in 1891contained a power to make laws with respect to "(19) the status in thecommonwealth of foreign corporations, and of corporations formed in any stateor part of the commonwealth". At the Adelaide Convention in 1897 this hadbecome cl 5O(XXII) referring to "Foreign corporations, and trading corporationsformed in any State or part of the Commonwealth". During the Convention thewords "or financial" were added after "trading".91 The paragraph appeared in thedraft Bill at Melbourne in 1898 as s 51(xx) in its final form: the words "formedin any State or part of the Commonwealth" were replaced by "formed within thelimits of the Commonwealth".

The significance of these amendments is difficult to divine. It is probable thatthe 1891 version would not have conferred a power to incorporate companies.The 1897 draft would seem (although it is not certain) less likely than the finalversion to support an interpretation that allowed the Commonwealth toincorporate companies. If it is accepted that the 1897 formula does excludeincorporation, the question arises what should be inferred from the changes madein the final version.

Use of successive drafts to aid in the interpretation of a constitutionalprovision is based on the authority of Tasmania v Commonwealth andVictoria.92 In that case, however, Barton J highlighted the difficulties of such anexercise:

It seems to me that the argument that an expression put by an earlierConvention into a draft Constitution is to influence us towards the constructionof this Constitution which is afterwards in operation, acts as a two-edged sword,because the abandonment of the earlier provision shows if anything that the~onvention had relinquished the idea of submitting it to the people ...93

Barton J considered that the successive drafts there in question pointed to theview

not that the final provisions are to be interpreted in the same sense as thosestruck out of the draft, but that the first intentions were given up, and thatentirely different intentions, to be gathered from the language of theConstitution, are those by which we are to abide.94

It could be argued that similar reasoning applies here, and that the differencebetween the 1897 and 1898 versions shows a change in focus from the behaviourof corporations formed under State laws to the regulation of all aspects ofcorporate activity. Examination of the two versions does not disclose whetherthe amendment represented the refinement of an existing position or the adoptionof a new approach. The apparent lack of debate on the amendment suggests theformer; but this consideration itself leads to the question of the uses to whichConvention Debates and the supposed intentions of the convention participantsmay be put.

Such material as appears in the record of the Convention Debates supports thecontention that the participants did not wish to give the Commonwealth powerto incorporate companies.9s However, as Deane J remarked, "the few brief

919293949S

Convention Debates (Adelaide 1897) Vol m, 1230.(1904) 1 CLR 329, 333, 350Ibid 350-351.Ibid 351.Convention Debates (Sydney 1891) Vol I, 686; (Adelaide 1897) Vol ill, 439, 1230.


references in the Convention Debates are far from compelling".96 The issue ofincorporation was addressed directly only at Sydney in 1891, when Sir SamuelGriffith successfully opposed amendment of the draft clause so as to provide apower of incorporation.97 While Griffith carried the day, it is evident that thiswas not a question to which many delegates gave their attention at thatConvention or later ones.98 Of contemporary commentators (some of whomattended the Conventions) it is interesting to note that Quick and Garranconsidered incorporation to be beyond Commonwealth power in 1901, but SirRobert Garran had changed his mind by 1934;99 while Harrison Moore consideredin 1902 that s 51(xx) authorised the making of "a Companies Law for the wholeof the Commonwealth", but had changed his mind by 1910 following Huddart,Parker.100

The question what may be made of the references in the Convention Debates isa difficult one. Although the argument was of relatively minor importance in theCorporations case, the differences between the majority and Deane J on thisissue demonstrate differences of approach which may prove significant forconstitutional interpretation generalIy.

The legitimacy of the Convention Debates as an aid to constitutionalinterpretation was asserted in Cole v Whitfield,lOl in which the Court listed threepwposes for which they might be used. These were identifying

the contemporary meaning of the language used, the subject to which thatlanguage was directed and the nature and objectives of the movement towardsfederation from which the compact of the Constitution finally emerged.!02

Historical material was not to be usedfor the purpose of substituting for the meaning of the words used the scope andeffect-if such could be established-which the founding fathers subjectivelyintended the section to have ...103

Use of the Debates to identify the subject at which a provision was directed wasendorsed by the Court in Port McDonnell Professional Fishermen's Associationv South Australia.l04

The exclusion of the subjective intentions of the founding fathers is sound.They were not the legislators who brought the Constitution into effect: that titlebelongs to the Imperial Parliament or the Australian people. However, some ofthe uses for historical material approved in Cole v Whitfield are, with respect,not really distinguishable from the project of effectuating the founders'intentions. The "subject to which that language was directed" must be eitheranother way of putting "the contemporary meaning of the language" or a

96 (1990) 169 CLR 482, 511.97 Convention Debates (Sydney 1891) Vol I, 686.98 This view is echoed by the Report of the Joint Committee on Constitutional Review

(1959) 109 which opined that "it is uncertain what the founders intended".99 I Quick and R R Garran, The Annotated Constitution of the Australian

Commonwealth (1901) 607; Sir Robert Garran, "Memoranda on ConstitutionalQuestions" in Commonwealth Parliamentary Papers 1934-1937, Vol IT, 73.

100 W H Moore, The Constitution of the Commonwealth of Australia (1902) 148; ibid(2nd ed 1910) 471-473.

101 (1988) 165 CLR 360.102 Ibid 385.103 Id104 (1989) 168 CLR 340, 376.


summation of what the founders thought they were doing: in the latter sense itclearly equals the intentions of the founders. The "objectives of the movementtowards federation" are, frrst, only as relevant as the intentions of the founders(since the "movement", if it could be defined, did not enact the Constitution) andsecondly not evidenced except in the form of the intentions of the movement'sarticulate supporters. The judgment in Cole \1 Whitfield itself slips into thelanguage of "purpose" and "intention")OS

The judgment of the majority in the Corporations case does not explicitlydeny the relevance of the founders' subjective intentions, but purports to usematerial from the Debates "to establish the subject to which the paragraph wasdirected.... "106 The material is not used to show what was understood byparticular expressions whose meanings may have changed or faded. It is usedonly to show what power participants in the Debates thought the paragraphshould confer. The discussion concludes:

There is thus no ground for thinking that s.51(xx) was framed with theintention of conferring upon the Commonwealth the power to provide for theincorporation of companies. Indeed, the history of the paragraph plainlyindicates that the draftsmen of the provision did not contemplate that it shouldconfer any power other than in respect of corporations already formed.107

Had this consideration been decisive in the majority's reasoning it would, it issubmitted, have amounted to substituting the supposed intentions of thefounders for the words of the provision.

Deane J took a very different view of the proper role of historical material:The answer to [the] question must, of course, be found in the words of theConstitution. It is those words - and those words alone - which constitute thecompact made between the people of this country when ... they 'agreed to unitein one indissoluble Federal Commonwealth'. If the words of s. 51(xx),construed in context in accordance with settled principle, extend to authorize themaking of such laws, it is simply not to the point that some one or more of thechanging participants in Convention Committees or Debates or someparliamentarian, civil servant or draftsman on another side of the world intendedor understood that the words of the national compact would bear some differentor narrower meaning. lOS

[I]t is not permissible to constrict the effect of the words which were adopted bythe people as the compact of a nation by reference to the intentions orunderstanding of those who participated in or observed the ConventionDebates.109

In Brea\1ington \1 Godieman110 his Honour had expressed a view of the properuses of Convention Debates broadly similar to the formula of Cole \1 Whitfield,while pointing out that the variable standard of those Debates made them lessthan satisfactory as an aid to interpretation.111 However, as suggested above, that

lOS106107l~

1<»110111

(1988) 165 CLR 360, 391.(1990) 169 CLR 482, SOl.Ibid 502 (emphasis added).Ibid 504.Ibid 511.(1988) 169 CLR 41, 132-133.His Honour expressed similar concerns during argument in Bourke v State Bank ofNSW (No S44 of 1989) 6 March 1990, Transcript, 49-52. That case is now reported:(1990) 64 AUR 406.


formula does not withstand analysis or application. A choice must be madebetween, on the one hand, introducing the intentions of the founders intoconstitutional interpretation and, on the other, limiting the use of historicalmaterial to the specific task of divining the contemporary meanings ofexpressions. The majority appears to have adopted the former course whileDeane J would appear to favour the latter.

At a philosophical level, it might be suggested that the authors of a text,including a statute, have no role in determining what meanings it may bear: thatrole is performed by the reader (in the case of laws by the body designated as theauthoritative reader-the court charged with interpreting the statute), the texthaving acquired an existence independent of its author.112 Some modernscholarship on statutory interpretation has emphasised fundamental difficulties inbasing interpretation on supposed legislative intent.113 In relation to ordinarystatutes the Commonwealth Parliament has taken a different view,114 as has agrowing body of judicial opinion.IIS It is not possible to explore this questionhere; it suffices to reiterate that, in relation to the Constitution, the foundingfathers are not the legislators. Even if they were, the possibility must beacknowledged that they may not have envisaged the future Commonwealth beingbound by the intentions they were able to form in the 1890s.116

Deane J's view of the Constitution as a compact of the people takes thematter further, excluding the intention of the Imperial Parliament from theanalysis. Further points may also be based on the fact that the Constitution isnot an ordinary statute. The Constitution belongs to, and derives force from, notthe people who made it but the community to whose polity it gives form. It is acompact which must endure: for this reason judges have acknowledged that itmust be interpreted flexibly117 and that it is appropriate for Commonwealthpower to evolve along with areas of acknowledged national concem.t18 This isnot a process in which ghosts should be involved. Today's High Court andtoday's Australian people are the guardians of the text.

There remains the use of Convention Debates to shed light on thecontemporary meaning of expressions used in constitutional provisions. This, itis submitted, is a different matter from invoking the intentions of the foundersand should be considered legitimate. It is settled that words in the Constitutionare to be given the meaning they possessed in 1900,119 albeit in terms of whatthe words connoted rather than what they denoted (so that, for example,

112

113

114115

116

117

118

119

For a much more sophisticated but somewhat difficult exposition of this position ina context far removed from constitutional law see R Barthes, "The Death of theAuthor" in Barthes, lmage-Music-Text (1977).Eg R Dworkin, Law's Empire (1986) Chs 9-10; R A Posner, "Legislation and itsinterpretation: a primer" (1989) 68 Nebraska Law Review 431.Acts Interpretation Act 1901 s ISAB.See D C Pearce and R S Geddes, Statutory Interpretation in Australia and New Zealand(2nd ed 1989) 33-42.Cf R Dworkin, supra n 113, 364; M Coper, "The High Court and the" World ofPolicy" (1984) 14 FL Rev 294, 296.Australian National Airways Pty Ltd v Commonwealth (1945) 71 CLR 29, 81 perDixon J.Eg Franlclin Dam (1983) IS8 CLR 1, 221 per Brennan I; Sir Anthony Mason, "TheAustralian Constitution 1901-1988" (1988) 62 AU 7S2, 7S6.Eg Attorney-General (Vic); ex rei Black v Commonwealth (1981) 146 CLR SS9,578.


"beacons" in s 51(vii) would now probably include radio and satellite navigationaids as well as lights on hills»)20 Cole v Whitfreld furnishes an example of thisuse of the Convention Debates: analysis of the Debates showed that theotherwise inscrutable term "absolutely free" in s 92 had a particular meaning inlate nineteenth century political debate which enabled the section to be construedsensibly at last. Similar analysis, however, sheds no light on the matter at issuein the Corporations case.

6 CONCLUSION

This article has argued that there are serious flaws in the reasoning of themajority in the Corporations case. One possible objection is that, if it isaccepted that "corporations formed within the limits of the Commonwealth"means "corporations which have been formed within the limits of theCommonwealth" - in short, "formed corporations" - it does not follow that alaw governing incorporation is not a law with respect to those corporations. It isa mistake to assume that "formed corporations" means corporations formed byoperation of State laws or laws made under other powers, or that putting thisconstruction on s 51(xx) means that a valid law can apply only to a corporationin existence at the moment of operation of the law.

A second objection is that it is not clear that the expression "formed withinthe limits of the Commonwealth" has the temporal element claimed by themajority. On this point the precedent and history appealed to by the majority andthe inferences sought to be drawn from the presence of other powers in theConstitution furnish little or no assistance. They do not sustain the conclusionof the majority: however, neither do they sustain the contrary conclusion ofDeane J. If this point is decisive of the extent of Commonwealth power, the factmust be faced that a decision cannot (at least with the interpretive devicescurrently available) be based on any compelling analysis.

Deane J regarded his view as supported the wide import properly to be givento the words "with respect to" in s 51 and the general principle thatconstitutional grants of power be liberally, and not narrowly or technically,construed.l21 This principle, enunciated by O'Connor J in Jumbunna Coal Mine,No Liability v Victorian Coal Miners' Association,122 and reiterated by the Courtin R v Public Vehicles Licensing Appeal Tribunal (Tas),· ex parte AustralianNational Airways Pty Ltd,123 is not in doubt. However, the manner in whichDeane J sought to deploy it is different from the roles it has previously played.

In Lansell v Lanselll24 members of the Court invoked the principle inrejecting an argument that "matrimonial causes" in s 51(xxii) should beconstrued according to the scope of matrimonial laws enacted prior tofederation.l 2S In the Bank Nationalisation case Dixon J relied on the principle toreject the proposition that "trade, commerce and intercourse" in s 92 was

1~

121112123

1214125

L Zines, supra n 17, 16.(1990) 169 CLR 482, 506.(1908) 6 CLR 309, 367-368.(1964) 113 CLR 207, 225 per Dixon CI, Kitto, Taylor, Menzies, Windeyer andOwen II.(1964) 110 CI.R 353.Ibid 363 per Kitto J; 365-366 per Taylor I; 369 per Menzies I; 370 perWindeyer I.


confined to trade in physical commodities.t 26 In R v Coldham; ex parteAustralian Social Welfare Union it was used to establish the "popular" meaningof "industrial disputes" - "disputes between employees and employers about theterms of employment and the conditions of work" - in s 51(xxxv).l27 In eachof these cases the choice before the Court was whether to use the normal,everyday meaning of an expression or to accept an argument that a narrower,specialised meaning should be adopted. There was little or no dispute about whatthe normal meaning of the term was. The choice was in each case betweeninterpretations which could be seen as shades of meaning (albeit important ones)rather than clear alternatives: the question was whether particular phenomena fellwithin a more or less established concept. In some cases the distinction drawn bythe Court between "connotation" and "denotation" was relevant, with the Courtpreferring the set of phenomena connoted by the tenn to the narrower set denotedby it in 19(0)28

In the Corporations case there was disagreement as to what was the normal,everyday meaning of the expression "corporations fonned within the limits ofthe Commonwealth". The alternative meanings were not shades of an agreedconcept but stark alternatives. It might be said that the question whether theword "formed" in s 51(xx) has temporal significance was not one of whether togive the words of the power their full ambit but one of what their ambit was.

In such a situation what Professor Zines has called an "intellectual convictionas to meaning"129 is more likely to arise than in the cases cited above. If such anintellectual conviction does not arise, the choice between clearly definedalternatives is not different in principle from one between a broader and narrowerversions of a single idea. The distance between the alternatives may vary, but inboth cases there is a choice to be made between plausible interpretations.

There is, however, a significant difference of degree. While it is difficult toobject to the use of an objective, predictable principle to resolve questions ofhow far a broadly agreed concept extends (especially when resolution is in favourof the words of the text unadulterated by technical implication), it hardly seemssatisfactory that a choice between highly polarised positions be made byreference to a kind of "fallback" principle. Observers could be forgiven forthinking that the highest court in the land should be able to do better than this.

It is not surprising, then, the majority judges denied the applicability of theprinciple,130 or that they and Deane J preferred to rely on forcefully professedconvictions as to meaning. The majority sought to bolster this conviction withanalysis of precedent and history which, it has been argued above, does not standup to scrutiny.

In the present writer's view it is very difficult to hold an intellectualconviction as to the meaning of the phrase "formed within the limits of theCommonwealth" sufficiently strongly to base a decision on it. Some better basisfor a decision is needed. This might be found in the principle of liberalinterpretation invoked by Deane J. If that principle is not sufficient, a basis for

126 (1948) 76 CLR 1, 380-382.171 (1983) 153 CLR 297, 312-314.128 Eg Lansell v Lansell (1964) 110 CLR 353, 363 per Kitto 1; 365-366 per Taylor 1.

See also R v Judges of the Federal Court (1979) 143 CLR 190, 261 per Mason 1.129 L Zines, supra n 17, 19.130 (1990) 169 CLR 482, 498.


decision must be found in an admission that the judges are operating within whatProfessor Stone called "leeways of choice" ,131 together with an open andarticulate mode of exercising that choice.

Professor Zines has suggested that where there is room for a difference ofopinion "the advantage or otherwise of the matter being under federal controlought to be the deciding factor and ... the court should articulate this reason."132The analysis above suggests that the validity of the Corporations Act was anappropriate question for this kind of decision. This would not be easy: thepractical complexities, noted above, of the Commonwealth exercising a power toincorporate companies would have to be weighed against the benefits of having asingle national scheme of corporate regulation. Nevertheless, when legalisticreasoning fails to provide an answer (as, it has been suggested, is the case here),the Court is still required to make a decision. A decision made on "policy"grounds by unelected judges can never be totally satisfactory, and judges havebeen understandably unwilling to couch decisions in these tenns.133 However, itis a mistake to pass off a decision based on an opinion as to what is thepreferable outcome as one based on legal reasoning: l34 this is apt to hinder thedevelopment both of policy and of law.

The methods for decision making by courts in situations where recognisedlegal methodologies do not supply an answer are largely uncharted in thiscountry,135 and this is not the place for an attempt to chart them. It is suggested,however, that the development of a set of principles by which judges could dealwith policy questions would be an important development in constitutional law.If such principles, although necessarily general, were to acquire a status similarto canons acknowledged as "legal" they might even reduce slightly the area inwhich judges feel themselves to be in the uncharted territory of "policy".

131

132133134

135

J Stone, Pr~ced~nt and Law: dynamics of common law growth (1985) passim. Seealso "Current Topics" (1990) 64 AU 235.L Zines, supra n 17, 18. See also 360-366.M Coper, supra n 116, 296-298.Eg M H McHugh, "The law-making function of the judicial process - Part ll" (1988)62 AU 116,124.For tentative beginnings see M Coper, supra n 116, 297-298; L Zines, supra n 17369-370.

1990] constitutional interpretation in the corporations...

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