New South Wales v Commonwealth (1990)

New South Wales v Commonwealth
New South Wales v Commonwealth
Court	High Court of Australia
Full case name	New South Wales, South Australia and Western Australia v The Commonwealth of Australia
Decided	8 February 1990
Citation(s)	(1990) 169 CLR 482;; [1990] HCA 2;; (1990) 90 ALR 335
Case opinions
	(6:1) Section 51(xx) of the Constitution does not permit the Commonwealth to make a law for the incorporation of trading or financial corporations nor does it permit the Commonwealth to prohibit the states from making laws with respect to the incorporation of companies. (per Mason CJ, Brennan, Dawson, Toohey, Gaudron & McHugh JJ; Deane J dissenting)
Court membership
Judge(s) sitting	Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron & McHugh JJ

Last updated April 27, 2019

New South Wales v The Commonwealth, the Incorporation Case,^[1] was a decision handed down in the High Court of Australia on 8 February 1990 concerning the corporations power in s51(xx) of the Commonwealth Constitution. The states of New South Wales, South Australia and Western Australia brought an application seeking a declaration as to the validity of certain aspects of the Corporations Act 1989 (Cth).

The High Court of Australia is the supreme court in the Australian court hierarchy and the final court of appeal in Australia. It has both original and appellate jurisdiction, the power of judicial review over laws passed by the Parliament of Australia and the parliaments of the states, and the ability to interpret the Constitution of Australia and thereby shape the development of federalism in Australia.

The Constitution of Australia is the supreme law under which the government of the Commonwealth of Australia operates, including its relationship to the States of Australia. It consists of several documents. The most important is the Constitution of the Commonwealth of Australia, which is referred to as the "Constitution" in the remainder of this article. The Constitution was approved in a series of referendums held over 1898–1900 by the people of the Australian colonies, and the approved draft was enacted as a section of the Commonwealth of Australia Constitution Act 1900 (Imp), an Act of the Parliament of the United Kingdom.

New South Wales is a state on the east coast of Australia. It borders Queensland to the north, Victoria to the south, and South Australia to the west. Its coast borders the Tasman Sea to the east. The Australian Capital Territory is an enclave within the state. New South Wales' state capital is Sydney, which is also Australia's most populous city. In September 2018, the population of New South Wales was over 8 million, making it Australia's most populous state. Just under two-thirds of the state's population, 5.1 million, live in the Greater Sydney area. Inhabitants of New South Wales are referred to as New South Welshmen.

Background

History of Section 51(xx)

Section 51(xx) of the Constitution provides:

"The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to...

(xx) foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth..."

In an early High Court case, Huddart, Parker & Co Ltd v Moorehead ,^[2] the corporations power had been construed extremely narrowly, mostly through adherence to the doctrine of reserved state powers which was later abandoned in the Engineers' case.^[3] The five justices in Huddart, Parker were of the opinion that the corporations power was confined to companies already in existence and did not extend to their creation.

The reserved powers doctrine was a principle used by the inaugural High Court of Australia in the interpretation of the Constitution of Australia, that emphasised the context of the Constitution, drawing on principles of federalism, what the Court saw as the compact between the newly formed Commonwealth and the former colonies, particularly the compromises that informed the text of the constitution. The doctrine involved a restrictive approach to the interpretation of the specific powers of the Federal Parliament to preserve the powers that were intended to be left to the States. The doctrine was challenged by the new appointments to the Court in 1906 and was ultimately abandoned by the High Court in 1920 in the Engineers' Case, replaced by an approach to interpretation that emphasised the text rather than the context of the Constitution.

Amalgamated Society of Engineers v Adelaide Steamship Co Ltd, commonly known as the Engineers case, was a landmark decision by the High Court of Australia on 31 August 1920. The immediate issue concerned the Commonwealth's power under s51(xxxv) of the Constitution but the court did not confine itself to that question, using the opportunity to roam broadly over constitutional interpretation.

However, 60 years on, the High Court declined to follow Huddart, Parker in the case of Strickland v Rocla Concrete Pipes Ltd .^[4] This was based on the fact that the decision in Huddart, Parker had relied on the now defunct theory of reserved state powers. This decision led to a significant revival in the use of the corporations power.

Strickland v Rocla Concrete Pipes Ltd, also known as the Concrete Pipes Case, is a High Court of Australia case that discusses the scope of the corporations power in section 51(xx) of the Australian Constitution. This was an important case in Australian constitutional law because it overruled the decision in the earlier case of Huddart, Parker & Co Pty Ltd v Moorehead, which held that the corporations power only extended as far as the regulation of their conduct in relation to their transactions with or affecting the public. Since this case, the Commonwealth has had at least the ability to regulate the trading activities of trading corporations, thus opening the way for an expansion in Commonwealth power.

Corporations Law in Australia

Corporations law in Australia had historically mirrored developments in English law and was mostly the concern of each separate state legislature. Thus, despite the reliance on the English framework, significant differences emerged between each state's corporations legislation.

After the Second World War it became increasingly clear that these legislative differences were creating unnecessary costs for companies operating nationally. Thus, the states and the Commonwealth co-operated in the formation of uniform national companies legislation which passed in each jurisdiction by 1962. The difficulty with this scheme was that it did not provide for uniformity in amendment of the legislation and with changes of government and policy each state's legislation once again developed on separate lines.

A second co-operative scheme was agreed to in 1978 and implemented by 1982 to overcome the defects in the first system. All laws and amendments would be agreed to by a Ministerial Council and automatically applied in each jurisdiction. This second scheme led the creation of the National Companies and Securities Commission, the forerunner to the present day Australian Securities and Investment Commission.

While an improvement on the first scheme, the 1982 scheme still presented significant difficulties mainly due to the NCSC delegating administrative functions to state commissions but retaining control of takeovers and policy. This led to funding difficulties and inefficient corporate regulation. Thus, the Commonwealth sought to take sole responsibility for corporations law in Australia.

Corporations Act 1989

Relying in the main on s51(xx) of the Constitution the Commonwealth enacted the Corporations Act 1989. Concerned with the constitutional validity of the legislation the states of New South Wales, South Australia and Western Australia sought a declaration as to the validity of the aspects of the legislation dealing with the registration and incorporation of companies.

The decision

The majority

The court split 6:1 in its decision. The majority (Mason CJ, Brennan, Dawson, Toohey, Gaudron & McHugh JJ) wrote a joint judgement in which they affirmed the view in Huddart, Parker that the corporations power was confined to making laws with respect to companies that had commenced trading and could not be interpreted so as to support laws providing for the formation of companies.

Sir Anthony Frank Mason, is an Australian judge who served as the ninth Chief Justice of Australia, in office from 1987 to 1995. He was first appointed to the High Court in 1972, having previously served on the Supreme Court of New South Wales.

Chief Justice of Australia presiding justice of the High Court of Australia

The Chief Justice of Australia is the presiding justice of the High Court of Australia and the highest-ranking judicial officer in the Commonwealth of Australia. The incumbent is Susan Kiefel, who is the first woman to hold the position.

Sir Francis Gerard Brennan,, is an Australian lawyer and jurist who served as the 10th Chief Justice of Australia. Prime Minister Malcolm Fraser appointed Brennan to the Court in 1981.

The majority placed particular reliance on two arguments. The first being the presence of the past participle adjective "formed" which, in their Honours' opinion, restricted the section to companies which had already been formed. The second argument relied on were the speeches and notes of the Constitutional Convention debates. Successive drafts of the Constitution made it clear that the section was meant to apply to already formed companies. Moreover, the question of giving the Commonwealth the power to legislate for incorporation had been raised and had produced the following response from Sir Samuel Griffith:

"There are a great number of different corporations. For instance, there are municipal, trading and charitable corporations, and these are all incorporated in different ways according to the law obtaining in different states... I think the States may be trusted to stipulate how they will incorporate companies, although we ought to have some general law in regard to their recognition."^[5]

The minority

Deane J wrote a vigorous dissenting judgment in which he said that the words of the constitution itself were authoritative, not the views expressed by the participants at the Constitutional Conventions. Deane J, in opposition to the majority of the court, considered that the wording of s51(xx) could be interpreted so as to give the Commonwealth a general power to incorporate trading and financial corporations.

Consequences

This decision had the practical effect of nullifying the intention of the Corporations Act 1989. However, not to be deterred, the Commonwealth sought the power it wanted through negotiation with the states. This process resulted in each state agreeing to pass identical registration legislation as amended from time to time and accepting the administrative control of ASIC.

To fully achieve the aim of a national scheme the Commonwealth and states entered a cross-vesting of jurisdiction agreement in which the Federal Court was vested with state jurisdiction to hear company law matters. Although this system functioned effectively for several years it was eventually brought to its knees by the High Court in Re Wakim; Ex parte McNally ,^[6] Bond v The Queen ,^[7] and R v Hughes,^[8] (2000) 171 ALR 155. These decisions precipitated further reform of the national corporation law scheme in 2001.

Related Research Articles

Section 51 of the Constitution of Australia grants legislative powers to the Australian (Commonwealth) Parliament only when subject to the constitution. When the six Australian colonies joined together in Federation in 1901, they became the original States and ceded some of their powers to the new Commonwealth Parliament. There are 39 subsections to section 51, each of which describes a "head of power" under which the Parliament has the power to make laws.

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Section 51(xx) of the Australian Constitution, is a subsection of Section 51 of the Australian Constitution that gives the Commonwealth Parliament the power to legislate with respect to "foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth". This power has become known as "the corporations power", the extent of which has been the subject of numerous judicial cases.

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References

↑ NSW v Commonwealth [1990] HCA 2 , (1990) 169 CLR 482.
↑ Huddart, Parker & Co Ltd v Moorehead [1909] HCA 36 , (1909) 8 CLR 330.
↑ Amalgamated Society of Engineers v Adelaide Steamship Co (Engineers' case) [1920] HCA 54 , (1920) 28 CLR 129.
↑ Strickland v Rocla Concrete Pipes Ltd [1971] HCA 40 , (1971) 124 CLR 468.
↑ Convention Debates (Sydney 1891) vol 1 at 686.
↑ Re Wakim; Ex parte McNally [1999] HCA 27 , (1999) 27 CLR 511.
↑ Bond v The Queen [2000] HCA 13 , (2000) 201 CLR 213.
↑ R v Hughes [2000] HCA 22 , (2000) 202 CLR 535.