#7111 - Corporations Power Theory - Constitutional Law

• Local government entity sold electricity and electrical appliances; is it a trading corporation?

• DECISION: public authority, not a trading corporation. No clear majority on reasons, but Gibbs and Menzies JJ proposed that a trading corp is identifiable by the purpose for which it was established. Barwick CJ said the reasons was whether the corp’s predominant and characteristic activity was of trading goods and services (law followed this later).

• A player sued a club and WANFL for restricting his ability to move to another club, arguing it was against Cth restrictive trade practices.

• The legislation would apply only if the club/WANFL were trading corporations.

• DECISION: they were trading corporations. Majority held that in determining if a corporation is a trading corporation, the prime consideration is whether the corporation engages in a ‘substantial’ (Barwick CJ, Murphy J) or ‘sufficiently significant proportion’ (Mason J) of the corporation’s overall activities. Minority thought the trading activities were only incidental to the main purpose of fostering football.

• Tasmanian Hydro-Electric Commission (HEC) was a corporation established by Tas statute; responsible for generating and distributing electricity in Tasmania (supplying electricity, constructing, operating and maintaining generating plants and dams).

• DECISION: HEC was a trading corp, despite its wide semi-governmental powers, since its trade in electricity was a ‘sufficiently significant proportion’ of its overall activities.

• SSB administered Vic public servants’ superannuation fund, invested funds in housing and commercial loans and property purchases (financial activities)

• Needed to confirm that SSB was a financial corp susceptible to the Trade Practices Act 1974

• DECISION: current activities test approved; the financial activities were substantial enough to be classified as a financial corporation.

• HP and its manager were fined for refusing to answer questions relating to suspected offences under a Cth Act purporting to outlaw trade monopolies and restraints.

• HP challenged the relevant sections of the Act as being beyond power

• DECISION: the Act was invalid (4:1 Isaacs J dissenting), largely in reliance on the reserved State powers doctrine. The scope was restricted to legislation granting corporations some form of legal recognition.

• Reserved State powers doctrine rejected

• Provisions of the Trade Practices Act 1965 (Cth) which made some anti-competitive agreements subject to examination by requiring corporations to provide the particulars of the agreements to a Cth Commissioner.

• R was party to an agreement that sought to reduce competition and was charged for failing to disclose the particulars; R challenged the legislation since under Huddart Parker the Cth could not regulate purely intrastate (Queensland) trading activities

• DECISION: HCA unanimously overturned Huddart Parker. Maintaining the residual power of the States was irrelevant and the words of the CC were what was relevant. S 51(20) would at least extend to controlling restrictive trade practices, including those intrastate; however here the legislation was invalid as it attempted to encompass all corporations.

• Concerned validity of s 45D of the TPA 1974 (Cth), which prohibited a person acting in concert with another to engage in conduct hindering or preventing the supply of goods and services, by a third person, to a trading corporation, where the conduct was for the purpose of and likely to cause substantial loss to the business of the trading corporation. It was aimed at “secondary boycotts” (where trade unions pressure suppliers not to supply goods and services to a targeted trading corporation).

• Actors Equity organised a boycott of Fontana for refusing to hire only union members, convincing theatrical booking agents to stop contributing actors to Fontana, preventing it making films.

• Fontana applied for an injunction under the TPA. AE appealed arguing s 45D(1)(b)(i) was invalid for being beyond scope.

• DECISION: the section was supported by s 51(20), since a law made under it can be directed towards the activities of a natural person at least in so far as the law is protecting a trading corporation (direct legal operation). Dual characterisation says a law can be with respect to corporations and secondary boycotts. Debate on narrow (that only laws dealing with the trading activities of trading corporations and financial activities of financial corporations) and broad view of corporations power unresolved (3 judges for broad, 2 for narrow, 2 decided on narrow on the facts of the case but did not commit).

• S 10(2) of the Cth’s legislation prohibited damaging works in the listed World-Heritage forest by “foreign and trading corporations” without the consent of the Minister. These were not “trading activities” per se, therefore s 10(2) apparently relied on the broad interpretation of the scope of the corps power. However, the Cth apparently included s 10(4) in case s 10(2) was invalid; 10(4) stated that these activities were not permitted to be carried out if the activities were done “for the purposes of trading activities”. This would cater to the narrower view.

• DECISION: majority of 5:2 found s 10(4) to be valid. Accordingly, laws regulating the activities of constitutional corporations done preliminary to, preparatory to, or for the purposes of later trading activities were within the scope of the corporations power.

  • 3 judges found s 10(2) invalid, 3 found it valid (thus supporting the broad view); Brennan J did not decide as thought it only necessary to decide on 10(4). Debate on narrow v broad unresolved.

• Changes to the Workplace Relations Act 1996 (Cth) brought in a national system of IR law allowing Cth to regulate relations between employers including, inter alia, constitutional corporations, and their employees.

• The legislation was challenged since it went beyond the Cth’s IR power at s 51(35). Only the broad view could save the legislation.

• DECISION: broad view adopted. Rejected the distinctive character test which allowed regulation only of trading/financial activities of those corporations. The legislation was upheld in its entirety.

• Majority judges endorsed the object of command test. They went even further, endorsing the description of the scope of s 51 (20) given by Gaudron J in Re Pacific Coal Pty Ltd which expanded the scope of the incidental power.

‘I have no doubt that the power conferred by s 51(xx) of the Constitution extends to the regulation of the activities, functions, relationships and the business of a corporation described in that sub-section, the creation of rights, and privileges belonging to such a corporation, the imposition of obligations on it and, in respect of those matters, to the regulation of the conduct of those through whom it acts, its employees and shareholders and, also, the regulation of those whose conduct is or is capable of affecting its activities, functions, relationships or business.’

• Trade unions made vicariously liable by legislation for actions of members and officers where the actions constituted a secondary boycott. It said that the actions of employees who were members of a trade union would be deemed to be actions of the trade union itself.

• DECISION: the provision was not valid under the corps power, direct or incidental. The Cth cannot simply ‘deem’ something to be within power if it is not. If a trade union had no more connection to a secondary boycott than that its members did it, it cannot be held liable.

• S 82(1) of the TPA 1974 (Cth) allowed any person suffering a loss due to misleading or deceptive conduct by a corporation to recover the loss from any natural person involved in the deception.

• It was argued that because the power did not directly affect the rights or duties of constitutional corporations it was invalid.

• DECISION: imposition of duties on natural persons under s 51(20) is valid since corporations act through natural persons and the control of them is incidental to regulation of the corporations. 4 judges found the regulation was incidental to the regulation of corporate activities of constitutional corporations; 3 found it incidental to the trading activities of trading corporations (narrow view).

• Industrial Relations Act 1988 (Cth) gave the Cth IR Commission the power to review and vary contracts to which independent contractors were party, if the Ks were unfair, harsh or contrary to the public interest

  • The Ks to be caught by the provisions: TPA s 127C(1).

    1. Ks to which a constitutional corporation is party

    2. Ks relating to the business of a constitutional corporation (corporations did not have to be parties)

    3. Ks entered into by a constitutional corporations for the purposes of...