New South Wales v Commonwealth (1990)
Encyclopedia
New South Wales v The Commonwealth [1990] HCA 2; (1990) 169 CLR
482; 90 ALR
355, also known as the Incorporation Case, 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).
In an early High Court case, Huddart, Parker & Co Ltd v Moorehead (1909) 8 CLR 330, the corporations power had been construed extremely narrowly, mostly through adherence to the doctrine of reserved state powers
which was later abandoned in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd. The five justices in Huddart were of the opinion that the corporations power was confined to companies already in existence and did not extend to their creation.
However, 60 years on, the High Court declined to follow Huddart in the case of Strickland v Rocla Concrete Pipes Ltd
(1971) 124 CLR 468. This was based on the fact that the decision in Huddart 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.
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 in order 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.
, Dawson
, Toohey, Gaudron
& McHugh
JJ) wrote a joint judgement in which they affirmed the view in Huddart 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.
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
:
J wrote a vigorous dissenting judgement 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.
In order 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
(1999) 163 ALR 270, Bond v The Queen
(2000) 169 ALR 607 and The Queen v Hughes (2000) 171 ALR 155. These decisions precipitated further reform of the national corporation law scheme in 2001.
Commonwealth Law Reports
The Commonwealth Law Reports are the authorised reports of decisions of the High Court of Australia. The CLR are published by the Lawbook Company, a division of Thomson Reuters...
482; 90 ALR
Australian Law Reports
The Australian Law Reports are an unauthorised series of law reports which report cases from the High Court of Australia, Federal Court of Australia and the Supreme Courts of the states and territories exercising federal jurisdiction. After each authorised series they are the most often cited...
355, also known as the Incorporation Case, was a decision handed down in the High Court of Australia
High Court of Australia
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, has the power of judicial review over laws passed by the Parliament of Australia and the parliaments of the States, and...
on 8 February 1990 concerning the corporations power in s51(xx)
Section 51(xx) of the Australian Constitution
Section 51 of the Australian Constitution, is a subsection of Section 51 of the Australian Constitution that gives the Commonwealth Parliament the right to legislate with respect to "foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth"...
of the Commonwealth Constitution
Constitution of Australia
The Constitution of Australia is the supreme law under which the Australian Commonwealth Government operates. It consists of several documents. The most important is the Constitution of the Commonwealth of Australia...
. The states of New South Wales
New South Wales
New South Wales is a state of :Australia, located in the east of the country. It is bordered by Queensland, Victoria and South Australia to the north, south and west respectively. To the east, the state is bordered by the Tasman Sea, which forms part of the Pacific Ocean. New South Wales...
, South Australia
South Australia
South Australia is a state of Australia in the southern central part of the country. It covers some of the most arid parts of the continent; with a total land area of , it is the fourth largest of Australia's six states and two territories.South Australia shares borders with all of the mainland...
and Western Australia brought an application seeking a declaration
Declaration
Declaration may refer to:* Declaration , specifies the identifier, type, and other aspects of language elements* Declaration , when the captain of a cricket team declares its innings closed...
as to the validity of certain aspects of the Corporations Act 1989 (Cth).
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 (1909) 8 CLR 330, the corporations power had been construed extremely narrowly, mostly through adherence to the doctrine of reserved state powers
Reserved State powers
The reserved country powers, also called reserved powers, is a doctrine reserved exclusively for the states, that is used in the interpretation of the Constitution of Australia. It adopted a restrictive approach to the interpretation of the specific powers of the Federal Parliament in order to...
which was later abandoned in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd. The five justices in Huddart were of the opinion that the corporations power was confined to companies already in existence and did not extend to their creation.
However, 60 years on, the High Court declined to follow Huddart in the case of Strickland v Rocla Concrete Pipes Ltd
Strickland v Rocla Concrete Pipes Ltd
Strickland v Rocla Concrete Pipes Ltd 124 CLR 468, 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 of the Australian Constitution...
(1971) 124 CLR 468. This was based on the fact that the decision in Huddart 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.
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
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
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 in order 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 Majority
The court split 6:1 in its decision. The majority (Mason CJ, BrennanGerard Brennan
Sir Francis Gerard Brennan, AC, KBE, QC , is an Australian lawyer, judge and 10th Chief Justice of Australia. He is father to Jesuit priest and lawyer Frank Brennan....
, Dawson
Daryl Dawson
Sir Daryl Michael Dawson, AC, KBE, CB Australian judge and naval officer, was a Justice of the High Court of Australia from 1982 to 1997.-Education:...
, Toohey, Gaudron
Mary Gaudron
Mary Genevieve Gaudron, AC, QC , Australian lawyer and judge, was the first female Justice of the High Court of Australia.-Youth:...
& McHugh
Michael McHugh
Michael Hudson McHugh, AC, QC is a former justice of the High Court of Australia; the highest court in the Australian court hierarchy.-Judicial Activity:...
JJ) wrote a joint judgement in which they affirmed the view in Huddart 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.
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
Samuel Griffith
Sir Samuel Walker Griffith GCMG QC, was an Australian politician, Premier of Queensland, Chief Justice of the High Court of Australia and a principal author of the Constitution of Australia.-Early life:...
:
- "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." Convention Debates (Sydney 1891) vol 1 at 686.
The Minority
DeaneWilliam Deane
Sir William Patrick Deane, AC, KBE, QC , Australian judge and the 22nd Governor-General of Australia.-Early life:William Deane was born in Melbourne, Victoria. He was educated at Catholic schools including St. Joseph's College, Hunters Hill and at the University of Sydney, where he graduated in...
J wrote a vigorous dissenting judgement 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.In order 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
Federal Court of Australia
The Federal Court of Australia is an Australian superior court of record which has jurisdiction to deal with most civil disputes governed by federal law , along with some summary criminal matters. Cases are heard at first instance by single Judges...
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
Re Wakim; Ex parte McNally
Re Wakim; Ex parte McNally was a significant case decided in the High Court of Australia on 17 June 1999. The case concerned the constitutional validity of cross-vesting of jurisdiction, in particular, the vesting of state companies law jurisdiction in the Federal Court.-Background:As part of the...
(1999) 163 ALR 270, Bond v The Queen
Bond v The Queen
Bond v The Queen [2000] HCA 13; 201 CLR 213; 169 ALR 607, was a significant case decided in the High Court of Australia regarding the power of the Commonwealth DPP to institute appeals in state courts....
(2000) 169 ALR 607 and The Queen v Hughes (2000) 171 ALR 155. These decisions precipitated further reform of the national corporation law scheme in 2001.
See also
- List of High Court of Australia cases
- Section 51(xx) of the Australian ConstitutionSection 51(xx) of the Australian ConstitutionSection 51 of the Australian Constitution, is a subsection of Section 51 of the Australian Constitution that gives the Commonwealth Parliament the right to legislate with respect to "foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth"...