Download Corporations Power s.51(xx) – Topic 4 and more Schemes and Mind Maps Finance in PDF only on Docsity! 1 Corporations Power s.51(xx) – Topic 4 The provision: s.51(xx) confers power on the Commonwealth parliament to make laws with respect to ‘Foreign corporations and trading and financial corporations formed within the limits of the Commonwealth’. As the corporations power is a non‐purposive power, the purpose/motive of X Act (Cth) is irrelevant [Tasmanian Dams Case (1983)]. First Question: is the corporation a constitutional trading of financial corporation which comes within s.51(xx)? A constitutional corporation under s51(xx) has been interpreted to include: Foreign corporations A foreign corporation is any corporation with legal corporate personality formed outside the limits of the commonwealth [The Incorporation Case (1990)]. Test for determining whether it is a constitutional corporation Adamson’s Case (1979) and State Superannuation Board (1982) underline that the current activities test is to be preferred to the dominant purpose of incorporation test in determining whether a corporation is a trading or financial for corporation for the purposes of s.51(xx). Therefore a constitutional corporation will exist where a substantial amount of its activities are trading/financial [Adamson’s Case (1979)]. o However the corporation will be considered a constitutional corporation even where trading was not its primary or dominant activity (Tasmania Dams Case) o Therefore a trading corporation whose trading activities take place so that it may carry on some other primary undertaking (which is not a trading activity) may nevertheless be a trading corporation [State Superannuation Board (1982)]. However: Where it can be shown that the trading/substantial activity is so slight and incidental to the principal activity then it will not be a constitutional corporation [Adamson’s Case (1979)]. o A Constitutional corporation will be found even where trading/financial revenues are only a small proportion of total operating revenues e.g. 18% [Quickenden (2001)]. o An important qualification ‐ in AWU v Etheridge Shire Council (2008) the Federal Court referred to Mason J’s test from Adamson’s quoted in Workchoices referring to substantial as “significantly sufficient proportion of overall activities”. Suggests some uncertainties here. o No determinative High Court authority and it is still unclear if the trading activities need to be a certain proportion. o In (AWU v Etheridge Shire Council) it was considered that the proportion is relevant but Quickendon and Metro Fire suggest otherwise. o Even where profit is earned for charitable means and not out of private gain, these will still classify as trading/financial activities [Australian Red Cross (1991)]. o The motive of the profit gained is not relevant [State Superannuation Board (1982)]. A Hydro‐Electric Commission has been held to be a “constitutional corporation” as it trades in electricity [Tasmanian Dam Case (1983)]. A governmental body may be a trading corporation (e.g. a State Superannuation Board or a Hydro‐Electric Commission) even where the trading is for the public interest. o But, activities that are in nature of public welfare and are funded by government grants are unlikely to be regarded as trade (E v Australian Red Cross; Aboriginal Legal Service of WA v Lawrence) 2 Shelf Companies (set up but not yet trading) Where a company has been set up but does not do any trading (e.g. it is a new company), you revert to the dominant purpose test (the dominant purpose for which the company was set up). I.e. the documents that set the company up including its memorandum, constitution and articles of association must be examined to determine whether the company intends to, and whether it has the legal capacity to, trade or engage in finance [Majority in Fencott v Muller (1983)] o Note: minority held that the proper test is to consider the subjective intention of the directors and all the circumstances as most corporations will have such powers as mere standards (Gibbs, Wilson, Dawson) Incorporation of Companies S.51 (xx) does not extend power to the Cth to regulate the incorporation of trading and financial corporations [The Incorporation Case (1990)] Note: o Following this case, huge pressure on States to refer the power to the Commonwealth which they eventually did – now incorporation of corporations (not confined to trading and financial corporations) is all under the Federal Jurisdiction because of referencing provision under s51(xxxvii) of the Constitution. Incidental Power Individuals In Fencott v Muller (1983): the corporations power extends to the imposition of duties on natural persons because corporations act through natural persons and also because in order for the regulation of corporations to be effective must regulate persons who participate in corporate activities. – Was incidental to main gran of power. Holding/Subsidiary Companies Never decided by the HC but conflicting views in Actors v Fontana – Murphy says ok, Stephen, Mason, Aickin says no. o Seems logical that holding companies could at least be regulated because they can influence subsidiaries – therefore the ability to regulate the subsidiaries is incidental to regulating the subsidiary. Internal Management and Industrial Relations Although no case, the minority in The Incorporation Case said it would extend (See: Murphy) – possible that could already be managed under the corporations power recognised in Tasmania Dams – ie would be for the ‘purposes of trading activities’. Question 2: Having established that the Corporation is a constitutional corporation, what activities can be regulated under s51(xx)? General Test and Principles After The Work Choices Case (2006) it is now settled that the interpretation of the corporations power as a broad plenary power (espoused by persisting minorities in Actors v Fontana, Tasmanian Dams and Re Dingjan) is to be favoured. Therefore majority of the court underlined that the corporations power extends beyond merely regulating the trading activities of constitutional corporations (as held by the majority in Strickland v Rocla (1971))