New South Wales v. Commonwealth: corporations and connections.

• Jurisdiction: Australia
• Date: 01 December 2007
• Author: Blackshield, Tony

[In the WorkChoices Case, the High Court held by a 5:2 majority (Kirby and Callinan JJ dissenting) that the Workplace Relations Amendment (Work Choices) Act 2005 (Cth), substantially reshaping the Workplace Relations Act 1996 (Cth), was valid. The substantive repeal of the older provisions based on s 51(xxxv) of the Constitution was a valid exercise of power under s 51(xxxv); their substantive replacement by new provisions based on s 51(xx) was a valid exercise of the latter power. The result entailed a clear rejection of the 'narrow' view of s 51(xx), and to that extent appeared to vindicate the 'wide' alternative view. However, the joint judgment did little to clarify the principles involved. This case note argues that despite the width now accorded to s 51(xx), the underlying rationale is still dependent on the need to establish a 'sufficient connection' with the business of corporations in order for legislation relying on this head of power to be valid. It also explores the possibility that the same idea of 'sufficient connection' might have been used to give stronger support to the dissident arguments against wholesale encroachment on the province of s 51(xxxv).]

CONTENTS I Introduction II Complications III Filters and Inversions IV Pacific Coal V Pidoto VI Other Matters I INTRODUCTION

The 2006 result in New South Wales v Commonwealth ('WorkChoices Case') (2) was as widely expected as the 1990 result in New South Wales v Commonwealth ('Incorporation Case') (3) had been unexpected. The decision in 1990 established that s 51(xx) of the Constitution (the 'corporations power') does not enable the Commonwealth Parliament to enact a comprehensive regime of corporations law, including control of the actual incorporation of corporations. The decision in 2006 establishes that the 'corporations power' does enable the Commonwealth Parliament to enact a comprehensive regime of industrial relations law, substantially replacing the traditional regime dependent on s 51(xxxv). The Workplace Relations Amendment (Work Choices) Act 2005 (Cth) ('WorkChoices legislation') cut a swathe through the Workplace Relations Act 1996 (Cth) leaving little more than an empty shell, which was then refilled with the new provisions based on s 51(xx). The repeal of the older provisions based on s 51(xxxv) is now upheld--uncontroversially--as itself a valid exercise of power under s 51(xxxv). (4) What remains controversial, at least at a political and emotional level, is the use of s 51(xx) to enact the new provisions.

At that political and emotional level, the dissenting judgments are passionate in protest. Callinan J deplores a reading of s 51(xx) so expansive that it utterly destroys any semblance of 'federal balance'; (5) Kirby J deplores the departure from our previous adherence 'over more than a century' to 'an industrial process that is uniquely Australian'--embodying not only 'an important part of the nation's institutional history', but a commitment to 'egalitarian and idealistic values' that have hitherto 'profoundly influenced the nature and aspirations of Australian society'. (6) Yet, however deeply we may sympathise with either or both of these protests, a jurisprudence of regret (7) is not itself a sufficient basis for constitutional argument.

On the other hand, the joint judgment of the majority (8) gives no convincing explanation of why the new regime is supported by s 51(xx). The actual decision rests solely on dicta by Gaudron J in Re Pacfic Coal Pty Ltd; Ex parte Construction, Forestry, Mining and Energy Union ('Pacific Coal') (9) (considered below); and insofar as the judgment does attempt a discussion of the principles that might inform the interpretation of s 51(xx), much of it appears to hark back to an earlier and more primitive stage of doctrinal development.

Initially, after Strickland v Rocla Concrete Pipes Ltd ('Concrete Pipes Case') (10) rescued s 51(xx) from oblivion, judicial opinion polarised between a 'broad' and a 'narrow' view of its scope--the broad view extending to any law addressed to a constitutional corporation, (11) or taking the presence of such a corporation as the trigger for its operation (so that any law in the form '[e]very corporation shall ...' or '[n]o corporation shall ...' would be valid); the narrow view taking the distinctive classes of corporations singled out for inclusion ('foreign', 'trading', 'financial') as an index to the subjects of legislation that the power would support. (12) By the time of Re Dingjan; Ex parte Wagner ('Dingjan'), (13) that dichotomy had been transcended: instead of pursuing the fruitless attempt to settle the ambit of the power definitively once and for all, most members of the Court were content to confine themselves to the immediate question of whether the provision there impugned had a 'sufficient connection' with power.

The canon of judicial parsimony underlying that approach has often been reaffirmed. (14) Indeed, the WorkChoices judgment itself effectively reaffirms such a canon, (15) and speaks at times as if the only question is one of 'sufficient connection' with a head of power. For example, it recites the standard collection of formulaic canons of characterisation attributed nowadays to Grain Pool of Western Australia v Commonwealth ('Grain Pool')--including an insistence that so long as a sufficient connection with a head of power exists, justice, wisdom and proportionality 'are matters of legislative choice'. (16) Moreover, much of the polemic that follows appears to assume that 'sufficiency of connection' is itself a self-sufficient criterion: for example, the plaintiffs are criticised for seeking to complicate it by 'an additional filter'. (17) Yet, along with all this (and no doubt in response to the plaintiffs' arguments), the main structure of the majority judgment reverts to the old dichotomous concern with a 'broad' and a 'narrow' view of s 51(xx)--now reformulated respectively as an 'object of command' test and a 'distinctive character' test--and is largely devoted to an extended refutation of the latter. Whether this means that the 'object of command' test has now prevailed will be considered below.

II COMPLICATIONS

The argument is complicated by reference to two other conceptions drawn from the decided cases. One is an attempt to confine the scope of s 51(xx) by limiting it to the regulation of activities and relationships 'external' to a corporation, as distinct from its 'internal' arrangements--a distinction proposed by Isaacs J in Huddart Parker & Co Pry Ltd v Moorehead ('Huddart Parker'), where he treated such matters as 'wages and hours' for employees as questions of 'purely internal management', (18) and hence beyond the scope of the power. The joint judgment rejects the whole distinction: the dividing line is lacking in clarity, its consequences are lacking in logic, and the whole idea of excluding legislative interference in a corporation's 'internal' affairs is an inappropriate transplant into constitutional law from the choice-of-law rules enjoining comity in the treatment of foreign companies. (19)

The second complicating factor is the test of 'discriminatory operation', originally proposed by Brennan J in Actors Equity. (20) Although Brennan J there declined to choose between the 'broad' and the 'narrow' view of s 51(xx), his approach seemed to favour the 'object of command' test, since it treated s 51(xx) as supporting any law that focused on corporate involvement as the discrimen triggering its application. Accordingly, the WorkChoices judgment initially assumes that 'on its face', the test of 'discriminatory operation' would be 'satisfied by any law which singled out constitutional corporations as the object of statutory command'. (21)

In Dingjan, however, Brennan J seemed to assimilate his test to that of 'significance'. (22) Accordingly, the plaintiffs in the WorkChoices Case adopted 'discriminatory operation' as an alternative but equivalent version of their own preferred 'distinctive character' test.

The majority judgment does not accept this equivalence. Instead, it proposes yet another interpretation, treating the test as one of 'discriminatory operation'--that is, as applying 'chiefly, perhaps only' to cases where the law applies on its face 'to constitutional corporations and to other persons indifferently', but its practical operation has a particular impact on its corporate subjects. (23) The majority reasons that if a law of this kind is brought within power under s 51(xx) by reason of its practical impact on constitutional corporations, a law applicable only to such corporations must be valid a fortiori: that is, the 'object of command' test is merely a 'logical extension' of the test proposed by Brennan J. (24)

Neither of these new explanations of what Brennan J meant by 'discrimination' seems very convincing; but the issue can be put to one side. The practical effect of the plaintiffs' explanation was that 'distinctive character' and 'discriminatory operation' became, in effect, alternative versions of the limit which they sought to impose on s 51(xx)--and, however it is expressed, the majority judges decline to impose any such limit.

III FILTERS AND INVERSIONS

The rejection of the plaintiff's argument rests partly on the objections that have always been raised against attempts to limit the regulatory possibilities permitted by s 51(xx) by relying on the adjectives 'trading', 'financial' and 'foreign': not only would this mean that different enactments relying on the one head of power would be tested by three different criteria, but the issues arising under the rubrics 'trading' and 'financial' would be different in kind from those arising under the rubric 'foreign'. The former epithets would invite attention to the activities of corporations, the latter to their 'status or origin'; (25) and there is 'no immediately evident reason for ... such disconformity'. (26)

Primarily, however, the...