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New South Wales v Commonwealth (WorkChoices Case) (2006) 231 ALR 1 Summary FACTS: Repeal of old provisions based on s 51(xxxv) were replaced by new provisions based on s 51(xx). •

Meaning of “employer” and “employee” in ss 5 and 6 of the Act o An employer was defined to include a constitutional corporation insofar as it employs or usually employs a range of individuals. o S 4 defined a constitutional corporation as a corporation to which s 51(xx) of the CC applies, including a foreign, trading or financial corporation.

Five states initiated the challenge – NSW, Vic, Qld, SA and WA, in joinder with a number of unions and peak union bodies. Tas, the NT and the ACT intervened in support. Held 5:2: that the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) (‘WCA’) was valid. The majority accepted that a direct connection between a s 51(xx) constitutional corporation and its employees would allow the use of the corporations power, and that a federal law regulating the activities, functions, relationships and the business of any constitutional corporation will be valid under s 51(xx). Therefore laws were constitutional when they controlled, regulated or governed the people through whom constitutional corporations act. Persons also external to or outside the corporation could also be the subject of the federal law where their conduct might affect the constitutional corporations in practically any way. The majority joint judgment per Gleeson CJ, Hayne, Heydon and Crennan JJ (Brennan J) The court’s decision at [55] adopted the reasoning of Gaudron J in Re Dingjan (1995) 183 CLR 323 (a very broad construction of the s 51(xx) corporations power): (1) The business activities of corporations formed within Australian signify whether they are trading or financial corporations, and the main purpose of the power to legislate with respect to foreign corporations must be directed to their business activities in Australia. (2) It follows that the power conferred by s 51(xx) extends “at the very least” to the business functions and activities of constitutional corporations and to their business relationships. (3) Once the second step is accepted, it follows that the power “also extends to the persons by and through whom they carry out those functions and activities and with whom they enter into those relationships”. o In Re Pacific Coal Pty Ltd; Ex parte Construction, Forestry, Mining and Energy Union [(2000) 203 CLR 346 at 375 Gaudron J expanded on this reasoning, saying: ▪ That the power conferred by s 51(xx) CC extends to the regulation of: • the activities, functions, relationships and the business of a corporation described in that subsection; • 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. o Thus, on an adoption of this understanding of the power, the legislative power conferred by s 51(xx) “extends to laws prescribing the industrial rights and obligations of corporations and their employees and the means by which they are to conduct their industrial relations”. o [Mere effects upon the acts, functions or relationships of corporations are sufficient for the law’s validity]

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ON CHARACTERISATION: The majority seemed to accept the main consensus in Re Dingjan; that rather than trying to determine the precise metes and bounds of the power conferred by s 51(xx), the Court, in any particular case, should simply focus on the question whether the impugned law has a “sufficient connection” with s 51(xx). This would be in accord with the current generally agreed approach to characterisation, and the joint judgment in Work Choices took care to reaffirm that approach (at [45]): o It is always necessary to construe the constitutional test and to do that “with all the generality which the words used admit” – R v Public Vehicles Licensing Appeal Tribunal (Tas); Ex parte Australian National Airways Pty Ltd (1964) 113 CLR 207 at 225-6. o The character of the law must then be determined by reference to the rights, powers, liabilities, duties and privileges which the law creates – Kartinyeri v Commonwealth (1998) 195 CLR 337 at 352-3. o The practical as well as the legal operation of the law must be examined – Re Dingjan (1995) 183 CLR 323 at 369. o If a law fairly answers the description of being a law with respect to two subject-matters, one a subject-matter within s 51 and the other not, it is valid notwithstanding there is no independent connection between the two subject-matters: Re F; ex parte F (1986) 161 CLR 376 at 388. o Finally, “if a sufficient connection with the head of power does exist, the justice and wisdom of the law, and the degree to which the means it adopts are necessary or desirable, are matters of legislative choice”: Grain Pool of Western Australia v Commonwealth (2000) 202 CLR 479 at 492.

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SUBMISSION ONE (REJECTED): Submission one was that s 51(xx) permits a making of law with respect only to its regulation of the external activities and relationships of constitutional corporations, and not to their internal relationships. o And further, that the relationship between a constitutional corporation and its employees should be classified as an internal relationship. This distinction was derived from Isaacs J’s judgment in Huddart Parker, where he had treated such matters as “[396] wages and hours” for employees as questions of “purely internal management”, and hence beyond the scope of the power.

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The majority of the Court indicated that the internal/ external distinction was not of assistance (was ‘inappropriate and unhelpful’) in addressing the issue of characterisation, and in any case the application of this distinction was not clear-cut, because: o It is based on choice of law rules. This was an inappropriate forum in which to raise choice of law issues. There is a fine line between what is internal and what is external. o This argument is based on a priori assumptions about division of power; not on terms on which federal legislative power is granted. o Such a distinction distracts attention from proper issues to be considered in the text of s 51(xx) and the ambit of the power conferred on Federal Parliament. o Essentially, this is an inappropriate and unhelpful distinction. o It distracts from the tasks of construing the constitutional text; identifying the legal and practical operation of the law; and then assessing the sufficiency of connection between the impugned law and head of power. ▪ Ie would marginalise characterisation issues. o At [31]: “By dealing with questions of employment, Isaacs J gave a very particular meaning to events and circumstances that were not external to a corporation… there seems little reason to assign relationships between the corporation and its employees to the class of “internal” relationships.” o The majority used the example of considering three ways in which a corporation could raise capital: (i) by borrowing from a bank;

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(ii) by raising debt finance from the public; or (iii) by issuing shares (either by private placement or by public issue). ‘There seems to be little reason to distinguish between the three. Yet it seems that [(i)] would be an “external” matter and issuing shares to existing shareholders would be an “internal” matter.’ SUMMARILY, the distinction of a company’s activities and relationships as “internal” or “external” is not relevant to the inquiry of whether the law is a law with respect to the corporations power. SUBMISSION TWO (REJECTED): Submission two was that it is insufficient for a law to be characterised as a law with respect to constitutional corporations simply because the law confers rights or imposes duties upon corporations. The complainants submitted that the preferred test was instead the distinctive character test: i. The “distinctive character test” (narrow view): ▪ A positive test. ▪ A law will be valid under s 51(xx) if the nature of the corporation (as a foreign, trading or financial corporation) is significant as an element in the nature or character of the laws (as a law with respect to the corporations power). The plaintiffs drew on Brennan J’s arguments in the Actors’ Equity case, and adopted “discriminatory operation” as an alternative but equivalent version of their own preferred “distinctive character” test. This would require that to be valid, the law demonstrate a particular significance to the corporation to distinguish it from other laws. The alternative test available was the object of command test: ii. The “object of command test” (wide view): that a constitutional corporation is an ‘object of command’ of a law, permitting or prohibiting a trading or financial corporation from engaging in conduct or forming relations ▪ Cf Murphy J in Fontana Films at CLR 212 and Griffith CJ in Huddart Parker at CLR 348. SUMMARY: Rejected the distinctive character test; rejected the idea that the law could not be a law with respect to constitutional corporations unless more was demonstrated than that the law was addressed to such corporations. BUT, did not fully endorse the object of command test. DETAIL: Difficulties with the P’s arguments in favour of the “distinctive character” test: 1. The arguments were based upon some statements of the Court in other judgments which, when read in their context, constituted no more than an explicit limitation upon what was being decided in the particular case. For example: • Eg Barwick CJ in the Concrete Pipes Case (1971) 124 CLR 468 commented that the result in that case did not necessarily or logically mean “[489] that any law which in the range of its command or prohibition includes foreign corporations or trading or financial corporations formed within the limits of the Commonwealth is necessarily a law with respect to the subject matter of s 51(xx)”. • Fontana Films case – Gibbs CJ finding that the secondary boycott provisions of the TPA were valid, but had to resort to the incidental aspect of the power to find this validity. So there had to be some additional supplementary element. HC rejected this argument, citing with approval Mason J’s much broader-ranging approach to Ch’n and the corps power.

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Tasmanian Dam case – ptfs had said we should accept the conclusions of Dawson J (dissenting) who said that the law dealing with corporations must show some additional element; it must direct its command to the object of the power and a mere with respect to Ch’n would be insufficient. The HC rejected this submission. Re Dingjan: in this case 4:3, narrow view so that the indirect r/ship with the const’l corporation. Not a contract with the const’l corporation but could potentially affect the operation of the const’l corporation. The HC found s 127C(1)(b) was in fact insufficiently connected with the corps power. The minority – Mason CJ, Deane and Gaudron JJ would have found some form of sufficient connection even though the contract did not involve the corporation directly itself (b/t two non-corporate bodies). HCA in present case cites with approval, and adopts Gaudron J’s dissenting view in Re Dingjan

2. Federal balance argument. The P’s submission that a broad reading of s 51(xx) would disturb a proper or intended “federal balance” is based on flawed assumptions: • A broad reading may have such consequence, but: - “[46] consideration of the legal or practical operation of the law in question” should precede the consideration of arguments against a sufficient connection, and - presuppositions about “federal balance” should not take priority over the process of construing the constitutional text. 3. As to the test of discriminatory operation: Based on Brennan J’s approach in Actors’ Equity, which required ‘discriminatory operation’, the P’s submitted that for a law to be valid under s 51(xx) it had to demonstrate a particular significance to the corporation to distinguish it from other laws. The HC rejected this argument. They said that Brennan J’s requirement of discriminatory operation was actually requiring only that the law focus on corporate involvement. The HC then proposed a new interpretation, treating the test as one of “discriminatory operation”: A law is valid under s 51(xx) if it is “intended to apply chiefly, perhaps only” to cases where the law applies on its face “to constitutional corporations and other persons indifferently”, but its practical operation has a particular impact on its corporate subjects (at [55]). They extended the application of this interpretation: If a law of this kind was 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 was merely “[56] the logical extension” of the test proposed by Brennan J. ▪

B&W: Neither of these new explanations (the HC’s new one, and the P’s one) of what Brennan J meant by “discrimination” seems very convincing…

4. As to the test of discriminatory character: This test is premised largely on “statements made in cases where laws in question have concerned the trading activities of trading corporations”. The argument is that “the adjectives “foreign”, “trading” and “financial” are the considerations on which the power turns. “Trading” and “financial” are said to refer to a corporation’s activities; “foreign” refers to a corporation’s status or origin – see [46]. This argument is flawed for a number of reasons: A. Produces awkward results The federal Parliament’s power with respect to Australian corporations would focus upon their activities, but the power with respect to foreign corporations focus only upon their status B. The test is proposed by the Ps as an additional filter [46]&[60] through which it is said the law must pass if it is to be regarded as having a sufficient connection with s

5 51(xx). This is a contention that, again, necessarily invokes the notions of federal balance (and should be rejected). Further, the HC held the test as inherently unsatisfactory. C. The approach would have particular problems in its application to foreign corporations. The power to legislate with respect to foreign corporations would be very narrow if the law must focus upon the status of the corporation. There is no immediately evident reason for there to be such a disconformity between the ambit of legislative power with respect to Australian corporations and the ambit of legislative power with respect to foreign corporations…. D. Fundamentally, s 51(xx) is “a persons power” – it is not “a power with respect to a function of government, a field of activity or a class of relationships” [New South Wales v Commonwealth (Incorporation Case) (1990) 169 CLR 482 at 497]. Despite its potentially broad reach, it should not be restrained on the basis of preserving the federal balance – see Gibbs CJ in Fontana Films (compare though, Dawson in Re Dingjan at CLR 345). E. [57] It was argued that it would distort constitutional arrangements to hold a law valid whose object of command is only constitutional corporations is a valid law (see Huddart Parker [8 CLR at 409], Higgins J). It was said these effects would damage the social or political unity of the parallel systems of law that deal with constitutional corporations on one hand, and all other persons on the other. They are not strong arguments: • The s 51 heads of legislative power are to be construed with “all the generality which words admit” • S 51(xx), like other powers, should not be given a meaning narrowed by an apprehension of extreme examples and distorting possibilities of its application to future laws. • While there may be room for debate about whether the particular examples proffered by Higgins J are properly to be characterised as extreme examples or distorting possibilities, what is plain is that, [as per Professor Zines]: o It is clear that any power of the Commonwealth, on the most restricted or the widest interpretation, might, if the federal Parliament were so inclined, produce results which, when viewed together with State laws, are inefficient, socially bad or downright ridiculous… That does not mean that the powers concerned should be construed restrictively so as to prevent those results. The object of the power, as an aid in its interpretation, is not to be seen as an accumulation of desirable laws. F. The argument (E) above was also said to effect notions of federal balance. This argument was rejected - The joint judgment reaffirmed the Engineers’ Case as rejecting any such presupposition, since both of the doctrines overturned in that case – implied immunity of instrumentalities and reserved State powers – had arisen out of a failure to start from “[58] the constitutional text, rather than a view of the place of the States that is formed independently of that text”]. More detail: • At [58], the Court commented on the appeal to the federal balance of power made by the plaintiffs: o Dixon J in Melbourne Corporation [74 at CLR 82-3] pointed out that “The position of the federal government is necessarily stronger than that of the States. The Commonwealth is a government to which enumerated powers have been affirmatively granted. The grant carries all that is proper for its full effectuation. Then supremacy is given to the legislative powers of the Commonwealth.” o Exactly what would be required to impermissibly alter the federal balance was not defined by the plaintiffs.

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No party challenged the Engineers’ case doctrine (which rejected the doctrine of implied immunities and reserved powers). The majority was critical about the poor quality of the submissions on the federal balance point; arguments were unsubstantiated.

Overall: - HCA rejects arguments based around “external” relationships, more than “object of command”, “distinctive character” or “discriminatory operation” - Cannot identify point where division falls for legislative powers of State Parliaments and Commonwealth Parliament lest Federal balance be disturbed - Proposition that particular construction of s.51(xx) would or would not impermissibly alter federal balance must have content – here ptfs did not provide that content •

Applying this to the provisions of the legislation at hand: o As part of the statutory protection against the possibility that a workplace agreement might contain “prohibited content”, s 365 made it an offence to seek to include such content in an agreement, and s 366 made it an offence to represent falsely (and recklessly) “that a particular term does not contain prohibited content”. The plaintiffs’ argument that these provisions had no sufficient connection with the power failed. o [78]: It was submitted that neither section required that the person to whom the prohibition was directed be a party or proposed party to a workplace agreement or a proposed agreement. Moreover, the submission contended, the provisions of s 366(1) “are even more abstract”, in as much as the conduct enjoined does not have to be in the course of, or in relation to, negotiations for a workplace agreement or a variation to it. o It is critically important, however, to recognise that both provisions relate to existing or proposed workplace agreements. By definition a workplace agreement is an agreement to which an employer, as defined in s 6(1), is a party… For present purposes, then, ss 365 and 366 have operation in relation to existing or proposed workplace agreements with constitutional corporations. o A law which forbids any person from making a misrepresentation in relation to an existing or proposed workplace agreement, that a particular term does not contain prohibited content, is connected with the subject-matter of s 51(xx) – constitutional corporations. o It is connected in a way that is not “insubstantial, tenuous or distant” [Melbourne Corporation CL...