Pauls Limited v Elkington[2001] QCA 414

SUPREME COURT OF QUEENSLAND

1. [1]
   McPHERSON JA: The appellant is Mrs Milly Elkington, who is the holder of securities in the form of non-redeemable preference shares in the respondent Pauls Limited. Some time ago the respondent took steps under Part 6A.2 of the Corporations Law of the State of Victoria to compulsorily acquire the shares of the appellant and of other shareholders in Pauls Victoria Limited.  Under that Law, where the holders of 10% or more of such securities object to the acquisition, s 664F enables the would-be acquirer to apply to the Court for its approval of the acquisition. That was the procedure followed here.
2. [2]
   When the matter came before Douglas J in the Supreme Court, it was agreed that his Honour should determine as preliminary questions a number of points of law identified by the appellant and other shareholders of like mind who appeared on the hearing of the application. Having heard submissions on those points, his Honour determined them in favour of the respondent to this appeal. This is Ms Elkington’s appeal (no 680 of 2001) against that decision, which was given on 22 December 2000.

Some of the others have also appealed, but their appeals are not before us.

3. [3]
   The points raised on this appeal are the same as those determined by his Honour. They raise questions about the validity of the legislation enacted by the Parliament of Victoria giving effect to Part 6A.2 of the Corporations Law. One ground of challenge is that the procedure used to enact that legislation involved an impermissible delegation by the  Victorian Parliament of its legislative power.  Another is that Part 6A.2 of the Law provides for an acquisition of property in the form of the securities or preference shares otherwise than on just terms, and so is beyond the legislative competence of that Parliament.
4. [4]
   To understand the first point, it is necessary briefly to retrace the history of national companies legislation in Australia. The first general enactment of that kind was the Corporations Act 1989 (Cth), which, because of certain limitations on the legislative power conferred on the Commonwealth Parliament by s 51(xx) of the Constitution, was, in New South Wales v The Commonwealth (1990) 169 CLR 482, held to be partly invalid. There are no such limitations on the power of the Commonwealth Parliament to legislate for the Territories under s 122 of the Constitution. In consequence, the Commonwealth Corporations Act of 1989 was amended to confine its operation to the Australian Capital Territory and Jervis Bay. That having been done, the Parliament of each of the Australian States, in pursuance of an agreement between them and the Commonwealth Parliament, enacted legislation adopting the Australian Capital Territory Act (the ACT Act), as it had now become. In the case of Victoria, that was done by the Corporations (Victoria) Act 1990. Section 7 of that Act provided and provides that the Corporations Law set out in s 82 of that Act, “as in force for the time being”, applied as a law of Victoria, and might be referred to as the Corporations Law of Victoria. Section 82 incorporated the ACT Act, with some minor verbal alterations to accommodate it to that State. Similar legislation was passed in each of the other States. To use the expression employed in these proceedings, the ACT Act was treated as the “template” for similar legislation throughout Australia.
5. [5]
   The original version of the ACT Act did not contain Part 6A.2 concerning compulsory acquisitions and “buy-outs”. It was inserted by an amendment to the original enactment. The Corporations Act (Victoria) Act 1990 specifically envisaged that there would be future amendments, which is why s 7(a) provided that the Corporations Law as in force “for the time being” was adopted, thereby giving the provision an ambulatory or a proleptic operation or effect. The intention plainly was that successive amendments of the ACT Act were to be incorporated in the Corporations Law of Victoria, they being part of the law for the time being in force in the Australian Capital Territory. It is clear that what was being adopted was the organic law itself and not merely the static text of the ACT Act as it was in 1970.
6. [6]
   The appellant challenges this legislative method as entailing an illegitimate delegation of Victorian legislative power to the Commonwealth Parliament. The proposition really has at least two aspects or elements. One is that the Parliament of Victoria has no power to delegate its legislative authority. The other is that the Constitution in s 51(xxxvii) provides an exhaustive method or procedure for authorising the Commonwealth Parliament to legislate on matters not otherwise within the legislative subjects assigned to it by s 51. That method is by referring a matter to the Parliament of the Commonwealth by the State Parliaments, and any other means of doing so is impliedly prohibited or excluded by the Constitution.
7. [7]
   The Parliament of Victoria has, like the legislatures of other States, power to legislate for the “peace, welfare and good government” of the State. The investiture of legislative authority in that form, or in the form “peace, order and good government”, has long been held to be plenary, and to connote, within its appointed limits, the widest law-making powers appropriate to a sovereign.  The authorities are collected in Union Steamship Co of Australia Pty Ltd v King (1988) 166 CLR 1, 9-10.  In a series of cases in the 19^th century the Privy Council decided that, in passing laws, the colonies (of which Victoria was then one) were in no sense delegates of the Imperial Parliament from which they had formally derived their legislative power. They were therefore not subject to any limitation or restriction that prevented them from delegating the power so acquired. See R v Burah (1878) 3 App Cas 889, 904; and Hodge v The Queen (1883) 9 App Cas 117. In so far as the appellant here contends simply that s 7(a) constitutes a delegation of Parliamentary legislative power that is impermissible, the point is one that was authoritatively determined against her more than a century ago.
8. [8]
   The point re-emerged in a slightly different form in Re Initiative and Referendum Act [1919] AC 935, where the Privy Council suggested that a Manitoba statute, providing for a proposed law to take effect and become law on receiving the approval of a majority of electors at a popular referendum, might offend s 92 of the British North America Act 1867, which entrusted the legislative power in a Province to its legislature, and to that legislature alone. Having described Hodge v The Queen (1883) 9 App Cas 117 as deciding that a legislature could entrust another body with power to enact regulations, Viscount Haldane added that it did not follow “that it can create and endow with its own capacity a new legislative power not created by the Act to which it owes its existence” ([1919] AC 935, 945). The particular vice of the referendum procedure in that case was that it provided for a proposal to become law automatically on receiving the approval of a majority of electors, and so deprived the provincial Lieutenant-Governor of his constitutional function of withholding assent to the proposed law. A somewhat similar referendum procedure in Alberta, which avoided that particular problem, was upheld not long afterwards in R v Nat Bell Liquors Ltd [1922] 2 AC 128, 134-135.
9. [9]
   The matter was considered again in Cobb & Co Ltd v Kropp [1967] 1 AC 141, in which the Privy Council held that the legislation of the Queensland Parliament was not invalid because it delegated to the Commissioner for Transport the power to fix and enforce licence fees under the State Transport Acts. In giving the advice of the Board, Lord Morris said ([1967] 1 AC 141, 157) that the legislature were entitled to use the Commissioner for that purpose:

3. “They were not abrogating their power to levy taxes and were not transferring that power to the Commissioner. What they created … could not reasonably be described as a new legislative power or separate legislative body, armed with general legislative authority … Nor did the Queensland legislature ‘create and endow with its own capacity a new legislative power not created by the Act to which it owes its existence’ (see In Re The Initiative and Referendum Act). In no sense did the Queensland legislature assign or transfer or abrogate their powers or renounce or abdicate their responsibilities. They did not give away or relinquish their taxing powers.”

What was said there also applies here. In enacting s 7 of the Corporations (Victoria) Act the Parliament of Victoria did not create any new legislative body. It had no need to do so in order simply to adopt or copy the template provisions of the ACT Act into the legal system of  Victoria. That is as true of provisions subsequently enacted as it is of those that were already in place when s 7 was first passed. The Victorian legislature remained free to repeal s 7, or the Corporations Law as a whole, or any part of its provisions, at any time it chose. No power to make laws was surrendered by Victoria to the Commonwealth, or at all. See Gould v Brown (1998) 193 CLR 346, 485 (Kirby J).  For the Victorian Parliament to say, like Ruth to Naomi, “whither thou goest, I will go” is to do no more than declare an intention that is capable of being altered or withdrawn at any time. Parliament cannot bind itself or its successors in that way, and its action has no impact at all on the extent of its constitutional powers.

10. [10]
    Section 7 conferred on the Commonwealth Parliament no power whatever to legislate for Victoria in this or any other matter. That, indeed, is the fundamental difference between a provision in the form of s 7 and a reference by a State under s 51(xxxvii) of the Constitution. A reference under s 51(xxxvii) transfers power to legislate, and it may do so either permanently or for a specified period of time. Such a reference, without more, does not itself make law, but simply supplies a means of doing so. If the Commonwealth Parliament refrains from acting on the reference to it, there will be no Commonwealth legislation on the subject, or no more than there was before the power was referred.  If it legislates in the exercise of the power referred and enacts legislation, the consequence will be that State legislation on the subject which is inconsistent with it is invalid under s 109 of the Constitution. Nothing remotely resembling that consequence is capable of arising from the enactment of s 7 of the Corporations (Victoria) Act 1990. The Corporations Law of Victoria and the ACT Act operate in different territorial spheres and neither is subordinate in status or effect to the other.
11. [11]
    The appellant’s submission that s 7 contravenes an implied constitutional prohibition dictating that s 51(xxxvii) is the exclusive method of transferring legislative power from State to Commonwealth is therefore untenable. If there is such a prohibition, s 7 does not contravene it. Victoria could, if it had chosen to do so, have elected to adopt as template legislation the corporations law of any other jurisdiction in the world. It might, for example, have selected that of New Zealand if it had wished: cf Hooper v Hooper (1955) 91 CLR 529, 536-537. For the respondent, Mr Wilson of counsel suggested an analogy that appropriately illustrates what was done here. Many jurisdictions when they were British colonies passed legislation adopting English law as their local legal system. Doing so involved no surrender of their legislative powers. Some of those colonial reception statutes adopted the law of England “for the time being”, which had the effect of picking up statutes passed in England after the original local reception date and of continuing to do so even after independence. The results were sometimes quite unexpected, as when European Union laws applicable in England began in this way to be imported into Singapore: see the discussion by Mr Andrew Phang in (1994) 28 Univ of Br Colum L Rev 205, 207. It would be quite absurd to suggest that Singapore had delegated or referred its power of legislating to the European Union.
12. [12]
    The appellant’s second major point can be approached in this way. Section 7 of the Corporations (Victoria) Act adopted the ACT Act not simply as a static text, as I have called it, but as an organic Act. Any limitations on the legislative power of the Commonwealth Parliament to enact the ACT Act would therefore be reflected in the constitutional invalidity of provisions of that Act. If the Victorian Parliament then adopted the ACT Act as local legislation of its own, it necessarily reproduced that Act with all the deficiencies and frailties to which as Commonwealth legislation it was subject. The process of copying would mean there would be corresponding deficiencies in the Victorian Corporations Law.
13. [13]
    To that extent, the submission may for present purposes be accepted. The problem is not so much its logic but the consequences that are here said to follow from it. The appellant contends that, because the ACT Act is Commonwealth legislation, it is subject to the limitation imposed in s 51(xxxi) of the Constitution. The Commonwealth Parliament may under the power conferred by that provision make laws for the acquisition of property from any person, but it can do so only “on just terms”. Part 6A.2 of the ACT Act provides for such an acquisition, but does so on terms which are said not to be just. It follows that, if that Part of the ACT Act when it was enacted was invalid, it was a non-existent law and could not have been copied into the Corporations Law of Victoria.
14. [14]
    A fundamental obstacle to making good this submission is that the ACT Act was not enacted by the Commonwealth Parliament in the exercise of the power conferred by s 51 of the Constitution but under the power to legislate for the Territories conferred by s 122. To Commonwealth legislation having that character or source, it has been held that the limitation or prescription of “just terms” in s 51(xxxi) has no application. See Teori Tau v The Commonwealth (1969) 119 CLR 564. The decision in that case has since attracted a measure of disapproval in Newcrest Mining (WA) Ltd v The Commonwealth (1997) 190 CLR 513; but it is not for us to say that it has been overruled and, until the High Court decides to overrule it, this Court must follow it. The result is that, even if the appellant is right about everything else, her submission fails to find its initial foothold. Part 6A.2 of the ACT Act was not invalid.
15. [15]
    It may in any event be questioned whether in enacting s 7 in 1990 the Victorian Parliament intended it to extend only to those provisions of the ACT Act that were constitutionally valid.  It is true that the overall scheme was to introduce in Australia a nationwide system of company law, but the omission of Part 6A.2 from the ACT Act alone might have been considered a small price to pay to secure the benefits of uniformity in all other States and in all other provisions of the national scheme. The appellant, however, goes further, and submits that not even the Parliament of Victoria was capable of enacting provisions in the form of Part 6A.2. Even State legislative power is, it is submitted, subject to the restrictions imposed by those fundamental rights recognised by the common law, of which the right of property is one. Whatever value or status this proposition might previously have possessed, the notion that, without just terms, rights of private property in Australia are constitutionally immune from acquisition under State legislation plainly received its quietus in Durham Holdings Pty Ltd v New South Wales (2001) 75 ALJR 501. To the many authorities cited there, it is perhaps worth adding a reference to what was said in Jerusalem-Jaffa District Governor v Suleiman Murra [1926] AC 321, 328. A “right” of private property is certainly recognised, but it is not one that prevails against a statute enacted in the exercise of the plenary power to legislate like that invested in the Parliament of Victoria.
16. [16]
    For these or similar reasons, the learned judge at first instance was correct in determining the preliminary points in favour of the appellant. His Honour went on to declare that, in so far as the terms of Part 6A.2 of the Corporations Law related to the application before him, it was valid. The Corporations Law referred to there was, of course, the Corporations Law of Victoria. Since that decision was given on 22 December 2000, the Commonwealth Parliament has enacted the Corporations Act 2001. It did so in the exercise of powers conferred under a matter or matters referred by State Parliaments in accordance with s 51(xxxvii) of the Constitution. The Act of 2001 came into force on 15 July 2001, and s 1384B continues, subject to any appeal, the order made by Douglas J on 22 December 2000. The effect of s 1384(3) is that those proceedings are to be continued as if the corresponding provisions of the new Corporations Law had always applied to them. Superficially, that would make some of the arguments that are considered here irrelevant or, as the parties described them, “moot”. However, it appears from the affidavit filed on behalf of the appellant at the hearing of this appeal that she intends in due course to challenge the constitutional validity of provisions of or applying to the new Commonwealth Act. Further notices will now have to be given to the Attorneys under the Judiciary Act. If that challenge succeeds, the result will be that the law will continue to be as it was when his Honour decided the preliminary questions and made the declaration on 22 December last year. Since this Court has no control over the appellant’s decision whether or not, or how and when, to pursue that challenge, it is preferable that the present occasion should be used to determine at least one element in the litigation between the parties. If in law the Corporations Act 2001 or the transitional provisions are not invalid, then the same result would ensue as is bound to follow here, which is that the appeal should be dismissed.
17. [17]
    As to costs, the parties should be allowed 10 days from the delivery of this judgment within which to make written submissions on the costs of the appeal having regard among other matters to s 664(4) of the Corporations Law if it continues to apply to these proceedings.
18. [18]
    WILLIAMS JA:  I have had the advantage of reading the reasons for judgment of McPherson JA and I agree with all that he has said.
19. [19]
    However, I wish to add some additional observations with respect to some issues raised.  Section 1384(3) of the Corporations Act 2001 (C'wth) ("the Act") provides that the provision therein which corresponds to a provision in the Corporations Law ("the Law") as adopted in Victoria at the relevant time shall apply to any proceeding continuing after the enactment of the Act.  That means that the provisions of the Act must now be taken to apply to (and to have always applied to) the proceeding which was heard and determined by Douglas J.
20. [20]
    If s 1384 of the Act is valid then most, if not all, of the arguments of the appellant become moot.  But the appellant has asserted that she intends to challenge the constitutional validity of s 1384.  If that section were held to be invalid on constitutional grounds, then it would be necessary to consider the correctness of the decision of Douglas J based on the provisions of the Law.  Record books had been prepared with respect to an appeal based on the provisions of the Law, written submissions forwarded to the Court, and a date for hearing set before the appellant became aware of the impact of the Act on her position.  In those circumstances it was appropriate for the Court to determine the issues raised as if the Law continued to apply.  That has the advantage of "closing a door" with respect to the litigation. Deciding the issue raised by the appeal adverse to the appellant essentially means that her position is the same whether s 1384 is valid or not.

21. [21]
    The only other issue on which I wish to make some observations is the submission that the acquisition in question was not on "just terms" because of the operation of s 51(xxxi) of the Constitution.  In my view the argument overlooks s 1362BA of the Law, and its corresponding provision s 1350 of the Act.  Subsection (1) thereof is in these terms:

3. "If:

3. (a)
   apart from this section, the operation of this Law [Act] would result in the acquisition of property from a person otherwise than on just terms;  and

3. (b)
   the acquisition would be invalid because of paragraph 51(xxxi) of the Constitution;

3. the person who acquires the property is liable to pay compensation of a reasonable amount to the person from whom the property is acquired in respect of the acquisition".

That provision, in my view, has the effect that if in law the acquisition must be on "just terms" because of the provision of the Constitution, that is how the compensation payable must be assessed.  In other words the legislation is not rendered invalid by operation of s 51(xxxi) of the Constitution, but rather if the provision of the Constitution applies appropriate compensation must be paid.

22. [22]
    I agree with the order proposed by McPherson JA.
23. [23]
    Jones J: I agree with the reasons of McPherson JA and Williams JA and with the proposed order that the appeal be dismissed.