Chapter 5 - Do Corporations Have Rights in Australia?

This chapter examines those legal rights of Australian corporations that serve to protect their corporate autonomy rights as described in chapter 3. Since these legal rights have been developed in the absence of a coherent conception of the corporation as a rights-bearing entity, they do not (at least explicitly) represent a recognition by lawmakers of corporations' autonomy interests. However no matter what their historical justification may have been - utilitarianism, anthropomorphism, or moral intuition - the fact that these rights do in fact promote corporate autonomy makes them an obvious foundation for the future development of corporate legal rights. The purpose of this chapter is therefore to set the scene for such development, whether it takes place ad hoc or based on a theory of corporate rights such as that developed in this paper.

1. Constitutional Law

1.1. Express Rights

The express rights of persons (both natural and corporate) under the Commonwealth Constitution are much more limited than in the United States or Canada, both in number and effectiveness. They are found in ss.51 (xxxi), 80, 92, 116 and 117. Section 51(xxxi) gives the Commonwealth Parliament power to make laws with respect to the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has legislative power. To prevent the requirement of "just terms" from being subverted, s.51(xxxi) has been held generally to act as a limitation on the other heads of legislative power.1 It has never been doubted that corporations qualify as "persons" for the purposes of this provision,2 given the normal presumption of interpretation of that word.3 However the provision does not extend to the States4 or territories,5 thus limiting its effectiveness in protecting corporate property rights.

Section 80 relevantly provides that the trial on indictment of any offence against a law of the Commonwealth shall be by jury. This section has been interpreted literally, so as to allow prosecutors to avoid it simply by trying the offence summarily, no matter how severe its penalty.6 This, and the fact that the section does not apply at all to offences under State law, renders the protection it offers very limited. The section would appear to encompass offences committed by corporations, although no authority exists on this point.

Section 92 of the Constitution relevantly provides that trade, commerce and intercourse among the States shall be absolutely free. For many years this section was interpreted as granting interstate traders a right to operate free of much government regulation.7 Cole v Whitfield8 has now greatly curtailed this "right", which in any event would be difficult to support as fundamental to corporate autonomy.

Section 116 of the Constitution relevantly forbids the Commonwealth to prohibit the free exercise of religion. According to three judges of the High Court,9 this section offers no protection to corporations, since a corporation cannot have a religious belief and therefore cannot exercise a religion. However the decision of the majority in Adelaide Company of Jehovah's Witnesses Inc. v Commonwealth10 is inconsistent with this view, despite being unsupported by reasons on this point. Given the necessarily communal nature of religious worship, it is submitted that the majority's view in this case is to be preferred. Any narrower conception of "exercising a religion" would arguably allow the Commonwealth to control the activities of religious bodies at an organisational level so long as the autonomy of individuals within those bodies was maintained.

The final express right in the Commonwealth Constitution is s.117, which prevents the States from discriminating against any subject of the Queen resident in another State. It seems that s.117 offers no protection to corporations, because a corporation cannot be a "subject of the Queen" within the meaning of the section.11

1.2. The Implied Freedom of Political Speech

Australia's few express constitutional rights have recently been supplemented by a new implied freedom. In Australian Capital Television Pty. Ltd. v Commonwealth12 the full High Court, Dawson J dissenting, struck down an amendment to the Broadcasting Act 1942 that limited television and radio advertising by political parties during election periods, on the ground that this infringed an implied constitutional guarantee of freedom of communication on matters of Commonwealth public affairs and politics. Mason CJ reasoned that:

Freedom of communication in the sense just discussed is so indispensable to the efficacy of the system of representative government for which the Constitution makes provision that it is necessarily implied in the making of that provision.13

In neither Australian Capital Television v Commonwealth nor its companion case Nationwide News Pty. Ltd. v Wills14 was it necessary for the High Court to determine whether the implied freedom extended to protect corporate speech. In the former case, the plaintiff's standing to challenge the constitutionality of the Broadcasting Act arose from its purely economic interest in broadcasting the political speech of others. In the latter case the standing of Nationwide News Pty. Ltd. to challenge s.299(1)(d)(ii) of the Industrial Relations Act arose automatically, as the challenge was mounted as a defence to prosecution under that section.15 Had the provision under challenge restricted only corporate speech, leaving individual speech unhindered, Nationwide News' challenge on this ground may have failed.16

It now appears from two recent High Court cases, Theophanous v The Herald & Weekly Times Ltd17 and Stevens v West Australian Newspapers Ltd.,18 that at least some corporations can plead the implied freedom of political speech as a defence to an action for defamation by a member of the Federal or Western Australian19 Parliaments.20 Deane J in his majority judgment in the Theophanous case expressly held that the implied freedom

precludes completely the application of such laws to impose liability in respect of such statements or comments upon those responsible for the conduct of the press and other media outlets through which such public discussion and criticism must, in our society, largely take place. It is true that the proprietors of media outlets are commonly large and powerful corporations and that there are some special arguments which can be advanced to support the full application of the ordinary laws of defamation to the political communications and discussions which they publish for profit to themselves. Ultimately, however, the authors of such communications and discussions published through the mass media are individuals and publication of them is the means of communication of the political statements or views of an individual, namely, the immediate author or the individual who directs or influences what the immediate author writes or says.21

In contrast, the other judges of the majority would apparently allow any corporate participant in political discussion to rely on the implied freedom:

Because the system of representative government depends for its efficacy on the free flow of information and ideas and of debate, the freedom extends to all those who participate in political discussion.22

Each of these views justifies the extension of the implied freedom to corporations in purely derivative terms; the former grants corporations an "active derivative speech right" and the latter a "passive derivative speech right".23 However it is submitted that corporate political speech should also fall within the protection of the implied freedom in its own right. On the analysis presented in this paper, corporations possess a corporate autonomy right to freedom of speech, which "provides for the development and expression of a collective point of view"24 that might otherwise go unexpressed.

2. Administrative Law

The common law principles of natural justice, or procedural fairness,25 are designed to ensure that the judicial and executive arms of government act fairly in determining persons' rights, interests and legitimate expectations. Leaving aside legitimate expectations (which have been described as "of uncertain connotation"),26 it is now clear that the rights and interests protected by the requirement of procedural fairness include "interests beyond legal rights that the legislature is presumed to intend to protect ...".27 These should at least include individual and corporate autonomy rights. Thus Mason CJ in Kioa v West28 said:

The reference to "right or interest" in this formulation must be understood as relating to personal liberty, status, preservation of livelihood and reputation, as well as to proprietary rights and interests.29

The reason why courts and administrators should take account of autonomy rights in making their decisions follows from two of the assumptions made in chapter 2. The first is that autonomy rights are prior to individual notions of the good, and so do not derive their moral force through the democratic political process. The second is that it is the duty of the liberal state to protect such rights. Just as the legislative arm of the state has a duty to safeguard autonomy rights through legislation, the other arms have a duty to provide a fair procedure when these rights are threatened by administrative or judicial action.30

It is settled law in Australia that the requirements of procedural fairness apply to corporations. The leading case on this question is FAI Insurances Ltd. v Winneke,31 in which an insurance company challenged the withdrawal of its approval to operate as an insurer. Gibbs CJ said:

The natural expectation is that the business will continue indefinitely, so long as it is properly conducted and proves successful. ... It would not be fair to deprive a company of the ability to carry on its business without revealing the reason for doing so, and, if the reason is one related to some alleged misconduct or deficiency in the conduct of the company's affairs, without allowing the company a full and fair opportunity of placing before the authority making the decision its case against the existence of the alleged misconduct or deficiency.32

3. Common Law

Common law rights of corporations may usefully be divided into three categories, which I will call residual rights, fundamental freedoms and legal process rights.

3.1. Residual Rights

In Australia, as in the United Kingdom, persons generally have a right to do anything that is not expressly prohibited by law. This residual freedom applies equally for the benefit of corporate and natural persons. Thus in Mudginberri Station Pty. Ltd. v Langhorne33 the court upheld the plaintiff corporation's right to carry on its business without executive interference, saying, "We think that, in the absence of any statutory prohibition, citizens of this country have a common law right to prepare goods for sale and to sell them here or overseas."34

3.2. Fundamental Freedoms

However, again as in the UK, a narrower array of specific rights and freedoms can be discerned which the common law is especially keen to protect. I will call these fundamental freedoms, simply because they have been so termed by the courts. For instance, Brennan J has observed, "Unless the Parliament makes unmistakably clear its intention to abrogate or suspend a fundamental freedom, the courts will not construe a statute as having that operation."35

Most of these common law rights and freedoms apply equally to corporations. Examples include the presumption that legislation is not intended to alienate vested proprietary interests without adequate compensation,36 the presumption that powers to levy taxation will be granted with express statutory words,37 and the applicability of the "principles of the common law governing the creation and disposition of rights of property."38 Although there undoubtedly exist common law fundamental freedoms which do not extend to corporations, such as the right to personal liberty,39 the opportunity has not yet arisen for Australian courts to consider this question.

3.3. Legal Process Rights

The third category of common law rights, legal process rights, can be distinguished from the other categories in that they are owed by the courts themselves. They include the basic right of an affected party to be heard in judicial proceedings, the privilege against self-incrimination and the right to trial by jury. As with fundamental freedoms, these rights may be overridden by express words of legislation, but the court will presume that this was not the Parliament's intention. For instance, in Thompson v Mastertouch TV Service Pty. Ltd. (No 3)40 the general words of s.24(1) of the Federal Court Act 1976 (Cwlth) were held not to give the Crown a right of appeal against a corporation's acquittal of an offence under the Trade Practices Act 1974 (Cwlth).

It has generally been assumed in Australia that the legal process rights accorded to juridical persons apply equally to natural and corporate persons,41 but little or no authority exists to confirm this assumption. Recently, a long-standing assumption42 that the privilege against self-incrimination extends to Australian corporations was proven incorrect. In Environmental Protection Authority v Caltex Refining Co. Pty. Ltd.43 the High Court held by a 4-3 majority that corporations are not entitled to take advantage of the privilege. The question arose when the NSW Environmental Protection Authority (EPA) served notices on Caltex requiring it to produce documents that the EPA intended to use against it in a prosecution under the Clean Waters Act 1970 (NSW). Caltex raised the privilege against self-incrimination as a ground for refusing to comply with the notices.

In ruling that the privilege is unavailable to corporations, the majority reviewed the historical and modern rationales that have been suggested for it. All but one of the rationales examined were teleological, or goal-based in nature, and hence outside the scope of this paper. As to the single deontological rationale, Mason CJ and Toohey J said:

[T]he modern and international treatment of the privilege as a human right which protects personal freedom, privacy and human dignity is a less than convincing argument for holding that corporations should enjoy the privilege.44

In my submission, this argument is only "less than convincing" because of the common law's lack of a coherent ontological conception of the corporation as a rights-bearing entity. Given such a conception, the argument has more weight. In a passage cited in each of the judgments in EPA v Caltex, du Parq LJ, delivering the judgment of the Court in Triplex Safety Glass Co. Ltd. v Lancegaye Safety Glass (1934) Ltd.,45 noted:

It is true that a company cannot suffer all the pains to which a real person is subject. It can, however, in certain cases be convicted and punished, with grave consequences to its reputation and to its members, and we can see no ground for depriving a juristic person of those safeguards which the law of England accords even to the least deserving of natural persons.46

This accords with the judgment of the minority in EPA v Caltex. They concluded that a corporation could claim the privilege against self-incrimination,47 which was

to be explained by the principle, fundamental in our criminal law, that the onus of proving a criminal offence lies on the prosecution and that in discharging that onus it cannot compel the accused to assist it in any way.48

Mason CJ's and Toohey J's argument that legislative abrogation of the privilege demonstrates that this principle is not of fundamental importance49 begs the question: is the legislature infringing its citizens' rights by abrogating the privilege so freely?50 Similarly, McHugh J's argument that the principle referred to by the minority is simply a factor to be weighed against "the public interest in the adduction of relevant evidence in civil and criminal proceedings"51 treats the privilege as a mere utility right. If the privilege is an autonomy right, as Article 14 of the International Covenant on Civil and Political Rights suggests, it ought to prevail over the public interest in all but exceptional circumstances.

4. Statute

Of the many legal rights which corporations possess under Australian statutes, few seem to correspond to corporate autonomy rights as I have described them. Three notable sets of exceptions will be discussed here. The first of these are what may be termed capacity rights. Capacity rights are necessary to constitute corporations as legal persons and thus enable them to exercise their autonomy in public life. Although corporations possess capacity rights at common law, these have been codified in the Corporations Law. Section 161(1) of the Law provides: "A company has both within and outside this jurisdiction, the legal capacity of a natural person ...". Section 166A states that the same legal personality, capacity, powers and status are held by "recognised companies" (effectively, companies from other States of Australia). Incorporated associations possess similar capacity and powers under s.13 of the Associations Incorporation Act 1987 (WA).

The second set of statutory rights that serve to safeguard corporate autonomy do so by protecting corporations against deliberate attacks on their business. These rights are found in ss.162 and 163 of the Industrial Relations Act 1988 (Cwlth). Subject to certain exceptions, s.162 prohibits two or more persons from hindering or preventing the supply of services by a third person to a fourth where

an immediate and substantial purpose of the conduct is to cause substantial loss or damage to the business of the fourth person, and the conduct has or is likely to have that effect.

The fourth person is given a right to recover damages for loss or damage occasioned by conduct that contravenes the provision and a right to seek an injunction to restrain a person from engaging in that conduct. Section 163 prohibits agreements to engage in conduct prohibited by s.162.

To similar effect is the third statutory right that serves to protect corporate autonomy. Section 46 of the Trade Practices Act 1974 (Cwlth) relevantly provides:

(1) A corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of - (a) eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market; ...

A corporation that suffers loss by reason of conduct infringing this section may sue for damages under s.82 of the same Act or seek injunctive relief under s.80. It is not contended that this provision was passed with the protection of corporate autonomy in mind; clearly enough, it was passed to prevent anti-competitive monopolisation.52 However s.46 incidentally operates as perhaps corporations' most forcible legal guarantee of their right to exist.

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