News Corporation Ltd, Re

(1987) 15 FCR 227
(1987) 70 ALR 419

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(Judgment by: Beaumont J.)

Re: In the matter of a reference to the Federal Court of Australia by the Australian Broadcasting Tribunal pursuant to Section 22B of the Broadcasting and Television Act 1942 in relation to applications to the Australian Broadcasting Tribunal for approval of transactions relating to the ownership and control of radio and television licences by The News Corporation Limited, Network Ten Holdings Limited and others.

Court:

Judges: Bowen C.J.
Lockhart J.

Beaumont J.

Judgment date: 20 January 1987

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Judgment by:
Beaumont J.

Question (i) I agree with the Chief Judge, whose reasons I have had the benefit of reading, that this question should be answered in the affirmative.

The words "the amount paid on the shares" where used in the Act are not terms of art. As mentioned by the Chief Judge, Regulation 12(1) of Table A Articles of Association is an illustration of the use of the phrase "money unpaid on the shares" as applicable not only in the case of moneys unpaid on account of nominal value but as applicable also in the case of moneys unpaid by way of premium. In my opinion, a reference to the amount paid on shares is, as a matter of ordinary language, capable of picking up both share capital and any premium paid on the issue of the shares. Since 1948, in legislation, and, before that time as a matter of common understanding, there has been a tendency to assimilate a share premium to capital in the strict sense. The Cohen Committee on Company Law said in 1946 (no doubt having in mind Drown's Case) that "share premiums are in essence capital": (para.108) Cmd. 6659; see the discussion in Wallace and Young, Australian Company Law and Practice at p.224; Companies and Securities Law Review Committee, September 1986, Report to the Ministerial Council on the Treatment of Share Premiums - Appendix B pp.1-3 and p.26. In similar vein, the Companies and Securities Review Committee said (at p.3) that "(t)here should be no quarrel with the general philosophy that premiums received upon the issue of shares should be assimilated to paid-up capital"; see also Courtaulds Investments Ltd. v. Fleming (1969) 1 WLR 1683 per Buckley J. at pp 1692-4.

There is nothing in the context of the legislation which would justify placing upon the words now in question any special or limited meaning of the kind suggested by the applicants so as to restrict the operation of the legislation to what is, strictly speaking, capital. On the contrary, as the Chief Judge has said, the objects and purpose of the legislation would be better served if there were taken into account all amounts paid in this connection, whether they be capital in the strict sense or, to use the words of the Court of Appeal in Re Duff's Settlement (1951) Ch 923 at p 929 , capital "notionally" paid up in the form of a premium.

Moreover, reference to the history of the legislation, if anything, reinforces this conclusion. The precursors of the provisions with which we are presently concerned used very different language. For instance, s.53B(a) of the Act, inserted by Act No. 33 of 1956, spoke of shares representing a stated percentage of "the issued capital". See also s.92D, inserted by Act No. 38 of 1965. The term "issued capital" is, of course, a term of art with a settled meaning. The present provisions, by contrast, make no reference to capital. Instead, they employ terms "the amount paid..." which, for this purpose, are neutral in their character and are thus capable of picking up both capital and strictly non-capital payments.

It was argued on behalf of the applicants that even if a share premium was an "amount paid", it was paid "for" and not "on" the shares. But, as has been said, we are not here concerned with a term of art and, in my view, it is accurate to describe a payment by way of premium as a payment "on" the shares in the sense that it is a payment made with reference to the shares. This accords with one of the dictionary meanings of "on" (see, e.g. the Macquarie Dictionary, item 10) and is appropriate in the present context.

Question (ii)

I agree with the answer to this question proposed by the Chief Judge for the reasons he has given.

To understand the intended meaning of s.92D(1), it is necessary to refer to the history of the legislation so far as it has dealt with foreign ownership and control of a licence. For reasons which will appear, it will be necessary also to mention the development of the statutory restrictions on the domestic control of a licence. By Act No. 33 of 1956, s.92 was inserted in what became Division 3 of Part IV of the Act. It provided that a licence was subject to a condition that -

(a)

shares representing not less than 80 per cent of the issued capital of the licensee will be beneficially owned by persons each of whom is either a resident of Australia (other than a company) or a company controlled by persons (other than companies) who are residents of Australia; and

(b)

shares representing more than 15 per cent of the issued capital of the licensee will not be beneficially owned by a person (other than a company) who is not a resident of Australia or by a company controlled, directly or indirectly, by persons who are not residents of Australia.

By s.91, inserted at that time, it was provided that a person was not to own, or be in a position to exercise control, either directly or indirectly, of, more than -

(a)

one commercial television station within the Australian Capital Territory or within the radius of 30 miles of the G.P.O. in the capital city of a State; or

(b)

two commercial television stations in Australia.

By Act No. 36 of 1960, in substituting a new Division 3, s.92D was inserted in substitution for the former s.92. In his Second Reading Speech, the Postmaster-General explained the mischief sought to be remedied:

"I now come to a group of clauses in the bill which substitute a new Division 3 for the Division 3 of Part IV that is now in the act. Division 3 in the act at present contains two very significant sections. The first is section 91 which provides that a person shall not be in a position to control directly or indirectly more than two television licences. The second is section 92 which provides that 80 per cent. of the share capital of a company holding a licence shall be held by residents of this country and that no non-resident shall hold more than 15 per cent. of that capital. These provisions were enacted to express this Government's policy that this very important channel of communication should not fall into the hands of too few, and that the benefit derived from the exercise of licences which lay in the grant of the Government should be spread widely through the Australian community.

Experience has shown that this division could fail to operate so as to carry out that policy because a legal view could be taken that the control of a company rests with the general meeting of the company and that to control a general meeting, and thus control the company, it is necessary to be able to exercise as of legal right 51 per cent. of the voting power in the general meeting. The Government, however, recognizes that a company may be effectively controlled in a commercial sense by persons who hold less than 51 per cent. of the voting power, and also that in relation to such an activity as the management of a television station, control can be exercised by a variety of means other than the possession of voting power at a general meeting. The Government does not deviate from the policy which it asked this Parliament to express in sections 91 and 92 of the existing act and accordingly I have retained them in substance in the new Division 3. But the Government is desirous that there should be no frustration of that policy by sheltering behind a legal concept whilst in truth and in commercial reality the policy is being defeated." (Emphasis added)

By s.91(2) of the new Division, "control" was defined to include control as a result of, or by means of, trusts, agreements, arrangements, understanding and practices, whether or not having legal or equitable force and whether or not based on legal or equitable rights. By s.92(1) of the new Division, a person was not to be in a position to exercise control, either directly or indirectly, of licences in respect of more than one or two licences, as the case may be, in respect of commercial television stations as previously provided. For the purposes of s.92, a person was deemed to be in a position to exercise control of a licence if -

(a)

that person was in a position to exercise control of the company that holds the licence; or

(b)

that person was in a position to exercise control of the operations conducted under or by virtue of the licence, the management of the station or the selection or provision of its programmes (s.92A).

By s.92B, for the purposes of Division 3, a person who was or who by any application or applications of this section, is deemed to be, in a position to exercise control of more than 15 per cent. of the total votes that could be cast at a general meeting was deemed to be in a position to exercise control of that company and of any voting rights of that company as a shareholder and of all acts and operations of that company.

Section 92D(1) imported a condition into a licence as to non-resident shareholding in the same terms as the earlier s.92.

By Act No. 38 of 1965, the Division of which s.92D formed part was repealed and replaced by a new Division. However, s.92D was re-enacted in the same terms as the previous s.92D(1).

By Act No. 113 of 1981, the present s.92D, described in the marginal note as "Foreign shareholdings & c.", was inserted. By s.92D(1), a licence is subject to a condition that a foreign person shall not be in a position to exercise control, either directly or indirectly, of the company holding the licence. By s.92D(2), a licence is subject to a further condition that two or more foreign persons shall not -

(a)

be in a position to exercise control of more than 20 per cent of the maximum number of votes that could be cast on a poll at, or arising out of, a general meeting of the company holding the licence, whether as regards all questions that could be submitted or as regards one or more of such questions;

(b)

hold shareholding interests in the company in respect of shares carrying voting rights on all questions at general meetings, exceeding in amount 20 per cent of the total of the amounts paid on all shares of that kind; or

(c)

hold shareholding interests in the company exceeding in amount 20 per cent of the total of the amounts paid on all shares in the company.

A foreign person is defined for the purposes of s.92D as (a) a natural person who is not an Australian citizen; or (b) a company, wherever incorporated, that is controlled by a person or persons referred to in (a) (s.92D(3)). For the purposes of s.92D(3)(b), a company shall be deemed to be controlled by a person or persons if, and only if -

(a)

the person is, or persons are, in a position to exercise control of more than 50 per cent of the maximum number of votes that could be cast on a poll at, or arising out of, a general meeting, whether as regards all questions that could be submitted or as regards one or more only of those questions;

(b)

the person holds, or persons hold, shareholding interests carrying voting rights on all questions at general meetings, exceeding in amount 50 per cent of the total of the amounts paid on all shares carrying such rights; or

(c)

the person holds, or persons hold, shareholding interests exceeding in amount 50 per cent of the total of the amounts paid on all shares in the company. (s.92D(4)).

In his Second Reading speech on the Broadcasting and Television Amendment Bill 1981, the Minister for Communications, Mr. Sinclair, said -

"FOREIGN SHAREHOLDINGS The existing sections 90G and 92D of the Act restrict ownership of shares, but not voting rights, in licensee companies by any individual non-resident to 15 percent, and by the aggregate of non-resident shareholders to 20 per cent, of issued share capital. The interpretation of the provision has presented difficulties because of the lack of definition of 'resident' and the meaning of 'control' - that is, whether it is commercial control, up to 50 per cent of votes, or control as defined in the Act; that is, 15 per cent of votes and shares. These sections have been redrafted to provide a redefinition of restrictions on foreign shareholdings to provide that only Australian citizens and companies in which Australian citizens hold more than 50 per cent of the votes and/or shares, may be 'in a position to control' a licensee company...."

As a concept, "control" is not defined in the Act. Section 91(1) merely defines it so as to include "control" achieved by various informal means. It becomes necessary then to look at the meaning attributed to the notion of "control" under the general law by way of background to the legislation.

In Bank of New South Wales v. The Commonwealth (1948) 76 CLR 1 , Dixon J., in the context of a consideration of s.92 of the Constitution, described "control" as "an unfortunate word of such wide and ambiguous import that it has been taken to mean something weaker than 'restraint', something equivalent to 'regulation'." (At p.385). The notion of "control" of a company has, however, acquired a more settled meaning, at least in revenue matters. In B.W. Noble Ltd. v. Inland Revenue Commissioners (1925) 12 Tax Cas 911 at p 926, Rowlatt J., in a passage which has been cited frequently, said that "controlling interest" had a well known meaning, and referred to the situation of a man "whose shareholding in the company is such that he is the shareholder who is more powerful than all the other shareholders put together in general meeting." (See also per Viscount Simon L.C. in British-American Tobacco Co. Ltd. v. Inland Revenue Commissioners (1943) AC 335 at pp 339, 340; per Lord Cooper in John Shields and Co. (Perth), Ltd. v. Commissioners of Inland Revenue (1950) 29 Tax Cas 475 at pp 481-2; Barclays Bank Ltd. v. Inland Revenue Commissioners (1961) AC 509 .) In W.P. Keighery Pty. Ltd. v. Federal Commissioner of Taxation (1957) 100 CLR 66 , Dixon C.J., Kitto and Taylor JJ. said (at p 84) that "(t)he controlling authority of a company is its general meeting, and...the only way in which a company can be controlled, in the relevant sense of the word, is by the carrying of a resolution at a general meeting." In Mendes v. Commissioner of Probate Duties (Victoria) (1967) 122 CLR 152 , Kitto J. (at p 165) held that if in the general meeting one person has the majority of votes on some subjects and another has the majority of votes on other subjects, "neither can truly be said to control the company.

The control is divided between them." Taylor J. agreed (at p.166). Windeyer J. (at p.169) said that for the purposes of the revenue laws a member of a company who holds enough shares to give a majority of votes at a general meeting has "control" of the company. "That is the general rule. Control in that sense means the capacity to carry an ordinary resolution at a general meeting." See also Kolotex Hosiery (Australia) Pty. Ltd. v. The Commissioner of Taxation of the Commonwealth of Australia (1973) 130 CLR 64 per Mason J. at pp 77-8; (1975) 132 CLR 535 per Gibbs J. at pp 572-3. On the other hand, in The Commissioner of Taxation of the Commonwealth of Australia v. Commonwealth Aluminium Corporation Limited (1980) 143 CLR 646 , the meaning of "control" of a business by non-residents for the purposes of s.136(a) of the Income Tax Assessment Act 1936 was seen to be different. Stephen, Mason and Wilson JJ. said (at pp.659-660) that shareholders, through their power to control the company in general meeting and perhaps through their power to elect directors, may be said to "control" the company, "but as a general rule they do not exercise de facto control of the company's business." Authorities such as Mendes were distinguished as being concerned with the different question of control of the company rather than its business (at p.660).

With this legislative history and general law background in mind, the question of the work intended to be done by s.92B(1) falls to be determined as a matter of statutory interpretation. It is plain that s.92B(1), in modifying the common law test, provides at least one definition of control of a licensee company for the purposes of s.92D(1). The matter of contention is whether s.92B(1) should be construed as the only way in which control can exist for this purpose or whether it is intended to be merely one of the ways in which control may be regarded as capable of being exercised.

Although s.92B(1) bears the marginal note "Meaning of control of a company", it is not, in form at least, framed as a definition or interpretative provision as is s.91(1). Rather, it provides that, in certain specified circumstances, a particular result will follow - a person shall be "deemed" to be in a position to exercise control of the company. Moreover, the provision is not expressed in exhaustive language: it does not in terms say (to borrow the language of s.92D(4)) that a company shall be deemed to be controlled by a person or persons "if, and only if" certain facts exist.

But, even if s.92B(1) is not in form an exclusive definition for the purposes of s.92D(1), is it in substance such a provision? On behalf of the applicants it is submitted that the deeming effected by s.92B(1) is intended to achieve this result.

In Muller v. Dalgety & Co. Limited (1909) 9 CLR 693 , the respondents were charged with the offence created by s.9A(1) of the Immigration Restriction Act 1901 which provided:

"(1) If any vessel, having on board any stowaway, who is a prohibited immigrant, comes into any port in Australia, the master, owners, agents, and charterers of the vessel shall be jointly and severally liable on summary conviction to a penalty of One hundred pounds for each stowaway."

23. Section 9D was as follows:

"Any person on board a vessel at the time of her arrival from any place outside Australia at any port in Australia who is not -

"(a) a bona fide passenger on the vessel, or

"(b) a member of the crew of the vessel whose name is on the articles, shall be deemed to be a stowaway, unless the master of the vessel gives notice to an officer that the person is on board the vessel, and does not permit him to land until the officer has had an opportunity of satisfying himself that the person is not a prohibited immigrant."

The marginal note to this section was "Definition of a Stowaway".

It was held that s.9D did not exhaustively define the term stowaway as used in s.9A, but must be construed as an extension of that term, and as indicating that persons belonging to the class mentioned, though not in fact, apart from the section, stowaways, shall be deemed to be stowaways for the purposes of the Act.

25. Griffith C.J. said (at p.696):

"The first question for determination in this appeal is whether sec.9D is to be read as an interpretation clause in the sense of an exhaustive definition, as suggested by the marginal note, or it is to be read as extending sub modo the sense which would otherwise be given to that word as used in sec.9A. The word 'deemed' may be used in either sense, but it is more commonly used for the purpose of creating what James L.J. and Lord Cairns L.C. called a 'statutory fiction' (see Hill v. East and West India Dock Co. (9 App Cas, 448 at p 456), that is, for the purpose of extending the meaning of some term to a subject matter which it does not properly designate. When used in that sense it becomes very important to consider the purpose for which the statutory fiction is introduced. An instance of the use of the word in the other sense is to be found in the case R. v. Norfolk County Council (60 LJQB, 379), where it was held that in a clause beginning, 'The following...shall be deemed to be,' the word imported an exclusive definition and not an extension of meaning."

As Windeyer J. observed in Hunter Douglas Australia Pty. Ltd. v. Perma Blinds (1969) 122 CLR 49 at pp 65-7 a "deeming provision" may not create a "statutory fiction"; it need not import artificiality; rather it may simply state the effect of some matter - "the way in which it is to be adjudged". See also University of Wollongong v. Metwally (1984) 56 ALR l per Mason J. at p 12. Where "deemed" is used in a definition to extend its meaning not in a fictional sense but to include matters that might or might not fall within the scope of the word so defined, the position is similar to that where "includes" is used in a definition (see Ex parte Armstrong; Re Hughes (1963) 80 WN 566 per Walsh J. at p 568 ; D.C. Pearce, Statutory Interpretation in Australia, 2nd ed. at p 50).

In my opinion, this is the present case. The evident object of s.92B(1) is to fix, at 15 per cent, certain percentages of voting power and shareholding interests as a conclusive statement of the existence of control of the company where control is achieved by one of those means. But there is nothing in the language of the Division or in the policy sought to be achieved by its provisions which suggests that it is not possible for a foreign person to be in a position to exercise control by other means for the purposes of the Division, including s.92D(1). On the contrary, when the Division is read as a whole bearing in mind the history of the legislation, it appears that what s.92B(1) is intended to do is to put beyond argument the issue of control where one of the criteria (a), (b) or (c) in that sub-section has been satisfied - it has nothing to say on the different question whether, even if none of those criteria is satisfied, a foreign person is, nonetheless, in a position, by other means, to exercise control of the company within the meaning of s.92D(1). Such a construction is consistent with the policy intended to be achieved by the statute, as explained in the ministerial statements, that de facto control can be exercised in various ways other than owning or voting shares and that the objective of the legislation is to ensure that only Australian citizens and companies in which Australian citizens hold more than 50 per cent of the votes or shares may be in a position to control a licensee company.

Question (iii)

28. I agree with the answer proposed by Chief Judge and with his reasoning. Remaining Questions

29. I agree with the course proposed by the Chief Judge.