SGH LTD v FC of T

Judges: Gleeson CJ
Gaudron J
McHugh J

Gummow J
Kirby J
Hayne J
Callinan J

Court:
High Court of Australia

MEDIA NEUTRAL CITATION: [2002] HCA 18

Judgment date: 1 May 2002

---

Gummow J

34. There was removed into this Court by order under s 40 of the Judiciary Act 1903 (Cth) (``the Judiciary Act'') that part of the cause pending in the Federal Court which involves two questions respecting the operation of s 114 of the Constitution. A case then was stated to the Full Court pursuant to s 18 of the Judiciary Act.

35. Section 114 states:

``A State shall not, without the consent of the Parliament of the Commonwealth, raise or maintain any naval or military force, or impose any tax on property of any kind belonging to the Commonwealth, nor shall the Commonwealth impose any tax on property of any kind belonging to a State.''

36. The first question is whether SGH Limited (``SGH'') is the ``State [ of Queensland]'' for the purposes of s 114. The consequence of an answer in the negative to the first question is that the second question, that of whether the tax in question is a ``tax on property'' for the purposes of s 114, does not arise. On 6 December 2001 the Full Court dealt with the case stated and I joined in the order of the Court answering the first question ``No''.

37. On 30 August 1999, the Commissioner of Taxation (``the Commissioner'') disallowed objections by SGH to the assessment dated 15 March 1995 in respect of the year of income ended 30 June 1994. The Commissioner ruled that SGH was not the State of Queensland for the purposes of s 114 of the Constitution. A decision by the Commissioner upon such an issue cannot amount to a final and binding determination of a constitutional question between the Commissioner and the taxpayer. The making of such a determination is a paradigmatic exercise of the judicial power of the Commonwealth. ^[46] MacCormick v FC of T 84 ATC 4230 at 4236, 4240, 4247; (1983-1984) 158 CLR 622 at 639-640, 646, 658-659 .

---

ATC 4374

38. So it is that the question was committed to the Federal Court in the exercise of the jurisdiction conferred by Div 5 of Pt IVC of the Taxation Administration Act 1953 (Cth) (``the Taxation Administration Act'') and also, with specific reference to the constitutional questions, by par (b) of s 39B(1A) of the Judiciary Act. <sup>[47]</sup> Added by s 3 and Sched 1 of the Law and Justice Legislation Amendment Act 1997 (Cth). The burden of establishing that the constitutional question should be answered ``Yes'', as a step in proving the assessment to income tax excessive, rested upon SGH as the taxpayer: s 14ZZO of the Taxation Administration Act.

39. The relevant facts are further detailed by Gleeson CJ, Gaudron, McHugh and Hayne JJ. The High Court Rules provide (O 35 r 1(4)):

``The Court may draw from the facts and documents stated in the special case any inference, whether of fact or law, which might have been drawn from them if proved at a trial.''

Constitutional interpretation

40. Before turning to consider the operation of s 114 upon the facts and circumstances of this case, it is convenient to refer to the subject of constitutional interpretation.

41. Questions of construction of the Constitution are not to be answered by the adoption and application of any particular, all- embracing and revelatory theory or doctrine of interpretation. Nor are they answered by the resolution of a perceived conflict between rival theories, with the placing of the victorious theory upon a high ground occupied by the modern, the enlightened and the elect.

42. The provisions of the Constitution, as an instrument of federal government, and the issues which arise thereunder from time to time for judicial determination are too complex and diverse for either of the above courses to be a satisfactory means of discharging the mandate which the Constitution itself entrusts to the judicial power of the Commonwealth. Thus, it is one thing to determine the validity of a law, said to be supported by one or more of the heads of power in s 51 of the Constitution, by regard to the settled principles recently outlined in the joint judgment of six Justices in Grain Pool of WA v The Commonwealth . ^[48] (2000) 202 CLR 479 at 491-495 [ 13]- [ 22]. It may be another to construe the present scope of the term ``a foreign power'' in s 44(i) of the Constitution. There, as Sue v Hill ^[49] (1999) 199 CLR 462 at 487-488 [ 50]- [ 52], 524-525 [ 162]- [ 163]. decided, it is necessary to have regard to changing matters and circumstances external to Australia, but in the light of which s 44(i) has effect from time to time.

43. As will appear, the construction of s 114 of the Constitution invites attention to a further consideration. The state of the law of the Constitution at any given time is to be perceived by study of both the constitutional text and of the Commonwealth Law Reports . Decisions of this Court dealing with the text and structure of the Constitution but not bearing directly upon a particular provision nevertheless may cast a different light upon that provision and so influence its interpretation.

44. This indicates, as indeed do the decisions in Grain Pool and Sue v Hill , that questions of constitutional interpretation are not determined simply by linguistic considerations which pertained a century ago. Nevertheless, those considerations are not irrelevant; it would be to pervert the purpose of the judicial power if, without recourse to the mechanism provided by s 128 and entrusted to the Parliament and the electors, the Constitution meant no more than what it appears to mean from time to time to successive judges exercising the jurisdiction provided for in Ch III of the Constitution.

Section 114

45. The second limb of s 114 is one of the few provisions of the Constitution which deals specifically with intergovernmental immunities. Reference is made in the joint judgment in Brodie v Singleton Shire Council ^[50] (2001) Aust Torts Reports ¶ 81-607 at 66,897-66,898 [ 91-95]; (2001) 75 ALJR 992 at 1010-1011 [ 91]- [ 95]; 180 ALR 145 at 171-172. to the various senses in which the term ``immunity'' is employed. The concern in construing s 114 is not <sup>[51]</sup> DFC of T v State Bank of New South Wales 92 ATC 4079 at 4083; (1991-1992) 174 CLR 219 at 230 . with that doctrine (``the shield of the Crown'') whereby an authority created by statute is sufficiently identified with the executive government of the enacting polity to attract the protection generally enjoyed by the executive of that polity from its own legislation. ^[52] See The Commonwealth v Western Australia (1999) 196 CLR 392 at 409-410 [ 32]- [ 33], 429-430 [ 105]- [ 106], 470-471 [ 227]- [ 228] ; Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at 345-347 [ 14]- [ 17] . The immunities for which s 114 provides apply not within the one polity but between the Commonwealth and the States, and their effect is to restrain the exercise of legislative power in certain circumstances. Further, as was pointed out by McHugh and Gummow JJ in State Authorities Superannuation Board v Commr of State Taxation (WA) : ^[53] 96 ATC 5167 at 5181; (1996) 189 CLR 253 at 288.

``... there is no prohibition placed [ by s 114] upon one State imposing upon another State a tax with respect to property of the other State within the area of the first State or with

---

ATC 4375

respect to dealings by the other State in such property.''

46. Rather, s 114 speaks of one polity (in this case, the Commonwealth) imposing ``any tax on property of any kind belonging to'' another polity (here, the State of Queensland). The power of the Commonwealth Parliament conferred by s 51(ii) of the Constitution to make laws with respect to taxation is expressed to be ``subject to this Constitution''. Thus, to say in this case that s 114 confers an immunity upon the State is to say that s 114 places a restraint upon the exercise by the Parliament of the Commonwealth of the legislative power in s 51(ii) which otherwise supports the provisions of the Income Tax Assessment Act 1936 (Cth) relied upon by the respondent for the inclusion of the two receipts in question in the assessable income of SGH. ^[54] See the judgment of Windeyer J in Victoria v The Commonwealth (1971) 122 CLR 353 at 400 . If the submissions by SGH respecting s 114 of the Constitution are accepted, the consequence is that s 15A of the Acts Interpretation Act 1901 (Cth) requires the reading down of the general terms of the taxing provisions upon which the respondent relies, so as to accommodate the operation of s 114.

47. Since the early decision of this Court in The Municipal Council of Sydney v The Commonwealth (``the Sydney Council Case ''), <sup>[55]</sup> (1904) 1 CLR 208. the term ``a State'' in the phrase ``a State shall not... impose any tax'' has not been given a narrow reading. It was decided in that case that the prohibition in s 114 applied to rates imposed in respect of Commonwealth land by the Municipal Council in the exercise of a power conferred upon it by a New South Wales statute; the municipal taxation was described by Griffith CJ as an exercise of the ``sovereign right'' of the State ``by delegation to the municipality''. ^[56] (1904) 1 CLR 208 at 230.

48. In the Sydney Council Case , ^[57] (1904) 1 CLR 208 at 239. O'Connor J said that ``to get at the real meaning'' of s 114 ``we must examine the context, consider the Constitution as a whole, and its underlying principles and any circumstances which may throw light upon the object which the Convention had in view, when they embodied it in the Constitution''. His Honour then proceeded: ^[58] (1904) 1 CLR 208 at 239-240.

``From the very nature of the Constitution, and the relation of States and Commonwealth, in the distribution of powers, it became necessary to provide that the sovereignty of each within its sphere should be absolute, and that no conflict of authority within the same sphere should be possible. The principles laid down by Marshall CJ, in his historic judgment in McCulloch v Maryland , ^[59] 4 Wheat 316 (1819) [ 17 US 159]. are as applicable to the Australian Commonwealth Constitution as to the United States Constitution, and it must be taken that those principles and the controversies which had arisen in the United States in reference to their application, were within the knowledge of the Convention.''

It should be added that, whilst McCulloch concerned federal ``immunity'', in 1870, in The Collector v Day , ^[60] 11 Wall 113 (1870) [ 78 US 113]. a principle of reciprocal immunity had been adopted by the United States Supreme Court; neither State nor federal government could tax the salaries of the officials of the other.

49. The conclusion O'Connor J reached in the Sydney Council Case was that s 114 was included as a specific example of the doctrine of intergovernmental immunities which at that time was seen by this Court as necessarily implicit in the Australian federal structure. O'Connor J said: ^[61] (1904) 1 CLR 208 at 240.

``What could be more natural than that the Convention should, while it had the opportunity, place the application of these principles to the property of the Commonwealth, at all events, as far as possible, beyond controversy by embodying them directly in the face of the Constitution.''

Barton J spoke to the same effect. ^[62] (1904) 1 CLR 208 at 234. However, as Higgins J later pointed out in the Steel Rails Case , ^[63] Attorney-General of NSW v Collector of Customs for NSW (1908) 5 CLR 818 at 853, 855 . the method adopted in s 114 for doing so was to use terms derived from or suggested by the British North America Act 1867 (Imp), ^[64] 30 & 31 Vict c 3. s 125.

50. The doctrine of intergovernmental immunities has had a varied history in the United States and remains in a state of flux. ^[65] Mason, ``The Role of a Constitutional Court in a Federation: A Comparison of the Australian and the United States Experience'' (1986) 16 Federal Law Review 1 at 17-21; Tribe, American Constitutional Law , 3rd ed (2000), vol 1 at 1237. In Australia the doctrine was overthrown in 1920 in the Engineers Case . ^[66] Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129 . In his concurring judgment in that case, Higgins J turned s 114 to account as an indication in the text and structure of the Constitution that the immunity doctrine had no sound basis. After noting that s 114 was an exception to the power conferred by s 51(ii), Higgins J said that this and other explicit exceptions: ^[67] (1920) 28 CLR 129 at 162.

``would not be necessary if the power to legislate on the subjects stated did not

---

ATC 4376

include, but for the exception, a power to make legislation binding on the States.''

As already remarked, the earlier view was that s 114 was designed to put beyond controversy the adoption for Australia of the United States doctrine current in 1900.

51. The doctrine of intergovernmental immunities, as protective of the States, survived after Melbourne Corporation v The Commonwealth ^[68] (1947) 74 CLR 31. in a much modified form. The implied limitation upon the legislative powers of the Commonwealth was said in the joint judgment of the Court in Re Australian Education Union; Ex parte Victoria to consist: ^[69] (1995) 184 CLR 188 at 231.

``of two elements: (1) the prohibition against discrimination which involves the placing on the States of special burdens or disabilities (`the limitation against discrimination') and (2) the prohibition against laws of general application which operate to destroy or curtail the continued existence of the States or their capacity to function as governments.'' ^[70] Queensland Electricity Commission v The Commonwealth (1985) 159 CLR 192 at 217 per Mason J.

52. With respect to the affectation of the Commonwealth by State legislative power, it is necessary to have regard to the Cigamatic ^[71] Commonwealth of Australia v Cigamatic Pty Limited (In Liquidation) (1962) 12 ATD 475 ; (1962) 108 CLR 372 . doctrine. The scope of that doctrine remains unsettled. In our judgments in Re Residential Tenancies Tribunal (NSW); Ex parte Defence Housing Authority , ^[72] (1997) 190 CLR 410 at 458-459, 469-470. See the further observations by McHugh J in The Commonwealth v Western Australia (1999) 196 CLR 392 at 421 [ 78] . McHugh J and I expressed the view that the Cigamatic doctrine is concerned with those aspects of Commonwealth executive power sourced in the Constitution rather than in federal statute; except to the extent that the latter are protected by s 109 of the Constitution, State law may apply to them.

53. The result is that, whilst the doctrine of which s 114 was a particular expression is no longer part of the law of the Constitution, s 114 remains. It will be apparent that s 114 will apply to the imposition of taxes on property in circumstances where neither the Melbourne Corporation nor Cigamatic doctrines would be offended. The section thus has been deracinated by the course of constitutional development in the decisions of this Court and no longer replicates any fundamental considerations of federalism which inform a present understanding of the Constitution.

54. This is an added reason to support what in South Australia & Anor v The Commonwealth & Anor ^[73] 92 ATC 4066 at 4070; (1991-1992) 174 CLR 235 at 248. was accepted as ``the strict view of the immunity conferred by the section''. The constitutional phrase ``any tax on property of any kind'' belonging to the Commonwealth or a State does not confer exemption upon such property from any form of tax; the tax must be imposed by reference to the relationship between the taxpayer and the relevant property, and tax the ownership or holding thereof.

55. In South Australia & Anor v The Commonwealth & Anor , Mason CJ, Deane, Toohey and Gaudron JJ said that: ^[74] 92 ATC 4066 at 4070; (1991-1992) 174 CLR 235 at 248-249.

``the adoption of a broad view of the immunity might lead to anomalies in the case of government-owned corporations formed with a view to their competing on favourable terms with private enterprise. One illustration, germane to the present case, will suffice. Were the immunity to extend to a tax on income, as the immunity conferred by words similar to s 114 in s 87(b) of the Indian Act 1970 (Can) has been held to extend, ^[75] Nowegijick v R [ 1983] 1 SCR 29 . the Commonwealth Parliament would be denied power to subject a corporation owned by a State to liability to pay income tax even if the corporation is engaged in commercial competition with private enterprise.''

``A State''

56. It appears from the above statement that ``government owned corporations'' are to be treated as answering the description in s 114 of ``a State''. It is here that the critical issues arise. The constitutional status and standing of statutory corporations gives rise to a range of questions beyond those immediately involved here; the decision in Airservices Australia v Canadian Airlines International Ltd ^[76] (2000) 202 CLR 133. provides illustrations. Again, in Austral Pacific Group Ltd (In liq) v Airservices Australia , Gleeson CJ, Gummow and Hayne JJ said: ^[77] (2000) Aust Torts Reports ¶ 81-571 at 63,959 [ 14]; (2000) 203 CLR 136 at 143 [ 14].

``Airservices is a body corporate which, while it is charged with the performance of what may be classed as governmental functions, is not part of the executive government of the Commonwealth. ^[78] Re Residential Tenancies Tribunal (NSW); Ex Parte Defence Housing Authority (1997) 190 CLR 410 at 458-460, 470-472 . Airservices is sued by Austral Pacific as the Commonwealth within the meaning of s 75(iii) of the Constitution but it does not necessarily follow that Airservices attracts the preferences, immunities and exceptions enjoyed by the executive government in

---

ATC 4377

respect of State laws and identified with the Cigamatic doctrine.'' ^[79] Re Residential Tenancies Tribunal (NSW); Ex Parte Defence Housing Authority (1997) 190 CLR 410 at 458, 464-465 .

57. In the present case, it was accepted in all the submissions that, consistently with DFC of T v State Bank of New South Wales , ^[80] 92 ATC 4079 at 4083; (1991-1992) 174 CLR 219 at 230. the term ``a State'' in s 114 is ``wide enough to denote a corporation which is an agency or instrumentality of the Commonwealth or a State''. However, the Commissioner contends that a corporation formed under general, rather than particular, legislation cannot be ``a State'' (nor, it would follow, ``the Commonwealth'') for the purposes of s 114. This is said to be so even if all the issued shares in such a corporation be owned by the body politic. Because SGH was formed under the law of Queensland providing generally for building societies, the Commissioner says that it follows that SGH cannot be ``a State''.

58. There is some support for this approach to s 114 supplied by the United States decisions respecting intergovernmental immunities which the framers of the Australian Constitution had in view. Cooley observed ^[81] The General Principles of Constitutional Law in the United States of America , 2nd ed (1891) at 59. that the inhibition respecting the use of the taxation power extended to protect the ``means or agencies'' through which governments performed ``their essential functions'', but continued: ^[82] The General Principles of Constitutional Law in the United States of America , 2nd ed (1891) at 60.

``But the sovereignty whose means or agencies of government would be affected by the tax might render it lawful by its assent, as has been done in some cases.''

In Thomson v Pacific Railroad ^[83] 76 US 579 (1869). the Supreme Court referred to McCulloch v Maryland and said that, in McCulloch , the Court: ^[84] 76 US 579 at 589 (1869).

``did hold that the Bank of the United States, with its branches, was exempt from taxation by the State of Maryland, although no express exemption was found in the charter. But it must be remembered that the Bank of the United States was a corporation created by the United States; and, as an agent in the execution of the constitutional powers of the government, was endowed by the act of creation with all its faculties, powers and functions. It did not owe its existence, or any of its qualities, to State legislation.''

The complainants in Thomson had submitted that the transcontinental railway, to be known to history as the Union Pacific: ^[85] 76 US 579 at 587 (1869).

``being constructed under the direction and authority of Congress, for the uses and purposes of the United States, and being a part of a system of roads thus constructed, is therefore exempt from taxation under State authority.''

But the taxpayer was incorporated under the law of Kansas, and the Supreme Court concluded: ^[86] 76 US 579 at 590-591 (1869).

``We do not think ourselves warranted, therefore, in extending the exemption established by the case of McCulloch v Maryland beyond its terms. We cannot apply it to the case of a corporation deriving its existence from State law, exercising its franchise under State law, and holding its property within State jurisdiction and under State protection.''

59. Section 102 of the Constitution suggests an alertness to the distinction between utilities (there, railways) which are operated by a public body synonymous with the notion of ``a State'' and those constituted under the law of a State but distinct from it. Section 102 empowers the Commonwealth Parliament in certain circumstances to forbid ``as to railways, any preference or discrimination by any State, or by any authority constituted under a State '' (emphasis added). Quick and Garran ^[87] The Annotated Constitution of the Australian Commonwealth , (1901) at 905. See also Riverina Transport Pty Ltd v Victoria (1937) 57 CLR 327 at 354-355 per Latham CJ. wrote that it was clear from the use of the term ``any State'' that the section ``applies to the Government railways of the States, whether controlled directly by the Executive Government of the State, or vested in a corporate body of Railway Commissioners''; they added: ^[88] The Annotated Constitution of the Australian Commonwealth , (1901) at 905.

``It seems that the subsequent words, referring to preferences made `by any authority constituted under a State,' are wide enough to include not only Railway Commissioners, but also railway companies incorporated by an Act of the Parliament of a State. The only importance of the question seems to be that if privately-owned railways are not included in this section, they will be subject to the full operation of the trade and commerce power, without limitations which are placed by this section upon the power of the Parliament.''

60. There also is some support for the Commissioner's submission in the judgments of the majority in The Commonwealth of Australia v Bogle . ^[89] (1953) 89 CLR 229. One issue there was whether certain State legislation applied to a corporation formed under the Companies Act 1938 (Vic), on the initiative of the Executive Government of the

---

ATC 4378

Commonwealth as a company limited by guarantee. In deciding that the State legislation did apply, Fullagar J observed: ^[90] (1953) 89 CLR 229 at 267-268.

``It is said that the company was formed at the instance of the Commonwealth, that the Commonwealth through the Minister is in a position under the articles to control the company, and that the ultimate financial interest is that of the Commonwealth. But none of these things can affect the legal character of the company as a person suing in the courts. If the company were a company limited by shares, it could make no difference that the Commonwealth held ninety-nine per cent of the shares. It is said (with perhaps more force) that the company is in possession and control of property of the Commonwealth, and that its activities are activities in which the Commonwealth, in the course of the exercise of the immigration power, is vitally interested. But again I am unable to regard these matters as affecting in any way the legal nature of the company. Having been incorporated under the Companies Acts of the State, it seems to me that it must be subject to the Companies Acts and all other State legislation which in terms applies to such companies . It may be that the Commonwealth Parliament could, under s 51(xxvii) and (xxxix) of the Constitution, enact legislation conferring immunities on the company and prevailing over State legislation by virtue of s 109. But no such question need be considered, because no such legislation has been enacted.''

(emphasis added)

61. In the present case, the Commissioner puts his submission on the footing that the procuring by a body politic of incorporation under the general law of a State is the manifestation by that body politic ``of a deliberate choice'' not to engage the immunities conferred by s 114. This suggests that the operation of s 114 is avoided by some process of election or waiver by the executive government of the body politic otherwise entitled to the benefit of the immunity. Questions respecting the effect of consent and waiver upon the absence of legislative power under the terms of the Constitution have given rise to various differences of judicial opinion. Examples are provided by Brown v R ^[91] (1986) 160 CLR 171. and Re Wakim; Ex parte McNally . ^[92] (1999) 17 ACLC 1,055 at 1,064 [ 24], 1,081 [ 114-117], 1,098-1,099 [ 211-214]; (1999) 198 CLR 511 at 546 [ 24], 577-579 [ 114]- [ 117], 611-612 [ 211]- [ 214].

62. In contrast to the provisions considered in those authorities, s 114 does deal specifically with consent to what otherwise would be an infraction of its provisions. However, it does so in a limited fashion. With the stipulated consent a State may raise or maintain a naval or military force. But the consent must be given by the Parliament of the Commonwealth, not merely the executive government. No such consent provision attaches to the second limb of s 114. It is true that statements by Barwick CJ, Mason J and Murphy J in Superannuation Fund Investment Trust v Commr of Stamps (SA) ^[93] 79 ATC 4429 at 4431-4432, 4443; (1978-1979) 145 CLR 330 at 337-338, 357, 357 respectively. The strength to be attached to the statement by Murphy J is diminished by his Honour's apparent reading of the provision respecting parliamentary consent in the first limb of s 114 as applying also to the second limb. support the proposition that this constitutional immunity may be waived in respect of cases where it otherwise operates. But it is said that the waiver must be by the Parliament of the body concerned and must be expressed in plain terms. Those conditions do not apply here. This makes it unnecessary further to pursue the question of waiver or consent. However, it may be added that, to the extent that United States authority supports the Commissioner's submissions, that authority concerned the displacement of implications upon which the theory of intergovernmental immunities was based, not any specific constitutional text such as s 114.

63. The immediately significant consideration is that to introduce a distinction for the purposes of s 114 between a ``general'' and a special or particular law of corporations would be to complicate the operation of the section, which is concerned with matters of substance rather than of form. ^[94] South Australia & Anor v The Commonwealth & Anor 92 ATC 4066 at 4070; (1991-1992) 174 CLR 235 at 249 .

64. In Superannuation Fund Investment Trust v Commr of Stamps (SA) , ^[95] 79 ATC 4429 at 4437; (1978-1979) 145 CLR 330 at 347. Stephen J said of the task of the Court in a case such as the present that ``the primary task is that of statutory interpretation rather than any mechanical application of supposed tests''. In that spirit, SGH and the Queensland Attorney-General, who intervened in its support, emphasised such matters as the ``public character'' of SGH and the public policy imperatives which were associated with its formation; the financial connection between SGH and the State, including the auditing of its accounts by the Auditor-General in the 1994 income tax year; and the control which Suncorp Insurance and Finance (``Suncorp'') (accepted to be the State of Queensland for this purpose) was in a position to exert over SGH.

---

ATC 4379

65. It is the last of these matters that is the most significant. ^[96] Superannuation Fund Investment Trust v Commissioner of Stamps (SA) 79 ATC 4429 at 4437-4438, 4441, 4451; (1978-1979) 145 CLR 330 at 347-349, 354, 371 . If the State did not control the conduct of the affairs of SGH, the State cannot be said to be carrying on the activities of government through the medium of SGH as its agent or instrument.

The structure of SGH

66. The Building Societies Act 1985 (Q) (``the 1985 Act'') empowered SGH to raise funds by the issue of shares (s 51(1)) or by the receipt of money on deposit (s 53(1)). There was no provision corresponding to that in s 11(1) of the Suncorp Insurance and Finance Act 1985 (Q), the statute which provided (s 7) for the constitution of Suncorp and specified its powers and authorities (s 8). Section 11(1) stated:

``Every policy or contract of insurance or indemnity issued or entered into within the authority of this Act is guaranteed by the Government of Queensland and any liability arising under such guarantee shall be payable out of the Consolidated Revenue Fund, which is hereby to the necessary extent appropriated accordingly.''

The Consolidated Revenue Fund was established by s 34 of the Constitution Act 1867 (Q).

67. Paragraph 12 of the stated case states:

``In the financial year ended 30 June 1994 Suncorp held 100% of the `B' class permanent voting shares issued by the Taxpayer. Each of the Directors had a non beneficial shareholding of 100 shares, and all of the `A' class shares were held by depositors of the Taxpayer.''

68. There were 33,070,588 ``B'' class shares of $1.00 each, issued and fully paid. The number of ``A'' class shares which were issued does not appear. It was suggested in argument that the figure of 2,214,400,000 shown in the balance sheet as at 30 June 1994 included ``A'' class shareholders and depositors who were not shareholders.

69. Where the question of control concerns a corporation with an issued share capital the matter ordinarily is approached by looking, as did Kitto J in Mendes v Commissioner of Probate Duties (Vict) , ^[97] (1967) 122 CLR 152. to the exercise of voting power at general meetings. His Honour said: ^[98] (1967) 122 CLR 152 at 160.

``The board binds the company by what it does within the authority which the articles of association confer upon it, but its decisions are decisions made for the company, not by it. Only the decisions of the company in general meeting are decisions of the company; and this is true however wide may be the powers of the board and however few and limited the powers of the general meeting.''

(original emphasis)

He added: ^[99] (1967) 122 CLR 152 at 165.

``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.''

70. The share structure of SGH is explained by Gleeson CJ, Gaudron, McHugh and Hayne JJ. From that analysis and what was said by Kitto J in Mendes , it follows that Suncorp (and thus the State) did not control SGH; it shared control with the ``A'' class shareholders. Moreover, as their Honours point out, any degree of control exercised by Suncorp could not be exercised for purposes foreign to the purposes of SGH as a whole. That limitation would, for example, extend to the making of a decision that SGH be wound up voluntarily under s 130(1)(b) of the 1985 Act.

71. Where the corporation in question lacks corporators but is constituted with a board of directors, questions of control may be determined by looking to the conduct of the directors. State Bank of NSW v Commonwealth Savings Bank of Australia ^[100] (1986) 161 CLR 639. was such a case. The State Bank was constituted by the State Bank Act 1981 (NSW) with no corporators. ^[101] (1986) 161 CLR 639 at 645-646. The proposition advanced by SGH that this decision shows that in any case sufficient control may be established by the presence of a power to appoint directors is too widely drawn.

72. In any event, Gleeson CJ, Gaudron, McHugh and Hayne JJ demonstrate that such control over the affairs of SGH as Suncorp exercised through the mechanism of the board was hedged about by an obligation not to disregard the interests of persons other than the State of Queensland.

73. Another aspect of the question of ``control'' concerns the funding arrangements which enable the entity in question to exercise its powers and discharge its functions. The sourcing of finance in appropriations by the legislature under the relevant constitutional

---

ATC 4380

provisions and the statutory classification of the moneys otherwise raised or received by that entity as part of the Consolidated Revenue Fund are indications that the entity is an agent or instrument of the Commonwealth or State for the purposes of s 114. However, in the case of SGH, unlike Suncorp, there is no provision to any such effect. ^[102] cf the financial structure of the Civil Aviation Authority considered in Airservices Australia v Canadian Airlines International Ltd (2000) 202 CLR 133 at 260-263 [ 369]- [ 379], 267-269 [ 396]- [ 403] . The circumstance that at the time of the receipts in question in this litigation SGH was subject to audit by the Auditor- General under Pt 6 of the Financial Administration and Audit Act 1977 (Q) is not of decisive importance.

Conclusion

74. For these reasons, I joined in the order pronounced on 6 December 2001.