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Wednesday, 15 August 1906

Senator DRAKE (Queensland) . - The operation of trusts and rings is now a world's problem. It has attracted a great deal of attention, not only in Great Britain and Australia, but also in. and perhaps principally in, the United States of America.. But even there, although they have had three Acts on the subject, they have not yet arrived at a true solution of the difficulty. They have only succeeded in a verv partial manner in interfering with the operations of the trusts and combines in that country.

Senator Findley - But the Socialists are moving in the right direction, too.

Senator DRAKE - What the Socialists desire is to nationalize the monopolies held by the great trusts, because they say that then they would be carried on in the interests of the public only. The opinion which is held by the President of the. Republic, and I believe by very many of the earnest thinkers in the United States, is that, while it seems to be almost impossible to overcome the operations of these trusts, if they cannot be abolished they can be controlled by law, and that will be, I think, the true solution. This question has naturally engaged the attention of the Commonwealth Government, almost from the first, and a great deal of attention was drawn to it 'at the time when the Tariff was passing through Parliament. It was argued frequently by those who were opposed to protective duties that, under the operation of protection, rings and trusts would be formed, which would have a tendency to raise prices to the consumer, and various suggestions were made as to the means which might be taken to overcome any such tendency. There is one remedy which appears at first sight to be almost obvious, but when it is looked into it is found to be attended by such disadvantages that it has to be put on one side. It has been pointed out that under the operation of a high protective Tariff manufacturers or producers might combine together and raise the prices of articles right up to the limit at which they could be imported. And it has been urged that the natural remedy in that case would be, either by Act of Parliament or by Executive action under the authority of an Act of Parliament, to lower the duty until the operations of the combination had been met - that is to say, to compel a reduction to lower prices to the consumer by allowing the goods to come in at- a reduced duty. That looks like an obvious remedy. But it is open to two almost insuperable objections. One objection is that, in endeavouring to defeat the operations of a ring by that means, we should be destroying smaller men in the same trade, who, perhaps, were being equally crushed by the ring; and the second objection is that if we succeeded in defeating the ring, we should probably be injuring our own producers and manufacturers bv admitting importations which were the produce of a big ring outside. I believe that no means have yet been devised to meet rings operating in that way to the disadvantage of the consumer. If they have been devised, I should very much like to know what they are. These are the rings and combinations which, it seems to me, we should be most earnest and anxious to endeavour to defeat, if possiNe. I shall show directly that they are not dealt with in any efficient manner in the Bill.' and perhaps we have not power to do it. When I was in England, thirteen or fourteen years ago, there was brought under mv personal notice an instance of the operation of one of these rings or combines, such as I think ought to be dealt with in some way. In the depth of winter, when the thermometer fell 20 degrees below freezing point, the price of coal suddenly went up, owing, I was told - and I do not doubt the statement - to a combination on the part of the coal merchants when it was in 'great demand. I saw the carts going about the streets of London, and selling coal in sixpenny worths and threepenny worths to poor people. In that- way the price of coal .was raised to the poorest of the poor at the very time when the severe cold was compelling them to part with almost their last pence in order to purchase fuel. That- is the sort of combine upon which I think all the resources of civilization should be brought to bear.

Senator Fraser - If we could.

Senator DRAKE - Yes; if we could.

Senator O'KEEFE (TASMANIA) -Even to the extent of nationalization.

Senator DRAKE - No, because that would not be necessary. I should justify any' Government action which would enable the necessaries of life to be. conveyed to poor people at a reasonable rate, if they were being withheld from them by a combination.

Senator Findley - Bad as that is, it is not so bad as a corner in the essentials of life - in, for instance, wheat.

Senator DRAKE - Combinations, I have no doubt, are formed in the same way in regard to wheat, some of them so large that perhaps they would not be touched under the Bill. I do not know whether they would or would not be. Any combination to raise the price of the necessaries of life would not be met by the Bill, for this reason : that its operations would always be confined within a State. Where the object was to raise the price in, a retail market it would not be a matter of a combine extending from State to State. It would be a combine within a State, and would not be dealt with under the measure.

Senator Guthrie - Probably it would consist of one man.

Senator DRAKE - I do not think that one man could do it.

Senator Best - But a corporation could.

Senator DRAKE - That would be hardly probable. It would be more likely to be a combination of a number of corporations or a number, of individuals for that express purpose. When the necessities of the poor were greatest they would raise the prices.

Senator O'Keefe - Does the honorable senator say that, if half-a-dozen coal merchants in Melbourne were to do that, they would not come under the scope of the Bill?

Senator DRAKE - Certainly they would not.

Senator Trenwith - Why? '

Senator DRAKE - Because in clauses 5 and 7. dealing with persona combaning, there is no limitation. It only deals with the case of trade or commerce among the States, or with countries outside Australia.

Senator Best - Pardon me; look at paragraph 20 of section 51 of the Constitution.

Senator DRAKE - The Bill purports to give power to deal with a case like that, if the operations are being carried on bv a foreign corporation, and not by a British corporation. I wish to make it perfectly clear that the combinations I have referred to cannot be dealt with under the Bill, because they would be operating within a State. Let me now deal with Senator Best's point about the Constitution. The Government and the draftsman of the Bill must have taken the view that is taken by the honorable and learned senator with regard to the power given to us in the Constitution to deal with foreign corporations. Section 51 tells us what our powers are. It says -

The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to - (i.) Trade and commerce with other countries and among the States.

I contend that in this paragraph are included the whole of our powers to deal with trade and commerce with other countries and among the States. If it were otherwise, the framers of the Constitution would have extended the paragraph, and made the limitation less severe. They would have told us what other powers of trade and commerce we had. But as they give in that paragraph no powers in regard to trade or commerce, except with other countries and among the States, I contend that those are all the powers we have. Of course, I quite agree that if we found any subsequent provision in the Constitution which clearly contradicted that, and gave us any other power with regard to trade and commerce, then,- following the well-known rule of interpretation, the latter would prevail, and our power would be increased. But we are not to assume, when we find a subsequent provision which may be. regarded as somewhat ambiguous, that the intention of the framers of the Constitution was to extend the powers given in paragraph 1. of section 51. I now come to paragraph xx. of that section, under which we have the right-

To make laws for the peace, order, and good government of the Commonwealth with respect, to- - (xx.) Foreign corporations, and trading or financial corporations formed within, the limits of the Commonwealth.

The Government and' Senator Best havetaken the view that under that paragraphwe have power to deal with all mattersconnected with the trade and commerce of foreign corporations. I suppose that at some time or other the point will come before the High Court for decision.

Senator Best - What meaning does the honorable and learned senator attach to-" "trading"?

Senator DRAKE - My interpretation of the paragraph is that it gives all1 the necessary power to make lawscorresponding with the Companies Actswhich have been passed in the various States, and which contain provisions regarding the formation of corporations, the way in which the shares shall* be held, the number of officers who shall beappointed, whether there shall be a registered office, and all those other provisions; which are necessary to identify acorporation, and make it a corporate body which can sue and be sued. Foreign corporations are mentioned specially, as well as trading and financial institutions, -which are British institutions, because it is well known that in the case of" foreign corporations it is necessary to havesome different provision, in consequence of the fact that the bulk of their capital is; held outside of Australia.

Senator Keating - Have we no further powers with regard to foreign corporationsand trading and financial corporations:, within the Commonwealth than those whichthe States had exercised at the time of the passing of the Constitution?

Senator DRAKE - I should think not.

Senator Millen - Than those which the States had exercised or might have exercised.

Senator DRAKE - Yes. that is so.

Senator Keating - They might have exercised these powers.

Senator DRAKE - Not with regard to the whole of Australia.

Senator Keating - No; each State within its own borders.

Senator DRAKE - Each of the States, up to the time of the formation of theCommonwealth, had passed Companies;

Acts and Foreign Companies Acts dealing with these matters. The Constitution now gives us power to make laws of the same character with regard to the Commonwealth for foreign corporations or for British corporations.

Senator Trenwith - To make laws " for the peace, order, and good government of the Commonwealth."

Senator DRAKE - Senator Best's interpretation would land us in this position : That the Imperial Parliament, in granting us our Constitution, gave us the power to discriminate in trade matters between a British corporation and a foreign corporation doing business within a State. That is unthinkable. When in the Constitution, from first to last, we draw so clear a dividing line between Commonwealth and States interests, and endeavour, wherever possible, to leave States interests to the States Governments, it is unthinkable that, while preventing us from making any difference between a British and a foreign trader within a State, it should give us the power to discriminate between a British corporation and a foreign corporation within the Commonwealth.

Senator Keating - What is the honorable and learned senator's interpretation of the expression "foreign corporation."

Senator DRAKE - 1 understand that paragraph xx. gives us the power to make laws of the nature of the Companies Acts which have been passed, I think, in all of the States, to provide for the way in which such corporations shall be represented here, where thev shall have their offices, and possibly whether they shall be called upon to give security.

Senator McGregor - Is not a British corporation a " foreign corporation " within the meaning of the paragraph ?

Senator Keating - Does not " foreign corporation " include all non-Australian corporations?

Senator DRAKE - -I beg the honorable and learned senator's pardon. I misunderstood his objection. "Foreign" means " non-Australian." certainly. As I read the paragraph, it refers to all those matters which are dealt with in the Companies Acts which have been passed in the various States. The matter is not being, discussed now for the first time. My contention is that, under paragraph i of section 51, our powers with respect to trade and commerce are limited to trade and commerce with other countries and among the States, and paragraph xx. does not give us any additional power with regard to trade and commerce. It does -not involve any alteration of the limitation of our powers with respect to trade and commerce, but simply provides for legislation with respect to those matters already embodied in the companies laws of the States. Paragraph xx. provides that we may deal with foreign corporations and trading or financial corporations in the way in which they are dealt with in the Companies Acts of the various States. In Queensland we have Companies Acts and British Companies Acts, and I suppose the same may be said of Victoria. Only a few years ago an Act was passed in Queensland amending the British Companies Act, and making some alterations with regard to the status of such companies. The view I take is that this simply refers to the status of these particular corporations.

Senator Keating - Does the honorable and learned senator not think that that would have been expressed if it had been intended ?

Senator DRAKE - I think that it is perfectly clear, and that, if the other view had been intended, it would have been stated. I think that, if it had been intended that trade and commerce, as referred to in section 51, should not be limited1 to trade and commerce between the States and with foreign countries, that would have been stated. It has not been so stated. However, there is little use in talking at length on this matter. We might talk for a month on this, particular question without agreement, and the High Court will eventually have to decide it.

Senator Keating - I have no desire to interrupt the honorable senator, but he will allow me to say something by way of illustration. It was only a very few years before the Commonwealth came into existence that we began to legislate in the States in anyway with regard to a director's personal liability. It might be that in the next ten or fifteen years some alteration of companies legislation of that character might be necessary. Does the honorable and learned senator contend that we could not introduce that legislation?

Senator DRAKE - Certainly we could, under paragraph xx. of section 51. We had a British and Foreign Companies Act passed in Queensland only a few years ago.

Senator Keating - How does the honorable and learned senator draw the dividing line as to our powers? Does he contend that they are those which were exercised by the States at the time of the establishment of the Commonwealth?

Senator DRAKE - I should say so. In the same way, it will be remembered that I argued with regard to trade marks that the definition which we must accept, is the meaning under British law attached to the term "trade mark," at the time the Constitution was passed.

Senator Keating - That is precisely analogous. I hold the contrary view.

Senator DRAKE - I am aware that the honorable and learned senator does.

Senator Best - Suppose paragraph 1 were not there, how would the honorable and learned senator then read paragraph xx. ? He must know that each of the sub-sections confers, separate jurisdiction.

Senator DRAKE - We must read each paragraph with reference to the others.

Senator Best - That is not my view.

Senator DRAKE - We must always remember that the Constitution must be interpreted as a whole.

Senator Best - Section. 51 includes paragraphs 1. to XXXIX., and each confers separate jurisdiction.

Senator DRAKE - Generally speaking, each paragraph deals with a separate matter. Paragraph 1. deals with trade and commerce, and paragraph xx. with a separate subject.

Senator Best - But each is complete in itself.

Senator O'Keefe - This dialogue between two lawyers who flatly contradict each other, is very interesting.

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