Banerjee v Commissioner of Police

1. [1]

   THE COURT: The applicants are the administrators of a company, United Security Enterprises Pty Ltd (“the company”) which, before it went into liquidation, provided security services to various government organisations, hospitals, banks, retailers and other businesses. It employed about 170 security staff and six administrative staff. To operate the business it was required to hold a master security licence under the Security Industry Act 1997 (NSW). By force of provisions of the Security Industry Act, and cl 13(3) of the Security Industry Regulation 2016 (NSW) (“the Regulation”), the Commissioner of Police was required to revoke the company’s master security licence upon it entering voluntary administration. That step was taken; the practical effect was to prevent the company (and therefore its administrators) carrying on its primary business.

2. [2]

   The administrators commenced proceedings in the Equity Division challenging the constitutional validity of the State laws requiring the revocation of the licence. They argued that the State laws were inconsistent with s 437A of the Corporations Act 2001 (Cth), which empowered them to carry on that business and manage the property and affairs of the company. As the resolution of the question was a matter of some urgency, on 28 September 2018 Sackar J stated a separate question and ordered that the proceedings be removed into this Court for determination of that question. The question was in the following terms:

Statutory provisions

1. [3]

   Section 109 of the Constitution provides:

2. [4]

   The critical provision of the Commonwealth law which is to be accorded paramountcy in the case of inconsistency is s 437A(1) Corporations Act, which reads as follows:

3. [5]

   Although this is the key provision for the purposes of demonstrating inconsistency, it is appropriate to read it in the context of other matters dealt with in Pt 5.3A. In particular, the applicants drew attention to the obligation of an administrator to convene a meeting of company creditors (s 439A(1)), and for the administrator to be the administrator of a deed of company arrangement resolved upon by the company’s creditors: s 444A. They noted that such a deed would prevent a person having a claim against the company before the day specified in the deed (s 444D(1)) making an application to wind up the company or proceeding with a winding up application which had been made before the deed: s 444E. Finally, the applicants drew attention to the powers of the Court to make orders concerning the administration of a company, including an order that the administration should end if the company were solvent: Pt 5.3A, Div 13.

4. [6]

   The applicants submitted that the scheme of Pt 5.3A left no room for the operation of a State law which imposed limitations or conditions on the powers of an administrator. The State laws which appeared to have such an effect were found first, in the Security Industry Act and, secondly, in the Regulation.

5. [7]

   The Security Industry Act provides comprehensively for the licensing and regulation of persons in the security industry. It commences with a general prohibition:

6. [8]

   Section 9 provides for various classes of licences, including “master licences”. Master licences are further divided into subclasses, depending upon the number of persons employed to carry on security activities. The company held an ME licence which “authorises the holder to provide 50 or more persons on any one day to carry on security activities, each of whom must be the holder of a class 1 or class 2 licence”: s 10(1)(e).

7. [9]

   The term “security activity” is defined in s 4(1) and includes acting as a bodyguard or crowd controller, [1] “patrolling, protecting or guarding any property, by physical means … or by electronic means” (par (c)), “installing, maintaining, repairing or servicing … any security equipment” (par (d)), and “providing persons to carry on any security activity referred to in this section” (par (m)).

8. [10]

   A person seeking a licence is to apply to the Commissioner for Police. The Commissioner has the following powers:

9. [11]

   Consideration of an application is undertaken on the basis of a number of mandatory and discretionary criteria, as set out in the following provisions:

10. [12]

    Three matters of significance arise from these provisions. First, all the criteria apply, in the case of an application for a master licence, to “each close associate of the applicant”: s 15(5) and s 16(5). The term “close associate” is defined as follows:

11. [13]

    Were it relevant, there would be no doubt that the administrator of a corporation applying for a licence would be a “close associate” of the applicant corporation. (In fact, the company was not under administration at the time it obtained its last licence and could not obtain a new licence while under administration.)

12. [14]

    Secondly, although each of the criteria to be considered is identified by reference to a state of satisfaction or opinion of the Commissioner, some are defined in concrete terms (such as the age of the applicant and his or her immigration status [2] ), while others involve evaluative judgments, including “the public interest”. [3]

13. [15]

    Thirdly, while none of the criteria identified in ss 15 and 16 address the circumstances of an insolvent corporation, s 15(4) allows for regulations providing for additional mandatory or discretionary grounds for refusal. It is necessary to turn to the terms of the Regulation. Central to the present case are the grounds for refusal specified in cl 13 of the Regulation.

14. [16]

    Clause 13(1) is not directly relevant for present purposes, but it provides, by way of context, an understanding of the statutory scheme which applies equally to individuals who have entered bankruptcy, or applied for relief from insolvency, and to corporations in similar circumstances.

15. [17]

    It should also be noted that cl 14 limits the operation of s 15(5) of the Act, so that references to an applicant in s 15(1)(c)-(f) do not apply to a close associate of the applicant.

16. [18]

    Clause 18 makes it a condition of a licence that the holder notify the Commissioner of any change in the particulars in respect of a licence, within 14 days of the change occurring. Clause 30 requires the holder of a master licence to notify changes with respect to close associates.

17. [19]

    The present case does not directly concern the power of the Commissioner to grant or refuse a licence, but rather the power of revocation. Relevantly for present purposes, that power is found in the following provision of the Act:

18. [20]

    The revocation of the company’s licence was mandatory in the present case once the Commissioner was satisfied that the company had entered into administration under the Corporations Act because, pursuant to cl 13(3) of the Regulation, the Commissioner was obliged to refuse to grant an application for a master licence to an applicant for which an administrator had been appointed.

Operation of Constitution, s 109

1. [21]

   It was common ground that the provisions of Pt 1.1A of the Corporations Act which preserve the operation of some State laws from possible invalidity under s 109 of the Constitution are not engaged. Accordingly, it is necessary to determine whether the Security Industry Act and the Regulation, in providing for the revocation of a licence held by a corporation which had entered administration under Pt 5.3A of the Corporations Act, are inconsistent with that Commonwealth law and hence invalid.

(a) nature of “inconsistency”

1. [22]

   Paramountcy is conferred on a Commonwealth law in circumstances where a State law is “inconsistent with” the Commonwealth law. There is much to be said for the view expressed by Mark Leeming SC (before his appointment to this Court) that there are no categories of inconsistency, but rather that inconsistency arises where “either expressly or by implication, the Commonwealth law provides for an immunity from a class of State laws, which immunity would be qualified, altered or impaired by, and is therefore inconsistent with, the operation of a State law within that class.” [4] As that analysis further explains, the familiar labels of “direct inconsistency”, “indirect inconsistency” and “covering the field” express a conclusion reached in particular circumstances. [5] An analysis of whether two laws are inconsistent will vary, depending on the characteristics of the respective laws. In particular, the analysis is likely to vary depending on whether the Commonwealth law, which may be considered first, imposes a prohibition or obligation, or, on the other hand, confers a right or power.

2. [23]

   This conforms to the approach of Mason J in Ansett Transport Industries (Operations) Pty Ltd v Wardley. [6] The question was whether an industrial agreement pursuant to which Ansett asserted an absolute right to dismiss a pilot was qualified by a State law prohibiting discrimination in employment on the ground of sex. The respondent, Deborah Wardley, was a trainee pilot employed by Ansett. Mason J stated: [7]

3. [24]

   Concluding that there was no inconsistency in that case, Mason J further stated: [8]

4. [25]

   The language of Mason J in Ansett v Wardley was adopted by the Court in Jemena Asset Management (3) Pty Ltd v Coinvest Ltd: [9]

5. [26]

   In Bell Group NV (In liq) v State of Western Australia [11] the High Court determined that a State Act which purported to vary the rights of the Commonwealth and the Commissioner of Taxation with respect to the recovery of tax liabilities of a corporation in winding up under Pt 5.6 of the Corporations Act was invalid. The joint reasons stated the relevant principles in the following terms: [12]

(b) construing the Commonwealth law

1. [27]

   The first step in the present case must be to construe the Commonwealth Act to determine its scope and operation. As explained by Gummow J in Momcilovic v The Queen: [18]

2. [28]

   There is a superficial attraction in the applicants’ proposition that there must be a conflict between a Commonwealth law which allows a company to appoint administrators who may carry on the business of the company, and a State law which provides that the very act of entering administration under the Commonwealth law deprives the company of its legal entitlement to carry on its business. While it is true that without the point of contact there would be no conflict, the fact that the State law would prevent the company carrying on its business when in administration does not mean that there is inconsistency between the two laws. Determination of that question requires that the Commonwealth law be examined, both at a general purposive level, and by reference to the specific provisions giving effect to the general purpose.

3. [29]

   The purpose underlying Pt 5.3A of the Corporations Act is expressly identified in the following terms:

4. [30]

   In constitutional terms, Pt 5.3A, as part of the Corporations Act, falls within s 51(xx) of the Constitution, dealing with trading or financial corporations; more specifically, it would also fall within the concept of “bankruptcy and insolvency” in s 51(xvii). That may be significant because the applicants’ contention may have consequential effects with respect to the provisions of the Security Industry Act relating to individuals who take the benefit of bankruptcy laws. (It also explains why assistance may be obtained from authority to which reference will be made below.)

5. [31]

   As the Commissioner noted, Pt 5.3A provides a mechanism for dealing with insolvent companies; it is not in terms directed to any aspect of the legal framework within which a particular company carries on business. By contrast, the Security Industry Act is not directed to questions of insolvency or bankruptcy, but rather is concerned with regulation of a specific industry, namely the security industry. The nature of the industry, which includes the carrying of firearms, and protecting individuals and their property, including by installing electronic surveillance devices, explains the restrictive conditions imposed on the grant of a licence. The Security Industry Act has no interest in regulating insolvent companies either generally or within the industry, nor with imposing limits on the regulation of insolvent companies and individuals under Commonwealth law. However, where, as in the present case, control of a company holding a master licence is transferred upon the company entering administration from its directors and management to administrators, the conditions under which the security licence was granted have changed in material respects.

6. [32]

   Subject to consideration of the specific provisions of Pt 5.3A, the general purpose of the Part is entirely consistent with the carrying on of the business of a company under administration being subject to the general laws of the State in which the company operates.

7. [33]

   Counsel for the Commissioner referred to three categories of provisions which supported the conclusion that Pt 5.3A was not inconsistent with the continued operation of State laws governing a company in a particular industry. First, he contended that s 437A conferred no broad power to carry on a business. Barrett J in Tolcher v National Australia Bank Ltd, [38] after referring to the powers of a liquidator in the case of a court-ordered winding up, continued:

8. [34]

   Secondly, the Commissioner submitted that, to the extent that Pt 5.3A protected the “property” of a company under administration, attention needed to be directed to the precise scope of the property protected and the extent of the protection. Putting to one side specific provisions relating to liens, pledges, mortgages and other charges, the Corporations Act prevents an owner or lessee recovering property used by the company and imposes a stay on court proceedings “against the company or in relation to any of its property”. [39]

9. [35]

   Entering administration may trigger a default under a charge, and may trigger a power or obligation to revoke a licence; Part 5.3A makes express provision for the former, but not the latter. That distinction is important in relation to licences which are necessary to carry on occupations and businesses and are personal to the holder. That includes licences under the Security Industry Act, which are subject to revocation upon any change in a material particular relating to the licensee and are also subject to the following prohibitions:

10. [36]

    It follows that the security licence was not a form of property which could be disposed of by the company, or by the administrator selling the business or part thereof. Furthermore, the enforcement of the licensing provisions was by way of criminal penalty. The protection provided by s 440D of the Corporations Act expressly excludes protection against criminal proceedings. [40]

11. [37]

    Thirdly, counsel submitted that the Corporations Act itself envisages that licences necessary for the carrying on of a business might be terminated where a company enters administration. Thus, Pt 7.6 of the Corporations Act, providing for the licensing of providers of financial services, provides that ASIC may suspend or cancel a licence of a natural person who “becomes an insolvent under administration”, [41] and of a body corporate which becomes “a Chapter 5 body corporate”, [42] a term defined to include a body that is under administration. [43] These provisions, within a single statute, must be construed to operate harmoniously. The fact that there was no express recognition of a need to give one priority over the other (by use of such language as “notwithstanding” or “subject to”) demonstrates that no inconsistency was perceived. Nor does the language of the Act suggest any basis for implying an inconsistency.

12. [38]

    The last conclusion demonstrates that while a company operating in the financial services industry is not precluded from obtaining relief from insolvency by entering administration under Pt 5.3A, it is not expected to retain its financial services licence having entered administration. In other words, nothing in Pt 5.3A protects it from losing its licence.

13. [39]

    It is possible that Pt 5.3A intended that, for an administrator to carry on the business of the company, it would have to comply with Commonwealth law regulating that business, but would not have to comply with State law regulating the business. While acknowledging such a possibility, that reading must be rejected because it finds no basis in the language of Pt 5.3A. In short, as a matter of interpretation of the Corporations Act, Pt 5.3A reveals no intention to confer on a company under administration, or the administrators of that company, any immunity from the operation of State law which was not to be found within the express terms of the Part. There was, therefore, no inconsistency between the State Security Industry Act and the Regulation and Part 5.3A of the Corporations Act, for the purposes of s 109 of the Constitution.

Relevant authorities

1. [40]

   In addition to Ansett v Wardley, it is helpful to note to two other cases involving Commonwealth laws conferring powers on non-governmental parties.

2. [41]

   First, Commercial Radio Coffs Harbour v Fuller [44] concerned the grant of a licence to the applicant under the Broadcasting and Television Act 1942 (Cth) permitting it to operate a radio transmitter in New South Wales. The Act stated that the holder of the licence “shall commence the service in pursuance of the licence on such date as is determined by the [Commonwealth] Tribunal.” [45] The licence was specific as to the location and nature of the requisite radio transmitter tower. On the other hand, the Environmental Planning and Assessment Act 1979 (NSW) identified the construction of the tower as a development which required consent from the local Council. The Bellingen Shire Council gave consent, but subject to a number of conditions. The applicant argued that the licence obtained under the Commonwealth Act, and the obligation to act in accordance with the licence, conferred an immunity from a requirement under State law to comply with further conditions.

3. [42]

   The joint reasons of Wilson, Deane and Dawson JJ, after referring to submissions that the Commonwealth law demonstrated both a legislative intention exhaustively and conclusively to state the law with respect to the provision of radio broadcasting services throughout Australia, and direct inconsistency given that the Commonwealth licence identified the particular location and height of the transmission towers, stated (at 56):

4. [43]

   Secondly, and closer to the circumstances of the present case, is the decision of the Full Court of the Queensland Supreme Court in R v Builders’ Registration Board of Queensland; Ex parte Snashall. [46] The Builders’ Registration Board had cancelled the licence of a builder who had executed a deed under Pt X of the Bankruptcy Act 1966 (Cth). A Queensland statute entitled the Board to cancel the licence of a builder who had taken advantage of laws relating to bankruptcy. [47] The builder challenged the constitutional validity of the Queensland law on the basis of inconsistency with s 135(1)(k) of the Bankruptcy Act 1966 (Cth), which empowered a trustee to employ the bankrupt “to carry on his trade or business for the benefit of his creditors.” [48] Matthews J (with whom other members of the Court agreed) noted the appellant’s submission that “the effect of the cancellation of registration made unlawful the carrying on of the appellant’s business as a builder and so deprived the trustee of the right to employ the appellant to carry on that business; and because the cancellation and the power conferred on the trustee pursuant to provisions of the Bankruptcy Act … both stem from execution of the deed there is, therefore, conflict and impairment of the powers of the trustee to carry on the business and to employ the appellant to carry it on and leads to invalidity of the State Act to the extent of the inconsistency appearing.” [49]

5. [44]

   The Court found there was no inconsistency, in part because, although the Commonwealth legislation evinced an intention of exclusive operation within the field of bankruptcy, the State legislation was not directed to the regulation of bankrupt estates. The Court also found that the State law did not vary, detract from or impair the operation of the Bankruptcy Act because the State had a legitimate concern with the financial probity both of a person applying to be registered under the Act and of a registered person. The State Act allowed the Board to cancel or suspend a registration if the builder were unable to pay its debts.

6. [45]

   The power of the trustee to “carry on a business of the bankrupt so far as may be necessary to dispose of it or wind it up for the benefit of creditors” [50] is closely analogous to the power conferred under s 437A of the Corporations Act. The conclusion and reasoning of the Full Court in Snashall supports the conclusion reached above with respect to the circumstances in the present case.

Conclusion

1. [46]

   For the reasons explained above, Pt 5.3A did not confer immunity on a company under administration from the application of State laws with respect to the carrying on of its business. The question referred by Sackar J should be answered as follows:

2. [47]

   The matter should be remitted to the Equity Division. The applicants should bear the Commissioner’s costs in this Court.