Ku-Ring-gai Co-Op Building Society (No 12) Limited ; Dee Why Co-Op Building Society (No 29) Limited ; Declarations and orders under Section 163A of the Trade Practices Act 1974 [1978] FCA 107

commerce" - Nature of condition of supply ~ Whether acts

Trad2 Practices Act 1974 ss.4, 47(1) and (6), 51(1)(b), 163A(1); Constituticn s.51 (css) Co~oreration Act 1923

(N.S.W.) s.82; Co-operatives "aculetionrs 1961 reg.35A;

Trajie Practiccs (Reroval of D.cections) Peculations

AND IN THD "MAe™IR of Declaraticis and Orders under

The answers to cuestions (a), (b), (c), (ad), (fe), (1), (c) ard (h) are as folleys:

IN THT of KWARIMG-CAT COmAT RAT AVE PULLING Smo (NO.]2) aa alu 1)

BOWHW C.J. I agree with the sucmaxy of the facts and the

Question (c) asks whether the upplicant societies are financial corporations formed within the limits of Australia. The authoritics on the phrase "finaneral corporations" in

s.51(xx) of the Constitution are meagre. We have the anthority

of Isaacs J. in Huddoert Parker & Co. Ptv. Limited ve. Moor

(1909) 8 C.L.R. 330 ut pp.405-107 for the view that the pever in s.51(xx) was granted to the Conronwealth Parliament in order to ensure there was a strong national aathoraty able to cc.uctvol the transactions of bodies of considevenle size, wealtn and influence, which micht be harmful to the public. Isaacs J. also said (at p.395) that s.51. (xx) empovers the Conmmenwoa! ch Parliament to regulate the conduct of the corperations therein described in their dealings with the public. This, however, assumes that the object to which the pover of the Cownowerlta

Parliament uider s.51 (sr) extend It does not assist in Getermining what corporations are iveclui:i

130 C.L.R. 335 at p.S?4). Counsel for the arplicant societics subritted thot S02 taz

Practices \ct 1974, a financial corporation 16 a corporation

that has a purpose of trading in noney, evinced either in 2t- constituent doctucents, or in its activities, or in a combie.i o of both. IF that arvvrent 1s soand, it would seem tnar ne

corporation 16 arnclude?d within s.81(:.) es a finene..ut cer w2.7

corporation. Trading includes trading in intangibles such as moncy, as well as in goods. Counsel for the applicants arquod that jn 1900 it may have been thought that a trading corporacicn would only compichend a corporation buying or selling voods, that being then a current conception of trade. In order to include within the scope of legislative power those corporations which commercially borrowed, lent or otherise dealt in money, the words "or financial" were ancluded in s.51(sx). But 1t wos said, the commercial nature of a trading corzoration should alio attach to a financial corporation.

I do not consider that there 1s any reason for interyprceiu~ s.51(xx) so as to subordinate the meaning of "finanerol" to tact

which borrows and londs or otherwise Ceals in finance as ics principal or characterist_c activity or, dependang cn which approach one trkes, 1t 1$ a corporaticn forred for the ru. os of borrowan¢e and lending or other. ise dealing in finance. TF

it does co in the way of trade it vay also bo a trating eco slat

eosary featacc of a fananctal cores rac The phrase "tradine or f2nancial] corporations" has a ¢Cistrinpa cs

Operation, and neither adjective qualifies the otner. YPurthar. -

although the connotation of the words used in s.51l(xe2) rerocies

constant, their denotation may charge (Tne xing v. Brislan;

Do the aprlicent socictics foll within tue vords "Fanuc. .

corporations"? The purpoce end activities of tne arylicinis ). However, uncer the loan

agreements, inmgarance was reqiired to be oeffected witha company Within New South Vales. because reg.3 removes the exception and e:roses the applicants to contravention of s.47(6), I would answer qvestion (g) no.

Although the applicants are not protected by s.513(1) (b),

the ansver J have given io giucstian (£) Jerds ame to the

I would answer the questions raised by the Special Case,

in respect of cach of Ku-ring-gai Socicty and the Dee Why

5 . F . F Wheelie guenk ecaletu tgs 2 trading corvceat ln fompe luttt ta tym tap fh x ar auele ride Lp fs ce E ° nae 1 > ' Many Te Loa I. awa 4 Oye are tm Seeri~en (fd ar ere "ide Foals Foves Aeoty fare, It is unnecessary to answer this question. fed Fleer lial cams. aoe

ra . 7 -7 4 -~ oa thy 44 - aos rv or a formu Tolen 22h te 3: we 1LE9D Oo F won 4 aie tf 7 Ta ser ty Ty ey © ye ,O% in Secilon sl., of tea Traio Paces At, 80s. Yes.

wie ti Cel ot ve ether to? ae ae de Crates a fF) ar fig 7

Ty ne Sse "y 49 Wretncop Irge72 a7

• • a ~~ - 7 rpop A wel, purpoet ta owed epina * ~Jer oo OuLat o 7 tee t . Lote Commo. ait ¢

. rroperiy ct, sire lag 7 } . gee ani then, : 7 , POON ES Gh TivevvGlse Welk x company Por appeape? by euch ecgretu t F contraven: tee provicteme of So vri 7 . : ood : the Aes by vivrrue cf Seetr-i 27 (0) oj bh: reat Aet, lari. No. Whetngp 72 Seetive Plies ta the Soetei, eo trate Poot rhe tat Pequtre wrth po.as a a rr

ae + ak . ot : itodge ot, > "Nye mae eM ue Gh VOM Slr oe, CV Tarts Sleste

• . raed - +t _ eu a OO 3 oot a oN ee nm Tan Malet en he toe ' . at Te . & ae' ' - = fe

wouid order that the Comnissicn pay the apelicanes' costs

IN THE MATTER OF _KU-RING-GAT CO-OPURATIV J ~ LLY (NOw2) 09

AND Li TAL MATeRP Or Di CO=OPLIGTTIVE RGTLDIG SCCEL

The stated case and its annerures ave analy - : in the judcnent of Deane J. which I nave hed the advance + of reading. I agree an the answers proposed by his Loncve to the several questions ra2sed by the case; anc cxecpe to the extent that these reasons depart from the rcetons expressed by his Honour, I concur in his judgnent.

5.1634 of the Tre ve Pruci tess net 1974. They will wcer

nominated by it, and if the Ku-ring-gai Socicty requires performance by its borrowers of their undertaking to insure with an insurer nominated by it. The reality of the risk of prosecution, and the certainty that the applicants are engaging and wish to continue to engage in a practice the lawfulness of which 1s challenged by an authority competent to prosecute, show the present case to be one where a declaration mignt properly be made, and where the declaration sought should be wade if tne

challenged practice be lawful (Re Trade Practices Act J97-

19 ALR 191). In determining waether the challengua practice is lawful, questions of the validity of s.47 of

the Trade Practices Act or of its construction in conforurtty

with the Constitution may ar'se. There is ample jurisdiction conferred upon this Court by $.1637. to

determine those questions. (See In the nutter of an

application by Tooth 6 Co. Ltd. [1978] A.T.P.R. 17805}.

Section 47 relevantly ap lies to trading and fanancial corporations as they are defined by s.4(1) of the Act. That definition - "a trading coxporation formed within the lamits of Australia or ... a fanancial corporation so forred" - cchoes the languace of s.51(x) of the

Constikrutzon which, proaing Cras upon as a soures of pover '

phrase "trading or financial corporations formed within the limits of the Commonyealth" denotes two classes of corporations locally formed, and that criteria of classification are necessarily to be applied to distinguish between those corrorations which fall into one or other of the stated classes, and those which do not. The subjects are not arenable to classification wiachin the natural order, for corporatiors are artificial entities htviana no enisterce save to the c.ttent prescribed Fy a system of law; yeu Clu description of a corporation as a "trading" or "financial" corporation refers to a factvrl activity or function and imports a nerus of some kind batween the activity or functitoa and the corporitiron,

there concviled to Ccetorriaus the cl iss1in St.Gcoruc County Cowivil, @ corporation creeted vider tre

trading activity as 1t was ewpevered to do. Thoair Voneurs' reasors for judgiout show varying ipproaccacs ro the criteria of classifieation, and no single ratio decidend2 appears.

Corporskien Fs, a Faritrewe of als clarcectler. He said

"TL sears to,e than tne eetivities of au corpuration at the time a Jaw of Parliavent

21s said tu operate vpon it will dotermine Whether or not it satisfies the statutory

and therefore the constitutional description, Thus, in my opinion, the rvdentifacation of

the corporation which falls within the statutory definition will be made principally upon a consideration of its current aclivittres."

NcTrernan J. construed the Act as exhibiting a legislative intention to apply to trading corporations which were engaged an a private enterprise and to exclude corporations which co:.jJuct a municipal] trading uncercating.

"Tt cen huedly bo 2 tieab tha Jcalwielure anterstd any col: EN eraucs. ine pre. til ef .a2 Pre L9O7L(Sch.) oe Et me act "as mide. weg ot Co voit on Li 2 Cy et recury d py the Pivolic LEST Nacucaliy en ec Lo percutnany ce - ps NULQLpruse

Couner] or or elceuraca) aeons 2b taaely to wr Gums OL money @% profits. FEF tne Council's of the unaéerichaing is revenue-ored tering that doos rot chenya tre Churacter cr tac enecut prise i u

Menzies J. rejected tho actavitres test us sutficient by atself, pointing Lo the siveral kinds of coLrpordvions Vhiea are nol tracing corporellers tnevsyh boty

ON > in sO att ane eo rbraewL is, Mo ydded (at y.554):

it 1s not mv purpose to attempt to @efiane all that ralis wrthin the limits the classircicution of 'trading corporation', Rather, I am concerned to indicate that the Clausuifieation has lamits 2 these liwits

are not to pe ascertained simply by asking ° the question "Docs the corporation trade?! As I have tinaicated, meny corporations which

cutside tne limits of and one group of corporations

that is not coupreheracd 18, in my view, corporations of an ecsantially diiferent character, nucely corporations for Local GOveLMncAL nurpo cs." Gibbs J., reyoetinyg the activities of the Council as sufficient by therselvas to determine its Catevorlzaticn a8 a trévine corporation, said:

" A treding corn. reaction 1s one formcd ior the puss CF -Oang. olorovor, as b have mete. od, tno wwre ect tle. & cavvrertion LS Treai.ig Geos NOt thn that at as a tracing eorrorrticon., It is neo cer La fetus ca tae rra. Coaleiiar ect te PEEL BERET T, "an a consicerst ion e1rreuntt chat

thre? Lc tate ent Foxu.. ad, wus vi holé.ungy wict the carrice aa ct

1atution of che ctreora at 18 required to fali.t Gibbs J. suid:

" The crucral question then 1s whether, because the County Council vas sel up to conduct, as 115 sole or at least its dominant activity, what may, for sone purposes at Jeasr, be described asa a trading undertak-ng, it 1s therefore a treding corporation. To say that the County Courcil was formed Cor ine puLlpose of trade seams to me to state a nalf-truth and to ignore a numeer of sienisrveant eireumstanc2s that reveal its true nature. It as clear that the County Council vas formed to fulcil a rereccron i w2ed was Give nN vy the Ace

prirarily to mu.iecips) and sh: which it Vas Aap sarently censidvred might more benerficrally ov wrercisedc br rn omaythoarity

operatanyg wethi1a awider area then that of one municipality or shire, That funcrion 1s cask

upen ebro Cooney Courier) ier wcticn taken ny tho Goverror uraer Mtoe ity or tac .ct. he prounaypal the "onecron 2° tra snoriy

e.sonti2) eam. Life - and an fultriling 2s funebica i Correo] ~ st enerer.G ths YeS Cavite. Los tne o,actiiL cf

the areas an the Coanty Oistrict. The Comnty Cou Noa Ore 2 ers are

Golo .tes Dy, GMA ale ctnew .etveas ii dors Of, TMa ec COri a1S. TH west saroly the cl cer. J diets aS Creapir a. pocsible 2 efore must n9nt zim ta «s-e@ a procit. % Liev ma ea a to. e rsdn ean oly L eT rerOvadire FOr the waters montlrar ad 1) of tna fet, and wall net enare for te oF Reveers of the Corah_ Co, moots VoLVvaed ene? taicls, Ine County C i to lovy caves, ard IES C.theI SCs vo be vat by tie constituent council . 7 ay bo.vo. uoreyvs unces Urans ity guarantes, when ali tnese fucrs are corse ored,

auyghedat1oa of Tuccl undar conditteone trom to wut yO seneficacld to ther, Th ie pron a Min ci pes

" Again I would of course acecpt that every corporation which happens to trido is not a trading corrorétion, tue engaging in trading activitzes anerllary to 'ome other principal activity cannot make the corporatrian o1e properly @eseribed as a trading corporation, But that preposition nas po relevance in the present case since the Comety Corrcil's activitins, boly as conte nleved ty the teras of its creation end as they are in fact un@ertekun, are concerné¢d wath tradiug and with nethiug cise, "

In each of these judamants the prefominant activity ain wutch the corpocuticn cngage:s oF which 1t

vas formed Lo wy. j@ Un Was rewiied «Ss cacher in@icc tyra

chavec.u.r. But in the view of the majority, Other features sho «d the subject af

corporatiou LG re in 4 caceyory which 3s cvclusive of

"trading core ratione", mai therefare te ite outs: O> the

ambit of Cor oivealth Pegisletie? peir. The relevant

category wos 2elnrified as local covernernt or menreical

corporations, ord the crresm chow inat the St.Groerge

County Council was forned for tre purpose of cond.wctine

undertaking" and tradea wecord neoly dad not take the Covneil out sf thet category. Tie minarity were nol so

concarned to veny the Cound) t)> enceractir of ao narseai

L 22 Patpdto. corpsration, hut tney regarced Aual cheroctorivzation as

corseritoenm"™ ooteor or neh stor cg alro vith bho

category of 1mnicipal corperation (see pp.543,573).

In choosing between the categorics, a number of features was referred to in the majority judgrents: the public character of the enterprise (pp.548, 564), the purpose of the Council's function (pp.551, 565), the povers of the Council (pp.551, 552,564) and the nature ol its borrowings (pp.552,564). These features were regardeca as the relevant criteria for placing the Covneil within a category of corporations which evelyded trading corporations (sce per Gibbs J. at p.565).

In the present case the relevant incwviry 15 whether e:thec of the applicant corporations 15 a financial corporation. Unless some feature of 115 constitution, or purpose of incorporation, or manaconent, would place it in a category which 1s exclusive of the cateqory of Financial corporation, its predomiaant activity must be recardea in order to ascertain whetnaer it answers the relevant description, Tts precomimmant activity 1s the activity which ait was Sormed to undertake - the borrowing of moneys to lend to its members, the lending of those moneys, the receipt of repayments and the ultimate repayment of the moneys to the source from vhich thty cam. Those are money dealins.. The activitics of borrowing 2n order to lend and lendiig at interest are financial activities which give to cach

of a financial corporation, It 3s no doubt right to describe the applicant socictics as co-operative societies or, more fully, as co-operative terminating building societies, bui that dascription neither places them in, nor removes them from, the category of financial corporations, Nor do the features of each society - Lts constitution, orcanizction and aanigaaent, the source

ana nature Of 1ts borrowings, its subjcetion to governmental controls - identify 1t as falling within some category of corporstion when excindcs abrancial

COYTPOLTALIONS, It zs net no neogoceasry ta aceternine

whether either cocicety 19 a trauing cozvoration, or the

an@ fanancial cosvporet.ons coinside, practices of cech at ui eent sectaty vere tivs e« er mde toa

Unlees an exerption 315 to be found elsewhere, s.47(1) anc (6) «3:ld yprourbit esch of ine applicant soc.cties frou engiging in the practice of making ioans on condition that tne Lorre ir taxes out an insurance

policy with a nomenauted cenpany. Scectren 51(2) (>) of

the ') -de Practices stonas relaed on to furnich such an

"(1) In determining .bether a contrivention of a g provision of this Part has been cormiited, regard shall not be had -

(b) in the case of acts or Lhings done in a State - except as provided by the regulatiors, to any act or thing that 1s, or is of a 'and, specificaliy authoriceae er approved by, cr uy reeniaksons

under, an Act passed by the rarliacnt of that State;"

Where an act or thang has reeerived tha crcorfic autnoriecc ins or approval mentioned in s.5](1) (yo), 1t 98 incarchble of forming a part of that body of facts which rust be proved

to establish a contliuvenczion of s.47. Sawtron 51(1) (bh)

opera*es distriabutively cver cuch of tao ultimate facts

(being actus or thirgs) which tegcianr waynes others ise

constitute a contraveition, That 1s not to sey That the ultamate facts are to bt 30 sreclvaed into thoir coneeptued constituents that the relevant mavcure of the acti or thingy GQ-samve2ars, The tatery of a leon on condirion t..L tne borne er takes out an insurance polacy "len a ro: sacred coupany £5 not the waeruyg of a loan siwrlscicer, wiin the

amposition of tie condilion being senmaratuly suneroddnd:

it as the meking of a loun uron the steked condition, The G x

The following matter is prescribed pursuant to ction 82(3) (2) of the Act to be set forth in the

The manner in which the insurance of any building or premises che subyect of a mortgage to tne society 18 to be effected and whether the insurance of that bui]ding or those premiscs 1s required to be etfected with an insurance company or insarance society specified, nowirated or epproveu by the society or Lhe board, "

prescrabing the ansertion of the reuuirenine an Of cha -ociety. Tie erevaision no docht as-uws cgu.lrcehont as layltul, for 1t 18 nov. to he thougnt esulakbticn prescribes the crearion of unlasful under th2 rules of the soctery. It 35 one thins to assume that 1t 1s Javfnl

of Jendaing vpon the relevant condition. It 1s conn place tLoat Crace laws assume the Layvfulnes:, va : ' roo ate

noo ocho: Orads Pp "hieg a Cet, for Part IV of thot Pet

is concerned for the most part with trading practices which would be perfectly lawful if 1t were not for the provisions of that Part.

It is a consequence of the enactment of Lhe Trade _

Practices Act that practices hitherto lawful are proscribed

by Conmmon..calth law, Section 51(1)(b) linits the operation

of s.47 so that the lavs of a State may defire the acls or

things which do not fall withon the prehilbictons of 8.47,

rom The bouncerres of this Alsuatia are to Le chosen, in the

farst 1nsia:rce, by the luvs of Lue relevant Scate, Buk

\ 7 7 - 5 . ~ or yop, oa Lhe approvriatc Seate lesislicion whicn c.cre2ten che

ered, TPG pessrt att specaric lly Aubborac? or apurove Lac

act or thang, tpakb ac, pt walt muir le ie) intention taut the «ct or tning, if daore aay, shall

Cavil Oo. criicnal, 'ole sur_, te do not levfulness of ects or things sateh aro rot otherwise proserivod, 2 4t a Jo aslétice .seummtion of cle Jew cits of an act or thing is net tantamount to a specific auchorizetion or approval] of that act or thiny; What 1s necessary 1s that the Stete Tas should esinb2r' a specific Tegielative ancention to anthoer1i72 or cporove

for the roves tons oF tne Tria Practices Act - be unlawfal.

Regulation 35, +3 NOt SO drawn ag Co give that Specific authorization Or approval

case in the manner proposed in the judgment of Deane g,

tee sae T acrenet neretn ct pay mone Rd. TS LOT du | AvoCC1a148 '

) ) NEW SOUTH WALI S DISTRICT REGISTRY ) No. G64 of 1977 ) GENERAL DIVISION )

IN THE MATITR of KU-RING-GAT CO-OPERATIVE SUTLDING socn Ty TNO. T2) EU En

AND IN HL MATTER of DY CO-OTERA LTV SULT CO. 26) TEM res

OF THE TRADL pracy isis SOT rv CORAM: Bowen C.J., Brennan and Deane JJ.

DANE J. This 1S a Special Case Stated in proceecin, 3 by the applicants, the hu-ring-gai Co-Operative Building

Socicty No, 12 Limited ("the Ku-ring-gai Society") and the

Dee Why Co-Operative Building Society No. 29 Limited ("the

Dec Why Society"), against the Trade Practices Commission

('the Comeission'), for declaratory relicf, pursuant to

s.163\ of the Trade Provtrees let, 1974 ("the Act"), us to

provisions of the Government Guarantees Act 1934 (N.S.W.).

The moneys made available to the Ku-ring-gai Society were offered and accepted on the condition that the loans by the Society be to enable the erection of new dwellings or the purchase of new dwellings erected and not previously occupied. The moneys made available to the Dee Why Society were offered and accepted on the condition that loans by the Society be,

in effect, restricted to enable the erection or acquisition of dwellings within the Sydney suburbs of Manly and Dee Why.

The Ku-ring-gai Society has corpleted its pro to members and, being a terninating society, its future activities can be expected to be directed towards receipt of the moneys cue under the nortgages granted by menbers, payrent of principal and interest in respect of the loan fror the Rural Bank of New South Wales and, ultimately, voluntary liquidation It would, however, seem at least theoretically possible that it could nake sone future loans to menbers. The Dee why Socucty

had not, at the time of the Special Case, actually conienced ¢

: making of loans to 1ts rewbers. That activity has, na deabt,

now commences and I shall refer to the Dee Why Society on the

basis that 1t has caamenced to make loans to 1ts nenbers.

The income of the applicants 1s derived fron intere:? paid by nenbers upon loans sade to them, management fees, fines and discharge fees paid by menbers and allowances and

commissions received Fro. mnsurance companies. The revenue

of the ben Guar, weaeye cat feos and acciastretive capoa ol.

The applicants neither receive money or deposits from the public

nor lend to the public. Each confines its borrowing to the one overall loan from a bank to which reference has been made.

Their lending 1s, under their Rules, restricted to lending to their members. They do not conduct their activities for the purpose of making financial profits but, subject to a loading

of less than 1% per annum charged as a contribution to nanageri.s and administrative expenses and a difference between rests for calculation of interest, lend to their members at the same rate

as that at which they borroy from the relevant bank. In the

event that an overall financial profit as found to bhuve re fo,

from their activities when the occasion for their voluntary liquidation arrives, any surplus is, under the Rules of cach applicant, to be distributed among the members propertionstels to the amount of the principal of their respective loans. Anv accumulated losses not written off at the comnencerent of voluntary winding up are, under the Rules, to be borne by

The applicants perform an important soc1él funeticn of assisting in the provision of finance to enable the acquisit- 1on and erection of dicllings. They perform their functions under strict governmental supervision and, in the perfornance of them, participate in the implementation of governmental policies of encouraging both the availability of housing to family units in what was referred to in argunent as "the lower income groups" end the erectryon of new housing by

the bu tdi aed tr. Mars cut d se ynadte tents ardor orto -

1Ons Canpoowd by Reevlateas s wide uncer the Co onperdeoioi y a -

or, less formally, by direction and advace comyunicated thivcsh

the New South Wales Registry of Co-operative Socicties) extend,

in the case of societies which, like the Ku-ring-gai Society, receive funds made available under the Commonwealth/State Housing Agreement or which, like the Dee Why Socicty, operate with the aid of a New South Wales Government Guarantee, to matters such as permissible sources of funds, the content of mortgages given by members to secure repayment of lcans, the maximum amount which can be lent to the i1undividual member,

the maximum income of a prospective borrower and the maximum value of improvencnts of the house for the purchase or erection

There 1s a degree of confusion in the Spec2zal Cass and annexed matcrial as to the terns of the requirenent as to insurance of the mortgaged property which the applic.nts impose and, 1n the case of the Dee thy Society, the Special Case (paragraph 28) incorrectly states the effect of Rule i7 of the Society's Rules. The rules of cach applicant each case) provide that the Society itself shall effect the relevent ansurance in the joint nanes of the Socicty and the

member with an insurer specified by the Society and provide trut the member shall reimburse the Society for the premium vithon

14 days of 1ts payment by the Society. The standard form of mortgage used to secure the repaynent of moneys lent to menbers provides that the mortgagor (1.e. the borrorang menber) :311 repay to the Society in accoidance with the Rules for t being of the Socicty ali premiums for insurance effected hy whe

tempest on all bualdines and nie ses the subzyect of the 1ort-

gage provided that the mortgagor if required by the Society in

accordance with the Rules for the time being of the Society will insure against such loss or damage such buildings and premises. Since there is nothing in the Rules which authorizes the Socicty to require that the member effects the relevant insurance, the reference in the form of mortgage to the Society's imposing such a requirement "ain accordance with the Ruics'' would appear to be without content with the result that the only operative provision of the mortgage in that revard 1s

that the insurance be effected by the Society on behalf of

On the other hand, the Special Case (paragraph 15) defines the requirement imposed by the hu-ring-gai Secicty as being a requirement that the member himself effect insurance on the property to he mortgaged in the joint names of the member and the Socicty "as owner and nortgazee respectively

and for their respective rights and interests" with a nowingice

insurance conpany (in the case of the Ku-ring-ga1 Society tne Australian General Insurance Comrpany limited). The Specia: Case (paragicph 28) states that 1t will] be the Dee why Socici'' practice to require borrowers from 1t to insure with a noracic. insurer. The statement of the relevant requirement in this form (i.e. that the insurance be effected by the member) finds some support in the annexed material (see Clause 5 of the Ku-ring-gaj Society's Standard Conditions of Loan}. When the discicpane, betreen the practice us stated in the Snecial Case ad the npr rere. 6 © the Mat og ye wr apesd an the corse of arouweht', Cie Co ullst do) asa sted toat pellet out uract!

was as stated in agreed toirms an the Speciul Case and no

application was made or foreshadowed by the applicants for a

variation of that statement of the practice in the Special Case. In all the circumstances, I consider that the questions raised by the Special Case should, at least in the farst instance, be approached on the basis that, notwithstanding

the provisions of the Rules, the relevant practice 1s as stated, by agreement between the partics, in the Special Cause and that the requirenent is that the borrowing member effect insurance of the subject property with a particular nomineted

Commission is paid by the nominated insurer to the relevant Society in respect of premiums paid under the policies of insurance effected or maintained in complicnee vita the requilerent relating to insurance. In monetars, teri, to amount of such commission is not great. For the year ended 31 March, 1977, the total of such comu:ssion received by tac Ku-1ing-2a1 Socicty 1.235 less ther 3400. Such coimissic: 367

however, in relative teins, male a significant contiibutivl.

The Special Case raises, in respect of cach arplicant, eight different questions. Those questions involve consiicr-

ation of certain prelininary ratters going to jurisdictavi ond

discretion and of four substantive issues between the parties.

It is convenient, before going to the actual questions, to

examine those preliminary matters and, if it is appropriate

that the substantive issues be dealt with, those four sub-

The four substantive issues between the parties are'

Whether cach (or either) of the applicants is a "corporation" for the purpasces of s.17 of

If so, whether the provisions of s.47 of the Act ian so fa1 as they purport to apply to that applicant are within the legislative

If yes to (1) and (11}, whether the condit- 4 or requirerent as to insurance or the practice of lending upon that condition or requirenent is to be disregarded in deteimining whether there 18 any contravention of the provisions

to insusance constitutes, in the abseree a7 authors ataea snder the \et, a centraventocr

The preliminary matters coing to jurisdiction and Ni g J

discretion are whether the Court has jurisdiction to grant declaratory relief embodying the answer to (ii) supra and whether the Court should, as a matter of discretion, grant declaratory relief embodying the answers to all or any of (i), (ii) and (iii). These matters going to jurisdiction and discretion arise at the threshold. It is desirable that a conclusion in relation to them be reached before consideration is given to the substantive matters in issve beti.cen the

Section 163(1) of the Act provides, for present purposes, that a person may institute a proceeding an the Federal Court seekine, in relation to a matter arisipg uwnacr the Act, a declaration as to the operation or effect of any provision (other than provisions not piesently relevant) of the Act and that the Court has jurisdiction to hear and deicrr-

mine such a proceeding. A daspute between the Trade Prac

Commission and a person as to whether an actual or proposed course of conduct of that person will constitute a contrarvc sic of the provisions of a section of the Act is, in my view, af s.5l(xvl af the Constitution subiect ontv to the qguulad satin thet ee soya ck "bbls Cory owet tes

the definition section eatcnds vo include beAAdng and deste ce

companies which may not, 1m the light of the express provisions

conferring legislative power in relation to banking and insur- ance which other placita of s.51 of the Constitution contain, be encompassed in the reference to financial] corporation in placitum (xx). (See the definition of "financial corporation" and "trading corporation" in s.4 of the Act; The Queen vy.

Trade Practices Tribunal Ex Parte St. George County Council

(1974) 130 C.L.R. 533 at pp. 538, 555; Bank of \eu South

Wales v. The Commoni.calth (1948) 76 C.L.R. 1l at p. 204).

"trading or financial corporation". There 1s no authoritative judicial statement of their ambit and it is inapwropriate

to attempt to frame a comprehensive definition of them an their conteat as the subject matter cf a constitut.onal

grant of legislative power. In the St. Georve Comnty Cannes]

Case (supra), there was an unresolved divergence of judicsil Opinion as to whether the questson whether a corpsiaticn 2 é- within the words should be ansitered nrimartlv by refererce to ats actual activities or by reference to the purnose Sor +" it was forued. The distinct1ron vectneen pessibie primers rc 7Lr- ence points may, 1n some cases, he of crucial anportanece. 'the present is not, 1n my view, such a case tor the reason that each of the applicants in the present matter «as formed for the purpose of carrying on the very activities which it in fect

corporition™ an the context of both s.5ttss) of the Can. tito and the definition of "corporation" in the Act aire composste

ones. [Tach phrase refers to a corporation which can appre)p-

riately be categorized by reference to activity whether actual or intended. The fact that a corporation was formed for pur- poses or with objectives that might legitimately he advanced through trading or that it in fact trades will not necessarily mean that it can be appropriately categorized as a trading corporation. Nor will the fact that a corporation was forned for purposes or with objectives that might legitimately be advanced by involvement 1n financial transactions or that it occasjonaily nas dealings in finance necessarily mcan that 3t can appropriately be categorized us a financial corporaticn. Trading activity or deuling iy finance (whether actuul or intended) w2]1 be decisive of catesori-ation onlv where the overall curcunstances a21e such that the corporation can

appropliately Le categorized by reference to such ectivity. 1 a & Py /

It was but faintiv submitted on behalf of the Commission that the present applicants are trading cerperctic.

Even accepting, as I do, that a much more exterded scone srt

be given to the concey;t of "trade" and "traving" than the Pui.

and selling of goods (see Runk of New South heles v. The & FS 2. aN

Comuom.calth feumra) at p. 38]; Strickland v. Rocla Canc

Pipes (1970-71) 124 C.L.R. 468 at po. 489), I incline to the

view that noither apnlicant can properly be catesorited as a

tradins corroretien, itis, however, unnecessery thet I express ear conetuded wien an that aueetion The pranayy 1s.

purposes, appropriately be categorized as financial corporations. In my view, each applicant should, for the purposes of s.51(\x) of the Constitution and the definition of "corporation" in

As has been saad above, the phrase "financial corpor- ation" 1s a composite one. It does not refer to solvency. An obvious reference point is to the activity of commerciel dealing in finance. Another possible reference point 1s the provision of nanayenent or advisory services in relatro" to financial natters. J use the words "dealing in tinance", for want of a better eapression, to refer to transactions in shien the subject of the transaction is finance (such as borrowing or lending 1oney) as distinct froin transactions (such os the purchase or sale of particular goods foi a monctary consiler- ation) an which finance, although involved in the payment cl the price, canrot properly be seen as constituting the se .ect of the trunsaction.

Section 51(xx) of the Constitution confers upon the

Parliament of the Conwonwealth legislative power with respect

• ¢ TI a» ad Cor ol ~ applicants is te be effected. The Special Case de

i relevant requirement as being that the menber must cffect

the insurance. The rules of cach applicant provide that the ansurance will be effected by the relevant applicant. Jt would, however, be a compairatively minor watter fur erther the rules or the actual practice of the applicants to be sancnded to remove the discrepancy and 1 approach the considerition of the question on the basis susacsted on behalf of the apjpiiciat napely, that the prainary question is whether either the

provision actually appearine in the rules or the practice 0. lending upon the condition s¢t out in that provision is, for

eo > the purposes of s.5iyft)(b), specs facally authorized cr approved

The effect of regulation 35.4 as to add a further Matter to the nany vhich musi, by reason of the specific pre-

visions of 5.87 of the Co-orcratien Act, be vet forth im the

dues NUe wiutee te ars Pe qtties ur gy de, J canteue oF tire

relevant proviszon un the rutes. It indicates no pie feronce

as to whether the requirement that insurance he effected with

a specified, nominated or approved insurer should be imposed

or as to the manner in which insurance is to be effected. It simply requires that the rules specify that manner and indicate whether insurance with a specified, nominated or approved insurer 15 or 1s not required. The question whach arises 15 whether such a requirement that the rules of a society contain provision on a particular subject matter can properly he seen, for the purposes of s.51(1)(b), as a specific authoriczation

or approval of any particular provision in the rules which

Regulation 55.\ adopts, in its failure to indicate any preferred content of the required provision, the apy roach found in the sub-cluuses of s.82(1), (2) and (3) which preoerids specific matei1al which the rules are required to set forth. The prescribed materia] as designated, wn the case of scme «7 those sub-clauses, by a general reference to subject natter. Thus, for example, s.82(1) requires that the rules of 4 registered society set forth, inter alia, the nave and the objects of the society, the munner in which the funds or tho society are to be raised and invested and the puiposes to which the funds of the society aie to be applied (s.82(1) (33, (d),(f£),(g) and (h)). In the case of other sub-clauses, the material to be set forth in the rules is, by reason of its nature, described «ith greater particularity. Thus, for examn}e, s.82f3) requires that the rales of a rep stored bu besa soete te uth oe Lo ret a te Te eb MOT Shae tt oe

Withdrubn ane whether the sucdety 16 2 non-termindting suerers

(s.82(3)(c) and (a)). The requircnent introduced by regulation

35A that the rules set forth the manner in which insurance 1s to be cffected falls within the former category. The require- ment that the rules set forth whether insurance 1s required

to be cffected with an ansurer specified, nominated or approved

When a statement has no purpose or effect other than to convey information as to independently existing facts or circumstances, a requirement that the information be stated may, 1f appropriately worded, constitute both general prior authorization or approval of sone undetermincd statenent conveying the information and specific authorisation or approva) of the precise accurate statcnent of the inforiation. It 1s, for example, possible to sec a requirement or instruct- jon that a person state his name as constituting specific authorization or approval of a precise accurate statenent satisfying the 1cquirement cr instruction. The positron :-, however, different 3n a case such as the present where the purpose and effect of the required statement 15 not sa luted and the statenent 18 not a statement of independertly cxistine

The rules of a registeied society themselves constitet the compact between the members. They will ordinarily be adopted at the inaugural meeting of the society. They celine

the rights and duties of the menbers of the sovlety. They

are reeistere? amder the Co-onersatiar let and have omerative

Obtect beur cs be gras eat oe ttl: ehotoe eeeborro oes

the matters wheeh tnev regurte. The watertel whieh thes set

forth cannot properly be seen as material set forth solely or

primarily for the purposes of information. The statement in the registered rules of a requirement as to insurance with which a member must comply is not only a statement of the requirement. It is also the source of the obligation to observe it. The prescribed statement 15 not one of andepend- ently existing fact or circumstance. The setting forth of the reJevant statement in the rules itself constitutes both the adoption and implementation of the particular socicty's actuel policy on the specified subject which the rules are required

set forth whether insurance 1s require? to be effected with a nominated insure: ay properly be seen as constitutine legislative approval or authorivution of the inclusion in the rules of an unspecaficd statcment on that suojyect. in

my View, lho.over, it ro rere consiututcs of rele avtnurir.s or appreval of any perticular stiienent on that susjyect ratio which the rules of a particular society misht centasr than docs, for example, the comien leqislative® requireseat svcurt a> that pas1icular matters be set out jn the prescrived written menorangun cf a money-Jend3sng contract constitute sneciafic les

lative authorization 0) authority for the partacular provitzic 34

which epre2y ap a particular contract (see, for crample, "oS i.

Monev-leneers and Infants Joans Sct, $.22(2)). It follows

that that requerenoat eoes ret, mc vier, censtitute spevaric

of erther oper eat tat piadrane® we dh ao partacdlar ue cn cee

unsurer 1s required. Tf T had Leon of the vic. that the

requirement coule constitute specific aperoval or authorization

of a particular statement which was actually set forth in the rules, a further question would arise as to whether the ambit of the authorization or approval extended beyond a statement that insurance with a nominated insurer was required and covered the actual naming of the particular insurer either in, or in

It follows that, 1n my view, the provisions of regulation 35A do not specifically authorize or approve any particulas provision an the zules of a icylisteiced suciety requiring insurance with a noninated insurer. Nor do such provisions specifically appreve cither the act of lendinz to members on the condition that insurance nust be effected with a particular noninated insurer or the terms or content of such a condition. In the result, it 15 unnecessary to express in view on the argunert advanced on behalf of the Comnissicn to the efrect that the practice of supplying on the conurticn cre not enjoy the protection of s.51(1)(b) for the reason th regulation 354 .as not Jinitec to "acts or things dune 2:

New South ules or the argument that the effect of the Trade Practices (Removal of Exceptions) Regulations 3s that the protection of s.51(1)(b) 15 not available in respect of

the requireacnt that ansurance be effected with a nominated

Section 57(1) and (6) of the Act provide, for present

"(1) Subjeet to this seetion, a eorporation shalt nol, tn trade or commerce, engage tn the practice cf cxelusive dealing.

corporazian curneics . i . will Geqvire ... corr . ov decerint on direc!

Section 4 of the Act defines "services" as gncludin., "any raghts (ineluding rights in relatien to ... personal

property) benefits, privileges or facilities that arc ...

provided, erented or conferred in trade or comrerce, and

without liniting the eencrajity of the foresoins, includes the rights, ber

agdan-t bated. lier the point or vice of the Savaety, alicou.

in the cyent of destruction ot dunaeo, a dearee of flexibilsiv

which might otherwise be unavailable. Indeed, insurance which is confined to the mortgagee's interests only will, in the

event of damage, plainly be likely to raise difficult problens in quantifying the loss actually suffered by the mortgagee.

From the point of view of both mortgagor and mortvagce, a joint policy with one insurer prevents, in the event of destruction

or damage, disputes betneen insurers as to quentun of respect. o liability and eliminates the possibility of a short fall

resulting from a gap in the cover provided by separate policies.

It was not contended on behalf of the Conmission that any coutravention of s.47 would be inmiolved if the condjtion as to insurance was restricted to cover.se of the interest of the relevant applrcant, as .iortgager, in the moitgaged property. Jt would scem a condition which was so limited would not be within $.17,0) for the reason would relute to acquisition ef the relevent services by tie applicant atself threoush the meier as -ts agents. The is ue beiicen the parties is whether the consideration or sequiie- ment 1s within s.d7(6) to the extent that it requires iunstra os

The condition of suyply to which s.47(6) of the Act

refers 18, for prescnt purposes, a condation that the recimient of the prinvary services "w3]1 acquire services of a parti. der kund or description! Sioi a th rd persoi not beirg a beds

Cayuse tes 1 et ted tay fle rryetony er F 4] sy. ts eet

ul pt ok nn rer sep od. cit toa coneltion. Can at properdy be said that sappsy upon a core rise

that supplier and recipient will, an asseciation and an thea:

joint names and in respect of their iespective rights and interests insure a nortgaged property comes within a proscriptio of supply upon condition that the recipient will acquire services? The resolution of this question 1s to be found

within the definition of "services" contained in s.4 of the

Section 4 of the Act defines services, for present purposes, as including, "aay rights ... benefits, privileves or facilitics that are, or are to be, provided, sranted or conferred in trace or commerce, and without liniting the generality of the foresoing, ancladss .4: rights, benelite,

privileges or facilitacs thet ave, of are to be provided,

granted or conferred under - ... (b) a contract of insurarce

2 (atadies added). As a vatter of lanauege, the phias, "ary

well as ar: ht whacl ws held andependentily. Tue riebes of a co-insure] under «© joint pojacy, of ansurence comm withiu its purvacw. The sulstitutien of the phrase "the 1ieats"

in thet part of the deflinstaor which copressly refers te

raghts under a policy of ir urence 15s in the conteat of a

provasien that that part of the definition shall not Jaait the gencrality of what hes sone before. In that conteat, the reference te "the rights ... under a contract of ansuranec" sheuld be sricrpreted as referrina not only ta the undivide totatity cf roebis ¢f the udlorendent aesured hut else toa am

Pb bet) Jo Hoek a por Phe Care 4 conc]usien dg. rewencd that the gagh © of a co-insarcd wneer 2

Oint insurance policy constitute "services" fer the purpores ] ' i

of s.47(6), a condition that the borrowing member effect insurance on the mortgaged property "in the joint names of the member and Society as owner and mortgagee respectively and for the respective rights and interests" can be seen as

a condition us to an acquisition of services for the purposes

It follows that the fact that the condition relrtes

to jo1nt ansurance Lv the Jercing apylicant and the borrowing

member prevents neither the cendition being, for the purpases of s.47(6), a condition that the borrowing menber will acquir

services nor the suysply upen that corcition being a proserzi:

Section S1(L4A) vrevides, for present pur wser, thet yn detemiurii, vhether @ conte voniuon of tne provisrers of s.47? has Leei ce ustied, resard shel? rot be had tiv ane ec. te dene, otherwise trau an the course of trade or ca wmeice, ap concert by ultinete users o2 consumers of sorvicls apaiist the suppliers of those services The applicants argued tia the condsison cortectied an reletten to ynsurance shicn wos

contei.e Tan the rates of cach eppliciurt cone within the

pretectron ef that sue-sectro1i. Pnows view, taere 15 no

specified in the Special Case and the condition contained in the rules of each applicant 1s ignored, 1t 1s, in my view, 1mposs1b} to see the provision in the rules as being, or constituting the result of, an act done in cancert by the members of an apnlscant against that applicant or by an applicant and its 1 cibers against a particular insurer or insurers generally. 'There js considerable difficulty an identifying any relevant act as

being done in concert by the members of an applicant or by

an applicant and its members. Jt was suggested jn arsvureni that the relevant act done in concert by the menbeis was tre formulation and adoption of the provisicn as to 1ansureanee on

the rules of the applicant of vhich they ere aoucnber. Th. documents aniwrved to tle Special Case ipticate Levetcr that

most of those who ulti iutely becewo waenbers would keee hou nothing to de with the forvutetion or avoption of those rutoes Fven if the a@ilficult;) of ge-Leal wath precision aay rit: act done an coucert by nonmbers or tv oun esplicant ord ats members be sur ounted, 1t is plain thit anv suon at coule not properly be scen as an act dene ar cencert by i emLers

efeot the retevant «po Jacant or bs an appdaceui and iis

moer' an Comeert .cs eo7 an arsurer ci aasurers scaeral?..

the lenttne we cw ye the epplacaunt. to ther veer. oe 1° ' . 1 Tove ~ vie 4 , pic, U 1, Poor, wos t ' aot tas

owner end worieyacee respectivels ard tor thear respectrve

rights and anterests" with a particular nowimated insurer

Special Case do not require consideration to be given to whether, in the case of the Ku-ring-gai Society, insistence

upon the condition as to insurance in respect of loans nade prior to the commencement of the provisions of the present

s.47 of the Act will involve any contravention of the provisions

I would answer the questions raised by the Special Case, in respect of each of Ku-ring-gai Society and the Dee

(a) Whet er cnan the Paste elbatcd tn once errno. Court Grovld ir ice emeres ge o> Tor soa. ' andor Ger.ta, Fral oP tie lade Serer. > LE7f mak wih OS the Ge26GPA Ie Rew ZL. POMEwES 2,

Cb) wnoinep eu 37a Cen teal er eres for ca waver. Pec la tele 2 oT . Gefined Jy Seesio: f(1) of Pha vest Cra.

(ce) Whether ever ecalet: toa fPoianetat wo ames] ys : : ; nm . 7 forred with. the bomeite of ec bealc rt cs i - ; a "oF 4 7 " ey > - 4, --7 a - - in Scetton (1) ef tho srade rractlecs oy te - Yes. : . - . " (d) Wren cretos pect fp ath le. a Nope , dete et : ry aS vol . . Go de Stra te v eC Re Doe Cb ee 2 ? Act, kts. ; 1 dt 1 Wor. 1 i wd wt (Kote gael . 4 a 1 , ey ee? > (oc) Whether taeccyar aa tae ceurrsters of Sosite. purport teoapet toe on Laeeedy tee carrie outst Te BRL tt ea a Fi Puede nt of tee

(f) Whether insofar as the promtetons of the Au? apply to suen sovrvety a requrrerer. Ly saeb soctely Lhat tis mermpers Uno berean she. Paw such coetety on the seeurity of pual prov. re insvre [ne sare tn the waroo of che severe 3 mortguges and the meander ae menlacrar pow 7 4

. toe 7 2 wy . YESpeelive Yeenhis aha whicresita veth a car ors, nomi~raied or opproved fy alah eee eo 4 ts fe Coniemavereion Of Ene prev 6.0n3s GP veal lo: 17s

4 + _ tan . "9 - of the Act by vertiue of Feo2ttor 27(6) of tho Trade Preetturs roby be?! Yes.

peal vic rer tt ete Fn a a toacr lt. DoT aT f.0 wie . we re :

• gard Stenter eo fay lic oe No.

(nr) foo de wetien the Got water cr et Court of. fren le ergo, IP ee 77 fet Or wey Cote te Tab ty re PRL st ° the rela. Gite. O° > GOPin tH ara,

l would order that th> enplicents pay the Co 71isc: