Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Banerjee v Commissioner of Police [2018] NSWCA 283 Hearing dates: 16 October 2018 Decision date: 22 November 2018 Before: Bathurst CJ, Beazley P, Basten JA Decision: 1. The question referred by Sackar J should be answered as follows: Q. Whether clause 13(3) of the Security Industry Regulation 2016 (NSW), in its operation pursuant to sections 15(4) and 26(1A) of the Security Industry Act 1997 (NSW), is inconsistent with the provisions of Part 5.3A of the Corporations Act 2001 (Cth) and therefore invalid or inoperative to the extent of any inconsistency by reason of s 109 of the Commonwealth Constitution. A. There is no inconsistency; the relevant provisions of the Security Industry Act and the Regulation are not invalid pursuant to s 109 of the Constitution. 2. Remit the proceedings to the Equity Division. 3. Order that the applicants pay the Commissioner's costs in this Court. Catchwords: CONSTITUTIONAL LAW – inconsistency – Constitution, s 109 – circumstances in which operation of State law will be inconsistent with Commonwealth law – where provisions of Security Industry Act 1997 (NSW) and Security Industry Regulation 2016 (NSW), cl 13(3) mandated revocation of company's security licence upon entering voluntary administration – State laws prevented company entering voluntary administration from carrying on primary business – whether operation of State laws inconsistent with Corporations Act 2001 (Cth), Pt 5.3A – whether State laws invalid to extent of inconsistency CORPORATIONS – voluntary administration – power of administrators to carry on business – security industry licence revoked under State law – whether State law valid – Corporations Act 2001 (Cth), Pt 5.3A COMMERCIAL LAW – security industry – requirement that Commissioner of Police revoke master licence of corporation under administration – whether valid State law Legislation Cited: Bankruptcy Act 1966 (Cth), ss 134, 135, 231; Pt X Broadcasting and Television Act 1942 (Cth), s 89C Builders' Registration and Home Owners' Protection Act 1979 (Qld), s 44 Constitution, ss 51, 109 Corporations Act 2001 (Cth). ss 9, 435A, 440D, 437A, 439A, 444A, 444D, 444E, 915B; Pt 1.1A; Pt 5.3A, Div 13; Pt 5.6; Pt 7.6 Security Industry Act 1997 (NSW), ss 4, 5, 7, 9, 10, 13, 15, 16, 21, 26, 37, 38 Security Industry Regulation 2016 (NSW), cll 13, 14, 18, 30 Cases Cited: Ansett Transport Industries (Operations) Pty Ltd v Wardley (1980) 142 CLR 237; [1980] HCA 8 Bell Group NV (In liq) v State of Western Australia (2016) 260 CLR 500; [2016] HCA 21 Commercial Radio Coffs Harbour v Fuller (1986) 161 CLR 47; [1986] HCA 42 Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 244 CLR 508; [2011] HCA 33 Momcilovic v The Queen (2011) 245 CLR 1; [2011] HCA 34 R v Builders' Registration Board of Queensland; Ex parte Snashall [1987] 1 Qd R 235 Tolcher v National Australia Bank Ltd (2004) 182 FLR 419; [2004] NSWSC 6 Texts Cited: M Leeming, Resolving Conflicts of Laws (The Federation Press, 2011) pp 141-142 Category: Principal judgment Parties: Shumit Banerjee and Jason Lloyd Porter in their capacity as the joint and several voluntary administrators of United Security Enterprises Pty Ltd (In administration) (Applicants) Commissioner of Police (Respondent) Representation: Counsel: Mr A P Cheshire SC/Mr J Cook (Applicants) Mr C Lenehan/Ms K Pham (Respondent) Solicitors: Fortis Law Group (Applicants) Crown Solicitor's Office (Respondent) File Number(s): 2018/291992 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] headnote [This headnote is not to be read as part of the judgment] The applicants were the administrators of United Security Enterprises Pty Ltd ("the company"). Before it went into voluntary administration, the company provided security services to government and other organisations. In order to operate that business, the company 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 respondent was required to revoke the company's master licence upon the company entering voluntary administration. The practical effect of revocation was to prevent the company (and therefore its administrators) from carrying on its primary business. The administrators commenced proceedings in the Equity Division, contending that the operation of the Security Industry Act and cl 13(3) of the Regulation was inconsistent with Corporations Act 2001 (Cth), Pt 5.3A ("Administration of a company's affairs with a view to executing a deed of company arrangement"). Sackar J stated a separate question and ordered that the proceedings be removed to the Court of Appeal for its determination. The question to be determined was: "Whether clause 13(3) of the Security Industry Regulation 2016 (NSW), in its operation pursuant to sections 15(4) and 26(1A) of the Security Industry Act 1997 (NSW), is inconsistent with the provisions of Part 5.3A of the Corporations Act 2001 (Cth) and therefore invalid or inoperative to the extent of any inconsistency by reason of s 109 of the Commonwealth Constitution." The Court (Bathurst CJ, Beazley P and Basten JA) answered that question in the negative and remitted the matter to the Equity Division, holding: 1. For the purposes of s 109 of the Constitution, inconsistency arises where, either expressly or by implication, a Commonwealth law provides for an immunity from a class of state laws, which immunity would be qualified, altered or impaired by the operation of a state law within that class: [22]. Ansett Transport Industries (Operations) Pty Ltd v Wardley (1980) 142 CLR 237; [1980] HCA 8; Bell Group NV (In liq) v State of Western Australia (2016) 260 CLR 500; [2016] HCA 21; Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 244 CLR 508; [2011] HCA 33, applied. 2. Part 5.3A of the Corporations Act reveals no intention to confer on a company under administration, or the administrators of that company, immunity from the operation of state laws, beyond any immunity found within the Part's express terms: [39]. The Part's purpose, identified in s 435A, is entirely consistent with the carrying on of the company's business under administration being subject to the general laws of the State: [32]. The Commonwealth Act confers no broad power on the administrators to carry on the company's business; security licences are not a form of property caught by the protection provided by s 440D of the Commonwealth Act; and provisions in Pt 7.6 of the Commonwealth Act expressly envisage that licences necessary for the carrying on of a business might be terminated where a company enters administration: [33], [36], [37]. Commercial Radio Coffs Harbour v Fuller (1986) 161 CLR 47; [1986] HCA 42; R v Builders' Registration Board of Queensland; Ex parte Snashall [1987] 1 Qd R 235, applied. Judgment 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. 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: Whether clause 13(3) of the Security Industry Regulation 2016 (NSW), in its operation pursuant to sections 15(4) and 26(1A) of the Security Industry Act 1997 (NSW), is inconsistent with the provisions of Part 5.3A of the Corporations Act 2001 (Cth) and therefore invalid or inoperative to the extent of any inconsistency by reason of s 109 of the Commonwealth Constitution. Statutory provisions 1. Section 109 of the Constitution provides: 109 Inconsistency of laws When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid. 1. 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: 437A Role of administrator (1) While a company is under administration, the administrator: (a) has control of the company's business, property and affairs; and (b) may carry on that business and manage that property and those affairs; and (c) may terminate or dispose of all or part of that business, and may dispose of any of that property; and (d) may perform any function, and exercise any power, that the company or any of its officers could perform or exercise if the company were not under administration. (2) Nothing in subsection (1) limits the generality of anything else in it. … 1. 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. 2. 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. 3. The Security Industry Act provides comprehensively for the licensing and regulation of persons in the security industry. It commences with a general prohibition: 7 Offence of carrying on unauthorised security activities (1) A person must not provide persons to carry on security activities unless: (a) the person is the holder of a master licence, and (b) the person provides no more persons on any one day than the number of persons authorised by the master licence. (c) (Repealed) Maximum penalty: (a) in the case of a corporation—1,000 penalty units, or (b) in the case of an individual—500 penalty units or imprisonment for 2 years, or both. (2) A person must not carry on a security activity (other than providing persons to carry on security activities) unless the person is the holder of a class 1 licence or class 2 licence that authorises the person to carry on the security activity. Maximum penalty: 500 penalty units or imprisonment for 2 years, or both. 1. 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). 2. 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)). 3. A person seeking a licence is to apply to the Commissioner for Police. The Commissioner has the following powers: 21 Grant and conditions of licence and renewal of licence (1) The Commissioner may, after considering an application for the grant or renewal of a licence: (a) grant a licence to, or renew the licence of, the person making the application, or (b) refuse to grant a licence or to renew the licence. (2) A licence confers no right of property and is incapable of being transferred, assigned or mortgaged, charged or otherwise encumbered. (3) A licence is subject: (a) to such conditions as may be imposed by the Commissioner (whether at the time the licence is granted or renewed or at any later time), and (b) to such other conditions as are imposed by this Act or prescribed by the regulations. 1. Consideration of an application is undertaken on the basis of a number of mandatory and discretionary criteria, as set out in the following provisions: 15 Restrictions on granting licence—general suitability criteria (1) The Commissioner must refuse to grant an application for a licence if the Commissioner is not satisfied that the applicant: (a) is a fit and proper person to hold the class of licence sought by the applicant, or (b) is of or above the age of 18, or (c) has the competencies and experience approved by the Commissioner, or (d) has undertaken and completed the training, assessment and instruction that is approved for the class of licence sought by the applicant, or (e) is competent to carry on the security activity to which the proposed licence relates, or (f) is an Australian citizen or a permanent Australian resident, or holds a visa that entitles the applicant to work in Australia (other than a student visa or a working holiday visa). … (3) The Commissioner may refuse to grant an application for a licence if the Commissioner considers that the grant of the licence would be contrary to the public interest. (4) The regulations may provide additional mandatory or discretionary grounds for refusing the granting of an application for a licence. (5) Except as provided by the regulations, a reference in this section to an applicant includes, in the case of an application for a master licence, a reference to each close associate of the applicant. … 16 Restrictions on granting licence—criminal and other related history (1) The Commissioner must refuse to grant an application for a licence if the Commissioner is satisfied that the applicant: (a) has, within the period of 10 years before the application for the licence was made, been convicted in New South Wales or elsewhere of an offence prescribed by the regulations in relation to the class of licence sought, whether or not the offence is an offence under New South Wales law, or (b) has, within the period of 5 years before the application for the licence was made, been found guilty (but with no conviction being recorded) by a court in New South Wales or elsewhere of an offence prescribed by the regulations in relation to the class of licence sought, whether or not the offence is an offence under New South Wales law, or (c) has, within the period of 5 years before the application for the licence was made, had a civil penalty imposed on the applicant by a court or tribunal in New South Wales or elsewhere, being a civil penalty prescribed by the regulations in relation to the class of licence sought, or (d) has, within the period of 10 years before the application for the licence was made, been removed or dismissed from the NSW Police Force or from the police force of any other jurisdiction (whether in Australia or overseas) on the ground of the applicant's integrity as a police officer. (2) Without limiting subsection (1), the Commissioner may refuse to grant an application for a licence if the Commissioner is satisfied that the applicant has a conviction that is not capable of becoming spent. Note. Under section 7 of the Criminal Records Act 1991, certain convictions are not capable of becoming spent. For example, convictions for which a prison sentence of more than 6 months has been imposed, convictions for certain sexual offences and convictions prescribed by the Criminal Records Regulation 2004. (3) The Commissioner must refuse to grant an application for a licence if the Commissioner is of the opinion that the applicant is not suitable to hold a licence because the applicant has been involved in corrupt conduct. … (5) A reference in subsection (1), (2), (3) … to an applicant includes, in the case of an application for a master licence, a reference to each close associate of the applicant. 1. 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: 5 Meaning of "close associate" (1) For the purposes of this Act, a person is a close associate of an applicant for, or the holder of, a licence if the person: (a) holds or will hold any relevant financial interest, or is or will be entitled to exercise any relevant power (whether in his or her own right or on behalf of any other person), in the business of the licence applicant or holder, and by virtue of that interest or power is or will be able (in the opinion of the Commissioner) to exercise a significant influence over or with respect to the conduct of that business, or (b) holds or will hold any relevant position, whether in his or her own right or on behalf of any other person, in the business of the licence applicant or holder. (2) In this section: relevant financial interest in relation to a business means: (a) any share in the capital of the business, or (b) any entitlement to receive any income derived from the business, whether the entitlement arises at law or in equity or otherwise. relevant position means the position of director, manager, and other executive positions and secretary, however those positions are designated, and such other positions as may be prescribed by the regulations for the purposes of this definition. relevant power means any power, whether exercisable by voting or otherwise and whether exercisable alone or in association with others: (a) to participate in any directorial, managerial or executive decision, or (b) to elect or appoint any person to any relevant position. 1. 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.) 2. 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] 3. 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. 13 Grounds for refusal to grant licence: section 15(4) (1) Mandatory grounds for refusal—individual For the purposes of section 15(4) of the Act, the Commissioner must refuse to grant an application for a master licence if the applicant, or a close associate of the applicant: (a) at any time in the 3 years immediately preceding the application for the licence was an undischarged bankrupt or applied to take the benefit of any law for the relief of bankrupt or insolvent debtors, compounded with his or her creditors or made an assignment of his or her remuneration for their benefit, unless the Commissioner is satisfied that the person took all reasonable steps to avoid the bankruptcy, or (b) at any time in the 3 years immediately preceding the application for the licence was concerned in the management of a corporation when the corporation was the subject of a winding up order or when a controller or administrator was appointed, unless: (i) the winding up of the corporation was by way of a member's voluntary winding up, or (ii) the Commissioner is satisfied that the person took all reasonable steps to avoid the liquidation or administration. (2) In determining the reasonable steps that could be taken by a person to avoid bankruptcy, liquidation or administration, the Commissioner is to have regard to the steps that could have been taken by the person at the time that the financial difficulties leading to the bankruptcy, liquidation or administration arose. (3) Mandatory grounds for refusal—corporation For the purposes of section 15(4) of the Act, the Commissioner must refuse to grant an application for a master licence if the applicant: (a) is a corporation that is the subject of a winding up order or for which a controller or administrator has been appointed, or (b) at any time in the 3 years immediately preceding the application for the licence, was a corporation the subject of a winding up order or for which a controller or administrator was appointed. (4) Discretionary grounds for refusal For the purposes of section 15(4) of the Act, the Commissioner may refuse to grant an application for a licence if the applicant, or a close associate of the applicant, has within the period of 3 years before the application for the licence was made, contravened any provision of the Act or the regulations under the Act, whether or not the applicant or close associate of the applicant has been convicted of an offence in relation to the contravention. (5) Discretionary grounds for refusal—master licence For the purposes of section 15(4) of the Act, the Commissioner may refuse to grant an application for a master licence if the applicant, or a close associate of the applicant, has, within the period of 3 years before the application for the licence was made, been found guilty of an offence under Chapter 4 of the Australian Consumer Law that relates to a contravention of section 29, 31, 33, 34, 36 or 50 of that Law. 1. 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. 2. 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. 3. 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. 4. 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: 26 Revocation of licence … (1A) The Commissioner must revoke a licence where the Commissioner is satisfied that, if the licensee were applying for a new licence, the application would be required by this Act to be refused. 1. 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. 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. 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. 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] "As a preliminary to an examination of the Agreement I should point out that the major thrust of Ansett's case is to establish the existence of what has been called 'direct inconsistency', that is, the disconformity which is created by the presence of an absolute right to dismiss for any reason whatsoever, which Ansett finds in the Agreement, and the presence in the State Act of a prohibition against dismissal for the prescribed reasons. 'Direct inconsistency' is a description which has always been applied to cases in which it is impossible to obey both laws …. It is also a description which has been applied to cases in which the Commonwealth law grants a permission or a right and the State law prohibits that which is permitted or prohibits the exercise of the right …. Cases of this kind have sometimes been treated as a separate head of inconsistency …, though even when so treated they have generally been related to the 'cover the field' test …, apparently on the ground that direct inconsistency is confined to a situation in which simultaneous obedience to both laws is impossible. As the various tests which have been applied by the Court are all designed to elucidate the issue of inconsistency it is not surprising that they are interrelated and that in a given case more than one test is capable of being applied so as to establish inconsistency. Especially is this so when it is the giving of a permission or the grant of a right by Commonwealth law that is the foundation of a claim of inconsistency." 1. Concluding that there was no inconsistency in that case, Mason J further stated: [8] "It is not enough for a plaintiff who alleges inconsistency to point to the existence under the Commonwealth law of a power or discretion which of its nature may be exercised in conformity with the provisions of State law. To succeed he must go further and demonstrate that as a matter of legislative intention the power or discretion is to be exercised to the exclusion of what State law says upon the topic. 1. 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] "[42] Although the utility of accepted tests of inconsistency, based on recognising different aspects of inconsistency for the purposes of s 109, is well established as Mason J observed in Ansett Transport Industries (Operations) Pty Ltd v Wardley, it is not surprising that different tests of inconsistency directed to the same end are interrelated and in any one case more than one test may be applied in order to establish inconsistency for the purposes of s 109. All tests of inconsistency which have been applied by this Court for the purpose of s 109 are tests for discerning whether a 'real conflict' [10] exists between a Commonwealth law and a State law." 1. 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] "[50] Where there is an alleged conflict between a Commonwealth law and a State law, 's 109 requires a comparison between any two laws which create rights, privileges or powers, and duties or obligations, and s 109 resolves conflict, if any exists, in favour of the Commonwealth'. [13] [51] A conflict may arise in a number of ways. The State law, if valid, might 'alter, impair or detract from the operation of a law of the Commonwealth Parliament'. [14] If so, then to that extent it will be invalid because of what sometimes is described as 'direct inconsistency'. [15] As the Court said in Jemena Asset Management (3) Pty Ltd v Coinvest Ltd: [16] 'The crucial notions of "altering", "impairing" or "detracting from" the operation of a law of the Commonwealth have in common the idea that a State law conflicts with a Commonwealth law if the State law undermines the Commonwealth law.' (emphasis added) The conflict may also arise from the laws' legal operation or from their practical effect. [17] " (b) construing the Commonwealth law 1. 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] "[258] The frequently used phrases 'upon its true construction' and "having regard to subject, scope and purpose" carry a weighty body of doctrine built up by curial decision‑making. The first task in any application of s 109 is to construe the federal law in question in accordance with that body of doctrine. Only when that has been done is it appropriate to consider whether upon its proper construction the State law is 'inconsistent' with the federal law. [259] The distillation of the scope and purpose of the federal law was of decisive importance in Commercial Radio Coffs Harbour Ltd v Fuller. [19] The provisions of the federal law for the licensing of radio transmitters were held to be cumulative upon those of State environmental protection laws; the conclusion was found 'in the nature and purpose' of the federal law. [20] Similarly, the Bills of Exchange Act 1909 (Cth), considered in Stock Motor Ploughs, [21] codified the law respecting negotiable instruments but did so in the general milieu of contract law, including modifications thereto by State moratorium legislation enacted during the Great Depression. [260] On the other hand, the head of legislative power supporting the federal law may, by express words, be exercised to exclude the rights or duties which the federal law creates from qualification, wholly or partly, by State laws of a particular description. [22] The authorities upholding the effectiveness of federal legislation of this kind, beginning with The Commonwealth v State of Queensland, [23] and including Australian Coastal Shipping Commission v O'Reilly [24] and Botany Municipal Council v Federal Airports Authority, [25] were considered and applied in Bayside City Council v Telstra Corporation Ltd, [26] the Work Choices Case [27] and John Holland Pty Ltd v Victorian Workcover Authority. [28] Again, the federal law may state that certain conduct is not to be subject to proscription by any State criminal law. Croome v Tasmania [29] was such a case. [261] Further, even in the absence of an express indication to that effect, the detailed character of the federal law may evince a legislative 'intention', in the sense given to that term in the passage from Zheng v Cai [30] set out at [146] of these reasons, to deal completely and thus exclusively with the law governing a particular subject‑matter. That proposition, which is drawn from what was said by Dixon J in Ex parte McLean, [31] Stock Motor Ploughs [32] and The Kakariki, [33] may be treated as presenting a 'negative implication' criterion and has been discussed when dealing with class (3) as identified in the submissions in Whybrow. [34] The question then is whether the State law is upon the same subject‑matter as the federal law and, if so, whether the State law is inconsistent with it because it detracts from or impairs that negative implication. [35] But the first question, and what Aickin J called 'the central question', [36] always is one of statutory interpretation to discern legislative 'intent' or 'intention'. [37] " 1. 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. (i) general purpose of the Commonwealth law 1. The purpose underlying Pt 5.3A of the Corporations Act is expressly identified in the following terms: 435A Object of Part The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for the business, property and affairs of an insolvent company to be administered in a way that: (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (b) if it is not possible for the company or its business to continue in existence—results in a better return for the company's creditors and members than would result from an immediate winding up of the company. Note: Schedule 2 contains additional rules about companies under external administration. 1. 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.) 2. 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. 3. 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. (ii) specific provisions of the Commonwealth law 1. 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: "[15] The duties and functions of an administrator under Part 5.3A differ significantly from those of a liquidator. Such an administrator has control of the company's business, property and affairs (s 437A(1)(a)) and may carry on the business and manage the property and affairs (s 437A(1)(b)). But an administrator does these things only to facilitate the investigation required by s 438A(a) and the assessment required by s 438A(b) so that creditors, guided by the administrator, may make a decision as to the company's fate. One such fate may be winding up. Recovery, protection and preservation of the company's property are not of themselves the direct concern of an administrator even though they may be to some extent incidental to due performance under s 437A." 1. 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] 2. 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: 37 Licensee not to sell or dispose of licence A licensee must not: (a) sell, dispose of, deliver, let out, hire or rent the licence to any other person, or (b) permit any other person to use the licence. Maximum penalty: (a) in the case of a corporation—200 penalty units, or (b) in the case of an individual—100 penalty units or imprisonment for 6 months, or both. 38 Prohibition of delegation of functions (1) A licensee must not delegate the carrying on of a security activity to a person who is not the holder of a licence authorising the person to carry on the same security activity. Maximum penalty: 40 penalty units. 1. 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] 2. 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. 3. 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. 4. 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. 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. 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. 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): "Despite the attempt to rely on both limbs of the inconsistency principle, we think that in the circumstances of this case there is only one question to be determined. That question is directed to the nature of the rights conferred and obligations imposed upon the grantee of a licence under the Commonwealth Act. … In the present case, our construction of the Commonwealth Act leads us to conclude that it does not purport to state exclusively or exhaustively the law with which the operation of a commercial broadcasting station must comply. The Act prohibits broadcasting without a licence. The prohibition is removed upon the grant of a licence, subject to certain conditions. Failure to comply with the conditions may result in a revocation or suspension of the licence thereby reinstating the prohibition. The licence confers on the grantee a permission to broadcast. There is nothing in the Act which suggests that it confers an absolute right or positive authority to broadcast so that the grantee, because he has a licence, is immune or exempt from compliance with State laws. On the contrary, in concentrating on the technical efficiency and quality of broadcasting services, the Act leaves room for the operation of laws, both State and Commonwealth, dealing with other matters relevant to the operation of such services." 1. 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] 2. 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. 3. 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. 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: Q. Whether clause 13(3) of the Security Industry Regulation 2016 (NSW), in its operation pursuant to sections 15(4) and 26(1A) of the Security Industry Act 1997 (NSW), is inconsistent with the provisions of Part 5.3A of the Corporations Act 2001 (Cth) and therefore invalid or inoperative to the extent of any inconsistency by reason of s 109 of the Commonwealth Constitution. A. There is no inconsistency; the relevant provisions of the Security Industry Act and the Regulation are not invalid pursuant to s 109 of the Constitution. 1. The matter should be remitted to the Equity Division. The applicants should bear the Commissioner's costs in this Court. ********** Endnotes 1. Section 4(1)(a) and (b), and see subs (2). 2. Section 15(1)(b) and (f). 3. Section 15(3). 4. M Leeming, Resolving Conflicts of Laws (The Federation Press, 2011) pp 141-142. 5. Ibid at p 141. 6. (1980) 142 CLR 237; [1980] HCA 8. 7. Ansett v Wardley at 259-260. 8. Ansett v Wardley at 265. 9. (2011) 244 CLR 508; [2011] HCA 33 (French CJ, Gummow, Heydon, Crennan, Kiefel and Bell JJ). 10. See, for example, Collins v Charles Marshall Pty Ltd (1955) 92 CLR 529 at 553. 11. (2016) 260 CLR 500; [2016] HCA 21. 12. Judgment of French CJ, Kiefel, Bell, Keane, Nettle and Gordon JJ. 13. Jemena Asset Management … at 523 [37]. 14. Jemena Asset Management … at 524 [39]. See also Victoria v The Commonwealth ("The Kakariki") (1937) 58 CLR 618 at 630; [1937] HCA 82; Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 at 76 [28]; [1999] HCA 12; Dickson v The Queen (2010) 241 CLR 491 at 502 [13]-[14]; [2010] HCA 30. 15. See Dickson … at 502 [14]. See also Telstra … at 76 [27]. 16. (2011) 244 CLR 508 at 525 [41]. See also Metal Trades Industry Association v Amalgamated Metal Workers' and Shipwrights' Union (1983) 152 CLR 632 at 642-643, 651; [1983] HCA 28; Telstra (1999) 197 CLR 61 at 76 [27]. 17. APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 399-400 [202]-[206]; [2005] HCA 44. 18. (2011) 245 CLR 1; [2011] HCA 34. 19. (1986) 161 CLR 47; [1986] HCA 42. 20. (1986) 161 CLR 47 at 49. See also McWaters v Day (1989) 168 CLR 289 at 298; [1989] HCA 59; Dickson v The Queen (2010) 241 CLR 491 at 506 [29]. 21. (1932) 48 CLR 128 at 137‑138. See also Re Residential Tenancies Tribunal (NSW); Ex parte Defence Housing Authority (1997) 190 CLR 410 at 433, 460, 462; [1997] HCA 36; Attorney‑General (Vic) v Andrews (2007) 230 CLR 369 at 401‑402 [54]; [2007] HCA 9. 22. The distinction between express exclusion wholly from State regulation and only partly therefrom is drawn, with examples from the decided cases, in Leeming, Resolving Conflicts of Laws, (2011), p 154. 23. (1920) 29 CLR 1; [1920] HCA 79. 24. (1962) 107 CLR 46; [1962] HCA 8. 25. (1992) 175 CLR 453; [1992] HCA 52. 26. (2004) 216 CLR 595 at 627‑629 [34]‑[39]; [2004] HCA 19. 27. New South Wales v The Commonwealth (2006) 229 CLR 1 at 166‑169 [370]‑[372]; [2006] HCA 52. 28. (2009) 239 CLR 518 at 526‑527 [18], 528 [23]; [2009] HCA 45. 29. (1997) 191 CLR 119; [1997] HCA 5. 30. (2009) 239 CLR 446 at 455‑456 [28]. 31. (1930) 43 CLR 472 at 483. 32. (1932) 48 CLR 128 at 136‑137. 33. (1937) 58 CLR 618 at 630. 34. At [240]‑[244]. 35. Professor Hogg explains that, while Ex parte McLean has not been adopted in Canada, a Canadian federal law will be interpreted to discover its purpose and a provincial law which frustrates that purpose will fail for inconsistency: Hogg, Constitutional Law of Canada, 5th ed (2007), vol 1, pp 491‑496. 36. Ansett Transport Industries (Operations) Pty Ltd v Wardley (1980) 142 CLR 237 at 280. 37. P v P (1994) 181 CLR 583 at 602‑603; [1994] HCA 20; Native Title Act Case (1995) 183 CLR 373 at 466; Mining Act Case (1999) 196 CLR 392 at 415‑416 [55], 439 [138]. See also Lindell, "Grappling with Inconsistency between Commonwealth and State Legislation and the Link with Statutory Interpretation", Constitutional Law and Policy Review, vol 8 (2005) 25, pp 30‑34; Rumble, "Manufacturing and Avoiding Constitution Section 109 Inconsistency: Law and Practice", Federal Law Review, vol 38 (2010) 445 at pp 457‑459. 38. (2004) 182 FLR 419; [2004] NSWSC 6. 39. Section 440D(1). 40. Section 440D(2)(a). 41. Corporations Act, s 915B(1)(b). 42. Corporations Act, s 915B(3)(b). 43. Corporations Act, s 9, Chapter 5 body corporate, par (c). 44. (1986) 161 CLR 47; [1986] HCA 42. 45. Broadcasting and Television Act, s 89C. 46. [1987] 1 Qd R 235 (Matthews, Macrossan and Carter JJ). 47. Builders' Registration and Home Owners' Protection Act 1979 (Qld), s 44(1)(g). 48. The same provision applied to the trustee of a deed of assignment, pursuant to Bankruptcy Act, s 231(2). (The power to employ the bankrupt to carry on the bankrupt's trade or business is now found in s 134(1)(m)(ii).) 49. Snashall at pp 236-237. 50. Bankruptcy Act, s 134(1)(b). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 November 2018