After a series of contradictory decisions in the Federal Court, and the Victorian and New South Wales Courts of Appeal since 2019, the Court in Hanssen Pty Ltd v Owners of Strata Plan 58161 [2024] WASCA 87 has decided for good that the State Administrative Tribunal has jurisdiction over corporations.
The mere fact that corporations owe their existence and capacity to sue and be sued to a federal law does not mean any matter in which a corporation is a party requires the exercise of federal jurisdiction to be resolved. That, implicitly, should also mean that the mere fact that a party is a corporation will be insufficient for the Federal Court to have jurisdiction over a matter.
Nor may a party merely making a genuine submission, not incapable on its face of legal argument, that a matter is within federal jurisdiction be enough to characterise the parties’ substantive dispute as within federal jurisdiction. While such a submission raises a jurisdictional matter requiring the exercise of federal jurisdiction to be resolved, it does not follow that the whole of the matter will be brought within federal jurisdiction.
The Court also considered that the Building Commissioner, in making an order described in Building Services (Complaint Resolution and Administration) Act 2011 (BSCRA Act) s 36(1)(a) requiring building services to be remedied (remedy order), is exercising administrative not judicial power.
No issue, then, arises as to the Building Commissioner exercising federal jurisdiction in making remedy orders. That issue might otherwise have become relevant in complaints made to the Building Commissioner involving, for example, a resident of another State or the Commonwealth. The same result may not follow, though, for an order for payment described in BSCRA Act s 36(1)(b) or (c) (payment order)made by the Building Commissioner, where there is a capacity to register those orders with a court and then to enforce them as judgments. Hanssen has not resolved that issue.
Why did Hanssen and the Strata Company end up in the Tribunal?
After Hanssen completed construction of an apartment complex in Victoria Park, the Strata Company made a complaint to the Building Commissioner under the BSCRA Act.
That required the Building Commissioner to decide whether to accept the complaint, and if so to cause it to be investigated and a report prepared. The Building Commissioner (or their delegate) was then to consider the report and whether to take action, including by making a remedy order.
In late 2015, a little while after the Building Commissioner accepted the Strata Company’s complaint, a delegate made a remedy order requiring Hanssen to carry out works to the apartments within 90 days.
Almost 6 years later, the Strata Company alleged the remedial works had still not been carried out, and applied to the Building Commissioner to have the remedy order revoked and a payment order made requiring Hanssen to pay it over $7.6 million for the repairs.
Because that amount was well above the maximum the Building Commissioner could order, the application was transferred to the Tribunal.
Shortly after that transfer, Hanssen applied to dismiss the proceedings on the basis that the Tribunal lacked jurisdiction to decide the matter.
How did the Constitution come up?
On its application, Hanssen contended that because it was a corporation taken to have been incorporated under the Corporations Act 2001 (Cth), the proceedings concerned a matter arising under federal legislation within the meaning of s 76(ii) of the Constitution.
If that were right, it would have meant the Tribunal had to exercise federal jurisdiction in deciding whether to make the payment order sought by the Strata Company. Because the Tribunal is not a court, it could not have done so.
It would also have meant the Tribunal lacked the ability to exercise judicial power in any proceedings in which a party was a corporation.
By the time of the hearing, Hanssen also argued the BSCRA Act was invalid to the extent it purported to confer jurisdiction on the Building Commissioner to make the remedy order against Hanssen as a corporation. Hanssen further said that because it had made that argument, the Tribunal proceedings involved a matter arising under the Constitution or involving its interpretation, meaning the Tribunal further lacked jurisdiction to determine the proceedings.
The Tribunal dismissed Hanssen’s application and Hanssen appealed.
In the Court of Appeal, Hanssen made two arguments:
- First, that the ability to make a remedy order against Hanssen capable of enforcement depended on Hassen’s legal status afforded by the Corporations Act. Accordingly, both the Building Commissioner and the Tribunal had been dealing with a matter arising under a federal law. To determine the matter they had to be able to exercise federal jurisdiction, which they could not do.
- Secondly, even if its argument that the Building Commissioner lacked jurisdiction was wrong, that constitutional submission was genuinely raised in the Tribunal and was not incapable on its face of legal argument. Therefore, the whole of the matter before the Tribunal was one arising under the Constitution or involving its interpretation. Accordingly, the Tribunal lacked jurisdiction to determine the matter transferred to it.
Why does the Tribunal have jurisdiction over corporations?
While the Tribunal could only form an opinion about the limits of its own jurisdiction after Hanssen had argued the matter was within federal jurisdiction, there was no such limitation on the Court’s power to confirm the Tribunal’s jurisdiction over corporations.
The Court identified that a series of decisions — commencing with Oliver v Nine Network Australia Pty Ltd [2019] FCA 583 and including Thurin v Krongold Constructions (Aust) Pty Ltd [2022] VSCA 226 — had set out contradictory positions about whether a party’s corporate status necessarily meant a matter was one arising under the Corporations Act. That is, a matter in which theenforcement of any order made would depend on the corporate party’s legal capacity and powers bestowed by the Corporations Act.
The Court, while acknowledging it was not bound by the obiter discussion in Thurin, essentially adopted that court’s reasoning in that:
- Where a Commonwealth law is simply ‘lurking in the background’ or is merely an ‘incidental consideration’, a matter is not one arising under it. That includes where the only connection between a matter and a Commonwealth law is that a party is incorporated under the Corporations Act. Such a connection is insufficient to characterise a matter as one arising under the Corporations Act.
- It is the matter itself that must arise under a federal law for federal jurisdiction to be engaged; it must be ‘endogenous’ to the justiciable controversy between the parties. The mere link between a corporate party and the Corporations Act is ‘exogenous’ to the justiciable controversy — it only concerns a party’s ability or capacity to agitate a matter or liability in relation to a matter arising under federal law.
- That conclusion attracts support from ss 75 and 76 of the Constitution specifically granting jurisdiction depending on the character of the parties (eg, residents of different States, or the Commonwealth), and otherwise depending on the subject of the controversy. Section 76(ii) is concerned with matters arising under federal laws, not the parties to those matters.
The Court went on to observe that the High Court had implicitly proceeded from the premise that a party being incorporated was insufficient to bring a matter within federal jurisdiction. For example, despite ASIC being established under federal legislation, the High Court had considered it necessary to determine jurisdiction on the basis that ASIC had the status of the Commonwealth (Re ASIC; Ex parte Edensor Nominees Pty Ltd (2001) 204 CLR 559).
The Court also added to the observations in Thurin about the nature of ss 75 and 76 of the Constitution. That some matters in ss 75 and 76 are described by reference to the parties to the controversy, but that none of those include ‘an entity established by any laws made by Parliament’ (or similar), indicated the lack of an intention that that should be the case.
Accordingly, where the issues in the proceedings before the Tribunal regarding making an order under the BSCRA Act neither owed their existence nor depended for their enforcement upon federal law, Hanssen was not immune from the BSCRA Act being applied by the Tribunal (or the Building Commissioner). The BSCRA Act, and other relevant State laws, applied to Hanssen by their own force.
Accordingly, the Court held the mere fact that a party to a dispute is a corporation is insufficient to characterise the dispute as a matter arising under the Corporations Act and within federal jurisdiction. The Tribunal’s jurisdiction over corporations was unaffected.
Why is the Building Commissioner exercising administrative power in making remedy orders?
The Court went on to reject Hanssen’s argument that the Building Commissioner lacked jurisdiction to make a remedy order for a further reason — the Building Commissioner was not exercising judicial power that could have required the conferral of federal jurisdiction.
The Court first identified the general rule that judicial power involves a decision settling for the future, as between defined people or classes, a question as to the existence of a right or obligation so that a new charter is created by reference to which that question is in future to be decided as between them. That required the Court to make an evaluative judgment having regard to factors including the nature of the power being exercised by the Building Commissioner.
The Court considered various features of the Building Commissioner’s power to make a remedy order strongly counted against it being characterised as a judicial power:
- Critically, the making of a remedy order did not operate as a final determination of the parties’ rights. In contrast to a payment order, it was not capable of being registered and enforced as a judgment of a court. It could only be enforced by prosecution for contravention, or by the making of a payment order. In either case the order would be open to collateral challenge.
- Further, the Building Commissioner was an officer of the executive government who did not need to be legally qualified, and who otherwise had a range of executive functions. The Building Commissioner also did not need to exercise the power personally but could delegate it to another person or a committee.
- Additionally, in dealing with a complaint the Building Commissioner was required to act informally, was not bound by the rules of evidence, and was able to inform themselves in any way they thought fit. And they were to proceed on consideration of a report prepared not by the parties but by someone appointed by the Building Commissioner.
Accordingly, in making a remedy order the Building Commissioner was exercising administrative power, which did not involve any exercise of federal jurisdiction.
It follows that even if the Building Commissioner is dealing with a complaint involving, say, a resident of another State or the Commonwealth, they may have power to make a remedy order. However, that a payment order can be enforced on registration as an order of a court may mean the same is not true in those circumstances. The Court did not decide that issue.
Why wasn’t Hanssen’s constitutional argument sufficient to deny the Tribunal jurisdiction to decide the substantive dispute?
The Court observed that Hanssen’s second argument would have an extraordinary consequence. Despite being wrong about its corporate status denying the Building Commissioner jurisdiction, it would have meant Hanssen — by merely genuinely raising the issue and it not being incapable on its face of legal argument — could have achieved the self-fulfilling result of depriving the Tribunal of jurisdiction over the parties’ substantive dispute.
The Court rejected that result, making plain that there was a clear difference between the substantive matter before the Tribunal — whether the building services were defective and the consequent rights and liabilities of the parties, and the jurisdictional matter raised by Hanssen’s constitutional argument.
That is, just because the issue raised about the Building Commissioner’s jurisdiction was a matter arising under or involving the interpretation of the Constitution, that did not mean that the substantive matter was to be similarly characterised.
The Court considered the resolution of the jurisdictional matter did not affect the resolution of the substantive matter; it only affected the forum in which the substantive matter could be decided. The jurisdictional controversy did not concern the rights, duties or liabilities in issue in the substantive matter. Accordingly, the Tribunal’s jurisdiction over the substantive dispute was not affected by the entirely separate jurisdictional matter requiring the exercise of federal jurisdiction to be resolved.
The mere fact, then, that a party makes a genuine submission, not incapable on its face of legal argument, that a court or tribunal is exercising federal jurisdiction is not sufficient to make the whole of the matter the subject of the proceedings a matter arising under the Constitution or involving its interpretation. That may have consequential effects for submissions as to the Federal Court’s jurisdiction, as well as the Tribunal’s.
