WSGAL P/L argued that s 81 was invalid as purporting to authorise the acquisition of property otherwise than on just terms contrary to s 51(xxxi) of the Constitution) and also that s 81(1A) was invalid as purporting to confer non-judicial powers on a Chapter III Court. The Full Federal Court (Justices Lockhart, Beaumont and Hill) disagreed, finding that the provisions were constitutionally valid. In particular:

• Sections 81(1) and 81(1A) 'cannot be characterized as laws with respect to the acquisition of property within the meaning of s. 51(xxxi)' (Justice Lockhart at para 36)
• Section 81(1A) was not invalid as conferring upon a court powers which were not of a judicial character.

This matter involved a constitutional challenge to proposed divestiture orders relating to a separate proceeding which alleged a contravention of s 50 of the TPA.

Justice Burchett held that sections 81(1) and (1A) were valid.

Dismissed appeal

On this issue of whether s 51(xxxi) applied

[Justice Lockhart; para 32] Section 76 of the Act empowers the Court to impose a pecuniary penalty upon persons who have, inter alia, contravened a provision of Part IV including s. 50. Plainly it is not a law of the Commonwealth within the scope of s. 51(xxxi). The object of s. 76 and the penalty which it authorizes is to ensure the due performance and enforcement of the laws of the Parliament with respect to the preservation and furtherance of competition in trade and commerce and the elimination of anti-competitive conduct, including mergers and acquisitions, which are likely to have an adverse effect on competition. Various expositions of principle which have been put forward over many years in judgments of the High Court would all lead to the same conclusion.

[Justice Lockhart; para 33] Is the compulsory divestiture of property for which s. 81 provides different? In America, divestiture has been described as the most important of the anti-trust remedies and as being "simple, relatively easy to administer and sure". ...

[Justice Lockhart; para 35] Where a corporation has contravened s. 50 of the Act by acquiring shares in or assets of a body corporate in the circumstances mentioned in the section, the remedy of divesting the acquirer of the shares or assets and revesting title to them in the vendor is a real sanction and deterrent for contravention of the section. It is also an effective remedy for the benefit of persons adversely affected by the contravention. Both subsections (1) and (1A) of s. 81 are integral elements in the scheme of the Act to prohibit anti-competitive mergers and acquisitions. They enable property which the contravener has acquired in contravention of the Act to be disgorged so that the parties to the transaction may be restored to their original position. They enable also the reestablishment of the competition which prevailed in the market before the occurrence of the prohibited acts that distorted the market. They are provisions essentially in the public interest. Section 81 ensures compliance with s. 50 of the Act and it is in furtherance of the statutory policy of prohibiting certain acquisitions and depriving the contravener of the spoils of its unlawful conduct. The public interest is protected by preventing damage to competition in the relevant markets.

[Justice Lockhart; para 36] Subsections (1) and (1A) of section 81 cannot be characterized as laws with respect to the acquisition of property within the meaning of s. 51(xxxi). The prohibition of anti-competitive mergers or acquisitions, the imposition of penalties, the grant of injunctions and the compulsory divesting of the unlawfully acquired gains of the prohibited acquisition presuppose the absence of quid pro quo of the kind involved in just terms within s. 51(xxxi). Section 81 is just as much a law outside the scope of paragraph (xxxi) as is a law with respect to taxation, fines or pecuniary penalties payable for criminal offences, forfeiture to the Crown of prohibited imports and the vesting of property of bankrupts in the Official Trustee in Bankruptcy. In one sense they all involve the notion of acquisition of property, but not acquisition of property in the composite sense to which s. 51(xxxi) is directed. The presence in s. 81(1A) of the provision that the shares or assets are deemed not to have been disposed of by the vendor and that the vendor is obliged to refund to the acquirer moneys paid to the vendor in respect of the acquisition, does not infuse the acquisition with a quid pro quo. The essential elements of s. 51(xxxi) on the one hand and of ss. 50 and 81 on the other are fundamentally different. [my emphasis]

[Justice Lockhart; para 37] Section 81 is in the nature of a mandatory injunction aimed at unravelling the conduct which gave rise to a contravention of s. 50. It is a provision, like a fine or penalty, the object of which is to ensure that the law is complied with and enforced. ...

[Justice Lockhart; para 40] Section 81 is an example of a genuine adjustment of competing rights of persons where contravention of s. 50 has occurred in an area of activity where the Parliament is concerned to ensure in the public interest the maintenance of competition in trade and commerce.

...

On the issue of whether s 81(A) conferred on the court powers which were not judicial in nature (contrary to the Constitution)

[Justice Lockhart; para 42] I turn to the second question, whether s. 81(1A) is invalid as conferring upon a court constituted under Chapter III of the Constitution powers which are not of a judicial character.

[Justice Lockhart; para 43] Section 81 is one of a number of provisions in Part VI of the Act which empower the Court to grant a variety of remedies where a contravention of Part IV has been established. It is a public interest provision.

[Justice Lockhart; para 44] Under s. 81(1) the Court may, on the application of the Minister, the Commission or any other person, find in that or another proceeding instituted under Part VI that a person has contravened s. 50, and give directions for the purpose of securing the disposal by the person of all or any of the shares or assets acquired in contravention of the section.

[Justice Lockhart; para 45] The Court's jurisdiction under s. 81(1A) is invoked when the Minister or the Commission applies to the Court and the Court declares that the acquisition, in so far as it relates to the shares or assets which have become vested in the acquirer or in any body corporate that is related to the acquirer (itself being a body corporate), is void as from the day on which it took place. In order to exercise the power of granting such declaration, the Court must be satisfied in a proceeding before it that a person has acquired shares in the capital or assets of a body corporate in contravention of s. 50. This is essentially a judicial task for a Court invested with federal jurisdiction by the Parliament under s. 71 of the Constitution. It may involve complex questions of fact and of law, determination of which must be made by a Court according to law and by the exercise of the judicial power of the Commonwealth. The Court may find also that the person from whom the acquirer acquired the shares or assets was involved in the contravention and that, at the time when it made that last mentioned finding, any of the shares or assets are vested in the acquirer or a body corporate related to it (assuming the acquirer is a body corporate). The Court then has a discretion as to whether it makes a declaration that the acquisition, in so far as it relates to the shares or assets, is void as from the day on which it took place. Again, this is essentially the task of the Court exercising the judicial power of the Commonwealth. The Court must determine, after considering all the relevant facts, whether the acquirer was in breach of a legal obligation and whether the vendor should also be held liable for the breach. The grounds upon which the Court exercises its jurisdiction are prescribed by the Act; and the determination whether they exist and whether an appropriate declaration should be made are essentially acts of judicial power: ...

[Justice Lockhart; para 46] The function reposed in the Court by s. 81(1A) is to resolve a dispute about rights and obligations of the parties by determining what they are and what the consequences of contravention should be. The exercise by the Court of its power and discretion must be in accordance with accepted legal principles and by reference to standards and tests prescribed by the Parliament. The determination of those matters constitutes an exercise of judicial power ...

[Justice Lockhart; para 47] It is no objection that the function entrusted to the Court may be novel. The statute itself prescribes to some extent the criteria to be employed by the Courts; but it is for the Court itself to develop and elaborate, as Courts have done for centuries, criteria regulating the exercise of discretion: .... The remedy entrusted to the Court by s. 81(1A) is essentially a restitutionary remedy when contravention of s. 50 by the vendor and acquirer has been established. The power of the Court to rescind a tainted transaction ab initio is judicial power of long standing: ....

[Justice Lockhart; para 48] It is true that, once the Court has made a declaration under s. 81(1A), the acquisition is void, in so far as it relates to the shares or assets to which that provision refers, as from the date on which it takes place. The subsection operates automatically to deem the shares or assets not to have been disposed of by the vendor and to require the vendor to refund to the acquirer moneys paid to the vendor in respect of the acquisition. That statutory consequence does not occur, however, until the Court has made the declaration under s. 81(1A).

[Justice Lockhart; para 49] It is true also that the subsection speaks of past matters. This is a common place in statutes which specify facts or events that must occur anterior to the exercise by courts of judicial power. But it is for the Court to determine whether there has been a relevant contravention and then to exercise its discretion whether or not to make the necessary declaration, and it does this after considering all the relevant facts and circumstances and questions of law attendant upon the exercise by the Court of what is undoubtedly in my view judicial power. It is not a case of a court exercising an administrative function by reference to policy considerations or matters of that kind.

[Justice Lockhart; para 50] Section 81(1A) is not invalid as conferring upon a court constituted by Chapter III of the Constitution powers which are not of a judicial character. ...

Dismissed appeal

On this issue of whether s 51(xxxi) applied

[Justice Beaumont; para 54] Given that s.81(1) should have the meaning and operation mentioned, that is, as a purely adjectival or remedial provision entirely dependent for its operation upon contravention of a substantive provision of the Act (s.50), it follows, in my opinion, that when s.81(1) is viewed in its proper context, it is not a law with respect to the "acquisition of property" within s.51(xxxi).

[Justice Beaumont; para 55] It is true that if s.81(1) stood alone, that is, if it were a free-standing provision having a substantive operation in its own right, there would be much to be said for the view that an independent provision of that kind would be a law with respect to an "acquisition" within s.51(xxxi). If so, it would then be necessary to enquire whether such a law did, in fact, provide for just terms as required by s.51(xxxi).

[Justice Beaumont; para 56] But s.81(1) is not such a free-standing provision. It does not stand alone. To the contrary, s.81(1) is a merely adjectival provision, doing no more than providing a remedy in the event of a breach of the substantive provisions of s.50. This is so, as a matter of form as well as substance. As a matter of form, s.81(1) is located in Part VI of the Act which deals with the enforcement of, and remedies for breach of, the rules for the prohibition of anti-competitive behaviour enacted in Part IV. As a matter of substance, it is plain that s.81(1) can only operate if s.50 has been held to have been contravened, and can only be used so as to remedy that contravention. It follows, in my opinion, that s.81(1) is, in truth, a law with respect to the remedial or adjectival aspects of a contravention of s.50. As a matter of characterisation, it is not a law "with respect to" the acquisition of property within the meaning of s.51(xxxi). It is merely incidental to the regulation of the activities of the relevant corporations under another head of legislative power. Put differently, s.81(1) is merely an appendix to s.50; accordingly, it takes its character from that substantive provision.

(e) Conclusion on whether s.81(1A) offends s.51(xxxi)

(i) The scope of s.81(1A)

[Justice Beaumont; para 57] As has been seen, s.81(1A) gives the Court power to grant a particular remedy if three conditions are satisfied: (1) that there are findings (a) that the acquirer acted in contravention of s.50; and (b) that the vendor was involved, as a secondary party, in that contravention; (2) that at the time the finding was made, any of the shares or assets are vested in the acquirer or a corporation related to it. The remedy available under s.81(1A) consists of a declaration by the Court that the acquisition is void from inception, with the consequences (1) that the shares or assets are deemed, by statute, not to have been disposed of by the vendor; and (2) that the vendor shall refund to the acquirer the amount paid in respect of the acquisition.

[Justice Beaumont; para 58] The Court's power to grant a remedy under s.81(1A) is discretionary. In Australia Meat Holdings, for instance, it was impractical to proceed under s.81(1A) because the vendors were outside the jurisdiction and there was a foreign prohibition upon enforcement in place (per Sheppard J at 50,097-8).

(ii) The characterisation of s.81(1A)

[Justice Beaumont; para 59] In my opinion, s.81(1A) is indistinguishable, in principle, from s.81(1) for present purposes. That is to say, both as a matter of form and of substance, s.81(1A) is a purely adjectival provision. It provides a curial remedy if, and only if, a contravention of s.50 has been demonstrated. Again, in my view, it must follow that, as a matter of characterisation, it is not a law with respect to an "acquisition" of the kind contemplated by s.51(xxxi).

On the issue of whether s 81(A) conferred on the court powers which were not judicial in nature (contrary to the Constitution)

[Justice Beaumont; para 69] ... before the power in s.81(1A) may be exercised, the Court must already have decided that the acquirer contravened s.50 and that the vendor was knowingly concerned in that contravention. It is not, and could not be, suggested that the anterior decisions made under s.50 do not involve the exercise of judicial power. The relief authorised by s.81(1A) is consequential upon these judicial determinations, that is to say, s.81(1A) confers a remedy to secure compliance with the Act and to redress, by a restitutionary process, the consequences of breach, even if the contravention was established in other proceedings, and notwithstanding that only the Minister and the Commission may apply for relief under s.81(1A). It follows, in my view, that the making of a declaration under s.81(1A), if not itself the exercise of judicial power, is at least ancillary or incidental to the exercise of judicial power and thus within Chapter III.

[Justice Beaumont; para 70] Moreover, in my view, it would be wrong to conclude, from the language or context of s.81(1A), that a decision to make, or refrain from making, a declaration was intended to be made, to borrow the words of Kitto J, "upon considerations of general policy and expediency alien to the judicial method". On the contrary, there is every reason to suppose that, in this connection, the discretion was intended to be exercised not only judicially but in accordance with the orthodox judicial method in a type of situation not infrequently encountered in the judicial process ...

[Justice Beaumont; para 72] There is nothing explicit or implicit in the present statute which would suggest that the contractual relationship between the vendor and the acquirer should be enforceable notwithstanding that the contract was made in breach of the prohibition in s.50 ... It follows that I cannot accept that s.81(1A) operates, as the appellant suggests, upon a valid, subsisting transaction.

[Justice Beaumont; para 73] It must further follow that the true character of a decision made under s.81(1A) is that of a judicial remedy dealing with the consequences of a prohibited and illegal contract. Decisions of this kind are made by courts not infrequently in this and analogous situations. ...

[Justice Beaumont; para 74] In my view, a declaratory order made under s.81(1A) involves the exercise of judicial power of the kind permitted to be conferred by Chapter III. I respectfully agree with Burchett J, essentially for the reasons his Honour gives, that the argument to the contrary should not be accepted.

Dismissed appeal

On this issue of whether s 51(xxxi) applied

Justice Hill agreed with the judgments of Justices Lockhart and Beaumont in relation to s 51(xxxi) of the Constitution and added

[Justice Hill; para 20] While it is true that ss.81 and 81(1A) are not directly sections which impose penalties for breach of s.50, they are aimed at ensuring that a person who breaches s.50 will not benefit from that breach. The sections are concerned with unwinding an acquisition which had been entered into in breach of s.50 on the assumption, presumably, that at least in most cases an order for divestiture would be likely to restore the competitive situation existing prior to acquisition. I agree with Beaumont J that the sections are merely adjectival and do no more than provide remedies in the event of a breach of the substantive provisions of s.50.

[Justice Hill; para 21] In these circumstances there is no relevant difference between the present case and the cases discussed earlier concerning penalties and forfeitures.

[Justice Hill; para 22] I agree that the appeal should be dismissed with costs.

On the issue of whether s 81(A) conferred on the court powers which were not judicial in nature (contrary to the Constitution)

Agreed with Justices Lockhart and Beaumont

WSGAL Pty Limited v Trade Practices Commission, the Gillette Company, Wilkinson Sword Limited and Registrar of Trade Marks [1994] FCA 1079; (1994) 122 ALR 673 (11 May 1994) (AustLII)

• See also Trade Practices Commission v The Gillette Co (No 2) 45 FCR 466; (1993) 118 ALR 280; [1993] ATPR 41-268 and Trade Practices Commission v the Gillette Company; Wilkinson Sword Limited; Wsgal Pty Limited (Formerly Wilkinson Sword Group Australia Limited); Registrar of Trade Marks [1993] FCA 496; (1993) ATPR 41-268; (1993) 118 ALR 280 and (1993) 45 FCR 466 (8 October 1993)

Ray Steinwell, 'Constitutional Validity of Divestiture Orders' (1994) 17(2) UNSWLJ 648