1. A proposal is under consideration having for its object the development of an area situated in the north-west of Western Australia and including the whole or a part of the Northern Territory.
2. The proposal involves the constitution by Royal Charter of a company with rights to develop and administer the territory assigned to it.
3. Companies have in the past been created by Royal Charter with power to trade with, exploit, and govern remote or unsettled countries. See Encyclopaedia Britannica–article on Chartered Companies.
4. Three notable examples may be mentioned: the British East India Company, the British South Africa Company and the Hudson’s Bay Company, the last two mentioned being still in existence. In the case of the East India Company and the Hudson’s Bay Company a monopoly of trading was given in respect of the territories in which the companies were respectively empowered to operate. In the case of the British South Africa Company the rights of the company were derived from the cession of territory and rights made to the company by the native chiefs which did not necessarily confer a monopoly. In all three cases the companies were given general governmental and administrative powers over the territories, and over the residents of the territories referred to in their Charters, but in the case of the British South Africa Company these powers were concurrent with, and subject to, the exercise of legislative powers by the British Government under the Foreign Jurisdiction Acts.
5. In the case of the British East India Company and the Hudson’s Bay Company the administrative and governmental functions of the company were brought to an end when the time became ripe for those responsibilities to be assumed by the Crown. The territories then became colonies.
6. The establishment of a chartered company with powers of government over, as well as rights of ownership in, the area of a State does not appear to be a practical possibility.

It is true that it is theoretically practicable to pass Federal and State legislation conferring upon a company formed for the acquisition and development of undeveloped territory within a State a measure of subordinate governmental power (e.g. the making of by-laws and the striking of rates) subject to disallowance by some specified authority of the Commonwealth or of a State. In view of the division of governmental powers in Australia between the Commonwealth and the States, any such legislation applying to an area which remained part of a State would necessarily depend upon complicated arrangements between the Commonwealth and the State expressed in Federal and State legislation. The continued concurrence of both Parliaments in the arrangement made would be a condition of its continuance.

7. The position with respect to any area which is a Territory of the Commonwealth is essentially different. In such a Territory no State has any powers and the Commonwealth has full powers. This matter is more fully considered in paragraphs 9 and 10.
8. The proposed company will operate within a defined area. There are two cases to be considered:
1. The case of the whole area concerned being a Territory of the Commonwealth, any part of the area within which the Company will carry on its activities which is not now a Territory of the Commonwealth being surrendered by the State to the Commonwealth.
2. The case of the whole or part of the area remaining part of a State.

(A) THE WHOLE AREA A COMMONWEALTH TERRITORY

9. Section 122 of the Constitution provides that the Commonwealth Parliament ‘may make laws for the government of any territory surrendered by any State to and accepted by the Commonwealth’. This power applies to the Northern Territory and also to any area which might be surrendered by a State and added to the Northern Territory.
10. The power of the Commonwealth to make laws for the government of a Territory is not subject to the constitutional limitations applicable to Commonwealth legislation having force in the States.

This subject has been considered on several occasions by the High Court. Reference may be made to Buchanan v. The Commonwealth, 16 C.L.R. 315 at pages 317, 318 and 335. At page 335 Isaacs J. says:

But the clear power contained in section 122 is independent of that contained in section 51 sub-section (ii.). The last named power–‘Taxation; but so as not to discriminate between States or parts of States’–applies to the Commonwealth proper. … And now that it is a Territory of the Commonwealth, it is not fused with it, and provisions of sections 53 and 55 of the Constitution, intended to guard the Senate and the States, have no application to the Northern Territory.

This is a clear decision that the prohibition of discrimination in taxation between States or parts of States has no application as between a State and a Territory.

In The King v. Bernasconi, 19 C.L.R., 629 at pages 635 and 637 another illustration of the general proposition above stated is to be found. In this case it was held that the provisions of Chapter III of the Constitution relating to the judicature have no application to Territories. At page 637 Isaacs J. says:

It is plain that that section (s. 122) does not consist merely of additional legislative power over territories beyond the powers already conferred upon Parliament in relation to the Commonwealth itself, for its language is unrestricted and covers many of the subjects already specified in sec. 51. It is an unqualified grant complete in itself and implies that a ‘territory’ is not yet in a condition to enter into the full participation of the Commonwealth constitutional rights and powers. It is in a state of dependency or tutelage, and the special regulations proper for its government until, if ever, it shall be admitted as a member of the family of States, are left to the discretion of the Commonwealth Parliament.

In Porter v. The King, 37 C.L.R. 432 at pages 440–1 Mr. Justice Isaacs emphasises that section 122 of the Constitution is in the nature of a plenary authority in the Commonwealth Parliament. At page 446 Mr. Justice Higgins says, with respect to the power to make laws for the government of the Territory under section 122:

This power to make laws for the government of the territory is, so far as appears, unlimited; and it is difficult to see what right we have to limit it by construction.

At pages 448-9 Mr. Justice Starke describes the position of the Territories in relation to the Constitution in the following words:

The Parliament has, by force of sec. 122 of the Constitution, full and plenary power over the territories. It is unnecessary, for the purposes of the present case, to consider whether certain constitutional limitations–as, for instance, that contained in sec. 116–extend to legislation in respect of the territories. ‘The governments of the territories are not, however, organised under the Constitution, nor subject to its complex distribution of the powers of government, but they are creations, exclusively, of the’ Parliament, and subject to its supervision and control.

In Federal Capital Commission v. Laristan Building and Investment Company Pty., Ltd., 42 C.L.R., 582 at page 585, Mr. Justice Dixon applied the principle that the general constitutional provisions did not extend to the Territories ‘which are governed under the power conferred upon the Parliament by section 122’.

11. A chartered company would be created and its powers would be defined by Royal Charter. The possibility of using those powers in the area would depend upon Commonwealth legislation.

A chartered company would be subject to federal law in the same way as a local company, but the fact that it was a British company, acting under a Royal Charter, would perhaps diminish the risk of governmental interference with the rights of the company after the company had started operations.

12. A local company could be formed under federal law passed for the purpose of facilitating the creation and the operation of a company in the area. Such a company, however, owing its existence to federal legislation, would not have quite the same apparent degree of independence as a chartered company depending for its existence upon a Royal Charter. This circumstance might strengthen the financial position of a chartered company as against a company formed under federal law.
13. Whether the company was a chartered company or a locally formed company, the Commonwealth Parliament could, in consideration of the company undertaking developmental work of a nature usually undertaken by Governments, give the company, subject to such control as may be thought proper, the right to levy rates and generally to perform such subordinate legislative functions as are usually within the competence of a municipal council. The company might require and could be given by legislation the power to raise and maintain such police forces as were necessary to preserve order and protect its rights, the administration of justice being retained by the Commonwealth.
14. It is necessary to consider whether the Commonwealth is prevented by the Constitution from according to the territory under the control of the company preferential treatment in the matter of customs duty, income tax, land tax, and other taxes.
15. Customs Duty. Section 88 of the Constitution requires that uniform duties of customs shall be imposed within two years after the establishment of the Commonwealth.

This section does not provide that duties of customs shall be maintained at all times on a uniform basis throughout the Commonwealth, but merely that uniform duties shall be imposed within the time stated.

The provisions which require the maintenance of uniformity in customs duties are contained in section 51(ii) and section 99 of the Constitution. Section 51(ii) confers on the Commonwealth Parliament power to legislate with respect to taxation but so as not to discriminate between States or parts of States (See note on page 829, Annotated Constitution of the Australian Commonwealth, Quick and Garran). While discrimination in legislation in respect of customs duty and other forms of taxation is forbidden as between States or parts of States, there is no such prohibition as between the territories of the Commonwealth and the States.

Section 99 is in the following terms:

99. The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof.

Preference is prohibited as between States or parts of States but not as between territories and States.

Reasons have been advanced in paragraph 10 of this opinion for the view that the provisions of section 51 and of section 99 do not limit the legislative power of the Commonwealth Parliament under section 122. On the other hand it may be mentioned that in the King v. Barger (6 C.L.R. at p. 78) the majority of the High Court held that the words ‘States or parts of States’ must be read as synonymous with ‘parts of the Commonwealth’ or ‘different localities within the Commonwealth’.

The majority of the Court gave its reasons for so holding as follows:

The existing limits of the States are arbitrary and it would be a strange thing if the Commonwealth Parliament could discriminate in a taxing act between one locality and another merely because such localities were not coterminous with States or with parts of the same State.

At the time this decision was given, however, the States occupied the whole area of the Commonwealth, there being then no territories of the Commonwealth within the geographical limits of the Commonwealth, and it is considered that the Court’s decision cannot be regarded as applying to questions of discrimination involving parts of the Commonwealth which were not also parts of States. It is clear, in my opinion, that the Court was not contemplating the existence of territories in relation to the statement quoted.

It is considered, therefore, that the Commonwealth Parliament may, if it thinks fit, legislate to provide a territorial tariff distinct from the general Commonwealth tariff and that the Commonwealth Parliament may also legislate to impose special duties upon goods imported from a Territory into a State.

16. Section 92 of the Constitution provides that ‘on the imposition of uniform duties of customs, trade, commerce, and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free’.

This section does not prevent the imposition of tariff restrictions on trade between a Territory and the rest of the Commonwealth.

It may be added that the High Court has decided that section 92 operates to limit State legislative power but that it does not bind the Commonwealth Parliament. McArthur Ltd. v. Queensland, 28 C.L.R. 530 at page 557; James v. The Commonwealth 41 C.L.R. 442.

The Northern Territory (Administration) Act 1910–1931 section 10 provides that ‘trade, commerce, and intercourse between the Northern Territory and the States, whether by means of internal carriage or ocean navigation, shall be absolutely free’.

It is, however, within the power of the Commonwealth Parliament to repeal this provision if it thinks fit.

17. The imposition of a special territorial tariff would involve the necessity for provisions to deal with the following matters:
1. If the territorial duties were lower than the Commonwealth duties, revenue officers might be required to prevent goods imported from abroad into the territory from being smuggled into a State.
2. Special legislative provisions would be necessary to deal with goods originally imported into the Territory and thence into the Commonwealth, and also with goods originally imported into the Commonwealth and thence into the Territory.
3. Probably some special legislative provisions would be required to deal with goods locally produced in the Commonwealth and imported into the Territory and with goods locally produced in the Territory and imported into the Commonwealth.
18. Income Tax, Land Tax, Excise Duty, Estate Duty, Entertainments Tax

For reasons similar to those stated in paragraph 15 above, the Commonwealth Parliament could give differential treatment to a Territory. In other words such federal taxation need not be uniform as between a Territory and the States.

Concessions in respect of income tax upon income accrued in the Northern Territory have already been granted by section 5A of the Income Tax Assessment Act 1922–1932. The Act is declared not to apply to any income derived from primary production in the Northern Territory of Australia by a resident of that Territory prior to the 1st of July, 1937.

19. Land tenure The Commonwealth can provide whatever form of land tenure it thought desirable in the Territory.

(B) THE WHOLE OR PART OF THE AREA ALLOTTED TO THE COMPANY REMAINING PART OF A STATE

20. In this case–where the whole or part of the area was in a State–it would not be possible for the Commonwealth Parliament to differentiate in any way between taxation in the said whole or part of the area and in the States generally. (Constitution ss. 51(ii) and 99).
21. The Company would be subject to federal legislation in the federal part of its area and to both Federal and State legislation in the State part of its area.
22. Preferential treatment in the matter of Customs duty to any State or any part of a State is forbidden by the Constitution (section 51(ii) and section 99). Preferences might be accorded to goods required for specified purposes, or even to companies or persons, if the preferences were uniform throughout the States. But from a practical point of view it would not be possible to relieve from customs duties any company occupying an area into which other persons could also import goods.
23. If it were desired to achieve the object of relieving any part of a State from any federal customs taxation notwithstanding the provisions of the Constitution forbidding discrimination (section 51(ii)) and preference as between States or parts of States (section 99), the following observations are relevant:
1. It would be possible to return to a State Government, by way of financial assistance under section 96 of the Constitution, the amount or part of the amount paid in customs duties by the citizens of that State.
2. Such a payment to the State Government would not, however, have the same (or anything like the same) economic effect as a reduction of the customs duties payable by individual persons.
3. Any scheme which involved the repayment from Commonwealth revenue to those persons of the duties which they paid would be of very doubtful validity. The same may be said if it were attempted to achieve the same object by the indirect method of a Commonwealth grant to the State and a payment by the State to the individual person who had paid the duty. Either scheme would be a rather obvious subterfuge and it is very probable that it would be held invalid on the principles laid down by the Privy Council in James v. Cowan 1932 A.C. 542.
24. As to other federal taxation than customs duties, it would be very difficult in practice to give any special treatment to any part of a State in respect of excise duties, entertainment tax, estate duty or income tax. In the case of land tax it would perhaps be practicable to devise a form of exemption which, though general in its form, would in fact have application only to the company in question. This would be much more difficult in the case of the other taxes mentioned.
25. In any area which was part of a State, the State Parliament could provide such exemption or relief from ordinary State taxation as such Parliament thought proper.

[Vol. 26, p. 379]