Because this is purely intrastate trade, the respondents would not have fallen within the legislative power granted by section 51(i) of the Constitution.

The Commonwealth Industrial Court, at first instance, rejected the charge, following Huddart, Parker & Co Pty Ltd v Moorehead,[2] in which it was held that a law with respect to the trading activities of constitutional corporations was not within power.

The Court unanimously rejected the decision in Huddart, Parker & Co Pty Ltd v Moorehead,[2] holding that it was based on the rejected doctrine of reserved State powers, which was abolished in Amalgamated Society of Engineers v Adelaide Steamship Co. Ltd.; "the earlier doctrine virtually reversed the Constitution" (per Barwick CJ).

The Court found that laws with a sufficient connection to the trading activities of constitutional corporations were valid.

However, since section 35(1) is a single provision and not a series of paragraphs, Barwick CJ felt that it would be "legislating and not construing" if it were broken up accordingly.