Dr Kwee Lim v Trade & Investment Queensland
[2016] FWCFB 6615
•15 NOVEMBER 2016
| [2016] FWCFB 6615 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.604 - Appeal of decisions
v
Trade & Investment Queensland
(C2016/1633)
DEPUTY PRESIDENT GOSTENCNIK | MELBOURNE, 15 NOVEMBER 2016 |
Appeal against decision [2016] FWC 4174 of Hunt, C at Brisbane on 8 July 2016 in matter number AB2016/365; whether Respondent conducting or undertaking a constitutionally-covered business; permission to appeal granted; appeal upheld; decision quashed; matter remitted to Commissioner to rehear.
[1] Dr Kwee Lim (Appellant) is an employee of Trade & Investment Queensland (Respondent) and has been since 17 April 2000. The Appellant is employed as the Respondent’s Principal Trade and Investment Officer. On 11 April 2016, the Appellant made an application, pursuant to s.789FC of the Fair Work Act 2009 (Act) for the Fair Work Commission (Commission) to make an order under s.789FF of the Act to prevent the Appellant from being bullied at work by an employee of the Respondent.
[2] The Appellant’s anti-bullying application was heard and determined by Commissioner Hunt, who issued a decision on 8 July 2016 1 (Decision) in which the Commissioner dismissed the application having concluded that the Commission did not have jurisdiction to determine the Appellant’s application because the Respondent is not a trading corporation and is therefore not conducting a constitutionally-covered business within the meaning of the Act.2
[3] On 14 July 2016, the Appellant lodged an appeal against the Decision.
[4] The Decision, the subject of the appeal was made under Part 6-4B of the Act. There is no right to appeal under s.604 of the Act, and an appeal may only be made with the permission of the Commission. Subsection 604(2) requiresthe Commission to grant permission to appeal if satisfied that it is “in the public interest to do so”. Permission to appeal may otherwise be granted on discretionary grounds.
[5] The task of assessing whether it is in the public interest to grant permission to appeal is a discretionary one involving a broad value judgment. 3 In GlaxoSmithKline Australia Pty Ltd v Makin4 a Full Bench of the Commission identified some of the considerations that may attract the public interest:
“... the public interest might be attracted where a matter raises issues of importance and general application, or where there is a diversity of decisions at first instance so that guidance from an appellate court is required, or where the decision at first instance manifests an injustice, or the result is counter intuitive, or that the legal principles applied appear disharmonious when compared with other recent decisions dealing with similar matters.” 5
[6] Other than the special case in s.604(2), the grounds for granting permission to appeal are not specified. Considerations which have traditionally been treated as justifying the grant of permission to appeal include that the decision is attended with sufficient doubt to warrant its reconsideration and that substantial injustice may result if leave is refused. 6 It will rarely be appropriate to grant permission to appeal unless an arguable case of appealable error is demonstrated. This is so because an appeal cannot succeed in the absence of appealable error.7 However, the fact that the Member at first instance made an error is not necessarily a sufficient basis for the grant of permission to appeal.8
[7] The Notice of Appeal lodged by the Appellant sets out the following grounds of appeal. The Appellant contends that the Commissioner erred:
- in finding at paragraph [61] that rental income received by the Respondent did not constitute trading activities;
- at paragraph [64] by:
- in finding at paragraph [65] that sponsorship did not constitute trading activities (there was, for example, no assessment undertaken like that in Hughes v The WACA 69 ALR 660);
- at paragraph [67] by:
“ by irrelevantly considering (although acknowledging it was not directly relevant) at paragraph [60] that the Respondent could not undertake its activities without government funding;
(a) applying the wrong test of ‘convenience to the public’ after having properly set out the test at paragraph [20] to the Decision, including by reference to R v Trade Practices Commission; Ex parte St George Council (1974) 130 CLR 533;
(b) taking into account an irrelevant consideration, and failing to give any, or any adequate, reasons, in finding that the activities of the respondent in paragraphs [63] were ‘peripheral activities’ and not trading activities; and
(c) failing to give any, or any adequate reasons for a finding that visa application free payments in paragraph [63] did not constitute trading activities
(a) applying the wrong test of whether the respondent had ‘adequately discharged its differentiation from the circumstances found by the High Court to determine that Queensland Rail is a trading corporation’;
(b) failing to expressly determine whether the respondent was a constitutionally-covered business;
(c) taking into account an irrelevant consideration that the respondent was ‘not required by statute to operate on a commercial basis’; and
(d) failing to take into account the relevant consideration of the revenue derived by the respondent through the activities in paragraphs [61] and [63] to [65].” 9
[8] The sixth ground of appeal alleges a denial of procedural fairness and that ground is only pressed if we are against the Appellant in respect of the primary grounds of appeal noted. 10
[9] The Appellant submits that the appeal raises the important question of the Commission’s jurisdiction to deal with applications for orders to stop bullying which is a matter of general and public interest. 11 It says further that permission to appeal should be granted as the anti-bullying jurisdiction is of critical importance to employees, employers and the community at large.12 The Respondent takes a contrary position and submits that the grounds of appeal raised by the Appellant reveal no appealable errors and the Commission did not fail to exercise its jurisdiction.13
[10] It is sufficient for present purposes to note that the gravamen of the various grounds relied upon by the Appellant is that the Commissioner erred in concluding that the Respondent is not relevantly a trading corporation and therefore is not conducting or undertaking a constitutionally-covered business within the meaning of the Act.
[11] The Commissioner’s reasoning is captured in the passages of the Decision extracted below:
“[60] The international exposure of businesses in Queensland is an important responsibility of TIQ. Without funding from the State Government, the activities could not be undertaken. This matter is not, however, a direct relevant consideration in determining whether TIQ is a trading corporation or not.
[61] The income from activities undertaken by TIQ in the 2014/2015 financial year is
$1,742,000. Approximately one third of that income is rent reimbursement from other
agencies, where TIQ is the landlord of the rented premises. I do not consider that
arrangement to constitute trading activities. It is understandable that owners of premises
would wish to enter into a lease with one foreign entity, TIQ, and not with various
organisations some of which may not have corporate entities.
[62] It is expected that organisations, whether trading corporations or not, will hold cash
balances in bank accounts. I do not consider the sum of $133,000 in the relevant year to assist K.L.’s argument that TIQ is a trading corporation.
[63] On TIQ’s evidence, the amount of $633,000 representing Sundries is largely payment from individuals through a Commonwealth visa application procedure, administered by TIQ. It is TIQ’s evidence that it administers this scheme for the benefit of the Commonwealth, and does so at a loss when the wages of employees required to administer the scheme is taken into consideration. Included in the amount of $633,000 are nominal payments on a cost-recovery basis made to TIQ when individuals are included in a ministerial visit overseas.
[64] I do not consider that these activities constitute trading activities. If these activities
can be regarded as trading activities, I do not consider their contribution to TIQ’s revenue to be of any substantial consideration. They are peripheral activities. The activities are largely undertaken for convenience to the public; in particular, if the visa activities were no longer undertaken by TIQ, it would not be necessary to incur the cost of approximately $800,000 per annum to undertake the activity.
[65] I do not consider the activities represented in the accounts as ‘Industry Contribution’
($143,000) and ‘Other’ ($250,000) as trading activities. The Industry Contribution income is largely event-cost minimisation through sponsorship. A sponsor agreeing to subsidise the cost of an industry event does not, in my view, constitute a trading activity to equate to TIQ being considered a trading corporation.
[66] The contribution of $250,000 was a grant of a Commonwealth department. It does not constitute a trading activity.
[67] The activities undertaken by TIQ pursuant to its statutory responsibilities are vastly
different to the statutory responsibilities of Queensland Rail. TIQ is not required by statute to operate on a commercial basis, and is not required to remit dividends to Queensland Treasury, nor pay an equivalent amount of taxation. I am satisfied TIQ has adequately discharged its differentiation from the circumstances found by the High Court to determine that Queensland Rail is a trading corporation.
[68]In the two cases cited by K.L., the activities of the Society, and those of the Board are easily distinguished. In the case of the Society, a significant enough portion of its revenue was generated through public appeals, the sale of merchandise, sale of equipment, training and other activities. In the case of the Board, commercial arrangements were entered into to sell and service fire sprinkler systems and alarms, generating $8 million in sales. The activities of TIQ do not in any way reflect the activities undertaken by the Society or the Board.
[69] I do not agree with the submissions of K.L. at paragraph [59]. It is argued that
because the anti-bullying jurisdiction is in place to prevent further or future bullying, I should find that because TIQ has the capacity to charge clients on a fee-for-service basis, it could constitute a trading corporation. While I have regard for the capacity of TIQ to charge on a fee-for-service basis, it presently does not do so, and could not be said to be a trading corporation on the basis of speculative activities.” 14 [Endnotes omitted]
[12] As we have already mentioned, the principal application to which this appeal relates was for an order under s.789FF of the Act.
[13] The application raised for determination the question whether the Respondent conducts a constitutionally covered business within the meaning of s.789FD of the Act and necessarily required a consideration of whether the Respondent is a constitutional corporation, that is, a corporation to which paragraph 51(xx) of the Commonwealth of Australia Constitution Act 1900 (Constitution) applies. Subject to the constraints in s.51 and the Constitution, that paragraph empowers the Parliament to make laws with respect to “[F]oreign corporations, and trading or financial corporations formed within the limits of the Commonwealth”. The determination of whether the Respondent is a constitutional corporation relevantly required a consideration of whether the Respondent is a trading corporation.
[14] The Respondent is a body corporate established by s.7 of the Trade and Investment Commission Act 2013 (TIQ Act).
[15] The functions and powers of the Respondent are enumerated in ss.10 and 11 of the TIQ Act respectively as follows:
“10 Functions
(1) TIQ has the following functions—
(a) to facilitate, encourage, promote, identify, attract and develop trade and investment opportunities;
(b) to assist, directly or indirectly, entities in relation to trade and investment opportunities;
(c) to promote, or participate in or coordinate projects to promote trade and investment opportunities;
(d) to obtain, and make available to entities, information relating to existing or future trade and investment opportunities;
(e) to conduct research into, and analysis of, trade and investment opportunities;
(f) to work collaboratively with public sector units and other entities in relation to increasing trade and investment opportunities;
(g) to develop and administer schemes in relation to export markets and foreign direct investment;
(h) to facilitate access by persons to Commonwealth and State entities if that access is likely to enhance trade and investment opportunities;
(i) to undertake trade missions for purposes in relation to TIQ's functions;
(j) to establish and administer offices in foreign countries for purposes in relation to TIQ's functions;
(k) to act outside Australia as agent for the State if requested by the Minister;
(l) to advise the Minister about the functions mentioned in paragraphs (a) to (k);
(m) to provide policy advice to the Minister in relation to trade and investment opportunities;
(n) anything else likely to complement or enhance a function mentioned under this section;
(o) to perform functions of the type to which paragraph (n) applies and given to TIQ in writing by the Minister;
(p) any other function given to it under an Act.
(2) In this section—
trade and investment opportunities means trade, investment and other commercial opportunities in Queensland and between Queensland and other States or foreign countries.
11 Powers
TIQ has all the powers of an individual and may, for example—
(a) enter into contracts or agreements; and
(b) acquire, hold, deal with, and dispose of, property; and
(c) appoint agents and attorneys; and
(d) engage consultants and researchers; and
(e) charge a fee for services and other facilities it supplies; and
(f) do anything else necessary or convenient to be done in performing its functions.”
[16] According to the Respondent’s “Statement of Comprehensive Income for the year ended 30 June 2015” 15 (Income Statement) set out in its 2014 – 2015 annual report, during that period it received income from continuing operations in the amount of $33,546,000 of which $32,197,000 was derived from grants and other contributions. These grants and other contributions consisted of a recurrent grant from the Queensland government of $31,533,000, contributions from the Commonwealth of $271,000, contributions of $143,000 from industry and other contributions amounting to $250,000.
[17] The balance of income was made up of $583,000 received in “User Charges and fees” and $766,000 described as other revenue.
[18] According to the evidence before the Commissioner, the contributions of $143,000 from industry was earned from sponsorship arrangements for some of the various business and networking events organised by the Respondent and the sponsorship income was said to help offset the cost of hosting the various events. 16 Part of the “other revenue” described in the Income Statement included an amount of $133,000 as interest earned from a number of bank accounts held by the Respondent in various jurisdictions The Respondent also administers a scheme said to be on behalf of the Department of Immigration and Border Protection enabling business and skilled migrants to reside and work in Queensland for which it charges an application fee of between $200 and $750 for each application processed through the scheme.17 The charging of an application fee in connection with the scheme generated income in the amount of $633,00018 which is the balance of the $766,000 described as “other revenue” in the Income Statement. The cost of administering the scheme to the Respondent was said to be in the order of approximately $800,000.19
[19] The income in the amount of $583,000 received by the Respondent and described in the Income Statement as “User Charges and fees” is wholly attributable to rental income. 20 According to the evidence before the Commissioner, the Respondent maintains 13 international offices across 11 countries.21 The Respondent was described as the “landlord” of those premises and it entered into sub-tenancy arrangements with other Queensland government agencies, “sister” state government agencies and some universities in respect of premises which it had leased in order to defray the cost of rental that it paid for the premises.22
[20] The sum of this income was in the order of $1,492,000 and represented approximately 4.45% 23 as a portion of the Respondent’s total income of $33,546,000 for the financial year ending 30 June 2015.
[21] A corporation may be a trading corporation within the meaning of paragraph 51(xx) of the Constitution if it is constituted for the purposes of engaging in, or its purpose is to engage in trading activities. 24A corporation may also be a trading corporation if it engages in trade or trading activities.25 As Gageler J observed in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Queensland Rail26the constitutional description of trading corporation as capable of applying to a corporation – by reference to its trading purpose or alternatively by reference to its trading activity – must each be qualified to exclude that which is insubstantial.27 There is no bright line delineating a body corporate that is a trading corporation and one that is not.28 The characterisation of a body corporate as a trading corporation is a matter of fact and degree.29
[22] So far as a consideration of a corporation’s activities in assessing whether a corporation is a trading corporation is concerned, a Full Court of the Federal Court in United Firefighters’ Union of Australia v Country Fire Authority 30 opined a framework for addressing the activities of the CFA.31 This involved first, considering in general terms how the question of a corporation’s activities is to be approached.32 Secondly, considering the legislation as in force at the relevant time which governed the body corporate.33 Thirdly, considering separately the revenue producing activities of the body corporate which were in issue, noting that it would be necessary to also consider those activities cumulatively.34 Fourthly, considering the central issue of whether or not the body corporate was a trading corporation within the meaning of paragraph 51(xx) of the Constitution, noting that this is a matter of characterisation and that no single consideration requires a conclusion that a corporation is, or is not, a trading corporation.35
[23] In considering the general approach to the charactisation of a corporation’s activities, the Court in CFA adopted the following approach:
“ …
69. In Adamson, Barwick CJ at 211 referred to certain activities, which he had listed, as being essentially commercial in nature and which emphasised the trading quality of the manner in which the Club and the League in that case promoted Australian Rules Football. Justice Mason at 235 listed certain activities of the two Leagues and said that he treated all of those activities which he had listed and which produced revenue as trading activities. His Honour did not limit the concept of trading to buying and selling at a profit; it extended to business activities carried on with a view to earning revenue.
70. Further, in Bankstown at [48]-[50], a Full Court of this Court accepted the following propositions as to the meaning of the word “trading” in the constitutional expression “trading corporation”, adopting the summary of the principles by Steytler P in Lawrence (No 2) at [68]:
(i) In this context, “trading” is not given a narrower construction. It extends beyond buying and selling to business activities carried on with a view to earning revenue, and includes trade in services.
(ii) The making of a profit is not an essential prerequisite to trade, but it is a usual concomitant. This was explained by the Full Court in Bankstown at [49].
(iii) The ends which a corporation seeks to serve by trading are relevant (sic) 36 to its description. Consequently, the fact that trading activities are conducted in the public interest or for a public purpose will not necessarily exclude the characterisation of those activities as “trade”.
(iv) The commercial nature of an activity is an element in deciding whether the activity is in trade or trading. 37”
[24] Having regard to the above, we consider that the Commissioner erred in her consideration and charactisation of several of the activities of the Respondent. Our reasons for that conclusion follow.
[25] First, as to the issue of rental income, the Commissioner concluded:
“[61] The income from activities undertaken by TIQ in the 2014/2015 financial year is $1,742,000. Approximately one third of that income is rent reimbursement from other agencies, where TIQ is the landlord of the rented premises. I do not consider that arrangement to constitute trading activities. It is understandable that owners of premises would wish to enter into a lease with one foreign entity, TIQ, and not with various organisations some of which may not have corporate entities.” 38
[26] The Appellant submitted it is well established that the charging of rent to another entity to occupy premises is a trading activity. 39 He submitted the fact that the tenants may be either directly or tangentially related to the Respondent does not alter the nature of the transaction.40
[27] The Respondent submitted that the Commissioner, in concluding that the revenue the Respondent received from being a landlord to other government agencies and some universities "did not constitute trading activities", was doing no more than considering whether such activities formed a significant proportion of its overall activities as to meet the description of a trading corporation. 41
[28] The Respondent’s submission cannot be accepted. First, the Commissioner expressly concluded that the activity did not constitute “trading activities”. Secondly, consideration of the significance of the activity relative to a corporation’s overall activities arises only if it is first concluded that the activity is a trading activity. So much is clear from the authorities, for example in CFA where the Court said:
“136 Answering that question does not simply involve the application of a formula or equation nor the substitution of percentages or other measures of monetary value as between the activities found to be trading activities and the activities not so found. The purpose for which a corporation is formed is not the sole or principal criterion of its character as a trading corporation and the Court looks beyond the “predominant and characteristic activity of the corporation.” We refer again to the nature and the extent or volume of a corporation’s activities needed to justify its description as a trading corporation. The relationship between the activities relied upon and the overall activities of the corporation, and the extent of those activities in comparison with the extent of the corporation’s activities overall are relevant. In our opinion, this was the approach taken by the primary judge. 42”
[29] The Respondent also submitted that the only evidence of income from rent was from the Respondent's leasing of property and the defrayal of property costs by sub-leasing property to other government entities and some universities. 43 As a percentage, it represented 1.7% of the Respondent's total revenue.44 There was no evidence that the Respondent conducted any investment activities with land, or that the Respondent bought and sold properties as a business, or that Respondent received interest or dividends from any property investments. It submitted that there is no comparison with the underlying factual situation set out in Quickenden v O’Connor45such that the Respondent's "rental activities" could be regarded as a substantial part of the Respondent's activities.46
[30] With respect, none of this speaks to the character of the activity undertaken, and whether the sub tenancy activity was commercial in nature or a business activity carried on by the Respondent with a view to earning revenue. The ends sought to be achieved by undertaking the activity (to defray costs) does not deny an activity of the character of trading if, having regard to the commercial nature of the activity from which the rental income is derived, it may properly be regarded as a trading activity. Similarly, that the Respondent did not further engage in investment activity with respect to land, does not strip the activity at issue of its character. The assessment of the significance of the activity vis-à-vis TIQ’s overall activity comes next.
[31] The basis for the Commissioner’s conclusion that the activity from which the rental income was derived was not a trading activity is not clear to us. As we earlier observed, on the evidence before the Commissioner, the Respondent maintains 13 international offices across 11 countries. 47 It entered into sub-tenancy arrangements with other Queensland government agencies, “sister” state government agencies and some universities in respect of premises which it had leased in order to defray the cost of rental that it paid for the premises.48 It received rental income from those sub-tenancy arrangements.
[32] Details of the sub-tenancy arrangements were not produced but it seems to us, on the evidence, that the sub-tenancy activity is prima facie commercial in nature and carried on by the Respondent with a view to earning revenue. To describe the arrangement as “rent reimbursement” is, with respect, a misnomer. Moreover, the motive of the principal overseas landlord in entering into the principal lease with the Respondent seems to us to be irrelevant to identifying the character of the sub-tenancy activity.
[33] In our view, the Commissioner did not focus on the character of the activity. In this regard the Commissioner was in error.
[34] We turn next to consider the sponsorship activity. On this issue the Commissioner’s consideration was as follows:
“[33] The amount of $143,000 was explained by Mr Bracegirdle as payment by sponsors when TIQ holds business events and networking opportunities for exporters and investors. An example was provided of KPMG sponsoring an event at a time when the G20, a global economic summit was held in Brisbane. The event sponsorship helps to defray the cost of holding events. Mr Bracegirdle’s evidence does not detail whether there was any surplus to the event, and if so, if it was retained by TIQ.
. . .
[65] I do not consider the activities represented in the accounts as ‘Industry Contribution’ ($143,000) and ‘Other’ ($250,000) as trading activities. The Industry Contribution income is largely event-cost minimisation through sponsorship. A sponsor agreeing to subsidise the cost of an industry event does not, in my view, constitute a trading activity to equate to TIQ being considered a trading corporation. 49”
[35] The Appellant submitted that sponsorship in this context is synonymous with advertising. 50 It is the payment by the sponsor to have their name associated with an event. In this case the example was KPMG sponsoring an event at or around the time of the G20. Income from such activities has long been accepted as trading.51 The Appellant maintained the fact that sponsorship activity was conducted to help defray costs or on a cost recovery basis is irrelevant.52
[36] The Respondent maintained that the Commissioner, in concluding that the sponsorship revenue received by the Respondent was not trading activity, was doing no more than considering whether such activity formed a significant proportion of its overall activities so that the Respondent should be characterised as a trading corporation. 53 For the reasons earlier given, this submission cannot be accepted. It is contrary to the Commissioner’s actual conclusion that the activity is not a trading activity.
[37] The Respondent also submitted that it provided evidence to the Commission which demonstrated that its sponsorship revenue merely involved a contribution at a cost recovery level towards the relevant events and the promotion of the relevant Free Trade Agreements. 54 With respect, this goes to the ends sought to be achieved by undertaking the activity but says nothing about its character.
[38] The Respondent also says that there was no evidence of the Respondent performing activities in the manner designed to compete in a market for networking services. 55 This seems to us to be a very one dimensional view of the activity. Take for example, the KPMG sponsorship. It is unlikely that KPMG was acting altruistically and sought no more than to assist the Respondent to defray its costs of hosting an event. Doubtless, KPMG saw an opportunity to promote its brand during the event. The Respondent facilitated this in return for a fee, which presumably KPMG paid.
[39] It seems to us that the Commissioner was distracted in her assessment of the character of the activity by a notion that it was “largely event-cost minimisation through sponsorship”. The evidence before the Commissioner was that the Respondent holds business events and networking opportunities for exporters and investors and seeks sponsorship for some of these events, to help offset the costs. 56 The Respondent’s motivation, namely that it seeks out sponsorship arrangements for which it charges a fee for the purposes of minimising the costs incurred in hosting events, does not speak to the character of the sponsorship arrangement. Moreover, the conclusion that “a sponsor agreeing to subsidise the cost of an industry event”57 is an activity not involving trading, finds no support in the evidence before the Commissioner. There was no evidence in the form of any sponsorship agreement and no sponsor was called to give evidence about how it became aware of the sponsorship opportunity or the terms on which it had agreed to be a sponsor. At its highest the evidence was that the Respondent “engaged the likes of KPMG to help sponsor a couple of business lunches” and that the sponsorship defrayed the cost of running the lunches.58 In our view, the Commissioner did not turn her attention to the actual character of the sponsorship activity and in failing to do so, she was in error.
[40] We next turn to consider the income derived from fees paid for the processing of certain Visa applications and fees paid for participation in overseas delegations. The Commissioner gave consideration to this issue as follows:
“[36] An amount of $633,000 is recorded as sundry revenue. Mr Bracegirdle explained that TIQ administers a scheme on behalf of the Commonwealth, and primarily for the Department of Immigration and Border Protection. When foreign individuals seek to apply for business visas and skilled migrant visas to work and reside in Queensland, Australia, TIQ administers the Commonwealth scheme. Applicants are charged between $200 and $750 for each of those applications, a charge set by the Commonwealth.
[37] TIQ employs the employees to administer the Commonwealth scheme. Mr Bracegirdle’s evidence is that this is at an annual cost of around $800,000, and the report demonstrates an income of $633,000. Mr Bracegirdle explained that the $633,000 also includes TIQ’s coordination of ministerial missions overseas, and business delegates are charged a very small participation fee when attending these overseas visits. Mr Bracegirdle explained that it is cost-recovery only.
. . .
[63] On TIQ’s evidence, the amount of $633,000 representing Sundries is largely payment from individuals through a Commonwealth visa application procedure, administered by TIQ. It is TIQ’s evidence that it administers this scheme for the benefit of the Commonwealth, and does so at a loss when the wages of employees required to administer the scheme is taken into consideration. Included in the amount of $633,000 are nominal payments on a cost-recovery basis made to TIQ when individuals are included in a ministerial visit overseas.
[64] I do not consider that these activities constitute trading activities. If these activities can be regarded as trading activities, I do not consider their contribution to TIQ’s revenue to be of any substantial consideration. They are peripheral activities. The activities are largely undertaken for convenience to the public; in particular, if the visa activities were no longer undertaken by TIQ, it would not be necessary to incur the cost of approximately $800,000 per annum to undertake the activity. 59 [Endnotes omitted]”
[41] The Appellant submitted that the evidence before the Commissioner did not reveal how much of the $633,000 could be apportioned to each activity; however the evidence established that the participation fees were the fees charged to business people by the Respondent to permit them to attend overseas delegations. 60 The Appellant submitted that the amounts paid are in consideration for the logistical services of arranging the trips and that the exchange of money for the provision of a service on a voluntary basis falls within a quintessential definition of trading activities.61
[42] The Appellant submitted further that so far as the $633,000 comprised income from the processing of visa applications, this represents the performance of a service (the processing of the application) in exchange for the payment of money. 62 The Appellant submitted the mere fact that the processing of the application may be required by law, does not prevent the exchange being characterised as a trading activity and this is especially so when it was a service operated by a corporate entity on behalf of the Commonwealth.63
[43] The Respondent accepted that the reason that a corporation engages in trading activities, to the extent that the corporation may engage in trading activities for a public purpose, does not necessarily exclude a corporation from meeting the description of a trading corporation. 64 It also accepted that the making of a profit, while a usual concomitant, is not the essence of trading.65
[44] However, the Respondent submitted that the Commissioner correctly concluded that if the Respondent's visa scheme activity was a trading activity, it did not form a significant proportion of the activity of the Respondent, so that the Respondent could be characterised as a trading corporation. 66 It submitted that having regard to the stated functions of the Respondent in s.10(1) of the TIQ Act, and the actual functions performed by the Respondent, the revenue derived from the visa scheme was not a significant proportion of the Respondent's activities.67 As a percentage, it represented 1.9% (rounded up from 1.87%) of the Respondent's total revenue.68
[45] It seems to us that the Commissioner’s conclusion that the activities at issue were not trading activities is not supported by any reasons. It may be inferred from [63] of the Decision that the reasons were that the visa scheme is administered “for the benefit of the Commonwealth” and “at a loss” and that the fees charged to business people by the Respondent to permit these people to attend overseas delegations are “nominal payments on a cost-recovery basis”. None of these reasons focus attention on the nature of the activity and whether it is commercial in nature or a business activity carried on by the Respondent with a view to earning revenue.
[46] In our view, the error is not corrected by the Commissioner’s alternative conclusion that if the Respondent's visa scheme activity was a trading activity, it did not form a significant proportion of the activity of the Respondent, because such an assessment should be made having regard to the totality of the trading activities identified, and for reasons already given, the Commissioner’s analysis of other activities was in our view, erroneous.
[47] We now turn to the interest earned by the Respondent from funds held in bank accounts in various jurisdictions. The Commissioner deals this issue as follows:
“[35] In addition to the grants and other contributions received, an amount of $133,000 was earned in interest on bank accounts where cash is held.
. . .
[62] It is expected that organisations, whether trading corporations or not, will hold cash balances in bank accounts. I do not consider the sum of $133,000 in the relevant year to assist K.L.’s argument that TIQ is a trading corporation. 69”
[48] The Appellant submitted that interest is by its very nature a return on an investment. 70 The Appellant submitted that interest is the amount a financial institution pays an investor for the use of money that is deposited with the institution and that it is not to the point that the activity may be common.71 The Appellant submitted that the question is whether the activity can be characterised as an incident of trade or commerce and it is well accepted that income earned from investments is to be characterised as a trading activity.72
[49] The Respondent submitted that there was no evidence before the Commissioner that the Respondent was investing its surplus funds in a way that could be described as investment seeking a return on an investment by, for example, depositing in term deposits or other products provided by a financial institution. 73 It submitted that earning interest from the bank accounts was an activity that was incidental to the Respondent’s functions and was not an activity which on its own or together with other activities leads to a characterisation of the Respondent as a trading corporation.74
[50] Be that as it may, it does not appear clear to us how the Commissioner arrived at the conclusion that the activity was not a trading activity. The Commissioner’s observation that maintaining bank accounts is that which is expected organisations will do with funds says little about the character of the activity.
[51] Given our conclusions above it is unnecessary to deal with the procedural fairness ground of appeal.
Conclusion
[52] The appeal raises important questions about the proper approach to determining whether a body is conducting or undertaking a constitutionally-covered business within the meaning of s.789FD, which combined with the errors identified leads us to conclude that it is in the public interest that permission to appeal be granted.
[53] For the reasons we have given, we are persuaded that the Commissioner erred in her approach to assessing whether the Respondent is a constitutional corporation. As a result, the Commissioner’s conclusion that the Respondent is not a trading corporation and is therefore not conducting or undertaking a constitutionally-covered business within the meaning of the Act should not in our view be permitted to stand.
[54] Finally, we would observe that in our opinion the Commissioner was not assisted by the paucity of probative evidence concerning the nature of the activities at issue. Moreover, given the application was made in April 2016 and that the hearing of the Respondent’s objection was conducted in late May 2016, it is somewhat surprising that the only financial data made available to the Commissioner about the Respondent’s activities was financial data for the financial year ending 30 June 2015. This is a matter that might be rectified when the matter is dealt with by the Commissioner.
[55] In the circumstances, we propose to grant permission to appeal, uphold the appeal, quash the Decision and remit the matter to the Commissioner to deal with the Respondent’s jurisdictional objection aided by our observations.
Orders
We order that:
1. Permission to appeal is granted;
2. The appeal is upheld;
3. The decision in [2016] FWC 4174 is quashed; and
4. The matter is remitted to Commissioner Hunt to hear and determine the Respondent’s jurisdictional objection.
DEPUTY PRESIDENT
Appearances:
Mr C Massy, Counsel for the Appellant.
Mr J Merrell, Counsel for the Respondent.
Hearing details:
2016.
Brisbane:
7 September.
1 [2016] FWC 4174.
2 ibid at [70]-[71].
3 O’Sullivan v Farrer (1989) 168 CLR 210 per Mason CJ, Brennan, Dawson and Gaudron JJ; applied in Hogan v Hinch (2011) 85 ALJR 398 at [69] per Gummow, Hayne, Heydon, Crennon, Kiefel and Bell JJ; Coal & Allied Mining Services Pty Ltd v Lawler and others [2011] FCAFC 54 at [44] – [46].
4 (2010) 197 IR 266.
5 ibid at [27].
6 Also see CFMEU v AIRC (1998) 89 FCR 200 at 220; and Wan v AIRC (2001) 116 FCR 481 at [26].
7 Wan v AIRC (2001) 116 FCR 481 at [30].
8 Lawrence v Coal & Allied Mining Services Pty Ltd t/as Mt Thorley Operations/Warkworth [2010] FWAFB 10089 at [28], 202 IR 288, affirmed on judicial review in Coal & Allied Mining Services Pty Ltd v Lawler (2011) 192 FCR 78; NSW Bar Association v Brett McAuliffe; Commonwealth of Australia represented by the Australian Taxation Office [2014] FWCFB 1663 241 IR 177 at [28].
9 Appellant’s Outline of Submissions dated 12 August 2016 at [2] – [7]
10 ibid at [8].
11 ibid at [44].
12 ibid.
13 Respondent’s Outline of Submissions dated 31 August 2016 at [19].
14 [2016] FWC 4174 at [60] – [69].
15 AB 224.
16 AB 28, PN77.
17 AB 29, PN88.
18 AB 29, PN87.
19 AB 29, PN88.
20 AB 27, PN 8.
21 AB 27, PN59.
22 AB 27, PN59 – PN65.
23 This figure is rounded to 2 decimal places. The actual percentage is 4.44762%
24 Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Queensland Rail (2015) 256 CLR 171 at 189 [41]; Fencott v Muller (1983) 152 CLR 573.
25 Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Queensland Rail (2015) 256 CLR 171 at 189 [42]; United Firefighters’ Union of Australia v Country Fire Authority (2015) 228 FCR 497; and Bankstown Handicapped Children's Centre Association Inc and Anor v Hillman (2010) 182 FCR 483; R v Federal Court of Australia; Ex parte Western Australian National Football League Inc (1979) 143 CLR 190; The Commonwealth v Tasmania (1983) 158 CLR 1.
26 (2015) 256 CLR 171.
27 ibid at 199 [69].
28 Bankstown Handicapped Children's Centre Association Inc and Anor v Hillman (2010) 182 FCR 483 at 511 [52].
29 Quickenden v O'Connor and others (2001) 109 FCR 243 at 261 [52].
30 (2015) 228 FCR 49.
31 ibid at 513 [67].
32 ibid at 513 [68].
33 ibid at 513 [72].
34 ibid at 519 [91].
35 ibid at 524 [132].
36 This is clearly a typographical error in the reported judgement and should read "irrelevant" as is clear from the text of the judgments in Bankstown and Lawrence to which reference is made and contextually from the sentence which follows.
37 (2015) 228 FCR 497 at 513 [69]-[70].
38 [2016] FWC 4174 at [61]
39 Relying on Quickenden v O’Connor (2001) 109 FCR 24.
40 Referring to United Firefighters’ Union of Australia v Country Fire Authority (2015) 228 FCR 497 at 523 [119]-[121] where the Court found no error in the primary judges conclusion that renting premises to employees at a discounted rate was a trading activity.
41 Respondent’s Outline of Submissions dated 31 August 2016 at [28].
42 (2015) 228 FCR 497 at 525 [136].
43 Respondent’s Outline of Submissions dated 31 August 2016 at [29].
44 ibid.
45 (2001) 109 FCR 24.
46 ibid at [30].
47 AB 27, PN59.
48 AB 27, PN59 – PN65.
49 [2016] FWC 4174 at [33] and [65].
50 Applicant’s Oral Submissions dated 31 August 2016 at [5a].
51 Referring to the judgements in Adamson at 220 (Stephen J) and 234 (Mason J).
52 Applicant’s Oral Submissions dated 31 August 2016 at [5a].
53 Respondent’s Outline of Submissions dated 31 August 2016 at [40].
54 ibid at [41].
55 Ibid at [42].
56 AB 28, PN77.
57 [2016] FWC 4174 at [65].
58 AB 29, PN78 – PN80.
59 [2016] FWC 4174 at [36] – [37] and [63] – [64].
60 Applicant’s Oral Submissions dated 31 August 2016 at [5c].
61 ibid.
62 ibid.
63 ibid.
64 Respondent’s Outline of Submissions dated 31 August 2016 at [32].
65 ibid at [33].
66 ibid at [36].
67 ibid.
68 ibid.
69 [2016] FWC 4174 at [35] and [62].
70 Applicant’s Oral Submissions dated 31 August 2016 at [5b]
71 ibid.
72 ibid.
73 Transcript PN141.
74 Ibid.
Printed by authority of the Commonwealth Government Printer
<Price code C, PR585415>
16
0