Kape v The Golden Mile Loopline Railway Society Inc & Ors (No.2)
[2017] FCCA 3014
•7 December 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KAPE v THE GOLDEN MILE LOOPLINE RAILWAY SOCIETY INC & ORS (No.2) | [2017] FCCA 3014 |
| Catchwords: CONSTITUTIONAL LAW – Constitutional corporation – trading corporation. CORPORATIONS – Not-for-profit corporation – whether trading corporation. WORDS AND PHRASES – “trading corporation”. |
| Legislation: Associations Incorporation Act 1987 (WA), s.4 Constitution, s.51(xx) Country Fire Authority Act 1958 (Vic) Fair Work Act2009 (Cth), ss.12, 14, 121, 368, 370, 388 Federal Circuit Court Rules 2001 (Cth) rr.13.03A, 45.06 |
| Cases cited: Aboriginal Legal Service of Western Australia (Inc) v Lawrence (No 2) [2008] WASCA 254; (2008) 37 WAR 450; (2008) 178 IR 168; (2008) 228 FLR 318; (2008) 252 ALR 136; (2008) 61 AILR 400-184 |
| Applicant: | STEVEN JAMES KAPE |
| First Respondent: | THE GOLDEN MILE LOOPLINE RAILWAY SOCIETY INC |
| Second Respondent: | TONY CROOK |
| Third Respondent: | MIKE LUCAS |
| Fourth Respondent: | DEBBIE SHORT |
| Fifth Respondent: | THE GOLDEN MILE LOOPLINE RAILWAY SOCIETY INC EXECUTIVE COMMITTEE |
| File Number: | PEG 252 of 2016 |
| Judgment of: | Judge Lucev |
| Hearing date: | 4 August 2017 |
| Date of Last Submission: | 4 August 2017 |
| Delivered at: | Perth (and by telephone to Kalgoorlie) |
| Delivered on: | 7 December 2017 |
REPRESENTATION
| For the Applicant: | In person |
| Counsel for the Respondents: | Ms H Millar |
| Solicitors for the Respondents: | SRB Legal |
DECLARATIONS AND ORDERS
The Court declares that the first respondent is a constitutional corporation for the purposes of section 14(1)(a) of the Fair Work Act 2009 (Cth).
The Court orders that the matter otherwise be adjourned to a directions hearing at 2.00pm on 2 February 2018.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 252 of 2016
| STEVEN JAMES KAPE |
Applicant
And
| THE GOLDEN MILE LOOPLINE RAILWAY SOCIETY INC |
First Respondent
| TONY CROOK |
Second Respondent
| MIKE LUCAS |
Third Respondent
| DEBBIE SHORT |
Fourth Respondent
| THE GOLDEN MILE LOOPLINE RAILWAY SOCIETY INC EXECUTIVE COMMITTEE |
Fifth Respondent
REASONS FOR JUDGMENT
Introduction
On 7 July 2016 the Court made orders that the following preliminary issues be listed for hearing:
a)whether the first respondent, The Golden Mile Loopline Railway Society Inc. (“GMLRS”) is a constitutional corporation; and
b)whether the applicant, Steven James Kape (“Mr Kape”) complied with r.45.06(b)(ii) of the Federal Circuit Court Rules 2001 (Cth) (“FCC Rules”), and whether the relevant Fair Work Commission certificate giving this Court jurisdiction had to name the second to fifth respondents (who are individuals associated with GMLRS, and the executive Committee of GMLRS) in order for this Court to have jurisdiction to hear any claim against them.
Mr Kape’s employment with GMLRS as works manager was terminated on 11 December 2015, allegedly on the grounds of redundancy. In the substantive application Mr Kape alleges a contravention by GMLRS of the general protections provisions of the Fair Work Act 2009 (Cth) (“FW Act”), which requires that the employer, here GMLRS, be a “constitutional corporation”: FW Act, s.14(1)(a). If GMLRS is not a constitutional corporation the Court has no jurisdiction to hear the substantive application.
At hearing, the second issue was not pressed by Counsel for GMLRS (following an exchange with the Court in which the Court referred to cases including Bognar v Skilled Offshore Pty Ltd & Anor [2016] FCCA 2962; (2016) 315 FLR 364; (2016) 68 AILR 102-721; Zehnder v Sell Lease Property Pty Ltd (t/as Sell Lease Property) [2015] FCCA 3393; Allan v Condamine Catchment Natural Resource Management Corporation Ltd & Ors [2015] FCCA 2632; (2015) 302 FLR 121; Devonshire v Magellan Powertronics Pty Ltd & Ors [2013] FMCA 207; (2013) 231 IR 198; (2013) 275 FLR 273; (2013) 65 AILR 101-892). Consequently, it is unnecessary for the Court to determine the second of the preliminary issues.
Whether GMLRS is a constitutional corporation
Evidence
For the purposes of the remaining preliminary issue there is evidence before the Court from GMLRS by way of affidavits from:
a)Anthony John Crook (an affidavit affirmed 29 September 2016) (“Crook Affidavit”); and
b)Andrew Bishop (an affidavit affirmed 29 September 2016) (“Bishop Affidavit”).
Mr Bishop also gave oral evidence at the hearing of the preliminary issue.
The Crook Affidavit was ultimately not relied upon for the purposes of the remaining preliminary issue.
Mr Kape did not rely upon any affidavit, and did not give oral evidence, for the purposes of the hearing of the remaining preliminary issue.
Mr Bishop’s evidence was that:
a)GMLRS was incorporated pursuant to the Associations Incorporations Act 1987 (WA) (“AI Act”) and a copy of the Certificate of Incorporation was an annexed to the Bishop Affidavit, showing that GMLRS was incorporated on 25 January 1983: Bishop Affidavit at [4] and Annexure A;
b)GMLRS had a Constitution which was also annexed to the Bishop Affidavit: Bishop Affidavit at [6] and [8] and Annexure B (“GMLRS Constitution”);
c)GMLRS was a not-for-profit organisation the aims of which, as set out in the GMLRS Constitution, included:
5.1. to preserve, maintain and improve the historic Loopline Railway;
5.2. to develop infrastructure for the Loopline Railway;
5.3. to establish the Loopline Railway and stations as a living museum displaying the history of railways in the Goldfields;
5.4. to educate people of the history of the Goldfields;
5.5. to promote general interest of the public by providing a society of persons united in the common aim of preserving and operating the narrow gauge railway.
Bishop Affidavit at [5];
d)the GMLRS Constitution provides that the income and property of GMLRS is to be applied solely to the promotion of its objects and aims and no part thereof is to be paid or transferred by way of profit to members: Bishop Affidavit at [6];
e)GMLRS’ affairs are managed by an executive committee, the fifth respondent in these proceedings: Bishop Affidavit at [7];
f)GMLRS’ principal areas of activity include:
i)the construction, restoration and operation of the Loopline Railway;
ii)the operation of the information centre and attached museum (“Information Centre/Museum”); and
iii)the operation of the Loopline Tram: Bishop Affidavit at [9]; and
g)at the time that Mr Kape’s employment was terminated in December 2015 GMLRS employed the following other staff:
i)one fulltime tram driver and one part-time tram driver;
ii)three team leaders;
iii)three staff, engaged on a rotational basis, in the Information Centre/Museum;
iv)one apprentice;
v)an administration manager; and
vi)the general manager: Bishop Affidavit at [10],
but also operated with “considerable input from volunteers”: Bishop Affidavit at [12].
Mr Bishop gave evidence that GMLRS’ income included monies from:
a)gold coin donations for entry through the Loopline Railway station;
b)the sale of souvenirs and drinks from the Information Centre/Museum;
c)the sale of tickets on the Loopline Tram;
d)a yearly payment from the City of Kalgoorlie-Boulder to assist with the operation of the Information Centre/Museum;
e)rental income received on premises owned in Williamstown Road, Kalgoorlie (“Williamstown Road Property”); and
f)income received from Max Employment and from Skilled Group for supervising "work for the dole" participants who work on the Loopline Railway development and restoration project.
In relation to income Mr Bishop also gave evidence that:
a)no income was derived by way of charging fares for passage on the Loopline Railway as no trains were yet in operation: Bishop Affidavit at [14]; and
b)revenue from the Information Centre/Museum and the rent received on the Williamstown Road Property could be said to have a commercial or trading character, in his view: Bishop Affidavit at [15].
Mr Bishop said that much of the operation, construction and restoration costs for the Loopline Railway had been funded from one-off capital grants provided by the Western Australian Department of Regional Development (“Department”) and Kalgoorlie Consolidated Gold Mines Pty Ltd (“KCGM”), but that both grants were now exhausted, and that GMLRS was awaiting a response on a further application to the Department for further funds: Bishop Affidavit at [16]-[18].
Mr Bishop said that GMLRS now finds that its current overheads exceed income: Bishop Affidavit at [18], and annexed a Profit and Loss Statement for the period January to December 2015 (“2015 P&L Statement”): Bishop Affidavit, Annexure C.
The 2015 P&L Statement shows income from various sources totalling just over $1.080 million for the 2015 calendar year: 2015 P&L Statement at page 7. That income is derived from various sources said to be as follows:
Income
Grants & Funding
Council· Grants/Services/Reimb 36,590.91
Foundation Account Transfer 327,187.33
R4R 400,000.00
Service Contract 163,490.28
Total Grants & Funding 927,268.52
Other Income
Interest Received 3,595.74
Memberships 210.00
Other Income • Other 3,500.00
Total Other Income 7,305.74
Rental Income
Williamstown Rd 17,400.00
Total Rental Income 17,400.00
Shop Income
Catering 419.09
Drinks - Shop Consumables 3,232.48
Entry/Donations 10,476.17
Groups 494.00
Misc 474.22
Novelty Machines 146.00
Souvenirs 15,074.14
Total Shop Income 30,316.10
Tram Income
Brochure advertise/sponsorship 15,727.25
Daily Tours 82,453.13
Total Tram Income 98,180.38
Total Income 1,080,470.74
Total Income 1,080,470.74
Cost of Goods Sold
COG –Shop 8,901.77
Total COGS 8,901.77
Gross Profit 1,071,568.97
In relation to the grants and funding the evidence indicated that:
a)the Council grants of $36,590.91 were from the Kalgoorlie Shire Council for the employment of staff in the Information Centre and an accounts person: Transcript at page 7;
b)the Foundation Account Transfer was the final tranche of money from a large grant by KCGM given some years previously which was being utilised primarily to refurbish the train station: Transcript at page 8; and
c)the “R4R” (or Royalties for Regions) grant of $400,000 was for the refurbishment of trains and locomotives and trams, and was phase one of a project which had two phases, the second phase of which was ultimately not funded by Royalties for Regions, or funded at all: Transcript at pages 8-9, 12-13 and 24. On the evidence, no further monies have been forthcoming from the Royalties for Regions scheme, or are presently likely to be forthcoming: Transcript at page 13. There is no evidence as to the basis for the Royalties for Regions grant made to GMLRS.
The “Service Contract” under the heading of “Grants & Funding” totalling $163,490.28 is money received by GMLRS from companies contracted by the Commonwealth and responsible for implementing the Commonwealth’s Work for the Dole Scheme (“Scheme”), whereby persons employed by GMLRS supervise Scheme participants who work primarily on infrastructure projects at GMLRS, and where the amount of the salary of GMLRS employed supervisors is the amount of the contract between GMLRS and the companies responsible for implementation of the Scheme: Transcript at pages 8, 11, 13-16 and 18-22, although some contracts also had some additional monetary amounts for consumable items on those infrastructure projects on which the labour supplied under the Scheme was engaged: Transcript at page 15. There was no profit for GMLRS as such, although Mr Bishop did acknowledge that what was being provided was essentially a source of cheap labour for GMLRS: Transcript at page 18.
In relation to the Royalties for Region money Mr Bishop gave evidence that there were a variety of contracts entered into for work to be performed for GMLRS which was funded by that money, including:
a)some “fairly expensive electrical works” on locomotives;
b)the removal of gauges and their refurbishment which involved them being sent away to be refurbished;
c)various engine repairs on the two locomotives;
d)hydraulic repairs on the two locomotives; and
e)various checks on the running gear and braking systems of the locomotives,
all of which had to be conducted by tradespersons whom the work for the dole scheme could not supply, and which was therefore funded by Royalties for Regions money: Transcript at pages 22-23.
There was no evidence per se as to the sources of “Other Income”. The rental income is from the Williamstown Road Property, and the shop income is from a small shop which operates at the Information Centre/Museum run by GMLRS. The total shop income of $30,316.10 is comprised primarily of money paid upon entry to the Information Centre/Museum by way of donations, and for drinks and souvenirs: Transcript at page 17. The drinks are made available for sale in the shop, the donations are a gold coin donation for entry to the Museum, and the souvenirs are items made by the Scheme participants in the GMLRS workshops, or jewellery purchased for on-selling by GMLRS: Transcript at page 17.
The tram income of $98,180.38 consists of $82,453.13 for daily tours, which at the time Mr Kape was employed appeared to be run each day between 9.00am and 4.00pm, and a small amount paid to GMLRS, primarily by KCGM, for advertising in its brochures: Transcript at pages 16-17.
The 2015 P&L Statement included expenses for matters such as administration, functions, vehicle and equipment costs, labour costs and various consumables and like items for the workshop, yard and station. Those items included a monthly lease in excess of $8,000 for vehicle expenses. There were also rental expenses associated with the Williamstown Road Property.
For the year ended December 2015 GMLRS had a net income (or profit) of $356,304.11: 2015 P&L Statement, page 9. This is slightly less than 33% of the gross income of GMLRS for the 2015 year.
The Bishop Affidavit annexes a copy of the position description (“Position Description”) for the Works Manager position occupied by Mr Kape: Bishop Affidavit, Annexure F. Under the heading “The Organisation” the following appears:
The Golden Mile Railway Society Inc.in concert with Rail Heritage WA and the City of Kalgoorlie-Boulder are implementing a detailed Strategy and Business Plan to operate heritage trains in the Goldfields in support of major events.
The project will be based at Boulder where a Rail Discovery Centre is being established with its own operating line and the capacity to operate heritage trains on the main line. The project will utilise a small number of paid staff, volunteers and will also engage Work Camp personnel.
The Golden Mile Railway Society Inc. offers the communities of the Goldfields a real opportunity to grow their economies and generate employment through the use of existing infrastructure. It will also significantly enhance social inclusion throughout the region.
In relation to “Position Competencies” with respect to the position of Works Manager the position description document also requires that the Works Manager have technical expertise in managing technical aspects of consumer, tourism and event related endeavours, and required background and experience in the technical aspects of organising and operating consumer, tourism and event related enterprises, and management experience in service delivery organisations.
In relation to the GMLRS Constitution the Court also observes that:
a)the objects of GMLRS include the “operation of … the Loopline, as a national tourist attraction and public exhibition”: GMLRS Constitution, cl.2;
b)the Secretary is responsible for attending to the record keeping affairs of GMLRS, and in conjunction with the General Manager, the overseeing of the production of material by the GMLRS for sale at the Boulder Station and any other outlets: GMLRS Constitution, cl.12;
c)any monies above expenses gained by the Society from its operations are to be used for the extension of facilities and to widen the scope of GMLRS: GMLRS Constitution, cl.17; and
d)there are appropriate provisions designating GMLRS as a not-for-profit society, including a provision that upon its dissolution no monies are to be paid, transferred or distributed amongst its members: GMLRS Constitution, cll.18 and 20.
GMLRS’ Submissions
GMLRS made the following submissions:
a)courts emphasise that whether it is apt to characterise a corporation as a trading corporation is “very much a question of fact and degree”: United Firefighters Union of Australia v Country Fire Authority [2015] FCAFC 1; (2015) 228 FCR 497; (2015) 247 IR 167; (2015) 315 ALR 460; (2015) 67 AILR 102-325 at [137] per Perram, Robertson and Griffiths JJ (“United Firefighters Union-Full Court”);
b)making a profit is not an essential prerequisite to trade, but it is a usual concomitant: R v Trade Practices Tribunal; Ex Parte St George County Council (1974) 130 CLR 533; (1974) 48 ALJR 26; (1974) 2 ALR 371; CLR at 539 per Barwick CJ, 563 per Gibbs J and 569 per Stephen J; Re Ku-Ring-Gai Co-operative Building Society(No 12) Ltd (1978) 36 FLR 134; (1978) 22 ALR 621; [1978] ATPR 40-094; FLR at 140 per Bowen CJ and 167 per Deane J;
c)activities of an organisation are more determinative in the assessment than the purpose for which the organisation was formed: R v Federal Court of Australia, Ex parte WA National Football League (1979) 143 CLR 190; (1979) 53 ALJR 273; (1979) 23 ALR 439 (“Adamson”);
d)an organisation will be a trading corporation if the trading it engages in is a “sufficiently significant proportion of its overall activities”: Adamson, CLR at 233 per Mason J and United Firefighters Union-Full Court at [135] per Perram, Robertson and Griffiths JJ;
e)a significant proportion of an organisation's income being earnt from its commercial enterprises suggests that the organisation is a “trading corporation”: Australian Beauty Trade Suppliers Ltd v Conference & Exhibition Organisers Pty Ltd (1991) 29 FCR 68; (1991) 99 ALR 474; [1991] ATPR 41-107; FCR at 72 per Morling Wilcox and Hill JJ (“Beauty Trade”);
f)if the organisation's activities advance the trading interests of its members, it supports the argument that the organisation is engaging in trading activities: Beauty Trade, FCR at 72 per Morling Wilcox and Hill JJ; and
g)the Federal Court has previously held that “carrying out the function of government in the interests of the community is not a trading activity”: Mid Density Development Pty Ltd v Rockdale Municipal Council (1992) 39 FCR 579; (1992) 79 LGERA 30; FCR at 585 per Gummow, Hill J and Drummond JJ.
GMLRS further submitted that:
a)GMLRS' purpose is to benefit the Kalgoorlie and Goldfields' community, and in that regard it:
i)is a not-for-profit organisation incorporated under the AI Act; and
ii)has an objective of preserving and developing the Loopline Railway in Kalgoorlie and educating people about the Goldfields;
b)GMLRS' predominant activity is community service;
c)GMLRS' commercial activities make up only a small proportion of its overall activities, and that:
i)redevelopment of the Loopline Railway takes up approximately 70% of the time and effort; and
ii)20% of the time and effort is taken up by running the Information Centre/Museum;
d)GMLRS' commercial activities bring in only a small proportion of its overall income, being:
i)tram ride and museum tickets of $118,020.00; and
ii)rental income on the Williamson Road Property of $17,400.00;
e)GMLRS operates at a loss, and that:
i)the railway redevelopment is a loss making enterprise; and
ii)once donations and grants are discounted the loss becomes significant; and
f)members of GMLRS do not have their trading interests furthered by GMLRS.
Mr Kape’s Submissions
Mr Kape provided no written submissions to the Court in support of his position that GMLRS was a constitutional corporation. Mr Kape also provided no affidavits in relation to the particular issue before the Court in this proceeding.
At hearing Mr Kape made the following statements in his closing remarks, at pages 35-36 of the Transcript:
a)the fixed contracts GMLRS has with MAX Employment should be considered commercial conduct;
b)the renting of properties does not fall within the GMLRS Constitution setting up a “tourism” purpose;
c)the commercial side outweighs the original concept of tourism, specifically: “…the whole purpose was to set up tourism as a non-for-profit, but they’ve actually drifted into the commercial side of trading”; and
d)the individual circumstances of the applicant are different to those in United Firefighters Union-Full Court.
Relevant law
It is the first duty of every court to determine whether or not it has jurisdiction: Federated Engine-Drivers and Firemen's Association of Australasia v Broken Hill Proprietary Co Ltd (1911) 12 CLR 398; (1911) 17 ALR 285; CLR at 415 per Griffith CJ, 428 per Barton J and 454 per Issacs J; Re Boulton; Ex parte Construction, Forestry, Mining and Energy Union (1998) 85 IR 468; (1998) 73 ALJR 129 at 133 per Kirby J; Rentuza v Westside Auto Wholesale [2009] FMCA 1022; (2009) 236 FLR 231; (2009) 190 IR 207 at [6] per Lucev FM, applied in Halls v KR & MA McCardle & Sons Pty Ltd & Ors [2014] FCCA 316 at [17] and [48]-[49] per Judge Lindsay.
The coverage of the FW Act is extended to employees and employers. These terms are defined in the first Division of each part of the FW Act: other than Part 1-1 of the FW Act: FW Act, s.12. The terms “employee” and “employer” will generally either be defined as national system employees or employers, or as having their ordinary meaning: FW Act, s.12. For the purposes of an application alleging a contravention of general protections provisions the employer must be a “national system employer”.
A national system employer is relevantly “a constitutional corporation, so far as it employs, or usually employs, an individual”: FW Act, s.14(1).
A constitutional corporation is “a corporation to which paragraph 51(xx) of the Constitution applies”: FW Act, s.12. These include foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth: Constitution, s.51(xx). For the purposes of the preliminary issue before the Court the issue is whether GMLRS is a trading corporation.
In Adamson it was stated that:
... The only sure guide to the nature of the company is a purview of its current activities, a judgment as to its nature being made after an overview of all those activities… CLR at 208 per Barwick CJ
Essentially it is a description or label given to a corporation when its trading activities form a sufficiently significant proportion of its overall activities to merit its description as a trading corporation…: CLR at 233 per Mason J.
The result of judgments following Adamson has seen courts adopt the broad non-technical approach expounded in Adamson, CLR at 207-208 per Barwick CJ when determining if an incorporated body is to be considered a “trading” corporation. Relevantly, charitable, benevolent and not-for profit organisations and corporations may still be, and have been held to be, constitutional trading corporations: E v Australian Red Cross Society (1991) 27 FCR 310; (1991) 99 ALR 601; [1991] ATPR 41-085 (“Red Cross Society”). In Orion Pet Products Pty Ltd v Royal Society for the Prevention of Cruelty to Animals (Vic) [2002] FCA 860; (2002) 120 FCR 191; [2002] ATPR 46-223 (“Orion Pets”), the RSPCA was found to be a trading corporation despite income accrued being used for charitable purposes other than to create a profit.
The principles used in determining whether a corporation is a trading corporation, derived from those first stated in Adamson, were set out in Aboriginal Legal Service of Western Australia (Inc) v Lawrence (No 2) [2008] WASCA 254; (2008) 37 WAR 450; (2008) 178 IR 168; (2008) 228 FLR 318; (2008) 252 ALR 136; (2008) 61 AILR 400-184 at [68] per Steytler P (“Lawrence (No 2)”) as follows:
68. The more relevant (for present purposes) principles that might be drawn from these and other cases are as follows:
(1) A corporation may be a trading corporation even though trading is not its predominant activity: Adamson (239); State Superannuation Board (303-304); Tasmanian Dam case (156, 240, 293); Quickenden [49]-[51], [101]; Hardeman [18].
(2) However, trading must be a substantial and not merely a peripheral activity: Adamson (208, 234, 239); State Superannuation Board (303-304); Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 at 20; Fencott (622); Tasmanian Dam case (156,240, 293); Mid Density (584); Hardeman [22].
(3) In this context, “trading” is not given a narrow construction. It extends beyond buying and selling to business activities carried on with a view to earning revenue and includes trade in services: Ku-ring-gai (139,159-160); Adamson (235); Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169 at 184-185, 203; 1 IR 397; Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 at 330; Quickenden [101].
(4) The making of a profit is not an essential prerequisite to trade, but it is a usual concomitant: St George County Council (539, 563, 569); Ku-ring-gai (140, 167); Adamson (219); E (343, 345); Pellow [28].
(5) The ends which a corporation seeks to serve by trading are irrelevant to its description: St George County Council (543, 569); Ku-ring-gai (160); State Superannuation Board (304-306); E (343). Consequently, the fact that the trading activities are conducted is (sic) the public interest or for a public purpose will not necessarily exclude the categorisation of those activities as “trade”: St George County Council (543) (Barwick CJ); Tasmanian Dam case (156) (Mason J).
(6) Whether the trading activities of an incorporated body are sufficient to justify its categorisations as a “trading corporation” is a question of fact and degree: Adamson (234) (Mason J); State Superannuation Board (304); Fencott (589); Quickenden [52], [101]; Mid Density (584).
(7) The current activities of the corporation, while an important criterion for determining its characterisation, are not the only criterion. Regard must also be had to the intended purpose of the corporation, although a corporation that carries on trading activities can be found to be a trading corporation even if it was not originally established to trade: State Superannuation Board (294-295, 304-305); Fencott (588-589, 602, 611, 622-624); Hughes (20); Quickenden [101]; E (344); Hardeman [18].
(8) The commercial nature of an activity is an element in deciding whether the activity is in trade or trading: Adamson (209, 211); Ku-ring-gai (139, 142, 160, 167); Bevanere (330); Hughes (19-20); E (343); Fowler; Hardeman [26]. (2008) 178 IR 168 at 186 per Steytler P; [2008] WASCA 254 at para.68 per Steytler P.
The Full Court of the Federal Court has adopted the propositions in Lawrence (No 2) in both United Firefighters Union-Full Court and Bankstown Handicapped Children’s Centre Association Inc v Hillman [2010] FCAFC 11; (2010) 182 FCR 483; (2010) 265 ALR 23; (2010) 192 IR 212 (“Bankstown”). The Federal Court most recently adopted the principles in Lawrence (No 2) in Hi-Rise Access Pty Ltd v Standards Australia Ltd [2017] FCA 604 at [133] per Murphy J (“Hi-Rise”).
The Court considers the principles in Lawrence (No 2) as the relevant law to determine this application, and also notes that the application of these principles in United Firefighters Union-Full Court, Bankstown and Hi-Rise means they are binding upon this Court: Suh & Ors v Minister for Immigration & Citizenship & Anor [2009] FCAFC 42; (2009) 175 FCR 515; (2009) 108 ALD 470 at [29] per Spender, Buchanan and Perram JJ; CEPU (Western Australia Division) v Fortescue Metals Group Ltd [2016] FCCA 1227; (2016) 310 FLR 1 at [50]-[55] per Judge Lucev.
Characterisations of the organisation’s trading activities
The legislative provisions
In United Firefighters Union-Full Court the Court considered the purpose and scope of the Country Fire Authority as provided in the Country Fire Authority Act 1958 (Vic) (“CFA Act”). In the present case, GMLRS is not a statutory body established under a statutory instrument, but rather under the GMLRS Constitution. It is therefore necessary for this Court to examine the GMLRS Constitution.
The GMLRS Constitution cl.2 states the objects of GMLRS to be:
The Society is a not for-profit organisation of members interested in the preservation and operation of the narrow gauge railway, known as the Loopline, as a national tourist attraction and public exhibition and as from 01/07/2000 has been registered as a “Deductible Gift Recipient” under the Income Tax Assessment Act of 1997 and is a charitable institution.
The GMLRS Constitution cl.3 further builds upon the objects clause in expressing the aims of the GMLRS:
3 a)To preserve, maintain and improve the historic Loopline Railway
3 b)To develop infrastructure for the Loopline Railway.
3 c)To establish the Loopline Railway and stations as a living museum displaying the history of railways in the Goldfields
3 d)To educate people of the history of the Goldfields
3 e)To promote general interest of the public by providing a society of persons united in the common aim of preserving and operating the narrow gauge railway.
The GMLRS Constitution provides for the expenditure of monies accrued in excess of expenses and outgoings in cl.17:
17. CAPITAL
Any monies above expenses gained by the Society from the operation of trains or by any other means will be used for the extension of facilities and to widen the scope of the Society.
Section 4(2) of the AI Act, provides that:
(2) Notwithstanding subsection (1), an association for the purpose of trading or securing pecuniary profit to the members from the transactions of the association is not eligible to be incorporated under this Act.
An exclusive ‘Not-For-Profit’ clause is included in the GMLRS Constitution in cl.20:
20. NOT-FOR-PROFIT:
Income and property of the Society shall be applied solely to the promotion of its objects and no part thereof shall be paid or transferred directly or indirectly by way of pecuniary profit to the members provided that nothing herein shall preclude the Society from applying any funds of the Society either directly or indirectly for purpose of improving any property vested in the authority within whose districts such property may be situated and provided further that remuneration may be paid in good faith to officers, workmen and servants of the Society or to other persons in return for services rendered to the Society.
The activities of GMLRS
It is important to look at the activities of an organisation and determine whether a sufficiently significant proportion of its overall activities merit the description of trading corporation, and whether the nature and extent or volume of an organisation’s activities justify its description as a trading corporation: United Firefighters Union-Full Court at [135] per Perram, Robertson and Griffiths JJ, citing, amongst other cases, Adamson, CLR at 233 per Mason J. Regard must also be had for the purpose for which a corporation or organisation is formed, although it is not the sole or principal criterion of its character as a corporation: Lawrence (No 2) at [68(7)] per Steytler P. The Court looks to the activities overall of the corporation, and where the independent trading activities are on a sufficiently significant scale, a corporation may be characterised as a trading corporation even where there are more extensive non-trading activities: United Firefighters Union-Full Court at [136]-[137] per Perram, Robertson and Griffiths JJ; Lawrence (No 2) at [68(1)] per Steytler P.
Some of the activities of GMLRS are plainly trading activities, and in particular:
a)the daily tram tours on the Loopline Tram earning daily income for GMLRS, and the associated income from advertising and sponsorship. There may be an element of public or community benefit both from employment, and from the educational content of any commentary on the Loopline Tram trip, but the activity is essentially a commercial tourism activity, which, on Mr Bishop’s evidence is one of three “principal areas of activity” for GMLRS;
b)the rental income from the Williamstown Road Property is properly characterised as a commercial activity; and
c)the sale of souvenirs (some manufactured by GMLRS by persons working there under the work for the dole scheme) and the sale of drinks is again a commercial activity, and not dissimilar to that of any other corporation running a shop and sales outlet at a stand-alone tourist attraction.
It cannot be said that the daily tram tours – a “principal … activity”, the sale of souvenirs and drinks in the Information Centre/Museum in particular are peripheral to GMLRS’ overall undertaking.
Much significance was placed on the evidence given by Mr Bishop that up to 70% of the activities undertaken by GMLRS were involved with the building or re-building of infrastructure and rolling stock for the Loopline Railway. Setting aside the Council grants, KCGM grants and the Royalties for Regions grants, it is relevant to observe that those activities are undertaken under the supervision of GMLRS employees whose salaries are paid from monies provided by what appear to be labour hire firms, or firms engaged in the implementation of a Commonwealth work for the dole programme, whereby the contracts between GMLRS and the firms concerned facilitate the provision of cheap labour to GMLRS to enable them to undertake the relevant activities. Those contracts are entered into in that manner for a commercial purpose: the provision of cheap labour to facilitate the undertaking of the activities, which themselves are ultimately in pursuance of GMLRS’ objective of development of a Loopline Railway and becoming “a national tourist attraction and public exhibition”. In this case, however, part of the avowed purpose of GMLRS is not inconsistent with its being a trading corporation. In those circumstances, the activities undertaken by reason of the entry into the service contracts are, in the Court’s view, commercial in nature, and consistent with GMLRS being a trading corporation.
In any event, and leaving to one side the issue of the service contracts, there are other activities such as the daily tram tours and the sale of souvenirs and consumables at the Information Centre/Museum, which are consistent with GMLRS being a trading corporation, as is the receipt of rental income from the Williamstown Road Property.
Even if the service contract activities, and for that matter the activities funded by Royalties for Regions and the KCGM grants, are considered to be non-trading activities, they are not necessarily independent of the trading activities or the ultimate purpose for which all of those activities are being engaged in, namely to make GMLRS a national tourist attraction and public exhibition: United Firefighters Union-Full Court at [139] per Perram, Robertson and Griffiths JJ; Lawrence (No 2) at [68(7)] per Steytler P.
In all of the above circumstances, it cannot be said that the trading activities undertaken by GMLRS are peripheral, insignificant, incidental or trivial when considered either in absolute terms or relative to the overall activities of GMLRS, and that remains the case whether or not the service contract activities are characterised as trading activities or not.
Revenue
It is necessary to consider the revenue producing activities of GMLRS, both individually and cumulatively: United Firefighters Union-Full Court at [91] per Perram, Robertson and Griffiths JJ.
An organisation being registered as a charitable or not-for profit organisation is not determinative of it being classed as a non-trading corporation. It has been acknowledged such organisations and charities can vary from being commercial in character, to those which operate purely for charitable and altruistic purposes: Fasold v Roberts (1997) 70 FCR 489; (1997) 145 ALR 548; (1997) 38 IPR 34; [1997] ATPR 41-561; FCR at 524-531 per Sackville J.
A number of authorities have held not-for-profit organisations are trading corporations on the grounds that their trading activities are not insubstantial: United Firefighters’Union of Australia & Ors v Metropolitan Fire and Emergency Services Board [1998] FCA 551; (1998) 83 FCR 346; (1998) 44 AILR 3-842 at [93] per Marshall J (“United Firefighters Union 1998”); Orion Pets; Red Cross Society FCR at 345 per Wilcox J.
The primary revenue source for GMLRS in 2015 is that which is characterised as “Grants & Funding” in the 2015 P&L Statement. That funding constitutes in excess of $927,000 (or in excess of 85% of GMLRS’ gross income). Even if the $163,490.28 of the service contract component is extracted as income from a trading activity, the grants and funding income is still almost $764,000 (or in excess of 70% of GMLRS’ gross income).
The other major components of GMLRS’ income, setting aside the gold coin donations for entry to the Information Centre/Museum of $10,476.17, are derived from what are trading activities, that income being:
a)$17,400 from rental income for the Williamstown Road Property;
b)$3,232.48 from the sale of drinks in the Information Centre/Museum;
c)$15,074.14 from the sale of souvenirs in the Information Centre/Museum; and
d)a total tram income of $98,180.38 comprising $82,453.13 from daily tours and a further $15,727.25 from the sale of advertising and sponsorship in relation to the daily tram tours.
The above income amounts to $133,887, or almost 12.5% of GMLRS’ total income. If the service contract component is as a trading activity, the trading activities income becomes $297,377.28, or approximately 27.5% of total income.
Even on the basis of the revenue derived from trading activities excluding the service contract component, the revenue from trading activities is not insubstantial in the context of an organisation such as GMLRS whose overall income whilst not huge, is also not insignificant in the context of the operations undertaken by GMLRS.
The Court notes that in 2015 GMLRS actually made a profit (nett income) of $356,304.11. That is a not inconsiderable sum in the context of gross revenue of slightly more than $1.080 million. The making of a profit is a usual concomitant of a trading corporation: Lawrence (No 2) at [68(4)] per Steytler P.
Overall characterisation
A difficulty in this case has been the nature of the evidence, and in particular its paucity. Although Mr Bishop was a board member during the period of Mr Kape’s employment by GMLRS, he was not actually employed by GMLRS until after Mr Kape’s employment had been terminated. Much of Mr Bishop’s evidence related to events subsequent to Mr Kape’s employment, and in relation to documentary evidence aside from the GMLRS Constitution and the 2015 P&L Statement there was little substantive evidence of the nature of GMLRS as an organisation, including no evidence of the relevant service contracts, and no documentation in relation to the grants and funding, particularly from KCGM and Royalties for Regions. The Court nevertheless has to make a determination on such evidence as is before it, and has done so.
A significant argument put forward by GMLRS was that it was providing public infrastructure, in the same manner as would be done by government, in this case presumably local or State government. The Court does not accept that argument, there being no evidence to support the contention that State or local government would engage in the development of what is essentially a very specialised small to medium sized tourism development. The fact that Royalties for Regions grants had been provided to GMLRS does not, in the absence of any evidence as to the reasons for those grants, sustain this argument. Nor is there any evidence that this is a community service: in essence, GMLRS is endeavouring to maintain the Information Centre/Museum and Loopline tram, and develop a train track and service to carry tourists. Whilst it may be intended to be a community service, the evidence of GMLRS’ activities in this regard was insufficient to sustain this contention. Presently GMLRS is a small to medium scale specialised tourist development which, pursuant to GMLRS’ objects, aspires to be a national tourist attraction and public exhibition. Its present activities are no more than integers of this ultimate object.
Some emphasis was placed upon the size of GMLRS, but in the Court’s view the size of GMLRS does not sustain an argument that it is not a trading corporation. Its income of just over $1.08 million for the 2015 calendar year is not insubstantial, and its profit for that year is likewise not insubstantial at $356,304.11 or just less than 33% of its gross income. Including Mr Kape it appeared to employ at least 12 people at the time of the termination of Mr Kape’s employment, and operated with considerable input from volunteers. It had infrastructure which was not insubstantial, running the Information Centre/Museum, a tram service, and although not operational was maintaining existing railway track and rolling stock, with a view to ultimately operating it. The FW Act plainly envisages that quite small corporations will ordinarily be subject to its provisions: see, for example, the Small Business Fair Dismissal Code provisions in s.388 of the FW Act, and the provisions excluding small business employers from having to make redundancy payments: FW Act, s.121(1). The fact that GMLRS might be said to be a small trading corporation does not, in all the circumstances, detract from the fact that it is a trading corporation.
Additionally, and having regard to a number of factors, including the following:
a)that even though trading may not be the predominant activity of GMLRS, its trading activities as set out above are nevertheless substantial and not merely peripheral;
b)that GMLRS’ trading activities extend beyond the provision of tourism services such as the daily tram tours, to include income from property that it holds, but also to those activities which are engaged in with a view to its becoming a more significant income-earning tourism attraction;
c)that GMLRS did make a profit during the 2015 calendar year;
d)that to the limited extent that the activities of GMLRS might (contrary to the Court’s findings above) be said to be for the benefit of the community or for a public purpose, that does not preclude GMLRS from being engaged in trading activities, and GMLRS is (for reasons set out above) engaged in such trading activities;
e)the ultimate purpose of GMLRS is not only, or even predominantly, a public benefit purpose, but rather the development of an income-earning national tourist attraction, albeit one which is not-for-profit, a factor which does not preclude it from being a trading corporation; and
f)the commercial nature of the activities of GMLRS is sufficient to warrant its characterisation as a trading organisation,
and, therefore, the Court is of the view that GMLRS is, on the evidence available in this case, a trading corporation, and therefore a constitutional corporation for the purposes of s.14(1)(a) of the FW Act. The consequence of that is that the Court has jurisdiction to hear Mr Kape’s claim of an alleged contravention of a general protection.
Conclusion and orders
The Court has concluded that GMLRS is a constitutional corporation for the purposes of s.14(1)(a) of the FW Act. There will be a declaration accordingly. Consequently, the matter will be adjourned to a directions hearing on 2 February 2018 at 2.00pm for further programming orders. There will be an order accordingly.
I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of Judge Lucev
Date: 7 December 2017
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