1
Fair Work Act 2009
s.789FC - Application for an order to stop bullying
Ms Marie Pasalskyj
(AB2015/407)
COMMISSIONER HAMPTON ADELAIDE, 13 NOVEMBER 2015
Application for an order to stop bullying – whether workplace conducted by a constitutionally
covered business – incorporated association providing services to prisoners - whether trading
corporation – extensive government funding – whether funded activities and income should be
treated as trading – many activities not in the nature of the government purchasing
commercial services – whether other income producing activities trading in nature and
significant – some trading activities found – trading activities significant and sufficient to
impact upon the character of the association – trading corporation – jurisdiction to deal with
alleged conduct found – application to be listed for hearing.
1. Background and case outline
[1] Ms Marie Pasalskyj has made an application under s.789FC of the Fair Work Act 2009
(the FW Act) for an order to stop bullying conduct she alleges has taken, and may in the
future take place, within her workplace. The workplace concerned is conducted by Outcare
Inc T/A Outcare (Outcare or the employer).
[2] Outcare is a community services organisation that provides a range of services to
offenders and former prisoners and their families in Western Australia. Ms Pasalskyi is the
Manager of the employer’s Family Care Centres that are operated in the prisons for the
Department of Corrective Services (WA) (DoCS).
[3] Having conducted preliminary proceedings, arrangements were made for the
determination of the application. In the course of that preparation, Outcare raised a
jurisdictional objection concerning its status as an organisation.
[4] It is common ground that for Ms Pasalskyj’s application to proceed, the behaviour
must have taken place in a workplace that is conducted by a constitutionally-covered
business. This arises from s.789FD of the FW Act, which is in the following terms:
“789FD When is a worker bullied at work?
(1) A worker is bullied at work if:
(a) while the worker is at work in a constitutionally-covered business:
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DECISION
E AUSTRALIA FairWork Commission
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(i) an individual; or
(ii) a group of individuals;
repeatedly behaves unreasonably towards the worker, or a group of
workers of which the worker is a member; and
(b) that behaviour creates a risk to health and safety.
(2) To avoid doubt, subsection (1) does not apply to reasonable management action
carried out in a reasonable manner.
(3) If a person conducts a business or undertaking (within the meaning of the Work
Health and Safety Act 2011) and either:
(a) the person is:
(i) a constitutional corporation; or
(ii) the Commonwealth; or
(iii) a Commonwealth authority; or
(iv) a body corporate incorporated in a Territory; or
(b) the business or undertaking is conducted principally in a Territory or
Commonwealth place;
then the business or undertaking is a constitutionally-covered business.
[5] Outcare is located in Western Australia and does not fall within the scope of
s.789FD(3)(a)(ii), (iii), (iv) or (b). Accordingly, in order to fall within the scope of
s.789FD(3) of the FW Act, Outcare must be a constitutional corporation.
[6] The term “constitutional corporation” is defined in s.12 of the FW Act in the following
terms:
“constitutional corporation means a corporation to which paragraph 51(xx) of the
Constitution applies.”
[7] The Constitution, in effect, defines “constitutional corporations” as follows:
“Foreign corporations, and trading or financial corporations formed within the limits of
the Commonwealth.”1
[8] It is also common ground that of these, only the concept of a trading corporation is
potentially relevant to Outcare. It is apparent that Outcare is incorporated within the limits of
the Commonwealth.
[9] Outcare contends that it is not a trading corporation within the meaning of the FW Act
due to its activities and nature, and as a result, the workplace is not conducted by a
constitutionally-covered business. In support of that proposition, it relies upon the evidence of
Mr Justin Clarke, its Finance Manager.
[10] Ms Pasalskyj contends that the activities of the employer include significant
government funded programs and that these, and other activities, are trading in nature and
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mean that it should be considered to be a trading corporation. Ms Pasalskyi provided a sworn
statement and also relies upon other publicly available information.
[11] In addition to the provision of comprehensive written submissions, a hearing was
conducted given certain factual disputes.
2. The broad operations of Outcare
[12] Before dealing with the detailed positions of the parties it is appropriate to initially
consider the nature and operations of the employer in broad terms. I leave aside for the
moment the characterisation of the various activities and the limited factual disputes that
exist.
[13] Outcare has been operating since the mid-1960s as a provider of rehabilitation services
in Western Australia. Originally, Outcare was established as the Civil Rehabilitation
Committee of WA, which was formed at the same time as the then Probation and Parole
Service.
[14] Outcare is engaged in the community services sector and is funded primarily by the
State and Federal Governments to provide services to offenders in the prison setting and
when they are released from prison to help the offenders reintegrate back into the
community. It is generally regarded as being a “not-for-profit” organisation.
[15] Outcare is an incorporated association pursuant to the Associations Incorporation Act
(1987) (WA) and is registered with an Australian Business Number (ABN). The incorporation
provides its corporate status for present purposes.
[16] Outcare is classed as a public benevolent institution and is eligible to accept tax
deductible gifts. It is governed by a board comprising a President, two Vice Presidents, a
Treasurer and a combination of elected and co-opted board members.
[17] Outcare’s current Constitution2 establishes its basic purpose in the following terms at
clause 3:3
a. to prevent crime and improve community safety;
b. to maximise the successful reintegration of defendants, offenders, ex-
offenders and their families into the community and to reduce re-offending
behaviours;
c. to identify and provide the necessary support and services for defendants,
Offenders, ex-offenders and their families. The support and services may be in
the areas of accommodation, career development, training, employment,
health, clothing, household goods and financial relief and counselling;
d. to identify and provide the necessary support and services for families, youth,
special needs groups and others identified from time to time who are in need of
assistance through offending influences;
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e. to develop partnerships and strategic alliances with government, non-
government and crime prevention organisations whose work affects or
supports the successful rehabilitation of defendants, offenders and ex-
offenders;
f. to generate and increase community and government awareness of the causes
of crime and the need for community and government acceptance of, and
participation in, processes which support the successful reintegration of
defendants, offenders, ex-offenders, and their families, into the community;
and
g. to reduce the risk of persons of any age becoming involved in the criminal
justice system and being put at risk of incarceration.”
[18] Clause 3.8 of the Constitution provides that the property and income of Outcare is
to be applied solely towards the promotion of the objects or purposes of Outcare and no
part of that property or income may be paid or otherwise distributed, directly or indirectly,
to its members except as bona fide compensation for services rendered or expenses
incurred on behalf of Outcare. I note that this constraint is consistent with associations that
may be incorporated under the Associations Incorporation Act (1987) (WA).4
[19] Outcare is a major non-government provider of crime prevention in Western
Australia and it works closely with offenders, ex-offenders and their families, as well as
the broader community, government and non-government organisations.
[20] Outcare provides services to clients during the six months prior to their release
from prison and also during the twelve months subsequent to their release. The main
services that Outcare provides are designed to deal with the issues that contributed to the
original offending behaviour in an effort to reduce the likelihood that the client will re-
offend. These services include offering support in finding accommodation, providing
training and education, assistance in finding employment and referrals to other service
providers.
[21] Outcare also offers a broad range of education, intervention and reform programs
aimed at reducing the re-offending rate of people in conflict with the justice system and
supporting their successful reintegration into the community.
[22] During the 2014/2015 financial year, Outcare delivered sixteen programs or services
focusing on specific groups including adult males, youth males, and individuals with
complex needs, Aboriginal clients, adult females and family members of clients.
[23] In order for Outcare to operate, it is dependent on funding received through the
DoCS, the Mental Health Commission (MHC), the Disability Services Commission (DSC),
the Commonwealth Department of Social Services (DSS) and the Department of Prime
Minister and Cabinet (PMC).
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[24] The property and income of Outcare for the Financial Year 2014/2015 includes the
following:
Income from funders $11.2m
Funds carried forward from funders from the
previous year
$1.8m
Interest on term deposits $220k
Cash at bank $171k
[25] The net assets of Outcare for the Financial Year 2014/2015 are set out in the
provisional (unaudited) Balance Sheet for Financial Year 2014/2015:
Closing 30/06/2015
CURRENT ASSETS
Cash at Bank 170,747
Receivables & Prepayments 58,754
Term Deposits 6,295,978
Total Current Assets 6,525,479
NON CURRENT ASSETS
Property, Plant & Equipment 2,381,644
Total Non-Current Assets 2,381,644
TOTAL ASSETS 8,907,123
CURRENT LIABILITIES
Trade and Other Payables 636,639
Deferred Income 492,217
Provisions 527,111
Undelivery of DSC Contract 908,598
Carry Forward Grants 680,989
TOTAL CURRENT
LIABILITIES 3,245,555
Non-Current Liabilities
Long Service Leave 175,123
NET ASSETS 5,486,445
ACCUMULATED FUNDS
Retained Earnings 5,428,746
Scott Scholarship Fund 57,700
TOTAL ACCUMULATED FUNDS
5,486,445
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[26] The total current assets identified in the above table have accumulated since
Outcare’s inception in the mid- 1960s and the evidence does not reveal where all of these
assets have derived from. It is however clear that the funding has included donations from
LotteryWest and individuals, and the accumulated product of its activities over time.
[27] In the Financial Year 2014/2015, Outcare retained a provisional surplus which was
comprised of the following:
TOTAL
Workforce Development $26,587
Special Needs/Justice
Funding
$25,575
Administration $212,233
[28] Five operational programs ran at a loss of $89,888 bringing the overall surplus to
$174,507. The total of the Operational Programs for the Financial Year 2014/2015 created
a net loss of $37,727. That is, the funded programs required additional financial support
from Outcare's reserves in order to maintain the services.
[29] The total income of Outcare was derived from the following sources to deliver a range
of services to the various target groups:
approximately 7.7% (being $877,295) from PMC to deliver services targeted at
Indigenous adult prisoners and Indigenous male youth in the Perth metropolitan
area;
approximately 2.4% (being $271,000) maintenance/rental contribution from
accommodation clients offenders newly released from prison who are assessed as
having a high risk of returning to custody due to a lack of suitable accommodation;
approximately 4.5% (being $511,892) from DoCS to deliver the Crisis
Accommodation Program which provides short term and emergency
accommodation and support services to a number of clients (and, in some
instances, their families) who have a high risk of returning to custody due to a lack
of suitable accommodation;
approximately 3.8% (being $430,500) from DoCS to provide an Accommodation
Transition Program in the metropolitan area to support dangerous sexual offenders;
approximately 5.6% (being $644,466) from MHC to provide non-clinical
community support services as part of the “Adult Mental Health Court Diversion
Support Program”;
approximately 4.5% (being $516,200) from MHC to provide support services to
young people who have mental health needs and are part of the Perth Children's
Court system;
approximately 0.9% (being $106,039) from Lotterywest to provide emergency
relief services to clients in immediate financial crisis to assist ex-offenders
reintegrate into the community;
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approximately 12.6% (being $1,435,811) from DoCS to provide Family Support
Services to public prisons to encourage offenders to maintain family contact by
implementing and maintaining a supportive and positive environment;
approximately 18.5% (being $2,118,066) from DoCS to provide a Live Works
Program which provides traineeships, apprenticeships and other employment to
young Indigenous men who have had contact with the justice criminal system;
approximately 2% (being $226,756) from the Commonwealth Department of
Families, Housing, Community Services and Indigenous Affairs to provide a
housing and homelessness prevention program called “Re-Connect” which
provides rental subsidies for low and moderate-income households, and to fund
homelessness prevention initiatives to reduce the impact of homelessness;
approximately 22% (being $2,511,949) from DoCS to provide a support program
called “The Re-Entry Link Program” that is targeted at ex-offenders re-entering the
community;
approximately 2% (being $223,886) from The Congregation of the Sisters of St
John of God to provide support and services specifically to women offenders to
provide them with through care services to assist in their rehabilitation and
reintegration back into society;
approximately 1.8% (being $210,633) from the Western Australian Department of
Training and Workforce Development to deliver workforce development services
to ex-offenders in Western Australia including supporting young people on their
employment and career prospects and providing incentives to stay in, or return to,
an education or training pathway;
approximately 7.7% (being $877,412) from DSC to provide individually funded
services to ex-offenders with intellectual disabilities living in Western Australia for
a period of two (2) years and nine (9) months from 1 October 2013 to 30 June
2016;
less than 2% (being $189,000) from bank interest;
approximately 1.3% (being $154,000) from the Youth Housing Renovation
program in which clients on the Live Works program renovate Department of
Housing properties as the practical learning component of their Certificate II in
Construction; and
approximately 0.5% (being $60,000) from various one off grants received from a
number of sources, including, for example, the City of Bayswater. These grants are
usually tied to specific deliverable such as art programs for youth in the criminal
justice system; and
approximately 0.2% (being $15,000) from sponsorships for the charity
“Nighthoops” which runs a basketball program for high risk youth in the
metropolitan area.
[30] The Administration surplus achieved in the 2014/15 year was comprised of
$331,000.00 of internal company cost recovery charges matched with $348,000 of
expenses, $189,000 in interest from term deposits, and approximately $40,000 other
income.
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[31] In 2015, Outcare directly employed in the order of 125 staff.
[32] Outcare does not engage in specific fundraising activities.
3. The contentions of the parties
3.1 Outcare
[33] Outcare contends that it is not a trading corporation on the following grounds:5
Outcare is an Incorporated Association and does not engage in trading;
Outcare is registered with an ABN, however this and the fact it is an incorporated
association does not determine whether they are a constitutionally-covered
business;
Outcare is funded by the State and Federal Governments to provide services to
offenders in the prison setting and to reintegrate offenders back into the
community;
Outcare is engaged in the community services sector and is constituted by a Board
who is responsible for the co-ordination and conduct of the affairs of Outcare;
Outcare heavily relies on State Government funding through DoCS and other
departments whereby the majority of its activities or services are carried out subject
to government grants which subsidises the services provided by Outcare;
The grants are typically in the form of bulk grants which might be linked to
performance requirements and benchmarks but do not involve a fee for service in
the conventional sense;
The services provided lack the character of buying and selling between Outcare and
the funding agency, and are often provided gratuitously to the public and are
considered to be an end in themselves. That is, the purpose of the service is not to
generate income but rather, to provide the service itself;
Outcare’s main services include a ‘thoroughcare service’ offering supports in
finding accommodation, providing training and education, assistance in finding
employment and referrals to other service providers;
Approximately 82% of Outcare’s programs or services are “block funded”, which
means that under the contract the surplus funds left over from the program delivery
must be refunded to the department if requested or carried forward to the following
year to be spent on the same program;
Cash reserves are held by Outcare but this has resulted from the compounding
effect of interest;
The remaining funding is paid according to contracts that fall into the following
three categories:
Funding contracts: which make up approximately 2% of Outcare’s income.
The employer enters a tender offering a service at a defined price and defined
Key Performance Indicators. Income is received in advance and brought into
the monthly Income Statement based on 1/12 of the contract value if Key
Performance Indicators are met. This is because the employer has provided
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the services that make it eligible to receive the contribution. At the end of the
financial year, any surplus funds may be retained by the employer because it
has achieved its Key Performance Indicators;
Individual contracts: which make up approximately 5% of Outcare’s income.
Each client has defined contractual service hours and associated funding;
Other funding/income: which make up approximately 5% of Outcare’s
income and includes income from term deposits which is accrued across the
financial year; and
Outcare does not make a profit out of any of the activities because it must remit to
the relevant Government department any unexpended funds.
[34] Furthermore, Outcare contends that:
Service delivery in the programs and services cannot be characterised as “business
activities carried on with a view to earning revenue” as all surpluses are either
carried forward to the following year for service delivery in the same program or
paid back to the funder;
Its greatest source of revenue is through the provision of State funding through
DoCS. Furthermore, the manner in which the employer has come into receipt of
funding from DoCS cannot be categorised as a trading activity. Primarily, the
Constitution of the employer makes it clear that its primary purpose is not directed
at trading functions;
There exists a limited capacity for the employer to generate income through the
operation of the services it provides, primarily because if fees are in fact charged,
they may be characterised as nominal at best;
As was the case in Lawrence6, the funding the employer receives from the
government under contract for the provision of (mostly) free of charge services to
community members should be removed from the ordinary concepts of trade or
trading. To that end, the employer submits that it is not a trading corporation on the
basis that it is engaged in the gratuitous provision of a public welfare service
substantially at government expense which is not the conduct of a ‘trade’;
The provision of government funding through DoCS to the employer is completely
regulated in terms of the purpose the funding must serve. For the majority of
programs, no fee is charged and little if no surplus is generated;
Consequently, the objectives of Outcare show that the very purpose for which the
organisation exists is to provide assistance and guidance to individuals with
disabilities. It is not to engage in commercial activities predominantly;
Where income is derived, for example, by sub-leasing premises to other entities
that deliver services for the employer, that income is directed to the further delivery
of the employer’s services and is, in any event, only peripheral to the employer's
activities;
Therefore, the percentage of the employer’s operations which can be classified as
pure trade are insubstantial and in reality, peripheral to its main non-trading
functions; and
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Having regard to the above matters, it is clear that the assessment of the nature of
the corporation is one of fact and degree. The income from activities that might be
considered to be trading activities is not significant in either relative or absolute
terms. Rather, those activities in the overall circumstances of the employer’s
organisation can be categorised as being insignificant, peripheral and incidental in
the sense contemplated by the authorities.
3.2 Ms Pasalskyj
[35] Ms Pasalskyj contends that Outcare is a constitutionally-covered business on the basis
that it is a trading corporation. The basis of that contention is as follows:7
Outcare is a corporation which has been incorporated under Western Australian
legislation, is registered as a business and has an ABN;
The contracts that Outcare has entered into with DoCS and the MHC are the main
contracts for the provision of services by Outcare to those respective departments
of Government. These contracts do not represent grants and are contracts for the
sale of services, which the respective departments purchase and pay for pursuant to
the provision of a tax invoice. The respective department acquits this expenditure
as a commercial expense (contract) and not a grant or donation;
The provision of accommodation to newly released prisoners through its housing
stock of 40 properties is a commercial undertaking and is not open to any
alternative interpretation. Written “tenancy” agreements are entered into,
commercial rent is payable, and local tenancy laws apply. Furthermore, Outcare
has entered into detailed and binding leases for the properties and is therefore
responsible to the Housing Authority for the proper management of those
properties;
The commercial nature of the contracts with the Government Departments and the
commercial nature of the provisions of accommodation by Outcare is not trivial
whether viewed from the generation of revenue or from the work carried out by
Outcare in providing the service or the accommodation;
Outcare has now established a commercial enterprise with substantial assets
including plant, equipment and buildings. This positions it in the commercial world
to provide services to the Government, which on the employer’s own admission it
regards as a major funding partner. Further, Outcare has formed a specialist
management team to prepare for tendering and procurement in a bid to compete
effectively with the emerging corporations;
It is not relevant whether or not Outcare is involved in the welfare sector of the
economy and this has been described by the Federal Court as a distraction;8
The activities of Outcare are in reality a commercial enterprise with a solid capital
foundation with 126 staff selling its services to the Government, which the
Government is prepared to purchase on certain terms and conditions. Additionally,
Outcare runs a significant accommodation service for its clients which operates on
the basis of normal tenancy provisions and the receipt of commercial rent for the
properties. The accommodation activity is not trivial; and
The position of Outcare is not different to that of Bankstown Handicapped
Children’s Centre v Hillman9 (Bankstown).
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[36] Ms Pasalskyj further submits that based on Outcare’s activities, the following arises:
The current balance sheet of the employer and the Treasurer’s annual report in
2014 reads like that of any small or medium size enterprise operating in the
commercial world. The balance sheet has grown from the 1990’s when the nett
assets were $132,305 and total income was $648,687 to 2015 where nett assets are
$5.5million (of which $2.417 million represents property plant and equipment) and
total income revenue of $11,379,145 of which $10,840,626 is from contracts and
grants;
Various detailed commercial contracts have been entered into with the DoCS and
the MHC on behalf of the Government of Western Australia. These contracts have
detailed and explicit key performance indicators and reporting obligations and in
the main require the presentation of a Tax Invoice to secure payment. The
expenditure by DoCS in obtaining the services provided by Outcare is reported by
that Department in its annual report as being for contracts with the employer; and
Outcare operates in an increasingly competitive environment where a range of
other not for profit (NFP) businesses are operating in the same field as Outcare and
some if not all are regarded as a threat to the respondent’s financial viability.
[37] Furthermore, Ms Pasalskyj submits that Outcare has grown significantly since it began
and enacted the charitable aims and objects that are set out in the Outcare Constitution.
Outcare is well positioned to provide services to Government to achieve its objects both with
its capital depth and staff resources, which underpin its activities that are commercial in
nature. If the term trading corporation is given a wide and liberal interpretation, the employer
should be found to be a trading corporation for the purposes of the FW Act.
4. What is a trading corporation?
[38] The following discussion is taken from my decision in McInnes,10 which was
comprehensively referred to by both parties. I have also extended the discussion based upon
the submissions of the parties in this matter.
[39] The approach of the Courts and Tribunals to the meaning of a trading corporation has
been conveniently summarised by Steytler P in Aboriginal Legal Service (WA) Inc v
Lawrence (No 2.)11 (Lawrence). Having reviewed the developments in the approach of the
High Court to arrive at what might be described as the activities test, His Honour found as
follows (footnotes and references omitted):
“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].
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(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]
FCA 357; (1986) 19 FCR 10, 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] HCA 23; (1982) 150 CLR
169, 184 - 185, 203; Bevanere Pty Ltd v Lubidineuse [1985] FCA 134;
(1985) 7 FCR 325, 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 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].”
[40] This summary was adopted by the Full Court of the Federal Court in Bankstown.
[41] Given the facts of this matter, it is also appropriate to further consider how
government funding and related activities have been treated by Courts and Tribunals in terms
of the characterisation of those activities for present purposes.
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[42] In Lawrence, the Western Australian Court of Appeal held by majority that the legal
service involved was not a trading corporation. It found that the funding it received from the
Commonwealth Government under contract for the provision of (mostly) free of charge legal
services to indigenous Australians was removed from the ordinary concepts of trade or
trading.12 The minority held that the legal service had entered into a trading arrangement
because its services were provided after a competitive tendering process.13
[43] In Fowler v Syd West Personnel Ltd14 the Australian Industrial Relations Commission
was dealing with a corporation established to create and operate a long term employment
program for people with intellectual disabilities and to place other workers in employment.
Much of its income came from Commonwealth Government grants under contract. The
Commission concluded that the respondent was not a trading corporation on the basis that it
was engaged in the gratuitous provision of a public welfare service substantially at
government expense which was not the conduct of a ‘trade’.
[44] In an earlier case of Pellow v Umoona Community Council Inc15 the Australian
Industrial Relations Commission distinguished between grant funded social service activities
and agency arrangements involving a charge on a government department for the provision of
a designated service.16
[45] These decisions must also be considered in the context of the later decisions of the
Federal Court.
[46] In Bankstown, the Full Court was also dealing with an incorporated association that
received most of its funding from government. The Court posed the question in the following
manner:
“51 Many activities and services which have historically been provided mainly or
exclusively by government are now carried on by companies which undertake those
activities or provide those services with the objective of making a profit. Examples are
legion and included prison services, electricity generation and distribution, potable
water collection or production and distribution and the construction and maintenance
of roadways. There can be little doubt that, at least in the ordinary course, companies
which undertake those activities or provide those services can be characterised as
trading corporations. Does the fact that a corporation likewise provides such services
but on effectively a cost recovery basis only, render it inappropriate to characterise that
corporation as a trading corporation?”
[47] The Full Court focused in particular on the funding and services provided in relation to
the ‘Out-of-Home Care’ (OOHC) programs under which the Centre was paid for services
provided to the relevant government agency (DOCS) on a fee for service basis. It concluded:
“54 If those substantial activities can be characterised as trading, then the Association
can likewise be characterised as a trading corporation. So much is apparent from the
authorities including, in this Court, the judgment of the Full Court in Quickenden (at
[51]). The Association undoubtedly provided services to the State and was
remunerated for doing so. It is, in our opinion, a proper characterisation of the
Association's activities to describe them as selling those services to the State and,
correspondingly, the State purchasing them. Indeed that was the language used in the
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header agreement which governed the contractual arrangements between the
Association and DOCS. The provision of a given service under the header agreement
resulted in an invoice from the Association to DOCS which it then paid. The prices at
which the services were provided were negotiated between the parties having regard to
the price at which others provide similar services. The Association employed
personnel and acquired rental property to equip it for the task of providing those
services. At least in its then manifestation (entailing its size, activities, property and
personnel), its continued existence depended on its success in placing itself in a
position in which it would continue to be remunerated by continuing to provide those
services.
55 All these matters appear to us to point to a relationship between the Association
and DOCS as having been a commercial one involving trade in services. It is, of
course, true that it is possible to characterise, as the Industrial Court did, the
Association's activities as the provision of public welfare services. However the fact
that the acquisition of these services by DOCS was for this purpose does not appear to
us to detract from the essentially commercial nature of the relationship. It is properly
so described. There may be many incorporated charitable bodies in Australia which
are nevertheless trading corporations for the purposes of paragraph 51(xx) of the
Constitution. As we have noted above, the terms of the header agreements were
negotiated, as were the terms of the renewal header agreement. Ultimately by that
process, further negotiation as to price was not then undertaken. Thereafter, DOCS did
not have to use the services of the Association at all, and the Association for its part
did not have to accept any offer or request by DOCS to provide such services. On the
evidence, DOCS selected those entities which it wished to provide services, once the
header agreements were negotiated, on the basis of the quality of the service to be
provided, but the Association (or others) did not have to agree to provide them. It is
distracting to note that the services which the Association and others contracted with
DOCS to provide were in the "welfare sector" of the economy, to use an expression
used by the Solicitor-General.”
[48] In an earlier case of E v Australian Red Cross Society,17 Wilcox J considered whether
the Australian Red Cross Society and the Royal Prince Alfred Hospital were trading
corporations. The Society supplied blood and blood products, generally free to the
community, but received substantial government funding. The Court, in considering the more
than $44m received in respect of its blood transfusion services, said:
“These were, of course, substantial sums. They were earned only because the
respondents are prepared to carry on blood transfusion services at a scale, in terms of
labour and resources, greater than that of many organisations which are undoubtedly
'trading corporations'. But I do not think that it is appropriate to describe the gratuitous
provision of a public welfare service, substantially at government expense, as the
conduct of a 'trade'. It is pertinent to recall the words of Stephen J in St George County
Council: 'It is the acts of buying and selling that are at the very heart of trade', and also
to remember the distinction he made in respect of the distribution of electricity free of
charge. In relation to the supply of blood, it seems to me that the first and second
respondents do not engage in trading activities. They engage in a major public welfare
activity pursuant to agreements with the Commonwealth and the various State
governments under which they will be reimbursed most of their costs.”18
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[49] I note that when considering the position of the Royal Prince Alfred Hospital,
Wilcox J found that the scale of the hospital's trading activities were “substantial enough” to
require that the hospital should be regarded as a trading corporation.19 The details of this
aspect are explained in more detail in a decision outlined below.
[50] In terms of the assessment of trading activities as substantial and not merely
peripheral, the approaches do vary to a degree.
[51] In Bankstown, the Full Court observed that “there is no bright line that determines
what proportion of trading activities is “substantial”.20 In the recent decision of the Federal
Court in United Firefighters Union of Australia v Country Fire Authority,21 (UFU v CFA)
Murphy J observed:
“[92] The term “substantial” is imprecise but it at least encompasses trading amounts
that are “not so small as to be trivial”: Quickenden at [51]. In that case the majority
treated substantial and nontrivial as synonymous. In the present case the CFA contends
that their trading activities are peripheral, insignificant or otherwise incidental. These
terms are drawn from the various cases: see for “peripheral” Adamson at 208 per
Barwick CJ; State Superannuation Board at 304 per Mason, Murphy and Deane JJ; for
“incidental” Adamson at 234 per Mason J; for “significant” see Adamson at 233 per
Mason J; E v Australian Red Cross Society and Ors [1991] FCA 20; (1991) 27 FCR
310 (“E v Red Cross”) at 345 per Wilcox J; Quickenden at [47] per Black CJ and
French J.
[93] The ordinary meaning of these words is straightforward. The Shorter Oxford
Dictionary defines them to include the following:
(a) “peripheral” means marginal, superficial, of minor importance, not essential
or relevant to but subordinate to;
(b) “insignificant” means lacking significance, meaningless, devoid of weight
or force, ineffective, ineffectual, of no importance, trivial, trifling, or
contemptible; and
(c) “incidental” means occurring as something casual or of secondary
importance; not directly relevant to; following up on as a subordinate
circumstance.”
[52] Having found that six of the County Fire Authority’s (CFA’s) non-fire fighting
activities were trading activities, Murphy J found:
“96 The scope of these activities is broad. While they are secondary to the CFA’s
primary purpose I would not describe any of them as insignificant, incidental, trivial or
unimportant. For example, the road accident rescue service is a specialised emergency
service that the CFA has agreed to provide in country areas, which has required special
training of CFA employees beyond the usual fire training, and which the CFA
recognises as an important part of the range of services it provides. The CFA has no
statutory obligation to provide this service and it does so at a cost to road users and the
State through the Traffic Accident Commission. I would not describe the provision of
this service as incidental to the CFA’s activities nor as a fortuitous or casual
[2015] FWC 7309
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occurrence of subordinate importance. Nor should its provision, viewed in the context
of all of its services, be described as trifling, ineffective, superficial or marginal.
97 For essentially the same reasons the provision of fire equipment maintenance
services, consultancy on matters related to fire safety, the provision of advice related
to the storage of dangerous goods and the sale of goods related to fire safety should
not be seen as insignificant, incidental, trivial or unimportant activities considered
against the range of services the CFA provides. I infer from the evidence that these
activities are seen as important by the CFA, although they are not its central or
predominant focus.
98 Nor do I consider that the revenue from these trading activities is incidental in
the sense of arising fortuitously or as a result of some other activity. The income is
earned deliberately by the CFA from these six specific sources and on the basis that
the CFA have special expertise or products of value which they provide in exchange.
Taken together the income from these activities is substantial.
99 While the quantum of income from the CFA’s trading activities relative to its
non trading activities is small, I am disinclined to treat almost $13 million of revenue
as minimal, trivial or insignificant. It should be seen for what it is, a significant
volume of trading revenue albeit dwarfed by the money received from non-trading
sources. The CFA put on no cogent evidence that $12.93 million was insignificant to
its operations, and no evidence was given that it could be easily foregone by the
organisation. Put another way, it is likely that the CFA would be impaired in its
capacity to provide services in road accident rescue, fire equipment maintenance, fire
safety consultancy or sale of fire safety related goods, which it regards as important in
the range of services offered, if it was not able to charge fees for doing so.
100 Although the $12.93 million of trading income is plainly a substantial amount
in absolute terms, it is only a small percentage relative to the CFA’s total income.
Even so, I do not consider it is trivial or minimal in relative terms.
101 In E v Red Cross the Australian Red Cross Society was one of the respondents.
Wilcox J held that its supply of blood and blood products was the gratuitous provision
of a public welfare service, substantially at government expense, and was not a trading
activity. The Red Cross received a total of $44.9 million from the government in
respect of its non-trading blood supply services, and about $2 million from trading
activities. Another respondent, a major hospital, made approximately $18 million from
trading activities and, in the words of Wilcox J, that sum was dwarfed by a State
government subsidy of $112 million. His Honour concluded that the disparity between
the money earned through trading and the money received by way of government
subsidy was unimportant explaining at 345:
Trading activities yielding some $18 million per year can only be described as
substantial. It seems to me that the scale of the hospital’s trading activities in
1984-1985 was such that it should be regarded as then being a trading
corporation.
See also United Firefighters’ Union of Australia v Metropolitan Fire and Emergency
Services Board (1998) 83 FCR 346 (“UFU v MFB”) at 354 to 356 per Marshall J.
[2015] FWC 7309
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102 The CFA contends that both E v Red Cross and UFU v MFB were wrongly
decided in that they incorrectly applied an absolute test. While I consider that the
CFA’s trading revenue is plainly significant if considered in absolute terms, I do not
approach the issue that way. Considering its trading revenue relative to its non-trading
activities, the question is not without difficulty and is one of fact and degree. In my
opinion the CFA undertakes sufficient trading for it to be seen as “not insubstantial”,
not trivial, insignificant, marginal, minor or incidental, and I find that it is a trading
corporation.”
[53] In Edmonds v Telethon Speech and Hearing Centre for Children [2014] FWC 1037,
Cloghan C helpfully observed that:
“[55] Not-for-profit organisations have generally been distinguished from profit
entities due to their pursuit of "social" rather than "economic" aims. However, in my
view, increasingly not-for-profit organisations have taken upon themselves many
characteristics of "for profit" entities. The fact is that despite their historical origins
(with some key differences such as profits not going to the shareholders) not-for-profit
and for profit organisations are becoming indistinguishable - no more so than when it
comes to generating income.
[56] Managerial professionalism, information and communication technology and
client expectations, have led to the continuing commercialisation of many not-for-
profit organisations. Gone is the reliance on "chook" raffles, lamington drives and car
boot sales to be replaced by discrete and dedicated resources to generate income from
a variety of sources. Much of the traditional community raising of monies from
clients, family and friends has been replaced by targeted cost benefit marketing
analysis and action. Many of these activities to raise money, is now outsourced to
specialised organisations.”
[54] The fact that an ABN is used by the employer cannot by itself mean that it is a
corporation. Amongst other reasons, non-corporations can apply and be granted an ABN.22
[55] The provision of services, largely or wholly, free of charge, and whether they are
provided for altruistic purposes not shared by commercial enterprises, are also relevant, but
not determinative, considerations.23
5. Is PSS a trading corporation?
[56] This matter primarily rests upon the characterisation of the activities associated with
the government payments received by Outcare. These activities are in the nature of
community welfare and services, however this is not of itself relevant. The services are also
significant in both relative and absolute terms and if the whole, or a reasonable part, of those
activities were considered to be trading activities, this would inevitably lead to the conclusion
that Outcare was a trading corporation.
[57] The decisions discussed earlier in this decision suggest that there is a dichotomy
between activities that are undertaken by organisations similar to Outcare where the
government pays for a service to be provided. Typically, these involve the delivery of services
[2015] FWC 7309
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to government (often in the form of services available to the community) that result from
competitive tendering processes where the Government is seeking specific services at
competitive rates, and where payment is made for the actual services provided. That is, the
“State” effectively purchases the services. In most cases, these activities are either undertaken
for profit, or at least to generate revenue to support other activities or the organisation as a
whole. The OOHC service in Bankstown is an example of this form of trading activity.
Activities of this nature are considered to be trading activities for present purposes.
[58] Alternatively, there are activities that are undertaken by organisations similar to
Outcare that are the subject of government payments whereby governments subsidise the
services provided by the organisation. Typically, these involve the provision of bulk grants
that might be linked to performance requirements and benchmarks, but do not involve fee for
service in the conventional sense. These services lack the character of buying and selling
between the organisation and the funding agency, and are often provided gratuitously to the
public and are considered to be an end in themselves. That is, the purpose of the service is not
to generate income but rather, to provide the service itself. The provision of blood products by
the Red Cross in E v Red Cross is an example of this form of non-trading activity. Activities
of this nature are not considered to be trading activities for present purposes.
[59] These two characterisations represent points on a spectrum, and the real world, as in
this case, often involves a mix of such indicia. It is also important to consider the entire
context in which the activities are undertaken.
[60] Against that background I turn to consider the various forms of government payments
provided to Outcare and the associated activities conducted by the employer.
5.1 Block Funding Contracts
[61] The essential immediate issue is how the so called block funding activities should be
treated. If all or some of these are considered to be trading in nature, they are significant
enough in their own right to effect the characterisation of the organisation for present
purposes.
[62] The combined block funding activities amounted to over 80% of the programs
provided by Outcare in the 2013/14 financial year. These activities include the following:
Aboriginal Through Care – support services for indigenous prisoner and male
youth in the Perth area - funded by the Commonwealth Attorney General’s
Department (now PMC);
Mental Health Court Diversion and Support Programs – non-clinical community
support services and support for young people with mental health issues as part of
the Perth Children’s Court - funded by the Mental Health Commission;
Emergency Relief DSS – emergency relief for clients in the form of food and other
necessities - funded by the Department of Social Services;
Emergency Relief Lotterywest– emergency relief assistance for clients in
immediate financial crisis - funded by Lotterywest;
Family Support Centres – support services to public prisons to assist prisoners to
maintain family contacts - funded by DoCS;
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Live works – traineeships and other employment to young indigenous men having
contact with the justice system - funded by DoCS;
Reconnect – housing assistance and homelessness prevention - funded by DSS;
Re-Entry and Lifeskills Program – transition for male prisoners back into the
community - funded by DoCS; and
Women Services – support and services to women prisoners – funded by St John of
God.
[63] I will deal separately with the accommodation and related services which are
facilitated to a significant degree by block funding contracts.
[64] Each of the block funding contracts operate under a service agreement, or contract,
which specifies the services and standards required, the funding arrangements, and the audit
and acquittal conditions. In general terms, these contracts provide a “block” of funding to
provide a particular service and the payment is not linked to a particular number of clients or
individuals services. This includes, for example, a target for the provision of services without
any link between the actual number and the amount of the payment made by the relevant
Department.24 The funding agreements do, however, normally have KPI’s that often include
the required achievement of some or all of the nominated targets. This includes, for example,
the number of clients and referrals.25
[65] Payments are made quarterly in advance, or on some other regular basis, and involve a
Recipient Created Tax Invoices (RCTI) being issued by the funding body in accordance with
the agreed funding amount. A RCTI is, as the name suggests, an invoice issued by the
recipient of the supply rather than by the supplier as would normally be the case. In some
limited cases, additional fees may be payable for additional services, such as the brokerage
funds that are made available to “purchase” services under one of the mental health
programs.26
[66] In most cases, the block funding contracts have been in place for many years and have
been continued without any form of competitive tendering processes.
[67] In each case, the block funding contracts require that the funding be spent exclusively
on the services outlined in the contract with any surplus or unspent money being returned to
the funding agency, allocated to another project with the specific approval of the funding
agency, or in some cases, rolled over into the next year for use on the original funded
program. The services are also generally provided free of charge to the clients.
[68] As a result, in general terms the block funding contracts are not intended, or able to be
used, by Outcare to fund other activities of the organisation. In each case, the funding must be
used for the particular programs concerned and these are undertaken to meet the fundamental
objectives of the organisation.
[69] I consider that in general terms these block funding contracts are more consistent with
the concept of non-trading activities. That is, they do not generally have the character of
commercial trade in services or elements of exchange or other commercial indicia in the
payment so as to be considered as trading activities for present purposes. The activities
resulting from these arrangements are also generally provided to the community without
[2015] FWC 7309
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charge. They are more akin to the non-trading services described by Wilcox J in E v Red
Cross.
5.2 Accommodation and related support services
[70] Outcare runs an accommodation program which utilises around 40 properties to
provide short term and emergency accommodation and support services to a number of clients
(ex-offenders newly released from prison who are assessed as having a high risk of returning
to custody due to a lack of suitable accommodation) and in some instances, their families.
[71] The 40 properties are provided to Outcare by the Department of Housing under a
funding/lease agreement. The Department leases the premises to Outcare at a peppercorn rent.
Outcare is obliged under the arrangements to charge its clients a market value fee or rental
cost. The Guidelines attaching to one of the lease agreements encourages the agency to
maximise their rental charges and returns in a manner that reduces the financial disadvantage
to the “tenants”.27
[72] Outcare provides a transitional accommodation program and does so by treating the
clients as boarders rather than tenants due to the nature of the arrangements and the need for
flexibility.28 In that context, it enters into a licence to occupy with its clients rather than a
tenancy agreement.
[73] Outcare generally charges $100 per week to its clients. This is variously described as
being a “maintenance contribution”, and in most contexts, as a “rental payment”. Outcare
does not charge or receive additional payments from clients in relation to utilities such as
phone, electricity, gas and water.
[74] The licence to occupy is a formal contract and requires that the first fortnight rent
payment will be $200 combined with a key deposit and a welcome pack. The rent is to be
paid two weeks in advance and arrangements are made to deduct payments via income
provided from Centrelink.
[75] The description of the client contribution as “rent” and the associated arrangements are
also designed to acquaint the clients with some of the normal terms and obligations that
would apply in the private rental market. This is part of the client transition process, and
although it may fall short of being a full market rate, it is the case that the rental payments are
commercial transactions and operate in the context of formal contractual arrangements. These
have a trading character.
[76] Some of the housing is suitable for multiple clients to occupy, and if that occurs, each
client is charged the “rental” fee. The housing stock is in high demand and Outcare applies
considerable staff and other resources to provide this service.
[77] In the last financial year, Outcare received, in addition to the government funding,
approximately 2.4% or $271,000 of its total funding for the provision of this service, in the
form of “rental” fees. These rental fees are a significant source of funds for the
accommodation program and this outcome is intended as part of the government funding
arrangements.
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[78] Any surplus from the accommodation services may be retained by Outcare for use in
the program; however, the program as a whole is normally loss making, with a loss of
approximately $6,000 in the financial year 2014/15.
[79] The Crisis Accommodation Program (CAP) is a further service run by staff of Outcare
and funded under an agreement with the DCS. There is also a variation to this agreement
which provided funding for the Dangerous Sex Offender program. The Accommodation
Service Agreement is supplemented by an agreement; namely, the General Provisions for the
Purchase of Community Services by Government Agencies.
[80] Funding under the Accommodation Service Agreement comprising a fixed annual fee.
In the last financial year, this funding comprised approximately 4.5% of Outcare's total
funding.
[81] Invoices for services are to be submitted quarterly in advance to the Department of
Justice and payment is made to Outcare subject to the provision and/or receipt of reports in
accordance with the terms of the Accommodation Service Agreement.
[82] The service payment is to be used for the sole purpose of providing the services and is
not to be used for “prohibited purposes” such as costs relating to any industrial or legal action,
payment of existing debts or those debts not related to the service and purchase of capital
items.
[83] Any surplus from the Accommodation Service Agreement may be retained by Outcare
to use in the program the following year.
[84] Although much of the accommodation and related services may not be considered to
be a trading activity, the direct provision of the housing to clients and the associated licence to
occupy and rental arrangements have the character of commercial trade in services or
elements of exchange or other commercial indicia in the payment so as to be considered as
trading activities for present purposes.
[85] As a result, I find that some of the accommodation and related services represent
trading activities. I will return to the measurement of that extent later in this decision.
5.3 Funding contracts
[86] The terms “Funding contracts” is used by the employer in this context to refer to the
fact that Outcare derives income from contacts that arise from a tender process and it offers
services at a nominated price. Income is received in advance based upon the contract price
provided the necessary Key Performance Indicators are met.
[87] Unlike the block funding contracts, any surplus funds may be retained by Outcare. The
only present funding contract is subject to a service agreement with the WA Department of
Training and Workforce Development and involves the provision of support services
including employment placement and vocational training.
[88] Approximately 1.8% of its total funding was derived from funding contracts in the last
financial year.
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[89] I consider that these activities are more consistent with the nature of the OOHC
service in Bankstown and should be considered to be trading activities for present purposes.
5.4 Individual contrasts
[90] In September 2013, Outcare entered into a service agreement with the Disability
Services Commission (DSC) for the provision of individually funded services to ex-offenders
with intellectual disabilities living in Western Australia for a period extending until 30 June
2016 (Special Needs Service Agreement).
[91] The Special Needs Service Agreement consists of a request for individually funded
services (including the basis of referrals), an advice of acceptance from the DSC, and general
provisions for the purchase of community services by public authorities.
[92] Prior to accepting a client referral, the Outcare Special Needs support worker is
required to undertake a risk assessment that analyses, among other things, the client's primary
offence, additional offences, sentence, expected date of release, and age at first conviction.
[93] The support services provided include mentoring, assistance with finding
accommodation, development of employment skills, domestic assistance, emergency relief
and assistance with personal care.
[94] Once funding has been acquired for the client, DSC complete the details required in
the contract regarding the individual funding and services and an estimate of the requirement
for staff support. These are based on interactions with the client and other relevant
stakeholders. This establishes the funding and deliverable hours for each client.
[95] Pursuant to the Services Agreement, Outcare must undertake and comply with certain
reporting requirements regarding details of the activities and agreed outcomes that are to be
funded and delivered, provision of an annual report stating whether they have delivered the
contracted services and, where required, provision of an annual financial report.
[96] The Special Needs Service Agreement arose from a tendering exercise which involved
a panel of providers. This was, in part, preparation for the roll-out of the NDIS in Western
Australia.
[97] In the last financial year, Outcare received approximately 7.7% of its total funding
from the State Department for the provision of this service, being $877,412.
[98] Approximately $17,396 (equivalent to 0.02% of the total Income) is classed by
Outcare as ‘Fee for Service’. This is where the Public Trustee holds the client funds and is
invoiced for service hours, rather than funding coming from the Commission.
[99] I consider that the activities subject to the funding contracts are more consistent with
the concept of trading activities. That is, they do have the character of commercial trade in
services or elements of exchange or other commercial indicia in the payment so as to be
considered as trading activities for present purposes.
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5.5 Other funding and income
[100] Approximately 4% of Outcare's income is derived from other funding or income
accrued across the financial year. This included just less than 2% ($189,000) of interest
derived from term deposits in the last financial year.
[101] Approximately 1.3% of Outcare's income is derived from the Youth Housing
Renovation program in which clients on the Live Works program renovate Department of
Housing properties as the practical learning component of their Certificate II in Construction.
In the last financial year, Outcare invoiced approximately $154,000 to the government for this
service.
[102] Approximately 0.5% of Outcare's income is derived from various one-off grants
received from a number of sources. These grants are generally tied to specific deliverables
such as art programs for youth in the criminal justice system. In the last financial year,
Outcare received approximately $60,000 in income from these sources.
[103] Outcare receives approximately $15,000 or 0.2% of its income for the charity
Nighthoops which runs a basketball program for high risk youth in the metropolitan area.
Outcare derives no profit from this “auspicing” arrangement and donates $5,000.00 in kind.
[104] There are a series of intercompany charges allocated in the accounts of Outcare. These
include a cost recovery charge of $4,500 per annum per employee to each program using
facilities in the building owned and occupied by Outcare in East Perth. This is to enable
employees to each program to be co-located with other programs. This is charged on an
estimated cost-recovery basis.
[105] In the last financial year, Outcare leased 52 vehicles and owned 6 vehicles. These
vehicles are leased to employees of Outcare's programs operating from East Perth for the
purposes of various trades and transporting clients. The six vehicles owned by Outcare are
charged to the programs at the same cost as the leasing company from which Outcare leases
its vehicles.
[106] In terms of interests on deposits, these would appear to be a natural consequence of
any incorporated association having cash investments. Activities in that regard may be
considered to be indicative of a financial corporation,29 however this has not been suggested
in this case and the level is such as to be insignificant for present purposes. I do not consider
this to be a trading activity in the context of Outcare’s operations.
[107] I consider that the Youth Housing Renovation program is a trading activity. Despite its
altruistic purpose, this activity involves the provision of a service to the Western Australian
government which is invoiced based upon the performance of specific services.
[108] However, I am inclined to the view that the process of generating “profit” from the
charging out of the motor vehicles and other overheads on a cost-recovery basis to each of the
activities is not, by itself, a trading activity in the context of Outcare.
[2015] FWC 7309
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5.6 The process for gaining funding
[109] I have set out above the basis under which the major activities have been funded. In
general terms, most of the activities have been gained by direct discussions with the funding
bodies rather than an open tendering process. There are exceptions to this rule and these are
also set out above.
[110] Various departments and agencies of the Western Australian government are amongst
the major funders of the employer. The WA government is moving to a more competitive
model for the provision of community services. This is known as the Delivering Community
Services and Partnership Procurement Model and this is being progressively implemented.
The Special Needs Service Agreement was organised and gained in a manner consistent with
this model and it is anticipated that many of the major activities of Outcare will be subject to
the full application of this model in 2016. This will involve a competitive tendering process
and a more commercial basis of assessment and operation of the contracts.
[111] To that end, Outcare had established a Tender Process Management Team, made up of
existing management staff, but focused on positioning the organisation to contest upcoming
tender exercises.
[112] There would be little doubt that the full application of this new model to the major
activities of Outcare would impact upon the characterisation of those activities for present
purposes. However, the approach adopted by the Federal Court in Bankstown30 was that the
time to evaluate whether a corporation is a constitutional (trading) corporation is when the
application is made. On that basis, other than where an activity has been obtained under the
revised funding model, I have not had regard to that development. This means that although
most of the services are being provided in what will be an increasingly competitive and
commercial context, that is not the contractual environment in which they presently operate.
5.7 Is there sufficient trading activity to impact upon the characterisation of
Outcare?
[113] As outlined earlier in this decision, the assessment of trading activities as substantial
and not merely peripheral, insignificant or otherwise incidental is a matter of fact and degree.
[114] I consider that activities conducted under the following funding arrangements bear the
necessary hallmarks of trading so as to be treated as being trading activities for present
purposes include:
Funding contracts - 1.8% of its total funding, being approximately $210,600
per annum;
Individual contracts – comprising 7.7% of its total funding being $877,412 and
approximately $17,396 (equivalent to 0.02% of the total Income) – a total of 7.72%
of total funding or $894,808 per annum; and
Youth Housing Renovation program - 1.3% of income amounting to approximately
$154,000 per annum.
[2015] FWC 7309
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[115] This amounts to, in the order of, 11% of Outcare’s income and approximately
$1.20m per annum.31
[116] In addition, I consider that activities associated with the direct provision of
accommodation services are also trading activities. If only the rental payments were taken
into account to measure the extent of this activity, that would amount to an additional 2.4% of
income and approximately $271,000 per annum. However, this is approach is too narrow in
that significantly more resources and funding is applied to this service than is measured in the
rental payments. Regrettably, it is not possible to derive that amount with any precision based
upon the information presently before the Commission.
[117] Despite this, it is reasonable to deal with this matter on the basis that the total of the
trading activities would be something well beyond $2.5m per annum and what would have to
be in excess of 15% of the income of Outcare. This is based upon a conservative estimate of
the additional value of the accommodation trading activities. This combined level of trading
activities is in my view substantial in the sense contemplated by the authorities. Further,
Outcare’s trading activities are not insubstantial, not trivial, insignificant, marginal, minor or
incidental.
6. Conclusions and order
[118] In all of the circumstances I am satisfied that Outcare is a trading corporation.
[119] The workplace in which the alleged conduct took place is conducted by a
constitutionally-covered business and this means that there is a basis for the Commission to
deal with the application under the relevant provisions of the FW Act.
[120] Accordingly, this application will be assigned so that it can be listed for a hearing to
deal with the substance of the matter.
COMMISSIONER
Appearances:
P Mullally, of Workclaims Australia, with permission for Ms Pasalskyj.
M Airey with M Lalli, of HWL Ebsworth, with permission for Outcare Inc.
WORK THE FAIR OMMISSION AUSTRALLA THE SEAL OF
[2015] FWC 7309
26
Hearing details:
2015
Adelaide and Perth (video hearing):
October 6.
Printed by authority of the Commonwealth Government Printer
Price code G, PR573223
1 Australian Constitution s.52(i).
2 Dated 9 October 2013.
3 Summary taken from the evidence of Mr Clarke.
4 Associations Incorporation Act 1987 (WA) – s.33. See also Bankstown at [43] and [44].
5 Taken from written and oral submission made on behalf of Outcare.
6 Aboriginal Legal Service (WA) Inc v Lawrence (No 2.) (2008) 252 ALR 136 at par [68].
7 Taken largely from written submissions made on behalf of Ms Pasalskyj.
8 Bankstown Handicapped Children’s Centre at [54].
9 (2010) 182 FCR 483 at par [48].
10 [2014] FWC 1395.
11 (2008) 252 ALR 136 at par [68].
12 Per Steytler P at pars [72] to [74].
13 Per Le Miere J at pars [133] to [139].
14 [1998] AIRComm 904 per McIntyre VP.
15 [2006] AIRComm 426 per O’Callaghan SDP.
16 Ibid at par [29].
17 (1991) 27 FCR 310.
18 Ibid at 343.
19 Ibid at 345.
20 (2010) 182 FCR 483 at par [52].
21 [2014] FCA 17.
22 See Ms S.W. [2014] FWC 3288.
23 See R v Trade Practices Tribunal Ex parte St George County Council (1974) 130 CLR 533 at 569 and Re: Ku-ring-gai Co-
operative Building Society (No. 12 ) Ltd (1978) 36 FLR 134 at 160. These authorities must also be considered in light of the
more recent decisions of the Federal Court outlined in this decision.
24 Service Agreement Amendment operating with respect to Accommodation Transition Program – part of attachment G to
exhibit R1.
25 Community Support Services Pilot for Youth Mental Health Court Diversion Program - part of attachment I to exhibit R1.
26 Ibid.
27 Guidelines for the Community Disability Housing Program – attachment D to the statement of Mr Clark – exhibit R1.
28 Boarders are excluded from the relevant tenancy laws in Western Australia.
29 See: Re Mid Density Development Pty Limited v Rockdale Municipal Council [1992] FCA 634 at 25.
30 Bankstown at [45] to [47].
31 Using the income from funders and interest on term deposits from the 2014/15 year as the basis of the income estimates.
