[2016] FWC 2190
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009
s.365—General protections

Heather Boyd and Ross Theedom
v
Shire of Yalgoo
(C2015/3034, C2015/3035)

DEPUTY PRESIDENT KOVACIC

CANBERRA, 8 APRIL 2016

Applications to deal with contraventions involving dismissal – jurisdictional objection – the Respondent is not a constitutional corporation covered by the Fair Work Act 2009 – jurisdictional objection upheld – applications dismissed.

[1] Ms Heather Boyd and Dr Ross Theedom (the Applicants) each made an application under s.365 of the Fair Work Act 2009 (the Act) alleging that they had been dismissed by the Shire of Yalgoo (the Shire - the Respondent) on 19 May 2015 in contravention of the general protections provisions of the Act. The applications were received by the Fair Work Commission (the Commission) on 9 June 2015.

[2] In its Form F8A – Response to general protections application, the Shire contended that it was not a constitutional trading corporation and that the Commission therefore lacked jurisdiction to deal with the applications. The Shire also contended in its Form F8A that the Applicants were not dismissed in contravention of the Act.

[3] The Commission issued Directions on 2 July 2015 regarding the Shire’s jurisdictional objection, with the jurisdictional objection the subject of a telephone hearing on 13 August 2015. At the hearing, Mr Mark Cox appeared with permission for the Applicants, while Mr Tony Saunders of Counsel appeared with permission for the Shire.

[4] Witness statements were filed Dr Theedom and Ms Boyd with neither required for cross examination. Mr Silvio Brenzi, the Shire’s Acting Chief Executive Officer (CEO), filed two witness statements on behalf of the Respondent.

[5] I find that the Shire is not a trading or financial corporation for the purposes of paragraph 51(xx) of the Constitution and is therefore not a constitutional corporation for the purposes of the Act. Accordingly, the Shire is not a national system employer. As a result, the applications are incompetent and must be dismissed. An order to that effect will be issued in conjunction with this decision.

Background

[6] The Shire is a local government body located about 500km north of Perth and just over 200 km east of Geraldton.

[7] Ms Boyd commenced her employment with the Shire on 31 January 2012 as Deputy CEO. At the time of her dismissal, Ms Boyd held the position of Executive Manager Corporate and Community.

[8] Dr Theedom commenced his employment as the Shire’s CEO on 30 June 2014. Dr Theedom was suspended on 12 February 2015 following a Council meeting at which a number of concerns were raised, including concerns about Dr Theedom’s failure to communicate effectively with the Council about elected member travel allowances. A number of concerns, including concerns regarding financial management related matters, were subsequently put to Dr Theedom in writing in two separate letters. Dr Theedom responded to both letters denying the allegations contained in those letters.

[9] Ms Boyd was suspended on 11 March 2015 and on 24 April 2015 received a letter from Mr Brenzi setting out various allegations of misconduct relating to the financial management of the Respondent. Ms Boyd responded to that letter on 7 May 2015 refuting each of the allegations made in the letter.

[10] Both Dr Theedom and Ms Boyd were summarily dismissed on 19 May 2015 for serious or wilful misconduct or wilful neglect in the discharge of their duties.

[11] The Applicants contended that they were dismissed for making complaints or inquiries in relation to their employment in contravention of s.340 of the Act which deals with protection concerning the exercise or otherwise of a workplace right. Specifically, the Applicants contended that they exercised workplace rights within the meaning of s.341(1)(c)(ii) of the Act when they, inter alia:

The Relevant Legislation

[12] The Shire is a local government body. In accordance with s.2.5 of the Local Government Act 1995 (WA) (LGA) local government bodies in WA are bodies corporate and have the legal capacity of a natural person. The relevant question before the Commission is whether or not the Shire is a trading or financial corporation and therefore falls within the jurisdiction of the Act, including the Act’s general protections provisions.

[13] Sections 337, 338 and 339 of the Act set out the application of Part 3-1 – General protections of the Act in the following terms:

337 Application of this Part

338 Action to which this Part applies

339 Additional effect of this Part

[14] Section 14 of the Act defines a national system employer as follows:

[15] Section 12 of the Act defines a constitutional corporation as “a corporation to which paragraph 51(xx) of the Constitution applies.”

[16] Paragraph 51(xx) of the Australian Constitution applies to “foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth.”

The Respondent’s case

[17] In its written submissions, the Shire contended that it was not a trading corporation and therefore was not subject to the Act. In support of that contention, the Shire pointed to several provisions of the LGA, including ss.1.3(3) and 3.1(1).

[18] The Shire described its activities as building control, cemetery, bushfire control, citizenship ceremonies, dog and cat control, community bus, environmental health, demolition permits, litter bins, drainage, parks and reserves, fire prevention, playground equipment, library services, public toilets, media releases, planning control, rubbish collection, public health services, stormwater drainage, public buildings for hire, recreational/sporting facilities, street lighting, roads/foot paths/curbing, street tree planting and vehicle licensing agency.

[19] More specifically, the Shire contended that the majority of its activities were undertaken in accordance with statutory requirements imposed on the Shire and were therefore non-trading activities. The Shire further contended that as its major source of revenue was from rates and grants, it did not engage in a sufficient level of trading activity to bring it within the coverage of the Act.

[20] As previously mentioned, Mr Brenzi filed two witness statements. In his first witness statement 1 Mr Brenzi deposed that:

[21] In his supplementary witness statement 2 Mr Brenzi deposed that:

[22] Mr Brenzi reiterated much of the above in his oral evidence. Beyond that, key aspects of Mr Brenzi’s oral evidence were that:

• fuel cards purchased by the Shire were sold at their purchase price;

• the Shire did not receive a discount on fuel because it leased property to Geraldton Fuel Pty Ltd (Geraldton Fuel) but rather because it was a local government body;

• the Shire did not provide any services in return for community benefits payments provided by MMG, Mt Gibson and Top Iron, with the Mt Gibson payment described as a donation.

[23] In support of its assertion that the Shire is not a constitutional corporation, the Shire relied on the decision in the Shire of Ravensthorpe v Galea 4 (Ravensthorpe) a decision made after the Western Australia Court of appeal decision in Aboriginal Legal Service of WA Inc v Lawrence [No 2]5(ALS). Specifically, the Shire contended that:

[24] The Shire also submitted that the Commission should not follow the decision in John David Burrows v Shire of Esperance 6 (Shire of Esperance), one of the authorities relied upon by the Applicants, as, inter alia, the principles applied in that case were inconsistent with those applied in more recent cases such as Ravensthorpe.

[25] As to the existence of the Shire of Yalgoo Comprehensive Enterprise Agreement 2011 7 (the Agreement), the Shire contended that its existence had no bearing on determining whether or not the Shire was a constitutional corporation at the time of the alleged adverse action against the Applicants.

[26] In light of the above, the Shire contends that is not a trading corporation as its trading activities do not form a sufficiently significant proportion of its overall activities.

The Applicants’ case

[27] The Applicants contended that although trading activities were not the dominant purpose of the Shire and may properly be said to be incidental to the Shire’s statutory functions, they were nevertheless a significant and substantial part of the Shire’s and its employees’ activities. On that basis, the Applicants submitted that the Shire engaged in requisite extent of trading activities to be considered a trading corporation. In their written submissions, the Applicants agreed with both the Shire’s characterisation of its status as a local government body and the list of activities undertaken by the Shire. The Applicants further submitted that the Shire had conducted itself in relation to its employees in a manner demonstrative of its own belief that it was governed by the Act as a result of the existence of the Agreement and the content of the Applicants’ employment agreements.

[28] Dr Theedom deposed in his witness statement 8 that during his employment with the Respondent the Shire engaged in the following activities with a view to raising significant revenue:

[29] Dr Theedom further deposed that during his period of employment with the Shire he and other staff spent time on a daily basis engaged in the Shire’s various trading activities, adding that all employees were as part of their duties variously involved in the trading activities. Dr Theedom also deposed that the Shire engaged contractors to provide some of the above trading activities, e.g. building and planning approvals.

[30] Dr Theedom also referred to his employment agreement which, among other things, defined the “Industrial Relations Law” applicable to the agreement as including the Act and the National Employment Standards (NES) and specified that his leave entitlements would be provided in accordance with the NES.

[31] Ms Boyd deposed in her witness statement 9 that she recalled that during her employment with the Respondent the Shire engaged in the following activities to raise significant revenue and profits, with the following activities in addition to the Shire’s statutory function of charging rates and providing services:

[32] Ms Boyd also referred in her witness statement to her employment agreement in terms similar to those deposed by Dr Theedom, adding that the Shire operates under a comprehensive enterprise agreement which had been approved by the Commission. Ms Boyd stated that she relied upon those representations in forming the belief that her employment was governed by the Act. Ms Boyd further deposed that she considered that the Level 11 classification contained in Schedule B of the Local Government Industry Award 2010 10 captured the various tasks which she performed during the course of her employment with the Shire.

[33] The Applicants relied upon a number of authorities in support of their contention that the Shire was a trading corporation. Those authorities included the decisions in R v The Judges of the Federal Court of Australia; Ex parte Western Australian National Football League (Inc) 11, State Superannuation Board (Vic) v Trade Practices Commission12, Eric Bell v Shire of Dalwallinu13 and Shire of Esperance.

[34] The Applicants submitted that the entire emphasis of the Shire’s case relied on the decision in Ravensthorpe, adding that the presiding member in that case, Acting President Ritter fell into error in his decision when he placed an incorrect emphasis on the purpose of the activity of the Shire in that case.

[35] The Applicants further contended that the Commission should adopt the principles applied in ALS, emphasising that the decision in ALS provided that the purpose of an activity did not exclude it from being a trading activity.

[36] Beyond this, the Applicants contended, among other things, that:

Consideration of the Issues

[37] In ALS the West Australian Court of Appeal examined a number of High Court decisions which dealt with the test to be applied in determining whether or not a corporation should be categorised as a trading corporation for the purposes of paragraph 51(xx) of the Constitution. In ALS the Court summarised the principles that might be drawn from those and other cases as follows:

[38] I adopt and follow these principles.

[39] Some of the key activities characterised as trading activities by the Applicants included the interest earned on funds invested by the Shire, the hire and/or lease of Shire properties and assets, the operation of the caravan park and the road use agreements with three mining companies.

[40] Before turning to consider these key activities in more detail, I will first deal with some of the other activities identified by the Applicants as trading activities which the Shire was engaged in. These other activities included the sale of water, concrete, scrap metal and excess property, the provision of vehicle licences and renting equipment to third parties.

[41] Dealing firstly with the sale of water, Mr Brenzi attested that the Shire had not sold water to a third party despite Ms Boyd’s evidence asserting that the Shire had done so. I note that Mr Brenzi gave a credible explanation as to what Ms Boyd was likely to have been referring to in her witness statement regarding this issue. I also note that Dr Theedom did not depose in his witness statement that the Shire sold water to third parties. Against that background, I prefer Mr Brenzi’s evidence on this issue.

[42] As to the vehicle licensing activity, Dr Theedom’s evidence was that this activity was undertaken by the Shire on behalf of the WA Department of Transport, with Mr Brenzi’s evidence being that the Shire received a commission for providing this service which totalled $2,324.35 in 2014/2015. While no detailed evidence was lead regarding the underpinnings of this arrangement, it has all the hallmarks of an outsourced arrangement designed to enable residents of remote communities to access government services without the need to travel beyond their community. Further, the commission paid to the Shire is likely to be designed to reimburse the Shire for some or all of the cost of the Shire providing this service on behalf of the WA Department of Transport. In the absence of a more detailed understanding of the underpinnings of the arrangement, I am unable to definitively say that it is not a trading activity of a commercial nature, though I consider it highly unlikely that it is.

With regard to the other activities cited by the Applicants, i.e. the sale of scrap metal and excess property and renting equipment to third parties, while it is not disputed that they occurred, there is no evidence which points to these activities occurring on anything other than an ad hoc or infrequent basis. This diminishes the weight or significance which can be attached to these activities and supports a view that they are at best peripheral activities of the Shire.

[43] I now turn now to consider in more detail what was described above as the key activities characterised as trading activities by the Applicants.

Interest earned on funds

[44] Mr Brenzi’s evidence was that under s.6.14 of the LGA the Shire has the power to invest funds. Specifically, s.6.14 of the LGA provides that:

[45] Further, the Local Government (Financial Management) Regulations 1996 provide as follows:

[46] What is evident from the above is that the capacity for local government bodies to invest is heavily proscribed by the LGA, with the level of prescription undoubtedly directed at protecting ratepayers. For instance, the money that may be invested is money that, for the time being, it not required for any other purpose. This does not point to the Shire’s decision to invest to being anything other than peripheral to its operations from both a statutory and practical perspective, though perhaps technically a trading activity. This view is consistent with the decision of Justice Spender in AWU v Etheridge Shire Council 14 (Etheridge) when he said:

Hire or Lease of Shire properties and assets

[47] Dr Theedom’s evidence was that the Shire received significant fuel discounts for itself and contractors engaged by the Shire as a result of its lease arrangement with Geraldton Fuel. Mr Brenzi in his evidence disputed this, attesting that the Shire did not receive a discount on fuel because of the lease but rather because it was a local government body. The lease between the Shire and Geraldton Fuel Company Pty Ltd for the “Yalgoo 24 Hour Fuel Station” 15 provides at clause 16.4 of Schedule 1 of the lease that:

[48] The wording of the lease supports a finding that the Shire does receive a fuel discount as a result of the lease, which points to the lease being a commercial arrangement or trading activity.

[49] As to the housing rented to Shire staff, Mr Brenzi’s evidence was that the Shire provided subsidised housing to staff to attract them to Yalgoo given that there are no private properties for rent in the town. That evidence is supported by the following extract from Dr Theedom’s CEO Report from the Shire’s Annual Report For the year ending 30 June 2014 16 which states among other things that:

[50] This does not point to the rental of staff housing being a trading activity.

[51] In his evidence Dr Theedom also pointed to the lease of public building to Centacare and the WA Department of Health. I deal with the Centacare lease below under the heading of Road use agreements. As to the WA Department of Health lease, Mr Brenzi’s evidence was that the Shire leases a nursing post to WA Country Health Services for about $16,000 per annum, but in 2014/2015 incurred costs of almost $35,000 in maintaining the property. The Shire submitted that this activity was undertaken for the benefit of the community. This points to the arrangement being directed at having health services available in the community, consistent with the Shire’s statutory function, as opposed to a commercial arrangement driven by a profit motivation.

[52] Beyond this, the Shire charges users for the hire/use of a number of Shire facilities/assets, e.g. the community bus and the Yalgoo racecourse. Based on the material before the Commission, I consider these activities highly likely to be underpinned by some broader community benefit. That view is supported by the following extract from Dr Theedom’s CEO Report from the Shire’s Annual Report For the year ending 30 June 2014:

[53] This does not support a finding that these are trading activities.

Caravan park

[54] The Shire submitted that the caravan park runs at a loss and was run to encourage tourists to visit Yalgoo, thereby benefitting the community. Despite this, it is difficult to envisage how this activity could be construed as anything but a commercial activity. While based on Mr Brenzi’s evidence, the caravan park lost around $75,000 in 2014/2015, I note that almost half of this amount could be attributed to redevelopment costs. These redevelopment costs are akin to a capital investment designed to enhance the revenue generation potential or commercial position of the caravan park. As per ALS, I note that “the making of a profit is not an essential prerequisite to trade, but it is a usual concomitant.” This analysis supports a finding that the caravan park is a trading activity undertaken for commercial purposes, albeit that it is likely to be of some broader community benefit.

Road use agreements

[55] Mr Brenzi’s unambiguous evidence was that the Shire did not provide any services in return for community benefits payments provided by MMG, Mt Gibson and Top Iron, indeed Mr Brenzi described the with the Mt Gibson payment as a donation.

[56] That evidence is supported by an examination of the Road Access and Public Benefit Agreement between the Shire and Top Iron Pty Ltd 17 which provides at clause 4.3 that:

[57] Further, Mr Brenzi’s evidence was that the community development payments under the Road Use (Restricted Access Vehicle Haulage) Agreement between the Shire and MMG Golden Grove Pty Ltd 18 were segregated to cover the costs of the Centacare office in Yalgoo, with the money paying for the employment of one Centacare staff member and the provision of a house and car for that employee. More specifically, the Shire does not undertake this activity for profit. In short, those funds meet the cost of the services provided by Centacare to Yalgoo residents. By way of background, the MMG road use agreement provides at clause E that:

[58] There is nothing in the above to support a finding that the community benefit payments under those road use agreements constitute trading activities.

Other considerations

[59] Section 3.1 of the LGA sets out the general function of a local government as follows:

[60] The broad construction given to the Shire’s functions by the LGA results in many of its activities coming within its general function.

[61] Finally, an analysis of the 2015 trial balance indicates that the Shire generated income of just over $7.503m in 2014/2015 and that the income generated from all the trading activities relied upon by the Applicants totalled just over $285,000 in 2014/2015. In other words, the activities asserted by the Applicants to be trading activities represent about 3.8% of all the income received by the Shire, whether from rates, grants and/or trading activities. Excluding the income received from those activities which for the reasons I have outlined above I do not consider to be trading activities (i.e. staff housing – $12,391.92; Community bus hire – $827.29; Hall hire – $27.27; Old Railway Station hire – $1,150.00; community benefit payments under road user agreements – $95,818.18) reduces the revenue generated from trading activities to around $175,000 or 2.3 per cent of the Shire’s total income. On neither measure, could the Shire’s trading activities be construed to be a significant part of its activities. To the contrary, the above analysis clearly indicates that the Shire’s trading activities are peripheral to its statutory function. As noted above, Mr Brenzi acknowledged in his oral evidence that the 2015 trial balance did not include all revenue, with a key omission being any revenue received by the Shire under the Mt Gibson road user agreement. The amount in question, around $40,000 per annum, is highly unlikely to alter the above conclusion.

[62] The conclusion drawn from the above analysis of the Shire’s statutory function and the peripheral nature of its trading activities is again consistent with the decision in Etheridge which found as follows:

[63] All of them, in my opinion, including the road works aspect of the activity of council, after close analysis, entirely lack the essential quality of trade. Almost all of them run at a loss. They are all directed, in my view, to public benefit objectives within the shire. Their scale, even in monetary terms (putting to one side the non-monetary significance of the legislative and executive activity of the shire council), are so inconsequential and incidental to the primary activity and function of the Council as to deny to the Council the characterisation of a “trading corporation” or a “financial Corporation”.” 19

[64] That conclusion and the accompanying observations are equally apt in this case.

Conclusion

[65] For all the above reasons, and drawing on the decision in ALS, I find that the Shire is not a trading or financial corporation for the purposes of paragraph 51(xx) of the Constitution and is therefore not a constitutional corporation for the purposes of the Act. Accordingly, the Shire is not a national system employer. As a result, the applications are incompetent and must be dismissed. An order to that effect will be issued in conjunction with this decision.

[66] This decision has obvious implications for the validity of the Agreement. I would encourage the Shire to seek advice on that issue as a matter of priority.

al of the Fair Work Commission with member's signature

Appearances:

M. Cox on behalf of the Applicants.

T. Saunders of Counsel for the Respondent.

Hearing details:

2015.

Canberra, Melbourne, Perth, Yalgoo and Sydney (telephone hearing):

August 13.

 1   Exhibit S1

 2   Exhibit S2

 3   Centacare acts as the official welfare arm of the Catholic Church, offering family relationship and community services to individuals, couples and families – www.centacaregeraldton.org.au

 4   [2009] WAIRC 01149

 5   (2008) 252 ALR 136

 6   Print Q8680

 7   AE889036

 8   Exhibit C1

 9   Exhibit C2

 10   MA000112

 11   (1979) 143 CLR 190

 12   (1982) 150 CLR 282

 13   (2008) 176 IR 226

 14   (2008) 175 IR 383 at paragraph 156

 15   Exhibit S2 at Attachment SB-5

 16   Exhibit S1 at Attachment SB-2 at pages 8-9

 17   Exhibit S2 at Attachment SB-8

 18   Exhibit S2 at Attachment SB-7

 19   (2008) 175 IR 383 at paragraphs 150-151

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