[2017] FWC 5974 [Note: a correction has been issued to this document]
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009
Section 789FC - Application for an order to stop bullying

Mr Martin Cooper
(AB2017/453)

Mr Lancelot Bagster
(AB2017/463)

DEPUTY PRESIDENT ANDERSON

ADELAIDE, 15 NOVEMBER 2017

Applications for an FWC order to stop bullying – matters heard concurrently – local government employer in South Australia – objection to Commission’s jurisdiction – non-standard hearing due to intervention orders - meaning of “constitutionally-covered business”- Australian Constitution section 51(xx) - trading or financial corporation formed within the limits of the Commonwealth – activities test – trading activities peripheral not substantial – applications dismissed

[1] This decision only concerns jurisdictional (legal) issues arising from applications before the Fair Work Commission (the Commission). It makes no findings concerning the merit or otherwise of conduct that is alleged to have been bullying conduct or on the responses of the parties thereto.

[2] On 17 August 2017 an application for an order to stop bullying was made to the Commission under section 789FC of the Fair Work Act 2009 (FW Act) by Martin Cooper. He alleges bullying conduct by Lancelot Bagster. His application states that he is employed or engaged by the City of Burnside (the employer).

[3] On 23 August 2017 an application for an order to stop bullying was made to the Commission under section 789FC of the FW Act by Lancelot Bagster. He alleges bullying conduct by Paul Deb, Martin Cooper and David Parkin. His application states that he is employed or engaged by the City of Burnside.

[4] The respondents to each application raise the following jurisdictional issues:

[5] I conducted a directions hearing of Mr Cooper’s application by telephone on 5 September and issued directions on that day. 1

[6] I conducted an in-person conference of the parties to both Mr Cooper’s application and Mr Bagster’s application on 11 September. The conference was adjourned to a further in-person conference of the parties on 19 September.

[7] On 12 September the employer made, inter alia, two requests: firstly, that I make interim orders against Mr Bagster; and secondly, that the jurisdictional issues be resolved prior to further hearings.

[8] On 17 September a support person for Mr Bagster (Mr Jacobsen) made, inter alia, two requests: firstly, that I determine the jurisdictional issues before any further discussion or mediation; and secondly, that I strike out the employer’s application for interim orders.

[9] The 19 September conference did not proceed when, immediately prior to its scheduled commencement, the Commission was informed by solicitors for the employer 2 that on 19 September an Interim Intervention Order had been issued by the Magistrates Court of South Australia on the application of Person A, Person B, Person C and a Person D (the “protected persons”) against Person E. Solicitors for the employer asserted that Person E would be in breach of the terms of the Order if he were to have contact with the protected persons and that any contact direct or indirect from each of the persons with Person E may constitute an aid and abet in breach of the Order. The Employer requested that the Commission’s proceedings scheduled for that day be “administratively adjourned until such time as the jurisdictional issue had been determined”. I granted that request.

[10] On 20 September 2017 I issued a Statement and Directions relating to the further management of the matter which provided for the hearing and determination of the jurisdictional matters. The Statement and Directions are attached to this decision (Attachment A) for reference. The directions issued established a non-standard mechanism for the hearing of the matter and for the communication of materials between the parties. In establishing this non-standard procedure I indicated that I did not wish to place the parties in a position of directly or indirectly breaching the terms of the Interim Intervention Order whilst it was in force but, at the same time, I intended to meet the Commission’s responsibilities under section 789FE of the FW Act to deal with applications promptly and according to law including procedural fairness in hearing and determining matters before it. In issuing these directions I provided practical direction to the parties without accepting that orders of a State tribunal bind or constrain, as a matter of law, the Commission’s exercise of its federal jurisdiction.

[11] Prior to the 4 October hearing, on 22 September 2017 I conducted a non-simultaneous directions hearing of the parties at which I outlined my Statement and Directions of 20 September 2017 and ascertained the parties’ readiness for the jurisdictional hearing.

[12] I conducted a hearing of the jurisdictional matters by telephone on 4 October in the manner set out in paragraph 22 of the Statement and Directions. It was audio recorded.

[13] No party was represented at the hearing by a lawyer or paid agent.

[14] In advance of the hearing the following materials relevant to the jurisdictional matters were filed with the Commission:

By the employer:

Statutory declaration of Alan Matthew Spearman dated 28 September 2017 (E1) which attached the following documents marked as exhibits during the proceedings:

•  Email from Mr Spearman to Chambers dated 25 September concerning Mr Cooper’s status as an employee (E2);

•  City of Burnside Organisational Chart (E3);

•  Employment Contract of Martin Cooper (redacted in parts) (E4);

•  City of Burnside 2017/18 Annual Plan and Budget (E5);

•  City of Burnside Annual Report 2015/16 (E6);

•  City of Burnside Financial Report to 30 June 2016 (E7);

•  City of Burnside Subsidiary Reports 2015/16 (E8);

•  City of Burnside Long Term Financial Plan 2016/17 to 2025/26 (E9).

By Mr Bagster

•  Statutory declaration of Lancelot James Bagster dated 28 September 2017 (AB1) 3.

[15] Neither Mr Cooper nor the other respondents to Mr Bagster’s application submitted additional material on the jurisdictional matters. Mr Cooper relied on the material he submitted with his application and on the material submitted by Mr Spearman.

[16] Prior to the jurisdictional hearing, Mr Cooper advised that he did not intend to appear as he neither sought to cross examine Mr Spearman on his evidence nor make submissions on the jurisdictional issue. A representative for Mr Deb and Mr Parkin advised that they also did not intend to appear as they had no additional information to provide. Mr Spearman appeared and gave oral evidence in support of his statutory declaration and in answer to questions from the Commission. He made a brief oral submission on behalf of the City of Burnside. Mr Bagster also appeared. He made submissions in his own right and cross examined Mr Spearman on his evidence.

[17] At the conclusion of the hearing I reserved my decision. I provided the parties a further week (by 11 October) to file written submissions in reply. None were filed.

The Parties

[18] Mr Cooper (both applicant and respondent in these proceedings) is the General Manager Corporate Services with the City of Burnside. He is currently Acting Chief Executive Officer in the absence of the Chief Executive Officer Mr Deb.

[19] Mr Bagster (both applicant and respondent in these proceedings) is an elected councillor of the City of Burnside representing the Burnside Ward. He is not employed by the City of Burnside.

[20] Mr Deb (a respondent in the proceedings brought by Mr Bagster) is the Chief Executive Officer of the City of Burnside.

[21] Mr Parkin (a respondent in the proceedings brought by Mr Bagster) is the elected Mayor of the City of Burnside.

[22] Mr Spearman is the Group Manager People and Innovation with the City of Burnside and, to date, has acted as the representative of the employer in these proceedings. The employer has an interest in both proceedings.

The Submissions on Jurisdiction

[23] Mr Cooper contends in his response to Mr Bagster’s application that Mr Bagster is not entitled to make a claim because he is not a “worker” within the meaning of the FW Act.

[24] Mr Bagster contends in response to Mr Cooper’s application that the Commission has no jurisdiction to hear the claim because (a) the City of Burnside is not a “constitutionally-covered business” and (b) because he (Mr Bagster) is not the employer of Mr Cooper.

[25] The City of Burnside (through Mr Spearman) contends that the Commission lacks jurisdiction to hear and determine both Mr Cooper’s and Mr Bagster’s claim because the City of Burnside is not a “constitutionally-covered business”. It also contends, in respect of Mr Bagster’s claim, that he is not entitled to make a claim because (being an elected councillor) he is not a “worker” within the meaning of the FW Act. It also asserts that he is a member of the Defence Force.

The Bullying Jurisdiction

[26] The Commission’s jurisdiction was established by the Australian parliament in 2013. It commenced from 1 January 2014. The jurisdiction is set out in Part 6-4B of the FW Act in the following terms:

[27] The Commission is only able to make orders to stop bullying if bullying (as defined) has occurred and if “there is a risk that the worker will continue to be bullied at work by the individual or the group”. 4

[28] The power to make a bullying order is discretionary. While the Commission may make any order it considers appropriate, it has no power to make an order requiring payment of a pecuniary amount. Any orders made must be preventative in nature, that is, forward looking; they must be designed to “prevent the worker from being bullied at work by the individual or the group”. 5 Orders cannot be made if the person was not a “worker” or is no longer a “worker” in the relevant workplace.6

Consideration

[29] The jurisdictional prerequisites for both applications before the Commission are:

•  That the applicant was a “worker” (as defined);

•  That the alleged bullying occurred “at work in a constitutionally-covered business”; and

•  That the person or persons alleged to have bullied the applicant were “an individual “or “a group of individuals”. It is to be noted that the jurisdiction is not limited to alleged bullying by an employer or another employee. It extends more broadly to alleged bullying by “individuals”.

[30] In relation to Mr Cooper’s application:

•  There is no contest that Mr Cooper was an employee of the City of Burnside at the relevant times. I have examined his contract of employment (E4). I find that he was a “worker” as defined;

•  Whilst the behaviour (as alleged) occurred while Mr Cooper was “at work” in the sense that he was engaged in the performance of work or engaged in activities authorised or permitted by his employer 7, he would not have been “at work” within the meaning of the anti-bullying provisions of the FW Act if the City of Burnside is not a “constitutionally covered business”. I deal with this issue later in this decision;

•  Mr Bagster is “an individual” and, as such, capable of being the subject of a bullying complaint. In relation to Mr Cooper’s application, it is irrelevant whether Mr Bagster was or was not the employer or was or was not an employee of the Council, or was or was not operating in an elected or unelected capacity or in a voluntary or paid capacity. I find that Mr Bagster, as a councillor, is an “individual” and capable of being the subject of a bullying complaint.

[31] In relation to Mr Bagster’s application:

•  There is a contest over whether Mr Bagster was a “worker” as defined. It is asserted by the City of Burnside that he is not a worker on two grounds: (a) that he is a councillor not an employee of Council; and (b) that he is a member of the Defence Force. I deal with these issues later in this decision;

•  Mr Bagster was not “at work” within the meaning of the anti-bullying provisions of the FW Act because (it is contended) the City of Burnside is not a “constitutionally covered business” I deal with this issue later in this decision;

•  Mr Cooper, Mr Deb and Mr Parkin are each “an individual” and, as such, capable of being the subject of a bullying complaint. In relation to Mr Bagster’s application, it is irrelevant whether any of these persons were or were not the employer or were or were not an employee of the Council, or were or were not operating in an elected or unelected capacity or in a voluntary or paid capacity. I find that Mr Cooper, Mr Deb and Mr Parkin were capable of being the subject of a bullying complaint. Whether they operated as “an individual” or a “group of individuals” is not relevant to the jurisdictional issue.

[32] It is apparent that a number of inconsistencies arise from the submissions of the parties:

•  Mr Cooper seeks orders (including interim orders) to prevent bullying in respect of the same workplace that the employer says (with Mr Cooper’s support in response to Mr Bagster’s claim) is not covered by the Commission’s jurisdiction;

•  Mr Bagster seeks orders to prevent bullying in respect of the same workplace that he and the employer say (in response to Mr Cooper’s claim) is not covered by the Commission’s jurisdiction; and

•  The employer (City of Burnside) supports orders (including interim orders) being made in Mr Cooper’s claim despite saying in response to both Mr Cooper’s claim and Mr Bagster’s claim that the workplace is not covered by the Commission’s jurisdiction.

[33] At the hearing on 4 October Mr Bagster and Mr Spearman acknowledged these inconsistencies and the consequence of, for example, Mr Bagster’s application failing for lack of jurisdiction should I find that Mr Cooper’s claim lacks jurisdiction for the same reason.

[34] Given the above, it is appropriate to determine the jurisdictional matters by first considering whether the City of Burnside is a “constitutionally-covered business” within the meaning of section 789FD of the FW Act. If it is not, both applications before me fail for want of jurisdiction. If it is a “constitutionally-covered business” then (given my earlier findings) (a) Mr Cooper’s application is within jurisdiction; and (b) I will need to determine whether Mr Bagster was a “worker” within the meaning of the anti-bullying provisions of the FW Act.

Is the City of Burnside a “constitutionally-covered business”?

[35] The City of Burnside is a local council situated in Adelaide’s eastern suburbs. It is a council created under the provisions of the Local Government Act 1999 (SA), an enactment of the parliament of South Australia. It consists of 12 ward councillors and a mayor.

[36] All major policy decisions of the City of Burnside are made by elected members who delegate the day-to-day running of the Council to its administration. It is the administration’s job to turn elected members’ decisions regarding the Council’s policies and priorities into action.

[37] The Local Government Act 1999 (SA) requires each Council (that is, the elected members) to appoint a Chief Executive Officer. 8 The Chief Executive Officer is responsible for “appointing, managing, suspending and dismissing” all other employees of the Council.9

[38] The principal purpose of the Council, as set out in the Local Government Act 1999 (SA), is to act as a decision-maker in the interests of the community and includes the provision and co-ordination of public services and facilities 10.

[39] A Council is also required, by law, to develop strategic management plans, to have annual business plans and budgets and keep accounts and financial statements (and have them audited on a financial year basis). 11

[40] This jurisdictional question is to be determined in accordance with the definition of “constitutionally-covered business” set out in section 789FD(3) of the FW Act.

[41] On the evidence before me I am satisfied that the City of Burnside is neither the Commonwealth (section 789FD(3)(a)(ii)), nor a Commonwealth authority (section 789FD(3)(a)(ii)), nor a body corporate incorporated in a Territory (section 789FD(3)(a)(ii)), nor does it conduct its business or undertaking principally in a Territory or Commonwealth place (section 789FD(3)(b)).

[42] Accordingly, the City of Burnside will be a “constitutionally-covered business” if it is:

•  a “person”; and

•  is conducting a business or undertaking (as defined); and

•  is a “constitutional corporation” (as defined).

A “Person”

[43] I am satisfied that the City of Burnside is a “person” within the meaning of section 789FD(3) of the FW Act. It is a separate legal entity recognised at law as having rights and obligations. It possesses the requisite legal personality.

A “Business or Undertaking”

[44] A “business or undertaking” for the purposes of section 789FD(3) of the FW Act is drawn from the definition in section 5 of the Work Health and Safety Act 2011. That provides as follows:

“5  Meaning of person conducting a business or undertaking

(1) For the purposes of this Act, a person conducts a business or undertaking:

(a) whether the person conducts the business or undertaking alone or with others; and

(2) A business or undertaking conducted by a person includes a business or undertaking conducted by a partnership or an unincorporated association.

(3) If a business or undertaking is conducted by a partnership (other than an incorporated partnership), a reference in this Act to a person conducting the business or undertaking is to be read as a reference to each partner in the partnership.

(4) A person does not conduct a business or undertaking to the extent that the person is engaged solely as a worker in, or as an officer of, that business or undertaking.

(5) An elected member of a local authority does not in that capacity conduct a business or undertaking.

(6) The regulations may specify the circumstances in which a person may be taken not to be a person who conducts a business or undertaking for the purposes of this Act or any provision of this Act.

(7) A volunteer association does not conduct a business or undertaking for the purposes of this Act.

(8) In this section, volunteer association means a group of volunteers working together for 1 or more community purposes where none of the volunteers, whether alone or jointly with any other volunteers, employs any person to carry out work for the volunteer association.”

[45] I find that the City of Burnside is established for the purposes set out in the Local Government Act 1999 (SA). Those purposes primarily concern the provision and co-ordination of public services and facilities in its geographic area and in providing a mechanism for local representative decision-making and community leadership. I further find that in performing these tasks the City of Burnside has established committees and structures provided for in the Local Government Act 1999 (SA) and has employed staff for those purposes. In these circumstances I am satisfied that it is a “business or undertaking” within the meaning of section 5 of the Work Health and Safety Act 2011 in that, irrespective of whether it has a profit making objective, it has elements of organisation, systems and continuity that would make it at least an “undertaking”.

[46] It is not a “volunteer association” (as defined) because whilst its councillors are elected and do not receive a remuneration (other than an allowance for expenses and payment of certain other out of pocket expenses) the Council employs persons to carry out work (section 5(8) Work Health and Safety Act 2011).

[47] I note the specific provision in section 5(5) of the Work Health and Safety Act 2011 that “an elected member of a local authority does not in that capacity conduct a business or undertaking.” Mr Bagster is an elected member of a local authority. This provision has the effect that Mr Bagster cannot be said, at law, to be conducting “a business or undertaking” and in that sense Mr Cooper cannot be found to be working for or to be a “worker” of Mr Bagster. However, Mr Cooper is a “worker” of the City of Burnside. As such, he has standing to make an anti-bullying claim under the FW Act against an “individual” (including Mr Bagster) whether or not that individual is a “worker” as defined. Section 5(5) of the Work Health and Safety Act 2011 does not operate to deny jurisdiction to either Mr Cooper’s or Mr Bagster’s application.

[48] I find that the City of Burnside conducts a “business or undertaking” within the meaning of section 789FD(3) of the FW Act.

A “Constitutional Corporation”

[49] Section 12 of the FW Act defines a “constitutional corporation” in the following terms:

“constitutional corporation means a corporation to which paragraph 51(xx) of the Constitution applies.”

[50] Section 51(xx) of the Australian Constitution provides as follows:

“Foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth:”

[51] To be either a “foreign corporation” or a “trading or financial corporation” the City of Burnside must be a corporation. The Local Government Act 1999 (SA) provides as follows:

“35 – Corporate Status

(1) A council is a body corporate with perpetual succession and a common seal.” 12

[52] I am satisfied that the City of Burnside is a corporation by virtue of section 35 of the Local Government Act 1999 (SA).

[53] I am also satisfied that the City of Burnside is not a “foreign corporation” within the meaning of section 51(xx) of the Australian Constitution. The City of Burnside is a creature of a statute made by a sovereign Australian parliament.

[54] The more substantive question arising is whether the City of Burnside is a “trading or financial corporation” within the meaning of section 51(xx) of the Australian Constitution.

[55] The High Court of Australia has considered the constitutional meaning of the expression “trading or financial corporation” on multiple occasions since federation. It is not a phrase that has had a static interpretation. Whereas the High Court’s early interpretation restricted the scope of Commonwealth powers to laws with respect to the establishment, governance and dissolution of trading or financial corporations more recent decisions of the Court (since the 1970’s) have interpreted this provision to empower the Commonwealth parliament to make laws with respect to the conduct and behaviour of corporations (including laws with respect to employment and industrial matters between a corporation and its employees 13).

[56] Similarly, the Court has not been static in its interpretation of what is meant by the phrase “trading or financial” for the purposes of this provision.

[57] The phrase “trading or financial corporation” is disjunctive. If the City of Burnside is either a trading corporation or a financial corporation then it will be captured by section 51(xx) of the Constitution.

[58] A corporation is a financial corporation if its principal purpose or purposes include banking or finance or if banking or finance activities are a not insubstantial component of its operations. 14 On the evidence before me, the City of Burnside is not established for banking or finance purposes nor operating in that industry. It does not undertake activities that could be said to involve the provision of finance or banking services. I find it is not a financial corporation.

[59] The approach of courts and tribunals to the meaning of a “trading corporation” was conveniently summarised by Steytler P in Aboriginal Legal Service (WA) Inc v Lawrence (No 2) 15 in the following terms:

“(1) A corporation may be a trading corporation even though trading is not its predominant activity: Adamson (239); State Superannuation Board (303 - 304); Tasmanian Dam case (156, 240, 293); Quickenden [49] - [51], [101]; Hardeman [18].

(2) However, trading must be a substantial and not merely a peripheral activity: Adamson (208, 234, 239); State Superannuation Board (303 - 304); Hughes v Western Australian Cricket Association Inc [1986] 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].”

[60] This summary was subsequently adopted by the Full Court of the Federal Court in Bankstown Handicapped Children’s Centre v Hillman 16 and has been cited with approval by the Commission in matters arising in the anti-bullying jurisdiction.17

[61] Also relevant are the recent observations of a Full Bench of the Commission in Lim v Trade & Investment Queensland 18:

“A corporation may be a trading corporation within the meaning of paragraph 51(xx) of the Constitution if it is constituted for the purposes of engaging in, or its purpose is to engage in trading activities. A corporation may also be a trading corporation if it engages in trade or trading activities. As Gageler J observed in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Queensland Rail 19 the constitutional description of trading corporation as capable of applying to a corporation – by reference to its trading purpose or alternatively by reference to its trading activity – must each be qualified to exclude that which is insubstantial. There is no bright line delineating a body corporate that is a trading corporation and one that is not. The characterisation of a body corporate as a trading corporation is a matter of fact and degree.”

[62] It is clear from these authorities that a corporation can be a trading corporation either because of the purposes for which it is established (the purpose test) or the activities it undertakes (the activities test).

[63] The principal purpose of a local council in South Australia (including the City of Burnside) is set out legislatively in section 6 of the Local Government Act 1999 (SA) as follows:

[64] It is evident from section 6 and the overall scheme of the Local Government Act 1999 (SA) that a council is established for purposes associated with the provision of local representative decision-making and local community services. Trading in goods or services is not a purpose for which council exists. The purpose test is not met. The City of Burnside is not established for purposes that would enable it to be characterised, at law, as a trading corporation.

[65] The activities of the City of Burnside are many and varied. Its activities fall within the statutory framework of the Local Government Act 1999 (SA) and in particular section 7:

“7—Functions of a council

The functions of a council include—

(a)         to plan at the local and regional level for the development and future requirements of its area;

(b)         to provide services and facilities that benefit its area, its ratepayers and residents, and visitors to its area (including general public services or facilities (including electricity, gas and water services, and waste collection, control or disposal services or facilities), health, welfare or community services or facilities, and cultural or recreational services or facilities);

(c)         to provide for the welfare, well-being and interests of individuals and groups within its community;

(d)         to take measures to protect its area from natural and other hazards and to mitigate the effects of such hazards;

(e)         to manage, develop, protect, restore, enhance and conserve the environment in an ecologically sustainable manner, and to improve amenity;

(f)         to provide infrastructure for its community and for development within its area (including infrastructure that helps to protect any part of the local or broader community from any hazard or other event, or that assists in the management of any area);

(g)         to promote its area and to provide an attractive climate and locations for the development of business, commerce, industry and tourism;

(h)         to establish or support organisations or programs that benefit people in its area or local government generally;

           

(i)         to manage and, if appropriate, develop, public areas vested in, or occupied by, the council;

(j)         to manage, improve and develop resources available to the council;

(k)         to undertake other functions and activities conferred by or under an Act.”

[66] Of particular relevance is section 46 of the Local Government Act 1999 (SA):

“46—Commercial activities

(1)         A council may in the performance of its functions and subject to this Act engage in a commercial activity or enterprise (a "commercial project”).

(2)         A council may, in connection with a commercial project—

           

(a)         establish a business;

(b)         participate in a joint venture, trust, partnership or other similar body.”

[67] In order to perform its functions, the Local Government Act 1999 (SA) confers statutory powers as well as duties on a council and its administration. Suffice for present purposes are the following:

•  the promotion of economic development (section 7(g));

•  to develop resources available for its use (section 7(j));

•  ensure sustainability of long term financial performance and position (section 8(k));

•  enter into contracts or arrangements (section 36(1));

•  partner with others and establish subsidiaries (section 36(1) and 42(1));

•  invest cash (section 42);

•  procure goods and services (section 49);

•  act prudentially (section 48);

•  declare rates and charges (Chapter 10); and

•  keep records and be accountable for the expenditure of funds (Chapter 8).

[68] I conclude from these provisions that the City of Burnside is vested with power to undertake activities which have trading characteristics. The question which arises is whether, as a matter of fact, such activities are conducted and if so, to a degree sufficient for the council to be characterised as a “trading corporation”.

[69] Irrespective of whether they are profit making, trading and commercial activities generally raise revenue. A convenient way to assess the character of an entity is to examine its sources of revenue. In relation to the City of Burnside, Exhibit E7 (Financial Report for year ending 30 June 2016) is the most pertinent of the material before me.

[70] I also take into account the annual reports and budgets for the City of Burnside for 2015/16 and 2016/17 (E5 and E6) and its long term (10-year) financial plan (E9) in order to ascertain whether the City of Burnside is a trading corporation. I have also had the benefit of oral evidence from Mr Spearman on this material.

[71] The City of Burnside has eight primary categories of income which in the 2016 financial year raised $43,642,000. They were 20:

[72] I do not consider the imposition of rates or statutory charges to be in the nature of revenue from trading activities. They are regulatory activities. On the evidence of Mr Spearman concerning the ‘reimbursements’ category, I find this too is revenue from non-trading activities (such as rebates on insurance and workers compensation premiums). These three categories account for 85.7% of total revenue. I find 85.7% of revenue can be safely said to be from non-trading activities.

[73] Of the remaining 14.3% each category (user charges; grants, subsidies and contributions; investment income; other income and equity gain on council businesses) may include certain components of trading activity.

[74] On the evidence before me, the ‘user charges’ relates to revenue from facilities hire (such as halls and swimming centres), leases, and transport. This is clearly trading, as it is offering an asset for fee in a contestable consumer market. I include the full value of the user charge revenue ($1,647,000) as trading activities.

[75] Equity gains of $766,000 on business activities are a gain in the value of assets held by council whether those assets are or are not able to be traded on an open market or whether the purpose of the activities are trading in nature. Management of the value of business assets involves risk assessment and prudential management for which council is statutorily accountable. I am satisfied they are trading activities. However the financial report (E7) reveals that council also incurred $132,000 in equivalent losses. The incurring of both gains and losses is itself evidence of a trading character. In order to assess the contribution of this trading activity to the overall character of council, I will deduct the loss from the gain, resulting in $634,000 being taken into account.

[76] Investing cash is capable of being a trading activity 21. I consider this so irrespective of whether the cash is primarily received from a non-trading activity (such as rate revenue). The investment is an incident of trade and commerce. It involves risk management and prudential judgment. I regard it as a trading activity.

[77] Grants and subsidies for activities are capable of being trading activities depending on whether they involve the purchase of services by government through a competitive tendering process (trading in character) or grants for the performance of activities which may be linked to outcomes or benchmarks but which do which not involve fees for services (non-trading activities). 22 On the material before me $3.55 million of the $3.6 million in grants were made available from Commonwealth and State governments and involve grants for specified purposes (such as roads, memorials, disability access).23 These are not in the nature of fee for service grants. On the facts before me I do not regard this as revenue from trading activities.

[78] The ‘Other Income’ category primarily includes rebates received, income from sale of surplus equipment and income from recyclable water. 24 I consider income from sale of surplus equipment and income from recyclable water to be income from trading activities as they involve sale of goods in a market. However, on the evidence of Mr Spearman, the income from rebates received is payment of monies due and not income from trading activities. I consider only $162,000 (0.4% of total revenue) of the $510,000 in this category to be income from trading activities.

[79] Accordingly, I find that direct revenue from trading activities by the City of Burnside in the 2016 year was $1,647,000 (user charges) plus $634,000 (equity gains on business activities) plus $28,000 (investment income) plus $162,000 (sale of surplus equipment and income from recyclable water) totalling $2,471,000. This is 5.66% of total revenue.

[80] The City of Burnside also operates certain activities in conjunction with other local councils. As noted earlier in this decision, the Local Government Act 1999 (SA) empowers a council to partner with other councils or persons, and to establish subsidiaries or regional subsidiaries (with other councils) for certain purposes.

[81] The City of Burnside has an interest in four joint ventures with other councils. These joint ventures have been established as regional subsidiaries in which the City of Burnside has a defined interest. These are:

•  Eastern Waste Management Authority (17% interest; with five other councils);

•  Highbury Landfill Authority (50% interest; with two other councils);

•  ERA Water (33% interest; with two other councils); and

•  Eastern Health Authority (25% interest; with four other councils). 25

[82] Each regional subsidiary is established under section 43 of the Local Government Act 1999 (SA) and provides services to the local community. Those services include certain services funded by general rates and also certain fee for service activities. Each regional subsidiary is a separate legal entity, with separate governance (which includes City of Burnside representatives) and separate administration.

[83] I do not consider the activities of the regional subsidiaries to be activities of the City of Burnside. They are activities of separate legal entities. However, to the extent that the City of Burnside has a lawful interest in the regional subsidiaries I consider that the activities of the regional subsidiaries are activities that indirectly inform the character of the council. Having regard to the references to these activities in E5, E6 and E7, if they were not done in partnership with other councils it is likely some or all would, to a greater or lesser degree, be done by the City of Burnside in its own right (for example, waste collection). They are evidence of the character of activities undertaken on behalf of the City of Burnside (and partnering councils). I have in evidence before me the annual reports of each of the subsidiaries for the 2016 year (E8). Relevant for present purposes, this evidence indicates as follows:

•  Eastern Health Authority income was comprised of $1,609,306 (72.7%) from council contributions and $605,470 (27.3%) from other sources. A large portion of those other sources were user charges and investment income, with a portion from grants 26;

East Waste Management income of $12,991,079 was predominately council funded user charges ($12,573,410 or 96.8%). It also engages in competitive tendering (for example, for disposal of recyclables) and rebates councils from income received on a tonnage basis 27;

Highbury Landfill Authority had only modest trading revenue ($1,619) and recorded a deficit of $263,351 28;

ERA Water income was principally grants received for new or upgraded water assets ($2,099,361 of $2,269,130 or 92.5%) 29;

The City of Burnside received an overall net income gain of $634,000 in 2016 from the four regional subsidiaries after taking into account gains and losses 30;

[84] The conclusion I draw from the evidence of the activities of the regional subsidiaries is that the City of Burnside has a significant interest in each. Each, to varying degrees, undertakes business activities which are indirectly and to a proportionate degree overseen by and attributable to the City of Burnside. However, the net contribution of these activities in financial terms is only 1.5% of total council revenue. Whilst that 1.5% of revenue is not entirely from trading activities by the regional subsidiaries, on the material before me it is substantially so. Accordingly, I will include that 1.5% of revenue as revenue from trading activities in my overall assessment of the activities of the City of Burnside. When added to direct trading revenues ($2,471,000) this additional amount results in $3,105,000 in revenue from trading activities or 7.1% of total income for the 2016 year.

[85] I have examined the activities of the City of Burnside as revealed in these materials and the sources of revenue received by council both directly and indirectly through its regional subsidiaries. I have categorised these activities as either trading or non-trading. I have assessed the totality of the value of its trading activities in order to determine whether the council is a “trading corporation”.

[86] There is no doubt that trading activities are not a predominant activity of the City of Burnside; but that need not be so for it to be classed as a trading corporation. Further, the City of Burnside does not return a profit of any significance from its trading activities but again that need not be so for it to be a trading corporation. The test is whether the trading activities are substantial rather than peripheral.

[87] Ultimately this is a question of fact and degree. There is no bright line that delineates the character of the City of Burnside, other than the bright line that safely characterises it as a local government authority providing services overwhelmingly funded by mandated rate revenue. I take into account that revenues from trading activities undertaken in its own name are only 5.66% of total revenue and that when activities of regional subsidiaries are included it is, at best, 7.1% of total revenue. I also take into account the overall character of the entity. As a local government body its activities primarily concern community services and local representation rather than trade in goods or services. In that sense, its trading activities are incidental and supplementary to its purposes as well as its operations. Although that is not decisive, it places the revenue received from trading activities into a context which is non-commercial. In terms of quantum the contribution to revenue from those activities are small. I also take into account Exhibit E9 and the evidence of Mr Spearman on E9 that the level of contribution to revenues in 2016 from the categories I have identified as trading activities is not dissimilar to 2015 and is not projected to materially increase over the ten years of the Long Term Financial Plan. Hence the current percentages are not an aberration.

[88] Having regard to these considerations, I conclude that the trading activities of the City of Burnside, at least as currently undertaken, are peripheral. They are neither substantial nor sufficiently significant for the local council to be reasonably characterised as a trading corporation within the meaning of section 51 (xx) of the Australian Constitution.

[89] As the City of Burnside is not a trading corporation and neither a financial corporation nor a foreign corporation it is not a “constitutional corporation” within the meaning of the FW Act. Accordingly, neither Mr Cooper nor Mr Bagster were at work in a “constitutionally-covered business” for the purposes of the anti-bullying provisions of the FW Act. As this is a mandatory prerequisite for invoking the Commission’s jurisdiction to make orders to prevent bullying, both the applications by Mr Cooper and Bagster fail for want of jurisdiction.

[90] In these circumstances I do not need to determine the other jurisdictional challenges made to Mr Bagster’s application concerning his status as a “worker” as defined.

[91] While this decision may be of some interest to the broader local government sector in South Australia, I emphasise that it is a decision based on the facts presented to me concerning the activities of the City of Burnside at the current point in time. Under the Local Government Act 1999 (SA) councils in metropolitan Adelaide and regional South Australia are provided scope to undertake activities of various types. Whether other councils are trading corporations will also be a question of fact and degree based on their particular circumstances and activities, as is evident from past decisions of the Commission 31. I have made no assessment either in-principle or in practice on those matters, and no party has suggested that I should do so.

[92] Orders giving effect to this decision dismissing the application by Mr Cooper and the application by Mr Bagster are to be issued in conjunction with the publication of this decision.

 

DEPUTY PRESIDENT

Appearances:

Mr L. Bagster, on his own behalf

Mr A. M. Spearman, for the City of Burnside

Hearing details:

2017.

Adelaide.

4 October.

Attachment A

STATEMENT AND DIRECTIONS

fwc_logo

Fair Work Act 2009 s.789FC - Application for an order to stop bullying

Mr Martin Cooper
(AB2017/453)

Mr Lance Bagster
(AB2017/463)

DEPUTY PRESIDENT ANDERSON

ADELAIDE, 20 SEPTEMBER 2017

Applications for an FWC order to stop bullying

Statement

[1] On 17 August 2017 an application (AB2017/453) for an order to stop bullying was made to the Fair Work Commission (the Commission) under section 789FC of the Fair Work Act 2009 (FW Act) by Martin Cooper. He alleges bullying conduct by Lance Bagster. His application states that he is employed or engaged by the City of Burnside.

[2] On 23 August 2017 an application (AB2017/463) for an order to stop bullying was made to the Commission under section 789FC of the Fair Work Act 2009 (FW Act) by Lance Bagster. He alleges bullying conduct by Paul Deb, Martin Cooper and David Parkin. His application states that he is employed or engaged by the City of Burnside.

[3] The respondents to each application raise jurisdictional issues.

[4] I conducted a directions hearing of Mr Cooper’s application by telephone on 5 September. I issued Directions to the parties on 5 September.

[5] I conducted an in-person conference of the parties to both Mr Cooper’s application and Mr Bagster’s application on 11 September. The conference was adjourned to a further in-person conference of the parties on 19 September at 3.15pm (later relisted for 4.00pm).

[6] By email to my chambers dated 12 September the representative of the employer made, inter alia, two requests: firstly, that I make interim orders against Mr Bagster; and secondly, that the jurisdictional issues be resolved prior to further hearings.

[7] By email to my chambers dated 17 September a support person for Mr Bagster (Mr Jacobsen) made, inter alia, two requests: firstly, that I determine the jurisdictional issues before any further discussion or mediation; and secondly, that I strike out the employer’s application (for interim orders).


[8] At 3.37pm on 19 September, twenty three minutes before the scheduled resumption of the conference of the parties, I was advised by telephone call and email from solicitors for the City of Burnside (Kelledy Jones Lawyers) that on 19 September an Interim Intervention Order had been issued by the Magistrates Court of South Australia on the application of Person A, Person C, Person D and a Person E (the “protected persons”) against Person B. Copies of those Orders accompanied the email. Solicitors for the City of Burnside asserted that Person B would be in breach of the terms of the Order if he were to have contact with the protected persons and that any contact direct or indirect from each of the persons with Person B may constitute an aid and abet in breach of the Order. The Employer requested that the Commission’s proceedings scheduled for 4.00pm that day be “administratively adjourned until such time as the jurisdictional issue had been determined”.

[9] Attached is a copy of the email of 3.37pm 19 September from solicitors for the employer to my chambers. Also attached is a copy of the Interim Intervention Order made by the Magistrates Court of South Australia dated 19 September against Person B on the application of Person A. Orders on the application of Person C, Person D, and Person E are in the same terms.

[10] In light of this development, at 3.50pm on 19 September I instructed my Associate to inform the parties that the 4.00pm scheduled conference had been cancelled and that I would shortly issue directions for the further management of these matters.

[11] I am cognisant of the terms of the Interim Intervention Order dated 19 September and do not wish to place the parties in a position of directly or indirectly breaching its terms, whilst it is in force.

[12] At the same time, I am cognisant of the Commission’s responsibilities under section 789FE of the FW Act to deal with applications promptly and according to law. This includes providing procedural fairness in hearing and determining matters before it.

[13] Having regard to these considerations, I issue the following directions. Compliance with these directions is mandatory. A breach of these directions may disadvantage a party in the conduct of these matters.

Directions

[14] As advised to the parties at the conference on 11 September, I direct, until otherwise ordered, that Mr Cooper’s application (AB2017/453) and Mr Bagster’s application (AB2017/463) be dealt with concurrently.

[15] That applications AB2017/453 (Cooper) and AB2017/463 (Bagster) for orders to stop bullying made under section 789FC of the FW Act be listed for concurrent hearing and determination by Deputy President Anderson at 10.00am on Wednesday 4 October 2017 to consider the following jurisdictional issues only:

1. Whether in matters AB2017/453 (Cooper) and AB2017/463 (Bagster) the applicants are working in a “constitutionally covered business” for the purposes of section 789FD(1) of the FW Act, and in particular whether the business or undertaking of the City of Burnside is a “constitutional corporation” for the purposes of section 789FD(3) of the FW Act;

2. Whether in matters AB2017/453 (Cooper) and AB2017/463 (Bagster) the applicants are “workers” within the meaning of the Work Health and Safety Act 2011 (Clth) and for the purposes of section 789FC(2) of the FW Act;

3. Whether in matter AB2017/463 (Bagster) the applicant is a “worker” for the purposes of section 789FC(2) of the FW Act and in particular whether he is a member of the Defence Force.

A Notice of Listing is attached.

[16] To assist the parties, a copy of sections 789FC and 789FD of the Fair Work Act 2009, and of section 7 of the Work Health and Safety Act 2011, are attached for reference;

[17] That by 12 noon Tuesday 26 September 2017 the City of Burnside must file in the Commission and serve on the parties a statement of evidence in the form of a statutory declaration or such other evidence or materials concerning the trading, business or commercial activities (if any) of the Council for its most recent financial reporting period and currently. I direct that the Council Officer attesting the statutory declaration not be a protected person within the terms of the Interim Intervention Order. I further direct that the Officer be available for cross examination on their statutory declaration at all times during the hearing on 4 October;

[18] That, if they wish to adduce evidence in the matters, by 12 noon Tuesday 26 September 2017 Martin Cooper and Lance Bagster file in the Commission any statement of evidence (in the form of a statutory declaration) or other materials on which they intend to rely in support of their respective claims that they are a “worker” for the purposes of section 789FC(2) of the FW Act;

[19] That by 12 noon Friday 29 September 2017 Martin Cooper and Lance Bagster and the respondent parties (City of Burnside, Paul Deb and David Parkin) file in the Commission an outline of submissions or any material in reply on the jurisdictional issues, should they wish to be heard on those questions.

[20] That, until further order and in variation to the Commission’s regular practice, material filed in the Commission in these proceedings in accordance with these Directions or otherwise by a person named in the Interim Intervention Order not be served by that person on another person named in the Interim Intervention Order who is a party to these proceedings. The Commission will, so far as possible, forward that material on those other persons who are parties to these proceedings.

[21] That, until further order and in variation to the Commission’s regular practice, any written communication concerning these proceedings made with the Commission by a person named in the Interim Intervention Order not be copied by that person to another person named in the Interim Intervention Order who is a party to these proceedings. The Commission will, so far as possible, forward that material to those other persons who are parties to these proceedings if the material is relevant to these proceedings.

[22] That the hearing and determination of the jurisdictional issue be conducted as a hearing by telephone. It will be a hearing on the record and a transcript will be made available to the parties once the hearing is concluded. However, I direct that the parties not appear simultaneously at the hearing. I will conduct the hearing in the following manner:

22.1. Between 10.00am and 11.00am on 4 October I will take evidence and hear submissions from Mr Cooper, Mr Deb and Mr Parkin on the jurisdictional issues, should they wish to be heard on those matters. They will have the opportunity to cross examine the relevant officer of the City of Burnside on its evidence;

22.2. Between 11.00am and 12 noon on 4 October I will take evidence and hear submissions from Mr Bagster on the jurisdictional issues, should he wish to be heard on those matters. He will have the opportunity to cross examine the relevant officer of the City of Burnside on its evidence (provided the officer is not a protected person);

22.3. At 12 noon on 4 October I will hear submissions from the City of Burnside on the jurisdictional issues, should it wish to be heard on those matters.

[23] That, by close of business Wednesday 11 October 2017 Martin Cooper and Lance Bagster and the respondent parties (City of Burnside, Paul Deb and David Parkin) file in the Commission submissions in reply on the jurisdictional issues, should they wish to do so.

[24] I will deliver a decision on the jurisdictional matter at an appropriate time following 11 October. The parties will be informed.

[25] The parties are reminded of the following Directions issued in matter AB2017/453 (Cooper), which continue to apply and which I now direct also apply to matter AB2017/463 (Bagster):

[26] I continue to allow the parties to be accompanied at the hearing of these matters by a support person or persons of their choice, subject to my discretion to make orders concerning the efficient conduct of proceedings.

[27] That Person A, Person B, Persons F, inform the Commission as soon as practicable of any variation in the terms or status of the Interim Intervention Order of 19 September or of any such other Orders that may be relevant to these proceedings.

[28] Liberty to apply is granted to all parties should further or amended directions be sought, consistent with the efficient conduct of proceedings.

DEPUTY PRESIDENT

Printed by authority of the Commonwealth Government Printer

 1   Directions, Deputy President Anderson 5 September 2017

 2   Email KelledyJones Lawyers to Chambers Deputy President Anderson 19 September 2017 3.37pm

 3   An initial request for a confidentiality order concerning this statutory declaration was subsequently withdrawn by Mr Bagster

 4   Section 789FF(1)(b)(ii)) FW Act

 5   Section 789FF(1) FW Act

 6   Atkinson v Killarney Properties Pty Ltd and Another [2015] FWCFB 6503

 7   Bowker and Others v DP World Melbourne Limited T/A DP World and Others [2014] FWCFB 9227 at [51]

 8   Sections 96, 97 and 98 Local Government Act 1999 (SA)

 9   Section 103 Local Government Act 1999 (SA)

 10   Section 6 Local Government Act 1999 (SA)

 11   Chapter 8 Parts 1, 2 and 3 Local Government Act 1999 (SA)

 12   Section 35 Local Government Act 1999 (SA)

 13   State of New South Wales and Others v Commonwealth of Australia (WorkChoices Case) [2006] HCA 52, 14 November 2006

 14   State Superannuation Board of Victoria v Trade Practices Commission (1982) 150 CLR 282

 15   (2008) 252 ALR 136 at [68]

 16   (2010) 182 FCR 483 at [48]

 17   For example, Re McInnes [2014] FWC 1395 at [26] per Commissioner Hampton

 18   [2016] FWCFB 6615

 19   (2015) 256 CLR 171

 20   E7 page 42 of annual report (page 4 of financial statement)

 21   Lim v Trade & Investment Queensland [2016] FWCFB 6615 at [47] – [50]

 22   Re McInnes [2014] FWC 1395 at [44] – [46]

 23   E7 Note 2 page 53 of annual report (page 15 of financial statement)

 24   E7 Note 2 page 42 of annual report (page 14 of financial statement)

 25   E7 Note 19 page 76 of annual report (page 38 of financial statement)

 26   E8 page 129 of annual report (page 41 of Eastern Health Authority Report)

 27   E8 page 181 of annual report (page 29 of East Waste Authority Report)

 28   E8 page 213 of annual report (page 2 of Highbury Landfill Authority Report)

 29   E8 pages 225 and 246 of annual report (pages 16 and 25 of ERA Water Report)

 30   E7 Note 19 page 76 of annual report (page 38 of financial statement)

 31   For example, John David Burrows v Shire of Esperance [1998] AIRC 1512 (a trading corporation); Australian Workers Union v Etheridge Shire Council [2008] FCA 1268 (not a trading corporation); Shelley Millen v Brisbane City Council (not a trading corporation); Heather Boyd and Ross Theedom v Shire of Yalgoo [2016] FWC 2190 (not a trading corporation)

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