Boyd v Shire of Yalgoo [2016] FWC 2190 (8 April 2016) [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 : raised concerns in relation to travel allowance expenditure with Council; sought advice from the WA Department of Local Government and Communities and legal advice in relation to the correct application of travel allowances and the process for approval of travel by the Council (Dr Theedom only); took steps to recover travel allowance overpayments; and instructed their legal representative to write to Mr Brenzi on 25 March 2015 raising their concerns in relation to the alleged adverse action taken by Council in response to them raising the travel allowance issue. 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: “Division 2—Application of this Part 337 Application of this Part This Part applies only to the extent provided by this Division. Note: Sections 30G and 30R extend the operation of this Part in a referring State. 338 Action to which this Part applies (1) This Part applies to the following action: (a) action taken by a constitutionally-covered entity; (b) action that affects, is capable of affecting or is taken with intent to affect the activities, functions, relationships or business of a constitutionally-covered entity; (c) action that consists of advising, encouraging or inciting, or action taken with intent to coerce, a constitutionally-covered entity: (i) to take, or not take, particular action in relation to another person; or (ii) to threaten to take, or not take, particular action in relation to another person; (d) action taken in a Territory or a Commonwealth place; (e) action taken by: (i) a trade and commerce employer; or (ii) a Territory employer; that affects, is capable of affecting or is taken with intent to affect an employee of the employer; (f) action taken by an employee of: (i) a trade and commerce employer; or (ii) a Territory employer; that affects, is capable of affecting or is taken with intent to affect the employee’s employer. (2) Each of the following is a constitutionally-covered entity: (a) a constitutional corporation; (b) the Commonwealth; (c) a Commonwealth authority; (d) a body corporate incorporated in a Territory; (e) an organisation. (3) A trade and commerce employer is a national system employer within the meaning of paragraph 14(d). (4) A Territory employer is a national system employer within the meaning of paragraph 14(f). 339 Additional effect of this Part In addition to the effect provided by section 338, this Part also has the effect it would have if any one or more of the following applied: (a) a reference to an employer in one or more provisions of this Part were a reference to a national system employer; (b) a reference to an employee in one or more provisions of this Part were a reference to a national system employee; (c) a reference to an industrial association in one or more provisions of this Part were a reference to an organisation, or another association of employees or employers, a purpose of which is the protection and promotion of the interests of national system employees or national system employers in matters concerning employment; (d) a reference to an officer of an industrial association in one or more provisions of this Part were a reference to an officer of an organisation; (e) a reference to a person, another person or a third person in one or more provisions of this Part were a reference to a constitutionally-covered entity; (f) a reference to a workplace law in one or more provisions of this Part were a reference to a workplace law of the Commonwealth; (g) a reference to a workplace instrument in one or more provisions of this Part were a reference to a workplace instrument made under, or recognised by, a law of the Commonwealth; (h) a reference to an industrial body in one or more provisions of this Part were a reference to an industrial body performing functions or exercising powers under a law of the Commonwealth.” [14] Section 14 of the Act defines a national system employer as follows: “ 14 Meaning of national system employer (1) A national system employer is: (a) a constitutional corporation, so far as it employs, or usually employs, an individual; or (b) the Commonwealth, so far as it employs, or usually employs, an individual; or (c) a Commonwealth authority, so far as it employs, or usually employs, an individual; or (d) a person so far as the person, in connection with constitutional trade or commerce, employs, or usually employs, an individual as: (i) a flight crew officer; or (ii) a maritime employee; or (iii) a waterside worker; or (e) a body corporate incorporated in a Territory, so far as the body employs, or usually employs, an individual; or (f) a person who carries on an activity (whether of a commercial, governmental or other nature) in a Territory in Australia, so far as the person employs, or usually employs, an individual in connection with the activity carried on in the Territory. Note 1: In this context, Australia includes the Territory of Christmas Island and the Territory of Cocos (Keeling) Islands (see paragraph 17(a) of the Acts Interpretation Act 1901 ). Note 2: Sections 30D and 30N extend the meaning of national system employer in relation to a referring State.” [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: the majority of the Shire’s income came from rates and grants; the Shire’s financial reports for the financial years ending 30 June 2012, 2013 and 2014 indicated that the Shire’s total income for each of those years was (in rounded figures) $2.041m, $3.630m and $2.328m respectively; income from hire fees charged for the use of camping sites and units at the local caravan park was around $75,000 for 2014/2015, up from around $20,000 per annum in previous years; hire fees charged for the use of public buildings in 2014/2015 totalled $1,898; fees charged for travelling on the community bus totalled $827 in 2014/2015; while the Shire did not privately lease any commercial or residential property, it did provide subsidised housing for staff so as to attract staff given that there are no private properties for rent in Yalgoo; the annual revenue generated from the provision of subsidised housing to staff was estimated to be $18,200, based on seven staff being provided with subsided housing at a rental of $50 per week; and to the best of his knowledge, the Shire did not make any profit from the above income streams. [21] In his supplementary witness statement 2 Mr Brenzi deposed that: the Shire occasionally rented equipment to private contractors who undertook work for the Shire, with income earned from this activity shown as $214.55 in the Shire’s trial balance of 30 June 2015 (the 2015 trial balance); the Shire did not run a concrete manufacturing business, though it did from time to time provide concrete from its batching plant at cost price when approached by organisations who may be undertaking work for the Shire which benefits the community; for instance, the Shire had provided concrete to Mains Roads WA for the construction of a concrete slab for storage purposes at its Yalgoo compound at a cost of $6,028.18, with the amount appearing in the 2015 trial balance; no profit was generated from the sale of concrete; the Shire does not sell water to third parties, though on one occasion the Shire did lease its air compressor to a mining company that needed water for seven to ten days due to problems with its water treatment plant, with the air compressor charged out at a market rate of $900 per week; the sale of scrap metal as shown in the 2015 trial balance totalled $711.63; the Shire had sold one of its properties in the 2014/2015 financial year for $30,000, however the Council incurred a loss of $47,078.64 on the sale of the property given that the property had a book value of $77,000; the loss was reflected in the 2015 trial balance; the Shire has the power under s.6.14 of the LGA to invest funds, with excess money invested in a term deposit account earning interest of $8,936.39 in 2014/2015 and cash held in reserve accounts invested earning interest of $69,091 in 2014/2015; while the caravan park generated revenue of around $75,000 in 2014/2105, expenditure on the caravan park over the same period totalled $148,783.33 (comprised of expenditure of $58,544.52 [not broken down], staff costs of $57,840.27 and redevelopment costs of $32,399.09); once these costs were taken into account, the caravan park incurred a loss of $73,961.31 over the financial year; income from the sale of history books at the caravan park was $350.50 in the 12 months to 30 June 2015; 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 owns land and the diesel and petrol tanks beneath that land which it leases to Geraldton Fuel Pty Ltd to operate a 24 hour per day key card system for the sale of fuel, with the lease generating rental income of $6,000 per annum; the Shire did not pay for any commercial services in kind; while the Shire has engaged Western Brothers to provide earthwork and haulage services, under its contract with Western Brothers the Shire is required to provide fuel, accommodation, food and grader blades to Western Brothers; while the Shire generated revenue of $1,150 from hiring out the Railway Station in 2014/2015, it spent $96,530.14 over the same period maintaining the Railway Station building and grounds; the racecourse, which is adjacent to the Railway Station and is part of that property, is hired to the Yalgoo Jockey Club; the Shire charges a small fee to hire the Railway Station and racecourse and in 2014/2015 spent $5,097.63 on maintaining the racecourse; the Shire did not have any involvement in the organisation of races or deciding when they are held; the Shire charged for one heavy vehicle permits, a CAO7 permit, in 2014/2015, generating $50 in revenue; the Shire had a road usage agreement with MMG Golden Grove Pty Ltd (MMG) under which MMG pays an access fee to use the Yalgoo-Ninghan road to move metals from the Golden Grove Mine to Geraldton; in 2014/2015 MMG paid fees totalling $170,205.70, with the funds placed in a reserve account which is used to cover maintenance and repair costs related to the road with the funds unable to be used for any other purpose; the Shire has a similar agreement with Top Iron Pty Ltd (Top Iron) under which the Shire receives an annual contribution of $40,000 annually, with that amount deposited into a Public Benefit Fund; payments from that Public Benefit Fund must only be made for the benefit of citizens of the Shire and under the agreement cannot be used to meet the Shire’s operational expenses; the Shire receives grants for projects, with a component of grant funding being an administration fee; the Shire is able to renew the vehicle licences of local residents and receives a small commission per transaction from the WA Department of Transport for providing this service; in 2014/2015 the commission received by the Shire totalled $2,324.35; fees for advertising in the Shire produced local newspaper “Bulldust” generated revenue of $288 in 2014/2015; and fees charged by the Shire for public access to photocopying/fax were $491.85 in the 12 months to 30 June 2015. [22] Mr Brenzi reiterated much of the above in his oral evidence. Beyond that, key aspects of Mr Brenzi’s oral evidence were that: the Shire had not sold water to a mining company; not all revenue was reflected in the 2015 trial balance; MMG paid $55,818.18 in community benefit funds under its road use agreement with the Shire; that money was segregated to cover the costs of the Centacare 3 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; • 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: A tribunal should not just take into account the activities of a corporation which produce income to decide whether it should be characterised as a trading corporation as a trading activity may represent a significant part of a corporation’s income but be relatively insignificant in an overall consideration of the corporations activities. The activities of the Shire must be viewed within the paradigm of its general function under s.3.1(1) of the LGA being to “provide for the good government of persons in its district.” The following factors are relevant when considering whether an activity undertaken by a Shire is a trading activity: (i) whether the activity produces a profit or is intended to produce a profit. This is not determinative, but will often be an important relevant factor ( Ravensthorpe at [213], [86] and [100]); (ii) whether the activity involves carrying out a function of government in the interests of the community ( Ravensthorpe at [89] – [90]); (iii) whether the activity is conducted for the benefit of the local community ( Ravensthorpe at [90], [100], [111] & [120]); and (iv) whether the activity is incidental to activities that are not trading activities, such as providing housing to staff or earning interest on funds received as rates ( Ravensthorpe at [239]). Once each alleged trading activity is considered, it is necessary to have regard to whether the activities found to be trading activities are (i) incidental to the activities of the Shire as a whole; and/or (ii) a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation ( Ravensthorpe at [71] & [148]–[149] & [154]–[155]). [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: investment of excess funds, recalling that in 2014/2015 the Shire expected to raise at least $60,000 by way of investment income; maintaining the caravan park and selling books and other items on site, with two Shire employees dedicated to working at the caravan park which generated around $75,000 in revenue; leasing of public buildings to organisations such as Centacare, the WA Department of Health and Geraldton Fuel, adding that the Shire also received non-financial consideration under these arrangements, e.g. significant fuel discounts for itself and contractors engaged by the Shire; hiring out the Yalgoo race course; hiring out the community bus; charging fees for licencing for commercial road users in circumstances where they exceed a predetermined tonnage; commercial agreements including those with MMG, Mt Gibson Mining and Top Iron; constructing real property which could be sold if surplus to requirements; administration/project management; motor vehicle licensing on behalf of the WA Department of Transport; occupational health and safety assessments of proposed buildings, with the Shire charging for these assessments; selling advertising space in its local magazine “Bulldust”; and the provision of photocopying services and sale of miscellaneous items from the Shire’s administration office, including fuel cards and books. [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: renting equipment to third parties; running a concrete manufacturing operation and concrete truck, selling concrete to Telstra when a mobile phone tower was being installed and to other organisations within the district; selling water to third parties, such as mining companies; selling road materials such as cattle grids and aggregate; selling scrap metals to third parties after it had collected abandoned cars, cattle grids and other used items; and selling Shire owned real properties on the open market. [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 Commission 12 , Eric Bell v Shire of Dalwallinu 13 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: the Shire was very much involved in revenue producing activity through the provision of goods and services for revenue and that revenue received by way of grants did not alter that situation; the community benefit funds provided by the three mining companies were not donations but were provided because the companies each had agreements for the use of Shire resources; Dr Theedom’s evidence was that 40 per cent of his time was spent on trading activities; the Commission should not look at each of the Shire’s activities individually but rather look at them together to see whether those trading activities constitute a substantial part of its operations; Mr Brenzi was unable to contradict Ms Boyd’s evidence that the Shire had charged for water and had conceded that not all of the mining company payments were reflected in the 2015 trial balance; and the Shire was of the view that it was substantially engaged in trading activity when it made the Agreement in the federal jurisdiction. 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: “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 at 239; State Superannuation Board at 303-304; Tasmanian Dam case at 156, 240, 293; Quickenden at [49]-[51], [101]; Hardeman at [18]. (2) However, trading must be a substantial and not merely a peripheral activity : Adamson at 208, 234, 239; State Superannuation Board at 303-304; Hughes v Western Australian Cricket Association (Inc) [1986] FCA 357 ; (1986) 19 FCR 10 at 20; Fencott at 622; Tasmanian Dam case at 156, 240, 293; Mid Density at 584; Hardeman at [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 at 139, 159-160; Adamson at 235; Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd [1982] HCA 23 ; (1982) 150 CLR 169 at 184-185, 203; Bevanere Pty Ltd v Lubidineuse [1985] FCA 134 ; (1985) 7 FCR 325 at 330; Quickenden at [101]. (4) The making of a profit is not an essential prerequisite to trade, but it is a usual concomitant: St George County Council at 539, 563, 569; Ku-ring-gai at 140, 167; Adamson at 219; E at 343, 345; Pellow at [28]. (5) The ends which a corporation seeks to serve by trading are irrelevant to its description: St George County Council at 543, 569; Ku-ring-gai at 160; State Superannuation Board at 304-306; E at 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 at 543 (Barwick CJ); Tasmanian Dam case at 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 at 234 (Mason J); State Superannuation Board at 304; Fencott at 589; Quickenden at [52], [101]; Mid Density at 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 at 294-295, 304-305; Fencott at 588-589, 602, 611, 622-624; Hughes at 20; Quickenden at [101]; E at 344; Hardeman at [18]. (8) The commercial nature of an activity is an element in deciding whether the activity is in trade or trading: Adamson at 209, 211; Ku-ring-gai at 139, 142, 160, 167; Bevanere at 330; Hughes at 19-20; E at 343; Fowler ; Hardeman at [26].” (Underling added) [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: “6.14. Power to invest (1) Money held in the municipal fund or the trust fund of a local government that is not, for the time being, required by the local government for any other purpose may be invested as trust funds may be invested under the Trustees Act 1962 Part III. (2A) A local government is to comply with the regulations when investing money referred to in subsection (1). (2) Regulations in relation to investments by local governments may — (a) make provision in respect of the investment of money referred to in subsection (1); and (b) [ deleted] (c) prescribe circumstances in which a local government is required to invest money held by it; and (d) provide for the application of investment earnings; and (e) generally provide for the management of those investments.” (Underlining added) [45] Further, the Local Government (Financial Management) Regulations 1996 provide as follows: “19C. Investment of money, restrictions on (Act s. 6.14(2)(a)) (1) In this regulation — authorised institution means — (a) an authorised deposit-taking institution as defined in the Banking Act 1959 (Commonwealth) section 5 ; or (b) the Western Australian Treasury Corporation established by the Western Australian Treasury Corporation Act 1986 ; foreign currency means a currency except the currency of Australia. (2) When investing money under section 6.14(1), a local government may not do any of the following — (a) deposit with an institution except an authorised institution; (b) deposit for a fixed term of more than 12 months; (c) invest in bonds that are not guaranteed by the Commonwealth Government, or a State or Territory government; (d) invest in bonds with a term to maturity of more than 3 years; (e) invest in a foreign currency.” [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: “Equally, it is not a financial corporation. The only financial activities which, on the evidence, it engages, is maintain interest-bearing deposits of funds prior to their utilisation for purposes of the shire council.” 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: “16.5 Fuel rebate (a) The Lessee agrees that the Lessor is entitled to a fuel rebate in respect of all fuel purchased from the Lessee by the Lessor and its officers . (b) The terms in the method of the rebate are to be as agreed between the Lessee and the Lessor from time to time but shall not fall below 6 cents per litre.” (Underlining added) [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: “…The Shire has been able to achieve the following major initiatives: … Commencement of construction of a new staff house in Weekes Street, plus the securing of funding for an additional staff house in the adjoining block.” [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: “At the Community level, there have been a number of notable events: … Yalgoo Cup – Run by the Yalgoo Jockey Club, but strongly supported by the Shire. This is perhaps the iconic event for Yalgoo and draws a significant crowd to celebrate horse racing in the Shire.” [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: “4.3 Public Benefit Agreement (a) The Shire agrees to establish the Public Benefit Fund. (b) From the Commencement Date, Top Iron agrees to pay the Shire $40,000 per annum into the Public Benefit Fund in the following manner: (i) Quarterly payments of $10,000 each paid in arrears; (ii) payments will be paid within 14 Business Days of receipt of a Tax Invoice from the Shire; (iii) the initial payment will be made three months from the Commencement Date; and (iv) payments will cease on the termination of this Agreement. (c) Payments out of the Public Benefit Fund will be subject to the majority approval of a committee comprising: (i) The Shire President or in his or her absence, the Deputy President; (ii) a resident nominated by the Shire and living within the jurisdiction of the Shire; and (iii) a person nominated by Top Iron. (d) Payments out of the Public Benefit Fund must only be made for the public benefit of the citizens of the Shire . (e) Payments out of the Public Benefit Fund will not be used for the operational expenses of the Shire of Yalgoo . (f) Top Iron agrees to grade Mt Gibson Road between the entrance to Mt Gibson Pastoral Station and Top Iron’s once per annum on the basis that the estimated cost of grading that part of Mt Gibson Road does not exceed $10,000 per annum. If the estimated cost exceeds $10,000 per annum, Top Iron agrees to contribute an additional $10,000 per annum to the Public Benefit Fund in lieu of grading Mt Gibson Road.” (Underlining added) [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: “E. The Road User [MMG] has an existing MOU in place with the Shire covering Road Maintenance and Community Development. The Road Maintenance component of this MOU shall be replaced by this Agreement. The Community Benefit component will remain.” [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: “3.1. General function (1) The general function of a local government is to provide for the good government of persons in its district . (2) The scope of the general function of a local government is to be construed in the context of its other functions under this Act or any other written law and any constraints imposed by this Act or any other written law on the performance of its functions. (3) A liberal approach is to be taken to the construction of the scope of the general function of a local government .” [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: “I have set out in detail the evidence in relation to what is said to be the trading activities of the council. [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. 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] WASCA 254 ; (2008) 252 ALR 136 6 Print Q8680 7 AE889036 8 Exhibit C1 9 Exhibit C2 10 MA000112 11 [1979] HCA 6 ; (1979) 143 CLR 190 12 [1982] HCA 72 ; (1982) 150 CLR 282 13 (2008) 176 IR 226 14 [2008] FCA 1268 ; (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] FCA 1268 ; (2008) 175 IR 383 at paragraphs 150-151 Printed by authority of the Commonwealth Government Printer <Price code C, PR578811>