WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION CITATION : 2016 WAIRC 00029 CORAM :Chief Commissioner A R Beech HEARD : Thursday, 24 September 2015, Monday, 23 November 2015 DELIVERED : friday, 15 January 2016 FILE NO. : B 83 OF 2015 BETWEEN : Paul Raymond West Applicant AND Central Wheatbelt Division of General Practice (Inc). Respondent CatchWords : Industrial law - claim for benefit under contract of employment – whether respondent is a trading corporation – grant funded activities - whether receiving income from Medicare for providing medical service is trading Legislation : Industrial Relations Act 1979 s 29AA(4), (4)(a), (4)(b), (5) Commonwealth Constitution s 51(xx) Result : Application dismissed Representation: Applicant : Mr G Sturman, as agent Respondent : Mr S Kemp, of counsel Case(s) referred to in reasons: Hoffman v Perth Mobile GP Services Ltd [2013] WAIRC 00816; (2013) 93 WAIG 1488 Aboriginal Legal Service of Western Australia (Inc) v Lawrence [No 2] [2008] WASCA 254; (2008) 89 WAIG 243; (2008) 37 WAR 450 Termination, Change and Redundancy General Order (WA) [2005] WAIRC 17152; (2005) 85 WAIG 1667 Bankstown Handicapped Children's Centre Association Inc v Hillman [2010] FCAFC 11; (2010) 192 IR 212 Re Ku-ring-gai Co-operative Building Society (No 12) Ltd [1978] FCA 50; (1978) 36 FLR 134 === REASONS FOR DECISION === ¶1 Mr West claims that he is entitled under his contract of employment to payment for two months’ sabbatical leave and ownership of a motor vehicle. He had been employed as the Chief Executive Officer of the Central Wheatbelt Division of General Practice Inc (the respondent) between June 2005 and October 2014. ¶2 The respondent opposes the claim and in addition states the Commission may not determine his claim because his annual salary exceeded the cap of $149,400 prescribed in s 29AA(4)(b) of the Industrial Relations Act 1979 (the Act). Section 29AA(4) states: (4) The Commission must not determine a claim that an employee has not been allowed by his or her employer a benefit to which the employee is entitled under a contract of employment if — (a) an industrial instrument does not apply to the employment of the employee; and (b) the employee’s contract of employment provides for a salary exceeding the prescribed amount. ¶3 The respondent also states that an ‘industrial instrument’ as referred to in s 29AA(4)(a) and (5) of the Act did not apply to Mr West’s employment because the respondent is a trading corporation and therefore a national system employer; to the extent that the Termination, Change and Redundancy General Order (WA) [2005] WAIRC 17152; (2005) 85 WAIG 1667 might have applied to the respondent, it was terminated by an order of the FWC on 29 July 2011. ¶4 In reply Mr West does not deny that his salary exceeded the cap but he says that the respondent is not a trading corporation and therefore the Termination, Change and Redundancy General Order (WA) did apply which means that the Commission may hear and determine his claim. ¶5 The only issue for determination at this stage is whether or not the respondent is a trading corporation. Trading Corporation - The Law ¶6 The Full Bench of this Commission in Hoffman v Perth Mobile GP Services Ltd [2013] WAIRC 00816; (2013) 93 WAIG 1488 (Hoffman) recently considered the principles for determining whether a corporation can be characterised as a trading corporation within the meaning of s 51(xx) of the Commonwealth Constitution. At [31] the Full Bench referred to the summary of those principles by Steytler P in Aboriginal Legal Service of Western Australia (Inc) v Lawrence [No 2] [2008] WASCA 254; (2008) 89 WAIG 243; (2008) 37 WAR 450 (ALS) as follows (references omitted): (1) A corporation may be a trading corporation even though trading is not its predominant activity. (2) However, trading must be a substantial and not merely a peripheral activity. (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. (4) The making of a profit is not an essential prerequisite to trade, but it is a usual concomitant. (5) The ends which a corporation seeks to serve by trading are irrelevant to its description. Consequently, the fact that the trading activities are conducted in the public interest or for a public purpose will not necessarily exclude the categorisation of those activities as 'trade'. (6) Whether the trading activities of an incorporated body are sufficient to justify its categorisation as a 'trading corporation' is a question of fact and degree. (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. (8) The commercial nature of an activity is an element in deciding whether the activity is in trade or trading. ¶7 I apply those principles, as they have been considered and applied in other matters, in this case. The time at which the question whether the respondent was a trading corporation falls to be considered was raised in the hearing. The submission on behalf of Mr West that the time at which the question falls to be considered is the date of termination of his employment on 1 October 2014 is not supported by any authority. The Full Court of the Federal Court of Australia has considered this issue and stated that the time at which the question whether the respondent was a trading corporation falls to be considered is at the time the jurisdiction of the court or tribunal is invoked, that is, at the time the application is made: Bankstown Handicapped Children's Centre Association Inc v Hillman [2010] FCAFC 11 at [47]. In this case Mr West’s application was made on 2 June 2015. I adopt the reasoning of the Federal Court and therefore the question whether the respondent was a trading corporation falls to be considered as at 2 June 2015. The Evidence ¶8 The respondent is incorporated. This provides its corporate status for the purposes of this matter. ¶9 The respondent’s financial reports for the years ended 30 June 2014 and 30 June 2015 were tendered in evidence. The report for the financial year ending 30 June 2015 describes its principal activities as follows: The principal activities of the association during the financial year were to provide social facilities to members of the association. To provide support for General Practitioners & Primary Health Care providers in the Wheatbelt region of Western Australia. To continue to operate and manage a number of General Practices throughout the Wheatbelt region. ¶10 It shows (at p 13) that the respondent received revenue of $8,367,545. This comprised the following: Grants – Recurrent and Capital $3,473,371 Medicare and Surgery Services $2,684,091 PIP/SIP Payments/Hospital Payments $666,840 Other revenue from operating activities $1,449,018 Interest income (on financial assets not at fair value from profit and loss) $16,786 Rental Income $77,439 ¶11 The respondent operated at a deficit for the 2015 financial year of $469,593. At page 6 of the financial report, under the heading Accounting Policies, it is stated that: … the organisation is aware that a large percentage of their income is derived from various sources of grant funding. It is acknowledged that any significant reduction in funding would impact heavily on the operations of the organisation. ¶12 The financial report contains separate income and expenditure statements for its different activities under the following headings: Consolidated General Practices Wheatbelt General Practice – Aboriginal Health South West WA Medicare Local Funding - Access to Allied Psychological Services (ATAPS) - National Peri-natal Depression initiative - Suicide Prevention - Child Mental Health Program - ATAPS Aboriginal & Torres Strait Islander - Indigenous Health Program Officer - Rural Primary Health Services - Aboriginal Outreach Worker - Care Co-ordination Support Services - CCS - Supplementary Services - RCSS Program - RPHS MHSRRA ¶13 Evidence was given by Dr Randhawa who stated the respondent is a primary care service provider aiming to provide health services across the Wheatbelt. It provides general practitioner services, allied health services and mental health services. A certain component is delivered on a fee for service, and other services are the product of a funding arrangement with the Primary Health Network and WA Country Health Service (WACHS). ¶14 The respondent operates in five principal locations: in Northam it has two clinics – the Wheatbelt Health Centre which is a general practice clinic and also an Aboriginal Health Clinic which operates within WACHS; in Toodyay it has a general practice clinic; and in Narrogin it has an Aboriginal health clinic and a mental health service. The Northam general practice clinic accounts for 50 – 60% of its operations in terms of volume and the Toodyay clinic accounts for about another 20%. ¶15 His evidence is that the vast majority of the payments received is through Medicare, and clients are not charged a fee. The fees obtained from Medicare are generally inadequate to cover the cost of the services provided. Private patients pay the full private rate or come under the Department of Veterans Affairs (DVA) or workers compensation arrangements. $2.684m was received in total from either Medicare, DVA, workers compensation or from private fees. Over 50% of its income is in terms of a fee for service arrangement. ¶16 He described the respondent as a combination of not-for-profit organisations. Excess revenue is put back into the organisation so it might be able to purchase the services of an additional clinician. It competes with other medical practices to provide its services particularly in Northam but not in Toodyay where it is the sole clinic. The respondent’s written submissions contain a number of statements about the respondent’s activities which were not challenged by Mr West and I accept them. I refer to them later where necessary. Does the Respondent Trade? ¶17 The respondent’s activities can be conveniently examined by reference to its financial statement for the year ended 30 June 2015. Grant Funding ¶18 The respondent received $3,473,371 by way of grant funding. The respondent submits that this is not income from trading. I agree with the submission. The evidence is that this funding is to run various programs, including its Aboriginal Health clinic in Narrogin. Dr Randhawa’s evidence is this is funded slightly differently from its other operations because it is a funded program. It receives block funding to employ staff to fulfil its services there. Using Narrogin Aboriginal Health as an example, its clientele are Aboriginal, and the clinic is not open to the public. The same funding arrangement applies to its Narrogin Mental Health service. These grant-funded services are provided free of charge, in clinics not open the public. The respondent does not compete with others in Narrogin. The separate income and expenditure statements for these activities (ie not including Consolidated General Practices) show that the respondent receives no income other than from the grant. ¶19 Evidence about some of the respondent’s activities also was given by Mr West. The evidence of Mr West that some grant funding had been for building the Wheatbelt Health Centre was not challenged and I accept it. ¶20 The evidence shows that these grant-funded activities lack the necessary ingredient of providing services for reward. In my view, the respondent’s activities which are funded by grants are not trading activities. Grant income is 41.5% of its total income and, on the evidence of Dr Randhawa, these activities account for less than 50% of its total activities. Medicare and Surgery Services ¶21 The respondent received $2,684,091 under this heading. The evidence suggests the income from Medicare is different from the income received from Surgery Services and I consider they should be examined separately. - Medicare ¶22 The financial report at p 26 shows $2,109,330 was received from Medicare. The evidence is that the respondent claims from Medicare the prescribed rebate for each consultation with a patient. The evidence of Mr West is that a doctor has a contract with Medicare, that some of the payments made by Medicare are fee for service, and the doctor assigns the payment to the respondent. I accept this description. The evidence is that the vast majority, perhaps 80%, of the respondent’s clients are not charged a fee and the respondent charges the service to the federal government through Medicare by bulk billing. The evidence of Mr West is that in his time there, the respondent bulk-billed children under 16, pension and concession card holders, and patients returning for pathology results. He agreed with the estimate that 80% of the respondent’s General Practice patients are bulk billed. ¶23 In its submissions the respondent states that this is income derived from what are properly described as trading activities because it is a fee for service. ¶24 However, it is not clear that receiving Medicare payments necessarily shows a trading activity. In Hoffman the Full Bench had regard to the character of the services the Perth Mobile GP Services provides, and the nature and character of the payments it receives from Medicare for those services. The Full Bench found at [38] that Perth Mobile GP Services provides medical services to homeless and marginalised people without charge to the patient. A payment will be sought from Medicare only if a patient has a Medicare number but this is not a condition of treatment. In the case of the Perth Mobile GP Services, it is simply the offer of a gratuitous medical service. Having regard to the character of the services the Perth Mobile GP Services provides and the nature and character of the payments from Medicare, the conclusion was reached at [40] that the transactions lacked a commercial character. ¶25 Significantly for this matter, however, the Full Bench stated at [45] that – ‘… the activity of obtaining Medicare benefits for the part payment of the provision of some medical services may be different to the activity of a commercial general medical practice who may bulk-bill some patients or utilise the assignment of HICAP payments from health care funds. Such practices are usually administered on a fee for profit basis and often require patients to pay a fee that represents the gap between the amount of a Medicare benefit payment or HICAP payment and the fee charged by the general medical practice. In such circumstances, these transactions could clearly be regarded as 'trade' or 'trading'. However, providing facilities to access funds for part or whole payment of services is not a matter that can be viewed in isolation from the entire activities of a corporation. When considering whether a corporation is a trading corporation within the meaning of s 51(xx) of the Commonwealth Constitution, the totality of the activities of the corporation must be considered. Other factors may also be of importance, such as whether a medical service competes with other services for clients. ¶26 The respondent submits that the decision in Hoffman is wrongly decided insofar as it suggests that the recovery of payment for medical services provided to a patient directly from Medicare by way of bulk billing is not trading. I do not accept the submission because in my view it misunderstands the conclusion reached by the Full Bench. The Full Bench did not consider this issue in isolation but pointed out that its conclusion was based on it being one consideration in the context of the operations of the Perth Mobile GP Services as a whole. As the extract in [45] above shows, the Full Bench recognised that in some circumstances the recovery of payment directly from Medicare by way of bulk billing for medical services provided to a patient could be regarded as trading. ¶27 In this case, the evidence shows that more than 58% of the respondent's total income comes from doctors seeing clients and charging a fee to either Medicare or private health insurance or DVA for the service provided. Private patients pay the full private rate charged by the respondent which is the gap between the amount of a Medicare payment and the fee charged. In contrast to the operation of the Perth Mobile GP Services, there is no evidence that the respondent provides a gratuitous medical service in its General Practice or provides it to persons who do not have a Medicare card. The evidence that the vast majority, perhaps 80%, of the respondent’s clients is not charged a fee does not show that the respondent provides a gratuitous medical service in its General Practice because it appears to be provided on the basis it will receive payment for the service via Medicare. ¶28 This in my view is what the Full Bench in Hoffman was describing when it referred to the activity of a commercial general medical practice which may bulk-bill some patients on a fee for profit basis and which require patients to pay a fee that represents the gap between the amount of a Medicare benefit payment and the fee charged by the practice. Further, in its General Practice the respondent competes with others to provide the service in Northam, and would compete with others in Toodyay except that it is the sole general medical practice in that town. Furthermore, the respondent does engage in other activities described below which are not disputed to be trading activities. ¶29 As set out at the commencement of these reasons, the principles for determining whether a corporation can be characterised as a trading corporation include that the word ‘trading’ is not to be given a narrow construction; it includes business activities carried on with a view to earning revenue and includes trade in services. Considered in the context of what is set out below, it is open to conclude that the respondent’s income of $2,109,330 it received from Medicare is for the activity of providing a general medical service which it rendered in each case to patients and that it shows a trading activity. Its General Practice activities have a commercial character, in marked contrast to its grant-funded activities which do not. - Surgery Services ¶30 The financial report at p 26 shows $529,371 was received for Surgery Services. It is not entirely clear from the evidence whether Medicare and Surgery Services both involve bulk billing however the evidence of Mr West is that Surgery Services are payments paid directly to the respondent for medical services provided. On that evidence, I find that this is income from a trading activity. PIP/SIP Payments and Hospital Payments ¶31 The respondent received $666,840 under this heading. On p 26 of the financial report, this sum is also listed as including ED, which I understand to refer to Emergency Department. ¶32 Dr Randhawa’s evidence is that PIP and SIP payments are Medicare payments derived according to a particular formula based on the number of clients seen for any particular type of service, for example pap smears. The payments come in quarterly. On the evidence of Mr West, PIP and SIP are Medicare payments for achieving best practice standards in patient care in a particular field, for example diabetes or cervical screening. The common element in their evidence is that these are payments received from Medicare for a type of service, or for achieving a particular standard for a type of service. In my view these payments are income received for a service provided by the respondent, which means that it results from a trading activity. ¶33 Hospital payments are received when the respondent’s GPs do their work in the hospital for which WACHS pays the respondent a fee. ED service fees, on Mr West’s evidence, are fees accepted by the respondent for the services of its doctors which it passes 100% on to the doctors, except that for rent and vehicles; in that regard, he says the respondent acts merely as a clearing house and the fees should not be counted as income from a trading activity. The respondent however submits that the fact that the respondent pays to employees money it has received does not change the nature of the activity undertaken to receive that money. ¶34 As to ED service fees, the evidence is clear that they are payments received by the respondent. The fact that the respondent then pays all, except that part paid for rent and vehicles, of those payments it receives to its doctors who provided the service to the hospital does not alter that fact. ED service fees may, for that reason, not contribute to the respondent’s net income after costs and expenses, including salaries and staff payments, are deducted, but this does not alter the fact that the respondent provides its doctors to the hospital to provide ED services, for which it receives the payment. The doctors do not receive the payment; their employer receives it even though, after receiving it, the employer then passes it on to them. The employer providing its doctors for that service for payment is the essence of a trading activity, and I so find. Other Revenue from Operating Activities ¶35 Under this heading, the respondent received $1,449,018. On the evidence, this includes services such as physiotherapy services rendered on a fee for service basis, the provision of forensic and other reports from health practitioners where the practitioner drafts a letter for a purpose (a court request was given as an example) for which a fee is paid. It also includes fees for drug and alcohol testing and running vaccination clinics. It includes payment for allied health services such as a dietician or psychologist for which Medicare pays the respondent. Physiotherapy services are a combination of payment from Medicare or from private fees. On Mr West’s evidence fees for services are fees charged to augment some grants; it is the respondent taking the opportunity to make ‘a little bit of income’ from what it provides. I find that these are trading activities. ¶36 A locum subsidy is a grant administered through Rural Health West. Allied Health Rooms is a grant. The respondent receives rent for its rooms which it lets out to staff of funded programs. It is not submitted that these are trading activities. Is the Respondent a Trading Corporation? ¶37 It is the activities in which the respondent is involved at the time of assessment which will determine whether it is, or is not, a trading corporation. The judgment is to be made after an overview of all of its activities. The respondent may be a trading corporation even though trading is not its predominant activity, however, trading must be a substantial and not merely a peripheral activity. It is a matter of fact and degree, and there is no bright line delineating what is or is not a trading corporation (Bankstown at [52]). ¶38 On the evidence, slightly less than half of its activities involve the gratuitous provision of medical services to indigenous Australians pursuant to grant funding. In that regard, it is similar to the provision of free medical services to homeless and marginalised people without charge to the patient (Hoffman) and the provision by the Aboriginal Legal Service of the overwhelming majority of its services free of charge, for altruistic purposes, although some contributions may be made for some services. ¶39 However, slightly more than half of its activities, those providing general health services in the clinics in Northam and Toodyay, are of quite a different character. In these activities, the respondent is providing, for reward, a medical service and this denotes the activity of trading: Re Ku-ring-gai Co-operative Building Society (No 12) Ltd [1978] FCA 50 per Bowen CJ at 8; (1978) 36 FLR 134 at 139. On the evidence, the respondent operates at a loss; however, ordinarily the provision of large scale medical and allied services for reward is trading and the fact that it does not make a profit is not determinative of its character. A corporation can still be a trading corporation even if it is not making a profit. ¶40 Its purpose is not only to provide social facilities to its members, which in my view describes its grant-funded activities, but also to provide support for general practitioners and primary health care providers and to operate and manage a number of general practices in the Wheatbelt. Its grant-funded activities themselves do not have a commercial nature but this is to be contrasted with the slightly more than half of its activities providing general health services in the clinics in Northam and Toodyay which can be said to be of a commercial nature. These are described as follows in the written submissions of the respondent which are not challenged by Mr West: The respondent receives grant funding to provide various health programmes in the Wheatbelt. In addition to these programmes, the respondent operates the Wheatbelt Health Centre (WHC) which gives residents access to integrated multidisciplinary health care. The WHC is a hub for delivery of regional primary care services. In the 2014 / 2015 financial year, WHC delivered 16,686 GP appointments and attracted 124 new clients every month. The respondent also operates the Toodyay clinic, which provides GP, nursing, physiotherapy, psychology, counselling, dietetics, and pathology collection services. In the 2014 /2015 financial year, WHC delivered 13,364 appointments with an average of 37 new clients per month. Physiotherapy provided over 4,000 treatment consultations across Northam and Toodyay and attracted 341 new clients during the year. ¶41 In these general health care activities the respondent’s activities are not of an altruistic nature. Unlike the circumstances considered in ALS, it is not said that the respondent is a public benevolent institution enjoying tax concessions. Also, it competes with other medical practices in Northam, and would do so in Toodyay if it was not the sole medical practice there. The clinics offering these services are separate from, and not incidental to, its grant-funded activities. It charges fees for some of these services. Its general health care activities are carried on with a view to earning revenue. The amount of revenue it receives is a function of the number of patients it can attract and the service it provides to them. These activities do have a commercial character. They are substantial, constituting slightly more than half of the respondent’s activities, and not peripheral. I consider that they are trading activities. ¶42 So far as its income is concerned, the income resulting from Medicare and Surgery Services, PIP/SIP and Hospital Payments and Other Revenue from Operating Activities result from trading activities and is significant to the respondent. That income is not insubstantial. ¶43 Whether the trading activities of an incorporated body are sufficient to justify its categorisation as a ‘trading corporation’ is a question of fact and degree. After an overview of all of its activities, I find that the respondent is a trading corporation. Conclusion ¶44 As the respondent is a trading corporation, an industrial instrument did not apply to Mr West’s employment. His contract of employment provided for a salary which exceeded the prescribed amount in s 29AA(4)(b) of the Act. The Commission therefore may not hear and determine his claim. An order will now issue dismissing his application.