Constitutional corporations 23/9/98

Analysis

Constitutional corporations 23/9/98

A constitutional corporation is one that is involved in trading in a substantial or not insubstantial way.

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A constitutional corporation is one that is involved in trading in a substantial or not insubstantial way.

In a recent unfair dismissal application, the Australian Industrial Relations Commission was faced with a preliminary issue of jurisdiction relating to whether or not the employer (the City of Armadale) was a constitutional corporation for the purposes of the federal Workplace Relations Act 1996(Todd v City of Armadale; Print Q2525).

The Commission referred to the High Court decision in The Queen v Judges of the Federal Court of Australia: Ex parte WA National Football League (1979) 143 CLR 190(Adamsons case). In the High Court decision it was stated that for a corporation to be a trading corporation (constitutional corporation) then "trading is a substantial and not merely a peripheral activity". Later in the High Court decision, the Court also noted that the corporation could be involved in trading as long as the trading "…is not insubstantial".

In relation to the status of the City of Armadale as a constitutional corporation, the Commission considered the City’s annual budget for 1997-98 in which there were:

"... a number of activities which could fall under the definition of trading activity although many of these would not individually be considered ‘substantial’ or ‘not insubstantial’. However in terms of both as a proportion of the total budget and as a raw figure the domestic rubbish removal would fall under the definitions applied. I am satisfied that this alone is sufficient to decide the matter.

"Moreover other combined trading activity results in substantial turnover for the City and I consider these could also fall under the definition.

"It is, of course, evident that the majority of the activities and funding arrangements within the City continues to be in response to the statutory requirements and is therefore non-trading activity. As time passes however it is becoming increasingly difficult as well as inappropriate to differentiate some of those because of modern business applications, including the corporatisation of activity, competitive tendering and contracting out as well as the integration of functions."

The Commission concluded, on the basis of the material presented, that the City of Armadale engages in a sufficient level of trading activity for it to fall within the coverage of the Workplace Relations Act 1996.

 

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