'Constitutional corporation' considered but not settled

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'Constitutional corporation' considered but not settled

A Full Bench of the NSW Industrial Relations Commission considered the question of what determines whether a business/organisation is a 'constitutional corporation', and so covered by WorkChoices.

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A Full Bench of the NSW Industrial Relations Commission considered the question of what determines whether a business/organisation is a 'constitutional corporation', and so covered by WorkChoices.

The matter was settled by the parties before the Full Bench gave its ruling. However, the Full Bench did formally dismiss the employer's motion - indicating that it did not meet the criteria of a constitutional corporation.

Background

The employee-applicant, Kirrilly Garvey, commenced proceedings on 22 September 2006 seeking relief from victimisation and unfair dismissal arising from the termination of her employment with the employer-respondent, The Institute of General Practice Education Incorporated, on 1 September 2006. The employer objected on jurisdictional grounds - arguing it was a constitutional corporation and so covered by WorkChoices - excluding the jurisdiction of the NSW IRC.

The employer was incorporated under the Associations Incorporation Act 1984 on 20 June 1994, when it was then known as South West Sydney Institute for General Practice Education Incorporated (IGPE).

IGPE submits that in 2005 and 2006 it engaged in trading activity by way of teaching and received income in the sum of $3,804.90 in 2005 and $760.98 in 2006.

The employee argued that the amount relied upon by the employer-respondent of $760.98 in the 2006 financial year was extremely minor, considering it was only 0.029% of the respondent's total income of $2,564,345.82.

Not trading corporation

The Full Bench found that the employer here did not meet criteria of a trading corporation:

' … we consider that the respondent cannot properly be characterised as a trading corporation on the basis of its single trading activity. It is sufficient to reach this conclusion by comparing the proportion of revenue arising from its sole trading activity to the respondent’s total revenue.

'Based on this comparison, it cannot be said that such proportion is substantial or even significant. In the context of the total revenue of the respondent, it constitutes a very small percentage amount. It is also a small amount in itself (and so is not akin to the situation in Australian Red Cross). On this basis, the respondent is not a trading corporation.'

Key principles

The Full Bench attempted to pull together relevant principles to resolve the question of what constitutes a constitutional corporation:

'Having reviewed the authorities identified by the High Court in NSW v Commonwealth (2006) 231 ALR 1, the authorities helpfully identified by the parties and other relevant case law, we consider that the key principles relevant to the question as to whether a corporation can properly be characterised as a trading corporation on the current state of the law are as follows:

  1. whether a corporation is a trading corporation depends upon the current activities of the corporation ...
  2. a corporation that carries on trading activities can be found to be a trading corporation even if it was not originally established to trade ...
  3. the focus is not on the purpose of the corporation, although the objects of the corporation will not be completely irrelevant ...
  4. the test as to whether the trading activities of a corporation mean that it is a trading corporation has been stated in terms of whether the trading activities are: "substantial" or "not insubstantial" and "a sufficiently significant proportion of its overall activities" ...
  5. a trading corporation (or a financial corporation) may exist even though its trading activities (or financial activities) do not form the predominant part of the overall activities of the corporation ...
  6. a trading corporation (or a financial corporation) may exist notwithstanding that its trading activities are not motivated by the hope of private gain but to enable other activities to be performed ...
  7. "trading activities" generally connote the activities of a commercial nature involving, in essence, the exchange of goods or services for reward ...
  8. whether the trading activities of a corporation are sufficient to warrant it being characterised as a "trading corporation" is a question of fact and degree ... '

This case settled

The Full Bench concluded:

'We note the respondent's advice that the parties have entered an agreement to settle this matter. That is a matter for the parties but we take the view that there is a significant public interest in the decision in these proceedings being published. We have decided, therefore, to deliver our decision on the jurisdictional question as previously scheduled before granting leave to discontinue the proceedings.

'We decline to grant leave to withdraw the notice of motion. For the reasons we have given, there is no basis to make the orders sought by the respondent in its notice of motion … '

Garvey v Institute of General Practice Education Incorporated [2007] NSWIRComm 159 - FB - Wright J President; Walton J Vice-President; Boland J - 28/

Related

Constitutional corporations and WorkChoices - the facts

 

 

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