Hillman v Bankstown Handicapped Children's Centre Association Incorporated

INTERVENOR Attorney General of New South Wales and Minister for Industrial Relations

INTERVENOR Unions New South Wales

CORAM: Boland J President; Walton J Vice-President; Staff J

CATCHWORDS: Constitutional law - Unfair contract - Notice of motion - Threshold jurisdictional challenge - s 16(1)(d) Workplace Relations Act - Constitutional corporation - Trading corporation - Whether first respondent engaged in trading activities - Not a trading corporation - Motion dismissed

Associations Incorporation Act 1984 Charitable Fundraising Act 1991 Children and Young Persons (Care and Protection) Act 1998 Commonwealth Constitution LEGISLATION CITED: Disability Services Act 1993 Higher Education Funding Act 1988 (Cth) Industrial Relations Act 1996 Judiciary Act 1903 (Cth) Local Government Act 1919 Workplace Relations Act 1996 (Cth)

Aboriginal Legal Service v Lawrence (2007) 166 IR 248 E v Australian Red Cross Society (1991) 27 FCR 310 Garvey v Institute of General Practice Education Incorporated (2007) 165 IR 62 CASES CITED: Ku-ring-gai Co-operative Building Society (No 12) Ltd, Re (1978) 36 FLR 134 Mark Fowler v Syd-West Q2463 [1998] IRCommA 904 Quickenden v O'Connor (2001) 109 FCR 243 R v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190 R v Trade Practice Tribunal and others; Ex Parte St. George County Council (1973) 130 CLR 533

HEARING DATES: 3 March, 4 April and 12 May 2008

APPLICANT (RESPONDENT ON NOTICE OF MOTION) Mr M Gibian of counsel Solicitors: Mr S M Penning, Turner Freeman

RESPONDENT (APPLICANT ON NOTICE OF MOTION) Mr P M Kite SC and Mr G M Boyce of counsel Solicitors: Mr G Duff, Employers First LEGAL REPRESENTATIVES: INTERVENOR (Attorney General of New South Wales and Minister for Industrial Relations) Mr I Taylor of counsel and Ms J C McDonald of counsel Solicitors: Mr I V Knight, Crown Solicitor

INTERVENOR (Unions New South Wales) Mr A M Slevin of counsel Solicitors: Mr P J Pasfield, Slater and Gordon

CORAM: BOLAND J, President WALTON J, Vice-President STAFF J

Jonathan Hillman v Bankstown Handicapped Children's Centre Association Incorporated

Application under s 106 of the Industrial Relations Act 1996

1 This matter concerns a jurisdictional challenge to an application by Jonathan Hillman brought under s 106 of the Industrial Relations Act 1996. 2 Mr Hillman commenced the action by summons on 22 November 2006. On 18 June 2007, conciliation proceedings were held before Marks J. Those proceedings were unsuccessful. 3 In a notice of motion filed on 20 July 2007, the first respondent, Bankstown Handicapped Children's Centre Association Incorporated ("BHCC") and the second respondent, Cheryl Moore, the Centre's Chief Executive Officer, (the "respondents") (applicants on the notice of motion) sought orders that the summons be set aside or, in the alternative, that a declaration be made that the Court had no jurisdiction. 4 The jurisdictional challenge was based on the contention that, as the respondent was a constitutional corporation, s 16(1) of the Workplace Relations Act 1996 (Cth) ("WR Act") operated to remove the Commission's jurisdiction in respect of the respondent. During the hearing, it was accepted by the parties that, if the respondent was able to satisfy the Commission that it was a constitutional corporation for the purposes of s 51(xx) of the Commonwealth Constitution and s 4 of the Workplace Relations Act, the Commission would not have power to hear the applicant's application by operation of s 16(1).

5 On 9 August 2007, the Attorney General and Unions NSW intervened under s 78A of the Judiciary Act 1903 (Cth) and s 167 of the Industrial Relations Act, respectively. The Minister for Industrial Relations also intervened pursuant to s 167(1) of the Act. 6 The respondent's jurisdictional challenge was referred to the Full Bench and heard on 3 March 2008, 4 April 2008 and 12 May 2008. 7 At the hearing the following evidence by affidavit was relied on:

(a) Cheryl Moore, second respondent and Chief Executive Officer of the first respondent, dated 13 July, 20 July and an affidavit in reply dated 1 February 2007;

(b) Catherine Threlfo, Acting Director, Service Monitoring and Review, New South Wales Department of Community Services, filed 10 December 2007;

(c) Denise King, Manager, Children's Service Funding, New South Wales Department of Community Services, filed 10 December 2007; and

(d) Suzanne Mathieson, Deputy Regional Director, Metro South Region New South Wales Department of Ageing, Disability and Home Care, filed 7 December 2007.

8 It was accepted by the parties that the only issue in dispute was whether the first respondent was a "trading corporation" and that this issue gave rise to two questions: (a) whether, as a matter of fact, the first respondent engaged in trading activities; and

(b) whether, as a matter of law, those trading activities, if any, were such that the first respondent could properly be characterised as a trading corporation. THE RELEVANT AGREED FACTS

9 For the most part, the facts applicable to the resolution of the jurisdictional question were agreed. 10 First there was agreement as to some basic factual considerations as follows: (a) On 11 August 1988, the first respondent incorporated under the Associations Incorporation Act 1984;

(b) The first respondent is an organisation operating in the disability services and childcare sectors which provides accommodation and support services and operates a preschool;

(c) According to its 2005-2006 annual report the first respondent's purpose is to provide high quality, individualised services that make a real difference to the lives, independence and social integration of people with any disability and children and young people regardless of background and also to provide support to their families and carers;

(d) The first respondent has various operational divisions, such as the adult disability accommodation program, the ASPIRE Out-of-Home-Care service, the Occasional Care Centre, the Day Program, Respite Programs and Clinical Support Services;

(e) It provides services to over 250 people, from 0 to 65 years of age, many with a disability;

(f) At 30 June 2006, the first respondent used 20 group homes, of which three were owned by the government and the remainder were rented on the open property market;

(g) In 2006, the first respondent employed 234 full time, part-time and casual employees;

(h) A significant component of the first respondent's staff were agency employees;

(i) The first respondent has an 'Authority to Fundraise for Charitable Purposes' under the Charitable Fundraising Act 1991;

(j) The constitution of the first respondent was adopted in its current form on 15 November 2006. An earlier constitution applied until that date;

(k) The former Constitution's Objects are as follows: Objects: The objects of the Association shall be:

a) To facilitate the provision of services and support for children and young people with special needs - and their families - in the local community;

b) To evaluate community needs in respect of such families and develop appropriate progress to respond to those needs; c) To foster and encourage: i) community participation in the program;

ii) self determination and self-help attitudes in families with handicapped members;

iii) social interaction and inter-family support between families involved in the Centre's programs.

d) To provide an information service to assist families in obtaining appropriate professional services and community support in respect of their special needs;

e) To provide, in the Bankstown Handicapped Children's Centre Incorporated at 80 Restwell St., Bankstown, appropriate facilities and accommodation for such services and programs as are deemed necessary for the pursuance of the preceding objectives;

f) To receive information from and to liaise with Bankstown City Council and ensure that the programs provided at the Bankstown Handicapped Children's Centre Incorporated cater appropriately for the needs of typical-young people in the Bankstown City Council area. ... (l) The current Constitution's Objects are as follows: The objects of the Association shall be:

-To provide high quality, individualised services that make a real difference to the lives, independence and social integration of people with any disability, as well as children, and young people, regardless of background;

-To provide support to families, carers and individuals;

-To provide welfare assistance, aid and support to members of the public;

-To operate, make available, and provide housing and accommodation and to acquire houses, dwellings, buildings, and premises for that purpose;

-To liaise with various government and non-government agencies and facilities;

-To employ such officers, staff and personnel for such tasks and functions and on such terms and conditions as shall be deemed to be appropriate from time to time;

-To operate an office and to provide administrative and managerial services for the benefit of the Association and its members;

-To form or participate in the formation of a body corporate pursuant to the provisions of the Associations Incorporation Act and to comply with the legal obligations and requirements of the Act;

-To operate bank accounts and to arrange for the deposit and withdrawal of monies;

-To attend to the payment of debts, accounts, and expenses and the meeting of liabilities, costs and outgoings of the Association;

-To attend to and carry out the conduct, business affairs, operation and management of the Association;

-To adopt and implement the Rules of the Association and to apply the Rules in relation to the conduct, operation, and management of the Association;

-To understand the needs of the community and provide services which contribute to meeting those needs and which benefit the community and its members;

-To enter into such arrangements, to conduct such businesses and enterprises, to provide such services and to acquire such goods or objects as may be necessary or desirable in a manner consistent with the objectives of the Association;

-To work in close partnership with the community and government, ensuring that resources required to achieve these objects are acquired managed, distributed and used effectively and efficiently;

-To engage in any other activity and to provide any other service to members of the public as may be deemed to be appropriate from time to time and as is consistent with the objects and activities as set out herein. ... (m) Rule 36 of the first respondent's Constitution is in the following terms:

36. Funds - Source a. The funds of the Association are to be derived from entrance fees and annual subscriptions of members, donations, government funding, grants and sponsorships and, subject to any resolution passed by the Association in a general meeting, such other sources as the Committee determines;

b. All money received by the Association must be deposited as soon as practicable and without deduction to the credit of the Association's bank account;

c. The Association, must as soon as practicable after receiving any money, issue an appropriate receipt. (n) In 2005-06 the total income of the first respondent was $9,799,694. In 2006-2007 total income was $10,191,741;

(o) A provider of funds to the first respondent is the Department of Ageing, Disability and Home Care ("DADHC"). DADHC provides services directly to older people, people with disabilities and their carers and provides funds to almost 900 government and non-government organisations and service providers to deliver services on behalf of DADHC. Those services include accommodation through group homes, respite care and other programs that help people with disabilities. We note that under s 10(1) of the Disability Services Act 1993 the Minister may approve the provision of "financial assistance" to a person or eligible organisation providing direct support or designated services to person in a target group. Section 10(2) of the Disability Services Act provides:

(2) Approval for the provision of financial assistance may not be given unless the Minister is satisfied on reasonable grounds that providing the assistance would conform with the objects of this Act and the principles and applications of principles set out in Schedule 1. (p) DADHC funding is provided pursuant to a Funding Agreement. The Funding Agreement describes the terms and conditions under which DADHC provides funding to Service Providers. The Schedule of the Funding Agreement specifies how grant money is allocated. It covers two types of funding, Recurrent Funding and Non-recurrent Funding; (q) The Funding Agreement makes clear that the various types of funding are provided by DADHC in order to fulfil government policy and provide appropriate services to the community. The Funding Agreement indicates: The primary goal of the Department is to create, promote and sustain opportunities and services which allow people with disabilities, older people and their carers to participate in the wider community and to have a better quality of life. (r) The Funding Agreement also provides: (i) a definition of "funding" as all financial assistance provided to the Service Provider by the Department (clause 1.1.1);

(ii) the Service Provider is required to provide the services set out in the schedule (clause 2.1);

(iii) the Service Provider is responsible for compliance with DADHC policies and guidelines (clause 2.2 and 5.1.6);

(iv) funds will be utilised for the specific item for which they are provided unless reallocation is permitted (clause 6.4);

(v) the Service Provider must return to the Department all unexpended funds unless approval is given by the Department (clause 7.1);

(vi) the Department will monitor the performance of the Service Provider and the Service Provider must comply with accountability and reporting requirements (clause 13.3);

(vii) the Minister retains equity in all property acquired wholly or partly using the funding (clause 14.4). (s) Another provider of funds to the first respondent is the Department of Community Services ("DOCS"). DOCS is the leading New South Wales government agency responsible for community services. Some of DOCS' core activities are to: help protect and care for children and young people and support their families; and to provide and fund accommodation and support services for children and young people who need to live away from their families. In order to meet its statutory obligations, DOCS provides funds to external service providers which are predominantly non-government organisations;

(t) The Act governing most of the work done by DOCS is the Children and Young Persons (Care and Protection) Act 1998. The legislation makes detailed provision for the circumstances in which a young person can be placed in care, standards of care, accreditation of services and provides a model for the organisation of out of home care services. 11 Secondly, there was agreement by the parties in the proceedings as to the services provided by the first respondent and to the source of its funds. What follows is a description of the services provided by the first respondent with a description as to the nature of its funding. (a) Activities which resulted in the receipt of monies from DADHC 12 These activities are provided with funding pursuant to a Funding Agreement with DADHC. The elements of these activities are: (i) Accommodation for adults with a disability through the operation of 'group homes': -The first respondent manages Group Homes, where between 4 and 6 people are housed in the community, usually with 24 hour support provided by residential support workers; -In 2005-06 and 2006-07 BHCC was funded by DADHC to provide group home accommodation to adults with a disability on both a long term basis and on an interim basis; -The first respondent received money in order to provide accommodation for adults with a disability in this respect from two sources:

a) Funding from DADHC pursuant to a "Funding Agreement" between the first respondent and DADHC; and b) Fees paid directly by the resident. -DADHC funding is provided to the first respondent for both 'permanent' placements ('recurrent funding') and interim accommodation ('non-recurrent funding'). In both cases such funding is governed by the terms of the Funding Agreement. The Funding Agreement is an agreement between the first respondent and DADHC which runs for a period of up to three years. Funding Agreements applied for 2002-2006 and in 2006-2009. The Funding Agreement describes the terms and conditions under which DADHC provides funding to Service Providers; -The Funding Agreement requires, inter alia :

a) The provision of defined services to the defined 'target group';

b) The provision of the services in compliance with defined output and outcome measures;

c) An acquittals process to be followed and the return of unexpended funds. -Pursuant to the Funding Agreement DADHC exerts considerable control and supervision over the provision of the defined services and there are Non-compliance Notices and Show Cause procedures; -Access to DADHC funded places is determined by DADHC, not the first respondent; -The first respondent also receives a fee from the residents who use its accommodation services. This fee is recorded in some of the financial records of the first respondent, as 'client board and lodgings'. Alternatively, it is recorded as 'fees'; -Where a resident is funded by DADHC, DADHC expects, and assumes when determining the funding to be allocated to a particular service provider, that the resident will be charged no more than 75 percent of the full Commonwealth Disability Support Pension and Rent Assistance, less the Pharmaceutical Allowance, together with some portion of the resident's Mobility Allowance. This is the same amount which DADHC charges residents who are accommodated in DADHC operated facilities. These fees, known as 'residency fees' are paid as a contribution to the costs of rent (if any), food, utilities such as phone, electricity, gas, and water, and motor vehicle running costs, but does not cover the full cost of these items; -According to DADHC on average the operational cost of a Group Home for four to five people with a disability, including staffing costs, is between $400,000 and $500,000 per annum, whereas the amount recouped from the residents is usually between $50,000 - $62,000; -The first respondent received on average about 48.2 percent of its total income from DADHC for the provision of this service, being $4,546,486 in 2005-2006 and $5,054,171 in 2006-2007; while on average about 5.1 percent of its total income was received in 'fees' or 'other income'; (ii) Community support programs for people with disabilities: -According to DADHC records, the first respondent provides or has provided, one community support program, namely a "Behaviour Intervention Service"; -Funding for a "Behaviour Intervention Service" is provided by DADHC to enable the first respondent to deliver behaviour support services to specified clients with challenging behaviour living in the first respondent's group homes in order to ensure that risks posed by the clients' behaviour are minimised. Funding is governed by the Funding Agreement. It is DADHC's expectation that funding provided should cover the costs of this service delivery and, accordingly, that it be provided free of charge to the residents; -In 2005-06 and 2006-07 for providing community support programs the first respondent received, on average, 0.7 percent of its total income from DADHC for the provision of this service. There is no other income recorded in this category. (iii) Community access programs for people with disabilities, including day programs: -The first respondent receives money in order to provide community access programs, namely day programs, a peer support program and a youth program, from two sources: a) Funding from DADHC pursuant to the Funding Agreement between the first respondent and DADHC; and b) Fees paid directly by the attendees. -Access to DADHC funded community access programs may be determined by DADHC or the first respondent, but the first respondent must ensure that the attendee is in the 'target group' as defined in the Funding Agreement and generally the terms of the Funding Agreement must be complied with by the first respondent. DADHC monitors the provision of funded community access programs and ensures that the terms of the Funding Agreement are met; -Day Programs provide people with a disability with meaningful day activities, usually from 9am to 3pm, which promote learning, skill development and support access, participation and integration in their local community; -Day Programs operated by DADHC itself are provided free of charge, however, expenses incurred in running a particular activity may be passed on to the attendee, for example, paints for painting. Any amounts charged are to recoup the costs of the goods or services purchased for the activity. There is no profit component in the amount charged; -So far as DADHC is aware, Day Programs run by non-government organisations such as the first respondent funded by DADHC operate on the same basis, that is, the program is provided to the client free of charge, save for activity fees to cover expenses; -It appears that all of the first respondent's Day Programs are provided at "Edgar Street". The first respondent's Profit and Loss Statements by Class for 2005-06 do not record the receipt of any income other than the funds received from DADHC under the category "Edgar Street"; in 2006-07 an amount of $18,916.30 is recorded under this category as "Other Income". Cheryl Moore's evidence was that this amount represented "fees that a person (private client) [had] paid for services purchased from the first respondent". There was no evidence from the respondents that this was other than a one-off occurrence, and both parties conceded this amount because it was such a small proportion of income it could not be considered a sufficiently significant proportion of overall activities for constitutional purposes; -Funding for "Peer Support" is provided by DADHC to enable the first respondent to provide a Saturday morning program to young people (aged 13-18) who have a disability to help them learn about the community through excursions, activities, and events. The program focuses on supporting young people to integrate into the local community and extend their social networks; -It is DADHC's expectation that funding provided should cover the cost of this service delivery and that the only additional charge to the users of the service is the cost of particular activities, for instance entry fees; -Funding for a "Youth Program" is provided by DADHC to enable the first respondent to provide a Saturday morning program to children (aged 6-12) who have a disability to help them learn about the community through excursions, activities, and events. The program is essentially the same as the "Peer Support" program, but is designed for children; -It is DADHC's expectation that funding provided should cover the cost of this service delivery and that the only additional charge to the users of the service is the cost of particular activities, for instance entry fees; -The first respondent received, on average about 3.8 percent of its total income from DADHC for the provision of community access programs. It received on average 0.1 percent of its total income from 'excursion fees' or 'other income' through the provision of these services; (iv) Respite care for families and carers of people with disabilities: -Respite care involves caring for a person with a disability for a short time, in order to give that person's family or other unpaid carer a break; -The first respondent runs four respite care services: Bankslink, Roselink, Arablink and Vietlink; -The first respondent is paid for the provision of respite care from two sources: a) Funding from DADHC pursuant to the Funding Agreement between the first respondent and DADHC; and b) Fees paid directly by the attendees or their families/carers. -DADHC does not charge children for the provision of respite care. There is, however, no sector wide policy for the charging of respite fees; -Bankslink is a respite care service for children. The service provides either community based respite, where the client attends organised community activities and events, with carer support; or family-based respite, where the client is cared for by a host family in the client's own home or in the host family's home; -Bankslink was originally funded by DOCS, however, in December 2005 responsibility for funding this service was transferred to DADHC. The service is funded completely by DADHC (previously by DOCS), as shown on the 'Profit and Loss by Class Statements' for 2005-06 and 2006-07; -Roselink is an 'in-home' respite care service for adults with a disability who live at home. The service is funded completely by DADHC, as shown on the 'Profit and Loss by Class Statements' for 2005-06 and 2006-07; -Arablink is a respite program very similar to the Bankslink program detailed above. The main focus of this program is the support of people with a disability from Arabic communities, who reside in the Bankstown and Auburn local government areas. The service is funded by DADHC, however, the 'Profit and Loss by Class Statements' record a very small amount of 'Other Income' as having been received in relation to the provision of this service; -Vietlink is a respite program provided to people from the Vietnamese community with disabilities and their families. It does not receive DADHC funding and is run using volunteers. A very small amount of 'Other Income' is recorded in the 'Profit and Loss by Class Statements' as having been received in relation to the provision of this service; -The first respondent received, on average, about 5.4 percent of its total income from DADHC/DOCS for the provision of respite care. It received less than 0.007 percent of its total income by way of 'other income' through the provision of these services. It is not clear if it is, in fact, income, or merely a contribution by those using the service to meeting a cost. (b) Activities which resulted in the receipt of monies from DOCS. (i) out-of-home care for children and young people: -'Out-of-Home Care' ( " OOHC " ) is a term defined in s 135 of the Children and Young Persons (Care and Protection) Act 1998 . In summary, OOHC is any residential care and control of a child or young person in any place other than the usual home, by any person other than a parent or relative for any period over 28 days (or 14 days, if subject of a Court order); -The first respondent provides accommodation for children requiring OOHC under DOCS' direct supervision. DOCS retains all parental responsibility and case management functions for the children and young people placed with the first respondent; -The first respondent is paid for the provision of OOHC by DOCS. A very small amount of 'Fees' and 'Other Income' is recorded in the 'Profit and Loss by Class Statements' as having been received in relation to the provision of this service; -The first respondent is not required to acquit unexpended funds received pursuant to this agreement; -Funding received by the first respondent from DOCS is governed by a 'Header Agreement' which is a pre-contractual statement of the terms and conditions, upon which the first respondent will provide OOHC services to DOCS and upon which DOCS will pay for such services; and by an 'Individual Client Agreement' ("ICA"), being a contract for the provision of the services listed in the ICA to an individual child or young person requiring OOHC. Once an ICA is entered into, the services contracted for are to be provided in accordance with the overarching terms of the Header Agreement; -The Header Agreement contains a service price list, which details the service types that the first respondent will provide for DOCS and its respective fee for doing so. The first respondent determines the actual prices for the services it will provide, however, DOCS requires the Service Price List to be set out according to a certain template, to allow ease of reference by DOCS staff. Clause 6.9 of the Header Agreement provides: "You must not charge or require any payment from the child/young person or a member of their family for the provision of any service provided in the ICA during the term of the ICA or Interim ICA, unless agreed to by DOCS in writing. For example, this may relate to young people over the age of 15 who receive a Centrelink payment." -No fee is charged to the child or young person or their family for the provision of OOHC services; -The Header Agreement does not commit DOCS to obtaining any services from the first respondent. Nor is the first respondent committed to supplying any services to DOCS. However, a Header Agreement must be signed before any agreement can be made about the services to be provided on behalf of DOCS to an individual child or young person; -The decision to use the OOHC services offered by a service provider with a Header Agreement in place is made after a determination of the placement type required, the placements available and by an assessment of the needs and interests of the individual child or young person. Factors affecting the decision include the potential length of the placement, the child's age, any physical and/or intellectual disabilities and the location of the child's family and of any siblings that are or are not in OOHC. The price of the service is not considered a relevant factor when placing a child (a Service Provider's prices for services having been determined at the stage when a Header Agreement is entered into); -In addition to the fee for OOHC services, paid by DOCS pursuant to the Service Price List annexed to the Header Agreement, the first respondent also receives reimbursement from DOCS for contingency items purchased for a child or young person, for example clothes, medical appointments, sporting fees and medications. These amounts are reimbursed at cost price. Pursuant to the terms of the Header Agreement, approval must be sought from DOCS before the expenditure is incurred if the first respondent wants to be assured of reimbursement; -The income the first respondent received in 2005-06 and 2006-07 for providing OOHC services, including amounts received as reimbursement for contingency items (identified as 'support funding' in some of the first respondent's financial documents), was $3,525,343.90 and $3,578,223.52. The first respondent received, on average, about 35.7 percent of its total income from DOCS for the provision of OOHC services. Despite the prohibition on charging for the provision of OOHC services contained in the Header Agreement, in 2005-06 $8 in 'fees' and $50 in 'other income' is recorded in the first respondent's 'Profit and Loss by Class Statements' against the category "OOHC". In 2006-07, $500 in 'fees' is recorded in the first respondent's 'Profit and Loss by Class Statements' against the category "OOHC". These amounts represent, on average, less than 0.003 percent of the first respondent's total income over the two years 2005-2007; (ii) Child care services: -The first respondent operates a child care service called "Bankstown Occasional Care"; -The first respondent receives money in order to provide occasional child care services from two sources: a) Funding from DOCS, pursuant to a 'Service Agreement' between the first respondent and DOCS; and b) Fees paid directly by parents. -The first respondent also receives free accommodation for a child care centre, supplied by the Bankstown City Council; -Funding from DOCS is provided to subsidise the cost of child care services. DOCS' funding is provided to the first respondent on the basis that it is a not-for-profit organisation. DOCS does not provide funding to private for-profit child care providers; -Funding from DOCS is governed by the terms of a Service Agreement. The Service Agreement requires, inter alia : a) The provision of defined services in accordance with a "Service Specification"; b) Rigorous financial reporting; and c) the return of unexpended funds. -Pursuant to the Service Agreement, DOCS exerts considerable control and supervision over the provision of the defined services, through extensive performance monitoring and review procedures, including visiting the premises of the funded project, accessing the service provider's records, conducting audits and collecting information to assess and improve performance; -While DOCS has no control over the fees the first respondent charges parents for the provision of occasional child care, the funding provided by DOCS is conditional upon the first respondent providing the number and type of child care places listed in the Service Agreement, for the aggregate amount of time specified. Each year, the first respondent is required to submit a report to DOCS reporting on, inter alia , the average number of children who attended the centre each day and their ages; the fees the first respondent charged per hour and the total fees they charged per year; and the number of children who attended by the income levels of their parents for whom fees were reduced; -In 2005-06 and 2006-07 the first respondent received, on average about 0.3 percent of its total income from DOCS for the provision of child care. It received on average about 0.6 percent of its total income by way of 'child care fees' including 'excursion fees' associated with child care. AN OVERVIEW OF FUNDING OR REVENUE 13 The table below, which is taken from the Minister's submission, provides a comprehensive breakdown of the first respondent's income. We consider that it accurately depicts the positions of the parties as to the income of the first respondent. The columns headed "DADHC/DOCS" show the amount of money BHCC received, for the service listed, according to the records of those Departments. The columns headed "BHCC" show the amount of money BHCC received from either DADHC or DOCS for the service listed according to BHCC's records, specifically BHCC's Profit and Loss Statements by Class. The total income shown on the table is taken from BHCC's Profit and Loss Statements. In 2005-06 total income was $9,799,694. In 2006-2007 total income was $10,191,741.

14 The table presents the different income figures provided by the Minister and respondent.

15 The column DADHC/DOCS shows the amount of money BHCC received, for the service listed according to the records of those departments.

16 To reconcile the income disparities between the parties, the table sets out two sets of income and two sets of percentages of total income, per year, per activity. 17 It is worth noting that the income disparities between the parties represent only a negligible percentage difference for the purposes of resolving the constitutional question, and both parties accepted the table as an adequate summary of the first respondent's activities for the purposes of resolving the constitutional question.

18 Based on the table, the following relevant facts are established by averaging the Minister's and respondent's income figures for the years 2005-06 and 2006-07. These percentages are expressed earlier in the judgment. (i) Accommodation for adults with a disability through the operation of group homes, comprised of the first respondent's income approximately (from DADHC) 48.2, (from fees and other income) 5.1. (ii) Community support programs for people with disabilities, comprised of the first respondent's income, approximately (from DADHC) 0.7. (iii) Community access programs for people with disabilities, including day programs, comprised of the first respondent's income, approximately, (from DADHC) 3.8, (from fees) 0.1.

(iv) Respite care for families and carers of people with disabilities comprised of the first respondent's income approximately (from DADHC/DOCS) 5.4, (from other income) 0.007.

(v) Out-of-home care for children and young people, (income from DOCS), comprised of the first respondent's income, approximately 35.7.

(vi) Child care services, comprised of the first respondent's income approximately (from DOCS) 0.3, (from fees) 0.6. Overview of facts 19 In accordance with its objects, the first respondent provides welfare in the form of accommodation and support services for the benefit of the disabled and young people. In this respect, it may be described as a public welfare corporation whose character and attributes bear many similarities to the blood transfusion activities of the Red Cross in the decision in E v Australian Red Cross Society (1991) 27 FCR 310 at 343.

20 In order to discharge those functions, the first respondent received funds from a variety of sources. Two types of monies received by the first respondent for its activities may be immediately put aside. Those sources are Commonwealth pension contributions from adult residents of group homes and child care fees paid by parents. The sum of these monies comprise approximately 5.5 percent of first respondent's income. It is not contended by either party that these fees, even if they did render the related activities trading activities, would constitute a substantial proportion of overall activities for the purposes of categorising a trading corporation under s 51 (xx) of the Constitution in the sense considered by the Full Bench in Garvey v Institute of General Practice Education Incorporated (2007) 165 IR 62 as follows at [30(d)]: (d) 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": see Adamson at 208 per Barwick CJ; · "not insubstantial": see Adamson at 239 per Murphy J; and · "a sufficiently significant proportion of its overall activities": see Adamson at 233 Mason J and at 237 per Jacobs J.

21 The majority of the monies received by the first respondent in connection with its activities are, in fact, provided in accordance with contractual arrangements with two New South Wales government departments, DADHC and DOCS. The monies are provided on a non-acquitted and an acquitted basis. To clarify, acquitted funds consist of monies that, if they are not expended on an activity, must be returned to the government department. Non-acquitted income is not subject to those requirements and becomes the property of the respondent once it is received, albeit that it is required to be allocated to a specific end. The first respondent performs different activities in response to acquitted and non-acquitted funds, which we will briefly describe below. The funds are for the year 2006-2007.

22 Acquitted funds are provided from DADHC for accommodation for adults with a disability through the operation of 'group homes', (this income includes monies received from DADHC as recurrent income in advance ($4,497,293.25) and non-recurrent income in arrears ($803,031)) as well as community support programs for people with disabilities and community access programs for people with disabilities, which include day programs and respite care for families and carers of people with disabilities. The funding consists of $134,370 for Bankslink, $81,596 for Arablink, $244,654 for Roselink, $54,657 for Peer Support and $93,007 for Youth Group.

23 These monies are received pursuant to the DADHC funding agreement, and are funded on a progressive basis. Under the terms of this funding agreement, a service provider is required to, amongst other things: provide the agreed program or service, return to DADHC any unexpended funds (see Clause 7 of funding agreement), comply with DADHC's monitoring, evaluation, reporting and record keeping requirements (see Clauses 13.3, 13.4 and 13.7 of funding agreement); and comply with various policies and procedures set out by DADHC.

24 In respect of the accommodation and support services purchased by DADHC from the first respondent, the first respondent provides DADHC with an 'Accommodation and Support Plan & Budget Proposal' which outlines the costs of providing the service. This proposal, if approved, then links back into the funding agreement and the services and monies provided become subject to it. 25 Acquitted funds are also provided from DOCS for child care services (the income includes $33,835 for the first respondent's preschool).

26 This activity is funded pursuant to a service agreement with DOCS and is an acquitted activity because DOCS requires the funds be returned to the extent they are not expended. Under the terms of the 'service agreement' the first respondent is required to, amongst other things: provide the services in Schedule A1 to the service agreement; return to DOCS any unexpended funds (see Clause 7.5 of Service Agreement); and comply with DOCS' monitoring, financial reporting and record keeping requirements (see Clauses 5-7 of the Service Agreement).

27 Non-acquitted funds are provided from DOCS for out-of-home care for children and young people. The received income is $3,571,125.35.

28 This activity sees monies provided in accordance with a header agreement. Under the terms of the 'header agreement', where DOCS and the first respondent agree for services to be provided to a specific client, only those services set out in the 'Service Price List' to the header agreement are to be provided by the first respondent pursuant to a individual client agreement ('ICA') (see Clauses 1.1, 1.2, 2.1 and 2.2 of header agreement). Although a documented ICA is not always entered into, the first respondent is required to provide DOCS with a tax invoice for the services it renders under the header agreement (see Clause 6.5 of header agreement). The first respondent is not required to return to DOCS any unexpended funds. LEGISLATION 29 By virtue of being incorporated under the Associations Incorporation Act, the first respondent is subject to the provisions of that Act which relevantly include sections 4, 7 and 66: 4 Association trading or securing pecuniary gain

For the purposes of this Act, an association shall not be deemed to trade or secure pecuniary gain for its members or to be formed or carried on for the object of trading or securing pecuniary gain for its members by reason only that:

(a) the association itself makes a pecuniary gain, unless that gain or any part of it is divided among or received by the members of the association or any of them; (b) the association buys or sells or deals in or provides goods or services where those transactions are ancillary to the principal object of the association and, where the transactions are with the public, the transactions: (i) are not substantial in number or value in relation to the other activities of the association, or (ii) consist of admission fees to displays, exhibitions, contests, sporting fixtures or other occasions organised for the promotion of the objects of the association,

(c) the association is established for the protection of a trade, business, industry or calling in which the members of the association are engaged or interested, and the association itself does not engage or take part in, or in any part or branch of, any such trade, business, industry or calling;

(d) members of the association derive pecuniary gain through enjoyment of facilities or services provided by the association for social, recreational, educational or other like purposes; (e) any member of the association derives pecuniary gain from the association by way of bona fide payment of remuneration; (f) any member of the association derives from it pecuniary gain to which the member would be entitled if the member were not a member of the association; (g) members of the association compete for trophies or prizes in contests directly related to the objects of the association; or

(h) the association: (i) engages in trade which is, or (ii) secures for its members pecuniary gain which is, of a class prescribed for the purposes of this section.

... 7 Eligibility for incorporation (1) Subject to this Act, an association formed or carried on for any lawful object and consisting of not less than 5 members is eligible to be incorporated under this Act; (2) Notwithstanding subsection (1), an association is not eligible to be incorporated under this Act if the association: (a) is carried on for the object of trading or securing pecuniary gain for its members; (b) has a capital divided into shares or stock held by members of the association; (c) holds property in which the members of the association have a disposable interest, whether directly or in the form of shares or stock in the capital of the association, or otherwise; (d) is an industrial organisation within the meaning of the Industrial Relations Act 1996 that is a State organisation incorporated under that Act; (e) is registered as a co-operative under the Co-operatives Act 1992 , a society under the Friendly Societies Act 1989 , a building society or credit union under the Financial Institutions (NSW) Code or a co-operative housing society under the Co-operative Housing and Starr-Bowkett Societies Act 1998 ; or (f) is a company within the meaning of the Corporations Act 2001 of the Commonwealth, other than a company limited by guarantee within the meaning of that Act; or (g) is an association which is, or is included in a class of associations which is, prescribed for the purposes of this subsection. (3) The incorporation of an association under this Act is valid notwithstanding that the association was not eligible to be so incorporated. ... 66 Trading etc by incorporated association (1) An incorporated association shall not: (a) trade; (b) secure pecuniary gain for its members; or (c) as trustee, trade or secure pecuniary gain for members of the incorporated association.

Maximum penalty: 5 penalty units. (2) Where an incorporated association contravenes subsection:

(1), any members and officers of the association who by reason of the operation of section 70 are deemed to have contravened that subsection also are jointly and severally liable to any creditor of the association for all debts and liabilities incurred by the association in or in consequence of the trading or the securing of pecuniary gain for members of the association; (3) The contravention by an incorporated association of subsection (1) does not affect the validity of any transaction. 30 The first respondent is also subject to regulation 10 of the Regulation to the Associations Incorporation Act which provides: 10 Charities taken not to infringe the prohibition against trading -

Trade engaged in for a charitable purpose within the meaning of the Charitable Fundraising Act 1991: (a) by an incorporated association (whether or not holding an authority under that Act); or (b) by a body or organisation to which (by virtue of Section 7 of that Act) apart from Section 48, does not apply, is prescribed for the purposes of section 4 of the Associations Incorporations Act 1984. Section 106 application

31 The applicant has made an application by way of summons under s 106 of the Industrial Relations Act which is in the following terms: 106 Power of Commission to declare contracts void or varied - (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract; (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason; (2A) A contract that is a related condition or collateral arrangement may be declared void or varied even though it does not relate to the performance by a person of work in an industry, so long as: (a) the contract to which it is related or collateral is a contract whereby the person performs work in an industry, and (b) the performance of work is a significant purpose of the contractual arrangements made by the person. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time; (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force; (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case; (6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss.

32 As earlier mentioned, in their notice of motion the respondents seek a declaration that the Court has no jurisdiction in respect of the subject matter of the proceedings as a result of s 16(1) of the Workplace Relations Act which would exclude the Industrial Relations Act as a State Law and, more specifically, that s 106 of the Industrial Relations Act as a law that falls within s 16(1)(d) of the Workplace Relations Act. That section is in the following terms: (1) This Act is intended to apply to the exclusion of all the following laws of a State or Territory so far as they would otherwise apply in relation to an employee or employer: (a) a State or Territory industrial law; (b) a law that applies to employment generally and deals with leave other than long service leave; (c) a law providing for a court or tribunal constituted by a law of the State or Territory to make an order in relation to equal remuneration for work of equal value (as defined in section 623); (d) a law providing for the variation or setting aside of rights and obligations arising under a contract of employment, or another arrangement for employment, that a court or tribunal finds is unfair; (e) a law that entitles a representative of a trade union to enter premises. Note: Subsection 4(1) defines applies to employment generally . State and Territory laws that are not excluded

(2) However, subsection (1) does not apply to a law of a State or Territory so far as: (a) the law deals with the prevention of discrimination, the promotion of EEO or both, and is neither a State or Territory industrial law nor contained in such a law; or (b) the law is prescribed by the regulations as a law to which subsection (1) does not apply; or (c) the law deals with any of the matters (the non-excluded matters) described in subsection (3). (3) The non-excluded matters are as follows: (a) superannuation; (b) workers compensation; (c) occupational health and safety (including entry of a representative of a trade union to premises for a purpose connected with occupational health and safety); (d) matters relating to outworkers (including entry of a representative of a trade union to premises for a purpose connected with outworkers); (e) child labour; (f) long service leave; (g) the observance of a public holiday, except the rate of payment of an employee for the public holiday; (h) the method of payment of wages or salaries; (i) the frequency of payment of wages or salaries; (j) deductions from wages or salaries; (k) industrial action (within the ordinary meaning of the expression) affecting essential services; (l) attendance for service on a jury; (m) regulation of any of the following: (i) associations of employees; (ii) associations of employers; (iii) members of associations of employees or of associations of employers. Note: Part 15 (Right of entry) sets prerequisites for a trade union representative to enter certain premises under a right given by a prescribed law of a State or Territory. The prerequisites apply even though the law deals with such entry for a purpose connected with occupational health and safety and paragraph (2)(c) says this Act is not to apply to the exclusion of a law dealing with that. This Act excludes prescribed State and Territory laws (4) This Act is intended to apply to the exclusion of a law of a State or Territory that is prescribed by the regulations for the purposes of this subsection. (5) To avoid doubt, subsection (4) has effect even if the law is covered by subsection (2) (so that subsection (1) does not apply to the law). This subsection does not limit subsection (4). Definition (6) In this section: "this Act" includes the Registration and Accountability of Organisations Schedule and regulations made under it.

33 Mr P Kite SC with Mr G Boyce of counsel appeared for the first and second respondents. Counsel acknowledged that the respondents had no issue with the Minister's interpretation of the relevant facts and agreed with the applicant and the Minister that the outcome of the matter would rest on the resolution of two issues, the Association Incorporation Act issue and the trading corporation issue. 34 With regard to the Associations Incorporation Act issue, the respondents' submission was that the first respondent did not trade in contravention of the Associations Incorporation Act as it did not distribute a pecuniary gain to members and this was the correct view to take in light of ss 4, 66 and the relevant regulations. 35 Whether the first respondent's activities were trading activities and whether it was a trading corporation under s 51 (xx), was the dominant issue and set apart from any consideration of the Association Incorporations Act. It was the respondents' submission that those activities it had termed 'grant', 'funding' and 'fee for service' should be characterised as trading activities. The characterisation of those activities correctly as trading activities would then characterise the first respondent as a trading corporation, because those activities, individually or together, comprised a substantial part of the first respondent's overall activities. 36 The first respondent submitted it made a profit with respect to Out of Home Care Fee for Service activities, although there was not a requirement that trading activities needed to be those which made a profit. A margin of sorts was also said to exist with regards to DADHC income in the form of management fees. 37 The essential proposition of the first respondent in contending that its activities were trading activities was that in offering its services it went to the market, sold to the New South Wales government at a negotiable price and this was a commercial activity carried on consistently. 38 The submissions of the respondents can be synthesised into the following propositions: a) Trading activities are the exchange of a good or service for value; b) Trading activities are commercial; c) All of the activities are trading for constitutional purposes, though they may be divided in three categories, based on how the income is received; d) The first category concerned those activities funded on a grant basis. These activities were the commercial supply of services for reward and, therefore, trading activities. These activities included monies provided for the preschool, respite care activities, peer support and the youth group. These were also said to be acquitted activities because the contractual arrangement under which income was received for them specified unused money needed to be returned; e) The second category were those activities funded by fee for service, specifically Out of Home Care income. They were considered to be the commercial supply of activities for reward and trading activities. So were the resident fees for accommodation and support services and the income received from parents for child care services. These were also said to be non acquitted activities; f) Those "funded" activities were the commercial supply of services for reward and trading activities. These were the accommodation services which received monies from DADHC. These were considered acquitted activities; g) Purchases and payments for staff and provisions made by the respondent were also considered to be trading activities. Submissions of the Minister and the Attorney General

39 Mr I Taylor and Ms J McDonald of counsel appeared for the Minister and Attorney General (referred to collectively as 'the Minister'). The Minister's submission was essentially confined to the trading activities question and whether the contended activities of the first respondent fell within that meaning. It was submitted that a trading activity must be the exchange of goods for a reward and must be of a commercial nature. 40 In asking what was a trading activity, the Minister considered the summary of what constituted such activities in Garvey to be an appropriate catch-all description. Trading activities were said to generally connote activities of a commercial nature for reward. Reference was made to the statements of Barwick CJ in R v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190 (Adamson) and Deane J in Re Ku-ring-gai Co-operative Building Society (No 12) Ltd, Re (1978) 36 FLR 134 to support the proposition that trading activities must contain a commercial element. 41 In the Minister's view there was not a great deal of distinction between DADHC and DOCS' funding for the purposes of the constitutional question, so that those activities submitted to be trading activities could be accepted or rejected as trading activities on an 'all or nothing' basis. 42 The Minister endeavoured to establish the proper meaning of trading activities as being activities which involved the exchange of goods or services for reward and of a commercial nature. The Minister contended that those activities funded by DADHC and DOCS on a grant and a fee for service basis did not have a commercial flavour, nor were they done in exchange for a reward. 43 It was the Minister's submission that the activities were essentially funded welfare activities provided on a charitable basis by grants provided by government. That is, the activities were more properly described as the provision of welfare funded by government rather than provision of a service bought by government on a commercial basis. 44 Such a construction was said not to be inconsistent with the activities test because it was an initial assessment of a corporation's activities in order to establish whether they were trading or not. The nature of the corporation itself was said to colour the nature of the activities. Those activities undertaken by the respondent did not appear to be commercial arrangements. 45 Factors submitted to be of importance by the respondent were disregarded as not of determinative influence by the Minister. It was contended that nothing turned on whether the recipients of DADHC funding or DOCS' funding were identifiable. Any discussion of a margin in relation to DOCS' fee for service funding, and any bearing that it might have on the activities' commerciality was discounted on the basis that it was negligible and that the margin went toward other associated costs.

46 In contending that the first respondent was not a constitutional corporation, the sum of the Minister's case was represented by the following propositions: i) The case turned on the question of whether a corporation engages in trade if it provides a gratuitous service to the public that is funded by government; ii) The respondents contended that such a corporation is a trading corporation because it is engaging in the activity of providing (or "selling") a service for a fee. This approach failed to analyse what were the activities of the first respondent (i.e, what it does as against what it is paid). There was no authority for the proposition that wherever an activity is funded by government it is a trading activity; (iii) Consistent with its role as a community based non-profit welfare organisation, the first respondent provides for no charge, or for a nominal fee, certain welfare services. Excepting some minor income, those services are entirely funded by DADHC and DOCS; (iv) The activities of providing those services are not trading activities, since the services are not provided for a reward (or at least a reward sufficient to characterise them as trading). To the extent the Court finds any of the services are provided for reward (such as the child care service which accounts for less than 1 percent of total income) the sums involved are so small as to not alter the overall character of the corporation. Submission of the applicant 47 Mr M Gibian of counsel presented similar arguments to the Minister regarding trading activities. 48 In addition, it was submitted that the statutory prohibition upon trading contained in the Associations Incorporation Act, combined with the limitation of sources of funds contained in the rules of the respondent's constitution, prevented its activities being considered trading activities. CONSIDERATION

49 The first respondent is a public welfare corporation whose purpose is to provide welfare and support services for people with disabilities, children and young people and to provide support for their families and carers. 50 Upon the present state of the authorities, as recently discussed by the Full Bench in Garvey (see at [29]-[30]), this characterisation of the first respondent (and its activities) cannot be determinative of the question of whether the first respondent is a trading corporation for the purposes of s 51 (xx) of the Commonwealth Constitution. A corporation, so described, may, nonetheless, engage in trading activities which will, if substantial or a sufficiently significant proportion of the corporation's overall activities, result in the organisation constituting a trading corporation for constitutional purposes and for the purposes of s 16(1) of the Workplace Relations Act. In Garvey the Full Bench discussed the matter thus (at [30(a)]): (a) whether a corporation is a trading corporation depends upon the current activities of the corporation. In R v Judges of the Federal Court of Australia; Ex Parte Western Australian National Football League (1979) 143 CLR 190, Barwick CJ, for the majority, found (at 208): The only sure guide to the nature of the company is a purview of its current activities, a judgment as to its nature being made after an overview of all those activities. I remain of the firm conviction that for constitutional purposes a corporation formed within the limits of Australia will satisfy the description 'trading corporation' if trading is a substantial corporate activity. Its activities rather than the purpose of its incorporation will designate its relevant character.

51 However, the nature and purpose of such a corporation may be instructive in analysing whether the activities of an organisation constitute trading, particularly in the present case when regard is had to the source of funds or revenue for the organisation. We consider that, at a conceptual level, this is what Barwick CJ was referring to in Adamson (at 208) when he observed: But once it is found that trading is a substantial and not a merely peripheral activity not forbidden by the organic rules of the corporation, the conclusion that the corporation is a trading corporation is open.

52 In attaching this importance to the funds of the first respondent in addressing the question raised by this matter we have, with respect, not followed the decision of the Full Bench of the Industrial Relations Commission of Western Australia in Aboriginal Legal Service v Lawrence (2007) 166 IR 248. In that matter, the Full Bench appeared to regard the services provided to clients as welfare activities and the contractual arrangement with government as two separate components or activities. In our view, the acts engaged in and the income received by a corporation are inextricably linked components of the same activity when assessing whether the organisation that is the subject of these proceedings is a constitutional corporation. 53 We shall firstly examine the acquitted activities of the first respondent in this respect. 54 DADHC acquitted activities are funded by way of a government grant pursuant to a funding agreement. The activities are funded because they serve DADHC policies and obligations in relation to disabled persons. The funding agreement is made prospectively and the majority of the funds are paid prospectively. The first respondent is contracted to provide defined services to defined target groups. Access to some activities such as accommodation is determined by DADHC. For other activities access is determined both by DADHC and first respondent. The arrangement represents an exclusive relationship between DADHC and the first respondent, and it is not subject to external competition. It is clear that, through the funding agreement, DADHC exerts control and supervision over the activities it funds. The first respondent does not make a profit out of these activities because the first respondent must remit to DADHC any unexpended funds.

55 It is enough to say that the DOCS' child care activities (funded pursuant to the service agreement) are substantially similar in nature. They are also public welfare activities, for which the first respondent is provided with funds by DOCS to subsidise the cost of child care expenses. It is conditional funding reliant on the first respondent providing a certain number and type of childcare places. It is not possible to make a profit because the first respondent must remit to DOCS any unexpended funds. 56 While the question as to whether a corporation makes a profit or loss is not a determinative consideration, it is clear that profit or loss may be part of the concomitant indicia that suggest an activity is either a trading or a non-trading activity. This reflects what Mason J said in Adamson (at 235): I do not limit the concept of trading to buying and selling at a profit; it extends to business activities carried on with a view to earning revenue. and Barwick CJ in R v Trade Practices Tribunal; Ex parte St George County Council (1974) 130 CLR 533 (at 539): Though profit-making is perhaps not of the essence of trading, it is a usual concomitant, and it can be said that the applicant trades at a profit.

57 The majority in St George (McTiernan, Menzies and Gibbs JJ) considered the purpose of a corporation to be determinative in the assessment that it was not a trading corporation. It was the reasoning, however, of Barwick CJ and Stephen J (affirmed in Adamson) that concentrated attention upon an activities test. In this respect, we note that the activities of the first respondent could not be said to be trading activities on either of the particular standards applied by Stephen J or Barwick CJ in St George. The activities of the first respondent cannot be said to be sold in the way electricity and services were sold in St George. 58 Stephen J considered that trading activities were those that were bought or sold and that non-trading activities were those provided freely. His Honour stated (at 569): ...It might be otherwise if it distributed electricity free of charge but so long as its activity is that of buying and reselling rather than distributing by way of gift it is, in my view, engaged in trading... 59 Barwick CJ considered that the activities constituted business transactions of buying and selling of products and services in a market setting on a commercial basis, though moderately restricted, his Honour said (at 539): It is clear that the applicant does trade. It does not generate electricity. It buys it in bulk and reticulates it within the county area, charging what is, in substance, a retail price for its supply to the consumer. The applicant is none the less trading, though it has in fact a monopoly of the supply of electricity. It also buys and sells electrical appliances and performs for reward services by way of installing and repairing such appliances in competition with other persons and bodies selling and servicing such appliances.

60 It is clear that a corporation's activities must show some indicia of trade in order to be characterised as trading activities, and that trading activities are not limited to mainstream commercial activities, nor are they inconsistent with the altruistic or charitable purposes of a corporation. 61 The analysis so far has revealed that the first respondent's activities are public welfare activities, funded by acquitted grants which do not produce a profit and which cover the first respondent's costs. The activities are not bought or sold. All of these factors are relevant to the determination of the jurisdictional question in this matter. 62 It is important, additionally. to note what Barwick CJ said in Adamson (at 209): I now consider what the Club and the State League were in fact engaged in doing. Trade for constitutional purposes cannot be confined to dealing in goods or commodities. Its full parameters may be difficult of definition. But the commercial nature of an activity is an element in deciding whether the action is in trade or trading. 63 Additionally, Mason J stated in Adamson (at 235): The financial revenue of the Leagues is so great and the commercial means by which it is achieved so varied that I have no hesitation in concluding that trading constitutes their principal activity. In saying this I treat all their activities which I have listed and which produce revenue as trading activities. I do not limit the concept of trading to buying and selling at a profit; it extends to business activities carried on with a view to earning revenue.

64 Our view is that the degree to which a commercial element is evident in an organisation's activities will contribute to the assessment that an activity is not a trading activity. In the activities of the first respondent, the commercial element of the activities is not nearly as apparent as it was in the curtailed commercial activities in St George and the commercial activities in Adamson.

65 In St George, Barwick CJ found that the Council was engaged in trading activities because it was involved in a limited market activity, namely, the selling of electricity under restrictions imposed by the Local Government Act 1919. 66 Here, however, it is apparent that the activities for which the funds are provided by DADHC and DOCS do not occur in a commercial market setting or even a curtailed market. The departments provide the funds to serve the best interests of disabled adults and young people. The funds that are paid are prospectively negotiated and, for the most part, prospectively paid. The requirement of the departments for the provision of the service is not price or cost sensitive, because the price or costs are not a major factor for the departments in the acquisition of the services.

67 A similar absence of market conditions occurred in Quickenden v O'Connor (2001) 109 FCR 243. There the provision of educational services under the Higher Education Funding Act 1988 (Cth) were not viewed by the majority (Black CJ and French J) as a trading activity. This was because the payments for the education services were required under statute and the setting of the price and payment were compelled by statute. Black CJ and French J in Quickenden found (at [51]): ... The concept of "trading" is a broad one. It is doubtful, however, that it extends to the provision of services under a statutory obligation to fix a fee determined by law and the liability for which, on the part of the student, appears to be statutory. 68 The activities that were considered trading activities in Quickenden included: the Festival of Perth, the sale of publication services, parking, provision of student accommodation and the provision of services through Winthrop Technology, were more clearly activities of a trading nature which involved the buying and selling of goods and services and renting and investing on a commercial basis. 69 The activities of the first respondent, when seen in the light of the funding arrangements, should be properly understood as social welfare activities provided to target groups. Government funds the cost of the activities as part of its policies and obligations with respect to disabled and young people. The activities are not of a commercial nature and cannot be appropriately described as buying or selling at a profit or loss. 70 The culmination of these factors must, in our view, result in a conclusion that the acquitted activities of the first respondent are not trading activities. 71 That approach sits comfortably with the approach taken in two single instance judgments which we have considered and found of some assistance in reaching our decision. The first respondent's activities have indicia which substantially accord with that considered by Wilcox J in Red Cross when his Honour considered whether blood transfusion activities by the Societies were trading activities (at 339): What may be important is that, whilst the funding formula ensures that the Society will not be much out of pocket because of its operation of BTS in each State, it is impossible for it to make a profit out of the operation. The society does not make a charge for its blood products. Its only income is from governments, and the formula prevents that income ever matching its costs.

72 Those indicia, together with the fact the corporation did not make a profit that it received its income from government, that it did not charge and that it provided a welfare service, were conducive to the assessment that the blood transfusion activities were gratuitous welfare activities rather than trading activities. In his Honour's view, this aspect of the Society's activities exhibited no indicia of trading activity (at 343): But, say counsel, the reality is that the blood transfusion activities of the respondents constitute substantial businesses by which they supply valuable commodities, blood and blood products, in return for large payments. In the year 1984-1985, the Society (including its Divisions) received from governments a total of $44,965,328 in respect of its blood transfusion services. Of this, the NSW Division directly received more than $10,000,000. (The exact figure is not ascertainable from the Division's annual report.) These were, of course, substantial sums. They were earned only because the respondents are prepared to carry on blood transfusion services at a scale, in terms of labour and resources, greater than that of many organisations which are undoubtedly "trading corporations". But I do not think that it is appropriate to describe the gratuitous provision of a public welfare service, substantially at government expense, as the conduct of a "trade". It is pertinent to recall the words of Stephen J in St George County Council: "It is the acts of buying and selling that are at the very heart of trade", and also to remember the distinction he made in respect of the distribution of electricity free of charge. In relation to the supply of blood, it seems to me that the first and second respondents do not engage in trading activities. They engage in a major public welfare activity pursuant to agreements with the Commonwealth and the various State governments under which they will be reimbursed most of their costs. 73 In Mark Fowler v Syd-West Q2463 [1998] IRCommA 904, McIntyre VP considered that the corporation was not engaged in trading activities because it recovered monies from government on a acquitted grant basis, engaged in welfare activities and neither bought nor sold in any relevant sense. His Honour stated: ...(7) by far the largest proportion of SWP's income comprises grants from the Commonwealth Department of Health and Family Services (the Department), being grants of financial assistance under the Disability Services Act 1986. ....

Conclusion In my view, SWP is not a trading corporation. The essence of what SWP does is to use grants from the Department to operate its long term employment program for people with intellectual disabilities and, also, to place other workers in employment. It is engaged in, to use Wilcox J's words in the Red Cross Case , "the gratuitous provision of a public welfare service, substantially at government expense". As Wilcox J said, this is not the conduct of a "trade". Having regard to Wilcox J's views, I reject Mr Latham's submission that the whole operation of SWP is a trading operation; that is, the spending of the grants in operating its programs. This, in my view, is not trading, the very heart of which, as Stephen J said in St George County Council , is buying and selling. 74 We also note that in the recent decision of the Full Bench of this Court in Garvey, education services provided by the corporation pursuant to an acquitted Federal Government grant were similar to the first respondent's arrangement, and these activities were not contended to be trading activities.

75 We turn now to the non-acquitted activities. These are also activities of a public welfare nature. There are a number of facts related to funding that are relevant to our determination. Funds are provided by DOCS to ensure government policies and departmental obligations in relation to young people are realised. The young people to whom the services are provided under the header agreement are referred to the first respondent by DOCS. The contractual arrangement represents an exclusive relationship between DOCS and the first respondent. The funds are provided by DOCS for the provision of specified activities on an estimated basis according to a service price list. The service price is negotiated prospectively. The payments are made retrospectively. The first respondent, as part of the activity, also receives reimbursement at cost-price for expenditure on contingency items. To have those monies paid out by DOCS, the first respondent must first have the expenditure approved by DOCS. 76 These factors suggest that the non-acquitted activities of the first respondent have the same broad characteristics in common with the acquitted activities. They are also welfare activities, this time provided to specific target persons. The costs are funded by DOCS. 77 DOCS makes funds available according to the price the first respondent sets and that price is at a level that appears to be at or near a cost recovery basis or with a negligible margin representing a difference between the actual costs of the service and monies paid by DOCS. If there is a margin factored into the service price list, as was contended in the evidence, it goes towards costs associated with repairing damage and with providing ongoing administration, management and infrastructure to enable the organisation to discharge its functions. We do not take the fact that there can be a overpayment or shortfall in the funds provided for this activity above or below the cost price, to change the nature of the provision of the funds or the nature of the service, that is, it is essentially government utilising the welfare services of a non-profit charitable organisation. It does not alter the true state of affairs that DOCS is only seeking to fund the service on the basis that the first respondent provides the service within its estimated costs. It will not matter if there is a shortfall or that there is any residue, particularly as that residue goes towards general costs for discharge of the first respondent's welfare functions. 78 The fee for service activity cannot be said to be sold in the way electricity was sold in St George. The nature of the activity and the way that it is funded make it a similar activity to those welfare activities funded by acquitted grant in Mark Fowler; the educational services funded by the acquitted grant in Garvey and blood transfusion services substantially supported by government funding in Red Cross.

79 Other factors indicate that it is not an activity that is commercial in nature and that the funds are not provided by government in accordance with a commercial market setting. Price is not a relevant factor in using the services. The requirement of DOCS for the provision of the service is disassociated from its cost. The first respondent is provided with funds to serve the best interests of young people. The department knows the price prospectively because a service price list sets out the price before an agreement is entered. The decision to use the OOHC services offered by the first respondent is made after a determination of the placement type required, the placements available and by an assessment of the needs and interests of the individual child or young person. Factors affecting the decision include the potential length of the placement, the child's age, any physical and/or intellectual disabilities and the location of the child's family and of any siblings that are or are not in OOHC. All these factors suggest that these activities are not business transactions taking place in a market or even a curtailed market. They have more similar attributes to the funding arrangement in Red Cross.

80 In the result, we conclude that the acquitted and non-acquitted activities are not trading activities.

81 Finally, we earlier noted the sources of revenue which comprise Commonwealth pension contributions from adult residents of group homes and child care fees paid by parents cannot of themselves result in the conclusion that the first respondent is a trading corporation. Even if the payments gave the activities they fund a trading character, which we do not accept, we do not believe that they are large enough to render those activities trading activities given the conclusions above. Even as a proportion of income, the funds represent only a small proportion of income and cannot constitute a sufficiently significant proportion of the first respondent's overall activities. 82 In similar fashion, we consider the one-off payment made by a parent for a disabled person cannot be treated as establishing that the first respondent is a trading corporation. 83 We also do not consider that the acquisition of staff and materials should be characterised independently as a separate activity but as a component of the activities which necessitate them.

Conclusion 84 The first respondent does not engage in trading activities. 85 Thus, the first respondent is not a trading corporation for the purposes of s 51 (xx) of the Commonwealth Constitution. ORDERS

86 The notice of motion filed on 20 July 2007 is dismissed. 87 The applicant shall file and serve submissions as to costs within 14 days. The respondents have a further 14 days in which to file and serve a reply. The applicant has a further seven days to respond. Unless the parties or any one of them require to be heard orally on the question of costs, costs will be dealt with on the papers. If the parties reach a consent position in respect of costs, the applicant shall file short minutes of order reflecting the consent position. ________________________

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