Michelle Hughes -v- Al-Hidayah Islamic Education Administration Incorporated trading as Al-Hidayah Islamic School [2009] WAIRComm 967 (6 October 2009)

AL-HIDAYAH ISLAMIC EDUCATION ADMINISTRATION INCORPORATED TRADING AS AL-HIDAYAH ISLAMIC SCHOOL

CITATION NO. 2009 WAIRC 00967

CatchWords Unfair dismissal - Jurisdiction - Constitutional Corporation - Trading activities - Fees for educational services - Industrial Relations Act 1979, s.29(1)(b)(i); Workplace Relations Act 1996, ss.4, 5, 16

Result Application dismissed for want of jurisdiction

1. The respondent challenges the jurisdiction of the Commission to deal with this application for unfair dismissal. In short, the respondent is an Association incorporated under the Associations and Incorporations Act 1987. The respondent operates an Islamic School and claims that they are a trading corporation and hence outside the jurisdiction of this Commission. They receive their income from school fees and State and Federal Government grants. The respondent relies on the evidence of Mr Umar Abdullah that when the school was first established it was only viable due to the introduction of school fees. This continues to be the case such that 18.9% of their income is derived from school fees. The school would not be able to function without these school fees.
2. The respondent relies on the decision of the Industrial Appeal Court in the Aboriginal Legal Service of Western Australia (Inc) v Lawrence [No 2] [2008] WASCA 254 (the ALS case). The relevant passages of the majority decision in the ALS case, for the purposes of this matter, are as follows:

"68 The more relevant (for present purposes) principles that might be drawn from these and other cases are as follows:

(1) A corporation may be a trading corporation even though trading is not its predominant activity: Adamson (239); State Superannuation Board (303 - 304); Tasmanian Dam case (156, 240, 293); Quickenden [49] - [51], [101]; Hardeman [18].

(2) However, trading must be a substantial and not merely a peripheral activity: Adamson (208, 234, 239); State Superannuation Board (303 - 304); Hughes v Western Australian Cricket Association Inc [1986] FCA 357; (1986) 19 FCR 10, 20; Fencott (622); Tasmanian Dam case (156, 240, 293); Mid Density (584); Hardeman [22].

(3) In this context, 'trading' is not given a narrow construction. It extends beyond buying and selling to business activities carried on with a view to earning revenue and includes trade in services: Ku-ring-gai (139, 159 - 160); Adamson (235); Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd [1982] HCA 23; (1982) 150 CLR 169, 184 - 185, 203; Bevanere Pty Ltd v Lubidineuse [1985] FCA 134; (1985) 7 FCR 325, 330; Quickenden [101].

(4) The making of a profit is not an essential prerequisite to trade, but it is a usual concomitant: St George County Council (539, 563, 569); Ku-ring-gai (140, 167); Adamson (219); E (343, 345); Pellow [28].

(5) The ends which a corporation seeks to serve by trading are irrelevant to its description: St George County Council (543, 569); Ku-ring-gai (160); State Superannuation Board (304 - 306); E (343). Consequently, the fact that the trading activities are conducted is the public interest or for a public purpose will not necessarily exclude the categorisation of those activities as 'trade': St George County Council (543) (Barwick CJ); Tasmanian Dam case (156) (Mason J).

(6) Whether the trading activities of an incorporated body are sufficient to justify its categorisations as a 'trading corporation' is a question of fact and degree: Adamson (234) (Mason J); State Superannuation Board (304); Fencott (589); Quickenden [52], [101]; Mid Density (584).

(7) The current activities of the corporation, while an important criterion for determining its characterisation, are not the only criterion. Regard must also be had to the intended purpose of the corporation, although a corporation that carries on trading activities can be found to be a trading corporation even if it was not originally established to trade: State Superannuation Board (294 - 295, 304 - 305); Fencott (588 - 589, 602, 611, 622 - 624); Hughes (20); Quickenden [101]; E (344); Hardeman [18].

(8) The commercial nature of an activity is an element in deciding whether the activity is in trade or trading: Adamson (209, 211); Ku-ring-gai (139, 142, 160, 167); Bevanere (330); Hughes (19 - 20); E (343); Fowler; Hardeman [26]."

1. Mr Umar Abdullah gave evidence for the respondent that his involvement with the school started in 1992 and arose from dissatisfaction with the Australian Islamic College which his daughter attended. He was advised that some members of the community were considering establishing an alternative Muslim school. They explored first the financial viability of a new school. They determined a new Muslim school would be viable if school fees were charged. He was advised that the Australian Islamic College was having difficulties as they did not collect sufficient school fees. The new school would attract State and Federal Government funds but it was determined that these would not be sufficient of themselves to sustain a new school. From the outset it was a basic premise of the school, and continues to be so, that the payment of school fees would be mandatory to ensure attendance at the school and to ensure the financial viability and independence of the school. It was decided also that they would not seek donations from parents to run the school.
2. Mr Abdullah says that the school is a non-profit association and if wound up the surplus funds or property would have to go to another non-profit association of similar aims and objectives. The school does not make a profit and revenues are not distributed to its members. The parents who enrol their children are automatically members of the Association. The decision making of the school has to be in accordance with Islamic practice. For the first two years the school had to operate without federal funding.
3. Parents are billed at the beginning of each term. No student has yet been excluded from school for the non-payment of school fees, however, the Board of the school has decided that, as there is now a waiting list, a student's place will be taken by another if fees are not paid. The school is operating currently at capacity which is 240-250 students and 30-31 staff members.
4. Tuition fees for 2008 were $325,156 which was 18.97% of the total income of 1,713,815. State Government grants were $327,760 which was 21.75% of total income. Commonwealth Government grants were $954,606 which was 55% of total income. Tuition fees for 2007 were $201,862 which was 12.64% of total income of 1,597,244.
5. The applicant led no evidence.

1. Mr Jensen for the respondent submitted that the respondent traded by providing education services for fees. He referred to the ALS case. He submitted that the respondent is a non-profit Association and the activities of the school are and were always intended to be commercial in that school fees ensure the viability of the school. The Association was never going to be a charitable organisation.
2. Mr Jensen also referred the Commission to the decision of the Queensland Industrial Commission in Educang Ltd v Queensland Independent Education Union of Employees 154 IR 436. In that matter two organisations set up a joint venture to run independent, financially viable schools. The Commission considered the requirement for fees, and the constitution and purpose of the organisation. The Commission accepted that the requirement for fees meant that the organisation was a trading corporation. In the latest audited report for the respondent, out of a total income of $1.7 million, 18.9% of that income was raised by school fees. Therefore the charging of fees is not peripheral to the existence of the school. Without school fees the school would not operate.

1. Exhibit A3 is the constitution of the Association. It states in part:

(1) (a) To establish and operate a School or Schools for Muslim students and non Muslim students who, with the cooperation of their parents, will be prepared to conduct themselves according to the principles of Islam and the Sunnah of the Holy Prophet Muhammad (S.A. W.); and according to School rules and guidelines;

(b) to run the School(s) according to the Principles of the Holy Quran and Hadith in order to establish an harmonious Islamic atmosphere in which the Muslim children will develop the attitudes and gain the knowledge necessary for them to take their place in Australian society as unified, practicing Muslims and in which the non Muslim children will develop an appreciation and an understanding of the religion of Islam;

(c) to strive for excellence through the establishment of the best possible School environment and offering the highest standards that can be provided in both Religious and Secular studies by;

(i) ensuring that the Islamic nature of the School(s) takes precedence above all other considerations relative to the day to day running of the School(s);

(ii) a) employing motivated, suitably qualified, experienced Principal(s) who will be Muslim and b) employing motivated and suitably qualified Teachers and Staff;

(iii) providing for the Primary and Secondary educational needs of the students using English as the medium of instruction in all subjects both religious and secular with appropriate Islamic emphasis where applicable through the development of an integrated Religious/Secular curriculum.

(2) To be financially sound through careful balancing of State and Federal Government Funding with School Fees and other incomes. The property and income of the School shall be applied solely towards the promotion of the Objects of the Association and no part of that property or income may be paid or otherwise distributed, directly or indirectly, to members of the Association, except in good faith in the promotion of the Objects of the Association.

(3) To be non-aligned with and independent from any and all political, nationalistic and ethnic groups and organizations.

(4) To be independent from, but run in cooperation with other educational institutions throughout Australia."

1. It is the case that the school, albeit religious in orientation, does not survive by resort to funds from a broad religious community. It survives solely as an independent entity by income from State and Federal governments and from school fees paid by parents with children at the school. The enrolment form [Exhibit A7], financial statement [Exhibit A5] and audited report [Exhibit A6] sustains the argument that the school relies on the receipt of school fees to ensure the continuing viability. Mr Abdullah's evidence is unchallenged that the school requires those fees and was established on the understanding that the school fees would be required if the school were to be viable.
2. In Quickenden v O'Connor and Others [2001] FCA 303; 109 FCR 243, Black CJ and French J addressed the question as to whether the University of Western Australia is a trading or financial corporation. They analysed the caselaw as it related to the purpose and activities of an organisation and concluded that "substantial trading activity is a sufficient condition for characterisation of a corporation as a trading corporation regardless of the purpose for which it was formed". They went on to analyse the activity of the University. They stated, "it is questionable whether the provision of educational services within the statutory framework of the Higher Education Funding Act amounts to trading. The Act creates a liability for each student to the University in respect of each course of study undertaken in a semester. The amount is not fixed by the University but rather by the Minister under published guidelines. The concept of "trading" is a broad one. It is doubtful, however, that it extends to the provision of services under statutory obligation to fix a fee determined by law and the liability for which, on the part of the student, appears to be statutory."
3. They went on to describe other activities of the University as trading activities and as being "a substantial, in the sense of non-trivial, element albeit not the predominant element of what the University does". The activities referred to include buying, selling and renting of property and investing. They include also sale of publications and services, parking, provision of student accommodation and the provision of services through Winthrop Technology. I should say that at first instance the judge in this matter calculated the percentage of revenues earned by the university through trading activities to be approximately 18% of the total operating revenues. This was then regarded as a substantial part of the operation of the University. Carr J on appeal endorsed this measure, being a relative measure as opposed to a large absolute figure.

**"**Overall, the majority of respondent's activities concentrate on its central activity of children's medical research: it being a medical research establishment. The trading activities, as identified, are peripheral to these research responsibilities. The respondent's 2006 Annual Report and its submissions indicate that most of the respondent's organisational resources are used for and in relation to the activities of medical research. The organisational structure of five research units and of five divisions responsible for administration, operations, bioservices, education and the director's office, does not give any indication of any identifiable division or unit where the significant focus is devoted to trading activities. There is no indication from the Annual Report, organisational structure, staff arrangements or the objects of the respondent that gives rise to the impression that trading activities are engaged in to a "substantial", "not insubstantial" or "sufficiently significant" degree, to use the various adjectives utilised by the High Court in R v Federal Court of Australia; Ex parte WA National Football League [1979] HCA 6; (1979) 143 CLR 190 (Adamson).

[23] We note that the allocation of staff and staffing duties devoted to trading activities is unknown. A perusal of the 2006 Annual Report gives some indication that a very small proportion of staff have duties relating to trading activities. The majority of staff have duties in medical research and administration. It appears that less than five in an organisation of 161, and of that number no more than three, appear to engage in identifiable trading activities on more than a part-time basis. Only one staff member is identified in the 2006 Annual Report as a "fundraising assistant". Two staff are listed as having specific duties pertaining to the Jeans for Genes campaign generally, but to the extent this relates to the actual "auction" is unknown. Seven Animal Attendant/Technicians are listed but their exact duties in relation to provision of animal services was not made out.

[24] Further, when comparing the revenue arising from its identifiable activities with the respondent's total revenue, it cannot be said such a proportion is substantial or significant, it is an insubstantial percentage amount, being 2.584 per cent."

1. So by analysing the structure and operations of the Children's Medical Research Institute it was determined that an insubstantial percentage amount of the Institute's activities were in fact 'trading'. In this matter the revenue from school fees has been growing and on the most recent accounts, represents 18.97% of total income. This is on par with the percentage of revenue derived from what were categorised as trading activities in the Quickenden case. In that light and in view of the fact that these fees have always been and continue to be central to the viability of the respondent, I find that the income derived from trading can be said to be 'sufficiently significant'.
2. I find therefore that the respondent is a trading corporation. I will not recite the relevant passages of the Federal Workplace Relations Act 1996. It is clear from numerous decisions of this Commission that where an employment is found to be a trading corporation the employment relationship belongs in the federal jurisdiction. Given my findings I will issue an order dismissing the application for want of jurisdiction.