T13157
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TASMANIAN INDUSTRIAL COMMISSION
Industrial Relations Act 1984
Priscilla Joan McQueen
and
Royal Society for the Prevention of
Industrial dispute – termination of employment – jurisdiction – whether a trading corporation – activities test - jurisdiction found
REASONS FOR PRELIMINARY DECISION
[1] On 21 May 2008, Priscilla Joan McQueen, (the applicant), applied to the President, pursuant to s.29(1A) of the Industrial Relations Act 1984 (the Act) for a hearing before a Commissioner in respect of an industrial dispute with the Royal Society for the Prevention of Cruelty to Animals Tasmania Incorporated (RSPCA Tas) (the respondent) arising out of a dispute in relation to termination of employment. [2] By correspondence dated 11 June 2008 the Tasmanian Chamber of Commerce and Industry (TCCI), representing the respondent, advised that the employer contended that it was a constitutional corporation and that therefore the Tasmanian Industrial Commission has no jurisdiction to hear the matter. [3] A hearing commenced at Ulverstone, Tasmania on Monday 23 June 2008, where Ms McQueen appeared for herself with the support of Ms L Woods as spokesperson. Mr L Jones of the TCCI appeared on behalf of the employer. Attempts at conciliation were unsuccessful and the hearing continued on Monday 18 August 2008. On that occasion Ms McQueen was represented by Mr B Trafford, who was granted leave to appear. [4] Subsequent to the hearing, decisions dealing with the matter at issue were published in other jurisdictions. The Commission considered it appropriate to take the recent decisions into consideration and advised the parties of this, providing them with the opportunity to make further submissions. These were received on 10 and 13 October 2008. [5] The jurisdictional question is the subject of the preliminary decision, which follows.
SUBMISSIONS Mr Jones for the respondent [6] Mr Jones, for the employer, submitted that the RSPCA Tas is a constitutional corporation covered by the Workplace Relations Act 1996 (Cth), that is, a trading corporation formed within Australia. [7] He provided a certified copy of the Certificate of Incorporation of an Association under the Tasmanian Associations Incorporated Act 1964 (Tas)[1]. [8] Mr Jones referred to a number of decisions regarding the question of what constitutes a trading corporation. He submitted that a not-for-profit organisation can be a trading corporation as found in the High Court decision in R v Judges of the Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190, (Adamson). The majority decision found that the football league was a trading corporation within the meaning of section 51(xx) of the Australian Constitution. He submitted that the decision was significant because it established that the activities of the organisation, not just the purpose or objects of the organisation, were relevant in determining the question of whether or not it is a trading organisation. [9] As further authority, Mr Jones cited the Federal Court’s decision in Re E v Australian Red Cross Society New South Wales Division and Central Sydney Area Health Service [1991] FCA20 (Red Cross) in which Wilcox J found the NSW division of the Red Cross Society and the Prince Alfred Hospital to be trading corporations. The substantial activity of the Red Cross Society was the free supply of blood, which was found not to constitute trading. However, 4.4 per cent, amounting to $2 million of the revenue was from trading activities. Whilst a small percentage, it was found to be a significant proportion of the Society’s income, sufficient to warrant a finding that it was a trading corporation. The court found that the purpose for which the organisation was formed was not important, it was the activities that counted. The trading activities must be substantial and not merely a peripheral corporate activity. [10] Mr Jones referred to the case of Orion Pet Products v Royal Society for the Prevention of Cruelty to Animals (Vic) FCA860 (July 2002) (Orion). In that case, the trading activity of the organisation represented 55% of the revenue, which Weinberg J found was substantial in the context of the overall revenue of the RSPCA. [11] Mr Jones tendered a document headed Consolidated Income Statement for the year ended 30 June 2007[2], which reveals that revenue was received by RSPCA Tas from the following sources:
[12] Mr Jones said that after discounting donations, sponsorships and grants from the operational revenue, there was a trading figure of between $800,00 and $840,000 derived primarily from animal adoption and boarding fees and the running of the veterinary clinic. [13] A document was tendered which summarised the Goods and Serves Tax (GST) paid[3], showing, according to Mr Jones, that the organisation trades between about $800,000 and $900,000 because they paid about 10 per cent of that amount in GST [the actual figure was $94,000]. [14] In written submissions which took into account recent decisions on the jurisdictional question, Mr Jones said that in Hillman v Bankstown Handicapped Children’s Centre Incorporated [2008] NSWIRComm 64 (16 September 2008) (Hillman) [in which the Industrial Court of New South Wales found the organisation was not a trading corporation] 93% of the revenue was from government agencies, leaving only 7% for the purposes of the activities test. In the case of the RSPCA Tas, he said that no government funding was received and he submitted that 40% (in excess of $800,000) of its revenue is related to goods and services, therefore it is not inconsequential or peripheral to the activities of the organisation. The provision of goods and services is an integral part of the ongoing purpose of the organisation and is essential for its viability. [15] In the Hillman case, the Bankstown Handicapped Children’s Centre received GST concessions, which is not the case for the RSPCA Tas which is responsible for GST in the same way as any other trading organisation, he said. Mr Jones referred to paragraph 29 of the decision in which the NSW Associations Incorporation Act is discussed, which restricts trading activities. He said that no such restriction of trade is imposed on the RSPCA Tas Inc. [16] In the case of Australian Workers’ Union of Employees Queensland v Etheridge Shire Council FCA 1268 (20 August 2008) (Etheridge) [in which the Federal Court found that the shire council was not a trading corporation] Spender J said at paragraph 140:
“…The written submissions of behalf of the Etheridge Shire Council ask the question: “How is the significance or substantiality of the trading activities to be assessed?”
It is undoubtedly a matter of fact and degree (Adamson at 234)
A measurement of what is received from the alleged trading activities against total receipts as an indication of substantiality and significance has been accepted and adopted in a number of cases…”
[17] And, at 146:
“In the light of the observations by the High Court in Adamson and the later cases, in the characterisation of a corporation as a trading corporation, or a financial corporation, the primary focus has to be on the activities of the corporation.”
[18] In Etheridge, Justice Spender said, at paragraph 151 that:
“All of them, in my opinion, including even the road works aspect of the activity of the council, after close analysis, entirely lack the essential quality of trade. Almost all of them run at a loss. They are all directed, in my view, to public benefit objectives within the shire. Their scale, even in monetary terms…are so inconsequential and incidental to the primary activity and function of the council as to deny to the council the characterisation of a “trading corporation” or a “financial corporation.”
[19] Mr Jones submitted that that there was no parallel between Etheridge and the RSPCA Tas because the trading activities of the RSCPA are not inconsequential or incidental. He said that Justice Spender accepted that the “activities test” is the appropriate test, which conclusion is supported in the High Court cases of Adamson and Red Cross as well as by Orion, Kirinari Residential Services AIRC 980 [1996] and Eric Bell v Shire of Dalwanlinu 2008 WAIRC (14 August 2008) .
Mr Trafford for the Applicant
[20] Mr Trafford referred to the decision of McAlpine C in Douglas Joseph Peter Massey v Sphere Pty Limited t/a Barron’s Bar and Grill T12762 TIC (2006) in which it was found that, even though the respondent was a constitutional corporation, section 30A of the Act made it clear that people in Mrs McQueen’s position still had a remedy through the state legislation. He submitted that the intention of the legislation was to protect people who had been dismissed and who “fell through the cracks” in the federal legislation. He said that the Commission in the instant case should make the same finding as that made by Commissioner McAlpine. [21] Mr Trafford was unaware that the decision had been appealed and overturned by a Full Bench of the Commission. [22] In later written submissions, he argued that the RSPCA Tas is not a trading corporation and that the Commission has jurisdiction to hear and determine the matter. [23] He addressed the “activities test” in terms of whether the trade in goods and services is the organisation’s predominant and characteristic activity. He said that whether or not a body is a trading corporation is determined by the “activities test” described by Barwick CJ in The Queen v Trade Practices Tribunal; Ex Parte St George County Council (1974) 130 CLR 533 (St George) which was later accepted by the High Court in Adamson. Barwick CJ said at 503 that a trading corporation was:
“a corporation whose predominant and characteristic activity is trading whether in goods or services.”
[24] This has been confirmed more recently in the Etheridge case. [25] Mr Trafford submitted that the trading activities of RSPCA Tas include the supply of animal boarding facilities, the provision of veterinary services and the sale of goods and merchandise, accounting for 40 per cent of revenue. Each of those activities are directly related to the predominant and characteristic activity of the organisation which is the promotion of animal welfare and the prevention of cruelty to animals. Sixty per cent of revenue comes from donations. Whilst the trading activities are substantial, they are not the predominant and characteristic activity of the organisation. [26] In Mr Trafford’s submission, the fact that a corporation’s trading activities are substantial does not conclusively determine that it is a trading corporation. In Adamson, Barwick CJ said at 208:
“..once it is found that trading is substantial and not merely peripheral activity…the conclusion that the corporation is a trading corporation is open.”
[27] Barwick CJ did not say that the existence of substantial trading activity conclusively determines that it is a trading corporation, it leaves the question open and it remains to be finally determined. This was affirmed by the Federal Court in Etheridge where the Court considered whether trading in goods and services was the predominant and characteristic activity of the council. Although the purpose for which the organisation was formed does not determine whether or not it is a trading corporation, the Federal Court in Etheridge at paragraph 148 found that the purpose for which an organisation is formed is not irrelevant. [28] Mr Trafford submitted that the RSPCA’S trading activities are ancillary to the organisation’s main purpose of preventing cruelty to animals and of promoting and educating the public about animal welfare. In the St George case Gibbs J said at 562 that: “the fact that a corporation carries on some trade that is merely incidental or ancillary to the fulfillment of its main purpose does not give it the character of a trading corporation.”
FINDINGS [29] There is no dispute that if the RSPCA Tas is a trading corporation then the Commission has no jurisdiction to hear the matter, as found by the Full Bench in Sphere Pty Ltd t/a Barron’s Char Grill and Douglas Joseph Peter Massey T12740 T12759 TIC (August 2006) (Sphere). In that case the Full Bench found that, although it had been the intention of the Tasmanian Parliament to provide a remedy for unfairly dismissed employees employed under federal awards, it was incontrovertible that the federal law had precedence over the state law, and, accordingly, the provisions of the amended federal Workplace Relations Act at section 16, which excluded State and Territory laws applying to employment generally (with some exceptions), applied by virtue of section 109 of the Commonwealth Constitution, which states:
“When the law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail and the former shall, to the extent of the inconsistency, be invalid.”
[30] In Sphere there was no argument that the company was not a constitutional corporation (it was formed for the purpose of trading and trading comprised all of its activities), the argument was whether the Commission had jurisdiction to hear cases where the employer was a constitutional corporation. In the present matter, the question is: is the employer is a constitutional corporation? [31] If the RSPCA is a “trading corporation” or a “financial corporation” (a “constitutional corporation”) within section 51(xx) of the Constitution, then the Workplace Relations Act has application, placing the instant case outside of the jurisdiction of the Commission. [32] The RSPCA Tas is incorporated under the Associations Incorporation Act 1964 (Tas) which provides at section 2 – Interpretation – that “association”
“Does not include any association, society, club, institution, or body that is formed or carried on for the purpose of trading or securing pecuniary profit for its members.”
[33] The respondent’s submission that no trading restrictions applied (as had applied in the case in the Hillman case) is wrong; the above trading restrictions apply. The question addressed in Adamson was whether such restrictions meant that the organisations could not be trading corporations. [34] Mr Jones relied heavily upon the judgment in Adamson in which Mr Adamson argued that the WA National Football League and a South Australian football club were trading corporations formed within Australia and were therefore bound by the Trade Practices Act (Cth), which gives jurisdiction to the Federal Court to enforce the act. It was argued inter alia by the football league that, because they were incorporated under associations incorporation acts which prevent the organisations from trading for the profit of their members, they were not trading corporations. [35] Barwick CJ, in the lead judgment, formed the opinion that the organisations were trading corporations within the meaning of the Constitution and thus the Federal Court did have jurisdiction. He found that the provisions of the associations incorporations acts did not prevent the organisations from trading; only from trading for the profit of their members. If a certificate of incorporation is issued, then the organisation must be a corporation. Therefore such an organisation could be a trading corporation. Trading corporations were not confined only to those corporations for whom the sole or predominant purpose was to trade and it was necessary to examine the activities of a corporation in order to determine the character of the corporation. He said, at 208:
“The only sure guide to the nature of a company is a purview of its current activities, a judgment as to its nature being made after an overview of all those activities.”
[36] I accept that the “activities test” should be applied in consideration of the instant case. [37] Whilst Adamson established that an organisation registered under an associations incorporation act can be a trading corporation, the authorities are agreed that not every organisation which is engaged in trading is a trading corporation. [38] Spender J in Etheridge summarised the case law and observed that there are two tests – one being an examination of the purpose for which the corporation was formed and the second a consideration of its activities, of which the activities test was determinative following the High Court’s acceptance of Adamson in New South Wales v Commonwealth (2006) 229 CLR 1, known as the Work Choices case. [39] In Etheridge it was found that the Etheridge Shire Council was not a trading corporation because the “trading activities” were for the public benefit and were conducted at a loss. These activities included: a visitor information centre, a tourism facility, road works, private works, hostel accommodation, child care centre, hiring of halls, water sales and provision of services to the Federal government. [40] Justice Spender, at paragraph 147, quoting Mason, Murphy and Deane JJ in State Superannuation Board v Trade Practices Commission (1982) when discussing Adamson said:
““The decision in Adamson is of importance for two reasons. First, the majority of the Court…rejecting the argument that the purpose for which a corporation is formed is the sole or principal criterion of its character as a trading corporation.”
This passage indicates that the purpose for which a corporation is formed is not the “sole” or “principal” criterion for the purposes of characterisation. The passage suggests, however, that the purpose of the formation of a corporation is not irrelevant in that process.”
[41] Therefore, the purpose for which the organisation was established must be of some relevance. There is no doubt that the RSPCA Tas is a not-for-profit organisation, incorporated under the Associations Incorporation Act, formed solely for the purposes of ensuring and promoting the welfare of animals, and that all of its powers and fundraising and commercial activities are solely for the purposes of achieving those objectives. [42] The RSPCA Tas, on its website, describes itself as:
“a non-Government, community-based charity and our primary concern is the welfare of all animals – great and small.”
[43] It makes reference to its emphasis on fund-raising to support its work:
“It costs millions every year to provide care for animals, run our education programme and campaigns and assist animals in distress Statewide…
RSPCA Tasmania are constantly developing ways to raise funds…”
[44] The Objects of the organisation are: “To protect from cruelty animals of all species by every lawful means; i. To relieve the suffering of animals, whether the suffering is caused by cruelty or otherwise; ii. To initiate and promote the passing of legislation protecting animals from cruelty; iii. To ensure by lawful means the effective observance and enforcement of current legislation that protects animals; iv. To take such steps and do such things as may be necessary or advisable in education all persons in the community in the care, maintenance, control and treatment with kindness and consideration of all animals; and v. To promote, participate in and sanction animal welfare activities. [45] The RSPCA Tas constitution sets out the powers of the organisation, which are:
“Solely for the purpose of carrying out the abovementioned objects and not otherwise.[4]”
[46] In the Red Cross case referred to by the respondent, Wilcox J applied the “activities test” and found that the Red Cross Society and the Prince Alfred Hospital were trading corporations because of the scale of their trading activities, which amounted to millions of dollars. The Society’s activities included the supply of blood and blood products, which he found was not a trading activity because it was a public welfare service provided at no charge. The government received more than $10 million in one year in payments from the government. Wilcox J said at paragraph 123:
“…I do not think 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.”
[47] However, Wilcox J found that in addition to the blood supply activities the Red Cross Society earned considerable sums of money from the sale of goods – an amount of over $2 million - mainly through opportunity shops and street stalls and other such activities. It charged for the provision of first aid courses and owned and operated a gift shop. [48] In relation to the Prince Alfred Hospital, His Honour addressed the question of whether the trading activities were substantial. The hospital received almost $15 million from patients’ fees and almost $4 million from “business activities”. [49] He said at paragraph 132:
“It is true that these amounts were dwarfed by its State government subsidy…But that does not matter. Trading activities yielding some $18 million per year can only be described as substantial.”
[50] In the case of Orion, also cited by the respondent, the RSPCA Vic was found to be a trading corporation for the purposes of the Trade Practices Act. As part of its activities it sells products for animals and conducts training courses for their care. Weinberg J said at paragraph 148:
“…the mere fact that a corporation engages in trade is not enough to constitute it a “trading corporation”.
[51] Overall, the extent of the revenue raised through trading represented $5.5 million which was 55% of the total revenue of almost $10 million. Weinberg J found at 171:
“It seems to me that, in accordance with the authorities to which I have referred, and on the evidence, the RSPCA must be regarded as a trading corporation within the meaning of s4 of the Act. I accept that trading on a modest scale does not imbue a company with the character of a trading corporation. However, in the RSPCA’S case, its trading activities seem to me to be anything but modest.”
[52] In Hillman, the Full Bench of the Industrial Court of New South Wales found that the Bankstown Handicapped Children’s Centre Incorporated was not a trading corporation. Two questions were determined: whether they engaged in trading activities; and, if so, whether those trading activities were such that they could be characterised as a trading corporation. The service was incorporated under the Associations Incorporations Act 1984, operating in the disability services and childcare sectors to provide disability services for children and young people. The total income was approximately $10 million per annum. The state government provided funds to the organisation subject to a funding agreement. Some components of that funding were required to be returned to the government if they were not acquitted. In addition, the service received funds from residents and fees from attendees at the service’s community access programs. The fee component comprised 5.5 per cent of its income. [53] The Full Bench found that the service was a public welfare corporation, which characteristic, while not determinative, was instructive. At paragraph 61:
“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 merely a peripheral activity not forbidden by the organic rules of the corporation, the conclusion that the corporation is a trading corporation is open.”
...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.”
[54] And, at paragraph 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 St George]…
Though profit-making is perhaps not the essence of trading, it is a usual concomitant, and it can be said that the applicant trades at a profit.”
[55] The Full Bench noted that the Bankstown Handicapped Children’s Centre Association Inc would not have been considered to be engaged in trading activities if the standards applied were those of the minority in St George which were later affirmed in Adamson, in that the services could not be said to be sold in the way that electricity and services were sold in St George. They said, at paragraph 58:
“Stephen J considered that trading activities were those that were bought or sold and that non-trading activities were those provided freely.
…
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.
…
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 an organisation.
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 and sold. All of these factors are relevant to the determination of the jurisdictional question in this matter.
…
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. ”
[56] The Full Bench concluded that the activities for which the government provided funds to the organisation did not occur in a commercial market setting, or even a limited market setting. The activities of the service were social welfare activities provided to target groups. The activities were not of a commercial nature and could not be described as buying or selling at a profit or loss. They said, at paragraph 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.”
[57] The Full Bench noted that their findings substantially accorded with what Wilcox J found in Red Cross, when he considered whether blood transfusions were trading activities and found that that aspect of the Society’s activities were not trading activities when he said that he did 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”.
[58] In relation to the non-acquitted activities of the service, the Full Bench decided that the fee-for-service activities could not be seen to be sold in the way that electricity was sold in St George. It is not an activity that is commercial in nature; price is not a relevant factor. The Full Bench found that these activities were not trading activities. [59] As indicated earlier, I accept that the “activities test” is the appropriate test, as found by Barwick CJ in a minority decision in St George (in which the High Court adopted the purposive reasoning) and later accepted by the High Court in Adamson. The “activities test”, however, is not so narrow as to be limited to an examination of an organisation’s trading activities only. The “activities test” is concerned with an organisation’s overall activities. [60] In Adamson, Mason J said at 472:
“Trading corporation” is not and never has been a term of art or one having a special legal meaning….Essentially, it is a description or label given to a corporation when its trading activities form a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation.”
[61] What has been found to be a “sufficiently significant proportion” of overall activities has varied from case to case, and should be determined depending on the range, scope and purpose of the overall activities of the organisation (as distinct from the purpose of the organisation itself). [62] Barwick CJ said in Adamson at 209:
“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. (my emphasis)
[63] Gibbs J in St George said at 562 :
“…the mere fact that a corporation is trading does not mean that it is a trading corporation. It is necessary to determine the true character of the corporation, upon a consideration of all the circumstances that throw light on the purpose for which it was formed. Thus there is no difficulty in holding that the fact that a corporation carries on some trade which is merely incidental or ancillary to the fulfilment of its main purpose does not give it the character or a trading corporation.” (my emphasis)
[64] I have read and considered all the authorities referred to during the proceedings. I now examine the activities of the respondent in the light of the principles established in the authorities referred to above. [65] As found in Adamson, if trading is a substantial corporate activity then the conclusion that it could be a trading corporation is open. It is first necessary to establish that trading is a substantial corporate activity and, if so, to then examine those trading activities in the light of the overall activities of the corporation. [66] It is clear that the RSPCA Tas does engage in some trading activities. Whilst the percentage of the total income that is derived from those activities is not determinative, it is relevant. Mr Jones told the Commission that between $800,000 and $840,000 of the organisation’s total income for the year ended 30 June 2007 was obtained as the result of trading activities amounting, he said, to over 40 per cent of their total revenue of $1,972,248. [67] There appears to have been little in the way of close analysis of the activities. I note that only an income statement was provided, not an expenditure statement, which circumstance does not enable a consideration as to whether particular activities were conducted at a profit or a loss. The statement shows an overall operating loss of $152,449 (whether a corporation operates at a loss is one of the indicia when considering whether or not an organisation is a trading corporation). The respondent was generally unable to answer questions in relation to aspects of the income statement and some of the responses were unclear. In reaching my decision I have had little option but to take the words in the Consolidated Income Statement – Exhibit R2 - at face value and have drawn my conclusions on the basis of what the words say. [68] The respondent argued that the fact that GST of $94,000 was paid showed that the organisation traded in amounts of between $800,000 and $900,000. I am of the opinion that taxation payments are of no assistance or relevance in determining this case, because of the different tests and considerations involved. [69] The Commission enquired of the respondent on several occasions what the objects of the organisation were, without being provided with that information. Little or no information was proffered regarding the overall activities of the organisation. In order to be properly informed about the RSPCA Tas’s activities I have taken into account publicly available information from the organisation’s website, which provides an overview of the RSPCA’s operational activities, structure, charter and constitution. It would have been preferable for this information to have been received by way of evidence, but section 20(1)(c) of the Act says that the Commission: “is not bound by the rules of evidence, but may inform itself on any matter in such a way as it thinks just.” [70] I have concluded that trading is not a substantial corporate activity on the part of RSPCA Tas. However, even if that were not so, I am of the view that the trading activities are ancillary to the fulfilment of the main purpose of the organisation and are in the main, activities which are directly related to the promotion of the welfare of animals. A significant proportion of the activities claimed by the respondent to be trading activities are funded by the public purse for the purpose of the provision of a public benefit. Whilst very little information was provided by the respondent in making their case, it seems to me that most of the claimed trading activities lack a commercial element, and are likely to have been operating at a loss (there was an overall operating loss). [71] Whilst not determinative, the purpose of the organisation is of some relevance, as is the source of funding. The source of the income of the RSPCA is overwhelmingly from donations, bequests and grants. [72] Revenue which is, in my view, derived from trading activities is: income from the boarding of animals ($175,169), veterinary clinic income ($869), merchandising ($49,600) (no information was provided as to what goods and services were traded) and sundry income ($11,802). This amounts to $237,440 or approximately 12 per cent of the total revenue; significantly less than the 40 per cent claimed by the respondent. Mr Jones said that the purpose of the activities (in addition to supporting the work of promoting the welfare of animals) was “the viability of the organisation”. [73] Income (not included in the 12 per cent referred to above) claimed by the respondent to be from “trading activities” included $175,169 received from animal adoption fees. The RSPCA Tas website says that they operate a number of animal shelters and that each year thousands of animals come into their care and are de-sexed, vaccinated and wormed before they are adopted. In my view, the fees received from adopting these animals out is not a trading activity but is cost-recovery for a core activity conducted as part of the RSPCA’s animal welfare charter, which includes care for abandoned and mistreated animals and the re-homing of strays. No information was provided as to the cost of operating this service or whether the fees received covered the costs. [74] Also counted by the respondent as a “trading activity” was an amount of $153,054 which is listed as “vet clinic sponsorship” (as distinct from another item listed as “vet clinic income”). The provision of a veterinary service would appear to be a core activity given that the organisation’s constitution has as its first object: “To relieve the suffering of animals, whether the suffering is caused by cruelty or otherwise.” It is obvious that in order to achieve that object veterinary services need to be provided to the “thousands” of mistreated, neglected and abandoned animals the organisation takes into its shelters each year. It is also obvious that this activity would need to be funded. When questioned as to why the veterinary services sponsorship income was counted as a “trading activity”, when, on the face of it, it seems to be money received to sponsor the veterinary clinic, the respondent was unable to clarify the issue. Whilst not conceding that the income was from sponsors the respondent was “happy to move on”. I note that that the RSPCA Tas website actively promotes sponsorship from individuals and businesses. I have concluded that the reference to sponsorship means what it says, and should not be included as income from a trading activity. In any event, the provision of veterinary services to mistreated, abandoned and suffering animals is, in my view, in the same category as the animal adoption program; it is a core part of the organisation’s animal welfare service provision and income raised to provide this service, however achieved, does not have the characteristics of “trade”. [75] The respondent included as a “trading activity” an amount of $142,000 received from the Department of Primary Industry and Water (DPIW) for the provision of an inspectorate service. The DPIW operates an animal welfare inspectorate comprising RSPCA and department officers. This service is provided under the provisions the Tasmanian Animal Welfare Act 1993 which provides for the appointment of inspectors who have powers under the act. Funds provided for this activity of the RSPCA should be treated in the manner described by Wilcox J in Red Cross when he said:
“I do not think 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”.
[76] To obtain the amount of $800,000 to $840,000 claimed by the respondent to be trading activities, income derived from operating a pound must have been included in their calculations. Of this income, $47,192 was received from the Launceston City Council which is itemised as a “service contract”. A further amount of $9,381 is itemised as “dog release”. Again, there was a paucity of information provided, but, at face value, it appears that the RSPCA entered into a service arrangement with the council in relation to the operation of the dog pound. That should be regarded in the same way as the provision of the inspectorate; that is, as a public service funded by local government, and should not be counted as a trading activity. The amount of funds listed as “dog release” presumably refers to amounts of money paid by members of the public to retrieve animals from the pound and should, I think, be regarded as cost recovery rather than as trading. Again, there was no information provided as to the actual cost of operating the pound and whether the organisation did so at a profit or a loss. [77] It is not true, as claimed by the respondent, that the “RSPCA Tas Inc receives no government funding.” There is the amount received from DPIW of $142,000 plus the amount from local government of $47,192. The fact that “service contracts” may have been entered into does not change the source of the income. Service contracts were entered into with government agencies by other organisations in the authorities referred to and the funding received in this manner was found not to amount to income received through trading activities. There is a further amount of $88,867 listed as income from “grants”, for which no information was provided. “Grants” is a term usually associated with governments. It is itemised separately from “donations’ and “sponsorships”. It is likely that this income was also as a result of government funding, however, the amount was not counted by the respondent as being as the result of trading activities. [78] The animal de-sexing program, whilst fee-for-service, is obviously an integral part of achieving the objective of reducing the number of unwanted animals. Again, no information was provided as to whether this service operated at a profit or a loss. [79] The largest proportion of the income received by the organisation came from sponsorship, legacies and bequests, donations and membership fees, amounting to $902,722, which is clearly not derived through trading activities. [80] Income was also received by way of grants and subsidies (in addition to the $189,192 received from DPIW and LCC), amounting to $129,107 including an amount of $21,500 described as “council subsidies”, amounting to more than $300,000 most likely received from various levels of government. Included under grants and subsidies was a small amount for “royalties”. No information was provided in relation to this. [81] There is an amount of $51,799 attributed to “telemarketing” which the respondent included as income from a trading activity. I am uncertain about this. The respondent told the Commission that it was from “running the telemarketing services” and that it was not soliciting donations. Mr Jones said: “the RSPCA has a telemarketing focus with their own staff and my understanding is that that’s a fee for service that’s accounted in the process of that” and that it was “subcontracted out[5]”. Whilst still unclear, it seems that it may have been an operation conducted by the RSPCA on behalf of other organisations, for which they received a commission on funds raised for those other organisations, in which case it would, I think, be a trading activity with a definite commercial focus. If this is so, then the percentage of income attributable to trading activities would increase by about two per cent. Whatever is the case, the amount is not so substantial as to make a difference to the findings in relation to the activities of the organisation. [82] Items listed under “non-operating activities” are not trading activities. Excluding legacies and bequests, they amount to $91,062. [83] It is very clear that most of the organisation’s income is received from donations (however described) and funding (however described) from various levels of government, with trading activities of a commercial nature generating a small proportion of the income received by the organisation. [84] As said earlier, the first part of the activities test is to establish whether or not trading is a substantial corporate activity, and then, if so, the conclusion that the organisation is a trading corporation is open. I am not convinced that the RSCPA Tas trades to such a significant extent as to meet the test. I incline to the view that the amount derived from commercial trading activities is so modest as to not imbue the RSPCA Tas with the character of a trading corporation. While acknowledging that comparing income from trading activities against total income has been a consideration when establishing substantiality, the authorities have more often emphasised the large sums of money involved as being determinative. There is no established threshold above which a corporation can be considered to be a trading corporation. [85] Even if the sum involved was not such a modest amount, my opinion is that the RSPCA Tas is not a trading corporation because a large proportion of the organisation’s income from “trading activities” (which operate at an overall loss) is from activities that are integral to their work in ensuring the welfare of animals. The organisation is publicly funded to provide many of its services and its main source of income is donations, sponsorship and bequests. [86] The authorities make it clear that the “activities test” is concerned with an examination of the corporation’s overall activities in order to determine whether its character is that of a trading corporation, or otherwise. [87] As said by Barwick CJ said in Adamson: “The only sure guide to the nature of a company is a purview of its current activities, a judgment as to its nature being made after an overview of those activities.” And in St George he said a trading corporation is: “a corporation whose predominant and characteristic activity is trading whether in goods and services.” The RSPCA is clearly not such a corporation. Its predominant and characteristic activity is not trading in goods and services. Its predominant and characteristic activity is the provision of services, funded through various means, dedicated to promoting the welfare of animals. Activities that have a commercial element and which could be said to operate in a market setting are a small proportion of the RSPCA Tas’s operations [88] Cumulatively, all of the above factors have led me to the conclusion that the RSPCA Tas does not have the characteristics of a trading corporation and therefore I find that it is not a trading corporation. I find that the Commission has jurisdiction to hear and determine the dispute. [89] It is open to the applicant to apply to have the matter set down for hearing.
P C Shelley
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