Incorporated Association found not to be trading corporation
The full bench of the New South Wales Industrial Relations Commission (“NSWIRC”) recently ruled that an incorporated employer did not have a significant part of its revenue derived from trading activities and therefore was not a trading corporation so as to fall within the definition of constitutional corporation under the WR Act.
In the case of Garvey v Institute of General Practice Education Incorporated  NSWIRComm 159, an employee had applied for relief from victimisation and unfair dismissal under the State’s Industrial Relations Act 1996. However, the employer challenged the NSWIRC’s jurisdiction to hear the matter based on its contention that it was a constitutional corporation.
The employer, the Institute of General Practice Education Incorporated (“IGPE”) was incorporated under the Associations Incorporated Act 1984 (“AI Act”).
The main issue for determination by the NSWIRC was whether the employer engaged in trading activities and if so, whether those activities meant that IGPE could be characterised as a trading corporation.
The full bench set out the key principles relevant to the characterisation of a corporation as a trading corporation, which can be summarised as follows:
- whether a corporation is a trading corporation depends upon the current activities of the corporation;
- a corporation that carries on trading activities can be found to be a trading corporation even if it was not originally established to trade;
- the focus is not on the purpose of the corporation although the objects of the corporation will not be completely irrelevant;
- 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:
– not substantial; and
– a sufficiently significant proportion of its overall activities
- a trading corporation may exist even though its trading activities:
– do not form the predominant part of the overall activities of the corporation;
– are not motivated by the hope of private gain but to enable other activities to be performed;
- “trading activities” generally connote the activities of a commercial nature involving the exchange of goods or services for reward;
- whether the trading activities of a corporation are sufficient to warrant it being characterised as a “trading corporation” is a question of fact and degree.
Although the primary source of IGPE’s revenue came from federal government funding, IGPE claimed it also earned income from providing teaching services to a university. While the NSWIRC accepted that those teaching services could properly be described as a trading activity, it concluded that the IGPE could not properly be characterised as a trading corporation “on the basis of its single trading activity”. In reaching this conclusion, the full bench compared the proportion of revenue arising from IGPE’s sole trading activity to its total revenue and found that it only formed a very small percentage amount.