WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

PARTIES Mark James Lawrence

APPLICANT

-v-

Aboriginal Legal Service of Western Australia, Inc

RESPONDENT

CORAM Commissioner S J Kenner

HEARD Tuesday 3 OCTOBER 2006, friday, 27 October 2006,

 Friday, 17 November 2006,

DELIVERED 19 DECEMBER 2006

FILE NO. U 477 OF 2006

CITATION NO. 2006 WAIRC 05849

CatchWords Industrial law - termination of employment - Harsh, oppressive and unfair dismissal - Whether Commission has jursidiction - Trading corporation - Principles applied - Commission not satisfied respondent is a constitutional corporation - Claim within Commission's jursidiction - Application to be re-listed - Industrial Relations Act, 1979 (WA) s 29 (1)(b)(i), s 23A, Commonwealth Constitution s 51(xx), s 109, Workplace Relartions Act, 1996 (Cth) s 4, s 5, s 6, Judiciary Act 1903 (Cth) s 78B.

Result Application to be re-listed

Representation 

Applicant Mr Borgeest of counsel instructed by Slater and Gordon

Respondent Mr Caspersz of counsel instructed by Blake Dawson Waldron

Reasons for Decision

1 The substantive claim in this matter is one by the applicant that on or about 21 July 2006 his employment as a solicitor by the respondent was terminated harshly, oppressively and unfairly.  The applicant now brings the present claim pursuant to s 29(1)(b)(i) of the Industrial Relations Act 1979 (“the Act”) seeking orders under s 23A of the Act that he be reinstated in his employment.  The respondent objects to and opposes the applicant’s claim.  Following the filing of the notice of answer and counterproposal in the matter, the respondent’s new solicitors on the record Messrs Blake, Dawson and Waldron advised that the respondent intended to raise as a preliminary issue, that it is a trading corporation for the purposes of s 51(xx) of the Commonwealth Constitution and s 4 of the Workplace Relations Act 1996 (Cth) (“the WRA”).  The respondent requested that the Commission hear this matter as a preliminary issue. 

2 Accordingly, the original dates listed to hear the application were vacated, and directions were made to hear the respondent’s preliminary objection to jurisdiction, including the serving of notices pursuant to s 78B of the Judiciary Act 1903 (Cth) on the Attorneys-General of the Commonwealth and of the States.  Those notices were duly served by the respondent’s solicitors and none of the Attorneys-General has sought leave to intervene.

Contentions of Parties

3 Both counsel for the applicant Mr Borgeest and for the respondent Mr Caspersz made detailed and helpful submissions on the relevant law in relation to whether a corporation is a trading corporation for the purposes of s 51(xx) of the Commonwealth Constitution and the application of those principles to the facts of the case.  I will return to those matters later in these reasons.

4 As to the activities of the respondent, counsel for the respondent submitted that there are a number of features of the respondent’s activities that should characterise it as a trading corporation.  The respondent provides general legal services to members of the Indigenous community by solicitors employed for that purpose.  Importantly for the purposes of the respondent’s arguments, it took part and was successful in a competitive tender process initiated by the Commonwealth Government for the funding of the provision of legal services to Indigenous persons.  As a result of the successful tender, detailed contractual arrangements were entered into between the respondent and the Commonwealth, which counsel for the respondent described as a “commercial” contract with commercial provisions.  Some of these features include for example, the provision of invoices by the respondent to the Commonwealth for the payment of monies due under the contract, in the form of monthly fees.  Reference was also made to various features of the contractual arrangement imposing certain performance requirements on the respondent.

5 Other matters referred to by counsel for the respondent include the fact that the respondent is registered as a business for GST purposes.  The respondent is required to keep appropriate professional indemnity insurances and the maintenance of a trust account, in respect of its work performed by its legal practitioners.  Also, counsel submitted that as the contract may be terminated by the Commonwealth for breach, this adds to the “commerciality” of the arrangements.  Reference was also made by the respondent to the fact that under the financial arrangements with the Commonwealth, there is some means testing as to access to its services by members of the Indigenous community and in some circumstances, a contribution to legal costs may be required by an individual client.

6 For the applicant, counsel submitted that in reality, the activities undertaken by the respondent accords with the description of Wilcox J in E v Australian Red Cross Society and Others (1991) 99 ALR 601 that being the “gratuitous provision of a public welfare service, substantially at government expense”.  Counsel for the applicant submitted that the nature of the funding arrangement between the Commonwealth and the respondent, albeit in contractual terms, cannot alter the essential nature of the activities undertaken by the respondent which do not involve any activities in trade.

7 It was the applicant’s contention that in reality the tender process leading to the agreement between the Commonwealth and the respondent for the provision of legal services to Indigenous persons, was a part of the general Legal Aid Services program undertaken by the Commonwealth Attorney-General’s Department and is simply a manifestation of one of many funding arrangements for the provision of like services throughout Australia.  In essence, the applicant submitted that the current financial arrangements between the Commonwealth and the respondent is not greatly different to previous arrangements whereby the respondent’s activities were funded through the Aboriginal and Torres Strait Islander Commission (“ATSIC”). The new arrangements enable a greater level of targeting and control in the provision of such services, and more stringent and detailed reporting and evaluation requirements.

The Evidence

8 There is little dispute on the facts in his matter.  On behalf of the respondent, who had the carriage of the preliminary issue, affidavit evidence was led through Mr Dennis Eggington the Chief Executive Officer of the respondent and also from Mr Andrew Grist the respondent’s in-house accountant.  For the applicant, evidence was adduced by way of an affidavit of the applicant with its various annexures.  Neither Mr Grist nor the applicant were cross-examined on their affidavit evidence. 

9 Mr Eggington has been the Chief Executive Officer of the respondent for some 11 years and prior to this was a member of the respondent’s board for about six years.  The respondent is an association incorporated under the Associations Incorporations Act 1895-1969 and a copy of the relevant certificate of incorporation dated 7 January 1975 was annexure DGE2 to Mr Eggington’s affidavit.  He described the main activity of the respondent as the provision of civil and criminal legal services to Indigenous persons in Western Australia.  The organisation however does do other things consistent with the promotion of the rights of Indigenous people within the Australian legal system.

10 In terms of employees, Mr Eggington testified that there are some 30 legal practitioners employed by the respondent throughout 18 locations in the State.  As required by law, trust accounts are kept by the respondent and it possesses professional indemnity insurance.  The employee’s terms and conditions of employment are covered by various industrial instruments under the WRA. 

11 As well as legal practitioners, the respondent provides court officers who are not legal practitioners but who provide assistance to Indigenous clients on more minor matters and also assist with local knowledge and language. 

12 In terms of funding arrangements, Mr Eggington testified that prior to 2005, the respondent received virtually all of its funding from ATSIC and in the period 2003 to 2005, from its successor body ATSIS.  With the abolition of ATSIC, that situation changed and in 2004-2005 an open tender process for funding by the Commonwealth was commenced, for the provision of legal services to Indigenous people throughout Australia.  The respondent competed in the first open tender process and was successful.  It entered into a written contract for the provision of such services with the Commonwealth in April 2005.  A copy of the tender document was annexure DGE3 to Mr Eggington’s affidavit and a copy of the resulting contract between the Commonwealth and the respondent was annexure ACG3 to the affidavit of Mr Grist.  Mr Eggington said that the respondent received little funding from the State and is not funded generally by charges to Indigenous clients.  Mr Eggington was involved in the tender process and testified that the major change from his point of view is that formerly the respondent decided what it was going to do within its overall charter and obtained funding for that work.  Now, the Commonwealth requires work to be done and the respondent tenders for it accordingly.

13 In terms of the tender process, Mr Eggington was taken to p 48 of his affidavit in annexure DGE3 being the tender document.  This section of the tender document is headed “Funds Available for Purchase of Services” and sets out the total funding allocations for the States of Victoria and Western Australia.  The total funding allocation available for Western Australia for the three year contract period from 2005-06 to 2007-08 is $23,439,891.00.  Mr Eggington confirmed that the respondent did not tender on the basis of any lower figures for the provision of its services.  In fact it seems that ultimately, the funding made available was higher than the initial allocation.

14 As a part of the tender process, Mr Eggington attended a briefing session and said that he was aware of two other groups who also attended the session including Legal Aid and a private law firm he thought.  Mr Eggington had no knowledge of any other tenderers for the provision of legal services in Western Australia.  Otherwise there is no evidence before the Commission as to any competition the respondent may have had for the funding.  It may well be the case in any event that few organisations, other than the respondent in Western Australia, could provide the level and depth of services to the Indigenous community required by the Commonwealth, particularly in remote locations.  It is to be noted in this regard, that from annexure MJL4 to the applicant’s affidavit, it seems that the organisations that have entered into such arrangements with the Commonwealth are Aboriginal and Torres Strait Islander legal Services organisations, similar to the respondent.

15 Mr Grist has been employed as the respondent’s accountant for about eight years.  He confirmed in his affidavit that the respondent is a registered business name and is registered for the purposes of goods and services tax.  Relevant documents in relation to these matters were annexed to his affidavit.  He referred in his evidence to the requirement under the contract, for the respondent to submit a tax invoice to the Attorney-General’s Department monthly in arrears and a copy of such an invoice was annexure ACG4 to his affidavit.  Also annexed to Mr Grist’s affidavit, was a copy of the respondent’s 2006 Annual Report containing a summary of the 2006 Consolidated Annual Reports.  From those documents, Mr Grist said that the income for the year to date as at 30 June 2006 from the Commonwealth was $7,264,521.00 and $956,197.00.  Those payments were received by the respondent in accordance with the terms of its contract with the Commonwealth.  The Commonwealth pays the 10% goods and services tax.  Other amounts noted in Mr Grist’s evidence included interest receipts of some $67,103.00 and costs covered and retained, relating to costs and fees charged to clients in accordance with the respondent’s contract with the Commonwealth, being in the sum of $205,933.00.  Mr Grist also referred to other sundry income of $84,193.00 which was inclusive of wage subsidies, refunds on car lease agreements and other various amounts.  The respondent also possesses on a freehold basis, property valued at $352,632.00.  There is no other activity undertaken by the respondent from which it derives any income.

16 In his affidavit, the applicant referred to a search he had undertaken of the Australian Taxation Office website, reporting on the incorporation and taxation status of persons and entities with Australian Business Numbers.   Annexed as MJL3 to his affidavit, was a copy of a document entitled “Current Details for 61 532 930 441” being the Australian Business Number for the respondent.  On the document produced in his evidence, the respondent’s tax concession status is as a Public Benevolent Institution, and is endorsed for various tax concessions including a GST concession, an FBT exemption and an income tax exemption.  The respondent is also endorsed as a deductible gift recipient on that same document.

17 In terms of the funding arrangements for the respondent, the applicant said that whilst he had not seen any tender or contractual arrangements for the respondent’s funding by the Commonwealth, he did undertake a website search for the Commonwealth Attorney-General’s Department and annexed to his affidavit various documents including a media release dated 12 November 2004, in relation to the request for tenders (MJL4); a document entitled “purchase of Legal Aid services for Indigenous Australians” in relation to the tender the respondent responded to (MJL5); a table entitled “Attorney-General’s Department List of Contracts Financial Year 2005-2006” at pages 1, 2 and 17 (MJL6); a document entitled “Policy Framework For Targeting Assistance Provided By Aboriginal and Torres Strait Islander Legal Services July 2005” (MJL7) and finally a document entitled “Policy Directions For The Delivery Of Legal Aid Services to Indigenous Australians May 2006” (MJL8) which appears to be in the same terms as the document dated March 2005 by the same name which is Schedule II to the contract document at annexure ACG3 to Mr Grist’s affidavit.

18 I find accordingly.

Consideration

Trading Corporation

19 In the event that the respondent is a trading corporation for the purposes of s 51(xx) of the Commonwealth Constitution and ss 5 and 6 of WRA, then by the operation of s 109 of the Constitution, for reasons that I have expressed recently, the application must be dismissed:  Sewell v Glenn Brown – CTI Logistics (2006) 86 WAIG 3278 per Kenner C at pars 15-19.

20 Whether a corporation is a trading corporation for these purposes is a question of fact and degree.  There are a number of guiding principles which have fallen from several judgments of the High Court to which reference should be made in order to determine whether in any particular case, a corporation can be so characterised.  If trading activities form a significant or substantial part of a corporation’s activities, and trading is not precluded by the organic rules of the corporation, then the conclusion that the corporation is a trading corporation is one that is open: R; ex parte The Western Australian National Football League (1979) 143 CLR 190 per Barwick CJ at 208; per Mason J at 233.  It has been said that “It is the acts of buying and selling that are at the very heart of trade:  as Lush J said in Higgins v Beauchamp [1914] 3 KB 1192 at 1195, “a trading business is one which depends on the buying and selling of goods”.  The word “trade” was said by the Lordships in Commissioners of Taxation v Kirk [1900] AC 588 at 592, to mean primarily “traffic by way of sale or exchange or commercial dealing”.  The Shorter Oxford English Dictionary gives, as meanings of ‘trading’, the ‘carrying on of trade; buying and selling; commerce, trade, traffic’:  E v Australian Red Cross (1991) 99 ALR 601 per Wilcox J at 632.

21 The attainment of profit is not necessary to the conclusion that a corporation is a trading or financial corporation, and the motive or object of a corporation does not necessarily condition the conclusion as to whether it is a trading corporation: R v Trade Practices Tribunal; ex parte St George County Council (1974) 130 CLR 533 per Stephen J at 569-570.  Furthermore, trading activities do not cease to be trading because they are entered into in the course of carrying out some other primary undertaking, which is not characterised as trade, as long as the carrying on of that undertaking requires or involves the engaging in trading activities: State Superannuation Board v Trade Practices Commission (1982) 150 CLR 282 per Mason, Murphy and Deane JJ at 303-304.  In the case of a corporation which has yet to commence any activity, then the “purpose test” taken from the constitution of a corporation can be used:  Fencott v Muller (1983) 152 CLR 570 at 602.  (See also the discussion of these principles generally in Quickenden v O’Connor (2001) 184 ALR 260.)

Is the Respondent a Trading Corporation?

22 There is little contest in the present matter as to the relevant facts.  I have set out the essential outline above.  The issue to be resolved is how the activities of the respondent, which is the focus of the inquiry, are to be characterised.  Inherent in the respondent’s submissions is that the activities of the respondent at the material time, which is the time at which the applicant was dismissed, embraces not just what the respondent does, but how it goes about it, ie the method of financing those activities.  The respondent’s contention being that the “commerciality” of the arrangement between the Commonwealth and the respondent in terms of the funding of the provision of legal services for Indigenous persons in this State is part and parcel of the trading activities undertaken.  That is, it is the provision of legal services to Indigenous persons in this State, in return for which the Commonwealth pays the respondent, is trading.  On the other hand counsel for the applicant submitted that in relation to the activity of the respondent, that being the “gratuitous provision of welfare services” the means by which those services are funded, is a matter of form and is peripheral to the essential inquiry to be undertaken by the Commission.

23 Both counsel placed some emphasis on the judgement of Wilcox J in Australian Red Cross.  In this case, there was an action brought against the Australian Red Cross Society and other parties, alleging that the respondents had breached the Trade Practices Act 1974 (Cth) and were negligent in giving the plaintiff contaminated blood which was infected with HIV.  An issue arose as to whether the Red Cross was a trading corporation for the purposes of the Trade Practices Act 1974 (Cth).  Having considered the evidence and summarising the relevant authorities (at 340-343) Wilcox J concluded at 343 as follows:

 “It is convenient to deal immediately with a submission made on behalf of the applicant that, in applying these principles to the first and second respondents account should be taken of their blood supply activity.  The applicant accepts that neither respondent makes any charge for any blood which it supplies.  Neither “trades” in blood, in the usual sense of that term.  But, say counsel, the reality is that the blood transfusion activities of the respondents constitutes substantial business 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, 965,328.00 in respect of its blood transfusion services.  Of this, the NSW Division directly received more than $10m.  (The exact figure is not ascertainable from the Division’s annual report).  These were, of course, substantial sums.  There 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.”

24 Wilcox J went on to find, that the Red Cross raised considerable funds from other activities such as opportunity shops, street stalls and so on to the tune of about $2m over 1984-1985.  He concluded therefore that based upon this activity, which he described as “a major contributor to the Division’s income the scale of the Division’s trading activities amply meets any of the tests enunciated in Adamson.”: at 343.  Wilcox J therefore concluded that based upon this activity, the Red Cross was a trading corporation. 

25 It is clear from this case that consistent with the authorities to which I have referred that it was not the essential, primary or dominant activity of the Red Cross which led His Honour to the conclusion that it was a trading corporation.  It was the ancillary activities, ie the sale of goods through retail shops and the sale of other items and services that constituted trading. 

26 The question in this case must focus on the activities of the respondent at the time of the applicant’s dismissal.  Did the respondent at that time engage in significant or substantial trading activities such that it can be described as a trading corporation?  As opposed to the facts in Red Cross, the respondent does not engage on the evidence, in any other activities such as running shops or providing services for fees, apart from its core activity of providing legal services to the Indigenous community.  The question therefore is whether the provision of those particular services, including the manner by which they are provided, constitutes trading for the purposes of s 51(xx) of the Commonwealth Constitution.

27 The respondent’s argument, as outlined above, is that it is the essentially “commercial” arrangements entered into with the Commonwealth, by way of the tender for the provision of Indigenous legal services, and the “commercial” nature of the resulting contract, in terms of the provision of its services to the Commonwealth that should characterise the activities of the respondent as trading.  The respondent submitted that the process of replying to the invitation for tenders, it being an open competitive tender, places the respondent in no different position to any other legal services provider tendering for work.

28 As noted the applicant contends that the respondent’s focus on the tender process and the contract documents are to place form over substance in terms of the actual activities of the respondent.  It submitted that as in Red Cross, the respondent essentially engages in “the gratuitous provision of a public welfare service, substantially at government expense”.  It is said that the only change that has occurred in recent times, is to the method of funding the respondent, which has gone from the provision of grant funding on an annual basis from ATSIC, to funding on a three yearly basis from the Commonwealth, in accordance with detailed program requirements, as a result of an open tender process.  The applicant’s submission was that the activities of the respondent, that is the provision of legal services to the Indigenous community, is no different.

29 The question is whether the activities of the respondent, which must be the focus of the inquiry, in providing legal services to the Indigenous community constitute activity of a commercial or trading character which involves for example, “buying and selling” being at the very heart of trade:  St George County Council per Stephen J at 569-570.  In this case it is common ground that except in a very small minority of cases, where there may be some contribution made by clients to costs, the respondent provides its legal aid services to the Indigenous community free of charge.  It does not sell its services as a commercial law firm would do.  That is, on one view, the respondent does not sell anything to its clients rather, the Commonwealth, as the respondent would have it, “purchases” the provision of legal services to the Indigenous community via organisations such as the respondent.  There is in effect a tripartite arrangement between the Commonwealth, the respondent and the clients of the respondent, on whose behalf the services are delivered.  It could equally be said however, that the system of annual grants previously in place, through ATSIC, also involve, at least indirectly, the Commonwealth “purchasing” the provision of such services albeit in a different form. That is the Commonwealth was funding an organisation to provide a service that it did not provide directly itself. 

30 There are many examples of such arrangements where governments fund various programs for particular groups in the community and it delivers those programmes through third parties. Depending on the particular arrangements entered into, some of those activities may be regarded as trading and some not.  For example, the provision of job search and placement activities by the private sector to government as part of its well known employment network for fee or reward, set by the provider, and part of the firm’s services to clients generally, would arguably be a trading activity.  The government is in effect contracting out a service that it would otherwise have to provide itself.  Whilst the end user in this example, that is the employer or prospective employee may not have to pay for the service, which is in effect being subsidised by the government, that may not alter the fact that the provider of the service acts on a commercial basis in providing it.

31 In my opinion, an issue arises in this matter as to whether the way in which the provision of the respondent’s services to the Indigenous community are financed, and any surrounding conditions or form of that financing, can fundamentally dictate the characterisation of the respondent’s activities.  This is so in my view, because it cannot be said that the respondent “sells” its legal services to members of the Indigenous community, and certainly, they do not buy them.  There is no doubt that from the objects of the respondent set out in its constitution the respondent is established to promote the welfare of members of the Aboriginal community in their dealings with the justice system administered by laws of the Commonwealth and the State.  That has an overall welfare or charitable type of flavour to it in my opinion.  The respondent is also registered, as noted above, as a Public Benevolent Institution for taxation purposes. That does not mean however, that the respondent cannot be a trading corporation as long as its trading activities are not prohibited by its constitution and the trading activities are a significant or substantial component of its overall activities.

32 Whilst the process for the funding of the respondent by the Commonwealth involves a tender, it is clear on the evidence that the respondent does not bid for the contract on the basis of a competitive price tender.  The Commonwealth sets the amount of funding available over the term of the contract.  The total sum payable is divided into three funding years and payments are made in equal monthly instalments.  This is clear from clause 2.7 on page 21 on the tender document as annexure DGE3 to Mr Eggington’s affidavit.  It is not also insignificant to note that the monies available are described as “funding”.  There are other aspects of the documentary evidence before the Commission that are to be noted as follows.  In the Policy Directions document annexed to the contract document in ACG3 to Mr Grist’s affidavit, is reference to the Legal Aid Services programme at 1.4 in the following terms:

“Legal Aid Services Program

1.4 Under the grant arrangements to be gradually phased out from 1 July 2005, the Department has provided grant funding of some $42.9m annually to a national network of 25 Aboriginal and Torres Strait Islander Legal Services (ATSILS).  This network has delivered legal aid services at some 94 separate service sites across Australia, and in 2002-03 provided legal representation to 69,292 Indigenous people in 113,698 case and duty matters.  Grant funding to ATSILS has been provided on an annual basis and has been subject to a range of specified terms and conditions, including compliance with the terms of a Legal Services Policy Framework.

1.5 The former Aboriginal and Torres Strait Islander Commission (ATSIC), ATSIS and the Department have pursued a series of reforms to Indigenous legal aid services since 1996.  The primary objective of these reforms has been to improve both the quality and efficiency of service delivery, to the ultimate benefit of Indigenous clients.  Among other reforms, changes have been made to the targeting of legal aid services, to the service standards to be met by legal service providers, and to arrangements for data collection, monitoring and evaluation.

1.6 In line with broader Government policy, an important feature of the reform process has been a commitment to contestability and competitive tendering for legal aid services.  The prime objective here is to better prioritise and target available resources, to ensure that services are responsive to established policy priorities and community needs, and to provide the best possible quality of service to individual clients.  Related objectives are to strengthen the accountability of service providers for the quality of services delivered and outcomes achieved, and to provide greater continuity and funding certainty to service providers than annual grant funding arrangements have allowed.

1.7 From 1 July 2005 the program of grant funding to ATSILS will gradually be replaced by a program under which legal aid service providers are selected by means of a competitive tender and engaged by the Department under contract for a three-year funding period.  The Exposure Draft of a Request for Tender was released in March 2004, providing information about the tendering and contracting process and inviting comments and feedback from interested parties.”

33 Additionally in the tender documents at cl 2.2 appears the following as to the description of the services:

“2.2 Objective of the Services

Aboriginal and Torres Strait Islander people experience much high rates of adverse contact with the justice system than other Australians and are incarcerated at significantly higher rates than non-Indigenous people.  They are also one of the most profoundly disadvantaged groups in Australian society, falling well below relevant national benchmarks on virtually every measure of well-being and socioeconomic status.

As part of a broader strategy designed to address both the causes and the effects of Indigenous disadvantage, the Australian Government funds a number of inter-related programs in the broad field of Law and Justice.  These include a program of Legal Aid Services for Indigenous Australians (the subject of this tender), and a range of complementary programs in the areas of Law and Justice Advocacy, Prevention, Diversion and Rehabilitation and Family Violence Prevention Legal Services.  Details of these programs may be found in the ATSIC/ATSIS Annual Report.

The primary objective of the Legal Aid Services program is to improve the access of Indigenous Australians to high-quality and culturally appropriate legal aid services, so that they can fully exercise their legal rights as Australian citizens.”

34 The Policy Framework document as annexure MJL 7 to the applicant’s affidavit in its introduction at par 1 provides:

“1. POLICY INTRODUCTION

1.1 Commitment to a strong, community based, high quality, accountable Legal Service is an effective response to the Government’s policy for Indigenous Australians.

1.2 Aboriginal and Torres Strait Islander Legal Services (ATSILS) play a leading role in promoting and protecting the legal rights and interests of Indigenous Australians, in promoting access to justice, and in resolving many disputes.  ATSILS deliver extensive legal assistance to Indigenous Australians and undertake important welfare roles related to these legal activities.

1.3 The Attorney General’s Department will revise this policy framework from time to time.

1.4 The Attorney General’s Department (AGD) requires ATSILS to adopt the Policy Framework as part of the 2005-2006 Program Specific Conditions for Legal Aid Service Program Funding Agreements (PFA).  This Policy Framework is deliberately designed to encourage discretionary application of its guiding principles.  Therefore there is no need for individual ATSILS to vary the guidelines to suit particular circumstances.

1.5 If an ATSILS believes that some aspects of the guidelines are unworkable in their circumstances, they may apply for a variation to the policy framework.  Such a variation must be negotiated through AGD and it will become a Program Specific Condition of agreement within the Letter of Offer.

1.6 Decisions based on the Policy Framework should result in the most effective use of limited resources and provide a basis for assessment of realistic funding levels.”

35 The Policy Framework also goes on to set out the purpose of the PFA funds and the targeted use to which the funding is to be directed.  It is clear from these provisions that the Commonwealth intends that the PFA funding be very specifically targeted consistent with its overall programme objectives, as set out above, and be the subject of tight controls.

36 The media announcement of the Commonwealth Attorney-General for the tendering process that led to the respondent’s funding included the following:

“The tendering process is intended to ensure that Indigenous Australians have access to high quality, professional and culturally appropriate legal services.  The Government has committed $120 million over three years for the provision of these services.  The selected providers are expected to start delivering services on 1 July 2005.

‘This will provide both increased certainty for service providers and a sharpened ability to distribute resources to those in most need of legal aid services.  The Government is committed to seeing better outcomes delivered to Indigenous Australians and ensuring value for money,’ he said.”

37 From the documentary evidence before the Commission, it is clear that the provision of monies by the Commonwealth to the respondent is a part of the Commonwealth’s overall program of Legal Aid Services for Indigenous Australians.  It is related to a number of other programs, which are set out at clause 2.2 of the tender documents and they include Law and Justice Advocacy, Prevention, Diversion and Rehabilitation and Family Violence Prevention Legal Services.  Additionally, from the tender documents, the Commonwealth’s primary objective in the Legal Aid Services program is stated to “improve the access of Indigenous Australians to high-quality and culturally appropriate legal aid services, so that they can fully exercise their legal rights as Australian citizens.”  That this is a social welfare objective is in my opinion, undeniable. 

38 Whilst it is certainly the case that the contract arrangements are detailed, it is clear from the tender documents and the contract itself that the Commonwealth, wishes to ensure a substantial degree of control over and attach conditions to the allocation of funding for the provision of legal services to the Indigenous community, in terms of quality, efficiency and accountability for the funding it is providing.  The services are to be targeted in ways perhaps different to arrangements of the past.  This is also accompanied by substantial record keeping and reporting requirements that the respondent is required to meet.  These are some of the stated objectives in changing the funding from an annual grant based arrangement administered by the former ATSIC.  I do not consider the detail of the funding and service arrangements as being inconsistent with activities undertaken by an organisation that is not a trading corporation.   Indeed it would be surprising, given the large sums of money involved, if there were not detailed conditions attached to any such funding.

39 As to the terms of the funding contract itself, I do not consider many of the provisions of the contract relied on by the respondent as conclusive of a commercial contract only.  Provisions as to GST, insurance, both professional indemnity and public liability, are of themselves unexceptional.  The engagement of legal practitioners requires the respondent by law, to have in place mechanisms imposed by the Legal Practice Act 2003.  Also the fact that the arrangement may be terminated for breach is again not decisive.  Mr Eggington, in his testimony, referred to the prior grant funding arrangements also being able to be terminated for a breach of conditions.

40 The fact that there is some limited means testing of clients is in my opinion consistent with the Commonwealth’s objective of greater targeting of the services and usage of the funding available being put to the best use.  Many government assistance programs are means tested; for example, family support.  Whilst the provision of invoices may suggest some commerciality, in substance they appear to me to be the administrative mechanism by which the monthly allocation of funding is dispersed to the respondent in accordance with the agreement.  The respondent does not, in reality, “charge” fees to the Commonwealth for the services it provides.

41 As stated by the applicant, there are some features of the arrangement that would appear to be at odds with the purely commercial delivering of a service.  For example, the Policy Directions document annexed to the contract provides in section 11, for the respondent to have both an internal and external review mechanism so that a client can effectively “appeal” a decision of the respondent as to various matters there set out.  This is more consistent with general administrative law principles and would be unusual to see in a commercial contract.

42 The funding for the respondent over the three year contract is in my view, clearly directed towards a social welfare objective in improving the access to and participation in legal services for Indigenous people who are involved in the civil and criminal justice system. There is no “on selling” of those services to Indigenous clients of the respondent. This is not a case where a legal services provider is contracting to a client to provide legal services to it on commercial terms the price of which the provider sets.  In this case the Commonwealth has a pool of funding available which it has allocated to the provision of legal services to the Indigenous community as a part of its general legal aid programme for such activities. Detailed provision is made for how that funding is to be targeted consistent with the Commonwealth’s programme objectives set out in the evidence before the Commission.  This funding allocation is part of the Commonwealth’s wider Legal Aid Services programme for the Indigenous community.  In effect, in my opinion, the respondent bids for the available funding from the government. Presumably also, and by inference from the evidence, the provision of the services and the engagement of the staff of the respondent is entirely dependant on the continuation of this funding source.

43 What appears from these materials is that the funding arrangements for the provision of legal services to the Indigenous community seems to be a further refinement of existing funding arrangements.  The Commonwealth describes the process in parts of the documents as a further “reform” of pre-existing funding arrangements.  In my opinion the financial arrangement between the Commonwealth and the respondent is a variation of a funding model by which the Commonwealth clearly wishes to see improvements in the targeting of service delivery and greater accountability by the provider of these services.  It does not fundamentally alter the character of the activities of the respondent itself.  As opposed to for example, a private job agency that may participate in the provision of job search services, the respondent does not seek to provide on commercial terms which it sets, a service to the Commonwealth that it otherwise or also provides on commercial terms to others.

44 In my opinion, the characterisation of the respondent’s activities as put by the applicant is to be preferred.  I do not regard the provision of legal services by the respondent to the Indigenous community, in the terms of the activities of the respondent, as being a commercial business, trading or mercantile activity in the sense used in the authorities.

45 Accordingly the matter will be re-listed for hearing on the applicant’s substantive claims.