FEDERAL COURT OF AUSTRALIA

Salvation Army (New South Wales) Property Trust v Commonwealth of Australia [2015] FCA 674

THE COURT ORDERS THAT:

1.    The interlocutory application dated 14 April 2015 be dismissed.

2.    The Commonwealth of Australia pay the costs of the Salvation Army (New South Wales) Property Trust (ABN 57 507 607 457) of and in connection with the interlocutory application, as agreed or taxed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

The interlocutory application

1    This is an application to strike out certain paragraphs of a statement of claim pursuant to r 16.21 of the Federal Court Rules 2011 (Cth). Rule 16.21(1)(e) provides that:

(1)    A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading:

…

(e)    fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading.

Relevant principles on a strike out application

2    There was no material disagreement between the parties about the principles which ought to be applied to an application to strike out a pleading or part of a pleading. Those principles were summarised in the submissions for the Salvation Army (New South Wales) Property Trust (the Salvation Army), as follows:

25.    The principles applying to the power to strike out pleadings or portions of pleadings are well-settled. In summary, the power to strike out pleadings or portions of pleadings:

a.    is a discretionary one: Hodges v Sandhurst Trustees Limited [2014] FCA 1223 at [6]-[7];

b.    should be exercised with caution: Tiver v University of South Australia [2014] FCA 1114 at [28];

c.    should be employed sparingly and only in a clear, or plain and obvious, case: Radisch v McDonald [2010] FCA 762 at [20]; Danthanarayana v Commonwealth of Australia [2014] FCA 552 at [47].

26.    A court will be cautious in exercising its discretion to strike out a pleading ‘lest one deprive a party of a case which it ought to be able to bring’: TPC v Pioneer Concrete (1992) 52 FCR 164 at 175.

27.    In Young Investments Group Pty Ltd v Mann [2012] FCAFC 107 at [6], the Full Federal Court stated:

In an application to strike out a pleading, all of the facts alleged in the relevant pleading are to be accepted as true, and it is to be taken for granted that, on all other points, the pleading is unassailable. Provided that a pleading fulfils its basic function of identifying the issues, disclosing an arguable cause of action and apprising the other party of the case that it has to meet at trial, the pleading should be allowed to stand and the proceeding should be allowed to go to trial. Further, a court of first instance should be careful not to risk stifling the development of the law by summarily dismissing a claim where there is a reasonable possibility that, as the law develops, a cause of action may be held to lie.

28.    The power to strike out a pleading because it discloses no reasonable cause of action will be exercised only in a plain and obvious case: Polar Aviation Pty Ltd v Civil Aviation Safety Authority (2012) 203 FCR 325 at [43]. The exercise of the power in such circumstances involves establishing that the applicant’s case is so untenable that it cannot possibly succeed: Hodges v Sandhurst Trustees Limited [2014] FCA 1223 at [7], citing Empire Shipping Company Inc v Owners of the Ship Shin Kobe Maru (1991) 32 FCR 78.

3    In addition to those principles, the Salvation Army relied on the statement of Gallop J in Turner trading as Classic Gourmet Sausages v Leda Commercial Properties Pty Ltd [2000] FCA 389; (2000) 97 FCR 313 at [39], that:

By launching the application to strike out, the respondent undertook the burden of establishing that there was no triable issue. On such an application the respondent bears the onus of proof and where the facts are peculiarly within the respondent’s knowledge of the appellants’ statutory cause of action should not have been dismissed because of gaps in the appellants’ case if the necessary evidence might be obtained as a result of discovery, interrogatories or evidence from reluctant witnesses.

4    I accept these submissions.

The paragraphs sought to be struck out

5    The impugned paragraphs of the statement of claim are paras 167 to 172, which are as follows:

Misleading and deceptive conduct

167    Further and in the alternative, the respondent, in operating the RPCs on Nauru and Manus Island, was carrying on a business, for the purposes of s 2A of the Competition and Consumer Act 2010 (Cth), by providing immigration processing services to Nauru and Papua New Guinea.

Particulars

(A)    Each of Nauru and Papua New Guinea were designated as regional processing countries pursuant to s 198AB of the Migration Act 1958;

(B)    Pursuant to Memorandums of Understanding between Australia and both Nauru and Papua New Guinea dated, respectively, 29 August 2012 and 8 September 2012:

(I)    Nauru and Papua New Guinea were to host assessment centres for persons purporting to seek asylum;

(II)    those countries were to assess the claims of those persons purporting to seek asylum according to their Constitutions and domestic law, and consistently with their obligations under international law;

(III)    the respondent undertook to bear all costs incurred under and incidental to the above Memorandums of Understanding, including the resettlement or transfer of persons purporting to seek asylum.

168    The applicant repeats and relies upon what is pleaded as paragraphs 159 to 162 above.

169    The Four Week Working Roster Representation was:

(a)    made in trade or commerce, within the meaning of the Australian Consumer Law (Cth); and

(b)    misleading and/or deceptive, or likely to mislead or deceive, contrary to s 18 of the Australian Consumer Law.

Particulars

The respondent has refused and failed to pay the applicant’s invoices issued under the Contract pursuant to the Four Week Working Roster, as pleaded in paragraphs 89, 107, 133 and 147 above.

170    The applicant relied upon the Four Week Working Roster Representation.

Particulars

The applicant relied by rostering its In-Country Personnel in accordance with the Four Week Working Roster, as pleaded in paragraph 159 above.

171    The applicant has suffered loss and damage as a result of its reliance upon the Four Week Working Roster Representation.

Particulars

The applicant repeats and relies upon the particulars to paragraph 165 above.

172    By reason of what is pleaded at paragraphs 167 to 171 above, the applicant is entitled to orders pursuant to ss 236 and 238 of the Australian Consumer Law.

6    It is pleaded in the statement of claim that the Salvation Army and the Commonwealth entered into a contractual arrangement pursuant to which the Salvation Army would provide welfare and support services at and to persons transferred to regional processing centres, referred to as RPCs, located on Nauru and Manus Island in Papua New Guinea. As pleaded, the relevant services were first provided by the Salvation Army pursuant to heads of agreement dated 3 October 2012, and subsequently provided pursuant to a contract between the Salvation Army and the Commonwealth dated 1 February 2013.

7    It is the case of the Commonwealth that the impugned parts of the statement of claim should be struck out because, irrespective of any factual matters, para 167 as pleaded cannot succeed. The Commonwealth contended that in providing “immigration processing services” to Nauru and Papua New Guinea by operating the RPCs on Nauru and Manus Island it could never be that the Commonwealth was carrying on a business for the purposes of s 2A of the Competition and Consumer Act 2010 (Cth) (the Competition and Consumer Act).

8    It is relevant in this regard that the impugned paragraphs incorporate by reference paras 159 to 162, including the reference to the “Four Week Working Roster Representation”.

9    In paras 159 to 162 of the statement of claim, upon which the Salvation Army relies for the purposes of the paras sought to be struck out (see para 168), there is pleaded a cause of action in estoppel by which it is said that pursuant to the contractual arrangements between the Commonwealth and the Salvation Army, a four week working roster system was in place to the knowledge of the Commonwealth and that there was an intention by the Commonwealth that the Salvation Army rely upon an implied representation that it could operate pursuant to the four week working roster and charge and recover the entirety of the working days under that roster in circumstances where if the Commonwealth were to resile from the four week working roster representation, the Salvation Army would suffer loss and damage.

10    Accordingly, while the particular focus of the Commonwealth is the pleading in para 167 of the statement of claim, that pleading functions in the broader context described above. This broader context cannot be disregarded when assessing whether the claim is obviously untenable.

Carrying on a business?

11    There was no real dispute between the parties about the principles relevant to the operation of s 2A of the Competition and Consumer Act. Reference was made to the decision of Emmett J in JS McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337, in which his Honour said at 356–7:

The Parliament was intending to limit the extent to which the Commonwealth would be bound by the Trade Practices Act. It could have chosen the same touchstone as is chosen for s 52, namely conduct engaged in in trade or commerce. It did not. Rather the Parliament chose to limit the application of the Act to the Commonwealth, in so far as it carries on a business.

I consider that that expression signifies that the Commonwealth is to be bound only where the conduct complained of is engaged in, in the course of carrying on the business. In other words, persons dealing with the Commonwealth in relation to the actual conduct of a business will have the same protection as when dealing with a private trader who is carrying on such a business but will not have protection when entering into other dealings with the Commonwealth. That appears to me to be consistent with the reason for the introduction of s 2A as explained by the Minister on the second reading of the Bill for the amendment which introduced s 2A (House of Representatives, Debates, 3 May 1977, p 1447) as follows:

“Government Commercial Operations

I announced last December that the Government had decided in principle that its commercial operations should be subject to the same restraints of the Trade Practices Act as apply to like operations of private enterprise. I then informed this House that the Government was studying the detailed implementation of this decision. This Bill gives effect to that decision in clause 4 which provides that the Act is to apply to all business undertakings of the Commonwealth Government and its authorities.”

The conduct of the Commonwealth in issuing the request for tender and in dealing with prospective tenderers was not actively engaged in in carrying on the business which has hitherto been carried on by the Commonwealth, in the guise of the DAS, under the name AGPS. The conduct complained of is that of officers of the Commonwealth who have had nothing to do with the day-to-day operations of the AGPS. It is conduct quite divorced from the carrying on of that business.

While some entities might be thought to engage in the business of selling capital assets, it was not contended by McMillan that the Commonwealth is engaged in a business of selling assets. A one off decision to cease engaging in the activities of AGPS, to dispose of the plant and equipment relevant to those activities, to undertake not to engage in those activities in the future and, in the capacity of client, to invite private enterprise to take on those activities, is not conduct in the carrying on of a business: nor is the conduct of offering plant and equipment for sale and offering the opportunity to perform package 3 activities for government departments the carrying on of a business. I conclude, therefore, that s 2A does not have the effect of making the Trade Practices Act applicable to the conduct about which complaint is made by McMillan in these proceedings.

In light of the factual findings which I have made, that is unfortunate. However, it is for the Parliament to determine the extent to which the Trade Practcies Act binds the Commonwealth. One might harbour a wish that in the circumstances, the Commonwealth would remedy the effect of the conduct which I have found misleading. However, it is not bound to do so.

Argument was also addressed to me on the possible application of s 2C of the Trade Practices Act. Section 2C has the effect that certain activity does not, for the purposes of s 2A, amount to carrying on a business. Having regard to the conclusion which I have reached in relation to s 2A, it is not necessary for me to deal with the submissions in relation to s 2C.

12    In addition, reference was made to the summary of principles in Murphy v Victoria (2014) 313 ALR 546; [2014] VSCA 238 at [46]–[47]:

[46]    First, the judge considered that the following propositions were relevant and likely to be of assistance:

(a)    For activities to constitute “carrying on a business”, the activities must be undertaken in a commercial enterprise or as a going concern. The activities must constitute trade, or commercial transactions or engagements. A business activity is an activity which takes place in a business context and which, of itself, bears a business character.

(b)    The expression “carry on a business” signifies a course of conduct involving the performance of a succession of acts with system and regularity, not the effecting of a solitary transaction. The less commercial the character and objectives of an organisation, the greater the degree of system and regularity required to establish that it carries on a business.

(c)    On the other hand, mere repetitiveness is insufficient. It does not necessarily follow that one who engages in transactions of the same kind systematically or regularly is carrying on a business in those transactions (for example regular deposits into a bank account). Absence of a system and regularity might deny that a business is being carried on but their presence does not necessarily establish that it is.

(d)    There is a distinction between those functions of a government which are purely governmental or regulatory and those functions which entail the carrying on of business. To carry on some part of “the business of government” is something different from carrying on a business in the relevant sense.

(e)    The carrying out of a function of government in the interests of the community, such as the performance of a statutory function (including one in respect of which fees may be charged), is not the

… carrying on of a business. That the purpose of the activities is the provision of governmental services will tend against a conclusion that they amount to the carrying on of a business.

(f)    There must be present some element of commerce or trade such as a private citizen or trader might undertake.

[47]    With respect we do not disagree. It is, however, also necessary to bear in mind, as counsel for the appellant submitted, that the word “business” is an “etymological chameleon” which takes its meaning from the context in which it appears and from the purpose of the statute in which it is found. Thus, as the majority observed in NT Power Generation Pty Ltd v Power and Water Authority, “business” in the context of s 2A of the Trade Practices Act 1974 (Cth) was a wide and general word which was further widened by the inclusion in the definition of “business” in s 4(1) of “a business not carried on for profit”. Ultimately, its meaning was informed by the purpose of s 2A of that Act which was to ensure that the Commonwealth Government should, in its commercial activities, be subject to the same regime as corporations.

13    Another useful reference to which my attention was drawn was the decision of Sundberg J in Sirway Asia Pacific Pty Ltd v Commonwealth [2002] FCA 1152, in particular at [56] where his Honour summarised the different factual contexts in which courts had considered the operation of s 2A of the former Trade Practices Act 1974 (Cth). His Honour said:

[56]    Having identified the principles to apply when determining whether the Commonwealth (or indeed any entity) is carrying on a business, it is useful to summarise the earlier decisions. The AGPS, the Australian Telecommunications Commission, the Australian Postal Commission and the Australian Broadcasting Commission have all been held to be businesses of the Commonwealth: McMillan, Tytel Pty Ltd v Australian Telecommunications Commission (1986) 67 ALR 433, Suatu Holdings Pty Ltd v Australian Postal Commission (1989) 86 ALR 532 and Sun Earth Homes Pty Ltd v Australian Broadcasting Commission (1990) 98 ALR 101. The Commonwealth has been held not to be carrying on a business by engaging in the following activities:

•    operating detention centres: Corrections Corp

•    inviting tenders to be submitted and dealing with prospective tenderers: McMillan, Corrections Corp

•    providing pharmaceutical, sickness and hospital benefits and medical and dental services in its administration of the National Health Act 1953 (Cth): Saitta

•    operating the Trade Practices Commission: Thomson Publications (Australia) Pty Ltd v Trade Practices Commission (1979) 40 FLR 257; (1979) 27 ALR 551

•    leasing and developing a site for the purpose of establishing Cabinet and Ministerial offices: National Management Services (Australia) Pty Ltd v Commonwealth (1990) 9 BCL 190.

Applying the analogous test in s 2B of the Act to the Crown in right of the State of New South Wales, the courts have concluded that the following activities do not constitute carrying on a business:

•    managing a national park: Easts Van Villages v Minister Administering the National Parks and Wildlife Act (2001) ATPR (Digest) 46-211

•    providing police and corrective services: Hamod v State of NSW [2001] FCA 157.

The State of New South Wales was found to be carrying on a business through the Ambulance Service of New South Wales by providing ambulance services at sporting events and first aid training for reward: Paramedical Services Pty Ltd v The Ambulance Service of NSW [1999] FCA 548.

14    The case the Commonwealth placed most reliance on, however, was the decision of Finkelstein J in Corrections Corporation of Australia Pty Ltd v Commonwealth [2000] FCA 1280; (2000) 104 FCR 448 (Corrections Corporation), in which his Honour dealt with a claim for misleading or deceptive conduct relating to the provision of immigration detention centres and a tender process into which the Commonwealth entered for the provision of services to those detention centres. After referring to the relevant principles relating to s 2A of the Trade Practices Act 1974 (Cth) at [12] and [13] in particular, his Honour said this at [14]:

It seems to me to be clear beyond argument that operating a detention centre is not a trading or commercial activity of the executive branch. It is no different from a government maintaining and operating a prison for convicted felons. Maintaining and operating a prison may be described by some as “government business”, but it does not amount to the carrying on of a trading or commercial activity. When laws provide that a person should be held in custody, whether that person be a prisoner serving a sentence for the commission of an offence or a non-citizen pending his deportation, the government is not providing any service either to the department which has responsibility for those persons or to the person in prison or detention. Even if what is being done could be characterised as the provision of a service, by no use of the English language could it be described as the carrying on of a business.

Conclusions

15    The difficulty in the present case is that this is an application to strike out a part of a pleading in circumstances where in order for that application to succeed, the Commonwealth has acknowledged that it must persuade me that the provision by one nation state of “immigration processing services” to another nation state pursuant to memoranda of understanding can never constitute the carrying on of a business within the meaning of s 2A of the Competition and Consumer Act. The Commonwealth’s essential submissions in support of this proposition is that this is obviously an inherent governmental function and could never constitute the carrying on of a business.

16    There are a number of difficulties, however, with accepting this proposition in the context of the current strike out application.

17    First, although the pleading at para 167 refers in the particulars (para B) to memoranda of understanding between Australia and Nauru and Papua New Guinea, I have no evidence before me and accordingly know nothing about the status or content of those memoranda of understanding. For example, it is not apparent from the face of the pleading that the memoranda of understanding constitute a written agreement between Australia and another country relating to the taking of persons to that country within the meaning of s 198AC(2)(c) of the Migration Act 1958 (Cth) (the Migration Act).

18    Second, the meaning of the phrase “immigration processing services” is not apparent from the face of the pleading. The scope of those services will depend upon the evidence. At the least, what can be said is that such services must include the kind of welfare and support services that the Salvation Army was contracted to provide as set out in the earlier paragraphs of the statement of claim. Beyond that however, the scope of those services remains unknown. The Commonwealth itself accepted that, given the nature of the pleading, it would be wrong to assume that the services were confined to determining a person’s immigration status and nothing more.

19    Third, I do not otherwise know anything about the arrangements between Australia and Nauru or Papua New Guinea in respect of the regional processing centres. All I presentlty know is that:

(1)    Under s 198AB(1) of the Migration Act:

The Minister may, by a legislative instrument, designate that a country is a regional processing country.

(2)    This designation can occur in accordance with s 198AB(2) of the Migration Act, which provides that:

The only condition for the exercise of the power under subsection (1) is that the Minister thinks that it is in the national interest to designate the country to be a regional processing country.

(3)    By operation of s 198AD of the Migration Act, an officer of the Commonwealth must, as soon as reasonably practicable, take an offshore entry person to whom s 198AD applies from Australia to a regional processing country.

(4)    By s 198AD(11) of the Migration Act, an offshore entry person who is being dealt with in this way is taken not to be in immigration detention.

(5)    Beyond this, the Migration Act says nothing about possible activities of the Commonwealth on, at or in connection with the operation of any regional processing centre in a regional processing country.

(6)    The Migration Act is proposed to be amended by the insertion of a new s 198AHA to specify powers which the Commonwealth will have in relation to regional processing functions but those amendments do not currently form part of the Migration Act.

20    The other thing I know is that both Papua New Guinea and the Republic of Nauru have enacted their own legislation which deals with regional processing centres.

21    In Papua New Guinea, s 15C of the Migration Act 1978 (Papua New Guinea) provides that the Minister may, by an instrument in writing, direct a refugee or a class of refugees or non-citizens claiming to be refugees to reside in what is referred to as a relocation centre.

22    In the Republic of Nauru, s 16(1) of the Asylum Seekers (Regional Processing Centre) Act 2012 (Nauru) provides that the Secretary, who is the head of the relevant department, may enter into an agreement on behalf of the Government of Nauru with a service provider, a service provider being defined in s 3(1) to mean:

…a body that has been engaged by the Republic of Nauru or the Commonwealth of Australia to provide services of any kind at a regional processing centre or in relation to protected persons.

23    But knowing the content of those two Acts, as I have said, tells me nothing about the particular arrangements between the Commonwealth and either Papua New Guinea or the Republic of Nauru. Accordingly, while the fact that the Republic of Nauru and Papua New Guinea have enacted legislation to deal with regional processing centres will undoubtedly be a relevant matter in determining whether or not the Commonwealth is or is not carrying on a business within the meaning of s 2A of the Competition and Consumer Act, without further facts it is not possible to reach a conclusion that what is pleaded by the Salvation Army is obviously untenable and cannot possibly succeed. This is particularly so, as I have said, given that the memoranda of understanding which are specifically referred to in the particulars to para 167 have an unknown status and an unknown content at this stage of the proceedings.

24    It also follows from all that I have said that it may be the case that the decision in Corrections Corporation is ultimately distinguishable. There is at least one critical factual difference between that case and the present matter. In Corrections Corporation the relevant services involved the provision of immigration detention and removal services in Australia, pursuant to the powers vested in relevant persons by the Migration Act (at [8]). In the present case, as I have said, the relevant statutes appear to be those of the Republic of Nauru and Papua New Guinea, not of Australia.

25    In addition to these matters, as has been pointed out in the written submissions for the Salvation Army, it is not apparent from the matters pleaded that the Commonwealth is doing anything different from that which a private entity might potentially do in a role as a head contractor for the operation of the regional processing centres. I also accept that it is not apparent from any material before me that the Commonwealth is required to operate the regional processing centres on Nauru or Manus Island. Nothing to that effect appears from the Migration Act or from the legislation enacted by the Republic of Nauru or Papua New Guinea.

26    Further, it is plain from the statement of claim that the Commonwealth has contracted with providers such as the Salvation Army for the purpose of enabling the operation of the regional processing centres. As the Salvation Army submitted, while the Commonwealth contends that it is a purely or inherently governmental function for services to be provided by one nation state to another, the pleading certainly leaves open a different characterisation of the Commonwealth’s activities; namely, the Commonwealth acting as the head contractor, as well as operator and/or manager of the regional processing centres in circumstances where there is no governmental obligation for it to do so.

27    What is clear is that, at least as the law currently stands, the Commonwealth was not acting under an Australian statute at all, that is, the Commonwealth was not exercising any statutory function when it contracted with the Salvation Army for the provision of services at the regional processing centres.

28    Ultimately however, the true character of the activities of the Commonwealth, it seems to me, is one that can be determined only by reference to all of the facts and not on an application to strike out part of a pleading. In summary, I accept the submission for the Salvation Army “that the Commonwealth has not discharged the high onus upon it on this application and, at the very least, the application is premature”. The reason for this, as the Salvation Army has said, is that the question whether or not the Commonwealth is carrying on business is “a factual question to be determined on the entirety of the evidence available at trial”.

29    Accordingly, the Commonwealth’s interlocutory application to strike out paras 167 to 172 of the Salvation Army’s statement of claim should be dismissed with costs.

Associate:

Dated:    3 July 2015