Corrections Corporation of Australia Pty Ltd v Commonwealth of Australia [2000] FCA 1280

FEDERAL COURT OF AUSTRALIA

Corrections Corporation of Australia Pty Ltd v Commonwealth of Australia [2000] FCA 1280

TRADE PRACTICES – misleading or deceptive conduct – government tender – Trade Practices Act 1974 (Cth) applies to government in so far as it carries on a business – whether operating detention centres amounts to carrying on a business – whether offering to tender amounts to carrying on a business WORDS AND PHRASES – "business" Trade Practices Act 1974 (Cth) ss 2A, 2C

Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355 applied J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 followed National Management Services (Australia) Pty Ltd v Commonwealth (1990) 9 BCL 190 applied CORRECTIONS CORPORATION OF AUSTRALIA PTY LTD v COMMONWEALTH OF AUSTRALIA V 710 of 1999 JUDGE: FINKELSTEIN J PLACE: MELBOURNE DATE: 14 SEPTEMBER 2000

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY V 710 of 1999

BETWEEN: CORRECTIONS CORPORATION OF AUSTRALIA PTY LTD

Applicant

AND: COMMONWEALTH OF AUSTRALIA

Respondent

JUDGE: FINKELSTEIN J

DATE OF ORDER: 14 SEPTEMBER 2000

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT: 1. Paragraphs 54 to 62 of the further amended statement of claim be struck out. 2. The applicant pay the respondent's costs of the motion filed on 17 April 2000. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY V 710 of 1999

BETWEEN: CORRECTIONS CORPORATION OF AUSTRALIA PTY LTD

Applicant

AND: COMMONWEALTH OF AUSTRALIA

Respondent

JUDGE: FINKELSTEIN J

DATE: 14 SEPTEMBER 2000

PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 An unlawful non-citizen (as defined in s 14 of the Migration Act 1958 (Cth)) is liable to be kept in detention pending his or her removal from Australia or deportation, unless in the meantime the non-citizen is granted a visa to remain in Australia: see Pt 2 Div 7 of the Migration Act.The Commonwealth maintains a number of "detention centres" where unlawful non-citizens are detained in custody. The detention centres are under the control of the Department of Immigration and Multicultural Affairs (DIMA). Until recently the Australian Protection Service (APS), an agency established by the Australian Protective Service Act 1987 (Cth), provided guarding services at the detention centres pursuant to an "agreement" with DIMA. By that "agreement", APS also provided escort services when a person in detention was required to travel outside a detention centre. 2 In 1997 the Commonwealth decided that the provision of detention and escort services should be put to competitive tender. A document entitled "Request for Proposal for Provision of Detention and Transfer of Persons Detained under the Migration Act", inviting proposals for the provision of those services, was sent to seventeen organisations including the applicant, Corrections Corporation of Australia Pty Ltd. The Request contained criteria and other requirements with which a proposal had to comply. The applicant submitted a proposal to provide the desired services. It says that this resulted in a contract with the Commonwealth that DIMA would evaluate and assess all proposals submitted in response to the Request in accordance with the criteria and requirements therein contained. 3 A number of other organisations, including Australasian Correctional Services Pty Ltd (ACS), also submitted proposals in response to the Request. The applicant says that the ACS proposal did not comply with the criteria set out in the Request. Nevertheless the ACS proposal was ultimately accepted by DIMA and ACS has now entered into an agreement with the Commonwealth for the provision of guarding services and escort services. 4 The acceptance of the ACS proposal led to the commencement of this proceeding in which the applicant sues the Commonwealth. A number of causes of action are relied upon. The first claims that the Commonwealth was in breach of the contract that it and DIMA would evaluate and assess all proposals in accordance with the criteria and requirements in the Request. It is not necessary to say any more about this cause of action. 5 The second cause of action is based upon an alleged contravention of s 52(1) of the Trade Practices Act 1974 (Cth) which provides that "[a] corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." Speaking generally, an enactment such as the Trade Practices Act will not apply to the Crown: Bradken Consolidated Ltd v Broken Hill Pty Co Ltd (1979) 145 CLR 107; Bropho v State of Western Australia (1990) 171 CLR 1. In any event, s 52 is concerned with the conduct of corporations and, although it is a corporation sole, the Commonwealth is not a corporation for the purposes of s 52. However, s 2A of the Trade Practices Act relevantly provides: "(1) …[T]his Act binds the Crown in right of the Commonwealth in so far as the Crown in right of the Commonwealth carries on business, either directly or by an authority of the Commonwealth. (2) Subject to the succeeding provisions of this section, this Act applies as if: (a) the Commonwealth, in so far as it carries on a business otherwise than by an authority of the Commonwealth; and (b) each authority of the Commonwealth (whether or not acting as an agent of the Crown in the right of the Commonwealth) in so far as it carries on a business; were a corporation." Accordingly, to the extent that the Commonwealth carries on a business, it is deemed to be a corporation and is bound by the Trade Practices Act. 6 The Trade Practices Act claim is to be found in paragraphs 54 to 62 of the further amended statement of claim. To deal with the application of the Trade Practices Act, it is alleged that the Commonwealth relevantly carried on business in one of two ways. First it is alleged (in para 54) that the Commonwealth, through DIMA or APS, carried on the business of providing or causing to be provided, immigration detention and removal services. The tender process is said to be conduct in the course of carrying on that business. In the alternative it is alleged (in para 54B) that the Commonwealth carried on the business of conducting the tender. 7 The basis of the Trade Practices Act claim is as follows. It is alleged that DIMA made a number of false representations to induce the applicant to participate in the tender. The representations were that DIMA would evaluate tenders in accordance with the evaluation criteria and the other terms and conditions contained in the Request and that the contract would be performed by DIMA. The applicant contends that, induced by these false representations, it participated in the tender and in consequence suffered loss and damage. 8 The Commonwealth moves to strike out the Trade Practices Act claim on the ground that no reasonable cause of action is disclosed. The Commonwealth contends that neither providing or causing to be provided immigration detention and removal services, nor engaging in the tender process, amounts to the carrying on of a business so as to bring the Commonwealth under the Trade Practices Act. If that is correct, this part of the claim must be struck out. 9 Let me say first that there is one aspect of the pleading that is apt to cause confusion. It is the allegation that the Commonwealth, through DIMA or the APS, was providing immigration detention and removal services. The executive branch of the Commonwealth, often referred to as "the government", carries out its activities through departments, agencies and statutory authorities. These departments and agencies, and many of the statutory authorities, are part of the body politic we refer to as the Crown in right of the Commonwealth, or in modern parlance, the Commonwealth. Often one department, agency or statutory authority will carry out a function that assists the workings of some other department, agency or authority. It would be a mistake in those circumstances to regard the first department or agency (I leave out of account statutory authorities in respect of which different considerations may arise) as having provided services to the second department or agency in anything other than a very loose sense. Consider the case of private employment. While it may not always be an inappropriate use of language to treat one employee of an organisation as providing services to another employee, in reality the services of each are provided to the organisation that employs him. So it is with a department of state or governmental agency. These departments or agencies, which have no separate legal status, do not, strictly speaking, provide any service to other departments or agencies. 10 Moreover, even to the extent that it is appropriate, in a loose way, to describe the activities of one department or agency as providing services to another, such conduct would not amount to the carrying on of a business. With the adoption of modern theories of government accountability and efficiency, it is common to find that a department or agency will charge another department or agency in respect of services that it renders. If a profit and loss statement were to be prepared for the providing department or agency, it may show that a "profit" has been made. But of course there is no real profit. All that has occurred is that part of the operating budget of the department or agency concerned has been taken from the appropriation of funds and allocated to another department or agency. Moreover, the annual appropriation to the first-mentioned department or agency will take into account the anticipated receipt by that department or agency of a portion of the appropriation to the other. 11 The point that I am seeking to make is, in effect, recognised by s 2C(1)(c)(i) of the Trade Practices Act. This sub-paragraph relevantly provides: "(1) For the purposes of sections 2A and 2B, the following do not amount to carrying on a business: … (c) a transaction involving: (i) only persons who are all acting for the Crown in the same right …" 12 Before giving further consideration to whether the described activities of the Commonwealth amount to carrying on a business, it is necessary to deal with the meaning of that concept. As Mason J observed in Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355 at 378-379 there is often ambiguity about the meaning of words like "business", "commercial" and "trading". The meaning that the word "business" is to bear, must be considered in the context in which it is used. Here that context is legislation that is, generally speaking, concerned with the conduct of trading corporations and financial corporations that compete in a market for the provision of goods and services (Part IV of the Act), or that are engaged in trade or commerce or are otherwise involved in the provision of goods and services (Part V of the Act). Thus it is plain enough that the "carrying on of a business" that will bring the Commonwealth under the Trade Practices Act is intended to refer to activities undertaken in a commercial enterprise or as a "going concern". Ordinarily, a commercial enterprise is one that the proprietor conducts with a view to a profit. That is not necessary for the purposes of s 2A, as "business" is defined in s 4(1) to include a business not carried on for profit. 13 A similar view of the meaning of "carrying on a business" was taken by McLelland J in National Management Services (Australia) Pty Ltd v Commonwealth (1990) 9 BCL 190. McLelland J said (at 198): "The claim under [the Trade Practices Act] is for damages pursuant to s 82 in respect of an alleged contravention by the Commonwealth of s 52, which prohibits certain conduct by a "corporation". Section 2A provides that the Act binds the Commonwealth insofar as it carries on a business, as if it were a corporation. By s.4, "business" includes a business not carried on for profit. The plaintiff's claim based on this Act depends, inter alia, on characterising the Commonwealth's role in the development of the Phillip Street site as carrying on a business. The evidence establishes that the Commonwealth required five floors of the new building on the Phillip Street site for the purpose of providing Cabinet and Ministerial offices. The Commonwealth's role in the development was carried on through the Department of Administrative Services. There is nothing to suggest that in relation to the development of the site the Commonwealth was engaged in a trading or commercial activity which could appropriately be characterised as carrying on a business." 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 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. 15 I now turn to consider whether issuing the Request for tenders and dealing with prospective tenderers involved carrying on a business. Much the same issue was considered in J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337, a case which was concerned with the activities of the Commonwealth in inviting tenders for the purchase of segments of its primary publisher, the Australian Government Publishing Service (AGPS). An unsuccessful tenderer claimed that the Commonwealth acted in contravention of s 52 of the Trade Practices Act in connection with the tender process. Emmett J, after reviewing a number of authorities, including National Management Services (Australia), said (at 356-357): "The conduct of the Commonwealth in issuing the request for tender and in dealing with prospective tenderers was not activity engaged in in carrying on the business which has hitherto been carried on by the Commonwealth, in the guise of the [Department of Administrative Services], 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." Earlier his Honour had found that the role of the AGPS was much the same as what any citizen or private trader might undertake and that the Commonwealth, in providing services of the type provided by the AGPS, was carrying on a business. 16 In this case, by the Request for tenders and the processing of the proposals that were submitted in response, the Commonwealth was seeking to find an appropriate person who would provide it with services at its detention centres; however, it was not itself attempting to trade in goods or provide any services. So it would always be difficult to characterise the tender process as a business. It is in any event difficult to see how the process of selecting a person to provide services to the Commonwealth can be described as conduct that has a commercial flavour, when looked at from the point of view Commonwealth. As in J S McMillan Pty Ltd,the conduct is quite distinct from any business. 17 Paragraphs 54 to 62 of the further amended statement of claim will be struck out. The Commonwealth should have its costs of the motion. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.