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The Regulatory Environment 
Applying to Universities

EIP 01/19
Phillips Fox
Lawyers

• Introduction
• Executive Summary
  • Restrictions on establishment of companies
  • Investment provisions
  • Land use – restrictions on disposal
  • Treatment of intellectual property/commercialisation of research

© Commonwealth of Australia 2001
ISBN 0 642 77238 X
ISBN 0 642 77239 8 (Internet version)
DETYA No. 6801.HERC02A

This work is copyright. It may be reproduced in whole or in part for study or training purposes subject to the inclusion of the source and no commercial usage or sale. Reproduction for purposes other than those indicated above, require the written permission from the Commonwealth available through AusInfo. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Legislative Services, AusInfo, GPO Box 1920, Canberra ACT 2601.

This report is funded under the Evaluations and Investigations Programme of the Department of Education, Training and Youth Affairs.

The views expressed in this report do not necessarily reflect the views of the Department of Education, Training and Youth Affairs.

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Introduction

Australian universities are presently having to reconsider working practices as the government funded portion of their budgets declines. Universities must now provide more funds themselves for the maintenance of their functions. This will often necessitate universities exploiting commercial opportunities for the supply of their goods and services. Universities are being strongly encouraged to do so by government funding authorities.

If universities are to be able to maximise commercial opportunities, it is essential for them to be aware of the scope of their powers and of any constraints that may exist on those powers. It is also important that the limits on the capacity of universities to obtain funds through commercialisation be understood by those authorities that urge greater reliance by universities on such sources of funding.

This report provides an overview of the powers and constraints on universities to engage in commercialisation. The report is divided into six broad topics. There is an overview of the law relating to the particular topic and its effect on universities generally. This is followed, where appropriate, by a consideration of any legislation of the jurisdiction in which the university is established that is relevant to the topic.

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Executive Summary

Restrictions on establishment of companies

The power of universities in all jurisdictions to establish companies, joint ventures and partnerships is an integral part of universities’ powers to corporatise and commercialise university services and enterprises generally. 

Any body corporate has the power to establish a company under the Corporations Act 2001. Universities are, in most cases, statutory bodies and therefore their powers are limited in this regard by the legislation that establishes them.

The Report notes that the establishing legislation of universities in the following jurisdictions provide for an express power to establish new companies (and in some instances enter into other arrangements such as joint ventures and partnerships). This power is generally limited to the establishment of companies to promote the universities’ objects and interests or otherwise in connection with the performance of the universities’ functions. 

A broad overview of the Report demonstrates that:

• New South Wales universities (except the Australian Catholic University, which has no express power) have the power to participate in such trusts, companies or other incorporated bodies limited only by the need to promote the objects and interests of the universities.
• Victorian universities may form or participate in the formation of limited companies only if the objects of the company are ‘incidental or conducive to’ the universities’ objects (as defined).
• Queensland universities may only form or take part in corporations that contain objects as expressed in the legislation including any object that the Council considers appropriate.
• The Tasmanian university has the power to form, and participate in the formation of companies, partnerships and joint-ventures that are in connection with the performance of its functions (as defined).
• The Northern Territory university has the power, subject to approval, to establish ‘trading research or other’ companies in the jurisdiction or elsewhere for the purpose of promoting the functions of the university.
• The universities in the Commonwealth and the Australian Capital Territory may establish companies, joint-ventures or enter into partnerships if the establishment of these entities is considered to be ‘necessary or convenient’ to the performance of the universities’ functions. 

While Western Australian and South Australian university Acts do not contain express provisions with respect to the formation or establishment of companies, this power would likely be implied from the general powers of the universities as bodies corporate and may be limited, as consistently expressed above, by the scope of the universities’ functions. 

Overall, the Report demonstrates that universities in all jurisdictions generally have the ability to establish and participate in companies only where such establishment or participation is within its express, or implicitly recognised, scope of university purposes or functions.

The Report also outlines the legislation in all jurisdictions that impacts on universities, as public bodies, primarily with respect to auditing and financial management requirements. The Report notes that this legislation relates less to whether universities can establish companies or joint-ventures and more to regulating the financial management of the activity or enterprise that universities may undertake through the corporate or other structure. The powers of a state auditor and certain reporting requirements under these Acts may flow-on to the subsidiaries of universities in some instances

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Table 1 Restrictions on establishment of companies

1. Universities in Western Australia and South Australia also contain no express provision with regard to the establishment of companies. While we believe that such a power would be implied from the general powers of these universities, we are unable to determine the scope of this power for the purposes of including them within the criteria as set out in this table.

2. Victorian universities do not have the power to form ‘limited companies’ unless the constitution of the company is in accordance with the relevant provisions in the legislation.

3. Both the Bachelor Institute of Indigenous Tertiary Education and the Northern Territory University have broad powers with respect to the participation in joint-ventures and partnerships, however they may only establish companies upon approval from the NT Treasurer.

4. The Australian Maritime College must first seek written approval from the Minister responsible before it may enter into partnerships and joint-ventures or establish companies.

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Investment provisions

The power of universities in all jurisdictions to invest monies under their control or to borrow monies for investment purposes is subject to varying limitations. Generally the universities’ express (or implied) functions and powers are the principal reference points for university investment power. 

Clearly there are investment activities that fall within the core functions of a university and are generally not questionable. Investments in university based research and development clearly fall within the investment powers of universities whether this is expressly provided, or left to implication from, the establishing legislation. The more difficult question lies in identifying the outer limits of these functions and powers; that is, whether investment in certain schemes that are seemingly unrelated to a universities’ core functions are permissible in light of the current legal and political landscape in which each independent university must operate. 

The Report identifies that the functions and powers expressed in the establishing Acts are only a part of a larger, more complex, environment of government control. It is necessary to consider broader issues dealing with the nature, make-up and core functions of a university as a ‘public’ entity that deals with (mostly) public monies.

In this regard, the Report recognised that government control of this kind is consistently exercised at (at least) two levels. The establishing Act of a university may include specific limitations on the university’s management discretion but this is only a part of the environment. In addition to this, general financial management legislation applicable to the public sector may also apply to constrain the capacity of the university to invest or borrow freely. This type of ‘public bodies’ financial management legislation is markedly different between each jurisdiction and, in turn, is guided by differing regimes of public policy that vary over time.

With respect to investments, the Report indicates that there are more differences between the varying investment powers, than similarities. The comparison, as demonstrated in the Report, between the investment powers of universities in the different jurisdictions is a clear expression of the inconsistency associated with this type of government control. It must be noted that the scope of the Report intentionally ignores other potentially variable, but very relevant, factors such as Ministerial directions and government policy applied to universities from both a federal and states/territories perspective. In this regard, the Report obviously cannot provide specific detailed advice on any particular issue with respect to investment possibilities of any particular university.

A broad overview of the Report demonstrates that: 

• Universities in Victoria have extremely broad powers of investment both under their establishing Acts and under general public bodies legislation.
• Universities in NSW are heavily regulated, as the establishing Acts and the public bodies legislation are interrelated and relatively onerous (notably, there are different standards for different universities within that state).
• Universities in Queensland operate under the limitation that investment be limited to ‘university purposes’ (as defined), but must also adhere to the restricted categories of investment provided under the relevant public bodies legislation in that State.
• Universities in WA operate under establishing Acts containing investment powers that range from being potentially very limited (Curtin), to potentially very broad (Murdoch) and to establishing Acts that are silent on investment (UWA). Further, the public bodies legislation in WA provides a quite limited investment regime that is read subject to any contrary powers in the universities’ establishing legislation.
• The Northern Territory University is, upon approval from the Treasurer, unrestrained in the type of investment it may undertake under its establishing Act.
• Universities in SA and Tasmania have potentially broad powers of investment under their respective establishing Acts (although the wording of this power is not consistent between the establishing Acts) and, apart from basic auditing requirements, are not limited to any material degree by the relevant public bodies legislation.
• Commonwealth and ACT universities’ establishing legislation range from express and expansive powers of investment (ANU), to purpose based investment (Canberra), to potentially highly restricted powers (Maritime College). The public bodies legislation for the Commonwealth places express restrictions on the investment of the Maritime College, but the ANU is exempt from any such restriction.

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Table 2 Investment provisions

1. Exempt from restrictions in public bodies legislation.

2. Broad powers under establishing Acts and general public bodies legislation.

3. Potentially broad powers and not subject to limited investment regime in public bodies legislation.

4. Unlimited power, provided it obtains approval from Treasurer.

5. Wording differs between establishing Acts.

6. Heavily regulated under establishing Acts and public bodies legislation. Different standards apply to individual universities.

7. Limited to ‘university purposes’ and by restricted categories of investment under relevant public bodies legislation.

8. Subject also to restricted investment regime in public powers legislation which is read subject to contrary powers in universities establishing legislation.

9. Purpose-based investment only.

10. Public bodies legislation for Commonwealth expressly limits investment.

11. Establishing legislation is silent on investment powers, however, subject to limited investment regime in public bodies legislation.

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Land use – restrictions on disposal

The use that universities can make of their land is the subject of constraining provisions in most university establishing Acts. It is clear that acquisition, use and disposal of university land must be for university purposes and that this connection must be established. 

The wide scope of university purposes, on their own, free universities to manage their land with minimal restriction but this freedom is limited by specific provisions in most university Acts. In particular, the Report demonstrates that university land which is Crown land, that is, land granted by the government to a university, is generally more closely regulated. For example, the university may need to meet the costs of buildings to be erected on Crown land granted to the university, or to meet the costs of compulsory acquisition of land, and special conditions may be imposed by government on use of the land, for example, to comply with environmental and general land planning and management laws. 

A common restriction as evidenced in the Report, is that there are restrictions on the length of term of a lease of Crown land used by the State universities, typically for a maximum term of 21 or 25 years. Ministerial approval or approval by a Governor of the State may also be required for dealings with Crown land, and that approval may be subject to conditions. Dealings include leasing, change of purpose of leasehold land, conversion of leasehold to freehold or perpetual lease, and the transfer or other dealings with land subject to a lease, licence, or sublease. 

University land acquired under the terms of a bequest, gift or trust is restricted by the conditions imposed in the bequest, gift or trust. No evidence was obtained as to patterns of restrictions evident from existing acquisitions of land from these sources. As a matter of commonsense universities would seek to minimise the limits which may be imposed by conditions in a will, gift or trust, but by the nature of those bequests, it will not always be possible for universities to intervene prior to the making of the will, or gift, or the setting up of a trust.

It is permitted under the governing legislation for universities to acquire land, to regulate the activities which may occur on that land and to lease out land for well-accepted university purposes. An example is land acquired for student accommodation. Land for this purpose may be leased to commercial providers for a nominal or commercial rental. At the same time, what activities are permitted on such land is usually closely regulated.

As the Report indicates, although the functions of universities have traditionally been focused on education, training and research, the position has changed as universities have themselves wished, or been encouraged, to commercialise. One of the most valuable assets of a university is its land and buildings attached to that land. Universities clearly have authority commercially to acquire and to develop university land either directly or by a corporation. However, land use is generally restricted to ‘university purposes’ and to be for the benefit of the university. Some purposes, such as sale or lease of land for less than commercial rates, or, for example, the deprivation of a significant portion of a campus, to the detriment of effective education, training and research activities on the balance of the land, would not be for university purposes. 

A broad overview of the Report demonstrates that:

• Universities in NSW are specifically permitted to commercially exploit university land but specific restrictions apply to dealings with Crown land.
• Commercial exploitation of university land in Queensland may be undertaken by universities subject to the control of the University Council, provided it is for the benefit of the university. However, dealings with university land which is Crown land must comply with general environmental, and land planning and land management laws in the State and may only be leased for a restricted term.
• University land within South Australia is held on purposes approved by the Governor, but no attempt has been made in this report to discover what are the actual purposes that have been approved. University land outside the State is not subject to this restriction. The length of term for leasing university land is limited, unless the Governor consents. The Governor’s consent is also required for any lease not on commercial terms and for the sale of university land. 
• There are restrictions on the length of term of a lease of university land in Victoria unless the Minister consents and there is a monetary limit on the sale of university land without the Minister’s approval.
• In Western Australia trust funds may be used for erecting buildings on university land for profit-making purposes. The Governor’s approval is required for dealings with Crown land used for university purposes and such land must comply with general land administration requirements in the State. If Crown land ceases to be used for university purposes, generally the land reverts to the Crown. 
• The only restrictions on land dealings for university land in Tasmania, the Northern Territory, the Australian Capital Territory, and the Commonwealth, is that they promote the interests of the universities and be in accord with their functions.

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Table 3 Land use – restrictions on disposal

1. Note that universities dealings in land are subject to the override that the dealings must be for university purposes.

2. The Australian Catholic University has no specific provision as to land use, acquisition and disposal. However, the power can be implied since the investment powers of the university include investment in real property.

3. The Australian National University Act 1991 (Cth) s. 6 also has a broad power to deal with property. The text has been reproduced at Restrictions – Crown land.

4. A request by Edith Cowan University and Curtin University of Technology to use or be given Crown land requires the approval of the Minister and the Governor. The Governor may also impose conditions on the acquisition of Crown land by the University of WA.

5. Use of Crown land by the University of Adelaide requires the approval of the Governor.

6. Crown land granted to Victorian universities may be given subject to conditions imposed by the Governor. 

7. Crown land acquired by Queensland universities must comply with State environment, land planning and land management laws.

8. NSW universities which acquire Crown land may have the land transferred subject to conditions imposed by Ministers. 

9. Powers include ‘to develop commercially any … property’ (Maritime College Act 1978 (Cth) s. 8)).

10. Powers include ‘to develop commercially any … property’ (The University of Canberra Act 1989 (ACT) s. 7).

11. The University of Tasmania, like the ANU, has no restrictions on use of land including Crown land.

12. University land of Flinders University outside State Australia is not tied to University educational requirements.

13. University land is held on purposes approved by the Governor.

14. Charles Sturt University has specific power for ‘the development of entrepreneurial activities to contribute to the development of western and south-western New South Wales.

15. The University of WA may use trust funds to erect buildings on university land.

16. Land held by SA universities outside the State is not subject to restriction. This rule does not apply to Adelaide University and the Uni of SA.

17. The universities have specific powers to vary the terms of a trust or gift.

18. Land dealings must comply with general environmental, and land planning and land management laws in Queensland. Leasing is for a limited term.

19. Land held by SA universities are subject to conditions imposed by the Governor. 

20. Victorian universities have restrictions on the length of term of a lease of university land unless the Minister consents. There is an upper limit on the sale of university land without the Minister’s approval. 

21. Mortgaging of Crown land requires the Minister’s approval.

22. No university may lease university land without the Minister’s approval unless the lease is for less than 21 years. The requirement does not apply to the lease of Crown land in South Cross University at Coffs Harbour. The Minister may impose conditions on the lease of Crown land, as too may the Universities Councils.

23. No SA university may lease land for more than 21 years, or mortgage land, without the Governor’s consent. The governor may also impose conditions on the lease. The Governor’s approval is required if a lease is not for commercial terms (except for Uni of SA).

24. Leases of university land in WA for terms of between 21 and 99 years require the approval of the Governor.

25. The Minister’s approval is required for the lease of land by Victorian universities when the term is over 21 years.

26. Universities in Queensland may only lease Crown land for a term of up to 25 years and may not mortgage Crown land. This does not apply to Bond University. Change of purpose of leases of Crown land require Ministerial approval.

27. The only restriction on the sale of land is that it promotes the interests of the University. 

28. If a University/Institute varies a scheme under which property is given to the University/Institute is given to the university it must be approved by the Administrator and gazetted.

29. Trust funds may be used for building on university land for profit-making purposes. 

30. The sale of Crown land owned by universities in Queensland requires Ministerial approval 

31. Sale of university land requires Ministerial approval.

32. Sale of university land over $1.5m requires Ministerial approval.

33. The Governor’s consent is required for the sale of university land.

34. If Crown land is no longer needed for university purposes, it reverts to the Crown or requires the approval of the Governor except for UWA.

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Treatment of intellectual property/commercialisation of research

The use and ownership of intellectual property is the subject of either Commonwealth legislation or the general law. It is therefore common throughout Australia. There is no relevant State or Territory legislation that affects individual universities.

The establishing Acts of NSW, Queensland, NT, ACT and Commonwealth universities contain express provisions permitting the exploitation of intellectual property. The establishing Acts of Victorian universities provide more general references to the promotion of research and the universities in Western Australia and South Australia contain no provision relating to intellectual property at all.

Generally, the absence of a specific or express power for universities to exploit their intellectual property does not prevent them from commercialising it. The basic principle that an intellectual property holder can exploit that property in whatever manner it chooses means that attempting to empower a university under its Act to commercialise this property is legally unnecessary. Universities, as owners of intellectual property (including that produced by members of staff), are given this right by the general law.

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