Australian Hospital Care (Latrobe) Pty Limited v The Commissioner of Taxation of the Commonwealth of Australia

REASONS FOR JUDGMENT Background 1 The present proceeding concerns the sales tax consequences of the privatisation of the state owned Latrobe Regional Hospital, which became the privately owned New Latrobe Regional Hospital as from 1 September 1998. The main issue is whether, as a result of that privatisation, the hospital is no longer a "public hospital", with the consequence that goods purchased by the hospital ceased to be exempt from sales tax as from 1 September 1998. 2 The applicant ("the hospital operator") operated the Latrobe Regional Hospital for the State of Victoria ("the State") from 3 February 1997 to 1 September 1998, and the New Latrobe Regional Hospital for Latrobe Regional Hospital Pty Ltd ("the hospital owner") since that date. 3 The hospital operator claims that the goods it purchased during the relevant periods for use at the two hospitals were covered by an exemption item that was in force at the time of the purchase, and were therefore exempt from sales tax under s 24 of the Assessment Act. It therefore claims that pursuant to s 51 of the Sales Tax Assessment Act 1992 (Cth) ("the Assessment Act") it is entitled to a credit in respect of the sales tax paid on those goods. An "exemption item" is defined in s 5 of the Assessment Act as an item or sub-item in Sch 1 to the Exemptions and Classifications Act. Item 140(a) of Sch 1 to the Sales Tax (Exemptions and Classifications) Act 1992 ("the Exemption and Classifications Act") exempts from sales tax, goods for use by "a public hospital". 4 Accordingly, the hospital operator claims that it is entitled to declarations that: · goods purchased by it for use at, or for the purposes of, the Latrobe Regional Hospital in the period 1 April 1997-1 September 1998; and · goods purchased by it for use at, or for the purposes of, the New Latrobe Regional Hospital in the period 1 September 1998-27 March 2000; constitute goods for use by a "public hospital" for the purposes of Item 140(a) of Sch 1 of the Exemptions and Classifications Act. 5 The respondent ("the Commissioner") accepts that from 1 April 1997 to 1 September 1998 the Latrobe Regional Hospital, which was state owned and state administered, was a public hospital. However, the Commissioner contends that the hospital operator is not entitled to either of the declarations it seeks. The Commissioner contends that, by reason of the privatisation of the hospital: · goods purchased by the hospital operator were purchased by it for the purpose of making profit from its contractual obligation to operate the two hospitals for their respective owners and, therefore, were not goods for use "by" a public hospital; · as from 1 September 1998 the New Latrobe Regional Hospital was no longer a public hospital but, rather, was a commercial enterprise carried on for the purpose of profit for the benefit of its owner and its operator, both privately owned corporations. The facts 6 There was little dispute as to any of the relevant facts. Rather, the parties were in dispute as to the conclusion to be drawn from them, namely whether the New Latrobe Regional Hospital was "a public hospital". 7 In 1991, the Central Gippsland Hospital at Traralgon and the Latrobe Valley Hospital at Moe merged so as to form the Latrobe Regional Hospital. In 1995, the Gippsland Psychiatric Service was also amalgamated with the Latrobe Regional Hospital. At that time the public hospital services provided by the Latrobe Regional Hospital were provided from five separate campuses. The Latrobe Regional Hospital operated as a "public hospital" as defined in s 3 of the Health Services Act 1988 (Vic) ("the Health Services Act") as it was listed as such in Sch 1 of that Act. 8 In March 1996 the Victorian Government prepared a Project Brief for the privatisation of the Latrobe Regional Hospital. Three parties were shortlisted for the project. They were the Australian Hospital Care Consortium, Health Care of Australia and the Sisters of Charity (which operated both the St Vincent's Public and Private Hospitals). 9 In summary, the Project Brief provided for the New Latrobe Regional Hospital to be constructed on a new site as a privately owned and operated hospital that would service the Latrobe Valley. The new hospital was to provide substantially the same public health care service as was being provided by the state owned and operated Latrobe Regional Hospital. The brief stated that to "all intents and purposes" the Government viewed the New Latrobe Regional Hospital as "providing publicly funded health services [to the public hospital patients] consistent with Victorian Public Hospitals generally". 10 The project involved financing, by members of a consortium, of the capital necessary to build the New Latrobe Regional Hospital. Ultimately, the State was to be liable to repay to the consortium the substantial part of the costs incurred in building the new hospital. The State was also to have ongoing responsibility for financing improvements to the facilities at the new hospital. 11 The Australian Hospital Care consortium was the successful tenderer. In due course it nominated the hospital owner to be the owner of the hospital and the applicant to be the hospital operator. The agreements establishing the project were complex. In summary, they comprised the following: · a Crown lease for 99 years from the State to the hospital owner; · a sub-lease of a new hospital site for 20 years from the hospital owner to the hospital operator; · a Master Security Deed setting out the financial arrangements between the State and the members of the financial consortium established to finance the construction of the new hospital; · the New Latrobe Regional Hospital Agreement between the hospital owner, the hospital operator and the State setting out the terms upon which the new hospital was to operate after the specified opening date (which, ultimately, was 1 September 1998); · the Latrobe Regional Hospital Management Agreement which provided for the transitional arrangements pursuant to which the hospital operator was to provide health care services to patients from the existing public hospital facilities in the period prior to the opening date for the new hospital; · a Health Services Contract for the New Latrobe Regional Hospital, which was entered into between the hospital owner and the hospital operator, pursuant to which the hospital operator agreed to perform all of the hospital owner's obligations to the State in respect of the New Latrobe Regional Hospital Agreement. 12 During the transitional period, being 3 February 1997 to 1 September 1998, the public hospital services at the Latrobe Regional Hospital were provided on the same basis to the public as they had previously been provided, save that during that period they were provided for the State by the hospital operator under the Latrobe Regional Hospital Management Agreement. The services were provided at the existing hospital premises until August 1998, after which they were provided from the New Latrobe Regional Hospital at the new hospital site. As from 1 September 1998, pursuant to the New Latrobe Regional Hospital Agreement, the New Latrobe Regional Hospital provided the public hospital health care service previously provided by the State. Clause 13.1 provided for the term of the Agreement to be 20 years although cl 13.2 provided for an extension of that term. 13 The New Latrobe Regional Hospital Agreement provided for the hospital owner to sub-contract to the hospital operator its obligations to the State to provide public hospital services. Under cl 13.3 the hospital operator undertook to the State that it will ensure that the hospital owner performs all of its obligations to the State under the Agreement and, to the extent that the hospital owner does not do so it will perform those obligations as if they were its own obligations. Under the same clause the hospital operator covenanted with the State that it will duly and punctually perform all of its obligations to the hospital owner under the Health Services Contract for the New Latrobe Regional Hospital. 14 Although the State was required to pay the hospital owner for the public health services provided pursuant to the Agreement in accordance with detailed provisions in relation to the calculation of the charges for those services, the commercial risk of owning and operating the hospital passed from the State to the hospital owner as from 1 September 1998. Thus, as from that date, the New Latrobe Regional Hospital was no longer a state owned and state administered institution. Instead, it was a privately owned and privately administered institution conducted for the purposes of profit. 15 The major consequence flowing from the change in the administration of the hospital was that, whereas previously the State was responsible under the Health Services Act for the quality and standard of the public health services provided by the hospital, as from 1 September 1998 that responsibility passed to the hospital owner and the hospital operator. Further, whereas previously the Latrobe Regional Hospital, as a public hospital for the purposes of the Health Services Act, was incorporated under, and governed by, the Act, as from 1 September 1998 the quality and standard of the public health services provided at the hospital were governed primarily by the terms of the contractual arrangements entered into between the various parties. However, notwithstanding that structural change, the New Latrobe Regional Hospital Agreement (and the other relevant contractual documents) in substance, provided for the quality and standard of the public hospital health services to continue to be maintained at the same levels as were previously applicable: see cll 14, 15, 16 and 17. Under those clauses, the State was granted rights to ensure that the requisite standards of service were maintained. Other clauses provided for periodic reporting to the State (cl 22), State auditing rights (cl 23) and the applicability of the Ombudsman Act 1973 (Vic) (cl 24) and of the Freedom of Information Act 1982 (Vic) (cl 27) as if the hospital were a State agency in respect of public patients. 16 Community representation on the hospital board continued as a result of the requirement that there be a community advisory board to enable the hospital to operate having appropriate regard to local community interests (cl 29). Clause 36 provided for the hospital operator to own or lease the equipment to be used for the purposes of the hospital. 17 Evidence was adduced by the hospital operator that, notwithstanding the privatisation of the hospital, it continued to be regarded and referred to by community members, staff and by the State as a public hospital. The evidence is not surprising as, save for the privatisation of the hospital in the manner explained above, the New Latrobe Regional Hospital continued to provide substantially the same public hospital services to the public as had previously been provided by the Latrobe Regional Hospital. Thus, notwithstanding the significant structural change that had occurred in relation to the ownership and operation of the hospital, it continued to provide an entitlement to all members of the community to be admitted as an in patient or out patient free of charge and after that admission to elect, if so desired, to be a private patient. In a Discussion Paper put out by the Victorian Government Department of Human Services in 1999 the aspects of election and non discrimination against patients upon admission on the basis of their insurance status was said, in a sense, to be "the defining essence of a public hospital". Although the New Latrobe Regional Hospital has a small percentage of private patients, the evidence is that it is common for public hospitals to have a similar percentage of private patients. 18 There was also expert evidence that, notwithstanding that the services provided may not have changed, privatisation had resulted in the hospital no longer being properly characterised as a public hospital as it was no longer a non-profit making public institution carried on for the public benefit. The Commissioner also contended that an essential element of a public hospital is that it be state owned and state administered. Thus, so it was submitted, denominational, community and privately operated hospitals that provide public hospital services were not public hospitals. The Health Services Act 19 The privatisation of the Latrobe Regional Hospital occurred in the context of the Health Services Act. The Act provides the legal framework within which public health services are to be provided by hospitals and other health care agencies in Victoria. It provides for the incorporation and governance of state owned and administered public hospitals (which are set out in Sch 1), denomination hospitals (which are set out in Sch 2) and privately-operated hospitals which provide public hospital services (Pt 3A of the Act). Pursuant to s 8(3) of the Health Services Act the New Latrobe Regional Hospital was gazetted as a privately operated hospital for the purposes of the Act as from 1 September 1998. Thus, the Act's main significance, for present purposes, is that it established the legal framework within which the New Latrobe Regional Hospital became a privately-operated hospital providing public hospital services to the community on substantially the same basis as such services were previously provided by the state owned and administered Latrobe Regional Hospital. 20 Section 17AA of the Health Services Act provides that the public hospital services principles operating pursuant to agreements in force from time to time between the Commonwealth and the State with respect to the provision of public hospital services are the guidelines for the delivery of public hospital services to public hospital patients by public hospitals and by privately-operated hospitals. 21 Part 3A of the Health Services Act provides for agreements between the State and hospital owners and hospital operators of privately-operated hospitals in relation to the provision of public hospital services. The agreements entered into between the State, the hospital owner and the hospital operator were entered into pursuant to Pt 3A. 22 In substance, the Health Services Act ensures that Commonwealth and State funding available for public hospital services will be provided to public hospitals and to privately-operated hospitals. Further, it also provides that the quality and standard of those services will be maintained at appropriate levels in the public interest, irrespective of whether the hospital concerned is a public hospital or a privately-operated hospital. Item 140 23 Item 140 of Sch 1 of the Exemptions and Classifications Act currently exempts from sales tax: "Goods for use by any of the following: (a) a public hospital; (b) a hospital that is carried on by a non-profit body; (c) a public benevolent institution; (d) a public body that is established and maintained principally for the relief of unemployed persons." 24 Item 140 was originally Item 81 of the Schedule to the Sales Tax (Exemptions and Classifications) Act 1935-1950 and applied to "goods for use…by a public hospital…". Section 4(g) of the Sales Tax (Exemptions and Classifications) Act 1951 omitted Item 81 and replaced it with the following sub-item: "(1) Goods for use (whether as goods or in some other form), and not for sale, by - (a) a public hospital; (b) a hospital which is carried on by a society or association otherwise than for the purpose of profit or gain to the individual members of the society or association; (c) a public benevolent institution; or (d) a public organization which the Commissioner is satisfied is established and maintained for the relief of unemployed persons." 25 Item 140 is concerned with public hospitals and benevolent institutions. Until the recent privatisation era it would have been difficult to conceive of a public hospital being conducted as a profit making enterprise because an essential element of a public hospital was the provision of services to the public free of charge. In 1951 a "public hospital" was a public institution that was not carried on for the purpose of profit or gain. It was assumed that only goods for use by state owned and administered public hospitals were exempt from sales tax under the exemption for public hospitals contained in Item 81 of the Schedule to the Exemptions and Classifications Act. Consequently, sub-para (b) of the new Item was regarded as necessary to enable the sales tax exemption to extend to community hospitals. 26 In his Second Reading Speech, the Treasurer, Sir Arthur Fadden explained the reason for extending the exemption to private hospitals conducted by non-profit organisations: "The most important of these amendments is that which extends to private hospitals conducted by non-profit organizations, the exemption from sales tax already enjoyed by public hospitals in respect of goods for their use. This concession is being allowed in conformity with a proposal to amend the Income Tax Assessment Act, upon the recommendation of the Commonwealth Committee on Taxation, to allow concessional deductions in respect of gifts to such private hospitals." 27 Both the income tax and sales tax legislation were amended together in 1951 in accordance with a recommendation of the Commonwealth Committee on Taxation. The Committee's Report to the Treasurer, "Income Tax - Concessional Allowances in Respect of Gifts to Certain Funds and Institutions in Australia (Reference No. 12)" presented on 10 October 1951, stated: "9. …the Committee considered whether the allowance of gifts to public hospitals should be granted by section 78(1)(a), while gifts to community hospitals are not subject to the allowance. 10. Community hospitals, such as the following Melbourne institutions, are conducted by public, charitable or religious organizations: - St. Andrew's (Presbyterian); Epworth (Methodist); Mercy (Roman Catholic); St Vincent's (Roman Catholic); St. Ives (Church of England); Bethesda (Salvation Army); Brightom (Community); and Freemasons'. 11. These hospitals are not conducted for private gain, but have been established and are maintained with the sole object of rendering a much needed service to the community. In the opinion of the Committee, they are essentially public institutions, and it would appear to be an anomaly to allow deductions for gifts to public hospitals, but not for gifts to institutions of this type. 12. If it is the intention of the Government to retain in the Income Tax laws the present concession for gifts to public hospitals, the Committee recommends that for the purposes of uniformity gifts to such institutions as are described in paragraph 10 above should be treated, for the purpose of the concessional allowance, in the same manner as those made to public hospitals. 13. The concession might be expressed in the law to apply to gifts to any public hospital or to any other hospital which is carried on by an organization or body, but not for the purpose of profit or gain to the individual members of that organization or body." 28 The recommendation was adopted for sales tax, as well as income tax, purposes. The Committee subsequently considered whether the same recommendation should be made for private hospitals for the purposes of sales tax. The Committee's Report to the Treasurer, "Sales Tax Exemptions: Private Hospitals and Similar Institutions (Reference No. 53)" presented on 20 October 1953, stated: "2. Early in its deliberations as an advisory body, the Committee formed the view that hospitals not carried on for gain - generally referred to as community hospitals - were deserving of tax immunity to assist them in their work of caring for the sick, and that it was anomalous that they should be distinguished from public hospitals for tax purposes. 3. The Committee's recommendation was adopted by the Government and an income tax deduction provided for such gifts. Further, the tax immunity has been extended by exempting both public and community hospitals from income tax and by extending the exemption from sales tax of goods for the use of public hospitals to include goods for the use of community hospitals. As amended, Item S1(1) of the First Schedule to the Sales Tax (Exemptions and Classifications) Act exempts goods for the use of a hospital which is carried on by a society or association otherwise than for the purpose of profit or gain to the individual members of that society or association. 4. In the opinion of the Committee, the whole justification for the exemption from sales tax of goods acquired for the use of community hospitals lies in the fact that such hospitals are not carried on for the purpose of profit or gain to individual members. As this feature distinguishes community hospitals from private hospitals, the Committee does not recommend the extension of the sales tax exemption to private hospitals." 29 In accordance with the Report's recommendation the exemption was not extended to private hospitals. Consequently, Item 140 has remained substantially in its present form since the amendments made as a result of the Committee's 1951 Report. 30 The corresponding amendments for income tax purposes were as follows. Section 78(1)(a)(i) of the Income Tax Assessment Act 1936 ("the 1936 Act"), which provided that gifts to "a public hospital" were allowable deductions, was omitted by s 13 of the Income Tax and Social Services Contribution Assessment Act 1951 ("the 1951 Act') and replaced with the following sub-paragraph: "(i) a public hospital, or a hospital which is carried on by a society or association otherwise than for the purposes of profit or gain to the individual members of that society or association." 31 The Explanatory Note to the amendment in the Bill that became the 1951 Act stated that: "In paragraph (a) of this clause, it is proposed to adopt a recommendation of the Commonwealth Committee on Taxation that the concession should be extended to gifts to hospitals which are carried on by societies and associations otherwise than for the purposes of profit or gain of individual members of those societies and associations. The societies and associations which conduct these hospitals are usually of a religious or charitable character. These hospitals are essentially public institutions, and the proposed extension of the concession will remove an anomaly from the Act." 32 As a final part of this package of amendments, s 23(e) of the 1936 Act was amended. As originally enacted, s 23(e) exempted the income of "a religious, scientific, charitable or public educational institution" from taxation. In 1952 , cl 4(a) of the Income Tax and Social Services Contribution Assessment Act (No. 3) 1952 ("the 1952 Act") inserted para (ea) into the 1936 Act to exempt: "the income of a public hospital, or of a hospital which is carried on by a society or association otherwise than for the purposes of profit or gain to the individual members of that society or association…" 33 The Explanatory Memorandum circulated with the Bill that became the 1952 Act included the following explanatory note: "Section 23(e) of the Principal Act exempts from income tax and social services contribution the income of a religious, scientific, charitable or educational institution. Under this provision, the income of a public hospital is exempt as being the income of a charitable institution. Community hospitals, however, although performing a similar service to the public, are not 'charitable' in the legal sense of that term and are accordingly outside the scope of the exemption. In order to correct this anomaly, it is proposed in paragraph (a) of this clause to extend the exemption to the income of hospitals which are carried on by societies or associations otherwise than for the purposes of profit or gain to their individual members. The societies or associations which conduct these hospitals are usually of a religious or charitable character and the hospitals are essentially public institutions. This is already recognised in section 78(1.)(a)(i) of the Principal Act, which allows a deduction in respect of donations to such hospitals in common with public hospitals." 34 The present case raises the issue of whether the meaning of the term "public hospital" is to be considered as at 1951, when Item 140 was enacted, or by reference to its contemporary meaning, thereby having regard to current economic realities and modern usage of the term. As outlined above the statutory history of Item 140 indicates that the exemption was granted to public hospitals because they were regarded as equivalent to public benevolent institutions. Generally speaking, the date at which an item in the Exemptions and Classifications Act "speaks" is on and from when it was substantially enacted in its present form: see Dick Smith Electronics Pty Ltd v Federal Commissioner of Taxation (1997) ATR 346 at 355 and 356. 35 The Commissioner contends that: · the term "public hospital" appears in many statutes: Income Tax Assessment Act 1936 s 23(ea) and former s 78(4) Item 1.1.1; Income Tax Assessment Act 1997 s 50-30 and s 30-20; Fringe Benefits Tax Assessment Act 1986 s 57A and s 65J(1)(c) (as recently amended by the A New Tax System (Fringe Benefits) Act 2000). See also Pay-roll Tax Act 1971 (Vic); and · it also appears in other documents such as wills: see, for example The Public Trustee v The Hospitals Commissioner of New South Wales (1939) 56 WN (NSW) 198 concerning a devise to "The Public Hospitals in the County of Cumberland in New South Wales". 36 Accordingly, the Commissioner submits that the accepted meaning of the term should not be lightly extended or modified. In support of that contention the Commissioner points to Australian Council of Social Service Inc. v Commissioner of Pay-roll Tax (1985) 1 NSWLR 567 where Street CJ cautioned against a contemporary interpretation of the phrase "public benevolent institution". Street CJ said (at 568): "So far as I am aware, in every reported case but one this element of direct dispensation of benefits is to be found within the factual context. This, of course, does not necessarily and of itself predicate that direct dispensation of benefits is a prerequisite. It does, however, provide a strongly persuasive basis for holding that, over the passage of years, this element has now become built into the concept of a public benevolent institution. The judges of the past have taken this for granted and it is a long step to hold that a comparatively modern statute (the Pay-roll Tax Act was passed in 1971) can properly be construed as being freed from that basic factual element. … The matter is not one in which laws or approaches previously laid down require to be moulded to accommodate modern social conditions and expectations. The phrase has, over the decades, been applied to countless property transactions in a context which has involved recognition of the need for the presence of the basic element of direct distribution or dispensation of aid. If the tacit assumption that this is an essential prerequisite is to be changed, it is in my view the province of either the legislature or the High Court, which has itself more than once been party to that tacit assumption, to prescribe and authorise the change." 37 In substance, the Commissioner contends that the Court should give the term "public hospital" the meaning understood at the time Item 140 was enacted, irrespective of its contemporary meaning. The 1951 meaning is not a hospital that is carried on for profit; rather, it is a public institution carried on for the benefit of the public. Alternatively, the Commissioner contends that that meaning has remained unchanged and is therefore the contemporary and commonly understood meaning. 38 The hospital operator contends that, in the context of sales tax, the term "public hospital" is to be given its commonly understood meaning in the contemporary society in which the hospital operates. It contends that the contemporary meaning is a publicly funded hospital providing public hospital services free of charge to the public. Reliance was placed upon Commissioner of Pay-roll Tax (Vic.) v Cairnmillar Institute (1990) 90 ATC 4752 where, in the context of construing the phrase 'public benevolent institution' for the purposes of the Pay-roll Tax Act 1971, McGarvie J observed (at 4,769): "It is, I think, important not to approach a consideration of the ways open to a benevolent institution to go about achieving its objectives, with preconceptions arising from the fact that the leading case was decided in the context of the very different society which existed some 60 years ago. … The institution with a benevolent purpose has to adapt itself to the realities of obtaining funds and dispensing its benevolence in the conditions of today. … As Mr Anderson [Counsel for the Institute] pointed out, the Pay-roll Tax Act itself contemplates that the modern public benevolent institution may take a form very different from the form taken by such institutions two generations ago." 39 The same point was made by Lord Atkin in Girls' Public Day School Trust Ltd v Ereaut [1931] AC 12 ("Girls' Public Day School Trust") at 31 where his Lordship, in favouring a contemporary meaning of the term "public school", observed that "[t]he circumstances in which education is given will vary as the years pass". Lord Macmillan (at 35) said that "[t]he conception of a public school cannot be stereotyped in consonance with the ideas of more than a century ago". 40 While there is an attraction about the contention of the Commissioner that the accepted meaning of a term commonly used in a statute should not be lightly extended or modified, on reflection the contention does not assist in the construction of Item 140 in the Exemptions and Classifications Act. 41 The determination of whether an Act uses an expression in any other sense than that which it has in ordinary speech is always a question of law: see N.S.W. Associated Blue-Metal Quarries Ltd v Federal Commissioner of Taxation (1956) 94 CLR 509 at 511-512 and Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 ("Agfa-Gevaert Ltd") at 397. If, as a matter of law, a court concludes that the term is to have a special meaning, that is a meaning other than its ordinary meaning, then it is to be given that special meaning. If not, then the term is to be given its ordinary and natural meaning, which is the commonly understood meaning that is appropriate in the circumstances. 42 In Maunsell v Olins [1975] AC 373 at 391, in a passage cited by the majority in Agfa-Gaveart Ltd (at 398) as a useful starting point in determining the construction of statutes or statutory instruments, Lord Simon observed: "Statutory language, like all language, is capable of an almost infinite gradation of 'register' - i.e., it will be used at the semantic level appropriate to the subject matter and to the audience addressed (the man in the street, lawyers, merchants, etc.). It is the duty of a court of construction to tune in to such register and so to interpret the statutory language as to give to it the primary meaning which is appropriate in that register (unless it is clear that some other meaning must be given in order to carry out the statutory purpose or to avoid injustice, anomaly, absurdity or contradiction). In other words, statutory language must always be given presumptively the most natural and ordinary meaning which is appropriate in the circumstances." 43 Often, with sales tax exemption items, it is not possible to identify an aim, purpose or objective of the exemption that will assist in determining the meaning of the item (see, for example, Telstra Corporation Ltd v Commissioner of Taxation (1996) 68 FCR 566 at 582 per Lindgren J). However I am satisfied, as a matter of law, that a special meaning ought to be given to the term "public hospital" in Item 140 to carry out the statutory purpose of the exemption. 44 The statutory purpose of the exemptions in Item 140 is clear from its content. Public hospitals and the other institutions identified in the item were to be entitled to sales tax exemption in respect of goods purchased by them because it was in the public interest that non-profit making institutions carried on for the purpose of rendering services to the community should be tax exempt. Thus, substantially similar exemptions were granted under the Exemptions and Classifications Act and the Income Tax Assessment Act 1936. In 1951, as community hospitals were conducted as non-profit making institutions for the purpose of rendering services to the community, they were granted the same tax exempt status as public hospitals and the other institutions in Item 140. This statutory purpose is confirmed by the legislative history and the extrinsic material to which I have referred. 45 Thus, to carry out the statutory purpose of Item 140, an essential element of a "public hospital" is that it be a public institution that is carried on for the purpose of rendering services to the community, rather than for the purpose of profit or gain for its members. The New Latrobe Regional Hospital does not meet this criterion. 46 I would add that I would have arrived at the same conclusion had I approached the matter by reference to the contemporary common understanding or ordinary meaning of the term "public hospital". I will briefly explain my reasons for doing so. 47 As was pointed out by the House of Lords in Girls' Public School Trust Limited, the notion of what constitutes a "public school" in England changes over time, and consequently it is unlikely that any one factor will be conclusive. Historically, public schools were basically those founded or maintained by the community, whether state or local. More recent examples of public schools included schools owned by a limited company, the constitution of which allowed the payment of a limited dividend to its preference shareholders. It was held not to be essential for the constitution of a public school that there be a total absence of any interest of any private person in the school or the absence of any profit in the contemplation of its founders or managers. 48 A similar approach was taken to the term "public hospital" for the purposes of a rating exemption under the Local Government Act 1919 (NSW) in O'Connell v The Council of the City of Greater Newcastle (1941) 41 SR (NSW) 190. Jordan CJ (with whom Halse Rogers and Street JJ concurred) said at (193): "I can see nothing in the phrase 'public hospital' nor in its immediate or general context to suggest that it is confined to hospitals which are subject to some form of public control (whatever is to be understood by this expression) and whose income and property are not at the disposal of any private authority. On the contrary it is the purposes to which the hospital is directed, not the manner in which it is controlled, which determines whether it should be regarded a public hospital." 49 Jordan CJ (at 193-194) accepted that whether a particular institution is a public hospital is "a question of fact to be determined upon a consideration of all the relevant facts of the particular case, no one fact being necessarily conclusive". However, his Honour stated (at 193): "In my opinion, in its present context, the phrase 'public hospital' means a hospital which is conducted not for private profit but primarily and substantially for the benefit of ordinary members of the general public…" 50 The question of whether certain hospitals connected with the Roman Catholic and Methodist Churches were public hospitals for the purpose of exemption from contribution to the War Damage Fund under National Security (War Damaged Property) Regulations was considered by the High Court in The Little Company of Mary (SA) Incorporated v The Commonwealth (1942) 66 CLR 368. Latham CJ and Starke J (with Rich J dissenting) considered that the hospitals were not public hospitals within the meaning of the Regulations even though they were not carried on for any personal profit and accepted patients of all religious denominations. The majority found these factors were outweighed by the fact that the hospitals charged fees to most, but not all, patients; were not subject to any form of public control and were not hospitals in relation to which members of the public had any rights. All members of the court accepted that, whether or not the hospitals were public hospitals for the purpose of the Regulations, was to be determined on the basis of the common understanding of that term and that that was a question of fact with no single matter being conclusive, for the reasons given in Ereaut and O'Connell. 51 The question of whether a particular institution is a public hospital according to common understanding is a question of fact to be resolved upon a consideration of all the circumstances. The institutions with which each of the above cases was concerned were different from the institution under consideration in the present case. Thus, the cases on the meaning of the term "public hospital" in other statutory contexts, while of assistance, cannot be treated as authorities on what constitutes a public hospital. As Latham CJ stated (at 378-379) in The Little Company of Mary (SA) Incorporated, insofar as O'Connell was relied upon to assist the plaintiff, "on a question of fact precedents are not of authority". 52 The New Latrobe Regional Hospital is obliged to provide public health care services, largely at public expense, free of charge to the public. Further, it is subject to fairly stringent regulation by the State in relation to the standard and quality of those services. It is also a teaching hospital. While those factors point to the Hospital being a public hospital, they are outweighed by other factors. 53 First, the Hospital is privately owned and operated for the purpose of gain or profit for its members. This factor, while not necessarily decisive, has been said (on some occasions implicitly, if not explicitly) to weigh against a hospital or other analogous institution being characterised as a public hospital or as a public institution: see O'Connell at 193 per Jordan CJ, Ereaut at 21 per Viscount Hailsham, at 32 per Lord Atkin and 35-36 per Lord Macmillan, Re Resch's Will Trusts [1969] 1 AC 514 at 540, The Little Company of Mary (SA) Incorporated at 379-380 per Latham CJ and at 384 per Rich J (who dissented in the result). 54 Second, in so far as there is state regulation of the Hospital's activities, that regulation is indirect in the sense that it is pursuant to the voluntary undertaking of obligations under contract rather than by statute or direct state control. Thus, a significant aspect of the "public" element existing in respect of "public hospitals" is absent. 55 Third, although the Hospital's revenue is funded by the state (whether Commonwealth or Victoria), the funding is primarily in the form of payments based on fees for the service provided. In the present context the payment of fees for services rendered pursuant to a contractual obligation to do so is not properly characterised as public funding. 56 Accordingly, it is accurate to characterise the Hospital as a privately owned and operated hospital that provides public hospital services to the public, rather than as a public hospital. Although there was a substantial body of evidence adduced that the Hospital was perceived by many to be a public hospital, that evidence was based primarily on the fact that the Hospital continued to provide substantially the same public hospital services as had been previously provided. As explained above, I regard that factor as being outweighed by the other considerations to which I have referred. 57 Thus, on either approach to the issue of construction of Item 140 the hospital operator is not entitled to the declaratory relief it seeks as from 1 September 1998. That leaves remaining the claim for declaratory relief for the period from 1 April 1997 to 1 September 1998. During that period the Latrobe Regional Hospital was a public hospital, as it was a public institution providing public hospital services and was not carried on by the State for the purpose of profit or gain. It was also State owned, and, indirectly (through the hospital operator), State operated. 58 The hospital operator conducted the Hospital as an independent contractor. Thus, the goods in question were acquired and used by the hospital operator as its own goods on its own behalf to carry out its contractual obligations as an independent contractor and, as such, were not used by the public hospital. Use of the goods at, or for the purposes of, the hospital is not use of the goods by the hospital: see Commissioner of Taxation v Brambles Holdings Limited (1991) 28 FCR 451 at 457 and 467 and Otto Australia Pty Ltd v Commissioner of Taxation (1991) 28 FCR 477 at 480 and 482. Accordingly, the hospital operator is not entitled to the declaratory relief it seeks in respect of the period from 1 April 1997 to 1 September 1998. Conclusion 59 For the above reasons the application is to be dismissed with costs. I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel.