Australians for Indigenous Constitutional Recognition Ltd v Commissioner of the Australian Charities and Not-for-profits Commission

RELEVANT PRINCIPLES 6 Rule 40.51(1) of the FCR provides that a "party may apply to the Court for an order specifying the maximum costs as between party and party that may be recovered in the proceeding". 7 It has been said that the principal purpose of r 40.51(1) (and its predecessor, O 62A r 1 of the Federal Court Rules 1979 (Cth)) was not so much a desire to limit the exposure to an adverse costs order in complex and lengthy commercial litigation, but rather to address concerns as to access to justice, public interest, and a desire to limit the costs of all parties, particularly in less complex and shorter cases - see: McKay Super Solutions Pty Ltd (Trustee) v Bellamy's Australia Ltd (No 2) (2019) 135 ACSR 278 at [71] (Beach J); Houston v State of New South Wales [2020] FCA 502 at [19] (Griffiths J). 8 In Corcoran v Virgin Blue Airlines [2008] FCA 864 at [6], in considering an application for a maximum costs order under O 62A r 1, Bennett J identified the following factors as relevant to the exercise of the discretion in the matter before her Honour: the timing of the application; the complexity of the factual or legal issues raised in the proceedings; the amount of damages that the applicant seeks to recover, and the extent of any other remedies sought; whether the applicant's claims are arguable and not frivolous or vexatious; the undesirability of forcing the applicant to abandon the proceedings; and whether there is a public interest element to the case. 9 This was not intended as an exhaustive statement of matters relevant to the exercise of the discretion. The weight each carries, if relevant to a particular case at all, varies according to the particular circumstances. 10 Other factors which might be relevant include: the nature of the relief sought; the amount of costs which are likely to be incurred; the likely duration of the proceedings overall and the length of any trial; the interests of the parties in both prosecuting and defending the litigation; the basis upon which legal representatives are acting, for example, if the legal representatives for the applicant are acting on a pro bono basis (as they are here); whether the applicant has a pecuniary interest in the outcome of the proceeding; and as is discussed at [27] to [29] below, the apparent merit of the proceeding. 11 It is the text of the provision, read in context, and the purposes the text reveals, which govern the exercise of the discretion. The discretion provided by r 40.51(1) is not expressly confined. Any relevant matter may be taken into account. The discretion is to be exercised judicially.

The nature of the proceedings 12 In the present case, it is necessary to start with an appreciation of the nature of the proceedings. The applicant applied to the Australian Charities and Not-for-profits Commission (ACNC) to register as a charity with the subtypes of advancing social or public welfare and public benevolent institution (PBI) under items 3 and 14 of the table in s 25-5(5) of the ACNC Act. It is convenient to set out the whole of the table: Entitlement to registration Item Column 1 Column 2 Type of entity Corresponding subtype of entity 1 Charity Entity with a purpose to which paragraph (a) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies (advancing health) 2 Entity with a purpose to which paragraph (b) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies (advancing education) 3 Entity with a purpose to which paragraph (c) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies (advancing social or public welfare) 4 Entity with a purpose to which paragraph (d) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies (advancing religion) 5 Entity with a purpose to which paragraph (e) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies (advancing culture) 6 Entity with a purpose to which paragraph (f) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies (promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia) 7 Entity with a purpose to which paragraph (g) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies (promoting or protecting human rights) 8 Entity with a purpose to which paragraph (h) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies (advancing the security or safety of Australia or the Australian public) 9 Entity with a purpose to which paragraph (i) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies (preventing or relieving the suffering of animals) 10 Entity with a purpose to which paragraph (j) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies (advancing the natural environment) 11 Entity with a purpose to which paragraph (k) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies (purposes beneficial to the general public and analogous to the other charitable purposes) 12 Entity with a purpose to which paragraph (l) of the definition of charitable purpose in subsection 12(1) of the Charities Act 2013 applies (advancing public debate) 13 Institution whose principal activity is to promote the prevention or the control of diseases in human beings 14 Public benevolent institution

13 The respondent notified the applicant on 29 July 2020 that the ACNC had decided to refuse to register the applicant as a PBI, but otherwise accepted its registration. The applicant objected to this decision in accordance with s 160-5 of the ACNC Act. The objection was disallowed. Section 160-25 of the ACNC Act permitted the applicant either to seek review of the objection decision in the Administrative Appeals Tribunal or to appeal against the objection decision to a "designated court", the definition of which included this Court. Section 160-25 provides: 160-25 Entity may seek review of, or appeal against, Commissioner's decision If the entity is dissatisfied with the Commissioner's objection decision, the entity may either: (a) apply to the Administrative Appeals Tribunal for review of the objection decision; or (b) appeal against the objection decision to a designated court. 14 The applicant chose to appeal to this Court rather than seek review in the Tribunal where it would not have been exposed to the possibility of an adverse costs order. The applicant did not address this issue in its written submissions in chief. In its written reply submissions, the applicant submitted that "the mere fact that a review could have been commenced in the Administrative Appeals Tribunal which has different rules as to costs, should not override the other reasons in favour of granting a protective costs order".

The provision of guidance 15 The applicant submitted that the Court's consideration of the issues in the proceeding will provide guidance on the proper construction of the phrase "public benevolent institution" and the proper characterisation of an entity's activities in the process of determining whether an entity is a PBI. I do not accept that (a) the meaning of "public benevolent institution" or (b) the characterisation of an entity's activities as "independent", "main", "ancillary" or "incidental" are as uncertain under the current law as the applicant would have it. 16 As to the former, the history and meaning of "public benevolent institution" was thoroughly examined by Allsop J in Ambulance Service of NSW v Deputy Commissioner of Taxation (2002) 50 ATR 496. A PBI is an organisation that promotes "the relief of poverty, suffering, distress or misfortune": Perpetual Trustee Co Ltd v Commissioner of Taxation (1931) 45 CLR 224 at 234 (Dixon J); see also 232 (Starke J), 235-236 (Evatt J). An organisation that is concerned with the relief of poverty and distress in an "abstract sense" or "indirect sense as a promoting body" is not a PBI: Australian Council of Social Service Inc v Commissioner of Pay-roll Tax (1985) 1 NSWLR 567 at 575 (ACOSS). ACOSS was an organisation that sought to promote the relief of poverty and distress through advisory, informative, research and advocacy functions related to social welfare, but did not itself directly provide relief to those in need. The NSW Court of Appeal held that the appellant was not a PBI. In Commissioner of Taxation v The Hunger Project Australia (2014) 221 FCR 302, the Full Court accepted that "an institution that provided general advice, information, research and advocacy services … did not amount to dispensing relief to the needy": at [51]. 17 As to the latter, the applicant contended that this proceeding will give guidance on what factors or considerations are determinative when assessing whether an institution's activities are "incidental" and as to the distinction between an institution's formal objects and the activities undertaken by the institution. To the extent these issues might arise in this case, I do not consider that the fact that the reasons might comment on the issues as one of particular weight, although it does count in the applicant's favour. Many of the issues have been dealt with in cases such as Maclean Shire Council v Nungera Co-Operative Society Ltd (1995) 86 LGERA 430 and Commissioner of Taxation v Word Investments Ltd (2008) 236 CLR 204 at 217. 18 I also note that, if the applicant had sought review in the Tribunal, the Tribunal's decision would have provided guidance. 19 The matters which the applicant puts on this application as ones of uncertainty in the law, and public interest or importance, could have been advanced in the Tribunal as reasons for the Tribunal to allocate a judicial or presidential member.

Arguable case and merit 20 In addressing whether the applicant had an arguable case, the applicant placed particular emphasis on Hunger Project, which it described as turning the understanding of PBI in the charitable world upside down. The applicant relied in particular on what the Full Court stated at [66] and [67]: In our opinion, whilst there is no single or irrefutable test or definition, the ordinary meaning or common understanding of a public benevolent institution includes (to adapt the words of Starke and Dixon JJ in Perpetual Trustee) an institution which is organised, or conducted for, or promotes the relief of poverty or distress. To adapt the words of Priestley JA in ACOSS, such an institution conducts itself in a public way towards those in need of benevolence, however that exercise of benevolence may be manifested[.] The ordinary contemporary meaning or understanding of a public benevolent institution is broad enough to encompass an institution, like HPA, which raises funds for provision to associated entities for use in programs for the relief of hunger in the developing world. The fact that such an institution does not itself directly give or provide that relief, but does so via related or associated entities, is no bar to it being a public benevolent institution. Such an institution is capable of being considered to be an institution organised or conducted for the relief of poverty, sickness, destitution and helplessness. 21 The question in Hunger Project was whether, in order for the entity to be a PBI, the entity had to dispense or provide relief directly, or whether an entity could be a PBI if its principal activity was to raise funds for dissemination to associated entities, which directly performed charitable acts to relieve hunger in the developing world: Hunger Project at [1]. The Full Court reached the conclusion that the distribution of the funds in this way was sufficiently direct for the relevant entity to be a PBI. The reasons of the Full Court are to be read in context. 22 The evidence of Mr Parkin on this application included: [7] AICR was established on 1 October 2019. I refer to AICR's Constitution which describes the purpose behind and reason for AICR's establishment as follows: "to empower Indigenous Australians to fully participate in the economic and social life of Australia through self-determination and recognition in the Australian Constitution". … [8] AICR's objective is to give Indigenous people a voice in their affairs through constitutional change. Such recognition will give them the empowerment and confidence to undertake all of the essential steps to improve their communities by active participation in decisions about housing, education, employment, welfare, wealth creation and their participation in the economic lifeblood of Australia. It will greatly facilitate their collective ability to claim their social and economic future as their own. [9] AICR seeks to advance its purpose of achieving constitutional recognition through activities, including but not limited to: (a) conducting research to determine current community attitudes toward Indigenous Australians; (b) providing information to Indigenous Australians about how a Voice to Parliament can help make a real and genuine positive change in their lives by giving them a say in the laws and policies made and designed by Parliament for them; (c) assisting Indigenous Australians to tell their story, to learn how to use their voice, to engage in effective discourse and to engage with the political system; (d) creating spaces and opportunities for Indigenous Australians to think deeply in supportive environments on their own experience and struggle, which will both help inform the broader narrative and move towards healing; (e) empower Indigenous Australians to spread the word among their own families and communities in their own way; (f) in partnership with Indigenous production companies and broadcasters, encourage the development of television, radio programming, film and podcasts designed to educate audiences about constitutional recognition; (g) in partnership with universities, encourage the ongoing academic work around the importance of constitutional recognition, including elevating work in international academic circles and inter-governmental institutions; and (h) work with education departments to change or update school curriculum to share stories about the experience of Indigenous Australians. [10] AICR wants to use the above strategies and purposes to build knowledge and engagement to achieve the groundswell required to lead to constitutional recognition. [11] AICR intends to undertake these activities across all States and Territories in Australia. [12] AICR is registered as a charity with ACNC with the purpose of advancing social or public welfare. 23 The applicant indicated that it intended to file expert evidence in the proceedings addressing (a) the fact that Indigenous Australians are not appropriately recognised in the Constitution; and (b) the resulting distress which exists amongst the indigenous community in Australia. I approach the present application on the basis that those matters are established. 24 The applicant submitted: AICR's prime motivation is to pursue registration as a PBI so that AICR is better placed to raise funds through fundraising activities and donations which can then be used to further advance its benevolent purpose. As AICR is a not-for-profit company, all funds raised are used in furtherance of AICR's charitable purpose. In other words, to the extent that AICR receives funds as a result of PBI endorsement, such funds will be utilised to advance its charitable purpose. Without registration as a PBI, AICR will be unable to receive deductible gifts and indications are that, in the absence of such registration as a PBI, any amounts received will be negligible. As such, without registration as a PBI, it will be difficult for AICR to provide the benevolent relief that it intends to provide, which will be to the detriment of Indigenous Australians. 25 The applicant is concerned with advancing education, promoting reconciliation, mutual respect and tolerance between groups of individuals in Australia; and advancing public debate, for the purpose of achieving self-determination and recognition in the Australian Constitution for Indigenous Australians. The money which the applicant hopes to raise by securing registration as a PBI would be directed to such matters as securing constitutional recognition for Indigenous Australians. It would not be distributed directly (or sufficiently directly) to Indigenous Australians. It would be used with the hope of ultimately relieving distress by seeking to secure constitutional recognition or by providing Indigenous Australians with a voice in their affairs through constitutional change. It may be accepted that relief does not have to be provided through money in order for an entity to be a PBI. Entities which, for example, provide relief to the needy in the form of food or accommodation would be capable of being public benevolent institutions. However, there comes a point where an entity can be seen to be pursuing, for beneficial purposes, social, political or legal change through increasing awareness, debate and other activities, rather than providing direct (or sufficiently direct) relief to those intended ultimately to benefit from the entity's pursuits. 26 The applicant has a difficult case for falling within the meaning of "public benevolent institution". That is not to say that its objects are not beneficial. The applicant's purposes have been accepted by the respondent as charitable in advancing social or public welfare. A "public benevolent institution" is a charitable institution of a particular kind. The more abstract and less direct an institution's activities are to the relief of poverty, sickness, destitution, helplessness or distress, the less likely the entity is to be regarded as a PBI. Accepting that a contemporary understanding of the meaning of the phrase would need to be brought to bear, it seems to me that the applicant has a difficult case for being regarded as falling within it. If it is assumed, as I do on this application, that the activities of the applicant are likely in the longer term to provide benefit to Indigenous Australians and to reduce distress, that of itself does not amount to the applicant being a strong contender for being a PBI. 27 The applicant submitted that the Court could only take into account whether its case was arguable and not frivolous or vexatious and that the Court could not, on an application such as this, take into account the degree of merit. I do not accept that submission. The apparent strength of a case on the evidence at the time of a maximum costs application is relevant to the question whether to grant the relief sought. There is no neat dividing line between what is arguable and what is not. Further, there will inevitably be cases which are so obviously meritorious on the material available as to weigh heavily in favour of the discretion being exercised and those which, although arguable, are so unlikely to succeed as to weigh against an order which would put a respondent to significant unrecoverable expense in defending the proceeding. 28 This does not mean that a mini trial should be conducted as to the merits. Indeed, in the usual case, it might be expected that there would not be significant evidence addressing the merits, because there will often be good reason to bring the application as early as possible and before putting the respondent to significant expense. In these cases, the weight to be given to the apparent merit of the case must be determined having regard to that context. It may be appropriate to confine consideration of the evidence and the issue to whether the case is arguable. 29 But the weight to be given to the apparent merit of a case is greater in a case such as this where the arguments have been the subject of significant evidence and communication between the parties both in the application for registration and on internal review (or objection). Further, there was considerable evidence on this application, which included the various communications between the parties, fully argued and lengthy written submissions and oral argument from Senior Counsel on both sides. In assessing the merit of this application, I have assumed in the applicant's favour that its foreshadowed expert evidence will say what was indicated during oral argument. 30 I accept that the applicant's case is arguable, but it is not, in my view, of a strength which would support the making of the order sought by the applicant when assessed together with the various matters referred to earlier and below - see: Houston at [36] per Griffiths J; Houston v State of New South Wales [2020] FCA 1099 at [44] per Jagot J.

Public interest 31 The applicant submitted that there was "a substantial public interest in the court's consideration and determination of the issues the subject of this proceeding". That was because, it was submitted, "the central issue is whether the objects and activities of AICR [the applicant] fall within the meaning of PBI" and uncertainty surrounds that meaning. The applicant submitted that "it is a matter of public interest that an institution empowering Indigenous Australians to fully participate in economic and social life of Australia through self-determination and recognition in the Australian Constitution should be registered as a PBI" and that the "benefit AICR can provide to Indigenous Australians once registered as a PBI is a matter of public interest". 32 I accept that there is a public interest element to the proceedings in the sense that the applicant has what have been accepted to be charitable objectives which include advancing social and public welfare. Its activities are directed for the benefit of persons who face real disadvantages. It pursues the present application in order to seek to obtain registration as a PBI which would put it in a position where it might, for example, receive deductible gifts. However, I would also observe that litigation such as this does not necessarily always contain an element of public interest or, to put the matter differently, the degree of public interest in any given case depends at least in part on the underlying merit of the arguments. Otherwise, the mere making of the claim that an entity is a PBI would necessarily make litigation challenging the contrary conclusion a piece of litigation which carried an element of public interest.

Time of application 33 I accept that the applicant brought this application as early as it possibly could, having claimed the relief in its originating application. Incidentally, this indicates that a decision was made to commence in this Court, appreciating that a maximum costs order would be needed, and deciding not to proceed in the Tribunal where such an order would not be necessary.

Whether proceedings will be stultified absent the order 34 The applicant stated that it would have to abandon these proceedings in the event it were unsuccessful in this application, because it had no assets or income. The applicant elected to bring proceedings in this Court which exposed it to a costs order if unsuccessful. It was entitled to seek relief in the Tribunal, which was a perfectly acceptable no costs alternative. The fact that the applicant has stated that it would not be able to pursue this litigation unless the maximum costs order is made is a factor of less weight in these particular circumstances, although it is a matter which weighs heavily in the applicant's favour and has caused me significant hesitation in reaching the conclusion that the application should nevertheless be dismissed. 35 Although not raised by the parties, I have taken into account, as a factor weighing in the applicant's favour, the fact that the applicant may not now be able to commence in the Tribunal. That position arises for two reasons: first, it has elected to bring the proceedings in this Court and, accordingly, may not be entitled now to commence in the Tribunal: Punin v Deputy Commissioner of Taxation (2000) 44 ATR 233 at [67] (Emmett J); Grapsas v Commissioner of Taxation (2011) 86 ATR 326 at [11] (Gordon J); Ferguson v Commissioner of Taxation (2012) 89 ATR 292 at [2], [13] (Edmonds J); secondly, the applicant is out of time to commence in the Tribunal. The weight of this factor in the applicant's favour is tempered by two considerations. First, the applicant's position is one of the applicant's own making. Secondly, the applicant is unlikely to be prevented from re-applying for the relevant registration if so advised.

Costs and judicial resources 36 The applicant submitted that the cost to the respondent in terms of what it would need to outlay in payment of his costs would be roughly the same whether the proceedings were conducted in the Tribunal or this Court. That is not correct. The present application was attended with significant cost for the respondent. As mentioned, this application involved lengthy submissions, evidence and argument. These costs would not have been incurred if the matter had been run in the Tribunal. If this application had been granted, the choice to commence in this Court would have exposed the respondent to greater costs than in the Tribunal by reason of needing to deal with this application and the underlying dispute. It might also be noted that, for the same reason, it would have resulted in the use of more judicial resources than would have been required in the Tribunal.

Pro bono representation, length of hearing and respondent's capacity to pay 37 I have also taken into account, as matters which favour a maximum costs order, the fact that the applicant has pro bono representation and the parties' estimate that the hearing should be completed within two days. I do not consider it particularly persuasive that the respondent has available funds to pursue legal matters which it considers appropriate for providing guidance. In my view, absent some proper basis for interference, the question of which cases ought receive test case funding (or equivalent) is a matter for the respondent.

CONCLUSION 38 Ultimately - but, as I have said, with considerable hesitation - I have concluded that a maximum costs order should not be made. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley.