CONCLUSIONS
69 Whilst it is true that s 50-60 does not speak of "substantial" application of a fund to its charitable purposes, it also does not speak of misapplication of part of a fund. The relevant words are "the fund is applied". The relevant question seems to be whether, having regard to the whole administration of the relevant fund, it is to be concluded that it "is applied" to the relevant charitable purpose. The question is not limited by concepts of substantiality. Nor does it address individual misapplications of parts of the fund.
70 The word "fund" is used in s 50-5, and elsewhere in Div 50A to denote an "entity". We infer that, in s 50-60, the word is also used in that sense. It is that entity which must be applied for the relevant purpose. It may be accepted that for all presently relevant purposes it is the application of Fund assets, both capital and income, which is to be considered. This approach leads us to conclude that the relevant enquiry is not as to individual transactions, but as to the application of the Fund as a whole. That is not to say that individual transactions are irrelevant. They may provide much of the evidence upon which the ultimate decision will be based. Further, as the Tribunal suggested, an examination of the way in which the Fund has been conducted may be relevant, quite apart from any consideration of particular applications. However such applications will also require detailed examination. The extent of any apparent misapplication may also be relevant, having regard to the size of the overall Fund. The way in which its capital is utilized and protected will also be relevant. Although a small number of misapplications may not be sufficient to justify a conclusion that the Fund has been misapplied, in other cases it may be sufficient. The question will, in all cases, depend upon the circumstances.
71 We consider that at least for some purposes, the Trustees' intentions in entering into a particular transaction may be relevant. Each transaction had to be analyzed in the context of the administration of the Fund as a whole. The Trustees are, after all, charged with the administration of the Fund. It is for them to decide how it should be administered and, in particular, how its assets should be invested and eventually disbursed. A particular appropriation may, prima facie, not be for a relevant purpose. However there is always the possibility of an explanation which justifies it. Trustees are not infrequently called upon to justify their conduct and do so by reference to the purposes which they have sought to achieve. Exercise of a trustee's powers frequently involves questions of judgment. When judgment is questioned, assessment of intention may be relevant. Actual intention may also be relevant to the overall assessment of whether the Fund is being applied for the relevant charitable purposes.
72 It seems unlikely that the purpose of s 50-60 is to deny a fund its exempt status merely because a trustee is inept or makes a mistake. Of course, a deliberate misapplication may justify adverse inferences as to the transaction in question and other transactions. In this context, though, "deliberate" means "intending to breach the trust". A discrete breach may, alone, be sufficient to justify an inference as to intention. Similarly, disposition of a substantial part of the Funds' assets for an unauthorized purpose might also, by itself, justify an adverse inference. As we understand it, his Honour found non-compliance with s 50-60 upon the basis of the interest set-off question and the trust account question, treating the Trustees' explanations as being irrelevant, and without regard to the administration of the Fund as a whole. That approach was erroneous. Those transactions had to be assessed in the light of the wider conduct of the fund, including the subjective evidence from those who acted in its administration.
73 It may be that his Honour's focus on these transactions was the ultimate outcome of the way in which the Commissioner's attitude to the matter has changed over its history. As appears from the reasons, even at first instance in this Court, the focus was changing. As a result, the focus became too narrow. We do not mean to pre-empt any further decision in this matter. However, there was, we think, good reason for suspecting that s 50-60 had not been satisfied. Much of the conduct of the Fund called for detailed explanation.
74 For the reasons which we have given, we conclude that his Honour was correct in concluding that the Tribunal's decision be set aside. As we see it, the Tribunal started with the proposition in para 51 that substantial compliance with the Fund's constituent terms would ordinarily provide some evidence that the Fund was being held for its intended purpose and, at least in the absence of contrary indications, would justify an inference that it "is applied" for its established purposes. That proposition may be substantially true, but it should not have been treated as creating a presumption which the Commissioner had to rebut. In our view the Tribunal so treated it. We say that in light of the fact that it then proceeded to examine the various impugned transactions, concluding that each of them could be seen as justified, discounted or otherwise treated as de minimis. See for example para 105 of the reasons. There appears to be no point at which the Tribunal addressed all of the evidence to determine whether or not the Fund, as a whole, was being applied to the relevant charitable purpose. As there has been no consideration of the proper question, the matter should be remitted to the Tribunal.
75 The Commissioner may have suspected that the Trustees and Mr Craik were treating the Fund as their own, and that this was inconsistent with its being maintained and applied for the relevant charitable purpose. No doubt the Commissioner wished to avoid advancing imputations against character which, given that the Trustees bore the burden of proof, he would not seek to prove. However it is difficult to understand why, by the time the matter reached the Tribunal, and the time it reached this Court, the Commissioner still had not taken a final position concerning the basis upon which he wished to defend his decision to refuse endorsement. When one party to litigation does not take a clear position, there is always the risk that proceedings will miscarry.