Central Bayside Division of General Practice Ltd v Commissioner of State Revenue [2003] VSC 285

Supreme Court of Victoria|2003-08-15|Before: NETTLE J

Pay-roll tax - Exemptions - Charitable body - Whether Division of medical general practitioners a charitable body- Pay-roll Tax Act 1971, s 10(1)(bb).

Solicitor to the Commissioner of State Revenue, Victoria

This is an application for leave to appeal from a decision of the Victorian Civil and Administrative Tribunal made on 22 November 2002. By its decision the Tribunal upheld the determination of the Commissioner of State Revenue dated 14 December 2001 that the Central Bayside Division of General Practice Ltd ("the Division") is not exempt from pay-roll tax. The question before the Tribunal was whether wages paid by the Division come within the exemption provided in s. 10 (1)(bb) of the Pay-roll Tax Act 1971.[1] The Tribunal found that the Division is a body which "plainly ...exists for purposes beneficial to the community" but that the Division was "too close to being an arm of government or a part of bureaucracy... to be an organisation whose objects come within the concept of charity revealed by the Preamble to the Statute of Elizabeth".

The principal ground of the application for leave is that the Tribunal erred in law in holding that a body which plainly exists for purposes beneficial to the community is to be denied the status of a charitable body by reason that its work consists in large part of providing services to the community at the expense of the Commonwealth Government as part of the National Health Care Scheme. The Division contends that the fact of Commonwealth Government funding and specification of the services which it provides is simply not to the point. The hearing of the application has been treated as the hearing of the appeal.

The Commissioner contends that the question of whether the Division is a charitable body is simply a question of fact. The Commissioner submits that the judgment of Phillips JA In S v Crimes Compensation Commission[2] is authority for that view. The Commissioner says it follows that there is no basis for an appeal. I do not accept that view.

The question in S v Crimes Compensation Commission was whether a claimant for compensation under s. 16 of the Criminal Injuries Compensation Act 1983 satisfied the relevant statutory description. That description was "victim" and "victim" was defined in words, used in their ordinary sense, as a "person... injured by the criminal act of another person". Phillips JA held that the question of whether the claimant's particular circumstances satisfied that description was essentially a question of fact. His Honour did not hold that the question of whether a body comes within a particular statutory description is always a question of fact.

When a statute uses words according to their ordinary meaning and it is reasonably open to hold that the facts of the case fall within those words, the question of whether they do or do not is ordinarily a question of fact[3]. That is the sort of question with which Phillips JA was concerned in S v Crimes Compensation Tribunal and, with respect, that is why his Honour described the question as he did. But it is different when a statutory description is in terms that are not used in their ordinary meaning. A long line of revenue cases shows that the question of whether something or someone comes within such a description involves a question of law[4]. That is the case under s. 10(1)(bb) of the Pay-roll Tax. It is directed to charitable institutions in the legal sense of that term and that is different to the sense in which the idea of charity is generally understood. The question of whether the Division is a charitable institution within the meaning of s. 10(1)(bb) of the Act involves a question of law and in my opinion it is one of general or public importance in the sense which is relevant to appeal[5].

In the opinion of the Tribunal, the evidence established that:

"The Division is a non profit company limited by guarantee comprised of primary and associate members. General Membership is available to any general practitioner practising in the Central Bayside area who supports the objects of the company and associated membership is available to any other person who supports the objects of the company. Membership is free and none of the members stand to gain anything in the winding up of the Division..." and that: "...the applicant company is plainly one that exists for purposes beneficial to the community. Its ultimate object is to improve the delivery of health care. It is just not open to the Tribunal to find, either by reference to the constituent documents of the applicant, or by reference to what it does, that its main purpose is to protect and advance the interests of its members. To the extent that GPs who are member of the Division derive benefits from that membership, I do not think there is any basis for suggesting that any such benefits are other than ancillary or incidental to the fulfilment of the object of the applicant company." but that: "...the services provided by the (Division) by itself and its members are provided in substance at the expense of the Federal Government and, most importantly, as an integrated part of a scheme of national health management presided over by the Federal Government...it is not just an ally of government but an essential part of it....an organisation(which is)...an integrated part of a national scheme regulated by the Federal Government to provide for the delivery of health care..." with the result that: "the (Division) is too close to being an arm of government or a part of bureaucracy...to be an organisation whose objects come within the concept of charity revealed by the Preamble to the Statute of Elizabeth."

As can be seen, the principal features of the Tribunal's reasons are a finding that the Division exists for purposes beneficial to the community and the conclusion that the degree of government involvement is such as to deprive the Division of a charitable status to which otherwise it might be entitled. I propose to deal with each of those matters separately.

The Commissioner does not dispute that it was open to the Tribunal to hold that the Division is one that exists for purposes beneficial to the community and that it is not its main purpose to protect and advance the interests of its members. Accordingly, I approach the application for leave to appeal on that basis. I may say, however, that it is not immediately apparent to me why the concession was made.

The objects of the Division stated in its Constitution, are:

"(a) improving communication between general practitioners and other areas of the health care system; (b) more effectively integrating general practice with other elements of the health care system; (c) enabling general practitioners to contribute to health planning; (d) providing better access to available and appropriate general practitioner services for patients, and reducing inappropriate duplication of services; (e) meeting the special (and localised) health needs of groups (such as Aboriginal and Torres Strait Islanders and those with non-English speaking backgrounds) and people with chronic conditions, particularly where these needs are not adequately addressed by the current health system; (f) advancing general practice, and the health and well-being of general practitioners; (g) enhancing educational and professional development opportunities for general practitioners and undergraduates; (h) increasing general practitioner focus on illness prevention and health promotion; and

(i) improving the effectiveness and efficiency of health services at the local level."

According, however, to the Commonwealth Department of Health and Aged Care publication, General Practice in Australia: 2000, which was in evidence before the Tribunal:

* The Division is one of 123 similar divisions of general practice which exist throughout Australia to "provide the organisational structure for general practitioner to work together to improve quality and continuity of care, meet local goals and targets, promote preventative care and respond more rapidly to changing community health needs. Divisions also provide general practitioner with a corporate identity, a method of influencing the organisation of health care delivery, a chance to utilise a broader range of skills, knowledge and expertise, and an opportunity to work with other stakeholders on issues of common interest".

* These divisions of general practice evolved from hospital-based departments of general practice which began to emerge in Australia in the mid-1970s as a focus for hospital related activities of general practitioners. The Royal Australian College of General Practitioners adopted a set of guidelines for the establishment of hospital based departments in 1984.

* One of the major difficulties experience in the development of hospital based departments of general practice was a lack of substantial infrastructure funding. Another was that increasing isolation of urban GPs from the activities of the local hospital had discouraged their involvement in the departments.

* The Commonwealth Government responded to those difficulties in 1991 with a major National Health Strategy. It announced that $12 million would be made available as part of the 1991-2 budget initiatives for a Demonstration Practice Grants Program for that year. That resulted in 850 applications for funding, involving some 3,500 GPs, of which 315 were approved. Ten of those approved were to support local groupings of GPs in the formation of trial divisions of general practice (variously described as divisions and departments).

* A series of issues papers was later released by the National Centre for Epidemiology and Population Health on the proposed reforms of general practice, a consistent thread of which was the concept of area-wide departments of general practice. In addition the National Health Strategy Issues Paper No 3, The Future of General Practice (Department of Health, Housing and Community Services 1992), described the 1984 RACGP Guidelines on Departments of General Practice in Hospitals and reviewed the then current developments in the departments in NSW and Tasmania. In the same year, the General Practice Consultative Group published a discussion paper: "The future of General Practice: A Strategy for the Nineties and Beyond", in which it was recommended that funding be made available to establish area based divisions and to support their activities. Those issues paper put forward a blue print for the development of general practice in Australia.

* The Divisions Steering Group was established in 1992, as a subset of the General Practice Working Group (GPWG), to guide the development of the divisions. The Divisions Evaluation Advisory Group (DEAG) was established at about the same time, initially as a subset of the Divisions Steering Group.

* By 1993 there were 100 divisions in place covering about 80 per cent of the geographic area of Australia, and this number has slowly increased to the present tally of 123 divisions. By 1994, membership levels had grown to around 60 per cent.

* The Divisions' Strategy Group (DSG) was set up in 1995 and by late 1995, a concept of additional functional support systems to assist divisions was developed and support and evaluation resource units (SERUs), the National Information Service and two divisional national representative organisations (Australian Urban Divisions of General Practice and Australian Rural divisions of General Practice) had been established.

* The objectives of the divisional program changed between 1992 and 1997 in response to strong support from general practitioners and wider health system. Initially, the divisions were funded by an infrastructure grant supplemented with project grant funds that were available on a competitive basis. This system required detailed assessment and was fraught with delays. In an effort to streamline the process and to ensure greater accountability, a block grant system that linked program objectives to outcomes was introduced in 1996-7 extending to all divisions by July 1999. The move from funding focused on individual projects to block grants based on agreed priorities is said to have reflected the growing maturity of divisions, both from the perspective of government and divisional members (Commonwealth of Australia, 1998).

* By 1999, membership levels were reported to be over 80 per cent, depending on the definition of "membership" (Divisions Development Advisory Committee 1999).

* The original 1984 RACGP Guidelines for the operation of the divisions are in some respects still relevant today, although somewhat hospital-centric. They describe the essential work of the divisions as: representing GPs in the local hospital and community; negotiating credentials for GP access to hospitals; organising continuing medical education for GPs; implementing peer review and quality assurance; facilitating undergraduate teaching and vocational training; and participating in primary care research, health promotion and education (NHS 1992:107).

* The 1998 GP Strategy Review recommended core roles for the divisions that reflected the original 1984 guidelines but also added further elements. The review saw the additional tasks as: support for the development of and implementation of information management/information technology in practices, including a principal role in data collection and validation; providing a central role in supporting practices seeking accreditation; focusing on the needs of local communities; encouraging a broader public health role for GPs; participating in recruitment and retention of the rural workforce; and focusing on targeted outcomes that meet local and national needs (GPSR) 1998: 288).

* On one view of the matter the divisions are now more realistically fulfilling the original aim of the Divisions of General Practice Program (DGPP), that is: "to improve health outcomes for patients by encouraging general practitioners to work together and link with other health professional to upgrade the quality of health service delivery at the local level" (Commonwealth Department of Health & Family Services 1998b).

* On another view of the matter, however, the divisions are still in their developmental stage and many are unclear about their role and function(Rogers and Veale 1999).

* Rogers and Veale also reported in their strategic evaluation of divisions of general practice that there is potential for conflict between the role of the divisions as associations of general practitioners and their structural role in the system. They observed that while the former commits the divisions to provide support for, and service to, GPs, the latter is more concerned with improvements in population health through an improved service focus, the better integration of services and the provision of programs with outcomes for public health. They noted that while those two roles are not mutually exclusive, the balance between the two remains speculative at this stage.

* Significantly, Rogers and Veale's findings showed that, on average, the divisions had increased funding for services to support GPs, in particular the provision of information management/technology, at the apparent expense of activities involving services to patients and initiatives in specific health areas.

Rogers and Veale's observations about the funding of services to GPs as compared to the provision of services to patients appear also to accord with the way in which the Division has focused its activities and hence spent its funding. As appears in the Division's 2002 Annual Activity Report, which was also in evidence before the Tribunal:

* Services to GPs: The provision of services to GPs is a key role of the Division. The services provided include Nurse/Managers Networks and the circulation of the division Newsletter. In addition, a range of program and project activities also involve provision of services to our members.[6]

* Accreditation: The accreditation program was busy particularly for the latter quarter of 2001 as practices sought accreditation in order to fulfil requirements for practice incentive payments... All practices within Central Bayside Division have reached level 1 accreditation and currently a number are undertaking level 2. The experience of accreditation has exposed practices to the importance of standardised and documented processes and systems implementation within the general practice setting. This has added richness to the implementation of new initiatives within practices.[7]

* Integrated Care Program: This year the Integrated Care Program (ICP) focused on design and development of the decision support software building on the experience of Phase One. This software will become an electronic tool for General Practitioners to assist in the implementation of the Asthma 3+ Visit Plan and in managing patients with asthma. The Integrated Care Program is a complex multi stakeholder program and in some instances this has resulted in delays The Division is involved in a Joint Venture Agreement between the Commonwealth Department of Health and Ageing, The Pharmaceutical Alliance and the Divisions of Central Bayside and Hornsby Ku-ring-Gai. The program has at its core the needs of the GP in managing chronic disease. This has been achieved by a dedicated local group of General Practitioners... Most of the year focused on developing the blue print or functional requirements for the software that will ultimately be tested by GPs within the Division.[8]

* Pharmacy and General Practice Disease Management Collaboration Project: the Pharmacy and General Practice Disease Management Collaboration Project is a 12 month local community based project. It is fully funded by the Pharmacy Guild of Australia Third Community Pharmacy Agreement Research and Development Grants Program. It is pleasing to note that The Guild received 80 funding application in 2001 and Central Bayside Division of General Practice was one of only 15 successful applicants ...The aim of the project is to develop an trial a better way for patients, GPs and local community pharmacists to work together to improve the patients' health.[9]

* Kingston/Bayside Falls Prevention Collaboration:... is funded by the Commonwealth Department of Health and Ageing through the National Falls Prevention for Older People Initiative. Central Bayside has the prestigious honour of being the only Victorian Division to receive funding for such a demonstration project... This is a two-year change management project that aims to implement a targeted multiple-focused intervention that will develop, trial and promote a community based model of falls and falls injury prevention for frail, aged residents of Kingston and Bayside... GP engagement in the project is facilitated by the usage of Enhanced Primary Care and Domiciliary Medication Management Review, aged care assessments and ongoing care through the use of the care planning item... The program is currently in the training needs phase and we are collecting information that will inform the content of the serviced provider training. The training sessions will ensure that all service providers have a clear understanding of their role in the proposed care pathway and will prepare agencies for the implementation phase due to begin in April 2003.[10]

* Small Group Learning: As a Division committed to the provision of Continuing Professional Development (CPD), the Central Bayside Division of General Practice recognizes the need to develop effective and innovative approaches to CPD. ...Small Group Learning is a key component of the quality activities identified in the plan.... Small Group Learning has proved to be a very popular choice of active learning activity that is a means to increase professional satisfaction for GPs and with the potential to increase the quality of care provided to patients...[11]

* Quality Use of Medicines: ...is a joint program run between Central Bayside and Monash Divisions of General Practice. It is funded by the National Prescribing Service (NPS). The main aim of the program is to provide General Practitioner with timely and objective information on therapeutics... Educational visiting is now in its third year and continues to be a major activity of the program. GPs are visited in their consulting rooms and are provided with information and NPS resources on specific therapeutic areas...[12]

* Building on Quality Project (Completed August 2001): ...has been a significant project for the Division and concluded in August 2001. The key elements to drive quality in General Practice have been incorporated into the Division's new strategic business plans. The activities have focused on the development of Small Group Learning and strengthening of the practice nurses and practice managers network.[13]

* Knowledge Management Project (Completed Feb 2000): ...The project has had a number of practical consequences and was instrumental in establishing certain priorities and strategies with the Division. These included: Processes for identifying particular skill and interests of members and utilising them effectively within the Division while at the same time supporting those GPs in furthering their interests; an emphasis on peer training and peer support...; a substantial reduction in the use of committees within the Division in favour of small work teams established for particular tasks. A theme through all this is that Division knowledge needs to be owned by Division members not just by staff...[14]

A similar impression is conveyed by the Core Funding Agreement between the Division and the Commonwealth Department of Health and Aged Care, which was also in evidence before the Tribunal, and which provides for the Division to conduct the Programs of Activity described in the Division's extended Strategic Plan for the period to which the agreement relates, and in accordance with annual business plans to be submitted to and approved by the Commonwealth Department of Health and Aged Care. The Agreement has the effect that all of those programs are funded by the Department on an "outcomes basis" to a level determined each year in accordance with activities undertaken. In the result, the Division derives virtually the whole of its revenue under the Core Funding Agreement and other specific government grants of the kind mentioned in the Division's 2002 Annual Report. In an affidavit sworn by Steve Sant, who is the chief executive officer of the Division, it was explained that in the year of income ended 30 June 2002 the total income of the Division was $1,087,813 of which $1,006,997 or 92.6% came from grants and of that 43% came from outcomes based funding with the remainder from specific project grants.

Based upon that information, my impression of the Division is one of an organisation of which the activities are directed principally to serve the interests of its membership, by the provision of continuing professional education and specialist development, accreditation resources and practice development with a particular emphasis on information management and technology development, albeit with the result of thereby developing and enhancing the standard of patient care provided by members. I have difficulty equating that sort of organisation to a charitable body.

No doubt a non-profit body which has as its principal object the care of the sick may readily be conceived of as a charitable body. Equally, a body which exists for the promotion of medical science[15] may be regarded as a charitable body[16] even if a consequence of its activities is that its membership will benefit[17]. But on one view of the facts - and it is a view which is expressed in the Division's annual report - the provision of services to GPs is the key role of the Division; its program and project activities also involve provision of services to "our members"; and a significant aspect of its activities is comprised of an accreditation program designed to enable members "to fulfil requirements for practice incentive payments". On that basis, it appears to me at least arguable that the Division is not a charitable body, because in some substantial part it exits to promote the interests of its membership[18].

I turn, however, to the question of whether the Tribunal erred in the view that the Division is so much akin to an arm of government as to be beyond the concept of a charity. According to the Tribunal's reasons for decision, the considerations which led to that conclusion were:

" - As it presently stands, the applicant is an association of GPs designed to deliver improvements to their practice. I agree that the co-operative analogy in not complete, but the comparison is I think instructive.

- The GPs do in the ordinary course provide their services for a fee.

- The services provided by the applicant are intended for the general community and not the needy part of it.

- The applicant is, as we have seen , almost totally dependent on the government for funding.

- The applicant is not just part of a scheme of regulation by government but it is part of a national scheme - all of Australia is, I was told, covered by a (d)ivision like this. It was I think for this reason that Mr Sant said that they were at risk of being seen as an arm of government.

The evidence on this issue was thin and it did not feature much in submissions, but the proposition the applicant has to face is that it is not just an ally of government but an essential part of it. It is one thing for the Salvation Army to be an integral part of our provision for the relief of poverty; it is another thing for an organisation to be an integrated part of a nation al scheme regulated by the Federal Government to provide for the delivery of health care. The issue is one of degree but n my view the applicant is too close to being an arm of government... to be an organisation whose objects come within the concept of charity revealed by the preamble to the Statute of Elizabeth."

The Division attacks that reasoning as an unwarranted application to the law of charitable bodies of notions of government participation which are concerned with the different and only distantly by related question of whether an organisation qualifies as a public benevolent institution. It argues that the conception of public benevolent bodies is considerably narrower than that of charitable bodies[19] and that whatever may be the significance of governmental involvement to the question of whether an organisation qualifies as one of the former, it is of no significance to the question of whether the Division qualifies as one of the latter. The Division says that in the law as it relates to charitable bodies it is clear that the source of an organisation's funds is irrelevant to the organisation's status as a charitable body[20] and that there is nothing in authority or logic which dictates that some governmental involvement in the affairs of an organisation should deprive it of the status of a charitable body to which otherwise it may be entitled[21]. The Division submits that the only question of relevance is whether the body exists for purposes which are within the spirit and intendment of the preamble to the Statute of Elizabeth[22], and it is contends that the purposes of the Division are plainly within that description.

The conception of a public benevolent body is certainly narrower than the idea of a charitable body[23]. It accords with modern notions of public charity and hence, as it was put by Allsop J at first instance in the Ambulance Service case[24]:

"...the benevolent or charitable element of the phrase is for the relief of suffering or misery. This characteristic of a `benevolent institution' is likely to evoke sympathy, and concomitantly, generosity from well-disposed people. In those circumstances, the revenue exemptions, such as s 78 of the ITAA 1936,can be seen as intended to encourage such well-disposed people to give to such objects..."

Benevolence in this sense "...carries with it the idea of benevolence towards persons in need of benevolence however manifested. Benevolence in this sense... (is) quite a different concept from benevolence exercised at large and for the benefit of the community as a whole even if such benevolence results in relief of or reduction in poverty and distress."[25] It imports an underlying conception of charity in the sense of gratuity as a fundamental foundation, although it is not restricted to the relief of poverty. It carries with it the idea of benevolence towards persons in need of benevolence, however manifested, because the relief of suffering, distress or misfortune is also a characteristic of a benevolent institution[26]. It involves notions of kindness or the rendering of assistance voluntarily to those who, for one reason or another, are in need of help and who cannot help themselves[27]. And in those respects it is quite different to the concept of benevolence exercised at large and for the benefit of the community as a whole, even if such benevolence results in relief of or reduction in poverty and distress[28].

Because that is so it has been held in a succession of cases[29] that a body which is constituted, funded and controlled by government and performing functions on behalf of government (which is to say functions that for many years have been regarded as the responsibility of government) is not a public benevolent body. The view which has been taken, although sometimes differently expressed, is that something is incapable of constituting a public benevolent body unless it is or is in the nature of a public charity, in the demotic sense, and that whatever may be their advantages to society generally and to individual members of society in particular, bodies which are funded and controlled by, and doing the work of government are not within that ken[30].

The Division is correct that the law applying to charitable bodies is different. It does not demand the same degree of benevolence as is required of a public benevolent institution. As explained by Barwick CJ in Incorporated Council of Law Reporting[31]:

"...it must be considered whether that benefit is charitable in the Elizabethan sense. Out of certain of the instances given in the preamble to the Act of 1601 a broad concept emerges of the kind of object of public utility which will satisfy the quality of charity. Any notion that that concept is of an eleemosynary nature is seen to be untenable by some of those very instances themselves, e.g. the repair of bridges, havens, causeways, seabanks and high-ways and the setting out of soldiers. Further, these instances seem to regard the provision of some of the indispensables of a settled community as charitable. The ability to move from place to place and to do so without let of river and streams, protection of the land from the ravage of eth sea, security against enemies, are fundamentals of the society seen to be within the concept of charitable public benefit as much as assistance to the needy and as education of the generations. Consistently with the spirit and width of this concept of charity the promotion of agriculture is seen to be charitable...On occasions, a benefit of that kind to a section of the public less than the whole community by the trust or purpose may be enough: but, as I mentioned before, I am not here concerned with such a case." (Emphasis added).

The word "eleemosynary" is used in that passage in the broad sense of something calculated to relieve any sort of suffering, distress or misfortune. It is the same sense in which it tends to have been used in the public benevolent institution cases to which the judgment directs comparison. Consequently, such requirement as there may be to demonstrate benevolence in the law relating to charitable bodies is very much less demanding than in the case of public benevolent institutions.

The Commissioner argues that some of the observations of Dixon J in Hobart Savings Bank and Launceston Bank for Savings v Federal Commissioner of Taxation lead to a different view. In that case Dixon J said that:

"The well known classification of Sir Samuel Romilly and Lord Macnaghten affords a guide but not a definition. `The method employed by the Court,' said Chitty J in In re Foveaux `is to consider the enumeration of charities in the Statute of Elizabeth, bearing in mind that the enumeration is not exhaustive. Institutions whose objects are analogous to those mentioned in the statute are admitted to be charities; and, again, institutions which are analogous to those already admitted by reported decisions are held to be charities. The pursuit of these analogies obviously requires caution and circumspection. After all, the best that can be done is to consider each case as it arises, upon its own special circumstances.' This is a safe but unenlightening conclusion. But the Courts seem now to have ventured from its dark security so far as to risk the modest generality that when, from motives which are altruistic, benevolent or philanthropic, purposes are put in execution for the benefit of the community, or of a considerable section or class, which do in fact tend to the amelioration of mind, manner or morals, or the relief of misfortune and are of a nature allowed by law and consonant with the received notions of morality, then these objects will be considered `charitable' the occasion for determining what purposes are charitable has, of course, arisen in the administration of the law of property. But once the view is adopted that the word `charitable' has itself a legal meaning there seems little difficulty in transferring it from the description of the purposes to which property is devoted, and understanding it as a description of the object for which and institution exists."[32] (Emphasis added).

According to the Commissioner, the emphasised passage implies that the law applicable to charitable bodies imports a substantial requirement of altruism, benevolence or philanthropy, even if it is not the same as that which is applicable to public benevolent institutions.

I do not accept that argument. When Dixon J spoke in terms of altruism, benevolence or philanthropic motives I consider that he intended no more than an elucidation of some of the circumstances in which charity has been held to exist. To conclude otherwise requires one to ignore a number of the cases which are referred to with apparent approval in the judgment and indeed the observation made later in the judgment itself_,_ that:

"In the end, however, that question must depend upon the nature of the purpose which, in existing conditions, such an institution serves. In the conditions which obtained in 1862 Cockburn CJ and, apparently, the other Judges, considered that they (savings banks) did not tend to the relief of social disabilities or the promotion of thrift to such a degree as the legal conception of a charity requires."[33]

The Commissioner also argues that the observations of Dixon J In Roman Catholic Archbishop v Lawlor[34] support the existence of a requirement of benevolence. In that case the High Court divided equally on the question of whether a gift to the Roman Catholic Archbishop of Melbourne "as a nucleus to establish a Catholic daily newspaper" could be supported as a gift for charitable purposes. In his judgment, which was that the gift was not for a charitable purpose, Dixon J noted that religious uses or purposes, using those terms in their natural unrestricted meaning, include purposes which may or may not be charitable and thus while the prima facie rule supplies a presumption which, if no contrary intention appears in the trust instrument, operates to confine the religious purpose within the boundaries of legal charity:

"'The abolition of religious tests, the disestablishment of the Church, the secularization of education, the alteration of the law touching religion or marriage, or the observation of Sabbath, are purely political objects. Equity has always refused to recognize such objects as charitable'...(thus) the object of a denomination may extend to purposes which, although pious, philanthropic, or benevolent, may not be charitable."

The Commissioner submits that Dixon J's reference in that passage to purposes which are pious, philanthropic, or benevolent supports the view that the legal conception of a charitable body has as its discrimen objects of piety, philanthropy or benevolence (so that in the absence of one or the other of them a body should not be regarded as charitable) and further, at the level of principle, that that which informs the denial of charitable status to bodies established for political purposes should be seen also to result in the denial of charitable status to bodies established and funded under the aegis of government to perform functions customarily performed by government.

I do not accept the first part of that submission, for it seems to me that Dixon J was doing no more in Lawlor than in Hobart Bank Savings Bank than identifying some of the considerations which have led to the recognition of organisations as charitable bodies. I am, however, attracted to the second part of the submission, because I consider that the level of government involvement in a body and in the funding of its activities may be relevant to the body's status as a charity. The Commissioner's argument perhaps assumes too much as to the existence of an underlying and informing principle[35]. But there is no absence of authority that one is to look to the decided cases and reason by analogy, albeit with caution and circumspection, to the conclusion of whether a body comes within the spirit and intendment of the Statute[36].

In my opinion it is not opposed to logic or common sense to reason from the exclusion of political purposes from the mantle of charity to the possibility that bodies of the kind examined in the public benefit cases are also beyond the spirit and intendment of the Statute. I am to some extent confirmed in that view by the conclusion of Dean J in In re Cain[37] that a gift for carrying on the ordinary activities of a government department pursuant to a statute is not a gift for charitable purposes, even if the activities are such that if carried on by private persons they would be charitable. Such activities are simply part of the government of the country.

In Alice Springs Town Council v Mpweteyerre Aboriginal Corporation the Northern Territory Court of Appeal held that corporate bodies providing housing for Aboriginals were charities despite the fact that they were incorporated pursuant to the Aboriginal Councils and Associations Act 1976 (Cth) and despite the fact that they were indirectly funded by the Commonwealth to provide for housing health and environmental programs to relieve the poverty, sickness, destitution, distress, suffering and misfortune of Aboriginal people. Mildren J who delivered the leading judgment distinguished the Metropolitan Fire Brigades Case on the basis that it was concerned with the question of public benevolent institutions, and thus with public charity in the demotic sense, and also that the case was distinguishable:

"...on the further ground that, irrespective of the associations' sources of funds, they could not be characterised as agencies or government. In this case no ministerial control could be exercised over any of the associations, either by virtue of the Acts under which they are constituted, or by the provisions of the constitutions. The mere fact that the associations are indirectly government funded does not deprive them of the character of being charities. I do not consider that the argument that the associations are merely carrying out the functions of government can be sustained."[38]

It has been submitted that the same logic applies to the Division. Although its funding comes directly from the Commonwealth, and not via some sort of semi-government aid agency like the Aboriginal Council, the Division has control over its funding (in the sense that the Division is not obliged to apply for the grants upon which it is at present reliant) and the Commonwealth has no control over the Division's activities (except to the extent that Division chooses to agree with the Commonwealth that it will undertake programs which are approved by the Commonwealth).

There is some force in that submission. Despite the close connection between the Division and the Commonwealth, the constitution of the Division leaves no room to doubt that the Division is not a department or other instrumentality of government; it is in the Division's own hands as to whether it will seek government funding and thus subject itself to the requirements which condition the grant; and, come what may, the Commonwealth has no greater control over the affairs of the Division than the power of the purse.

It is to be remembered, however, that the question of whether an organisation is a charitable body for the purposes of s. 10(1)(bb) of the Pay-roll Tax Act is in the end as much dependent upon what the organisation does in fact as it is upon what the organisation's constituent documents permit it to do. Pay-roll tax, like income tax, is a periodic tax and therefore the exemptions for which s. 10(1) of the Pay-roll Tax Act provide are, like the exemptions for which s. 23(1) of the Income Tax Assessment Act 1936 (Com) used to provide, concerned with the status of the taxpayer during the relevant period. Consequently, the question to be asked under s. 10(1)(bb) of the Pay-roll Tax Act is whether the Division is a charitable body during the relevant period, and in order to answer that question one must look to the main purposes of the body[39] during the relevant period.

To ascertain the main purposes in that period the material facts and circumstances which should be examined include the body's constitution, its activities, its history and its control[40]. For the reasons already expressed, the practical reality of the Division's activities, history and control, in my view, is that of an organisation formed under the aegis of the Commonwealth's 1992 general practice initiative to carry out government sponsored health care programs as part of the Commonwealth national health care strategy. On that basis the Division appears plainly to be distinguishable from the Alice Springs Town Council.

Furthermore, the question of whether the Division is more closely to be compared to the Metropolitan Fire Brigades Board or to the Alice Springs Town Council is but one consideration among many in the determination of whether the Division's activities are within the spirit and intendment of the Statute. In the long run the question of whether a body is to be regarded as a charitable institution is a matter of judgment[41] and in this country that is a question to be approached without any predisposition to the view that a body is charitable simply because it may be beneficial to the community and of general public utility[42]. I know of no case and none has been cited in which a body analogous to the Division has been held to be a charity.

Having regard to the constitution, activities, history and control of the Division, and in particular, to the extent to which the Division's activities of providing services to its members are funded and thereby controlled by the Commonwealth, I am not persuaded that the Division is sufficiently analogous to any recognised charity or is otherwise to be regarded as within the equity of the Statute.

In the Tribunal's reasons for decision it was noted that the Tribunal had some misgivings about the conclusion that the Division was not a charitable body, and that one of the considerations which contributed to the uncertainty was that the Tribunal found it hard to see why the law should deny charitable status to an institution such as the Division while granting charitable status to an institution formed "to deliver a product to assist lawyers". The Tribunal supposed that members of the medical profession might see the outcome as "just another case of the arrogance of the lawyers producing a result that would be anathema (to the common man)".

I do not share the Tribunal's misgivings. The reference to the institution formed to deliver a product to assist lawyers is of course a reference to the Incorporated Council of Law Reporting Case and I venture the view that the reason why the law grants charitable status to such an institution, just as it has and may continue to grant charitable status to institutions formed to promote the study or advancement of medicine or one of its specialist branches[43], is because such organisations are conceived to elicit information and speculation of value to the profession at large and of advantage to all who may be interested in its learning and that they thereby promote and add to the sum of human knowledge in a way which is of benefit to all society[44]. The same is not true of institutions like the Division, no matter how beneficial they may be to society or to a significant section of it. They are in essence like law societies and bar councils, to which charitable status is denied.

It is of course another question whether organisations like the Division are any less deserving of the fiscal advantages of charitable status than many other organisations which have been held entitled to enjoy it. But that is not a question for the Tribunal or the court to decide. The Act prescribes a test which invokes the spirit and intendment of the Statute, and the Act must be given effect.

In my opinion, the Tribunal did not err in upholding the Commissioner's determination. I grant leave to appeal but order that the appeal be dismissed.

[1] Wages paid or payable "by a charitable body (other than a school or educational institution or an instrumentality of the State) to a person during a period in respect of which the body satisfies the Commissioner that the person is engaged exclusively in work of the body of a charitable nature".

[3] Collector of Customs v Pozzolanic (1993) 43 FCR 280 at 289; Collector of Customs v Agfa-Gavaert Ltd [1996] HCA 36; (1996) 186 CLR 389 at 395

[4] See, for example, Hayes v Federal Commissioner of Taxation [1956] HCA 21; (1956) 96 CLR 47 at 51; the cases collected by and the observations of Hill J in Commissioner of Taxation v Roberts [1992] FCA 363; (1992) 37 FCR 246 at 252; Royal Australasian College of Surgeons v Federal Commissioner of Taxation [1943] HCA 34; (1943) 68 CLR 436 at 448, per Starke J; Alice Springs Town Council v Mpweteyerre Aboriginal Corporation (1997) 115 NTR 25 at 32 per Mildren J

[5] Secretary to Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331

[15] Using that term in the broadest sense that conventional medicine would allow.

[16] See, for example, In re Royal College of Surgeons of England [1899] 1 QB 871, 883

[17] Commissioners of Inland Revenue v Forrest (1890) 15 QBD 334 at p. 351 and 354

[18] cf_. Society of Writers to the Signet v Commissioners of Inland Revenue_ 14 Court Sess. Cas. 4th Series, 34; Reg v Institution of Civil Engineers 5 QBD 48; NZ Society of Accountants v Commissioner of Inland Revenue [1986] NZLR 147 (CA) at 156-7,per Somers J

[19] Perpetual Trustee Co v Federal Commissioner of Taxation [1931] HCA 20; (1931) 45 CLR 224 at 231-4

[20] Robinson v Stuart (1891) 12 LR (NSW) Eq 47, 49-50; Perpetual Trustee Co Ltd v Shelley (1921) 21 SR 426,441; Jacobs, Law of Trusts in Australia, 6th Ed at [1004]

[21] Northern Land Council v The Commissioner of Taxes [2002] NTCA 11 at [24]

[22] Incorporated Council of Law Reporting (Q) v Federal Commissioner of Taxation [1971] HCA 44; (1971) 125 CLR 659 at 666-7; Brisbane City Council v Attorney General [1979] AC 411 (PC) at 422

[23] Chesterman v Federal Commissioner of Taxation [1926] AC 128(PC) at 132; Perpetual Trustee Co Ltd v Federal Commissioner of Taxation supra; Ambulance Service of New South Wales v Deputy Commissioner of Taxation [2002] FCA 1023; 50 ATR 496 at 487-500; aff'd on appeal [2003] FCA FC 161

[25] Australian Council of Social Services Inc v Commissioner of Pay-roll Tax (1985) 1 NSWLR 567 at 575

[26] Commissioner of Pay-roll Tax v Cairnmiller Institute [1992] VR 706 at 709

[27] Mines Rescue Board (NSW) v Commissioner of Taxation [2000] FCA 1162; (2000) 101 FCR 91 at 95, per Hely J; aff'd on appeal (2000) 101 FCR 279; Ambulance Service of New South Wales v Deputy Commissioner of Taxation, supra at [61]

[29] ACOSS Case; Metropolitan Fire Brigades Board Case, Mines Rescue Board Case; Ambulance Service Case

[30] Compare the somewhat different formulation in the judgment of the Full Federal Court in the Ambulance Service case, [2003] FCAFC 161 at [40]

[34] [1934] HCA 14; (1934) 51 CLR 1 at 33, citing Bowman's Case [1917] AC at 42, per Lord Parker

[35] cf, Bradshaw, The Law of Charitable Trusts in Australia, at 28-9

[36] Hobart Bank Savings Bank Case, supra

[39] Congregational Union of New South Wales v Thistlethwaite (1952) 87 CLR 315 at 442; Stratton v Simpson [1970] HCA 45; (1970) 125 CLR 138 at 160

[40] Cronulla Sutherland Leagues Club v Commissioner of Taxation (1990) 23 FCR 82 at 94-6, per Lockhart J and at 115, per Beaumont J

[42] Brisbane City Council v Attorney General (Q) supra at p. 422

[43] In re Royal College of Surgeons of England supra

[44] Commissioners of Inland Revenue v Forrest supra at p. 351; Incorporated Council of Law Reporting at p. 669

At a glance

Court

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Judgment (111 paragraphs)

Parties

Cases Cited (15)