Central Bayside General Practice Association Limited v Commissioner of State Revenue

Central Bayside General Practice Association Limited v Commissioner of State Revenue - [2006] HCA 43 - HCA 2006 case summary — Zoe

[50]

The course of the proceedings below was affected to some extent by a change in the Commissioner's position.
Dealings between the appellant and the revenue authorities. Why, in its decision of 14 December 2001, did the State Revenue Office refuse to grant the appellant an exemption from pay-roll tax on the basis that s 10(1)(bb) of the Act did not apply? It gave the following reason: that the appellant was "predominantly a professional body with the aim of promoting the interests of its members". In its Notice of Determination of 16 July 2002 disallowing the appellant's objection to the decision of 14 December 2001 and declining to grant an exemption from pay-roll tax, the Commissioner, through a delegate, adhered to a similar position. The Commissioner said that the appellant "exists for the benefit of its members independently of whether benefits flow to the public."
Proceedings before the Tribunal. Before the Tribunal, the Commissioner attempted to rely on a new ground: "[T]hat the Commissioner was not satisfied that the relevant employees were engaged exclusively in work ... of a charitable nature." The Tribunal declined to allow that point to be agitated. The Commissioner maintained the contention that the appellant existed principally for the benefit of its members. The Tribunal rejected that contention, and said that the appellant existed for purposes beneficial to the community. However, it held that the appellant's purposes were not charitable[6], on the ground that services provided by the appellant were "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". The appellant 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 ...". It was "not just an ally of government but an essential part of it".
Proceedings before Nettle J. Before Nettle J, the Commissioner abandoned reliance on the contention that the appellant's main purpose was to protect and advance the interests of its members. Nettle J doubted the soundness of this course[7] but did not in terms depart from it[8]. He did, however, disagree with the Tribunal's view that the appellant was "an essential part" of government, or "close to being an arm of government": he said it was not a department or other instrumentality of government, that it was in its own hands as to whether it would seek government funding and subject itself to any conditions attached to the funding, and that the Commonwealth's only control over it was the power of the purse[9]. Nettle J said that the question whether the appellant was a charitable body turned on its main purposes, and they depended on its constitution, activities, history and control. He said that having regard to these matters "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", he was not persuaded that the appellant was a charitable body[10].
Proceedings in the Court of Appeal. In the Court of Appeal, Chernov JA dismissed the appeal on the ground that the appellant's "core activities are performed pursuant to the dictates of government"[11]. These dictates were said to lie in the terms of the OBF Agreement[12]. Osborn AJA dismissed the appeal on the ground that the appellant was "a creature and agent of government"; he agreed with Chernov JA's reasons and added some of his own[13]. Byrne AJA dissented. He concluded that the appellant was not "the mere creature or agent of the Commonwealth government". He said[14]:

[60]

The Commissioner's contention was advanced through particular sub-arguments.
Acting at the behest or bidding or as the puppet of the Government. First, the appellant was said to act only at the behest, or at the bidding, or as the puppet, of the Department. However, it turned out that these expressions related only to the process by which the appellant entered its OBF Agreement and to the regime of obligations which that Agreement imposed, and lacked any content independent of those matters.
Incapacity to negotiate. The Commissioner contended that divisions like the appellant did not "negotiate ... [the OBF] Agreements". It was said that the Agreements were "uniform and are presented by the Commonwealth on a take it or leave it basis". If a division refused to sign it would "wither on the vine" because it would cease to receive Commonwealth funding.
There are three answers to this argument.
The first answer is that while the OBF Agreements are in large measure in a standard form, the central obligations created for a division like the appellant depend on the "Programs of Activity" as described in the relevant division's extended Strategic Plan and approved Business Plans. Although the plans submitted by the divisions will not become part of a division's OBF Agreement unless the Commonwealth agrees, the plans are devised by each division to suit its own purposes, resources, problems and personnel. It is for each division to identify for what it wants the Commonwealth funding. The Commissioner denied that the divisions had any autonomy, because they were obliged by cl 3 of Sched 1 to provide programmes of activity based on a national framework within which decision making and priority setting was focused on activities in four areas (namely, population health, services by general practitioners to patients, services to general practitioners by the division, and infrastructure). The Commissioner submitted that these four areas were not nominated by the divisions but were instead presented by the Department. The problem with this approach is that the Commissioner failed to indicate anything restrictive about those four very general areas, which appear to cover the universe of relations between a division and general practitioners and between general practitioners and the population. Byrne AJA was correct to conclude that the appellant "plays an active role in itself selecting the particular projects which it undertakes for the benefit of its community"[16].
The second answer is that the evidence does not reveal that there was in fact any incapacity to negotiate. There was no legal compulsion on the appellant to seek funding from the Commonwealth, and the evolution of divisions suggests that the Commonwealth felt some pressure to ensure that divisions like the appellant entered OBF Agreements so that the Commonwealth's desires could be carried out. The Commonwealth referred to evidence by the Chief Executive Officer of the appellant that after the late 1990s the Commonwealth "moved to a [system of] block grant[s] and set some broad outcome indicators and said, 'You shall do a variety of things that will meet these outcomes'". This summary was directed only to the distinction between activity funding and outcome funding, not to the precise way the Commonwealth behaved in its communications with divisions. That apart, as the Commissioner accepted, there was no admissible evidence of how the appellant and the Department had behaved when the appellant proposed its extended Strategic Plan and its Business Plans, and whether any process of bargaining or amendment to those Plans had taken place or could take place.
The third answer is that even if it were the case that the Commonwealth declined to negotiate about Strategic and Business Plans, and even if a failure by the appellant or any other division to enter an OBF Agreement would impair or destroy its capacity to function, it does not necessarily follow that the fact of entry by the appellant into an OBF Agreement of itself establishes that the appellant is under the control of the government. However, its terms might create that control, and the Commissioner submitted that in this case they did.
Ongoing contractual management and control. The Commissioner relied on two aspects of the OBF Agreement. One was that it compelled the appellant to conform with the Strategic Plan and the Business Plans. The second was that the Agreement provided for periodic reporting by the appellant (cl 7.1 and Sched 3), provided for liaison by the appellant with the Department as required (cl 8.1), provided for the Department to have access to the appellant's premises and records (cl 19), prohibited subcontracting without the Department's consent (cl 22), gave the Department power to procure the replacement of personnel undertaking work in relation to Programs of Activity (cl 23) and gave the Department power at any time to terminate the Agreement or reduce the scope of the Programs of Activity (cl 24.1).
It is common for the donors of funds for charitable purposes to attach conditions to the gift or to stipulate mechanisms pursuant to which the funds are to be expended. These conditions or stipulations do not affect the charitable character of gifts. In addition, the Department is obliged by s 44 of the Financial Management and Accountability Act 1997 (Cth) to manage its affairs in a way that promotes the efficient, effective and ethical use of its resources. Recital C of the OBF Agreement refers to this obligation:

[63]

Ongoing review by the Department. The Commissioner relied on a letter of 14 September 2001 from the Department foreshadowing the "development of a strategic planning and performance reporting framework". The Commissioner also relied on a letter dated April 2002 from the Department to the appellant (and presumably all other divisions) indicating that the Department proposed "to undertake a more considered approach in developing future funding agreements with Divisions and identifying the services the Commonwealth wishes to purchase from Divisions." Finally, the Commissioner relied on the existence of a Commonwealth Government review of the future role of Divisions of General Practice.
The Commissioner did not make clear how these events supported the argument. They add nothing to the arguments relating to the capacity of the Commonwealth to attach conditions to the advance of funds by inserting appropriate terms in the OBF Agreements. The Commissioner relied on Osborn AJA's statement that the Chief Executive Officer of the appellant "implicitly accepted" in evidence "that it would be the Commonwealth Government which determined the ongoing role of the Division"[17]. That overlooks the fact that the role of divisions will in truth evolve as a compromise between the desires of the Commonwealth and those of the divisions.
Implementing government purposes. The Commissioner, while accepting that a public hospital which received all its income from grants by the Commonwealth or a State subject to conditions was a charitable body, failed to explain how the appellant was different. The Commissioner said that the hospital was acting primarily in furtherance of its own purposes, but that the appellant did not: it "acted to implement certain government purposes directly". The Commissioner said that the government prescribed the purpose: in fact the appellant prescribed the purpose and the government agreed.
The Commissioner also accepted that if a wealthy foundation had approached the appellant and offered it money for the purposes and in the terms set out in the OBF Agreement, that would be a valid charitable gift, because the donor would not have "independent non-charitable purposes" of its own which it would require to be furthered. But just as the appellant's purposes would be identical with the foundation's, so the appellant's purposes are identical with those of the Department.
The Commissioner submitted that the difference between a hospital receiving funds from the government, or the appellant receiving funds from a foundation, on the one hand, and the appellant receiving funds under the OBF Agreement, on the other, was that in the latter instance "the whole system was set up to implement government policy".
The appellant, while receiving funds under the OBF Agreement, was not independently pursuing its own charitable purposes, but was rather implementing government policy, even if its purposes "are consonant with or coincide with government policy". This argument is unsound. The appellant had a certain charitable purpose. The government wanted to advance the very same purpose. The appellant decided to advance its purpose by receiving funds from the government and spending them in the manner it did. These events did not cause the appellant to cease to be a charitable body merely by reason of the fact that the government is not a charitable body. Many charities implement government policy in the sense that their goals - providing education, aiding the sick and the poor - are the same as those of the government. Thus "a trust for the benefit of inmates in government mental asylums, or for the benefit of children under the care of the Children's Welfare Department would be charitable"[18]. The history of general practice divisions suggests that medical practitioners originally began to cooperate for charitable purposes of their own volition. The Commonwealth Government perceived that those purposes, which it shared, could be more effectively carried out by government-influenced reorganisation of, and government funding for, the activities of local private medical practitioners, than by enlisting the aid of more remotely located public servants.
The appellant submitted that the Commissioner's stand rested on a confusion between the purpose of the appellant in acting "to improve patient care and health", which is a purpose shared by the Commonwealth, and the purpose of a body to give effect to government purposes, whatever they might be. The mere fact that the appellant and the government both have a purpose of improving patient care and health does not establish that the appellant has the purpose of giving effect to government purposes, abdicating any independent fulfilment of its own. The appellant's purpose is charitable. It remains charitable even though the government is the source of the funds it uses to carry out that purpose. Its consent to the attachment by the government of conditions to the employment of those funds does not establish that the appellant is not independently carrying out its purpose.
These submissions are correct. To carry out the object of the appellant may be said to assist the achievement of government policy, but it does not follow that the appellant's object has changed from improving patient care and health to achieving government policy. The appellant's object continues; all that has happened is that it has seen entry into a beneficial agreement with the government as a means of achieving that object.
It follows from the rejection of the Commissioner's arguments that Chernov JA, with respect, erred in holding that the appellant carried out its functions "in order to discharge the responsibility assumed by government to support and ensure the provision of efficient, integrated, quality local health care"[19]. Rather, the appellant carried out its functions in order to fulfil its object, improving patient care and health, and the government entered the OBF Agreement in order to discharge its own responsibility for patient care and health.
It also follows that Chernov JA, with respect, erred in concluding that the appellant's core activities were performed pursuant to the dictates of government. Even if, by fulfilling its own purpose, the appellant performed "the work or function of government"[20], that did not prevent it from being a charitable body.
Osborn AJA erred, with respect, in concluding that the appellant was "a creature and agent of government". The precise sense in which these expressions were employed was not indicated, but an otherwise charitable body which accepts conditional grants in order to fulfil its object does not thereby become in any sense an agent, let alone a creature, of government. His Honour also erred in concluding that the Commonwealth controlled the appellant's activities.
Accordingly, the appeal must be allowed.

[76]

Appellant's activities and claim: The facts relevant to the decision in this appeal are set out in some detail by Gleeson CJ, Heydon and Crennan JJ[34], and by Callinan J[35]. Their Honours' reasons severally describe the legal character of the appellant as a not-for-profit company limited by guarantee established for specified objects, with a mission statement and goals set out in its constituting documents.
The membership and governance of the appellant are also described in those reasons, together with the general nature of its activities. Putting them broadly, they were to support general practitioners within the Central Bayside area of suburban Melbourne by improving their health information systems; assisting their professional development; and facilitating accreditations; improving their access to information systems; and increasing cooperation with one another, with pharmacists and with others (including in a specific project addressed to falls and falls injury prevention in frail and aged persons)[36]. These activities were designed to encourage, directly or indirectly, an outreach to the local community by the general practitioners concerned; and the treatment of patients living in that community.
The evidence establishes that a relationship exists between the appellant and the federal Department of Health and Ageing ("the Department"). This feature of the appellant's operation has occasioned close and repeated attention by the law. As appears in the other reasons, the resulting relationship provided the overwhelming bulk of the appellant's income in the year of revenue in question in these proceedings[37]. The income was effectively tied to purposes specifically designated by the terms of the departmental grant (Outcomes-Based Funding or "OBF grants"); or by grants for other specifically approved purposes ("project-based grants")[38].
The arrangements with the Department included requirements to submit strategic and business plans to the Department, together with regular reports on the fulfilment of the approved purposes. In addition, the appellant faced the possibility of on-site inspections by departmental officers. Such inspections were designed to ensure that the Department could be accountable for the expenditure of the federal funds directed to the appellant, and that the appellant's approved activities would fulfil its own programmes at the same time as they contributed towards the aggregate activities of similar "divisions of general practice", established throughout the nation. Such divisions had begun operation in 1992 for the stated purpose of improving the delivery of general medical practice services to patients. They were established with the support of federal funding. By the time of the year of revenue, 123 such divisions had been established throughout Australia. Together they enjoyed a participation rate of about 80% of general practitioners in Australia.
The appellant contended that it was properly to be characterised as a "charitable body". It made this assertion by reference to the charitable objects expressed in its founding documents; the not-for-profit constitutional provisions governing its organisation; and the ongoing public benefit which it gave to patients (including to particular groups such as the old and frail, Aboriginal and Torres Strait Islanders and non-English speaking patients[39]). For this reason, it claimed that it was entitled to exemption from the liability otherwise arising under the Pay-roll Tax Act 1971 (Vic) ("the Act"), to pay tax on wages paid to its employees.
Shifting basis of the dispute: Originally, the Commissioner rejected the appellant's claim for an exemption on the basis that the proper characterisation of the appellant was that of a "professional body with the aim of promoting the interests of its members". A body so characterised would not, on a conventional approach, be classified as a "charitable body", even though it might incidentally perform charitable activities.
Before the Tribunal, however, the Commissioner shifted his ground. He contested the classification of the appellant as a "charitable body" on the basis that its purposes were not exclusively charitable but amounted to services provided, in effect, as part of "an integrated … scheme of national health management presided over by the Federal Government"[40]. The Tribunal, expressing misgivings, upheld this argument. Its decision survived two levels of appeal in the Supreme Court of Victoria. Those appeals were limited to a point of law. Before the Supreme Court, the Commissioner did not press his original argument that the true character of the appellant was that of a body promoting the interests of its members. Doubts about the correctness of that concession were voiced both by the primary judge[41] and by Chernov JA in the Court of Appeal[42]. However, that issue has not been agitated before this Court.

[77]

Decisional history: The history of the proceedings is described in other reasons[43]. Although the Tribunal, the primary judge and the majority in the Court of Appeal severally expressed themselves in somewhat different terms, the essential reasons for rejecting the appellant's claim to be a "charitable body" were the same. All of the decision-makers (including Byrne AJA, who dissented in the Court of Appeal) assumed that the word "charitable", contained in the Act, was to be given a meaning derived by analogy from the preamble to the Statute of Elizabeth (the Charitable Uses Act 1601 (UK)[44]), as explained by Lord Macnaghten in the decision of the House of Lords in Commissioners for Special Purposes of the Income Tax v Pemsel[45].
According to this approach, the decision-maker was required to search for the "spirit and intendment" of the Elizabethan statute[46] or, as otherwise put, to ascertain whether the appellant lay within the "equity" of that statute[47]. It was accepted that, ultimately, this task enlivened a question for judgment and evaluation in the circumstances of the particular case[48]. Upon this basis, the Tribunal, the primary judge and the majority in the Court of Appeal concluded that the appellant was not a "charitable body". Effectively, this was because the evidence revealed that it was "too close to the Commonwealth" so that, essentially, it was carrying out federal government or legislative policy and not acting for charitable purposes[49].
Upon this view of the facts, the appellant was held to be effectively responding to the "dictates" of the Department, exerted through the power of the purse[50]. It was thus a "creature" or "agent" of the federal Government[51]. Whilst doubtless many of its activities and purposes were consonant with a "charitable" classification, the "body" itself could not be so characterised. In effect, it was carrying out national governmental policy. This was held to deprive it of the "charitable" character that was necessary to qualify for the exemption under the Act.
Common ground: I have mentioned the common ground that existed between the parties, below and in this Court, concerning the way in which the word "charitable", appearing in the Act, was to be interpreted. This was common ground upon a matter of law. That puts it in a class different from common ground on issues of fact. I will return to this point.
In the meantime, it is useful to take note of the common ground that also existed between the Commissioner and the appellant about the facts. The Commissioner acknowledged that the appellant was not, as such, a department or instrumentality of the federal Government. So much was plain from the relevant legislation. He accepted that the appellant's activities were for the benefit of the community. The Commissioner also accepted that the appellant received, and could seek, funds other than those provided by the Department. Moreover, it was not bound in law to accept those funds. It could reject them if it so decided in accordance with its constitution.
The Commissioner further accepted that the only means by which the Commonwealth could exert control over the appellant was through its financial power. However, he submitted that this was sufficient. The extremely high reliance placed on federal funds (which constituted almost the entirety of the appellant's income); and the subjection of the appellant to approval, monitoring and potential intervention, all added up to effective control in practical terms. That fact was supported by the existence of a large, integrated national scheme, within which the appellant formed only one of many units pursuing an overall objective orchestrated by the Department. Upon this view, it was not necessary for the Department to appoint representatives to the appellant's board so as to control it. The appellant's pursuit of federally approved projects was assured by the fact that any deviation would be sanctioned by the unwelcome reduction, or withdrawal, of federal funds.
These are the arguments that convinced the Tribunal and the courts below. However, into the exotic consideration of a statute enacted by the Parliament of England in the reign of the first Queen Elizabeth, I must now intrude the practical realities of the statute applicable to this appeal, enacted by the Parliament of Victoria in the reign of the second Queen Elizabeth.

[84]

There follow further exemptions extending to particular cases of great specificity. There is an exemption for certain private hospitals (par (c)); certain schools, colleges and school councils (pars (d), (da), (daa) and (db)); specified municipal councils (save for wages paid for activities of identified profit-making kinds) (par (e)); consular and like staff (par (f)); United Nations agency staff (par (g)); the Commonwealth War Graves Commission (par (h)); the Australian-American Educational Foundation (par (i)); defence personnel or employers employing such personnel whilst on leave (par (j)); and defined corporations acting in connection with municipal councils (par (l)).
As is evident from the foregoing list, the category of exemption claimed by the appellant was added to the Act after its original enactment. In so far as the specific reference to a "charitable body" grants an exemption, it expressly excludes schools and educational institutions or instrumentalities of the State. In order to qualify for an exemption, such bodies have to attract one of the other specific paragraphs and satisfy their terms.
According to the Pemsel test, "'[c]harity' in its legal sense comprises four principal divisions: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads"[52]. However, the drafter of s 10(1) of the Act was not content to leave "charitable bodies", defined in such general terms, to do the entire work of exemption. Indeed, the notion of "charitable body" was not originally expressed in the Act at all. Depending on the particular circumstances, several of the expressed categories of exemption might come within the charitable notions of "relief of poverty", "advancement of education" and even (in s 10(1)(b) of the Act) "the advancement of religion". Many, in a general sense, would be for "purposes beneficial to the community not falling under any of the preceding heads". Yet the Parliament of Victoria took no chances. As can be observed, s 10(1) includes a collection of highly particular categories and institutions which, in aggregate, seem to owe more to political bargaining and compromise than to a semi-coherent scheme of the kind that Pemsel was endeavouring to sustain.

[91]

Implausible issue or judicial obligation? In their joint reasons, Gleeson CJ, Heydon and Crennan JJ have suggested that "[i]t is not easy to see a basis upon which [the Pemsel rule could be questioned] with any degree of plausibility"[56]. I do not agree with this opinion. Ultimately, my disagreement rests on a view of the Constitution, of the role of the Judicature it creates, and specifically of the functions of this Court.
A fundamental assumption of the Constitution of the Commonwealth is maintenance of the rule of law[57]. Inherent in that obligation is the notion that courts, disposing of matters within the Judicature, will give effect to the commands of the several legislatures of the States and the Commonwealth, as expressed in the statutes which they enact, or in the subordinate laws which they thereby authorise. The Act in question in this case is such a statute. Its validity has not been questioned. On its face, it is valid and applicable. This Court must therefore give effect to it. It must do so according to its terms.
This Court has no authority to ignore or neglect a meaning of legislation which the Parliament intended. Whilst respect is paid to the issues which the parties define, it is ultimately not for the parties to make "concessions" concerning the content of the law. No court can accept, and act upon, an incorrect understanding of the law. Nor can parties expect that judges will simply go along unquestioningly with an erroneous understanding of the law, particularly where these understandings arise because they have not been questioned by the parties[58].
As averted to earlier, the position differs when a court is considering matters of fact, as opposed to matters of law. If the parties agree on the state of the facts, it would ordinarily work a procedural unfairness for a court to ignore the parties' agreement and to proceed to decide facts in a manner contrary to the way in which the case has been litigated[59].
However, no such procedural impediment arises when the court is faced with issues of law. The judicial duty to the law is paramount. Any potential procedural unfairness arising from a different view of the law can be overcome by raising the matter for argument and affording the parties the opportunity to put their submissions. This was certainly done when this appeal reached this Court. The concern that I felt about the assumed meaning of the phrase "charitable body" in s 10(1)(bb) of the Act was squarely identified. It involves the discharge by this Court of its constitutional function of disposing of the appeal according to law. If judges do not question doubtful assumptions about the law they will just go on, sheep like, repeating legal mistakes inherited from past generations. There have been many advances in the approach to the interpretation of legislation adopted by this Court in recent years. A nation's final court, as I conceive it, must be willing to test past legal assumptions and to correct error if it is demonstrated by the course of proceedings.
Statutory primacy: The present appeal is, in fact, a clear instance of an error in approach to legal analysis which is relatively common and which this Court, over the past decade, has been at pains to correct.
I made this point in Brodie v Singleton Shire Council[60]:

[96]

Time and time again, this Court has reinforced the foregoing instruction. It is self-evident, but apparently it needs to be restated. Where the law in issue is expressed in the form of an Act of an Australian legislature, it is in the words of that statute that the content of the legal obligation is to be found, not in judicial synonyms, restatements or approximations. Upon this matter, this Court has until now spoken with a single voice[64]. It should be consistent in applying the same rule to the present appeal. It is not implausible to do so. It is our legal duty.
Special considerations: There are a number of special considerations that reinforce the correctness of this approach in the present instance. They combine to cast doubt on the interpretation of a phrase in s 10(1)(bb) of the Act in question in this appeal by unquestioning reference to the authority of English judges (including in the Privy Council[65]), insisting that Australian legislative texts, making reference to "charity" or "charitable", should be interpreted in accordance with the approach stated by the House of Lords in Pemsel.
First, the words in issue appear not in a general statute concerned with the law of charities or charitable trusts at large[66]. They exist in the particular context of a specific law with respect to the raising of revenue for the general purposes of the government of an Australian State and in connection with the budget process of that government.
Presenting the Bill that introduced par (bb) in s 10(1) of the Act, the then Treasurer explained to the Legislative Assembly of the Victorian Parliament adjustments in various State taxes, including payroll tax, alteration in the threshold at which employers would begin to pay such tax and alteration in the exemptions, including the introduction of an exemption applicable "to charitable bodies other than educational institutions, schools, government departments and public statutory bodies"[67]. The Minister stated that "the urgency to commence the restoration of the State's finances necessitates the passage of a significant amount of legislation within a limited parliamentary session. This leaves the government no alternative but to adopt this compendium measure." There was no reference before the elected representatives, either in the Minister's speech or in the accompanying documents, to the Statute of Elizabeth, the decision in Pemsel or the importation of their categories into the adjustments of this particular and urgent State fiscal legislation. Without explanation, it seems most unlikely that members of the Victorian Parliament would have read par (bb) as connoting a reference to Pemsel. To render the State legislature accountable to the electors, particularly in the matter of taxation, as the postulate of democratic government requires, it does not seem sufficient that parliamentary counsel might have known of Pemsel or that expert tax lawyers are aware of what it says. At the least, the postulate of democratic accountability for a law enacted by a Parliament of lay members suggests that we should question such an assumption.
Secondly, the text into which par (bb) was inserted already included, in several of the other paragraphs, references to exemptions which duplicate, cut across or partially cover the four categories identified in Pemsel which, it is suggested, were imported by the use of the phrase "charitable body" in the new par (bb). Inserting that phrase into a modern statute, by way of amendment, when other categories of a "charitable" character, so defined, are expressly exempted, would not appear to make sense. According to ordinary canons of statutory interpretation, it would not be assumed that par (bb) was inserted into s 10(1) as a redundancy or as a means of duplicating existing exemptions. Yet if there is imported with the reference to "charitable body" in par (bb) the "technical" or "legal" categories described in Pemsel, a significant part of the supposed purpose of the paragraph is rendered otiose because of the other express provisions in the sub-section.
Thirdly, the character of the exemption for payroll tax must be understood in light of the fact that such a tax, being imposed on wages, is of a recurrent nature. It falls due for consideration with each recurring payment. The word "wages" is itself very broadly defined in the Act[68]. The recurrent character of this form of taxation appears to contradict the notion of a settled and immoveable denotation for a "charitable body" that has never changed, at least in its basic categories, since Pemsel was decided by the House of Lords in 1891 and by inference long before.
Fourthly, it defies commonsense and ordinary intuition to suggest that the understanding by the Victorian Parliament, in the context of a 1992 amendment inserting the phrase "charitable body" in the law, would necessarily be the same as the understanding of that phrase in England when Pemsel was decided in 1891. Even more so, it seems unlikely that the phrase would have had the identical meaning in the social circumstances of England in 1601 when the preamble to the Statute of Elizabeth was drawn up. There is no reference in Pemsel or in the preamble to many considerations that might be apt to embody the meaning of a "charitable body" in contemporary Australian society. For example, there is no mention of the defence of fundamental human rights and human dignity; the maintenance of the benefits of science and technology; the protection of refugees and other vulnerable persons; the need for specific assistance for indigenous peoples; the protection of the welfare of animals; the advancement of culture, arts and heritage; the defence of the environment and so forth. To impose rigid categories derived from an English statute of the early 17th century (re-endorsed in 1891 at an historical moment when unity of the common law throughout the British Empire was thought essential) seems arguably incompatible with this Court's duty to adopt a purposive interpretation of legislation enacted by an Australian legislature.
Conclusion - consistent approaches: It follows that there is no reason, in principle, why the problem of statutory interpretation presented by the present appeal should be approached in a way different from other cases involving statutory interpretation, considered by this Court in recent times[69]. The starting point is the statute. This includes its language but also the context of the contested phrase; the given reasons for the introduction of the particular provision; the light thrown on its meaning by surrounding provisions; the general purpose and object of the statute viewed in its time; and the constitutional context of the enactment of a law imposing taxation by which a State government, proposing that law, is rendered accountable to the electors.
There may be reasons why a court such as this might ultimately conclude that it cannot perform the function of devising a modern definition of "charitable body", apt to the particular circumstances of the Victorian legislation in issue in this appeal. For example, that conclusion might present where the court lacks detailed assistance from the parties or the presence of a contradictor. However, in my view it is proper, in the first instance, to comply with the settled methodology of this Court in deriving the meaning of the phrase "charitable body" in the statute in question. By that methodology, the ascertainment of the meaning must begin with the legislation and with proper analysis of its text. Revenue law is part of the general law. It is subject to the same general principles governing the ascertainment of its specific parliamentary purposes[70]. It is not implausible to bring this body of law back to the general approach of the Court. Consistency in matters of general principle is a hallmark of the rule of law. Revenue and charity law are not exempt.

[97]

Once it is accepted that the Court must give meaning to the words "charitable body" in the context of s 10(1)(bb) of the Act, in the way typical to ascertaining the meaning of Australian statutes, there are a number of reasons for breaking from a search for the "spirit and intendment" of the preamble to the Statute of Elizabeth as the criterion for answering that question[71].
Some of the reasons have already been foreshadowed. It is unlikely that an Australian Parliament, acting without instruction and comprising ordinary citizens, would appreciate and intend that enacting a statute not specifically concerned with charitable trusts automatically imports a classification devised in England four centuries ago.
Least of all could this be regarded as likely if the legislators knew that, in the United Kingdom, where the statutory formula was first adopted in 1601, the Statute of Elizabeth itself was repealed by the Mortmain and Charitable Uses Act 1888 (UK)[72], passed before the federation of the Australian colonies. Although that repeal preserved the preamble[73], which thereby remained in operation, the 1888 Act, including the preamble, was itself later repealed by the Charities Act 1960 (UK)[74]. The words of Gonthier J in the Supreme Court of Canada are equally applicable in the Australian context: "no statutory authority for the preamble now exists"[75].
For judges, no longer subject to the authority of Imperial or English courts, to maintain obedience to conceptions of "charity" and "charitable bodies", expressed in such different times, seems, on the face of things, an irrational surrender to the pull of history over contemporary understandings of language used in a modern Australian statute.
Further, much criticism has been directed towards the continued use of the categories established by the Statute of Elizabeth, and reasoning by analogy from the preamble to that statute. In 1966, several Australian reports reviewed the law relating to charitable trusts[76]. No substantive change ensued. However, in 2000 a federal inquiry was established into the legal definition of "charity". This resulted in the Report of the Inquiry into the Definition of Charities and Related Organisations, (2001). The report concluded that, although use of the preamble to the Statute of Elizabeth had been "valuable", it had "now outlived its usefulness". The report declared that the process of determining "whether a purpose is within the 'spirit and intendment' of the Preamble or is analogous to a charitable purpose is ambiguous and could lead to inconsistencies". The report further noted that removal of reference to the Statute of Elizabeth had been recommended in England by reports delivered in 1952 and 1976[77] and that this Court, in 1974, had referred to the possible need for reform[78]. A detailed statutory definition was proposed for Australian federal purposes, including for revenue purposes. However, after a process of consultation undertaken by the Board of Taxation, the ensuing federal Act[79] effected only relatively modest and special amendments to the previous law[80].
In England, following earlier reports recommending changes to the law, an inquiry in 2002 recommended a new approach to the meaning of "charitable", with a fresh definition of "charity" including several features missing from the approaches adopted in earlier centuries. A Bill to implement the report for England and Wales is before the United Kingdom Parliament. A separate inquiry into the issue has been undertaken in Scotland[81].
In Canada the defects of the Pemsel categories were noted by the majority of the Supreme Court in the Immigrant and Visible Minority Women case[82]. That case concerned the entitlement to registration as an organisation with "charitable" status under the Income Tax Act 1985 (Can). The body was established for the purpose of assisting immigrant and visible minority women to obtain employment.
The majority of the Supreme Court rejected the Society's appeal against the Minister's refusal of its application. However, they noted "repeated calls for the expansion or replacement of the test to reflect more completely the standards and values of modern Canadian society". They endorsed remarks of Strayer JA in Human Life International in Canada Inc v MNR[83] to the effect that the definition of charity remains "an area crying out for clarification through Canadian legislation for the guidance of taxpayers, administrators, and the courts". The majority in the Supreme Court observed that "[i]n the absence of legislative reform, Canadian courts must contend with the difficulty of articulating how the law of charities is to keep 'moving' in a manner that is consistent with the nature of the common law"[84]. The minority in the Supreme Court accepted the need for such movement as axiomatic[85].
One paper, cited in the Supreme Court[86], by Mr E B Bromley, a Canadian expert on the law of charities, remarked[87]:

[100]

A further reflection of the perceived inadequacies of the Pemsel approach was the recent adoption in New Zealand of the Charities Act 2005 (NZ). Although this enactment appears to preserve the use of the traditional four heads of charity expressed in Pemsel[89], it introduces reforms designed to protect special Maori charities and to forestall invalidation of a "charity" by the inclusion amongst its purposes of ancillary non-charitable purposes (including, for example, advocacy)[90].
Not all countries of the common law world have continued to adhere to Pemsel. In India, although the influence of Pemsel may still be seen in revenue legislation[91], local cultural concepts appear to have been accepted and grafted onto the old law[92].
A wrong turning? In 1923, in Chesterman v Federal Commissioner of Taxation[93], this Court was asked to give meaning to s 8(5) of the Estate Duty Assessment Act 1914 (Cth). That sub-section exempted bequests and gifts "for religious, scientific, charitable or public educational purposes".
A majority of the Court (Isaacs, Rich and Starke JJ; Knox CJ and Higgins J dissenting) rejected the submission that "charitable purposes" was to be read in a "technical legal sense". Isaacs J pointed to the "non-technical interpretation" of "charitable purposes" that had been adopted in a decision of the English Court of Appeal published only eight months after the decision in Pemsel[94]. His Honour was strongly influenced by the context and language of the Australian legislation in issue. So was Starke J who, in language similar to that used above, pointed to the need to construe each statute "by itself for the purpose of ascertaining its meaning" and to have regard to any other exemptions which would "cover a large number of 'charities' in the strict legal sense"[95]. The reasons of Rich J were to like effect[96]. There had been earlier Australian decisions in which local judges had endeavoured to be faithful to what they took to be the particular purposes of the Australian statutory text as enacted by Australian legislators[97].
These entirely orthodox approaches, attentive both to legal principle and to local conditions, were overruled when Chesterman reached the Privy Council[98]. That Court insisted on obedience to the "legal meaning expressed by Lord Macnaghten in Pemsel's Case"[99]. Fifty years later, the same approach was restated in a Privy Council decision from the Court of Appeal of New South Wales[100].
It was natural, in a legal environment in which this Court's decisions were subject to appeal to the Privy Council, that obedience to the Pemsel rule would continue, virtually unquestioned. But since that supervision has ceased[101], this Court is free to reach its own conclusions. It may, if it chooses, return to its own earlier authority in Chesterman. That authority is, after all, more respectful to the purposes discerned from the particular legislation and to the ordinary principles governing the construction of statutes that give primacy to the parliamentary words over judicial authority.
The foregoing reasons therefore provide a sound basis for reopening the meaning of "charitable body" in the present appeal. The issue is not immaterial to the outcome of this appeal given that, upon one view, a narrower, popular meaning for the word "charitable", understood in its ordinary sense, would exclude the appellant, especially if the phrase "charitable body" is interpreted in a revenue statute which imposes a general tax and permits exemptions only in specified and very particular circumstances.
In light of the criticism that has been directed at Pemsel, both in Australia and in other common law countries, it is by no means self-evident that Pemsel provides the starting point for defining the word "charitable".

[101]

Had this Court's decision in Chesterman not been overruled by the Privy Council in 1925, it is possible that a more satisfactory approach to the meaning of "charity" and "charitable" would have been fashioned in Australian courts and legislation over the years. In the event, a new kind of judicial mortmain was imposed on the law of charities, relevant to the content of federal and State legislation in Australia. Although, as I have shown, there are reasons that would support, even now, an attempt to fashion a new principle for application to the Act of the Victorian Parliament in question in this appeal, for the reasons which follow, I have concluded that such an attempt should not be made.
First, it is by no means clear that the Victorian Parliament intended in this case to depart from the definition supplied by Pemsel. Recent amendments in the Australian federal context and in New Zealand have proved extremely limited. This may demonstrate the complexity and controversy of bolder reforms. Alternatively, it may reinforce a conclusion that the present law is not considered sufficiently anomalous, inefficient or unjust as to require general statutory intervention. If, as a result of the outcome of these proceedings, the Commissioner or the Government and Parliament of Victoria are disturbed, it will be open to them to seek and adopt a further amendment to the Act. The many amendments enacted, and the highly particular provisions appearing there, indicate that such amendments can easily be made where the political will exists. In effect, this constitutes the best answer available to the suggestion that the "technical" or "legal" definition of "charitable" is prone to mislead the elected representatives and Parliament when approving a law raising taxes from the people.
Secondly, the one indisputably correct statement that Lord Macnaghten made in Pemsel was that "no one as yet has succeeded in defining the popular meaning of the word 'charity'"[102]. At least, no one has succeeded in providing a definition that enjoys universal acceptance. To reconceptualise the notion of charity and to apply it to the phrase "charitable body" in the Act, would desirably require assistance from the parties; a study of much comparative material; and close analysis of such material. In a case where neither the parties nor the Commonwealth intervening, was willing to undertake that task, I am not convinced that this Court, unaided, should attempt to do so on its own.
Thirdly, the issue of whether the Privy Council's decision in Chesterman should be reversed was carefully re-examined by that Court in Joyce. Lord Wilberforce, who could not be described as a narrow or parochial legalist, took pains to refer to many decisions of this Court, and other Australian courts, which, once the Rubicon of Chesterman was crossed, had faithfully followed the Pemsel approach[103]. He offered several reasons of legal principle and policy for adhering to the old approach. He did not confine himself to a demand for unquestioning adherence to judicial authority.
Fourthly, a judicial re-expression would have wide-ranging implications, affecting the legal affairs of many persons, ordered on the assumption of adherence to the Pemsel approach. One of the reasons of policy advanced in Joyce (also mentioned in this appeal by Gleeson CJ, Heydon and Crennan JJ[104]) is that numerous charitable bodies have organised their affairs to bring themselves within the technical or legal definition, so as to secure the advantage of the exemption[105]. The Pemsel approach has also been applied beyond the context of revenue law. In light of these considerations, in a case such as this, judges should submit to the constraints of authority[106], even where they have serious doubts about the correctness of that authority.
Fifthly, in the one instance in which a final appellate court has been invited to review the approach in Pemsel, and to substitute a more modern and local judicial definition, the Supreme Court of Canada declined to accept the invitation. In the Immigrant and Visible Minority Women case[107], the majority[108] accepted the appellant's criticism of the Pemsel categories and approach. However, they concluded that, for the Court to attempt a re-expression of the law, having so many applications of great variety, would go beyond the proper judicial function to re-express the general law[109]. Given the ramifications, the majority considered that any such re-expression should be left to Parliament.
Sixthly, the existing categories already afford a broad scope for a modern or liberal interpretation of "charity", a point acknowledged by a minority of the Supreme Court of Canada in the Immigrant and Visible Minority Women case[110]. Whilst not disagreeing with the majority's criticisms of Pemsel, the minority concluded that, especially in the fourth stated category ("trusts for other purposes beneficial to the community, not falling under any of the preceding heads"), and in the technique of reasoning by analogy from the categories collected in the preamble to the Statute of Elizabeth, Pemsel, in practice, afforded a potentially broad and facultative approach to the meaning of "charity" and "charitable"[111].
Indeed, it is arguable that Pemsel may have actually condoned adjustment and modernisation of the notion of "charity". A return to the ordinary meaning of the word might constrict that process. Dictionary definitions tend to assign as the primary meaning of "charity", "almsgiving; the private or public relief of unfortunate or needy persons; benevolence"[112]. "Charitable" is primarily defined as "generous in gifts to relieve the needs of others"[113]. If, as a matter of legal policy, it is considered that the term "charitable", in contemporary revenue laws, should be permitted to expand so as to cover a wider range of community interests, the Pemsel approach may be more conducive to this outcome than an embrace of the demotic meaning of the statutory words. It is possible that colloquial use of the notion of "charity" has kept pace with modern community interests in the legal context in a way that dictionary definitions do not reflect. I tend to think it has. But not everyone shares this belief. Reopening the question (which many parliaments appear to have been willing to leave to the courts) might produce a more restrictive and deleterious policy outcome than is represented by persistence with the approach that Pemsel mandates[114].
Outcome - change unnecessary: For these reasons, I am content to follow past authority and to treat the reference to "charitable body" in s 10(1)(bb) of the Act as a reference to such a body defined in the Pemsel sense. I concede that this is a counter-intuitive conclusion, given the normal way in which this Court approaches the construction of language in statutes of an Australian Parliament, where the Parliament itself has not provided a special definition to authorise an artificial meaning. The result is odd and the consequential meaning of "charitable" is derived in such a very strange way that I venture to suggest that few citizens know of it and most lay persons, when told, would find it astonishing.
A return to an understanding of "charitable" in this context, according to the understanding of ordinary language, might result in a finding adverse to the appellant. But because I have concluded that this Court should adhere to past authority on the "legal" or "technical" meaning of "charitable", that outcome is avoided. A "charitable body", as the phrase is used in s 10(1)(bb) of the Act, is not confined to a body whose purposes and activities are concerned with gift-giving and help to "needy" or disadvantaged persons. Within the fourth category described by Pemsel, the appellant has been established for purposes which, though not falling under the three earlier heads, are nonetheless beneficial to the community.
Subject, therefore, to the suggested exclusion of the appellant by reason of its close association with the Department, and its implementation of federal governmental policy, the appellant qualifies as a "charitable body". It is thus entitled to exemption from Victorian payroll tax.

[112]

In these circumstances, I can understand the reasons that led the three decision-makers below to find against the appellant's claim for exemption under s 10(1)(bb) of the Act. Specifically, I could understand the Commissioner deciding that, if the federal Minister wished to provide federal funds through a private corporation for the implementation of formulated federal health policies, with employees receiving wages, the wages of such employees should be treated like those of any other employer and should not attract the special exemption limited to a "charitable body". It was this characterisation of the "purposes" and "activities" of the appellant that resulted in the conclusions unfavourable to exemption that have occasioned this appeal.
Significance of the "body": In performing the task of characterisation enlivened by the Commissioner's ground of objection to the appellant, it is important to remember that the statutory question presented by s 10(1)(bb) of the Act is whether the organisation claiming exemption is a "charitable body". It is the character of the "body" that is important for deciding whether the Act's description is satisfied. Obviously, the appellant is not, as such, a governmental body. It is not part of government, established by statute to effect governmental purposes as such. In any case, even bodies so established have sometimes been held capable of being treated as "charitable".
For example, in British Museum v White[120], a devise to the British Museum was held to be charitable although it was argued that the Museum was not a charitable institution because it was founded by the munificence of the State. Sir John Leach, VC said it was "a gift to an institution, established by the Legislature, for the collection and preservation of objects of science and of art, partly supplied at the public expense, and partly from individual liberality, and intended for the public improvement". This, and several other cases in England[121] and in Australia[122] follow this line of reasoning.
The type of distinction identified in the early cases may be seen in most recent times, and in Australia, by contrasting Metropolitan Fire Brigades Board v Commissioner of Taxation[123] and Alice Springs Town Council v Mpweteyerre Aboriginal Corporation[124].
In the former case, the question was whether the Fire Brigade Board, established under Queensland legislation, was a "public benevolent institution". The Federal Court of Australia held that it was not. That Court characterised the Fire Brigades Board as a governmental body which, in the language of In re Cain, was simply exercising the functions of government. Whilst the expression "public benevolent institution" is not the same as "charitable body", there is sufficient similarity to make the approach in that case noteworthy.
However, this decision was distinguished by the Court of Appeal of the Northern Territory in the Alice Springs Council case. An Aboriginal corporation claimed (and the Town Council contested) that it was entitled to exemption from rates in respect of "land used or occupied for the purposes of … charity". The corporation had objects and purposes which extended to the provision of help to needy Aboriginal people as well as to its members. The corporation used premises on its lands for the accommodation of generally impoverished visitors who wished to stay in Alice Springs for short intervals. Mildren J, who gave the principal reasons of the Court of Appeal, rejected the argument that the corporation should, like the Fire Brigades Board in the earlier case, be characterised as an agency of government. He said[125]:

[114]

Comparative law: When considering the question whether a body is "charitable" for legal purposes, courts of other common law countries have not treated as decisive the fact that it receives funds, even substantial funds, from government or in some ways contributes to effectuating the policy of government under the encouragement of subventions.
Tax concessions under federal law in the United States of America do not contain express exclusions from "charitable" status for recipients of government funds. Typically, the disqualifications provided by statute relate to the provision of private benefits to members; participation in propaganda activities; attempts to influence or alter legislation; or participation in political campaigns[126]. In a number of cases, the presence of governmental representation on a chartered private company established by government and supported by government funds has not prevented the corporation from being classified as a "charitable" organisation for tax purposes[127].
In the United Kingdom, an exempt charity for income tax purposes is "any body of persons or trust established for charitable purposes only"[128]. In the Charities Act 1993 (UK) a "charity" is defined as "any institution, corporate or not, which is established for charitable purposes and is subject to the control of the High Court in the exercise of the Court's jurisdiction with respect of charities"[129]. The phrase "charitable purposes" is, in turn, defined to mean "purposes which are exclusively charitable according to the law of England and Wales"[130]. In this way the definition dating back to the Statute of Elizabeth, as explained in Pemsel, continues to apply. However, the case law does not reveal a prohibition, as such, against governmental association or funding, of the kind adopted by the Court of Appeal of Victoria in this case.
In 2001, the Charity Commissioners for England and Wales formulated guidelines that addressed the potential loss of a "charitable" character occasioned by too close an association with, or dependence upon, government[131]. These guidelines make it clear that an institution is not prevented from being an institution established for charitable purposes simply because it has been "set up by government". Nor is it a bar to such status that the body is created with a view to taking on a governmental function, so long as the body's purposes are exclusively "charitable" in the general sense. Moreover, under the guidelines, the motive of the promoter is irrelevant in determining whether the body is a "charity". It is critical that the body must be independent, such that it exists to carry out its own charitable purposes and not simply for the purpose of implementing policies or directions of the government.
In New Zealand, under the Charities Act 2005 (NZ), registration for the purpose of concessions under the Income Tax Act 2004 (NZ) and the Gift Duties Act 1968 (NZ) depends on demonstration of a "charitable purpose". This is defined to include criteria that, in part, repeat those adopted in Pemsel[132].
In Canada the Income Tax Act 1985 (Can) provides for the registration of charities. To be registered for this purpose, the charities must satisfy stated criteria[133]. These include the requirement that more than 50% of the controlling officers of the body be independent of private or public "foundations" and that no controlling group contribute more than 50% of the capital. However, the latter restriction does not apply to capital contributed by government. No exclusion for governmental association or funding is expressed in the Canadian legislation; nor is it evident in the Canadian case law.
Obviously, many of these instances depend on their own special legislation. They suggest that generally the establishment, control or funding of a body by government may be relevant to the characterisation of that body's purposes and objects as "charitable" or otherwise. However, if a body is established separately from government, with substantial independence in its organisation, it is not necessarily disqualified from characterisation as "charitable" merely because it receives substantial government funds.
Government funding for public benefit through private sector organisations has expanded greatly in recent years in many countries, including in Australia. This development has occurred as a means of securing perceived advantages, including decentralisation; and securing the efficiency that small, local, private sector bodies can achieve. From the standpoint of legal policy, it would be undesirable for the law to needlessly expand the disqualification of such bodies from the advantages that they enjoy as "charities" under revenue law where their purposes otherwise qualify. If, because of a particular governmental association, and for inter-governmental, political or other reasons, governments wish to remove exemptions from bodies that otherwise meet the requirements of being "charitable" within the general law as it has been expounded by the courts, they can easily do so by securing the amendment of the legislation. In the matter of exemptions for charities and in defining exempted charities, Australian legislatures have a record of enacting very particular provisions when they deem it to be necessary. There is no need for the courts to descend to such particularity.

[115]

When attention is directed to the characterisation of the "body" which is constituted by the appellant, and the question is asked whether or not it is "charitable", within s 10(1)(bb) of the Act, the better answer is therefore that it is "charitable". True, the appellant receives most of its funds from government, but so too did the Aboriginal corporation in the Alice Springs Council case, and so did many other bodies held by this Court to be charitable. If attention is focused on the "purposes" of the body, rather than its funding as such, those purposes emerge as "charitable" within the fourth category in Pemsel. They are performed for the public benefit in the sense there described. Care was taken in constituting the appellant to preserve its ultimate independence from government if ever the position should arise that government wished the appellant to perform activities inimical to its members, their patients or services conceived and expressed through the board.
The appellant's board contained no representative of the Department or the government. True, the financial and other arrangements imposed by the association with the Department were rigorous. But that is how it must be in the expenditure of funds for which the Department, and its Minister, are accountable, through the Parliament, to the electors from whom taxes are raised. At all times, as a "body", the appellant was a private corporation, constituted independently of government. It was only tied to the governmental purposes so long as those purposes coincided with benefits to the public, the patients and the members, as perceived and accepted by the constituent body of the appellant. The appellant was fulfilling its own objectives and purposes, which were conceded to be beneficial to the public. The appellant was not simply carrying out the objects of government. Still less was it part of the "government of the country"[134].
It follows that the suggested ground of disqualification from entitlement to the exemption claimed by the appellant was not established. The Court of Appeal erred in law in deciding otherwise. Wider questions concerning the ambit of the suggested disqualification for governmental association need not be answered in this appeal.

[178]

The area in which the appellant operates is part of suburban Melbourne. "Divisions" of the kind of which the appellant is one were created, if not as a result of a government initiative, certainly with at least the encouragement and support of government from as early as 1992. It seems likely that they would not have been brought into existence, or would not function as they do, were it not for that encouragement and support, including, significantly, financial support for their programmes. Among the actual activities undertaken by the appellant are the expansion of access to immunisation, the provision of continuing medical education to general practitioners, the improvement of medical software systems, the enhancement of co-operation with pharmacists, the development of a "falls prevention programme", and the improvement of access by medical practitioners to timely and objective information about therapeutics.
In the relevant tax year (1 July 2001 to 30 June 2002) the total receipts of the appellant were $1,048,979. The "sales revenues" were $1,087,813 (less $45,132 "unearned income on projects"). The source of $1,006,997 of those funds (about 93 per cent of the total receipts) was by way of grant from the Commonwealth government.
About 43 per cent of the appellant's total income (less than half of the amount received from grants) was received from the Commonwealth under "outcomes based funding" ("OBF"). The other grants were described as being predominantly "project-based".
A programme of funding from the Commonwealth to divisions of general practice under OBF agreements started in 1999. The first triennial OBF agreement was extended to 30 June 2003.
It is not disputed that the appellant is bound to conduct activities intended to achieve the identified outcomes set out in its strategic plan and business plan (as approved by the Department) and incorporated in the agreement between it and the Department. In turn, these outcomes must be in keeping with the current aims of the division of general practice. The block grant from the Commonwealth, that is, 43 per cent of the appellant's income did not specify actual projects or actual project outcomes. The majority of the appellant's grant funding related to specific projects. Some of the projects were devised by the appellant. In some cases, the appellant would actively pursue funding for a particular project which it had decided was important to the community. In other cases, expressions of interest might be invited or tenders called. The appellant would then propose a project in response to the call for expressions of interest, or accept the tender. Grants for specific projects might be augmented from a variety of sources including "health promotion agencies" of which the Pharmacy Guild is one.

[190]

"That according to the law of England a technical meaning is attached to the word 'charity,' and to the word 'charitable' in such expressions as 'charitable uses,' 'charitable trusts,' or 'charitable purposes,' cannot, I think, be denied. The Court of Chancery has always regarded with peculiar favour those trusts of a public nature which, according to the doctrine of the Court derived from the piety of early times, are considered to be charitable. Charitable uses or trusts form a distinct head of equity. Their distinctive position is made the more conspicuous by the circumstance that owing to their nature they are not obnoxious to the rule against perpetuities, while a gift in perpetuity not being a charity is void. Whatever may have been the foundation of the jurisdiction of the Court over this class of trusts, and whatever may have been the origin of the title by which these trusts are still known, no one I think who takes the trouble to investigate the question can doubt that the title was recognised and the jurisdiction established before the [Statute of Elizabeth][[141]] and quite independently of that Act. The object of that statute was merely to provide new machinery for the reformation of abuses in regard to charities. But by a singular construction it was held to authorize certain gifts to charity which otherwise would have been void. And it contained in the preamble a list of charities so varied and comprehensive that it became the practice of the Court to refer to it as a sort of index or chart. At the same time it has never been forgotten that the 'objects there enumerated,' as Lord Chancellor Cranworth observes[142], 'are not to be taken as the only objects of charity but are given as instances.' Courts of Law, of course, had nothing to do with the administration of trusts. Originally, therefore, they were not concerned with charities at all. But after the passing of the Act 9 Geo 2, commonly known as the Statute of Mortmain, which avoided in certain cases gifts to 'uses called charitable uses,' alienations and dispositions to charitable uses sometimes came under the cognizance of Courts of Law, and those Courts, as they were bound to do, construed the words 'charitable uses' in the sense recognised in the Court of Chancery, and in the Statute of Elizabeth, as their proper meaning. I have dwelt for a moment on this point, because it seems to me that there is a disposition to treat the technical meaning of the term 'charity' rather as the idiom of a particular Court than as the language of the law of England. And yet of all words in the English language bearing a popular as well as a legal signification I am not sure that there is one which more unmistakeably has a technical meaning in the strictest sense of the term, that is a meaning clear and distinct, peculiar to the law as understood and administered in this country, and not depending upon or coterminous with the popular or vulgar use of the word. ...

[207]

The respondent nevertheless advances these propositions: a government department, (here the Commonwealth Department of Health and Ageing), is not a charitable body when it acts to implement government policy. When a body, such as the appellant here, acts so much under the control or influence of a government department that it can be seen to be acting to implement government policy, rather than in the independent performance of its own objects, then it too may not be regarded as a charitable body. The history of the divisional system and the control asserted over all divisions of general practice, including the appellant, by the Commonwealth, shows that the appellant was acting so much under the control and influence of government in discharging its obligations under its OBF agreement, and otherwise, during the tax year ending 30 June 2002, that it is an implementer of government policy rather than an independent body pursuing its own objects: accordingly it was not a charitable body entitled to exemption from pay-roll tax.
I would reject the respondent's arguments. Section 10(1)(bb) says nothing about government, government control, or the implementation of government policies. It is not difficult to conceive, as I have foreshadowed, of many charitable bodies, the activities of which further government ends. The classic example is a body which does good works for the relief of poverty. A major aim of all well-intentioned governments is the elimination or reduction of poverty. In argument, the respondent accepted that to be so but submitted that the facts have shown more, that the Commonwealth controlled the activities of the appellant. The submission went so far as to contend that the appellant was the puppet of the Commonwealth. The argument continued that the appellant was not a charitable body because, by reason of the Commonwealth's "control", it did not bear the hallmark of all charities: subjection to control by the Supreme Court at the suit of the Attorney-General for the State of Victoria.
I disagree. There is no real possibility of a conflict between the appellant, the Commonwealth and the Attorney-General, leading to an application to any court by the Attorney-General, either personally or in a relator action. This is so because the appellant's objects are all truly charitable. They are also objects which either further or even implement government policy, and none of the appellant properly advised, the Commonwealth or the Attorney-General for Victoria, would have any interest in anything other than the proper pursuit of those objects. Both the Commonwealth and the Attorney-General would also have exactly the same interest in the proper application of the funds, however derived, of and by the appellant, to the charitable objects for which the appellant was established. The Attorney-General would not in any event be precluded from applying to the court if concerned about any misapplication or, if the Attorney wished, to ensure the proper application, of the appellant's funds however derived.
Three cases upon which the respondent sought to rely are readily distinguishable even if everything that was said and held in them should be accepted (something which is unnecessary to decide here but about which there may be some doubt in view of the passages from Bathurst City Council that I have cited). First, in each of Metropolitan Fire Brigades Board v Commissioner of Taxation[164], Mines Rescue Board (NSW) v Commissioner of Taxation[165] and Ambulance Service of New South Wales v Commissioner of Taxation[166], the appellant sought to be classified as a "public benevolent institution" within the meaning of the Fringe Benefits Tax Assessment Act 1986 (Cth), not as a charitable body within the meaning of the general law. Secondly, unlike the appellant here, the relevant body in each was established by statute and owed its whole existence to that statute. In Metropolitan Fire Brigades Board, it was expressly held that the Board was an emanation of government[167]. In Mines Rescue Board, the Board was held to represent the State[168], and in Ambulance Service, it was held that when proper regard was had to the constitution, funding and functions of the Service, it was sufficiently governmental in character as to fall outside the meaning of the statutory phrase "public benevolent institution"[169]. On no view does the appellant answer any of the descriptions applied to the appellants in those cases. Each was obliged by statute or regulation to expend money under the ultimate supervision of the Minister to whom it was answerable. Accordingly, in those cases it was not difficult to conclude that the government could be said to have effectively assumed responsibility for what the appellants there did.
The appellant in this case was entirely voluntarily established. It is not, and has never been, part of a government department. It does not owe its existence to a statute. It is quite separate from government. It is a matter entirely for it whether it seeks government funds or subsidisation.
The respondent sought to rely on a principle that clear words are required before an obligation on the part of the Crown, or a servant or agent of the Crown will be treated as a trust according to ordinary principles, even if the obligation could be described as a fiduciary obligation: absent the clearest of words, the obligation will be characterised as a government or political obligation. Kinloch v Secretary of State for India[170], Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation[171] and Bathurst City Council[172] were relied upon in an attempt to make good that proposition. The submission continued that, by analogy with the reasoning underlying the exclusion of trusts for political purposes from the category of charities, a court could not adjudge whether the implementation of a particular government policy or particular work of government is for the benefit of the community or a section thereof. Roman Catholic Archbishop of Melbourne v Lawlor[173] and Royal North Shore Hospital of Sydney v Attorney-General (NSW)[174] were cited in support of the argument.
Both the analogy and the reliance are inapt. In Roman Catholic Archbishop of Melbourne, Dixon J was referring to truly political objects, that is to say, controversial subjects although they may have had, for example, a religious connexion, such as to secularise education. Activities of that kind cannot be charitable because "the Court has no means of judging whether a proposed change in the law will or will not be for the public benefit, and therefore cannot say that a gift to secure the change is a charitable gift"[175]. His Honour's observations there, and in Royal North Shore Hospital, have nothing to say about a case in which, as here, the objects can be seen to be undeniably charitable. No occasion arises for any assessment of any coincident governmental or political policy.
That the Commonwealth, by the Department, controls the appellant and its activities is a misconception. The respondent seeks to make much of cl 2.3 of the agreement between the appellant and the Commonwealth requiring the former to comply with requirements "regarding identified Outcomes for Outcomes-Based Funding as specified ...". Charitable bodies, within the course of their activities, no doubt enter into many contracts under which obligations are imposed upon them, or they assume them. The fact that those obligations are, by contract, enforceable against them, by no means has the consequence that in respect of those particular obligations, they are under the control of another contracting party or parties. It is a matter for the charitable body in question, as here, to decide whether it wishes to enter into a particular contract.
I would therefore reject the respondent's contention that the primary judge and the majority of the Court of Appeal were correct in concluding that, under the OBF agreement, or otherwise, the appellant acted to further the purposes of government "rather than to implement its own [charitable] purposes". The fact that the purposes of government are coincident with the undoubtedly charitable purposes of the appellant does not mean that the appellant cannot qualify for exemption under the Act. The appellant does not lose the status to which it may be entitled because it does not have, or seek to implement, any purposes different from those of the government in relation to health care. If the respondent's contention and the holdings in the courts below were correct, the result would be that whenever the government had a purpose, which if it were pursued by any non-government body would be charitable, and it funded some other body which happened to have the same purposes, and no others, that other body could never be regarded as a charitable body. As I have already said, many of governments' policies, particularly in modern times, are directed to what would undoubtedly be charitable purposes if they were undertaken by non-government bodies.
It follows that the appeal should be allowed with costs. I would join in the orders proposed in the joint judgment.

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