Grain Growers Limited v Chief Commissioner of State Revenue

Court of Appeal (NSW)|2016-05-11|Before: Bathurst CJ, Beazley P, Leeming JA

ncil [2016] NSWCA 257 Lansell House Pty Ltd v Federal Commissioner of Taxation (2011) 190 FCR 354; [2011] FCAFC 6 Ngurratjuta Pmara/Ntjarra Aboriginal Corporation v Commissioner for Taxes (2000) 44 ATR 217; [2000] NTSC 25 Nowegijick v The Queen (1983) 144 DLR (3d) 193 Rail Corporation New South Wales v Brown (2012) 82 NSWLR 318; [2012] NSWCA 296 Simpson v Stratton (1970) 125 CLR 138; [1970] HCA 45 Smith v Federal Commissioner of Taxation (1987) 164 CLR 513; [1987] HCA 48 The Queen v Khazaal (2012) 246 CLR 601; [2012] HCA 26 Vancouver Society of Immigrant and Visible Minority Women v Minister of National Register [1999] 1 SCR 10 Texts Cited: GE Dal Pont's Law of Charity (2010, LexisNexis Butterworths) P Herzfeld, T Prince and S Tully, Interpretation and Use of Legal Sources (2013, Thomson Reuters) Category: Principal judgment Parties: Grain Growers Limited (Appellant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel: J Batrouney QC and J Gatland (Appellant) R L Seiden SC and S Kaur-Bains (Respondent)

Solicitors: PricewaterhouseCoopers (Appellant) Crown Solicitor's Office (Respondent) File Number(s): 2015/234440 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Division Citation: Grain Growers Limited v Chief Commissioner of State Revenue [2015] NSWSC 925 Date of Decision: 14 July 2015 Before: Black J File Number(s): 2014/305291

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

[This headnote is not to be read as part of the judgment] The appellant commenced proceedings seeking review of the decision of the respondent to disallow the appellant's application for a payroll tax exemption and refund of payroll tax for the 2009-2013 financial years pursuant to the Payroll Tax Act 2007 (NSW), s 48. That section provides, relevantly: "48 Non-profit organisations (1) Subject to subsection (2), wages are exempt wages if they are paid or payable by any of the following: … (c) a non-profit organisation having as its sole or dominant purpose a charitable, benevolent, philanthropic or patriotic purpose (but not including a school, an educational institution, an educational company or an instrumentality of the State). (2) The wages must be paid or payable: (a) for work of a kind ordinarily performed in connection with the religious, charitable, benevolent, philanthropic or patriotic purposes of the institution or body, and (b) to a person engaged exclusively in that kind of work." The primary judge held that the appellant had a charitable purpose, namely the advancement of the grain industry. The primary judge rejected the claim for exemption from payroll tax in respect of wages paid to employees engaged in information, technical and analytical services. Prior to July 2011 these services had been conducted by separate entities. In July 2011 these services were fully integrated into the appellant's operations. The primary judge held that wages paid to these employees were not exempt from payroll tax on the grounds that the work they undertook was not "work of a kind ordinarily performed" in connection with the appellant's charitable purpose. The issue that arose for determination on the appeal was the proper construction of s 48(2).

Held:

The appropriate starting point and end point in any question of statutory construction is the text of the provision. [108] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55.
The language of subs (2) directs attention not to work of the particular institution but to "work of a kind ordinarily performed in connection with the charitable purposes of the [taxpayer] institution". The expression "work of a kind" indicates work which is like or similar to work which, relevantly, is "ordinarily performed in connection with the … charitable ... purposes of the institution". [115]
The words "of a kind" have been construed as denoting a "genus, class or description" in the context of goods and services tax legislation. [116]-[119] Lansell House Pty Ltd v Federal Commissioner of Taxation (2011) 190 FCR 354; [2011] FCAFC 6; Commonwealth v Spaul (1987) 16 FCR 292; Cascade Brewery Company Pty Ltd v Federal Commissioner of Taxation (2006) 153 FCR 11; [2006] FCA 821; Deputy Commissioner of Taxation v Hygienic Lily (1987) 13 FCR 396.
The phrase "work of a kind ordinarily performed" must be construed within the context of s 48(2) itself. [119]
When construing the words "in connection with" it is necessary to identify, from the terms of the relevant provision, what there is to be connection with. [123] Hoy v Coffs Harbour City Council [2016] NSWCA 257
For a non-profit organisation to be entitled to an exemption from liability for payroll tax, it has to establish that the wages must be paid or payable for work of a kind that is like or similar to that which is ordinarily, that is, regularly or commonly or customarily, performed in connection with the charitable purposes of the organisation. [126]

Judgment

BATHURST CJ: I have had the advantage of reading the judgment of Beazley P. I agree with the orders proposed by her Honour and with her Honour's reasons.
BEAZLEY P: By summons filed on 17 October 2014, the appellant, Grain Growers Limited, commenced proceedings in the Supreme Court seeking review of the decision of the respondent, the Chief Commissioner of State Revenue, to disallow the appellant's application for a payroll tax exemption and refund of payroll tax for the 2009-2013 financial years pursuant to the Payroll Tax Act 2007 (NSW), s 48.
Black J granted the appellant the relief sought in relation to the 2009, 2010 and 2011 financial years, and held the appellant was entitled to a partial exemption and refund in relation to the 2012 and 2013 financial years: Grain Growers Limited v Chief Commissioner of State Revenue [2015] NSWSC 925.
The appellant appeals against that part of his Honour's judgment that relates to the 2012 and 2013 financial years, insofar as his Honour held that the exemption was not available in those years in respect of certain employees engaged in the appellant's information services, technical services and analytical services. Those services had become fully integrated into the appellant's operations in July 2011, subsequent to the appellant's acquisition of BRI Australia Pty Ltd (BRI) and Agrecon Operations Pty Ltd (Agrecon). The amounts of payroll tax in issue exceeded $100,000, so that the appeal lies as of right.

The relevant legislation

It is convenient at the outset to set out the terms of the relevant legislation. The Payroll Tax Act, s 48 provided to specified non-profit organisations, of which the appellant was one, an exemption from the liability to pay payroll tax. Insofar as it is relevant to this case, s 48 provided: "48 Non-profit organisations (1) Subject to subsection (2), wages are exempt wages if they are paid or payable by any of the following: … (c) a non-profit organisation having as its sole or dominant purpose a charitable, benevolent, philanthropic or patriotic purpose (but not including a school, an educational institution, an educational company or an instrumentality of the State). (2) The wages must be paid or payable: (a) for work of a kind ordinarily performed in connection with the religious, charitable, benevolent, philanthropic or patriotic purposes of the institution or body, and (b) to a person engaged exclusively in that kind of work."
Prior to 1 July 2008, when amendments under the State Revenue Legislation Amendment Act 2008 (NSW) came into operation, s 48(1)(c) referred to a non-profit organisation having "wholly" charitable purposes. Insofar as it is relevant to this case, s 48 as originally enacted provided: "48 Non-profit organisations (1) Subject to subsection (2), wages are exempt wages if they are paid or payable by any of the following: … (c) a non-profit organisation having wholly charitable, benevolent, philanthropic or patriotic purposes …"
Section 48(2) has at all times remained in the same terms.

Factual background

The appellant is a company limited by guarantee. The appellant's origins are to be found in the Premium Wheat Growers Association (the Association), established in 1958. In 1992, the Association acquired wheat storage and handling facilities from the NSW Government. Those facilities were subsequently transferred to a commercial entity, GrainCorp, in which the Association had significant shareholdings.
The appellant was established in 2000 as a result of a merger between the Association and Victorian Grain Services. That merger took place in connection with a merger between GrainCorp and a Victorian grain handler.
Subsequently, in 2001, the appellant received a substantial payment in relation to the cancellation of certain of its shares in GrainCorp.
On 1 October 2002, the appellant was recognised as a charitable institution for the purposes of the Income Tax Assessment Act 1997 (Cth), subdiv 50-B.
In 2003, the appellant accepted new members in Queensland following a merger between GrainCorp and a Queensland bulk handler
On 31 December 2008, the appellant acquired BRI and, in 2009, acquired Agrecon. In 2011, the assets, liabilities and staff of Agrecon and BRI were transferred to the appellant and the appellant sold its remaining shares in GrainCorp for a substantial sum.
At the date of acquisition by the appellant, BRI was an independent research company providing laboratory services, technical and advisory services, consultancy and training to the food industry. Agrecon conducted a business of providing satellite imaging, and advisory and consultancy services, to the agricultural sector.
At the time of acquisition of Agrecon, the appellant's internal discussion paper dated December 2008 indicated that the acquisition provided the appellant with: "… a unique opportunity to position itself as an independent 'in market place' with a tangible grains based service offering and value proposition to Grain Growers' processors, consumers and exporters both domestic and off-shore."
This was similar to the content of the internal discussion paper in relation to the acquisition of BRI.
As mentioned above, on 1 July 2011, the staff, assets and liabilities of BRI and Agrecon were transferred to the appellant. BRI and Agrecon remained as dormant corporate entities which owed inter-company loans to the appellant. After the transfers, the appellant's activities comprised seven components: corporate services, grower development, industry development, business development, information services, technical services and analytical services.
In August 2013, the appellant applied to the respondent for an exemption from payroll tax and a refund of the tax paid for the 2009 to 2013 financial years. The appellant, in a letter from its accounting advisers to the Chief Commissioner, identified that the application was made on the basis that the appellant was a non-profit organisation with a charitable purpose as its activities met the requirements of the "public benefit" head of charity at common law.
On 22 January 2014, the Chief Commissioner rejected the application. By his notice of disallowance, the Chief Commissioner accepted that the appellant was a non-profit organisation, but rejected that the appellant had a charitable purpose. Rather, according to the Chief Commissioner, the appellant's purposes "are primarily for the benefit of its members, and as such it cannot be said to have charitable purposes". The Chief Commissioner also stated that the appellant's objects lacked public utility and any public benefit was too remote from its overall purpose.
By notice of objection dated 19 March 2014, the appellant objected to the respondent's decision, taking issue with the views expressed by the respondent. By letter dated 18 August 2014, the Chief Commissioner informed the appellant that its objection was disallowed on the basis that the appellant's objects and activities were primarily for the benefit of its members and lacked a public benefit and charitable intent.
By summons filed on 17 October 2014, the appellant sought review of the Chief Commissioner's decision to disallow its claim pursuant to the Taxation Administration Act 1997 (NSW), s 97. Two challenges were raised in the summons: first, that the Chief Commissioner erred in failing to allow the exemption, as the appellant was a non-profit organisation having as its sole or dominant purpose a charitable purpose within the meaning of s 48(1)(c) of the Act; and secondly, that the Chief Commissioner had made certain factual errors in coming to its determination.

The decision below

The primary judge found, at [43], that the objects stated in the appellant's constitution indicated that the appellant had as its dominant purpose the promotion and development of Australian agricultural resources, with particular reference to the grain industry in Australia.
His Honour recorded, at [44], that the appellant identified its activities as falling broadly into four groups: 1. Policy and advocacy-related activities directed towards advancing the interests of the agricultural industry, particularly the grain industry, within Australia, including the making of submissions to government and the development of policies; 2. Development and distribution of products, services and projects for a fee to its members and to non-members directed towards benefitting the Australian agricultural industry, particularly the grain industry. These services are provided for a fee to members and the public, with no differential pricing for non-members; 3. The production of publications, information and resources, including research in scientific testing results, for a fee to its members and to non-members; 4. The arrangement of a range of educational, training and professional activities including hosting meetings, arranging seminars and facilitating tutorials directed at benefiting the agricultural and grain industry in Australia and providing occupation-specific training courses in the food production industry.
It is convenient to note at this point that the Chief Commissioner accepted that the appellant's activities of grower development, industry development and possibly business development involved an 'industry'. The term "'industry good' functions" was used by Grain Growers to identify "[a] service or function that did not directly generate commercial returns for specific individuals but provides benefits for the whole industry". This acceptance would mean that the first and fourth of these categories fell within that term. The activities recorded in the second and third categories were activities previously undertaken by BRI and Agrecon.
The primary judge, from [41]ff, examined the evidence relating to the appellant's objects as set out in its constitution, including its amended constitution; its annual reports from 2008-2012; its strategic plan for 2009-2013; the evidence of Mr Eastburn; and the evidence of Ms Garden, the appellant's chief executive.
His Honour, at [48], referred to the evidence of Mr Eastburn, a director of the appellant and its chairman from February 2008 to August 2014, that following the disbandment of the Australian Wheat Board, the appellant had sought to fill the gap in the industry good functions that had previously been conducted by AWB, by promoting Australian wheat overseas. His Honour described Mr Eastburn's evidence as focussing on the benefit of the appellant's activities for grain growers, rather than any wider focus on the agricultural industry or other sectors of the grain industry, such as grain traders.
The primary judge found, at [69], that "the businesses conducted through BRI and Agrecon are conducted for Grain Growers' wider purposes". This finding was in response to the issue, articulated by his Honour at [49], as to whether the appellant's activities were "directed to the dominant purposes of benefitting its members rather than for the promotion of agriculture [or] any wider charitable purpose".
His Honour, at [70], accepted that the businesses of BRI and Agrecon that had been acquired by the appellant were not generating, and were possibly not being operated so as to seek to generate, profits to support the appellant's "'industry good' functions". His Honour considered that that did not deprive the operation of those businesses, or the appellant's wider activities, of a wider charitable purpose of the advancement of agriculture, including the advancement of the grain industry, which was served by those businesses.
His Honour found, at [73], that the evidence established that the appellant's business services activities, that is, those provided by BRI and Agrecon, were conducted in order to advance its larger charitable purpose, and were not to be treated as non-charitable merely because they had a commercial character.
His Honour concluded, at [75], that the appellant's purpose in conducting its affairs and the businesses of BRI and Agrecon in particular, was that of advancing at least the Australian grain industry, and the Australian agricultural industry insofar as the grain industry formed a subset of that industry, and thus had a charitable purpose. His Honour was satisfied, therefore, that the requirements of s 48(1) of the Payroll Tax Act were satisfied in respect of the appellant's activities in the relevant years.
That left the question of whether the requirements of s 48(2) were satisfied, namely, whether the wages in respect of which exemption from payroll tax was claimed were paid or payable "for work of a kind ordinarily performed in connection with the … charitable purposes" of the appellant and "to a person engaged exclusively in that kind of work".
The relevant employees to whom this question was directed were the employees within the successor business units to BRI and Agrecon in the appellant's organisation and the administrative and management staff who were ancillary to those business units from 1 July 2011 when the staff, assets and liabilities of the two entities were transferred to the appellant. Prior to 1 July 2011, those employees had been employed directly by the separate corporate entities BRI and Agrecon, who in turn had paid payroll tax in the relevant years.
His Honour considered, at [87], that the relevant test for the purposes of s 48(2) required: "… an assessment whether the work is of a kind 'ordinarily performed' in connection with the relevant charitable purpose of the particular body, in this case the advancement of agriculture or at least of grain growing."
His Honour referred to the Shorter Oxford English Dictionary meaning of "ordinarily" as bearing the meaning of "usual", "a common occurrence", "frequently" or "customary" and to the meaning given to the word in Federal Commissioner of Taxation v Chubb Australia Ltd (1995) 56 FCR 557 at 570 as meaning "commonly".
His Honour then re-stated the test in s 48(2) as requiring: "… an assessment of whether the particular activities of the relevant body are such that bodies with the same charitable purpose ordinarily, or in other words regularly, commonly or customarily, perform them."
His Honour considered that the statutory test involved having regard to: "… the circumstances of the particular body, since whether the relevant connection exists is to be determined having regard to that body's purpose."
His Honour added: "However, it does not seem to me that it can be established that an activity is 'ordinarily performed' in connection with a charitable purpose of the advancement of agriculture merely by the fact that the particular body performs it, even if it does so on a regular basis. The phrase 'ordinarily performed' would otherwise be deprived of any real application, if activities uniquely performed by the particular body - for example, the conduct of a funeral business as in Word Investments - could be treated as satisfying that requirement merely because a particular entity performed them to support its charitable purpose, where other bodies with the same purpose did not ordinarily do so."
His Honour, at [88], rejected the Chief Commissioner's submission that the words "ordinarily performed" meant work that was "intrinsically charitable" and provided examples where the exemption would apply notwithstanding that the work performed by employees in an organisation whose business was carried on for a charitable purpose was not "intrinsically charitable". His Honour explained his reasoning as follows: "For example, a funeral business, or a car dealership or plumbing business or any other kind of profit-making enterprise, might be conducted for a charitable purpose, if the intent of those conducting it were to apply its profits to support the charitable purpose. However, the persons working in the funeral business or car dealership or plumbing business would not, without more, perform work of a kind ordinarily performed in connection with the charitable purpose of the body supported by those profits and their wages would not be exempt from payroll tax, unless it were established that bodies with such a purpose ordinarily performed such activities."
His Honour found, at [88], that the work of BRI and Agrecon had "a real connection with agriculture generally and the grain industry specifically". That being so, his Honour considered that this case was "more finely balanced" than the examples he had given.
His Honour found, at [90], that it had not been established as a matter of evidence or inference, there being an absence of a specific evidentiary basis, that grain research or the provision of consulting services using satellite imaging were work of a kind "ordinarily performed" in connection with a charitable purpose of the advancement of agriculture. In this regard, his Honour observed that the fact that the appellant itself conducted those activities did not establish that they were ordinarily performed for the purpose of the advancement of agriculture, "since its interest in those fields may be idiosyncratic or a product of its particular circumstances".
His Honour pointed out, at [90], that the appellant had not led evidence: "… of any substance that research into bread or grain or the provision of consulting services using satellite imaging are ordinarily performed by charitable bodies that have the purpose of promoting agriculture, by contrast with, for example, educational activities that may well be ordinarily performed by such bodies."
His Honour noted that there was "scattered" reference to "activities undertaken by United States governmental and trade bodies" but that those references fell: "… well short of establishing any 'ordinary' practice among bodies directed to the advancement of agriculture or undertaking the kind of activities undertaken by BRI or Agrecon."
His Honour found, at [90], that the business rationale for the appellant's acquisition of those businesses did not suggest that they were required because their services were: "… 'ordinarily performed' by comparable bodies to [the appellant] or other bodies directed to the advancement of agriculture, as distinct from being desirably performed by [the appellant] in its particular circumstances."
His Honour concluded, at [91], that the appellant had not established, on the evidence, that wages paid or payable to its employees working in the successor functions to the BRI and Agrecon entities were paid or payable for work of a kind "ordinarily performed" in connection with the relevant charitable purposes of the appellant. That was so whether the charitable purposes were characterised as the advancement of agriculture or the advancement of the grain growing industry.
His Honour, at [92], held that the exemption was not available for the wages of the appellant's executive and administrative staff who were partly engaged in performing work that was necessary for charitable work but not exclusively engaged in work of a kind ordinarily performed in connection with the appellant's charitable purposes.

Issues on the appeal

The following issues were raised on the appeal: (1) whether the wages paid by the appellant to the employees of the successor business units to BRI and Agrecon from 1 July 2011 and to the administrative and management staff ancillary to those business units were exempt wages: grounds 1-3 of the notice of appeal; (2) what wages are properly excluded by the limitation in s 48(2): ground 4; (3) whether his Honour erred in failing to find that all the wages paid by the appellant were exempt having regard to his findings, at [73], that the appellant's business service activities were conducted in order to advance its larger charitable purpose, and that its purpose in conducting its affairs had a charitable character: ground 5.
The principal issue on the appeal was that raised by grounds 1-3. The determination of that issue turns upon the proper construction of s 48(2) (Orange 64 para (1)). If that issue is answered adversely to the appellant, it will be unnecessary to determine the second and third issues. Ground 6 of the appeal was abandoned in the course of the hearing of the appeal. That ground had raised the question whether the appellant was denied procedural fairness, in construing s 48(2) in terms that had not been the subject of submissions and had not been raised by his Honour as a possible construction of the provision.

Appellant's submissions

The appellant submitted that his Honour erred in two respects in his construction of s 48(2). First, the appellant contended that his Honour's construction of s 48(2) inappropriately imposed a form of normative requirement on charitable bodies as to what activities were suitable for the effectuation of a charitable purpose that was not suggested by the terms of the section. In this regard, the appellant particularly challenged his Honour's reasoning at [88], set out above at [38].
Secondly, the appellant contended that on his Honour's construction, a taxpayer would only be entitled to an exemption from liability to pay payroll tax if its charitable purpose was "mainstream". An entity which conducted an undertaking with a new or innovative charitable purpose would not be entitled to an exemption, as it would not be able to discharge the evidentiary burden that his Honour's construction gave rise to, as there would be no body against which the necessary comparison was to be made. The appellant contended that would be an absurd result.
The appellant further submitted that the effect of his Honour's construction of s 48(2) was that not only was it required to adduce evidence of the activities of all of its employees, a task to which it had attended, but was also required to adduce evidence of what comparable bodies did to achieve the same charitable purpose.
The appellant also contended that his Honour's construction was problematic in that it would depend upon the scale of the activities of an organisation and the focus of what was the charitable purpose. The appellant submitted that its activities were so much larger than any of its potential comparable bodies that there was no yardstick that could be applied to ascertain what was, or what was not, an "ordinary activity" of such an organisation.
The appellant further submitted that its activities in providing industry services were unique and that there were no other bodies about which evidence could be adduced of what was "ordinarily performed" in the pursuit of the charitable purpose of the advancement of agriculture and, in particular, the advancement of the grain industry.
In short, the appellant said that, as the evidence established, it "has no peers".
The appellant contended that on his Honour's construction, the taxpayer respondent in Federal Commissioner of Taxation v Word Investments Ltd (2008) 236 CLR 204; [2008] HCA 55 would not be able to establish that its activities were charitable unless one could find some other missionary organisation that was running a funeral business.
The appellant also submitted that it was meaningless to seek to determine what work "is ordinarily done to advance a purpose of the advancement of agriculture" in circumstances where the field of agriculture was diverse. The appellant proffered, by way of example, activities as diverse as a cottage truffle business through to a vast sheep station. The appellant submitted that it was not possible to assess "what would ordinarily be done" to promote one type of agricultural venture by reference to another type of agricultural venture.
The appellant also submitted that it was difficult to reconcile his Honour's findings at [69]-[70] in relation to the activities of BRI and Agrecon, with his findings in relation to lack of evidence as to how those activities were connected to the apparent charitable purpose. The appellant further submitted that when regard was had to what the appellant did before the integration of the businesses of BRI and Agrecon in 2011, and what it did afterwards, the activities remained the same. In this regard, it was submitted that it was necessary to look at the substance of an organisation rather than merely to have regard to its structure: Federal Commissioner of Taxation v The Hunger Project Australia (2014) 221 FCR 302; [2014] FCAFC 69 at [63].
Finally, the appellant submitted that the sales tax cases upon which his Honour relied and the additional cases to which the respondent referred in his submissions were inappropriate for the purposes of the proper construction of s 48(2). Those cases were: Federal Commissioner of Taxation v Chubb Australia Ltd per Burchett J at 491; Diethelm Manufacturing Pty Ltd v Federal Commissioner of Taxation (1993) 44 FCR 450; [1993] FCA 606 at 470; Deputy Commissioner of Taxation v Hygienic Lily Ltd (1987) 13 FCR 396.
The appellant submitted that the question in the sales tax cases was "whether goods are of a kind ordinarily used for a particular purpose", which was not the question here, that is, the question was not "whether work is of a kind ordinarily performed for agricultural charitable purposes". Rather, according to the appellant, properly construed, s 48(2) was to be read (the words in bold being inserted into the section on the appellant's approach), such that the wages must be paid or payable for work of a kind "ordinarily performed by the [taxpayer] in connection with [the] … charitable … purposes of the [taxpayer]".
In other words, the phrase "ordinarily performed in connection with the … charitable … purposes of the institution" meant how the taxpayer ordinarily carried out its charitable purpose. The appellant submitted that this construction was supported by the fact that s 48 was dealing with wages paid by the taxpayer to the taxpayer's employees, for work ordinarily performed in connection with the charitable purposes of the taxpayer, not some different entity.
Consonant with that construction, the appellant rejected his Honour's construction that s 48 required a taxpayer who was seeking exemption to establish that the work in respect of which wages were paid was work that was ordinarily performed in connection with the advancement, in this case, of agriculture.
The appellant's submissions stated in various ways the appellant's central argument that, given that particular activities of the taxpayer might be idiosyncratic, such as, in this case, the provision of testing and imaging services, the enquiry mandated by s 48(2) was in respect of the "usual work of the institution" or "charitable work of the body" (appellant's emphasis) that was pursuing the idiosyncratic activity in furtherance of its charitable purpose, rather than by reference to a standard or common activity, such as the advancement of agriculture, which may or may not be an appropriate yardstick to apply to that institution. In a similar vein, the appellant advanced an argument that his Honour's test failed to take into account the variability in scale of charitable organisations.
The appellant advanced the following reasons why the construction it advanced was the preferred and proper construction of the provision.
First, the appellant contended that on the plain words of the section it was envisaged that a non-profit entity might be exempt from liability to payroll tax notwithstanding that it had non-charitable, non-dominant purposes. It was submitted that subs (2) operated so as to carve out work that was performed in the entity's non-charitable, non-dominant activities.
Secondly, the appellant submitted that the construction for which it contended was aided by the legislative history of the provision.
Thirdly, the appellant pointed out that it carried on its activities in accordance with the Commissioner's published practice. This was a reference to a publication produced by the Office of State Revenue entitled "NSW Payroll Tax Exemptions". In particular, the appellant relied upon the publication as at June 2012, which stated: "Persons engaged directly in the primary work or in administrative or management work which is predominantly associated with the organisations charitable or similar work are accepted as being exclusively engaged in that work. Wages paid to persons working in a non-profit organisation that has wholly charitable purposes will be exempt even if those persons are engaged in commercial work of the organisation. However if a non-profit organisation has a charitable purpose but it is not wholly charitable, only the wages paid to the persons engaged exclusively in the organisation's charitable purpose, including commercial activities connected with the charitable purpose, are exempt from payroll tax."
The Office of State Revenue's June 2015 publication contained the same explanation, but had added to it the following additional paragraph: "Wages paid to persons who are partly or exclusively engaged in commercial activities which are not connected with the charitable purposes of the organisation are not exempt."
The appellant relied upon these publications, not as an aid to the construction of s 48(2) itself, but to demonstrate that its proposed construction was not absurd and to explain how the provision applied in practice.
Fourthly, the appellant relied upon a similar publication of the Victorian State Revenue Office, in respect of similar but stricter legislation, as an explanation of how a provision such as s 48(2) was intended to operate.
Finally, the appellant contended that the test proposed by the primary judge created an evidential burden that was impossible to meet. Further, and in any event, in response to the respondent's contention that the evidential burden identified by the primary judge was not uncommon, the appellant argued that in circumstances where the appellant had adduced uncontradicted evidence of its objectives, purposes and activities there was a basis for the primary judge to be satisfied that the test is s 48(2) was satisfied and that, in those circumstances, it was up to the respondent to adduce evidence to counter that position.

The respondent's submissions

The respondent submitted that his Honour was correct in the construction of the section, having regard to the text of the provision as well as its legislative history.
The respondent submitted that for the purposes of construing s 48, it was first necessary to identify the "charitable purpose" that was the sole or dominant purpose of the non-profit organisation for the purposes of s 48(1)(c). Otherwise, s 48(2) providing for exemption from tax for non-profit organisations, did not apply. It was then necessary to consider that identified charitable purpose for the purposes of s 48(2), to ascertain whether the wages paid or payable were exempt from payroll tax.
Section 48(2) applied in respect of wages paid or payable for work of a kind ordinarily performed in connection with the identified charitable purpose of the institution or body in question. In addition, wages must be paid or payable to a person engaged exclusively in "that kind of work". The respondent submitted that the phrases "work of a kind" and "that kind of work" were referrable to work performed by an entity other than the taxpayer. In other words, the test was "outward looking". The respondent contended that if the construction of s 48 for which the appellant contended was correct, the words "work of a kind ordinarily performed" in subs (2) had no work to do.
The respondent submitted that the expressions "work of a kind" and "ordinarily" were to be construed objectively and not by reference to the particular goods or matter or items subject of the determination. The respondent, in that regard, drew attention to the decision of the Full Court of the Federal Court in Federal Commissioner of Taxation v Chubb Australia in seeking to argue that: "… the test that we're looking at isn't about whether the activity is done for a particular purpose but it's whether it's work of a kind and the relevant connection that must be found is between the work of a kind ordinarily performed and the, as submitted, already identified charitable purpose."
The respondent referred to P Herzfeld, T Prince and S Tully, Interpretation and Use of Legal Sources (2013, Thomson Reuters) at [25.1.1480] in arguing that where two constructions are open, the construction which avoids surplusage is to be preferred.
The respondent further submitted that the publications of the Office of State Revenue and the Victorian State Revenue Office were no assistance to the Court. The respondent said that these materials were, firstly, not in evidence before the primary judge and, further, relied on Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 at 117 where Kitto J said "[n]o conduct on the part of the commissioner could operate as an estoppel against the operation of the Act". The respondent acknowledged, however, that his contention as to the construction of s 48(2) differed from that on the fact sheet.

Legislative history

As both parties contended that their respective cases were supported by the legislative history of s 48(2), it is convenient at the outset to consider the terms of the section as originally introduced and as amended.
Exemption from liability for payroll tax was first introduced into the Payroll Tax Act 1971 (NSW) by the Pay-roll Tax (Further Amendment) Act 1977 (NSW). At the time of its introduction the Treasurer, in the Second Reading Speech, adverted to publicity on income tax avoidance schemes involving charities. The Treasurer stated that this problem was sought to be overcome in relation to payroll tax by the inclusion of subs (2), which he said operated: "… only so as to exclude from wages liable to payroll tax under this Act wages which are paid or payable to employees in respect of time when they are engaged in charitable work within the charity, society, institution or statutory body."
The same point was made by the Vice President of the Executive Council in the Second Reading Speech in the Legislative Council.
The appellant places some reliance on the words "within the charity" in the passage above. However, the statement made in the Second Reading Speech echoed the words of the amended provision (then s 10) as introduced in 1977, which was in the following terms: "10. (1) Subject to subsection (2), the wages liable to pay-roll tax under this Act do not include wages paid or payable - … (j) by a charity … … (2) [Paragraph] (j) … only operate[s] so as to exclude from wages liable to pay-roll tax under this Act wages which are paid or payable to employees in respect of time when they are engaged in charitable work within the charity, society, institution or statutory body."
Section 10 was amended in 1979 so that the word "within" in subs (2) was replaced with the word "of". The Second Reading Speech in the Legislative Council in respect of that amendment also referred to the relevant mischief to which the amendment was directed as being tax avoidance. Reference was made to the known tax avoidance measures as follows: "This has been achieved by hiring out employees to a commercial enterprise in return for a fee. As the firm which has hired the services from the exempt institution is not an employer as defined in the Act, it is not liable for tax. Similarly, no tax is payable by the institution under the terms of the existing exemption." It was pointed out that under the legislation, the exemption was to be confined to: "Wages paid to persons engaged in the usual work of the exempt institution [Legislative Assembly]; … Wages paid to employees engaged in the normal work of the exempt body … [Legislative Council]" (emphasis added)
Two things are immediately apparent. First, the language of the Second Reading Speeches in 1977 echoed the words of the legislation as introduced in 1977. Secondly, the terms in which the exemption is couched in the 2007 Act (either as introduced and in the amended form relevant to these proceedings) are very different from the terms of the exemption in the 1971 Act, either as introduced in 1977 or as amended in 1979. Accordingly, no assistance is to be obtained from the Second Reading Speeches in respect of the 1971 Act.
Accordingly, the appellant's point that there is no suggestion in the Second Reading Speeches in respect of the previous legislation that the means by which the mischief was to be addressed was by subjecting the exempt body to any sort of comparison with some other charitable body, fails to grapple with the significant change in the terms of the legislation as introduced in 2007, whether that be in respect of s 48 as initially enacted, or in its amended form relevant to the exemption sought in this case.
The terms of s 48 of the 2007 Act as first introduced are set out above at [6]. The explanatory note to the 2007 Act stated, in respect of s 48(2), that: "Clause 48 provides an exemption for non-profit organisations. Wages are exempt from payroll tax if they are paid or payable by a religious institution or a public benevolent institution. In order to qualify for exemption, the wages must be paid or payable for work of a kind ordinarily performed in connection with the religious or public benevolent purposes of the institution, and to a person engaged exclusively in that kind of work. The clause also provides an exemption for wages paid or payable by a non-profit organisation that has wholly charitable, benevolent, philanthropic or patriotic purposes. The wages must be paid or payable for work of a kind ordinarily performed in connection with those purposes, and to a person engaged exclusively in that kind of work."
Section 48(1)(c) was amended in 2008 by the State Revenue Legislation Amendment Act 2008 (NSW), to take effect from 1 July 2008 so that the requirement that a non-profit organisation have a 'wholly charitable' purpose in order to qualify for the exemption was replaced with the provision in its present form, so that the exemption from liability to payroll tax was available, relevantly, to a non-profit organisation having as its sole or dominant purpose a charitable purpose. Sub-section (2) was not amended, so the requirement for wages to be paid "for work of a kind ordinarily performed in connection with the … charitable … purposes of the institution" remained.

The case law

In support of its construction, the appellant relied upon Ngurratjuta Pmara/Ntjarra Aboriginal Corporation v Commissioner for Taxes (2000) 44 ATR 217; [2000] NTSC 25; Commissioners of Inland Revenue v Yorkshire Agricultural Society [1928] 1 KB 611 and Federal Commissioner of Taxation v Word Investments Ltd (2007) 164 FCR 194; [2007] FCAFC 171.
In Ngurratjuta Pmara/Ntjarra Aboriginal Corporation v Commissioner for Taxes Riley J considered s 9 of the Pay-roll Tax Act (NT) which, at that time, provided: "Section 6 does not apply to wages paid or payable: - (a) by a religious or public benevolent institution, or by a public hospital, to a person during a period in respect of which the institution or hospital, as the case may be, satisfies the Commissioner that the person is exclusively engaged in the religious work, work of a public benevolent nature or work of the hospital of a kind ordinarily performed in connection with the conduct of public hospitals, as the case may be."
The appellant was an Aboriginal Corporation comprised of all communities and outstations deemed to be "affected" by oil and gas mining operations taking place in Central Australia. It received statutory royalties payable to affected communities and groups pursuant to the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth). All income received was directed to relieving the social and economic disadvantage of its members.
There was no dispute that the appellant was a public benevolent institution. The appellant had applied for an exemption for employees in two groups: 1. employees in the accounting and management area; and 2. employees in the Outstation Resource Centre Services Area, who were responsible "for tasks which are in the nature of direct provision of public benevolence".
The appellants placed particular emphasis on the remarks of Riley J at [35]: "Whether particular work is or is not work of a public benevolent kind will always be a matter of fact and degree. In each case the nature of the work must be considered. Is it benevolent by virtue of its own characteristics? Does it have a sufficiently close connection to the benevolent works of the institution to be, itself, classed as benevolent? In my opinion it would be placing too restrictive an interpretation on the requirement to insist that the work be benevolent when considered in isolation. The work must be considered in its context. The context may be sufficient to give the work its benevolent character. A person cleaning rooms in a private hotel will not normally be performing a benevolent activity. The same person doing the same work in an establishment classified as a public benevolent institution and providing assistance to the sick and needy will be performing a benevolent activity. That work is a necessary part of fulfilling the objectives of the institution."
Riley J went on to say at [36]: "Likewise … the person managing the funds of a public benevolent institution including its investment funds is performing work of a benevolent nature where, as here, those funds are to be used for the public benevolent purposes of the institution. That is an essential part of the operations of a public benevolent institution in the present day. The maintenance of proper accounting records and management procedures is a necessary part of receiving government and other grants. There will be statutory and regulatory obligations to be undertaken. The capacity of the institution to perform its benevolent work is dependent upon the proper management of the funds …"
At [37], his Honour noted that "the mere fact that a person is employed by a public benevolent institution does not mean the wages of that person are to be exempt under the legislation". As his Honour was, on the evidence before him, unable to make determinations in relation to individual employees, so he allowed the appeal and set aside the decision of the Commissioner with the matter to be returned to the Commissioner for determination according to law. Riley J made these observations about the employees: "39 In the circumstances of this matter those who manage the appellant, including its investment portfolio, and those who control the necessary record keeping and accounting records relating to the appellant are, to my mind, employees engaged in the principal activities of the appellant or, at least, work sufficiently incidental thereto and directed to achieving the goals of the appellant to be regarded as falling within the class of employees to whom an exemption should apply. Subject to considering whether there was some work of those engaged in 'accounts and management' that may not fit within that description the respondent ought to have been so satisfied. 40 However, a person providing services to persons or entities external to the appellant in areas which are not directly or incidentally related to the objects of the appellant but, rather, are exercises undertaken to create funds for the use of the appellant by providing commercial services for reward is not a person who is exclusively engaged in work of a public benevolent nature. This is so even if those services are provided at a fee less than that charged by commercial competitors. This is not a situation where the services for which a charge is rendered are otherwise benevolent activities of the institution as was the case in Commissioner of Pay-roll Tax (Vic) v Cairnmillar Institute [1992] 2 VR 706. However, in this regard, the respondent ought to have considered whether the 'commercial' services, or any of them, may have been in themselves benevolent or part of the benevolent activities of the appellant in the sense discussed above. He did not do so."
In Commissioners of Inland Revenue v Yorkshire Agricultural Society the King's Bench was called upon to determine whether the Yorkshire Agricultural Society was exempt from income tax pursuant to s 37(1)(b) of the Income Tax Act 1918. Lawrence LJ held, at 637-8, that: "The objects of the Society and the inducements in the shape of personal benefits held out to persons in order to procure their membership and to obtain their subscriptions are two entirely different things. It is a common thing for a charitable institution to offer all kinds of privileges and benefits which are in no sense charitable in order to obtain funds for the purpose of carrying out its objects. As an instance I might mention the giving of dinners, dances and theatrical entertainments, all of which entail an expenditure of money on non-charitable objects incurred for the purpose of obtaining funds … So here the fact that members obtain certain privileges in no way militates against the proposition that the purpose of the Society was a charitable purpose only."
The appellant relied on this passage to advance the following submission: "Our submission would be that the change from wholly to sole or dominant was a distinction without a difference, and it's surmised that it might well have been changed wholly to sole or dominant to send a message to the assessors at the Payroll Tax Office that it was in fact okay for entities to be entitled to these exemptions if they had other non-charitable purposes which were merely incidental or ancillary. That message would not be conveyed to an assessor if the words of the legislation referred to 'wholly charitable purposes'. The assessor could carve out some purpose of raising funds, and point to that as a separate purpose, as in fact was attempted to be done in Word Investments."
The appellant also placed reliance upon Simpson v Stratton (1970) 125 CLR 138; [1970] HCA 45 at 150 where Windeyer J said that the relevant question in the context of a number of case concerning charitable institutions had been "whether the non-charitable objects or purposes of a corporate body were independent of or ancillary to its charitable object or objects". The appellant also referred to GE Dal Pont's Law of Charity (2010, LexisNexis Butterworths) where it was said that "it follows that an association may be exclusively charitable in the face of incidental, subsidiary, collateral or subordinate non-charitable purposes".
The question before the Full Court of the Federal Court in Federal Commissioner of Taxation v Word Investments was whether the respondent institution fell within the definition of "charitable institution" for the purposes of s 50-5 of the Income Tax Assessment Act 1997 (Cth). Word Investments Ltd was founded to give money to an organisation that undertook missionary work and Bible translation activities.
The Commissioner argued that an entity that did not itself engage in significant charitable work but which conducted commercial activity, the profits of which it was compelled to distribute to a charitable institution or charitable institutions, should not be considered a charitable institution in and of itself.
The Full Court (Stone, Allsop and Jessup JJ) held that the fact an organisation undertakes commercial activities will not preclude it from being a charitable institution for the purposes of s 50-5. An appeal to the High Court was dismissed (Federal Commissioner of Taxation v Word Investments Ltd (2008) 236 CLR 204; [2008] HCA 55). The High Court (Gummow, Hayne, Heydon and Crennan JJ) at [37], rejected the Commissioner's argument, saying it "would not reflect credit on the law if the if the distinction implicit in the Commissioner's argument were sound".
The appellant relied on Federal Commissioner of Taxation v Word Investments to demonstrate that: "… the High Court said that there was no dichotomy between commercial activities and charitable activities where the commercial activities are conducted in order to further the charitable purposes."
The appellant also relied upon Vancouver Society of Immigrant and Visible Minority Women v Minister of National Register [1999] 1 SCR 10 at 108: "The difficulty is that the character of an activity is at best ambiguous; for example, writing a letter to solicit donations for a dance school might well be considered charitable, but the very same activity might lose its charitable character if the donations were to go to a group disseminating hate literature. In other words, it is really the purpose in furtherance of which an activity is carried out, and not the character of the activity itself, that determines whether or not it is of a charitable nature … Unfortunately, this distinction has often been blurred by judicial opinions which have used the terms 'purposes' and 'activities' almost interchangeably." (emphasis added)
This passage was cited with approval by Kirby J in Central Bayside General Practice Association Ltd v Commissioner of State Revenue (2006) 228 CLR 168; [2006] HCA 43 at 208-209 by the Full Federal Court and in Federal Commissioner of Taxation v Word Investments at [40].
As noted above, the respondent relied upon Federal Commissioner of Taxation v Chubb Australia in support of the argument that the construction for which they contended in respect of s 48 was "a perfectly ordinary usual test that courts are familiar with".
Federal Commissioner of Taxation v Chubb Australia concerned, inter alia, the question of whether freestanding safes fell within the "ordinarily used for household purposes" exemption pursuant to Item 1(a) of Sch 3 of the Sales Tax (Exemptions and Classifications) Act 1935 (Cth). Hill J, in discussing the application of the decision in Diethelm Manufacturing Pty Ltd v Federal Commissioner of Taxation, explained, at 568-9, that in order for certain items of office furniture to fall within the exemption for "furniture" "of a kind ordinarily used for household purposes" it would need to be demonstrated: firstly, that the item could be described as "furniture"; and secondly, that the item was "of a kind ordinarily used for household purposes". That is, the first question is the classification of the goods, or defining the genus of the goods. The second question is determination of whether the goods fall within the language of, in that case, Item 1(a).
In answering the latter question, Hill J observed, referring to his Honour's own judgment in Diethelm (with which Whitlam J agreed), that: "… the question to be determined was not whether the particular goods before the Court were ordinarily used for domestic purposes, but rather whether the goods themselves were of a particular kind ordinarily used for household purposes."
Referring to French J's separate judgment in that case, Hill J observed, at 569: "French J delivered a separate judgment emphasising the objective nature of classification and the need to find 'the essential character' of particular items. In his Honour's view, the essential character of the chairs in question was that they were office furniture, a characterisation which reflected the market in which the chairs were manufactured and sold and, accordingly, the chairs were not of a kind ordinarily used for household purposes."
Hill J (with whom Tamberlin J agreed) found that the freestanding safes fell within the exemption.
Hygienic Lily again concerned whether an item was "of a kind ordinarily used for household purposes". In that case, the goods in question were wax-coated paper cups. Gummow J considered, at 400, that: "In my view, the cups involved in this case, are of a kind ordinarily used for household purposes because they are members of a class or genus (paper cups) which commonly or regularly (albeit not necessarily exclusively or principally) is used for household purposes (viz the carrying of beverages and the consumption thereof). In my view, a purpose may be a household purpose even if not exclusively or principally pursued in situ a dwelling."
His Honour, before drawing this conclusion, observed that: "Item I may be compared with and contrasted to Item 8I(1)(c). This exempts 'goods for use … and not for sale, by ... a public benevolent institution.' Unlike Item I, it directs attention not to goods identified by the purposes for which goods of that kind are ordinarily used, but, more immediately, to the goods in question themselves, and to the identity or character of a particular user. Even so, in Deputy Commissioner of Taxation v Stewart (1984) 154 CLR 385, the High Court held certain machines to satisfy the description in Item 81(1)(c) notwithstanding that their inherent character was not that of goods designed for use by a public benevolent institution, and notwithstanding that they were not exclusively used by the particular public benevolent institutions to which they were supplied. The interpretation of Item 81 which led to this conclusion is consistent with, albeit not compelling the approach which I have taken to Item I in the Third Schedule."

Consideration

The essential issue before the Court is the proper construction of s 48(2). As with any question of statutory construction, the starting point and end point is with the text of the provision: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41. As the High Court stated in that case, at [47]: "This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy." (footnotes omitted) See also Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55 at [39].
In these circumstances, little assistance can be derived from decisions of courts considering different legislative provisions in a different context. It is the meaning of the text in question which must be considered.
For the reasons which follow, the construction for which the appellant contended is not the proper construction of the subsection.
There was no issue in respect of the construction of s 48(1), which requires, relevantly, the identification of a non-profit organisation having as its sole or dominant purpose a charitable purpose. There was no dispute, as found by the primary judge, that the appellant had a charitable purpose of advancing the Australian grain industry.
There was a dispute between the parties as to whether the primary judge found that the appellant had a solely charitable purpose or a dominant charitable purpose. The appellant contended that his Honour found that it had a solely charitable purpose but that, even if it did not, the work of the employees whose wages were in issue was still exempt work. The appellant also submitted, in its submissions in reply, that it did not follow from a finding that it had a dominant charitable purpose that there were other, non-dominant purposes. The respondent submitted that the Court "could not be satisfied that his Honour held that there had been a sole purpose".
At [43], the primary judge "accepted" that the evidence "indicate[d] a dominant purpose of the promotion and development of Australian agricultural resources". There is a reference at [78] to a "dominant charitable purpose". It is not clear from [75] whether the purpose referred to is "sole" or "dominant". Submissions in relation to mixed charitable and commercial purposes are referred to by the primary judge at [81]-[82], as is certain of the evidence adduced by the appellant. However, his Honour does not appear to make any finding in respect of those submissions.
In my opinion, the distinction is not of importance in the present context. The question for determination is whether the work of the employees of the enterprises that succeeded BRI and Agrecon is work which falls within s 48(2). That question does not turn upon the question whether the appellant has a sole or dominant charitable purpose but, rather, whether the work was work of a kind ordinarily performed in connection with the charitable purposes of the appellant. Section 48(2) requires that to be exempt, the wages paid by the non-profit organisation must be paid or payable: "… for work of a kind ordinarily performed in connection with the … charitable … purposes of the institution or body …"
Subject to one matter and further consideration of the appellant's submissions, the language of subs (2) directs attention not to work of the particular institution, but as the section states, to "work of a kind". The expression "work of a kind" would indicate that work which is like or similar to work which, relevantly, is "ordinarily performed in connection with the … charitable ... purposes of the institution", would fall within that phrase. In other words, precise identity or correspondence is not required.
The phrase "of a kind" has been the subject of judicial consideration in a number of cases in respect of the different legislative provisions of goods and services taxation legislation. Thus, the phrase "of a kind" was considered in Lansell House Pty Ltd v Federal Commissioner of Taxation (2011) 190 FCR 354; [2011] FCAFC 6. In that case, the Full Court of the Federal Court (Bennett, Edmonds and Nicholas JJ) said, at [30]: "… The phrase 'of a kind' has been defined by the Oxford English Dictionary (online edition, Oxford University Press, 2010) as 'of the same sort, not a typical or perfect specimen of the class'. The word 'kind' is appropriately used to denote a genus, class or description (Commonwealth of Australia v Spaul (1987) 74 ALR 513 at 516 per Davies, Lockhart and Neaves JJ) ... Thus, a new product that does not possess all of the same characteristics of known [products] may nevertheless be within the relevant item."
In Commonwealth v Spaul (1987) 16 FCR 292 the Full Court of the Federal Court considered, at 294, that "kind" was "appropriately used to denote a genus, class or description".
In Cascade Brewery Company Pty Ltd v Federal Commissioner of Taxation (2006) 153 FCR 11; [2006] FCA 821 Sundberg J, in the course of determining the meaning of the phrase "of a kind" in the context of whether a beverage was "of a kind marketed principally as food for infants", reviewed the authorities including Hygienic Lily, being one of the authorities upon which the Chief Commissioner relied in his submissions. In Hygienic Lily Gummow J, in relation to the question of whether waxed paper cups used by McDonald's Restaurants were "goods of a kind ordinarily used for household purposes", stated, at 399: "… the setting in which the phrase 'goods of a kind' appears suggests it is directed not to the use for which the particular goods in question were designed or manufactured, nor to the purpose to which it is intended those particular goods shall be put, but rather to the nature, quality and adaptation of goods in the class or genus in question. Thus, goods are 'of a kind ordinarily used for household purposes' if they are to be recognised as members of a class or genus which commonly or regularly (albeit not necessarily exclusively or principally) is used for household purposes; cf Customs and Excise Commissioners v Mechanical Services (Trailer Engineers) Ltd [1979] 1 WLR 305 at 312-313, 315, 316-317." (emphasis added)
It is not necessary to analyse the other authorities to which reference was made in Cascade Brewery Company v Federal Commissioner of Taxation, not only because to do so would be a replication of the task undertaken by his Honour, but more fundamentally because the phrase in question, "work of a kind ordinarily performed", must be construed within the context of s 48(2) itself. Nonetheless, these cases are consistent with the meaning I consider is to be given to the phrase "work of a kind" as I have expressed it above.
The primary judge, in his reasons, gave particular focus to the meaning of "ordinarily performed". In my opinion, on its plain meaning and as the primary judge pointed out, "ordinarily" bears the meaning of "regularly, commonly or customarily". No different meaning was suggested by the appellant, although the appellant submitted that his Honour's reliance on the sales tax cases was unhelpful, arising as they do in a different statutory context. Whilst that last submission is correct, as I have pointed out in the previous paragraph, the submission does not lead anywhere given the accepted meaning of the word "ordinarily". But in any event, the appellant's contention that the sales tax cases were unhelpful was a necessary concomitant to its submission that there were to be implied or parenthetically inserted the words "by it" after the phrase "ordinarily performed".
The appellant submitted that the phrase "in connection with" has a broad meaning. Examples may readily be found of decisions in which the potential width of those words has been stated. The appellant drew attention to the fact that in Smith v Federal Commissioner of Taxation (1987) 164 CLR 513; [1987] HCA 48 at 533, Toohey J quoted with approval the following observations of the Supreme Court of Canada in Nowegijick v The Queen (1983) 144 DLR (3d) 193 at 200: "The words 'in respect of' are, in my opinion, words of the widest possible scope. They import such meaning as 'in relation to', 'with reference to' or 'in connection with'. The phrase 'in respect of' is probably the widest of any expression intended to convey some connection between two related subject-matters."
In Hoy v Coffs Harbour City Council [2016] NSWCA 257, at [60], Bathurst CJ accepted the submission of the applicant that the words "in connection with" are of "wide import". Similarly, in Compagnie Francaise D'Assurance Pour le Commerce Exterieur v Sims Group Australia Holdings Ltd [2013] NSWCA 418 at [66], Ward JA referred to consensus between the parties that the words were of "wide import".
So much may be accepted, so long as it is borne in mind that the meaning of such "relational terms", as French CJ referred to phrases of this nature in The Queen v Khazaal (2012) 246 CLR 601; [2012] HCA 26 at [31], is highly dependent upon context. His Honour said that: "They are ambulatory words and may be designed to cover a variety of subjects and a variety of relationships between those subjects. The nature and breadth of the relationships they cover will depend upon their statutory context and purpose." Little assistance is gained in ascertaining the meaning of the particular provision at hand by relying upon the meaning that those words have been given in a different statutory context.
However, it is clear that when construing the phrase "in connection with", it is necessary to identify, from the terms of the relevant provision, what there is to be connection with. Thus, in Hoy v Coffs Harbour City Council, the Chief Justice did not accept that legal costs incurred in establishing an entitlement to have land compulsorily acquired fell within s 59(1)(a) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW), that section being directed to compensating persons for legal costs incurred in respect of an acquisition, not costs incurred prior to acquisition. In other words, the required connection was not established.
The next step in the statutory process is the reference to the charitable purposes of the institution, a task already undertaken in subs (1). In this case, the relevant charitable purpose was that found by his Honour, namely, advancing at least the Australian grain industry, and the Australian agricultural industry insofar as the grain industry formed a subset of that industry.
Accordingly, for a non-profit organisation to be entitled to an exemption from liability for payroll tax, it has to establish that the wages must be paid or payable for work of a kind that is like or similar to that which is ordinarily, that is, regularly or commonly or customarily, performed in connection with the charitable purposes of the organisation. This requires, as his Honour found at [87]: "… an assessment of whether the particular activities of the relevant body are such that bodies with the same charitable purpose ordinarily, or in other words regularly, commonly or customarily, perform them."
By contrast, the construction for which the appellant contended requires the implication or parenthetic insertion of the words "by the organisation" so that it reads: "… the wages must be paid or payable for work of a kind ordinarily performed [by it or by the organisation] in connection with the … charitable … purposes of the organisation."
Although the proper construction of a provision may require words to be implied or notionally inserted, it is usually necessary to establish the three pre-conditions outlined in Wentworth Securities Ltd v Jones [1980] AC 74 at 105-106, cited with approval in Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292. The second of those is that it must be apparent that the drafter and the Parliament "had by inadvertence overlooked, and so omitted to deal with, an eventuality that required to be dealt with if the purpose of the Act was to be achieved": see Rail Corporation New South Wales v Brown (2012) 82 NSWLR 318; [2012] NSWCA 296 at [43]. That condition has not been satisfied in this case. Rather, the appellant seeks the parenthetical insertion of the words so as to have the provision conform with the appellant's preferred construction. Not only have the preconditions for doing so not been satisfied, to do so would offend the established principles of statutory construction.
An argument raised against the construction of s 48(2) that I consider it bears is the proposition that where a non-profit organisation engages in some new or innovative charitable purpose, it is not possible to find "work of a kind ordinarily performed in connection with the … charitable … purposes of the organisation". The appellant argued that the exclusion of unique charitable undertakings from s 42(2) rendered the construction posited by the respondent "absurd". In response, the respondent accepted that if the appellant's activities were unique then they would not fall within the exemption, but argued that "there is no unfairness in such a result if that is what Parliament has legislated".
As the primary judge's reasons demonstrate in his consideration of s 48(1), the identification of a charitable purpose or purposes has a long history, predating the Elizabethan Statute of Charitable Uses. In Commissioners for Special Purposes of the Income Tax v Pemsel [1891] AC 531 the Court identified four categories of charitable purposes, namely: the relief of poverty; advancement of education; the advancement of religion and, relevantly, "for other purposes beneficial to the community, not falling under any of the preceding heads". It is difficult to conceive of anything so new or innovative that it would give rise to some different conceptual notion of charitable purpose.
It is quite a different thing to say, however, that an activity or operation is conducted in a new or innovative way. Whether in such a case it was able to be established that wages were paid or payable for "work of a kind ordinarily performed in connection with the … charitable … purposes of the institution" is a fact-dependent question and cannot be resolved in the abstract. However, because, as I have found, there does not have to be precise identity or correspondence between work of a kind ordinarily performed in relation to a charitable purpose and the work performed by the organisation in connection with its charitable purpose, s 48(2), in my view, contains within it the necessary flexibility to deal with new or innovative ways of carrying out a charitable purpose.

Conclusion

The order I propose is that the appeal should be dismissed with costs.
LEEMING JA: I agree with Beazley P.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 December 2016

Pay-roll Tax (Further Amendment) Act 1977(NSW)

Payroll Tax Act 1971(NSW)

State Revenue Legislation Amendment Act 2008(NSW)

Taxation Administration Act 1997(NSW)

At a glance

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Judgment (17 paragraphs)

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Legislation Cited (9)

Cases Cited (37)

Cited By (3)