Racing NSW v Chief Commissioner of State Revenue - [2019] NSWCATAD 172 - NSWCATAD 2019 case summary — Zoe

NSWNSWCATAD

Racing NSW v Chief Commissioner of State Revenue

[2019] NSWCATAD 172

NCAT Administrative and Equal Opportunity|2019-07-01|Before: Greig J

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Source facts

Court

NCAT Administrative and Equal Opportunity

Decision date

2019-07-01

Before

Greig J

Source

Original judgment source is linked above.

Judgment (37 paragraphs)

[1]

What is this matter about?

Racing New South Wales ("Racing NSW") was established under the Thoroughbred Racing Act 1996 (NSW) to be the regulating body for thoroughbred horse racing in New South Wales.
Under that Act the functions of Racing NSW include all the functions of the principal club for New South Wales and its committee under the Australian Rules of Racing, the control, supervision and regulation of horseracing in the State, the initiation, development and implementation of policies conducive to the promotion, strategic development and welfare of the horse racing industry and the protection of the public interest as it relates to that industry (section 13).
Under that Act Racing NSW also has power to do all things necessary or convenient to be done in connection with the exercise of its functions and to do things incidental or conducive to the exercise of its powers and the performance of its functions (ss 14 (1) and 14 (2) (w)).
It is accepted that the references in the Act to the "principal club for New South Wales" are to the Australian Jockey Club Limited ("the AJC"). For convenience of reference, the provisions of the Thoroughbred Racing Act relevant to this case are set out in the Appendix to these Reasons.
By a Trust Deed which was undated but which was apparently intended to have effect from 1 January 2011, Ken Arthur James Murray as Settlor, the AJC as Appointer and 4 named persons as Trustees established the Thoroughbred Horse Rehabilitation Trust. By a deed made in October 2011 the AJC (and Sydney Turf Club with which it had merged) retired as Appointer and Racing NSW became the Appointer. That trust has apparently been renamed "The Racing NSW Equine Welfare Trust" and appears to be referred to also as "the Equine Welfare Fund". In these Reasons my references to "the Trust" are to the Thoroughbred Horse Rehabilitation Trust, the Racing NSW Equine Welfare Fund Trust and the Equine Welfare Fund.
It seems to be accepted that the current principal activities of the Trust are those approved in the Trustees' report for the year ended 31 July 2017; namely to provide money, property and services for the care and rehabilitation of thoroughbred horses which have ceased to be competitive or have ceased to race and have been mistreated or are without owners or are at risk of being killed or mistreated.

[5]

Racing NSW's case

Racing NSW's case was eventually based on 5 separate grounds. These are summarised below.
Initially Racing NSW's case was put on two grounds set out in its Outline Submissions dated 1 November 2018. It contended that it should be allowed a complete or alternatively a partial exemption from duty because: 1. it is deemed by operation of s 275(3)(c) of the Duties Act to be an "exempt charitable or benevolent body" because it had entered the Capertee Agreements in its capacity as trustee for the Trust and the Trust was a "body corporate, society, institution or other organisation" referred to in paragraph 275(3)(b), because the Trust is of a charitable or benevolent nature and the dutiable transactions (the Capertee Agreements) were for purposes approved by the Chief Commissioner in accordance with guidelines approved by the Treasurer. For convenience of reference I shall refer to this ground as "the s 275 (3) (c) Ground" or "Ground 1"). 2. Alternatively, the Trust was an "exempt charitable or benevolent body" within the meaning of s 275A (7) and, by operation of section 275A the duty should be reduced by the portion of the dutiable value of the Capertee Land that is referable to the portion of that land which is used for an exempt purpose (that is, used for purposes approved by the Chief Commissioner in accordance with guidelines approved by the Treasurer). For convenience of reference I shall refer to this ground as "the Trust s 275A Ground" or "Ground 2".
Subsequently, in its written submissions lodged on 9 April 2019, Racing NSW advanced two further grounds. Each was pleaded as an alternative to the two grounds described above. The new grounds were as follows: 1. Racing NSW itself is an "exempt charitable or benevolent body" within s 275(1)(b), because it is a body corporate of a charitable or benevolent nature and the Capertee Agreements were for purposes approved by the Chief Commissioner in accordance with guidelines approved by the Treasurer. For convenience of reference I shall refer to this ground as "the Racing NSW s 275 (3) (b) Ground" or "Ground 3". 2. In the alternative, Racing NSW itself is a "charitable or benevolent body" within the meaning of s 275A (7) and, by operation of section 275A duty should be reduced by the portion of the dutiable value of the Capertee Land that is referable to the portion of that land which is used for an exempt purpose. For convenience of reference I shall refer to this ground as "the Racing NSW s 275A Ground" or "Ground 4".
Finally, in the course of legal argument at the hearing Racing NSW advanced a further alternative ground, to the following effect: 1. (5) Racing NSW itself is an "exempt charitable or benevolent body" within the meaning of s275 (3)(a) of the Duties Act. That is, it is a body corporate for the time being approved by the Chief Commissioner for the purposes of that paragraph whose resources are, in accordance with its rules or objects, used wholly or predominantly for the relief of poverty in Australia or the promotion of education in Australia. For convenience of reference I shall refer to this ground as "the s 275 (3) (a) Ground" or "Ground 5").

[11]

Racing NSW's case as to its "charitable or benevolent" nature"

Racing NSW's case on this issue appeared to have been made in two distinct stages.
Initially, for example in its first set of written submissions, it contended that it was a body of a body of a charitable nature on the basis of the work of the Trust, being principally functions relating to retired horse rehabilitation and the use of the Capertee Land to enable disadvantaged persons and armed services veterans to work with horses in retraining. Indeed the Tribunal was invited to consider the acts and intentions of Racing NSW and the Trust collectively, in order to decide whether Racing NSW was a body of a charitable or benevolent nature and it was contended that: "Racing NSW is for all intents and purposes acting as trustee for (the Trust) thereby satisfying the requirements of sub paragraph 275 (3) (c)." (Submissions, 1 November 2018 at [25c]).
It was also contended that the use of the Capertee Land by the Trust promoted education in the form of reskilling people to work with horses and assisted disabled people through a program of collaboration between the Trust, Riding for the Disabled and RSL LifeCare.
In the second stage, commencing with Racing NSW's subsequent written submissions and at the hearing, the basis on which it asserted its charitable or benevolent nature was expanded. I was asked to consider its activities as a whole (that is, not restricted to those activities undertaken in connection with the Trust).
Racing NSW's initial written submissions dated 1 November 2018 had confirmed that it was a statutory authority, constituted under the Thoroughbred Racing Act, responsible for the control, supervision and regulation of thoroughbred racing in New South Wales. However, in subsequent written submissions, for example those dated 8 April 2019 and 28 May 2019, it relied on the expenditure reports and associated financial information disclosed in its Annual Reports for 2017 and 2018 (which formed annexures to the affidavit of its Chief Operating Officer, Mr Hinton) and contended that they revealed the following matters significant to its claim to be a body of a charitable or benevolent nature. 1. Substantial funds generated through its activities had been devoted to ensuring the safety and welfare of participants in the racing industry and associated grants were used by Racing NSW in charitable and benevolent activities including the education of industry participants, support for current and former jockeys who were in financial difficulty and the establishment of related charitable funds, including the Trust. 2. It had dedicated significant financial resources to making sporting facilities available for public use (including those referred to at (3) below). It was asserted that this was a charitable object on the authority of the decision of Re Chapman (Unreported, High Court of New Zealand, 17 October 1989, Greig J.) and Prof GE Dal Pont, Law of Charity (second edition 2017) at [11.18]-[11.25] and the authorities cited there. 3. It was asserted that Racing NSW had raised a provision in 2012 of just over $98 million to be utilised in making capital improvements to thoroughbred racing club facilities and that a substantial proportion of those monies had been advanced by way of interest free interminable loan to the racing clubs and that those loans are an asset of Racing NSW. This was explained in Note 31 to the Accounts in the 2018 Annual Report and for convenience of reference I will refer to as "the Race Fields Funding Loans". 4. Furthermore, as explained at Note 32 to the 2018 Accounts, on 1 July 1998 the operations of the Racecourse Redevelopment Fund were transferred to Racing NSW, including the right to interminable loans from the AJC of over $43 million and from the former Sydney Turf Club for over $53.6 million. These interminable loans are repayable only on the sale of the properties which have benefited from the expenditure or in the event of the Company seeking to perform its current operations and on that basis these loans were treated for accounting purposes on the basis that they will never be recovered by Racing NSW. The arrangements referred to at (3) and (4) were said to demonstrate Racing NSW's commitment of over $150 million in assets by way of financial accommodation for the improvement of facilities for public use.
Racing NSW's case included contentions that as a result of some or all of the above initiatives: "(Racing NSW) is not a body that solely or primarily promotes a sport… It is a not-for-profit "organisation established by statute for charitable and benevolent public purposes" (Supplementary Submissions, 8 April 2019 at [3a]); and "..in the context of Racing NSW's objects and utilisation of its assets (the funding outlined at [32] (1) to (5) above) compels the conclusion that its principal activity is a charitable or benevolent one." (Reply Submissions, 28 May 2019 at [4].

[19]

Racing NSW's activities: the Race Fields Funding Loans

In considering this issue I have given substantial attention to the financial documentation and reports to which I was referred and to the other documentary material, mainly adduced by Racing NSW, as to its current activities.
There can be no doubt that Racing NSW does engage in activities which can reasonably be described as being of a charitable or benevolent nature. I accept that it devotes substantial sums to the promotion of the racing industry and to the provision and improvement of sporting facilities which can be used by the public and that, through the Trust, it provides facilities such as those in allowing disabled people, children and armed services veterans to work with retired horses (all of which in my view could reasonably be described as activities for the public benefit and as charitable).
There can also be little doubt that by way of the Race Fields Funding Loans Racing NSW has made what, if measured in dollar terms alone, is a substantial capital development program over some time for the improvement and upgrading of racing and training infrastructure and other racing club facilities.
I understood Counsel for Racing NSW to contend that the existence of the Race Fields Funding Loans was a principal illustration of Racing NSW's charitable nature in that by doing so it had "dedicated significant financial resources (available) to the charitable object of making available facilities for public use" (Submissions 28 May 2019 at [4]). That contention was based on the authority of the New Zealand case of Re Chapman (cited at [30] (2) above and Prof GE Dal Pont, Law of Charity (second edition 2017) at [11.18]-[11.25] and the authorities cited there.
However: 1. Re-Chapman is clearly authority only for the proposition that in particular circumstances; in that case, the creation by Will of a trust for providing a new grandstand at a ground in Napier at which representative Rugby football matches would be played (an activity which, on contemporary accounts, is a reasonably prevalent occurrence in New Zealand), a Court will recognise such a trust or gift as charitable. But the Court's decision there is one as to the nature of a particular gift or trust. It is not a decision as to the charitable or other nature or character of the donor. It is not authority for the proposition that a body which provides or facilitates the availability of sporting facilities for public use will be regarded as a charitable body. 2. I view the decision of the Supreme Court of South Australia in Strathalbyn Show Jumping Club Inc v Mayes (2001) 79 SASR 54 at 88 (3) in the same light. That is authority for the proposition that: "A trust for the establishment of a sports ground or recreational facilities will be charitable, provided that it is for the used by the community at large or is of general public utility." 1. As with Re Chapman, that was a case in which the central issue was whether a trust was a charitable one. In this case the trust was one of particular land and buildings for use as a polo ground, but subject to that use, also as a recreational ground, a showground or for the purposes of any sports or games. The Court held that on a proper construction of the trust intention was that the land be used solely for polo and on that basis it was not a charitable trust under any of the 4 heads of charity identified in Income Tax Special Purposes Commissioners v Pemsel [1891] AC 531 ("Pemsel"), namely trusts for the relief of poverty, for the advancement of education, for the advancement of religion and for other purposes beneficial to the community. (The "other purposes" element is often referred to in relevant cases and texts as " the fourth head of Pemsel"). Again the decision was one as to the nature of the trust; not as to the charitable or other nature or character of the settlor or other originator of the trust. 2. The case of Re Hoey (1994) 2 Qd R 51 at 510.20, 512.53 and 513.6, was relied upon by the Chief Commissioner as authority for the proposition that a gift or trust (which the Chief Commissioner says would extend to repayable loans such as the Race Fields Funding Loans) which is made for the purpose of conducting horseracing cannot be charitable according to ordinary concepts including those discussed in Pemsel. I find that broad proposition difficult to accept, particularly if it is extended to the Race Fields Funding Loans and I agree with Counsel for Racing NSW that the decision does not support the proposition that financial accommodation for improving land and facilities for the better use and enjoyment by the public of horseracing can never be a charitable object. Nevertheless, again the decision is not one as to the charitable nature or character of any particular body. It is a decision as to the nature of the particular gift or trust, not as to the characteristics of the maker of the gift or the creator of the trust 3. Similarly, the passages cited by Counsel for Racing NSW from Prof Dal Pont's leading text on the Law of Charities, as noted at [47], concern the question of whether certain objects (for example the direction under a trust or gift of a donation or otherwise of funds for the improvement or preservation of a locality, monuments, or land all facilities for public use) can be regarded as charitable objects.

[22]

Prevalent or main character: Current activities

In doing that, I gave the most substantial weight to the detailed description of Racing NSW's activities in its own documentary evidence, as supplemented by the oral testimony of its Chief Operating Officer, Mr Hinton. The most relevant documents in this regard were its Annual Reports and Accounts for 2017 and 2018. My detailed review of those documents leads me to conclude that its prevalent or main character is that of the statutory body charged with conducting and regulating the sport (often called the "industry") of thoroughbred horse racing in New South Wales, the growth and protection of that industry and the maximisation of revenue from, and the general conduct of, that industry.
In reaching that view I considered the Annual Reports as a whole, but I found the Chairman's and Chief Executive's reports in the 2018 Annual Report to be most illustrative and relevant.
The Chairman's report, which of course is a report to the Minister for Racing, consists of an account of major developments in the following areas, with each being given approximately equal prominence: 1. improvement of the financial well-being of the "thousands of participants" in the industry, with particular emphasis on horse owners; 2. increases in prizemoney; 3. protection of the integrity of the industry; 4. the national and international profile of the industry in NSW achieved through major events, particularly through the inaugural running of "The Everest"; 5. the promotion and support of provincial and country Championships; 6. equine welfare, including through the participation of the Capertee Land; 7. commencement of development of a new strategic plan, including consultation with race clubs and participant groups.
It will be seen that the only sections which can reasonably be regarded as having anything to do with what might be regarded as charitable purposes (within any of the heads in the Pemsel Case, but particularly the fourth head) are those in (6) and potentially (5) and (7) above.
The Report of the Chief Executive is a substantial and detailed report of some 8 double-column pages. It commences with a brief description of what are described as the highlights of the 2017/18 year. These are concerned with returns to owners, increases in prizemoney, the inaugural running of "The Everest" the development of other events including "the Kosciuszko" and the implementation of a Point of Consumption Tax which is estimated to generate an additional $29 million for the industry.
There is some account of the Equine Welfare Program and of capital development, but read together they comprise only approximately one and a half of the 8 columns in the report. The description of them does not reflect that any charitable purpose for which they are conducted is a principal one of Racing NSW or that charitable activities are its prevalent or main activity.

[26]

Are some of the objects of Racing NSW potentially detrimental to the public?

For completeness, as this issue was raised by Counsel, I make the following brief comments on it.
In the concluding sections of Professor Gino Dal Pont's learned analysis of the nature of charitable gifts ("Law of Charity" Second Edition, 2017 LexisNexis Butterworths, at [11.26)] he comments that: "Charity has no mandate to (give) effect to objects detrimental to the community"
I note that in the written submissions made on behalf of the Commissioner, particularly at [74] of the submissions received on 8 May 2019, which I recall were repeated in oral submissions, Counsel for the Commissioner raised the issue of whether the activities of the peak administration body of a commercial sport such as thoroughbred horse racing, whose object and nature was in part to maximise betting turnover on New South Wales thoroughbred race meetings and whose revenue substantially comprised of fees associated with gambling receipts, could be considered charitable. Counsel for Racing NSW urged me to ignore or to give minimal weight to that contention.
It is readily observable that gambling activities, apart from providing the benefit of an opportunity for social engagement and enjoyment, also can contribute to some degree of social detriment in the nature of gambling addiction, albeit to a proportionally small section of those who participate in those activities. I say that without ignoring the considerable efforts and resources now devoted to education about gaming and the frequent media warnings as to the risks of gambling, which appear to be promoted and supported by many sporting and gaming bodies.
The evidence of Mr Graham Hinton, the Chief Operating Officer of Racing NSW (Racing NSW 2018 Financial Statements: Exhibit A2: Annexure H page 234) indicated that in 2018 it had income from wagering revenue exceeding $162 million out of total revenue of approximately $219.5 million.
I make no finding: 1. that the purposes or activities of Racing NSW itself directly contribute to the existence in New South Wales of the social problem of addiction to gambling, being a social issue clearly detrimental to the community; or 2. that any connection which Racing NSW may be seen to have with wagering or gambling of itself prevents Racing NSW from being treated as a charitable or benevolent body corporate.

[34]

Section 275- CHARITABLE AND BENEVOLENT BODIES (1) Duty under this Act is not chargeable on the following: (a) a transfer, or an agreement for the sale or transfer, of dutiable property to an exempt charitable or benevolent body, (b) a declaration of trust over dutiable property held or to be held on trust for an exempt charitable or benevolent body, (c) a surrender of an interest in land in New South Wales to an exempt charitable or benevolent body, (d) a vesting of dutiable property in an exempt charitable or benevolent body, (e) a lease of dutiable property to an exempt charitable or benevolent body, (f) a mortgage given by or on behalf of an exempt charitable or benevolent body. (1A) Duty under section 58 (Establishment of a trust relating to unidentified property and non-dutiable property) is not chargeable on an instrument that declares a trust over property held or to be held on trust for an exempt charitable or benevolent body. (2A) Landholder duty is not chargeable on the acquisition of an interest in a landholder by an exempt charitable or benevolent body. (3) In this section: "exempt charitable or benevolent body" means: (a) any body corporate, society, institution or other organisation for the time being approved by the Chief Commissioner for the purposes of this paragraph whose resources are, in accordance with its rules or objects, used wholly or predominantly for: (i) the relief of poverty in Australia, or (ii) the promotion of education in Australia, or (b) any body corporate, society, institution or other organisation that, in the opinion of the Chief Commissioner, is of a charitable or benevolent nature, or has as its primary object the promotion of the interests of Aborigines and if: (i) (in the application of this definition for the purposes of subsection (1) or (1A)) the dutiable transaction or instrument is for such purposes as the Chief Commissioner may approve in accordance with guidelines approved by the Treasurer, or (iii) (in the application of this definition for the purposes of subsection (2A)) the land holdings of the landholderare being used or are to be used for such purposes as the Chief Commissioner may approve in accordance with guidelines approved by the Treasurer, or (c) any person acting in the person's capacity as trustee for a body corporate, society, institution or other organisation referred to in paragraph (a) or (b). "landholder duty" means the duty chargeable under Chapter 4.

[37]

Section 14 - POWERS OF RACING NSW (1) Racing NSW has power to do all things that may be necessary or convenient to be done for or in connection with the exercise of its functions. (2) Without limiting subsection (1), Racing NSW has power to do the following: (a) investigate and report on proposals for the construction of new racecourses, and inspect new racecourses or alterations or renovations to existing racecourses, (b) register or licence, or refuse to register or licence, or cancel or suspend the registration or licence of, a race club, or an owner, trainer, jockey, stablehand, bookmaker, bookmaker's clerk or another person associated with racing, or disqualify or suspend any of those persons permanently or for a specified period, (c) supervise the activities of race clubs, persons licensed by Racing NSW and all other persons engaged in or associated with racing, (d) inquire into and deal with any matter relating to racing and to refer any such matter to stewards or others for investigation and report and, without limiting the generality of this power, to inquire at any time into the running of any horse on any course or courses, whether or not a report concerning the matter has been made or decision arrived at by any stewards, (e) allocate to registered race clubs the dates on which they may conduct race meetings, (f) direct and supervise the dissolution of a race club that ceases to be registered by Racing NSW, (g) appoint an administrator to conduct the affairs of a race club, (h) register and identify galloping horses, (i) disqualify a horse from participating in a race, (j) exclude from participating in a race a horse not registered under the Rules of Racing, (k) prohibit a person from attending at or taking part in a race meeting, (l) impose a penalty on a person licensed by it or on an owner of a horse for a contravention of the Rules of Racing, (m) impose fees for registration of a person or horse, (n) require registered race clubs to pay to it such fees and charges (including fees for registration of a race club) as are required for the proper performance of its functions, calculated on the basis of criteria notified to race clubs by Racing NSW, (o) consult, join, affiliate and maintain liaison with other associations or bodies, whether in the State or elsewhere, concerned with the breeding or racing of galloping horses, (p) enter into contracts, (q) acquire, hold, take or lease and dispose of real and personal property whether in its own right or as trustee, (r) borrow money, (s) order an audit of the books and accounts of a race club by an auditor who is a registered company auditor nominated by Racing NSW, (t) scrutinise the constitutions of race clubs to ensure they conform to any applicable Act and the Rules of Racing and that they clearly and concisely express the needs and desires of the clubs concerned and of racing generally, (u) publish material, including periodical publications, to inform and keep informed the public concerning matters relating to racing, whether in the State or elsewhere, (v) undertake research and investigation into all aspects of the breeding of horses and of racing generally, (w) take such steps and do such acts and things as are incidental or conducive to the exercise of its powers and the performance of its functions. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 26 August 2019