Kenny J

Federal Court


Judgment date: 16 September 2005

Kenny J

This is an appeal from a decision of the Administrative Appeals Tribunal (``the Tribunal'') pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (``the AAT Act'') [reported at
2003 ATC 2107]. The appeal raises the question whether the respondent, The Triton Foundation (``Triton''), is a charitable institution within the meaning of item 1.1 of the table in s 50-5 of the Income Tax Assessment Act 1997 (Cth) (``the Act'').

2. Section 50-1 of the Act exempts from income tax the ordinary income and statutory income of various entities - although, in some cases, subject to special conditions. Item 1.1 of the table in s 50-5 identifies a ``charitable institution'' as an exempt entity subject to the special conditions in ss 50-50 and 50-52. It is common ground that Triton is an ``institution'' and satisfies s 50-50, in particular, s 50-50(a).

3. Subject to qualifications that are not presently relevant, s 50-52 requires certain entities, including charitable institutions, to be endorsed as exempt from income tax under subdivision 50-B. By virtue of s 50-105 (in subdiv 50-B) the Commissioner must endorse the institution as exempt from income tax if it is entitled to be endorsed by satisfying s 50-110 and has applied for endorsement. An entity such as Triton is entitled to endorsement if it is a charitable institution, has an ABN and meets the other specified special conditions: s 50-110.

4. The Commissioner refused Triton's application for endorsement on the basis that it was not a charitable institution covered by item 1.1 of the table in s 50-5 of the Act because it did not have a charitable purpose, being neither for the purpose of the advancement of education nor for other purposes beneficial to the community. The Commissioner disallowed Triton's subsequent objection to this decision, and Triton made application to the Tribunal. The Tribunal set aside the Commissioner's decision to disallow Triton's objection, on the basis that Triton was a charitable institution within item 1.1 of the table in s 50-5, because, although its main purpose was not the advancement of education, its main purpose was beneficial to the community in the legal, charitable sense.

5. The Commissioner appeals against the Tribunal's decision and seeks orders that the Tribunal's decision be set aside. By a Notice of Contention, Triton also maintains that the Tribunal was wrong in holding that Triton's services were not for the advancement of

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education and that it was not a charitable institution on this basis.

The Tribunal's decision

6. The Tribunal made the following findings of fact.

  • a) Triton was established as a not-for-profit organization in 2000 by a successful inventor, Mr George Lewin, following the National Innovation Summit, which was sponsored by the Federal Government in February 2000. Mr Lewin was committed to contributing up to $3 million over 5 years. The Victorian and Queensland Governments have also funded Triton.
  • b) The principal object of Triton is ``the promotion of a culture of innovation and entrepreneurship in Australia, particularly among the young, by visibly assisting innovators to commercialise their ideas''. In this connection, the Tribunal referred to Triton's constitution and a ``Mission Statement''.
  • c) Triton is involved in a number of activities.
  • d) Triton provides advice to inventors on marketing, intellectual property, business planning, etc, by telephone, facsimile, e- mail or in person.
  • e) Triton has an interactive website that provides a self-assessment module ``to assist inventors identify gaps in their knowledge and to determine where they are placed in the pathway to a commercial product''.
  • f) Triton has case managers, who review applications for assistance and provide guidance. If approved by a case manager, an invention is assessed by an assessment panel, constituted by experienced people who act on a voluntary basis. The panel provides comments and suggestions to the inventor. Where an inventor requires professional services, he or she may be referred to an appropriate professional.
  • g) Triton's ``initial services, up to the assessment by a case manager, are available to any person, but the result of the assessment may well be advice to an applicant that there is no point in continuing the process''. Triton is free to decline assistance to any individual and is ``more likely to concentrate its resources on ideas that are more likely than others to be successful''.
  • h) Triton has not yet charged an investor any fee for its services, although, according to its executive director, Triton ``may need to charge for some services and/or enter into an income sharing arrangement for successful inventions'', in the event of a reduction in Government grants.
  • i) In conjunction with the Victorian Department of Education and Training and the Education Foundation, Triton promotes a competition for students in years 5 to 10 at government schools called ``The Dreams and Schemes Award - Students as Innovators''. In collaboration with the Australian Design Awards, Triton selects three inventions, registered with it, to be considered for the Australian Invention of the Year Award.
  • j) Triton also seeks media exposure to promote innovation in Australia frequently using examples of innovative inventions. Although it had not proceeded with an initial proposal to develop a television series to be called the ``Clever Country'', Triton has received a specific Commonwealth grant to create a pilot of such a program. In this connection, the Tribunal simply noted that Triton's executive director agreed that ``one role of such a series would be the promotion of a market for inventions featured but maintained that it was equally envisaged as a promotion of the concept of innovation and entrepreneurship in Australia''.
  • k) From time to time, Triton organizes seminars and workshops for prospective inventors.

7. In concluding its discussion of the facts and evidence, the Tribunal noted that Triton's executive director maintained that [ATC at 2109]:

``... [T]he role of the Foundation is to provide structured and organised information to inventors. He maintained that this involved education packages, self- assessment tools, an educational pathway through the commercialisation process and individual review and assessment. He noted a number of inventions, which, in his view, may never have been commercially successful without the assistance of the Foundation and which have been of benefit to the community.''

ATC 4894

8. The Tribunal summarized its conclusions about the objects and activities of Triton by observing that Triton [ATC at 2109]:

``... was established for, and operates to provide, assistance to actual or prospective inventors by way of providing information, evaluation and assistance in developing an invention to a commercial product.''

9. The Tribunal stated that, before it, Triton primarily claimed that it was a charitable institution because its main purpose was the advancement of education. After discussing
Property Services Industry Training Advisory Board Ltd v FC of T 99 ATC 2076, the Tribunal said that [ATC at 2110]:

``... Here, I am of the view that what the Foundation provides is a structured information package rather than education. The information and self- assessment part of its service may be seen as a means of condensing information which would otherwise need to be obtained by an inventor from a variety of sources of such information, such as books or manuals on preparing business plans, marketing, intellectual property protection, etc. To the extent that it is education, in the sense of enabling users to be better informed, it is difficult to comprehend the service as being the advancement of education.''

10. The Tribunal noted that ``[w]hile the main thrust of the submissions related to advancement of education'', it considered it ``appropriate to consider this Foundation under the fourth of the four heads of charity'', namely, other purposes beneficial to the community. In this connection, the Tribunal said [ATC at 2110]:

``... The question can be asked as to whether the objects and operations of the Foundation are, to paraphrase the words of Windeyer J, the promotion of innovation, the promotion of the learning of the skills and results of innovation and adding to the number of persons skilled in innovation and augmenting their learning and are themselves charitable objects and beneficial to the community.''

(Emphasis added)

The Tribunal answered this question in the following way [ATC at 2110]:

``In this case, it is said that the services of the Foundation are available to any member of the community who has a desire or inclination to use them and the accomplishment of the objects of the Foundation in the encouragement and assistance in innovation and entrepreneurship in Australia is of benefit to the whole community. It is clear, and not in dispute, that the Foundation is a `not-for- profit' institution.... In my view, the present objects and operations of the Foundation are for purposes beneficial to the community in the sense of providing direct services to a section of the community and overall future benefits to the community as a whole. Consequently, I find that the Foundation is a charitable institution within the meaning of Item 1.1 of s. 50-5 of the Act and is entitled to be endorsed as exempt from income tax under s. 50-105.''

Competency of the appeal

11. The Commissioner submitted that the question that arose on this appeal was a question of law such as to ground an appeal under s 44 of the AAT Act, because the expression ``charitable institution'' was used in item 1.1 of the table to s 50-5 of the Act in a technical legal sense. The question of law was whether the facts found by the Tribunal brought Triton within the legal meaning of the words ``charitable institution''. The Commissioner also submitted that the Tribunal erred in law by failing to consider whether, in addition to being beneficial to the community, the objects and activities of Triton were ``charitable'' in this technical legal sense. This too was said to raise a question of law.

12. Triton challenged the competency of the appeal. Relying on
Collector of Customs v Pozzolanic (1993) 43 FCR 280 at 286 (``Pozzolanic'') and
FC of T v Brixius 87 ATC 4963 at 4968; (1987) 16 FCR 359 at 365 (``Brixius''), Triton contended that the present proceeding invited the Court to reconsider questions of fact and degree that had been decided by the Tribunal against the Commissioner. The proceeding was not therefore an appeal that lay to this Court under s 44 of the AAT Act. Alternatively, Triton submitted that the only question that could arise on this appeal was whether the Tribunal's finding of fact was open on the evidence before it. The Court should, so it submitted, be astute to resist attempts to secure a review on the merits under the guise of an appeal under s 44 of the AAT Act.

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13. I accept that the word ``charitable'' in item 1.1 of the table in s 50-5 of the Act is to be understood in the legal sense, and not in accordance with ordinary English usage. The character of the Act and the authorities preclude any other conclusion: see, e.g.,
Salvation Army (Victoria) Property Trust v Ferntree Gully Corporation (1952) 85 CLR 159 at 175 (``Salvation Army'') per Dixon, Williams and Webb JJ and 182, 184 per Fullagar J; and
The Incorporated Council of Law Reporting for the State of Queensland v FC of T 71 ATC 4206 at 4210 and 4212; (1967-1971) 125 CLR 659 at 666 per Barwick CJ and 671 per Windeyer J (``ICLR'').

14. There are well-accepted legal principles for determining whether an entity is ``charitable'' in this technical sense. In ICLR, Barwick CJ and Windeyer J referred to these principles in the following way. At ATC 4210; CLR 666, Barwick CJ stated:

``... [W]hether or not the institution is relevantly charitable will be determined according to the principles upon which the Court of Chancery would act in connection with an alleged charity. That means that the indications contained in the preamble to the Statute of Elizabeth 1601 and the classifications in Lord Macnaghten's speech in Commissioner for Special Purposes of Income Tax v Pemsel (Pemsel's Case) (1891) AC 531 at 583 are to be observed in deciding whether or not the institution is charitable for the purposes of the Act.''

In the same case, Windeyer J said, at ATC 4212; CLR 671:

``A charitable institution is an instrument designed for carrying a charitable purpose into effect.... What in law is a charitable purpose is to be gathered from the miscellany of objects set out in the preamble to the statute, 43 Eliz I., c. 4. The spirit and intendment of that enactment, as well as its words, have for centuries dictated the meaning of charity in law.''

15. The distinctions that may be drawn between questions of law, questions of fact and mixed questions of fact and law can be elusive, as was acknowledged in Pozzolanic at 287. Plainly enough, the meaning of a technical legal expression is a question of law and, generally, so too, is the question whether facts fully found fall within the provision of a statutory enactment: see
Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at 450 (``Vetter'');
Hope v The Council of the City of Bathurst 80 ATC 4386 at 4389; (1980) 144 CLR 1 at 7 per Mason J, with whom Gibbs, Stephen, Murphy and Aickin JJ agreed; and Pozzolanic at 287. In Hope at ATC 4389; CLR 7, Mason J said as follows:

``Many authorities can be found to sustain the proposition that the question whether facts fully found fall within the provisions of a statutory enactment properly construed is a question of law. One example is the judgment of Fullagar J in Hayes v FC of T, where his Honour quoted the comment of Lord Parker of Waddington in Farmer v Cotton's Trustees, which was adopted by Latham CJ in FC of T v Miller, that where all the material facts are fully found, and the only question is whether the facts are such as to bring the case within the provisions properly construed of some statutory enactment, the question is one of law only. Fullagar J then said:

`... this seems to me to be the only reasonable view. The distinction between the two classes of question is, I think, greatly simplified, if we bear in mind the distinction, so clearly drawn by Wigmore, between the factum probandum (the ultimate fact in issue) and facta probantia (the facts adduced to prove or disprove that ultimate fact). The ``facts'' referred to by Lord Parker... are the facta probantia. Where the factum probandum involves a term used in a statute, the question whether the accepted facta probantia establish that factum probandum will generally - so far as I can see, always - be a question of law.'

However, special considerations apply when we are confronted with a statute which on examination is found to use words according to their common understanding and the question is whether the facts as found fall within these words. Brutus v Cozens was just such a case. The only question raised was whether the appellant's behaviour was `insulting'. As it was not unreasonable to hold that his behaviour was insulting, the question was one of fact.''

(Citations omitted)

In Vetter at 450, Gleeson CJ, Gummow and Callinan JJ specifically adopted Mason J's

ATC 4896

discussion and statement of the law on this subject.

16. There is, therefore, ample authority for the proposition that, where the facts have been found and the only question is whether they fall within a statutory provision, the question is one of law: see above; also
FC of T v JD Roberts; FC of T v Smith 92 ATC 4380 at 4384-4385; (1992) 37 FCR 246 at 252 (``Roberts'') per Hill J and the authorities there cited;
Lombardo v FC of T 79 ATC 4542 at 4545=4546; (1979) 40 FLR 208 at 212 per Bowen CJ;
FC of T v Cooper 91 ATC 4396 at 4408-4411; (1991) 29 FCR 177 at 193-196 per Hill J; and
Australian National Railways Commission v Collector of Customs (SA) (1985) 69 ALR 367 at 379 per Sheppard and Burchett JJ. The principal question in this case is whether, on the facts as found by the Tribunal, Triton is a ``charitable institution'' within the meaning of item 1.1 of the table in s 50-5 of the Act. It is common ground that Triton is an institution. The point of dispute is whether the institution is ``charitable'' in the legal sense of that term. Clearly enough, the appeal turns on a question of law: see also
Tasmanian Electronic Commerce Centre Pty Ltd v FC of T 2005 ATC 4219 at 4221 [6]-[7]; [2005] FCA 439 at [6]-[7] (``Tasmanian Electronic'') per Heerey J and
Central Bayside Division of General Practice Ltd v Commr of State Revenue (Vic) 2003 ATC 4835 at 4836 [4]-[5]; (2003) 53 ATR 473 at 474-475 [4]-[5] (``Central Bayside'') per Nettle J.

17. Brixius has no application in this case. Brixius concerned the deductibility of an item under the first limb of s 51(1) of the Income Tax Assessment Act 1936 (Cth) and the inquiry attracted considerations of a different kind from the present, as Hill J, with whom Jenkinson J agreed, explained in Roberts at ATC 4383-4384; FCR 251-252. Moreover, the present case is not concerned with a finding as to the application of a statutory word or expression used in its ordinary English sense, like the expression ``mining operations'' and ``mining property'' in
NSW Associated Blue- Metal Quarries Ltd v FC of T (1956) 11 ATD 50 at 51-52; (1956) 94 CLR 509 at 511-512 per Kitto J, which was also discussed by Mason J in Hope at ATC 4389-4390; CLR 7-8. The inquiry that would properly arise in such a case does not arise on this appeal. As Heerey J said in Tasmanian Electronic at ATC 4221-4222 [8]; FCA [8], the question whether more than one meaning is reasonably open arises in cases of this latter kind only ``because of the anterior affirmative answer to the question of law whether the word or phrase was used in the sense conveyed in ordinary speech''. This question does not, therefore, arise in this case, where the relevant expression is used in a specifically legal sense.

18. Before turning to the principal question of law that arises on the appeal, I want to dispose of the Commissioner's argument that the Tribunal applied the wrong legal criterion. I reject the Commissioner's second submission that the Tribunal erred in law by failing to consider expressly whether the purposes found were ``within the spirit and intendment of the preamble'' to 43 Eliz I, c 4 (referred to below as ``the Statute of Elizabeth''). On a fair reading of the Tribunal's reasons, there was no such error. The Tribunal referred specifically to this requirement before asking itself whether the objects and operations of Triton were ``in themselves charitable objects and beneficial to the community'': see [10] above. I reject the Commissioner's contention that this was a pronouncement made without any real understanding of the task. This was a clear statement of the correct test. The Tribunal's conclusion that Triton was a charitable institution must therefore be taken to be a finding that its objects were not only beneficial to the community but also charitable in the legal sense. The Commissioner's complaint, in essence, was that the Tribunal had failed to make a specific finding to this effect. There is no shortage of authority that one must not scrutinise the reasons of an administrative tribunal over-zealously, with an eye for error: see, e.g., Pozzolanic at 286-287 and the cases cited therein. The Tribunal did not misdirect itself as to the correct legal criterion, as the Commissioner submitted.

A charitable institution?

19. In this branch of the law, there are some well-settled principles. First, as already noted, the ``charitable'' character of an institution is to be determined by reference to the preamble to the Statute of Elizabeth and the four classifications in Lord Macnaghten's speech in
Income Tax Special Purposes Commissioner v Pemsel [1891] AC 531 (``Pemsel's Case''). By reference to the preamble, in Pemsel's Case, at 583, Lord Macnaghten classified the following

ATC 4897

purposes as ``charitable'' purposes, namely, purposes for: 1) the relief of poverty; 2) the advancement of education; 3) the advancement of religion; and 4) other purposes beneficial to the community, not falling under any of the preceding heads. The present case is primarily concerned with the fourth classification, although Triton also relies on the second classification.

20. It is also settled law that whether a particular corporate body is a charitable institution depends on the central or essential object of the institution as determined by reference to its constitution and activities: see, e.g., Salvation Army at 171-172 per Dixon, Williams and Webb JJ;
Congregational Union of New South Wales v Thistlethwayte (1952) 87 CLR 375 at 442 per Dixon CJ, McTiernan, Williams and Fullagar JJ;
Stratton v Simpson (1970) 125 CLR 138 at 150-151 per Windeyer J; and
Crunulla Sutherland Leagues Club Ltd v FC of T 90 ATC 4215 at 4225; (1990) 23 FCR 82 at 95-96 (``Crunulla'') per Lockhart J. If the main purpose of such a body is charitable, it does not lose its charitable character simply because some of its incidental or concomitant and ancillary objects are non-charitable. In relation to this process of characterization, Lockhart J said, in Crunulla at ATC 4225; FCR 96:

``The material facts and circumstances which should be examined to characterise the main purpose of the relevant body include its constitution, its activities, its history and its control. These may alter from time to time and the purpose of establishment may correspondingly change. It is not sufficient to look to the formation of the body and to ascertain what was at the time the purpose of its formation. The statute gives a periodic operation to the words and directs the inquiry to a particular time, namely, the year of income so that consideration must be given not only to the purpose for which the society was established but also the purpose for which it is currently conducted.''

This description of the process is also apposite in this case. The description also indicates that the charitable status of an institution can change over time.

21. An institution is not necessarily a charitable institution simply because it has a purpose that is beneficial to the public. In order to qualify as a charitable institution, an institution must have a purpose that is both beneficial to the community and within the spirit and intendment of the preamble to the Statute of Elizabeth. The authorities on this point are clear: see, e.g., ICLR at ATC 4210, 4211; CLR 667, 669 per Barwick CJ and
The Royal National Agricultural and Industrial Association v Chester (1974) 3 ALR 486 at 487 per McTiernan, Menzies and Mason JJ.

22. Further, in order to fall within Lord Macnaghten's fourth class, the purpose must be to benefit the public generally, as opposed to individual members of the community, although the fulfilment of the purpose ``either directly or indirectly incidentally may benefit such individuals'': see
Commissioners of Inland Revenue v Oldham Training and Enterprise Council (1996) 69 TC 231 at 250-251 (``Oldham TEC'') per Lightman J. The public may, however, include a section of the public: see Oldham TEC at 250;
Commissioners of Inland Revenue v Yorkshire Agricultural Society [1928] 1 KB 611 at 622-623 per Lord Hanworth MR, 629-630 per Atkin LJ and 637 per Lawrence LJ (``Yorkshire Agricultural Society'');
Crystal Palace Trustees v Minister of Town and Country Planning [1951] Ch 132 (``Crystal Palace'') per Danckwerts J;
Commissioners of Inland Revenue v White (1980) 55 TC 651 (``White'') and
Royal Australasian College of Surgeons v FC of T (1943) 7 ATD 289 at 297, 298-299, 301; (1943) 68 CLR 436 at 447 per Rich J, 450 per McTiernan, 454 per Williams J; and contrast
Hadaway v Hadaway [1955] 1 WLR 16 and
New Zealand Society of Accountants v Commissioner of Inland Revenue (1986) 8 NZTC 5205 at 5208 per Somers J, 5212-5214 per Richardson J, Casey J agreeing with Somers and Richardson JJ.

23. In Royal Australasian College of Surgeons, the High Court held that the ``main or real object of the College [was] the promotion and advancement of surgery'', which entitled the College to an exemption pursuant to s 23(e) of the Income Tax Assessment Act 1936-1941 (Cth) and the fact that ``some of these subsidiary or ancillary functions and purposes [of the College] may indirectly and incidentally be of benefit to the members of the profession'' did not detract from this status: see ATC 297; CLR 447 per Rich J. In Yorkshire Agricultural Society, the English Court of

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Appeal held that the Society, which was formed for the purpose of promoting the general improvement of agriculture, as opposed to a society for the conferral of benefits on its particular members, was charitable within Lord Macnaghten's fourth class in Pemsel's Case. Similarly, in Crystal Palace, Danckwerts J held, at 858, that the promotion of industry and commerce in general by holding public exhibitions, as opposed to the furtherance of the interests of individuals engaged in trade or industry, was a public purpose of a charitable nature. In White, Fox J held that the object of preserving and improving craftsmanship was charitable, though the means required to achieve this end included the provision to craftsmen of particular benefits, including the provision of premises at affordable rent. The fact that individual craftsmen might obtain benefits from the association's activities did not, in this case, operate to deprive the association of charitable status: see White at 656, 659-661. Mackenzie J adopted the same reasoning in
Barclay & Ors v Treasurer of Queensland 95 ATC 4496 (``Barclay''). In considering the status of the Queensland Construction Training Fund, his Honour held that the object of fostering and developing the knowledge, skills, training and education of persons employed in the Queensland construction industry was a charitable object, and any benefit to any particular individual in the industry was an incidental object of the Fund: see Barclay at 4500. In Tasmanian Electronic, at ATC 4232 [56]; FCA [56], Heerey J held that, in assisting Tasmanian businesses to adopt electronic commerce, the Tasmanian Electronic Commerce Centre was pursuing a charitable purpose within Lord Macnaghten's fourth category.

24. The question whether the purpose is to benefit a section of the public as opposed to individual members of the community does not always admit of a ready answer. In
Dingle v Turner [1972] AC 601, this consideration led Lord Cross of Chelsea to say, at 624:

``In truth the question whether or not the potential beneficiaries of a trust can fairly be said to constitute a section of the public is a question of degree and cannot be by itself decisive of the question whether the trust is a charity. Much must depend on the purpose of the trust. It may well be that, on the one hand, a trust to promote some purpose, prima facie charitable, will constitute a charity even though the class of potential beneficiaries might fairly be called a private class and that, on the other hand, a trust to promote another purpose, also prima facie charitable, will not constitute a charity even though the class of potential beneficiaries might seem to some people fairly describable as a section of the public.''

Although this may not be the law in Australia, these comments highlight the essential matter of dispute in this case. At the hearing the Commissioner submitted that the real question in this case was whether Triton's fundamental or overall purpose of achieving the object of promoting a culture of innovation was achieved in a way that was of general benefit to the community.

25. In relation to Lord Macnaghten's fourth class of charitable purpose, the Commissioner's submissions were as follows.

  • 1. Referring to Triton's constitution, business and strategic plans, and mission statement, the Commissioner submitted that Triton's broad object of ``promoting a culture of innovation and entrepreneurship in Australia'' was too vague and imprecise to fall within the spirit and intendment of the preamble to the Statute of Elizabeth. Contrasting the public benefit referred to in ICLR at ATC 4211; CLR 668-669 per Barwick CJ and ATC 4213; CLR 672 per Windeyer J, the Commissioner said that the promotion and encouragement of innovation, as an end in itself, did not make the object charitable. Comparing
    Re Hummeltenberg Beatty v London Spiritualistic Alliance [1923] All ER Rep 49 at 51,
    Re Elmore dec'd [1968] VR 390 at 394,
    Inland Revenue Commissioners v Baddeley [1955] 1 All ER 525 at 530, 531-533, 547-548 and
    Re Payne dec'd[1968] Qd R 287, the Commissioner contended that the community, as distinct from individual inventors, has ``only a hope to be benefited''. Further, any benefit to the community is incidental or consequential to the assistance and advantages obtained by individual investors and is restricted to the ``remote and intangible prospect of greater wealth and job opportunities in Australia''. The public as a whole did not get access to the benefits or services provided by Triton to individuals beyond the publication of

    ATC 4899

    their successful endeavours. That is, the public benefit was limited to the encouragement and inspiration of innovation through reported examples of other successful innovators. When looked at as a whole, the constituent documents of Triton showed that Triton did not achieve a benefit to the public in a way that brought the institution within the spirit and intendment of the preamble to the Statute of Elizabeth.
  • 2. Citing
    Re Income Tax Acts (No 1) [1930] VLR 211 at 223, the Commissioner submitted that there was ``[a]n important distinction... between benefit to a section of the public composed of persons with particular attributes, and benefit to a section of the public which reserves the right to admit others''. In the latter case, where there was no ``primary, community benefit of a wider sort'', the purposes were non- charitable. Since Triton's activities focussed on assisting innovators to commercialise their ideas and it limited its services to innovators that showed commercial potential, Triton was not a charitable institution.
  • 3. The Commissioner contended that Triton's services were not available to all members or a relevant section of the community without discrimination. Ultimately, so the Commissioner said, Triton's services are more akin to those of a consultant providing services to clients than a charitable institution. Put another way, although the purpose of promoting innovation in commerce or industry, was capable of being a charitable purpose, Triton was not a charitable institution because of the way in which it was seeking to carry out its purpose. Alternatively, Triton was not a charitable institution, because its real purpose was to benefit individuals.

26. In Triton's written and oral submissions:

  • 1. Triton contended that its objects and functions were within the spirit and intendment of the Statute of Elizabeth ``as applicable to charitable purposes in modern conditions'' and, in particular, if not for the advancement of education, Triton fell within Lord Macnaghten's fourth class of charitable purposes. Triton said:
    • ``It was formed to promote innovation and entrepreneurship in Australia. It fosters the enhanced public awareness of, and participation in, the phenomenon of human innovation and its practical manifestation in contemporary society. It does so by a process that is both integrated and inductive - it assists individual inventors to develop and commercialise ideas in order to publicize that process to the community at large.''
  • 2. Referring, amongst other things, to its constituent documents, it submitted that the objects and purposes of Triton were beneficial to the community as a whole. It stated:
    • ``The public benefit Triton seeks to achieve is also both integrated and inductive. The assistance given to individual inventors is educational, informative and practical. The consequent public exemplification of the successful inventive process serves to encourage and entrench innovative initiative in the community. The promotion of commerce is a recognized purpose of legal charity. In contemporary Australia the promotion of commercially successful innovation constitutes a public benefit falling within such purposes.''
  • 3. Citing
    Scottish Burial Reform and Cremation Society Ltd v Glasgow Corporation [1968] AC 138 at 154, Triton submitted that the question of what constituted a charity in the legal sense should be considered, having regard to ``the values, beliefs and infrastructure of contemporary Australian society''. It added that the category of ``other purposes beneficial to the community'' had ``a notable width of application'', including (as listed by Dixon J in
    Barby v Perpetual Trustee Co Ltd (1937) 58 CLR 316 at 324) the arousing of intellectual interests, general or special education, and the aiming at some other betterment of the community.
  • 4. Triton submitted that focussing on the inventors was the means chosen by it to achieve its purpose of benefiting the community. Referring to its mission statement, Triton emphasized that its prime objective was the promotion of a culture of innovation and that assistance to individual inventors was a subordinate means to achieve this aim. The benefit to the inventor was the concomitant of its primary object. To the extent that identifiable benefits

    ATC 4900

    accrued to individuals, they were, Triton submitted, ancillary to the main object of the promotion of innovation through public awareness.
  • 5. In oral submissions, Triton emphasized that it was concerned with a practical field of endeavour, and that a good way of promoting innovation in such a field was by example. In written submissions, Triton said that its activities, with their emphasis on public exposure, ``underscores that its prime concern is for the effectuation of the general public benefit it seeks to achieve, rather than a simple focus only on the commercial success of particular inventors'' (emphasis original). According to Triton, the purposes of assisting inventors and promoting innovation were interlocking and integrated, alternatively, that the purpose of assisting inventors was ancillary to the main purpose of promoting innovation.
  • 6. Referring to
    Re Income Tax Acts (No 1)[1930] VLR 211 at 222-223, per Lowe J, Triton submitted, in the alternative, that it provided benefits to a section of the public. In written submissions, it said:
    • ``The individual inventers are not `members' or other adherents to Triton as an institution. They are disparate individuals drawn from various parts of the public. They are united only in an underlying disposition or demonstrated capability for invention, and to this extent perhaps possess the `common calling' to which Lowe J referred. There is no barrier which admits some persons to assistance and not others. Whilst it may be the case that in some instances Triton may not continue assistance to a person whose application is, upon evaluation, considered to be without merit, this is not to exercise an arbitrary or other power to admit or exclude from membership. Rather, it is the result of a considered judgment after Triton has in fact provided assistance sufficient to render that judgment.''
  • There was, so Triton said, universal access at the threshold because it gave initial assistance to everyone. Because resources were limited, the same intensive assistance could not be given to everyone the whole way through and therefore Triton concentrated on the inventors who were likely to be the best exemplars of innovation, to the greater public benefit. This process of selection was, it submitted, intrinsic to the objects to be achieved.
  • 7. Triton submitted that objects involving the promotion of commerce could be charitable. It added that the promotion of greater innovation in commercial Australian society was a matter of general public utility, providing a ``productive outlet for inventers''. Moreover, it said:
    • ``It is also of general public utility that innovative ideas generally be carried through to successful commercial fruition, not only so that inventers themselves may pursue appropriate reward (and in the process seek to minimize the government's financial obligations), but equally so that the public generally may enjoy the benefits that the ready availability of new and improved products may bring to increase their material well being.''
  • 8. The Tribunal was entitled to take into account that there was government support for the promotion of a culture of innovation and for Triton. Triton also relied on what it said was the Commissioner's concession that the promotion of a culture of innovation was capable of being a charitable purpose: see [25] above.
  • 9. Triton contended that it was not for the Commissioner, the Tribunal or the Court to inquire whether some other means might have been as or more effective to achieve its objects. It was enough, if, having regard to the institution's constituent documents, purposes and activities, Triton's essential, main or prevalent character was for the promotion of a culture of innovation by a method appropriate and adapted to that end. Triton added that there was nothing in the evidence to suggest that it was assisting individuals to a great extent than necessary to achieve the purpose of promoting a culture of innovation.

27. Triton's constituent documents, when read as a whole, show that its main and overarching object was to promote a culture of innovation and entrepreneurship for the ultimate benefit of Australian society. The preamble to the constitution of Triton, a company limited by guarantee, referred to the company's Mission Statement - ``To promote

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a culture of innovation and entrepreneurship, particularly among our youth, by visibly helping Australian innovators commercialise their ideas''. Clause 2(a) of Triton's constitution stated:

``The objects for which the company is established are to pay and apply its income and property to or for, and otherwise promote, the public charitable objects and purposes that the directors decide from time to time having regard to the recommendations of any advisory committee the directors establish under clause 15 comprising (to the extent they are charitable):

  • (1) the promotion of a culture of innovation and entrepreneurship in Australia, particularly among the young, by visibly assisting innovators to commercialise their ideas;
  • (2) for the purpose outlined in (1), providing assistance to innovators with regard to patents, prototypes, business plans, licensing agreements, venture capital proposals and networking and otherwise; and
  • (3) for the purposes outlined in (1), providing funding and support for public educational programs and schools competitions.''

28. A ``Strategic Plan'', apparently created about September 2002, again referred to the promotion of a culture of innovation and entrepreneurship, which was to be achieved by:

``• Publicising positively inventions and inventors

• Acclaiming the wins and glorifying the winners

• Seeking out and identifying good ideas (inventions) and the inventors who create them

• Encouraging their emergence and development

• Assisting the passage of good ideas to commercial success

• `Closing the Circle' to encourage people to be productive with good ideas, and foster a climate of approval and encouragement among peers and society at large, by affirming that inventiveness and enterprise is;

  • • A virtue in itself
  • • A significant contribution to the betterment of Australian society, for everybody
  • • A worthy and credible means of fulfilment of personal life goals, including recognition and reward.''

This plan stated that:

``The principle [sic] aim of the Foundation is to publicise the inventive ability of Australians and the commercial success of enterprises based on such innovation for the purposes of fostering a national culture in which innovative enterprise is encouraged, applauded and rewarded.''

An earlier business plan, which included a Mission Statement, also contained an expression of the similar objects and planned activities.

29. Triton's activities were consistent with its constituent documents. As noted above, the Tribunal found that it provided: (1) advice, in different forms, on matters of probable commercial concern to inexperienced inventors; (2) a means for an inventor's self-assessment of his or her commercial knowledge; and (3) case managers for the initial review of applications and, if appropriate, assessment by a panel of suitably experienced volunteers. Triton promoted media exposure for the concept of innovation; and, in conjunction with a Victorian Government Department, ran a competition for innovation amongst school students. It also participated in a national award program for inventions.

30. Triton was established in 2000 following a National Innovation Summit, which the Federal Government had sponsored. It was a not-for-profit organization, in receipt of both private and public funds from two State Governments. The Tribunal found that its services were free.

31. Bearing in mind (1) Triton's history, in particular, that it was created following upon an initiative sponsored by the Federal Government; (2) that Triton is in receipt of State Government funding; and (3) that Triton is involved in State School education and a national award program, its principal object and activities can fairly be regarded as beneficial to the public as a whole. In its proper context, the

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meaning of the words ``the promotion of a culture of innovation and entrepreneurship'' is plain enough. The words signify the promotion of an appreciation of the worth, especially for commerce, of novel ideas or things and of those people who undertake their commercial exploitation, in order that other people may be encouraged to develop and invest in novel ideas or things having commercial utility.

32. I accept, as indeed the Commissioner apparently conceded, that this object, which plainly involves the promotion of an aspect of commerce, is capable of being a charitable object; and indeed it is within the spirit and intendment of the preamble to the Statute of Elizabeth. The authorities discussed at [22] and [ 23] above, including Oldham TEC, Crystal Palace and White, Barclay and Tasmanian Electronic, support this conclusion. I do not consider that Tasmanian Electronic should be put to one side as the Commissioner contended.

33. I reject the Commissioner's submission that, for present purposes, Triton's objects were too vague and imprecise and the benefit to the community too remote to qualify for ``charitable'' status. Triton's objects and activities are designed, broadly speaking, to promote commercial activity of a particular kind, which Governments at State and Commonwealth levels apparently regard as beneficial, in various ways, to the inhabitants of their States and Australia. They are, moreover, of a kind that the law recognizes as charitable.

34. It cannot be said that, in this field of practical commercial endeavour, the means that Triton chose to achieve its principal object - by example, awards and publicity - are not reasonably suited to this end. In this circumstance, it is immaterial whether this object might be achieved as or more effectively by some other means.

35. Further, I reject the Commissioner's submission that Triton's services were not available to all members or a relevant section of the public without discrimination. As Triton pointed out, it was open to anyone to seek its assistance and receive some guidance, although the resource-intensive help was limited to the inventors who were likely to be the best exemplars of innovation. This limitation was a rational one, in keeping with Triton's main object, which was to promote an innovative and entrepreneurial culture to the public at large.

36. On the facts as found by the Tribunal, it was open to the Tribunal to conclude that Triton's purposes and activities were not only beneficial to the Australian public generally, but also of direct benefit to a section of the public, being those members of the public with the inclination and ability to make inventions for commercial purposes and invest in them. For the reasons already given, I reject the Commissioner's contention that access to Triton's services was not relevantly open to all with the requisite inclination and ability. Further, the mere fact that a charitable institution focuses greater resources on one class of persons than another does not necessarily lead to the conclusion that the body is in the nature of a club.

37. Having regard to Triton's constitution and the other constituent documents mentioned above, as well as other facts found by the Tribunal, it is clear enough that Triton focussed on inventors, especially inventors with ideas that were most likely to have commercial success, as a means to achieve its main promotional object, which was designed to benefit the community at large. The assistance given to inventors, though of direct benefit to them, was concomitant or ancillary to its principal object. This assistance, which was intended to enable Triton to ``showcase'' inventors and their inventions, complemented Triton's other activities, also directed to promoting and publicizing an innovative and entrepreneurial commercial approach in Australia. Triton offered its services for the benefit of the public or a sector of the public, as opposed to individual members of the community. The authorities confirm that, in these circumstances, the fact that individuals (here inventors) may benefit from Triton's activities does not detract from its charitable status: see [22]-[23] above.

38. On the facts that the Tribunal found, and having regard to Triton's constitution, activities and history, Triton's essential object was a charitable one, within Lord Macnaghten's fourth classification. It was not suggested that there was anything about its control that should lead to a contrary conclusion. On the facts found by it, the Tribunal did not err in finding that Triton was therefore a charitable institution for the purpose of item 1.1 of the table to s 50-5 of the Act. I emphasize that the question for the Court is whether, on the facts found by the

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Tribunal, Triton was a charitable institution for the purposes of the relevant provisions of the Act. As Lockhart J noted in Crunulla at ATC 4225; FCR 96 (see [20] above), the Act directs inquiry to a particular time, and consideration must always be given not only to the purpose for which the society was established but also the purpose for which it was being conducted at the time relevant to the inquiry mandated by the Act. If Triton were significantly to change its operations by, for example, charging market rates for most of its services, then it might be liable to lose its charitable status for another period of inquiry under the Act.

The advancement of education

39. As noted above, by a notice of contention, Triton sought to argue the Tribunal was wrong in concluding that it could not properly be characterized as within Lord Macnaghten's second classification, being for the advancement of education.

40. The Commissioner sought to uphold the Tribunal's finding that Triton provided a structured information package and not education upon the basis that Triton's activities were not sufficiently structured or organized to fall within the second of Lord Macnaghten's heads. The Commissioner maintained that, essentially, Triton provided free advice at a basic level, with assessments done in order to decide whether Triton's more expensive services ought to be applied to any particular invention. Further, the Commissioner submitted that, even if Triton's services were in the nature of education, these services were not Triton's essential function, which was to assist innovators. Finally, the Commissioner submitted that there was no evidence to support some of Triton's submissions on the education question.

41. Triton contended that, on the facts, its activities were in fact sufficiently structured and organized to fall within Lord Macnaghten's second head. A charitable purpose would, so Triton submitted, exist even where the educational value was indirect and incapable of objective determination; that educating the public may ground an educational purpose; and that the education of inventors would also do so. Referring to the words ``the supportation, aid and help of young tradesmen, handicraftsmen'' in the preamble to the Statute of Elizabeth, Triton emphasized the practical nature of the subject matter, with the educational means being adapted to that end, namely, the education of inventors.

42. Since, for the reasons already stated, on the facts as found by the Tribunal, I would accord charitable status to Triton on the ground that, as the Tribunal found, it fell within Lord Macnaghten's fourth head, it does not seem to me either necessary or appropriate to venture into a discussion of Triton's educational status. It should not be overlooked that, at the hearing, the parties focussed on the fourth head, rather than the second, in support of their respective submissions.

43. For the reasons stated, I would dismiss the appeal with costs.


1. The appeal pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) be dismissed.

2. The Commissioner of Taxation pay the costs of and incidental to the proceeding.

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