-
The impact of this case on ATO policy is discussed in Decision Impact Statement: Bicycle Victoria v Commissioner of Taxation (2010/1721, 2010/1723).
BICYCLE VICTORIA INC v FC of T
Members:SA Forgie DP
Tribunal:
Administrative Appeals Tribunal, Melbourne
MEDIA NEUTRAL CITATION:
[2011] AATA 444
S A Forgie (Deputy President )
Bicycle Victoria Incorporated (Bicycle Victoria) is an association incorporated on 20 March 1986 under the Associations Incorporation Act 1981 (Vic). It currently has approximately 45,000 members. On 27 February 2009, Bicycle Victoria applied to the Commissioner of Taxation (Commissioner) to be:
- (1) endorsed as a deductible gift recipient (DGR) for the operation of a fund, authority or institution under s 30-120(a) of the Income Tax Assessment Act 1997 (ITAA97);[1]
T documents in AAT No. 2010/1721 (1721 T documents) at 313–314 and - (2) endorsed as:[2]
T documents in AAT No. 2010/1723 (1723 T documents) at 45–48 - (a) an income tax exempt charity under s 50-110 of ITAA97 on the basis it is a charitable institution as described in item 1.1 of the Table in s 50-5 of ITAA97;
- (b) a health promotion charity under s 123D of the Fringe Benefits Tax Assessment Act 1986 (FBTA Act); and
- (c) a charitable institution under s 176-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
2. The Commissioner refused the applications and disallowed Bicycle Victoria's objections to his decisions. Bicycle Victoria has applied to the Tribunal for review of his objection decisions. I have decided that it is entitled to be endorsed as an entity exempt from income tax under s 50-105 of the ITAA97 and as a charitable institution under s 176-1 of the GST Act but that it is not entitled to be endorsed as a DGR for the operation of a fund, authority or institution under s 30-120(a) of ITAA97 and is not entitled to be endorsed as a health promotion charity under s 123D of the FBTA Act.
Legislative background
3. The procedures that an entity must follow in order to apply for and gain any or all of the endorsements are set out in Division 426 in Schedule 1 to the Taxation Administration Act 1953 (TA Act). There is no suggestion that Bicycle Victoria has not complied with those procedures.
Deductible Gift Recipient
4. In so far as it is relevant, s 30-120 of ITAA97 provides:
"If an entity applies for endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953, the Commissioner must endorse the entity:
- (a) as a deductible gift recipient, if the entity is entitled to be endorsed as a deductible gift recipient for the operation of the fund, authority or institution; or
- (b) …"
5. Again in so far as it is relevant, s 30-125(1) provides:
"An entity is entitled to be endorsed as a deductible gift recipient if:
- (a) the entity has an ABN; and
- (b) the entity is a fund, authority or institution that:
- (i) is described (but not by name) in item 1 … of the table in section 30-15; and
- (ii) is not described by name in Subdivision 30-B if it is described in item 1 of that table; and
- (iii) meets the relevant conditions (if any) identified in the column headed 'Special conditions' of the item of that table in which it is described; and
- (c) the entity meets the requirements of subsection (6), unless:
- (i) the entity is established by an Act; and
- (ii) the Act (or another Act) does not provide for the winding up or termination of the entity; and
- (d) …"
6. The table in s 30-15 sets out the situations in which a taxpayer can deduct a gift or contribution. It describes eight situations by reference to the recipient, the type of the gift or contribution, the amount that may be deducted and any special conditions. Only item 1 is relevant in this case and then only in relation to the description of the recipient. The description is that of "A fund, authority or institution covered by an item in any of the tables in Subdivision 30-B". Section 30-B sets out fourteen tables. The first, headed "Health" sets out general categories of health recipients. Of these, it has been agreed between the parties and I accept, that item 1.1.6 is relevant. It describes the fund, authority or institution as:
"a charitable institution whose principal activity is to promote the prevention or the control of diseases in human beings".
7. Section 30-125(6), to which reference is made in s 30-125(1)(c) must be read with s 30-125(7). When that is done with the circumstances of this case in mind, s 30-125(6) provides:
"A law (outside this Subdivision), a document constituting the entity or rules governing the entity's activities must require the entity, at the first occurrence of an event described in subsection (7) [i.e. the winding up of the fund, authority or institution[3]
ITAA97, s 30-125(7)(a) ], to transfer to a fund, authority or institution gifts to which can be deducted under this Division:
- (a) any surplus assets of the gift fund (see section 30-130); or
- (b) if the entity is not required by this section to meet the requirements of section 30-130 - any surplus:
- (i) gifts of money or property for the principal purpose of the fund, authority or institution; and
- (ii) contributions described in item 7 or 8 of the table in section 30-15 in relation to a fund-raising event held for that purpose; and
- (iii) money received by the entity because of such gifts or contributions."
In summary, s 130-125(6) and (7) require that the entity be required by a law or by its constitution to transfer its funds to another DGR should it be wound up or its endorsement revoked.
An entity exempt from income tax under s 50-105 of ITAA97
8. Section 50-105 of ITAA97 provides that:
"The Commissioner must endorse an entity as exempt from income tax if the entity:
- (a) is entitled to be endorsed as exempt from income tax; and
- (b) has applied for that endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953."
Section 50-110 sets out the circumstances in which an entity is entitled to be endorsed. That entitlement arises if an entity meets all of the relevant requirements of s 50-110.[4]
9. Only one of those requirements is relevant in this case. It is found in s 50-110(2), which provides that, in order to be entitled, an entity must be covered by one of the items it specifies. The item that is relevant in this case is item 1.1 of the table in s 50-5. That item specifies a "charitable institution".
A health promotion charity under s 123D of the FBTA Act
10. Section 123D of the FBTA Act provides that:
- "(1) The Commissioner must endorse an entity as a health promotion charity if:
- (a) the entity is entitled to be endorsed as a health promotion charity (see subsection (2)); and
- (b) the entity has applied for that endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953.
- (2) An entity is entitled to be endorsed as a health promotion charity if the entity:
- (a) is a health promotion charity; and
- (b) has an ABN; and
- (c) is not an employer in relation to which step 2 of the method statement in subsection 5B(1E) applies."
11. Bicycle Victoria does not come within s 123D(2)(c) as it is not a government body or a public hospital, it is not carrying on a hospital and it is not providing ambulance services or services that support those services as described in step 2 of the method statement in s 5B(1E).
12. The expression "health promotion charity" is defined in s 136(1) of the FBTA Act to mean "… a charitable institution whose principal activity is to promote the prevention or the control of diseases in human beings."
A charitable institution under s 176-1 of the GST Act
13. Section 176-1 of the GST Act provides that:
- "(1) The Commissioner must endorse an entity as a charitable institution if:
- (a) the entity is entitled to be endorsed as a charitable institution (see subsection (2)); and
- (b) the entity has applied for that endorsement in accordance with Division 426 in Schedule 1 to the Taxation Administration Act 1953.
- (2) An entity is entitled to be endorsed as a charitable institution if the entity:
- (a) is a charitable institution; and
- (b) has an ABN."
Endorsement: its date of effect and cessation
14. If the Commissioner decides to endorse an applicant for endorsement, that endorsement takes effect from a date he specifies. That may be a date before the application for endorsement was made and a date before the applicant had an ABN.[5]
CONSIDERATION: statutory interpretation and the meaning of "charitable institution"
15. The essential issue under the endorsement provisions I have set out is that Bicycle Victoria be a "charitable institution". If it is, that will be sufficient in the circumstances of this case to require its endorsement as income tax exempt under s 50-105 of ITAA97 and as a charitable institution under the GST Act. In order to be endorsed as a DGR under s 30-120 of ITAA97 or as a health promotion charity under the FBTA Act, I will need to consider further elements.
Approach to statutory interpretation: general principles
16. I am mindful that:
"…In the end the task of the court is to ascertain and to enforce the actual commands of the legislature:
Scott v Cawsey … [[1907] HCA 80; 5 CLR 132] at 155. This will best be achieved by studying the words used and the context and the purpose or object underlying the Act."[8]per Bowen CJ Re Application of the NEWS CORP LTD (1987) 15 FCR 227 (Bowen CJ, Lockhart and Beaumont JJ) at 236
In more recent times, Hayne and Heydon JJ repeated the warning in
Shi v Migration Agents Registration Authority (Shi):[9]
" As this Court has so often emphasised … in recent years, questions presented by the application of legislation can be answered only by first giving close attention to the relevant provisions. Reference to decided cases or other secondary material must not be permitted to distract attention from the language of the applicable statute or statutes. Expressions used in decided cases to explain the operation of commonly encountered statutory provisions and their application to the facts and circumstances of a particular case may serve only to mask the nature of the task that is presented when those provisions must be applied in another case. The masking effect occurs because attention is focused upon the expression used in decided cases, not upon the relevant statutory provisions."[10]
[2008] HCA 31 ;(2008) 235 CLR 286 ;48 AAR 345 at [92]; 311; 366
17. These warnings have to be read in conjunction with four principles. In the confines of these reasons, I can state them only broadly and without their myriad of qualifications and exceptions but do so to give an indication of their content. The first is to return to the provision and apply it rather than another version of it. That this is so is apparent from the case of
McKinnon v Department of Treasury[11]
"… We would prefer to ask the question in terms of the language of the legislation itself, rather than any adaptation of it, because the former is perfectly clear in asking whether there exist reasonable grounds for the claim that the disclosure of the documents would be contrary to the public interest. …"[14]
[2006] HCA 45 ;(2006) 228 CLR 423 ;229 ALR 187 ;91 ALD 516 at [131]; 468; 222; 551
18. The second is that no legislative provision stands entirely alone. Its immediate context is that of the particular legislation in which it is placed. Its wider context is that of legislation generally. Unless Parliament has expressed a contrary intention, that brings it within the purview of the Acts Interpretation Act 1901 (AI Act). Like the common law, it requires close attention to be paid to the object of any particular Act for it provides that, in interpreting it, "… a construction that would promote the purpose or object underlying the Act … shall be preferred to a construction that would not promote that purpose or object."[15]
19. There is also judicial imprimatur for this approach. An example is found in High Court authorities such as
Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Tax[17]
"… The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction."[18]
81 ATC 4292 ;[1981] HCA 26 ;(1981) 147 CLR 297 ;35 ALR 151 at 320, 169–170
Brennan CJ, Dawson, Toohey and Gummow JJ discussed legitimate aids to construction in
CIC Insurance Ltd v Bankstown Football Club Ltd[19]
"It is well settled that at common law, apart from any reliance upon s 15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure …. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses 'context' in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy …. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in
Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363 at 388, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent …"[20](footnotes omitted) per Brennan CJ, Dawson, Toohey and Gummow JJ, and see also (1997) 187 CLR 384 ;141 ALR 618 at 408; 634–5per Mason J; Wacando vThe Commonwealth (1981) 148 CLR 1 ;37 ALR 317 at 25–26; 335–6; and TCN Channel Nine Pty Ltd vAustralian Mutual Provident Society (1982) 42 ALR 496 at 507–508per Woodward J) Alexandra Private Geriatric Hospital vBlewett (1984) 2 FCR 368 ;56 ALR 265 at 375–6; 271–2
20. The third principle relates to legitimate aids to construction other than those relating to extrinsic material. They are the rules of statutory construction developed by the common law to aid the interpretation of legislation. In so far as their application is consistent with the principles set out in cases such as Cooper Brookes and CIC Insurance, it must be assumed that Parliament has kept them in mind and, unless it has provided to the contrary, expects them to be applied.[21]
21. The fourth principle is that the Tribunal is bound by any interpretation of a provision previously given by the Federal Court and the High Court. It cannot engage in statutory interpretation simply by "… studying the words used and the context and the purpose or object underlying the Act" if there is binding authority. Only the High Court can take that approach if it chooses for it is not subject to binding authority.[22]
Approach to statutory interpretation: charitable institution
22. This is a case in which I will not be able to make my decision by simply studying the words used and the context and the purpose or object underlying the Act. The expression "charitable institution" has not been defined in ITAA97 or in the FBTA Act or the GST Act. There is, though, judicial authority that has interpreted the expression. Furthermore, it is binding judicial authority that takes me back to the common law and it is found in
Aid/Watch Incorporated v Commissioner of Taxation[23]
- "23. Where statute picks as a criterion for its operation a body of the general law, such as the equitable principles respecting charitable trusts, then, in the absence of a contrary indication in the statute, the statute speaks continuously to the present, and picks up the case law as it stands from time to time. Further, where, as here, the general law comprises a body of doctrine with its own scope and purpose, the development of that doctrine is not directed or controlled by a curial perception of the scope and purpose of any particular statute which has adopted the general law as a criterion of liability in the field of operation of that statute.
- 24. Accordingly, the use of the term 'charitable' in the phrase 'charitable institution' in s 50-5, item 1.1 of the 1997 Act and the corresponding provisions of the FBT and GST Acts is to be understood by reference to its source in the general law as it is developed in Australia from time to time."[24]
[2010] HCA 42 ;(2010) 272 ALR 417 ;77 ATR 195 ;85 ALJR 154 at [23]–[24]; 423; 203; 161
Charitable institution: source of its meaning?
23. There was no issue regarding Bicycle Victoria's being an "institution" and I accept that it is an institution for the purposes of the definition of "charitable institution".
24. Consistently with Aid/Watch, both parties submitted that the expression "charitable institution" takes its meaning from the common law and, more particularly, from the preamble to the Charitable Uses Act 1601 (Imp)[25]
Chesterman v Federal Commissioner of Taxation[26]
Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation[31]
"The Act attempts no definition of charity or of what for its purposes will be charitable. But having regard to the decision of the Privy Council in
Chesterman v Federal Commissioner of Taxation … it must be taken that whether or not the institution is relevantly charitable will be determined according to the principles upon which the Court of Chancery would act in connexion with the 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 … are to be observed in deciding whether or not the institution is charitable for the purposes of the Act."[32]71 ATC 4206 ;[1971] HCA 44 ;(1971) 125 CLR 659 at 666
25. The same approach is to be taken in relation to the meaning of the expression "charitable institution" when it appears in s 50-5 of ITAA97. This is apparent from the judgment of the majority of the High Court in
Commissioner of Taxation v Word Investments Limited[33]
Charitable institution: Statute of Elizabeth
26. The Statute of Elizabeth is a reference to the Charitable Uses Act 1601 (Imp).[35]
"Or on the rents and profits of lands, tenements, hereditaments, or heritages belonging to any hospital, public school, or almshouse, or vested in trustees for charitable purposes, so far as the same are applied to charitable purposes".[36]
per Lord Chancellor Halsbury The Commissioners for Special Purposes of the Income Tax vPemsel [1891] AC 531 at 583
27. There was some doubt whether the word "charity" and its derivatives should be given their popular meaning or that derived in the context of trust law where a trust established for a purpose is invalid unless the purpose is a charitable purpose. The law relating to charitable trusts had developed before the enactment of the Statute of Elizabeth. In
The Commissioners for Special Purposes of the Income Tax v Pemsel[37]
"…'Charity' in its legal sense comprises four principal divisions: trusts for the relief of poverty, trusts for the advancement of education, trusts for the advancement of religion, and trusts for other purposes beneficial to the community not falling under any of the preceding heads. The trusts last referred to are not the less charitable in the eye of the law because incidentally they benefit the rich as well as the poor, as indeed every charity that deserves the name must do, either directly or indirectly. …"[38]
[1891] AC 531 at 583
28. As to the application of these principles in a particular case, Barwick CJ, with whom McTiernan J concurred, considered the relevance of earlier authorities in the Council of Law Reporting case. His Honour said that, having regard to the decision of the Privy Council in Chesterman, the indications contained in the preamble to the Statute of Elizabeth and the classifications set out by Lord Macnaghten in Pemsel are to be observed in deciding whether or not an institution is charitable. His Honour continued:
"The reported cases may in some instances afford a guide by analogy to the decision whether a particular trust, or a particular purpose is charitable. In addition, the many dicta found in the reasons for judgment in such cases, though by no means of one accord, provide valuable assistance in resolving such a question. But in the long run, it seems to me, it is a matter of judgment whether the trust or purpose fairly falls within the equity, or as it is sometimes said, 'within the spirit and intendment' of the preamble to the … [Statute of Elizabeth]. …
The instances given in that preamble are not exhaustive. Charity is not limited to activities eiusdem generis with those instances, if indeed a genus is really to be found in them. But the preamble does give an indication and, it would seem, a definitive indication, of what will be charitable, whether in point of trust or of purpose. Lord Macnaghten in
Pemsel's Case [1891] A.C. 531 extracted from this indication four heads or categories of charity of which the first three heads or categories are capable of more certain application than the last category …"[39]71 ATC 4206 ;[1971] HCA 44 ;(1971) 125 CLR 659 at 666–667
29. The majority of the High Court in Aid Watch expressed the same thought when they acknowledged that:
"The speech of Lord Macnaghten in Pemsel … is the source of the modern classification of charitable trusts in four principal divisions … But even in 1891, the case law which gave the term 'charitable' its technical meaning had developed considerably since the time of the British income tax statute of 1799. The case law may be expected to continue to do so as the cases respond to changed circumstances. As Lord Wilberforce put it, the law of charity is a moving subject which has evolved to accommodate new social needs as old ones become obsolete or satisfied …"[40]
; citations omitted [2010] HCA 42 ;; (2010) 272 ALR 417 ;77 ATR 195 ;85 ALJR 154 at [18]; 422; 202; 160
30. Their Honours did not elaborate upon the nature of any change in social need or the extent of any change that is required before the courts will respond to accommodate that change. I would venture to suggest that it is inherent in the authorities to which I have referred that the response will be cautious and consistent with that adopted by the Supreme Court of Canada in
R v Salituro.[41]
"… Judges can and should adapt the common law to reflect the changing social, moral and economic fabric of the country. Judges should not be quick to perpetuate rules whose social foundation has long since disappeared. Nonetheless, there are significant constraints on the power of the judiciary to change the law. … [I]n a constitutional democracy such as ours it is the legislature and not the courts which has the major responsibility for law reform; and for any changes to the law which may have complex ramifications, however necessary or desirable such changes may be, they should be left to the legislature. The judiciary should confine itself to those incremental changes which are necessary to keep the common law in step with the dynamic and evolving fabric of our society."[42]
cited with approval by the majority in [1991] 3 SCR 654 at 670. See also Vancouver Society of Immigrant and Visible Minority Women vMinister of National Revenue [1999] 1 SCR 10 Cory, Iacobucci, Major and Bastarache JJ; L’Heureux-Dubé, Gonthier and McLachlin JJ dissenting at [150]per Heerey J Tasmanian Electronic Commerce Centre vFederal Commissioner of Taxation [2005] ATC 4219 ;[2005] FCA 439 ;(2005) 142 FCR 371 ;219 ALR 647 ;59 ATR 10 at [37]; 385; 659; 21; 4229
Charitable institution: purposes and activities
31. Lord Macnaghten referred to "purposes" and Barwick CJ to both "purposes" and "activities". The reference to "purposes" is in keeping with the equitable roots of the concept of a charitable trust. The reference to both purposes and activities is consistent with the manner in which activities may shed light on the purposes for which they are undertaken but activities do not determine purposes. As Iacobucci J explained in
Vancouver Society of Immigrant and Visible Minority Women v Minister of National Revenue[43]
"… Another is its focus on 'charitable activities' rather than purposes'. 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. Accordingly, this Court held … that the inquiry must focus not only on the activities of an organization but also on its purposes."[44]
See also [1999] 1 SCR 10 at [152]AYSA vCanada Revenue Agency and Canadian Centre for Philanthropy [2007] 3 SCR 217 at [24]
32. Word Investments illustrates the point. The High Court considered a submission made on behalf of the Commissioner to the effect that there was no nexus between the profit made from Word Investment's commercial activities in publishing and the effectuation of a charitable purpose i.e. to proclaim the Christian religion. All that it did was to determine to distribute its profits to other bodies so that they could proclaim the Christian religion. In rejecting the submission, the majority of the High Court concluded that nexus is important but need not be immediate. Rather, the nexus is found in what is the natural and probable consequence of its activities. Their Honours said:
"In
Baptist Union of Ireland (Northern) Corporation Ltd v Commissioners of Inland Revenue … [(1945) 26 TC 335 at 348] MacDermott J said:'the charitable purpose of a trust is often, and perhaps more often than not, to be found in the natural and probable consequences of the trust rather than in its immediate and expressed objects.'
Similarly, the charitable purposes of a company can be found in a purpose of bringing about the natural and probable consequence of its immediate and expressed purposes, and its charitable activities can be found in the natural and probable consequence of its immediate activities."[45]
[2008] ATC ¶20-072 ;[2008] HCA 55 ;(2008) 236 CLR 204 ;251 ALR 206 ;83 ALJR 105 ;70 ATR 225 at [38]; 226; 219; 117; 241; 9,003
33. In Word Investments, the majority of the High Court considered the objects of a company that had a memorandum of association in which it had stated its objects. It was not required to do so but, having chosen to do so, the majority said that:
"… it is necessary to examine the objects, and the purported effectuation of those objects in the activities, of the institution in question. In examining the objects, it is necessary to see whether its main or predominant or dominant objects, as distinct from its concomitant or incidental or ancillary objects, are charitable …'[46]
[2008] ATC 20-072 ;[2008] HCA 55 ;(2008) 236 CLR 204 ;251 ALR 206 ;83 ALJR 105 ;70 ATR 225 at [17]; 217; 212; 112; 234; 8,997
34. In dissent, Kirby J warned that:
"… With respect, there are real dangers in assigning too much importance to the constituting document. This is especially so now that the doctrine of ultra vires in relation to companies has been discarded as an important element in Australian corporations law ….
The constituting document can obviously be drafted widely or ambiguously. Its language may generate uncertainty as to the true purposes of the institution propounded as charitable. It may contain multiple purposes but not indicate whether they are all of equal importance or whether some purposes are subsidiary to others. The document may not identify the outer limits of the purposes which the institution may pursue. For these reasons, in my opinion, the real discrimen for the characterisation of an entity propounded as a 'charitable institution' is what that entity actually does and what purposes it actually pursues. I take this to be the reason why, in
Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation …, Barwick CJ said: 'If its purposes are charitable, it will be such an institution for the nature of the institution inheres in the purposes it is created to and does pursue.'"[47][2008] ATC 20-072 ;[2008] HCA 55 ;(2008) 236 CLR 204 ;251 ALR 206 ;83 ALJR 105 ;70 ATR 225 at [173]-[174]; 265; 251–252; 140–141; 271; 9,026
35. It seems to me that his Honour's words of warning are consistent with earlier English and Australian authority as well as with the principles implicit in the approach adopted by the majority. It is clear from them that the determination whether an object is charitable or not is not determined simply by reference to the objects set out in the entity's documentation. As Mackenzie J of the Supreme Court of Queensland indicated in
Barclay v De Lacy,[48]
Charitable institution: purposes, objects and motives
36. The cases contain references to both purposes and objects. At times, they distinguish them and at times they use them synonymously while distinguishing them from motives. As far as motives are concerned, it is clear that "Mere motive does not make a charity under the revenue laws"[51]
"Whether the purposes of the trust are charitable does not depend on the subjective intentions or motives of the settler, but on the legal effect of the language he has used. The question is not what was the settlor's purpose in establishing the trust, but what are the purposes for which trust money may be applied."[52]
Latimer vCommissioner of Inland Revenue [2004] UKPC 13 ;[2004] 1 WLR 1466 at [2]; 1475
37. The distinction between motive and purpose is apparent in the judgment of Romer LJ in
In re King;
Kerr v Bradley:[53]
"In this case I have to determine, in the first place, whether a gift of the residuary estate of the testatrix for the purpose of providing a stained-glass window in memory of herself and certain members of her family, is a good charitable bequest. I have no doubt that it is. It is clear that a bequest to provide a parish church with stained-glass windows is a good charitable gift. But it is said that the gift here is bad because the motive is not to beautify the church or to benefit the parishioners, but to perpetuate the memory of the testatrix and her relations. It was, however, pointed out in
Hoare v Osborne … that in considering whether a bequest is charitable, the motive of the testator in making it is immaterial. In certain cases a gift for the purpose of erecting a tomb in a church has been held not to be a charitable gift, but the distinction between those cases and this is that a gift for erecting a tomb is not so obviously a gift for the benefit of a church as a gift for the provision of a stained-glass window. …"[54][1923] 1 Ch 243 at 245
38. When distinguishing objects and purposes, it seems to me that the courts have done so in cases concerning companies required to state their objects in their Memoranda and Articles of Association. The objects expressed in those Memoranda may not be the purposes for which the company is operated. For those companies not required to state their objects or for other bodies, the two words are used interchangeably. That is also the case when the distinction is made between objects and purposes on the one hand and motive on the other.
39. The case of
Brookton Co-operative Society Limited v Federal Commissioner of Taxation[55]
40. Mason J, with whom Murphy and Wilson JJ concurred, said:
"…in determining the purpose for which the taxpayer is established the courts below were entitled to look not merely to the activities of the taxpayer and its directors, but also to the intention of the promoters. In general a distinction is to be drawn between purpose on the one hand and motives and intentions of the promoters on the other hand, but I do not see why the intentions of the promoters may not be relevant in determining what is the purpose for which a company is established. … Likewise, in determining the purpose for which a company is established, it is permissible to look at the business carried on by subsidiary companies, at least when action to make the companies subsidiaries is taken by the promoters on the incorporation of the holding company and pursuant to plans they have previously made as promoters of the holding company."[57]
81 ATC 4346 ;[1981] HCA 28 ;(1981) 147 CLR 441 ;35 ALR 293 ;55 ALJR 479 at 453; 301; 4,353; 483-484
41. The distinction was also made in Word Investments and again in relation to an incorporated body that was required to state its objects. The judgment of the majority in Word Investments referred to the distinction between purposes and objects and its relevance to companies having a memorandum of association with an objects clause. They relied on the following passage from the judgment of Dixon J in
HA Stephenson & Son Ltd (In liq) v Gillanders, Arbuthnot & Co[58]
"When the question is whether a particular transaction binds the company, or is extra vires, the well-known principle may not apply by which, in considering whether a company should be wound up because the substratum of its constitution has failed, its true, main, dominant or paramount purpose is ascertained and general clauses are understood as subsidiary, as conferring powers not independent but subserving the main end. In the one case the ultimate question is whether it is just and equitable that the company should be wound up, and, for its determination, general intention and common understanding among the members of the company may be important. In the other case the question is one of corporate capacity only, and this must be ascertained according to the true meaning of the memorandum interpreted by a fair reading of the whole instrument."[59]
[1931] HCA 47 ;(1931) 45 CLR 476 at 487
42. In the context of deciding whether an incorporated body is a charitable body, the majority of the High Court focused upon the purposes of the body. They referred to the RAC of Surgeons case in which the search was made for the real purpose rather than the stated purpose. In that case, the High Court had considered s 23(e) of ITAA36 but had done so in considering whether the Royal Australasian College of Surgeons (College) was a scientific institution within the meaning of that section and so exempt from income tax on income received from its investments. Despite that, it illustrates the approach adopted by the courts in ascertaining an institution's objects.
43. There was no requirement that the scientific institution have been established only for the promotion of science or the like. The College was a limited company whose income and property were applied solely to its objects. Its objects were partly for the promotion of professional interests and partly for the promotion of surgical knowledge and practice. It conducted conferences to discuss surgical matters. A library was provided by the College for the use of its members and it published a surgical journal. It held examinations for admission to its membership and awarded scholarships to medical students but did not confer medical degrees.
44. The issue to be considered was whether the College was a scientific institution, and so coming within the scope of s 23(e), or a professional society, and so falling beyond it. Latham CJ said that "Unless the promotion of surgical science is the main substantial or primary object of the College, it cannot be described as a scientific institution".[60]
45. Rich J concluded in RAC of Surgeons that:
"… the main or real object of the College is the promotion and advancement of surgery. By this I mean that its essential purpose is to enlarge and extend the boundaries or area of the science of surgery. Its other objects are not collateral or independent but merely concomitant and incidental to the main object. And the fact that some of these subsidiary or ancillary functions and purposes may indirectly and incidentally be of benefit to the members of the profession does not destroy the exemption claimed."[62]
[1943] HCA 34 ;(1943) 68 CLR 436 at 447
Starke J expressed a similar conclusion in this way:
" The activities of the College may benefit its fellows, but the facts related speak for themselves and establish that the College is doing 'something higher and larger' than the mere promotion of professional interests. It is actively engaged in the promotion and advancement of science in the advancement of surgical knowledge and practice. And that, I think, is the main and prevailing and the characteristic nature of the activities of the College. …"[63]
A related example is found in [1943] HCA 34 ;(1943) 68 CLR 436 at 449in which the Supreme Court of Queensland was required to consider whether the Queensland Construction Training Fund was an institution exempt from stamp duty under the Barclay vDe Lacy [1996] 2 Qd R 112 Stamp Act 1894 (Qld). Section 59E exempted a body from stamp duty if it had been declared to be “…an institution … the principal object and pursuit of which is the fulfilling of a charitable object or an object promoting the public good (not being an object or pursuit that is a sporting, recreational, leisure or social pursuit or object or an object or pursuit declared by order in council … ”. Mackenzie J concluded at 117 that:“Having considered all of these aspects of the matter and formed an impression of the way in which the body operates and is intended to operate, I am satisfied that it fits the statutory test. The underlying premise in the objects of the Fund is that the level of skills of those engaged in the building and construction industry will be enhanced by enhancing their level of education and training through the medium of facilities assisted by the Fund and that thereby the public would benefit from better and more efficient services and products. It is true that the industry as a whole may benefit by reason of its enhanced efficiency but what is the principal object and pursuit of the fund is to be determined by an overall view of its structure and operation. In my view, any benefit to any particular individual in the industry or the industry generally is incidental rather than the principal object and pursuit of the Fund.”
46. The same principles were applied by the Federal Court in
Cronulla Sutherland Leagues Club Ltd v Federal Commissioner of Taxation[64]
47. In separate judgments, Lockhart and Beaumont JJ decided that the encouragement or promotion of sport did not need to be the exclusive purpose or object of the Club in order for its trading income to be exempt from income tax under s 23(g) of ITAA36 but it did need to be the main or predominant purpose or object.[65]
"… have other objects or purposes which are merely incidental or ancillary thereto or which are secondary and even unrelated to the main object or purpose without disqualifying the body from the exemption. But if it has two co-ordinate objects, one of which is outside the exemption, the exemption cannot apply because it would be impossible to say that one object is the main or predominant object."[66]
90 ATC 4215 ;(1990) 23 FCR 82 at 95; 4,225
As Beaumont J said:
"… [A]lthough it is not necessary that the promotion or encouragement of the sport or game be the only, or exclusive, object, in order to qualify for the exemption of its income from tax, the institution must have, as its predominant purpose, the promotion or encouragement of the sport or game. If the institution has such a purpose, that will be the intrinsic character of the object it seeks to promote and the existence of merely incidental functions and purposes will not destroy the claim for exemption. …"[67]
90 ATC 4215 ;(1990) 23 FCR 82 at 117; 4,244
48. Neither of the Club's two objects could be correctly described as ancillary or incidental to the other or as necessarily independent of the other. They overlapped to some degree but the main object was the provision of social amenities:
"It is unreal to regard the appellant's clubhouse and its social activities as being undertaken for the purpose of encouraging or promoting rugby league football and supporting the football club. This is a secondary purpose."[68]
per Lockhart J 90 ATC 4,215 ;(1990) 23 FCR 82 at 97; 4,227
That meant that the Club was not a charitable institution.
Charitable institution: when are the purposes of an institution identified?
49. As to the time at which the purpose for which the company "is established" is to be determined, Mason J said in Brookton:
"… it is necessary to look, not only to the circumstances existing at the time of incorporation, but also to the activities of the company at the time when its status as a co-operative company is to be determined. No doubt it was the presence of the words 'is established' and the purpose of the section that led Fullagar in
A & S Ruffy Pty Ltd v Federal Commissioner of Taxation … [(1958) 98 CLR 637 at p 656] and Menzies J in Renmark Fruitgrowers Co-operated Ltd … [(1969) 121 CLR 501 at p 506] to adopt this approach. To my mind it is evidently correct, allowing, as it does, that the purpose for which a company is established may change in the course of time and that with the change of purpose there may come a change in status as a co-operative company. Moreover, in Ruffy … the Court explicitly rejected the suggestion that the objects of the business were to be gathered solely from the objects clause in the memorandum. In that case the Court, in characterizing the object of the business, looked to the business activities of the company after its incorporation - see the joint judgment of Dixon CJ, Williams and Webb JJ … In
Revesby Credit Union Co-operative Ltd v Federal Commissioner of Taxation … [(1965) 112 CLR 564 at 576], Mc Tiernan J said 'The main test to be adopted in ascertaining the primary object is to ask what the actual activities of the appellant society indicate it to be.'"[69]81 ATC 4346 ;[1981] HCA 28 ;(1981) 147 CLR 441 ;35 ALR 295 ;55 ALJR 479 ; at 451; 299; 4,352; 482–483
50. Aickin J underlined the need to examine the company and its activities on a year by year basis and not merely at the time of its incorporation.[70]
51. The currency of the assessment of a company's objects is a theme also to be found in the judgment of Lockhart J in Cronulla. Noting that purpose may change over time and that the enquiry must be made in relation to a particular year of income under the ITAA 1936, Lockhart J stated that 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."[72]
For the reasons I give at [104]–[107] below, I do not consider that the issue I must decide is limited to any particular year of income. 90 ATC 4215 ;(1990) 23 FCR 82 at 95–96; 4,225
Charitable institution: charitable purposes, profits and "co-payments"
52. From the context in which charitable purposes and charities have been considered, it is clear that a charitable entity, be it a trust, association or institution of some sort, may make a profit. As Dixon CJ said in Council of Law Reporting case:
"… Indeed, the very fact that the [Income Tax] Act exempts the income of a charitable institution concedes that such an institution may derive profits from its activities."[73]
and see also Re Tennant at [75] above 71 ATC 4206 ;[1971] HCA 44 ;(1971) 125 CLR 659 at 670
53. The case of
The Commissioners of Inland Revenue v The Falkirk Temperance Café Trust[74]
Charitable institution: purposes "beneficial to the community"
54. The fourth category identified by Lord Macnaghten was considered further by the Court of Appeal in
Commissioners of Inland Revenue v Yorkshire Agricultural Society[75]
"(1.) The holding of an annual show for the exhibition of live stock, poultry, farm produce, horticultural produce, also of machinery, implements, tools, appliances, utensils, etc., connected with or appertaining to agriculture; such annual show to be held successively in different parts of the county; (2.) the improvement of live stock, poultry, implements, machinery and appliances in connection with agriculture; (3.) the demonstration of methods and processes connected with, and the furthering of the interests of agriculture, horticulture, arboriculture, apiculture and allied industries; (4.) agricultural education; (5.) scientific research and experimental work; (6.) watching and advising on legislation affecting the agricultural industry."[76]
[1928] 1 KB 611 at 612–613
The Society derived its income from entry fees and gate receipts at its annual show, interest on investments and subscriptions of its members. It spent its money on its annual show, which was held in a different location each year, the publication of a Journal disseminating scientific knowledge of value to farmers and breeders and general administration. It invested any excess of receipts over expenditure and realised investments if there was a shortfall. The Society sought exemption from income tax on the basis that it was a body of persons established for charitable purposes only.
55. The Court of Appeal considered whether income that the Society derived from its investments formed part of the income of a body of persons established for charitable purposes only. Referring to the fourth category identified by Lord Macnaghten, Lord Hanworth MR made the following points:
"… What is a 'purpose beneficial to the community'? It has long been established that a mere benevolent purpose is not necessarily a purpose beneficial to the community. …
… it has been determined that where the purpose of the association is rather for the benefit of the members themselves, than a wider aim, then such institutions as are so established are not within the purview of purposes beneficial to the community. …"[77]
[1928] 1 KB 611 at 622
56. With regard to whether or not the Society was for a purpose beneficial to the community, Lord Hanworth found that it was for it was formed for the purpose of improving agriculture as a whole. It was not established for any confined purpose of benefiting its own members but rather for a purpose of bringing advancement and improvement to the benefit of the community at large[78]
57. The benefits derived by the Society's members were also the subject of the judgments delivered by Atkin and Lawrence LJJ, both of whom concurred with Lord Hanworth. Lord Atkin said:
"There can be no doubt that a society formed for the purpose merely of benefiting its own members, though it may be to the public advantage that its members should be benefited by being educated or having their aesthetic tastes improved or whatever the object may be, would not be for a charitable purpose, and if it were a substantial part of the object that it should benefit its members I should think that it would not be established for a charitable purpose only. But, on the other hand, if the benefit given to its members is only given to them with a view of giving encouragement and carrying out the main purpose which is a charitable purpose, then I think the mere fact that the members are benefited in the course of promoting the charitable purpose would not prevent the Society being established for charitable purposes only. That I imagine to be this case."[80]
[1928] 1 KB 611 at 631
Lawrence LJ said:
"In my judgment the crucial question in this appeal is whether the appellant Society was established for the promotion of agriculture generally or was what has been conveniently called a members' society, established for the promotion of the interests of its members in their respective businesses. If the former be the case I am clearly of opinion that the Society was established for charitable purposes only within the legal acceptation of that expression. Agriculture is an industry not merely beneficial to the community but vital to its welfare. The fact that the operations of the Society may be confined to Yorkshire-a matter upon which I desire to express no opinion-is, in my opinion, immaterial, as it is well settled that the benefit in point of local area need not extend to the public at large and that the benefit of the inhabitants of a particular district will suffice … It is plain to my mind that the general improvement of agriculture is a charitable purpose falling within the fourth class of Lord Macnaghten's well known classification of legal charities …".[81]
[1928] 1 KB 611 at 635–636
58. This aspect was further considered in
Commissioners of Inland Revenue v Oldham Training and Enterprise Council.[82]
59. Lightman J observed that:
"… So far as the object of Oldham TEC is to set up in trade or business the unemployed and enable them to stand on their own feet, that is charitable as a trust for the improvement of the conditions in life of those 'going short' in respect of employment and providing a fresh start in life for those in need of it, and accordingly are for the relief of poverty … The activity of Oldham TEC in providing such benefits as business start-up services is accordingly, charitable. …"[83]
(1996) 69 TC 231 at 249
60. Lightman J focused on those of Oldham TEC's activities falling outside those that relieved poverty. Did they fall within Lord Macnaghten's fourth category? He observed:
"To fall within the fourth category, it is necessary (but not sufficient) that the object is of general public utility. The public to be benefited for this purpose may be a section of the public and this includes the inhabitants of an area such as Oldham (see e.g.
In re Smith [1932] 1 Ch 153). The object must be to promote a purpose beneficial to the community, and not to the interests of individual members of the community. But an object may nonetheless be charitable as beneficial to the community though its fulfilment either directly or indirectly incidentally may benefit such individuals. Beyond such general public utility it is necessary that the object comes within the spirit and intendment, even if not within the words, of the Statute of Elizabeth. As an example, if the object of setting up the unemployed in trade or business was not charitable as being for the relief of poverty, it would fall within the fourth head of charity. It is a matter of general public utility that the unemployed should be found gainful activity and that the State should be relieved of the burden of providing them with unemployment and social security benefits, and this object is within the spirit, if not the words, of the Statute of Elizabeth, which includes amongst its list of charitable objects 'the support, aid and help of young tradesmen and handicraftsmen'."[84][1968] AC 138 at 250
61. Analysing the objects of the Oldham TEC, Lightman J concluded that it is an altruistic organisation, in the sense that no profit or benefit is conferred on its members and its very reason for being is to assist others in and around Oldham. It is substantially publicly funded and some of its objects were indisputably charitable. His Honour then went on to consider its second main object and said of it:
"… the second main object, namely promoting trade, commerce and enterprise, and the ancillary object, of providing support services and advice to and for new businesses, on any fair reading must extend to enabling Oldham TEC to promote the interests of individuals engaged in trade, commerce or enterprise and provide benefits or services to them. …".[85]
[1968] AC 138 at 251
The facts that had been agreed between the parties showed that this was precisely the manner in which Oldham TEC had conducted itself and Lightman J said of its activities in this regard:
"… Such efforts on the part of Oldham TEC may be intended to make the recipients more profitable and thereby, or otherwise, to improve employment prospects in Oldham. But the existence of these objects, in so far as they confer freedom to provide such private benefits, regardless of the motive or the likely beneficial consequences for employment, must disqualify Oldham TEC from having charitable status. The benefits to the community conferred by such activities are too remote. …".[86]
(1996) 69 TC 231 at 251
62. Clearly, the fact that Oldham TEC's main object was promoting trade, commerce and enterprise did not take it outside Lord Macnaghten's fourth classification per se. So too in
Crystal Palace Trustees v Minister of Town and Country Planning,[87]
Income Tax Special Comrs. v Pemsel …".[88]
63. These cases show that the fourth class is not confined to purposes that were considered "beneficial to the community" in 1891. Instead, the community and what is beneficial to it has been considered from time to time. In
Scottish Burial Reform and Cremation Society Ltd. v Glasgow Corporation,[89]
"… The purposes in question, to be charitable, must be shown to be for the benefit of the public, or the community, in a sense or manner within the intendment of the preamble to the statute 43 Eliz. 1, c. 4. The latter requirement does not mean quite what it says; for it is now accepted that what must be regarded is not the wording of the preamble itself, but the effect of decisions given by the courts as to its scope, decisions which have endeavoured to keep the law as to charities moving according as new social needs arise or old ones become obsolete or satisfied. Lord Macnaghten's grouping of the heads of recognised charity in
Pemsel's case [1891] A.C. 531, 583 is one that has proved to be of value and there are many problems which it solves. But three things may be said about it, which its author would surely not have denied: first that, since it is a classification of convenience, there may well be purposes which do not fit neatly into one or other of the headings; secondly, that the words used must not be given the force of a statute to be construed; and thirdly, that the law of charity is a moving subject which may well have evolved even since 1891."[90][1968] AC 138 at 154
64. This is also illustrated by a case such as that decided by the Federal Court of Appeal in Canada in
Vancouver Regional FreeNet Association v Minister of National Revenue (C.A.).[91]
"Information is the currency of modern life. This has properly been called the information age. The free exchange of information amongst members of society has long been recognized as a public good. It is indeed essential to the maintenance of democracy, and modern experience demonstrates more and more frequently that it, more than any force of arms, has the power to destroy authoritarianism. The recognition of freedom of speech as a core value in society is but one aspect of the importance of freedom of information.
The preamble to the Statute of Elizabeth I speaks of the repair of bridges, ports, causeways and highways. These were, of course, at the time the essential means of communication. With the passage of time they have been considered so essential to the public welfare that they have been almost entirely taken over by public authorities. The same is true of the example given by Lord Macnaghten in Pemsel's case, and the supply of pure water, though generally not 'gratuitous', is now viewed as an essential public service. Likewise, the provision of electric light, one of the examples listed in the foregoing quotation from Tudor on Charities.
While I do not want to insist unduly on the analogy to the information highway, there is absolutely no doubt in my mind that the provision of free access to information and to a means by which citizens can communicate with one another on whatever subject they may please is a type of purpose similar to those which have been held to be charitable; it is within the spirit and intendment of the preamble to the Statute of Elizabeth I."
65. At common law, a trust established for the purpose of attaining political objectives was invalid. The reason for that conclusion was explained by Lord Parker of Waddington in
Bowman v Secular Society Ltd[92]
"… a trust for the attainment of political objects has always been held to be invalid, not because it is illegal, for everyone is at liberty to advocate or promote by any lawful means a change in the law, but because the Court has no means of judging whether a proposed change in the law will or will not be for the public benefit, and therefore cannot say that a gift to secure the change is a charitable gift."[93]
[1917] AC 406 at 442
66. This has been applied in other cases to which the majority of the High Court referred in its judgment in Aid/Watch.[94]
De Themmines v De Bonneval.[95]
67. The majority in Aid/Watch referred to Australian authorities considering Bowman and paid particular attention to the judgment of Dixon J in
Royal North Shore Hospital of Sydney v Attorney-General of NSW.[97]
"(i) a purpose contrary to the established policy of the law cannot be recognised as a charitable purpose; (ii) even if (i) does not apply, the purpose in question must have the real or imputed intention of contributing to the public welfare; (iii) when the main purpose of the trust is 'agitation' for legislative or political changes, with respect to religion, poor relief or education, 'it is difficult' for the law to find that (ii) is satisfied; and (iv) the source of that difficulty is the apparent paradox in a 'coherent system of law' treating as for the public welfare 'objects which are inconsistent with its own provisions'."[98]
[2010] HCA 42 ;(2010) 272 ALR 417 ;77 ATR 195 ;85 ALJR 154 at [43]; 428; 207
68. The majority observed that the "coherent system of law", to which Dixon J had referred, was supplied by the Commonwealth Constitution. The provisions of the Constitution mandate a system of representative and responsible government with universal adult franchise. Section 128 establishes a system for the amendment of the Constitution. As that system requires that a proposed law to effect amendment must be submitted to the electors, communication between electors and legislators and officers of the executive and among electors themselves is an indispensable incident of the system itself. The majority concluded:
"… Any burden which the common law places upon communication respecting matters of government and politics must be reasonably appropriate and adapted to serve a legitimate end in a manner which is compatible with the maintenance of that system of government ….
The system of law which applies in Australia thus postulates for its operation the very 'agitation' for legislative and political changes of which Dixon J spoke in Royal North Shore Hospital. … [I]t is the operation of these constitutional processes which contributes to the public welfare. A court administering a charitable trust for that purpose is not called upon to adjudicate the merits of any particular course of legislative or executive action or inaction which is the subject of advocacy or disputation within those processes."[99]
[2010] HCA 42 ;(2010) 272 ALR 417 ;77 ATR 195 ;85 ALJR 154 at [44]–[45]; 428–429; 207–208
69. With these principles in mind, the majority went on to accept the submissions made by Aid/Watch that it should be regarded as a charitable institution:
"… Aid/Watch submitted that the generation by it of public debate as to the best methods for the relief of poverty by the provision of foreign aid has two characteristics indicative of its charitable status. The first is that its activities are apt to contribute to the public welfare, being for a purpose beneficial to the community within the fourth head identified in Pemsel. The second is that whatever else be the scope today in Australia for the exclusion of 'political objects' as charitable, the purposes and activities of Aid/Watch do not fall within any area of disqualification for reasons of contrariety between the established system of government and the general public welfare.
… [T]he generation by lawful means of public debate, in the sense described earlier in these reasons, concerning the efficiency of foreign aid directed to the relief of poverty, itself is a purpose beneficial to the community within the fourth head of Pemsel.
It also is unnecessary for this appeal to determine whether the fourth head encompasses the encouragement of public debate respecting activities of government which lie beyond the first three heads (or the balance of the fourth head) identified in Pemsel and, if so, the range of those activities. What, however, this appeal should decide is that in Australia there is no general doctrine which excludes from charitable purposes 'political objects' and has the scope indicated in England by
McGovern v Attorney General…."[100][2010] HCA 42 ;(2010) 272 ALR 417 ;77 ATR 195 ;85 ALJR 154 at [46]–[48]; 429–430; 208–209
Charitable institution: what is "the community"?
70. As each of the cases in the previous section of my reasons recognises, the purpose must be beneficial to the community or the public, however it is described, if it is to be regarded as charitable. Each also recognises that the purpose will not lose that character merely because individuals benefit when the purpose is implemented. At the same time, if its purpose is to benefit individuals, its purpose cannot be charitable. Each case also recognises, explicitly or implicitly, that it is not necessary that the whole of the community or of the public benefit. It is enough that it is a part of the community but, where is the line to be drawn?
71. Dixon CJ also reflected on the matter in his later judgement in
Thompson v Federal Commissioner of Taxation.[101]
"… But putting aside any marginal questions about the field of education … there is no reason to doubt that a trust which would be upheld as charitable solely on the ground that it was for the advancement of education would obtain the exemption given by s. 8 (5) to devises and bequests etc. for public educational purposes, that is of course provided that the purposes were in Australia. The tendency of the trust must be to benefit the public, a condition that is satisfied if it tends to the benefit of the public at large, or a class or section of the public. The trusts may be limited in their operations by reference to locality, to conditions of people, to their disabilities, defects or misfortunes and by reference to many other attributes of men and things, yet the trusts may retain their 'public' character. Not a little difficulty has been felt in defining the conception of 'public', 'public charity' or 'public benefit' which this involves but the contrast is, of course, to private advantage. It is not the occasion to enter upon the discussion of the difficulty; it is enough to refer to some of the leading modern cases dealing with it … In
In re Scarisbrick;
Cockshott v. Public Trustee [[1951] Ch 622] Jenkins L.J. set out five general propositions upon this subject, in relation however to a case concerned with the relief of poverty. His Lordship in doing so said: 'An aggregate of individuals ascertained by reference to some personal tie (e.g., of blood or contract, such as the relations of a particular individual, the members of a particular family, the employees of a particular firm, the members of a particular association, does not amount to the public or a section thereof for the purposes of the general rule' [at p. 649]. (The italics are mine.)The words I have italicized apply to the facts here. Of course the foregoing considerations operate directly only upon the law of charity, not upon the application of s. 8(5). But they do provide something more than an analogy. For it is obvious that the statutory exemption is in pari materia.
For myself I would reject the view that a trust in favour of the William Thompson Masonic Schools and Hostels is to be considered a charitable trust because it is for the advancement of education. I would reject it because such a trust would lack the 'public' element, the element of public benefit or advantage that is necessary. … The same reasons as govern this view lead me to the further conclusion that the gift does not amount to a devise or bequest for public educational purposes so as to be exempt from estate duty under s. 8(5).
Large as is the membership of the masonic order in New South Wales it forms but a society of persons bound together as a voluntary association into which members are admitted by the election of the existing members as provided by the rules adopted contractually for the government of the society.
The size and importance of the order cannot give it any different character. It is true that the benefit of the William Thompson Masonic Schools and Hostels is enjoyed by the children of deceased or incapacitated brethren, not the brethren themselves. But as was remarked by Lord Normand in refusing to regard as material a similar distinction in Oppenheim's Case [(1951) AC 297 at 310] there is no public relationship between parent and child. On the same point Lord Simonds said in that case: 'I can make no distinction between children of employees and the employees themselves. In both cases the common quality is found in employment by particular employers.' [at p. 306].
The fact is that it is part of the advantages which a member of the masonic order obtains in virtue of his membership that his child should become eligible thus to be provided with part of his education and upkeep.
In
In re Income Tax Acts (No. 1) [(1930) VLR 211] the Full Court of Victoria decided that a benevolent asylum to which none other than freemasons and their wives or the widows of freemasons were eligible for admission was not a 'public benevolent asylum' within a Victorian enactment giving a deduction from income tax in respect of gifts to a public benevolent asylum. This decision appears to be directly in point and is in my opinion correct. I refer in particular to the following passage in the judgment of Lowe J.: 'It may not be easy or even possible to enumerate in advance the differentiae of a "section of the public" within this rule, but I illustrate along what lines a conclusion may be arrived at. Having regard to the composition of the public, certain large groups may readily be recognized, the members of which have a common calling or adhere to a particular faith or reside in a particular geographical area. There is no bar which admits some members of the public to those groups and rejects others. Any member of the public may, if he will, follow a particular calling, adhere to a particular faith, or reside within a particular area. Of the members of such a group it may be said in a real sense that they are primarily members of the public, and such a group may well constitute a section of the public. They stand on one side of the line. Each group, it is true, may consist of many individuals, but number alone is not the criterion by which to determine whether the group constitutes a section of the public. A club, a literary society, a trade union may all have numerous members, but I think that none of these could properly be called a section of the public. They stand on the other side of the line. The distinguishing feature of each of these latter bodies is that it is an association which takes power to itself to admit or exclude members of the public according to some arbitrary test which it sets up in its rules or otherwise. Each of them does oppose a bar to admission within it. It is not one of the groups into which the community as a matter of necessary organization or by convention is divided, but it is in a sense an artificial entity which exists for the benefit of its members as members thereof and not as members of the public.' [at pp. 222,223]."[102][1959] HCA 66 ;(1959) 102 CLR 315 at 321–324
72. Dixon CJ referred to a number of cases that had discussed the difficulty he faced in identifying the concept of "public". Among those was
Re Koettgen's Will Trusts[103]
73. Earlier, in
In re Income Tax Acts (No. 1)[104]
"The authorities, I think, bring out what is after all merely a matter of English - that 'the public' does not mean necessarily the whole community. 'Public' may mean a section of the community, that is, a section of the 'public' in the larger sense. What is meant by a section of the public? Now in one sense every considerable body or collection of persons in a community is a section of the public, a section of the community. But many of such bodies are neither public nor a section of the public in the sense intended by the authorities. The exact discrimen may be difficult to formulate, and is best brought out by an illustration. Seamen are a section of the public, whereas the Seamen's Union is not. Any member of the community who happens to have the necessary natural qualification may become a seaman, but before he can become a member of the Union he must obtain the consent of the Union. … It may be that the common characteristic of the sections of the community which can properly be described as 'sections of the public' in the relevant sense is, roughly speaking, that the right to membership of, or inclusion in them depends only on the possession of natural attributes or attributes which any members of the community may acquire, and does not depend on the consent of other members of that section. What is clear is that, generally speaking, if admission to membership of a body or inclusion in a class depends on the consent of the other members or some of the members (e.g., a committee) of the body or class it is not 'a section of the public' in the relevant sense of the term: and I prefer to express it in that negative form."[105]
[1930] VLR 211 at 216-217
74. Issues relating to the benefit to the community and commercial benefits to individual members of that community became relevant in
Crystal Palace Trustees v Minister of Town and Country Planning, to which I have already referred. Danckwerts J considered a submission by the Minister to the effect that the promotion of industry or commerce amounted to no more than the promotion of the interests of those engaged in the manufacture and sale of their particular products. In doing so, it was not in any way concerned with any benefit to the public at large. I set out in the following paragraph his Honour's view of the evidence to which he could have regard. He had already found that the promotion of art was a purpose for the benefit of the public at large and so was of a charitable nature. Danckwerts J went on to have regard to all of the circumstances, including the nature of the trustees who comprised representatives of all of the public authorities who had contributed to the moneys to acquire the property, the fact that the trustees would not distribute any profits and the constant theme in the legislation establishing the Crystal Palace and Park that it was to provide benefits to the public. He then concluded:
"In those circumstances it seems to me that the intention of the Act in including in the objects the promotion of industry, commerce and art, is the benefit of the public, that is, the community, and is not the furtherance by the trustees of the interests of individuals engaging in trade or industry. It appears to me that the promotion of industry or commerce in general in such circumstances is a public purpose of a charitable nature within the fourth class in the enumeration of charitable purposes …"[106]
[1950] 2 Ch D 857 at 858–859
75. Hammond J of the High Court of New Zealand has also had occasion to consider the relevance of profit-making or potential profit-making in implementing objects that are said to be charitable. He did so in
Re Tennant[107]
Crystal Palace Trustees v Minister of Town and Country Planning and continued:
"Obviously each case will turn on its own facts. I would not be prepared to say that there may not be cases which would fall on the other side of the line because of private profit making of some kind. But here the settlor was attempting to achieve for a small new rural community what would then have been central to the life of that community: a cluster complex of a school, public hall, church and creamery. In my view he was endeavouring to confer an economic and social benefit on that particular community for the public weal. To see the creamery in isolation from what was really an overall purpose of benefit to this locality - the complex - would be both unrealistic, and in my view wrong in principle.
But even if I were to be wrong in that approach I think, on a narrower footing, that this particular purpose was for the promotion of industry (dairying) in that particular locality. This settlement was made in the 1920s in the post-war expansion of dairying in the Waikato. Such an industry cannot come into being without a source of manufacture. Effectively this settlor was donating land to the overall good of the locality to help 'kick start' as it were, in an economic sense, dairying in a very fertile area. And with such an enterprise would necessarily have come the associated public benefits of furthering of employment; the training of young men and women in that sort of business; together with the social centre that such institutions were in the life of this country in that era." [108]
[1996] 2 NZLR 633 at 640
76. A more modern example is found in the New Zealand case of
Travis Trust v Charities Commission.[109]
"… The purpose of the Trust is to fund a Group 2 race for the benefit of the Cambridge Jockey Club's race program. The jockey club has 350 members. Membership is not open to the public generally upon payment of a subscription or similar. Instead members must be elected after being proposed and seconded in writing by two members of the club. … It is very much a private club similar in format to those considered in the Strathalbyn case. I hold that the Cambridge Jockey Club is not the community or a sufficient section of it to amount to 'the public' in accordance with that requirement."[110]
The [2008] NZHC 1912 at [58]Strathalbyn case to which reference is made is; see [92]–[95] below Strathalbyn Show Jumping Club Inc vMayes and Others [2001] SASC 73 ;(2001) 79 SASR 54
Charitable institution: benefits derived by individuals from subsidiary or ancillary functions in pursuing main object do not necessarily deprive the main object of its charitable characterisation
77. In
Royal Australasian College of Surgeons v Federal Commissioner of Taxation[111]
"… The inclusion of an institution in an exemption clause depends on the intrinsic character of the object which it promotes and not upon the scope of the benefits which may result from its transactions. After considering all the relevant matter in the case stated … I have come to the conclusion that the main or real object of the College is the promotion and advancement of surgery. Its other objects are not collateral or independent but merely concomitant and incidental to the main object. And the fact that some of these subsidiary or ancillary functions and purposes may indirectly and incidentally be of benefit to the members of the profession does not destroy the exemption claimed."[112]
[1943] HCA 34 ;(1943) 68 CLR 436 at 447
78. In the case of
Bills v Pease,[113]
Charitable institution: purposes both beneficial to the community and within the spirit and intendment of the preamble to the Statute of Elizabeth
79. The cases considering gifts or bequests made for the purposes of sport illustrate not only that they must be given or made for a purpose beneficial to the community but that they must come within the spirit or intendment of the preamble to the Statute of Elizabeth. The distinction between the two is not always clearly drawn but is implicit in the approach taken by the courts to such gifts.
80. In the case of
In re Nottage;
Jones v Palmer[115]
"… It is a prize for a mere game. … Now I should say that every healthy sport is good for the nation - cricket, football, fending, yachting, or any other healthy exercise and recreation; but if it had been the idea of lawyers that a gift for the encouragement of such exercises is therefore charitable, we should have heard of it before not. … I deal with the present case on the broad ground that I am not aware of any authority pointing to the conclusion that a gift for the encouragement of a mere sport can be supported as charitable."[116]
[1895] 2 Ch 649 at 655–656
Inherent in the judgment is the notion that the bequest did not come within the spirit or intendment of the preamble.
81. Lopes and Rigby LLJ reached the same conclusion but based their reasoning expressly in the arena of whether or not the benefits attaching to the gift were benefits for the community at large. As Rigby LJ said:
"… We must always go back to the analogy of the statute, which furnishes the only test that can be applied, to see whether a gift is charitable or not. If the present gift is to be supported as charitable, it must be on the ground that it is for a general public purpose. …"[117]
[1895] 2 Ch 649 at 656
This is the reasoning implicit in the judgment of Lopes LJ when he concluded:
"… I am of the opinion that a gift, the object of which is the encouragement of a mere sport or game primarily calculated to amuse individuals apart from the community at large, cannot upon the authorities be held to be charitable, though such sport or game is to some extent beneficial to the public. If we were to hold the gift before us to be charitable we should open a very wide door, for it would then be difficult to say that gifts for promoting bicycling, cricket, football, lawn-tennis, or any outdoor game, were not charitable, for they promote the health and bodily well-being of the community."[118]
[1895] 2 Ch 649 at 656
82. The case of
R v The Special Commissioners of Income Tax;
ex parte The Headmasters' Conference[119]
"… Education in some of its aspects is a charity; headmasters are connected with education; the Headmasters' Conference is connected with headmasters; therefore the Headmasters' Conference is a charity. It is really a very old friend: Some soldiers have red hair; this man has red hair; therefore this man is a soldier. In like manner it might be argued and with equal force a charity is for the good of mankind; all lawful trades and professions are for the good of mankind; therefore all lawful trades and professions are charities; and in that way - quite a pleasant way - the Income Tax under Schedule D might be abolished universally. At this time of day the principles which are to be observed in deciding whether a body of persons was established for charitable purposes only, and whether moneys are applicable to charitable purposes only, are abundantly clear. The cases go back to the well known case of Pemsel …"[120]
10 TC 73 at 85
83. In his judgment, Shearman J focused on particular purposes for which the Headmasters' Conference could spend its money and which were not charitable within the meaning of Pemsel's case:
"… In particular I refer to No. 2 of their Memorandum of Association: 'To protect and improve the status, character and interests of persons engaged in the profession of education,' and then No. 7: 'To initiate or promote or oppose measures, legislative or administrative, in Parliament or elsewhere,' and I have no doubt that that entitles them to promote or oppose anything in the interests of the scholastic profession. I refer again to the first part of No. 10 of their Memorandum which says 'to provide for the holding of examinations and inspections, and the awarding of certificates of distinction.' It seems to me they can spend their money in improving the status and position of the scholastic profession quite apart from the general interests of education. I am not supposing that they have any sinister object at all; indeed there is no doubt that their objects are thoroughly good and benevolent, but they have the power to spend their money for purposes which are clearly not charitable purposes."[121]
10 TC 73 at 87
84. In
Re Hadden,
Public Trustee v More,[122]
"… I am of the opinion that the fact that the provision of prizes and like means for the mere encouragement of sport has been held not to be a charitable purpose (see
In re Nottage …) offers no obstacle in the way of my conclusion. I see no trace in the present will of a desire to encourage mere sport; the health and welfare of the working classes is obviously the dominant object in the testator's mind. Nor can I see that any difficulty arises from the fact that the testator contemplates that the beneficiaries should be working people, that is to say, using the term in the popular though inaccurate sense, members of a social class who are not likely to have satisfactory facilities for similar recreation within the cartilage of their own houses. It is surely far too late in the day to suggest that, in so far as it may be necessary that the element of public benefit should be inherent in the trust if it is to be held charitable, that element is not secured by the direction that working people generally are to be beneficiaries."[123][1931] 1 Ch 133 at 142
85. When the High Court was asked some forty years later to consider bequest for the purpose of applying its income to "improving the breeding and racing of homer pigeons", there had been many creative ideas presented by lawyers in the intervening years. Unlike the Court of Appeal in Nottage, the High Court in
Royal National Agricultural and Industrial Association v Chester[124]
"It may be that in a general way the breeding of pigeons for racing is a purpose beneficial to the community. It provides recreation for quite a number of pigeon fanciers; it produces birds which are interesting, beautiful, and may at times be useful as a means of communication; it affords opportunity for the scientific study of the birds' remarkable homing instinct."[125]
(1974) 3 ALR 486 at 488
86. Where the gift foundered was on a consideration of whether it was within the spirit and intendment of the preamble:
"It is when the inquiry turns to the question whether the breeding of racing pigeons is within the spirit and intendment of the statute 43 Eliz 1, c 4 that the case of the appellant plainly fails. We find no justification for deciding that the breeding of racing pigeons is a purpose of the kind instanced in the preamble to the statute. An examination of the judgments of their Lordships of the House of Lords in
Scottish Burial Reform and Cremation Society v Glasgow Corporation[126], supra, indicates the nature of the inquiry. There, in the Court of Session, a society for the promotion of cremation was regarded by the majority as existing for a purpose beneficial for the community, but that purpose was not regarded within the spirit and intendment of the statute 43 Eliz 1, c 4. It was upon this latter point that the House of Lords came to a different conclusion, holding that cremation was within the statute principally because it had been established by previous decisions that trusts for burial grounds were within the preamble and that the intendment which brought burial grounds within it would do the same for cremation. Lord Wilberforce perhaps went further. After deciding that the provision of facilities for cremation was for the benefit of the community he treated the second problem in this way ( [1968] AC 138 ;[1967] 3 All ER 215
[1968] AC at 138; [1967] 3 All ER at 224): 'First, it may be said that the same evolutionary process which carried charity from the "repair of churches" to the maintenance of burial grounds (i) in a churchyard and (ii) in a cemetery extended from a churchyard should naturally carry it further so as to embrace the company's objects. Secondly, and more generally, the company's objects themselves may directly be seen to be within the preamble's spirit. The group "repair of bridges, ports, havens, causeways, churches, sea banks and highways" has within it the common element of public utility and it is of interest to note that the original label of Lord Macnaghten's fourth category "other purposes beneficial to the community" affixed by Sir Samuel Romilly in
Morice v Bishop of Durham (1805) 10 Ves 522 at 532, was "… the advancement of objects of general public utility." In this context I find it of significance that Parliament in 1902 by the Cremation Act of that year placed cremation, as a public service on the same footing as burial.I regard, then, the provision of cremation services as falling naturally, and in their own right, within the spirit of the preamble.'
Applying either method of approach to the problem here, it seems to us that the breeding of pigeons for racing cannot, either by analogy or by reason of the character of the activity itself, be said to be of benefit to the community in a sense within the preamble."[127]
(1974) 3 ALR 486 at 488–489
87. In the United Kingdom, a Football Association sought to establish a charitable trust whose objects were:
"… to organise or provide or assist in the organisation or provision of facilities which will enable and encourage pupils at schools and universities in any part of the United Kingdom to play association football or other games or sports and thereby to assist in ensuring that due attention is given to the physical education and development and occupation of their minds …".
The trust deed stipulated various methods by which those objects were to be achieved.
88. The House of Lords decided in
Inland Revenue Commissioner v McMullen[128]
89. Lord Hailsham was at pains to point out that he was concerned with a gift for the physical education of children of school age or just above and not with a gift for physical education per se and without that qualification. He looked to what Parliament had considered to be educational of the young when it passed the Education Act 1944 (UK). There was no of trace any idea that education was limited to the development of mental, vocational or practical skills or to grounds or facilities of particular schools or to schools or colleges in particular localities. Furthermore, there was an express recognition of the contribution that extra-curricular activities and voluntary bodies could make in the promotion of the statutory scheme of education provided by Parliament. In light of that, Lord Hailsham was "… very reluctant to confine the meaning of education to formal instruction in the classroom or even the playground …".[129]
"… complex and varied … It is the picture of a balanced and systematic process of instruction, training and practice containing … both spiritual, moral, mental and physical elements, the totality of which in any given case may vary with, for instance, the availability of teachers and facilities, and the potentialities, limitations and individual preferences of pupils. But the totality of the process consists as much in the balance between each of the elements as in the enumeration of things learned or the places in which the activities are carried on. I reject any idea which would cramp the education of the young within the school or the university syllabus, confine it within the school or university campus, limit it to formal instruction, or render it devoid of pleasure in the exercise of skill. It is expressly acknowledged to be a subject in which the voluntary donor can exercise his generosity, and I can find nothing contrary to the law of charity which prevents a donor providing a trust which is designed to improve the balance between the various elements which go into the education of the young. That is what in my view the object of the instant settlement seeks to do.
I am at pains to disclaim the view that the conception of this evolving and therefore not static, view of education is capable of infinite abuse or, even worse, proving void for uncertainty. …
I also wish to be on my guard against the 'slippery slope' argument of which I see a reflection in Stamp LJ's reference to 'hunting, shooting and fishing.' It seems to me that this is an argument with which Vaisey J dealt effectively in
In re Dupree's Deed Trusts [1945] Ch 16 in which he validated the chess prize. He said, at p 20:I think that the case before may be a little near the line, and I decide it without attempting to lay down any general propositions. One feels, perhaps, that one is on a rather slippery slope. If chess, why not draughts? If draughts, why not bezique, and so on, through to bridge and whist, and, by another route, to stamp collecting and the acquisition of birds' eggs? Those pursuits will have to be dealt with if and when they come up for consideration in connection with the problem whether or no there is in existence an educational charitable trust."[130]
[1981] AC 1 at 18-19
90. Unlike Lord Hailsham, the Ontario Supreme Court was asked to consider whether physical fitness should, in itself, be regarded as a charitable object. In delivering the judgment of the court, Southey J said in
Re Laidlaw Foundation[131]
- "(a) promotion of amateur athletic sports under controlled conditions promotes health, and is akin to those cases which have decided that the promotion of health is a charitable purpose, e.g. re McClellan's Will (1918) NBR 161, and
- (b) participation in organized amateur sports is in itself educational, both the sense of training in discipline and maintenance of a healthy body and further in respect to education resulting from the interchange of people from different cultures in cases where competitions involve more than local participants.
-
…
-
It is my view that an organization, the main object of which is the promotion of an amateur athletic sport which involves the pursuit of physical fitness is prima facie an organization beneficial to the community within the spirit and intendment of the Statute of Elizabeth and may be classified as a charitable organization provided that any other non-charitable object of the organization be incidental or ancillary to the promotion of that amateur sport, and provided that the public benefit test be met with respect to the class of persons who will benefit."[132]
(1984) 13 DLR (4th) 491 at 523; [20] and see also [22]
91. In 1905, 25 acres of land at Strathalbyn were transferred to three men who declared themselves to hold it on trust for use as a polo ground and, subject to its use for that purpose by a polo club, as a recreation ground for the purposes of any other sports or games as thought fit by the trustees. Between 1904 and 1962, polo was played on the land from time to time. Polo was not played on it again until 1974 but, since then, polo has been played on it between October and April each year. The land has also been used by the Strathalbyn Show Jumping Club Inc for equestrian and show jumping activities and for other community activities involving a wide spectrum of the community. Three polo clubs gave notice that they intended to use the land and the facilities on the land in order to play polo. They argued that use of the land by other interests was subject to their use and that the use by other groups interfered with their activities.
92. In
Strathalbyn Show Jumping Club Inc v Mayes and Others[133]
"Thus, if the Trust Deed in this case is regarded as merely promoting the sport of polo, it will not be a valid charitable trust.
On the other hand, where the trust is to encourage sport for some charitable end … or where the trust will establish sporting or recreational facilities which will benefit the public, the position may be different. There are cases in which trusts to establish sporting grounds have been upheld as charitable.
Re Hadden;
Public Trustee v More [1932] 1 Ch 133 concerned a trust to establish playing fields, parks and gymnasiums for working people. Although Clauson J found support for the trust's charitable nature in various English legislation, he also expressed himself in terms of general principles (at 142):'… I ought to add that I am of the opinion that the fact that the provision of prizes and like means for the mere encouragement of sport has been held not to be a charitable purpose (see
Re Nottage) offers no obstacle in the way of my conclusion. I see no trace in the present will of a desire to encourage mere sport; the health and welfare of the working classes is obviously the dominant object in the testator's mind.'Clauson J went on to conclude that the working classes were a sufficient section of the public to meet the public benefit test, to which further reference is made below. It was the 'health and welfare of the working classes' that was the relevant object of the trust. That approach, so far as playing polo is concerned, would not assist the saving of the trust in this case.
…
Further,
Re Hadden has been taken to attend for the proposition that if a trust to establish a sporting or recreational facility can also be said to have some public benefit, it will be valid as a charitable trust. An example is a trust to provide a sporting or recreational facility for the inhabitants of a particular locality. …"[134][2001] SASC 73 ;(2001) 79 SASR 54 at [76]–[80]; 69–70
93. Bleby J referred to the difficulty of determining what constitutes an appropriate section of the community for the purposes of determining whether there is adequate public benefit in order to constitute a trust a charitable trust:
"… Courts have tended not to recognise public benefit where benefits were conferred upon a group related to or employed by one or a group of persons, perhaps as representing a privileged and closed group to which one is admitted either by birth, employment or some other privilege. On the other hand, there is an acknowledged public benefit where the beneficiaries consist of a relatively small group suffering a disability of some kind over which they have no control and which might equally be brought about by an accident of birth.
Public benefit is an elusive quality. It is not always open to sound reason, but is a quality often plainly recognised when it exists. In some cases the trust may confer tangible benefits on those constituting a relevant group. In other cases the benefit may be much more indirect, such as the provision of community facilities which might otherwise have to be provided out of some form of taxation. …"[135]
[2001] SASC 73 ;(2001) 79 SASR 54 at [96]–[97]; 74–75
94. Bleby J concluded that the first limb of the trust which promoted the sport of polo and no more was not an adjunct to any other purpose that was charitable and was not a valid charitable trust:
"… There is nothing in the material before me to indicate that the playing of polo confers a benefit on any section of the community other than the participants, and perhaps by way of entertainment for a small group of spectators. Furthermore, it cannot be said that the provision of a polo ground is typical of the public services provided by government or local government bodies for the benefit of the local or State community. Indeed, the provision of polo facilities by a local government council would probably be regarded as discriminatory and catering only to sectional interests, even if it was within the power of a local government body to provide it.
That leaves the relevant class of those who benefit, as being those who participate, namely the members of any polo club. There are three incorporated bodies represented in these proceedings who claim to provide facilities for the playing of polo or for the promotion of that sport. There is nothing to suggest that they are not representative of the manner in which the sport is organised and how polo clubs are constituted.
…
… The class of persons to whom the benefit is conferred is a group or groups of individuals who have a common interest in the playing of polo and who have been admitted to membership by the controlling body of the organisation. Even if there were less stringent restrictions on or qualifications for membership, I doubt whether the class of beneficiaries would meet the necessary public benefit test.
…
Therefore, in my opinion, not only does the first limb fail as being a trust for the promotion of a sport, but it were properly construed as providing facilities for the playing of polo, it fails for the lack of any public benefit. It is not a trust for charitable purposes."[136]
[2001] SASC 73 ;(2001) 79 SASR 54 at [102]–[111]; 76–78
95. Of the second limb of the trust, Bleby J held:
"It seems to me that there are two ways in which the test of public benefit is satisfied in respect of the second limb of the trusts. One is the promotion of the physical health, well-being and recreation of those who participate in such activities, and in respect of these second limb activities, there is no restriction in the Trust Deed on who may so participate. The second way is the relief on the public purse by the provision of such facilities, being facilities which might otherwise have to be provided out of rate revenue by the Corporation of the Town of Strathalbyn. While it is by no means decisive as to the validity of the trusts, it is to be noted that the settlors contemplated the land becoming vested in the Corporation, subject to the same trusts, as no doubt being a facility appropriate to be provided otherwise by the Corporation. In my opinion the second limb constitutes a valid charitable trust."[137]
[2001] SASC 73 ;(2001) 79 SASR 54 at [115]; 79
96. The application of similar principles in the Supreme Court of Canada led to the same outcome in considering whether the Amateur Youth Soccer Association (AYSA) is a charity for the purposes of the Income Tax Act RSC 1985, c. 1 (5th Supp.) (Canada) (ITA). The case was
AYSA Amateur Youth Soccer Association v Canada Revenue Agency and Canadian Centre for Philanthropy (AYSA).[138]
97. AYSA's objects described in its Letters Patent began with the object "to fund and develop activities and programs to promote, organize and carry on the sport of amateur youth soccer" in Ontario. Another object was to fund, promote and develop local amateur youth soccer programmes and coaching appropriate to different age groups and different levels of ability to increase participation in the sport of soccer. When AYSA applied to the Canada Revenue Agency to become a registered charity, it described the activities in which it intended to engage in order to achieve these objects. In doing so, it defined soccer as being "… played for the purpose of deriving physical, mental and social benefits that organized sport has to offer other than present or future commercial gain.'[140]
"… encourage and promote good sportsmanship and fair play. Encouraging youth in the community to pursue physical activities in a team environment will enable each individual to develop a healthy attitude toward fitness and teamwork. Extra-curricular activities that are structured around the pursuit of physical fitness and belonging to a team require significant commitment of time and attention. This personal commitment will undoubtedly result in healthy and socially beneficial attitudes and improved time management skills. It will also have the result of less time to 'hang out' around the corner store. The players, hopefully, will not have the time or interest to spend time in undesirable places with people of questionable character where they are more readily exposed to illegal activities including drugs, vandalism and anti-social behaviour such as bullying."[141]
2007 SCC 42 at [3]
98. In delivering the judgment of the majority, Rothstein J said:
"Although I am sympathetic to the proposition that organizations promoting fitness should be considered charitable, there is no mention of these objects in the Letters Patent of AYSA. The Letters Patent only refer to promoting soccer and increasing participation in the sport of soccer. AYSA's application to the CRA describes its 'main objective' as being 'to offer youths in the community the opportunity to develop and hone soccer skills though practice and competition so they can develop pride in their abilities and soccer skills'. The application also mentions 'physical fitness' and diversion from exposure to 'anti-social behaviour'. But these are clearly by-products of its main objective, the promotion of soccer. The fact that an activity or purpose happens to have a beneficial by-product is not enough to make it charitable. If every organization that might have beneficial by-products, regardless of its purposes, were found to be charitable, the definition of charity would be much broader than what has heretofore been recognized in the common law.
In referring to AYSA's Letters Patent and application to the CRA, I do not wish to leave the impression that the assessment to be carried out is formalistic in nature. That was the only evidence in the record in this case. But the government is entitled and indeed obliged to look at the substance of the purposes and activities of an applicant for registered charity status. Rewriting the objects in the Letters Patent or filing a carefully worded application will not be sufficient. The organization, in substance, must have as its main objective a purpose and activities that the common law will recognize as charitable. Examples of sporting activity that the government acknowledges would be charitable include therapeutic horseback riding for children with disabilities, or sports camps for children living in poverty. In these examples, the objectives are ones well established as charitable."[142]
[2007]3 SCR 217 at [41]–[42]
99. The most recent case to which I have been referred is a case decided by the High Court of New Zealand:
Travis Trust v Charities Commission.[143]
"… [T]he purpose is the support of a single Group race to be run by the Cambridge Jockey Club once a year. While it may be possible to say the indirect purpose is to support the Cambridge Jockey Club's annual calendar of three meetings through sponsorship of one of the club's headline races, any wider benefits that may accrue to the racing industry or indeed the racing public are too remote to be considered within the scope of the Trust's purpose. Any downstream benefits to the racing industry and those who are employed by it, or attend its race meetings are, in my view, mere by-products of the Trust's purpose rather than the purpose itself and so, in accordance with the AYSA decision, should be set aside."[144]
[2008] NZHC 1912 at [34]
100. After analysing the authorities, Joseph Williams J summarised their principles:
" The cases then seem to establish some workable first principles. The first, the class of charitable purposes does indeed evolve over time and the Courts (including those in New Zealand) have shown a willingness to develop new categories of charitable purpose and to develop or extend established ones. In the area of sport and leisure, the general principle appears to be that sport, leisure and entertainment for its own sake is not charitable but that where these purposes are expressed to be and are in fact the means by which other valid charitable purposes will be achieved, they will be held to be charitable. The deeper purpose of the gift or trust can include not just any of the three original Pemsel heads but also any other purpose held by subsequent cases or in accordance with sound principle to be within the spirit and intendment of the Statute of Elizabeth.
In the area of sport, the deeper purpose is usually health or education. …"[145]
[2008] NZHC 1912 at [52]–[53]
101. Applying these principles to the case before him, his Honour reasoned:
"… A trust to promote racing could only be charitable in nature if its deeper purpose was the pursuit of some other objective, either in principle or, in accordance with charities jurisprudence, a charitable purpose in its own right within the spirit and intendment of the Statute of Elizabeth. Thus, if it could have been established that the true intention of the support for this race was the promotion of health, education or perhaps even animal welfare …, it might have satisfied the test. But it is clear that none of these purposes is the deep reason for this Trust, and counsel for the appellant quite rightly did not pitch his case on that basis."[146]
[2008] NZHC 1912 at [59]
102. Most recently, the New South Wales Administrative Decisions Tribunal Appeal Panel (NSWADTAP) considered whether Northern NSW Football Ltd (NNSWF) was entitled to exemptions from the imposition of certain taxes and duties on the basis that it was engaged in charitable, benevolent, patriotic or philanthropic work. It considered the findings of a single member below regarding the purposes for which NNSWF had been established with:
"… the dominant purpose being to 'provide and promote football as an undertaking which benefits communities, the benefit being the improvement in the health and general wellbeing of participants, through education which encompasses education generally and specifically relating to football'. This is an amalgam of the objects and describes a clear and dominant purpose beneficial to the community."[147]
per Needham J, Deputy President, A Verick, Judicial Member and C Bennett, Non-Judicial Member Chief Commissioner of State Revenue vNorthern New South Wales Football Ltd (RD) [2010] NSWADTAP 28 at [44]
103. The NSWADTAP decided that:
"… It seems to us that the evidence was firmly to the effect that the purpose of the organisation, as set out in its Objects, the Report of Directors and that of Mr West, as well as demonstrated by its activities, is indeed the promotion of football. The learned Tribunal member found that that was part of the purpose of the organisation. The benefit to the community is a result of the promotion and management, and not the result of a 'wholly charitable' purpose on the part of the organisation. The distinction is a little like that in
R v The Assessors of the Town of Sunny Brae [1952] SCR 76 referred to by the majority in Word Investments at [26], in which a corporation had charitable and non-charitable purposes, and carried on a business which incidentally conferred benefits on charities. Here, NNSWF has a major or dominant purpose of promotion and encouragement of football, which incidentally has the attribute of being beneficial to the community. The distinction is as against a company which has purposes which are solely charitable, and which carries on a commercial business in order to give effect to those purposes.…
The purpose of the organisation is the promotion and management of football. The result of that purpose may be a benefit to the community, but the benefit to the community is not the purpose of the organisation. Much as the breeding of a better homing pigeon, or the sight of racing yachts under full sail, may have some beneficial effect on the community, so would playing football under the auspices of NNSWF. The 'amalgam' purpose found by the learned Tribunal member is not one which gives proper weight to the activities of the organisation (see Word Investments), which, it was clear, was one of promoting football, managing teams and players, and seeking to put it forward as a healthy and beneficial game to play.
…
… The purpose, even as found by the learned Tribunal member, is one for the 'promotion of sport'. Whether that promotion results, as this may do, in beneficial results for a particular community is not to the point. The purpose, and the activities, of the organisation are not charitable in the sense of the fourth head of Pemsel's Case nor purposes which can be said to be within the spirit and intendment of the Statute of Elizabeth, given their focus on management and promotion of the 'beautiful game'."[148]
[2010] NSWADTAP 28 at [46]–[51]
CONSIDERATION: the time at which I must consider endorsement
104. The first question to consider is the time at which I must consider whether Bicycle Victoria is a charitable institution. In Cronulla, Lockhart J said that the question was to be answered in the year of income but it must be remembered that he did so in a context different from that of endorsement following the provisions in Division 426 of Schedule 1 to the TA Act. He did so in the context of s 23(g)(iii) of ITAA36 which provided that the income of a club was exempt from income tax if the club was not carried on for the purposes of profit or gain of its members and was "… established for the encouragement or promotion of an athletic game or athletic sport in which human beings are the sole participants". Attention was necessarily focused on a particular year of income.
105. The provisions of Division 426 make no reference to any particular year of income and nor do the individual provisions establishing qualification for endorsement.[149]
106. Sections 426-40 to 426-55 regarding the revocation of an endorsement suggest that an endorsement is not circumscribed by any particular tax year or other period but continues until revoked. Revocation may be made with effect from a date earlier than that of the decision to revoke but, even then, it must not be made from a day earlier than the first day an entity ceased to be entitled to be endorsed.
107. These provisions suggest to me that the Commissioner is required to look at Bicycle Victoria's entitlement to be endorsed from a time before its applications for endorsement up until the date of his decision. If he is satisfied that it satisfies all of the requirements for endorsement at any time within that period, he may endorse it under the relevant provision. As the review provisions in Part IVC of the TA Act do not qualify my role on review, his task is my task. We are both part of the administrative decision-making process which is, as Davies J described it in
Jebb v Repatriation Commission,[151]
Esber v Commonwealth of Australia and Another:[153]
"… to stand in the shoes of the decision-maker (the delegate) and arrive at its own decision (16).[154]
In Drake, Bowen CJ and Deane J said of the Tribunal (16):[155] Drake vMinister for Immigration (1979) 24 ALR 577 at 589Drake vMinister for Immigration (1979) 24 ALR 577 at 589'The question for the determination of the Tribunal is not whether the decision which the decision maker made was the correct or preferable one on the material before him. The question for the determination of the Tribunal is whether that decision was the correct or preferable one on the material before the Tribunal.' "[156]
per Mason CJ, Deane, Toohey and Gaudron JJ, Brennan J dissenting (1992) 174 CLR 430 at 440
CONSIDERATION: does Bicycle Victoria carry an onus of proof?
108. The answer to the question that I have asked in the heading to this section of my reasons must be "yes". The query only arises because s 426-35 of the TA Act provides that an applicant dissatisfied with the Commissioner's refusal to endorse it may object against the refusal in the manner set out in Part IVC of that legislation. Part IVC provides that a person may object to an assessment, determination, notice or decision or with the failure to make a private ruling if a provision of an Act or of regulations provides that a person dissatisfied with one or other of them may do so.[157]
"On an application for review of a reviewable objection decision:
- (a) …
- (b) the applicant has the burden of proving that:
- (i) …
- (ii) …
- (iii) in any other case - the taxation decision concerned should not have been made or should have been made differently."
CONSIDERATION: the relevance of the endorsement or otherwise of other bodies as charitable institutions
109. After the conclusion of the hearing, Bicycle Victoria sought leave to make further submissions and to produce supplementary documents regarding the endorsement of Victoria Walks Incorporated (VWI) as a health promotion charity. It submitted that VWI has similar purposes and activities and that this was directly relevant to the resolution of its status. It criticised what it saw as the failure of the Commissioner to act as a model litigator as required by Appendix B to the Legal Services Direction 2005 (LSD) and as described at [16]-[20] of its own Practice Statement Law Administration (PS LA 2009/9). The LSD had been made under s 55ZF of the Judiciary Act 1903.
110. The Commissioner resisted the application on four bases and asserted his position on a fifth. The first was that material taken from the public domain and relating to the circumstances of another taxpayer is irrelevant and misleading. Second, the review of any decision is to be decided by reference to the circumstances of the particular taxpayer and not by reference to those of another. Third, the Commissioner would be in breach of the confidentiality provisions of Division 355 of Schedule 1 to the TA Act were he to disclose to the Tribunal information obtained and/or considered by him concerning another taxpayer. Fourth, it cannot be assumed that the material in the public domain was the only material on which the Commissioner relied in endorsing VWI as a health promotion charity. Fifth, the Commissioner submitted that he considered that he had acted as a model litigant in accordance with his obligations under the LSD and the Taxpayers' Charter.
111. The starting point for my consideration lies in the Tribunal's power to review the Commissioner's decision. Assuming that an objection decision is a reviewable objection decision, a person dissatisfied with it may apply to the Tribunal for its review.[158]
112. The Tribunal's powers on review of a reviewable objection decision are those set out in the Administrative Appeals Tribunal Act 1975 (AAT Act) as modified by Division 4 of Part IVC of the TA Act. The scope of the review is circumscribed by the particular decision under review. This is clear from s 14ZZK when it imposes a burden of proof upon the applicant for review:
"On an application for review of a reviewable objection decision:
- (a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
- (b) the applicant has the burden of proving that:
- (i) if the taxation decision concerned is an assessment (other than a franking assessment) - the assessment is excessive; or
- (ii) if the taxation decision concerned is a franking assessment - the assessment is incorrect; or
- (iii) in any other case - the taxation decision should not have been made or should have been made differently."
113. As the taxation decision did not concern an assessment in any form, the scope of the Tribunal's review is limited to whether the taxation decision should not have been made or should have been made differently. In this case, the taxation decision is a decision refusing to endorse Bicycle Victoria under the four enactments. That means that the scope of my review is limited to deciding whether that taxation decision should not have been made or should have been made differently. That question can only be decided within the legal framework of the various provisions of ITAA97, the FBTA Act and the GST Act, to which I have referred and under which endorsement is sought. Each of those provisions requires that Bicycle Victoria meet certain requirements or criteria.
114. None of the requirements or criteria brings into play the circumstances of an entity other than Bicycle Victoria. Each is focused on the particular entity seeking endorsement and whether that taxpayer meets it. None of the provisions relating to each of the four endorsements sought by Bicycle Victoria gives the Commissioner a discretion to refuse endorsement once an entity has fulfilled the relevant requirements or criteria. Instead, each provides that the Commissioner "must" endorse the entity if that is the case.
115. Had the Commissioner been granted a discretion as to whether or not to endorse an entity that met all of the requirements or criteria, it might have been possible to reach a different conclusion. Whether it would have been would have again been determined by the scheme established by the relevant provisions for it would have been a scheme very different from that which currently prevails. As currently enacted, the circumstances of other entities have no place in determining the entitlement of a particular entity. They are not expressly provided for and it is not possible to imply a requirement that the Commissioner have regard to them.
116. It may be thought that this approach can lead to inconsistency in administrative decision-making by the Commissioner. Perhaps it can but that does not mean that it is the role of this Tribunal to monitor his decision-making for consistency. The Tribunal's role is to decide matters consistently by interpreting the law consistently, determining facts consistently on the evidence and exercising any discretion conferred upon it in a manner consistent with the legislation conferring it. It achieves that consistency not by looking to other cases that have been decided on similar issues. That is the approach of the common law when principles are drawn from decided cases and applied to the case before the court. Instead, the Tribunal achieves consistency by interpreting the relevant legislation according to recognised rules of statutory interpretation and applying any relevant judicial interpretation of that legislation. It achieves it by determining the facts or making findings of fact on the evidence according to a consistent standard of proof which is usually the civil standard and so on the balance of probabilities. When a discretion is involved, it achieves it by having regard to any criteria expressly provided in the relevant legislation or implicit in it. Consistency may also be assisted by reference to any guidelines provided for decision-makers at the primary level but only if they are themselves consistent with the legislation.
117. It is to be expected that the Commissioner and his delegates will be following a similar approach in their decision-making under the relevant legislation. That is a matter that is concerned with the administration of his functions and is a matter that has been commented upon by the Full Court of the Federal Court in
Bellinz v Federal Commissioner of Taxation:[161]
"…It is unnecessary to refer to the numerous other cases, many from areas outside revenue, which were cited to the court in support of the submission that equality of treatment of taxpayers is an aspect of unreasonableness of decision making. There is little difficulty in accepting that, where a decision-maker, including the Commissioner of Taxation, has a discretion, a principle of fairness will require that that discretion be exercised in a way that does not discriminate against taxpayers: cf
Pickering v FCT 97 ATC 4893 and, in another context,
New South Wales Aboriginal Land Council v Aboriginal and Torres Strait Island Commission (1995) 59 FCR 369 at 387-8; 131 ALR 559. The same principle may be said to permit judicial review in matters of administration or procedure where a decision-maker acts unfairly by discriminating between different categories of persons. But where the question arises as to the inclusion of an amount in assessable income or the allowance of an amount as a deduction, where no question of discretion arises and where the Commissioner is charged to administer the law (cf s 8 of the Act), and one might say bound so to do in accordance with the language used in the statute as passed by parliament, it is difficult to see how the Commissioner can properly be said to have acted unfairly, even if there is an element of discrimination, where he has acted in accordance with the law itself. Different considerations arise in other circumstances."[162]and see also (1998) 84 FCR 154 ;155 ALR 220 at 167; 232–233per Merkel J Bellinz vFederal Commissioner of Taxation 98 ATC 4399 at 4417
118. When the Tribunal's task is understood in this way, it cannot be said that the Commissioner has breached his obligations to act as a model litigant by omitting to provide any information about the circumstances of VWI. It is information that is not relevant to the issues that I must determine and he had no obligation to provide it. Had he provided it, he might well have acted contrary to his obligation under s 355-5 of Division 355 of Schedule 1 of the TA Act. In general terms, that section protects the confidentiality of taxpayer's personal tax affairs by restricting what may be done with indirect tax information and documents. They may be disclosed if disclosure "is in connection with proceedings under a taxation law".[163]
119. For these reasons, I have not given leave to Bicycle Victoria to make further submissions and produce further material relating to the purposes and activities of VWI. In coming to my decision, I have paid no regard to the submissions and material that it lodged in seeking that leave.
120. Bicycle Victoria also submitted that the Commissioner had referred to the National Heart Foundation at [60] and [61] of the submissions made on his behalf and had included in the T documents a submission made by that body into the Inquiry into the Definition of Charities and Related Organisations.[164]
"… [I]n recognition of the significant contribution they make to promoting good health in Australia, the bill will allow charitable institutions whose principal activity is promoting for prevention or control of disease in humans, such as the Heart Foundation, to continue to access fringe benefits tax, income tax and sales tax concessions."[165]
Hansard, House of Representatives, 25 June 2001 at 28506
121. Reference to Parliamentary Debates may be relevant in interpreting legislation and, in particular, s 123D of the FBTA Act when it refers to a "health promotion charity".[166]
CONSIDERATION: is Bicycle Victoria a charitable institution?
122. I will begin by setting out the findings of fact I have made regarding such matters as Bicycle Victoria's formation and activities.
Bicycle Victoria's documented constitution, purposes and activities: 1975 to 1986
123. On the basis of a notice of its first Annual General Meeting (AGM) on 4 April 1975, I find that the predecessor of Bicycle Victoria was the Bicycle Institute of Victoria Inc (BIV). BIV had been established in 1975 at the instigation of the then Minister for Youth, Sport and Recreation.[167]
"The Bicycle Institute of Victoria has been formed by cycle enthusiasts, environmentalists, leading public figures and industry leaders.
It caters for the need of the majority of cyclists who urgently need safe, convenient and pleasant places to ride, who require safe and adequate cycle storage facilities and who wish to convince the public of the value of the bicycle in both society and the environment.
Much work has already been done in laying the foundations for the greater and more pleasant use of the bicycle - but much more urgently needs to be done.
The energies of bicycle enthusiasts and bicycle action groups, clubs and ordinary pleasure cyclists and commuters are being co-ordinated by the institute to achieve these results.
…"[168]
ST documents at ST13-833
The first edition of Pedal Power contains BIV's basic aims as formulated in 1976:
- "1. To improve the environment by encouraging the bicycle as a legitimate form of transport with equal rights of the road.
- 2. To work for bicycle paths and to encourage Highway Authorities to consider the bicycle whenever, and wherever road construction takes place.
- 3. To promote and support laws which give a better, more balanced transport system, less harmful to the environment.
- 4. To see rights for the bicycle observed with parking facilities in streets, Department stores, offices, parks and public transport facilities.
- 5. To encourage airlines, railways, and bus-lines to transport bicycles efficiently at special rates.
- 6. To develop rigid safety standards for the bicycle. To promote quality standards in the manufacturing and retail industry.
- 7. To promote rigorous instruction in bicycle safety, especially in schools at Primary level and during motor vehicle driver instruction.
- 8. To do all in its power to promote publicity for the bicycle and its use. Encourage manufacturers and retailers to educate the public that the bicycle is for all ages.
- 9. To advocate the development of bicycle communities in which most residents depend upon the bicycle for transport rather than the car.
- 10. To encourage cyclists to get together for fun, sport and recreation. Encourage the organisation of Bicycle Rides, Tours and Camps."[169]
ST Documents at ST13-833
124. BIV invited "… membership from everyone interested in the future of the bicycle, whether for fun, fitness, commuting or simply relaxation purposes".[170]
125. BIV established the Great Victorian Bike Ride in 1984 and it has continued as an annual event.[173]
Bicycle Victoria's documented constitution, purposes and activities: 1986 to 1989
126. On 20 March 1986, BIV was incorporated as Bicycle Victoria Incorporated[175]
Bicycle Victoria's documented constitution, purposes and activities: 1989 to 2005
127. Bicycle Victoria's constitution was amended on 29 August 1989 when rules relating to interpretation and aspects of its membership were amended. Although its name had been changed and I accept that this was the constitution of Bicycle Victoria in 1989, I note that it is named at the head of the document under its old description i.e. Bicycle Institute of Victoria.
128. Bicycle Victoria's purposes were not amended and read:
"The purposes of the Association are:
Promotion . To promote the bicycle as a vehicle on Victorian roads and to promote all forms of cycling.
Information . To facilitate the circulation, development and exchange of relavent [sic] research and technical information about bicycles and bicycling.
Liaison . To encourage communication and coordination between groups and organizations interested in cycling.
Policy formulation. To develop policies reflecting the views of Victorian cyclists.
Political lobbying. To ensure the input by cyclists into government policies and impementation [sic], and into other areas affecting cyclists.
Education. To increase the general skills, knowledge and competence of cyclists, and to educate motorists, government departments and the general public about the needs of cyclists.
Planning and Design. To encourage effective planning, design and development of cycling opportunities and facilities in Victoria.
Fundraising. To conduct fundraising activities.
Equipment. To lease, sell, hire, exchange or loan equipment and goods to members or other persons.
Safety. To facilitate the safety of all cyclists through the application of the above purposes."[177]
ST documents at ST14-834
129. There were limited members of BIV, who were not entitled to vote, life members and ordinary members of BIV. A person could apply to become an ordinary member by making a written application in a form as required by BIV's committee and paying the annual subscription. Once both had been received, the membership secretary was required to enter the person's name in the register of members and, thereupon, the person was a member.[178]
130. Bicycle Victoria described its principal activities in Financial Report for the year ending 30 June 2003:
"The principal continuing activities of the Institute during the year were:
- • Promoting services to members
- • Running bicycle events
- • Providing bicycle related products and services
- • Representation of cyclists [sic] interests at all levels at government and in the community for the purpose of getting more people cycling more often"[180]
1721 T documents at 711
These principal activities were repeated in the Financial Report for the following year.[181]
131. On the basis of a note in the June-July 2005 magazine of Bicycle Victoria, I find that the Ride to Work Day program was begun in 2003. It was undertaken by Bicycle Victoria and TravelSmart Victoria in conjunction with the Institute of Transport Studies at Monash University and was funded by the Australian Greenhouse Office and TravelSmart Victoria.[182]
"Over the past two years, research undertaken by the Ride to Work and Beyond! Project has helped to unlock the potential of Ride to Work Day as a tool for change. Ride to Work Day has become the main 'call to action' in a year-round behaviour-change campaign.
Ride to Work Day works as:
- 1. A thought-provoker for those who are yet to contemplate riding to work
- 2. An opportunity to prepare for and trial the experience for those thinking about riding to work
- 3. A deadline for those who have already been preparing
- 4. A reminder or prompt for seasonal or lapsed riders
- 5. An opportunity for regular riders to celebrate and to support new and returning riders.
Through research, we've learned to make more sophisticated distinctions between how we market the event and how we follow it up. For example, we now know that the social angle motivates new riders to participate on the day; however, the main reason that they keep riding is for health and fitness.
With this type of information, we've become much better at pitching Ride to Work Day to first-timers. In 2004, 1,233 first-time riders registered - a 600% increase on 2002 figures.
More than 61% of last year's new riders reported that they normally drove to work; 50% drove alone. If we can support these new riders to keep going, that's seriously good news for the environment. Even better news when we consider the distances covered. Most first-timers tackled between 7.5km and 10km one way.
A survey of participants five months after the 2003 event showed that 23% of first-time riders were still riding to work, with the average first-timer riding three days during the survey week. The same survey highlighted a positive shift in attitudes to riding to work and directly linked this participation in the Ride to Work Day event."[183]
ST documents at ST15-851
132. In Bicycle Victoria's February 2004 edition of BVnews, Mr Barber wrote:
"For the last hundred years public health programs have dramatically increased well being and life expectancy. Sanitation, fresh water, immunisation as well as anti-tobacco and road safety campaigns have meant more people now live longer, healthier lives.
These successes give public health professionals confidence that as a community we can reduce the health problems and premature deaths that occur when people don't get enough exercise - one in three deaths are from coronary heart disease for example,
If you imagine what would happen if Australians took more exercise, then a rosy picture quickly emerges. An active Australia would spend less on medical costs, live longer and have a better quality of life.
One hundred years ago people said (and still say in the developing world) 'If only we could get clean water to these people they will be better off'. The engineers did that job. Today we say 'If only people took more exercise, they would be better off'. Who will do this job? How will we do it?
It seems clear to us at Bicycle Victoria that we are the people to do the job. We have shown that we can get people riding for all sorts of reasons. All our surveys and feedback from people show that there is a strong connection between bike riding and keeping fit and healthy. In fact it is probably the only common thread that weaves every type of cycling from doodling along the bike path to bursting over L'Alpe Duez. Furthermore, everyone can ride a bike, at any age.
It's exciting to think that by promoting the thing we love we can also make a huge contribution to our community as well.
The public health push for physical activity is still in its early days and the 'How do we do it?' question is still being explored. 2004 ended with the news that we have received a grant from VicHealth to run a program called Cycling for Health. This project signals the start of our effort to build a strong, effective, popular successful cycling component of the public health push for more exercise.
If you are already part of this public health effort and think you could contribute or help us, please get in touch - we would love to know members who are GPs in the Active Script program for example. Whatever you do, don't watch this effort from the sidelines. One prescription we can all fill ourselves is 'Get out on your bike'."[184]
1721 T documents at 140
133. In its Annual Report for the year ending 30 June 2004, Bicycle Victoria described itself as a self-funded community organisation and went on to say:
"… We were born in 1975, and since then we have been dedicated to getting More People Cycling More Often.
Each year thousands enjoy our Great Rides put on by our inspiring volunteers. Come and make new friends, have fun, get fit and surprise yourself with what you can do. We welcome and support novice riders and we are honoured when long-time riders join in too."[185]
1721 T documents at 517
134. Mr Barber wrote in the August 2004 edition of RideOn about the self-reliant manner in which Bicycle Victoria has chosen to fund itself. Although grants and sponsors have been welcome, it has chosen not to rely on them.[186]
"… We are pitching the health benefits of increased cycling to government and hope to welcome their support for our mission as well.
Outside government members and supporters who strongly identify with More People Cycling More Often have been getting their companies behind cycling. There are hundreds of companies that back Around the Bay in a Day®, the companies like MasterFoods in Ballarat that have funded a section of bike path in their area. Other companies are offering their support because More People Cycling More Often will help their real estate development or retail sales.
Today our mission is now no longer a lone task for one small organisation, but a vision that excites many to invest in and contribute to."[187]
1721 T documents at 138
135. In its Annual Report for the year ending 30 June 2005, Bicycle Victoria summarised its 2005 Strategy. It reads, in part:
" We are passionate about bike riding. We believe that 'Life is better on a bike!'
We want to share our passion with the community. This desire is expressed in our core purpose: More People Cycling More Often.
We are committed to making riding a cultural norm throughout life. We will make a difference by:
- • Measurably increasing the size of the 'cycling world'.
- • Taking accountability for getting more people cycling more often.
Wherever we can we will:
- • Enhance and extend cycling networks.
- • Build wider connections and community support.
- • Create exciting opportunities.
Leadership and innovation will be seen as part of the Bicycle Victoria Way."[188]
1721 T documents at 508
136. Bicycle Victoria's President restated the Strategy in the same Annual Report:
"Our passion is of course bike riding and we agreed our core purpose is to measurably grow the cycling world so that there are More People Cycling More Often.
Our long-term focus to achieve this purpose was encapsulated in a vision, which, simply put, is that 'Life's Better on a Bike'. This flowed into our long-term goals, which are to make cycling a cultural norm throughout life. We aim to deliver this by enhancing the cycling networks (both physical and human) and by measurably increasing the size of the 'Cycling World'.
Our core values are: having mutual respect; being welcoming and inclusive; having discipline, courage and persistence; the health and well-being of all; being fun, sociable and creative.
These key components will form the basis for all our future activities. Council has already begun translating this longer term vision into specific objectives and strategies."[189]
1721 T documents at 506
137. In reflecting on the new strategy, Bicycle Victoria's General Manager, Mr Harry Barber, noted that:
"As a result of the Strategy we will have to measure our strategic progress against population measures. Our organisational goals such as 'more riders on the Great Victorian Bike Ride®' or 'more novices on Ride to Work Day®' or 'increase the numbers of riders on Beach Road, the Yarra Path or the Murray to Mountains Rail Trail' remain important, but become the means to a strategic end rather than the ends in themselves. …"[190]
1721 T documents at 509
Bicycle Victoria's documented constitution, purposes and activities: 2005 to 2007
138. Its constitution was amended on another half dozen or so occasions before Bicycle Victoria adopted a new constitution 7 November 2005. Its purpose was then expressed in the sentence: "The purpose of the association is 'More People Cycling More Often'."[191]
139. The June-July 2005 edition of Bicycle Victoria's magazine, Ride On, contained a statement from its then President, Mr Simon Crone:
"It is 30 years since Keith Dunstan started a group interested in promoting cycling and working to improve the lot of cyclists. In that time many things have changed and many have stayed the same and it is in this light that Council are working on a couple of key projects.
- · Revising the Constitution - making sure it represents the needs of a modern organisation and properly protects the interests of Members in the governance and control of Bicycle Victoria.
- · Reviewing the strategy of Bicycle Victoria - we have achieved many of the goals previously set and the time is right to consider our future direction. This process includes reconfirming our purpose of More People Cycling More Often, enunciating the core values within which we operate and identifying the long-term goals.
The common theme in both these processes is the message (that gets stronger every day) 'Life's better on a bike'. Both the Constitution and the strategy of Bicycle Victoria are being completed with this message in mind and with the aim of helping as many people as possible to experience the truth of this statement."[192]
ST documents at ST15-842
140. In the same edition of the magazine, its General Manager, Mr Barber referred to his visit to Chapel Street to see the lines and bicycle logos that had been marked on the road. His contribution read, in part:
" It was in April 1999 that we started to work for a bicycle space here. Not only did Chapel St account for one in six casualty accidents in Stonington [sic], it was the street with the state's highest bicycle casualty rate. On average one cyclist a month was being hospitalised.
We thought at the time that it would be a long haul - Stonnington was not a pro-bike Council. But we knew that we had to be in there trying - however long it would take and however difficult it was.
It has taken considerable effort. Volunteer riders have helped with parking surveys, street measurements, leafleting and phone calling. Members who live in Stonnington supported the campaign through two council elections by voting in pro-bike councillors. Many riders have written in support of the project.
That's how we will make things better for people who ride bikes - through persistent effort in support of practical improvements. …"[193]
ST documents at ST15-842
141. Bicycle Victoria continued to organise the Great Victorian Bike Ride as, typically, a nine day ride through Victoria. In 2008, it attracted 4,000 participants. Since 2007, Bicycle Victoria has run the event with Diabetes Australia (Victoria) under the motto "Ride away from Diabetes".[194]
142. In Bicycle Victoria's Financial Report for the financial year ended 30 June 2006, its principal activities and the activities carried out in support of them were described as:
" Principal activities
The principal continuing activities of Bicycle Victoria during the year were:
- • Representation of cyclists [sic] interests at all levels of government and in the community for the purpose of getting More People Cycling More Often; and
- • Promoting services to Members.
The following activities were carried out in support of the principal activities:
- • Running bicycle rides; and
- • Providing bicycle related products and services."[196]
1721 T documents at 627
143. In its Annual Report for 2005-2006, Bicycle Victoria reported that it wanted to establish a baseline measurement of the then current cycling rate and to do so by the end of 2006. It needed to do that in order to establish a SMART[197]
Bicycle Victoria's documented constitution, purposes and activities: 2007 to 2009
144. In May 2007, Bicycle Victoria launched a booklet entitled "The Cycle-Friendly Workplace".[201]
"… regular cycling can help control stress, anxiety and depression, and build social connections in the workplace. As a result, cycle-friendly workplaces may have greater morale, lower absenteeism and higher productivity.
A healthy and happy workforce can also have substantial financial and community benefits as well as productivity benefits which are complemented by other direct financial savings to the organisation. These can include reduced costs for taxis, car parking, fleet packages and petrol cards."[203]
1721 T documents at 254
145. In Bicycle Victoria's Financial Report for the financial year ended 30 June 2007, its principal activities and the activities carried out in support of them were described in the same manner as had appeared in the previous year's Financial Report[204]
"Our long standing Facilities Development program has delivered some substantial improvements to the bike riding world, laid the groundwork for future successes and helped ensure that new and innovative facilities have been piloted. It is important to say here that, without the support of the Members we would be unable to achieve many of the following improvements to the bike riding world."[206]
1721 T documents at 193
146. Mr Crone's President's Report in Bicycle Victoria's Annual Report for 2007-2008 noted that the Board had clarified, some four years earlier, that its mission of "More People Cycling More Often" was about societal change i.e. increasing the participation rate of cycling and making cycling "normal".[207]
147. RideOn for June-July 2007 contained an article entitled "More Bang for your Buck" in the section marked "Facilities Development". The article noted that Sport and Recreation Victoria make two types of investment: venues for major sporting events; venues for organised community sport. Watching sport, however, does not increase the amount of exercise spectators and others undertake and research indicates that fewer and fewer people get their exercise from organised sport and examined the figures and trends. The article asked how funds should be invested to get the population active and compared the amount spent on facilities such as aquatic centres with the much smaller amount spent on bike paths. Bike paths, it was noted, are multi-functional being used by walkers and runners as well as cyclists. The article ended with the statement by Bicycle Victoria's Facilities Manager, Mr Mark Dixon:
"We can expect Sport and Recreation to join other State authorities and local government and become a big investor in bike paths in the future as the trend to unstructured recreation gathers momentum,' says Dixon. 'If we want to keep people healthy and out of hospital, building a bike path has to be one of the most effective things we can do. …"[209]
1721 T documents at 132
148. The Financial Report prepared for the year ending 30 June 2009, contained a slightly different description:
" Principle [sic] activities
The principle [sic] continuing activities of Bicycle Victoria during the year was [sic]:
- • Representation of cyclists' interests at all levels of government and in the community to get More People Cycling More Often; making riding a cultural norm so we have healthier people in a healthy society.
The following activities were carried out in support of the principal activities:
- · Promoting services to Members.
- · Running bicycle rides; and
- · Providing bicycle related products and services."[210]
1721 T documents at 528
Apart from a six month sabbatical in 2007, Mr Steven Reynolds was Bicycle Victoria's Chief Financial Officer from 24 January 2005 to 6 August 2010. He is a Fellow of the Australian Society of Certified Practising Accountants and a Chartered Secretary. On the basis of his evidence, I find that Mr Reynolds was responsible for altering the similar passage appearing in Bicycle Victoria's Financial Report for the financial year ending 30 June 2006 and reproduced at [142] above to the form it took in the Financial Report for the financial year ending 30 June 2009. He did so by adding the words "making riding a cultural norm so we have healthier people in a healthy society" and had done so because "… there was greater clarity coming from our board … in terms of what our strategy was."[211]
149. On the basis of the evidence of Mr Barber and of its Terms of Reference, I find that Bicycle Victoria established a Medical and Public Health Reference Panel (Panel). It was to be made up of prominent public health academics and medical professionals. From time to time:
"… Bicycle Victoria will ask panel referees to either
- - comment on medical and public health issues relating to bicycle riding research and activities or,
- - provide guidance to assist in the planning of bicycle riding research and activities.
For example, on priority areas of impact."[212]
Exhibit H
150. At the date of the hearing, Bicycle Victoria had appointed the following health professionals had been appointed to the Panel:
| Name | Position |
| Associate Professor Jo Salmon | School of Exercise and Nutrition Sciences, Deakin University[213]
|
| Professor Louise Alison Baur | Professor, Discipline of Paediatrics & Child Health, University of Sydney; Director, NSW Centre for Overweight & Obesity; Consultant Paediatrician, The Children's Hospital at Westmead[214]
|
| Professor Tim Olds | Professor, School of Health Sciences, Physical Education, Exercise and Sport Studies, University of South Australia[215]
|
| Professor Neville Owen | Professor of Health Behaviour; Director, Cancer Prevention Research Centre, School of Population Health, The University of Queensland[216]
|
| Professor Wendy Brown | Professor of Physical Activity and Health, School of Human Movement Studies, The University of Queensland[217]
|
| Dr Graeme Sloman | Emeritus Director of Cardiology, Royal Melbourne Hospital; Emeritus Director of Cardiology, Epworth Hospital; President, Zone 1, Asian Pacific Society of Cardiology of Cardiology[218]
|
| Dr Chris Rissel | Director of Health Promotion Service; Associate Professor, School of Public Health, University of Sydney[219]
|
| Mr Trevor Shilton | Director - Cardiovascular Health, National Heart Foundation (WA); Acting National Manager - Physical Activity[220]
|
151. The Terms of Reference make it clear that members of the Panel are not expected to attend meetings and that any communication will be by means of the internet or telephone. To date, I find on the basis of their evidence that Professor Owen,[221]
152. Bicycle Victoria's Annual Report for 2008-2009 reported that:
"Our most effective intervention continues to be the pressure we put on to increase investment in relevant bicycle infrastructure. The year in report produced substantial dividends for many different types of riders."[225]
1721 T documents at 481
The report went on to set out data collected by Bicycle Victoria and others on the use of bicycles. It reported on a 15% increase in the use of bicycles for transport on Super Tuesday but also noted that it had to improve its data collection. Bicycle riding was rated nationally fourth in popularity behind walking, aerobics and swimming. In Victoria, it came third behind walking and aerobics. This data did not take account of those who used a bicycle for transport. It was then noted:
"From a physical activity point of view, it is disappointing to note that in 2008 only half the population met the national physical activity guidelines of at least three sessions of physical activity in a week. From a More People Cycling More Often point of view this low level of physical activity represents an enormous opportunity. An investment in bike riding is probably the fastest and most cost effective way for our community to lift the overall level of physical activity. There is no doubt that a significant, effective upstream investment in bike riding would be repaid many times over in downstream benefits in areas such as disease prevention as well as carbon and congestion reduction."[226]
1721 T documents at 481
Bicycle Victoria's documented constitution, purposes and activities: 2009 to 2011
153. On 16 November 2009, the Statement of Purposes set out in Bicycle Victoria's constitution was amended so that it now read:
"The purpose of the association is to promote the health of the community through the prevention and control of disease by 'More People Cycling More Often'."[227]
ST documents at ST4-742 and ST4-745
154. The Explanatory Memorandum that accompanied the notice of the special resolution required to effect this amendment stated:
"The recent September Health survey confirms past feedback from members of the strong connection they see between health and our purpose to get More People Cycling More Often:
- • Members report that bike riding provides a significant health benefit in their lives; many say they would be unlikely to reach their physical activity goals if they were unable to ride
- • Members are physically active to a level well beyond the minimum recommended by the government.
…
Looking at our society:
- • Members recognise the problem our community has with diseases that are caused by inadequate physical activity
- • Members think that raising the level of physical activity in the community would be a positive factor in disease prevention
- • Members support strong efforts by government to increase physical activity in the community, recognising that this will bring many other benefits in addition to better community health.
The Board of Bicycle Victoria recognises and values the many individual and societal benefits … that come from an increased level of bike riding … including a better environment, improved transport system and more friendly neighbourhoods.
In the view of the Board the strong connection between bike riding and health has not been given appropriate prominence in the high level statements of Bicycle Victoria.
Over 2009 the Board has been developing high level statements that confirm the link between Bicycle Victoria's purpose and the resulting health benefits including:
- • Our visionary picture is 'We want everyone to experience that life is better on a bike'
- • Our aim is to measurably grow the 'cycling world' through More People Cycling More Often
- • Our ultimate milestone is to make riding a cultural norm so we have healthy people in a healthy society.
In order to strengthen the organisation's ability to pursue its purpose Bicycle Victoria is applying for formal status as a health promotion charity. This application is being reviewed by the Tax Office.
This status will allow us, among other advantages, to increase the number of revenue streams that support our purpose. For example with this status members will be able to make tax deductible donations to campaigns, programs and projects. The organisation will be able to apply to philanthropic trusts. (Search 'charity' on www.bv.com.au)
The Board believes it is appropriate to reflect the strong connection with health in our formal constitutional purpose. We are determined to continue, however, the familiar priorities and activities of the organisation as well as the means by which we achieve our purpose which include working for better bicycle infrastructure, running behaviour change programs, putting on major bike riding events and providing member services and information.
The Board is asking members to approve a change in our constitution that indicates unambiguously to the wider community that by pursuing More People Cycling More Often we are working towards healthier people in a healthy society.
Our legal advisers have recommended that the purpose be amended to:
The purpose of the association is to promote the health of the community through the prevention and control of disease by 'More People Cycling More Often'.
The wording is consistent with our application to the Tax Office."[228]
Statement of Mr Barber, Exhibit D, Attachment A at 1
155. The principal activities described in the Financial Report remained those described in the Financial Report for the previous year i.e. 2009.[229]
156. In April 2010, Bicycle Victoria completed a document entitled "Bicycle Victoria's disease prevention & health promotion Strategy"[230]
"… Bicycle Victoria's health promotion and disease prevention strategy. Through strategy we aim to make clear:
- • Our place in the health promotion and disease prevention world. We identify our contribution and our role in the community of knowledge and practice. We describe the areas in which we aspire to lead and where we expect to follow the lead of others.
- • How we will make a difference
We identify the activities through which we pursue our purpose as well as our methods and approach. We show how each of our activities contributes to the pursuit of our purpose. We describe what we consider to be success. We show how the organisation is shaping itself to be effective in pursuit of our purpose."[231]
1721 T documents at 359
157. The document went on to detail Bicycle Victoria's contribution and its place in prevention. Referring to authorities to support its statement, the Strategy-First Draft set out the burden of disease in Australia and stated that approximately 32% of Australia's total burden of disease can be attributable to modifiable risk factors. Bicycle Victoria's response to this state of affairs was to:
"… work to diminish the risks of a sedentary lifestyle by getting more people riding bikes more often.
Strong medical evidence shows that diseases caused by a sedentary lifestyle can be avoided, mitigated and remediated by moderate levels of physical activity.
In addition bicycle riding has been clinically proven to be a method of physical activity that delivers these benefits.
The main focus of our effort will be to catalyse changes in the behaviour of individuals, families and communities that measurably reduce sedentary lifestyles. We aim to make these changes across all age groups and at a societal or population scale.
We aim to increase the prevalence of levels of physical activity that are effective in preventing disease in order to improve the health, wellbeing and life expectancy of Australians.
Through this strategy we will fulfil the purpose of our organisation … and reduce the burden of disease on the Australian community. "[232]
1721 T documents at 362 (citation omitted)
158. The Strategy-First Draft identified two types of riding - transport and recreation - and then divided each into high intensity and low intensity activities according to the purpose of the activities.[233]
159. The second was to place a strong emphasis on large scale, measurable and cost effective behaviour change programmes. Some of those programmes would take the form of information and awareness campaigns to promote existing infrastructure but Bicycle Victoria regards such programmes as limited in their ability to foster behaviour change. Other programmes on which they would rely would be national behaviour change programmes such as Ride2School and Ride2Work. Other programmes would be developed to reach other audiences in other settings.
160. The third lever for change was focused on changing or modifying legislation that is suppressing bike riding so that there is a strong legislative infrastructure supporting individuals and communities in making and sustaining healthy choices.
161. The Strategy-First Draft proposed that Bicycle Victoria would bring about change by facilitating and supporting those who wished to ride, encouraging and challenging institutions and individuals to consider that riding a bicycle would help them achieve their goals, bring influence to bear on government and to act as a catalyst for the growth of public opinion favouring changes to support bicycle riding and taking a stand for what it believes in.
162. The Strategy-First Draft went on to identify the areas in which Bicycle Victoria will work dividing them into the government sector, the private sector, the tertiary sector and the non-government sector. Bicycle Victoria would try to influence governments in the expenditure of their budgets, the development of their policies and programmes (legislative and otherwise) and service delivery. It proposed that it would work with government and others to improve the evidence base that is available to government for its decision-making processes. The particular areas of government on which it would focus its attention would be transport, climate and pollution, recreation planning and provision, tourism, planning and urban design, health sector and sport. Bicycle Victoria will explore its relationship with bodies that have public health goals of increased physical activity. The Strategy identified the National Health and Medical Research Council, the Australian Research Council, the Australian Institute of Health and Welfare, VicHealth and Western Australia's Healthway.
163. Bicycle Victoria would try to influence the private sector by providing data and supporting efforts to establish other data showing the financial value of higher levels of physical activity to business in general and to particular organisations. Furthermore, it will try to influence the private sector to invest in physical activity to achieve that financial value, to change its policies so that they are supportive of physical activity, to establish standards, public recognition for organisations that are making effective change and to support changes by government and others to increase physical activity.
164. Bicycle Victoria would look to the tertiary sector to work with it to develop an understanding of bicycle riding in the community and the means of monitoring that riding so that an improved evidentiary basis becomes available.
165. Bicycle Victoria noted in its Strategy-First Draft that it continued to develop effective partnerships with non government organisations (NGOs) and to emphasise its connections with organisations that have an interest in physical activity, disease prevention and health promotion. The Strategy - First Draft stated:
"As the Taskforce says 'NGOs, at all levels, are partners and often leaders in prevention, providing research and development, advocacy, social marketing, public information and primary care, as are professional associations and academic groups.'
We continue to develop our effective partnerships in this area. We will emphasise connections and organisations that have an interest in physical activity, disease prevention and health promotion.
For example in physical activity we seek to develop relationships with community based recreational bike riding groups whether municipality based or organised in local areas by national organisations such as YMCA and Youth Hostels Association.
In disease prevention we seek to develop relationships with organisations that work with preventable 'lifestyle diseases' such as diabetes, heart disease, depression and cancer.
In health promotion we will work with organisations that promote physical activity either like the Heart Foundation as part of 'core business' or those that use physical activity and bike riding to raise funds like the MS society.
Where possible we will seek to develop partnerships that increase our ability to influence government and the private sector to support higher levels of physical activity."[235]
1721 T documents at 383
166. I find that the Strategy-First Draft was considered by Bicycle Victoria's Board and its members considered the document during 2010. It was not a document on which the Panel members were asked to comment.[236]
Bicycle Victoria's behavioural change programmes
167. On the basis of the evidence of Mr Barber, I find that Bicycle Victoria runs behavioural change programmes such as the Over 50s Riding Program (formerly the Seniors Riding Program) and the Women's Cycling Program. These are in addition to the Ride to Work Program and the Ride2School Program. Over 50,000 students participate in the Ride2School Program nationally and approximately 30,000 participate in the Ride to Work Program nationally. Both contain a number of flexible units and are tailored by schools and workplaces to meet their particular needs.
168. Ride2School's Annual Report for 2006-2007 sets out reasons for walking and riding to school. It noted the decrease in the numbers walking and riding to school with the corresponding increase in childhood obesity. As the numbers who walked and rode increased, Bicycle Victoria predicted that more schools would become aware of the benefits for both their students and their local community:
"… Riding and walking to school provides some of the 60 minutes of daily physical activity recommended for school students - it's good for their health, good for the environment and good for the family budget. A winning concept all round."[240]
1721 T documents at 100
169. Mr Barber had taken up a similar theme in the August-September 2005 issue of Bicycle Victoria's magazine RideOn:
"Some years ago most children got themselves to school - often by bike. Not today. Looking back we realise that this one little thing did a lot of people a lot of good.
We know that the independence and responsibility of getting yourself to school builds social and life skills and is linked to improved academic performance.
The health benefits keep depression, diabetes, osteoporosis and heart problems at bay. You really can't afford not to do it. The main risks to children today are, ironically, not kidnapping and the other things that parents fear.
Parents also benefit from reduced taxi time - as do we all: family taxis make up 17% of road congestion during the school term.
The good news is that many kids are keen to tear off the parental bubble wrap and be independent. There are still schools that encourage children to ride. The experience and practice gained in these smart schools can feed back into the mainstream."[241]
1721 T documents at 134
170. Ride2School's Annual Report for 2006-2007 set out strategies for encouraging students to walk or ride to school as well as addressing barriers that discourage their doing so. Barriers include lack of adequate parking for bicycles and busy roads. Bicycle Victoria advised on grants that were available from the Sustainability Fund for bike sheds and the manner in which they could be constructed. It also drew attention to its website where it advised how to develop Quiet Neighbourhood Routes. Encouragements included frequent rider incentives, competitions and prizes. Ride2School assisted in locating equipment, providing volunteers to assist teachers and developing students' skills.[242]
171. Ride2School conducted workshops, conferences and stalls during 2006-2007:[243]
| Workshop, conference or stall | Activity |
| Healthy Schools for Health Kids Conference, Shepparton | Ride2School delivered a presentation of the programme outline and facilitated a discussion of the barriers frequently encountered when considering walking and riding to school. |
| Toolbox for Environmental Change Conference, RMIT | Ride2School provided a workshop for teachers to inspire them and give them resources to enable them to return to the classroom to promote effectively walking and riding. |
| Millenium Kids Sustainability Road Show, Toorak Library | Two workshops were run for primary and secondary students from the area. Students discussed their experiences of riding and walking to school and were challenged to develop strategies that overcame barriers to their doing so. |
| Victorian Teachers Games, Geelong | Ride2School provided information to teachers on the Ride2School programme and offered an opportunity to discuss the ideas, barriers and achievements. |
| Gisborne Secondary School | A Ride2School Stall was run as part of a Careers and Environment Expo. Stickers and postcards were distributed, students discussed their experiences of walking and riding to school and lunchtime prizes were drawn for those students who had ridden to school. |
172. The then Minister for Sport, Recreation and Youth Affairs, Mr James Merlino, launched the "1000 Bikes campaign" in May 2007. That campaign rewarded Year 6 students in government schools who had been nominated as being exceptional as student leaders and as committed to walking and cycling to school. The campaign was sponsored by Malvern Star and 500 government primary schools each received two Malvern Star bicycles together with helmets and locks.[244]
Bicycle Victoria's income, expenditure and surplus
173. On the basis of Mr Reynold's evidence, I find that Bicycle Victoria generated nearly $11.7m in the financial year ending 30 June 2010 and spent some $11.6m leaving it with a surplus of $116,000. On the basis of the pie charts in his statement, I find that Bicycle Victoria's revenue and expenditure in that year can be allocated according to its source as a percentage of the whole as follows:[245]
| Source | Revenue | Expenditure |
| Rides | 58% | 48% |
| Membership fees and donations | 19% | 12% |
| Facilities | 2% | 8% |
| Behaviour change | 9% | 8% |
| Other products, services, interest and investments | 12% | 24% |
174. Mr Reynolds' reference to "facilities" is a reference to campaigns so that the reference to "facilities revenue" is a reference to revenue received from campaigns to improve bicycle infrastructure. Campaigns of that sort involve some government lobbying in the sense of working with local councils to ensure that they put their money into the correct bicycle infrastructure. It also includes work for local councils, which generates revenue. Bicycle Victoria's work for local councils includes, for example, the number of cyclists travelling through various municipalities. Information of that sort is required for planning and design work undertaken by local councils.
175. Revenue for rides is generated by the fees paid by participants and from donations by their sponsors. The sponsor for the most recent Great Victorian Bike Ride was HBA and that for the Around the Bay in a Day Ride was the RACV.
176. The revenue generated under the heading of "behaviour change" is generated from programmes such as Ride2School and Ride to Work. As it is donated by sponsors and government departments, the activities undertaken in such programmes must be tailored to the revenue received. In the financial year ending 30 June 2010, the Ride2School activities had to be scaled back from previous years for that reason. The behaviour change activities are intended to be revenue neutral. If they exceed the revenue received from sponsors and government departments, Bicycle Victoria will fund the difference but the intention is that they do not. If they cost less than the revenue received, the surplus is applied to Bicycle Victoria's other activities.
177. In the financial year ending 30 June 2010, revenue of approximately $1.3m was received from other products, services, interest and investments with $190,000 of that sum being interest and investment income. The remainder was generated from the sale of such items as parking rails used to lock up bicycles on the street.
178. The main purpose for which Bicycle Victoria uses the surplus of revenue over expenditure is in relation to facilities and behaviour change. The division of that surplus and its sources in the year ending 30 June 2010 is set out in the following table:[246]
| Source | Surplus contribution | Surplus utilisation |
| Rides | 87% | |
| Membership fees and donations | 6% | |
| Facilities and behaviour change | 82% | |
| Profit/(Loss) | 18% |
Cycling and health
179. Evidence on the relationship between cycling and health was given by:
| Witness | Qualifications |
| Dr Chloë Mason[247]
|
Tertiary qualifications in Medical Geography, Industrial Relations, Environmental Studies and Law. She is admitted as a legal practitioner in New South Wales and has a PhD (Industrial Relations) from the School of Economics at the University of New South Wales. Dr Mason is a consultant on policy, programme development and implementation and research in areas circumscribed by the intersection of her qualifications and experience. |
| Professor Alan Rob Moodie[248]
|
A Fellow of the Royal Australian College of General Practitioners as well as holding a Diploma in Obstetrics and Gynaecology and, from Harvard University, a Master of Public Health in International Health. Inaugral Chair of Global Health at the Nossal Institute for Global Health and leading the Disease Prevention and Health Promotion Unit in that Institute. Over the past 30 years, Professor Moodie has held a range of positions in the field of public health and health promotion. More recently, he chaired the Commonwealth Government's National Preventative Health Taskforce overseeing Australia's National Preventative Health Strategy, "Australia: the Healthiest Country by 2020". |
| Professor Neville Gordon Owen[249]
|
Co-Director of the Cancer Prevention Research Centre and a Professor of Health Behaviour in the School of Population Health at the University of Queensland and an Honorary Professorial Fellow at the Baker IDI Heart and Diabetes Institute. He has a PhD in Experimental Psychology and a Bachelor of Arts and is an expert in behavioural epidemiology and chronic disease prevention research with a particular focus on physical inactivity and health outcomes and on the identification of evidence to inform population strategies to reduce the risk of major chronic diseases. |
| Associate Professor Chris Ernest Rissel[250]
|
Director of the Health Promotion Service in the Sydney South West Area Health Service and Associate Professor at the School of Public Health at the University of Sydney. |
180. Associate Professor Rissel and Professor Owen are also members of the Panel. They and Associate Professor Salmon, Professor Baur, Professor Olds, Professor Brown, Dr Sloman and Mr Shilton have all written to the Commissioner regarding various aspects of the benefits of physical activity in general and of bicycle riding in particular. Dr Mason, Professor Moodie and Professor Owen have also prepared statements. Each has supported their opinions with references and supporting material.
181. On the basis of their evidence, I find that one of the greatest public health challenges facing Australia is obesity. Meeting the challenge is a task that is complex and cannot be solved simply by education or the provision of information or by a directive or prohibitionist approach. Cycling is a form of physical activity that can prevent, remediate and control diseases, including those associated with obesity. Obesity is responsible for, or operates as a predictor for, many lifestyle diseases such as diabetes, osteoarthritis, cardiovascular disease, colorectal, breast, uterine and kidney cancer.
182. The role of cycling in reshaping people's behaviour was recognised in Technical Report 1 to Australia, the healthiest country by 2020 (Technical Report 1) when it referred to it as one of the strategies under the heading of "Reshape urban environments towards healthy options".[251]
183. On the basis of the approach taken in Technical Report 1 and on the evidence of Professor Owen in his statement, I am satisfied that behavioural epidemiological studies demonstrate that external factors such as the access to information and their environments, physical and otherwise, influence people's choices. People are more likely to exercise when their physical environment is conducive to walking and/or cycling. If they are to be effective, health promotion campaigns must address the external factors that have an impact upon behaviour. Therefore, health promotion programmes must extend beyond the provision of information and advice. They must establish an environment in which people can make choices about the activities in which they engage. Establishing that environment is a multi disciplinary task that draws in people such as health care professionals, urban and transport planners, educators and employees.
Bicycle Victoria's purpose and activities
184. I must bear in mind that I must look beyond the intentions of Bicycle Victoria to the purpose for which it was established and for which it remains in operation. The purpose may vary over time. On the basis of the findings I have already made in the preceding paragraphs, I find that the primary purpose for which it was established in 1976 was to encourage people to use the bicycle as a means of transport and as a means of getting together for fun, sport and recreation. Its other purposes were ancillary to its main purpose in that they were directed to infrastructure, such as bicycle paths, parking facilities and safety standards, required to promote its main purpose.
185. The reasons for encouraging people to use bicycles was not articulated in the early literature. I find, however, that there is an emphasis in the material on Bicycle Victoria's being concerned about the environment. At least some of its focus was upon promoting cycling as one of the ways in which the environment could be protected from pollution. Reference is made to cycling and walking as ways in which people could have access to forestways and parks in material submitted by Bicycle Victoria from that time.[252]
186. There is also an emphasis in the material on the social side of cycling.[253]
187. On its own, this increasing focus on health in the magazines is of no particular consequence either way. It becomes of consequence when seen in the context of the development of Bicycle Victoria's activities and the changes in its constitution as well as the editorial comment in rideOn over the years and particularly since 2004. It was in that year that there was a marked increase in the reference to fitness and health in the section of the magazine written by Mr Barber. His article in the February 2004 edition spoke of the common thread identified by Bicycle Victoria linking all those who rode bicycles for various reasons and purposes. Mr Barber linked the promotion of the "the thing we love" with making "a huge contribution to our community as well" and did so in the context of the "public health push for physical activity".
188. This emphasis, I find, has continued in later magazines. It has been at the foundation of the changes made by Bicycle Victoria. Its President flagged in its June-July 2005 edition that Bicycle Victoria was reviewing both its constitution and strategy that "Life's better on a bike". Certainly, its aim was to get as many people as possible riding bicycles but not simply for the sake of riding. What is inherent in the mantra that "Life's better on a bike", is developed in subsequent publications. In Bicycle Victoria's booklet "The Cycle-Friendly Workplace", Mr Turnbull's foreword identified cycling's benefit to health (controlling stress, anxiety and depression) and social connections as a means to improving the workplace and productivity.
189. Bicycle Victoria has continued the theme through its Annual Reports and the introduction of the Panel. It is true that nobody from that Panel has yet been called upon to advise Bicycle Victoria on its health strategy but its members are available and, on the basis of Professor Owen's evidence, I find that this is not an unusual practice. Not only are the health professionals on the Panel prepared to provide ad hoc advice, they are prepared to have their names associated with Bicycle Victoria.
190. The changes made by Bicycle Victoria to its constitution on 16 November 2009 were consistent with the steady changes that had occurred in Bicycle Victoria over the years since its inception as BIV. The documents, supported by the evidence and particularly that of Mr Barber, show its members first wanting to share the experience they so much enjoyed and then looking for what it was that they enjoyed and for the common threads that bound its members. Having found those common threads, Bicycle Victoria identified them as being the benefits that flow from physical fitness. Its view on this is supported by the findings I have made with regard to the benefits flowing from the reduction of obesity and from physical fitness generally.[259]
191. The same trend can be seen in its activities. Initially, its activities focused on safety for its riders, facilities for them and cycling activities in which they could engage be they social or competitive. This is apparent in the early rideOn magazines. There is an emphasis, for example, on bicycle lanes in Chapel Street and on parking or storage facilities at workplaces and shopping centres. Attention is given to the construction of bicycle paths.
192. As Bicycle Victoria identified the common threads of interest and motivation of their riders, they continued with these activities. On the surface, it could be said that little has changed. Programmes such as Round the Bay and the Great Victorian Bike Ride have continued for many years with the introduction of new programmes such as Ride2Work and Ride2School in more recent years.
193. There is no question that all of Bicycle Victoria's programmes are directed at the use of the bicycle for transport or for leisure and for promoting the use of the bicycle. They are directed not only to their members but also to the wider community. Participation in programmes such as Round the Bay and the Great Victorian Bike Ride is open to anybody whether a member of Bicycle Victoria or not. Programmes such as Ride2Work and Ride2School are specifically directed to those who are not already cycling to work or school and so to persons who are unlikely to be members of Bicycle Victoria. Ancillary programmes are directed to supporting its cycling programmes. They include the information sessions held in association with the Ride2School programme.
194. Whereas such activities developed in an ad hoc way in the earlier days, I find that they are now part of an overall strategy by Bicycle Victoria directed to promoting fitness and, by that means, preventing disease. Also part of that strategy is the development of infrastructure required for safe cycling. That is not something that Bicycle Victoria can achieve through its own labour but what it does do is agitate for improved infrastructure and an environment free of pollution by lobbying both the public for its support and government for its commitment to allocate the resources necessary to establish that infrastructure. Within these two broad groups are many smaller groups. There are, for example, those focused on the environment, health, town planning, road safety and so on. The way in which it presents its message to various interest groups may vary according to the particular interests of the group concerned but, I am satisfied, the essential message and the reasons for presenting it are consistent. The message is to get people cycling more often and the reasons for it are to make people fitter and healthier.
195. In view of my findings, I am satisfied that the purpose of Bicycle Victoria is to benefit the general community. That leads to the next issue which is whether the promotion of cycling is a charitable purpose. Cyclists may, and do, engage in cycling as a competitive sport but sporting activities are only one of the ways in which Bicycle Victoria promotes its purpose. If it is to encourage more people to cycle more often it has to present the appeal of cycling in many forms. The other forms in which it presents it are as transport and as a recreational activity. The presentation of cycling in these various forms is part of its strategy to encourage cycling just as agitating for a safe environment in which they may do so is part of it. The fact that cycling may be a sport in some instances and a leisure activity in another does not characterise Bicycle Victoria's purpose as being for sporting purposes or for recreational purposes as such. It is for the purpose of promoting cycling in all its forms and for the overall purpose of promoting fitness. That is a purpose that has been recognised as charitable. Therefore, I am satisfied that Bicycle Victoria is a charitable institution.
Section 50-105 of ITAA97 and section 176-1 of the GST Act
196. Provided Bicycle Victoria meets the other criteria prescribed in the provisions, my conclusion means that it is entitled to be endorsed as an entity exempt from income tax under s 50-105 of the ITAA97 and as a charitable institution under s 176-1 of the GST Act.
Section 30-120 of ITAA97 and 123D of the FBTA Act
197. My conclusion that Bicycle Victoria is a charitable institution does not mean that it is necessarily a charitable institution whose principal activity is to promote the prevention or control of diseases in human beings. On the findings I have made, its purpose is to promote physical fitness. Certainly, it describes itself as promoting "… the health of the community through the prevention and control of disease by 'More People Cycling More Often'" but, on the evidence, I am not satisfied that this is so. Its purpose is to promote cycling and cycling will promote the improvement of health by cyclists' improving their level of physical fitness and reducing the risk of their becoming obese. The increase in the level of physical fitness and the reduction in obesity assists in the prevention of certain diseases and may play a part in containing certain diseases. Seen in its context, prevention and control of disease is a consequence of Bicycle Victoria's principal activity which is the promotion of cycling and of physical fitness. Prevention and control of disease in human beings is not its principal activity.
198. Consequently, Bicycle Victoria is not a charitable institution whose principal activity is to promote the prevention or control of diseases in human beings. It is not entitled to be endorsed as a DGR for the operation of a fund, authority or institution under s 30-120(a) of ITAA97 and is not entitled to be endorsed as a health promotion charity under s 123D of the FBTA Act.
DECISION
199. For the reasons I have given, I have decided:
- 1. in relation to the respondent's objection decision dated 27 November 2009 (Objection Reference No. 6285807 - Application No. 2010/1723) to refuse endorsement of the applicant as:
- (1) an income tax exempt charity under s 50-110 of ITAA97 on the basis it is a charitable institution as described in item 1.1 of the Table in s 50-5 of ITAA97;
- (2) a health promotion charity under s 123D of the FBTA Act; and
- (3) a charitable institution under s 176-1 of the GST Act;
-
that decision is:
- (4) set aside in so far as (1) and (3) of that decision are concerned and there is substituted for that part of the decision a decision that:
- (a) the applicant is a charitable institution; and
- (b) subject to the applicant's satisfying any other criteria prescribed by the relevant provisions of ITAA97, it is entitled to be endorsed as:
- (i) an income tax exempt charity under s 50-110 of ITAA97 on the basis it is a charitable institution as described in item 1.1 of the Table in s 50-5 of ITAA97; and
- (ii) a charitable institution under s 176-1 of the GST Act;
- (5) affirmed in so far as (2) is concerned being a decision to refuse the applicant's endorsement as a health promotion charity under s 123D of the FBTA Act; and
- 2. in relation to the respondent's objection decision dated 27 November 2009 (Objection Reference No. 6281520 - Application No. 2010/1721) to refuse endorsement of the applicant as a DGR for the operation of a fund, authority or institution under s 30-120(a) of ITAA97 that decision is affirmed.
Footnotes
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“Having considered all of these aspects of the matter and formed an impression of the way in which the body operates and is intended to operate, I am satisfied that it fits the statutory test. The underlying premise in the objects of the Fund is that the level of skills of those engaged in the building and construction industry will be enhanced by enhancing their level of education and training through the medium of facilities assisted by the Fund and that thereby the public would benefit from better and more efficient services and products. It is true that the industry as a whole may benefit by reason of its enhanced efficiency but what is the principal object and pursuit of the fund is to be determined by an overall view of its structure and operation. In my view, any benefit to any particular individual in the industry or the industry generally is incidental rather than the principal object and pursuit of the Fund.”
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