SSAU Nominees Pty. Limited v. Federal Commissioner of Taxation.Judges:
Supreme Court of Victoria
SSAU Nominees Pty. Limited (``SSAU'') has brought an action against the Commissioner of Taxation of the Commonwealth of Australia (``the Commissioner'') for two declarations. The first declaration sought is that the plaintiff is an institution or organization established and carried on exclusively or principally for the promotion of the interests of a university or school conducted by an organization not carried on for the profit of an individual, within the meaning of Item 63B(1) in Div. X of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 of the Commonwealth of Australia (``the Act''). The second declaration sought is that certain computer and ancillary equipment constitute goods for use by such an institution or organization and that the equipment is exempted from liability for sales tax by sec. 5 and Item 63B(1) in Div. X of the First Schedule to the Act. Item 63B of the First Schedule to the Act is contained in a list of sales tax exemption items upon the sale value of which sales tax is not payable under specified Sales Tax Assessment Acts by reason of sec. 5 of the Act. Sub-item (1) of Item 63B reads:
``Goods for use (whether as goods or in some other form), and not for sale, by a society, institution or organization established and carried on exclusively or principally for the promotion of the interests of a university or school conducted by an organization not carried on for the profit of an individual.''
The Acts to which this exemption apply are compendiously known as the Sales Tax Assessment Acts (Nos. 1-9) 1930 of the Commonwealth. The defendant Commissioner, in denying the plaintiff's claim, asserts in substance that it is not an institution or organization within the meaning of sub-item 63B(1).
SSAU is a company incorporated on 20 May 1982 pursuant to the provisions of the Companies Act 1961 (Vic.) for the purpose of acting as trustee of a superannuation scheme then being prepared by a drafting committee set up some years earlier and including four
ATC 4634representatives from each of the Australian Vice-Chancellors' Committee and the Federation of Australian University Staff Associations. A Deed of Trust was executed on 24 December 1982 by SSAU and the University of Tasmania, by which there was established what was called ``the Superannuation Scheme for Australian Universities'' (``the scheme'').
On the pleadings the Commissioner admitted that SSAU was established and is carried on solely for the purpose of acting as the trustee of the scheme. In order to ascertain fully the objects and purposes of the institution or organization known as SSAU, it is at the least necessary, therefore, to look at the nature of the scheme created by the Deed of Trust and to look at the objects and purposes of that scheme, whether stated directly or indirectly in the deed. The deed does not contain any express objects or purposes, but it states that the University of Tasmania, described as the ``initial participating institution'', had established the scheme ``for the purpose of carrying... into effect'' a ``determination'' which was set out in Recital A, as follows:
``The Initial Participating Institution has determined to establish a superannuation scheme to be called `the Superannuation Scheme for Australian Universities' (hereinafter called `the Scheme') for the purpose of making provision with the co-operation of certain of its present and future employees for individual personal benefits, pensions, retiring allowances and death and disability benefits for those employees and for their dependants.''
The other two recitals state that the University of Tasmania had caused the trustee ``to be formed to act as the first trustee of the Scheme'' and that SSAU had agreed to act as trustee of the scheme. Thereafter, it can be seen from the deed that the scheme is a somewhat elaborate version of a conventional employer's superannuation scheme, making provision for contribution by members of the scheme and their employers, who are called ``participating institutions'', and for the payment of benefits, including pensions and allowances, upon the retirement, disablement or death of the members. More importantly, membership is confined to employees of participating institutions, and to persons nominated by participating institutions and accepted by the trustee as eligible for membership of the scheme, although it is difficult to ascertain what persons, other than those who were or are employees in the widest sense of participating institutions, could become members of this superannuation scheme. Consequently, the scope of the scheme, and the range of members and potential members of it, must be ascertained by looking at who are and can become participating institutions and who are thus the employers who are obliged, in the ordinary course of events, to make contributions at the rate of 14 per cent of the salary of each contributing member every month: see cl. 14. The definition of participating institution is in cl. 1(1):
```Participating Institution' means a body corporate or unincorporate which -
- (a) either
- (i) is a University or a University College or is any other body which is established for the purpose of higher education in the University sector or some related purpose and which is approved by the Trustee for participation in the Scheme; or
- (ii) is a College of Advanced Education or another corporation or association established for the purpose of higher education in the advanced education sector and which is approved by the Trustee for participation in the Scheme on such terms and conditions as the Trustee shall determine; or
- (iii) is a corporation or an association the activities of which are wholly or significantly related to a University or the University sector and which is approved by the Trustee for participation in the Scheme on such terms and conditions as the Trustee shall determine; or
- (iv) is the Trustee as an Employer; and
- (b) has agreed to execute the Deed as required by Clause 4(2);''
The deed referred to is one approved by the trustee in the form, or to the effect, of that set out in the First Schedule, which requires the participating institution to observe the provisions of the deed and to require, as a
ATC 4635condition of employment, that all employees who join the service of that institution within superannuable classifications shall apply to become members of the scheme.
Other provisions of the deed which may be of relevance include a clause which enables the trustee to receive from other superannuation or pension schemes or funds moneys or other assets representing a member's interest in that other scheme or fund, with the consequence that the member's period of pensionable service, as defined in the deed, is extended by an appropriate period: see generally cl. 31. The trustee is obliged not merely to act as a trustee of the assets vested in it, but also, by cl. 32, to have the ``general control, management and administration of the Fund''. However, the powers given to the trustee under the deed are, in certain respects, invested subject to the powers of direction and recommendation given to a consultative committee under cl. 33. That committee consists of persons to be nominated, appointed or elected ``by each University which is a participating institution'' and including two persons representing the controlling body of the participating institution, and one representing the academic staff and one representing the non-academic staff of each participating institution. It is not necessary to set out all the powers and duties of the consultative committee, but among them is the power to consider and, if thought fit, to consent to the appointment by the trustee of new or additional trustees of the scheme and, in particular, to the amendment of the scheme by the trustee: see cl. 48.
Before moving to the other evidence adduced at the hearing of this action, I must mention that counsel for the Commissioner submitted that, in order to resolve the plaintiff's claim that it was an institution or organization within the meaning of sub-item 63B(1), or at least to answer the question whether it was ``established'' for the purposes stated in that sub-item, the Court was obliged to look only at what he called the ``charter'' of the trust fund, by which I understood him to mean the terms of the trust deed, for the Commissioner had admitted on the pleadings that SSAU was established and is carried on solely for the purpose of acting as the trustee of the scheme. For this proposition, he relied upon certain observations by members of the House of Lords in a case under the Scientific Societies Act 1843 (6 and 7 Vict. c. 36):
Institution of Mechanical Engineers v. Cane (1961) A.C. 696, esp. at pp. 707, 708 and 722. Although it may have been desirable to resolve this question of relevance at this stage, I prefer to summarise the other evidence adduced, for it tends to expose the problems raised, and to reach a conclusion later as to its relevance after considering the proper construction of the words in sub-item 63B(1).
This other evidence came in the form of documents and in oral testimony by Professor David Caro, Vice-Chancellor of the University of Melbourne, a member of the drafting committee and at that time Chairman of the Australian Vice-Chancellors' Committee, who subsequently became a director of SSAU and has been Chairman of its directors since 10th November 1983. He said that before the introduction of the scheme approximately 12 of the Australian universities had separate, but varying, superannuation schemes, most based on an insurance policy which was delivered to the employee upon retirement and which were, for the most part, funded by five per cent contributions from employees and ten per cent from the employer universities. In New South Wales universities and at the Australian National University most of the staff were in government superannuation schemes and, in fact, none of the New South Wales universities is yet a participating institution in the SSAU scheme. He proceeded to outline some of the known and perceived defects in the existing superannuation schemes, concentrating on those run by the universities themselves. For various reasons, during the 1960s and 1970s, inflation had revealed a number of defects, primarily in the funding of those schemes. In many cases, the lump sump benefit payable pursuant to the individual insurance policies upon maturity proved to be inadequate and, as a result, most universities set up supplementary schemes of differing kinds, some of which were funded and some of which were not. Because of the defects of the primary schemes and the dependence of university staff on the supplementary schemes, which were inadequately funded, some of those supplementary schemes were close to insolvent. Professor Caro particularly pointed to those run by the University of Tasmania and the University of Western Australia. Other universities had more than one primary scheme.
Furthermore, Professor Caro expressed his opinion, doubtless based on his experience as Vice-Chancellor of two universities since 1978 and as Deputy Vice-Chancellor of Melbourne University from 1972 to 1977, as well as his other experience in university administration, that transferability of interests under the existing schemes was very poor. Although it was possible to transfer the insurance policy component from one university scheme to another, it was rarely possible to transfer anything from the supplementary schemes or parts of those schemes. He said that older university staff in particular, over the age of 45 to 50, were most reluctant to accept positions in other universities in Australia. There were, likewise, difficulties impeding the transfer of staff from those universities whose staff participated in government schemes and, in particular, in the Commonwealth Superannuation Scheme.
In response to this, in the latter part of the 1970s, following the abolition of fees in the universities and the provision of all university funds from the Commonwealth, the administrations and staff associations of the different universities held discussions as to the possibility of the introduction of some form of national scheme of superannuation for university staff. Professor Caro said that the drafting committee worked from a number of criteria, which were said to be the purposes intended to be achieved by the creation of a national superannuation scheme for universities. In part, the universities were concerned to reduce the cost, which had escalated greatly in recent years, but the scheme was also designed to provide a considerable degree of transferability between universities within Australia, and between government and universities, as well as between the universities and the private sector. Moreover, the proposed scheme was one which was designed so as to enable the recruitment of staff from overseas with the greatest possible flexibility. For their part, the staff associations were concerned to see that the scheme was one which did not provide substantially lower benefits than those from the existing schemes, although Professor Caro thought that the present scheme had produced benefits which were lower than those already available from at least two of the universities. Other ends sought to be achieved were a central administration and a larger fund, which were considered likely to produce better returns from investments and lower administrative costs.
However, the drafting committee was equally concerned with the level of contributions, especially those coming from the government. The report of the Commonwealth Tertiary Education Commission (``the Commission'') for the 1982-1984 triennium had recommended that supplementary funds be provided to meet the increasing costs of superannuation in universities and colleges of advanced education.
In about December 1981 the government accepted these recommendations and announced a special grant of up to $12 million for the years 1983 and 1984. However, this was said by the then Minister for Education to be conditional upon the proposed superannuation scheme being acceptable to the government and, in particular, upon it being extended to staff of colleges of advanced education and consistent with existing government policy on superannuation. The latter condition was explained by Professor Caro as being primarily designed to enable transfers in and out of the Commonwealth Public Service. As to the level of employer contribution, the government stated that it would make grants enabling, for the most part, higher contributions than had previously been made, but so as to limit the cost to each institution to 14 per centum of the salaries of staff eligible for benefits. According to Professor Caro, this level would make the scheme more expensive than most individual schemes, which were generally based on employer contributions of ten per centum of salaries, although the poor funding of many schemes had the result that unfunded payments made their total costs much greater. After detailed discussions about the scheme during 1981-1982 between the government, the Commission, the Vice-Chancellors' Committee, the Association of College Principals, the Staff Associations and other interested bodies, the government informed the Vice-Chancellors' Committee that the proposed scheme was consistent with its requirements and that, pursuant to the States Grants (Tertiary Education Assistance) Act 1982, it was intended that additional funding would be provided by adding to existing grants sums equivalent to 5/28ths of employer contributions to the SSAU
ATC 4637scheme, on the assumption that employers would be contributing sums equal to 14 per centum of the salary of each member of staff joining the scheme. The then Minister, Senator Baume, in a letter to Professor Caro dated 16 November 1982, said that those ``funds will be available to universities to assist them to participate in the new Scheme''. However, the evidence indicated that in due course this extra 5/28ths will become part of the normal funding of the universities.
Professor Caro said that a combination of factors led the universities to consider the scheme seriously and to put it into effect. These included the government's fixing of the 14 per centum limit on employer contributions, combined with its agreement to add to its grants sums equal to 2 ½ per centum of members' salaries, i.e. the 5/28ths previously mentioned, its approval later in November 1982 of the terms of the scheme, and the expression by the Minister in his letter of the view that the scheme would make ``an important contribution to the development of higher education in Australia''.
Shortly afterwards the deed was executed by SSAU and the University of Tasmania, which had been the most enthusiastic of its supporters, especially as it had already decided to close its own scheme from the end of 1982. SSAU had already been formed as an independent company to manage the scheme. This it has done, although it engaged professional fund managers to manage its investments. The shareholders of SSAU are the participating universities alone, the drafting committee having decided that others should not become members of the company. That remains the case, although it is possible that the colleges of advanced education will take shares in the future.
Some description was given of the various institutions who might and did become ``participating institutions'' within the meaning of the definition. All the universities in Australia were set up under charter or Act of parliament and none is carried on for profit. Each university's eligibility is considered by the trustee before it is accepted as a participating institution, as is the case with every other institution seeking to participate in the scheme. Only the University of Tasmania was accepted before the commencing date on 1 January 1983, but seven other universities joined before the end of 1983 and two more during 1984. Not all universities have yet applied, including all New South Wales universities and those in Victoria other than the University of Melbourne.
The reason for the delay or failure of some universities to apply to join the scheme is attributed to the wide variety of existing schemes, including those in New South Wales whose members were part of the government superannuation scheme. No attempt was made to examine the vices and virtues of each scheme, but it has not followed that all existing staff members have transferred to the new scheme. A number of the older schemes continue to operate. For example, at least two schemes at Melbourne University are maintained, with about 140 to 150 members out of about 2,500 staff members.
The universities, apart from the control effectively given them, have dominated membership of the scheme, with 6,108 out of 6,194 members at 31 December 1984. The first category in the definition also includes university colleges. The relationship of those colleges and their universities varies considerably. By no means all directly form part of a university and at Melbourne University, for example, they are independent bodies, affiliated by the university statutes, situated on land owned by the university and performing the function of residential colleges used predominantly by university students. Only four such colleges have joined the scheme, with four members in all being the warden, principal or master of each college.
As to the second category of participating institution, colleges of advanced education and similar institutions, none has yet joined the scheme, notwithstanding the imposition of the condition by the government of the day that they should have the right to join. It was explained that most of the college staffs are members of government superannuation schemes, with better benefits than the SSAU scheme can offer, and others have not yet had the money to make employer contributions at the rate of 14 per centum. No description was given of these institutions, except that they form that part of the tertiary education ``sector'' conventionally known as ``higher education'' institutions so as to distinguish them from technical and further education colleges.
The third category in the definition comprises corporations and associations which are ``wholly or significantly related to a university or the university sector''. Professor Caro's evidence revealed that in earlier schemes there had been members from a wide range of institutions affiliated or associated with the universities, including residential colleges, research institutes and the Vice-Chancellors' Committee itself. He said that the drafting committee had wished to include employees from those organizations. He described some of the bodies which then existed and have joined the scheme, presently numbering eight, and which have 84 members. They include bodies such as the Howard Florey Institute of Experimental Physiology and Medicine, the National Vision Research Institute, the Royal Children's Hospital Research Foundation, the International Development Program of Australian Universities and Colleges, and the Australian Council of Educational Research. Although their constitutions were not all produced in evidence, I was told that all the bodies were affiliated to a university or a number of universities, either by the statute setting them up or by agreements with the universities. For example, the Howard Florey Institute, by the Act establishing it, the Howard Florey Institute of Experimental Physiology and Medicine Act 1971 (Vic.), is directly related to the University of Melbourne by a number of statutory provisions: see sec. 4(1)(d) and (2), 6(1), and 16 and the Preamble. Most universities appear to give their councils direct or indirect powers enabling the affiliation of research and educational institutes and colleges: see, e.g., Australian National University Act 1946 sec. 27(1)(q) and (r); Tasmanian University Act 1951 sec. 18(1)(i) and (j); Melbourne University Act 1958 sec. 18; University of Western Australia Act 1911 sec. 31(1)(s) and 34. The institutes usually have provision for higher degree students and the director is frequently a professor of the related university. Some bodies are not directly related to a specific university, such as the Australian College of Educational Research set up by the Commonwealth Government, and the International Development Program of Australian Universities and Colleges, which was set up by the Vice-Chancellors' Committee to assist in establishing higher education facilities in neighbouring countries. As the definition provides that these bodies' participation in the scheme must be approved by the trustee, some description was given of the method adopted to ascertain whether they are sufficiently related to a ``University or the University Sector'' and an application form and questionnaire was tendered in evidence. Although the evidence was objected to, Professor Caro said that the board's concern had been to establish that applicants were affiliated or set up ``in support of the university system'', that they were ``profit-free'' and had been established for educational or research purposes. In cross-examination he said there are also a number of bodies, not participating institutions, but related to universities or colleges of advanced education, which are members of the Australian Tertiary Institutions Consulting Companies Association and which have been set up primarily to market the research findings of universities and colleges. None of these are participating institutions.
The scheme has been operating only for a short time and uncertainty as to the comparative benefits has led to some delays in joining the scheme, but already the fund exceeds $200 million and the investments are producing a satisfactory return. The board of SSAU now consists of four representatives of the universities, together with two representing academic staff and two representing general staff, with one co-opted member. As to the advantages of the scheme, Professor Caro thought that it was a little early to say, but he believed that, at least at senior levels, staff now found it easier to transfer from university to university.
The only other relevant facts were, that SSAU had decided to acquire computer and ancillary equipment for use in the administration of the scheme and had written to the Commissioner seeking a ruling that the equipment would be exempt from sales tax, but the Commissioner had replied asserting that SSAU would not be entitled to an exemption and must pay the appropriate sales tax.
No real challenge was made to Professor Caro's evidence, which I therefore accept, subject to the question of the admissibility and relevance of some parts of that evidence.
I return then to the question whether SSAU is an institution or organization of the kind described in sub-item (1) of Item 63B. Although every word in the sub-item is a
ATC 4639familiar, if not simple, word of the English language, many of them have posed difficulties of interpretation in the past and this particular collocation of words contains a series of concepts capable of many meanings. Nevertheless, in the end I have reached the conclusion that SSAU is an institution or organization of the relevant kind. I consider it to be a company both established and carried on essentially to promote the interests of universities and colleges of advanced education by ensuring the proper remuneration, in the widest sense, of the employees of these bodies and thereby encouraging the recruitment and retention of the best available staff, especially academic staff. I shall endeavour to explain why I have reached this conclusion.
In the first place, there seems little doubt that SSAU is either an ``institution'' or an ``organization'', and the Commissioner was not disposed to argue to the contrary. Both words are somewhat formal descriptions of bodies the definition of which is elusive. I am inclined to the opinion that SSAU is best described for this purpose as an ``organization''. That word, which may be defined as a body or society formed with a definite and systematic structure (cf. the definitions of ``organization'' and ``organize'' in the Oxford English Dictionary), would ordinarily comprehend an ``institution'', although the language of the item might suggest that some distinction is being drawn between them. The word ``institution'' denotes a public or quasi-public body not set up primarily for business purposes, and was perhaps most clearly defined by Lord Macnaghten in Mayor, etc. of
Manchester v. McAdam (1896) A.C. 500 at p. 511 as ``an undertaking formed to promote some defined purpose'' and ``the body (so to speak) called into existence to translate the purpose as conceived in the mind of the founders into a living and active principle'': cited in part or in whole with approval by Williams J. (in whose judgment Rich J. concurred) in
Maughan v. F.C. of T. (1942) 66 C.L.R. 388 at p. 398 and by Gibbs J. (in whose judgment Barwick C.J. and Menzies J. concurred) in
Stratton v. Simpson (1970) 125 C.L.R. 138 at p. 158. At that page Gibbs J., while asserting that its meaning must depend on its context, also defined ``institution'' as ``an establishment, organization, or association, instituted for the promotion of some object, especially one of public utility, religious, charitable, educational, etc.''. In the present case, it might be tempting to consider as the ``institution'' the scheme and fund created by the Deed of Trust and administered by SSAU as trustee, but the balance of authority suggests that the word ``institution'' ``would not ordinarily connote a mere trust'': per Gibbs J. in Stratton v. Simpson at p. 158, approving the statements of the Privy Council in
Minister of National Revenue v. Trusts and Guarantee Co. Ltd. (1940) A.C. 138 at pp. 149-150: see also per Stephen J. in
Commissioner of Land Tax (N.S.W.) v. Joyce (1973-1974) 132 C.L.R. 22 at pp. 30-33: but cf. Stratton v. Simpson (supra) at p. 145 per Windeyer J. and at pp. 154-155 per Walsh J. However, in the present case it would be impossible to avoid some reference to the nature of the scheme of the trust because of the Commissioner's admission that SSAU was established and is carried on solely for the purpose of acting as trustee of the scheme. In the end the word ``organization'' seems more apt to describe a body incorporated pursuant to the Companies Act 1961: cf.
Australian Medical and Accident Insurance Co. Ltd. v. McCann (1957) S.A.S.R. 10 at pp. 14-15, 24.
The real question in the case is whether SSAU is an organization of the kind described in sub-item 63B(1). For these purposes it is necessary to look first to the qualifying words ``established and carried on exclusively or principally for the promotion, etc.''. In this expression the word ``for'' is clearly purposive, in much the same way as it was construed in sec. 25(e) of the former Income Tax Assessment Act 1922 (Cth): see
Herald & Weekly Times Ltd. v. F.C. of T. (1932) 48 C.L.R. 113 at p. 118 and
Amalgamated Zinc (de Bavay's) Ltd. v. F.C. of T. (1935) 54 C.L.R. 295 at p. 309 per Dixon J.: see also
Stewart and Stewart v. D.F.C. of T. 82 ATC 4321 at p. 4324; on appeal 84 ATC 4146 at pp. 4148-4149; (1984) 58 A.L.J.R. 191 at p. 193.
The next stage of the argument, however, is more difficult, for it involves an analysis of the concepts expressed in the words ``established and carried on exclusively or principally''. The Commissioner contends that these words require a consideration of the nature and purposes of the organization, both at the time it was established and as it is now carried on, and for determining the former of these inquiries, at the least, the Court is permitted to look at only the ``charter'' of the plaintiff, by which I
ATC 4640understood him to mean not merely the memorandum and articles of association of SSAU, but also the Deed of Trust itself. Before resolving those issues, however, it is necessary to decide whether the words ``exclusively or principally'' should be read distributively, i.e. whether both words qualify each of the expressions ``established'' and ``carried on''. Counsel for SSAU argued that these expressions should be so qualified and I did not understand counsel for the Commissioner to be arguing to the contrary. The concession seemed to me to be correct, so that the purposes for which the organization was established and is carried on must be tested by reference not only to its exclusive purposes and objects, but alternatively by inquiring as to its principal purposes and objects.
This is significant, for the Court in ascertaining the principal, as well as the exclusive, purposes and objects of SSAU must embark on a wider inquiry than frequently is the case in considering the meaning and effect of expressions governed by words such as ``established'', ``maintained'' and ``carried on''. Moreover, this inquiry may well have a bearing on what evidence is admissible and relevant in this action.
Because the exemption is not confined to bodies whose exclusive purpose is that described in the sub-item, it follows that the inquiry to be made is in part qualitative, in that what is the principal purpose of an organization will usually be a matter of opinion and degree. It also follows, in my opinion, that the Court should be cautious in applying directly or by analogy cases in which tests of exemption from liability were based on the exclusive purpose of the body. In turn, it will be seen that an emphasis on exclusive purpose has affected the nature of the evidence the courts have admitted to resolve the question of purpose. It is necessary to examine those cases, and cases on similar exemptions, in order to deal with the question of what evidence may properly be taken into account.
Nevertheless, it is first desirable to see how far the question posed in this case can be resolved by an examination of the ``charter'', or the constituent documents of SSAU. For this purpose, the inquiry is whether SSAU was established and is now carried on either exclusively or principally for the purpose of promoting ``the interests of a university or school conducted by an organization not carried on for the profit of an individual''. The only document controlling the activities of the company is its memorandum of association. Even the limitations imposed by that kind of controlling document have been much watered down in recent years with the gradual but effective abolition of the doctrine of ultra vires by sec. 20 of the Companies Act 1961 and, more recently, by sec. 68 of the Companies (Victoria) Code, which came into operation on 1 July 1982, and especially by the amendments to that Code, which came into effect on 1 January 1984, now contained in sec. 37, 67, 68 and 68A to 68D of the Code. The latter sections now enable companies to be formed without stated objects and having the ``rights, the powers and the privileges of a natural person''. Nevertheless, since this company was formed with stated objects, it remains possible for a member or other interested person to obtain an injunction restraining an act beyond those stated objects.
My task has been simplified to a degree by the Commissioner admitting in its defence para. 3 of the statement of claim to the effect that ``the plaintiff (a) was incorporated and established; and (b) is carried on - solely for the purpose of acting as the trustee of the Scheme''. No doubt this was a sensible admission, but for the purpose of dealing with the question of relevance it should be observed that the company had a conventional memorandum of association in the convenient form stringently criticised in cases such as
Cotman v. Brougham (1918) A.C. 514 and
H.A. Stephenson & Son Ltd. (in liq.) v. Gillanders, Arbuthnot & Co. (1931) 45 C.L.R. 476 esp. at pp. 485 and 490-491 per Dixon J. For example, the first of 14 objects and powers, each declared by the memorandum to be independent of each other, reads:
``To act as and perform the functions of the sole trustee of, or one of the trustees of, or a custodian trustee or agent or representative or nominee of the trustee, or trustees, for the time being and from time to time of such superannuation, pension, provident or other debt or disablement funds or of any similar fund created or established for the benefit of all or any of the employees of Australian universities or university colleges or other bodies established for higher education or other corporations or associations the
ATC 4641activities of which are significantly related to an Australian university or the university sector or higher education in Australia.''
It will be remembered that the trust deed was not executed for some seven months after the incorporation of SSAU and, in fact, the second object enabled the company to create or establish by declaration of trust ``any superannuation, pension, provident or other debt or disablement fund'' for the benefit of the same class of employees referred to in the first object.
Counsel for the Commissioner did not suggest that this case should be determined by an analysis of these two objects, or of any other object, set out in the memorandum, although some of his arguments tended to suggest that the first question to be answered was whether SSAU was originally established, i.e. incorporated, for the purposes set out in sub-item 63B(1). Rather, he contended that the purpose of its establishment should be resolved by reference to the Deed of Trust as what he described as the ``charter'' of the trust fund. That deed, made on 24 December 1982, did not set out detailed objects or purposes, but referred indirectly to a purpose stated in the preamble, being the determination of the University of Tasmania to establish a superannuation scheme for the purpose of making provision for retirement, death and disability benefits for its employees. The trustee, for its part, by recital C, declared only that it had agreed to act as the first trustee of the scheme.
Having regard to the Commissioner's admission and the course of argument, I consider it best to regard his argument as to the purposes for which SSAU were established as being based upon a document incorporating by reference the Deed of Trust into the objects in the company's memorandum. The very fact that I have to undertake this exercise suggests that any argument which requires the Court to confine itself to the constituent document must be very carefully scrutinized. Looking first to the purposes for which the organization was established, one might fairly reach the conclusion from the memorandum alone that SSAU was incorporated, at least primarily, to act as a trustee of a superannuation, pension or provident fund of the kind described in object para. (a). Its functions as trustee could be limited to those of a ``custodian trustee'', or it could have the wider powers of administration of a trustee of the kind in fact conferred by cl. 32 of the deed. As trustee, however, its duties and powers are controlled by the terms of the trust deed and the accepted principles of equity applicable to trustees. Those duties and powers must, as was argued on behalf of the Commissioner, be exercised in the interests of the beneficiaries, who were expected to be, and in fact are, members of the staff of universities and related institutions. Those functions were said to be not ones which conduced, either exclusively or principally, to the promotion of the interests of universities or schools, for the trustee must look exclusively to the interests of the beneficiaries and not to those of the settlor or those who contributed moneys to the fund. That argument, to my way of thinking, ignores the reality behind the setting up of the scheme and the incorporation of SSAU. It is one thing to ask what is the stated purpose of a trust, especially that of a purpose trust which in law can only be for charitable purposes, but it is another to ask what is the principal purpose of the establishment and carrying on of a society, institution or organization.
Consequently, I consider that one must look further afield in order to ascertain the nature and characteristics of a society, institution or organization claiming exemption under this item. Furthermore, the question is whether SSAU was established and carried on ``exclusively or principally for the promotion of the interests of'' universities or schools of a defined class. No authority was cited to me as to the meaning of the word ``promotion'' and I have been unable to find any authorities definitively analysing that word, although it appeared in exemptions provided by sec. 11 of the Customs and Inland Revenue Act 1885 (48 and 49 Vict. c. 51) (U.K.) and in sec. 3 of the Administration and Probate Act 1907 (Vic.). These sections, long since repealed, were considered by the courts on a number of occasions, notably by the House of Lords in
I.R. Commrs. v. Forrest (1890) 15 App. Cas. 334 (``property... applied... for the promotion of... science'') and by the Full Court in
Edgar v. Greenwood (1910) V.L.R. 137 (``institution for the promotion of science and art''). The most that can be gathered from the judgments in these cases is that the word ``promotion'' appears to have been treated as synonymous with ``advancement'': Forrest's case (supra) at
ATC 4642p. 354 per Lord Macnaghten and Edgar's case (supra) at p. 150 per Cussen J. The word ``promotion'' therefore appears to have a very broad connotation and the question whether a body satisfies the test in the sub-item may not easily be satisfied by reference only to the body's constituent documents.
In considering whether a society, institution or organization has been established for the promotion of the interests of universities or schools, one might first inquire whether that purpose or object is expressly set out in the document creating the body, either in a declaration of trust or in a constitution or memorandum of association containing purposes or objects. Such a purpose or object would not have to be expressed in terms of ``promotion'' or ``advancement'', but might use any appropriate language conveying the same meaning. However, in my opinion, the inquiry could not stop there, for the item might be satisfied by a body with a different but explicit specific purpose which indirectly enabled the promotion or advancement of universities or schools. For example, a foundation established to raise money for the provision of new buildings or facilities for a school would, no doubt, satisfy the test, although the word ``promotion'' or any similar expression did not appear in its constituent document. The Commissioner's argument suggested that this characterisation could only be made by examining such a document, and without considering any extraneous evidence. There may have been some substance in this argument if the issue had been confined to what are the exclusive purposes of the body, for the inquiry might then have been directed to whether the body could legally apply its funds to any purpose other than the stated purpose, and this may well have depended on the construction of its constitution or memorandum: cf. cases such as
Oxford Group v. I.R.C. (1949) 2 All E.R. 537 at pp. 539-540, referred to below.
However, under sub-item 63B(1) the inquiry is not confined to the body's exclusive purposes, but requires also a consideration of its ``principal'' purposes, and this in each case is a matter of degree not properly or satisfactorily resolved by a mere reading of its constitution. I see no reason to read into the word ``principally'' the artificial test posed by the so-called ``main objects rule'', which has created so much difficult case law relating to companies and specific exemptions from rates, taxes and duties discussed below: compare H.A. Stephenson & Son Ltd. (in liq.) v. Gillanders, Arbuthnot & Co. (1931) 45 C.L.R. 476 at pp. 485-491 per Dixon J. (company powers);
Berry v. St. Marylebone Borough Council (1958) Ch. 406 at pp. 416-417 (C.A.) (rating); and Stratton v. Simpson (1970) 125 C.L.R. 138 at pp. 148-153 per Windeyer J. (duties). In the present context the word ``principally'' may be correctly interpreted as meaning ``chiefly or in the main'': cf. the meaning given to the word in a different context in
F.C. of T. v. Commonwealth Aluminium Corp. Ltd. 80 ATC 4371 at p. 4378; (1980) 143 C.L.R. 646 at p. 658 per Stephen, Mason and Wilson JJ.; and cf.
The Little Company of Mary (S.A.) Incorporated v. The Commonwealth (1942) 66 C.L.R. 368 at p. 386 per Starke J. and
Parker Pen (Aust.) Pty. Ltd. v. Export Development Grants Board (1983) 46 A.L.R. 612 at pp. 619-621 per Lockhart J. So the present inquiry is to ascertain, if not the predominant purpose of SSAU, then its primary, major or main purpose. Consequently, in this inquiry those ``main objects'' cases in which it has been held that an institution will fall outside a statutory definition if one or more of its purposes, other than the permitted purpose, are more than merely incidental or ancillary, but are collateral, albeit of lesser importance, cannot apply in the interpretation of sub-item 63B(1). For present purposes, therefore, it would be possible for SSAU to have other collateral purposes, although it must be demonstrated that its principal or main purpose is of a kind referred to in sub-item (1).
It follows from this conclusion that whatever may be the appropriate exercise for determining the main object of a company, and however appropriate it may be to insist upon the words of the constituent document as the primary source for any decision on that issue, one could not expect to rank in importance the objects of a company, or the purposes of a society, institution or organization by a mere reading and analysis of the documents by which a company, society, institution or organization was set up. Moreover, it is not a question under sub-item 63B(1) of ensuring that the taxpaying society, institution or organization does not carry on some enterprise or have as its purpose that which is prohibited, expressly or
ATC 4643impliedly, by the sub-item. If that were the purpose of the draftsman, then clearly enough the word ``exclusively'' would have been used as the sole test of qualification of a society, institution or organization for a claim for exemption under the sub-item, as it has been frequently used in rating and taxing Acts.
What I have said so far about the use of the words ``exclusively or principally'' indicates that I do not accept the Commissioner's contention that one should look only at the charter of the trust fund, being the deed under which the scheme was set up. For that purpose counsel for the Commissioner relied upon two dicta of Lords Simonds and Tucker in Institution of Mechanical Engineers v. Cane (1961) A.C. 696 at pp. 707-708 and 722. In the rating appeal there under consideration, for the purpose of determining whether the appellant chartered corporation was a society ``instituted for purposes of science... exclusively'' within the meaning of sec. 1 of the Scientific Societies Act 1843 (U.K.), their Lordships each considered that the question should be answered by looking solely at the terms of the charter or other document by which the society was constituted. The appeal was rejected on a number of grounds by all members of the House of Lords present on the hearing of the appeal, but the other Lords of Appeal were far more cautious about confining the inquiry to the constituent charter. Lord Reid (at p. 718) construed the words of the charter ``in the light of the circumstance of the institution when the charter was granted'', although he reserved his opinion as to how far it was relevant to consider the present activities of the institution. Lord Radcliffe, after stating that the words of the charter were not ambiguous, expressed the opinion that there was ``something unsatisfactory about deciding a claim to exemption from a current year's rating merely by construing words in a charter, Memorandum of Association, etc., which may itself date back fifty or a hundred years'' and thought the word ``instituted'' meant ``having as its institutional purposes'', so as to allow a direct inquiry as to what purposes were being pursued by the society at the time exemption was claimed: at pp. 718-719. Lord Denning, somewhat more forcefully, said that the question was not to be solved ``by looking at the royal charter alone and construing it as if you were sitting aloft in an ivory tower, oblivious of the purposes which the institution has in fact pursued'': at p. 723. However, he said that might be a proper approach if one had only to consider the purposes for which the society was originally instituted. Apart from the fact that the observations of Viscount Simonds and Lord Tucker were not essential to the decision in the case, the exemption in question was one which required proof of the institution of the society exclusively for the relevant purposes. In fact, there were several cases decided on the 1843 Act which had held that the inquiry was confined to the charter or other constituent document of the society. But, in my opinion, what is appropriate for the test of exclusive purpose cannot be binding in a case where an exemption is determined by exclusive or principal purpose.
If Institution of Mechanical Engineers v. Cane (supra) were the only case in which it was stated that the purpose of an institution or organization could be determined only by reference to its constituent documents, it would not be necessary to examine the issue further. However, there are a large number of statements in the reports expressing the same conclusion on legislation of a not dissimilar kind, a few of which were touched on in argument. Each of them was made in the course of interpreting, or in discussing the application of, legislation which gave exemptions from rates, taxes or duties to, or which gave special treatment for tax purposes to the income of, certain societies, institutions, organizations, funds, or to interests created by trust or will. I shall attempt to classify the legislation and to indicate whether or not it was held that the Court was confined to the body's or fund's constituent document, or to the trust or will, and to state their relevance to the present inquiry:
- (1) In the first place, there were other cases on the meaning of the exemption in sec. 1 of the Scientific Societies Act 1843 (6 and 7 Vict. c. 36), which exempted from rates societies ``instituted for purposes of science, literature or the fine arts exclusively''. Statements suggesting that the exemption must be ascertained wholly from the constituent documents of the society, which were not overruled by Institution of Mechanical Engineers v. Cane (supra) include:
R. v. Cockburn (1851) 16 Q.B. 480 at p. 490 per Lord Campbell C.J.;
Metropolitan Borough of Battersea v. British Iron and Steel Research Association (1949) 1 K.B. 434 at pp. 451-452 (per Jenkins J., Bucknill and Denning L.JJ. concurring);
British Launderers' Research Association v. Hendon Borough Rating Authority (1949) 1 K.B. 434, 462 at pp. 470-471 (per Denning L.J., Bucknill L.J. and Jenkins J. concurring);
Institute of Fuels v. Morley (1955) 1 Q.B. 317 at p. 325 per Evershed M.R., at p. 335 per Jenkins L.J. and at p. 343 per Birkett L.J. (reversed on appeal (1956) A.C. 245, the question of evidence being conceded with the apparent approval of Lord Morton at pp. 252-253 and Lord Tucker at p. 255); Institution of Mechanical Engineers v. Cane (1960) 1 Q.B. 388 at p. 404 per Hodson and Ormerod L.JJ. and Wynn-Parry J. The only dicta to the contrary, to my knowledge, before the Institution of Mechanical Engineers' case (supra) were by Parke B. in
Purvis v. Traill (1849) 3 Ex. 344 at pp. 349-350 and by Denning L.J. in the British Launderers' Research Association case (supra) at pp. 470-471, in which it was suggested that if there were ambiguity or uncertainty as to whether the society's stated purposes had in fact been pursued, then evidence as to those matters might be admissible. As I have already stated, the test posed under this Act is quite different, in that it required proof that a society had been instituted for certain purposes exclusively. As was pointed out by Lord Macnaghten in I.R. Commrs. v. Forrest (1890) 15 App. Cas. 334 at p. 352, the word ``exclusively'' was ``anxiously introduced'' into the legislation and was ``naturally confined within narrow limits'' because an exemption from local rates involved an additional burden on the ratepayers of a particular area. Moreover, the benefit of the exemption was granted to bodies which were either charitable or had some other public element which justified the concession. In the event that they were charitable, the notion of a purpose trust was well-known to the law, as were the strict rules which required that the property or income of a trust extending into perpetuity should not be capable of application except to those charitable purposes, which in equity could only be defined by a consideration of the trust documents. Although the present case involves bodies of a similar character, the words used to qualify the purpose in the sub-item are ``exclusively or principally''. Thus these cases are of no assistance.
- (2) Another class of rating case in England gave rise to similar dicta. A right to claim limited relief was given by sec. 8 of the Rating and Valuation (Miscellaneous Provisions) Act 1955 (4 and 5 Eliz. 2 c. 9) to organizations ``whose main objects are charitable or are otherwise concerned with the advancement of religion, education or social welfare''. For this purpose it was held that the main objects should be exclusively concerned with those matters and that ordinarily the Court could look only to the organization's written constitution: see Berry v. St. Marylebone Borough Council (1958) Ch. 406 at pp. 414-415 per Romer L.J., Lord Evershed M.R. and Ormerod L.J. concurring;
General Nursing Council for England and Wales v. St. Marylebone Corporation (1959) A.C. 540 at pp. 550-551 per Lord Morton, at p. 559 per Lord Keith of Avonholm, at p. 564 per Lord Somervell;
Working Men's Club and Institute Union Ltd. v. Swansea Corporation (1959) 1 W.L.R. 1197 at p. 1201 per Morris L.J.;
Victory (Ex-Services) Association Ltd. v. Paddington Borough Council (1960) 1 W.L.R. 106 at pp. 110-111 per Lord Parker C.J. and Cassels and Ashworth JJ. However, a broader view was taken in the following cases on the meaning of the section:
Chartered Insurance Institute v. Corporation of London (1957) 1 W.L.R. 867 at p. 875 per Devlin J.;
National Deposit Friendly Society Trustees v. Skegness Urban District Council (1959) A.C. 293 at p. 320 per Lord Denning;
Re North of England Zoological Society (1959) 1 W.L.R. 773 at p. 778 per Lord Evershed M.R. and at p. 786 per Romer L.J.; Working Men's Club and Institute Union Ltd. v. Swansea Corporation (1959) 1 W.L.R. 1197 at pp. 1205-1206 per Romer L.J. and at p. 1209 per Willmer L.J.
- Cases under this section are likewise of little help. Although the section required proof only that the ``main objects'' of the organization were charitable or of another prescribed kind, I have already pointed out that those words have borne a technical meaning which appears to have influenced their interpretation in the manner described
ATC 4645by Windeyer J. in Stratton v. Simpson (1970) 125 C.L.R. 138 at pp. 148-153, although the North of England Zoological Society case is the only one of the cases listed above directly referred to by his Honour. I consider that the word ``main'' in the expression ``main objects'' has not been treated as equivalent to ``principal'' and has been given a narrower interpretation. In any event, the interpretation of those words by members of the House of Lords and the Court of Appeal from 1957 to 1960 in the dicta I have referred to are so inconsistent that I am unable to resolve which was the prevailing view before the repeal of the section, even if I thought it useful to do so.
- (3) There is another line of authority concerning expressions in the English Income Tax and Finance Acts relating to exemptions for income of bodies ``established for charitable purposes only'', which would confine the inquiry to the body's constituent document: see, e.g.,
Keren Kayemeth Le Jisroel Ltd. v. I.R. Commrs. (1932) A.C. 650 at p. 657 per Lord Tomlin;
Tennant Plays, Ltd. v. I.R. Commrs. (1948) 1 All E.R. 506 at pp. 507-508 per Cohen L.J., Tucker and Somervell L.JJ. concurring; Oxford Group v. I.R. Commrs. (1949) 2 All E.R. 537 at p. 539 per Tucker L.J. and at pp. 540, 544 per Cohen L.J.;
I.R. Commrs. v. City of Glasgow Police Athletic Association (1953) A.C. 380 at p. 398 per Lord Oaksey (dissenting);
Incorporated Council of Law Reporting for England and Wales v. Attorney-General (1972) Ch. 73 at p. 99 per Buckley L.J. However, a somewhat different and wider view of these sections was taken in the following cases:
Royal Choral Society v. I.R. Commrs. (1943) 2 All E.R. 101 at p. 106 per Lord Greene M.R. and at p. 108 per Du Parcq L.J.; Oxford Group v. I.R. Commrs. (1949) 2 All E.R. 537 at pp. 541-542 per Cohen L.J.; I.R. Commrs. v. City of Glasgow Police Athletic Association (1953) A.C. 380 at p. 395 per Lord Normand, at p. 399 per Lord Morton, at p. 401 per Lord Reid and at pp. 404-407 per Lord Cohen; Incorporated Council of Law Reporting for England and Wales v. Attorney-General (1972) Ch. 73 at p. 91 per Sachs L.J.;
London Hospital Medical College v. I.R. Commrs. (1976) 1 W.L.R. 613 at pp. 621-622 per Brightman J.
- These tax cases again require proof that a body was established for charitable purposes ``only''. What I have said about ``exclusive'' purposes is equally applicable to this class of case, although the correct view may be that a majority of the House of Lords in I.R. Commrs. v. City of Glasgow Police Athletic Association (supra) favoured the adduction of at least some evidence to resolve the issue posed by those sections.
- (4) In Australian rating and land tax cases there have been, so far as I am able to discover, only two similar observations about the scope of the inquiry. The first was a concession in argument based on two of the English rating cases, which was referred to without disapproval by the Judge:
City of South Melbourne v. Y.M.C.A. (1960) V.R. 709 at p. 711 per Herring C.J. Secondly, some of the English cases were referred to with approval by Rath J. in
White v. Commr. of Land Tax (1975) 2 N.S.W.L.R. 85 at pp. 90-91. The explanation for this lack of authority may lie in the form of the relevant legislation, as, for example, in New South Wales it is necessary to establish the body claiming exemption is a charity in law: see
Ashfield Municipal Council v. Joyce (1978) A.C. 122 (P.C.), and in Victoria it is necessary for the body claiming exemption to establish use ``exclusively for charitable purposes'': see Local Government Act 1958 sec. 251(1)(b) and
Salvation Army (Vic.) Property Trust v. Fern Tree Gully Corporation (1951-1952) 85 C.L.R. 159. The concentration on ``user'' in Australian rating and land tax legislation poses different, although not entirely unrelated, questions. As Windeyer J. said in
Randwick Corporation v. Rutledge (1959) 102 C.L.R. 54 at p. 94:
- ``The presence of `exclusively', `solely', or `only' always adds emphasis; and is not to be disregarded... When such words are present, it is a question of fact whether the land is being used for any purpose outside the stipulated purpose... such words confine the use of the property to the purpose stipulated and prevent any use of it for any purpose, however minor in importance, which is collateral or independent, as
ATC 4646distinguished from incidental to the stipulated use.''
- It is sufficient to say that that analysis indicates that those rating cases depending on proof of user have been determined on a basis which cannot be treated as analogous to the present case. See also
Ryde Municipal Council v. Macquarie University (1978) 139 C.L.R. 633 and
Joyce v. Ashfield Municipal Council (1959) 4 L.G.R.A. 195 at p. 212 per Walsh J., discussed by Rath J. in
College of Law (Properties) Pty. Ltd. v. Willoughby Municipal Council (1978) 38 L.G.R.A. 81 at pp. 86-87. Another case in which evidence was admitted and considered on the question of ``user'', on this occasion user of property ``primarily and principally as or in a public hospital'' for the purposes of exemption from the War Damage Fund levy, was The Little Company of Mary (S.A.) Incorporated v. The Commonwealth (1942) 66 C.L.R. 368 at p. 378 per Latham C.J. and at p. 386 per Starke J. I should add that apart from the equivocal reference cited earlier in this judgment (at p. 386), there is no analysis in the judgments of the word ``principally''.
- (5) Another group of cases decided in Australia which may appear to have some relevance are those which involve exemptions from Commonwealth estate duty in favour of gifts to, or for the purpose of setting up, funds or trusts ``established and maintained'' for the benefit of ``public benevolent institutions'', ``public hospitals'' or for ``public educational purposes'' or the relief of ``persons in necessitous circumstances''. It is not possible to go into the history of sec. 8 of the Estate Duty Assessment Act 1914 and its various amendments over the years. In a few of those cases observations were made which suggested that the question of exemption could only be resolved by a consideration of the terms of the will: see, e.g.,
Ballarat Trustees Executors & Agency Co. Ltd. v. F.C. of T. (1950) 80 C.L.R. 350 at p. 353 per Kitto J.;
Downing v. F.C. of T. (1971) 125 C.L.R. 185 at pp. 192, 201 per Walsh J. and
Ryland v. F.C. of T. 73 ATC 4107 at pp. 4111-4112; (1973) 128 C.L.R. 404 at p. 412 per Barwick C.J., McTiernan J. concurring. However, in cases other than those in which no particular institution or class of institutions was contemplated by the terms of the will, it appears that evidence of activities of the various institutions involved was examined without reference to the question of admissibility: see, e.g.,
Perpetual Trustee Co. Ltd. v. F.C. of T. (1931) 45 C.L.R. 224;
Public Trustee (N.S.W.) v. F.C. of T. (1934) 51 C.L.R. 75;
Lemm v. F.C. of T. (1942) 66 C.L.R. 399 (but cf. at p. 409); Ballarat Trustees Executors & Agency Co. Ltd. v. F.C. of T. (1950) 80 C.L.R. 350 at pp. 354-356;
Lloyd v. F.C. of T. (1955) 93 C.L.R. 645 at pp. 662, 663 and 675.
- None of these cases contains any direct statement that evidence is admissible or inadmissible, although it is implicit in some of them that, as the inquiry relates to bodies with charitable objects, then a power to apply property to purposes other than those stated in the will or the constituent documents of a named institution, would deprive the bequest or gift of its exemption. Although the nature of the exemption varied from time to time, the problem under discussion in those cases was somewhat different from the present problem, as can be seen from what Kitto J. said about the meaning of the words ``established and maintained'' in Ballarat Trustees Executors & Agency Co. Ltd. v. F.C. of T. (supra) at p. 353 and later expanded by him in relation to a bequest (for public educational purposes) in Lloyd v. F.C. of T. (supra) at p. 671:
- ``In the case of a gift to an individual or individuals it is necessary to find that by the terms of the gift he or they are effectually restricted in the application of the property given so that the gift satisfies the description in s. 8(5). In the case of a gift to a body, incorporated or unincorporated, it is necessary to find that the constitution of the body prescribes a similarly restricted scope of application. In neither case is the restriction as precise as it would be if the word `exclusively' or `only' were found in s. 8(5) after `public educational purposes', for then no gift could attract the exemption if any part of the corpus or income of the property given could be applied, consistently with the gift, for any purpose, however minor in importance, which was collateral or
ATC 4647independent as distinguished from being a purpose of or incidental to public education... But even without any such word having been `anxiously introduced', the exemption extends only to cases in which purposes of public education characterize the gift; and that cannot be the case unless the gift so deals with the property that it is devoted to such purposes, if not exclusively, at least chiefly...''
- Cf. Public Trustee (N.S.W.) v. F.C. of T. (supra) at p. 101 per Starke J.
- In the most recent of these cases, Ryland's case, which was concerned with an exemption for the establishment and maintenance of a fund for the relief of persons in necessitous circumstances, there is a passage in the judgment of Barwick C.J. (at p. 412) stating that ``the question must be dealt with as one of construction''. However, in this case a suggestion which appeared implicit in Downing's case (supra) and some of the earlier cases, that the purpose of the trust or fund should be exclusively of the kind prescribed in the exemption was rejected, and a test of ``predominant purpose'' was laid down by Barwick C.J. and McTiernan J. (at p. 411) and of ``essential purpose'' required by Menzies J. (at p. 415). In the light of these conclusions, and because the case was decided on evidence that a ``very small proportion'' of those who might qualify to benefit might be outside the terms of the exemption (at p. 412), I cannot accept that Barwick C.J. was intending in his dictum on the same page to be stating that the question can only be dealt with as one of construction and without the assistance of evidence. In any event, these observations were not made in relation to a test of exemption based on principal purpose, or in relation to an exemption similar in form to the present sub-item. The distinctions drawn are perhaps subtle and suitable only for gifts by way of will or trust and exemptions from estate duty. As Menzies J. wisely pointed out in Ryland's case (supra) at ATC pp. 4113-4114; C.L.R. p. 415, in language even more apposite to an exemption from sales tax: ``Parliament's language is not that of an equity lawyer''.
- (6) There remains only a miscellaneous collection of Australian cases on exemptions from income tax or special treatment of bodies for income tax purposes. There are relatively few observations, which I have found, requiring the exclusion of evidence for the purpose of considering these exemptions. In the first of these, concerning an exemption for the income of a ``scientific... institution'', there is a qualified statement by Williams J., relied on by the defendant, that, although it is possible to examine the principal activities of an institution, evidence as to motive as to its formation is irrelevant:
Royal Australasian College of Surgeons v. F.C. of T. (1943) 68 C.L.R. 436 at p. 452. In a later case, also referred to in argument,
Bray v. F.C. of T. 78 ATC 4179; (1978) 140 C.L.R. 560, exemption from income tax was sought for an allegedly public fund established and maintained for the purpose of providing money and benefits to certain charitable and like institutions. Aickin J. (dissenting) maintained the view that the question could be resolved only by reference to the terms of the instrument of trust: at pp. 580-581. There was another series of cases briefly touched on in argument, which might appear to have a closer relevance to the present case inasmuch as they related to exemptions for superannuation funds pursuant to sec. 23(j)(i) (now sec. 23F) of the Income Tax Assessment Act 1936, in which it was consistently held that the matter must be resolved as a question of construction: see
Mahoney v. F.C. of T. (1965) 39 A.L.J.R. 62 at p. 63 per Owen J.;
Compton v. F.C. of T. (1965-1966) 116 C.L.R. 233 at p. 238 per Taylor J., at pp. 244-245 per Kitto J., at p. 247 per Menzies J., at p. 253 per Owen J.;
Driclad Pty. Ltd. v. F.C. of T. (1966-1968) 121 C.L.R. 45 at p. 67 per Barwick C.J. and Kitto J.
- On the other hand, there are a substantial number of statements to the effect that such evidence is admissible and a number of cases which assume that evidence as to the nature and activities of a body claiming exemption may be adduced. For example, in Royal Australasian College of Surgeons v. F.C. of T. (supra) all members of the High Court considered evidence of the appellant's activities necessary to determine whether its
ATC 4648income was exempt as that of a scientific institution: see at p. 444 per Latham C.J., at pp. 446-447 per Rich J., at p. 448 per Starke J., at p. 450 per McTiernan J. and at p. 452 per Williams J.: cf.
``The Waratahs'' Rugby Union Football Club Ltd. v. F.C. of T. 79 ATC 4337. Notwithstanding his qualifications as to evidence of motive, Williams J. expressed the following principle (at p. 452):
- ``[I]n order to determine what is the main or dominant purpose of the College, it is a mistake to examine the objects contained in the memorandum in this disjunctive fashion. They should be examined in conjunction with one another and in the light of the circumstances in which the College was formed and of the manner in which the College is fulfilling the purposes for which it was incorporated.''
- Further, in Bray v. F.C. of T. (supra), the majority (Barwick C.J., Stephen, Mason and Jacobs JJ.) examined the form and nature of the alleged public charitable fund and Jacobs and Stephen JJ. considered that evidence as to the establishment and maintenance of the fund was relevant, although motive was immaterial: at ATC p. 4188; C.L.R. p. 577. Another two cases concerned the special treatment of co-operative companies under sec. 117 of the Income Tax Assessment Act 1936, being companies ``established for the purpose of carrying on any business having as its primary object or objects'' certain stipulated co-operative enterprises: see
A. & S. Ruffy Pty. Ltd. v. F.C. of T. (1958) 98 C.L.R. 637 and
Brookton Co-operative Society Ltd. v. F.C. of T. 81 ATC 4346; (1980-1981) 147 C.L.R. 441. Here it is clear that all members of the Court on each occasion held the view that the primary object or objects of the appellant's business could not be determined solely, or even initially, by reference to its memorandum of association, and that evidence of its history, setting up and activities, had to be examined. In this instance Mason J. (at ATC p. 4353; C.L.R. p. 453), with the concurrence of Wilson J., thought that the intentions, if not the motives, of the promoters could be looked at, although Aickin J. strongly disagreed: at ATC pp. 4359-4360; C.L.R. p. 463.
- Neither the co-operative nor the superannuation cases appear to me to be analogous to the present. Although the word ``established'' was considered and closely analysed in the co-operative cases, it is apparent that the continuing status of the co-operative company was held to be the critical question in each case, so that the apparently helpful observations of members of the High Court were directed to a different issue. The apparently restrictive observations in the superannuation cases are explained by the fact that each case involved the construction of a trust deed and that it has been held consistently that exemption cannot be obtained unless, on its proper construction, the superannuation trust fund deed was intended to benefit employees and their relatives exclusively: cf. Compton's case (supra) at pp. 244-245, 248 and 252-253. Thus the question in those cases could only be resolved by the construction of the relevant deeds. That leaves only Bray's case (supra) and the Royal Australasian College of Surgeons case (supra). In Bray's case the majority favoured the reception of evidence, although it may be conceded that the question was primarily one whether the apparently public nature of the fund was borne out by the facts. Perhaps most help can be drawn from the Royal Australasian College of Surgeons case, although it must be remembered that neither the word ``exclusive'' nor the word ``principal'' qualified the nature of the activities of a body which was entitled to exemption as a scientific institution. As a matter of construction the Court held, by the use of slightly differing language, that the test of exemption was satisfied whether the ``main'', ``substantial'', ``primary'', ``intrinsic'', ``predominant'' or ``dominant'' object of the College was the promotion of surgical science. For that purpose the only explicit exception to the admission of evidence was Williams J.'s reference to the motives of the promoters: at p. 452.
Upon a careful consideration of all these cases, both in England and Australia, I have reached the conclusion that there is neither binding nor persuasive authority which requires me to resolve this case solely on a construction
ATC 4649of the plaintiff's constituent documents. In the first place, it is obvious that a variety of opinions have been expressed from time to time in the highest appellate courts on this issue and they are by no means consistent. Indeed, the observations relied upon on behalf of the Commissioner in Institution of Mechanical Engineers v. Cane (supra) were expressed only by a minority of their Lordships. Secondly, the legislation under consideration in those cases where evidence has been excluded was sufficiently different for me to conclude that they are not persuasive in the present case. In particular, most of that legislation required the Court to determine the exclusive or sole purpose of the institution or trust and none of them involved an evaluation of its ``principal'' purpose.
I therefore conclude that there is no authority which binds me to exclude evidence of the activities of the plaintiff company, or of the surrounding circumstances which led to the setting up of the scheme. What I am concerned with in the present case is an alternative test based on either exclusive or principal purpose and that entitles the Court to have regard to a wide range of relevant factual circumstance, although I would not think that motive was one of the relevant circumstances. Of course it is necessary to look at the constituent documents, but in the present case, as with many of the cases which I have cited, those documents are of relatively little assistance, certainly in determining what is the principal purpose of the plaintiff company. This is not a matter to be resolved merely by the construction of a deed of trust, for it requires a realistic appraisal of whether the chief or major purpose of the scheme is the advancement of ``the interests of a university or a school'' of the relevant kind. For this purpose I would adopt the passage set out above (at p. 4648) from Williams J.'s judgment in the Royal Australasian College of Surgeons case (supra at p. 452).
Before turning to that final question, some minor aspects of the latter words of the sub-item must be considered. In the first place, it was faintly submitted that ``the interests of a university or a school, etc.'' could not be interpreted as comprehending the interests of universities or schools, or universities and schools. A contrast was sought to be made with Item 63, in which the words ``universities and schools'' are used and with sub-item (2) of Item 63B, in which the words ``universities or schools'' appear. Whatever may be the reason for the use of the plural in the other items, I can see no reason for not applying the usual rule that words in the singular include the plural: sec. 23(b) of the Acts Interpretation Act 1901. Nor, when the expression in the singular is naturally phrased disjunctively, can I see any reason why it should not be applied conjunctively to the relevant ``interests'' to be promoted, when taken in the plural. Thus, a foundation might be set up for a particular school or university, which could properly claim the exemption, but if a similar foundation were set up for a number of institutions, it could claim the exemption if it were set up to promote the interests of both schools and universities. Nothing in the language of the sub-item suggests that the exemption ought not to be claimed by an organization of the defined kind merely because it is intended to promote the interests of more than one university or of a group combining both universities and schools.
Next, the word ``school'' may seem inapposite in the present context. No argument was advanced on behalf of the Commissioner that colleges of advanced education should not be entitled to the exemption. Such a concession is consistent with the very wide definition of ``school'' adopted by Barwick C.J., in whose judgment McTiernan and Stephen JJ. concurred, in
Cromer Golf Club v. Downs (1973) 47 A.L.J.R. 219 at p. 221:
``It seems to me that a `school' is a place where people, whether young, adolescent or adult, assemble for the purpose of being instructed in some area of knowledge or of activity.''
The last preliminary matter is the operation of the expression ``conducted by an organization not carried on for the profit of an individual''. These words, as may readily be seen, qualify ``university or school'', not ``society, institution or organization''. None of the universities or colleges of advanced education referred to in evidence fell within this prohibition, nor did the evidence suggest that it was likely that a private, profit-making university or college would be set up in the future, still less would it be permitted to become a participating institution of the scheme.
As I understood the argument, it was suggested that the definition of ``participating
ATC 4650institution'' in the scheme did not preclude commercial universities or schools from participation. As a matter of construction that is correct, but it is of no consequence, because this is not a case of exclusive definition. It is sufficient that the objects of SSAU's activities are ``principally'' non profit-making universities and colleges of advanced education. The evidence shows that, both when the scheme was established and as it is now carried on, all such bodies satisfy the test.
Secondly, considerable emphasis was placed on the existence of a number of commercial ``offshoots'' of universities and colleges, especially on a list of members of the Australian Tertiary Institutions Consulting Companies Association, which have been formed to exploit for profit technical advances based on research carried out at a substantial number of universities and colleges and which trade under names such as Unisearch Limited, Technisearch Limited and Wait Aid Limited. It was said, no doubt correctly, that each of them fell within the definition of ``participating institution'', so that the benefits of the superannuation fund might be diverted to commercial enterprises and their employees. None had in fact been approved by SSAU for participation in the scheme under subpara. (iii) or any other part of the definition. Obviously, none of these companies are universities or schools, though each is indirectly related to, or to the staff of, an institution which is or would qualify as a participating institution. Again the argument founders on the word ``principally''. Unless it could be shown that these bodies or their staff members are so numerous that they would be likely to detract from any conclusion that the scheme was established and carried on principally for the promotion of the interests of non profit-making bodies, or that the principal beneficiaries of the scheme are staff members of such bodies, then these companies have no significance for present purposes and the argument has an air of unreality about it. The evidence did not indicate that these companies had many employees and there seemed no real possibility of those employees ever forming anything other than a small proportion of the membership of the scheme, even if their employers were admitted as participating institutions.
In the light of what I confess must seem to be an over-elaborate examination of these preliminary matters, the critical question which remains to be decided is whether the plaintiff was ``established and carried on exclusively or principally for the promotion of the interests of a university or a school, etc.''. As I have earlier stated, that must here be answered by asking whether the scheme was so established and carried on. Whether or not the scheme was designed exclusively for the promotion of the interests of universities and colleges of advanced education, I have little doubt that it was both established and carried on principally for that purpose. The Commissioner sought to argue that the true purpose of the scheme was to benefit the academic and other staff who stood to gain superannuation benefits upon retirement. I believe such an analysis inverts the real nature of the scheme. It was not a co-operative scheme run by and for university staff members. Although clearly one object was to provide adequate superannuation benefits for the members, the purpose of the scheme, and thus of the organization, was to enable universities and other tertiary institutions to provide those benefits in an economic and efficient manner. Moreover, the economic and efficient provision of superannuation benefits can only be seen as leading to the promotion of universities and colleges of advanced education in the sense that a properly remunerated staff is an essential concomitant of a well-run university or other tertiary institution. Every institution, commercial or public, depends on its staff to a greater or lesser extent, but in a university, or in any other institution in which learning is imparted, the staff, especially the teaching staff, are fundamental to its very existence. As originally understood the academic staff, the fellows, of a university formed an essential part of the corporate body: cf.
Ex parte McFadyen (1945) 45 S.R. (N.S.W.) 200 at p. 202. A definition of a university adopted from the Shorter Oxford English Dictionary by Kaye J. in
Clark v. University of Melbourne (1978) V.R. 457 at p. 462 (which judgment was reversed on another point (1979) V.R. 66) reads in part:
``The whole body of teachers and students pursuing, at a particular place, the higher branches of learning; such persons associated together as a society or corporate body, having the power of conferring degrees and other privileges, and forming an
ATC 4651institution for the promotion of education in the higher branches of learning.''
The structure of each Australian university varies, but Melbourne University, for example, by sec. 4(1) of the Melbourne University Act 1958 is a ``body politic and corporate'' and consists of certain classes of persons, including ``the professors'', ``members of the academic staff'' and certain other non-academic staff.
Regardless of the formal structure of each university and other participating institution, there can be little doubt of the importance of the staff in each institution. The teaching staff not only teach students, but conduct research of a kind which is expected in bodies of higher learning. The role of the other staff cannot be disregarded. In each case the employer has a real interest in seeing that its staff is employed on a basis which not only attracts proper and suitable staff, but also in ensuring their retention. It is now essential that permanent staff be offered superannuation benefits of a kind which require substantial contributions from the employer and which are provided from a fund which is professionally managed. It is likewise essential that those benefits should come from a fund organized by the employer, but whose assets are held independently on trust for the members. Moreover, it is important that those benefits should be easily transferable, for it is in the interests of all the universities and colleges that staff can be recruited without loss of superannuation benefits.
After considering the evidence given, it is clear why the universities should have an interest in the efficient running of the scheme. Several of the former schemes provided greater benefits, but were so badly organized that the burden placed on the universities was often unfunded and erratic. These circumstances make it clear that the principal purpose to be achieved by the scheme was an orderly rationalization of what appeared to be the increasing superannuation burden on these institutions. In reaching these conclusions I have taken account of the evidence given as to the circumstances surrounding the incorporation of SSAU and the setting up of the scheme, but I have treated the motives of those responsible as irrelevant.
Some distinction was sought to be drawn between the words ``established'' and ``carried on'' and the proof of those two elements in the present case. It is clear that both elements have to be established, but the distinction ought not to be over-emphasised. In particular, I accept the plaintiff's argument that one cannot apply the estate duty and income tax cases referred to above to the words of this item. Those cases were concerned almost exclusively with trusts, funds or institutions set up by will or trust, which were of a charitable nature, or with bodies which were either charitable or were said to have some other public element. As pointed out above, frequently the issue was resolved by a close analysis of the terms of a will or trust and of the power to apply the funds for non-charitable purposes, although the later cases displayed some amelioration of that strict approach. Adapting Menzies J.'s dictum cited above, one would not readily assume that an item in a list of exemptions from sales tax was drafted by an equity lawyer with a view to importing the strict rules relating to charitable purpose trusts. That exclusive purposes are not of the essence of the exemption is sufficiently demonstrated by the use of the alternative ``principally''. Moreover, the exemption is granted not to funds or trusts, but to societies, institutions and organizations, and it is by no means obvious that one can apply rules applicable to purpose trusts to bodies which may be set up in a variety of ways. Both parties have chosen to ignore the memorandum of association of the plaintiff company and have referred to the terms of the trust which set up the scheme, but there would obviously be many cases of societies and other organizations whose constitutions would be less formal and incapable of such a close analysis: cf. the difficulties pointed out by Lord Denning in the Derbyshire Miners Welfare Committee case (1959) A.C. 807 at pp. 826-828.
In my opinion the collocation of words ``established and carried on'' in this sub-item has two purposes. It requires that the body claiming exemption shall have been set up either exclusively or principally for the stated purpose and it requires that at the date of claiming the exemption it should still be carried on either exclusively or principally for those purposes. However, it does not require an analysis of the constituent documents to ascertain what possible variety of beneficiaries there may be, for it requires only a practical assessment of the purposes of the body as
ATC 4652originally set up and as presently carried on. I shall turn in a moment to the nature of the institutions which might be fairly thought to have been the principal participating institutions.
The words ``established and carried on'' also provoke the question, by whom? The concept of establishment in relation to societies, institutions or organizations suggests that there are promoters, or at least a group of persons, responsible for the setting up of the body who have defined an object or objects to be achieved by that body. The carrying on of such a body ordinarily involves the activities of a board of directors or a committee, whose purposes may be ascertained not merely by reference to its constituent document, but also by its day-to-day activities.
In the present case, the company was clearly set up by a group of universities and the scheme was established by a declaration of trust by one of those universities, the University of Tasmania. Although one could not describe their irrelevant motives as necessarily altruistic, the principal object sought to be achieved by the scheme's establishment was a rational and efficient means of paying and funding the superannuation obligations of the employer universities and other participating institutions. That, so far as the evidence goes, is what has been achieved. Although, no doubt, staff pressure was one significant element leading to its establishment, the body created was not a staff friendly society or some other co-operative venture between members of staff of universities and colleges of advanced education. What was created was a trustee company to oversee and manage a scheme designed to enable the payment of the necessary superannuation benefits. No doubt, as in the past, university staff associations would have negotiated similar benefits for their members, but the object to be achieved by the setting up of the company and the scheme was one primarily directed to ensuring that negotiated superannuation benefits could be met, directly or indirectly, by each employer university or college of advanced education. Seen in that light, I have no doubt that the organization and the scheme were set up primarily for the promotion and advancement of the interests of universities and colleges of advanced education.
Furthermore, I see no reason to consider that SSAU and the scheme is not now being carried on for the very same purposes and with the same objects in view. The provisions of the deed set out above and the method of its administration each suggest that the universities, if not the colleges of advanced education, retain a primary role in the administration of the fund through the company. Merely because there is now a trust deed with certain obligations imposed as a matter of law does not change the purpose of the organization claiming the exemption. The company's, and the scheme's, continued existence enables the superannuation obligations of the universities and other participating institutions to be met in an efficient and economic manner.
Finally, it remains to consider the argument directed to the width of the class of participating institutions. As I understood it, the Commissioner argued that the class of participating institutions was so wide that it could not be said that the organization was either established or being carried on exclusively or principally for the promotion of the interests of universities or schools. To this end, counsel for the Commissioner analysed with some particularity the provisions of the definition of ``participating institution'' and of the four subclauses in that definition. He maintained there was a wide variety of body, other than universities or colleges of advanced education, or bodies which could otherwise be described as schools, which were entitled to participate when the scheme was established and that in fact this class of institution, not included in the exemption, now formed a large proportion of the participating institutions in the scheme. What he said may well have been accurate if the requirements of the sub-item were the promotion of interests exclusively of universities and schools.
However, as has been pointed out earlier, the question is whether the organization was established and carried on ``principally'' for the promotion of those interests, so that it must be a question of degree in each case. For the moment I will not linger over university colleges, some of which by definition form part of their related universities and some of which may not, but in any event they had but four members out of 6,194 as at 31 December 1984. Nor will I concern myself with SSAU itself as
ATC 4653trustee for the scheme and its nine employees, although there is an argument that the promotion of its interests come within the meaning of the ``interests'' of universities and colleges of advanced education. It is the other group of related bodies, such as the Howard Florey Institute, the Vice-Chancellors' Committee and the Australian Council of Educational Research and similar bodies which were primarily attacked as being outside the purposes intended to be protected by the item. Moreover, it was argued that one could not identify at the time of establishment which universities and colleges would come in as participating institutions and which bodies other than universities or colleges would apply to participate in the scheme. As a question of construction of the deed, those submissions are no doubt sound, but the question is whether the organization was established ``principally'' for the relevant purposes.
It is here that the evidence is of importance in the present case. That indicated clearly that a number of universities were concerned and instrumental in the setting up of the scheme, and that they had a large number of staff members who would have to become members if they participated in the scheme. Moreover, the related bodies were relatively few in number and had comparatively modest numbers of employees. The fact that some universities have not chosen to participate does not affect this conclusion. At the outset, the University of Tasmania joined the scheme and has now approximately 700 members. By 1 May 1983, three other universities had joined, so that there were approximately 5,000 members brought into the scheme. Even by the end of 1984, there were only 85 members from other bodies, whatever definition may be adopted. The history of the scheme therefore clearly indicates that it was established principally for the promotion of the interests of the universities themselves. The reason for including colleges of advanced education has been already set out and their present lack of participation cannot affect the conclusion that they were intended to benefit by the setting up of the scheme. Nor could the fact that a number of commercial consulting companies may have had the power to apply for approval as participating institutions have any bearing on this conclusion. The numbers involved would clearly have been, and are, minute compared with the number of staff members at the universities themselves.
It is even more obvious, to my way of thinking, that the organization satisfies the second part of the test in terms of participating institutions, in that the figures clearly indicate that it is ``principally... carried on'' for the promotion of the interests of universities. 6,108 out of 6,194 members as at 31 December last year clearly suggest an answer as to where the principal benefit and purpose lay. I should add that in order to determine the principal purpose of the organization, I have looked at the number of members whose superannuation benefits will be paid in this way, rather than the number of institutions who may be approved to participate in the scheme. I do not believe that the appropriateness of this approach requires any greater exposition. Moreover, each of the related bodies allowed to participate had a clear connection with universities and their superannuation arrangements, although this is not essential to my findings.
The foregoing are the reasons, somewhat laboriously expounded, why I have concluded that SSAU is an organization established and carried on principally for the promotion of the interests of universities and colleges of advanced education, in each case conducted by organizations not carried on for the profit of an individual. No argument was put to me that the computer and ancillary equipment proposed to be purchased and used by SSAU would not be ``goods for use'' by an organization of the kind referred to in sub-item (1) of Item 63B, if I were satisfied that SSAU was an organization which fulfilled the requirements of the sub-item. Consistently with my findings, I declare:
- (A) that the plaintiff is an organization established and carried on principally for the promotion of the interests of universities and schools, in each case conducted by organizations not carried on for the profit of an individual, within the meaning of sub-item (1) of Item 63B in Div. X of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935;
- (B) that the equipment referred to in para. 7 of the statement of claim constitutes goods for use by an organization established and carried on principally for the promotion of the interests of universities and schools, in
ATC 4654each case conducted by an organization not carried on for the profit of an individual, within the meaning of the said sub-item, and that the equipment is exempted from liability for sales tax by virtue of the operation of sec. 5 and the said sub-item of the Sales Tax (Exemptions and Classifications) Act 1935.
I order that the plaintiff's costs, including any reserved costs and the costs of transcribed evidence, be taxed and when taxed paid by the defendant.