Case U63

Members:
PM Roach SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 13 November 1986.

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P.M. Roach (Senior Member)

The questions to be determined in these five references, heard together by consent, require that the Tribunal shall review a decision of the Commissioner of Taxation not to grant certificates of exemption pursuant to sec. 11 of the Bank Account Debits Tax Administration Act 1982.

2. The applicant in each case is a Legacy Club named for the city upon which it is centred. I shall refer to it as "Community Legacy". (The applicant has consented to it being identified as a Legacy Club.) The several applications relate to separate bank accounts maintained by Community Legacy. The only issue to be determined upon the references is whether Community Legacy is "a public benevolent... institution". That phrase has been interpreted by the High Court of Australia on a number of occasions which will be considered in due course.

3. In 1923 John Gellibrand, a member of the Australian armed forces who had served overseas during the First World War, met with some fellow survivors in Hobart. Recognising the special need for support for the windows and children of their comrades who had lost their lives in the defence of their country, they determined to provide that support. They founded "Legacy". From those small beginnings the spirit of service which characterised Legacy caught on and ultimately Legacy Clubs were established throughout Australia, all founded on the concept that those servicemen who had returned from overseas service with the defence forces would help the widows and children of their comrades who had not returned. Each Legacy Club is autonomous but all clubs associate together for their common purposes doing so in voluntary association through a National Co-ordinating Council which ordinarily organises conferences on an annual basis.

4. Since 1923 the work of Legacy has changed and expanded. It has changed as young widows have aged and children have matured in years. It has expanded as a result of Australia's participation in other wars and it has also expanded as responsibility has been assumed towards widows and children of servicemen who survived war survived war service only to die later. Similarly the membership of the

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group rendering service has changed. As the legatees of the First World War aged their responsibilities were assumed by the generation who served in the Second World War. They in turn will be succeeded by the survivors of later conflicts.

5. All of the foregoing is reflected in the terms of "The Charter of Legacy" issued in the name of the Co-ordinating Council to the constituent Legacy Clubs. The Charter of Legacy reads as follows:

"The Spirit of Legacy is Service.

The case of dependants of comrades who served their country in war and who died on service or subsequently, affords a field for service.

Safeguarding the interests of children is a service worth rendering and their interests include their mental, moral, vocational and physical welfare.

Personal effort is the main essential.

Inasmuch as these are the activities of Legacy it is your privilege to accept the `Legacy of fallen comrades'.

Therefore you men who served overseas with honourable records form you a Club to be known as the `Legacy Club' and keep fair the name of (Community) Legacy."

6. The evidence placed before me satisfies me that each Legacy Club operates very much on the basis that legatees personally render service to the persons entrusted to their care and that they recognise their "legacy" not as a financial advantage accruing upon the death of another but as a responsibility to others. Each legatee assumes responsibility, so far as it is within his power to do so, for a family in special need - in some cases more than one - entrusted to him. That responsibility may involve advising elderly widows; counselling young children; arranging maintenance and repair of premises and domestic equipment; providing special tuition for children in need or advanced educational opportunities for children capable of benefiting from them; arranging medical and dental care as needed and the provision of fuel and foodstuffs for those who are unable to provide adequately for themselves. In short the legatees to the best of their ability endeavour to provide for widows and children in their care that care which their deceased comrades would have or should have provided had they survived and had the capacity to do so. To personalise that sense of "family" small birthday and Christmas presents are provided by legatees to their charges, all provided for out of the resources of Legacy.

7. Because personal service on the part of legatees is considered to be so important the Legacy Clubs are not open for membership to the public at large. Only ex-servicemen from recognised theatres of war may be members and even then membership is limited to such a number of persons as is sufficient to provide for the care of all dependants. Membership of the applicant club at all material times amounted to about 90 legatees serving overall some 2,500 widows and some 60 children of whom most were undergoing tertiary education.

8. Much of the work of Legacy involves financial expense. Legacy maintains premises for administrative purposes but also in days past providing a gymnasium to assist in the physical development of youngsters, a facility in recent years converted to social and recreational purposes for widows providing them with an opportunity to congregate for mutual comfort and support and to participate in indoor bowls. An additional expense, sometimes substantial, is involved in the provision of welfare services and in the employment of welfare officers. Expenditure to the direct advantage of any particular person is directly controlled by a Welfare Committee which works to ensure that such assistance is only provided for those unable to adequately provide financially for themselves.

9. The work of Legacy members is assisted by the Widows' Club which provides not only mutual support for widows but also raises funds to be applied in the course of other Legacy activities.

10. The Legacy Clubs depend heavily on financial support from the community, relying on government grants; the Certificate of Adoptions Scheme; donations and bequests; and a Legacy Appeal Week sponsored nationally by His Excellency, the Governor-General, and Their Excellencies, the State Governors. It also organises its own fund-raising activities and generates further income by the investment of its reserve funds. In terms of organisation and membership it is quite independent of other returned service

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organisations, although many members of Legacy are also members of the RSSAILA which in turn is generous in its financial support of Legacy.

11. The work of Legacy is organised at monthly luncheon meetings held at club premises and the Board ordinarily meets twice per month. Meetings with groups in other parts of the district for which the Community Club has assumed responsibility are held half-yearly. Luncheons are sometimes addressed by guest speakers on subjects of interest and relevance to the activities of the club and its members. Luncheons are catered for by the widows and the costs of the meal are funded by those participating. To avoid any risk that members might try to "profit" from such luncheons a gift to Legacy itself is made annually from luncheon funds.

12. The High Court of Australia has considered on a number of occasions the question whether a particular entity constitutes a "public benevolent institution". In
Perpetual Trustee Co. Ltd. v. F.C. of T. (1931) 45 C.L.R. 224 Starke, Dixon and Evatt JJ. (McTiernan J. dissenting) held that "Royal Naval House" in Sydney was not a public benevolent institution. Royal Naval House was conducted for the benefit of the petty officers and lower ratings of the Navy, providing accommodation and recreation for them when ashore. Evatt J. said at pp. 235-236:

"The House of course serves very useful purposes. It is convenient that the lower ratings in actual naval service should have an inexpensive hostel available to them when on leave from their ships in Sydney. If they take leave overnight they might otherwise have to seek for places of accommodation at hotels or other places in city or suburbs. The Naval House, no doubt, has become to a large extent the club of those who are accorded its privileges. It probably enables the officers in control of His Majesty's ships of war to get quickly in touch with men required to return at short notice from leave.

There is no element of profit-making in the concern, but the receipts from service charges make the House nearly self-supporting. It resembles in this respect, bodies founded at Australian Universities by State or governing authorities in order to benefit the undergraduates. They are sometimes self-supporting; often they are not, because charges made for services are as small as possible. Halls and rooms are there used for lectures and debates but no one (except perhaps a student in sarcastic vein at a debate) would describe them as `benevolent institutions'. Yet students are as a class notoriously impecunious, much more so than the naval ratings in regular employment at a pay fixed by Government.

There are, however, very many bodies which readily answer the description of `benevolent institutions'. The Benevolent Society of New South Wales provides food and clothing for those in poverty and distress, the Scarba Home takes care of deserted babies, many organizations of Church and State provide for the maintenance, housing and relief of the aged poor, orphans and those suffering from bodily or mental disease. A characteristic of most of these organizations is the absence of any charge for services or the fixing of a purely nominal charge.

Such bodies vary greatly in scope and character. But they have one thing in common: they give relief freely to those who are in need of it and who are unable to care for themselves.

Those who receive aid or comfort in this way are the poor, the sick, the aged, and the young. Their disability or distress arouses pity, and the institutions are designed to give them protection. They are very numerous - `the nobler a soul is the more objects of compassion it hath' - and they have come to be known as `benevolent institutions'.

Such a phrase seems to me to be impossible to apply to the Royal Naval House at Sydney. It is in truth a cheap and convenient club-house for those in regular naval services and pay and for no one else."

13. The question again arose for consideration in
Public Trustee of New South Wales & Ors v. F.C. of T. ((1934) 51 C.L.R. 75) where the Full Bench (Gavan Duffy C.J., Rich, Starke and Dixon JJ.: McTiernan J. dissenting) held for diverse reasons that bequests in favour of named Church of England homes together with "other homes for children funded by the Church of England having for its

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[sic] objects the care and control of children" was so broad in scope as to not ensure that the donee would in all cases be a public benevolent institution, notwithstanding that the Commissioner of Taxation had conceded that the named homes might be public benevolent institutions. The claim failed.

14. The matter again came forward for consideration in
Maughan v. F.C. of T. ((1942) 66 C.L.R. 388) where the Court held that the "Boys Brigade Inc." of Sydney was a public benevolent institution. The association was wholly maintained by public donations, subscriptions and other voluntary contributions and rendered service to boys up to 14 years of age who were underprivileged; invariably in poor circumstances; and residing in some of the worst slum areas of Sydney. The Court (Rich, McTiernan and Williams JJ.) unanimously held that the Brigade was a public benevolent institution. McTiernan J. said (at p. 395):

"Poverty is a relative condition. It is I think hardly open on the facts of the case to draw any other inference than that the charity of those who maintain the Boys' Brigade Inc. is excited by social conditions arising from poverty and that the dominant object of the institution is to elevate boys adversely affected by those conditions. It is not probable that many of the boys for whose welfare this institution exists could overcome those conditions without its aid."

On the question as to the need for "public control" his Honour said (at p. 395-396):

"The institution is not incapable of being properly described as a public benevolent institution because it is not owned or controlled by the Government. It would be contrary to a considerable volume of judicial authority to say that such is the only test whether an institution is public. An individual may render public service although he is not a public official or controlled by the Government."

Williams J. said (at p. 397):

"In
Perpetual Trustee Co. Ltd. v. F.C. of T. (1931) 45 C.L.R. 224 this Court held that the collocation of words `public benevolent institution' connotes the relief of poverty, suffering, distress or misfortune. Some time after that decision, which related to the same expression in the Estate Duty Assessment Act 1914-1928, sec. 8(5), the Commonwealth Parliament amended the Income Tax Assessment Act 1936-1939 by adding to the Act as an allowable deduction under sec. 78 gifts to a public institution or fund established and maintained for the comfort, recreation or welfare of the members of the Naval, Military or Air Forces of the Commonwealth. This amendment is significant as showing that the Parliament evidently intended the word `public' to include institutions which, like the Royal Naval House, provide for the needs of some special but substantial class of the community. But this is merely a recognition of the view established by many decisions (see the cases collected in the judgment of Rich J. in
The Little Company of Mary Case [(1942) 66 C.L.R. 368]) that an institution which aims at benefiting an appreciable and particularly but not necessarily an appreciable needy section of the community is a public institution."

15. On the same day their Honours in
Lemm & Ors v. F.C. of T. ((1942) 66 C.L.R. 399) held that the action of a testator in devising and bequeathing his home, furniture and furnishings to the Presbyterian Church (N.S.W.) Property Trust in order to provide a home for aged women in straitened financial circumstances constituted a gift to a public benevolent institution in that -

"The control of the institution is vested in the Church Property Trust. This body, which is incorporated by Act of Parliament, is a public body in the sense that it represents an important section of the community (
Royal Masonic Institution for Boys (Trustees of) v. Parkes (1912) 3 K.B. 212, at p. 217). The benefits of the institution are available to members of the class of aged women in straitened circumstances irrespective of their religion. A home for such women, even if they are able to pay one pound per week, is an institution organized for the relief of poverty. Poverty is a relative term. There are degrees of poverty less acute than abject poverty or destitution, but poverty nevertheless (In
re Clarke (1923) 2 Ch. 407; In
re de Carteret; Forster v. de Carteret (1933) Ch. 103, at pp. 108-113. It is therefore a benevolent institution within the meaning of the sub-section (Perpetual

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Trustee Co. Ltd. v. F.C. of T. (1931) 45 C.L.R. 224). The purpose of the home is to confer benevolence upon an appreciable needy class in the community, so that it complies with the most important test of what is a public institution (
Shaw v. Halifax Corporation (1915) 2 K.B. 170;
Verge v. Somerville (1924) A.C. 496, at p. 499)..."

(pp. 410-411).

16. I cannot but agree. It was argued for the Commissioner that the circumstance that membership is restricted both as to the persons eligible and as to their number operates to deny to the applicant the attribute of being "public", and of being "an institution". I do not accept that. Such contentions caused me to say that the benevolence extended by a university professor and friends to the poor and downtrodden prior to their group being recognised by the Commissioner as satisfying the requirements of sec. 78(1) of the Income Tax Assessment Act was not the action of a "public benevolent institution". That was too small to be described as an "institution" because the group was too restricted in number to be characterised as "public" (reference 286/8-1985, unpublished), yet the St Vincent de Paul Society is undoubtedly a "public benevolent institution" although it also had its origins in the private charitable acts of a university professor. If on the evidence there was no more than individual acts of generosity extended by ex-servicemen to those in need, that would be another matter altogether, but that is not the case. Legacy continues to play such a substantial part in the social structures of Australia, it is in my view an "institution" and furthermore "public" and "benevolent". In my view Legacy in Australia is, and each autonomous club having the same characteristics as Community and which is recognised by the Co-ordinating Council of Legacy, a "public benevolent institution". Each Legacy Club represents an important section of the community and it serves a group in need within the community. In doing so it recognises that need is not synonymous with financial poverty and that benevolence is a much broader concept than "financial assistance".

17. Further, nothing in my view turns on any distinction between the five accounts. One account is the principal operating account maintained at Head Office; two are impressed accounts maintained by regional groups; a fourth is an account separately maintained in relation to moneys borrowed in respect of which an interest subsidy is paid by the State Government; and the remaining account is an account separately maintained to keep clear the distinction between the benefits taken by club members at their own costs and all other funds held for the benefit of those whom legatees would serve.

18. I would allow the objection in all cases.