University of Western Australia v. Commissioner of State Taxation (W.A.)
Members:Smith J
Tribunal:
Supreme Court of Western Australia
Smith J.
These two appeals sec. 33 of the Stamp Act 1921-1979 (``the Act'') were heard together pursuant to a consent order made by the Master on 12 October 1987. Section 33, so far as relevant for present purposes, is in these terms:
``33(1) A person who is dissatified with the decision of the Commissioner on an objection by the person may, within 42 days after service of notice of the decision of the Commissioner, appeal to the Supreme Court against that decision.
(2)...
(3) The Supreme Court shall hear and determine an appeal under subsection (1).
(4) Where the Supreme Court determines that the assessment of duty to which the appeal relates is in error, it shall assess the duty chargeable under this Act, recalculate any fine charged under section 20, and order the Commissioner to refund the amount of any excess of duty which may have been paid and the amount of any excess of any fine charged under section 20.''
The appellant, as purchaser, was assessed for ad valorem stamp duty with respect to eight agreements relating to the purchase of properties listed in the Schedule to these reasons, pursuant to sec. 74(1) of the Act and item 4 of the Second Schedule to the Act. The total duty assessed and which has been paid by the appellant to the respondent is $1,831,855.25.
The grounds of objection contained in each of the appellant's notices pursuant to sec. 32(1) of the Act in each instance were in similar terms, they being:
- 1 (a) Each of the agreements was an agreement for the conveyance on purchase of property for the purpose of the University of Western Australia or for charitable or similar public purposes.
- (b) The Commissioner could not reasonably be other than satisfied as to that.
- (c) In the circumstances the Commissioner was obliged to exempt the agreements from ad valorem duty under sec. 75AA of the Act.
and
- 2. Further or alternatively:
- (a) the assessments purport to change or levy a tax on property of the University or on the University in respect of its property;
- (b) the assessments are thereby in breach of sec. 10 of the University Endowment Act 1904 and in breach of sec. 36 of the University of Western Australia Act 1911.
The respondent's statement as required by O. 77, r. 6(1)(d) of the Supreme Court Rules is in the following terms:
``1. The Appellant, as purchaser, was assessed for ad valorem stamp duty in respect of the conveyances described in the Notice of Objection (marked with the letter `A') pursuant to section 74 of the Stamp Act and item 4 of the Second Schedule to the Act.
2. The properties conveyed are income-producing properties not intended to be occupied by the Appellant for the purposes of a University.
3. The questions of law which the Commissioner considers will require to be determined on the appeal are:
- (a) Was such assessment contrary to section 10 of the University Endowment Act 1904?
- (b) Was such assessment contrary to section 36 of the University of Western Australia Act 1911?
- (c) Should the Commissioner have been satisfied that the said conveyances were made for the purpose of a university or for charitable or similar public purposes, within the meaning of section 75AA of the Stamp Act?
- (d) If yes to (c), then should the Commissioner have exempted the said conveyances from ad valorem duty?''
On the hearing of the appeals no argument was advanced by counsel for the appellant with respect to grounds 2(a) and (b) contained in the Notices of Objection and I was informed by the appellant's counsel that the appellant accepted the stamp duty calculated as being correctly calculated having regard to the appropriate rates in the Second Schedule to the Act and taking into the account the exemptions under the Third
ATC 4022
Schedule on the basis that the agreements were agreements for sale under sec. 74(1) of the Act.It was common ground between the parties:
- (a) that all funds used for the acquisition of the properties, the subject of the agreements were derived from the sale of land endowed in the first instance upon the Trustees of the University Endowment pursuant to the University Endowment Act 1904 and then in the University pursuant to the University of Western Australia Act 1911; and
- (b) the properties, the subject of the assessment, are all commercial properties. It is not intended that they will be occupied by the appellant itself but rather that they will be leased to persons unconnected with the appellant so as to ensure a reliable source of income to meet the appellant's requirements for funds for the control and management of the affairs and concerns of the University.
The issue in the case is whether the appellant is entitled to an exemption from duty pursuant to sec. 75AA of the Act which is in these terms:
``75AA. When the Commissioner is satisfied that any deed of gift, conveyance, transfer, settlement or other instrument operating as a voluntary disposition of property or any conveyance on the purchase of property, has been made for the purpose of a university or for charitable or similar public purposes, he may exempt from ad valorem or refund ad valorem duty paid on, that deed, conveyance, transfer, settlement or other instrument or conveyance on the purchase of property.''
Pursuant to sec. 74(1) of the Act an agreement for sale is treated as a conveyance on sale and therefore the substantive question which arises in relation to each appeal is should the Commissioner have been satisfied that the conveyances were made for the purpose of a university or for charitable or similar public purposes within the meaning of sec. 75AA of the Act. Before giving consideration to this question it is convenient to touch upon the relevant provisions of the University Endowment Act 1904 and related legislation.
The University Endowment Act 1904 contemplated the establishment of a university in this State. Section 2 of that enactment authorised the Governor to appoint seven person to be the trustees of an endowment for a State university and the next succeeding section provided that the trustees so appointed should be a body corporate by the name of the Trustees of the University Endowment. Section 4 was in the following terms:
``By way of permanent endowment the Governor may grant or demise to the trustees such lands of the Crown as he may think fit.''
Section 5 provided that all real and personal property vested in the trustees or acquired by them by purchase, gift, devise, bequest or otherwise should be held in trust ``for a State University to be established by Parliament''. The powers of the trustees were dealt with in sec. 6 to 9 inclusive and sec. 10 provided as follows:
``10. No tax or rate shall be charged or levied upon any property acquired by the trustees under this Act, or upon the trustees in respect thereof; but the benefit of such exemption shall not extend to any other person who may become the owner of any estate or interest in such property, whether as purchaser, lessee, or otherwise.''
The university contemplated by this legislation was created by the University of Western Australia Act 1911 the preamble to that enactment being in these terms:
``WHEREAS of the States of the Commonwealth Western Australia alone is unprovided with a University:
And whereas it is desirable that provision should be made for further instruction in those practical arts and liberal studies which are needed to advance the prosperity and welfare of the people:
And whereas it is desirable that special encouragement and assistance should be afforded those who may be hindered in the acquisition of sound knowledge and useful learning by lack of opportunity or means:
And whereas for these purposes it is expedient to incorporate and endow a University within the State of Western Australia...''
In addition to acquiring the property already held by the Trustees of the University Endowment the University of Western Australia became entitled also to receive grants
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of further land. The role of the Governor and the vesting of the property held by the Trustees of the University Endowment was dealt with in sec. 35 of the enactment in these terms:``35(1) By way of permanent endowment, the Governor may grant or demise to the University such lands of the Crown as he may think fit.
(2) All real and personal property whatsoever vested in `The Trustees of the University Endowment' shall, on the appointment of the Senate, by force of this Act, and without any conveyance, transfer, or assignment, vest in and become the property of the University.''
Section 42 of the enactment provided for the dissolution of the corporation of the ``Trustees of the University Endowment'' and discharged the trustees incorporated under that name from the trusts imposed upon them by the University Endowment Act 1904. The powers of the appellant in relation to the property so vested in it, which included the endowment land, were set out originally in sec. 14, 15 and 16 of the 1911 legislation. These sections have since been amended but for the purposes of this case it is unnecessary to refer to them.
It would seem, however, that there was some doubt as to whether the appellant had the power under the 1911 Act to sell endowment land. This question was resolved by the Universities Endowment Act Amendment Act 1927. This enactment provided expressly that it should be lawful for the appellant, with the consent of the Governor, to sell any land granted or demised to the Trustees of the University Endowment or to the University of Western Australia by way of permanent endowment, and to transfer such land to a purchaser freed and discharged from any trust. But the amending legislation provided the proceeds of sale should be applied to the purchase of other land or the improvement by the erection of buildings or otherwise of other land. The terms of the amending legislation were as follows:
``1. This Act may be cited as the University Endowment Act Amendment Act, 1927, and shall be read as one with the University Endowment Act, 1904, and the University of Western Australia Act, 1911.
2. Subject as hereinafter provided, it shall be lawful for the University of Western Australia, with the consent of the Governor, to sell any land granted or demised to the Trustees of the University Endowment or to the University of Western Australia by way of permanent endowment and to a purchaser freed and discharged from any trust:
- Provided that the proceeds of sale shall be applied to the purchase of other land, or the purchase and improvement by the erection of buildings or otherwise of other land, or the improvement as aforesaid of land already owned by the University.
- Provided also that land and buildings so acquired by investment of the proceeds of the sale of endowment lands, shall be held and used for revenue producing purposes as permanent endowment, upon the same trusts as the endowment lands are held.''
The effect of this enactment is that the proceeds of the sale of any property vested in the appellant are to be reinvested in land and used for revenue producing purposes and that the land acquired or improved by investment of the proceeds of the sale of endowment land is to be held on the same trusts as the endowment lands had been held. The consequence is, counsel for the appellant contended, that it is by statutory force that the properties purchased by the appellant under the agreements with money derived from the sale of endowment land have been acquired for the purpose of a university.
This submission, I think, clearly is correct. The words ``for the purpose of'' in sec. 75AA of the Act may be paraphrased as ``in carrying on the activities of''. And it is commmon ground that the properties the subject of the agreements are all commercial properties which will be leased by the appellant ``so as to ensure a reliable source of income to meet the appellant's requirements for funds for the control and managements for funds for the control and management of the affairs and concerns of the University''.
Counsel for the respondent argued that to be eligible for exemption under sec. 75AA the properties acquired, themselves, must be used for the purpose of the university. It was counsel's contention that as the properties had been acquired to be leased simply to raise money for the purposes of the university the decision of
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C. of T. v. Trustees of St Mark's
Ryde Municipal Council v. Macquarie University (1978) 139 C.L.R. 633 at p. 643 as to the applicability of the dicta of that decision. These cases, however, related to a different taxing provision. The St Mark's Glebe case related to rating legislation and the question in that case was were the lands in question ``occupied or used exclusively for or in connection'' with the public charitable purposes of a church. The Ryde Municipal Council case likewise related to rating legislation. In that case the legislation under consideration declared all land in the municipality to be ratable but the particular section contained a number of exceptions including:
``Land which is vested in the Macquaire University, or in a college thereof, and is used or occupied by the University or college, as the case may be, solely for the purposes thereof.''
In each of those cases the respective legislative provision under consideration looked to the actual use of the land. Section 75AA of the Act does not look to the occupation and use of land but focuses only upon the purpose for which the property has been acquired. In these circumstances the cases relied upon by counsel for the respondent are to be distinguished. In my opinion the words of sec. 75AA ``for the purpose of a university or for charitable purposes'' include by necessary implication the acquisition of property for revenue-producing purposes for use in carrying out the activities of a university or a charitable purpose.
It follows from my conclusion that the appellant acquired the properties in question for the purpose of a university, that the appellant has satisfied the precondition of sec. 75AA of the Act and it is unnecessary, therefore, for me to deal with the alternate contention of counsel for the respondent that the juxtaposition of the words ``purpose of a university'' and ``charitable purposes'' in sec. 75AA of the Act means that the purpose of a university must be taken not to be a charitable purpose for the purposes of the Act. For the sake of completeness, however, I will make brief reference to this contention which again I have concluded is without substance. It is patent, I think, that charitable purposes in sec. 75AA is to be interpreted as meaning charitable purposes in the legal sense and not in any colloquial sense. The nature of the enquiry as to whether a purpose is charitable in the legal sense is now well settled. It was briefly stated by the High Court in a joint judgment in
Royal National Agricultural & Industrial Association v. Chester & Ors (1975) 48 A.L.J.R. 304 at p. 305 in these terms:
``To justify an affirmative answer, it seems to us that it must, at least, be found that the breeding of racing pigeons is a purpose both beneficial to the community and within the spirit and intendment of the preamble to the statute 43 Eliz. 1. c. 4. The House of Lords' decisions in
Williams' Trustees v. Inland Revenue Commissioners, [1947] A.C. 447,... provide modern authority that the existence of these two elements is both necessary and sufficient to warrant the conclusion that a particular purpose is charitable in law. This Court so decided in
Incorporated Council of Law Reporting (Q.) v. Federal Commissioner of Taxation (1971), 125 C.L.R. 659; see Barwick C.J. at pp. 667 and 669.''
The reference in the preamble to the Statute of Elizabeth to ``schools of learning, free scholars, and scholars in the universities'' has provided courts in England and Australia with an ample opportunity to admit to the status of charity many kinds of trusts for the advancement of education: see Ford and Lee, Principles of the Law of Trusts at p. 835 and the cases there cited. Trusts for the advancement of education do not have to relate to any specific educational institution and they may be expressed in the broadest of terms. The House of Lords has rejected expressly the notion that education has a static meaning: see
I.R. Commrs v. McMullen (1981) A.C. 1. In my judgment it cannot be suggested that a trust for the purpose of a university is not a charitable purpose. In the present case I accept the submission of counsel for the appellant that the properties in question were acquired for the purpose of a university and for charitable purposes.
The next question arises out of the opening words of sec. 75AA of the Act ``When the Commissioner is satisfied that...''. The function of the Commissioner under the section depends upon him being satisfied that the instrument in question has been made for the purpose of a university or for charitable
ATC 4025
purposes. I am satisfied that in concluding in the present case that the agreements had not been made for the purpose of a university or for charitable purposes the Commissioner misled himself as to the legal questions involved and that this has resulted in him not having addressed the correct question. The role of the court in these circumstances is as was stated by Dixon J. (as he then was) inAvon Downs v. F.C. of T. (1949) 78 C.L.R. 353 at p. 360:
``His decision, it is true, is not unexaminable. If he does not address himself to the question which the sub-section formulates, if his conclusion is affected by some mistake of law, if he takes some extraneous reason into consideration or excludes from consideration some factor which should affect his determination, on any of these grounds his conclusion is liable to review. Moreover, the fact that he has not made known the reasons why he was not satisfied will not prevent the review of his decision. The conclusion he has reached may, on a full consideration of the material that was before him, be found to be capable of explanation only on the ground of some such misconception.''
His Honour was then sitting as a single Judge hearing a tax appeal but the dictum was adopted and applied by the Full High Court in the case of
F.C. of T. v. Brian Hatch Timber Co. (Sales) Pty. Ltd. 71 ATC 4093; 72 ATC 4001; (1971-1972) 128 C.L.R. 28. A similar question arose in relation to payroll tax legislation in this State. In the case of
Commr of State Taxation (W.A.) v. Scotford Cameron & Middleton Pty. Ltd. 81 ATC 4576 Burt C.J. said this at p. 4578:
``The appeal was argued before us upon the basis that should it appear upon the material before the Commissioner he fell into error because he did not address himself to the question which was formulated by that subsection or if his lack of satisfaction can be seen to have been affected by some mistake of law or by his taking into consideration some extraneous reason or by his excluding from consideration some factor which he ought to have taken into account - Avon Downs Pty. Ltd. v. F.C. of T. (1949) 78 C.L.R. 353, per Dixon J. at p. 360 - then his decision can be examined by this Court. And if on the material before the Court it should appear that in that sense the decision of the Commissioner had been affected by error then the Court should reach its own conclusion as to whether the Commissioner ought to have been satisfied. If this Court is of the opinion that he ought to have been satisfied then the Commissioner concedes that he should exclude the taxpayer from the group.''
Although this is different legislation, a fortiori it seems to me, that this direction applies in the present case by reason of sec. 33(4) of the Act which provides that in the event that the Court hearing the appeal determines that the assessment is in error the Court is obliged itself to assess the duty.
The final question arises out of the use of the words in sec. 75AA of the Act ``when the Commissioner is satisfied... he may exempt'' (emphasis supplied). It was the submission of counsel for the respondent that in the event that it was my conclusion that the Commissioner should have been satisfied that the purchases had been made for the purpose of a university or for charitable purposes the Commissioner nevertheless retained a discretion not to grant the exemption from ad valorem duty. Counsel for the appellant contended that in such circumstances the Commissioner would be obliged to exempt.
There are a host of cases touching upon the question of when ``may'' in the context of particular words and circumstances becomes ``must'' stretching back to
Julius v. Lord Bishop of Oxford (1879) 5 App. Cas. 214. There is, however, no need to do more, I think, than refer to the case of
Finance Facilities Pty. Ltd. v. F.C. of T. 71 ATC 4225; (1970-1971) 127 C.L.R. 106 in which the majority of the High Court held that, despite the use of the words ``may allow'' in sec. 46 of the Income Tax Assessment Act 1936-1968, if the Commissioner was satisfied on the matters set out in sec. 46(3)(a) he was obliged to allow a further rebate. In his judgment in that case Windeyer J., who was one of the majority, had this to say at ATC p. 4229; C.L.R. p. 134 et seq.:
``The question then is must the permitted power be exercised if one of those conditions be fulfilled?
This does not depend on the abstract meaning of the word `may' but of whether the particular context of words and
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circumstance make it not only an empowering word but indicate circumstances in which the power is to be exercised - so that in those events the `may' becomes a `must'. Illustrative cases go back to 1663:
R. v. Barlow (1663) Carth. 293 [90 E.R. 73]; 2 Salk. 609 [91 E.R. 516]. Today it is enough to cite Julius v. Bishop of Oxford (1879) 5 App. Cas. 214; and add in this Court
Ward v. Williams (1955) 92 C.L.R. 496 at pp. 505-506. But I select one other reference out of a multitude:
Macdougall v. Paterson (1851) 11 C.B. 755 [138 E.R. 672]. There Jervis C.J. said in the course of the argument (at p. 766): `The word `may' is merely used to confer the authority: and the authority must be exercised, if the circumstances are such as to call for its exercise.' And, giving judgment, he said (at p. 773):
- `We are of opinion that the word `may' is not used to give a discretion, but to confer a power upon the court and judges; and that the exercise of such power depends, not upon the discretion of the court or judge, but upon the proof of the particular case out of which such power arises.'''
I consider this dicta to be directly applicable to the present case. If the Commissioner is or should have been satisfied as to matters giving rise to exemption from ad valorem duty he cannot refuse to grant the exemption from duty. It is inconceivable, I think, in the context of taxing legislation, that in the event that conditions for exemption from fiscal levy are established that the fiscal authority can, in the open exercise of his discretion, allow an exemption in one case and not in another.
I would allow each appeal and assess the duty payable in each instance to be nil. Pursuant to sec. 33(4) of the Act I order that the respondent refund to the appellant the total amount of duty paid together with interest at the rate for which sec. 33A of the Act makes provision from the date of payment of duty.
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