Case L50

Judges:
HP Stevens Ch
CF Fairleigh QC
JR Harrowell M

Court:
No. 1 Board of Review

Judgment date: 31 August 1979.

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H.P. Stevens (Chairman): The questions at issue in this reference concern a gift of shares in a Norfolk Island company to a purported Benevolent Society of Norfolk Island by a taxpayer who is not a resident of Norfolk Island. The principal question is whether the Society (constituted by a deed just shortly prior to the transfer) is ``a public benevolent institution'' within the terms of sec. 78(1)(a)(ii) whilst an issue was also raised as to the value of the shares transferred.

2. A company - hereinafter referred to as N - was apparently incorporated in Norfolk Island in 1964 and the taxpayer became a director thereof on 7 July 1966. On the same date a family company - T - was allotted 250 $2 shares with a further allotment of 9,250 $2 shares on 31 January 1967. As at 30 June 1973 the issued and paid up capital of N was $66,500 held by nine shareholders comprising five individuals (three resident in Norfolk Island and two resident in Australia) and four companies (including one referred to hereafter as B in respect of which the residency of shareholders was apparently not Norfolk Island). As at the same date the directors were the taxpayer, Z and X and his son Y (the last three being residents of Norfolk Island). Until the appointment of Y, he and I (the secretary of X and also a Norfolk Island resident) were alternate directors for X - at a later date I and one L became directors. It was admitted by the taxpayer that X, Y, I and L were close friends and business associates.

3. The principal activity of N from about 1966 to 1973 was the restoration of a ruin (held under Crown lease dated 1 March 1968 for 28 years at an annual rent of $100 with provision for tenant rights) upon which, to 30 June 1973, an amount of $63,880 had been expended. The restored premises were used for both commercial and domestic purposes being sub-leased to M - a family company of X - with X and his wife occupying the living quarters. In addition to the above N also ``involved itself in the normal activities of a trustee.'' The accounts of N show the following details:

                                           1973              1974

      Profit and Loss Statement              $                 $

      Income - Rent                       4,200             4,200

      Commission                          2,725             4,176

      Directors' Fees                     1,333               500

      Interest                              322   $8,580      568   $9,444

                                         ------            ------

      Expenditure                                  2,758             3,529

                                                  ------            ------

      Net Profit                                  $5,822            $5,915

                                                  ------            ------

      Balance Sheet

      Issued Share Capital               66,500                     66,500

      P/L Account                        12,380                     14,970

                                         ------                     ------

      Share Capital and Reserves         78,880                     81,470

      Current Liabilities                 3,480   $82,360   4,498  $85,968

                                         ------    ------  ------   ------

      Leasehold Improvements             63,880            67,703

      Interest Bearing Deposit            7,500            13,500

      Current Assets       10,980       $82,360     4,765          $85,968

                                         ------    ------  ------   ------
      

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4. Concern was felt about the amendments to be made to the Income Tax Assessment Act which would affect Norfolk Island - ultimately by Act No. 164 of 1973 - and the taxpayer was asked in cross-examination whether X ever suggested ``that some steps be taken to ensure that the shareholding in (N) was restricted to territory residents?'' The taxpayer said his ``recollection is that the proposal to transfer the shares... was of my initiative. I think it was my concern more for tainting (N) than the directors of (N)''. Whoever was the initiator the fact is that, following share transfers of 15 October 1973, 18 December, 21 December and 28 December 1973, the 33,250 issued shares were all held by Norfolk Island entities - five individuals (X and his wife, Y, I and Z), one company (M) and the Society referred to in para. 1 as follows:

         X family

         interests

             X                 250

             Y               6,247

             X's wife          252

             M               9,750       16,499

                             -----

             Society                     16,251

             X's secretary I                250

             Z                              250       33,250

                                          -----       ------
      

In addition to the above share transfers changes were made to the directors and, as a result of resignations on 28 December 1973, the number of directors was reduced from four to two, viz., X and Y (also signatories to the Deed creating the Society).

5. The Society's shareholding of 16,251 comprised 9,500 shares originally held by the taxpayer's family company T and 6,751 shares held by B (apparently the family company of another Sydney resident F). By transfers of 21 December 1973 both sets of shares became registered in the names of the taxpayer and F respectively and were then transferred - by transfers of 28 December 1973 - to the Society.

6. Insofar as the transfer from T to the taxpayer is concerned these were transferred at par - the consideration $19,000 being said to have been paid by cheque (no evidence to substantiate this was led but it was not disputed). No independent evidence was called in relation to the value of the shares acquired for $19,000 - as Chairman I rejected as evidence a written valuation by a person not available for cross-examination - and I do not accept the taxpayer (although an accountant of long standing) as an expert witness. However certain details were placed before the Board, e.g., the accounts of N and the Crown lease together with the opinion of the taxpayer that the shares ``were certainly not worth less than par''.

7. Turning now to the Society it was created by Deed of 6 November 1973 executed by X, Y, I and L (the various clauses are being discussed in the reasons of Mr. Fairleigh and reference should be made thereto). Whilst it is common knowledge that discussions leading to a decision to draw up and the later execution of such a deed are not instantaneous events, there was no specific evidence given in relation thereto. Similarly there was little evidence given in respect of the decision of the taxpayer (and F) to donate shares to the Society and of the Society's decision to accept such donation. Nevertheless, in answer to a question ``was one of the reasons why you transferred them to the Benevolent Society the fact that the trustees were your close friends and you knew they would continue to hold the shares?'', the taxpayer said, ``That would be the paramount reasons''. This answer indicates, in my view, that the decisions to create the Society and for the taxpayer and F to donate the shares in N held by their family companies to the Society were not reached in vacuo but rather (whilst accepting a desire in X to have such a Society in Norfolk Island) were inter-related.

8. The minutes of the meeting of the Society on 28 December 1973, after the tabling of correspondence to and from the taxpayer (not produced to the Board) and the transfer from the taxpayer of the 9,500 shares (but not in respect of F), refer to conversations with F and the new legislation (Income Tax amendment) and record, inter alia:

``Both (taxpayer) and Mr. (F) did not want to prejudice the company and had considered giving their shares in it to the Norfolk Island Public Hospital, the Sunshine Club of Norfolk Island, and perhaps other charities. They were under the impression, however, that neither of the bodies mentioned would be able to retain the shares and that any forced sale

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would probably be harmful. Learning that the Society had come into existence they had respectively decided to make the transfers now to be presented for registration to (N).''

It was then resolved that:

``(a) appropriate letters be sent to (taxpayer) and to Mr. (F) thanking them

(b) the interests of (X) and (Y) as Directors and shareholders and of (I) as a shareholders and Secretary and Alternate Director of (N) be noted

(c) in deference to the wishes of the donors and having regard to the close association with, and interest in, (N) of all present members of the Society, the investment in these shares of (N) be retained in full until and unless otherwise decided by the Society.''

9. At the first meeting of the Society on 6 November 1973 it was decided to ``leave detailed Rules for later determination'' whilst it ``was further agreed that at this stage no public announcements be made as to the formation of the Society but that the present members... should inform any friends expressing interest in such an idea''. The minutes of a meeting on 23 June 1977 contain the following statement after reference to the Public and Patriotic Funds Ordinance 1927:

``It was noted that the Society was not organised as a public fund and did not invite or receive subscriptions from the public.''

Reference is made in a number of minutes to the uncertainty as to the status of Norfolk Island and the minutes of 19 September 1977 record, inter alia, that when this was ``finally resolved then the activities of the Society will be published to a greater extent and opportunity given to all interested persons to become members if they so desire''.

10. It is recorded in a number of minutes that L (the Honorary Welfare Officer as well as Treasurer) and others were unaware of any case of hardship in which application of the Society's funds was called for and the following table sets out in summary form the income and expenditure of the Society for the periods shown taken from the income statements for those periods:

                             6.11.73        Year        Year         Year

                               to           ended       ended        ended

                            31.12.74       31.12.75    31.12.76    31.12.77

                               $              $           $            $

 Income

 Members' Subscriptions -

      Life                      500           -           -             -

      Ordinary                   20           -          10             -

      Donations (including

      Shares N $32,502)      36,182          50           -           576

      Dividends ex N          1,625       1,625       3,250         1,625

      Interest                   10 8,337    86 1,761    94  3,354     77 2,278

                             ------       -----      ------         -----

 Expenses

      Donation N.I.

      Public Hospital         3,950          -            -         1,000

      Sunshine Club               -          -          250             -

      N.I. Central School

      (Library)                   -          -          100             -

      Wives and Mothers' Club     -          -            -           826

      Cables, Telephone, etc.     - 3,950    -      -     -    350     18 1,844

                             ------ ----- ---- ------ ----- ------ ------ -----

         Surplus                  $34,387      $1,761       $3,004         $434

                                   ------       -----        -----          ---
      

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The balance of the donations for the first period was, apart from the shares ex taxpayer and F, from 11 companies and one Trust all presumably Norfolk Island entities. The $520 Members' Subscriptions represents $5 from each of the signatories to the Deed (cl. 8 ``to provide petty cash'') but the source of the $500 is unknown - only X, Y, I and L are shown in the Annual Report 31 December 1974 as being members and there is no reference in the minutes to the creation of a life membership. The $520 is taken from Exhibit H but, in Exhibit J, the figures 500 and 20 have been excised and donations increased to $36,702.

11. Although full details are not available subsequent to the year ended 31 December 1977 the minutes of a meeting on 20 September 1978 record, inter alia, the acceptance of the resignation of L and the receipt of a donation of $303 from him, the receipt from I of $30 (subscription to 6 November 1979), a donation from a Norfolk Island company of $250 and a resolution to make the following donations:

      The Girl Guides Association

         of Norfolk Island ..................  $250

      The Sunshine Club .....................  $250

      The Wives and Mothers'

         Club ...............................  $250

      The Royal Far West

         Children's Health Scheme ...........  $250
      

By report of 10 January 1979 X recommended a donation of $300 to the Norfolk Island Underwater Club to procure an Oxy-Viva Resuscitator No. 3 Unit and a minute of 28 June 1979 refers to amendments to the constitution of that Club as discussed with X and Y (if Club ceases to function resuscitator to go to Norfolk Island Hospital) and records that the Club would maintain it ``and train its members in use of the resuscitator in the ordinary course of their participation in the activities of the Club''. Finally it is mentioned that at a meeting of 10 June 1979 it was approved that up to $400 be made available ``for the purpose of employing a designer to produce finished design work for the flag for Norfolk Island proposed by the Norfolk Island Council at its Meeting on June 6, 1979'' - it being noted that the flag design accepted by the Council had been prepared by Y.

12. Concluding the factual position it is necessary to point out that no evidence was led in relation to the constitutions of the various bodies to whom the Society made donations. Nor were the Memorandum and Articles of Association of N produced.

13. Turning now to the questions at issue it is convenient to deal with that relating to value first. In this regard counsel for the Commissioner submitted ``that the evidence is not adequate having regard to the onus which the taxpayer is obliged to discharge'' - he did not submit what valuation was contended for by the Commissioner merely suggesting that ``it would be inappropriate to value the shares in (N) on the basis of any net asset application'' and inferring an income earnings basis should be adopted in respect of which the taxpayer had produced no evidence.

14. I am far from satisfied that, when the taxpayer did decide to acquire the shares in N from T, he did in fact attempt a proper valuation of those shares. However, there is before the Board evidence in the form of the accounts of N for 1973 and 1974 (para. 3) and the regular receipt of dividends from N by the Society (para. 10) and I am not prepared to make a finding on the basis that the onus has not been discharged. Whilst, having regard to this evidence, I am unable to make a finding as to what would be a proper valuation under either of the suggested bases, I feel able to find that, taking into account the fact no evidence was adduced (pursuant to the shifting evidentiary onus) by the Commissioner as to restrictions, etc., and their effect, $2 is not an unreasonable figure to adopt. Taking as a mean figure $80,000 for share capital and reserves there would need to be discounting factors in excess of $13,500 before, on a net assets basis, a figure below $2 is reached. On an earning capacity basis (adopting a Net Profit of $11,000) there is an earning rate of 11,000/80,000 or 13.75% - a dividend rate for all years available of 5% except 10% for 1976 - and expectations, if legislation to increase its trustee work were introduced, of a higher rate in future. Having regard to this I would think that even on this latter basis a figure of $2 would not be beyond reason.

15. It follows that I accept (albeit with some hesitation due, inter alia, to the absence

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of N's Memorandum and Articles of Association) the amount of $19,000 for the value of the shares transferred as being an acceptable figure. I turn now to the principal issue.

16. Counsel for the taxpayer submitted that the meaning of the expression public benevolent institution could not be considered without considering the meaning of each of the three words. In relation to the word ``public'' he referred to
Maughan v. F.C. of T. (1942) 66 C.L.R. 388 in support of a submission that the word ``looks principally at the nature of the objects of the institution'' - he also relied on
O'Connell v. Council of the City of Greater Newcastle 41 S.R. 190 and distinguished
Bray v. F.C. of T. 78 ATC 4179 on the basis that a ``a public fund set up for specified purposes uses the word public in a different way with a quite different connotation''. With respect to the word ``benevolent'' he said ``the true meaning of that word, in our submission, is dictated by a spirit of benevolence or doing good to others, either others individually or in the community generally'' and referred to
Perpetual Trustee Co. Ltd. v. F.C. of T. (1931) 45 C.L.R. 224 whilst also finding comfort in
The Attorney General for the State of N.S.W. v. Adams (1908) 7 C.L.R. 100 and
The Attorney-General of New Zealand v. The New Zealand Insurance Co. Ltd. (1936) 3 E.R. 888 . An ``institution'' he said was ``an organisation or association of persons instituted for the promotion of some object, especially some object of public utility'' and reference was made to
Stratton v. Simpson (1970) 125 C.L.R. 138 .

17. He also said, in relation to the suggestion that the Deed in its preamble referred to the establishment of a ``public fund'' such ``public fund to be conducted as a public benevolent institution'' whereas the facts seemed to indicate a ``private fund'',

``our answer is well all right let us say the deed was departed from in that respect. Instead of being a public fund it was a private fund, if one uses those words to describe its source and composition. Nevertheless, except to that extent the deed governs its composition, operation and the organisation which controls it but that difference is immaterial for the present purposes, that is our point.''

18. It was counsel's conclusion that, having regard to the deed and to the activities carried on, the Society met the tests of sec. 78(1)(a)(ii) and the $19,000 should be allowed as a deduction.

19. On the other hand counsel for the Commissioner submitted the Society fell ``within none of the component elements of the composite expression''. He denied that it was sufficient to ascertain the objects, etc., of a body and submitted that ``to be public in the requisite sense it must in fact have a control and must have an origin and must have an administration which is in the requisite sense a public institution'' - he said Maughan's case and others ``do not lay down that anything that simply has objects which are in a sense public necessarily qualifies for the description of a public body''. He also referred to the other parts of sec. 78(1)(a) where the word ``public'' is used, suggested ``one would not lightly assume that the legislature envisaged the use of a word - the same word - with radically different meanings so often in the one section'' and submitted ``that the word `public' where appearing, where (? whether) the public fund, public authority, public institution or any other expression, the word `public' must mean the same'' - in support he referred to both the Federal Court and High Court decisions in Bray's case. It was also submitted that ``the word `public' was there intentionally to qualify the word `benevolent' so that not all benevolent funds attract the exemption or the deduction, only those benevolent funds which are public''. In addition he relied on the fact that ``free and public involvement thus far has never been a characteristic of the fund... as most strongly tending to support the contention that it is not such a fund''.

20. With respect to the word ``benevolent'' Commissioner's counsel said the proper construction was the narrower one put forward by Evatt J. in the Perpetual Trustee Co. case and that there was no evidence to support the proposition ``that the objects to which the fund was applying its moneys were, in the strict sense benevolent'' - there being no evidence in relation to the bodies receiving the moneys. He also submitted that ``objects at least in (d), (e) and (f) of cl. 3 of the trust deed would not... necessarily qualify for the description

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benevolent... those objects are very wide; they are wide enough to encompass purposes or beneficiaries which might be either benevolent or for that matter, charitable or non-charitable''. It was also said that the decision in the Perpetual Trustee Co. case was given in 1931 on the expression ``public benevolent institution'' as then appearing in the Estate Duty Assessment Act and it may well be that, when introduced into the new 1936 Income Tax Assessment Act, it was intended to bear the same meaning as ``assigned to it in previous litigation over the same words''.

21. In relation to the final word ``institution'' it was submitted, after reference to remarks of Windeyer J. and Gibbs J. in Stratton's case, ``the facts of this case point to its being not an institution but a mere trust, nothing more in effect than a bank account upon which are engrafted specific purposes''.

22. When referred to the matters set out in para. 4, 7 and 8 and the power to retain the shares (cl. 14(c)) in relation to the finding of Mr. Justice Jacobs in Bray's case, counsel for the Commissioner was not prepared to rely thereon because there was a necessity to deal with moneys exclusively in a particular manner which did not exist in the present situation. However he did suggest that was ``yet another indicator on the question of the public nature of the fund; that a group of closely connected individuals dealing with an asset that was, in varying senses and from varying views, of importance to all of them, so arranged that asset as to achieve a particular purpose. The retention of the shares in that form, even assuming it is an investment authorised by the trust deed, merely points to the absence of the requisite public element''.

23. In reply counsel for the taxpayer suggested (with respect to the preceding paragraph) that the reason why a particular gift is accepted was not a relevant factor. He also said it was unnecessary to produce the constitution, etc., of the bodies to whom donations were made it being ``quite sufficient to establish the general nature of the gifts and to bring those gifts within the field of benevolence which is all that really matters''. In relation to cl. 3(d), (e) and (f) he referred to the very special circumstances of Norfolk Island and submitted ``that benevolence includes contributing to the good of the community considered as a community and those three objects are within that concept''. In conclusion he referred to
Lemm v. F.C. of T. (1942) 66 C.L.R. 399 (another estate duty case re a public benevolent institution where a gift by will to the Presbyterian Church was involved) as lending support to the proposition that a private gift to establish a society falls within the section.

24. When regard is had to the multitude of decisions given on particular fact cases within the prescribed area it is not always easy to extract what is the underlying principle involved. However, an examination of the decisions in the Perpetual Trustee Co. Ltd. case, Maughan's case and Lemm's case - dealing as they do with the composite expression ``public benevolent institution'' - is, in my view, rewarding. In this regard I think there is merit in the submissions of counsel for the Commissioner outlined in the first sentence of para. 20 above although I would put it in a slightly different manner. Prior to the introduction of the 1936 Act which introduced sec. 78(1)(a)(i) to (vii) inclusive (basically in the same terms as at present) the relevant section was sec. 23(1)(h)(ii) providing, inter alia, for a deduction in respect of gifts made to ``public charitable institutions in Australia'' with the term ``public charitable institution'' defined as meaning:

``a public hospital, a public benevolent institution and includes a public fund established and maintained for the purpose of providing money for such institutions or for the relief of persons in necessitous circumstances.''

At the same time sec. 8(5) of the Estate Duty Act (in fact force when both Perpetual Trustee and Lemm were decided) provided that:

``Estate duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement for religious, scientific or public educational purposes in Australia or to a public hospital or public benevolent institution in Australia or to a fund established and maintained for the purpose of providing money for

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use for such institutions or for the relief of persons in necessitous circumstances in Australia.''

25. The striking identity between the latter portion of the above sec. 8(5) and the definition of ``public charitable institution'' in the then income tax sec. 23(1)(h)(ii) is obvious and, in my opinion, of significance. It is necessary to be careful when comparing statutes to ensure that the overall context is the same but here the context seems identical, i.e., the granting for taxation purposes of relief in respect of bequests and gifts respectively to the same class of bodies. In these circumstances I regard the decisions upon what is a ``public benevolent institution'' for the purposes of sec. 8(5) of the Estate Duty Act as providing guidance as to what is a ``public benevolent institution'' for the purposes of sec. 78(1)(a)(ii) of the Income Tax Assessment Act .

26. The Perpetual Trustee Co. Ltd. case concerned a bequest to the Royal Naval House. It was held ( McTiernan J. dissenting) that the Royal Naval House was not a ``public benevolent institution''. At pp. 231-232, 45 C.L.R. Mr. Justice Starke said:

``Now we have to consider the expression `public benevolent institution'. It cannot be said that this expression has any technical legal sense, and therefore it is to be understood in the sense in which it is commonly used in the English language.... In the context in which the expression is found, and in ordinary English usage, a `public benevolent institution' means, in my opinion, an institution organised for the relief of poverty, sickness, destitution or helplessness. The Royal Naval House has none of these characteristics.''

Dixon J. at pp. 232-233 said:

``Because of its association with the various Governments, and because it is concerned with the naval forces of the country, it would be difficult, if it be a benevolent institution, to deny it the description `public'. But, in my opinion, it is neither promoted nor conducted for the relief of poverty, distress, suffering or misfortune, and the question is whether for this reason it lacks the qualities necessary to bring it within the meaning of the compound description `public benevolent institution'.''

At pp. 233-234 he said:

``Having regard to this history of the legislation and to the considerations I have mentioned, I am unable to place upon the expression `public benevolent institution' in the exemption a meaning wide enough to include organisations which do not promote the relief of poverty, suffering, distress or misfortune.''

27. It is interesting that both Starke J. and Dixon J. referred to and took into account the amendment of sec. 8(5) by Act No. 47 of 1928 to that set out in para. 24 from -

``Estate duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement for religious, scientific, charitable or public educational purposes''

following the Privy Council's decision in
Chesterman v. F.C. of T. (1925) 37 C.L.R. 317 . In this regard sec. 23(h)(ii) of the Income Tax Assessment Act 1922-1925 which merely provided for gifts to ``public charitable institutions in Australia'' was amended by Act No. 32 of 1927 to, inter alia, insert the definition of ``public charitable institution'' set out in para. 24 above. Thus it seems the estate duty amendment adopted the then existing words in the Income Tax Act (rather than the reverse) and this fact is of some further support to the views set out in para. 25.

28. In Lemm's case it was held that a home for aged women in straitened financial circumstances was a ``public benevolent institution'' and that, other than the part devised and bequeathed to pay annuities, the residuary estate was devised and bequeathed ``to a fund established and maintained for the purpose of providing money for use'' for public hospitals and public benevolent institutions. In respect of this last finding it is to be noted that, unlike sec. 78(1)(a)(iii) of the Income Tax Act which refers to a ``public fund'', sec. 8(5) of the Estate Duty Act only uses the word ``fund''. Mr. Justice Williams (with whom Rich J. and McTiernan J. agreed) found that a home for such women

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``is an institution organised for the relief of poverty'' (at p. 410) and ``It is therefore a benevolent institution within the meaning of the subsection ( Perpetual Trustee Co. Ltd. v. F.C. of T. )''. He also found that 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'' (at p. 411).

29. The case is also of importance in that it resolved the conflict then existing as to whether a public hospital, public benevolent institution or fund could be created by the will itself. In this regard at p. 410 Williams J. said:

``It is the character and not the pre-existence of the institution or fund, just as it is the quality of the purpose, which is important. The trusts in the will are intended to establish an institution and a fund the beneficial interests in which are not to be vested in any private person but are to belong inalienably to the public (
Dilworth v. Commr of Stamps (1899) A.C. 99 at p. 109 ;
Girls' Public Day School Trust Ltd. v. Ereaut (1931) A.C. 12 at p. 35 ).''

30. Maughan's case involved sec. 78(1)(a)(ii) itself and whether the Boys' Brigade Inc. was a ``public benevolent institution''. Mr. Justice McTiernan said there was nothing to indicate that the expression ``has any other meaning than its ordinary meaning'' (at p. 395), referred to Perpetual Trustee Co. Ltd. decision (followed in
Public Trustee (N.S.W.) v. F.C. of T. (1934) 51 C.L.R. 75 ) and said ``In the present case the argument centres on the question whether the Boys' Brigade Inc. is organised for the relief of poverty''. He thought it ``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''. Williams J. (with whom Rich J. agreed) also referred to the Perpetual Trustee Co. Ltd. decision (at p. 397) and, in relation to the necessity for public control, said at p. 397:

``But public control is not essential (the main criterion is the extensiveness of the class it is the object of the institution to benefit) and, in order to be of a public nature, the control need not be, in my opinion, that of some government body. A constitution which provides for those members of the public who are sufficiently interested in the work of the institution to subscribe to its funds and thereby become annual members and as such eligible to vote at the election of the controlling body creates a control which is public in its nature.''

At p. 398 he said:

``To sum up, the sources of the Association's finances are public benevolence, it is controlled by an executive elected upon a quasi -public basis, and its activities, which accord with and fulfil the main objects in the memorandum of association, are of a public benevolent nature.''

31. Applying the above principles to the facts of the present case I am unable to find that the Society is a public benevolent institution within the meaning of sec. 78(1)(a)(ii). I can see nothing in the Deed of 6 November 1973 that would limit its activities to ``the relief of poverty, sickness, destitution or helplessness'' or ``the relief of poverty, distress, suffering or misfortune''. Also, when the actual activities of the Society are looked at, it is difficult to accept that these meet the same test - particularly when there was no evidence concerning the constituent papers of the recipients. In addition the Deed has no provision for the election of officers (cl. 14(k) gives the power to make rules but, as indicated in para. 9, none have been made) and, to the extent public control is relevant, there is not the slightest trace of it to the present date - as also shown in para. 9 the Society's own minutes make it clear that public participation was not sought.

32. Although I have approached the issue on the basis that the mere provision of moneys to other bodies would not cause the Society to fail to be a public benevolent institution, it is fair to mention that I am uncertain whether this is correct. All (to the extent of my research) of the cases relating to what constitutes a public benevolent

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institution deal with ``bodies'' where they directly themselves relieve poverty, etc., rather than be a conduit pipe (as it were) to others who carry out the actual operations. This appears consistent with sec. 78(1)(a) overall in that there is sec. 78(1)(a)(iii) (dealing with public funds established before 23 October 1963) and the concluding portion of sec. 78(1)(a) (dealing with other public funds) which make provision for situations where there is the mere provision of moneys, etc., to others. In Bray's case Jacobs J. at p. 4187, 78 ATC looks to a " consideration of sec. 78(1)(a) as a whole and states:

``The need for such funds, contributions to which would not necessarily be immediately available to any of the named authorities or institutions, could be reconciled with the general intention disclosed in sec. 78(1)(a) that no mere setting aside or appropriation of money or property would be sufficient to qualify for a deduction by providing that only a gift made to a public fund should be deductible. The implicit distinction is between a public fund and a private fund. A private fund as much as a public fund may as a result of the trusts created be irrevocably devoted to the required purposes; but that was not to be sufficient.''

33. If it be proper to look at the matter in the above fashion then (apart from the lack of a relevant ground of objection) the claim in respect of the gift would fail for the same reasons as in Bray's case.

34. Although I have not placed any reliance upon it in reaching my decision I should mention that the Deed provided that the -

``Society shall continue for the maximum period for the time being and from time to time permitted according to the law of Norfolk Island or for twenty (20) years from the death of the survivor of Queen Elizabeth II and her issue living at the date hereof whichever shall be the longer period''

(emphasis inserted).

In answer to an invitation to discuss the effect of the latter period being possibly greater than the law of Norfolk Island allowed counsel for the taxpayer said:

``Well, the legal position probably is that the maximum period permitted provision is probably inoperative and the 20 years from the death of the survivor of the Queen or her issue living is probably the only operative part of that clause. But the significance of it is that it shows, in the contemplation of the founders, that it was to endure.''

Counsel for the Commissioner did not place any reliance on this aspect of the case and, in the circumstances, I do no more than record my uncertainty as to whether or not there is a saving provision to be found in the law of Norfolk Island.

35. For the above reasons I would uphold the Commissioner's decision on the objection and confirm the taxpayer's assessment for the year ended 30 June 1974.