Central Bayside Division of General Practice Ltd v Commissioner of State Revenue

[2005] HCATrans 1042

[2005] HCATrans 1042

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M94 of 2005

B e t w e e n -

CENTRAL BAYSIDE DIVISION OF GENERAL PRACTICE LTD

Applicant

and

COMMISSIONER OF STATE REVENUE

Respondent

Application for special leave to appeal

HEYDON J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 16 DECEMBER 2005, AT 10.12 AM

Copyright in the High Court of Australia

MR B.J. SHAW, QC:   If the Court pleases, I appear with my learned friends, MRS J.J. BATROUNEY, SC and MS L.G. DE FERRARI, for the applicant.  (instructed by Health Legal)

MR I.J. HARDINGHAM, QC:   If the Court pleases, I appear with my learned friends, MR S.G. O’BRYAN, SC and MS R.J. ORR, for the respondent.  (instructed by Solicitor to the Commissioner of State Revenue)

MS M.M. GORDON, SC:   May it please the Court, I appear with my learned friend, MR P. GRAY, for the Commonwealth seeking leave to be heard as amicus in support of the application.  (instructed by Clayton Utz)

HEYDON J:   Yes, thank you.  We think, Mr Hardingham, we would like to hear from you first.  Could I just say this, if special leave were granted no doubt the outcome might well be favourable to your side but the decisions of the courts below seem to have had considerable practical consequences.  There does not seem to be any unanimity in the ultimate reasoning of the members of the courts below.  This Court does not ever seem to have looked at this particular problem.  In those circumstances, there seems to be a strong case for special leave.

MR HARDINGHAM:   I follow what your Honour is saying.  What the respondent would contend, however, is that the decision of the Court of Appeal is accompanied by insufficient doubt to warrant the granting of special leave to appeal.  The starting point is the applicant’s concession, which is to be found in paragraph 3 of its argument in reply, that a government department cannot be characterised as charitable even although the activities which it may pursue would be characterised as charitable if carried out by others.

That proposition follows from Re Cain, a decision of Mr Justice Dean, and the reason why that proposition is so palpably correct, your Honours, is that a government department does not act out of motives of altruism or philanthropy, it acts in the performance of functions prescribed by the State and thereby to advance government policy.  So much was made clear by Mr Justice Chernov at page 55 of the application book.                  In the Hobart Savings Bank Case Justice Dixon referred to charitable purposes as being put into execution:

from motives which are altruistic, benevolent or philanthropic -

In the Barby Case Justice Dixon again, referring to a charitable gift observed that it:

must proceed from altruistic motives or from benevolent or philanthropic motives.

It follows from all that, of course, that if a body acts for profit it can never be characterised as charitable because it is not acting altruistically or philanthropically.  The applicant is not a government department but it will not be acting charitably if it is acting other than pursuant to altruistic or philanthropic motives.  It is clear, we would contend, that the applicant would not be acting with altruistic or philanthropic motives if and to the extent that it could be characterised as acting in the performance of functions prescribed by government and thereby to advance government policy.  It would be acting like a government department or, as two judges of the Court of Appeal described it, as a creature or agent of government. 

Now, your Honours, it was open to the Court of Appeal to conclude that the applicant could be characterised as acting in the performance of functions prescribed by government and thereby to advance government policy.  The best treatment of this is in the judgment of Justice Chernov at pages 63 to 66 of the application book.  Perhaps I can take the court to page 64 of the application book where at line 7 his Honour said:

That this was the result of the change in funding policy is unsurprising, given that funding pursuant to OBF agreements –

outcome based funding agreements –

is made available only for the purposes of enabling divisions to meet aims that have been “vetted” or approved by the Department and which are set out in specific financial, business and strategic plans that are annexed to the funding agreement.  Continued funding by government under such agreements is linked to the satisfactory achievement by the divisions of the objectives stated therein.  Put another way, OBF agreements are executed by the government only if a division’s indicated “outcomes” are “in keeping with the Current Aims of the DGPP.”

The latter is a government introduced document and the acronym stands for Divisions of General Practice Program –

Thus, as Steven Sant, the Division’s Chief Executive Officer, said in his evidence before the Tribunal, in providing block grants to divisions the government stipulates broad “outcome indicators” and tells them, effectively, “you will do a variety of things that will meet these outcomes.”  In short, divisions are funded by government in order to give effect to government policy.

On page 65 at line 4 his Honour said:

Through the OBF agreements (in combination with project‑specific grants), the government exercises effective control over the Division’s operation and activities in a number of ways, importantly, as part of its national health strategy . . . the Division . . . is required to report to it every six months, in a prescribed manner . . . The agreement also contemplates that the Department’s officers will monitor and supervise the operation of the Division and requires it to provide to such officers access to its premises and to permit them to inspect and copy materials pertaining to its operations in relation to the approved budget and business plan.

In paragraph 20 in line 12 his Honour concluded:

Despite the Division’s objects being of public benefit, it is apparent from the material that it carries out its functions in order to discharge the responsibility assumed by government to support and ensure the provision of efficient, integrated, quality local health care.

Those findings are not disputed by the applicant and it follows inexorably, we would say, that from those findings that the applicant is indeed acting as the creature or agent of government and, accordingly, should be treated as was the Department of State in Re Cain as having no charitable status. 

Those conclusions, your Honours, are supported by the trilogy of Full Court of the Federal Court cases to which we refer in our summary of argument.  It is important to note in relation to those cases that they were, as my learned friend has pointed out in his reply, statutory bodies but, nevertheless, they were not Departments of State.  All three cases involved the composite expression “public benevolent institution”.  It is clear, your Honours, that public benevolence is a charitable concept.  Public benevolent institutions form a subset of charitable institutions, the purposes of which are the relief of poverty and distress amongst the public and so much was made clear by Justice Dixon in Perpetual Trustees v Federal Commissioner of Taxation where he confirmed that the concept of public benevolence does not extend beyond charity.

Although the activities of each of the bodies in question in the three Federal Court cases, although the activities of each body relieved poverty and distress none of the bodies was deemed a public benevolent institution.  Each lacked altruistic motivation.  Each acted to carry out functions prescribed by government and thereby to advance government policy.  They were in much the same position as the applicant in this case.  The activities of a public benevolent institution, like the activities of any charitable institution must be the product of altruistic or philanthropic motivation.  Such motivation will be lacking if the body in question can be characterised as acting to carry out the functions prescribed by government and thereby to advance government policies.

In Metropolitan Fire Brigades Board, which is case No 5 in the respondent’s folder of authorities, the Full Court of the Federal Court observed at page 281 at the top of the page that:

the appellant’s status as a body constituted, funded and controlled by government and performing functions on behalf of government.  The notion that such a body fulfils the description “public benevolent institution” seems a novel one.

In the Mines Rescue Board Case which is case No 6 in the respondent’0s folder of authority the court confirmed the decision of the primary judge, Mr Justice Hely, at page 95 - paragraph 17 there is an indented passage there, a quotation, about halfway down it after a reference to the Metropolitan Fire Brigades Case, Justice Hely says:

Here the applicant is a governmental body, under the control of the Minister, brought into existence to give effect to government policy –

That characterisation was upheld by the Full Court.  Finally, in the Ambulance Services Case which is case No 1 in the respondent’s folder of authorities, the court upheld the finding of the primary judge, Mr Justice Allsop.  This is at page 488.  At paragraph 30 the Court will see that:

his Honour further found, the subject ambulance services involve the relief of distress and suffering, and are carried out caringly –

but in paragraph 31 it is said:

Nevertheless the primary judge expressed the conclusion that in the light of the Fire Brigade and Mines Rescue decisions of Full Courts, the degree of government character or nature which he had identified rendered it difficult to conclude that the Ambulance Service was a public benevolent institution . . . That was because the relief of suffering and distress was achieved in each case by an entity carrying out government policy, being an entity controlled by and representing the State.  His Honour further found, “not without reluctance”, in the light of those two decisions of the Full Federal Court, “that the relief of distress and suffering which the [Ambulance Service’s] activities bring about is not through benevolence, but through the successful discharge or execution of government policy”.

Your Honours, we say that those three decisions are directly in point but having regard to the findings, starting with the decision in Re Cain, going to the findings of Justice Chernov in relation to the activities of the applicant and looking at those three Full Federal Court decisions it is clearly beyond doubt that the decision of the majority in the Court of Appeal was correct and therefore it is our contention, your Honours, that the decision of the Court of Appeal is accompanied by insufficient doubt to warrant the granting of special leave to appeal in this case.

HEYDON J:   Yes, thank you, Mr Hardingham.  We need not trouble you, Mr Shaw or Ms Gordon.  There will be a grant of special leave in the matter.  The case should finish within one day, should it not, Mr Shaw?

MR SHAW:   Yes, I think it should, your Honour.

HEYDON J:   I think it would be prudent if counsel agreed on a division of time amongst themselves allowing for a modest period for Ms Gordon.  Ms Gordon, your application to participate as amicus curiae will have to be made to the Full Court.

MS GORDON:   Yes, your Honour.

HEYDON J:   If you make both the application and, as it were, the substantive arguments in writing in the ordinary way that will be the best course.

MS GORDON:   If the Court pleases.

HEYDON J:   The Court will adjourn to reconstitute.

AT 10.27 AM THE MATTER WAS CONCLUDED