Racing NSW v Chief Commissioner of State Revenue

[2019] NSWCATAD 172

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	Racing NSW v Chief Commissioner of State Revenue [2019] NSWCATAD 172
Hearing dates:	36 June 2019
Date of orders:	23 August 2019
Decision date:	23 August 2019
Jurisdiction:	Administrative and Equal Opportunity Division
Before:	J S Currie, Senior Member
Decision:	1. The Applicant is permitted to make this application for review notwithstanding the expiry of the period prescribed by s99 (1) of the Taxation Administration Act 1996.  2. The Chief Commissioner’s decision under review is affirmed.
Catchwords:	REVENUE - Stamp Duty – Exemptions - agreement for sale of dutiable property to exempt charitable or benevolent body - Duties Act 1997 (NSW), ss 275, 275A - whether a body created by statute to regulate and control thoroughbred horse racing fell within the exemptions, of itself or as trustee of a trust for retired racehorses - nature of a charitable body - meaning of benevolent - Chief Commissioner decided to disallow objection to decision not to allow the exemption - Decision affirmed.
Legislation Cited:	Administrative Decisions Review Act 1997 (NSW). Civil and Administrative Tribunal Act (No 2) 2013 (NSW) Duties Act 1997 (NSW) Taxation Administration Act 1996 (NSW) Thoroughbred Racing Act 1996 (NSW)
Cases Cited:	B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187. Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 Drake v Minister of Immigration and Ethnic Affairs (1970) 2 ALD 60 Income Tax Special Purposes Commissioners v Pemsel [1891] AC 531 Joyce v Ashfield Municipal Council (1959) 4 LGRA 195 Re Chapman (Unreported; High Court of New Zealand, 17 October 1989, Greig J.) Re Hoey (1994) 2 Qd R 51 Strathalbyn Show Jumping Club Inc v Mayes (2001) 79 SASR 54 Tasmanian Electronic Commerce Centre Pty Ltd v Commissioner of Taxation [2005] FCA 439 The Salvation Army (NSW) Property Fund v Chief Commissioner of State Revenue [2018] NSWSC 128
Texts Cited:	Dal Pont, Prof G: “Law of Charity” Second Edition, 2017 LexisNexis Butterworths.
Category:	Principal judgment
Parties:	Racing NSW (Applicant) Chief Commissioner of State Revenue (Respondent
Representation:	Counsel: C. Peadon (Applicant) A. Gerard (Respondent)   Solicitors: Racing NSW (Applicant) Crown Solicitor (Respondent)
File Number(s):	2018/00257988
Publication restriction:	Nil

REASONS for decision

What is this matter about?

1. Racing New South Wales (“Racing NSW”) was established under the Thoroughbred Racing Act 1996(NSW) to be the regulating body for thoroughbred horse racing in New South Wales.

2. Under that Act the functions of Racing NSW include all the functions of the principal club for New South Wales and its committee under the Australian Rules of Racing, the control, supervision and regulation of horseracing in the State, the initiation, development and implementation of policies conducive to the promotion, strategic development and welfare of the horse racing industry and the protection of the public interest as it relates to that industry (section 13).

3. Under that Act Racing NSW also has power to do all things necessary or convenient to be done in connection with the exercise of its functions and to do things incidental or conducive to the exercise of its powers and the performance of its functions (ss 14 (1) and 14 (2) (w)).

4. It is accepted that the references in the Act to the “principal club for New South Wales” are to the Australian Jockey Club Limited (“the AJC”). For convenience of reference, the provisions of the Thoroughbred Racing Act relevant to this case are set out in the Appendix to these Reasons.

5. By a Trust Deed which was undated but which was apparently intended to have effect from 1 January 2011, Ken Arthur James Murray as Settlor, the AJC as Appointer and 4 named persons as Trustees established the Thoroughbred Horse Rehabilitation Trust. By a deed made in October 2011 the AJC (and Sydney Turf Club with which it had merged) retired as Appointer and Racing NSW became the Appointer. That trust has apparently been renamed “The Racing NSW Equine Welfare Trust” and appears to be referred to also as “the Equine Welfare Fund”. In these Reasons my references to “the Trust” are to the Thoroughbred Horse Rehabilitation Trust, the Racing NSW Equine Welfare Fund Trust and the Equine Welfare Fund.

6. It seems to be accepted that the current principal activities of the Trust are those approved in the Trustees’ report for the year ended 31 July 2017; namely to provide money, property and services for the care and rehabilitation of thoroughbred horses which have ceased to be competitive or have ceased to race and have been mistreated or are without owners or are at risk of being killed or mistreated.

7. By separate agreements for sale dated 22 June 2017 (“the Capertee Agreements”), Racing NSW agreed to purchase two substantial rural properties near Capertee NSW (“the Capertee Land”) for a total consideration of $5.1 million. It seems to be uncontested that if no exemption is available under the Duties Act 1997 (NSW) (“the Duties Act”), then the Capertee Agreements are liable for ad valorem stamp duty of $226,010 and that the party primarily liable for that duty is Racing NSW as purchaser..

8. On or about 19 October 2017 Racing NSW lodged with the Office of State Revenue an application for exemption from stamp duty for the Capertee Agreements, based on s275(3) (b) and s275A of the Duties Act. For convenience of reference the text of sections 275 and 275A is set out in the Appendix to these Reasons. In general terms:

1. section 275 establishes a regime exempting certain instruments from stamp duty, including an agreement for sale or transfer of land to an exempt charitable or benevolent body (including a trustee for such a body) and a declaration of trust over dutiable property which is held on trust or to be held on trust for such a body; and

2. section 275A establishes a regime for partial and proportional exemption from duty for a dutiable transaction by which an exempt charitable or benevolent body acquires land or an interest in land, where the land is used or to be used by a charitable or benevolent body partly for an exempt purpose.

9. It appears from Racing NSW’s application for exemption from duty on the Capertee Agreements that it claimed the exemption on behalf of the Trust, on the basis that the objects of the Trust included the promotion of education, relief for those suffering from disability and assisting persons with special needs. The primary objects of the Trust were stated to be:

“Public charitable purpose being care and rehabilitation of retired thoroughbred horses.”

10. On 20 December 2017 the Chief Commissioner of State Revenue (“the Chief Commissioner”) disallowed the exemption application. On 20 February 2018 Racing NSW objected to that disallowance. By letter dated 26 April 2018 the Chief Commissioner disallowed that objection.

11. On 22 August 2018 the Tribunal received from Racing NSW an application which sought administrative review of the Chief Commissioner’s disallowance of Racing NSW’s objection to the assessment of duty.

12. My task was to conduct that administrative review and to determine whether the Chief Commissioner’s decision to disallow the objection should be affirmed, varied or set aside in the manner permitted by ss 63 (3) and 65 (1) of the Administrative Decisions Review Act 1997 (NSW) (“the ADJR Act”).

The Tribunal’s role in conducting a review under the ADJR Act

13. The role of the Tribunal in determining an application for administrative review under the ADJR Act is:

“… to decide what the correct and preferable decision is having regard to the material then before it, including the following:

(a) any relevant factual material,

(b) any applicable written or unwritten law.”: s 63(1).

14. For the purpose of making its decision, the Tribunal may exercise all of the functions that are conferred or imposed by any relevant legislation on the administrator who made the decision: s 63(2)

15. The effect of these two subsections is often described as requiring the Tribunal to “stand in the shoes” of the maker of the decision under review. As is the case with many such abbreviated statements of principle, that is not entirely accurate. The Tribunal is required to decide what the correct and preferable decision is having regard to the material that is before it at the hearing. That may of course include material which was not available at the time of the making of the decision. The Tribunal’s decision must be made “as things stand” at the hearing, not as they stood when the administrator made his or her or its determination. It is clear that the Tribunal may take into account material that was not before the primary decision-maker: Drake v Minister of Immigration and Ethnic Affairs (1970) 2 ALD 60 at 77.

The onus of proof

16. Under s 100 (3) of Taxation Administration Act 1996 (NSW) (“the TA Act”), in any review by this Tribunal the applicant has the onus of proving its case and that requires the applicant to prove all matters necessary to enable the Tribunal to answer the statutory question in its favour. The requisite standard of proof is the balance of probabilities: Cornish Investments Pty Limited v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 at [31] and B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187.

Preliminary issue: Application out of time

17. Racing NSW’s application for review was received by the Tribunal on 22 August 2018, which is more than 60 days after the date of issue of the Chief Commissioner’s determination of Racing NSW’s objection, being 26 April 2018. Subsection 99 (1) of the TA Act requires an application for review of a determination by the Chief Commissioner of an objection to be made not later than 60 days after the issue of the notice of the Chief Commissioner’s determination, but also permits the Tribunal to allow an application for review made outside that 60 day period.

18. I understood the Chief Commissioner not to press the issue of Racing NSW’s non-compliance with this time limit. I could see no prejudice to the Chief Commissioner in allowing the review to proceed notwithstanding that non-compliance and accordingly I ordered that Racing NSW be allowed to apply for the review notwithstanding its breach of s 99 (1).

Racing NSW’s case

19. Racing NSW’s case was eventually based on 5 separate grounds. These are summarised below.

20. Initially Racing NSW’s case was put on two grounds set out in its Outline Submissions dated 1 November 2018. It contended that it should be allowed a complete or alternatively a partial exemption from duty because:

1. it is deemed by operation of s 275(3)(c) of the Duties Act to be an “exempt charitable or benevolent body” because it had entered the Capertee Agreements in its capacity as trustee for the Trust and the Trust was a “body corporate, society, institution or other organisation” referred to in paragraph 275(3)(b), because the Trust is of a charitable or benevolent nature and the dutiable transactions (the Capertee Agreements) were for purposes approved by the Chief Commissioner in accordance with guidelines approved by the Treasurer. For convenience of reference I shall refer to this ground as “the s 275 (3) (c) Ground” or “Ground 1”).

2. Alternatively, the Trust was an “exempt charitable or benevolent body” within the meaning of s 275A (7) and, by operation of section 275A the duty should be reduced by the portion of the dutiable value of the Capertee Land that is referable to the portion of that land which is used for an exempt purpose (that is, used for purposes approved by the Chief Commissioner in accordance with guidelines approved by the Treasurer). For convenience of reference I shall refer to this ground as “the Trust s 275A Ground” or “Ground 2”.

21. Subsequently, in its written submissions lodged on 9 April 2019, Racing NSW advanced two further grounds. Each was pleaded as an alternative to the two grounds described above. The new grounds were as follows:

1. Racing NSW itself is an “exempt charitable or benevolent body” within s 275(1)(b), because it is a body corporate of a charitable or benevolent nature and the Capertee Agreements were for purposes approved by the Chief Commissioner in accordance with guidelines approved by the Treasurer. For convenience of reference I shall refer to this ground as “the Racing NSW s 275 (3) (b) Ground” or “Ground 3”.

2. In the alternative, Racing NSW itself is a “charitable or benevolent body” within the meaning of s 275A (7) and, by operation of section 275A duty should be reduced by the portion of the dutiable value of the Capertee Land that is referable to the portion of that land which is used for an exempt purpose. For convenience of reference I shall refer to this ground as “the Racing NSW s 275A Ground” or “Ground 4”.

22. Finally, in the course of legal argument at the hearing Racing NSW advanced a further alternative ground, to the following effect:

1. (5) Racing NSW itself is an “exempt charitable or benevolent body” within the meaning of s275 (3)(a) of the Duties Act. That is, it is a body corporate for the time being approved by the Chief Commissioner for the purposes of that paragraph whose resources are, in accordance with its rules or objects, used wholly or predominantly for the relief of poverty in Australia or the promotion of education in Australia. For convenience of reference I shall refer to this ground as “the s 275 (3) (a) Ground” or “Ground 5”).

The Chief Commissioner’s case

23. The Chief Commissioner’s case is that all 5 grounds advanced by the Racing NSW described above must fail, on the following bases. (For convenience of reference I shall address the grounds using the same sub-paragraph numbering as in [20] to [22] above.)

1. In relation to Ground 1, the s275 (3) (c) Ground, Racing NSW did not enter into the Capertee Agreements as a trustee and Racing NSW is not the trustee of the Trust.

2. In relation to the Ground 2, the Trust s275 A Ground, the Trust did not acquire any land or any interest in land by the Capertee Agreements.

3. In relation to Ground 3, the Racing NSW s275 (3) (b) Ground, Racing NSW is not of a charitable or benevolent nature. I understood the Chief Commissioner to dispute that ground also on the basis that Racing NSW does not satisfy the requirement of sub paragraph (b)(i) of the 275 (3) because the dutiable transactions (the Capertee Agreements) were not entered into entirely for such purposes as the Chief Commissioner may approved in accordance with guidelines approved by the Treasurer; see: The Salvation Army (NSW) Property Fund v Chief Commissioner of State Revenue [2018] NSWSC 128 (“The Salvation Army Case”).

4. Ground 4, the Racing NSW s275 A Ground, was challenged on the same basis as Ground 3 above.

5. In relation to Ground 5, Racing NSW is not an “exempt charitable or benevolent body” within s275 (3) (a), because its resources are not used wholly or predominantly for the relief of poverty in Australia or the promotion of education in Australia.

The “guiding principle” and identification of the real issues

24. Under section 36 of the Civil and Administrative Tribunal Act 2013 (“the NCAT Act”), I am required to give effect to a “guiding principle”, which essentially is that I should facilitate the just, quick and cheap resolution of the real issues in the proceedings. Under that section each of the parties and their respective legal representatives must assist me to do that.

25. In order to facilitate the resolution of the real issues, it is obviously necessary for me to identify the real issues.

26. It is clear that each of Grounds 3 and 4 is dependent upon Racing NSW being a body corporate of a charitable or benevolent nature. If it is not, then:

1. the exemption under s 275(3)(b) will not be available to it;

2. the partial exemption under s 275A will also not be available to it;

The real issues

27. On that basis, and in light of the parties’ respective presentation of their cases and the components of the relevant statutory provisions, I identified the real issues in the order in which they can most effectively be determined, as follows:

1. Is Racing NSW a body corporate “of a charitable or benevolent nature”, so as to attract the opening words of paragraph (b) of s 275 (3) as well as s275A (7)? The issue is stated that way because it was accepted that Racing NSW does not have as its primary object the promotion of the interests of Aborigines for the purposes of the definition of “charitable or benevolent body” in s275A (7). If Racing NSW is not such a body corporate then Grounds (3) and (4) must fail.

2. Were the Capertee Agreements entered for a purpose approved by the Chief Commissioner in accordance with guidelines approved by the Treasurer, so as to attract sub paragraph (i) of s 275 (3)(b)? If both issues (1) and (2) are concluded in favour of Racing NSW, then the Capertee Agreements are exempt from duty, by operation of s 275. If either of those issues is resolved contrary to Racing NSW then ground (3) must fail.

3. Was Racing NSW acting in the capacity of trustee for the Trust in relation to the Capertee Agreements? If it was not, then Ground (1) must fail.

4. Is the Trust “an exempt charitable or benevolent body” within s 275 (3) (b) so as to attract the exemption?

5. Is either Racing NSW or the Trust an “exempt charitable or benevolent body” within the meaning of s 275(3) (a)? This requires that its resources be used, in accordance with its rules or objects, wholly or predominantly for the relief of poverty in Australia or for the promotion of education in Australia. If Racing NSW is not such a body then Ground (5) must fail.

6. Is s275A attracted, so that the amount of duty chargeable by reason of the Capertee Agreements should be reduced? If it is not, then Grounds (2) and (4) must fail.

1. Is Racing NSW a body corporate “of a charitable or benevolent nature”?

Initial observations

28. Sections 275 and 275A create a regime for complete exemption (by operation of s 275) or partial exemption (by operation of s275A) from duty otherwise chargeable under the Duties Act, and it is clear from the substantive provisions commencing at sub-section (3) of s275 that the exemption regime which is created is limited by reference to the nature of the entity which would otherwise be liable for duty. (I accept of course that s275 (1) defines the type of instrument to which the exemption or partial exemption might apply).

29. On a plain reading of ss 275 and 275A, the exemption regime which they establish is not one whose availability in relation to agreements for the sale or transfer of land is predicated on the charitable or benevolent nature of the transaction itself. Nor is it based directly on a charitable or benevolent intention of the parties or either of them or on the intentions or expectations of the transferee or purchaser. It is rather a regime based on the nature or character of the purchaser.

30. In particular, unless the party liable to duty can establish that it is an “exempt charitable or benevolent body” within the meaning in s275 (3) (which includes a person acting in his, her or its capacity as trustee for an exempt charitable or benevolent body) the exemption regime so created will not be available.

Racing NSW’s case as to its “charitable or benevolent” nature”

31. Racing NSW’s case on this issue appeared to have been made in two distinct stages.

32. Initially, for example in its first set of written submissions, it contended that it was a body of a body of a charitable nature on the basis of the work of the Trust, being principally functions relating to retired horse rehabilitation and the use of the Capertee Land to enable disadvantaged persons and armed services veterans to work with horses in retraining. Indeed the Tribunal was invited to consider the acts and intentions of Racing NSW and the Trust collectively, in order to decide whether Racing NSW was a body of a charitable or benevolent nature and it was contended that:

“Racing NSW is for all intents and purposes acting as trustee for (the Trust) thereby satisfying the requirements of sub paragraph 275 (3) (c).” (Submissions, 1 November 2018 at [25c]).

33. It was also contended that the use of the Capertee Land by the Trust promoted education in the form of reskilling people to work with horses and assisted disabled people through a program of collaboration between the Trust, Riding for the Disabled and RSL LifeCare.

34. In the second stage, commencing with Racing NSW’s subsequent written submissions and at the hearing, the basis on which it asserted its charitable or benevolent nature was expanded. I was asked to consider its activities as a whole (that is, not restricted to those activities undertaken in connection with the Trust).

35. Racing NSW’s initial written submissions dated 1 November 2018 had confirmed that it was a statutory authority, constituted under the Thoroughbred Racing Act, responsible for the control, supervision and regulation of thoroughbred racing in New South Wales. However, in subsequent written submissions, for example those dated 8 April 2019 and 28 May 2019, it relied on the expenditure reports and associated financial information disclosed in its Annual Reports for 2017 and 2018 (which formed annexures to the affidavit of its Chief Operating Officer, Mr Hinton) and contended that they revealed the following matters significant to its claim to be a body of a charitable or benevolent nature.

1. Substantial funds generated through its activities had been devoted to ensuring the safety and welfare of participants in the racing industry and associated grants were used by Racing NSW in charitable and benevolent activities including the education of industry participants, support for current and former jockeys who were in financial difficulty and the establishment of related charitable funds, including the Trust.

2. It had dedicated significant financial resources to making sporting facilities available for public use (including those referred to at (3) below). It was asserted that this was a charitable object on the authority of the decision of Re Chapman (Unreported, High Court of New Zealand, 17 October 1989, Greig J.) and Prof GE Dal Pont, Law of Charity (second edition 2017) at [11.18]-[11.25] and the authorities cited there.

3. It was asserted that Racing NSW had raised a provision in 2012 of just over $98 million to be utilised in making capital improvements to thoroughbred racing club facilities and that a substantial proportion of those monies had been advanced by way of interest free interminable loan to the racing clubs and that those loans are an asset of Racing NSW. This was explained in Note 31 to the Accounts in the 2018 Annual Report and for convenience of reference I will refer to as “the Race Fields Funding Loans”.

4. Furthermore, as explained at Note 32 to the 2018 Accounts, on 1 July 1998 the operations of the Racecourse Redevelopment Fund were transferred to Racing NSW, including the right to interminable loans from the AJC of over $43 million and from the former Sydney Turf Club for over $53.6 million. These interminable loans are repayable only on the sale of the properties which have benefited from the expenditure or in the event of the Company seeking to perform its current operations and on that basis these loans were treated for accounting purposes on the basis that they will never be recovered by Racing NSW. The arrangements referred to at (3) and (4) were said to demonstrate Racing NSW’s commitment of over $150 million in assets by way of financial accommodation for the improvement of facilities for public use.

36. Racing NSW’s case included contentions that as a result of some or all of the above initiatives:

“(Racing NSW) is not a body that solely or primarily promotes a sport… It is a not-for-profit “organisation established by statute for charitable and benevolent public purposes” (Supplementary Submissions, 8 April 2019 at [3a]); and

“..in the context of Racing NSW’s objects and utilisation of its assets (the funding outlined at [32] (1) to (5) above) compels the conclusion that its principal activity is a charitable or benevolent one.” (Reply Submissions, 28 May 2019 at [4].

The Chief Commissioner’s case on this issue

37. In the substantial written and oral submissions made on behalf of the Chief Commissioner it was contended that Racing NSW is not a charitable or benevolent body because that phrase, being undefined in the relevant legislation, must be construed as a compendious one which extends only to bodies corporate, societies, institutions and other organisations which are charity in the legal technical sense; that is, that their sole or dominant purpose is charitable in the technical legal sense.

38. As an alternative contention the Chief Commissioner submitted that a body will only be “of a charitable or benevolent nature” the purpose of the relevant provisions if on a proper characterisation of its activities as a whole it can be described as “charitable or benevolent” and that requires a careful examination of 3 things; namely the body’s constituent documents, its activities and its history. The Chief Commissioner relied upon Tasmanian Electronic Commerce Centre Pty Ltd v Commissioner of Taxation [2005] FCA 439 at [43] (“the Tasmanian Electronic Commerce case”) and asserted that on neither basis is Racing NSW a body corporate that could be characterised as one of a “charitable or benevolent nature” because neither its constituent documents nor its history support such a conclusion.

39. The Chief Commissioner contended that in reality Racing NSW is the peak administration body of a commercial sport whose main object in nature is to regulate and administer the sport industry thoroughbred racing and to ensure that the thoroughbred racing industry in New South Wales achieves revenue growth, profitability and greater returns to industry participants, to ensure and promote the integrity of the sport and to maximise betting turnover. The Chief Commissioner contended that none of these elements is remotely charitable

Is Racing NSW a body of “charitable or benevolent nature”?

40. The phrase “charitable or benevolent” is not defined for the purposes of the Duties Act and it is therefore necessary to give consideration to the way in which the phrase has been construed in the authorities.

Is it necessary for the body to be a charity?

41. The Chief Commissioner’s written submissions (first submissions, 08.05 at [70].19,) contend that a body will only be charitable benevolent if it is a charity; that is, if its sole or dominant purpose is charitable and the submissions cite Joyce v Ashfield Municipal Council (1959) 4 LGRA 195 at 205 where the Full Court of the NSW Supreme Court confirmed that strictly the only establishment of a charity which the law recognises is a trust. However the phrase in the Duties Act under consideration is a broader one: “charitable or benevolent nature” and I was not referred to any authorities which support the existence of a legislative intention to equate that phrase with “charity” in the strict legal sense.

42. To treat the phrase any differently, so that it requires the body under consideration itself to be a charity, appears to me to be at odds with the use of the phrase within the context of Part 2 of Chapter 11 of the Act (“Other Exemptions”), as a whole. If the relevant exemptions were intended to be restricted to registered charities and other charities recognised as such at law, then the legislation could have made that clear. It does not do so.

Must the body’s main object or real nature be charitable?

43. I understood the Chief Commissioner to contend in the alternative that for a body to be a charitable one within the meaning of the phrase under consideration, its main object or real nature must be charitable in the sense discussed in the Tasmanian Electronic Commerce Case, particularly at [43] of that case. That seems to be authority for the proposition that a body may be considered charitable if, as a proper characterisation of its activities as a whole, its real nature can be described as charitable or benevolent as distinct from its real nature being something else. I found that contention persuasive.

The body’s objects, its constituent documents, activities and history

44. In the Tasmanian Electronic Commerce Case the principal matter for consideration was whether the Electronic Commerce Centre was a “charitable institution” the meaning of the relevant item under s 50-5 of the Income Tax Assessment Act 1997 (Cth). It was said that in order to determine that question in the affirmative

“[41] The main object of the institution must be shown to be charitable. There may be objects that are incidental or ancillary to the main object, but object that is not charitable, and not incidental or ancillary, or disqualify the institution has a charity. Once the main object is established, it must be shown to be beneficial to the community or to a part of the community and not merely to individuals, although the pursuit of the main object may benefit them indirectly…

[42] A charitable institution may make a profit…

[43] The material facts and circumstances that should be examined to characterise the main purpose of the body in question include its constitution, its activities, its history and its control.”

The body’s prevalent or main character

45. The necessity for such an analysis is supported by the approach adopted by the High Court of Australia in Royal Australian College of Surgeons v The Federal Commissioner of Taxation (1943) 68 CLR 436 (“the Surgeons’ Case”), where it was observed by Latham CJ at p444, in the particular context of considering whether the relevant College was a scientific institution:, but which I accept as being apposite to the issue under consideration here, that:

“… The question- difficult or easy to answer- must always be- what is the true nature and the objects and activities of the particular (body)? If these objects and other activities are of a mixed character… then the question must be decided according to the prevalent or main character. Unless the promotion of surgical science is the main or substantial or primary object of the College, it cannot be described as a scientific institution.”

46. Racing NSW’s case as developed in its later written submissions and in the course of the hearing laid particular emphasis on its current activities and it is in that context that it relied on the substantial financial outlays and commitments summarised at [35] above. Only passing reference was made to the corporation’s objects set out in the Act which incorporated it or as to which object or activity could be regarded as prevalent or main or as to which its constituent documents might have on the issue of whether it is indeed a body of a charitable or benevolent nature; other than the broad assertion as to the charitable character of its activities set out at [32] above.

Racing NSW’s objects and main purpose under its Act

47. It seems to me that when the focus of this analysis is a statutory corporation it is particularly important to give weight to a proper analysis of the body’s constituent documents, especially as to the way in which they set out the corporation’s main objects. As is the case with many statutory corporations, Racing NSW has no separate constitution and regard must therefore be principally placed on the Act which incorporated it, that is the Thoroughbred Racing Act 1996.

48. On any reasonable analysis of that Act, it simply does not reflect an intention by Parliament that Racing NSW should be a body whose functions or activities are to be primarily focused towards charitable or benevolent ends.

Racing NSW’s activities: the Race Fields Funding Loans

49. In considering this issue I have given substantial attention to the financial documentation and reports to which I was referred and to the other documentary material, mainly adduced by Racing NSW, as to its current activities.

50. There can be no doubt that Racing NSW does engage in activities which can reasonably be described as being of a charitable or benevolent nature. I accept that it devotes substantial sums to the promotion of the racing industry and to the provision and improvement of sporting facilities which can be used by the public and that, through the Trust, it provides facilities such as those in allowing disabled people, children and armed services veterans to work with retired horses (all of which in my view could reasonably be described as activities for the public benefit and as charitable).

51. There can also be little doubt that by way of the Race Fields Funding Loans Racing NSW has made what, if measured in dollar terms alone, is a substantial capital development program over some time for the improvement and upgrading of racing and training infrastructure and other racing club facilities.

52. I understood Counsel for Racing NSW to contend that the existence of the Race Fields Funding Loans was a principal illustration of Racing NSW’s charitable nature in that by doing so it had “dedicated significant financial resources (available) to the charitable object of making available facilities for public use” (Submissions 28 May 2019 at [4]). That contention was based on the authority of the New Zealand case of Re Chapman (cited at [30] (2) above and Prof GE Dal Pont, Law of Charity (second edition 2017) at [11.18]-[11.25] and the authorities cited there.

53. However:

1. Re-Chapman is clearly authority only for the proposition that in particular circumstances; in that case, the creation by Will of a trust for providing a new grandstand at a ground in Napier at which representative Rugby football matches would be played (an activity which, on contemporary accounts, is a reasonably prevalent occurrence in New Zealand), a Court will recognise such a trust or gift as charitable. But the Court’s decision there is one as to the nature of a particular gift or trust. It is not a decision as to the charitable or other nature or character of the donor. It is not authority for the proposition that a body which provides or facilitates the availability of sporting facilities for public use will be regarded as a charitable body.

2. I view the decision of the Supreme Court of South Australia in Strathalbyn Show Jumping Club Inc v Mayes (2001) 79 SASR 54 at 88 (3) in the same light. That is authority for the proposition that:

“A trust for the establishment of a sports ground or recreational facilities will be charitable, provided that it is for the used by the community at large or is of general public utility.”

3. As with Re Chapman, that was a case in which the central issue was whether a trust was a charitable one. In this case the trust was one of particular land and buildings for use as a polo ground, but subject to that use, also as a recreational ground, a showground or for the purposes of any sports or games. The Court held that on a proper construction of the trust intention was that the land be used solely for polo and on that basis it was not a charitable trust under any of the 4 heads of charity identified in Income Tax Special Purposes Commissioners v Pemsel [1891] AC 531 (“Pemsel”), namely trusts for the relief of poverty, for the advancement of education, for the advancement of religion and for other purposes beneficial to the community. (The “other purposes” element is often referred to in relevant cases and texts as “ the fourth head of Pemsel”). Again the decision was one as to the nature of the trust; not as to the charitable or other nature or character of the settlor or other originator of the trust.

4. The case of Re Hoey (1994) 2 Qd R 51 at 510.20, 512.53 and 513.6, was relied upon by the Chief Commissioner as authority for the proposition that a gift or trust (which the Chief Commissioner says would extend to repayable loans such as the Race Fields Funding Loans) which is made for the purpose of conducting horseracing cannot be charitable according to ordinary concepts including those discussed in Pemsel. I find that broad proposition difficult to accept, particularly if it is extended to the Race Fields Funding Loans and I agree with Counsel for Racing NSW that the decision does not support the proposition that financial accommodation for improving land and facilities for the better use and enjoyment by the public of horseracing can never be a charitable object. Nevertheless, again the decision is not one as to the charitable nature or character of any particular body. It is a decision as to the nature of the particular gift or trust, not as to the characteristics of the maker of the gift or the creator of the trust

5. Similarly, the passages cited by Counsel for Racing NSW from Prof Dal Pont’s leading text on the Law of Charities, as noted at [47], concern the question of whether certain objects (for example the direction under a trust or gift of a donation or otherwise of funds for the improvement or preservation of a locality, monuments, or land all facilities for public use) can be regarded as charitable objects.

Conclusions on this issue

54. I have concluded that Racing NSW is not a body of a charitable or benevolent nature for the following reasons.

Objects and prevalent or main character

55. Racing NSW is a statutory body corporate. It is incorporated under and its objects are stated in the Thoroughbred Racing Act. Its functions and powers are set out respectively in sections 13 and 14 of that Act and none of the them can be considered charitable, with the possible exception of the function to initiate, develop and implement policies considered conducive to (amongst other things) the welfare of the horseracing industry and the protection of the public interest as it relates to the horseracing industry. None of the stated powers of the body in section 14 appeared to be directed to charitable objects or functions.

56. Even on a generous view then, Racing NSW’s objects could only be regarded as “of a mixed character” in the sense applied in the Surgeons’ Case as described in more detail at [45] above and on the basis of that decision and in light of the other decisions discussed above, I should enquire as to Racing NSW’s prevalent or main character.

Prevalent or main character: Current activities

57. In doing that, I gave the most substantial weight to the detailed description of Racing NSW’s activities in its own documentary evidence, as supplemented by the oral testimony of its Chief Operating Officer, Mr Hinton. The most relevant documents in this regard were its Annual Reports and Accounts for 2017 and 2018. My detailed review of those documents leads me to conclude that its prevalent or main character is that of the statutory body charged with conducting and regulating the sport (often called the “industry”) of thoroughbred horse racing in New South Wales, the growth and protection of that industry and the maximisation of revenue from, and the general conduct of, that industry.

58. In reaching that view I considered the Annual Reports as a whole, but I found the Chairman’s and Chief Executive’s reports in the 2018 Annual Report to be most illustrative and relevant.

59. The Chairman’s report, which of course is a report to the Minister for Racing, consists of an account of major developments in the following areas, with each being given approximately equal prominence:

1. improvement of the financial well-being of the “thousands of participants” in the industry, with particular emphasis on horse owners;

2. increases in prizemoney;

3. protection of the integrity of the industry;

4. the national and international profile of the industry in NSW achieved through major events, particularly through the inaugural running of “The Everest”;

5. the promotion and support of provincial and country Championships;

6. equine welfare, including through the participation of the Capertee Land;

7. commencement of development of a new strategic plan, including consultation with race clubs and participant groups.

60. It will be seen that the only sections which can reasonably be regarded as having anything to do with what might be regarded as charitable purposes (within any of the heads in the Pemsel Case, but particularly the fourth head) are those in (6) and potentially (5) and (7) above.

61. The Report of the Chief Executive is a substantial and detailed report of some 8 double-column pages. It commences with a brief description of what are described as the highlights of the 2017/18 year. These are concerned with returns to owners, increases in prizemoney, the inaugural running of “The Everest” the development of other events including “the Kosciuszko” and the implementation of a Point of Consumption Tax which is estimated to generate an additional $29 million for the industry.

62. There is some account of the Equine Welfare Program and of capital development, but read together they comprise only approximately one and a half of the 8 columns in the report. The description of them does not reflect that any charitable purpose for which they are conducted is a principal one of Racing NSW or that charitable activities are its prevalent or main activity.

The Trust, the Race Field Loans and capital expenditure on facilities

63. On the basis of the analysis above and a consideration of all the evidence submitted by Racing NSW and the submissions of both parties, I concluded that:

1. activities associated with the Trust do not constitute or reflect the main or prevalent activity of Racing NSW;

2. the Race Fields Funding Loans, whether or not they reflect any charitable intention or at least in some instances have an outcome that may be regarded as one based on a charitable or benevolent intentions, are not such as to constitute or reflect a dominant charitable purpose to the conduct of the affairs of Racing NSW or that charitable activities are its main or prevalent activities; and

3. a proper consideration of the Thoroughbred Racing Act (as the constituent document of Racing NSW) and of Racing NSW’s activities leads to the conclusion that its prevalent or main character is not charitable, but is rather that concerned with the administration, promotion and regulation of thoroughbred horseracing in New South Wales.

“Benevolent”

64. There were no submissions as to the meaning of “benevolent” within the relevant phrase: “of a charitable or benevolent nature”. In particular there was no contention which in the context of the sections of the Duties Act under review had any broader meaning of substance than “charitable”. The Concise Oxford Dictionary, New Edition defines “benevolent” as:

“desirous of doing good, charitable (benevolent fund, society); kind and helpful..”

65. Roget’s Thesaurus (Longman edition) associates the term with the words:

“philanthropic, humanitarian, humane, enlightened, charitable, aid-giving..”

66. On the basis of my analysis of the objects and the main purpose and activities of Racing NSW I am unable to conclude that it is a body corporate of a benevolent nature.

Conclusions: Grounds 3 and 4

67. For those reasons Racing NSW is not a body of a charitable or benevolent nature and it therefore follows that Grounds 3 and 4 as described at [21] must fail. That is, the exemption referred to in s 275(1) (b) and the partial exemption referred to in s 275A do not apply to it.

Are some of the objects of Racing NSW potentially detrimental to the public?

68. For completeness, as this issue was raised by Counsel, I make the following brief comments on it.

69. In the concluding sections of Professor Gino Dal Pont’s learned analysis of the nature of charitable gifts (“Law of Charity” Second Edition, 2017 LexisNexis Butterworths, at [11.26)] he comments that:

“Charity has no mandate to (give) effect to objects detrimental to the community”

70. I note that in the written submissions made on behalf of the Commissioner, particularly at [74] of the submissions received on 8 May 2019, which I recall were repeated in oral submissions, Counsel for the Commissioner raised the issue of whether the activities of the peak administration body of a commercial sport such as thoroughbred horse racing, whose object and nature was in part to maximise betting turnover on New South Wales thoroughbred race meetings and whose revenue substantially comprised of fees associated with gambling receipts, could be considered charitable. Counsel for Racing NSW urged me to ignore or to give minimal weight to that contention.

71. It is readily observable that gambling activities, apart from providing the benefit of an opportunity for social engagement and enjoyment, also can contribute to some degree of social detriment in the nature of gambling addiction, albeit to a proportionally small section of those who participate in those activities. I say that without ignoring the considerable efforts and resources now devoted to education about gaming and the frequent media warnings as to the risks of gambling, which appear to be promoted and supported by many sporting and gaming bodies.

72. The evidence of Mr Graham Hinton, the Chief Operating Officer of Racing NSW (Racing NSW 2018 Financial Statements: Exhibit A2: Annexure H page 234) indicated that in 2018 it had income from wagering revenue exceeding $162 million out of total revenue of approximately $219.5 million.

73. I make no finding:

1. that the purposes or activities of Racing NSW itself directly contribute to the existence in New South Wales of the social problem of addiction to gambling, being a social issue clearly detrimental to the community; or

2. that any connection which Racing NSW may be seen to have with wagering or gambling of itself prevents Racing NSW from being treated as a charitable or benevolent body corporate.

2. Were the Agreements for a purpose approved by the Commissioner?

74. It is unnecessary to consider this issue because I have found that Racing NSW was not a body corporate of a charitable or benevolent nature.

3. Was Racing NSW acting as trustee of the Trust in relation to the Capertee Agreements?

75. The trustees of the Trust at its inception were the 4 persons referred to at [5] above. I was given to understand that those 4 persons and persons who later became trustees were associated with the thoroughbred racing industry. By the deed made in October 2011 referred to in the same paragraph above, the AJC retired as Appointer and Racing NSW assumed that role. But none of that alters the essential fact that the trustee at relevant times was not Racing NSW. It was contended in the initial written submissions on behalf of Racing NSW that Racing NSW purchased the Capertee Land for use by the Trust and , as such:

“for all intents and purposes and for the purposes of sub-paragraph 275(3)(c), Racing NSW purchased the land for the benefit of (the Trust), essentially as trustee for (the Trust)”.

76. I found the persuasive value of that contention to be minimal.

77. There was no support in the documentation provided for such a contention. There was no suggestion that Racing NSW had declared a trust of the land (which in any case would be subject for assessment of duty subject to available exemptions) or that any trust was created by transfer. I find that there was no such declaration of or creation of a trust as asserted.

78. It follows that Racing NSW was not acting in any capacity as a trustee and so cannot be an exempt charitable or benevolent body within the meaning of s 275 (3)(c). So Ground 1 must fail.

4. Is the Trust a “charitable or benevolent body” under s 275(3)(b)?

79. It is unnecessary to consider this issue because I have found that Racing NSW was not acting as trustee of the Trust in relation to the Capertee Agreements.

5. Is Racing NSW, or is the Trust, an exempt charitable or benevolent body, within s275 (3) (a)?

80. This involves determining whether either Racing NSW or the Trust is a body corporate, society, institution or other organisation whose resources, in accordance with its rules or objects, are used wholly or predominantly for the relief of poverty in Australia or for the promotion of education in Australia. As noted above, this issue was raised in the course of the hearing in respect of Racing NSW. It was not expressly contended that the Trust fell within s 275(3)(a), but for completeness, the issue of the availability of this branch of the exemptions to the Trust should be addressed.

81. As to Racing NSW, it is implicit in my findings and conclusions in relation to issue 1, particularly at [54] to [66] above, that Racing NSW’s resources are not, in accordance with its rules or objects, used wholly or predominantly for the relief of poverty in Australia or for the promotion of education in Australia and I find accordingly.

82. As to the Trust, as it was not the purchaser of the Capertee Land, this route to an exemption would only be available to it if s275(3) (c) had been found to be applicable; that is, if Racing NSW had been found to have been acting in its capacity as trustee for the Trust in purchasing the land. I have found that it was not so acting: see [78].

6. Is a partial exemption from duty available under section 275A?

83. Section 275A introduces a regime which allows a partial exemption from duty where a portion only of land is to be used for an exempt purpose; that is, a purpose approved by the Chief Commissioner in accordance with guidelines approved by the Treasurer. (The section is set out in full in the Appendix to these Reasons).

84. There are two significant preconditions to the availability of a partial exemption under the section:

1. By the dutiable transaction, the land must have been acquired by, or an interest in it acquired, by an exempt charitable or benevolent body; and

2. the land concerned is used or to be used by the charitable or benevolent body partly for an exempt purpose; that is, a purpose approved by the Chief Commissioner in accordance with guidelines approved by the Treasurer.

85. I have found that neither Racing NSW or the Trust is an exempt charitable or benevolent body and it follows that a partial exemption from duty, under s 275A is not available to either of them.

Conclusion and order

86. All the grounds relied upon by Racing NSW having failed, it must follow that the decision of the Chief Commissioner to refuse the exemption was the correct one. I am satisfied, on the basis of my findings, that it was also the preferable one. The decision must therefore be affirmed and I order accordingly.

Order

1. The Applicant is permitted to make this application for review notwithstanding the expiry of the period prescribed by s99 (1) of the Taxation Administration Act 1996.

2. The Chief Commissioner’s decision under review is affirmed.

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APPENDIX

Extracts from relevant legislation

Duties Act 1997 (NSW)

Section 275- CHARITABLE AND BENEVOLENT BODIES

(1) Duty under this Act is not chargeable on the following:

(a) a transfer, or an agreement for the sale or transfer, of dutiable property to an exempt charitable or benevolent body,

(b) a declaration of trust over dutiable property held or to be held on trust for an exempt charitable or benevolent body,

(c) a surrender of an interest in land in New South Wales to an exempt charitable or benevolent body,

(d) a vesting of dutiable property in an exempt charitable or benevolent body,

(e) a lease of dutiable property to an exempt charitable or benevolent body,

(f) a mortgage given by or on behalf of an exempt charitable or benevolent body.

(1A) Duty under section 58 (Establishment of a trust relating to unidentified property and non-dutiable property) is not chargeable on an instrument that declares a trust over property held or to be held on trust for an exempt charitable or benevolent body.

(2A) Landholder duty is not chargeable on the acquisition of an interest in a landholder by an exempt charitable or benevolent body.

(3) In this section: 

“exempt charitable or benevolent body” means:

(a) any body corporate, society, institution or other organisation for the time being approved by the Chief Commissioner for the purposes of this paragraph whose resources are, in accordance with its rules or objects, used wholly or predominantly for:

(i) the relief of poverty in Australia, or

(ii) the promotion of education in Australia, or

(b) any body corporate, society, institution or other organisation that, in the opinion of the Chief Commissioner, is of a charitable or benevolent nature, or has as its primary object the promotion of the interests of Aborigines and if:

(i) (in the application of this definition for the purposes of subsection (1) or (1A)) the dutiable transaction or instrument is for such purposes as the Chief Commissioner may approve in accordance with guidelines approved by the Treasurer, or

(iii) (in the application of this definition for the purposes of subsection (2A)) the land holdings of the landholderare being used or are to be used for such purposes as the Chief Commissioner may approve in accordance with guidelines approved by the Treasurer, or

(c) any person acting in the person’s capacity as trustee for a body corporate, society, institution or other organisation referred to in paragraph (a) or (b).

“landholder duty” means the duty chargeable under Chapter 4.

Section 275A- PARTIAL EXEMPTION FOR CERTAIN TRANSACTIONS BY CHARITABLE AND BENEVOLENT BODIES

(1) If the Chief Commissioner is satisfied, in relation to any dutiable transaction by which an exempt charitable or benevolent body acquires land or an interest in land, that the land concerned is used or to be used by the charitable or benevolent body partly for an exempt purpose, the dutiable value of the land concerned is, for the purposes of charging duty under Chapter 2 or 2A, to be reduced by the portion of that dutiable value that is referable to the portion of the land used or to be used for an exempt purpose.

(4) If the Chief Commissioner is satisfied, in relation to a mortgage given by or on behalf of a charitable or benevolent body, that the land the subject of the mortgage is used or to be used partly for an exempt purpose, the amount secured by the mortgage is, for the purpose of charging duty under Chapter 7, to be reduced by the proportion of the amount secured that is referable to the portion of the land used or to be used for an exempt purpose.

(5) If the Chief Commissioner is satisfied, in relation to an acquisition of an interest in a landholder by a charitable or benevolent body, that any of the land holdings of the landholder are used or to be used for an exempt purpose, the unencumbered value of that land holding is to be disregarded when calculating the duty chargeable on the acquisition under Chapter 4.

(6) This section does not limit section 275.

(7) In this section: 

"charitable or benevolent body" means any body corporate, society, institution or other organisation that, in the opinion of the Chief Commissioner, is of a charitable or benevolent nature, or has as its primary object the promotion of the interests of Aborigines. 

"exempt purpose" means a purpose approved by the Chief Commissioner undersection 275.

Thoroughbred Racing Act 1996 (NSW)

Section 13- FUNCTIONS OF RACING NSW

(1) Racing NSW has the following functions:

(a) all the functions of the principal club for New South Wales and committee of the principal club for New South Wales under the Australian Rules of Racing,

(b) to control, supervise and regulate horse racing in the State,

(b1) such functions in relation to the business, economic development and strategic development of the horse racing industry in the State as are conferred or imposed by this Act,

(c) to initiate, develop and implement policies considered conducive to the promotion, strategic development and welfare of the horse racing industry in the State and the protection of the public interest as it relates to the horse racing industry,

(d) functions with respect to the insuring of participants in the horse racing industry, being functions of the kind exercised by the AJC on the commencement of this section, and such other functions with respect to insurance in the horse racing industry as may be prescribed by the regulations,

(e) such functions as may be conferred or imposed on Racing NSW by or under the Australian Rules of Racing or any other Act,

(f) such functions with respect to horse racing in New South Wales as may be prescribed by the regulations.

(2) The functions of Racing NSW are not limited by the Australian Rules of Racing and are to be exercised independently of Racing Australia Limited.

(3) The AJC ceases to have the functions that are solely the functions of the principal club for New South Wales or committee of the principal club for New South Wales under the Australian Rules of Racing.

(4) In this section: 

"AJC" means the club known as the Australian Jockey Club as referred to in the Australian Jockey Club Act 1873 on the commencement of this section.

Section 14 - POWERS OF RACING NSW

(1) Racing NSW has power to do all things that may be necessary or convenient to be done for or in connection with the exercise of its functions.

(2) Without limiting subsection (1), Racing NSW has power to do the following:

(a) investigate and report on proposals for the construction of new racecourses, and inspect new racecourses or alterations or renovations to existing racecourses,

(b) register or licence, or refuse to register or licence, or cancel or suspend the registration or licence of, a race club, or an owner, trainer, jockey, stablehand, bookmaker, bookmaker's clerk or another person associated with racing, or disqualify or suspend any of those persons permanently or for a specified period,

(c) supervise the activities of race clubs, persons licensed by Racing NSW and all other persons engaged in or associated with racing,

(d) inquire into and deal with any matter relating to racing and to refer any such matter to stewards or others for investigation and report and, without limiting the generality of this power, to inquire at any time into the running of any horse on any course or courses, whether or not a report concerning the matter has been made or decision arrived at by any stewards,

(e) allocate to registered race clubs the dates on which they may conduct race meetings,

(f) direct and supervise the dissolution of a race club that ceases to be registered by Racing NSW,

(g) appoint an administrator to conduct the affairs of a race club,

(h) register and identify galloping horses,

(i) disqualify a horse from participating in a race,

(j) exclude from participating in a race a horse not registered under the Rules of Racing,

(k) prohibit a person from attending at or taking part in a race meeting,

(l) impose a penalty on a person licensed by it or on an owner of a horse for a contravention of the Rules of Racing,

(m) impose fees for registration of a person or horse,

(n) require registered race clubs to pay to it such fees and charges (including fees for registration of a race club) as are required for the proper performance of its functions, calculated on the basis of criteria notified to race clubs by Racing NSW,

(o) consult, join, affiliate and maintain liaison with other associations or bodies, whether in the State or elsewhere, concerned with the breeding or racing of galloping horses,

(p) enter into contracts,

(q) acquire, hold, take or lease and dispose of real and personal property whether in its own right or as trustee,

(r) borrow money,

(s) order an audit of the books and accounts of a race club by an auditor who is a registered company auditor nominated by Racing NSW,

(t) scrutinise the constitutions of race clubs to ensure they conform to any applicable Act and the Rules of Racing and that they clearly and concisely express the needs and desires of the clubs concerned and of racing generally,

(u) publish material, including periodical publications, to inform and keep informed the public concerning matters relating to racing, whether in the State or elsewhere,

(v) undertake research and investigation into all aspects of the breeding of horses and of racing generally,

(w) take such steps and do such acts and things as are incidental or conducive to the exercise of its powers and the performance of its functions.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 26 August 2019