South Australian EMPLOYERS' Chamber of Commerce and Industry Incorporated v Commissioner of State Taxation

[2019] SASCFC 125

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

SOUTH AUSTRALIAN EMPLOYERS' CHAMBER OF COMMERCE AND INDUSTRY INCORPORATED v COMMISSIONER OF STATE TAXATION

[2019] SASCFC 125

Judgment of The Full Court

(The Honourable Chief Justice Kourakis, The Honourable Justice Stanley and The Honourable Justice Parker)

16 October 2019

TAXES AND DUTIES - PAYROLL TAX - OBJECTIONS, APPEALS AND REVIEWS

TAXES AND DUTIES - PAYROLL TAX - LIABILITY TO TAXATION - EXEMPTIONS - NON-PROFIT ORGANISATIONS

CHARITIES - CHARITABLE PURPOSES - OTHER PURPOSES BENEFICIAL TO PUBLIC

CHARITIES - NON-CHARITABLE PURPOSES - ECONOMIC AND COMMERCIAL PURPOSES

This is an appeal against a decision of a Judge of the Supreme Court dismissing an appeal against the respondent’s disallowance of an objection which refused to recognise the appellant as exempt from payroll tax under the charitable purpose exemption in s 48 of the Payroll Tax Act 2009 (SA) and declined to order a refund of payroll tax paid.

The appellant is a not-for-profit incorporated association. The Judge found that its activities fall into five major areas: policy advocacy, member services, commercial services, subsidised programs and apprenticeship support.

The appellant contended that all activities are undertaken for the purpose of promoting trade and commerce in Australia, which is a recognised charitable purpose. The respondent contended that the appellant’s activities were conducted for the purpose of benefiting members or alternatively benefiting businesses and employers in South Australia generally, which are not recognised charitable purposes. The appellant further contended that the wages it pays are for work of a kind ordinarily performed in connection with its charitable purposes and are paid to persons engaged exclusively in that work and are therefore exempt wages and not liable to payroll tax. The respondent contended that none of the wages are so paid, or alternatively only those paid to persons engaged exclusively in policy advocacy activities are so paid.

The Judge found that on a stand-alone basis the appellant's policy advocacy, member services and commercial services are not undertaken for the purpose of advancing trade and commerce, however, on a stand-alone basis its dominant purpose in undertaking subsidised programs and apprenticeship activities is to advance trade and commerce. The Judge found that on a holistic assessment the appellant had failed to prove that its dominant purpose is to advance trade and commerce. Rather, the appellant’s dominant purpose was the advancement of the interests of businesses in South Australia. His Honour held that the advancement of the interest of business in South Australia was not a recognisable charitable purpose.

On appeal, the appellant contends that the Judge made three fundamental errors:

1.  That the Judge wrongly stated that the appellant had conceded that the advancements of interests of business in South Australia was not a recognised charitable purpose when its submission was that there is no difference between advancing the interests of business and advancing trade and commerce;

2.  That the Judge erred by drawing a false dichotomy between advancing the interests of business and advancing trade and commerce; and

3.  That the judge erred by examining separately the appellant's five main areas of activity and then considering those activities together.

The appellant further contends:

4.  That the Judge erred in declining to admit the evidence given by the appellant's President/Chairperson and its then Chief Executive Officer about their opinions or beliefs as to what are the fundamental purposes of the appellant; and

5. That the Judge erred in distinguishing the decision of Re Chamber of Commerce and Industry of Western Australia Inc v Commissioner of State Revenue (2012) 89 ATR 797.

Held, by Parker J (Kourakis CJ and Stanley J agreeing), dismissing the appeal:

1.  The meaning of the term “trade and commerce” is extremely broad, and its participants include businesses, workers, consumers and governments. The interests of businesses, workers and consumers will not always coincide. The interests of business are not entirely synonymous with the advancement of trade and commerce. The Judge did not err by drawing a false dichotomy between the advancements of the interests of business and the advancement of trade and commerce. The first and second fundamental errors alleged by the appellant are not made out (at [185]–[190]);

2.  Where an institution carries on many diverse activities, it will often be necessary at a preliminary stage of the analysis for a judge to divide the functions or activities into discrete but coherent groups. The approach taken by the Judge was both appropriate and necessary because the appellant carried out a very diverse range of activities. After the Judge determined whether or not the activity carried on by each functional grouping had a charitable purpose, his Honour proceeded to consider the situation on an overall or holistic basis. The third fundamental error alleged by the appellant is not made out (at [195]–[198]);

3.  The ultimate questions to be decided by the Court were, first, what are the primary or principle purposes of the appellant and, secondly, are those purposes charitable. The first question was a matter of fact to be decided after a careful assessment of the evidence. The second question was a matter of law to be decided by the Court (at [200]);

4.  What the President and Chief Executive Officer of the appellant thought about the second question was irrelevant. Even if the evidence of the President/Chairperson and Chief Executive Officer was admissible in relation to the first question, what they considered to be the primary or principle purposes of the appellant could carry very little weight in comparison to the large volume of documentary evidence concerning the activities of the appellant and the statements it made about its purposes. The Judge did not err in declining to admit the evidence of those witnesses concerning the purposes for which the appellant carried out its activities (at [200]–[216]);

5. The facts identified by the Judge provided compelling grounds to distinguish Re Chamber of Commerce and Industry of Western Australia Inc v Commissioner of State Revenue (2012) 89 ATR 797. The Judge did not err in distinguishing that case (at [228]-[229]);

6.  Business is only one of several groups that participate in trade and commerce. A function of or activity that promotes the interests of business may not necessarily advance trade and commerce. The authorities demonstrate the need to avoid conflating the charitable purpose of promoting trade and commerce with the purpose of advancing the interests of business. The Judge was correct to distinguish the charitable purpose of advancing trade and commerce from a purpose of promoting the interests of business (at [235]);

7.  The appellant’s contention that business should be recognised as falling within the fourth Pemsel class is rejected. Its acceptance would effectively abandon the clear distinction drawn in the authorities between the advancement of the personal and private interests of business and the public benefit of the promotion of trade and commerce (at [232]–[238]);

8.  Appeal dismissed.

Associations Incorporation Act 1985 (SA) s 51(i); Payroll Tax Act 2009 (SA) ss 7, 10(2), 48; Statute of Charitable Uses 1601 (Eng), referred to.
Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1; Law Institute of Victoria v Commissioner of State Revenue [2015] VSC 604; Re Chamber of Commerce and Industry of Western Australia (Inc) v Commissioner of State Revenue (2012) 89 ATR 797, distinguished.
Aid/Watch Inc v Federal Commissioner of Taxation (2010) 241 CLR 539; Assafiri v Horne [2004] WASCA 40; Beaven v Wagner Industrial Services Pty Ltd [2017] QCA 246; Canterbury Development Corporation v Charities Commission [2010] 2 NZLR 502; Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 228 CLR 168; Commissioner of Taxation v Triton Foundation (2005) 147 FCR 362; Commissioners of Inland Revenue v Yorkshire Agricultural Society [1928] 1 KB 611; Congregational Union (NSW) v Thistlethwayte (1952) 87 CLR 375; Crystal Palace Trustees v Minister of Town and Country Planning [1951] Ch 132; Dingle v Turner [1972] AC 601; Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149; Federal Commissioner of Taxation v Word Investments Ltd (2008) 236 CLR 204; Fox v Percy (2003) 214 CLR 118; Grain Growers Ltd v Chief Commissioner of State Revenue (NSW) [2016] NSWCA 359; Grannall v Marrickville Margarine Pty Ltd (1955) 93 CLR 55; Hadaway v Hadaway [1955] 1 WLR 16; In Re Cranston, Webb v Oldfield [1898] IR 431; Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation (1971) 125 CLR 659; Inland Revenue Commissioners v McMullen [1981] AC 1; Lloyd v Federal Commissioner of Taxation (1955) 93 CLR 645; Motor Industry Training Association of Western Australia Inc v City of Joondalup [2013] WASAT 14; National Deposit Friendly Society Trustees v Skegness Urban District Council [1959] AC 293; Navy Health Ltd v Federal Commissioner of Taxation (2007) 167 FCR 1; Oppenheimer v Tobacco Securities Trust Co Ltd [1951] AC 297; Re Compton: Powell v Compton [1945] Ch 123; Re Queenstown Lakes Community Housing Trust [2011] 3 NZLR 502; Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 15 NSWLR 158; Royal Australasian College of Surgeons v Federal Commissioner of Taxation (1943) 68 CLR 436; Royal National Agricultural and Industrial Association v Chester (1974) 48 ALJR 304; Scottish Burial Reform and Cremation Society Ltd v Glasgow City Corporation [1968] AC 138; Stratton v Simpson (1970) 125 CLR 138; Tasmanian Electronic Commerce Centre Pty Ltd v Commissioner of Taxation (2005) 142 FCR 371; Tesco Supermarkets Ltd v Nattrass [1972] AC 153; Vancouver Regional FreeNet Association v Minister of National Revenue (1996) 137 DLR (4th) 206; Vancouver Society of Immigrant and Visible Minority Women v Minister of National Revenue (1999) 169 DLR (4th) 34; W & A McArthur Ltd v Queensland (1920) 28 CLR 530, discussed.
Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531; Commissioners of Inland Revenue v Oldham Training and Enterprise Council (1996) 69 TC 231, considered.

SOUTH AUSTRALIAN EMPLOYERS' CHAMBER OF COMMERCE AND INDUSTRY INCORPORATED v COMMISSIONER OF STATE TAXATION
[2019] SASCFC 125

Full Court:      Kourakis CJ, Stanley and Parker JJ

1. KOURAKIS CJ:    I would dismiss the appeal for the reasons given by Parker J and for the following brief additional reasons.

2. First, because the appellant’s current constitution was adopted for two express purposes, one of which was to ‘enhance the prospects of a payroll tax exemption’, this is a case in which actions must speak louder than words.

3. Secondly, the membership structure and activities of the appellant were typical of many member-services associations.  The discounted commercial services provided to members included:

   ·supporting the overseas trade engaged in by some of its members;

   ·assisting with the workplace relations and regulatory obligations of its employer-members; and

   ·providing occupational health and safety training for its members who occupied workplaces.

   In mid-2014, about one fifth of the appellant’s workforce was employed in the provision of these or similar services.

4. Thirdly, the provision by the appellant of worker-training services, and other programs, with government grants, even if not limited to members, facilitates access to those programs by its members and contributes to the appellant’s fixed costs.  It is not unusual in modern times for member‑services organisations, including industry and professional associations, to provide programs of that kind.

5. Fourthly, the rationale for the exemptions given to charities from the time of enactment of the Statute of Charitable Uses is the public benefit provided by them.  The advancement of trade and commerce head of the fourth residual division of charitable purposes must be approached with some care.  It was recognised by analogy from the purposes expressly identified in Pemsel’s case:[1] relief of poverty, advancement of education, advancement of religion and other purposes beneficial to the community.  In applying this head to particular facts or circumstances, its derivation must be kept steadily in mind.  It is the broader public interest, not the self-interest of individuals or classes of individuals engaged in trade and commerce, which must be served.

   [1]    Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531.

6. Fifthly, the public benefit of trade and commerce does not only arise from the profitability of the businesses which engage in it.  Trade and commerce advances the public interest because it facilitates production, exchange and innovation and thereby increases the productive output of communities, societies and the nation as a whole.  As a result, there is greater employment, the quantity, quality and range of goods and services increases and ultimately the standards of living of all sections of society improve.  For that reason, the paradigm of a charitable purpose under this head is the promotion of trade and commerce through trade or agricultural fairs.  So too are the advocacy of structural reforms to economic regulation which facilitate trade and commerce, the promotion of innovation and exchanges on technological, industrial and agricultural best practices.  An organisation does not have the charitable purpose of advancing trade and commerce if it has as a substantial purpose, or purposes, the advancement of the sectional interests of particular participants, or classes of participants, in trade and commerce. 

7. Finally, and of importance to this case, an organisation established primarily to serve the sectional interests of its members who are in business may nonetheless occasionally advocate policies and provide services which promote trade and commerce.  That is not surprising because, as a general rule, businesses do benefit from improvements in trade and commerce.  It is not, however, a universal rule, as historical debates between protectionism and free trade and tensions between monopolies and new market entrants show.  The coincidence, in some of the appellant’s activities, between the interests of its members, or at least a majority of them, and the public interest, in advancing trade and commerce, is of limited weight, because the appellant’s membership structure, the services which it provides and its funding model are primarily focussed on serving the self‑interest of its members.

8. STANLEY J:         I would dismiss the appeal.  I agree with the reasons of Parker J and the additional reasons of Kourakis CJ.   

9. PARKER J: This is an appeal against the finding that the appellant, the South Australian Employers’ Chamber of Commerce and Industry Inc (trading as Business SA), is not exempt from payroll tax under the charitable purpose exemption found in s 48 of the Payroll Tax Act 2009 (SA) (“the Act”).[2] 

   [2] [2017] SASC 127 (Blue J).

10. The appellant seeks the refund of payroll tax (being $2,575,844) it has paid on wages paid for the period from 1 July 2009 to 31 May 2014 and interest.  The appellant also contends that it is entitled to a refund of payroll tax paid from 1 June 2014 to August 2017.

11. For the reasons that follow, I would dismiss the appeal.

    The Payroll Tax Act 2009 (SA)

12. Section 7 of the Act imposes payroll tax on all taxable wages. However, s 10(2) provides that exempt wages are not taxable wages. Section 48 defines certain wages to be exempt wages:

    48—Non-profit organisations

    (1)Subject to subsection (2), wages are exempt wages if they are paid or payable by any of the following:

    (a)     a religious institution;

    (b)     a public benevolent institution (but not including an instrumentality of the State);

    (c)     a non-profit organisation having as its sole or dominant purpose a charitable purpose (but not including a school, a college, an educational institution, an educational company or an instrumentality of the State).

    (2)     The wages must be paid or payable—

    (a)     for work of a kind ordinarily performed in connection with the religious, public benevolent or charitable purposes of the institution or body; and

    (b)     to a person engaged exclusively in that kind of work.

13. The appellant contends that the Judge erred in not finding that it is a non‑profit organisation having as its sole or dominant purpose a charitable purpose within the meaning of s 48(1)(c). The appellant further contends that the wages it pays are for work of a kind ordinarily performed in connection with its charitable purposes and are paid to persons engaged exclusively in that kind of work. The appellant therefore contends that the wages it pays are exempt wages and not liable to payroll tax.

    The grounds of appeal

14. The notice of appeal stated the appellant’s grounds in a narrative style.[3] However, the five primary grounds of appeal advanced by the appellant appear in its outline of argument as follows:

    (a) in finding that the Chamber’s dominant purpose was that of advancing the interests of businesses in South Australia, rather than the charitable purpose of advancing trade and commerce, his Honour erred in failing to apply the correct statutory test, that is to say, the objective test required by the technical legal meaning of “charity” (“Ground l”);

    (b) his Honour erred in his characterization by failing to distinguish between the Chamber, which is a non-profit organisation, and an ordinary commercial service provider, which is conducted for the benefit of its owners (“Ground 2”);

    (c) his Honour erred in dissecting each of the Chamber’s five main activities separately, as this lead to a misapplication of the holistic test applied by the High Court in Commissioner of Taxation v Word Investments Limited (“Word Investments”) (“Ground 3”);

    (d) in the alternative, if his Honour applied the correct statutory test, his Honour erred in finding that the Chamber had failed to prove that its dominant subjective purpose was a charitable purpose within the meaning of section 48(l)(c) of the Act (“Ground 4”); and

    (e) his Honour erred in distinguishing the decision of Chaney J in Re Chamber of Commerce and Industry of Western Australia Inc and Commissioner of State Revenue on the basis that the legislation in that case was “materially different to the tests in section 48 of the Act” (“Ground 5”).

    (Footnotes omitted)

    [3]    I note that there was a change in senior counsel shortly before the appeal was heard.

    Evidence

15. The Judge made extensive findings of fact concerning the history, structure, objects and activities of the appellant. It is necessary to make detailed reference to those findings. The findings made by the judge were based upon substantial documentary evidence. Oral evidence was also given by Mr Vincent Tremaine, who was at the time of trial the President/Chairperson of the appellant, Mr Nigel McBride, its then Chief Executive Officer, and four other employees. With limited exceptions, the findings of fact made by the Judge are not challenged in this appeal. 

16. One exception is the rejection by the Judge of certain of Mr McBride’s evidence “about quantitative matters such as the split between member and non‑member revenue and personnel matters such as personal duties and numbers”. The Judge found that evidence to be inconsistent with the appellant’s business records and the evidence given by two other employees of the appellant, Ms Karen Just and Mr Stephen Moore.

1. The Judge also rejected opinion or belief evidence given by Mr Tremaine and Mr McBride. They stated in cross-examination that the purpose of the appellant was to support and promote businesses in South Australia and this support generates economic activity that is beneficial to the community. The Judge held this evidence inadmissible as it amounted to a conclusion on a question that his Honour was required to decide. A further ground for rejection was that it was merely evidence about the opinion or beliefs of two individual office holders that had not been communicated to the appellant’s board or members, nor adopted by them.

2. The Judge also found that there was no evidence that responsibility for determining the fundamental purposes of the appellant had been delegated to Mr Tremaine or Mr McBride and it was inherently unlikely that determination of such a weighty matter would be delegated to an individual. The Judge held that even if this opinion or belief evidence was admissible, he would give no weight to it as Mr Tremaine and Mr McBride have an obvious interest in the outcome. His Honour noted that the evidence was given in response to cross-examination and the appellant had not sought to adduce such evidence.

   The structure, objects and purposes of the appellant

3. The appellant traces its ancestry to the establishment in 1839 of an unincorporated not-for-profit association.  The appellant was incorporated in 1993 under the Associations Incorporation Act 1985 (SA). New rules adopted at that time were later periodically amended with the last amendment being made in 2005 (“the Former Constitution”). The appellant adopted a new constitution (“the Current Constitution”) on 27 November 2012. As previously noted, the appellant uses the business name “Business SA”. It is a member of the Australian Chamber of Commerce and Industry and there are counterpart bodies in each State performing similar functions.

4. The evidence referred generally to matters from 1 July 2009 up to early 2016.  The parties accept that apart from the change of constitution in 2012 other changes over that period of six years have no effect on the question of whether the appellant’s sole or dominant purpose was charitable over the relevant period.  The Judge accepted that the evidence was broadly representative of the appellant’s position throughout the relevant period. 

5. As at 30 June 2013 the appellant had 4,472 ordinary members.  By 30 June 2015 this figure had declined to 3,970 ordinary members.  Only ordinary members are entitled to attend and vote at general meetings.  During the relevant period between 7% and 10% of South Australian employers were members of the appellant and approximately 3% of South Australian businesses were members.

6. Eligibility for ordinary membership is not materially different between the Former and the Current Constitutions.  In both cases a person or entity was eligible for ordinary membership if they conducted a business or were a “not‑for‑profit” incorporated association (other than a trade union or employee association).  Under the Former Constitution there was an additional requirement that an incorporated association required the approval of the board to be eligible for membership, while under the Current Constitution there is no such requirement. 

7. The appellant has affiliate members in the form of regional chambers of commerce located in several areas of the State.  Members of those affiliated chambers are associate members of the appellant. In 2013 there were 253 associate members and in 2015 that figure had increased to 310 associate members.  The appellant classes ordinary members who have become non‑financial as “supporter members”.  In 2013 there were 240 supporter members and in 2015 615 such members.

8. The general management and control of the appellant is vested in a board, subject to decisions made by members in general meetings. The only office holders are the Chairman and Deputy Chairman, formerly entitled the President and Deputy President. The Chief Executive Officer is responsible for the day‑to‑day operations of the appellant.

   Objects

9. The primary objects under the Former Constitution were expressed as follows:

   The objects of SAEC are to promote the interests of members generally and in particular to promote the development of the commercial manufacturing      or industrial resources of Australia.

10. The primary objects under the Current Constitution are as follows:

    (a)     The primary objects of SAEC are:

    (i)to promote economic development in Australia through the promotion of industry, trade and commerce in Australia and in particular in South Australia; and

    (ii)for that purpose to promote the development of the manufacturing, industrial, intellectual, natural and agricultural resources of Australia generally and of South Australia in particular.

11. The secondary objects under the Former Constitution included the following:

    (a)    To hold meetings for the discussion of matters affecting the interest of members, and for the delivery of lectures, and the reading and discussion of papers.

    (b)     To print, publish, and distribute lectures, papers, notices and any matter of interest to members or affecting the objects.

    (c)     To promote, support or oppose any proposals or measures (including any legislation of the Commonwealth or State Parliaments and any by-laws, regulations, acts or awards of any public authority, board, Commission or Court) which may affect the interests of SAEC or the members thereof.

    (d)     To take action for the protection of members in connection with Customs and Excise Tariffs.

    (e)     To watch developments in industrial matters, and take action on behalf of members to protect their interests.

    …

    (j)    To offer prizes, rewards, or premiums for the encouragement of invention, skill, and greater technical knowledge in connection with work appertaining to the objects.

    (l)    To establish support or aid or join with others in the establishment and support of associations or institutions however designated which in the opinion of the Board have objects consistent with the objects of SAEC.

    (la)    To generally represent and advise and to provide training services to members and employers generally provided that such services are consistent with the interests of employers generally.

    …

    (p)     To hold meetings, classes, seminars or other similar sessions for the purpose of informing and/or educating members in any field of activity which SAEC participates.…

12. The secondary objects under the Current Constitution are:

    (b)     In pursuit of its primary objects, SAEC may:

    (i)undertake or fund research;

    (ii)lobby and negotiate (both publicly and privately) with governments and other decision-makers and opinion leaders;

    (iii)undertake or fund training or other education for the business sector;

    (iv)take an interest industrial matters, and participate in and take action generally or on behalf of an employer;

    (v)offer prizes, rewards, or premiums for the encouragement of invention, skill, and greater technical knowledge in connection with work appertaining to be objects; and

    (vi)form, affiliate with or otherwise collaborate with or support associations or institutions which, in the opinion of the Board, have objects consistent with the objects of SAEC.

13. The Current Constitution was adopted at the 2012 Annual General Meeting of the appellant. An Explanatory Note provided to the meeting stated the following about the draft Current Constitution:

    For the most part, this draft Constitution modernises the language and format and updates some of the concepts of the existing Constitution and, to that extent, the changes are essentially cosmetic.

    However there are some important substantive changes.  The key changes are

    ·The objects are changed to broaden them generally and also to prioritise them.  This has been done for two reasons.  The first is to minimise the risk that someone might complain that an activity of Business SA is ultra vires.  The second is to enhance the prospects of the payroll tax exemption …

14. While the Judge accepted that the reason for the separation between the primary and secondary objects and between objects and powers was to modernise the format, his Honour also found that the principle reason for the revised wording of the objects was to enhance the prospects of the appellant obtaining the taxation advantages available to charitable institutions.  His Honour referred to the revised wording of the objects. The new wording increased the focus on the promotion of trade and commerce and economic development and removed references to the interests of or services provided to members (with the exception of a reference to action taken in an industrial matter on behalf of an employer).  His Honour’s finding that the principal reason for the revised wording of the objects was to gain a taxation advantage is challenged in ground 3.11 of the notice of appeal.  I will return to that matter.

    The activities of the appellant

15. The Judge divided the activities of the appellant into five major areas.  The characterisation adopted by his Honour was:

    1.Policy development and advocacy.  This involved the development of policies and advocacy for those policies by lobbying the Government and the Opposition, both directly and through the media.

    2.Services and products provided exclusively to members.  This was further divided into four principle subcategories:

    a.A business advisory service which provided a free and unlimited telephone advice service to members.  It receives about 18,000 calls per annum;

    b.One free consultation annually with an employer consultant;

    c.The issue of free weekly and monthly general and topic specific newsletters and information updates under several different titles; and

    d.Member networking events.

    3.Commercial services sold to businesses and employers.  Both members and non-members could avail themselves of these services but members received a significant discount on fees.  The services comprised:

    a.International business services covering such matters as the provision of certificates of origin and other documentation, facilitation of visas and migration, translation and interpreting services and the conduct of international trade workshops and training;

    b.General and client based training courses in workplace relations, work health and safety, injury management, marketing, social media and business;

    c.Acting as a consultant to employers and businesses in relation to workplace relations, work health and safety and injury management;

    d.Publications dealing with workplace relations, awards, human resource management, taxation, health and safety and employment law; and

    e.The hire of rooms and facilities at the appellant’s premises, Enterprise House.

    4.The conduct of externally funded or subsidised programs which were mostly funded or subsidised by government grants and, to a lesser extent, by sponsorship from private organisations.  The programs cover entrepreneurship, business coaching workshops dealing with the start-up of a venture, and buying or selling a business. There is also a small business contact service which provides a free telephone advisory service funded by the State Government.

    5.Apprenticeship and traineeship support services provided with Commonwealth government funding to give advice and assistance in relation to apprenticeships and traineeships.  The service mostly comprises the promotion of apprenticeships and traineeships, including advice and assistance with recruitment and contracts, submission of contracts to the relevant government agency for approval, facilitation of the performance of the contract and acting as a liaison between apprentices, their employer, the training centre and the government department, and monitoring the performance of the contract and of the apprentice.

16. The appellant also undertook research projects on specified topics that were commissioned by Government or, to a lesser extent, by private bodies. 

17. In mid-2014 the appellant employed about 109 full time equivalent employees (“FTE”).  Of these, 38 FTE provided apprenticeship support, 22 FTE dealt with commercial services, 7.5 FTE were engaged in policy advocacy and 4 FTE provided member services.  While there were only 2 FTE engaged in subsidised programs in 2014, because the entrepreneurs’ program was not conducted that year, as of January 2016 there were 9 FTE dedicated to subsidised programs.  In addition to the Chief Executive and Chief Operating Officer, there were about 25 FTE performing support functions in fields such as human resources, information technology, finance, sales and marketing.  The Judge noted that the support functions were purely ancillary to the appellant’s activities.  Thus, if the dominant purpose of the appellant in undertaking the activities was charitable, so too were the support functions.  The converse applied if the dominant purpose of the appellant in undertaking the activities was non‑charitable. 

18. After noting that the revenue of the appellant had declined from almost $19 Million in the 2010 financial year to a little over $11 Million in 2015, the Judge analysed the sources of income for the 2013 year on the basis that it was typical or the mid-point of the relevant period.  The total revenue for the 2013 financial year was $17.53 Million.  Of this amount, 37% was derived from commercial services, 33% from apprenticeship services, 20% from membership fees with 5% derived from subsidised programs and ‘other’, respectively.

19. The Judge analysed the sources of the fee revenue derived by the appellant.  His Honour found that 75% of the total revenue for commercial services was derived from members.  Because of the fee discount received by members, the percentage of services provided to members was somewhat greater than 75%. 

20. The appellant derives revenue from undertaking subsidised programs.  That revenue is primarily in the form of Commonwealth or State government grants but participants are also charged registration fees. The proportion of total revenue for subsidised programs derived from grants varied from 100% in the 2013 financial year to 76.6% in 2015.

21. The appellant also derives revenue from providing apprenticeship support.  The funding for this service is provided exclusively by the Commonwealth Government which contracts with the appellant to pay a fixed fee per apprentice over the term of their apprenticeship.  No charge is made to either businesses or apprentices.

22. The evidence before the Judge suggested that the appellant records a surplus on most of its subsidised programs.  However, the Judge noted that the expenses attributed to the subsidised programs did not include overheads such as wages.  Thus, it is likely that the appellant only makes a small surplus on subsidised programs.

23. The constitutions of, and 2015/2016 financial statements for, each of the five interstate employer’s chambers were tendered. The appellant’s Chief Executive, Mr McBride, also gave evidence concerning the activities of those bodies and the relationship between them and the appellant.  The Judge concluded that each of the six State chambers undertakes fundamentally the same activities. 

    Analysis by the Judge

24. The parties accepted that the reference to “charitable purpose” in s 48 of the Act was to the general law concept of charitable purpose rather than the popular meaning. The Judge noted that the statute had an ambulatory operation so that as the general law meaning of “charitable purpose” changes so too does the meaning of the term as used in that Act.

25. His Honour also noted that under the general law the relevant issue is the purpose of an institution as distinct from the motive of its controlling mind.  The motive is the reason for a person performing the act while the purpose is the object of performing it.  The purpose of an activity can be contrasted with its effect. If the purpose is charitable, it is not fatal if the effect is found not to be charitable.  However, the fact that an effect may be charitable will not suffice if the purpose is not charitable.  The most probative evidence of the purpose of an activity will usually be evidence of its effect. 

26. The Judge noted that there are two cumulative requirements for a purpose to be characterised as a charitable purpose.  His Honour stated:[4]

    1.   The purpose must be to provide a public benefit as opposed to private advantage or benefit (the public interest element).

    2.   The purpose must fall within a recognised category of charitable purpose by reference to principle and authority (the recognised category element).

    [4]    South Australian Employers’ Chamber of Commerce & Industry Incorporated v Commissioner of State Taxation [2017] SASC 127 at [106].

    A recognised category

27. The Judge noted that in Commissioners for Special Purposes of the Income Tax v Pemsel Lord Macnaghten formulated four principle “divisions” of charities:[5]

    [T]rusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads.

    [5] [1891] AC 531 at 583.

28. The Judge also noted that the High Court has endorsed the requirement that for a purpose to be charitable it must fall within a recognised category that lies within one of those four divisions.[6]  His Honour also noted that the categories recognised as charitable are not closed but evolve over time as society and societal attitudes change.  Thus, new categories of charitable purposes can be recognised and old categories may become obsolete.[7]  If a purpose falls within a recognised category it is not necessary to enquire further about that element, although there will still be the question as to whether the purpose is to provide a public benefit.  However, if a purpose does not fall within a recognised category, it will be necessary to have regard to first principles to determine whether the purpose is beneficial to the community and also whether a new category should be recognised by analogy to the existing categories.[8] 

    [6]    Swinburne v Federal Commission of Taxation (1920) 27 CLR 377 at 384 (Isaacs, Gavan Duffy, Rich and Starke JJ); Aid/Watch Inc v Federal Commissioner of Taxation (2010) 241 CLR 539 at [13]–[24] (French CJ, Gummow, Hayne, Crennan and Bell JJ).

    [7]    Aid/Watch Inc at [66] (Kiefel J).

    [8]    Royal National Agricultural and Industrial Association v Chester (1974) 48 ALJR 304 at 305 (McTiernan, Menzies and Mason JJ).

29. The High Court had recognised in Aid/Watch Inc v Federal Commissioner of Taxation that the scope of purposes falling within each of the four divisions has been expanded.[9]  Many categories of purpose falling within the fourth residual division have been recognised by analogy.  Amongst other additions to the fourth residual division mentioned by his Honour were the improvement of agriculture and horticulture[10] and the advancement of trade and commerce.[11]

    [9] (1971) 125 CLR 659.

    [10]   Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation (1971) 125 CLR 659 at 669 (Barwick CJ); Hadaway v Hadaway [1955] 1 WLR 16 at 20 (Viscount Simonds).

    [11]   Vancouver Regional FreeNet Association v Minister of National Revenue (1996) 137 DLR (4^th) 206 at 207–208 (Hugessen JA).

    The public interest

30. The Judge noted that for a purpose to be charitable, the purpose must be to provide a public benefit rather than a private benefit or advantage.  If the purpose of an institution is to advance the partisan interests of its members or a group to which they belong or represent or the purpose is to confer benefits on persons in a private capacity, rather than a general public benefit, the institution will not be charitable.  A guide to determining whether a purpose is to provide a public benefit is whether the recipients of benefits from that institution comprise the public or a section of the public rather than a private body of individuals.  This may involve questions of degree and is only a guide rather than a decisive test.

1. Leaving aside trusts for the benefit of the poor, the public benefit test will not be satisfied when a collection of individuals is benefitted.[12] 

   [12]   Re Compton: Powell v Compton [1945] Ch 123; Oppenheimer v Tobacco Securities Trust Co Ltd [1951] AC 297; Dingle v Turner [1972] AC 601.

2. The Judge noted that the public benefit requirement has been emphasised in cases where the advancement of trade and commerce has been suggested as a charitable purpose.[13]  His Honour drew a distinction between an institution which has the purpose of providing a public benefit (such as assisting the aged or infirm) and an institution that has a purpose of advancing the interests of its members or a group to which they belong.

   [13]   Commissioners of Inland Revenue v Yorkshire Agricultural Society [1928] 1 KB 611; Commissioners of Inland Revenue v White (1980) 55 TC 651.

3. The Judge also observed that the fact that a person’s motive is not altruistic does not mean that their purpose is not charitable.  However, when a purpose is considered, the requirement that the purpose is to provide public benefit rather than advancing one’s own interests necessarily denotes that the purpose is altruistic.  In support of that observation his Honour referred to a passage in the judgment of FitzGibbon LJ in In Re Cranston, Webb v Oldfield where his Lordship stated that the essential attributes of a charity are that it shall be unselfish (i.e. for the benefit of persons other than the donor), that it shall be public (i.e. those to be benefitted comprise a class worthy, in numbers or importance, of consideration as a public object of generosity) and that it shall be philanthropic or benevolent (i.e. dictated by a desire to do good).[14]  The reference by FitzGibbon LJ to a charity being philanthropic or benevolent referred to the purpose of the charitable institution as opposed to the motives of those involved with the institution.  Lord MacDermott indicated in National Deposit Friendly Society Trustees v Skegness Urban District Council that a valid charity must be substantially altruistic and benevolent in its purposes but it will not fail if its founders or promoters incidentally take some degree of benefit.[15]

   [14] [1898] IR 431 at 446.

   [15] [1959] AC 293 at 315.

   The trade or commerce category

4. One of the recognised categories under the fourth head in Pemsel is the advancement of trade and commerce generally or in a specific industry (such as agriculture) or in a specific locality.  His Honour referred in substantial detail to a large number of cases which considered whether an institution that promoted business or trade and commerce was held to be charitable in some instances and not in others.  The Judge noted that there are two lines of authority which he regarded as being inconsistent.  Each of those cases concern an institution that was a non‑government organisation but was essentially funded by government grants.  In Commissioners of Inland Revenue v Oldham Training and Enterprise Council,[16] Canterbury Development Corporation v Charities Commission[17] and Re Queenstown Lakes Community Housing Trust[18] the relevant Court held that the primary purpose of the particular institution was the assistance of individual businesses rather than business and industry generally.  The other line of authority referred to by the Judge comprised Tasmanian Electronic Commerce Centre Pty Ltd v Commissioner of Taxation[19] and Commissioner of Taxation v Triton Foundation.[20]  In those two cases the Court held that the primary purpose of the institution was to benefit business and industry generally and the assistance given to individual businesses was merely ancillary to the principle object.  His Honour indicated that he preferred the approach adopted in the Tasmanian Electronic Commerce Centre and the Triton Foundation cases. 

   [16] (1996) 69 TC 231.

   [17] [2010] 2 NZLR 707.

   [18] [2011] 3 NZLR 502.

   [19] (2005) 142 FCR 371.

   [20] (2005) 147 FCR 362.

5. In that context the Judge noted that Chaney J in his Honour’s capacity as President of the State Administrative Tribunal had found in Re Chamber of Commerce and Industry of Western Australia (Inc) v Commissioner of State Revenue (“the WA Chamber case”) that the principal purpose of the WA Chamber was the promotion of commerce and industry in that State.[21] The services that it provided to members and others were undertaken to enable it to better achieve its primary purpose. Chaney J accepted that the principal purpose of the WA Chamber, being the promotion of trade and commerce, was a recognised charitable purpose. The Judge also noted that the Western Australian legislation is relevantly different to s 48 of the Act. His Honour also observed that the findings made by Chaney J were based upon the evidence put before the Tribunal; that evidence was materially different to the evidence in this case.

   [21] (2012) 89 ATR 797.

   Political purpose

6. The Judge noted that the law in England is that a trust for the attainment of political objects is not a trust for charitable purposes.[22]  However, the High Court has held that this principle does not operate in Australia.[23] 

   [22]   Bowman v Secular Society Ltd [1917] AC 406.

   [23]   Aid/Watch Inc (2010) 241 CLR 539 at [48]-[49] (French CJ, Gummow, Hayne, Crennan and Bell JJ).

   Sources of funding

7. The Judge observed that the mere fact that the activities of an institution are funded by the Government does not preclude it being charitable provided that its purposes are otherwise charitable.[24]  The Judge noted that the provision of Government funding may weigh in favour of the conclusion that the purposes of the institution are charitable because the Government recognises its purposes as being for the public benefit.

   [24]   Central Bayside General Practice Association Limited v Commissioner of State Revenue (2006) 228 CLR 168 at [36]-[43] (Gleeson CJ, Heydon and Crennan JJ), at [142] (Kirby J), and at [170] and [185] (Callinan J).

8. The Judge also observed that if the activities and purposes of an institution are otherwise charitable, it is not disqualified from being charitable merely because it charges for its charitable services.  That is especially the case where the charge is substantially below the cost of providing the service or its economic value.[25]  His Honour also observed that if an institution charges a market price for its services or generates a surplus from service provision, unless it sells its services for an ulterior charitable purpose, these considerations will weight in favour of the conclusion that its purpose in selling its services is non‑charitable.

   [25]   Scottish Burial Reform and Cremation Society Ltd v Glasgow City Corporation [1968] AC 138 at 156 (Lord Wilberforce).

   Generation of a surplus

9. The Judge held that if the purposes of an institution are otherwise charitable, it will not be disqualified from being charitable merely because it generates a surplus.  However, his Honour further held that the relevant question is the purpose of the activities undertaken that generate the surplus and the purpose of the generation of that surplus.  The question is whether that purpose is charitable.

10. His Honour noted that if an institution generates a surplus for an ulterior purpose that is charitable, the purpose of the institution will be charitable.  That principle is illustrated by the decision of the High Court in Federal Commissioner of Taxation v Word Investments Ltd.[26]  Word Investments conducted businesses for a profit so as to fund missionary work.  The High Court held that even though the sole activities of Word Investments were ordinary commercial activities conducted with a view to generating a surplus, it was a charitable institution because its purpose was to fund the missionary work which was itself charitable.[27]  On the other hand, if an institution generates a surplus for a purpose that is not charitable, the purpose of the institution will not be charitable.  The Judge referred to the example of an institution that generates a surplus for distribution to its members.[28]  His Honour also referred to the judgment of Atkin LJ in Commissioners of Inland Revenue v Yorkshire Agricultural Society.[29]

    [26] (2008) 236 CLR 204.

    [27] Ibid at [33] (Gummow, Hayne, Heydon and Crennan JJ).

    [28]   Royal Australasian College of Surgeons v Federal Commissioner of Taxation (1943) 68 CLR 436 at 447 (Rich J); Incorporated Council of Law Reporting for England and Wales v Attorney General [1972] Ch 73 at 90 (Sachs LJ).

    [29] [1928] 1 KB 611.

    Ascertainment of purpose

11. The Judge indicated that the purposes of an institution are usually ascertained by considering its objects and activities.[30]  His Honour also noted that ultimately a holistic assessment is required.[31]

    [30]   Brookton Co-operative Society Ltd v Federal Commissioner of Taxation (1981) 147 CLR 441 at 450-1, (Mason J, Gibbs CJ and Wilson J agreeing); Federal Commissioner of Taxation v Word Investments Ltd (2008) 236 CLR 204 at [17] (Gummow, Hayne, Heydon and Crennan JJ).

    [31]   Royal Australasian College of Surgeons (1943) 68 CLR 43 at 447-8 (Starke J), at 450-1 (McTiernan J) and at 452 (Williams J); Word Investments (2008) 236 CLR 204 at [17] (Gummow, Hayne, Heydon and Crennan JJ).

12. The Judge referred to a passage in the judgment of Iacobucci J (Cory, Major and Bastarache JJ agreeing) in the Supreme Court of Canada in Vancouver Society of Immigrant and Visible Minority Women v Minister of National Revenue where his Lordship stated “it is really the purpose in furtherance of which an activity is carried out, and not the character of the activity itself, that determines whether or not it is of a charitable nature.”[32]

    [32] (1999) 169 DLR (4^th) 34 at [152].

13. The Judge noted that because s 48 of the Act refers to charitable purposes rather than charitable activities, the observation made by Iacobucci J is even more significant under the Act. It is necessary to determine the purpose in furtherance of which an activity is carried out as opposed to the inherent character of the activity itself.

14. The Judge observed that the directing mind and will of a body corporate is usually the members in general meeting or the board of directors.  His Honour went on to state that the collective purpose of a body is ascertained from the collective acts of the body and the manifestation of its collective will.  Evidence, usually in the form of the minutes of meetings, would be admissible of collective decisions made by the members in general meeting or by the board and their reasons in relation to the purpose of undertaking activities which are contended to be charitable.  Such evidence will be weighed with other admissible evidence.

15. Importantly, the Judge held that the evidence of one or more individual directors or members about their own uncommunicated subjective state of mind, including their purposes in supporting activities undertaken by the institution, is inadmissible as to the relevant purposes of the institution.  His Honour said that it “is only what is communicated between and adopted by the members as a whole (whether by motion, consensus or otherwise) that is admissible”.  In the case of a director his Honour said “it is only what is communicated between and adopted by the board that is admissible.”

16. The Judge acknowledged that in theory it was conceivable that the directing mind and will of the institution could be that of a single person, such as its chief executive, “if the members and/or the board had delegated their authority to that person to make the relevant decisions.”  It might then be contended that evidence from that person of their uncommunicated purposes is admissible.  However, his Honour observed that it is “extremely unlikely” that the determination of a weighty matter such as the fundamental purposes of the institution would be delegated to the chief executive officer or any other individual.  For that reason, his Honour held that “evidence of an institution’s formal objects, activities, decision making, transactions, financial position and performance, minutes of meetings and other objective material is admissible so as to ascertain its purpose.”  However, evidence of the internal thoughts and intentions of individual members or directors that have not been communicated to and shared by the members of the board will not ordinarily be admissible.

    Sole or dominant purpose

17. The Judge noted that s 48(1)(c) does not require the charitable purpose to be the exclusive or sole purpose of the institution. It will be sufficient if the charitable purpose is the dominant purpose. That may be contrasted with the position under the general law where a charitable purpose is required to be the exclusive purpose of the institution, although it is permissible for an institution to have purposes that are not charitable provided that they are concomitant, incidental or ancillary to the charitable purpose.[33]

    [33]   Stratton v Simpson (1970) 125 CLR 138 at 159–60 (Gibbs J, Barwick CJ, Menzies and Walsh JJ agreeing).

18. The Judge considered that it was apparent from the meaning, context and evident purpose of s 48(1)(c) that the word “dominant” in the phrase “dominant purpose” bore its ordinary meaning. The evident purpose of the section was to exempt those institutions with charitable purpose even though they may have a minor non-charitable purpose. Thus, his Honour held that if an institution has a charitable purpose and also another purpose that is “independent of the charitable purpose but so minor that the charitable purpose remains the ruling, prevailing or most influential purpose,” the charitable purpose will be the dominant purpose. The determination of what is no more than a minor purpose requires an assessment of relativity and questions of degree.

    Onus of proof

19. The parties accept that the onus of proof in this appeal lies with the appellant on the balance of probabilities.

    The Chamber’s dominant purpose

20. The appellant contended to the Judge that its dominant purpose or purposes were charitable in three different respects. 

21. First, the appellant contended that the dominant purpose of undertaking all five major areas of activity identified above was the advancement of trade and commerce in South Australia.  It met that dominant purpose by advancing trade and commerce through policy advocacy at a macro level and through providing member services, commercial services, apprenticeship support and subsidised programs at a micro level.  In turn, those activities generated economic activity that was beneficial for the community at a macro level.

22. Secondly, the appellant contended that the dominant purpose of undertaking policy advocacy, apprenticeship support and subsidised programs was to advance trade and commerce in South Australia as under the first contention.  However, its purpose in providing member services and commercial services was for the incidental purpose of providing the appellant with greater credibility when it made submissions to government.  That greater credibility arose due to its increased member numbers resulting from the provision of services and of funding and facilitating its policy advocacy activities. 

23. Thirdly, the appellant contended that its dominant purpose was policy advocacy to advance trade and commerce in South Australia.  It provided member services, commercial services, apprenticeship support and subsidised programs for the incidental purpose of giving it greater credibility when making submissions to government.  Again, that increased credibility was due to its increased member numbers resulting from the provision of services and funding and facilitating its policy advocacy activities. 

24. While the appellant gave greater emphasis to the first and third contentions and only developed its second contention during the hearing of the case, the Judge observed that no contention was identified as being the primary contention.  In its closing address the appellant submitted that it provided member services and commercial services for the dual purposes of advancing trade and commerce and funding and facilitating its other activities.  The appellant also submitted that, on a holistic assessment, its dominant purpose was charitable.

25. The contrary submission advanced by the respondent was that the purpose of the appellant in undertaking policy advocacy was to advance the interests of its members or, alternatively, the interests of business generally in South Australia as opposed to the advancement of trade and commerce.  The respondent further submitted that the appellant’s purpose in undertaking its other four major areas of activities was to provide services to its members.  To the extent that services were also provided to non-members, that activity was conducted to fund or facilitate the provision of services to members.  On a holistic assessment, the respondent contended that the dominant purpose of the appellant was non-charitable.

26. In light of the contrary submissions advanced by the parties, the Judge proceeded to consider each of the major areas of activity of the appellant on a stand‑alone basis before conducting a holistic assessment of its dominant purpose(s).

    Major activity areas

    Policy advocacy

27. The appellant made submissions to the State and Commonwealth governments, and to a lesser extent local government, on matters of interest.  It undertook research and developed policies as a basis for its submissions rather than as an end in itself.  Its submissions were often the subject of media releases.  In that respect, submissions might be regarded as being addressed, to some extent, to the public although they were principally addressed to the Government and Opposition.  Submission that were addressed to the media were still for the purpose of influencing the Government and Opposition through the media and the public.

28. The appellant contended that its purpose in undertaking policy advocacy was to advance trade and commerce in South Australia or in Australia generally.  Its Former Constitution referred to the promotion of the development of the commercial manufacturing and industrial resources of Australia while its Current Constitution refers to the promotion of economic development and industry, trade and commerce in Australia and South Australia.  Some of its submissions were not popular with or were opposed by some of its members.  These included its decisions to support deregulation of shop trading hours and the development of nuclear waste disposal in South Australia.

29. The respondent contended that the purpose of the appellants policy advocacy role was to advance the interests of members or, alternatively, the interests of South Australian businesses generally.  That contention was supported by reference to both the Former Constitution and the Current Constitution which referred to the promotion of the interests of its members generally.  The changes in the revised constitution were largely cosmetic.  The appellant also published marketing material addressed to potential members that emphasised that it acts in the interests of members and business generally.

30. The respondent acknowledged that if the purpose of the appellants policy advocacy work was to advance trade and commerce in South Australia that would be a recognised charitable purpose and its activities in this respect would be for the public benefit.  The Judge recorded that the appellant had accepted that if the purpose of policy advocacy was to advance the partisan interests of its members or businesses in South Australia, that purpose would not be a recognised charitable purpose and its activities in this respect would not be for the public benefit.  Counsel for the appellant submitted on appeal that it had made no such concession.  I will return to this issue.

31. The Judge held that if the dominant purpose of the appellant in undertaking policy advocacy was the promotion of trade and commerce with the benefits to members or businesses being merely incidental, those incidental benefits should be disregarded.  Equally so, if the dominant purpose of the appellant was to advance the partisan interests of members or businesses with the benefits to trade and commerce being merely incidental, those incidental benefits should also be disregarded.  His Honour held that if there were two purposes, neither of which was incidental or subservient to the other or minor or secondary, such purposes could not be characterised as charitable.  His Honour further noted that if there were two purposes and he was not satisfied on the balance of probabilities that the trade and commerce purpose was the dominant purpose, then the appellant would have failed to discharge its onus of proof.  Thus, the Judge concluded that the issue was whether, and to what extent, the appellant had proved that its purpose in undertaking policy advocacy was to promote trade and commerce as opposed to advancing the partisan interests of its members or businesses in South Australia. 

1. The Judge noted that the objects of an institution are relevant in two ways.  First, a not for profit association incorporated under the Associations Act (as compared to a company) cannot lawfully act outside the scope of its objects.  Neither party contended that the objects of the appellant relevantly constrained its activities.  Secondly, the objects were relevant in that they afforded evidence of the purpose of the institution.  When conducting a holistic assessment, the weight of that evidence will vary.  The Judge held that such evidence was of lesser weight for two reasons in this case.  First, the activities of the appellant had not changed as a result of the adoption of the Current Constitution in November 2012 even though the description and emphasis in relation to its objects had changed markedly from the Former Constitution. Secondly, his Honour had already found that the principle reason for the change in the wording of the objects in November 2012 was to enhance the prospect of a taxation advantage as a charitable institution by increasing the focus on the promotion of trade and commerce and reducing the focus on the interests of members and of business.  However, his Honour found that the purposes of the appellant had not in fact changed as a consequence of the adoption of the Current Constitution.

2. The Judge stated that although he had taken into account the objects of the appellant as set out in both versions of its constitution, he had given greater weight to its activities and other objective evidence of its purposes in comparison to the objects contained in its past and present constitutions. 

3. Consistently with the latter observation, the Judge referred to a series of statements made by the appellant concerning its principal activities.  Those statements were drawn from the financial statements of the appellant and the highlights reports that it published.  The overall effect of these statements was that the appellant promotes the interests of its members and promotes the development of the commercial, manufacturing and industrial resources of South Australia and Australia, generally.  The appellant also stated that it had existed for over 175 years for “one reason,” being to “support South Australian businesses and employers…”  Promotional material directed to members or potential members included a description by the appellant of its “one purpose” as being “to serve our members within the business community of South Australia”.  His Honour also noted that the appellant frequently describes itself as “the voice of business”.

4. The appellant tendered 25 policy papers and submissions that it had made to the Commonwealth and State governments between 2009 and 2014.  The Chief Executive Officer of the appellant, Mr McBride, gave evidence that the appellant had made many more submissions.

5. The Judge found that the policy papers and submissions prepared by the appellant served a range of purposes.  Many of the submissions were directed at the twin purposes of advancing trade and commerce in South Australia and advancing the interests of South Australian businesses.  His Honour found that a policy paper produced in 2009 was directed to advancing trade and commerce generally in South Australia. However, seven submissions made to the Commonwealth and State governments between 2012 and 2014 were directed predominantly towards advancing the partisan interests of South Australian businesses.  Seven submissions made by the appellant to the Fair Work Commission between 2009 and 2014 were also directed to advancing the partisan interests of South Australian employers.  I note that those submissions dealt with such matters as the modernisation of awards and the setting of wages.

6. The Judge observed that the submissions made by the appellant that were directed prominently or partially to advancing the partisan interests of South Australian businesses usually introduced the appellant as representing South Australian businesses.  His Honour set out the terms of a typical introduction included in such documents.  His Honour also observed that the appellant frequently described itself as “the State’s leading business membership organisation” or “[an organisation that] represents businesses through direct membership” or “[playing] a lead role in advocating on key issues affecting [its] members”. 

7. After surveying this material, the Judge found that there were some policy papers and submissions included amongst the tendered documents that were directed to the advancement of trade and commerce in South Australia generally.  However, the overall majority of the papers and submission were directed prominently to advancing the partisan interests of South Australian businesses.

8. The Judge considered the position descriptions of personnel working in the appellant’s policy advocacy area.  The position descriptions focused on advancing the interests of businesses rather than advancing trade and commerce.  Thus, for example, the primary objective of the position of the Director of Policy was recorded as being to “formulate policy on behalf of the South Australian business community”.  Similarly, the position descriptions of the policy advisors and senior policy advisors recorded their primary objective as being to “represent the interests of South Australian businesses”.

9. The Judge expressed the view that in a government regulated market economy there are four main participants.  These are business enterprise, employees and consumers comprising the market economy, and the government which regulates it.  His Honour stated that each participant in the market economy is dependent upon the others and in that sense they operate collectively.  Thus, for example, most business enterprises could not operate without employees to undertake the necessary work or consumers to purchase their goods or services.  His Honour stated that in another sense, the interests of business enterprises are opposed to the interests of employees and consumers.  Employees have an interest in maximising wages and consumers have an interest in minimising prices, whereas business enterprises have an interest in minimising wages and maximising prices.

10. The Judge expressed the view that if consumers formed a lobby group to advance their interests vis a vis business, such a lobby group would not have a charitable purpose.  Similarly, if employees formed a lobby group to advance their interests against business, the lobby group would not have a charitable purpose.  Most significantly for the present purposes, his Honour stated that if business enterprises formed a lobby group to advance the interests of business vis a vis consumers and employees, that group would not have a charitable purpose.

11. The Judge held that there is no doubt that the appellant represents businesses.  It describes itself as “the voice of business” and its trading name is “Business SA”.  The appellant’s corporate name is the South Australian Employers’ Chamber of Commerce and Industry Inc.  Its members comprise only businesses and employers.  His Honour observed that the natural probable expectation is that when it undertakes policy advocacy the appellant seeks to advance the interests of businesses.

12. Despite those findings, the Judge also held that it would be possible for a chamber of commerce to structure its activities so that it sought to advance trade and commerce as a higher goal in disregard of the self-interests of its members to advance the interests of businesses.  His Honour posited the example that a chamber might adopt a formal policy, whether in its constitution or by way of resolution, that its policies and advocacy were to be determined having regard to the advancement of trade and commerce rather than the interests of members or businesses.  In order to implement such a policy, a chamber might create a committee to oversee its policy advocacy activities.  One or more members might be appointed to that committee who do not participate in business and who have no interest in the advancement of businesses but do have an interest in the advancement of trade and commerce, whether that be as an employee, a consumer or a neutral person.  In that respect, the chamber could emulate bodies formed to decide on disciplining members of professions.  While the existence of such a mechanism would not necessarily ensure that the dominant purpose of a chamber was to advance trade and commerce, it would be an important consideration in the overall assessment.

13. The Judge noted that the appellant had not taken any steps of that type.  While a non-member was now eligible to be appointed to the board, this had not happened. Neither the board nor a general meeting of members had adopted a formal policy to advance trade and commerce in the manner canvassed by the Judge.  No mechanism existed to ensure that the policies and submissions of the appellant were to be made by reference to the criterion of advancing trade and commerce.  While the absence of such mechanisms was not decisive, it was an important consideration in the overall assessment.

14. The Judge identified the relevant question as not whether a chamber of commerce could have a dominant purpose of advancing trade and commerce by policy advocacy, but rather whether the appellant had proved that it had such a purpose.

    Assessment by the Judge of the appellant’s policy advocacy

15. The Judge conducted what he described as a holistic assessment to determine whether the appellant’s policy activities were to advance trade and commerce or to advance the interests of members or businesses.  His Honour also considered whether a dominant purpose was advancing trade and commerce, with advancing the interests of members or businesses being a subsidiary or minor purpose.

16. The Judge rejected the submission by the respondent that the appellants purpose was to advance the narrow personal interests of its members at the expense of, or in disregard of, the interests of businesses in South Australia.  His Honour accepted that insofar as the appellant’s purpose might have been to advance the interests of members, it was to advance the wider interests of businesses in South Australia of which its members were representative.  His Honour also observed that if this was the dominant purpose of the appellant it would have still have been indirectly advancing the interests of members and its purpose would not have been charitable.

17. After considering all of the evidence, his Honour found that the primary purpose of the appellant was to advance the interests of businesses in South Australia.  Its purpose of advancing trade and commerce was secondary to that primary purpose.  His Honour held that the appellant, who bore the onus of proof, had not satisfied him on the evidence that its dominant purpose in undertaking policy advocacy was to advance trade and commerce.  The manner in which the appellant held itself out to members, prospective members and government demonstrated that its primary role in undertaking policy advocacy was as the voice of business in South Australia.  The submissions that it had made confirmed that fact.  Moreover, membership of the appellant was only open to businesses and employers.

18. Mr McBride, gave evidence that the appellant viewed its purpose or mission as the economic development of South Australia.  It was prepared, where necessary, to upset and lose members if it believed that it was better for the economy overall to take a particular position.  That led to the resignation of members.  The Judge held that the first part of this evidence was not admissible. His Honour also did not accept it as evidence of the appellant’s purposes for the reasons previously given.  Such evidence would not cause his Honour to reach a different conclusion or to outweigh the objective evidence noted above.  Mr McBride and Mr Tremaine each gave evidence that in their view the purpose of the appellant was to support and promote not just the interests of its members but that of all businesses in South Australia.  His Honour held that the observation he had made about the weight to be given to the evidence of Mr McBride also applied to this evidence.  Moreover, the evidence did not necessarily support the appellant’s case.

19. The appellant sought to draw support from the decision of Chaney J of the Supreme Court of Western Australia in Re Chamber of Commerce and Industry of Western Australia (Inc) and Commissioner of State Revenue.[34]  In that case Chaney J concluded that the main purpose of the WA Chamber was charitable.  The Judge distinguished the Western Australian case on its facts.  In the present proceedings the appellant failed, not because it was not possible that policy advocacy activities by a chamber of commerce may be for the dominant purpose of advancing trade and commerce, but because the appellant had failed to prove that matter as a question of fact.

    [34] (2012) 89 ATR 797.

20. The Judge also distinguished the decision of the Victorian Supreme Court in Law Institute of Victoria v Commissioner of State Revenue.[35]  The Victorian Commissioner had accepted that some of the objects and activities of the Law Institute had a charitable purpose.  It was accepted that the policy advocacy by the Law Institute was altruistic in nature and non-partisan.

    [35] [2015] VSC 604.

21. The appellant also placed general reliance on several other authorities.  I will refer to those cases later.   At this point it is sufficient to note that in none of the cases relied upon by the appellant did the relevant institution undertake policy advocacy.  The institutions considered in those authorities also generally did not have a partisan interest. 

22. The Judge concluded his analysis of the policy advocacy activities undertaken by the appellant with the finding that, on the evidence adduced, the primary purpose of the appellant’s policy advocacy activities was the advancement of the interests of South Australian businesses.  His Honour was not satisfied that the dominant purpose of the policy advocacy activities was the advancement of South Australian trade and commerce generally.  In that respect, the appellant had not discharged its onus of proof.

    Member services activities

23. The appellant contended that the provision of the services to members referred to at [31] comprises the advancement of trade and commerce and is a charitable purpose in itself.  The assistance of members enhances trade and commerce generally.  The appellant submitted that by providing services to members that assisted them to conduct their businesses in trade and commerce, there was an enhancement of trade and commerce in South Australia to the advantage of the entire South Australian community.  The respondent contended that the appellant’s purpose in providing free services to members was simply to provide its members with a benefit.

24. The Judge was not satisfied that the purpose of the appellant in providing services to its members was to enhance trade and commerce in South Australia.  His Honour reached that conclusion for several reasons.  First, when considered in the abstract, provision of services by the appellant to its members might improve the profitability of members’ businesses to their own advantage, while not being to the advantage or even being to the disadvantage of the South Australian economy and trade and commerce generally.  The Judge noted that there was no evidence before the Court on which he could find that the appellant’s purpose in providing member services was for the ulterior purpose of advantaging the South Australian economy and trade and commerce generally as opposed to assisting individual members who received the services.

25. The second basis upon which the Judge was not satisfied that the appellant’s purpose in providing services to members was to enhance trade and commerce in the State was that if the appellant was correct in its contention that providing the services to a particular business for use in the operation of its business was for the assistance of the economy and trade and commerce generally, that could be said of any institution which provides products or services to business.  The mere fact that goods and services are provided to a business does not mean that they are provided for a charitable purpose.

26. The third basis for the finding by the Judge was that the appellant’s highlights reports and the material it provided to members and prospective members suggested that its purpose in providing member services was simply to assist members and provide them with a benefit in return for their membership fees and also to attract prospective members.  The Judge acknowledged that promotional material of this type would naturally tend to emphasise the benefits of membership, however, the way in which the appellant referred to services to members remained evidence of its purpose in providing those services.

27. The Judge found that there was no evidence adduced before him that satisfied him on the balance of probabilities that the dominant purpose of the appellant in providing services to members was to advance the South Australian economy and trade and commerce.

28. The Judge found that the evidence given by Mr McBride, that the appellant regards all personnel as contributing to policy, did not assist the appellant.  First, this evidence did not establish that the primary reason that staff not working in the policy advocacy area (e.g. those providing member services) was to inform the appellant’s policy advocacy work as opposed to providing services to members.  Secondly, Mr McBride stated that the appellant regarded everyone working for it as an advocate for business and employers.  That is not itself a charitable purpose.

29. The Judge concluded, on a standalone basis, that the evidence did not satisfy him that the dominant purpose of the appellant in providing member services was the advancement of South Australian trade and commerce generally.  Thus, the appellant had not discharged its onus of proof.

    Commercial services

30. The appellant contended that its purpose in selling the commercial services referred to at [31] to businesses was the advancement of trade and commerce, and that was a charitable purpose in itself.  By selling services to businesses that assisted them in conducting their businesses in trade and commerce, South Australian trade and commerce were enhanced to the benefit of the entire community.  In response, the respondent contended that the appellant’s purpose in selling commercial services to members was to provide them with a benefit, while its purpose in selling services to non-members was to subsidise the provision of services to members at a discount. 

31. The Judge observed that in selling commercial services to businesses the appellant competed with other providers of the same services and products.  That was apparent from the internal marketing activity plan created by the appellant in 2009 which identified five other membership based associations selling services in competition with the appellant.  The evidence was also clear that the appellant competed with commercial providers of services in addition to membership based associations.

32. By competing in the market economy for the supply of goods and services, the appellant was itself engaging in trade and commerce.  There was no evidence adduced that when the appellant sold services to non-members that was done below cost or market value or on a basis subsidised by the appellant.  There was no basis upon which the Judge could find that the appellant knew whether it was making or going to make a surplus or deficit on the sale of services to non‑members or even to members.

33. For these reasons, the Judge was not satisfied that the principle purpose of the appellant in selling commercial services was to enhance trade and commerce in South Australia to the advantage of the community.  As with the provision of member services, there was no evidence upon which the Judge could find that the purpose of the appellant in selling commercial services was for the ulterior purpose of advantaging the South Australian economy and trade and commerce generally, rather than assisting the businesses to whom the services were sold.

1. To like effect, Lawrence LJ also noted that it was common for a charitable institution to offer privileges and benefits that were not charitable in order to obtain funds for the purpose of carrying out its objects.  His Lordship observed at page 638 that “[m]any charitable institutions, in return for annual subscriptions or donations, offer special benefits to the persons who become their members.”  The fact that the members in this case obtained certain privileges did not militate against the purpose of the Society being charitable.

2. The ratio of the Court of Appeal in Yorkshire Agricultural Society is found in the observation by Atkin LJ at page 631, where his Lordship said “if it were a substantial part of the object that it should benefit its members I should think that it would not be established for a charitable purpose only”. However, it is clear from the judgments that an institution may offer benefits to its members for the incidental purpose of attracting and retaining members. That action facilitates the charitable work of the institution. These principles are of central importance in this case.

   Crystal Palace Trustees v Minister of Town and Country Planning[69]

   [69] [1951] Ch 132.

3. The issue in Crystal Palace Trustees was whether certain land held under statute was subject to a charitable trust.  The relevant legislation provided that the purpose of the statutory trust was “the promotion of industry, commerce and art”.  The property was administered by the trustees to provide recreation and amusements to the public at a low cost.

4. Danckwerts J held at page 142 that the statutory intention in providing the objects of the Trust was that the promotion of industry, commerce and art was to be of benefit to the public rather than the furtherance of the interests of individuals engaged in those activities.  Promotion of industry and commerce in general is a public purpose of a charitable nature within the fourth class in Pemsel. 

5. In my view, the judgment of Danckwerts J leaves no doubt that if the purpose of the Trust had been to further the interests of individual participants in industry or commerce then his Lordship would have held that the Trust was not charitable.

   Hadaway v Hadaway[70]

   [70] [1955] 1 WLR 16.

6. The issue before the Privy Council in Hadaway was the validity of a testamentary trust.  The testator had bequeathed the residue of his estate upon trust for the purpose of establishing a bank with the object of assisting planters and agriculturalists in St Vincent by providing low interest loans.  The Privy Council held that while the promotion of agriculture was a charitable purpose, in this case the public benefit was too speculative and remote for it to be regarded as charitable. 

7. The relevance of Hadaway to this appeal is that the benefit to the community which flows from the promotion of the advancement of business is generally regarded as too remote from the advancement of trade and commerce to fall within that head of charity.

   Commissioners of Inland Revenue v Oldham Training and Enterprise Council[71]

   [71] (1996) 69 TC 231.

8. The first main object of the respondent in Oldham Training and Enterprise Council was to promote vocational education and the training. The second main object was to promote industry, commerce and enterprise of all forms for the benefit of the public in or around Oldham.  An ancillary object was to develop, secure and provide training and other support services and advice to and for new and local small businesses.  Subsequently a further subsidiary object was added, that being to promote the development of existing businesses and the establishment of new businesses. 

9. The enterprise services provided by the Oldham TEC included the giving of information and advice to business, the provision of diagnostic services in the form of an assessment of a business’s strengths and weaknesses and opportunities for development, business skills training in areas such as planning, financial management and the identification of new markets.  The Oldham TEC also provided business start-up services in the form of a free enterprise training program for anyone thinking of setting up a new business, and a cash allowance of up to £60 per week for people starting new businesses who met certain criteria, up to a maximum of £2,800 for any one individual.  The TEC also trained young people for work and re-trained the unemployed.  Apparently, much of this work was funded by government grants.

10. Lightman J held at page 250 that to fall within the fourth class in Pemsel the purpose of an institution must be to benefit the public generally, as opposed to individual members of the community, although the fulfilment of the purpose “either directly or indirectly incidentally may benefit such individuals”.  The public may include a section of the public.

11. Lightman J held at page 251 that it was necessary to consider the memorandum of association and also what had been done by the Oldham TEC in pursuing its objects.  The motives of the founders and how they intended that the Oldham TEC should operate were irrelevant.  Some of the objects of the Oldham TEC were indisputably charitable.

12. Lightman J concluded that the object of “promoting trade, commerce and enterprise”, together with the ancillary object of providing support services and advice to and for new businesses, permitted the Oldham TEC to promote the interests of individuals engaged in trade, commerce and enterprise and allowed the Oldham TEC to provide support and services to them.  While these activities may be intended to make the recipients of assistance more profitable, and thereby improve employment prospects in Oldham, the existence of those objects which permitted the conferral of private benefits disqualified the Oldham TEC from having charitable status.  The benefits conferred upon the community were too remote.

13. In Oldham Training and Enterprise Council Lightman J drew a clear distinction between an object or purpose of assisting individual businesses, and one of assisting trade, commerce and industry.  While the provision of a benefit to individual businesses may improve local employment prospects, the benefit to the community was too remote for the activity to be regarded as charitable.

    Royal Australasian College of Surgeons v Federal Commissioner of Taxation[72]

    [72] (1943) 68 CLR 436.

14. The issue before the High Court in Royal Australasian College of Surgeons was whether the College was a scientific, charitable or public educational institution.  If so, it was exempt from income tax.  The College was a non-profit institution.  Its objects included cultivation of the highest principles of surgical practice and ethics, promoting the practice of surgery by securing the improvement of hospitals and hospital methods, arranging for post-graduate surgical training and the conduct of the examination of candidates for admission as fellows, promotion of research in surgery, bringing together surgeons for scientific discussions and practical demonstration, and maintenance of a library and publication of works that may promote its objects. A particular activity of the College was the holding of conferences about surgical matters. The Court noted that fellowship of the College was not a qualification to practice surgery.

15. The Commissioner submitted that the College had an object other than the promotion of surgical science, that being the promotion of the professional interest of its members.  The Commissioner submitted that this object was not subsidiary to the promotion of surgical science. In other words, one of the principal objects of the College was said not to be charitable.

16. In separate judgments, Latham CJ, Rich and Starke JJ held that the main or real object of the College was the promotion and advancement of surgery.  Its other objects were merely incidental to the main object.  The fact that some of the incidental objects may indirectly benefit surgeons did not defeat the exemption of the College from income tax.  It is clear that each member of the Court undertook a holistic assessment to determine the main or real object of the College. However, in conducting that holistic assessment the judges took into account the wide range of functions performed by the College.

    Federal Commissioner of Taxation v Triton Foundation[73]

    [73] (2005) 147 CLR 362.

17. Triton had been incorporated as a company limited by guarantee following an initiative sponsored by the Commonwealth government.  Its constitution indicated that its main and overarching object was to promote a culture of entrepreneurship for the ultimate benefit of Australian society.  It received money from an individual and from two State governments.  It focused its attention on inventors, especially those with ideas that were most likely to have commercial success.  Triton provided advice on matters of commercial concern to inexperienced inventors.  It also provided a means for an inventor to self‑assess their commercial knowledge.  Its case managers reviewed applications for assistance and gave guidance.  Where appropriate, applications for assistance were assessed by a panel of experienced volunteers.  Triton also provided media exposure to the concept of innovation.  In conjunction with the State government, Triton ran a competition for innovation among children at government schools and also participated in a national award program for inventors.  The services provided by Triton were free, although in the future it might find it necessary to charge for some services if grants from State governments were to be reduced.

18. The Administrative Appeals Tribunal (“AAT”) held that Triton was a charitable institution and thus exempt from income tax.  On appeal to the Federal Court, the Commissioner submitted that Triton’s broad object of “promoting a culture of innovation and entrepreneurship in Australia” was too vague and imprecise to fall within the spirit and intendment of the preamble to the Statute of Elizabeth.  The community, as distinct from individual inventors, only had a hope of being benefited.  Any benefit to the community was incidental to the advantages obtained by the individual inventors.  Because Triton’s activities focused on assisting innovators to commercialise their ideas, and its services were limited to those innovators who showed commercial potential, the Commissioner submitted that Triton was not a charitable institution.  The Commissioner also submitted that Triton’s services were more akin to those of a consultant providing service to its clients rather than a charitable institution.  Although the purpose of promoting innovation in commerce and industry was capable of being charitable, Triton was not a charitable institution due to the way in which it sought to carry out its purpose.  In the alternative, the Commissioner submitted that Triton was not a charitable institution because its real purpose was to benefit individuals. 

19. Kenny J held at [32] that the promotion of an aspect of commerce was capable of being a charitable object, and was within the spirit and intendment of the preamble to the Statute of Elizabeth.  Kenny J also rejected at [33] the Commissioner’s contention that Triton’s objects were too vague and imprecise, and the benefit to the community too remote, to qualify for charitable status.  His Honour held that, broadly speaking, the objects and activities of Triton were to promote commercial activity of a particular kind.  Kenny J also rejected at [35] the Commissioner’s contention that Triton’s services were not available to all members, or a relevant section of the public, without discrimination.  Anyone was entitled to seek advice and assistance, although resource intensive help was limited to those inventors that were likely to be the best exemplars of innovation.  The mere fact that a charitable institution focuses greater resources on one class of persons than another, did not necessarily lead to the conclusion that the body was in the nature of a club.  On this basis, Kenny J confirmed the decision of the AAT that Triton was a charitable institution.

    Navy Health Ltd v Federal Commissioner of Taxation[74]

    [74] (2007) 163 FCR 1.

20. Navy Health was incorporated as a non-profit company limited by guarantee.  It was registered as a restricted membership organisation under the National Health Act 1953 (Cth). It had succeeded to the business of providing health insurance previously operated by an unincorporated registered association. In several respects, the health insurance benefits provided by Navy Health were especially beneficial to serving members of the Australian Defence Forces, in that benefits were offered which were not generally available. Navy Health sought to provide particular benefits to Naval personnel. Its promotional efforts were concentrated amongst Naval personnel and their families. Nevertheless, the business of Navy Health was conducted in a commercially conventional way and its premiums were at commercial rates. The members received no benefits other than those fairly reflected in their premiums. During the relevant period, civilians comprised something less than 10% of the members of Navy Health.

21. Jessup J held at [56] that a gift to provide aid, comfort and encouragement to serving members of the armed forces, retired members or their dependents promoted the efficiency of the armed forces.  Thus, it was for a purpose beneficial to the community and charitable.  The fact that Navy Health conducted its business in a commercially conventional way did not preclude its activities from being charitable.  However, a body would not be a charitable institution if it has a non‑charitable objects which are more than merely incidental or ancillary to its main charitable objects. 

22. Jessup J made the following observation concerning the identification of an object as being ancillary or incidental to a main object, and also the effect of that characterisation on the charitable status of the institution.  His Honour stated:[75]

    When the courts have described objects of an institution as ancillary, incidental or concomitant to a main object, they have not meant that the lesser object was merely a minor one in quantitative terms.  Rather, they have required that object not to be of substance in its own right, but only to be something which tends to assist, or which naturally goes with, the achievement of the main object.  Thus in Salvation Army, it was held that trading in the inevitable produce of a training farm established for delinquent boys did not mean the lands in question were not used exclusively for charitable purposes.  Thus in Yorkshire Agricultural Society the receipt of private benefits by members — free admission to shows, access to reading rooms, reduced fees for analysis of manures and foodstuffs, special railway facilities, and the like — were held not to disqualify the society from being regarded as charitable.

    [75] Ibid at [65].

23. Jessup J held at [71] that the provision of benefits to persons other than serving or retired defence force personnel or their dependents was a non‑charitable object that was more than merely incidental or ancillary to the main objects of Navy Health.  On that basis, his Honour held that Navy Health was not a charitable institution.

    Commissioner of Taxation v Word Investments Limited[76]

    [76] (2008) 236 CLR 204.

24. Word Investments was incorporated as a company.  It accepted deposits of money from members of the public who received little or no interest in return.  Those funds were invested by Word at commercial interest rates.  Word also operated a funeral business on a commercial basis.  Profits from those two activities were given to a Christian missionary organisation.  Gummow, Hayne, Heydon and Crennan JJ held that:[77]

    …it is necessary to examine the objects, and the purported effectuation of those objects in the activities, of the institution in question.  In examining the objects, it is necessary to see whether its main or predominant or dominant objects, as distinct from its concomitant or incidental or ancillary objects, are charitable.

    [77] (2008) 236 CLR 204 at [17].

25. Their Honours also noted that it would not be enough that the purpose, or main purpose, of an institution were charitable if it had ceased to carry out that purpose.

26. Gummow, Hayne, Heydon and Crennan JJ observed that Word Investments had only one group of objects, being to advance religious charitable purposes. It also had powers to carry out those objects.  Their Honours held at [26] that the activities of Word Investments in raising funds by commercial means were charitable because those activities were carried out in furtherance of its charitable purpose.  Word only sought to make a profit in aid of its charitable purposes and did not have a commercial object of profit that was an end in itself. 

    Tasmanian Electronic Commerce Centre Pty Ltd v Commissioner of Taxation[78]

    [78] (2005) 142 FCR 371.

27. The appellant (“TECC”) in Tasmanian Electronic Commerce Centre was a company limited by shares. The only shareholders were the State of Tasmania and the University of Tasmania.  The TECC had started with money provided by the Commonwealth Government.  That money had come from the sale of Telstra.  The purpose of the Commonwealth funding was to assist regional, rural and remote communities to identify their communication needs and to develop projects to meet those needs.  While it had been intended that the TECC would be self-funding, it continued to rely on Commonwealth funding. 

28. The business plan of the TECC stated that its objectives were to assist Tasmanian industries to establish themselves in the international electronic marketplace, research and develop information systems and business infrastructure to enable small to medium size enterprises to enhance and transform business processes, accelerate the adoption of electronic commerce in Tasmania and become viable as a self-funding body.

29. In pursuing these objects, the business plan envisaged that the TECC would engage in two types of activity.  One activity was whole of industries activities aimed at increasing the awareness and understanding of electronic commerce possibilities.  The second activity was specific to industry sectors.  This involved the TECC working with a particular industry group or enterprise to develop an electronic commerce system, marketing approach or idea, to the proof of concept stage only.

30. Heerey J noted at [60] and [61] that the combination of small population and long distances from markets and raw materials resulted in conventional manufacturing industry in Tasmania being at a disadvantage.  The Tasmanian economy trailed the rest of Australia.  The evidence showed that modern information technology could give a competitive edge to small and large Tasmanian firms.  Accordingly, the focus of the TECC was on the potential for business to develop without the restraints that had previously disadvantaged Tasmania.  In that sense, Heerey J considered that the objects of the TECC were clearly for the direct benefit of the public. 

31. Heerey J also observed at [63] that the receipt of public funding was not determinative of the question whether an institution was a charity, but it was certainly a relevant consideration, and particularly so in the case of the TECC.

32. There was no dispute in this case that assistance to business and industry could provide a public benefit of the kind that the law recognises as charitable.  On that basis, Heerey J held that the fact that individual businesses may benefit was not a disqualifying factor.  His Honour observed at [56] that “it would be an odd result if an institution established to benefit business could only qualify as a charity if the recipients of its benefits made losses or did no more than break even.”  Heerey J also observed that there had been no suggestion in Yorkshire Agricultural Society that the fact that farmers in Yorkshire may have increased their profits due to the work of the Society militated against the Society being a charity.  The only issue in Yorkshire Agricultural Society was whether the fact that members received benefits would result in the Society not being a charity.

1. Heerey J held that it was self-evident that benefits to the Tasmanian economy would be a benefit to the Tasmanian public.  A prosperous and productive private sector would generate profits and create employment, which would benefit individuals and also enable more taxes to be raised to provide essential public services.  For these reasons, Heerey J held that the TECC was a charitable institution.

   Canterbury Development Corporation v Charities Commission[79]

   [79] [2010] 2 NZLR 707.

2. The Canterbury Development Corporation (“CDC”) was funded from public sector sources.  The CDC included two teams.  One team was responsible for the economic development strategy for Christchurch and Canterbury.  The other team supported businesses that required a business advice service.  Ronald Young J held at [89] that there may be some ultimate public benefit from providing assistance to develop individual businesses, but the primary focus in that situation would be private benefit rather than public benefit.  Any commercial enterprise may provide jobs and generally contribute to the economic wellbeing of their society but they are not charities.  His Honour also observed at [91] that where an institution is concerned with the promotion of economic development, the focus must be directly on the promotion of public development as the primary object.  The object will only be charitable where the assistance to individual businesses is truly ancillary to the main purpose of economic development.  Ronald Young J found that the assistance provided by the CDC to business was not collateral to its purposes but a central element.  The purpose of the assistance was to make the business more profitable.  The CDC believed that this assistance would, in turn, benefit the local community.  However, the central focus remained on increasing the profitability of businesses and not on the public benefit.  Thus, the CDCC was not a charitable institution.

   Re Queenstown Lakes Community Housing Trust[80]

   [80] [2011] 3 NZLR 502.

3. The Queenstown Lakes Community Housing Trust had been established by the local council because of a concern that housing affordability was affecting the ability to attract and retain key workers vital to the functioning and operation of the community.  The Trust operated a program where it and the successful applicant would each own a defined percentage share of a house.  The percentage interest varied in accordance with what the owner could afford to pay towards the purchase price by way of deposit and mortgage finance.  The balance of the cost would be met by the Trust.  Various criteria were applied to determine eligibility to participate in the scheme.  The criteria included a household income test and a requirement that the applicant must pay a minimum deposit of 5% of the purchase price and at least one member of the family must be employed locally.

4. Mackenzie J agreed with the analysis of Ronald Young J in Canterbury Development Corporation, to the effect that a gift which confers a private benefit on a private business, which ultimately, it is hoped, might benefit a community, is not a charitable purpose. His Honour also stated at [57] “that while the promotion of an industry within which a private business is engaged may potentially be a charitable purpose, the manner of promotion is also relevant to whether it is a charitable purpose.” His Honour noted that although assistance to business and industry can provide a public benefit which will be recognised as charitable, not every assistance to business and industry which provides a public benefit will be charitable. His Honour stated at [67] “[t]he fact that the assistance is provided by means of assistance to individual businesses may preclude a finding of charity”.

5. Mackenzie J distinguished, on the one hand, Triton Foundation and Tasmanian Electronic Commerce Centre from, on the other hand, Canterbury Development Corporation.  The basis of the distinction identified by his Honour was that in the former two cases assistance was provided to individual businesses by way of advice and assistance with specific issues, whereas in the latter case the focus was on the development of individual businesses in the hope that their success would be reflected in the economic well-being of the region.

6. Mackenzie J held at [75] that the fact that participants in the scheme were selected because of the contribution they could make to the wellbeing of the local community did not confer on the community a sufficiently tangible and clearly defined benefit so as to bring the scheme within the fourth head of charity.