Re COUNCIL OF THE DOMINICAN SISTERS OF AUSTRALIA and COMMISSIONER FOR ACT REVENUE COLLECTIONS

Members:
RK Todd

Tribunal:
Administrative Appeals Tribunal

Decision date: 14 January 1991

---

RK Todd (Deputy President)

This is an application for review of an objection decision of a Delegate of the Commissioner for ACT Revenue Collections (``the respondent'') dated 29 March 1990 disallowing objections against assessments of payroll tax for the financial years 1 July 1982 to 31 July 1987 inclusive. The applicant had objected to the assessments on the basis that as a religious institution it was entitled to the exemption contained in s. 13(b) of the Pay-roll Tax (Territories) Assessment Act 1971 (``the Act'').

2. In 1958 the amalgamated Congregation of the Dominican Sisters of Australia (``the Order'') came into being by Vatican Decrees. Pursuant to Article VII of the Fundamental Constitution of the Order, the official work of the Order is:

``... to conduct and teach in educational establishments of all types according to the law and mind of the Catholic Church and the needs of the people of God both in Australia and in the Solomon Islands.''

Articles 29 and 31 state further that:

``29.... The fields of work in which the Sisters may be engaged include: - Catechetics, Pre-Primary, Primary education, Secondary education, Tertiary education, Specialised education (e.g. for blind, deaf or retarded children), Foreign Missions, Motor Missions, Adult education, Home Management, Secretarial work, Administration, Nursing of the sick and aged, Librarianship.

31. The Congregation, in answering to a call from the Church and in response to an invitation from the Bishops, engages in primary, secondary, tertiary education and special schools for the mentally retarded, visually impaired and deaf children, catechetic education of children in state schools and related educational activities. The Congregation, sensitive to the changing needs of the Church, is ready, when necessary, to give new form to its activities for the better fulfilment of the educational mission of the Church.''

In 1958 the Order also wrote to the Catholic Archbishop of Canberra and Goulburn for his approval to establish the Generalate of the Order in Canberra. This involved building, amongst other things, the Sisters' Generalate and Training School. The Archbishop made an appropriate application to the National Capital Development Commission for a site in Dickson for this purpose. Approval was granted and construction of Signadou College was commenced.

3. On 24 December 1962 Articles of Association and a Memorandum of Association to form a company limited by guarantee were completed. The company was to be known as ``The Council of the Dominican Sisters of Australia'' (``the Corporate Council''). On 22 January 1963 the then Minister of State for the Interior Mr Gordon Freeth, acting for and on behalf of the Attorney-General of the Commonwealth of Australia, granted the applicant a licence to be registered as a company with limited liability without the addition of the word ``Limited'' to its name. This was stated by the Minister to be on the footing that the company was ``being formed for the purpose of promoting religion and education in the Australian Capital Territory, in particular by the conduct of a teachers' training college at which members of teaching orders of nuns of the Roman Catholic Church... will be instructed in the art of teaching...''. On 12 February 1963 the applicant was incorporated in the Australian Capital Territory as a public company under the Companies Act 1962. Clause 39 of the Memorandum of Association sets out the objects for which the company was established. These included the following:

``a) To promote religion and education in the Australian Capital Territory and elsewhere in the Commonwealth of Australia and Territories under the control of the Commonwealth.

b) To conduct in the Australian Capital Territory a teacher's training college at

---

ATC 2012

which members of Teaching Orders of Nuns of the Roman Catholic Church will be instructed in the art of teaching.

c) To establish maintain and conduct a school or schools for the education of children.

d)...

e) To purchase take on lease or in exchange hire or otherwise acquire any real and personal estate which may be deemed necessary or convenient for any of the purposes of the company provided that in case the company shall desire to hold more land than the law shall for the time being permit it to hold without licence such licence shall be obtained.

f) To construct maintain and alter any houses buildings or works necessary or convenient for the purposes of the company.

g)-i)...

j) To sell manage lease mortgage dispose of or otherwise deal with all or any part of the property of the company.

k) To borrow and raise money in such manner as the company may think fit.

l) To invest any moneys of the company not immediately required for any of its objects in such manner as may from time to time be determined.

m) To do all such other lawful things as are incidental or conducive to attainment of the above objects.''

The Memorandum of Association was altered on 14 October 1980 by substituting the following in lieu of Clause 3(b):

``3(b). To conduct in the Australian Capital Territory a teachers' college for the education of men and women to staff primary and secondary schools especially, but not exclusively, within the Catholic system of education in Australia.''

Accordingly, the construction of Signadou College was closely linked to the pursuit of these objects.

4. The ultimate governing body of the Order is the Council of the Generalate (``the Generalate Council''). Its membership comprises the Prioress-General and two other Dominican sisters as councillors. The Generalate Council is responsible for the overall work of the whole of the Australian Congregation. Article 36 II of the Fundamental Constitution of the Order states in relation to Signadou College:

``The Teacher's College will have its own Council, comprising Mother Prioress General or her representative, the Principal, two members of staff (at least one lay) and at least two more members experienced in the fields of education and finance.

The Principal will be responsible for:

• a. consultation with the General Advisory Commission on Education re the design of the Teacher's College Courses and the recruitment of Dominican Sisters for the Teacher's College Staff.
• b. recruitment of other Staff (other Religious, lay).
• c. supervising the day to day organisation of the College.
• d. submitting to the Bursar General the annual College budget.
• e. holding staff meetings regularly.''

5. Sister Grace Belcher, who was the Secretary of the Corporate Council from 1985 to 1987, stated in her evidence-in-chief that the Generalate Council was responsible for the administration of Signadou College. On educational matters, the Generalate Council was assisted by the Signadou College Council (``the College Council'') established pursuant to Article 36 II. Sister Grace explained that the three members of the Generalate Council and of the Corporate Council were the same three people:

``... [the Corporate Council] was drawn up simply for the purpose of having a legal entity to hold property and it has no other function than that. Whoever were members, the elected members of the Generalate Council were by reason of their office also the members of that company [ie the Corporate Council].''

By the rules of the Order individual sisters are not entitled to hold property themselves - it must be held collectively. Accordingly, the role of the Corporate Council was to act as the legal entity of the Order for the purpose of holding

---

ATC 2013

the Crown leasehold on which Signadou College is and was at the relevant times situated.

6. Although the Generalate Council was responsible for the management of Signadou College, it delegated the actual work of management. The Prioress-General appointed the Principal of the College. The latter was responsible for the daily management of the College. In this both the Principal and the Generalate Council were assisted by the College Council fulfilling its advisory duties. Although the College Council advised on educational appointments, and the Principal was responsible for the conduct of interviews, the actual appointments were made by The Dominican Sisters of Australia (see Ex.L). I take this to mean the Corporate Council as the entity which acts on behalf of the Order in respect of legal matters.

7. At the relevant times Signadou College had a student population in the vicinity of 300 pupils and received Commonwealth Government funding as an establishment which trained teachers. During cross-examination Sister Grace indicated that that funding has always been conditional upon there being no requirement that students be of a particular religious belief, undertake religious units of study or have an intention to teach solely in the Catholic system. Sister Grace agreed with Mr P. Walker, representing the respondent, that throughout the period in question a greater proportion of time was spent teaching secular subjects as opposed to time spent teaching religious subjects. This feature is however apparently common to all Catholic Schools as a result of the manner in which government funding is granted. Sister Grace's evidence was that Signadou College differed from other teachers' colleges in that it also taught religion and trained teachers of religion. Qualified teachers also attend the College to update their qualifications specifically for the purpose of teaching in Catholic Schools.

8. In 1984 Mr L.J. Daniels became a lay member of the College Council. On behalf of the applicant he stated in evidence that from 1982 to 1987:

``... there was a company comprising the Dominican Sisters which, during that period, gave legal form, as it were, to the Sisters' need to conduct leases and to hold property and to make contracts... But, as far as the college was concerned, that company which was a company comprised of Sisters of the Dominican Sisters the distinction, if there was one, between the company and the college was nil...

The College had no separate existence, in the legal sense... There was no such legal being, no such legal creature as the College, as distinct from the creature which was the company which owned the College and which was the Dominican Sisters.''

Mr Daniels also emphasised the importance placed by the Catholic Church on the principle of religious involvement in education.

9. The relevant provisions of the Act during the period in question are as follows:

``s. 10. (1) Subject to, and in accordance with the provisions of, this Act, tax is payable in respect of all wages that are paid or payable by an employer on or after the commencing date and before 1 July 1978 (being wages in respect of services performed or rendered at any time) and -

• (a) are wages that are paid or payable in a Territory, not being wages so paid or payable in respect of services performed or rendered wholly in one of the States; or
• (b) are wages that are paid or payable elsewhere than in a Territory in respect of services performed or rendered wholly in a Territory or wholly in the Territories.''

``s. 13. Section 10 does not apply to wages paid or payable -

• (a)...
• (b) by a religious or public benevolent institution, or by a public hospital;
• (c)...
• (d) by a school or college (other than a technical school or a technical college) that -
  • (i) is carried on by a body corporate, society or association otherwise than for the purpose of profit or gain to the individual members of the body corporate, society or association; and

    ---

    ATC 2014

  • (ii) provides education at or below, but not above, the secondary level of education;
• (e)-(k)...''

10. At the hearing of this matter the applicant conceded that the relevant employer for the purposes of s. 10 was the Corporate Council. Since Signadou College provides education at the tertiary level the exemption from payroll tax provided by s. 13(d) is not applicable. The applicant's case was that it was entitled to the exemption provided for by s. 13(b). No suggestion was made by the applicant that should the Tribunal find that it was not entitled to the exemption claimed under s. 13(b), then the applicant was not the correct employer for the purposes of assessment of payroll tax pursuant to s. 10. No question arose as to whether the applicant was a public benevolent institution or not.

11. The issue before the Tribunal therefore is whether the applicant is entitled to claim an exemption from the payment of payroll tax because it is a ``religious institution''. This question was somewhat complicated by the composition and number of councils involved in the administration of the College: the Generalate Council, the Corporate Council and the College Council. During the period in question the College Council only had an advisory role and can therefore be removed from the picture. The Generalate Council is clearly a religious institution and if it were considered to be the relevant employer for the purposes of s. 10 of the Act would be entitled to claim the exemption provided by s. 13(b). The better view however is that the Corporate Council is the relevant employer for the purposes of the Act. This much was conceded by the applicant. The question is then whether the Corporate Council is entitled to claim and bear the shield of religion carried by the Generalate Council.

12. The evidence which emerged clearly enough during the course of the hearing was that the Corporate Council is the legal face of the Generalate Council. It is the legal entity which acts on behalf of the Generalate Council and was created to hold legal title to property on its behalf. Although this was understood to be the case, when it came to the administration of Signadou College it was not always clear which acts were those of the Corporate Council alone and which acts were those of the Generalate Council. For example, Sister Grace exhibited a degree of such confusion in her oral evidence:

``The D. President: Perhaps we could pursue this question of the lay employees to appoint somebody.

Sr. Grace: The principal would have had the duty of interviewing, of setting up interviews and that kind of thing, and then those appointments would have been approved by the council.

The D. President: By the generalate?

Sr. Grace: No, the Dominican Sisters Council.

The D. President: The generalate of council?

Sr. Grace: Yes.''

If the reference to the Dominican Sisters Council was a reference to the Corporate Council an inconsistency is apparent. The confusion can partly be explained on the basis that both councils consisted of the same members. On the basis of the evidence I accept that the Corporate Council was responsible for the administration of Signadou College on behalf of the Generalate Council.

13. Signadou College is an establishment which teaches both secular and religious units to students wishing to train as teachers. Some questions arose as to whether the nature of the activities of the College coloured the way in which the Corporate Council should be viewed. The issue which subsequently arose from this was whether the fact of pursuit of both religious and educational objects prevented the Corporate Council being considered to be a religious institution. On behalf of the applicant it was contended that the test was to be applied to the Corporate Council and not to the school. It was submitted therefore that the Corporate Council could be a religious institution notwithstanding that it managed an educational establishment. The fact that Signadou College was engaged in education did not derogate from the fact that the fundamental purpose of the Order was to pursue religion through education. The Corporate Council merely represented the legal means to this end.

14. On behalf of the respondent it was argued that religion has to be the dominant feature of the activities of an institution if it is

---

ATC 2015

to be considered to be a ``religious institution''. Accordingly, for this purpose, it was said to be insufficient that the pursuit of religion be merely incidental to a dominant, non-religious purpose, or that a non-religious purpose is pursued in accordance with religious principles: see
The Roman Catholic Archbishop of Melbourne v Lawler & Ors (1934) 51 CLR 1;
Glebe Administration Board v Commissioner of Pay-roll Tax (NSW) 87 ATC 4825 and
Keren Kayemeth Le Jisroel v Commissioners of Inland Revenue [1932] AC 650. Since there is no formal requirement that students of Signadou College undertake religious units of study or subsequently work in the Catholic School system, and since secular subjects predominate in any event, it was argued that even though the applicant does engage in some religious activities its primary purpose was education. This being the case it was not, it was argued, entitled to claim the exemption under s. 13(b) of the Act.

15. There was sufficient evidence before the Tribunal that the official work of the Order is the advancement of religion through education. This appears clearly from the Fundamental Constitution of the Order and was reiterated by oral evidence at the hearing. In practical terms this means the establishment of schools in which religion can be taught. Such schools need appropriately qualified staff. The establishment of a Catholic Teachers Training College like Signadou College is an integral component of this scheme. In turn, that College needs to employ individuals to train its students. If the Generalate Council were the relevant employer in this case there could be no doubt as to its entitlement to the exemption provided by s. 13(b) of the Act. Although the administration and educational programme of Signadou College is of necessity similar to that of many other tertiary institutions it should not be said that this prevents the entity which administers it from being regarded as a religious institution. Funding arrangements with the Commonwealth Government are such that the imposition on students of particular religious requirements or restraints by the College is precluded. Similarly, secular subjects must of necessity predominate over religious units of study if those who graduate from Signadou College are to receive recognised teaching qualifications. These features merely represent the practical aspects of the Order's goal of the advancement of religion through education. Of themselves they do not detract from what is the official work of the Order.

16. Similar reasoning can be applied to the Corporate Council. The Order may, by its Constitution, only hold property on a ``collective'' basis. The pursuit of its goal of advancement of religion through education involves the establishment of schools. In turn, this necessitates the acquisition of legal title to land on which such schools can be constructed. It was for this purpose that the Corporate Council was created, namely to act as the legal arm of the governing body of the Order, being the Generalate Council. The Corporate Council in this case can be distinguished from the administration board in the Glebe Administration Board case. In that case the board was involved in commercial work. In this case, the Corporate Council owns no other property other than the leasehold of the land on which Signadou College is situated, and it has no involvement in any other commercial activity. Its membership corresponds directly with that of the Generalate Council, so much so in fact that, as evidenced by the confusion in Sister Grace's evidence, it is difficult to differentiate between the acts of either when they are not categorised as strictly legal acts. Clearly then the Corporate Council was during the period in question the legal arm of the Generalate Council and for the purposes of the exemption, inseparable from it. The Corporate Council merely represented the legal means by which the Generalate Council gave effect to the underlying principles of the Order. It became clothed with the fundamental character of the Generalate Council which was that of a religious institution.

17. Accordingly, the Tribunal will set aside the decision under review and in substitution therefor decide that the applicant was at the material times a religious institution within the meaning of s. 13(b) of the Act.