Glebe Administration Board v. Commissioner of Pay-roll Tax (N.S.W.).

Judges: Priestley JA
McHugh JA

Lee AJA

Court:
Supreme Court of New South Wales (Court of Appeal)

Judgment date: Judgment handed down 18 September 1987.

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Lee A.J.A.

This is an appeal by the appellant from the decision of Rogers J. upholding the refusal of the Commissioner of Pay-roll Tax to allow the objections of the appellant to assessments of pay-roll tax under the Pay-roll Tax Act 1971 (as amended) for specified periods during the years 1971-1979. The appellant, hereafter referred to as the Board, in its objection to each assessment claimed (inter alia) that the wages, the subject of the assessment, were wages "paid or payable... by a religious institution" within the meaning of sec. 10(1)(b) of the Act and thus exempt from pay-roll tax. The "religious institution" was, in the notice of objection, stated to be either the Board, the Diocese of Sydney of the Church of England, or the Church of England in Australia.

I record here that the Pay-roll Tax Act 1971 was amended in a number of respects over the period covered by the assessments but for the purpose of dealing with the problem arising in the present case, it is unnecessary to refer to all those amendments. The categories of exemption established by sec. 10 were, however, extended by the Pay-roll Tax Amendment Act 1977 sec. 4 (Act No. 134 of 1937) by adding para. (j), (k) and (l) to sec. 10(1) and by making clear in subsec. (2) that in respect of those paragraphs the wages exempt were those "which are paid or payable to employees in respect of time when they are engaged in charitable work whether within the charity, society, institution or statutory body" referred to respectively in para. (j), (k) and (l). No such limitation was placed upon the exemption of wages paid or payable under sec. 10(1)(b) until the Pay-roll Tax Amendment Act 1979 Sch. 1(2) (Act No. 158 of 1979), which introduced subsec. (1A) into sec. 10. That subsection provided that in the case of a religious institution, sec. 10(1)(b) only exempted wages "paid or payable by a religious institution to a person in respect of time when the person is engaged in religious work of the religious institution". Analogous provisions were made in respect of the other bodies referred to in para. (b), (c) and (d) of sec. 10(1). The Act, however, was not assented to until 12 December 1979, and accordingly the amendment does not have any operation in respect of the assessments under consideration in the present case.

The Board is a body corporate constituted under the Church of England (Bodies Corporate) Act 1938 and it is not in dispute that the wages under consideration were, in fact, paid by the Board out of moneys received by it in carrying on, managing and controlling certain properties, to persons who were, pursuant to contract, employees of the Board.

The contention which the Board advances is that sec. 10(1)(b) gives exemption to the wages "paid or payable by" the religious institution, and that the Act makes a clear distinction between the exemption of wages from tax and the criterion for ascertainment of the persons who are liable to pay tax in respect of wages which are not exempt. In the latter case, as the Board acknowledges, that liability for tax falls upon the employer.

"Employer" is defined to mean "any person who pays or is liable to pay any wages and includes the Crown in right of the State of New South Wales": sec. 3(1). "Wages" means "any wages, salary, commission, bonuses or allowances paid or payable... to any employee as such...". Section 6 provides: "Subject to section 10, the wages liable to pay-roll tax under this Act are wages that are paid or payable by an employer after the month of..." Section 7 fixes the rate of tax on "all taxable wages". Section 8 provides: "pay-roll tax shall be paid by the employer to whom the taxable wages are paid or payable". Section 12 requires employers who pay or are liable to pay

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"any taxable wages" to register with the Chief Commissioner. Part IVA (introduced in 1977) makes provision for grouping employers for tax purposes in certain circumstances. Special provision is made in sec. 24 for substituted service to be affected on an employer in proceedings for recovery of tax. Provision is made for payment of tax by trustees and agents (sec. 27 and 42) and executors or administrators (sec. 28). Section 31 entitles the Commissioner in certain cases to collect tax from persons owing moneys to the employer. Employers registered or required to be registered must keep books (sec. 44).

Rogers J. in his careful analysis of the Act, and after examining other cases in which the operation of the Act has come under scrutiny, concluded:

"Consideration of the authorities satisfies me that what the Tax Act looks to is the payment of `wages' by an entity which is an `employer' to an `employee as such' within the meaning of the Tax Act. The only entity which satisfies the definition of `employer' is the plaintiff. Whether it uses monies owned by it beneficially or trust funds, it is the entity by whom the wages are paid or payable pursuant to the contractual arrangements which it makes with its employees."

He accordingly dismissed the appeal, it not being claimed in those proceedings that the Board itself was "a religious institution". For reasons which will appear later, I am of the opinion that the Board is not "a religious institution" within sec. 10(1)(b).

At the heart of the submission made on behalf of the Board is the proposition that the words "paid or payable by" when used in sec. 10 in relation to an "institution" and indeed, in relation to many of the bodies - to use a general word - referred to in the paragraphs of sec. 10 do not necessarily mean that the institution or body is in a contractual relationship of employer with the person who receives the wages, but merely mean that those wages, as a matter of fact, derive from the body being carried on for whatever is its purpose.

In order to consider the submission it is necessary first to examine the evidence in order to determine what is the "religious institution" to which sec. 10(1)(b) might be taken to refer and what part, if any, the Board may be said to play in the carrying on of that institution. As this requires an examination of the Church of England in Australia it is appropriate to consider first what is meant by a "church". "A church is a voluntary association which is charitable because it has as its object the practice of a lawful form of religion in accordance with lawful rules of the association":
The Solicitor-General v. Wylde (1946) 46 S.R. 83 at p. 98 per Jordan C.J. "In the ascertainment and enforcement of rights and liabilities among its members, a Church is regarded by the law in precisely the same light as any other society of men who have entered into association for lawful purposes... the social compact is at once the source and the measure of the rights of those who compose the body":
Macqueen v. Frackelton (1909) 8 C.L.R. 673 at p. 704 . The religious purposes of the Church of England are plainly expressed in the Church of England in Australia Constitution Act 1961 Sch. Chapter 1 - Fundamental Declarations. Articles 1, 2, 3, 4, 5 and 6.

The Church of England in Australia Constitution Act 1961 established the constitution of the Church in this country, and under that Act (sec. 4 and Ch. XII (sec. 71)) the Church of England Constitutions Act Amendment Act 1902 (except to the extent of any inconsistency with the provisions of the 1961 Act) prescribed the constitution for the State of New South Wales. Under the latter Act the dioceses already established are governed by a Synod. Article 3 provides:

"The Synod of each Diocese may make ordinances upon and in respect of all matters and things concerning the order and good government of the Church of England and the regulation of its affairs within the Diocese, including the management and disposal of all Church property, moneys, and revenues (not diverting any specifically appropriated, or the subject of any specific trust, nor interfering with any vested rights), except in accordance with the provisions of any Act of Parliament, and for the election or appointment of church-wardens and trustees of churches, burial grounds, church lands, and parsonages. And all ordinances of the Synod shall be binding upon the Bishop and his successors, and all other members of the Church within the Diocese, but only so far as the same may concern their respective rights, duties, and liabilities

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as holding any office in the said Church within the Diocese."

There are a number of dioceses in New South Wales. One of these is the Diocese of Sydney and for present purposes it is only necessary to view the structure of the Church by reference to the structure and organisation of that Diocese. The Synod of the Diocese has proclaimed an ordinance establishing a Standing Committee which elects the members to the appellant Board.

Apart from its religious purposes, the Church, that is the voluntary association, has property at its disposal which is vested in trustees holding the property for its religious purposes. Most of the property of the Church in New South Wales is held by property trusts established for each diocese and these property trusts are, by virtue of the Church of England Trust Property Act 1917, duly constituted as "bodies politic and corporate" by their respective names.

The Church of England Property Trust Diocese of Sydney, it would seem, acts as trustee of most of the Church's halls, rectories and other trust properties in the Diocese and the Church of England (Bodies Corporate) Act 1938 refers to other trust in respect of schools carried on by the Church. Religious education and training is offered and given by the Church as part of its overall purpose on property vested in the trustees for the purposes of the Church. There is some real estate which is vested in private trustees.

In order to see the relationship of the appellant Board to the voluntary association which is the Church of England, it is necessary to consider the position of the Board particularly in its relationship to the Standing Committee and Synod which are the two substantial elements in the Church structure, which administer the affairs of the Church. The Synod of the Sydney Diocese comprises approximately 800 lay and clerical representatives. It meets once a year. The Standing Committee of Synod comprises approximately 50 lay and clerical members who meet once a month except in January. The Standing Committee derives its function and powers from ordinances made by Synod. The Board was established by the Glebe Administration Ordinance of 1930. Under that Ordinance it was given the power (para. 13) of "managing and controlling" The St Philip's Glebe (comprising certain properties in Glebe), the St James' Glebe (comprising certain properties at Edgecliff and Waverley) and "such other Church property which it may be appointed a trustee". No property was actually vested in the Board in 1930, all the property it was to manage being, in fact, vested in the Church of England Property Trust Diocese of Sydney under the Church of England Trust Property Act 1917. The Church of England (Bodies Corporate) Act of 1938 constituted the Board a body corporate under the name Glebe Administration Board and vested in it the St Philip's and St James' Glebe. By resolution of the Standing Committee in 1963 the St Mark's Glebe (comprising certain properties in Randwick), the St John's Glebe (comprising certain properties at Parramatta) and the Bishopthorpe Estate (comprising certain properties at Glebe) were vested in the Board. The establishment of the Board as a body corporate did not affect the power of the Synod to make ordinances with respect "to the institution or organisation for the management, government or control of which the body corporate was constituted or with respect to any Church trust property vest in the body corporate" (sec. 10).

Paragraph 13 of the Glebe Administration Ordinance did not, however, give the Board any power of sale. Powers of sale of some of the properties vested in it were provided in separate ordinances. There was a separate ordinance giving power of sale in respect of each of the four Glebes in the Board, during the period covered by the assessments under consideration in this case. Until 1968 the Board owned only old properties in the four Glebes referred to above. Most of those were very low income producing properties. From that time onwards the policy of building up a portfolio of modern properties producing a higher rate of income was adopted by the Board. In 1972 the Board decided that instead of developing its old properties it would sell some of them, purchase further income-producing properties and reinvest the proceeds. The Board purchased, for instance, Macquarie Chambers in the City, commercial premises in the City of Sydney and North Sydney, residential land at Penrith, commercial property at Edgecliff Centre, flats and a nursing home. As at 31 July 1972 the new properties were valued at $15,910,000 and

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the old properties at $30,425,000. The new properties were turned over and the proceeds reinvested and at 31 December 1975 the total properties were valued at $36,067,841. By June 1978 properties had been sold and the proceeds reinvested and the figures show the total book value of old and new properties $28,321,890. In addition, the Board had an investment in St Andrew's House and in the Sydney Anglican Property Fund of approximately $10,000,000. I have set out the above figures in order to show the magnitude of the business in land dealing with which the Board was concerned. The evidence shows that in respect of the properties managed by the Board they did not, with a few exceptions, comprise properties upon which stood Churches, theological colleges, homes for aged persons or for young people, schools, hospitals, nursing homes or the like: in short, they were, with a few exceptions, not properties upon which the religious purpose of the Church were furthered. In addition to managing and controlling the properties to which reference has been made, the Board submitted to Standing Committee many proposals for sale of properties. At the request of Standing Committee the Board entered into negotiations, prepared plans and undertook feasibility studies for the major project of developing the Church land in the block upon which St Andrew's Cathedral is constructed. The Board did not make any charge for this work. From time to time Standing Committee directed the Board to carry out its activities in a way which would assist other groups, institutions or organisations within the Church. For instance, the Board took over the management of the sale of most of the property of the Sydney Church of England Girls Grammar School. The Board also assisted the Blue Mountains Grammar School when it encountered financial difficulties.

Returning to the terms of the Ordinance, it is to be observed that the Board is elected by Standing Committee (para. 5). Paragraph 12 provides that the Board at least once each year and also when required by resolution of the Synod, should report proceedings to the Synod and present a statement of receipts and disbursements duly audited by auditors appointed by the Board and such other accounts and information as may be required by resolution of Synod (para. 12). The appeal papers contain the Balance Sheet and profit and loss accounts of the Board for the year ended 31 December 1979. Under para. 12(a) the Synod or Standing Committee could appoint the Board to the office of trustee of any Church trust property.

Paragraph 13 which gave the Board "absolute and full powers of managing and controlling" the Glebes and other property, authorised it to lease the properties, accept surrenders, sub-divide the Glebes, repair, etc., existing buildings, employ and remove officers, servants and agents. There were, however, restrictions placed upon the right to lease. These restrictions prohibited leasing of premises:

"(a) for any illegal or immoral purpose;

(b) for the sale by wholesale of tobacco in any form;

(c) in any way connected with gambling or betting;

(d) for the manufacture, sale distribution or consumption on the said premises of liquor in any of the following ways:

• (A) in a restaurant;
• (B) at social functions held in premises used commercially as reception rooms;
• (C) on the premises of a club or any like association;
• (D) in or from any hotel shop or other point of delivery;
• ...

(e) in any way connected with narcotic drugs except as part of the normal trading practices of a registered pharmacist or registered chemist;

(f) for the erection of any sign or advertisement which expressly or impliedly refers to tobacco or alcoholic liquor in such a position as to be visible from the outside of the premises leased or any part thereof PROVIDED that this prohibition shall not apply to non-illuminated signs relating to tobacco in or adjacent to any kiosk or shop premises which relate to goods sold therein, and the Board may waive this prohibition in any particular case;

(g) on Sundays for purposes of trade except the operation of automatic vending machines for essential purposes and for such trade as the law may at any time and from

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time to time permit, authorise or make lawful for the sale of food, newspapers, petrol or pharmaceutical services and supplies or other necessary services and supplies urgently required on Sundays for reason of sickness or injury;"

The appeal papers include certain reports - "Theological Principles Governing the Church's Use of its Property", Sydney Diocesan Secretariat, Glebe Administration Board and Sydney Church of England Investment Trust, "Report Re Responsible Christian Investment" - and it is apparent that the commercial operation of the Board has been sought to be kept within what is regarded as proper Christian dealing with property. The restrictions on leasing exemplify this attitude.

Clause 14 is of significance because it sets out the obligation of the Board in respect of the income received by it.

"14(1) The Board shall between the 1st April and the 30th June each year cause a statement to be prepared showing the gross surplus of the rents issues and profits arising from all the Glebes other than Bishopthorpe Estate held managed and controlled by the Board, for the year ended 31st March immediately preceding. The gross surplus shall be the balance of the total gross rents issues and profits less rates and other statutory outgoings, repairs, maintenance and other normal expenditure associated with the administration of the said Glebes. The said statement shall be duly audited and shall be furnished to the Standing Committee not later than the 30th June in each year.

(2) The Standing Committee shall, by resolution, determine annually upon the sum to be remitted to the Standing Committee. Such sum shall not exceed the greater of three-fourths of the gross surplus disclosed in the said statement or the sum which the Board may have notified the Standing Committee will be available to the Standing Committee from its income. Such sum shall be remitted to the Standing Committee at such time or times as the Standing Committee may determine and shall be held and applied by the Standing Committee for such purposes and in such manner as the Synod may be Ordinance from time to time determine.

(3) The Board may from time to time notify the Standing Committee that an amount being the whole or any part of any gross surplus not previously remitted to the Standing Committee pursuant to sub-clause (2) of this clause or this sub-clause is available for diocesan purposes. The Board shall remit to the Standing Committee so much of the said amount so notified as the Standing Committee may call upon it from time to time so to do. Any amount remitted to the Standing Committee pursuant to this sub-clause shall be held and applied by it for such purposes and in such manner as the Standing Committee shall by resolution determine.

(4) The whole of any gross surplus not remitted to the Standing Committee pursuant to sub-clauses (2) or (3) of this clause shall be retained by the Board for the administration and development of the said Glebes."

It will be seen that the Board is required only to remit what may sufficiently be described as net income after payment of expenses as therein referred to including statutory outgoings. The Board has been conducted upon the footing that the expenses in managing and owning the various properties vested in it have been met out of its own income so that its operation could be described as Mr Malone, Chief Executive Officer of the Sydney Diocese and Secretariat of the Board, described it, namely, "a wholly self-contained operation financially".

There was further evidence disclosing what might be called an association between the Board and the Christian purposes of the Church. The Board opened and closed its meetings with extemporaneous prayer. Throughout the relevant period there were approximately two Bishops, two clergymen as well as eight lay persons on the Board. Until 1976 the Bishop was an officer and member of the Board. The evidence shows that the Standing Committee did not elect anyone who was not an Anglican and, furthermore, who was not a practising member of his or her local Church. The affidavit of Bishop Cameron filed in the proceedings and read, contains the following:

"When it comes to electing Board members there is a clear though unwritten policy that

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Standing Committee does not elect anyone who is not Anglican and, furthermore, who is not a practising member of his or her local church. It is the usual practice for anyone nominating a person to fill a vacancy on the Board to discuss the nomination with the nominee's local rector. A person who does not ordinarily attend an Anglican church each Sunday will be neither nominated nor elected.

The reason for this unwritten rule that all members of the Board must be practising and churchgoing Anglicans is as follows. The Board seeks to generate income by means compatible with a Christian conscience, even though interpretations of the demands of a Christian conscience may differ. Theological principles are from time to time discussed and this would be impossible if the members were not active Christians. During my period of membership of the Board it has not been unusual for such theological principles to be referred to in the course of making particular decisions, for example concerning the factors which should govern investments by a Christian organisation. The Board also discusses and seeks to implement theological principles in deciding what types of commercial activities to permit in its properties."

I have already referred to the evidence placed before the Court in regard to the use of property and the generation of income and the need to apply Christian doctrine in respect thereof. I would mention, however, that no attempt was made in the Board's case to disguise the fact that members of the Board were chosen by Standing Committee also for their financial expertise in property management. Nor was any attempt made to disguise the fact that the policy of the Board has always been one of preserving the value of its assets and providing a maximum return.

The final aspect of evidence to which reference is to be made is that which relates to the persons who were in fact employed by the Board as employees. The evidence of Mr Malone, the chief executive officer (inter alia) of the Board showed that, except for very junior ranks of employees, they were always members of the Church and church-going persons. The evidence shows that the senior staff comprised approximately 20 persons, and, as mentioned earlier, the Board and its employees did not restrict their activities wholly to the properties managed and controlled by the Board. In addition, some employees from time to time did work providing free valuations for parish properties and gave free advice to parishes and Church organisations regarding all aspects of property insurance, development and building projects, the purchase and selling of properties and in the development and building of properties used by parishes and other Church organisations.

From all the foregoing, the conclusion to be drawn, in my view, is that the Board is but an agency (using that word in a general sense) of the Church, and its function is essentially that of providing an income from property of the Church for the furtherance of the religious objects of the Church. The "profit" which the Board made in respect of its activities was a profit which the members of the voluntary association constituting the Church, through Synod and the Standing Committee of the Diocese, intended should be applied to the religious purposes of the Church so that although it is undeniable that the activity of the Board was a commercial activity it was not, as in the case of ordinary bodies corporate operating for commercial gain, an activity designed to achieve profit to be distributed among those who had "invested" in the body corporate. The payment by the Board of pay-roll tax would of course lessen the amounts available for the distribution to the Standing Committee and thus the Diocese.

Does the evidence set out disclose the existence of a religious institution and if so what is it? The word "institution" has been considered in a number of cases and, of course, it is trite law that it must be considered in the context in which it appears. It is to be noted that sec. 10(1)(c) and (d) use the words "society or association" and in (k) the words "society or an institution" are used. As Walsh J. said in
Christian Enterprise v. Commr of Land Tax (1968) S.R. 90 at p. 98 . "There are many societies which would not ordinarily be described as institutions. Admittedly, the latter is a vague word." In
Theosophical Foundation Pty. Ltd. v. Commr of Land Tax (1966) 67 S.R. 70 Sugerman J.A. had earlier considered the meaning of the words "religious society". In
Joyce v. Ashfield Municipal Council (1959) 4 L.G.R.A. 195 the meaning of the word

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"charity" and of the expression "public charity" in a statute was considered and this led Herron C.J. to make the observation: "Strictly the only establishment of a charity which the law recognises is a trust. Once this is proved nothing more is needed but nothing less will suffice. An institution or entity may exist apart from a trust but a charity cannot." (at p. 205) In
Stratton v. Simpson (1970) 125 C.L.R. 138 the meaning of "institution" was considered. At p. 158 Gibbs J., as he then was, referred to the ordinary meaning of "institution" and "bodies" and went on:

"In its ordinary sense `institution' means `an establishment, organisation, or association, instituted for the promotion of some object, especially one of public utility, religious, charitable, educational etc.' ( The Shorter Oxford English Dictionary ). It means, as was said in
Mayor etc of Manchester v. McAdam (1896) A.C. 500 , at p. 511 , `an undertaking formed to promote some defined purpose...' or `the body (so to speak) called into existence to translate the purpose as conceived in the mind of the founders into a living and active principle'. Although its meaning must depend on its context, it would not ordinarily connote a mere trust (cf.
Minister of National Revenue v. Trusts and Guarantee Co. Ltd. (1940) A.C. 138 at p. 149 ). A school could appropriately be called an institution within the ordinary meaning of the word."

In
Commr of Land Tax (N.S.W.) v. Joyce (1972-1973) 132 C.L.R. 22 the Court considered sec. 10(1)(d) of the Land Tax Management Act 1956 which provided that land was exempt from taxation if it was land owned by or in trust for a charitable or educational institution if the institution however formed or constituted is carried on solely for charitable or educational purposes and not for pecuniary profit. Stephen J. applied the test referred to by Gibbs J. in the case just cited and came to the conclusion: "In the present case the only relevant owners of land are the four respondents who are trustees of a charitable trust but are not themselves an institution, and there exists no other landowning entity to look to in order to satisfy the characteristics of an institution for which the paragraph calls." (at p. 33)

There is no reason, in my view, why an institution cannot comprise the general members of the unincorporated association, the trustees of the property being held for the purposes of the association and bodies corporate formed to participate in and to carry out the purposes of the institution. This is not to say that a body corporate having an association with an institution is necessarily to be regarded as part of that institution - each case must be dealt with upon its own facts. In Theosophical Foundation Pty. Ltd. v. Commr of Land Tax (supra) Sugerman J.A. made the observation: "... in general I see no difficulty in the notion that an association or a society simpliciter may have a membership consisting wholly or in part of corporations".

In my view, the expression "religious institution" in sec. 10(1)(b) requires no narrow meaning to be given to it but may be given the meaning which Gibbs J. considered to be its ordinary meaning. It is, in my view, wholly appropriate, in the light of its constitution, its structure, its activities, its composition and its extent to regard the Church of England in Australia in New South Wales or even the Diocese of Sydney as an "institution" for the purposes of sec. 10(1)(b). The "institution" of the Church (or Diocese) plainly has a separate existence of its own, which in its entirety takes in the trustees, including the Board, who hold Church property upon trust for the religious purposes of the Church. The reasoning which leads to this conclusion makes it impossible to regard the Board itself as an "institution".

I pause here to mention that counsel for the Commissioner appeared to concede that it was appropriate to refer to the Church or the Diocese of Sydney as "a religious institution", and it is to be stressed that no question was raised to suggest that the Church (or Diocese) might not be regarded as a religious institution merely because of the commercial nature and extent of the activities carried on by the Board on its behalf. The appellant's evidence in regard to the nature and structure of the Church of England in New South Wales was not challenged. Indeed, the case before Rogers J. was conducted upon the footing that the activities of the Board were separate and distinct from the religious, educational and charitable purposes of the Church - that is that the Board's activities were expressly directed to raising funds for the Church. No suggestion

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was made that the Church or for that matter any religious institution would cease to be "religious" merely because it embarked upon commercial activity intended to produce funds to enable it to carry out its fundamental religious objects.

What then does sec. 10(1)(b) mean when it exempts from pay-roll tax "wages... paid... by a religious institution"? How, one asks, does an institution "pay wages"? If it, that is, if the institution is a body corporate it can as, an employer, employ labour and pay wages. But if it is unincorporated it must, unless its membership is very small, act through committees or agencies established by the members of the unincorporated association:
Peckham v. Moore (1975) 1 N.S.W.L.R. 353 . The contractual employer in such a case will be the members of the committee, not the institution, and in strictness the wages will be paid or payable by the members of the committee: but as a matter of ordinary English it may also be said that the wages are paid by the institution. There can be no doubt that the law recognises "institutions", "societies", "associations", "clubs", "organisations", and the like as having an existence in fact, even though it does not accord to them legal personality unless they are incorporated in pursuance of some statute or given corporate status by statute. It is common in statutes to see provisions referring to property "which belongs" to institutions, societies, etc., which might be corporate bodies or unincorporated associations: Local Government Act 1919-1955 sec. 132(1)(d) considered in Joyce v. Ashfield Municipal Council (1959) 4 L.G.R.A. 195 - see also sec. 132(1)(h). Section 10(3) of the Land Tax Management Act refers to the use or occupation of a building "by any society, institution, club or association". Section 10(1)(g) of the same Act contemplates that a society may "use or occupy" land. The Pay-roll Tax Act 1971 refers in sec. 10(1)(d) to "a school or college" being "carried on by a body corporate, society or association...". That same Act treats societies and associations as taxable in certain events. Other statutes might be referred to but it is unnecessary to do so because it is clear that although the law does not regard unincorporated associations as legal persons independently of their members, it does recognise that institutions, societies, etc., which are unincorporated are sufficiently identifiable to be able to be described as "using" or "occupying" property or "receiving" income or "exempt" from tax.

If an unincorporated association, which may be referred to as an "institution" or a "society" or an "association", can as a matter of ordinary English use or occupy property, or conduct a school, or be liable for tax or have property belonging to it then why cannot it be said "to pay" wages when it sets up a body, later incorporated by statute, to control its financial affairs in so far as they consist of realising properties held in trust for the purposes of the association to provide funds for the purposes of the association. In my view, the expression "paid or payable" is as a matter of ordinary English appropriate to the word "institution" even when as here the institution of the Church is not a body corporate. Whether in any given case it can be said that wages have been paid by an institution will be a question of fact and an answer that they are so paid is in no sense dependent upon there being evidence that the members of the association have a beneficial interest in the funds from which the wages are drawn. All the facts and circumstances which define the institution, its purpose and its operations must be looked at.

The final and critical question to be answered is whether the words "wages paid or payable... by a religious institution" in sec. 10(1)(b) are to be understood as including the meaning referred to above when the institution is unincorporated.

On the one hand, we have sec. 6 quite plainly imposing liability for tax on "taxable wages" upon the "employer" - on the other hand we have sec. 10 exempting from tax, wages "paid or payable by" an assortment of persons and bodies (to use a neutral word). Are sec. 6 and 10 to be read together (aided, of course, by any other relevant provisions of the Act) to exempt only wages paid by "employers" who fall within the paragraphs of sec. 10, or is sec. 10 to be given the meaning to which I have referred so that unincorporated associations as well as bodies corporate can be said to have "paid" wages?

Before us, counsel for the Board stressed that sec. 6 is expressly stated to be "Subject to section 10...", so that exemption of wages from tax and liability of an employer paying taxable wages became two separate and distinct

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features of the Act. The words, "subject to" do not themselves determine the extent to which as a matter of construction the persons or bodies exempted by sec. 10 can be associated with or dissociated with the obligation to pay payroll tax cast upon an employer by sec. 6. I adopt the observations of Megarry J. in
C. & J. Clark Ltd. v. I.R. Commrs (1973) 2 All E.R. 513 at p. 520 :

"In my judgment, the phrase `subject to' is a simple provision which merely subjects the provisions of the subject subsections to the provisions of the master subsections. Where there is no clash, the phrase does nothing - if there is collision, the phrase shows what is to prevail. The phrase provides no warranty of universal collision."

Thus the fact that sec. 6 is "subject to" sec. 10 at least allows the expression "paid or payable... by a religious institution" in sec. 10(1)(b) to be given a meaning not necessarily requiring that institution to be an "employer" as prescribed by sec. 6 if, of course, that construction is in fact deducible from the terms of sec. 10 and the other provisions of the Act. There are, in my view, compelling reasons why such a construction of the exemption should be made.

At the outset, it is of significance that sec. 10 deals with certain institutions or organisations which are of the kind that are, traditionally (e.g. Land Tax Management Act 1956 sec. 10; Local Government Act 1919 sec. 132), considered in our society to have claim to be exempted from tax - religious and benevolent institutions, hospitals, schools, colleges, charities. The exemptions in para. (e) to (i) were taken from the Commonwealth Pay-roll Tax Assessment Act 1941-1973 sec. 15 but it can be said that they are also of the kind one might expect to be exempted from tax. (The Commonwealth had occupied the field of payroll tax from 1941 ("temporary war-time measure") until the passing of the Pay-roll Tax (Termination of Commonwealth Tax) Act 1971. ) The section, in my view, on a fair reading, can be said to be selecting and describing the institutions and organisations which are to be exempt from liability to tax rather than in any way at all addressing itself to the question whether the particular institution or organisation can or must be regarded as being in an employer relationship with the recipient of the wages being considered for assessment of tax. The section nowhere mentions the word "employer" except in para. (i) and then the reference is to a specific case of employer and employee which is clearly being treated as a special case.

The decision in Mayor of Manchester v. McAdam (1896) A.C. 500 and the reasoning therein applied is directly relevant to the problem in the present case. In that case, an exemption from income tax under the Income Tax Act 1842 applied to any building "the property of any literary institution". The building, a library building, was vested in a city council under the Public Libraries Act which empowered a town or city council to appropriate any land for the purposes of the Act and to erect any building suitable for public libraries. The Public Libraries Act 1982 enacted that the library might, subject to the provisions of the Act, provide "all or any of the following institutions" which included public libraries. The Corporation of Manchester was the library authority and its powers and duties had been delegated to a committee of the corporation called "The Public Free Libraries Committee". The building was used exclusively for library purposes. The Corporation was assessed for tax and claimed that the case fell within the exemption. At p. 508 Lord Herschell said:

"What, then, is meant when the property of `such an institution', is spoken of? No more than this, I think, that it is property appropriated to and applied for its purposes. It is not open to doubt that institutions in connection with which there is no incorporated body in whom property can vest are within the scope of the enactment. In the case of an institution of this description, any building appropriated exclusively for its use must be vested in individuals as trustees; but these trustees are certainly not the institution, nor are the individuals who manage it. Counsel were asked, what persons are in that case the institution owning the property? The answer given was, The members. But where the institution is `established for the use of the public' at large, it cannot be said to consist of any members who can be regarded as the beneficial owners of the property."

At p. 513 Lord McNaghten stressed that if the expression "property of" were to be treated literally and strictly as the Court of Appeal had

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done, all unincorporated institutions must be excluded from the benefit of the exemption. He went on:

"It is impossible to suppose that this could have been the intention of Parliament. It seems to me, therefore, that the word `property' in the exemption in question cannot import legal ownership. It imports the right of possession and exclusive enjoyment. Moreover, that is the ordinary meaning of the term. The word `property' is not a technical expression. No one in ordinary language would speak of land or buildings vested in a trustee and in which the trustee has no beneficial interest as his `property'. I may observe that if your Lordships will turn to the Act of 1854, to which I have just referred, you will find the very expression, `property of the institution', used in more than one place to denote real and personal property held on trust for the purposes of the institution, though not legally vested in the institution itself."

In that case it was a rational and a proper use of English to say that the library building was "the property of the library institution". In the present case it is equally rational and appropriate to say that the lands which are vested in the Board and managed by it are "the property of the Church" and that as the wages were generated by the leasing and sale of those properties, the moneys were "paid by the Church". Until the Board was incorporated under the Church of England (Bodies Corporate) Act 1938 it was in the same position as a committee of the Church, and I do not consider that the fact of its incorporation in any way prevents the conclusion being drawn that the wages were, nonetheless, paid by the institution. It has already been pointed out that although the Board was incorporated by the Act it still remained associated with, and in a practical sense, substantially under the control of Synod and the Standing Committee as it had previously been.

Unless the expression "paid or payable" is given the meaning for which counsel for the Board contends, then the consequence is that only religious or public benevolent institutions which are incorporated will receive the benefit of the exemption. Many of such institutions, however, will be mere voluntary associations and I find it impossible to accept that the legislature could have intended that result. The legislature would not, if that had been the intention, used such loose concepts as "institution", "society" or "association" which point strongly to exemption of bodies or organisations generally rather than mere bodies corporate. My conclusion is that to give to the words "paid or payable" the meaning of "coming from the funds of" does no violence to the language used in the section and I am of the opinion that unless the words receive that construction the clear policy of the legislature in regard to exemption will be frustrated. Even if it were thought that the words of the Act had left the matter in doubt, the proper course for the Court would be to relieve the appellant of liability for the tax. In
Burt v. F.C. of T. (1912) 15 C.L.R. 469 at p. 482 Barton J. said:

"The several deductions allowed by sec. 30 are exceptions to the general rule of taxation prescribed by the Act. Where the construction of such exceptions is seriously in doubt, the interpretation should favour those whose claims are based upon the exceptions. For that position there is the highest authority, if authority be necessary. In Armytage v. Wilkinson 3 A.C. 355 at p. 369, the Judicial Committee express their dissent from the principle that in a taxing Act provisions establishing an exception to the general rule of taxation are to be construed strictly against those who invoke their benefit. They point out that such a principle is opposed to the rule expressed by Lord Ellenborough in
Warrington v. Furbor 8 East 242 , and followed and confirmed in
Hobson v. Neale 17 Beav. 178 . Lord Ellenborough's words are 8 East 242 at p. 245: - `I think that when the subject is to be charged with a duty, the cases in which it is to attach ought to be fairly marked out; and we should give a liberal construction to words of exception, confining the operation of the duty.' It is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction need arise."

Those observations were cited with approval by Herron C.J. in Theosophical Foundation Pty. Ltd. v. Commr of Land Tax (supra) at p. 75 and in
Western Australian Trustee Executor & Agency Co. Ltd. v. Commr of State Taxation (W.A.) 80 ATC 4567 ; (1980) 147 C.L.R. 119

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by Gibbs J. as he then was, at ATC pp. 4570-4571; C.L.R. pp. 126-127.

The final matter to which I would refer is that Rogers J. in his judgment cited a number of cases in which pay-roll tax Acts, both Commonwealth and State, had been considered, but it is my view that those cases do not touch the problem which has been considered in this case. Those cases plainly support a proposition that it is the employer who must pay the tax on wages which are not exempt from tax, but what has been considered in the present case is the scope of the exemption given in sec. 10(1)(b).

In the result, I am of the opinion that the appeal should be upheld and the four assessments appealed against set aside. The respondent should pay the appellant's costs in this Court and before Rogers J.

ORDERS

Appeals by Glebe Administration Board dismissed with costs.