DOUGLAS & ORS v FC of T

Judges:
Olney J

Court:
Federal Court

Judgment date: 6 August 1997

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Olney J

These two proceedings, which involve the same parties and which were heard together, raise a single issue, namely, whether income derived by the applicants as trustees of the Protestant Hall, Geelong, is exempt from income tax.

Proceeding VG 743 of 1996 relates to an assessment of income tax for the year ending 30 June 1993 whereas proceeding VG 744 of 1996 relates to an assessment for the year ending 30 June 1994. The applicants objected to both assessments but their objections were disallowed. The present proceedings are by way of appeal from the respondent's decision disallowing the applicants' objections and are brought pursuant to s 14ZZ of the Taxation Administration Act 1953.

The applicants claim exemption under each of paragraphs (e), (g) and (j) of s 23 of the Income Tax Assessment Act 1936 which, to the extent relevant, provides:

``23 The following income shall be exempt from income tax:-

• ...
• (e) the income of a religious, scientific, charitable or public educational institution;
• ...
• (g) the income of a society, association or club which is not carried on for the purposes of profit or gain to its individual members and is-
  • ...
  • (v) a society, association or club established for community service purposes (not being political purposes or lobbying purposes);
• (j) the incomes of the following funds, provided that the particular fund is being applied for the purpose for which it was established-
  • ...
  • (ii) a fund established by will or instrument of trust for public charitable purposes;''

The facts

The property known as the Protestant Hall Geelong is situate at the corner of Yarra Street and Little Malop Street Geelong being the land comprised in certificate of title volume 3652 folio 266. The improvements erected on the land consist of a two storey building built in the 1880s and a two storey detached annex built in or about 1980. The original building was opened in April 1889. The ground floor has always been let as office accommodation to commercial tenants. The upper floor (the hall) is and has always been used for meetings. The annex was constructed in order to generate additional income. During the two financial years ending 30 June 1993 and 1994 the ground floor of the original building was leased to a firm of solicitors and the annex was leased to an accountant.

The applicants are the joint registered proprietors of the land which is held by them pursuant to the terms of a deed executed by their predecessors in title on 14 January 1905 (the trust deed). To the extent presently relevant the trust deed provides that:

``... the Trustees do severally and respectively declare that the said lands and hereditaments and premises were transferred to such Trustees upon the trusts to and for the ends intents and purposes in these presents expressed and declared concerning the same, that is to say:

• 1. To erect and build thereon, and to repair take down, remove, alter and enlarge and rebuild a hall or building with other rooms for lodge or other meetings dwellings or other purposes offices conveniences and appurtenances or any of them in such manner as the Trustees shall from time to time deem expedient.
• 2. To permit the said building with the appurtenances at all times to be used as and for a Protestant Hall in which meetings of the Loyal Orange and Protestant Alliance Lodges and all Committees thereof and of any other

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  body not disapproved of by the Trustees may be held.
• ...
• 5. To let at all times the rooms and offices or any part or parts of any building erected on the said lands free of charge or for such rent upon such conditions and for such period or terms as to the Trustees may seem fit and the Trustees may collect the rents and income to arise in any manner from the said premises AND shall out of the moneys arising therefrom pay all costs in connection with the purchase Title and this Declaration of Trust and all duties taxes rates impositions and assessments whether municipal parliamentary or parochial and other outgoings lawfully payable in respect of the said premises or any part thereof and of keeping the same insured against loss or damage by fire in such sum as they may think and in keeping the same in good repair and condition and pay the interest on all moneys due and owing on the security thereof and reimburse themselves all expenses lawfully incurred in the execution of the trust of these presents and of cleaning lighting and attending to the premises and apply any surplus towards a sinking fund to reduce pay off and discharge any debts existing over the said premises and invest any moneys in their hands on mortgage or real estate in Victoria in purchase of Government or Municipal debentures or on deposit in any Banking Company.
• ...
• 8. It shall be lawful for the Trustees if there are the full number of six acting and they are unanimous at any time absolutely to sell and dispose of the said land and hereditaments...and the Trustees shall apply the money to arise from any such sale so far as the same will extend to the discharge of all liabilities lawfully incurred and shall use any balance of such moneys for the purposes of acquiring or assisting to acquire another Protestant Hall for Geelong to be held on the like Trusts.''

The hall has been in continuous use for lodge and various other meetings since its opening in 1889. The peak use of the hall occurred during the 1930's when it was generally in use every night of the week. Usage declined in the 1940's to about four nights a week and remained at about that level until the mid 1970's when it declined further to about three nights a week.

Apart from the Loyal Orange and Protestant Alliance lodges, the hall has in the past been used, inter alia, by various lodges and friendly societies, a political party, several churches, Alcoholics Anonymous, ``Grow'' Mental Self Help Organisation and the Protestant Churches Cricket Association. For about two years it was also used by a dancing group.

The hall is currently used by the following organisations:

• (a) The Christian Spiritualist Church uses it every Sunday, Thursday nights and occasionally on Saturday afternoons. The Church had met at the hall for a period of sixty years, until it acquired a church. It returned to the hall in February 1997 after the church was badly damaged by fire.
• (b) Alcoholics Anonymous meets every Monday evening at the hall and has done so for the past fifteen years.
• (c) The Loyal Orange Lodge has met one night a month at the hall for nine months of the year for the past fifteen years. Prior to that it met three nights a month for eleven months of the year.
• (d) The Royal Black Preceptory, which is a fraternal society that grew out of the Loyal Orange Lodge, has always used the hall and now meets once a month eight times a year.

Other groups and organisations have used, and do still use, the hall for various periods or occasional meetings. The Protestant Alliance Friendly Society ceased to hold meetings in April 1995.

Income Tax Assessment Act s 23(e)

To claim successfully exemption from income tax under s 23(e) it is necessary (in the present context) that the income be that of either ``a religious institution'' or a ``charitable institution''. (It is not said that the trust is either a scientific or public educational institution). Central to each of these descriptions is whether the trustees are properly to be regarded as an institution. In my opinion they are not to be so regarded.

In
Minister of National Revenue v Trusts and Guarantee Company Limited [1940] AC 138

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the Judicial Committee of the Privy Council had occasion to consider the construction of a Canadian statute which exempted, inter alia, charitable institutions from liability for income tax. The issue arose in circumstances in which a fund had been settled on trustees upon trust to pay certain sums to the settlor during his lifetime and upon the expiration of twenty one years after his death, to pay the accumulated capital and income to the municipal council of a town in England ``for the benefit of the aged and deserving poor'' of the town. In the facts of the case their Lordships were in no doubt that the trust in question was a charitable trust. However, in addressing the question of whether the trust should be regarded as a ``charitable institution'' they said (at p 149):

``It is by no means easy to give a definition of the word `institution' that will cover every use of it. Its meaning must always depend upon the context in which it is found. It seems plain, for instance, from the context in which it is found in the sub- section in question that the word is intended to connote something more than a mere trust. Had the Dominion Legislature intended to exempt from taxation the income of every charitable trust, nothing would have been easier than to say so. In view of the language that has in fact been used, it seems to their Lordships that the charitable institutions exempted are those which are institutions in the sense in which boards of trade and chambers of commerce are institutions, such, for example, as a charity organisation society, or a society for the prevention of cruelty to children. The trust with which the present appeal is concerned is an ordinary trust for charity. It can only be regarded as a charitable institution within the meaning of the sub-section if every such trust is to be so regarded, and this, in their Lordships' opinion, is impossible. An ordinary trust for charity is, indeed, only a charitable institution in the sense that a farm is an agricultural institution. It is not in that sense that the word institution is used in the sub-section.''

In
Stratton v Simpson 125 CLR 138 Windeyer J said at p 144:

``A body or organisation which holds property upon a charitable trust and carries out the trust purposes is commonly called a charitable institution or a charity. It is really but the instrument for carrying a purpose into effect.''

His Honour then somewhat critically referred (at p 145) to the passage quoted above from Minister of National Revenue v Trusts and Guardian Company Limited but nevertheless having recognised the distinction between the types of institutions referred to and ``mere trusts'' he said:

``But I can see no reason why, unrestrained by context, a fund raised by public contributions and administered by trustees could not be properly called an institution.''

In the same case Gibbs J, with whom Barwick CJ and Menzies J agreed, addressed the meaning of ``institution'' in these terms (at p 158):

``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] AC 500 at 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] AC 138 at 149).''

This passage was subsequently referred to by Stephen J in
Commissioner of Land Tax (NSW) v Joyce and Others (1974) 48 ALJR 432. The facts in Commissioner v Joyce were not all that different from those in the present case insofar as the land in question was simply vested in trustees whose only function was the management of the trust property consistently with the trust deed. His Honour (at p 436) observed:

``The performance of this function cannot, in my view, confer upon these four trustees the quality of an `institution', however widely that term may be construed.''

In the present case the applicants have no functions in relation to the trust property apart from those defined in the trust deed. They have no role to play in the affairs of any of the

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disparate groups who may from time to time have occasion to use the trust premises nor of promoting the objects of such groups. The trust is properly to be regarded as a mere trust and not an institution within the meaning of that term in s 23(e) of the Income Tax Assessment Act 1936.

Having regard to the foregoing conclusion the income from the trust is not exempt from tax by reason of s 23(e). It is however worth noting that the trusts declared in the trust deed are in no way related to or qualified by the pursuit of any religious purpose. The only purpose of the trust is to provide a place for the holding of meetings. Although there is no evidence upon which a definitive finding can be based, the Court can take judicial knowledge of the fact that the Loyal Orange Lodge and the Protestant Alliance Lodge are organisations which draw their membership from persons whose religious affiliations are such that they are regarded as Protestants i.e. members or adherents of any of the Christian bodies that separated from the Roman Communion in the Reformation or their offshoots (The Concise Oxford Dictionary). But that does not clothe the trustees with the character of a religious institution. Whilst it may be that the trustees and indeed their predecessors in title are of a particular religious persuasion the trust deed imposes upon them no role in propagating any religious beliefs or activities nor does it confer any benefits that are conditional by any religious criteria.

Even if the trustees are to be regarded as an institution for the purposes of s 23(c) they are not a religious institution.

The question of whether the objects of the trust are charitable, and thus if the trustees be found to be an institution whether they are a charitable institution, is dealt with later in these reasons and the conclusion there expressed applies equally in the present context.

Income Tax Assessment Act s 23(g)(v)

Subparagraph (v) of s 23(g) was introduced into the Income Tax Assessment Act by the Taxation Laws Amendment Act (No 2) 1990. As the section contains no definition of either ``society, association or club'' or ``community service purposes'' it should be construed according to the ordinary meaning of the words used and, if necessary, after resort to the relevant explanatory memorandum and second reading speech.

Unassisted by authority I would construe the collation ``society, association or club'' to refer to a voluntary organisation having members associated together for a common or shared purpose. Such a description is consistent with various dictionary definitions of the several words used. The following examples can be found in the Concise Oxford Dictionary:

Society:      Association of persons united by a common aim or interest or
              principle;

Association:  Organised body of persons for a joint purpose;

Club:         Association of persons united for some common interest,
              usually meeting periodically for shared activity.
      

It would be stretching the ordinary usage of these terms to include a group of persons whose only functions are to act as the joint registered proprietors of a parcel of land and to administer the property in accordance with the terms of a deed of trust. Even if that be not so the purpose for which the trust was established is not within the ordinary concept of ``community service''.

The absence of a statutory definition and the very broad ambit of the words ``community service'' justify resort to the explanatory memorandum to identify more precisely the legislative intention.

The explanatory memorandum circulated by the then Treasurer upon the introduction of the Taxation Laws Amendment Bill (No 2) 1990 states at p 19 in dealing with clause 6 of the bill (which introduced what is now s 23(g)(v)):

``Among the institutions exempted from income tax under paragraph 23(e) are charitable institutions. However, many organisations that undertake a range of activities for the benefit or welfare of the community are not charitable, and so such bodies as the traditional community service clubs - Apex, Rotary, Lions, Zonta, Quota and the like - have not qualified for exemption.

...''

And at pp 20-21:

``Paragraph (b) of this clause will introduce subparagraph 23(g)(v) which will exempt from income tax the income of not-for-profit bodies established for community service purposes. The words `for community service

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purposes' are not defined but are to be given a wide interpretation. The words are not limited to those purposes beneficial to the community which are also charitable. They extend to a range of altruistic purposes. The words would extend to promoting, providing or carrying out activities, facilities or projects for the benefit or welfare of the community, or of any members of the community who have particular need of those activities, facilities or projects by reason of their youth, age, infirmity or disablement, poverty or social or economic circumstances. An exclusion from the exemption will apply to bodies established for political or lobbying purposes.

...

When purposes are directed to the benefit or welfare of members of the community in particular need, that need must arise by reason of youth, age, infirmity or disablement, poverty or social or economic circumstances. These causes of need are intended to be read broadly. Infirmity or disablement, for example, could be intellectual or physical, and could be congenital or the product of disease or of injury. Similarly, social or economic circumstances could include such varied matters as sex, living in a remote area, or inability to speak English.

Political or lobbying purposes include standing candidates for election, campaigning for changes to the law or to government policy, and the like. Community service organisations may engage in political or lobbying activities, provided these are no more than merely incidental to other purposes beneficial to the community. But a body will be unable to claim exemption from income tax under this subparagraph if its only undertakings for the benefit of the community are political or lobbying ones.

All the traditional service clubs such as Apex, Rotary, Lions, Zonta, Quota and the like and community service organisations such as the Country Women's Association of Australia and its constituent Associations are considered to be exempt from income tax under the new subparagraph.''

The explanatory memorandum confirms the view previously expressed that the functions of the present applicant as trustees of the Protestant Hall Geelong do not come within the exemption contemplated by s 23(g)(v). The trustees' obligations are simply to hold the title to the relevant land, to maintain the building erected on it and to make it available for use to the organisations identified in the trust deed. They do not undertake any activity which could properly be described as being for the benefit or welfare of the community. Indeed, they have no authority to expend their surplus funds otherwise than in maintaining the building.

The Income Tax Assessment Act s 23(j)(ii)

The remaining issue is whether the trust is to be regarded as ``a fund established... for public charitable purposes'' so as to qualify for exemption under s 23(j)(ii). It is common cause that in determining whether the trust is charitable the Court will have regard to the terms of the trust deed rather than the course of events since the execution of the deed.

In
Incorporated Council of Law Reporting (Queensland) v FC of T 71 ATC 4206; 125 CLR 659 the High Court had occasion to consider whether the appellant was a ``charitable institution'' within the meaning of s 23(e). At ATC p 4210; CLR pp 666-667 Barwick CJ said:

``The Act attempts no definition of charity or of what for its purposes will be charitable. But having regard to the decision of the Privy Council in
Chesterman & Ors v FC of T (1925) 37 CLR 317 it must be taken that whether or not the institution is relevantly charitable will be determined according to the principles upon which the Court of Chancery would act in connection with an alleged charity. That means that the indications contained in the preamble to the Statute of Elizabeth 1601 and the classifications in Lord MacNaghten's speech in
Commissioner for Special Purposes of Income Tax v Pemsel (Pemsel's case) [1891] AC 531 at p 583 are to be observed in deciding whether or not the institution is charitable for the purposes of the Act.

The reported cases may in some instances afford a guide by analogy to the decision whether a particular trust, or a particular purpose is charitable. In addition, the many dicta found in the reasons for judgment in such cases, though by no means of one accord, provide valuable assistance in

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resolving such a question. But in the long run, it seems to me, it is a matter of judgment whether the trust or purpose fairly falls within the equity, or as it is sometimes said, `within the spirit and intendments' of the preamble to the Charitable Uses Act 1601. This is clearly so in Australia and it would appear still to be so in England where that preamble appears to have been repealed by the operation of the Charities Act 1960.''

The classifications in Lord MacNaughten's speech to which Barwick CJ referred were expressed by His Lordship thus:

```Charity' in its legal sense comprises four principal divisions: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement or religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads.''

The applicants' primary submission is that the trust in this case falls under the fourth heading namely a trust for ``other purposes'' beneficial to the community. The authorities do not appear to differentiate between the terms ``the community'' and ``the public'' when used in the context of charitable trusts and in what follows I have assumed that the two are synonymous.

Both parties to these proceedings have made reference to two Australian authorities dealing with trusts which have involved the erection and maintenance of halls. It will be useful to consider each in some detail.

Monds v Stackhouse (1948) 77 CLR 232 was an appeal to the High Court (Latham CJ, Dixon and McTiernan JJ) from the Supreme Court of Tasmania. The facts, so far as presently relevant, were that a testator had bequeathed his residential estate to the Corporation of the City of Launceston ``to be held by the Corporation as a nucleus of a fund to provide a suitable hall or theatre for the holding of concerts to provide music for the citizens of the City and for the production of drama entertainments and the holding of meetings of a cultural or educational value''. The trustees of the testator's estate took out an originating summons in the Supreme Court of Tasmania for the determination, inter alia, of the question whether the gift contained in the will was a good charitable gift. In the Supreme Court Morris CJ held that it was. The High Court was of the same opinion.

Latham CJ was of the view that the gift fell within Lord MacNaughten's fourth class on the basis that the trust related to an object of public general utility which was within the spirit and intendment of the preamble to the Statute of Elizabeth 1601. After quoting the ten objects specifically referred to in the preamble his Honour said (at p 241):

``In my opinion heads (4) and (10) afford assistance in determining the present case. Head (10) expressly relates to relief from the burdens of taxation. It has been held that gifts in aid of rates or taxes, though they benefit rich as well as poor, are charitable. In
re St Botolph without Bishopsgate Parish Estates (1887) 35 Ch D. 142;
Attorney- General v Bushby (1857) 24 Beav 299 (53 ER 373). Head (4) relates to the repair of bridges, ports, havens, highways &c., charges in respect of which would normally fall upon the public. Accordingly if a gift is made for a public purpose analogous to any of these purposes so that it is not a gift for the benefit of a limited number of individuals, but is really in relief of the public, it is prima facie a good charitable gift. The provision of a public hall is such a purpose. Such a hall, maintained under public management, such as that of a municipality, is available for the general use of the community, and, if it is provided by private benevolence, brings about a reduction of the burden of rates and taxes on the community. In
In re Spence: Barclays Bank Ltd v Mayor &c. of Stockton-on-Tees [1938] Ch 96 a gift upon trust to apply moneys in the purchase of a suitable site in a certain town and `in or towards' the erection on such site of a public hall, the hall to be vested in the corporation, was held to be a valid charitable trust. In
Murray v Thomas [1937] 4 All ER 545 a fund was formed for a soldiers' memorial which was to be `of a useful character possibly in the nature of a memorial hall'. Here the object was held to be the public betterment and a good charitable object.''

His Honour was also of the view that in the instant case there were special features which independently of the decisions to which he had referred, supported the gift. At p 242 he said:

``The gift is to the municipal corporation of Launceston. Under the Launceston Corporation Act (1941) (Tas) the

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corporation has power to take and hold real and personal property (s 4). The municipal fund may be applied to (inter alia) erecting, purchasing and maintaining buildings belonging to the corporation, the construction, maintenance and management of halls (s 91(v) and (x)). Accordingly, the gift in this case is a gift to a municipal corporation for a public purpose which is specifically declared by statute to be one of the purposes in relation to which the corporation may act and expend money. These provisions in my opinion make it clear that the gift in this case is a gift for a beneficial public purpose which is of the same type as the trusts with respect to bridges, ports, havens, highways &c., mentioned in the preamble to 43 Eliz. c.4. Accordingly, on this ground also I am of the opinion that the gift falls within head (4) of Lord MacNaughten's classification.''

Dixon CJ (at p 245) considered the purpose of the trust was to make a subvention to a fund enabling the Corporation, in the exercise of its functions, to provide a hall or theatre adapted for particular purposes. After referring to various authorities which supported the proposition that trusts for the public improvement of a town or locality for the benefit of the inhabitants at large are considered charitable his Honour said (at p 246):

``A bequest to a municipal corporation for the purpose of enabling it to provide a hall or towards doing so is clearly charitable. Indeed any bequest to be applied in the improvement of a city in accordance with the powers of the municipal corporation for the benefit of the inhabitants appears to be charitable: see
In re Bones; Goltz v Ballarat Trustees Executors & Agency Co Ltd [1930] VLR 346. Here the bequest is to the municipal corporation itself, and it is made in reliance upon the exercise of appropriate powers by that authority. The City of Launceston is in fact armed with sufficient power. The Launceston Corporation Act 1941 (4 and 5 Geo. VI, No 91) governs the capacity of the Mayor, Aldermen and Citizens of the City of Launceston, which is the full name of the corporate body mentioned in the will. It has power to take, purchase, hold, demise and dispose of real and personal property, and generally to do and suffer all such things as bodies corporate may by law do and suffer (s 4). Among the descriptions of money which are to form part of the municipal fund are `endowments and gifts of money' (s 90(1)(xv)). The purposes to which moneys may be applied include erecting, purchasing and maintaining buildings belonging to the corporation and the construction, maintenance and management of halls (s 91(v) and (x)). As might be expected, the corporate powers are expressed to cover the establishment, maintenance, improvement and extension of halls (ss 297 and 299(1)(I)). The powers of purchase and of compulsory acquisition of land include such purposes (s 313). Under the construction which I place upon the gift in the will the corporation is to take the residue as a nucleus of a fund to be applied by it to provide a hall of the required description.

For the reasons I have given, the provision of such a hall is a charitable purpose, and it is within the corporate powers of the body to carry it into execution.''

McTiernan J was of the same view. At p 251 he said:

``The purpose of the gift is of a municipal or public character: it aims at assisting the citizens of Launceston by providing a public hall. This is an object analogous to those mentioned in the Statute of Elizabeth. The decisions cited in Halsbury's Laws of England, 2nd ed., vol 4 pp 123, 124, fully warrant this conclusion. The purpose of the gift is charitable.''

It is fair to observe that the fact that the bequest had been made in favour of the municipal corporation for a purpose which was not only within its powers to carry out but was also expressed for the purpose of providing a facility for the citizens of the city was the determining factor in the High Court's decision.

The second authority to which both parties made detailed reference is the decision of the Supreme Court of Tasmania (Zeeman J) in
Perpetual Trustees Tasmania Limited v Attorney General (Tas) and another (Unreported; No 351/1991; 18 November 1993). The facts of this case were somewhat more complex than those in Monds v Stackhouse. By an indenture dated 8 February 1897 one Reid had conveyed, subject to a life

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interest retained by himself, certain property to trustees,

``UPON TRUST to permit and suffer to be erected thereon or upon some part thereof a suitable building or buildings for a Protestant Hall according to such plan and designs and by and under the directions and control of such person or persons as the said Trustees should order or direct AND from time to time and at all times after the said buildings should be so erected and built as aforesaid permit and suffer all such repairs alterations enlargements additions improvements and rebuildings to be from time to time made in or about or upon the said land and any erections which might from time to time be erected thereon as the said Trustees should order or direct AND upon trust to permit the same to be forever hereafter used and occupied as an Institute or place of instruction and recreation to be called `The Protestant Hall' for the benefit of the inhabitants of the City of Hobart and the vicinity thereof. (the inter vivos trust)''

Subsequently, Reid, by his will dated 3 September 1904 devised his real estate to trustees and directed that the net rents and profits be used:

``(1) In the maintenance and repair of the fabric of a certain Hall or Institute situate in Bathurst Street in the city of Hobart and known as the `Protestant Hall', which said Hall (has) been erected by me upon an allotment conveyed by me to certain Trustees by an Indenture or Deed of Gift dated the 8th day of February one thousand eight hundred and ninety seven and registered 9/7197 and in the maintenance and repair to the other messuages or shops or dwelling erected upon the said allotment of land (2) In the keeping of the said Hall or Institute open and available for the gathering of persons who are or may become connected with the said Institute as Associates thereof under such regulations as may from time to time be made by my Trustees and for meetings in furtherance of the doctrines of the Reformed or Protestant Religion or of any bodies or associations professing such doctrines upon such terms or conditions as my Trustees may think fit (3) In the giving of prizes or rewards to Associates of the said Institute or to other persons connected therewith or receiving religious instruction therein for encouraging the study of and an acquaintance with the doctrine and principles of the Reformed or Protestant Religion and for providing for such religious instructions as aforesaid (4) In the formation of a library of books setting forth the aforesaid doctrines and principles which said library shall be placed and maintained in the said Institute and with which said library shall be placed the books which I have collected as aforesaid (5) AND generally in and about the promotion in Hobart by means of the said Institute of the aforesaid doctrines and principles.''

Zeeman J construed the deed by which the inter vivos trust was created as requiring the trustees (subject to the reservation of the settlor's life interest)-

• 1. To permit the construction on some part of the land of a suitable building or buildings for a Protestant Hall;
• 2. To permit repairs etc to be made to any such building or buildings;
• 3. To permit the whole of the land and the buildings thereon from time to time, to be used and occupied as an institution or place of instruction or recreation to be called the Protestant Hall for the benefit of the inhabitants of the city of Hobart and its vicinity.

At p 11 (Butterworths Unreported Judgments BC 9300137) His Honour said:

``I have no hesitation in concluding that each of the two trusts is a charitable trust. Each of the trusts is one which is of public benefit in that it is a benefit for an appreciable, although unascertained and indefinite portion of the community (see
Re Income Tax Acts (No 1) [1930] VLR 211 at 222-223). Each of the trusts may be described as being for the advancement of education, for the advancement of religion and for other purposes beneficial to the community so that it comes within the test laid down by Lord McNaughten in
Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531 at 583.''

The terms of the trusts considered in the two authorities discussed above are readily distinguishable from the terms of the trust deed in the present case. In Monds v Stackhouse the bequest was made in favour of a municipal

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council for a purpose which was within the ordinary scope of the council to carry out and which was clearly for a beneficial public purpose. In Perpetual Trustees v Attorney General (Tas) the inter vivos trust was expressed to be for the benefit of the inhabitants of the City of Hobart and its vicinity. Again, there was a clear expression of a beneficial public purpose. But no such conclusion can be drawn from the trust deed relating to the Protestant Hall Geelong. The primary purpose expressed in the deed (paragraph 1) is to provide ``a hall or building with other rooms for lodge or other meetings, dwellings or other purposes, offices, conveniences and appurtenances or any of them''. Nothing in this paragraph could be construed as evidencing a purpose beneficial to the community. Paragraph 2 of the trust deed does however refine the general provisions of paragraph 1 by providing that the trustees are to permit ``the said building and appurtenances at all times to be used as and for a Protestant Hall in which meetings of the Loyal Orange and Protestant Alliance Lodges and all committees thereof and of any other body not disapproved of by the trustees may be held''.

One construction of paragraph 2 that is open on the words used is that the whole of the building and appurtenances must at all times be available to the two lodges and the other bodies referred to for the holding of meetings. Whilst such a construction may be open if the paragraph is taken in isolation, it would contradict the obvious intention expressed in paragraph 1 that the building may also be used for dwellings and offices. In my opinion the preferred construction of the two paragraphs when read in context is that whatever other uses the building or any part thereof may be put to, the two lodges and other bodies are to be provided with the facility of a meeting place as and when required. Apart from the two lodges, the trustees clearly retain the power to determine which bodies shall be accorded the facility of using the building for meetings. The trustees are not constrained in any way in determining to what ``other bodies'' they may extend their disapproval and thus the use of the hall by bodies other than the two named lodges is entirely a matter for the trustees' discretion. The hall is clearly not available to whoever may want to use it.

Neither Monds v Stackhouse nor Perpetual Trustees v Attorney General (Tas) is authority for the general proposition that the provision of a hall, even one which is made available for the use of the community at large is to be regarded as a charitable objective. Many halls and other meeting places are provided by commercial interests for public use. Mere availability for use by the public is not the determining factor even if in the circumstances of the case there is some benefit to the community in having such a facility available. As Barwick CJ said in Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation at p 667:

``Not every purpose beneficial to the community is a charitable purpose but only those which are within the equity of the preamble to the Statute of Elizabeth. The purpose must not be merely beneficial; it must also be charitable.''

The only basis upon which it is said that the trust presently under consideration comes within the equity of the preamble to the Statute of Elizabeth is that it provides a facility that some organisations are permitted to use. In my opinion this is not a sufficient basis to bring the trust within the scope of the spirit and intendment of the statute.

The exemption provided for in s 23(j)(ii) is available only to funds of the type described which have been established for ``public charitable purposes''. In circumstances in which the applicant seeks to rely upon the fourth class of charity identified by Lord MacNaughton, it probably makes no difference that the legislature has used the words ``public charitable purpose'' rather than ``charitable purpose'' although in other cases the contrary may be so. Be that as it may, in order to come within the scope of s 23(j)(ii) it is necessary that the applicants demonstrate that the benefit of the trust is enjoyed by the public.

The meaning of ``public'' when used in a similar context was considered by the Full Court of the Supreme Court of Victoria in
Re Income Tax Acts (No 1) [1930] VLR 211. The question that there fell for determination was whether a benevolent asylum to which only Freemasons and their wives and the widows of Freemasons were eligible for admission was a ``public benevolent asylum'' within the meaning of s 29 of the Income Tax Act 1915 (Vic).

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In a short judgment in which he concurred with the conclusions of the other members of the Court Irvine CJ said at p 215:

``The determination of the point raised by the special case depends upon the answer to be given to the simple question whether this benevolent asylum is a public benevolent asylum. I think the negative answer to that question may be supported by a very narrow proposition, namely, that a benevolent asylum of which the benefits are limited to members of a voluntary association and their wives and the widows of deceased members - such association being constituted by election by existing members and thus possessing the power of arbitrary exclusion - cannot be said to be covered by the description `public benevolent asylum'.''

The other members of the court dealt with the matter in more detail. At pp 216-217 Macfarlane J said:

``The authorities, I think, bring out what is after all merely a matter of English - that `the public' does not mean necessarily the whole community. `Public' may mean a section of the community, that is, a section of the `public' in the larger sense. What is meant by a section of the public? Now in one sense every considerable body or collection of persons in a community is a section of the public, a section of the community. But many of such bodies are neither public nor a section of the public in the sense intended by the authorities. The exact discrimen may be difficult to formulate, and is best brought out by an illustration. Seamen are a section of the public, whereas the Seamen's Union is not. Any member of the community who happens to have the necessary natural qualification may become a seaman, but before he can become a member of the Union he must obtain the consent of the Union. So Jews, if they exist in a community in fairly large numbers, may be a section of the public, but `The Society for the Repatriation of Jews' is not. Any person may become a resident of a particular locality, and the residents thereof may constitute a section of the public. There are cases of greater difficulty. For example, the members of Gray's Inn might not constitute a section of the public, whereas all barristers might, although ultimately the right to be called to the bar might only be obtained by enrolment in an Inn or similar institution. It may be that the common characteristic of the sections of the community which can properly be described as `sections of the public' in the relevant sense is, roughly speaking, that the right to membership of, or inclusion in them depends only on the possession of natural attributes or attributes which any member of the community may acquire, and does not depend on the consent of the other members of that section. What is clear is that, generally speaking, if admission to membership of a body or inclusion in a class depends on the consent of the other members or of some of the members (e.g., a committee) of the body or class it is not `a section of the public' in the relevant sense of the term: and I prefer to express it in that negative form.''

And at pp 222-223 Lowe J said:

``There is, I think, one element connoted by the word `public' in relation to all these institutions which justifies the use of the word. It is the carrying on of the institution for the benefit of the public generally, or at least of a definitely ascertainable section of the public, where the benefit of the institution is available without discrimination to every member of the public or of that section of it. The absence of this element prevents an institution from being public within the meaning of the section of the Act, though its presence is not necessarily conclusive that the institution is public.

It may not be easy or even possible to enumerate in advance the differentia of a `section of the public' within this rule, but I illustrate along what lines a conclusion may be arrived at. Having regard to the composition of the public, certain large groups may readily be recognised, the members of which have a common calling or adhere to a particular faith or reside in a particular geographical area. There is no bar which admits some members of the public to those groups and rejects others. Any member of the public may, if he will, follow a particular calling, adhere to a particular faith, or reside within a particular area. Of the member of such a group it may be said in a real sense that they are primarily members of the public, and such a group

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may well constitute a section of the public. They stand on one side of the line. Each group, it is true, may consist of many individuals, but number alone is not the criterion by which to determine whether the group constitutes a section of the public. A club, a literary society, a trade union may all have numerous members, but I think that none of these could properly be called a section of the public. They stand on the other side of the line. The distinguishing feature of each of these latter bodies is that it is an association which takes power to itself to admit or exclude members of the public according to some arbitrary test which it sets up in its rules or otherwise. Each of them does oppose a bar to admission within it. It is not one of the groups into which the community as a matter of necessary organization or by convention is divided, but it is in a sense an artificial entity which exists for the benefit of its members as members thereof and not as members of the public.''

These observations were approved of and adopted by Dixon CJ in
Thompson v Federal Commissioner of Taxation 102 CLR 315 at 323-324 and are apposite in the context of s 23(j)(ii) and its application to the trust deed relating to the Protestant Hall Geelong.

To the extent that the terms of the trust may be thought to provide any benefit to the community, they are limited to permitting two named lodges and other bodies not disapproved of by the trustees to hold meetings in the premises. For the reasons explained by the Victorian Full Court in re Income Tax Acts (No 1) neither the Loyal Orange Lodge nor the Protestant Alliance Lodge can be identified as a section of the public nor can the other ``bodies'' referred to in the deed. In the latter case the bodies in question must overcome the additional hurdle of being not disapproved of by the trustees a matter about which the trust deed provides no direction but leaves entirely in the trustees' discretion. (see
Rex v The Special Commissioners of Income Tax ex parte Rank's Trustees 8TC 286 per Lord Trevithin CJ at p 288).

There is clearly nothing about the terms of the trust deed which encompasses the public or any identifiable section of the public. It follows that the trust does not fall within the description of a fund established for ``public charitable purposes''.

Conclusion

The applicants have failed to demonstrate as a matter of law that any of the various exceptions provided by s 23 of the Income Tax Assessment Act upon which they rely is applicable to the income derived by them in their capacity as trustees of the Protestant Hall Geelong. In these circumstances the appeal in each proceeding will be dismissed with costs.

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The applicants pay the respondent's costs including any reserved costs.