Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Northern NSW Football Ltd v Chief Commissioner of State Revenue [2011] NSWCA 51 Hearing dates: 2 February 2011 Decision date: 15 March 2011 Before: Allsop P at 1; Handley AJA at 2; Gzell J at 3 Decision: (1) Appeal dismissed with costs. (2) Proceedings remitted to the Tribunal to determine whether the appellant satisfies the requirements of s 259(1)(c) and s 267(2) of the Duties Act 1997. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: TAXATION - payroll tax - exemption - non-profit organisation - whether dominant charitable purpose - promotion of soccer - not charitable purpose CHARITY - promotion of sport - not charitable Legislation Cited: Payroll Tax Act 2007 Administrative Decisions Tribunal Act 1997 Cases Cited: Commissioner of Taxation v Word Investments Ltd [2008] HCA 55; (2008) 236 CLR 204 Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation [1971] HCA 44; (1967-1971) 125 CLR 659 Commissioners for special purposes of Income Tax v Pemsel [1891] AC 531 In Re Nottage [1895] 2 Ch 649 The Royal National Agricultural and Industrial Association v Chester (1974) 48 ALJR 304 Re Laidlaw Foundation (1984) 13 DLR (4th) 491 AYSA Amateur Youth Soccer Association v Canada (2007) 287 DLR (4th) 4 Australian Council of Social Service Inc v Commissioner of Pay-roll Tax (NSW) (1985) 1 NSWLR 567 Perpetual Trustee Co Ltd v Federal Commissioner of Taxation [1931] HCA 20; (1931) 45 CLR 224 Federal Commissioner of Taxation v Launceston Legacy 87 ATC 4,635 Category: Principal judgment Parties: Northern NSW Football Ltd (Appellant) Chief Commissioner of State Revenue (Respondent) Representation: Counsel I Mescher/ N Kirby (Appellant) G Lindsay SC/ L Byrne (Respondent) Solicitors Lander & Rogers (Appellant) Crown Solicitor (Respondent) File Number(s): CA 2010/132630 Decision under appeal Citation: Northern NSW Football Ltd v Chief Commissioner of State Revenue [2010] NSWADTAP 28 Date of Decision: 2010-04-29 00:00:00 Before: Needham J SC - Deputy President; Verick A - Judicial Member; Bennett C - Non-Judicial Member File Number(s): ADT 099033 HEADNOTE The appellant, a not for profit organisation established for the promotion of soccer, claimed exemption from payroll tax under s 48 of the Payroll Tax Act 2007 as an organisation having a sole or dominant charitable or benevolent purpose. The Appeal Panel of the Administrative Decisions Tribunal rejected its claim. On appeal Held, dismissing the appeal: (1) The promotion of a healthy sport, such as soccer, although beneficial to the participants and the public is not a charitable purpose: Re Nottage [1895] 2 Ch 649 CA and The Royal National Agricultural and Industrial Association v Chester (1974) 48 ALJR 304 followed: and (2) The promotion of a sport was not a benevolent purpose: Australian Council of Social Service Inc v Commissioner of Pay-roll Tax (NSW) (1985) 1 NSWLR 567 applied. Judgment 1ALLSOP P: I agree with Gzell J. 2HANDLEY AJA: I agree with Gzell J. 3GZELL J: The appellant, Northern NSW Football Ltd, claims that a portion of its wages are exempt under the Payroll Tax Act 2007, s 48. So far as is relevant, that provision was in the following terms: " 48 Non-profit organisations (1) Subject to subsection (2), wages are exempt wages if they are paid or payable by any of the following: (a) a religious institution, (b) a public benevolent institution (but not including an instrumentality of the State), (c) a non-profit organisation having as its sole or dominant purpose a charitable, benevolent, philanthropic or patriotic purpose (but not including a school, an educational institution, an educational company or an instrumentality of the State). (2) The wages must be paid or payable: (a) for work of a kind ordinarily performed in connection with the religious, charitable, benevolent, philanthropic, or patriotic purposes of the institution or body, and (b) to a person engaged exclusively in that kind of work." 4It was common ground that the Appellant is a non-profit organisation for the purposes of s 48(1)(c) of the Act. It contends that its sole or dominant purpose is a charitable or benevolent one. The Administrative Decisions Tribunal Appeal Panel rejected this claim. 5The objects of the Appellant set out in its constitution were: "1 Objects of Company 1.1 Objects The objects for which the Company is established are: (a)to be the member of FFA in respect of the State and to comply with the constitution and by-laws of FFA; (b)to govern Football throughout the State and protect Football from abuse; (c)to provide and promote Football as an undertaking which benefits communities within the State through enhancement of and improvement in, the health and general well-being of participants; (d)to provide and promote education of Football players, coaches, referees and administrators; (e)to provide and promote a healthy lifestyle in schools, and communities generally, through Football education; (f)prevent infringement of the constitution and by-laws of FFA to the extent that it is able to do so; (g)to foster friendly relations among the officials and players of Football by encouraging Football games in the State; (h)to take all reasonable steps to ensure that discrimination or distinction does not occur among Football participants on any grounds regulated under any Equal Opportunity Law; (i)to promote, provide for, regulate and manage Football tournaments and games in the State; (j)to promote, provide for, regulate and manage Football players representing the State; (k)to co-operate with FFA, other members of FFA and other bodies in the promotion and development of, or otherwise in relation to, Football, the Statutes and Regulations and the Laws of the Game; (l)to facilitate the provision and maintenance of grounds, playing fields, materials, equipment and other facilities for Football in the State so that Registered Participants and communities, in general, enjoy safe environments; and (m)to carry on any business, enterprise or undertaking in any sphere or activity which is permitted by law." 6The football in question is soccer. 7It was submitted on behalf of the Appellant that its dominant purpose should be ascertained by reference only to its constitutional objects and without any significant reference to its activities because the relevant inquiry is limited to the purpose of the organisation and not its actions. 8That is inconsistent with what was said by the majority in Commissioner of Taxation v Word Investments Ltd [2008] HCA 55; (2008) 236 CLR 204 in determining whether an organisation was a charitable institution at [17]; 217: "it is necessary to examine the objects, and the purported effectuation of those objects in the activities, of the institution in question; and at [34]; 224: "A caveat . To avoid doubt in future, it should be noted that it would not be enough that the purpose or main purpose of an institution were charitable if in fact it ceased to carry out that purpose." 9It was submitted that the reference to activities in Word was distinguishable because the question was whether a body was a charitable institution. I see no reason to distinguish it on that basis. There is no reason why the word "charitable" should have a different meaning in that context from that in s 48(1)(c). 10It does not matter in this case, in my view, but if attention is directed solely to the stated objects in a constitution, it would allow an employer to claim that its wages were exempt wages simply because it stated charitable objects in its constitution. 11And it would allow an organisation to maintain its exempt status after it had ceased to carry out its charitable objects. 12Barwick CJ with whom McTiernan and Windeyer JJ agreed, recognised this in Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation [1971] HCA 44; (1967-1971) 125 CLR 659 at [16]; 666 when he said that if an institution's purposes are charitable, it will be a charitable institution for the nature of the institution inheres in the purposes it is created to and does pursue. 13All the Appellant's profits, other income and property, however derived, must be applied only to promote its object. 14The activities of the Appellant were described in written submissions. 15Education of football players is coordinated by the Appellant through the provision of services and education to zones. The education is provided through club seminars, club coaching seminars and on park coaching sessions. The manual produced by the Appellant contains information on child protection, alcohol, smoking, pregnancy, risk management, sun safety and goalpost safety. 16The Appellant also provides further education on an annual basis to club administrators with direct administration seminars conducted throughout the geographical region of the State (from Morrisset in the south to Tweed Heads in the north and diagonally inland incorporating Lightning Ridge and Moree.) 17The Appellant visits over 200 local schools and promotes a healthy lifestyle through participation in football. In this regard it has provided kick bags to schools and there is no requirement that schoolchildren register to play football nor is there any financial cost to the participating school. 18The Appellant also facilitates the provision and maintenance of ground facilities for use and enjoyment by visiting and consulting with councils and being actively involved with Federal and State initiatives concerning facility safety. This includes the provision of education and training seminars on safe practices and risk management. 19The appellant conducts a school development programme in conjunction with the various zones. The programme focuses on the grassroots promotion and development of basic football skills and health and nutrition for children. Codes of conduct are published for players, coaches, parents and administrators. 20The administration aspect of football in the region is only a partial function of the Appellant. The Appellant takes a proactive approach in maintaining soccer facilities. The Appellant likewise plays a significant role in the development of females who play football and that is part and parcel of its commitment to non-discrimination and equal opportunity. 21Notwithstanding the emphasis upon education in this description of its activities, the Appellant's annual report described its activities thus: "The principal activities of the Company in the course of the financial period ended 30 th September 2008 were the promotion and management of the game of football throughout Northern NSW." 22And the business manager of the Appellant gave evidence that the sole or dominant purpose of the Appellant was the promotion and management of the game of football throughout northern New South Wales. 23The Appellant embraced the characterisation of its dominant purpose by the Judicial Member of the Tribunal at first instance at [62]: "The purpose of the applicant is clear only when the objects set out in the constitution of the company at Clause 1 are taken as a whole. When taken as a whole the sub-clauses of Clause 1 describe a dominant purpose being to "provide and promote football as an undertaking which benefits communities, the benefit being the improvement in the health and general wellbeing of participants, through education which encompasses education generally and specifically relating to football". This is an amalgam of the objects and describes a clear and dominant purpose beneficial to the community." 24With respect to the Judicial Member, her amalgam mistakes the effect of playing football by the improvement of health and general wellbeing of participants as a purpose. The purpose is the promotion and management of football. The benefit to communities is a result. 25The Appeal Panel at [48] recognised this distinction. It was said that the purpose of the Appellant was the promotion and management of football. The result of that purpose might be a benefit to the community. But benefit to the community was not the purpose of the organisation. This distinction is also apparent in article 1.1(c) of the Appellant's constitution. 26Furthermore, in my view, the Judicial Member overemphasised the role played by education. 27The dominant purpose of the Appellant is the promotion and management of football. That gives rise to beneficial aspects for those who participate. So much is apparent from the expression of the Appellant's objects. The first three objects are concerned with the promotion and management of football as are articles 1.1(f), 1.1(g), 1.1(h), 1.1(i), 1.1(j), 1.1(k) and 1.1(l). The conclusion is reinforced if its activities are taken into account. Both the Appellant's annual report and the evidence of its business manager make clear that the dominant purpose of the Appellant is the promotion and management of football. 28An appeal lies to this court from the Appeal Panel on a question of law under the Administrative Decisions Tribunal Act 1997, s 119(1). 29It was submitted on behalf of the Appellant that the Appeal Panel erred in law in rejecting the amalgam purpose identified by the Judicial Member. For the reasons set out above I do not agree with that submission. 30It was also submitted that the Appeal Panel erred in law at [46] - [52] in using the expression "wholly charitable"; in using the definite article to describe the purpose; and in placing undue weight upon the activities. 31But in those paragraphs, in coming to its conclusion, the Appeal Panel also addressed itself to the "major or dominant purpose" and the use of the definite article is not a misdescription in that discussion. 32Nor did the Appeal Panel address itself to a wholly charitable purpose. It placed those words in inverted comas and in the discussion that followed addressed itself to the major or dominant purpose of the Appellant. 33In this case one does not need to consider the activities of the Appellant to arrive at the characterisation of its dominant purpose. But for the reasons discussed above, the Appeal Panel did not err in law in taking the activities into account. 34The Appeal Panel did not err in law in the respects put on behalf of the Appellant. 35It was accepted that "charitable" in s 48(1)(c) bears its technical legal meaning of being within the spirit and intendment of the preamble to the Charitable Uses Act 1601 and within the four divisions defined by Lord Macnaghten in Commissioners for special purposes of Income Tax v Pemsel [1891] AC 531 at 583: trusts for the relief of poverty, trusts for the advancement of education, trusts for the advancement of religion and trusts for other purposes beneficial to the community not falling under any of the preceding heads. It was submitted that the Appellant came within the fourth category. 36In Re Nottage [1895] 2 Ch 649 concerned a bequest of a fund in trust to provide, annually, a cup to be given to the most successful yacht of the season, the testator stating that his object was to encourage the sport of yacht racing. The bequest was held not to be charitable. Lindley LJ said at 656 that a gift for the encouragement of a mere sport could not be upheld as charitable. 37It was accepted that Nottage was approved by the High Court in The Royal National Agricultural and Industrial Association v Chester (1974) 48 ALJR 304 at 306 and had been followed in Australia in a long line of cases. 38Chester involved a residuary bequest to a charitable body for the purpose of applying the income in improving the breeding and racing of homer pigeons. The gift was held not to be for a charitable purpose. 39If the dominant purpose of the Appellant was the amalgam found by the Judicial Member, the Appellant argued that Nottage and Chester were distinguishable for the Appellant's objects went far beyond the promotion and encouragement of a mere sport. 40If the amalgam is rejected, the Appellant's attempt to distinguish Nottage and Chester is more tenuous. It was said that the promotion of healthy exercise through football is not the encouragement of a mere sport. 41But Lindley LJ in Nottage would not have accepted that formula as giving rise to a charitable bequest. At 655 his Lordship said: "Now, I should say that every healthy sport is good for the nation - cricket, football, fencing, yachting, or any other healthy exercise and recreation; but if it had been the idea of lawyers that a gift for the encouragement of such exercises is therefore charitable, we should have heard of it before now." 42A formal submission was put that Nottage and Chester were wrongly decided and should no longer be part of the law of Australia. 43It was put that times have changed and this court should follow the Canadian decision in Re Laidlaw Foundation (1984) 13 DLR (4 th ) 491. The purposes of the foundation were to apply its property for the benefit of charitable organisations. It made gifts to organisations promoting amateur sports in Canada and promoting participation in international sporting events by Canadian amateur athletes. 44A surrogate court judge concluded that the recipients were charitable and an appeal to the Divisional Court was dismissed. It was pointed out that it was no longer necessary in Ontario to refer to the preamble to the Charitable Uses Act in order to determine whether or not a purpose was charitable. The preamble was replaced by a statutory provision. 45The Divisional Court held that the surrogate court judge reached the correct decision on correct principles. She had taken the view that while a purpose which had as its object the promotion of mere sport had traditionally been held to be non-charitable, this was not so if the purpose had as its object the promotion of a sport for a wider purpose beneficial to the community or for the public benefit. It was no longer necessary, she said, that the purpose be associated with, or incidental to, an otherwise charitable purpose such as education. Rather, the promotion of amateur athletic sports under controlled conditions was itself a charitable purpose falling under the fourth head of charity in that it promoted health and was akin to cases holding that the promotion of health was a charitable object. 46The surrogate court judge went on to hold, in any event, that participation in organised amateur sports was educational and would thus fall under the second head of charity in that it provided training in discipline and promoted interaction between individuals. 47Laidlaw is not part of the law in Australia. 48Furthermore, the Supreme Court of Canada in AYSA Amateur Youth Soccer Association v Canada (2007) 287 DLR (4 th ) 4 at 21 [38] said that Laidlaw appeared to be an anomalous case based on a statutory provision that adopted only part of the common law test and was inconsistent with that court's holding that public benefit alone does not equal charity. 49It was submitted that if the Appellant's dominant purpose was not a charitable purpose it was a benevolent one. 50It was submitted that the word "benevolent" has no technical legal meaning and is to be given a liberal construction as part of an exemption provision. It was submitted that it was not to be given the same meaning as in the phrase "public benevolent institution" in s 48(1)(b). Benevolence in s 48(1)(c) was not limited to the provision of assistance to the destitute and the non-profit organisation need not promote the relief of poverty, suffering, distress or misfortune, it was submitted. It was sufficient, it was said, that the Appellant's dominant purpose was wishing to do good, being actively friendly and helpful. 51Benevolent applies to an institution in s 48(1)(b). It applies to a purpose in s 48(1)(c). But the fact that it qualifies a different noun in the two subparagraphs does not mean that it has a different meaning. 52The Judicial Member at [49] said that the term "benevolence" did not have a long settled legal meaning and ought to be construed in accordance with its ordinary meaning as affected by the context and purposes of the statute. Reference was made to dictionary definitions. The preferred ones being "(of an organisation) charitable rather than profit-making" and/or "charitable (benevolent fund, society)." 53The Judicial Member thought that the definitions connoted a narrower concept of generosity to the poor and infirm which narrower concept was absent from the activities of the Appellant. In support of this approach the Judicial Member relied upon what had been said by Priestley JA in Australian Council of Social Service Inc v Commissioner of Pay-roll Tax (NSW) (1985) 1 NSWLR 567 at 575: "To me, the word "benevolent" in the composite phrase "public benevolent institution" carries with it the idea of benevolence exercised towards persons in need of benevolence, however manifested. Benevolence in this sense seems to me to be quite a different concept from benevolence exercised at large and for the benefit of the community as a whole even if such benevolence results in relief of or reduction in poverty and stress. Thus it seems to me that "public benevolent institution" includes an institution which in a public way conducts itself benevolently towards those who are recognizably in need of benevolence but excludes an institution, which although concerned, in an abstract sense, with the relief of poverty and distress, manifests that concern by promotion of social welfare in the community generally." 54The Appeal Panel at [49] relied upon what had been said by Evatt J in Perpetual Trustee Co Ltd v Federal Commissioner of Taxation [1931] HCA 20; (1931) 45 CLR 224 at 235 - 236: "Such bodies vary greatly in scope and character. But they have one thing in common: they give relief freely to those who are in need of it and who are unable to care for themselves. Those who receive aid or comfort in this way are the poor, the sick, the aged, and the young." 55Reference was made to Federal Commissioner of Taxation v Launceston Legacy 87 ATC 4,635 in which Northrop J said at 4,646 that the authorities showed a softening of attitude to what comes within the concept of benevolent in the phrase "public benevolent institution". His Honour concluded at 4,646 - 4,647 that the concept of benevolence is no longer limited to the provision of assistance to the destitute. Need is not synonymous with financial poverty and benevolence is a much broader concept than financial assistance. 56But, at the very least, the word "benevolent" connotes the provision of need to those in need of that aid. That is not a characteristic of the Appellant. It promotes the game of football generally and the recipients of its largesse are not in need in any sense that would characterise its activities as benevolent. 57It seems to me that neither the Judicial Member nor the Appeal Panel erred in law in concluding that the Appellant did not have a benevolent purpose as its sole or dominant purpose. 58The proceedings included the Appellant's claim that insurance taken out by it was exempt from duty under the Duties Act 1997, s 259(1)(c). A dismissal of the appeal to this court will not necessarily determine that issue because what is required is that one of the Appellant's objects is a charitable, benevolent, philanthropic, or patriotic purpose. 59The same applies to the Appellant's claim under s 267(2) of the Duties Act exempting such a non-profit organisation from motor vehicle registration duty. 60By agreement the Appeal Panel remitted the proceedings to the tribunal to deal with these issues pursuant to the Administrative Decisions Tribunal Act 1997, s 114(2)(b). 61Section 120(1) empowers the court to make such orders as it thinks appropriate. Those orders include, but are not limited to an order under s 120(2)(b) remitting the case to be heard and decided again by the Appeal Panel either with or without the hearing of further evidence. Counsel for the Appellant sought such an order but I think it preferable to remit the matter to the Tribunal. 62The orders I propose are: (1) Appeal dismissed with costs. (2) Proceedings remitted to the Tribunal to determine whether the appellant satisfies the requirements of s 259(1)(c) and s 267(2) of the Duties Act 1997. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 May 2011