Maughan v Federal Commissioner of Taxation [1942] HCA 32; (1942) 66 CLR 388 (26 November 1942)

HIGH COURT OF AUSTRALIA

Maughan Appellant; and The Federal Commissioner of Taxation Respondent.

H C of A

26 November 1942

Rich, McTiernan and Williams JJ.

Weston K.C. (with him Kerrigan), for the appellant.

Hardwick K.C. (with him E. J. Hooke), for the respondent.

The following written judgments were delivered:—

Nov. 26

Rich J.

I have read the judgment of my brother Williams and agree with it.

McTiernan J.

This case was stated by my brother Williams for the decision of the question whether a deduction should be allowed from the assessable income of the appellant of a gift which he made to an institution known as the Boys' Brigade Inc. on the ground that the gift was to a public benevolent institution within the meaning of sec. 78 (1) (a) (ii) of the Income Tax Assessment Act 1936-1940. I have read the reasons for judgment which his Honour has since prepared for the decision of the case and agree with them, and shall add but little.

The case is stated in an appeal to the Court from a decision of the Board of Review. A decision of the Board is not appealable unless it involves a question of law, and the form of the substantial question to be decided is determined by this limitation. It is in substance whether it was open to the Board, applying the right criteria, to conclude that the Boys' Brigade Inc. was not a public benevolent institution within the above-mentioned provision of the Act. The expression "public benevolent institution" is not a term of art. Its meaning may be governed by the context in which it is found. There is nothing to indicate that the expression in sec. 78 (1) (a) (ii) has any other meaning than its ordinary meaning. The Court considered the meaning of the expression "benevolent institution" in Perpetual Trustee Co. Ltd. v. Federal Commissioner of Taxation[1], and applied the criteria laid down there in a subsequent case, Public Trustee (N.S.W.) v. Federal Commissioner of Taxation[2]. It decided in the former case that the common understanding of the words "benevolent institution", when used together, is a body organized for the relief of poverty or distress. In the present case the argument centres on the question whether the Boys' Brigade Inc. is organized for the relief of poverty. Poverty is a relative condition. It is I think hardly open on the facts of the case to draw any other inference than that the charity of those who maintain the Boys' Brigade Inc. is excited by social conditions arising from poverty and that the dominant object of the institution is to elevate boys adversely affected by those conditions. It is not probable that many of the boys for whose welfare this institution exists could overcome those conditions without its aid. The institution is not incapable of being properly described as a public benevolent institution because it is not owned or controlled by the Government. It would be contrary to a considerable volume of judicial authority to say that such is the only test whether an institution is public. An individual may render public service although he is not a public official or controlled by the Government. The premises and the facilities of this institution and its services are provided for an extensive class, and by reason of the measure of its public service and the conditions under which it is given, I agree it is not open, on the facts of the case, to say it is not a public benevolent institution.

The questions should be answered: 1. No. 2. Yes. 3. Yes. 4. Yes. 5. Yes.

Williams J.

During the year ended 30th June 1940, the appellant gave £3 3s. to the Boys' Brigade Inc. In his income-tax return, he claimed this sum as an allowable deduction under sec. 78 (1) (a) (ii) of the Income Tax Assessment Act 1936-1940, on the ground that it was a gift to a public benevolent institution within the meaning of that sub-section. The Commissioner having disallowed the deduction the appellant appealed to the Board of Review, which dismissed the appeal. The appellant has now appealed to this Court. On this appeal coming on for hearing before me I stated a case for the opinion of the Full Court pursuant to sec. 198 of the above Act, the principal questions being whether on the facts the Board could in law have reasonably come to the conclusion that the Brigade was not a public benevolent institution within the meaning of the sub-section, and whether it necessarily followed as a matter of law that the Board should have decided that the Brigade was such an institution. The facts upon which the Board reached its conclusion are set out in pars. 4 to 11 of the case stated and need not be repeated in detail. The Brigade (which I shall call the Association to accord with the nomenclature in the case stated) was incorporated in 1927 under the Companies Act 1899 N.S.W. to take over and carry on as a going concern an unincorporated association of the same name which was founded in the year 1882. The Association, which is financed entirely by public donations, bequests and subscriptions, is governed by a Council consisting of a president, vice-presidents and not more than twelve members, two of whom retire annually by rotation but are eligible for re-election. On application in writing to the Council, and subject to its approval, every annual subscriber of not less than £5 5s. to the funds of the Association becomes an ordinary member (but only for the period of each subscription), and every person who has paid a sum of not less than £21 to the funds of the Association becomes a life member.

The question whether an institution is subject to some form of public control is a factor to be taken into account in determining whether it is a public institution (The Little Company of Mary (S.A.) Incorporated v. The Commonwealth[3]). But public control is not essential (the main criterion is the extensiveness of the class it is the object of the institution to benefit) and, in order to be of a public nature, the control need not be, in my opinion, that of some government body. A constitution which provides for those members of the public who are sufficiently interested in the work of the institution to subscribe to its funds and thereby become annual members and as such eligible to vote at the election of the controlling body creates a control which is public in its nature. It is the sort of control that one could expect to find for an institution which carries on activities calculated to arouse the interest of a considerable number of well-disposed citizens with a liberal and progressive outlook, to cause them to subscribe to its funds and to take an interest in its management and work. Similar provisions are contained in Part V. of the Public Hospitals Act 1929-1940 N.S.W..

The headquarters of the Association are located in two buildings situated one in Surry Hills and the other in Pyrmont, both of which are slum areas. There it provides free of charge facilities for the boys of these poor districts which their more fortunate brothers obtain in their own homes. This keeps them off the streets, provides intelligent occupation for their leisure hours, and generally contributes to their physical, mental and moral well-being and improvement. As enrolment is voluntary, the fact that on an average between 800 and 900 boys a year avail themselves of these facilities proves that the Association caters for a real want. In Perpetual Trustee Co. Ltd. v. Federal Commissioner of Taxation[4] this Court held that the collocation of words "public benevolent institution" connotes the relief of poverty, suffering, distress or misfortune. Some time after that decision, which related to the same expression in the Estate Duty Assessment Act 1914-1928, sec. 8 (5), the Commonwealth Parliament amended the Income Tax Assessment Act 1936-1939 by adding to the Act as an allowable deduction under sec. 78 gifts to a public institution or fund established and maintained for the comfort, recreation or welfare of the members of the Naval, Military or Air Forces of the Commonwealth. This amendment is significant as showing that the Parliament evidently intended the word "public" to include institutions which, like the Royal Naval House, provide for the needs of some special but substantial class of the community. But this is merely a recognition of the view established by many decisions (see the cases collected in the judgment of Rich J. in The Little Company of Mary Case[5]) that an institution which aims at benefiting an appreciable and particularly but not necessarily an appreciable needy section of the community is a public institution.

To sum up, the sources of the Association's finances are public benevolence, it is controlled by an executive elected upon a quasi-public basis, and its activities, which accord with and fulfil the main objects in the memorandum of association, are of a public benevolent nature. It complies with the following definition of an institution contained in the speech of Lord Macnaghten in Mayor &c. of Manchester v. McAdam[6]: "It is 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. Sometimes the word is used to denote merely the local habitation or the headquarters of the institution. Sometimes it comprehends everything that goes to make up the institution—everything belonging to the undertaking in connection with the purpose which informs and animates the whole": See also Minister of National Revenue v. Trusts and Guarantee Co. Ltd.[7].

The only conclusion, in my opinion, which was reasonably open to the Board on the evidence was that the Association was in the year of income a public benevolent institution. The questions should therefore be answered as follows:—1. No. 2. Yes. 3. Yes. 4. Yes. 5. Yes. The parties have agreed there should be no order as to costs.

Questions in the case stated answered as follows:—1. No. 2. Yes. 3. Yes. 4. Yes. 5. Yes. No order as to costs of the case stated pursuant to the agreement of the parties. Case remitted to Williams J.

Solicitors for the appellant, Stephen, Jaques & Stephen.

Solicitor for the respondent, H. F. E. Whitlam, Crown Solicitor for the Commonwealth.

[1] [1931] HCA 20; (1931) 45 C.L.R. 224.

[2] [1934] HCA 10; (1934) 51 C.L.R. 75.

[3] Ante, p. 368.

[4] [1931] HCA 20; (1931) 45 C.L.R. 224.

[5] Ante, p. 368.

[6] (1896) A.C. 500, at pp. 511, 512.

[7] (1940) A.C. 138, at pp. 149, 150.