Case: Commissioner of Taxation v Word Investments Ltd (2007) 164 FCR 194
Outcome: cited
The High Court recently reaffirmed the application of the technical meaning to the word "charity" and its derivatives used in statutes unless a contrary intention is evident. In Central Bayside General Practice Association Ltd v Commissioner of State Revenue [2006] HCA 43 ; (2006) 229 ALR 1 , Gleeson CJ, Heydon and Crennan JJ referred, in a footnote, to the technical legal sense of "charitable" as that defined by Lord Macnaghten in Pemsel [1891] AC 531 "by reference to the spirit and intendment of the preamble to the Statute of Charitable Uses Act 1601 (UK)". Their Honours referred also to "... the general rule that, the word "charitable" being a word that has a technical legal meaning, when it is used in a statute it should be understood in its legal sense unless a contrary intention appears". They noted that the general rule has been accepted as the law of Australia at least since the decision of the Privy Council in Chesterman v Federal Commissioner of Taxation [1925] UKPCHCA 2 ; (1925) 37 CLR 317. They further said (at [18] fn 6): The word is commonly used in statutes. It is reasonable to assume that parliamentary counsel, taxpayers, revenue authorities, settlors, testators and others have acted on the faith of an understanding that the general rule applies. The Full Court of the Federal Court in Commissioner of Taxation v Word Investments Ltd (2007) 164 FCR 194 at [8] accepted, and there was no dispute before it, that the word "charitable" in the relevant provisions of the ITAA 1997 bears its technical legal meaning. It relied upon Bayside [2006] HCA 43 ; 229 ALR 1 for that purpose. 130 The general nature of the inquiries to be undertaken in ascertaining whether an entity is a charitable institution was discussed by Allsop J in Word Investments Ltd 164 FCR 194. His Honour referred to Royal Australian College of Surgeons v Federal Commissioner of Taxation [1943] HCA 34 ; (1943) 68 CLR 436 and the analysis of the judgments in that case by Lockhart J in Cronulla Sutherland Leagues Club Ltd v Commissioner of Taxation (1990) 23 FCR 82 at 90-93. These authorities demonstrated that the question as to the true nature or character of the entity is to be assessed having regard to its objects, purposes and activities (at [11]). Allsop J formulated the task of characterisation thus (at [14]): The relevant task, as stated in the Surgeons' Case is to assess the true character or nature of the entity by reference to its objects, purposes and activities. It is an integrated, holistic enquiry directed to whether a body of facts and circumstances satisfies a legal category or conception. 131 Importantly, the Commissioner had submitted to the Full Court that a charitable institution could conduct commercial activities but only as incidental or ancillary to its charitable activities. After referring to relevant authorities, Allsop J observed that the cases did not support the submission. He cited Scottish Burial Reform and Cremation Society Ltd v Glasgow City Corporation [1967] UKHL 3 ; [1968] AC 138 and The Incorporated Council of Law Reporting of the State of Queensland v Commissioner of Taxation [1971] HCA 44 ; (1971) 125 CLR 659 and said (at [18]): ... both stand as authority for the proposition that the making of a profit from the conduct of the charitable activity does not necessarily destroy the charitable nature of the purpose exhibited by the activity. Stone J agreed with Allsop J.