In a decision handed down on Fri 13.6.2014, the Full Federal Court has held that Hunger Project Australia (HPA) is a public benevolent institution even though it was predominately engaged in fund raising.
HPA is a not-for-profit company, which is part of a global network of entities that operate under the name “The Hunger Project”.
- The principal objective of the Hunger Project is the relief of global hunger.
- The activities of HPA are mainly directed at raising funds, which are then disseminated to Hunger Project members in the developing world.
- It is those entities that directly perform charitable acts to relieve hunger.
The question raised by this appeal was whether HPA is a “public benevolent institution” (PBI) within the meaning of s 57A(1) of the Fringe Benefits Tax Assessment Act 1986. The Commissioner contended that an entity that merely engages in fund raising activities and does not materially perform charitable works directly for the benefit of the public is not a PBI.
At first instance, in The Hunger Project Australia v FCT [2013] FCA 693, the primary judge (Perram J) rejected that contention and found that HPA was a PBI even though it was predominately engaged in fund raising.
The Full Federal Court has now found that decision was correct and dismissed the Commissioner’s appeal. The Court considered the ordinary contemporary meaning or understanding of a PBI was “broad enough to encompass an institution, like HPA, which raises funds for provision to associated entities for use in programs for the relief of hunger in the developing world”.
(FCT v Hunger Project Australia [2014] FCAFC 69, Full Federal Court, Edmonds, Pagone and Wigney JJ, 13 June 2014.)
[LTN 112, 13/6/14]
Extract from [2014] FCAFC 69
Ordinary meaning
27. The Commissioner correctly accepts that the expression public benevolent institution does not have any technical legal meaning and that, in the absence of a statutory definition, it must be given its ordinary meaning. He contends, however, that it is possible to glean from observations made in some of the judgments in Perpetual Trustee that the ordinary meaning requires the direct provision of aid.
28. We do not consider that the judgments in Perpetual Trustee support the Commissioner’s restrictive interpretation of the ordinary meaning of the expression.
29. The matter in issue in Perpetual Trustee was whether the Royal Naval Home in Sydney was a public benevolent institution for the purposes of s 8(5) of the [Estate Duty Assessment Act 1914 – 1928] EDA Act. The Royal Naval House provided accommodation and recreation for petty officers and lower ratings of the navy when onshore. Because the relief provided by the Royal Naval House was provided directly, the issue [of] whether an institution could be a public benevolent institution if it did not itself directly provide relief did not arise for consideration by the Court.
30. Starke J said (at 232) that in ordinary English usage a public benevolent institution means “an institution organized for the relief of poverty, sickness, destitution or helplessness.” Dixon J (at 233) similarly gave a meaning to the expression, which focused on the objectives or purpose of the relevant institution: an institution fell within the expression if it “organised”, or was “conducted for” or “promoted” the relief of poverty or distress.
31. The Commissioner relies primarily on passages in the judgments of Evatt J and McTiernan J. Evatt J said the following about public benevolent institutions (at 235):
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.
32. The Commissioner places emphasis on the word “give” in this passage and submits, in effect, that this means that the relief must be directly given. He argues that an institution that simply raises funds does not “give” relief. In our opinion this reads far too much into the words used by Evatt J. Read in context his Honour was simply emphasising that the relief must be given or provided free of charge. His Honour was not suggesting that an institution cannot be a public benevolent institution if it does not itself directly give relief to those in need.
33. McTiernan J dissented on the facts. Before turning to the passage relied on by the Commissioner, it should be noted that in his lengthy judgment McTiernan J emphasised (at 237) that there did not appear to be any definite understanding of the precise meaning of the expression. His Honour also said that the question whether a particular institution was a public benevolent institution should not be approached by propounding a single or irrefutable test or definition, and then considering whether the institution in question meets each element of that test or definition.
34. Yet that is essentially the approach that the Commissioner urges in this matter.
35. Later in his judgment, McTiernan J noted that s 8(5) of the EDA Act had, prior to its amendment, exempted from estate duty gifts for “religious, scientific, charitable or public educational purposes”. His Honour then said (at 242):
A comparison of the two sub-sections appears to show that the Legislature intended to exclude from the benefit of the exemptions granted by the Act a number of gifts which, though good charitable gifts in the technical sense, were not for religious or scientific or for public educational purposes or were not made upon the principle of giving direct relief or assistance to mankind in sickness or in need.
36. The Commissioner emphasises the words “direct relief or assistance” in this passage. Again, however, when read in context we do not consider that this passage provides any support for the Commissioner’s contention in this case. His Honour’s use of the word “direct” was not addressed to the nature of the institution that received the relevant gifts, but rather to the purpose or character of the gifts themselves. The point his Honour was making was that as a result of the amendment, only gifts that were eleemosynary in nature, that is gifts that provided aid to those in need, were exempt. Gifts that were charitable only in the technical legal sense (cf. Chesterman v Federal Commissioner of Taxation [1925] UKPCHCA 2; (1926) 37 CLR 317 at 319) were no longer exempt. His Honour was not in any way propounding a single or irrefutable test for a public benevolent institution which involved the direct provision of relief.
37. There is a further difficulty with the Commissioner’s reliance on what was said in the various judgments in Perpetual Trustees. Even if there could be divined from the various judgments a single expression of the common understanding of public benevolent institution, the Commissioner’s approach suggests that the common understanding in 1931, when Perpetual Trustee was decided, must forever fix the common understanding or meaning of the expression. We doubt that is the correct approach.
38. Whilst past judicial statements concerning the ordinary meaning of a word or expression can often assist in divining the meaning of the word or expression, the common understanding of the meaning of an expression may change over time depending on the particular expression in question. When the question is whether a particular institution is a public benevolent institution, the answer depends on the common or ordinary understanding of the expression at the relevant time. The question is not to be approached as a legal question to be dealt with by the mechanical application of past authority, irrespective of the present current understanding of the expression in the currently spoken English language: Ambulance Service (NSW) v Deputy Commissioner of Taxation [2002] FCA 1023; (2002) 50 ATR 496 at [40]– [42] (Ambulance Service).
39. There is much to be said for the proposition that the common understanding or usage of the expression in question here has expanded or changed since Perpetual Trustee was decided; ACOSS at 575C-E (per Priestley JA); Ambulance Service of New South Wales v Deputy Commissioner of Taxation [2003] FCAFC 161; (2003) 130 FCR 477 at [44]. It is unlikely that global aid networks comprising separate fundraising entities such as the Hunger Project were prevalent when Perpetual Trustee was decided. Even if it was the case that the common understanding of a public benevolent institution in 1931 involved the institution directly dispensing relief, we can see no reason why that common understanding may not have changed over time to encompass organisations that may be structured in ways that separate fund raising entities from entities that dispense relief or aid using those funds. [Emphasis added]