FEDERAL COURT OF AUSTRALIA
IN THE FEDERAL COURT OF AUSTRALIA
DATE OF ORDER:
THE COURT ORDERS THAT:
1. Having regard to s 44(4) and s 44(5) of the Administrative Appeals Tribunal Act 1975 (Cth), the decision of the Administrative Appeals Tribunal the subject of this proceeding is set aside and the case remitted to the Tribunal to be heard and decided again in relation only to the question of the effective date of revocation of the four endorsements as described at  of the reasons for judgment published today having regard to the submissions made by the applicant before the Tribunal in relation to that question.
2. The consideration by the Tribunal of the question described in Order 1, having regard to the submissions made by the applicant before the Tribunal in relation to that matter, is to be undertaken according to the existing evidence admitted by the Tribunal in the course of the proceedings before it with no further evidence being taken, subject to Order 3.
3. To the extent the Tribunal finds it necessary to admit further evidence concerning the matter described by the Tribunal at paras 93 and 94 of its reasons for decision, such evidence may be admitted.
4. The parties are to file written submissions in relation to the question of the costs of this proceeding within 14 days.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
QUEENSLAND DISTRICT REGISTRY
QUD 55 of 2014
THE STUDY AND PREVENTION OF PSYCHOLOGICAL DISEASES FOUNDATION
COMMISSIONER OF TAXATION
21 OCTOBER 2015
REASONS FOR JUDGMENT
1 This proceeding concerns an appeal from a decision of the Administrative Appeals Tribunal (the “Tribunal”) constituted by Deputy President Molloy, pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (the “AAT Act”).
2 The applicant, described as “The Study and Prevention of Psychological Diseases Foundation Inc”, was incorporated in 2005. In the proceedings before the Tribunal, the applicant adopted the acronym “SPED”. That description is adopted in the Tribunal’s reasons. In these reasons, I have adopted the same description of the applicant.
3 The Commissioner of Taxation (the “Commissioner”) issued the following endorsements to the applicant:
(a) an endorsement, effective from 1 January 2005, under s 50-110 of the Income Tax Assessment Act 1997 (Cth) (the “1997 Act”) as an entity exempt from income tax as a “charitable institution” having regard to Item 1.1 in the table in s 50-5 of the 1997 Act;
(b) an endorsement, effective from 1 July 2005, under s 176-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the “GST Act”), as a charitable institution;
(c) an endorsement, effective from 1 January 2005, under s 30-125 of the 1997 Act as a “deductible gift recipient” having regard to Item 1 of the table at s 30-15 and Item 1.1.6 in the table at s 30-20(1), on the footing that SPED satisfied the description at Item 1.1.6: “a charitable institution whose principal activity is to promote the prevention or the control of diseases in human beings”; and
(d) an endorsement, effective from 1 July 2005, under s 123D(2) of the Fringe Benefits Tax Assessment Act 1986 (Cth) (the “FBT Assessment Act”), as a health promotion charity.
4 By a letter dated 6 April 2011 (issued to SPED on 7 April 2011), the Commissioner advised SPED that as a result of a review of the endorsements granted to it, the Commissioner was not satisfied that the statutory requirements entitling SPED to those endorsements had been met (from the outset) and, further, that those endorsements had been revoked as from 1 January 2005 in the exercise of statutory powers conferred upon the Commissioner under s 426-55 of Sch 1 to the Taxation Administration Act 1953 (Cth) (the “TAA”).
5 Consequent upon the revocation, the Commissioner issued assessments to SPED on 3 May 2011 for the tax years ending 30 June 2005, 2006, 2007, 2008 and 2009 pursuant to s 167 of the Income Tax Assessment Act 1936 (Cth) (the “1936 Act”). Further, penalties were imposed pursuant to s 284-75(3) of the TAA. A General Interest Charge was also imposed.
6 In November 2011, SPED lodged objections against both the Commissioner’s decision to revoke the endorsements and the s 167 default notices of assessment.
7 As to the objection to the revocation of the endorsements, the objection decision upheld the Commissioner’s decision to revoke those endorsements. The objection decision was notified to SPED in writing on 27 March 2012. On 21 May 2012, the Commissioner gave notice of an objection decision to SPED concerning the s 167 default notices of assessment in part allowing (as to the Administrative penalty and the General Interest Charge) SPED’s objections in the manner set out in the Commissioner’s letter and supporting reasons for decision.
8 SPED applied to the Tribunal for a review of the objection decision disallowing its objection to the Commissioner’s decision to revoke the endorsements.
9 On 20 December 2013, the Tribunal affirmed the Commissioner’s objection decision: 2013 AATA 919.
10 The applicant says that three questions of law arise for determination in these proceedings.
11 First, did the Tribunal misconstrue the phrase “charitable institution” as it appears in Item 1.1 of the table in s 50-5 of the 1997 Act and its application to the integers of s 50-105 and s 50-110 of the 1997 Act? An examination of that question is said to reveal a failure by the Tribunal in undertaking the correct methodological analysis required of it by the authorities as the Tribunal failed, it is said, to consider and make findings about: whether SPED’s objects were confined to charitable purposes; the circumstances concerning SPED’s formation and the relationship between those matters and SPED’s purposes; and, a consideration of SPED’s activities in the specific context of its objects and the circumstances of its formation.
12 The applicant also says that the Tribunal impermissibly imposed a requirement to the effect that in order for SPED to satisfy the notion of a “charitable institution” as that term is understood for the purposes of Item 1.1 of the table at s 50-5 of the 1997 Act, SPED had to establish, as an element of “public benefit”, a “benefit to the community that is real and of value” and “available to the public” before SPED’s purpose could be characterised as “for the public benefit”.
13 Second, did the Tribunal deny the applicant procedural fairness or constructively fail to exercise its statutory review function because either the Tribunal made a finding of fact that the activities of the applicant did not amount to “research” when that question was not in issue, or alternatively, the Tribunal failed to address evidence, said to be cogent and substantial evidence, relating to the activities of the applicant as “research” and, in particular, failed to address a document described as “Methodology Overview of the SPED Research”?
14 Third, did the Tribunal deny the applicant procedural fairness or fail to take into account relevant considerations by failing to consider submissions made by the applicant going to six identified propositions (and other matters) concerning the exercise of the discretion conferred by s 426-55 of Sch 1 of the TAA and, in particular, the issue of the date upon which revocation under s 426-55(2) would take effect?
15 Before examining the Tribunal’s reasons for decision, some aspects of the statutory framework and the settled general principles concerning the questions in issue ought to be identified.
16 As to the 1997 Act, s 50-1 provides that the total ordinary income and statutory income of entities falling within the description of entities in the table at s 50-5 is exempt from income tax (subject to a qualification not presently relevant). Item 1.1 of the table at s 50-5 describes an “exempt entity” as a “charitable institution”.
17 Section 50-105 provides that the Commissioner must endorse an entity as exempt from income tax if the entity is entitled to be so endorsed and has applied for the endorsement according to law (that is, in compliance with Div 426, Sch 1 to the TAA). As to entitlement, an entity is entitled to be endorsed as exempt from income tax if the entity meets all the requirements of s 50-110: see s 50-110(1). Relevantly, to be entitled, an entity must be an entity “covered by Item 1.1” in the table at s 50-5: s 50-110(2). Thus, the entity must be a “charitable institution” as that term is understood according to law. The entity must also have an ABN: s 50-110(3).
18 Section 30-120 of the 1997 Act provides, relevantly, that if an entity applies (in compliance with Div 426, Sch 1 to the TAA) for endorsement as a “deductible gift recipient” (as that term is defined in s 30-227 of the 1997 Act), the Commissioner must so endorse the entity if it is entitled to be so endorsed. As to entitlement, an entity is entitled to be so endorsed if the entity has an ABN and the entity is an institution described (although not by name) in Item 1 of the table at s 30-15: see s 30-125. Item 1 of that table contains, relevantly, a cross-reference to an institution covered by any of the tables in Subdivision 30-B. One of those tables is the table at s 30-20. That table sets out general categories of health recipients. Item 1.1.6 refers to: “a charitable institution whose principal activity is to promote the prevention or the control of diseases in human beings” [emphasis added].
19 Relevantly then, an entity is entitled to be endorsed as a deductible gift recipient if it is a charitable institution whose principal activity meets the description in Item 1.1.6 of the table at s 30-20.
20 As to the GST Act, s 176-1 provides that the Commissioner must endorse an entity as a charitable institution if the entity is entitled to be so endorsed under s 176-1(2) and the entity has applied according to law (see Div 426 of Sch 1, TAA). An entity is entitled to be so endorsed if it is a charitable institution and it has an ABN: s 176-1(2).
21 As to the FBT Assessment Act, s 123 D(1) provides that the Commissioner must endorse an entity as a “health promotion charity” if the entity is entitled under s 123 D(2) to be so endorsed and the application has been made in accordance with Div 426, Sch 1 of the TAA. An entity is entitled to be so endorsed if it is a health promotion charity: s 136(2). A health promotion charity is defined as: “a charitable institution whose principal activity is to promote the prevention and control of diseases in human beings” [emphasis added]: s 136(1).
22 It follows that SPED’s entitlement to each endorsement under each Act required SPED to be a charitable institution apart from any other consideration such as the principal activity required by Item 1.1.6 in the table at s 30-20 of the 1997 Act and the principal activity required by s 123 D(2) and s 136(1) of the FBT Assessment Act.
23 Section 426-55(1) of Sch 1 to the TAA provides that the Commissioner may revoke the endorsement of an entity if, relevantly, the entity “is not … entitled to be endorsed”: s 426-55(1)(a). The phrase “is not entitled to be endorsed” may suggest considerations going to no present entitlement to the relevant endorsement and thus considerations which do not look back to the moment in time when the endorsement was made (in the case of SPED’s endorsements, 2005). However, one of the reasons why an entity “is not entitled to be endorsed” may be that the entity was never entitled to be endorsed from the outset of the endorsement as the entity failed to satisfy the statutory integers required to be met so as to be entitled under each Act.
24 Section 426-55(2) provides that the revocation “has effect from a day specified by the Commissioner (which may be a day before the Commissioner decided to revoke the endorsement)”. Section 426-55(3) recognises that the revocation power conferred by s 426-55(1) may be exercised in a way that takes effect from a day on which the entity “first ceased to be entitled” but no earlier than that day.
25 Thus, the revocation may relate back to a day earlier than the day of the revocation decision.
26 It is necessary when determining whether the entity is a charitable institution “to examine the objects, and the purported effectuation of those objects in the activities, of the institution in question” and in examining the objects, it is necessary to see whether, “its main or predominant or dominant objects, as distinct from its concomitant or incidental or ancillary objects are charitable”: Federal Commissioner of Taxation v Word Investments Ltd (“FCT v Word”) (2008) 236 CLR 204 at , per Gummow, Hayne, Heydon and Crennan JJ. Put another way, by Latham CJ, in Royal Australasian College of Surgeons v Federal Commissioner of Taxation (“Royal Australasian College v FCT”) (1943) 68 CLR 436 at 444: “But the question – difficult or easy to answer – must always be – what is the true nature and the objects and activities of the particular society? If these objects and activities are of a mixed character, … then the question must be decided according to the prevalent or main character”.
27 In the context of an entity established by a constitutional document containing a range of objects (in the case of the Royal Australasian College, 16 objects were recited in the constitution), the mistake to be avoided in methodological analysis was put this way by Williams J in the Royal Australasian College case at 452: “But, in order to determine what is the main or dominant purpose of the College, it is a mistake to examine the objects contained in the memorandum in this disjunctive fashion. They should be examined in conjunction with one another and in the light of the circumstances in which the College was formed and of the manner in which the College is fulfilling the purposes for which it was incorporated” [emphasis added].
28 As to activities, McTiernan J at 450 in Royal Australasian College v FCT said this:
The members of the association might have devoted their corporate endeavours either to its scientific objects, the promotion of the science of surgery, or to its professional objects, the maintenance of proper standards for the practice of surgery or to both of these objects. But the question whether the appellant [College] fulfils the description of a scientific institution depends less upon the fact that it can direct its efforts to all these objects than what it does in pursuit of each of them.
29 The enquiry, so far as it concerns activities, “must centre on whether it can be said that the activities are carried on in furtherance of a charitable purpose”: FCT v Word at , per Gummow, Hayne, Heydon and Crennan JJ. In the case of Word Investments Ltd (“Word”), the entity was founded by members closely associated with Wycliffe Bible Translators Australia (“Wycliffe”). Wycliffe was associated with a missionary organisation called Wycliffe Bible Translators (International) which sought to spread the Christian religion internationally and particularly in developing countries by translating the Bible into the language of those countries. Word was formed for the purpose of raising money within Australia to give it to Wycliffe for carrying out its purposes which, at least to some degree, were to be fulfilled overseas. Word paid Wycliffe to carry out Bible translation on its behalf. However, Word did not itself directly carry out the training or dispatching of missionaries overseas, the publishing of the Bible or the preaching of the Gospel. It gave its profits to Wycliffe and other similar Christian organisations to enable them to perform those activities. As to Word’s activities, the plurality in FCT v Word said this at : “The activities of Word in raising funds by commercial means are not intrinsically charitable, but they are charitable in character because they were carried out in furtherance of a charitable purpose”.
30 The term “charitable institution” used in the 1936 Act (in the form of s 23(e) of that Act – the pre-cursor to the current 1997 provisions, as construed in longstanding authorities) and the 1997 Act, has an established technical meaning deriving from (although continuously adapting according to contemporary circumstances) the “spirit and intendment” (see Central Bayside General Practice Association Ltd v Commissioner of State Revenue (2006) 228 CLR 168 per Gleeson CJ, Heydon and Crennan JJ at , footnote (28)) of the Preamble to the Statute of Charitable Uses Act 1601 (UK) 43 Eliz 1, c 4 and Lord Macnaghten’s well-known judgment (speech) in Commissioners for Special Purposes of Income Tax v Pemsel (“Pemsel”)  AC 531 and particularly the observations at 583 in these terms:
“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 of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads. The trusts last referred to are not the less charitable in the eye of the law, because incidentally they benefit the rich as well as the poor, as indeed, every charity that deserves the name must do either directly or indirectly.
31 Lord Macnaghten’s view reflected the view of the majority: Lord Watson at 554-563; Lord Herschell at 568-574; and, Lord Macnaghten at 574-592. See also Incorporated Council of Law Reporting (Qld) v Commissioner of Taxation (Cth) (1971) 125 CLR 659 at 666 and 667 per Barwick CJ and 671 per Windeyer J. See, generally, Equity and statute in charity law, Matthew Harding, (2015) 9 Journal of Equity 167.
32 Terms such as “charity” or “charitable institution” bear this technical meaning unless the statute reflects a contrary intention. None of the statutes in issue in these proceedings reflect a contrary intention. None of the statutes, however, define the term “charitable institution”. Although the plurality, French CJ, Gummow, Hayne, Crennan and Bell JJ in Aid/Watch Incorporated v Commissioner of Taxation (Cth) (“Aid/Watch v CoT”) (2010) 241 CLR 539 at  recognised that Pemsel is the source of the modern classification of trusts in the four principal divisions described in Lord Macnaghten’s observations, their Honours also recognised, in the following way, the evolving characteristics of the technical meaning of the term “charity”:
But even in 1891 [the year of the Pemsel decision], the case law which gave the term “charitable” its technical meaning had developed considerably since the time of the British income tax statute of 1799. The case law may be expected to continue to do so as the cases respond to changed circumstances. As Lord Wilberforce put it, the law of charity is a moving subject which has evolved to accommodate new social needs as old ones become obsolete or satisfied (Scottish Burial Reform and Cremation Society v Glasgow Corporation  AC 138 at 154. See also Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 at 582 ).
33 The principled approach to the statutory construction of the undefined term “charitable institution” (as amplified by the common law over time) for the purposes of the legislation in issue in these proceedings is put this way by the plurality in Aid/Watch v CoT at ,  and :
20 A law of the Commonwealth may exclude or confirm the operation of the common law of Australia upon a subject or, as in the present case, employ as an integer for its operation a term [“charitable”] with a content given by the common law as established from time to time. …
23 Where statute picks up as a criterion for its operation a body of the general law, such as the equitable principles respecting charitable trusts, then, in the absence of a contrary indication in the statute, the statute speaks continuously to the present, and picks up the case law as it stands from time to time. Further, where, as here, the general law comprises a body of doctrine with its own scope and purpose, the development of that doctrine is not directed or controlled by a curial perception of the scope and purpose of any particular statute which has adopted the general law as a criterion of liability in the field of operation of that statute.
24 Accordingly, the use of the term “charitable” in the phrase “charitable institution” in s 50-5, item 1.1 of the 1997 Act and the corresponding provisions of the FBT and GST Acts is to be understood by reference to the source in the general law as it is developed in Australia from time to time.
34 I will return to the fourth category identified in Pemsel later in these reasons.
35 The focus of the enquiry in determining the true nature or character of the entity has been described by Chief Justice Allsop as an “integrated, holistic inquiry directed to whether a body of facts and circumstances satisfies a legal category or conception”: Federal Commissioner of Taxation v Word Investments Ltd (2007) 164 FCR 194 at  (per Allsop J, as the Chief Justice then was). The judgments in the High Court in FCT v Word do not suggest any point of departure in principle from that view. As the plurality in the High Court observe in FCT v Word at , if the main purpose of the entity is charitable, it does not lose its charitable character simply because some of its incidental or concomitant and ancillary objects are non-charitable. As to the body of facts and circumstances relevant to the characterisation question as mentioned by Allsop J at  (as above), Lockhart J said, in Cronulla Sutherland Leagues Club Ltd v Commissioner of Taxation (Cth) (1990) 23 FCR 82, this: “The material facts and circumstances which should be examined to characterise the main purpose of the relevant body include its constitution, its activities, its history and its control”.
36 His Honour went on to say this at 96:
These may alter from time to time and the purpose of establishment may correspondingly change. It is not sufficient to look to the formation of the body and to ascertain what was at the time the purpose of its formation. The statute gives a periodic operation to the words and directs the enquiry to a particular time, namely, the year of income so that consideration must be given not only to the purpose for which the society was established but also the purpose for which it is currently conducted.
37 Where a society, body or entity is established, governed by an expression of the purposes for which that entity is formed, or trusts are established (by bequests or otherwise) for particular purposes, an analysis of the true nature of those purposes will be necessary to determine whether they are charitable purposes. In this sense, purposes are akin to objects. “Purposes” and “objects” give rise to another distinction however in the context of an entity established by a constitutional document containing objects. The constitutional document may also contain “general subsidiary clauses” conferring powers “but serving the main end” (see H.A. Stephenson & Son Ltd (In liq) v Gillanders, Arbuthnot & Co (1931) 45 CLR 476 at 487, per Dixon J). In determining the main end or true object of the entity, it must be ascertained, “according to the true meaning of the memorandum interpreted by a fair reading of the whole instrument” [emphasis added]: Dixon J at 487. As to the distinction between purposes and objects in this sense and the application of the distinction see FCT v Word at  per Gummow, Hayne, Heydon and Crennan JJ.
38 As to Lord Macnaghten’s fourth category in Pemsel (trusts for other purposes beneficial to the community), Lord Hanworth M.R. in Inland Revenue Commissioners v Yorkshire Agricultural Society (“IRC v Yorkshire Agricultural”) (1928) 1 K.B. 611 at 622 described it as “of a somewhat wide and indefinite nature”. As that conception is understood in a contemporary setting, an entity is not necessarily a charitable institution simply because it is established for purposes that benefit the community (that is to say, benefit the public). The entity must have a purpose which also falls within the spirit and intendment of the Preamble to the Statute of Charitable Uses.
39 In order to fall within the fourth class in Pemsel, the purpose must be to benefit the public generally rather than the domestic or private interests of particular members of the community or the domestic or private interests of those who may have come together to form the entity. Nevertheless, the fulfilment of a purpose of benefit to the public generally may, directly or indirectly, or in a tangible or intangible way incidentally benefit individual members. The fundamental question is whether a purpose of benefiting the public generally is being fulfilled.
40 Lord Hanworth put it this way in IRC v Yorkshire Agricultural at 622:
… it has been determined that where the purpose of the association [entity] is rather for the benefit of the members themselves, than a wider aim, then such institutions as are so established are not within the purview of purposes beneficial to the community.
41 Although in IRC v Yorkshire Agricultural, Lord Atkin was dealing with a statutory income tax provision that required the society to be established for “charitable purposes only” (in order for the relevant income of the society to be exempt), Lord Atkin made these observations which have more general application, at 631:
There can be no doubt that a society formed for the purpose merely of benefiting its own members, though it may be to the public advantage that its members should be benefited by being educated or having their aesthetic tastes improved or whatever the object may be, would not be for a charitable purpose, and if it were a substantial part of the object that it should benefit its members I should think that it would not be established for a charitable purpose only. But, on the other hand, if the benefit given to its members is only given to them with a view of giving encouragement and carrying out the main purpose which is a charitable purpose, then I think the mere fact that the members are benefited in the course of promoting the charitable purpose would not prevent the Society being established for charitable purposes only.
42 Speaking of the fourth category, Dixon J said this in Barby v Perpetual Trustee Co. (Ltd.) (1937) 58 CLR 316 at 324:
In this now familiar classification of charitable gifts, the fourth class [in Pemsel], as has often been pointed out, does not attempt to define a charitable object. It is no more than a final class into which various objects fall that are not comprised in the first three classes, but are nevertheless charitable. It has been found impossible to give an exhaustive definition of what amounts to a charitable purpose, but the authorities indicate the attributes that are to be looked for. The gift must proceed from altruistic motives or from benevolent or philanthropic motives. It must be directed to purposes that are for the benefit of the community or a considerable section or class of the community. The purposes must tend to the improvement of society from some point of view which may reasonably be adopted by the donor. The manner in which this tendency may be manifested is not defined by any closed category. It is capable of great, if not infinite, variation. It may be by the relief of misfortune; by raising moral standards or outlook; by arousing intellectual or aesthetic interests; by general or special education; by promoting religion; or by aiming at some other betterment of the community. The purposes must be lawful and must be consonant with the received notions of morality and propriety.
43 In Aid/Watch v CoT, for example, having regard to the Australian constitutional setting, French CJ, Gummow, Hayne, Crennan and Bell JJ considered that the generation by Aid/Watch v CoT of public debate as to the best methods for the relief of poverty by the provision of foreign aid characterised by two features indicative of charitable status, reflected a charitable purpose falling within the fourth category in Pemsel. Those features were that its activities were apt to contribute to the public welfare being a purpose beneficial to the community and the second was that the purposes and activities of Aid/Watch v CoT did not fall within any area of disqualification from charitable purposes for reasons identified by the plurality at 557 .
44 Although “the public” may include a “section of the public” (Commissioner of Taxation v Triton Foundation (2005) 147 FCR 362 at , per Kenny J), the relevant section of the public ought to be “a considerable section or class of the community”: Barby v Perpetual Trustee Co. (Ltd.), per Dixon J at 324. In Downing v Federal Commissioner of Taxation (Downing v FCT”) (1971) 125 CLR 185 at 201, Walsh J although finding no room in that case for the operation of the relevant rule, nevertheless recognised a rule that a class “defined by reference to a personal relationship to a single propositus or to several propositi does not constitute a section of the community, for the purposes of satisfying the requirement of public benefit”.
45 In Thompson v Federal Commissioner of Taxation (1959) 102 CLR 315, the High Court was required to decide certain questions upon a case stated. One question was whether a particular bequest was a bequest “for public educational purposes in Australia”. The testatrix by her will bequeathed a portion of her residuary estate to the William Thompson Masonic Schools, Baulkham Hills, New South Wales. A question arose as to whether the bequest was exempt from estate duty as a bequest for public educational purposes in Australia within the meaning of the relevant Estate Duty Assessment legislation. At 321, Dixon CJ observed that in the “classification of charitable trusts which the law will enforce the category of educational purposes has been a little strained by the inclusion of unexpected pursuits as subjects of instruction or encouragement”. The Chief Justice also said this in the context of public educational purposes at 321:
The tendency of the trust must be to benefit the public, a condition that is satisfied if it tends to the benefit of the public at large, or a class or section of the public. The trusts may be limited in their operations by reference to locality, to conditions of people, to their disabilities, defects or misfortunes and by reference to many other attributes of men [and women] and things, yet the trusts may retain their “public” character. Not a little difficulty has been felt in defining the conception of “public”, “public charity” or “public benefit” which this involves but the contrast is, of course, to private advantage.
46 The Chief Justice, at 322, in this context, recognised the application to public educational purposes of this proposition drawn from Cockshott v Public Trustee (1951) Ch. 622:
An aggregate of individuals ascertained by reference to some personal tie (e.g., of blood or contract, such as the relations of a particular individual, the members of a particular family, the employees of a particular firm, the members of a particular association, does not amount to the public or a section thereof for the purposes of the general rule.
[the original italics of Dixon CJ]
[bold emphasis added]
47 As to the particular bequest, as an illustration of the principle, Dixon CJ said this at 322:
For myself I would reject the view that a trust in favour of the William Thompson Masonic Schools and Hostels is to be considered a charitable trust because it is for the advancement of education. I would reject it because such a trust would lack the “public” element, the element of public benefit or advantage that is necessary.
Large as is the membership of the masonic order in New South Wales it forms but a society of persons bound together as a voluntary association into which members are admitted by the election of the existing members as provided by the rules adopted contractually for the government of the society. The size and importance of the order cannot give it any different character.
48 As already mentioned, the term “charitable institution” as used in the 1997 Act and the other legislation in issue in these proceedings has, as a matter of law, an established technical meaning as described at  and  of these reasons and as amplified by the authorities and principles discussed at  to  and  to  of these reasons. The term “charitable institution” however is a composite term which contemplates an institution which reflects charitable purposes or charitable objects. The composite term bears colour drawn from both the words “charitable” and “institution”. As to the meaning of “institution” in the composite phrase, Higgins J in The Young Men’s Christian Association of Melbourne v Commissioner of Taxation (Cth) (1926) 37 CLR 351 at 360-361, in the context of a discussion of the term “religious institution” for the purposes of the exempting provisions of the Income Tax Assessment Act 1915 (Cth), accepted that the term “institution” appropriately bore the characterisation reflected in the definition of that term in the Oxford Dictionary at meaning 7. In Stratton v Simpson (1970) 125 CLR 138, Gibbs J at 158 (Barwick CJ, Menzies and Walsh JJ concurring) said this in the context of a bequest directing trustees to distribute net income between “institutions and bodies” falling within s 134 of the Administration Act 1903-1965 (WA):
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 “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.). A school could appropriately be called an institution within the ordinary meaning of the word. Similarly, the words “medical service or fund”, if construed to mean the body set up to organise and control the service or administer the fund, could also be regarded as describing an institution.
49 In FCT v Word, Gummow, Hayne, Heydon and Crennan JJ at  adopted as the meaning of “institution”, the meaning attributed to the term by Gibbs J in Stratton v Simpson. As to the Oxford English Dictionary definition of the term “institution”, meaning 7, is in these terms:
a. An establishment, organisation, or association, instituted for the promotion of some object, esp. one of public or general utility, religious, charitable, educational, etc., e.g. a church, school, college, hospital, asylum, reformatory, mission, or the like; as a literary and philosophical institution, a deaf and dumb institution, the Royal National Life-boat Institution, the Royal Masonic Benevolent Institution (instituted 1798), the Railway Benevolent Institution, etc. The name is often popularly applied to the building appropriated to the work of a benevolent or educational institution.
As to this definition, see: Oxford English Dictionary (Oxford University Press, subscription service) website: oed.com, viewed 7 October 2015.
50 In the context of the term “religious institution”, Davies J in the Full Court of the Federal Court adopted meaning 7. a. as an appropriate meaning of the term “institution” for the purposes of the statute in question: Pamas Foundation (Inc) v Commissioner of Taxation (“Pamas v CoT”) (1992) 35 FCR 117 at 118.
51 In Christian Enterprises Ltd v Commissioner of Land Tax  2 NSWR 99, the question in issue was whether land was exempt from land tax because the land was owned by a company limited by guarantee which was either a “religious society” or alternatively a “charitable institution” as those terms were used in the relevant land tax legislation. Walsh JA observed that membership of the company was confined to natural persons who accepted particular articles of faith. His Honour also observed that the company’s primary object was to raise funds to promote particular religious purposes with the income of the property to be applied towards that object. Walsh JA observed that “there are many societies which would not ordinarily be described as institutions” and accepted that the term “institution” is “a vague word” and its meaning must always depend upon the context in which it is found. As an illustration of the distinction between a religious society and a religious institution, Walsh JA made these observations which were, on the meaning of institution, adopted (with the emphasis illustrated in the quote below) by Beaumont and Lee JJ in Pamas v CoT at 125:
At the relevant time the appellant had only seven members. But I do not think that the question before the court [ie whether it was a “religious society”] turns in any way on that fact. One cannot say that if it had had 100 members or some other selected number of members it would be a religious society but that, with only seven members, it is not. For example, I think that the Franciscan Order of Friars Minor, which has a large membership, would undoubtedly be properly described as a religious society. Cf Perpetual Trustee Co (Ltd) v Wittscheibe (1940) 57 WN 166 … But I think also that it was already a religious society at the time when St Francis of Assisi and his then quite small group of followers had joined together in a community, with the common purpose of devoting themselves to preaching as well as to poverty and prayer. It may well be that, in the ordinary use of the language, one would speak of the Franciscans as being now, but not being in those early days, an “institution”. But, in the term “religious society” I find no notion that size or numbers are of importance.
The Tribunal’s decision
52 The Tribunal identified three issues for determination.
53 First, whether SPED is a charitable institution. Second, whether SPED is a health promotion charity. Third, if any of SPED’s endorsements are to be revoked, from what date should each revocation take effect?
54 As to the evidence, the Tribunal examined evidence given by Ms Naomi Elizabeth Perry, a member and past President of SPED. The Tribunal describes Ms Perry, who is a graduate chiropractor, as Dr Perry.
Dr Perry’s evidence
55 The Tribunal notes these matters concerning Dr Perry’s evidence.
56 Dr Perry attended a meeting in the early 1980s at which a former soldier, Mr James Salerno, spoke of his personal experiences during and on his return from the Vietnam War. In meetings during the next few years, an emerging group developed “laws” or “rules” on how to deal with one another including, as quoted by the Tribunal from Dr Perry’s evidence: “… a working knowledge base on what is required to create sustainable harmonious and cooperative human association”. In the mid-1980s, Dr Perry and other members of the group moved to Cununurra in North Western Australia. They lived on a cattle station purchased as a group investment. The group experimented with varying organisational structures and leadership rotations. They researched, experienced and developed an understanding of what makes good leaders: paras 11, 12 and 13.
57 During this period, Mr James Salerno, began collating research and developed a test for choosing leaders that was described as the “Emotional Quotient (EQ)” test. The Tribunal notes Dr Perry’s evidence that Mr James Salerno was the “brainchild and a founding member of the research” program. By 1989, the group described as the “research team” was undergoing changes in composition. Dr Perry had moved to South Australia. She had two children, Anika Salerno and Navarone Salerno. The cattle station was sold in 1991. The finances were divided amongst the members: paras 14 and 15.
58 Some members of the group, including Dr Perry and some other founding members, re-grouped and re-defined their purpose. They began raising funds for further research by establishing a number of clinics described by Dr Perry as “multidisciplinary health clinics”. These clinics employed some members of the research team. In 1996, Mr James Salerno published a book he had written entitled: “The Emotional Quotient – Are you ready for it?”
59 During the period 1995 to 2000, members of the group travelled extensively, made television appearances and presented at national and international conferences. In approximately 1999, members, described as the research team, became known as the “Ideal Human Environment Social Research Team” (described as “IHESRT”) with a membership of about 40 members. In 1999, IHESRT raised funds for a project which brought together 60 strangers who lived for five to six months in a camp in the Kimberley area of Western Australia. The project was funded by IHESRT at a cost in excess of $500,000. The purpose of the project was to “road-test the principles of the Ideal Human Environment”, a concept described by Dr Perry in this way:
The IHE is a place where all people regardless of race, colour, creed or religion can be emotionally and physically safe from and with each other.
See paras 17, 18 and 19 of the Tribunal’s reasons.
60 In 2000, IHESRT established the IHE Foundation. Dr Perry was the President. Its aim was to provide direct relief to young people suffering from social disorders. During the period 2000 to 2004, the IHE Foundation provided assistance to thousands of people through its programs and its telephone hotline. It also operated a 31 bed full time live-in facility for those needing short term accommodation: paras 20 and 21.
61 In 2004, the group began to restructure its activities so as to focus on the study of early indicators of psychological disease. The Tribunal notes Dr Perry’s evidence in these terms: “The focus was on how we needed to act and think, to create an environment that prevented the development and expression of psychological disease – namely the ideal human environment”. The group agreed that to achieve primary prevention of psychological disease it would be necessary to undertake an intense period of research. All members of the research team had to be prepared to undergo intensive personal and inter-personal examination and self-exposure: paras 22 and 23.
62 In 2005, SPED was incorporated. Its primary activity was to undertake research seven days a week, 24 hours a day, and then trial and test research findings through the conduct of programs designed to promote the prevention of psychological disease.
63 All of these factual matters at  to  reflect the Tribunal’s observations of the evidence of Dr Perry.
64 At para 25, the Tribunal notes the expression in cl 4 of SPED’s Constitution of an object in these terms:
The Foundation [sic] objects are for public benefit and charitable purposes, in seeking to promote the prevention and control of psychological diseases in human beings and therefore setting out to ultimately create the Ideal Human Environment (IHE).
65 At para 26, the Tribunal notes what it describes as functions of SPED set out in cl 5 of the Constitution. The Tribunal recites that those functions include the following:
5.1 primarily to operate and fund a research team that functions 7 days a week, 24 hours a day, whose purpose is to research human psychological disease by studying a cross-section of human behaviour in a variety of emotional, social and physical conditions, circumstances and environments.
66 At para 27, the Tribunal notes that SPED’s Constitution provides for an unlimited number of members (cl 10) and by cl 11 any person may apply to be a member by signing an application form and, upon approval by the Board and payment of the annual subscription fee, such an applicant shall become a member.
67 At para 28, the Tribunal notes that under cl 63 of the Constitution (subject to exceptions such as payments in good faith for the remuneration of officers or servants), SPED’s income and property is to be applied only towards the promotion of its objects.
68 As to the membership of SPED, the Tribunal notes Dr Perry’s evidence that there are two forms of membership. One is “Full Time Research” members called “FTR” team members and “Free Lance Research” members called “FLR” team members. FLR team members include any person who has attended a SPED program: para 29.
69 At para 30, the Tribunal notes Dr Perry’s acknowledgement that FLR team members are not “official members” of SPED. The only “members” of SPED are the FTR team members.
70 At para 35, the Tribunal notes that the qualification for membership under SPED’s Constitution refers to payment of an annual subscription. The Tribunal also notes that the application form for membership and the SPED membership agreement contain particular requirements. At para 36, the Tribunal notes that cl 9 of the application form is headed “Entry Principle [sic] Assets” and provides in these terms:
a. Upon joining the SPED SRT [Social Research Team] all your assets become part of the asset base to be available for use by the SPED Foundation. This includes cash and all forms of property. These assets form part of what is termed entry principle assets.
71 At para 37, the Tribunal notes that there is provision in the application form to list the assets of the applicant including those assets which the applicant does not want to make available to SPED. The Tribunal also notes that assets are said to be returnable to an applicant “upon completion of this agreement” although “no interest is payable”. The Tribunal observes that implicitly an applicant’s assets, and whether those assets would be available for use by SPED, are relevant to an applicant’s application for membership.
72 At para 38, the Tribunal notes some provisions of the SPED membership agreement. By cl 1.1, the member will undertake study into the IHE principles under the guidance of the SPED Social Research Team (“SRT”). The Tribunal notes that by cl 1.3, the member will be available to participate in the following:
1.3.7 become familiar with the IHE program principles;
1.3.8 be accountable to abiding by the IHE principles for all daily decisions on all actions. All actions and the psychology behind those actions and reactions form part of the research data;
1.3.9 [p]articipate in fund raising activities for the Foundation.
73 At para 39, the Tribunal notes that by cl 3.1 of the SPED membership agreement, it is agreed that any income the member derives is classified as “fund-raising” for SPED. Any expenses derived from the efforts of the member are characterised as “SPED expenses” unless otherwise determined by the Board of SPED.
74 At para 40, the Tribunal notes that by cl 4.1 of the SPED membership agreement, participation as a member may be terminated by either party to the agreement on 24 hours’ notice without giving a reason. Also at para 40, the Tribunal notes that by cl 4.2 “the agreement will ‘cease’ if the member does not display a genuine attempt to follow the Ideal Human Environment principles, or displays actions whereby the member is deemed to be an ‘unsafe person’”.
75 At para 41, the Tribunal notes that the evidence is that no application for membership has ever been refused and that as the only changes have been the departure of the four identified individuals, there “presumably” says the Tribunal, have been no new applications for membership.
76 At para 42, the Tribunal notes Dr Perry’s evidence that membership is entirely open to the public. The Tribunal also notes Dr Perry’s evidence that: “… however, we have not actively solicited members of the public to become members”.
77 The Tribunal notes that in the year ended 30 June 2005 there were 21 members of SPED. The members were Dr Perry, Emma T Salerno, Matteo T Salerno, Victoria Salerno, Ben Salerno, Navarone Salerno, Kerrian Salerno, James Salerno Jnr, Anika Salerno, Julius T Salerno, Oliver Salerno, Hannah Salerno, Lincoln Haycroft, Julie MacDonald, Andrew MacDonald, Anna Dupont, Deborah Hamilton-Smith, Grayson Hamilton-Smith, Justine Bond, John McKelvie and Sonia Sandro: para 31.
78 At para 32, the Tribunal notes that from 2005 to 2009 the membership of SPED did not change significantly. Of the 21 individuals mentioned above, John McKelvie, Sonia Sandro, Oliver Salerno and Hannah Salerno ceased to be members in 2008/2009. There were no additional members.
79 At para 33, the Tribunal notes that membership of SPED did not include Mr James Salerno Snr although it did include his wife (or former wife), Kerrian Salerno; his brother, Ben Salerno; and some of his children.
80 At para 34, the Tribunal observes that SPED acknowledges that the members are bound by blood ties, marriage or friendship.
81 Apart from Dr Perry’s evidence of the background to the formation of the group (see  to  of these reasons) and the development commencing in 2004 when the focus became one of concentrating on creating an environment that prevents the development and expression of psychological disease, that is, the principles governing the ideal human environment (see  and  of these reasons), the Tribunal notes, at para 43, Dr Perry’s evidence that SPED’s undertaking is concerned with “action based qualitative research” whereby research is “undertaken in an interactive real time manner”. The Tribunal also notes that SPED’s qualitative research is said to address “methodologies that describe and explain people’s experiences, behaviours, interactions and social contexts without the use of statistical procedures or quantification”. See also the Tribunal’s references to SPED’s object at cl 4 and the research function at cl 5.1 set out at  and  of these reasons.
82 At para 44, the Tribunal notes a summary provided by SPED during the course of an ATO audit which describes SPED’s activities in language much along the lines of the language of its object and cl 5.1 function. In the submission, the activity is described as the “one activity” SPED undertakes. The Tribunal notes the scope of the activities as reflected in these quoted remarks from the submission:
The one activity that the SPED Foundation undertakes is the study of psychological disease and the implementation of the IHE in order to prevent psychological disease. This activity is 24 x 7. The number of hours devoted to this task is the whole number of possible hours in any one week.
As previously outlined, the unique design of the SPED research is in its 24 x 7 methodology. No action is outside the scope of the research.
83 At para 45, the Tribunal notes, in this same context, that SPED describes its members as both “researchers” and “guinea pigs”. The Tribunal also notes at para 45 that the members engaged in such action-based qualitative research aimed at preventing psychological disease, conducted on a fully engaged 24 hours a day, seven days a week basis (thus engaging the “whole number of possible hours in any one week”), are not required to hold any qualifications in social science research or psychology. At para 45, the Tribunal notes that the only member of the group who has “studied psychology at all” at a tertiary institution is Dr Perry.
84 At para 46, the Tribunal notes that the activities of members across their various experiences, behaviours, interactions and social contexts are analysed over the 24 hour cycle of a day each day of the week. The Tribunal notes, at para 46, Dr Perry’s evidence that researchers “undergo normal life activities such as going to work, minding children and maintaining a household” and the range of human experiences is said to reflect dealing with poverty, opulence, crowded living, living alone, living in cities, living in remote isolated communities, living overseas and living in Australia.
Ms Dupont’s evidence
85 The Public Officer and Treasurer of SPED, Ms Anna Dupont, also gave evidence before the Tribunal. Ms Dupont holds a Bachelor of Arts (Communications) and a Master of Business (Accounting) degree.
86 The Tribunal notes at para 47 that Ms Dupont has children from a relationship with Mr James Salerno Jnr from whom she is separated and that she was introduced to what was the “Ideal Human Environment Social Research Team” through attending the same school as Ms Emma Salerno, the daughter of Mr James Salerno. These matters of connection noted by the Tribunal are only relevant to the extent that Ms Dupont’s membership of SPED falls within the description of someone bounded by “blood ties, marriage or friendship” (see para 34).
87 At para 48, the Tribunal notes that Ms Dupont gave evidence that she is a full-time mother juggling her role as Treasurer of SPED and other administrative and accounting duties. The Tribunal also notes Ms Dupont’s evidence that she is “first and foremost a guinea pig of the SPED social research” and “being a full-time researcher is like the scientist who uses his own body to experiment and has to go through all the consequences of those experiments to find the cure we all want”: para 48. Because Ms Dupont sees herself as first and foremost a guinea pig of the SPED social research, Ms Dupont says that there are no “holidays” and no “time off” from the research: para 48. The Tribunal also notes at para 49, Ms Dupont’s evidence that, through research, she has been able to more honestly investigate her own disposition towards disorders like bulimia and depression and that the “research team as a whole has been engaged in investigating my thought patterns that are early warning signs to maladaptive behaviour”.
88 At para 50, the Tribunal notes that everything that SPED members do through the 24 hour cycle of a day, seven days a week, is regarded by SPED and its members as research.
The projects and the financial statements
89 As to the projects, the Tribunal notes at para 51 that SPED has conducted a number of projects. At paras 51 and 52, the Tribunal described the projects in this way:
51. As part of what was called Project Inebriation, SPED investigated aspects of human behaviour as it relates to luxury motor vehicle use. This research was undertaken using motor vehicles purchased by SPED. They included a Hummer, for which it paid about $100,000, a Ferrari purchased for about $300,000 and a Rolls Royce at about $695,000. When asked about the use of these vehicles, [Ms] Dupont said the Ferrari was generally driven by the young men, and the Rolls Royce by “one of the older women”.
52. Other projects included Project India (undertaken when SPED members visited India to attend a wedding), and “Project Gambling: Understanding thought processes and addictive behaviour from engagement in games of chance”.
90 At para 53, the Tribunal observes that there is no evidence of SPED’s research or findings being published in the traditional sense. The Tribunal observes: “Nothing has made its way into, or even been submitted to, any medical or other journal. SPED’s publications are for internal purposes”.
91 Having considered these factual matters, the Tribunal then examined aspects of SPED’s financial affairs. The Tribunal notes that the entire income of SPED’s members, some of whom are or were employed (or self-employed) in conventional occupations is given over to SPED as donations with the result that members pay no income tax. Their living and other expenses are provided for by SPED: para 54. The Tribunal observes that consistent with SPED’s view that every activity of its members amounts to research, SPED treats every outlay, including but not limited to its members’ ordinary living expenses, as a research expense. SPED also meets at least some of the expenses of Mr James Salerno Snr, on the footing that he is an adviser to SPED, even though he is not a member of SPED.
92 At para 56, the Tribunal identifies these matters arising out of SPED’s financial statements:
(a) During the years in question SPED entered into a significant number of transactions buying and selling shares in publicly listed companies;
(b) This culminated in transactions between 12 November 2008 and 30 June 2009, during which time, SPED outlaid $98,597,632.13 and generated an income in the order of $123,333.05;
(c) During the 2006 financial year, SPED’s “research expenses” amounted to $324,264. Of that total, $47.00 was spent on “advertising and marketing” and the line item “study and research” accounted for $394;
(d) The 2009 “research expenses” amounted to a total of $761,052. Advertising and marketing comprised $1,516 and “internet and website” comprised $783. There is no line item for “study and research”;
(e) SPED’s balance sheet as at 30 June 2009 reveals that it had total assets of $10,665,655 and total liabilities of $3,151,812. Of the liabilities, the largest creditor appears to be, A.M. Mac[D]onald whose “debt” is noted in the amount of $2,954,222. Andrew Mac[D]onald has been a member of SPED, but left around Christmas 2009. He was said to be in a relationship with Anika Salerno, Dr Perry’s daughter. His mother, Julie MacDonald is SPED’s secretary.
93 At para 57, the Tribunal identifies these further financial matters:
The approximately $760,000 in research expenses for 2009, referred to above, include the following, recorded under a heading “Credit card and petty cash”:
Registration & Subscriptions
Repairs & Maintenance
Study & Training
Vehicles & Maintenance
94 As to “Project Vanuatu”, the Tribunal notes these matters at para 58:
One of SPED’s investments was a development in Vanuatu with a company incorporated in that country, Vanuatu Indigenous Development Alliance Limited. The agreement between SPED and the Vanuatu company includes recitals that it is the parties’ intention to work together on a commercial enterprise that will also produce benefits to the economy of Vanuatu, and that SPED has agreed to advance $1,100,000 towards the development. This was “Project Vanuatu”. The development did not proceed, and the property was sold in 2008, although the sale did not settle until some four years later.
95 As to the 2006 and 2008 accounts, the Tribunal also notes these financial matters at paras 59 and 60:
59. Transactions recorded in SPED’s accounts for 2006 include Salerno Perry Pty Ltd - $730,000. [Ms] Dupont thought this was a loan, although she could not recall seeing a loan agreement. Another entry was Salerno Bradock Pty Ltd - $65,000. [Ms] Dupont thought this referred to a construction company one of the researchers had formed and again possibly a loan.
60. In the 2008 accounts, SPED’s income is recorded as $2,368,105. This includes “Donations” of $66,188, “Dividends from Shares” of $55,242 and a “Gain on Options Trading” of $104,119. The highest amount of income was $1,849,700 from “Trust Distributions”. [Ms] Dupont thought the source was the Salerno Perry Family Trust.
96 At para 61, the Tribunal finds that there is “a pattern of similar transactions over all the years in question”.
The Tribunal’s analysis of the issues
97 At para 62, the Tribunal observes that whether an entity is an “institution” within the composite description “charitable institution” depends upon the whole of the relevant circumstances. For the purposes of the analysis, the Tribunal says it assumes “that SPED is correctly described as an institution” [emphasis added].
98 At para 63, the Tribunal observes that the word “charitable” has a technical legal meaning and that an institution is a charitable institution if it has charitable purposes. The Tribunal identifies observations of the High Court in FCT v Word as the source of the proposition that the technical meaning of the term derives from the Preamble to the Statute of Charitable Uses Act 1601 (UK), described as the Statute of Elizabeth. The Tribunal notes at para 64 the role of the observations of Lord Macnaghten in Pemsel.
99 At para 65, the Tribunal observes that a purpose is for the public benefit “if it offers a benefit to the community that is real and of value, either tangible or intangible, and the benefit is available to the public”. Downing v FCT is cited for the proposition although there is no reference to any particular part of the reasons for judgment identifying the source of the proposition.
100 At para 66, the Tribunal notes that SPED claims to be a charitable institution on the footing that it has charitable purposes within either the second purpose identified in Pemsel, namely, the “advancement of education”, or the fourth purpose of “other purposes beneficial to the community” although the Tribunal does not identify the other limb to the fourth purpose in Pemsel contained in the words “not falling under any of the preceding heads”.
101 At para 67, the Tribunal observes that an institution is charitable if its only purpose or its main or dominant purpose is charitable in the technical legal sense earlier described and the institution is established and maintained for that charitable purpose (that is, three elements). The judgment of the plurality in FCT v Word, Gummow, Hayne, Heydon and Crennan JJ is identified as the source of that proposition.
102 At para 68, the Tribunal observes that if an institution’s objects in its constitutional document indicates a purpose that is a charitable purpose but its actual activities and other relevant factors indicate that the substance and reality is contrary to the recited charitable purpose, “the institution will not be charitable”. The Tribunal cited an observation from the judgment of the plurality in FCT v Word at 220 and 221 to the effect that the relevant enquiry so far as it is directed to an analysis of activities “must centre on” whether it can be said that the activities are carried on “in furtherance of a charitable purpose”.
103 At para 70, the Tribunal observes that SPED’s principal activities, as it claims, are the research its members carry on 24 hours per day, seven days a week. The Tribunal then observes that it does “not accept that this is research”. The Tribunal concludes that the activities of the members, described by SPED as research, are “predominantly the ordinary activities of life” and that these activities are “carried out for the personal benefit of the members themselves”: para 70. The Tribunal concludes, at para 71, that although SPED asserts that all of its expenditure is “on research”, nevertheless “overwhelmingly, its expenditure goes on its members’ living expenses, other personal expenditure, and commercial investments”.
104 The Tribunal further finds at para 71 that expenditure “in any way beneficial to the community is insignificant compared to expenditure on private purposes”.
105 At para 72, the Tribunal concludes and finds that although SPED says that it has been represented at conferences, has conducted seminars or workshops and has run various programs, “the extent of these activities [is] greatly exaggerated”.
106 At para 73, the Tribunal finds that even accepting that SPED has been involved “in running programs, or these other activities [described at para 72], as it asserts, these are minor, by any measure, compared to its main activities, namely the research SPED claims is being carried out by its members 24 hours a day, seven days a week”.
107 At para 74, the Tribunal concludes that SPED’s “actual activities” do not coincide with the stated objects in its Constitution and that it does not fulfil the charitable purposes it asserts. The Tribunal concludes that SPED “exists, and existed during the relevant years, for the benefit of its small number of members” and a considerable part of that benefit “is financial”.
108 At para 75, the Tribunal concludes that SPED was not at any relevant time a charitable institution.
109 As to the question of whether SPED is an institution for the purposes of the composite phrase “charitable institution” the Tribunal cites the observations of Gibbs J in Stratton v Simpson at 158 and aspects of the observations of Beaumont and Lee JJ at 125 in Pamas v CoT: paras 77-79.
110 At para 80, the Tribunal observes that SPED’s members are all related by blood, marriage or friendship as earlier mentioned by the Tribunal at para 34 when reviewing the evidence. The Tribunal also concludes that the conditions SPED places on its members means that the membership of SPED is unlikely to grow. The Tribunal also concludes that any attraction of new members is likely to be confined to persons who are born into SPED or who marry or commence a relationship with an existing member.
111 At para 81, the Tribunal finds that there is little, if any, public utility in SPED’s activities and that its activities, which it calls research, “are predominantly its members’ ordinary activities of life, carried out for their own benefit”.
112 The Tribunal also finds that SPED’s expenditure “in general, is for the personal benefit of its members”: para 81.
113 At para 82, the Tribunal concludes that SPED is not an institution in the relevant sense.
The evidence and the findings
114 I have examined the Tribunal’s analysis of the evidence and its conclusions and findings of fact in some real detail (including the matters mentioned at  to ) because none of the findings of fact with the exception of a challenge to the finding that SPED’s activities did not amount to “research” (a matter I will come to later in these reasons) are challenged by the applicant. The applicant challenges the methodological approach to the determination of whether SPED is a charitable institution but the findings of fact (with the exception noted) are not challenged. Of course, it needs to be remembered that under the AAT Act an appeal lies to the Federal Court of Australia (as an exercise of original jurisdiction) on a question of law from any decision of the Tribunal. No appeal lies on the ground that a finding by the decision-maker was against the weight of evidence or on any ground which engages a deliberative evaluation of the merits of the decision-maker’s findings.
115 A challenge to a finding of fact might well arise in circumstances where the question is whether there is any evidence of a particular fact or whether inferences drawn from foundation facts are open. Both of those matters would raise a question of law. Sundberg, Emmett and Finkelstein JJ put the matter this way in Minister for Immigration & Multicultural Affairs v Al-Miahi  FCA 744; (2001) 65 ALD 141:
The question whether there is any evidence of a particular fact is a question of law. Likewise, the question whether a particular inference can be drawn from facts found or agreed is a question of law. That is because, before the inference is drawn, there is a preliminary question as to whether the evidence reasonably admits a different conclusion. Accordingly, in the context of judicial review, the making of findings and the drawing of inferences in the absence of evidence is an error of law. On the other hand, there is no error of law simply in making a wrong finding of fact. Even if the reasoning whereby the Court reached its conclusion of fact were demonstrably unsound, that would not amount to an error of law. A party does not establish an error of law by showing that the decision-maker inferred the existence of a particular fact by a faulty process, for example by engaging in an illogical course of reasoning. Thus, at common law, want of logic is not synonymous with error of law. So long as the particular inference is reasonably open, even if that inference appears to have been drawn as a result of illogical reasoning, there is no place for judicial review because no error of law has taken place – Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 355-6.
116 These observations were made in the context of judicial review in the face of contended jurisdictional error. Nevertheless, the observations going to that which constitutes error of law remain relevant considerations in the context of an appeal to the Federal Court on a question of law under s 44(1) of the AAT Act. If the question involves the exercise of a discretion, the considerations reflected in Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 at  to  per French CJ and  to  per Hayne, Kiefel and Bell JJ would also be relevant. A failure to address material evidence going to an applicant’s case before the Tribunal might amount to a denial of procedural fairness or a failure to discharge the statutory review function which would give rise to a question of law.
The further questions
117 The Tribunal considered two further questions.
118 The first is whether the principal activity of SPED is to promote the prevention or the control of diseases in human beings. That question is relevant to Item 1.1.6 of the table at s 30-20 of the 1997 Act concerning SPED’s endorsement as a “deductible gift recipient”. It is also relevant to the question under s 123D(1) and s 136(1) of the FBT Assessment Act in determining whether SPED is a “health promotion entity”.
119 The second question concerns the revocation of the endorsements under s 426-55 of Sch 1 to the TAA.
120 I will return to the second question later in these reasons.
121 As to the principal activity of SPED, the Tribunal observed at para 83 that “disease” includes any mental or physical ailment or disorder. The Tribunal then quoted observations of the Tribunal at  in Re Krishnamurti Australia Inc v Federal Commissioner of Taxation (2011) 84 ATR 322 in which the Tribunal was not satisfied that by expenditure, allocation of resources, statements of objects, subject matter of publications nor by any other measure could it be said that control or prevention of mental illness was a principal nor even a subsidiary activity of any significance of the entity under examination in that Tribunal proceeding. In that proceeding, the Tribunal also said that representatives of the entity could not point to any specific passage or publication, activity or object which addressed the subject in a direct way. The point of the reference was that the Tribunal in determining the proceedings concerning SPED took the view that the same conclusions could be said of SPED with the exception of the statement of objects in SPED’s Constitution.
122 Thus, at para 86, the Tribunal concluded that SPED’s principal activity was not “at any relevant time, to promote the prevention or control of diseases in human beings”.
The Tribunal’s decision concerning the date of revocation
123 Having regard to what went before (paras 1 to 86), the Tribunal at para 87 observed that it follows that SPED was not entitled to any of the endorsements granted to it in 2005 as it was not a charitable institution at any relevant time (para 75) and its principal activity was not, at any relevant time, to promote the prevention or control of diseases in human beings (para 86).
124 At para 88, the Tribunal observes that SPED contended that the power of revocation under s 426-55(1), Sch 1 to the TAA involved the exercise of a discretion. At para 89, the Tribunal observes that under s 426-55(2) the revocation has effect from a day specified by the Commissioner which may be a day before the Commissioner decides upon revocation of the endorsement. At para 90, the Tribunal notes SPED’s contention that the revocations took effect from 1 January 2005 and that if the endorsements were to be revoked, the effective date of revocation should be the date of the Tribunal’s decision on 20 December 2013 or “at worst, from the date of the Commissioner’s decision” which was 6 April 2011.
125 At para 91, the Tribunal notes SPED’s contention that the discretion ought to be exercised in its favour having regard to these considerations identified by Ms Dupont in her evidence: SPED has implemented investment strategies influenced by the endorsements it held; SPED was subject to a Business Activity Statement (“BAS”) audit completed in February 2007 in which the auditor found that SPED was properly endorsed as a health promotion charity; SPED received notice from the Commissioner of a review in 2007 in response to which it provided information requested by the Commissioner, thus cooperating with the Commissioner; and the grant of the endorsements originally is itself a relevant fact.
126 At para 92, the Tribunal concludes that it is appropriate in all the circumstances that the revocations take effect from the date nominated by the Commissioner “especially having regard to SPED’s actual activities and financial affairs”. The Tribunal observes at para 92 that the BAS audit in 2006/2007 did not examine “those matters in any depth”. The Tribunal observes at 92 that nor did the review proposed in 2007 review those matters and the subsequent audit required information of SPED that was not previously made available.
127 It is apparent from the material that two of the endorsements took effect from 1 January 2005 and two of them took effect from 1 July 2005 yet the revocation date takes effect for all of them from 1 January 2005. As to that anomaly, the Tribunal said this at paras 93 and 94:
93. The decision of the Commissioner, and the objection decision, were that the endorsements be revoked effective from 1 January 2005. It seems to have been assumed that all of the endorsements were granted from that date. The material before the Tribunal indicates that two of the endorsements did not take effect until 1 July 2005. However, there was subsequent correspondence about back-dating, so that it is possible that these endorsements also took effect from the earlier date. The matter was not specifically raised by the parties.
94. The intention is that each revocation encompass the respective period of endorsement. The objection decision achieves that and provides certainty.
128 Thus, the Commissioner’s objection decision was affirmed.
The applicant’s essential contentions
129 As to the first question, the applicant contends that in determining whether SPED is a charitable institution, the decision-maker is required to consider, in conjunction with one another, the circumstances of formation, the objects and the actual activities. The applicant accepts that the Tribunal set out in its reasons some discussion of the formation of SPED (paras 11-24), its objects (paras 25-28) and its activities (paras 43-53) although that discussion is said to reflect “substantial deficiencies”. However, the error of law is said to lie in the “actual approach” adopted by the Tribunal when considering whether SPED is a charitable institution at paras 62-75 of the reasons. Those paragraphs are said to demonstrate that either the Tribunal did not correctly understand the analytical approach to be adopted required by the authorities or the Tribunal simply did not apply the correct approach.
130 That is said to follow because although the Tribunal referred to SPED’s Constitution (paras 25-28) and noted SPED’s contention that it is a charitable institution because it has charitable purposes within the second class in Pemsel (the advancement of education) and the fourth class (other purposes beneficial to the community), first, the Tribunal failed to make any finding about whether the recited objects were confined to charitable purposes and, second, the Tribunal failed to make any finding as to within which of the Pemsel classes SPED’s purposes fall.
131 Rather, the Tribunal recognised the need for there to be a charitable purpose but then directly embarked upon, it is said, a consideration of SPED’s activities in isolation from any consideration of its stated purposes or the circumstances of its formation.
132 SPED contends that the Tribunal ought to have considered and made findings about whether its objects or purposes were (or predominantly were) charitable purposes. That process of fact-finding required the Tribunal to assess SPED’s objects not in any “disjunctive fashion” but in conjunction with one another and also in light of the circumstances in which SPED was formed so as to determine and find whether the applicant’s objects fell within the second or the fourth class in Pemsel.
133 SPED also contends that the Tribunal (starting at para 70) considered SPED’s activities in isolation from its objects and circumstances of formation “notwithstanding that there was extensive evidence as to three decades of public activities, aims and historical background leading to the incorporation of [SPED]”. That material is described in the relevant footnote to the applicant’s submissions as pages 2-5 (paras 3-19) of SPED’s Consolidated Statement of Facts Issues and Contentions; pp 1-17 (paras 6 to 117) of the statement of Dr Perry; and pp 673-684 of a document described as “An Historical Overview of the SPED Research”.
134 SPED also says that the Tribunal’s reasons do not give any indication that it considered SPED’s research activities by reference to its recited purposes or by reference to any of SPED’s submissions about the purpose and reasons for which the research activities were undertaken, in the manner they were undertaken. The material going to that issue is said to be pp 6-12 (paras 22-57) of SPED’s Consolidated Statement of Facts Issues and Contentions; pp 18-20 (paras 123-136) of the statement of Dr Perry; and pp 685-695 of a document described as “Methodology Overview of the SPED Research”.
135 SPED contends that para 71 of the Tribunal’s reasons reflects error as the Tribunal examined SPED’s expenditure on research activities by asking whether the “activity alone” was “beneficial to the community” rather than by asking whether SPED’s purposes were beneficial to the community and, in any event, SPED says the activities analysis was without any context as to whether SPED fell within one of the Pemsel classes.
136 SPED also says that the Tribunal at para 65 adopted, as a principle of law, a requirement that in order for SPED to be regarded as a charitable institution on the footing that it has purposes beneficial to the public, a purpose would only be “for the public benefit” if the benefit to the community is “real and of value, either tangible or intangible, and the benefit is available to the public”.
137 SPED says that such a principle does not derive from the judgments in Downing v FCT which is the authority cited by the Tribunal for the proposition. SPED says that the test is correctly identified by Kenny J in Commissioner of Taxation v Triton Foundation at  in these terms:
Further, in order to fall within Lord Macnaghten’s fourth class, the purpose must be to benefit the public generally, as opposed to individual members of the community, although the fulfilment of the purpose “either directly or indirectly incidentally may benefit such individuals” … The public may, however, include a section of the public …
138 SPED contends that the requirement that there be a purpose that is of benefit to the “public generally” arises only if the purpose under consideration falls within the fourth class or category from Pemsel” and it is not necessary to show that the benefit offered is “real and of value” or that the benefit is “available to the public”.
139 Further, the applicant says that it contended for a charitable purpose before the Tribunal on two grounds: advancement of education and other purposes beneficial to the community. SPED says that the need to demonstrate, on the facts, a purpose of “benefit to the public generally” was only relevant to the fourth Pemsel class, and the Tribunal did not reject SPED’s submission that its objects were within the second Pemsel class.
140 SPED says that the imposition of the principle described at  was an error of law and, in any event, the erroneous test was applied to only one of the contended purposes without any resolution, on the facts, of SPED’s other contention concerning a purpose of the advancement of education.
141 Both matters are said to be material to the Tribunal’s decision.
142 As to the second question, SPED says that the Tribunal at para 26 notes SPED’s primary function as recited at cl 5.1 and, at para 43, the Tribunal notes an observation from Dr Perry (drawn from p 18, para 125 of her statement) by which she describes the characteristics of SPED’s research method as to which see  and  of these reasons.
143 SPED contends that the question of whether its activities amounted to research was not put in issue by the respondent or the Tribunal during the hearing. SPED says that the respondent’s case before the Tribunal went to the availability and public utility of SPED’s research rather than any question of whether its activities “amounted to research”. SPED says that the Commissioner’s emphasis in its closing submission was that the “primary purpose”, in all of the documentation in the case, of the Foundation (SPED), “is research” and “if one looks at the research, that research is “introverted” insofar as it is research that is performed only on a full-time basis by the 12 members – or the 17 members on 30 June 2009 of the Foundation”.
144 SPED says that both parties presented their case before the Tribunal on the basis that the activities carried out by SPED were or included research.
145 That contention was advanced in SPED’s Consolidated Statement of Facts Issues and Contentions.
146 SPED says that the Commissioner proceeded on the same basis by its Amended Statement of Facts Issues and Contentions. The contentions of the Commissioner relied upon by SPED are these:
SPED’s research only has “real educational value” to a very limited class of people.
The results of the research have not been published or otherwise made public.
Seen in this context, the research has (and had from 2005) little or no educational value to the community and, in any event, if benefits were produced by the research, those benefits were not available to the public or a sufficiently significant section of the public.
Any alleged benefit which may flow from that research in the “prevention” of psychological disease is, at best, ancillary to that principal activity.
147 SPED says that notwithstanding these considerations, the Tribunal determined (at para 70) that SPED’s activities did not amount to “research” and then relied upon that finding to conclude that SPED was not a charitable institution (paras 70 to 82) nor a health promotion charity (paras 84 to 86) and that its endorsements should be revoked retrospectively (para 92).
148 SPED says that the finding as to its research was a critical part of the reasoning upon which the decision was based.
149 SPED says that the Tribunal made the research finding without giving it fair notice that the question was in issue thereby denying SPED procedural fairness. It says that had it been given notice, it could have led substantial evidence on the question.
150 Alternatively, SPED says that the Tribunal has fallen into error of law by ignoring or failing to have regard to relevant material which it says is cogent and substantial evidence regarding the nature of its activities as research. The material (evidence) not addressed by the Tribunal is said to be, at para 33 of SPED’s submissions, as follows:
(a) A document titled “Methodology Overview of the SPED Research” (the Research Methodology), to which the Tribunal’s attention was specifically directed in closing argument.
(b) Evidence afforded by Dr Perry by statement and oral evidence at the hearing, as to the history and evolution of the Applicant’s research methodology, including a description of the methodology and why it was considered most appropriate.
(c) The Applicant’s “Consolidated Statement of Facts Issues and Contentions”.
151 SPED says that the Tribunal made only brief reference to Dr Perry’s evidence about the research activity (at para 46) and the Tribunal “did not refer to or consider” the Methodology Overview document “at any stage of its decision”.
152 SPED says that the Tribunal, when making its finding that SPED’s activities did not amount to “research”, failed to explain whether it had accepted SPED’s evidence about its activities or “why its particular research methodologies were chosen”. SPED says that the Tribunal did not explain why SPED’s activities “could not or did not amount to ‘research’”. SPED says that the Tribunal concluded that since members’ activities are predominantly the ordinary activities of life, those activities did not amount to “research”. SPED says that the Tribunal reached that finding without reference to SPED’s evidence of the relevance, necessity and analysis of those “ordinary activities” to its research methodology including oral evidence given by Dr Perry at p 31 of the Transcript, lns 31-41 in these terms:
Question: How did you settle upon that methodology …?
Answer: We realised that really full accountability is the only way to be able to accurately create the real life situations that are human and vicissitudes, the human psychology and that are human emotions are presented to everyday. So if we are to come up with a solution at a primary prevention stage and we are to have something that we can apply on the ground it has to be applicable to everyday people in everyday situations, and in extreme situations of all sorts, but we have to be able to see that that can be applied in the everyday normal situation and that it works on the ground in the workplace, in the family – you know, when you’re at night, all those sorts of things, so it has to be applicable in all sorts of situations.
153 SPED says that the Tribunal’s finding that its activities did not qualify as “research” gives rise to error of law in two possible ways.
154 First, SPED says the Tribunal has ignored or failed to have regard to evidence about the research activities and methodology and thus has failed to take into account considerations relevant to the statutory review function.
155 Second, the Tribunal has failed to give any real explanation in its exposed reasons for decision that SPED’s activities did not qualify as research, thereby failing to give adequate reasons as required by s 43 of the AAT Act.
156 SPED says that the failure to give adequate reasons constitutes an error of law having regard to Dornan v Riordan (1990) 24 FCR 564; Comcare Australia v Mathieson (2004) 39 AAR 450; Brackenreg v Comcare Australia (1995) 56 FCR 335.
157 As to the third question, SPED says that in the proceedings before the Tribunal it advanced three primary submissions which it contended were of central importance to the exercise of the revocation discretion. The submissions were these:
(a) That the Applicant acted compliantly, transparently, honestly and in good faith, including:
(i) That it had been engaged in research endeavours for over 30 years, and that its functions and objects set out in its constitution as submitted in the initial application for the charitable endorsements had remained substantively the same;
(ii) That it had acted honestly, compliantly and transparently in all its dealings with the Respondent since its initial application for endorsements in 2005, including seeking approval for its objectives, functions and activities.
(iii) That during the Business Activity Statement audit in May 2006, an officer of the Respondent had confirmed the view that the Applicant’s research methodology, whilst novel, was not unacceptable for tax purposes.
(iv) That it had provided evidence to the Respondent as to its purpose, research methodology and activities in response to notification of review by the Respondent initiated in 2007, to which the Respondent did not raise any deficiencies or problems pertaining to its ongoing eligibility to endorsements.
(v) That it had structured itself in reliance upon the relevant endorsements and approvals in conducting its operations.
(vi) That from the outset of the Respondent’s audit, notice of which was given in October 2009, the Applicant had requested the auditor to attend, observe and verify the activities of the Applicant but the auditor declined to do so. The Applicant made repeated requested throughout the audit for the auditor to visit, view and participate in the research in action and to visit programs that were being conducted throughout the duration of the audit.
(b) The auditors lack of impartiality, including:
(i) That documents obtained from the Respondent showed that the auditor had already formed a view that the Applicant should not be eligible for endorsement prior to the Applicant being audited;
(ii) Imposing penalties to the Applicant at the highest rate, up to the amount of 90% as well as backdating general interest charges (GIC), compounding daily; a decision that was later overturned on objection whereupon it was found that penalties and GIC had been incorrectly applied and subsequently remitted the entire penalties to nil and remitted the backdated GIC.
(c) The policies, powers, discretions and obligations incumbent upon the Commissioner (and therefore the Tribunal) in exercising its discretion, including:
(i) The Respondent’s publication “Tax Payer’s Charter” and “Compliance Model” outlining the Commissioner’s obligations that are of relevance in exercising the revocation discretion in circumstances where the Applicant submitted it had fulfilled its requirements according to the compliance model, namely acted truthfully, maintained requisite records and taken reasonable care.
158 SPED contends that on a fair reading of the Tribunal’s reasons with particular references to paras 91 and 92, it is apparent that the Tribunal has not considered SPED’s submissions on revocation or made the factual findings necessary to dispositively deal with those submissions. SPED contends that it is well established that an error of law arises should the Tribunal overlook or fail to consider submissions advanced by a party at least where those submissions are “worthy of serious consideration” or “centrally relevant” to the decision: Rand v Comcare (2014) 63 AAR 460 at ; Soliman v University of Technology, Sydney (2012) 207 FCR 277 at .
159 SPED says this at para 43 of its submissions:
43. Critically, the Tribunal failed to consider or make findings with respect to;
(a) The Applicant’s contention that it acted compliantly, transparently, honestly and in good faith, and in particular the Applicant’s repeated invitations from the outset of the audit in 2009 for the auditor to visit, view and participate in the Applicant’s research activities and programs. A contention, we submit that has particular significance in the exercise of discretionary retrospective revocation, in circumstances where the Respondent’s revocation decision was not ultimately made until 6 April 2011;
(b) The Applicant’s contention as to the auditor’s lack of impartiality and the significance of the Commissioner overturning the [auditor’s] decision on penalties and GIC upon objection; and
(c) The Applicant’s contention that the Commissioner (and therefore the Tribunal), in exercising any revocation discretion is required to do so in accordance with the “Taxpayer’s Charter” and “Compliance Model” whereby a taxpayer is treated relative to its level of compliance. In our submission, a proper consideration of the compliance model would require a finding as to the Applicant’s compliance level, before exercising a discretion. A contention, we submit that is particular relevant in circumstances where it may be inferred that the Commissioner accepted the Applicant’s previous compliance in overturning the penalties in their entirety and remitting GIC.
160 SPED’s ultimate conclusion on these issues is that it was denied procedural fairness by the Tribunal or that the Tribunal failed to take into account relevant considerations by failing to consider and make findings in respect of the revocation submissions.
161 Thus, SPED contends that each question of law demonstrates that the Tribunal’s decision is affected by legal error with the result that it ought to be set aside and the matter remitted to the Tribunal to be heard and determined according to law.
162 Subject to particular propositions advanced by the Commissioner in relation to Question 3, the Commissioner contests all of the contentions of the applicant.
Consideration of the application
The first ground of appeal
163 As to the first question, I do not accept that the Tribunal has failed to correctly understand the analytical approach to be adopted as required by the authorities or has simply failed to apply the correct approach to the task of determining whether SPED is a “charitable institution”.
164 That follows because the reasons of the Tribunal must be read overall in an integrated way to see and understand how the task was approached by the decision-maker and the decision reached.
165 The Tribunal began by drawing upon the evidence of Dr Perry (particularly Dr Perry’s 26 page statement) to identify, by way of a synoptic narrative, the essential features of the formative influences in the period from the early 1980s to particularly 2004 when the restructure of the activities of the members occurred: see  to  of these reasons. Although I have not conducted a detailed comparison between the factual matters set out in the Tribunal’s narrative of those matters and the document described as “An Historical Overview of the SPED Research (July 2006)” it is clear from reading the document that quite a number of the factual matters mentioned in that document are also mentioned in the Tribunal’s narrative for this period: paras 11, 12, 13, 17, 18, 20 and 21, for example, reflect facts contained in the document.
166 Nevertheless, the principal witness was Dr Perry and the Tribunal plainly had extensive regard to her evidence, including the July 2006 document.
167 The Tribunal then had regard to the period from 2004 when the re-focus in the activities of the members and the new direction for the group began, concerning the study of early indicators of psychological disease, the formation of SPED in 2005 and the adoption of the “primary activity” of undertaking “24 x 7 research” with a view to then trialling and testing research findings through the conduct of programs.
168 The Tribunal considered the focus, direction and philosophy of SPED across the post 2004 period: see  to ;  to  of these reasons. Also in this context, the Tribunal examined the evidence of Ms Dupont: see  to  of these reasons. These matters represent one element in the analysis of the evidence going to the history of the coming together of like-minded members; the re-focus and new direction in areas of enquiry and particularly the evolution of the principles concerning the ideal human environment; the use of action-based qualitative research; research conducted in an interactive real time manner; and all of the matters mentioned at  to  of these reasons.
169 The second element examined by the Tribunal concerned SPED’s objects and functions, the categories of membership, qualification for membership, the application documents, SPED’s membership agreements, and the method by which persons join SPED and the way in which membership might come to an end: see  to  of these reasons.
170 As to the objects, SPED has a single object clause quoted by the Tribunal: see  of these reasons.
171 No question arises of a disjunctive or conjunctive, wide or otherwise, examination of a range of objects recited in the Constitution so as to discern whether SPED’s only or predominant purpose or purposes is “charitable”. SPED’s purpose is recited in its single object although it is true that within the short and only object clause, SPED’s “objects” (in the plural) are said to be “for the public benefit and charitable purposes” followed by the qualifying words “in seeking to promote the presentation and control of psychological diseases in human beings” followed by what might be described as the “goal” in these terms: “and therefore setting out to ultimately create the Ideal Human Environment (IHE)”: see cl 4 at . The “primary” function that gives voice to the object is quoted by the Tribunal: see . The primary function of SPED is to operate and fund the 24 x 7 cross-sectional human behaviour research: see the content of the clause at .
172 It follows that the Tribunal was entirely conscious of the purpose reflected in the single short statement of SPED’s objects in the precise language of the clause (as quoted) and also the primary function set out in cl 5.1 (as quoted). The Tribunal had regard to each of these considerations and recited them one after the other in the sequence of its reasoning. The Tribunal was plainly conscious of the inter-relationship between the recited object, the recited function and the membership mechanisms described at  of these reasons.
173 The third element examined by the Tribunal concerned the composition of the membership of SPED: see  to  and  of these reasons. That analysis resulted in the conclusion that the members of SPED are bound by blood ties, marriage or friendship and by 30 June 2005 there were 21 members. In the period 2005 to 2009, four of those individuals ceased to be members and there were no additional members. The Tribunal notes Dr Perry’s evidence that although membership is entirely open to the public, SPED has not actively solicited members of the public to become members: see  of these reasons.
174 The fourth element examined by the Tribunal concerned aspects of the projects said to be the effectuation of the object and functions and the effectuation of the methodology described at  to  of these reasons. The examination of the projects undertaken by SPED also involved the related matter of an examination of the treatment of income and expenses and factual matters concerning SPED’s financial statements: see  to  of these reasons. The analysis of the financial statements led the Tribunal to the finding that there is a pattern of similar transactions over all the financial years in question as reflected in the financial statements described at  to .
175 The fifth element in the Tribunal’s analysis and reasoning concerned its approach to the questions it was required to answer. It characterised those questions as whether SPED is a charitable institution; whether it is a health promotion charity; and questions going to the date of revocation. As to the phrase “charitable institution”, the Tribunal recognised that a determination of whether SPED meets such a description requires an examination of the whole of the relevant circumstances: see  of these reasons. For the purpose of the analysis of whether SPED is a “charitable” institution, the Tribunal assumed that SPED was correctly characterised as an “institution”. Later in its reasons, the Tribunal returned to the question of whether SPED is an “institution” and ultimately the Tribunal came to the view that it was not at any time an “institution”. Nevertheless, for the purposes of examining the whole of the circumstances to determine whether SPED is or was, at any relevant time, a “charitable” institution, the Tribunal focused its attention on the notion of what is meant by “charitable” and whether, on the facts, SPED was engaged in “charitable purposes”.
176 The Tribunal did not fall into error of principle in relation to the matters described at  of these reasons.
177 The Tribunal, at para 65 and described at  of these reasons, made an observation about “public benefit” which is said to reflect error. The Tribunal observed that a purpose is for the public benefit if it offers a benefit to the community that is real and of value, either tangible or intangible and the benefit is available to the public. The Tribunal cites Downing v FCT as authority for that proposition although no reference is made to any part of the judgments in that case. Downing v FCT is not authority for that proposition. However, even though that proposition may not find expression in those terms in Downing v FCT, the question is whether the observation, as a guiding influence on the decision-maker in reaching the decision in question, is erroneous thus giving rise to legal error. I am not satisfied that the Tribunal has fallen into error in the way the applicant contends. The expression of the purpose must, objectively, be a charitable purpose in the sense that it benefits the community in a way that is real, that is to say, is not illusory, fanciful or contrived and must be of value in the sense that it exhibits community utility. Those features might be tangible or intangible but, either way, there must be nevertheless benefit and utility to the community. The effectuation of the purposes must be available to the public rather than, posing the contrast, simply available to service private advantage, as Dixon CJ observes in Thompson v Federal Commissioner of Taxation at 321 as discussed at  of these reasons.
178 The Tribunal expressly noted SPED’s contention that it was a charitable institution because it was engaged in charitable purposes within the second and fourth purposes in Pemsel. Thus, the Tribunal understood that in reaching a decision about whether SPED is or was at any relevant time a charitable institution, the central contention was that SPED was engaged in charitable purposes of the “advancement of education” and the advancement of “other purposes beneficial to the community” in seeking to promote the prevention and control of psychological diseases in human beings through the primary function of operating and funding a research team to undertake 24 x 7 cross-sectional human behaviour research in a variety of emotional, social and physical conditions, circumstances and environments as a method of examining human psychological disease: see , ,  to  of these reasons.
179 The Tribunal observed at para 67 that an institution is charitable if its purpose (or dominant purpose) is charitable in the technical sense in which that term is used having regard to the authorities and the institution is established for that purpose and maintained for that charitable purpose. Thus, the Tribunal recognised three elements to the examination of the circumstances: the technical understanding of the term; the establishment of the institution; and the activities: see  of these reasons.
180 When the Tribunal turned its mind to this question, it was already conscious of the first four elements of its analysis.
181 The Tribunal then observed that, in effect, it is one thing for the institution’s constitutional document to recite an object that suggests a charitable purpose coupled with a primary function in support of that object, but it is another thing if an examination of the actual activities and other relevant factors indicate that, in truth, the “substance and reality” of the activities and undertaking (and other relevant factors) is contrary to the recited “charitable” purpose. The Tribunal observed that in such a case the institution will not be regarded as “charitable”: see  of these reasons.
182 There is no error of principal in those observations. The Tribunal, in effect, regarded itself as bound (by reason of the observations of the plurality in FCT v Word at 220 and 221) by the notion that the relevant enquiry, so far as it is directed to an analysis of the activities of the institution, must centre upon whether it can be said that the activities are “carried on” in “furtherance of a charitable purpose”: see  of these reasons.
183 The Tribunal then examined the activities of SPED so as to form a view about whether those activities could properly be regarded as activities carried on in furtherance of a charitable purpose. The examination of the activities of SPED represents the sixth element in the Tribunal’s analysis of the whole of the circumstances. When the Tribunal examined SPED’s activities with a view to reaching conclusions about whether the activities were carried on in furtherance of a charitable purpose, it brought to that examination its understanding of the first five elements of its analysis.
184 It is therefore unrealistic to separate out parts of the Tribunal’s decision-making.
185 The consideration by the Tribunal of facts, matters and circumstances at particular points in the reasoning must be understood in the context of the examination of the other elements already undertaken by the Tribunal which it necessarily has in mind when it turns to the particular topic under examination in the particular section of its reasons.
186 The Tribunal, in examining the activities of SPED, was, in effect, seeking to answer this question: Recognising that SPED contends that it is engaged in a charitable purpose of advancing education or a charitable purpose otherwise beneficial to the community, was SPED engaged in activities which could properly be described as activities carried on in furtherance of a charitable purpose at any relevant time? In answering that question, the Tribunal made a series of findings of fact described at ,  to ,  to  and the findings concerning SPED’s “principal activity” described at  to  of these reasons.
187 Leaving aside for the moment the Tribunal’s observation at para 70 to the effect that the Tribunal did not accept that SPED’s principal activities constituted “research” (a topic I will address later in these reasons), the findings described in the paragraphs mentioned in  of these reasons were all open on the evidence.
188 Those findings led the Tribunal to the conclusion described at  that SPED was not at any relevant time a charitable institution and the conclusion described at  that SPED’s principal activity was not at any relevant time to promote the prevention or control of diseases in human beings.
189 As mentioned at , the Tribunal member in the context of discussing SPED’s principal activities, observes at para 70: “I do not accept that this is research”. The Tribunal member made that observation in the context of examining the assertion that SPED’s members undertake research 24 hours per day, seven days a week. In context, the Tribunal’s refusal to accept that the principal activities constitute research is an observation about the claimed continuous nature of the activities over every hour of every day every week being “the whole number of possible hours in any one week” with the result that “no action is outside the scope of the research”: see  of these reasons. This section of the Tribunal’s reasons is concerned with the question of whether the activities of SPED’s members are properly regarded as activities carried on in furtherance of a charitable purpose at any relevant time rather than an analysis of whether the activities amount to research notwithstanding that the Tribunal member has expressed the conclusionary observation that this 24 x 7 methodology is not research. Although the Tribunal member has expressed that view, the real question addressed at paras 70 to 75 of the Tribunal’s reasons is whether the activities, as claimed, are in furtherance of a charitable purpose.
190 There are significant findings of fact adverse to SPED in this context.
191 They are these:
The members’ activities, described by SPED as research, are predominantly the ordinary activities of life.
They are carried out for the personal benefit of the members themselves.
Overwhelmingly, SPED’s expenditure (said to be expenditure on research) goes on its members’ living expenses, other personal expenditure, and commercial investments.
Expenditure in any way beneficial to the community is insignificant compared with expenditure on private purpose.
SPED’s contention that it is represented at conferences, has conducted seminars or workshops and has run various programs is greatly exaggerated.
Even accepting that SPED was engaged in running programs, or these other activities, as it asserts, these are minor, by any measure, compared to its main activities, namely, the research SPED claims is being carried out by its members 24 hours a day, seven days a week.
SPED’s actual activities do not coincide with the stated objects in the Constitution.
It does not fulfil the charitable purposes it asserts.
It exists, and existed during the relevant years, for the benefit of its small number of members.
A considerable part of that benefit is financial.
SPED was not at any relevant time a charitable institution.
192 These findings of fact represent the underlying findings concerning the activities and the relationship between SPED’s activities and the contended furtherance of a charitable purpose. These findings were open on the evidence.
193 I have addressed the question of the Tribunal’s observation about non-acceptance of the activities as research, in the context of the first ground or question of law relied upon by the applicant as the relevant paragraphs really go to the question of whether SPED is or was at any relevant time a charitable institution and the examination of the activities of members was undertaken by the Tribunal so as to answer the question of whether those activities were carried on in furtherance of one or other of the charitable purposes claimed by SPED.
The second ground of appeal
194 The Tribunal’s refusal to accept that SPED’s 24 x 7 cross-sectional study of human behaviour in a variety of emotional, social and physical conditions, constitutes “research” also goes, independently, to the second question or second ground of appeal. The observation in para 70 which gives rise to this ground is a conclusionary observation. The critical findings, however, concern the nature of the underlying activities themselves and the nature, scope and focus of those activities was always a question in issue as part of the question of whether SPED was engaged in the furtherance of charitable purposes. The critical findings on the underlying question of the nature, scope and focus of the activities were that the activities were predominantly the ordinary activities of life; they were carried out for the personal benefit of the members themselves; the expenditure was expenditure on the living expenses and personal expenditure of the members or SPED’s commercial investments; expenditure in any way beneficial to the community is insignificant when compared with expenditure on private purposes; SPED’s actual activities do not coincide with the stated objects in the Constitution; SPED does not fulfil the charitable purposes it asserts; and SPED exists and existed during the relevant years, for the benefit of its small number of members.
195 Those foundation findings may well have informed the Tribunal’s conclusion that SPED’s activities did not amount to “research”. That finding may have been open as an inference drawn from other foundation facts but even if the conclusionary observation was not open, the decision did not turn on a finding of fact that SPED’s activities were not research. The critical findings were the private non-public nature of the activities which reflected no benefit to the community or at least benefits which were regarded as “insignificant” when compared with expenditure, for example, on private purposes. The critical matter is the private domestic furtherance of the interests of the members rather than the furtherance of any purpose focused upon benefits to the community.
196 A further aspect of Ground 2 is the particular contention that the Tribunal failed to have regard to a document described as the Research Methodology document (see  of these reasons), Dr Perry’s oral evidence and the applicant’s Consolidated Statement of Facts Issues and Contentions. As to the Research Methodology document, I have not been able to find any reference to that document in the Tribunal’s reasons by title, that is, “Methodology Overview of the SPED Research”. I accept, however, that the reasons contain references to the methodology adopted by SPED arising out of the re-focus and new direction for the activities of members from 2004. The particular methodology SPED elected to adopt from 2004 is discussed by the Tribunal across the various elements of its consideration as already mentioned. In particular, see  to ;  to  of these reasons. Dr Perry’s evidence referred to at  does not take the matter any further.
197 It follows therefore that the applicant has not made good the first two grounds of the application.
The third ground of appeal
198 Apart from the Tribunal’s introductory paragraphs at paras 88 to 90, the revocation question is dealt with by the Tribunal in two paragraphs at paras 91 and 92 as discussed at  and  of these reasons.
199 At para 91, the Tribunal notes that SPED contended that the discretion should be exercised in its favour for four reasons. First, SPED implemented investment strategies influenced by the endorsements it held. Second, SPED was subject to a BAS audit finalised in February 2007 in the course of which the auditor found, it is said, that SPED was “properly endorsed as a health promotion charity”. Third, SPED received notice of a review from the ATO in 2007 in response to which it provided information requested by the Commissioner. Inferentially, it seems to be suggested from that observation that the Commissioner from 2007 had relevant information and yet elected not to assert any ground or basis upon which SPED’s endorsements could or would be called into question. Fourth, SPED contended that the fact of having been granted the original endorsements was itself a material matter. Presumably, that contention bore some relationship with the first contention in the sense that SPED had, over time, acted in reliance upon the endorsements.
200 The determination of the question by the Tribunal is addressed in para 92.
201 In that paragraph, the Tribunal says that it is appropriate “in all the circumstances” that the revocation of the endorsements take effect retrospectively, that is, from the moment in time when they were granted. That is said to be appropriate “especially having regard to SPED’s actual activities and financial affairs”.
202 By that observation, the Tribunal seems to be saying that that which emerged from its consideration of SPED’s actual activities and its financial affairs are the primary or dominant considerations in the exercise of the discretion as to the effective date of revocation.
203 At para 92, the Tribunal addresses the second question (at ) and observes that the BAS audit in 2006/2007 did not examine “those matters” in any depth. The reference to those matters is a reference to an analysis of SPED’s actual activities and its financial affairs. Thus, the Tribunal concludes that the circumstance of the BAS audit does not weigh heavily in the exercise of the discretion because the BAS audit did not address those two critical matters.
204 The Tribunal then addresses the third question (at ) concerning the 2007 review and concludes that that review did not address those two critical matters either. Thus, the circumstance of the 2007 review does not weigh heavily in the exercise of the discretion.
205 As to the fourth matter (at ), the Tribunal says that the subsequent audit required information of SPED that was not previously available.
206 At  of these reasons, I set out SPED’s contention in relation to the third ground of appeal. SPED’s proposition is that three submissions on the revocation question were put to the Tribunal and the submissions were not properly addressed in the Tribunal’s reasons with the result that, in the absence of any proper articulation of the Tribunal’s consideration of the submissions, an inference arises that the submissions were not dealt with.
207 As to those three submissions, the first submission is that SPED acted compliantly, transparently, honestly and in good faith. Six propositions are then set out which amplify that submission.
208 The first is that SPED had been engaged in 30 years of research endeavours and over the period its functions and objects had remained essentially the same. The Tribunal deals with that matter by its reference to the weight it attached to its consideration of SPED’s actual activities and financial affairs.
209 The second is that SPED had acted honestly, compliantly and transparently in all its dealings with the Commissioner since its initial application for endorsements in 2005. The Tribunal does not address, expressly, the relevance of the contention that SPED acted honestly, compliantly and transparently in its dealings with the Commissioner in terms of whether that consideration weighs properly in the balance in determining whether revocation should take effect from the earliest date should it be demonstrated that the relevant entity was not entitled to the endorsements from the date on which they were granted.
210 The third consideration concerns the BAS audit in May 2006. The Tribunal has dealt with that consideration.
211 The fourth consideration is that SPED provided the Commissioner with information as to its purpose, research methodology and activities in response to a notification from the Commissioner initiated in 2007. The Tribunal has dealt with that consideration.
212 The fifth consideration is that SPED has structured itself in reliance upon the relevant endorsements and approvals in conducting its operations. The Tribunal has dealt with that matter by concluding that having regard to SPED’s actual activities and financial affairs, the endorsements ought to be revoked from the date of grant. The consideration of SPED’s actual activities and its financial affairs expressly takes into account those things done since the grant of the endorsements and in reliance upon them.
213 The sixth consideration is that from the outset of the Commissioner’s audit in October 2009, SPED had requested the auditor to attend, observe and verify its activities, yet the auditor declined to do so notwithstanding repeated requests of the auditor to visit, view and “participate in the research in action and to visit programs” being conducted throughout the duration of the audit. That matter, although not expressly addressed in those terms, seems to be dealt with in the Tribunal’s conclusions concerning its assessment of both SPED’s actual activities and SPED’s financial affairs, over time, and its conclusions concerning the subsequent audit.
214 All of these six matters are an amplification of the first submission as mentioned above.
215 The second submission was a contention that the auditors lacked impartiality for two reasons: see .
216 The third submission was a contention that the Commissioner was required (and so too is the Tribunal in the exercise of the statutory review function) to take into account in exercising the discretion two particular publications called “Tax Payer’s Charter” and “Compliance Model”. Those documents are said to set out obligations of the Commissioner relevant to the exercise of the revocation discretion in circumstances where SPED had submitted that it had fulfilled its requirements according to the compliance model of acting truthfully, maintaining all requisite records and having taken reasonable care.
217 At , SPED’s contentions concerning the Tribunal’s failure to address its submissions are set out.
218 In the course of its reasons, the Tribunal does not make any reference to the second and third submissions: that is, the contentions relating to the auditor and the documents and whether SPED had discharged any obligations cast upon it for the purposes of those documents.
219 It seems plain enough that the Tribunal regarded its assessment of SPED’s actual activities and financial affairs as the critical considerations informing the exercise of the discretion. The reasons, however, do not make any reference to the submissions mentioned at  and  which may have some relationship with the matters at . The reasons do not contain any reference to a phrase such as “notwithstanding SPED’s submissions concerning revocation” which might suggest that the Tribunal has fully considered all of the written and oral submissions and elected not to recite in the exposed reasons each reason for rejecting each submission.
220 In the absence of at least some reference to the applicant’s submissions concerning, particularly, the contentions in relation to the auditor and the two nominated documents in the context of SPED’s contentions of compliance with what was required of it, an inference arises that those matters were not considered by the Tribunal.
221 SPED is entitled to have those matters addressed in the exercise of the Tribunal’s statutory review function.
222 For that reason, the decision of the Tribunal is to be set aside and the matter remitted to the Tribunal for consideration of the applicant’s submissions on the question of the effective date of revocation, only. The propositions put to the Tribunal need to be considered and addressed notwithstanding that the Tribunal has expressed, in a shorthand form, the view that its consideration of SPED’s actual activities and SPED’s financial affairs are the two particularly important considerations informing its existing decision.
223 There is a further matter addressed in the Tribunal’s reasons concerning the apparent anomaly of the effective revocation date: paras 93 and 94 of the Tribunal’s reasons and  of these reasons.
224 It is not clear from the material that the anomaly is resolved. It may, however, be resolved. It is simply not clear on the present material.
225 If two of the endorsements date from 1 July 2005, a decision revoking those two endorsements from 1 January 2005 would be inconsistent with s 426-55(3) of Sch 1 to the TAA. The Tribunal’s reasons suggest that correspondence was exchanged which makes that matter clear. That material, however, is not before this Court. Accordingly, the Tribunal may need to give further consideration to that question as part of its consideration of the effective date of revocation. If, having considered the applicant’s submissions on revocation, the Tribunal is of the view that each endorsement is to be revoked from the date of grant of each endorsement, the Tribunal will need to be satisfied as to the effective date of each endorsement as no endorsement can be revoked from a date earlier than the date of grant.
226 Accordingly, having regard to s 44(4) and (5) of the AAT Act, the decision of the Tribunal is to be set aside and the case remitted to the Tribunal to enable the Tribunal to consider the question of the effective date of revocation.
227 The other matters determined by the Tribunal which have been the subject of the first two grounds of the applicant’s challenge in this Court do not require any reconsideration by the Tribunal. Those matters are finally addressed by the Tribunal in accordance with its existing decision and its exposed reasons in support of that decision. The question of the Tribunal’s consideration of the effective date of revocation having regard to the submissions put on before the Tribunal by the applicant is to be determined without hearing further evidence.
228 To the extent that there is any question alive before the Tribunal of uncertainty concerning correspondence or other matters relevant to the effective date of revocation, further evidence concerning that matter may be taken.
229 Otherwise, the evidence before the Tribunal is to be regarded as closed and the question alive is the Tribunal’s considerations of the applicant’s submissions on the effective date of revocation having regard to the present state of the evidence before the Tribunal.