Title: ARCHIMEDES, AID/WATCH, CONSTITUTIONAL LEVERS AND WHERE WE NOW STAND. Speakers: Dr Matthew Turnour (Queensland University of Technology)

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1 1 Title: ARCHIMEDES, AID/WATCH, CONSTITUTIONAL LEVERS AND WHERE WE NOW STAND Conference: Defining Taxing and Regulating Not for profits in the 21 st Century Venue: Melbourne University, 19 July 2012 Speakers: Dr Matthew Turnour (Queensland University of Technology) Miss Elizabeth Turnour (Moores Legal, Melbourne ) Chair: Emeritus Professor Michael Bryan (University of Melbourne) Abstract: Significant reform of the laws regulating charities is underway in Australia. The reforms cover almost every facet of the relationship between charities and government. The reform process has brought to the surface different assumptions about the role of charities in society, their entitlement to fiscal and other privileges and the scope and nature of regulation that can or should be imposed on the charities. This paper explores these broader issues in the context of the Aid/Watch case. The case involved an organisation that was utilised by citizens to challenge the State. Such organisations occupy contested space as to what does and does not constitute a charity. Accordingly the case provides a useful perspective from which to consider the broader issues in the relationship between government and charity. This paper seeks to build on the contribution made by other academics. It does so by exploring the constitutional significance of political purposes and drawing from philosophy to provide context and meaning to potentially significant aspects of the judgment that might be missed when it is analysed only in terms of legal precedent through the narrow lens of the existing four heads of charity. Revenue implications for taxation of charities and political parties are also considered as a part of the discussion and it is suggested that in practise if not in theory the fence between them has come down. Contact details: Dr Matthew Turnour GPO Box 649 Brisbane, Queensland, 4001 Australia mturnour@qut.edu.au Ms Elizabeth Turnour 9 Prospect Street, Box Hill, Victoria, 3128 Australia eturnour@mooreslegal.com.au

2 2 ARCHIMEDES, AID/WATCH, CONSTITUTIONAL LEVERS AND WHERE WE NOW STAND Contents A. Archimedes...3 B. Aid/Watch Aid/Watch: who are they and what did they do? Legal background: political purposes and the implied freedom of communication...5 a. The political objects doctrine...5 b. The implied freedom of political communication...5 c. Implied freedoms trump the political purpose doctrine in Australia Aid/Watch and traditional charity law analysis - what did the majority decide?...8 a. Introduction...8 b. The law must change and the relevance of the Preamble...8 c. Public Benefit...10 d. What is status of organisations like Aid/Watch under the Australian Constitution...10 e. Can political parties be charitable?...11 f. Limiting public benefit: what guidance does Aid/Watch give?...13 g. The relevance of revenue concessions...14 h. Interim conclusion...15 C. Where we now stand Introduction Changing the law and the relevance of the Preamble Public benefit...18 a. Introduction to the discussion...18 b. What is the status of political parties and organisations like Aid/Watch in Australia?...18 c. Expanding the boundaries of charity to include political parties...20 d. Limiting public benefit to exclude organisations subversive of democracy Constitutional law, protection of freedom and associations in constitutional democracy The relevance of revenue concessions...25 D Conclusion...27

3 3 A. Archimedes Archimedes is reported as famously saying: Give me a place to stand and I will move the earth 1. He was referring to the power of levers. His point was that a person of ordinary capacity with a place to stand, a fulcrum and a lever could change the path of planets. This principle of physics is a metaphor for how the common law has moved over the last millennium. Courts found a stable foundation on which to stand, such as the constitutional bedrock or well-grounded precedent; and using cases as fulcrums and legal principles as levers they moved the law. Australia is at a critical juncture in development of the law of charities. The government has announced that there will be a statutory definition of charity and the draft legislation is being prepared. At common law the High Court in deciding Aid/Watch v Federal Commissioner of Taxation 2 ( Aid/Watch ) could simply have affirmed the reasoning in the Administrative Appeals Tribunal. 3 It could have held that political advocacy to relieve poverty was itself a lawful way to discharge the charitable purpose of poverty relief and in so doing remained within the private law tradition in which charity law has developed. It did not adopt this course. It drew from principles normally associated with public law. That it did so came as a surprise. 4 The presumption inherent in the paper is that the law of charities is in need of development. The metaphor throughout is that the law of charities may seem as immovable as the earth but the resources for significant development are at hand. Aid/Watch acts as a fulcrum a fulcrum that has been pushed up very close so as to maximize leverage. The constitution provides levers very long levers. Where we stand when we bring force to bear on the lever is, then, the remaining major variable that will determine how much charity law can be, and is in fact, moved. We offer suggestions and comment on implications throughout but do not close with recommendations. The paper is directed to open up the discussion not moving toward closing it. B. Aid/Watch We begin with the background, first about Aid/Watch Incorporated and then the public law developments surrounding political communication. We then bring that context to the charity law issues raised in Aid/Watch. We progress then through more usual charitable purpose subjects; the equity of the Preamble to the Statute of Elizabeth 1601 ( the Preamble ) 5, public benefit and then grounds for exclusion. Comments in Aid/Watch with revenue implications are touched upon before an interim conclusion of the overarching lesson from the case is drawn from comments by Justice Michelle Gordon of the Federal Court of Australia. It is not until the second section, where we now stand, that we turn to discuss how this judgment might be used to develop significantly the law of charities. 1. Aid/Watch: who are they and what did they do? 1 Pappus of Alexandria and Friedrich Otto Hultsch (eds), Volume 3 of Pappus of Alexandria, ApudWeidmannos (1878) Berlin, 1060 cited in Chris Rorres, The Lever: Introduction (1995) Archimedes at < accessed 1 July [2010] HCA 42; (2010) 241 CLR Re Aid/Watch Inc and Federal Commissioner of Taxation[2008] AATA 652; (2008) 71 ATR 386.(28 July 2008) 4 George Williams, The Australian Constitution and the Aid/Watch Case. Cosmopolitan Civil Societies: An Interdisciplinary Journal, North America, 3, Nov Available at: < 1-8, Eliz I, c 4.

4 4 Aid/Watch Incorporated ( Aid/Watch ) was established in 1993 and became an aggressive advocate on issues of Australian foreign aid policy and practises. It was recognised by the Australia Taxation Office ( ATO ) as an income tax exempt charity in As an exempt charity Aid/Watch also enjoyed fringe benefits tax concessions 6 and Goods and Services Tax ( GST ) tax concessions. 7 Whilst it was not mentioned in the judgement it was also entitled to deductible gift recipient status ( DGR ) on the basis that it was listed on the Register of Environmental Organisations. 8 Aid/Watch pursued its charitable purposes by: monitoring Australian aid to see how much was delivered, where it was delivered, and its quality; conducting and publishing research into the aid, having regard to whether it reached those in need, whether it met their needs, and whether it was environmentally sustainable; and campaigning for changes to the ways in which aid was delivered by the Australian Government. 9 Aid/Watch was found by the Administrative Appeals Tribunal at first instance: to campaign very often against government ; 10 to describe itself as an activist group and an activist and solidarity organisation ; 11 to engage in activities that were at the edges of appropriate conduct. 12 For example, it sent derogatory 60th birthday gifts to the World Bank with the suggestion that the bank retire; and to engage in activities, including calls to action that were somewhat aggressive. 13 It did not shy away from this forthright approach in dealing with government. Dr Goodman, Chair of Aid/Watch stated we re not specifically seeking to persuade anybody there, we re seeking to push the Australian Government to promote a holistic approach. 14 Dr Goodman also recorded in the Aid/Watch 2005 Annual Report that: We are campaign focused and dedicated to pursuing global justice. We do this by targeting the policies and practices of inter-governmental institutions, transnational corporations, and, most especially, the Australian Government By virtue of s 123E of the Fringe Benefits Tax Assessment Act 1986 (Cth). 7 By virtue of s of A New Tax System (Goods and Services Tax) Act 1999 (Cth). 8 Commissioner of Taxation v Aid/Watch Incorporated (2009) 178 FCR 423, 423; James Goodman, Inside the Aid/Watch case: translating across political and legal activism (2011) 3.3 (Special issue) Cosmopolitan Civil Societies Journal 46, Commissioner of Taxation v Aid/Watch Incorporated (2009) 178 FCR 423, 427 [16-17]. 10 Aid/Watch Incorporated and Commissioner of Taxation 71 ATR 386, 388 (28 July 2008) [4]. 11 Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, 560 [57](Heydon J). 12 Aid/Watch Incorporated and Commissioner of Taxation 71 ATR 386, 388 (28 July 2008) [35]. 13 Ibid. 14 Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, 562 [59](Heydon J).

5 5 2. Legal background: political purposes and the implied freedom of communication a. The political objects doctrine Throughout most of the twentieth century it was taken as given in Australia that an entity that has a recognised charitable purpose will be disqualified from charitable status if it has a political purpose that is more than ancillary or incidental ( the political objects doctrine ). 16 The genesis of the political objects doctrine is traced to the judgement of Lord Parker in the English case of Bowman v Secular Society 17 and it was subsequently developed by Justice Slade in another British decision, McGovern v Attorney-General. 18 In following Bowman and McGovern the Australian courts remained in step with the development of the political purposes doctrine across the common law world. In Aid/Watch the High Court of Australia was asked to break from that tradition and did so by a majority of five of the seven justices. The majority held: there is no general doctrine which excludes from charitable purposes political objects and has the scope indicated in England by McGovern v Attorney-General. 19 b. The implied freedom of political communication Appreciating the reasoning in Aid/Watch requires some understanding of the way the High Court developed the implied freedom of political communication within the Constitution of Australia 20 ( the Constitution ). We therefore now set out this background. Beginning in the early 1990s there were a series of cases emanating from the High Court of Australia which established that there is, implied in the Constitution, a freedom of political communication (the implied freedom of political communications cases ). 21 Those cases held that the system of representative and responsible government established by the Constitution requires the protection of communication between the people concerning political or governmental matters which enables 15 Aid/Watch Incorporated and Commissioner of Taxation 71 ATR 386, 388 (28 July 2008) [27]. 16 GE Dal Pont, Law of Charity (LexisNexis Butterworths, 2010)[12.1]; O'Halloran, Kerry&McGregor-Lowndes, Myles, Charity law, advocacy and the aid/watch decision: compatibility of charitable purposes and political objects - the view from Australia (2011) 13 The Charity Law & Practice Review See also Hubert Picarda, The Law and Practice Relating to Charities (Bloomsbury Professional, 4th ed, 2010) [1917] AC 406 at 442 ( Bowman ). 18 McGovern v Attorney General [1982] Ch 321 ( McGovern ). See Joyce Chia, Matthew Harding and Ann Connell, Navigating the politics of charity: Reflections on Aid/Watch Inc v Federal Commissioner of Taxation [online]. Melbourne University Law Review, Vol. 35, No. 2, 2011: and GFK Santow, Charity in its Political Voice a Tinkling Cymbal or a Sounding Brass? (1999) Australian Bar Review for discussion of development of the doctrine and its application in Australia. 19 Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, 557 [48]. 20 Commonwealth of Australia Constitution Act 1900 (Imp) 63 & 64 Vict, c 12, s See e.g. Australian Capital Television Pty Ltd v The Commonwealth (1992) 17 CLR 106; Nationwide News Pty Ltd v Wills (1992) 177 CLR 1; Theophanous v Herald & Weekly Times Ltd (1994) 182 CLR 104; Stephens v West Australian Newspapers Ltd (1994) 182 CLR 211; Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 ( Lange ); Levy v Victoria (1997) 189 CLR 579; Coleman v Power (2004) 220 CLR 1; Mulholland v Australian Electoral Commission (2004) 220 CLR 181.

6 6 the people to exercise a free and informed choice as electors. 22 As it has evolved the implied freedom of political communication: Is limited to what is necessary for the effective operation of the system of representative and responsible government provided for by the Constitution; 23 Extends to protect communications between electors themselves, in addition to communication between electors and legislators and officers of the executive. 24 This is because it is necessary for the people to communicate between themselves in order to elect their representatives, as provided for in the Constitution; 25 Extends to protect communications regarding government and political matters at State, Territory and even local government level, irrespective of whether or not the communication bears on matters at the federal level. 26 This is in part because of the existence of national political parties and the federal fiscal imbalance; 27 Extends beyond communication at election periods; Does not extend to speech generally, and it has been recognised that there can be some artificiality in determining whether a communication is one concerning governmental or political matters; 28 Operates to preclude the curtailment of the protected freedom by the exercise of legislative or executive power. 29 This has been expressed as a pro tanto immunity. 30 Although it can be used to invalidate legislation, it does not create personal rights giving rise to a cause of action which, if successful, will result in damages. 31 It will not operate to protect rights that only exist by virtue of statute. A common law right must be identified before the freedom will operate; 32 Is not absolute and can be limited. However, any burden placed upon the protected communication must be reasonably appropriate and adapted to serve a legitimate end in a manner which is compatible with the maintenance of the system of government established by the Constitution; 33 and, 22 Lange v Australian Broadcasting Corporation (1997) 189 CLR Ibid, Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, 557 [44]. 25 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520, Ibid. 27 Ibid, Coleman v Power[2004]220 CLR 1, 30 [28](Gleeson CJ). 29 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520, Theophanous v the Herald & Weekly Times Limited and Another (1994) 182 CLR 104, 168, (Dean J), cited in Lange v Australian Broadcasting Corporation (1997) 189 CLR 520, British American Tobacco Australia Ltd v The State of Western Australia and Another [2003] 217 CLR 30, 78 (Kirby J). 32 Mulholland v Australian Electoral Commission (2004) 220 CLR 181, Lange v Australian Broadcasting Corporation (1997) 189 CLR 520, 562.

7 7 Operates not only upon the exercise of legislative and executive power, but also upon the development of the common law. 34 This last point is important for charity law development. If the common law is inconsistent with the implied freedom of political communication, it follows that it must develop to conform. 35 This is because the Constitution displaced, or rendered inapplicable, the English common law doctrine of the general competence and unqualified supremacy of the legislature. The Constitution, the federal, State and territorial laws, and the common law in Australia together constitute the law of this country and form one system of jurisprudence. Covering clause 5 of the Constitution renders the Constitution binding on the courts, judges, and people of every State and of every part of the Commonwealth, notwithstanding anything in the laws of any State. Accordingly the Constitution may have an effect on the content of the common law. 36 The principle underlying the development of the implied freedom of political communication was the common convenience and welfare of society. 37 It has been thought to follow from the increasing integration of social, economic and political matters, 38 and the fact that the scope of governmental influence is so broad, and its impact on the quality of life of individuals in Australia is so high, that every Australian has, a real and legitimate interest in the exercise (or failure to exercise) of public functions and powers, 39 and in disseminating and receiving information, opinions and arguments concerning government and political matters. 40 Accordingly, the common convenience and welfare of Australian society are advanced by discussion the giving and receiving of information about government and political matters. 41 The High Court has again had reasons to consider these issues in Wooton v State of Queensland. 42 Affirming that the starting point for consideration of the constitutional principles which the plaintiff seeks to engage is supplied by the statement in the joint reasons in Aid/Watch Incorporated v Federal Commissioner of Taxation 43 the majority held: The terms of the questions are settled. They were recently stated, and applied, by the whole Court in Hogan v Hinch as follows. The first question asks whether in its terms, operation or effect, the law effectively burdens freedom of communication about government or political matters. If this is answered affirmatively, the second question asks whether the law nevertheless is reasonably appropriate and adapted to serve a legitimate end in a manner compatible with the maintenance of the constitutionally prescribed system of government described in the passage from Aid/Watch set out above. 44 c. Implied freedoms trump the political purpose doctrine in Australia 34 Ibid, Ibid. 36 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520, Ibid, Ibid, Stephens and Others v West Australian Newspapers Limited (1994)(McHugh J) cited in Lange v Australian Broadcasting Corporation (1997) 189 CLR 520, Lange v Australian Broadcasting Corporation (1997) 189 CLR 520, Ibid. 42 Wooton v Queensland [2012] HCA 2 (29 February 2012) ( Wooton ) 43 Ibid [20] 44 Ibid [25].

8 8 There was, then, an inherent tension, identified by the High Court, between the implied constitutional freedoms enjoyed by Australians and the common law doctrine of political purposes in charity law that operated as a stricture on political communications. The High Court recognised that the political objects doctrine was premised on the fact that it is difficult for the law to find that a trust whose purpose is agitation for legislative or political changes is a trust established for the public welfare. 45 Consistently with the case law concerning the implied freedom of political communication the majority found, however, that the operation of these constitutional processes [being agitation for legislative and political changes] contributed to the public welfare. 46 Accordingly the majority overturned the political objects doctrine and in so doing, to adopt Gino Dal Pont s expression exposed another chink in the historical armour confining the bounds of charity law. 47 Now, as George Williams explains: If it can be shown that the freedom applies, it trumps everything else. 48 We turn next to the way that the majority reached this conclusion in the context of charity law jurisprudence. 3. Aid/Watch and traditional charity law analysis - what did the majority decide? a. Introduction The majority decision was delivered by Chief Justice French and Justices Gummow, Hayne, Crennan and Bell. George Williams provides a tidy six step summary of the process adopted by the court and we do not recite it here. 49 What is important for this paper is that in deciding that Aid/Watch was charitable the majority characterised Aid/Watch s charitable purpose as the generation by lawful means of public debate [in the sense described earlier in its reasons] concerning the efficiency of foreign aid directed to the relief of poverty. 50 The majority found that this purpose fell within the fourth head of charitable purposes identified in Commissioners for Special Purposes of Income Tax v Pemsel 51 ( Pemsel s case ): purposes beneficial to the community. We take each aspect in turn in this section. We deal first with the general requirement that the common law develop over time and the seeming scant regard paid by the majority to the spirit and intendment of the Preamble. We deal only with the majority decision as the minority judgements have been well explored elsewhere. 52 We close drawing attention to comments of the majority on revenue matters for Aid/Watch was, in fact a revenue case. b. The law must change and the relevance of the Preamble 45 Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, 555 [43]. 46 Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, 556 [45]. 47 Gino Dal Pont, Charity law no magic in words? Unpublished paper presented at Defining, Taxing and Regulating Not-for-Profits in the 21st Century Conference, Melbourne Law School, Melbourne, July 2012, George Williams, The Australian Constitution and the Aid/Watch Case, Cosmopolitan Civil Societies: An Interdisciplinary Journal, North America, 3, Nov Available at: < 1-8, 3 49 Ibid, Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, 556 [47]. 51 [1891] AC Kerry O Halloran and Myles McGregor-Lowndes(2011) Charity law, advocacy and the aid/watch decision : compatibility of charitable purposes and political objects the view from Australia. The Charity Law & Practice Review, 13, pp. 1-25, and Joyce Chia, Matthew Harding and Ann Connell, Navigating the politics of charity: Reflections on Aid/Watch Inc v Federal Commissioner of Taxation [online]. Melbourne University Law Review, Vol. 35, No. 2, 2011:

9 9 The law of charities must change over time but the development must either be within one of the three recognized heads of charitable purpose or belong to the fourth head of other purposes beneficial to the community and found by analogy to be within the spirit and intendment of the Preamble. The majority judgment did not over-rule this but was silent on how Aid/Watch s purpose could be found by analogy to be within the spirit and intendment of the Preamble. The majority stated that the equity of the preamble may operate upon additional matters and circumstances that lie beyond its actual terms. 53 The reference to the equity of the Preamble is footnoted by the majority to reference another case which alludes to the doctrine of the equity of a statute: This doctrine had the support of the common law judges led by Sir Edward Coke, who looked back to a time before the rise of the doctrine of parliamentary sovereignty and the subjection to it of the common law. The notion of the equity of the statute operated in two ways. First, the policy of the statute, as so perceived, might operate upon additional facts, matters and circumstances beyond the apparent reach of the terms of the statute. In addition, cases within the terms of the statute but not within its mischief might be placed outside its operation. 54 The majority referred to a judgment of Chief Justice Barwick in Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation 55 and stated not every purpose beneficial to the community is a charitable purpose; the purpose must be within the equity of the preamble to the Statue of Elizabeth. 56 In his paper to this conference Gino Dal Pont asks whether the law of charities has come full circle back to its simple articulation by Lord Camden in 1767 as a gift to the general public use. 57 It is our view that whilst this is an excellent question to ask - and it may ultimately be answered in the affirmative if gift is understood more broadly as an altruistic contribution and excludes grants and other transfers from government 58 - the decision in Aid/Watch does not go that far. What the High Court has made clear, citing Lord Wilberforce in Scottish Burial Reform and Cremation Society v Glasgow Corporation 59 and referencing its own precedent in Bathurst City Council v PWC Properties Pty Ltd 60 is that the law of charity is a moving subject which has evolved to accommodate new social needs as old ones become obsolete or satisfied. In Bathurst City Council v PWC Properties Pty Ltd the High Court held: The decision of the Privy Council in Brisbane City Council v Attorney-General for Queensland[26] is illustrative of two relevant principles; the first and one 53 Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, [13]. 54 Nelson v Nelson (1995) 184 CLR 538, [48]. 55 Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation (1971) 125 CLR 659, Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, 547 [13]. 57 Gino Dal Pont, Charity law no magic in words? Unpublished paper presented at Defining, Taxing and Regulating Not-for-Profits in the 21st Century Conference, Melbourne Law School, Melbourne, July 2012, 29, citing Jones v Williams (1767) Amb 651 at 652; 27 ER 422 at See Matthew Turnour,, Modernising charity law: steps to an alternative architecture for common law charity jurisprudence in Modernising charity law: Recent Developments and Future Directions Myles McGregor-Lowndes and Kerry O Halloran Eds Edward Elgar Cheltenham UK 2010; developed further in Matthew Turnour (2009) Beyond Charity: Outlines of a Jurisprudence for Civil Society Unpublished PhD Thesis QUT available at 59 [1967] UKHL 3; [1968] AC 138 at [1998] HCA 59; (1998) 195 CLR 566 at 582 [34].

10 10 relevant this analysis being that the spirit and intendment of the Preamble to the Statute of Elizabeth should be given no narrow or archaic construction 61 In the next section we explore how far the majority did take the concept of public benefit in charity law. c. Public Benefit The fourth head of Pemsel, being purposes beneficial to the community, is now extended to recognise that the encouragement of public debate respecting activities of government regarding the first three heads is itself charitable 62. So much is clear, and the ratio of the majority does not extend beyond this. However, there is evidently scope to develop the law of charity by reference to the principles relied upon by the majority in its decision. There is restatement of the implied freedom of political communication principles in the broad form framed in Wooton and an evident willingness of the High Court to revise the definition of charity in accordance with new social needs. This has opened the door to consider how the concept of public benefit, which itself underpins the whole concept of charity, can be informed by the concept of the common convenience and welfare of Australian society as expressed and advanced by the freedoms implied into the Australian Constitution. d. What is status of organisations like Aid/Watch under the Australian Constitution The first and most obvious question is whether the fourth head now extends to encompass as charities organisations that encourage public debate respecting activities of government which lie beyond the first three heads (or the balance of the fourth head) identified in Pemsel. The majority found it unnecessary to determine this issue. 63 Given that the implied freedom of political communications cases establish that the common convenience and welfare of Australian society are advanced by discussion the giving and receiving of information about government and political matters, 64 it would appear a natural development to accept that a purpose of generating debate about activities of government, concerning any subject matter, was a purpose beneficial to the community within the fourth head. 65 Given the implied freedom of communications cases establish that the common law must conform to the Constitution, whether this requirement would withstand further consideration by the High Court is unclear. A framework has been set, though, for the boundaries of charitable purpose to be significantly pushed. The second question is whether the fourth head of Pemsel could extend beyond recognising the public benefit in communication, debate and discussion to recognising freedom of movement or association. The decision in Aid/Watch arguably invites the extension but it is not, at present, a part 61 [1998] HCA 59; (1998) 195 CLR 566 at 582 [34].a 62 Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, 557 [48]. 63 Ibid. See discussion in Joyce Chia, Matthew Harding and Ann Connell, Navigating the politics of charity: Reflections on Aid/Watch Inc v Federal Commissioner of Taxation [online]. Melbourne University Law Review, Vol. 35, No. 2, 2011: as to how the majority decision is in part a reflection of the approach taken by Counsel for Aid/Watch in its submissions.. See also p Lange v Australian Broadcasting Corporation (1997) 189 CLR 520, Cf Joyce Chia, Matthew Harding and Ann Connell, Navigating the politics of charity: Reflections on Aid/Watch Inc v Federal Commissioner of Taxation [online]. Melbourne University Law Review, Vol. 35, No. 2, 2011:

11 11 of the law of Australia. There is some judicial support for the proposition that the freedom extends beyond written or spoken words. 66 Justice Kirby in Levy v Victoria gave examples: 67 A rudimentary knowledge of human behaviour teaches that people communicate ideas and opinions by means other than words spoken or written. Lifting a flag in battle, raising a hand against advancing tanks, wearing symbols of dissent, participating in a silent vigil, public prayer and mediation, turning away from a speaker, or even boycotting a big public event clearly constitutes political communication although not a single word is uttered. The constitutionally protected freedom in Australia must therefore go beyond words. 68 In Australian Capital Television Pty Ltd v Commonwealth 69 Justice McHugh found that the Constitution contains rights of participation, association and communication in relation to federal elections, but that these rights extend only so far as they are identifiable in ss 7 and 24 of the Constitution. 70 In Kruger v The Commonwealth 71, Justices Toohey, Gaudron and McHugh recognised an implied constitutional freedom of association. 72 Justice Toohey regarded the freedom of association as an essential ingredient of political communication. 73 Justice Gaudron expressed the view in Levy v Victoria that freedom of political communication extends to include a freedom of movement (either as an aspect of the freedom of political communication or as its subsidiary). 74 Justice Kirby in Mulholland went so far as to find that there is implied in ss 7 and 24 of the Constitution a freedom of association and a freedom to participate in federal elections extending to the formation of political parties, community debate about their policies and programmes, the selection of party candidates and the substantially uncontrolled right of association enjoyed by electors to associate with political parties and to communicate about such matters with other electors. 75 Chief Justice Gleeson found that it was unnecessary to consider whether there was a freedom of association because His Honour found that the burden on political communication had been justified and to the extent that there was a freedom of association (if any), it would be subject to the same limitations as the freedom of political communication. 76 To date, then, a majority of the High Court have not held that freedom of association is implied in the Constitution. The extent to which the freedom of association follows as the natural consequence of the findings by the High Court in relation to the system of representative and responsible government and in particular whether it is sufficiently connected to supply the finding of public benefit without compromising the role of the judiciary warrants further consideration. e. Can political parties be charitable? 66 In Levy v Victoria (1997) 189 CLR 579, 595, 617, 638 Justices Brennan, Kirby and Gaudron considered this issue and all were in agreement. 67 Although it is accepted that it extends beyond written or spoken words, this statement from Justice Kirby has not received endorsement from the whole court and was offered obiter. 68 Levy v Victoria (1997) 189 CLR 579, 638 (Kirby J). 69 Australian Capital Television Pty Ltd v Commonwealth (1992) 177 CLR 106, Ibid 106 (McHugh J) cited in Mulholland v Australian Electoral Commission (2004) 220 CLR 181, 225 (McHugh J). 71 (1997) 190 CLR See comments in Mulholland v AEC 220 CLR 181, 225 (McHugh J) ( Mulholland ). 73 Kruger v The Commonwealth (1997) 190 CLR 1, 144; Mulholland v Australian Electoral Commission (2004) 220 CLR 181, 225 (McHugh J). 74 Levy v Victoria (1997) 189 CLR 579, 617 (Gaudron J). 75 Mulholland v Australian Electoral Commission (2004) 220 CLR 181, 277 [284]. 76 Ibid 201 (Gleeson CJ).

12 12 Is there now any defensible basis for objecting to political parties being found to be charitable? The transcript reveals an interesting discussion between Justices Gummow and Heydon and Chief Justice French with Counsel for Aid/Watch (Mr Williams) on the issue of whether there was any reason in principle to exclude political parties from being charitable: 77 GUMMOW J: Well, would it be contrary to public policy to provide for a trust to fund one of the mainstream political parties? MR WILLIAMS: Based upon the authorities, it would be. GUMMOW J: Why? MR WILLIAMS: Well, because the authorities have always GUMMOW J: Forget about the authorities. You are in the High Court. Now, tell us why. MR WILLIAMS: As a matter of principle the objection would be that it is based upon a gift to persons, that is the political party rather than for the public benefit. HEYDON J: It seems a strange explanation. Members of political parties are not allowed to put money into their own pockets if supporters of the party give them money for the purposes of the party. MR WILLIAMS: Well, the historical foundation I appreciate, your Honour, this is perhaps less an answer to your Honour s question of principle, but the historical foundation seems to have been that it is contrary to public policy to provide for a gift to a political party that would entrench a political party in office. GUMMOW J: We live in a different constitutional structure in this country, do we not, after Lange? MR WILLIAMS: We do and what we would respectfully suggest is this, that ultimately the Court is looking at questions of public benefit. It is the touchstone and there may be cases in which it would be possible to adduce evidence that may be accepted by a court as to requisite public benefit in that area but it would be a matter that one would have great difficulty GUMMOW J: Theories of responsible and representative government in this country assume and depend upon, do they not, the existence of political parties? MR WILLIAMS: They do, they do. We would respectfully submit that what today might be seen as providing that public benefit might be quite different from what had been considered to be providing a public benefit in years gone past. 77 Transcript of proceedings, Aid/Watch Incorporated v Commissioner of Taxation (2010) HCAT (15 June 2010), 4-5.

13 13 FRENCH CJ: You pitch your submissions, as I see then at a certain level of generality which avoids getting into the merits or demerits of particular issues by saying that public debate itself is a public good. Once you say that then the question is how do you exclude funding to a political party which has an agenda to improve administration of government, improve laws, and so forth? MR WILLIAMS: The answer is that there may not be an absolute prohibition. The answer may be that it depends upon the particular organisation with which one is concerned, the particular objectives which it has and a consideration of whether, in current times, those objectives can be seen to be at least within the fourth class of Pemsel s Case in the public interest, or for a public benefit, I should say. This dialogue can be read in comparison with the statement by Chief Justice Latham that it is not difficult to suggest reasons of public policy which would prevent recognition by the law of the establishment in perpetuity of a trust for the promotion of a particular political object as such, or for the maintenance and advocacy during the indefinite future of the principles of a particular political party. Such trusts might become a public danger. 78 It is clear that the majority decision itself does not warrant the conclusion that political parties could fall within the category of charitable. The basis in principle is for the prohibition on political parties and the extent to which it is the logical implication of the reliance by the High Court on the implied freedom of political communication is a question asked by our judiciary and not one which yet has a clear answer. f. Limiting public benefit: what guidance does Aid/Watch give? If the fourth head of charity were expanded to conform to the implied freedom of communication to encompass (for example) any organisation whose dominant purpose was to advance communication concerning political or government matters to enable the people to exercise a free and informed choice as electors, then what would be the limits on the scope of the fourth head? One possible limitation arises from the implied freedom of political communication cases. It is well established that the implied freedom of political communication is not absolute. A law may burden the implied freedom of political communication if it satisfies two conditions. The first condition is that the object of the law is compatible with the maintenance of the constitutionally prescribed system of representative and responsible government. The second is that it must be reasonably appropriate and adapted to achieving that legitimate object or end. 79 Other language used in this context includes legitimate purpose and proportionality ( the Lange test ). 80 Although these principles were developed by reference to whether the freedom would operate to invalidate legislation, it follows from the finding of the Court in Lange that common law rules must be 78 The Royal North Shore Hospital of Sydney v The Attorney-General for New South Wales and Others (1938) 60 CLR 396, 412 ( the Royal North Shore Hospital case ). 79 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520, Ibid. The Lange test was slightly reformulated in Mulholland v Australian Electoral Commission (2004) 220 CLR 181 by McHugh, Kirby, Gummow and Hayne JJ who were in agreement that the test as stated in Lange should be changed from in fulfilment of to in a manner. The alteration was semantic more than substantive.

14 14 examined by reference to the same principles. 81 In this context, it should be noted that the majority did not go so far as to say that the political objects doctrine constituted a burden upon communication prohibited by our Constitution. They did not apply the two-stage test and so it is not clear from the judgment how such a limitation could work in the context of charity law. Another possible limitation arises by reference to the concept of public policy considerations. During the course of oral argument, Chief Justice French asked Counsel for Aid/Watch: if one dispenses with a political purposes exception or disqualification what are the boundaries of community benefit, or public benefit? 82 Counsel for Aid/Watch s response was that it had to be determined as a question of fact, according to the evidence being adduced. Counsel refused to state with precision the limits and stated it generally with respect to public policy considerations. 83 Aid/Watch s written submissions included the following statement of Chief Justice Jordan of the Supreme Court of New South Wales, noted by Justice Mason in A v Hayden 84 in relation to public policy : the phrase public policy appears to mean the ideas which for the time being prevail in a community as to the conditions necessary to ensure its welfare; so that anything is treated as against public policy if it is generally regarded as injurious to the public interest. 85 This statement was not cited by the majority and the phrase public policy considerations does not appear in their decision. Nor is it clear how public policy considerations would fit with the concept of public benefit. Limits are discernible from the majority judgment itself in the following statement: it may be that some purposes which otherwise appear to fall within one or more of the four heads in Pemsel nonetheless do not contribute to the public welfare in the sense to which Dixon J referred to in Royal North Shore Hospital. But that will be by reason of the particular ends and means involved, not disqualification of the purpose by application of a broadly expressed political objects doctrine. 86 It is difficult to derive from this passage a clear understanding of what the majority meant when they referred to ends and means and a review of the Royal North Shore Hospital case does not seem to shed further light. It may be that an intention to affect or interfere with government administration is one of the limits. 87 It is difficult to reconcile this, though, as an actual limitation given the facts in which show Aid/Watch evidently did intend to influence or affect government administration. It may be that the majority decision reference to ends and means, when read within the factual context provided in Aid/Watch is to excluding only political parties or other associations formed for the purpose of taking part in government itself. g. The relevance of revenue concessions 81 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520, Transcript of proceedings, Aid/Watch Incorporated v Commissioner of Taxation (2010) HCAT (15 June 2010) See comments in Joyce Chia, Matthew Harding and Ann Connell, Navigating the politics of charity: Reflections on Aid/Watch Inc v Federal Commissioner of Taxation [online]. Melbourne University Law Review, Vol. 35, No. 2, 2011: A v Hayden (No 2) (1984) 156 CLR 532, Re Jacob Morris (1943) 43 SR (NSW) 352, (Jordan CJ) cited in Appellant submission, Aid/Watch Incorporated v Commissioner of Taxation (High Court, French CJ, Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ, 1 December 2010) 19, para Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, 557[49]. 87 See The Royal North Shore Hospital of Sydney v The Attorney-General for New South Wales and Others (1938) 60 CLR 396, 427 (Dixon J).

15 15 The Commissioner submitted that the common law meaning of charitable should be developed on the basis that taxation concessions were a state subsidy. 88 The majority rejected this submission. 89 The majority held: 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. 90 A further qualification was added the term charitable is to be understood by reference to its source in general law as it is developed in Australia from time to time (emphasis added). 91 The majority of the High Court noted that this exclusion arises not because such objects or activities are not charitable, but because of particular statutory provisions. 92 For completeness we mention that the High Court did not reference the DGR status of Aid/Watch nor draw a distinction between exemption or DGR status in the context of concessions. h. Interim conclusion There is ample room for significant contest over what the High Court decided and where the boundary between charity and its other is now to be drawn. The interim conclusion that we wish to focus upon is how open textured these matters are now and how difficult it is to resolve differences arising since Aid/Watch by framing the controversy only in technical, doctrinal terms. Justice Michelle Gordon of the Federal Court of Australia commenting extra curia put it this way: What these cases make clear (and there are many others) is that tax practitioners whether they be lawyers or accountants cannot be too focussed on the interpretation of incredibly narrow statutory provisions, or specific words within those provisions, without considering other and overlapping areas of law. The cases also highlight the need to consider the broader legal, economic, commercial or (as in the case of Aid/Watch) public policy implications of a problem or set of facts. 93 With this lesson in mind we turn now to the broader legal, economic, commercial and public policy implications of a problem. C. Where we now stand 1. Introduction Australians stand with an extremely open textured High Court judgment. It is impossible to know with any certainty were the boundaries of charitable purpose is. What we do know is that it is illustrative of the principle that the spirit and intendment of the Preamble to the Statute of 88 Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, 549 [21]. 89 Ibid [22]. 90 Ibid [23]. 91 Ibid, 550 [24]. 92 Ibid, 550 [25]. 93 Justice Michelle Gordon, "The interrelationship between tax law and other areas of law, and the consequences on teaching, drafting and interpreting tax laws" (FCA)[2011] Fed J Schol 1 Paper given at 23rd Australasian Tax Teachers Association Conference 20 January 2011 at

16 16 Elizabeth should be given no narrow or archaic construction 94 Australians also stand with a parliament ready to assist in the development of the law. The fulcrum and levers are in place for significant movement of this body of law. The challenge is to identify the needs of society and how best to move the law in accordance with sound principles. Loosely following the structure utilized above in this section we seek to develop ideas that might inform the development of the common law of charities. In doing so the wider socio-political context informs each aspect of how we suggest the law might be developed. We remind that we do not propose solutions but open up ideas for consideration. Suggestions for a comprehensive alternative paradigm have been provided elsewhere Changing the law and the relevance of the Preamble Jurists in Australia now stand possessed of a conundrum: how to reframe the spirit and intendment jurisprudence to include not just additional matters and circumstances that lie beyond its actual terms but purposes considered, prior to Aid/Watch to be expressly excluded from it. 96 The project is larger, even, than that, for contribution to Australia s democratic constitutional foundations must be included. 97 More thinking can be done about the overlapping public nature of charities public law concepts and how these are to be infused within this division of private law. 98 Where to begin? When the question is so broad it may be helpful to stand back and look at charity law as a social institution developed through conflict. The Australian philosopher John Anderson said we must ask of social institutions: not what is their end but of what conflict is it the scene. 99 Referencing this point the now United States philosopher, Alisdair MacIntyre s point is that it is through conflict, and sometimes only through conflict that we learn what our ends and purposes are. 100 Applying that question to charity law as a social institution, it is natural for jurists to view the dispute over the function of the Preamble in charity law as just a dimension of as a tax contest. Viewed as a scene of a social conflict, charity law is perceived quite differently. In tax terms Aid/Watch was a tiny organisation. According to James Goodman, a member of the management committee of Aid/Watch, at the time, it had an income of less than $100,000 per annum. But, wrote Goodman, for organisations such as Aid/Watch the capacity to establish and maintain a presence, and thus to influence the public sphere, can hinge on access to tax 94 [1998] HCA 59; (1998) 195 CLR 566 at 582 [34]. References removed. 95 Matthew Turnour, Modernising charity law: steps to an alternative architecture for common law charity jurisprudence in Modernising charity law: Recent Developments and Future Directions Myles McGregor- Lowndes and Kerry O Halloran Eds Edward Elgar Cheltenham UK 2010 developed further in Matthew Turnour (2009) Beyond Charity: Outlines of a Jurisprudence for Civil Society Unpublished PhD Thesis QUT available at 96 Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539, [13]. 97 Matthew Harding, Finding the Limits of the Aid Watch Decision (2011)3.3(Special issue) Cosmopolitan Civil Societies Journal 34, Joyce Chia, Matthew Harding and Ann Connell, Navigating the politics of charity: Reflections on Aid/Watch Inc v Federal Commissioner of Taxation [online]. Melbourne University Law Review, Vol. 35, No. 2, 2011: , Alisdair MacIntyre, After Virtue: A Study in Moral Theory(University of Notre Dame Press, first published 1876, 3 rd Ed, 2007) Ibid 164.