Legislative Council Fifty-Second Parliament, First Session (52-1) 52 1 Parliament of South Australia Legislative Council published Bills Health Services Charitable Gifts Bill HEALTH SERVICES CHARITABLE GIFTS BILL Introduction and First Reading Introduction and First Reading Received from the House of Assembly and read a first time. Second Reading Second Reading The Hon. G.E. GAGO Legislative Council Minister for Regional Development, Minister for Public Sector Management, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises The Hon. G.E. GAGO (Minister for Regional Development, Minister for Public Sector Management, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises) (18:29): I move: That this bill be now read a second time. I seek leave to have the second reading explanation inserted in Hansard without my reading it. Leave granted. The Commissioners of Charitable Funds were first established under the then Public Charities Act 1875 to manage donations to public charitable institutions in South Australia. While their Act has undergone various amendments since that time, it has remained virtually unchanged since 1935 when the current Public Charities Funds Act 1935 (the current Act) was passed. To this time the Commissioners have worked successfully to manage the donations and bequests for those institutions under that Act. However, the current Act is seriously out of date and in need of substantial revision to ensure that it is consistent with current drafting standards and contemporary language. For example, the definition of an institution has not altered much since the 1875 Act and is expressed in a language that is no longer accepted by the community. The definition of an institution in the current Act is given as '…any public hospital, destitute asylum, lunatic asylum, hospital for the mentally defective, orphanage, reformatory or other institution of like character…'. The definition gives honourable members some indication of the character of the current Act as well as how governments and the community have shifted in their understanding and approach to services that provide for people in need. The Commissioners welcome the Health Services Charitable Gifts Bill 2010. It not only remedies the drafting and language issues, but also confers more contemporary responsibilities and powers on the Commissioners. The Bill also addresses legal uncertainty about the establishment of the Commissioners and some of their past actions. In summary the Bill: maintains the independent decision-making powers of the Commissioners preserves the current principal powers of the Commissioners under the current Act has new provisions consistent with other revised powers of the Commissioners and a more contemporary drafting, language and focus establishes the Health Services Charitable Gifts Board requires the Minister for Health to consider the skills and experience of persons to act as Commissioners when making nominations to the Governor continues the application of the Act to hospitals under the Health Care Act 2008 removes unnecessary restrictions on the preservation of capital enables the Commissioners to establish a trust under the direction of the Minister for Health subject to meeting certain conditions, enables the Commissioners to apply a gift to an institution different to the one intended by a donor enables the Commissioners to Act as a trustee or co-trustee establishes advisory committees (in particular an Investment Advisory Committee) and requires the Commissioners to seek their advice validates past actions of the Commissioners done in good faith provides for better transparency of and accountability for the decisions of the Commissioners. It is the Government's intention that the proposed Act apply to all public hospitals, with some exception. The hospitals can be proclaimed either individually such as the Royal Adelaide Hospital or Modbury Hospital for example, or as the incorporated entity, such as Adelaide Health Service, to be a public health entity for the purpose of the Act. The main exception is for Health Advisory Councils and their local country hospital sites. The government previously made a commitment to people in the country regions of South Australia that the Health Advisory Councils established for those hospitals would retain control of local assets, including donations to a local hospital. In keeping with this commitment, the Bill specifically precludes Health Advisory Councils from being proclaimed a public health entity and the property they hold on trust from being vested with the Health Services Charitable Gifts Board that is proposed to be established by the Bill. There may, however, be some circumstance where a Health Advisory Council prefers to transfer the property to the Board and the Bill will enable this to occur with the agreement of the Minister. Such property, despite any other provisions of the Bill, must be used by the Commissioners for the benefit of the local hospital that is named by the Health Advisory Council. The Bill also provides that the property, or remaining property or its financial equivalent must be returned to the Health Advisory Council should the Minister revoke such a decision. The Bill considers the circumstances where an existing country hospital already has property vested with the Commissioners and enables these to remain with the Commissioners or be transferred to the relevant Health Advisory Council. These provisions of the Bill will ensure that the government's commitment to the country region are kept and can be consistently applied across that region. The decision as to whether property should vest with the Board or with a Health Advisory Council will be made by the relevant Health Advisory Council. The Bill provides for another exception for donations made to a hospital by a foundation or local auxiliary of a hospital. These donations will be exempted from being vested in the Board where the Minister grants such an exemption on application from a hospital. Such an exemption will avoid an overly bureaucratic process where public donations made to a body such as a hospital foundation or an auxiliary for a hospital must vest with the Board, and the hospital then having to apply to the Board for access to those donations. It also supports the direct relationship of a local auxiliary with the hospital and assures them that their fundraising efforts will remain for the benefit of that hospital. A further exception is made to gifts of property that can be characterised as a chattel (for example, a television, piano or chair and the like which are donated for the use of staff or patients). Without this exception, these kinds of gifts must vest with the Board and again, the hospital would need to apply to have these for the use of the hospital. As given in the latest annual report of the Commissioners, the total value of the trusts the Commissioners hold is some $75.7 million. Of this, about $0.5 million is held in the name of the Intellectual Disability Services Council and Metropolitan Domiciliary Care service. That is, for institutions related to the Department for Families and Communities. Over recent years the growth of these funds has been achieved primarily through the returns on the capital that the Commissioners have achieved and not though increased donations. The Bill is focussed on public health entities that come under the Health Care Act 2008. It therefore enables the funds the Commissioners hold for benefiting those in need of disability or domiciliary care service to be transferred to the Minister for Families and Communities. When the funds are transferred to the Minister for Families and Communities, the Bill provides that the Minister will have a responsibility to ensure, as far as is reasonable, that the funds are applied in a manner that accords with the intent of the donor. The Commissioners will work with that Minister to support the transfer of these funds. The Act that established the Commissioners and the subsequent amending Acts which continued them led to some uncertainty about when the Commissioners were acting as a body corporate and when they were acting as individuals. This situation is remedied by the establishment of the Health Services Charitable Gifts Board as the body corporate to which the Commissioners are appointed. As a consequence, the Bill proposes that all gifts will vest with the Board and not with the Commissioners. These gifts are termed the 'charitable assets' of the Board. Persons appointed to the Board will still be known as the Commissioners but they will act as administrators of the charitable assets rather than themselves acting as trustees for the charitable assets. The Bill ensures that the Commissioners will, as they do currently, retain their independence in terms of the decisions they make regarding the investment and application of the charitable assets. The Commissioners will continue to be appointed by the Governor on nomination of the Minister but the Bill now provides that the Minister must consider the requirements of the Board and the skills and knowledge of the persons that he may nominate to enable the Board to carry out its functions. The Bill defines the procedures for the Board's meetings in line with current practices. For example, enabling a Board member to be regarded as present through a teleconference and for the Board to make decisions where a Commissioner cannot be physically present at a meeting of the Board through the use of a fax, email or letter. These provisions, which are now considered standard in most modern Board procedures, are lacking under the current Act and will make it easier for the Board to conduct its business. For the first time, there will be provisions that clearly describe the functions and responsibilities of the Board. These functions and responsibilities are broadly consistent with those that the Commissioners currently undertake. In summary they include: to prudentially manage the charitable assets and apply them for the benefit of public health entities or otherwise in accordance with this Act to fulfil any fiduciary and other duties that arise out of the functions of the Board to determine appropriate investment strategies for the charitable assets and other property vested in the Board after consultation with the Investment Advisory Committee (to be established under the proposed Act) or any other body considered appropriate by the Board to consult with any body considered appropriate by the Board including a committee that may be established under this Act for the purpose of advising the Board on an application of funds for research and/or equipment to provide advice to the Minister as may be appropriate. The Bill enables the Commissioners to act as trustees or co-trustees where they are so named or asked to act in this capacity. Under such circumstances, they will have the same responsibilities that are required of any other trustee under the Trustee Act 1936. The Bill will, for example, enable the Commissioners to act as a co-trustee for the Helpmann Family Foundation in which they are so-named and be actively involved in the management of this trust, something that they cannot do under the current Act since it provides no power to the Commissioners to undertake the functions of a co-trustee. The current Act converts the specific purposes of a gift held on trust by the Commissioners given for a particular hospital to a more general one of being applied for the benefit of that hospital. The Bill maintains this power of the current Act and, in addition, enables the Board to apply a gift to a different hospital or a prescribed research body. This is a widening of the powers of the Board also sought by the Commissioners. However, before the Board makes a decision, the Bill requires that the Board must consider the intent of the donor, as far as that can be reasonably ascertained, and must apply that part of the charitable assets the Board considers most likely to achieve that intent. These are powers that the Commissioners support since it enables them to apply funds in the most beneficial way to achieve the health benefits for patients that may have been the intent of the donor. From the government's perspective, it also makes sense since a considerable part of the charitable assets are funds for health and medical research and, in the future, much of this research will be undertaken by the South Australian Health and Medical Research Institute (SAHMRI) and far less so in individual hospitals. The Commissioners will now have the option of applying those funds to the SAHMRI (as a prescribed research body) where they believe that this will best achieve the health outcomes that a donor may have intended. The government recognises that donations are often made because of an emotional attachment to a particular hospital and because the donor believes that the hospital can undertake the research intended to benefit patients. These are important considerations however, as the focus of health and medical research shifts to the SAHMRI, the belief the hospital is the best place to undertake the research may be misplaced. If the health benefits for patients for which a donation is intended are to be optimally achieved, the Board should have the capacity and the flexibility to apply funds where they believe there is better research infrastructure and the hoped for health benefits for patients can be best achieved. Again, it is stressed that the Board will act independently and cannot be compelled in these decisions by any person or body, including the government. The Bill removes the provisions that require the Commissioners to preserve the capital of a trust and restrict them to applying only the income derived from the investment of the capital. This restriction has meant the Commissioners have been unable to apply the full value of a gift even where that amount was small and/or where the donor intended this to occur. This restriction necessitated the enactment of the Mount Gambier Hospital Hydrotherapy Pool Fund Act 2009. This legislation enabled the Commissioners to apply all of the capital collected though local fundraising for a purpose agreed to by the Mount Gambier and Districts Health Advisory Council after the original fundraising venture failed to raise sufficient funds for a hydrotherapy pool at the local hospital. Had this specific legislation not been enacted, the Commissioners, much to the frustration of the local community, would only have been able to apply the earnings on that capital to the agreed purpose. The Bill widens the investment powers of the Commissioners, enabling them to invest in the share market where they were previously unable to do so. To better support the Board in its decisions regarding investments by the Board, the Bill will make possible the establishment of the Investment Advisory Committee. The Investment Advisory Committee will have at least a representative from the Department of Treasury and Finance and a person nominated by the Commissioners who has expertise in the field of investment advice. The Committee will be able to provide advice to the Board on the composition of its investment portfolio and on the performance of the Board's investments and procedures. The government regards it as prudent to establish such a committee to aid the Board, particularly given the negative experience of the national and international financial sectors over recent years and the wider investment powers of the Commissioners. However, the Committee cannot direct the Board. In the interests of public reporting and accountability, the Committee must provide a report to the Board which will be included as part of the Board's annual report that is tabled in Parliament. With the greater power given to the Board in how it may apply a gift, it is expected that the Board will establish a committee that will advise it on the application of funds for research and equipment to ensure it has access to sound advice when making these decisions. It is unreasonable to expect the Commissioners to have the expertise to properly evaluate research proposals. While the government wishes to keep its involvement in the Board's business to a minimum, it nevertheless does have a responsibility to ensure that there are proper mechanisms in place that support the Board and provide for public transparency and accountability of the funds donated and managed by the Board. The Bill therefore gives the Minister the power to direct the Board to establish such an advisory body. The regulations will prescribe the information that must be provided by the Board in their annual report about the application of gifts. The Bill enables the Board to establish what is described as a 'health trust' on direction of the Minister. Such a trust will hold specific funds that are not part of the charitable assets vested in the Board but can be managed by the Board. The primary purpose of these provisions is to enable the Board to hold funds that are not part of charitable donations or those that the Commissioners have in the past incorrectly held and enable these to be managed such that they do not become part of the Board's charitable assets. For example, such a trust will hold funds transferred from the South Australian Health and Medical Research Fund held by the Department of Health for the SAHMRI and for that Fund to be managed independently of the department by the Commissioners. A health trust will also be able to hold the funds given to the Hanson and the IMVS that are currently incorrectly held by the Commissioners. The Commissioners have received legal advice that they were not empowered under the current Act to hold funds on trust for these bodies since they were not part of the Royal Adelaide Hospital, although they had a close connection with it. It was this connection that led the Commissioners to mistakenly believe that they could hold these donations on trust. On advice from the Crown Solicitor's Office, they continue to hold these donations as a 'constructive trust' until they can be properly dealt with. Enabling these funds to be transferred to a health trust will enable the Board to continue to manage these funds. The Act and its previous iterations have been in operation for 135 years. During that time the government believes that the Commissioners have always strived to act in accordance with their Act. Nevertheless, because of the above mentioned outmoded drafting style, the changes in community values, the institutions and the assumptions about how the current Act (which is itself 75 years old) operates the Commissioners have erred in some decisions they have made in relation to the gifts they hold on trust. The example of gifts to the Hanson and IMVS is one of these. They have also on occasion made available the capital of a trust in circumstances where they should not. These are decisions the government believes the Commissioners made in good faith. Nevertheless, the Commissioners may remain exposed to a legal liability. This Bill seeks to address this risk by providing for the validation of the past acts of the Commissioners in so far as they may have acted in contravention of their current Act. The Bill also provides for the continuation of the current Commissioners and ensures that the gifts properly vested with them will continue as gifts vested in the Board. It also ensures that the Board continues to hold in perpetuity, and for the benefit of the Royal Adelaide Hospital, 'Town Acre 86, City of Adelaide, Hundred of Adelaide', which is part of the Thomas Martin bequest. This land, on which the Citi Centre building is also situated, is approximately encompassed by Pulteney St, Rundle Mall, Twin St and Hindmarsh Square. The Bill is a vast improvement on the existing Act under which the Board must operate. It provides much clearer provisions as to the powers, functions and responsibilities of the Board in a contemporary legislative framework. It addresses issues for the Commissioners that have arisen out of the antiquated nature of the current Act. The Bill provides greater flexibility to the Board in applying gifts to meet the changing circumstances of hospitals and research in South Australia as well as mechanisms to support them in them in their decisions. It provides for better reporting and therefore greater public transparency in the Board's decisions. Crucially, it maintains the independence of the Commissioners when making their decisions concerning the charitable assets vested with the Board. The Bill is a vast improvement over the existing Act and I commend the Bill to honourable members. Explanation of Clauses Explanation of Clauses Part 1—Preliminary 1—Short title 2—Commencement These clauses are formal. 3—Interpretation This clause defines terms and concepts used in this Bill. 4—Public health entity This clause provides for the Governor to declare, by proclamation, an entity to be a public health entity. A proclamation may not declare a HAC, a prescribed research body, a private hospital within the meaning of the Health Care Act 2008 or an entity that is not eligible, under the Income Tax Assessment Act 1997 of the Commonwealth, to receive income tax deductible gifts to be a public health entity. Part 2—Health Services Charitable Gifts Board 5—Establishment of Board This clause provides that the Commissioners of Charitable Funds established as a body corporate under the repealed Act continues in existence as the Health Services Charitable Gifts Board and sets out relevant matters relating to the establishment of the Board. 6—Removal from office This clause provides for the removal of a Commissioner from office. 7—Casual vacancies This clause provides for a vacancy in the office of a Commissioner. 8—Acting Commissioner This clause provides for an acting Commissioner to be appointed in certain circumstances. 9—Procedures This clause sets out the procedures of the Board. 10—Vacancies or defects in appointment of Commissioners This clause provides that an act or proceeding of the Board is not invalid by reason only of a vacancy in its membership or a defect in the appointment of a Commissioner 11—Remuneration This clause makes provision for the remuneration of the Commissioners. 12—Executive officer This clause provides for an executive officer of the Board. 13—Staff of Board This clause makes provision for the Board to appoint staff or make use of the services of the staff, equipment or facilities of an administrative unit or an instrumentality or agency of the Crown by arrangement with the relevant body. Part 3—Functions of Board 14—Functions This clause sets out the functions of the Board. 15—Certain gifts vest in Board as part of charitable assets This clause provides that prescribed gifts vest in the Board as part of the charitable assets. A prescribed gift includes property given to a public health entity or a body specified in Schedule 1 clause 1. Proposed subsection (3) provides that certain gifts do not vest in the Board as part of the charitable assets (unless otherwise agreed). Proposed subsections (4), (5) and (6) provide that an exemption may be granted from subclause (1) in respect of gifts made from an organisation whose primary purpose is to benefit a particular public health entity. 16—Public health entity may transfer property to the Board This clause provides that a public health entity may, with the agreement of the Board, transfer designated property to the Board (and the property becomes part of the charitable assets). Proposed subsection (2) defines designated property. 17—Application of charitable assets This clause provides for the application of the charitable assets by the Board. Key aspects of the clause are as follows: once a gift has become part of the charitable assets, the gift is held free from any trust to which it was subject; the Board may give the whole or part of the gift to any public health entity or a prescribed research body (provided that, in so doing, the Board complies with the requirements of proposed subsection (3)); the Board, in managing and applying a portion of the charitable assets attributable to a particular donor, must consider the intent of a donor and, so far as is reasonably practicable, apply that portion of the assets in a manner that the Board considers is most likely to achieve the intention of the donor. 18—HAC may apply to transfer property to Board This clause allows a HAC to make a request in writing to the Minister for permission to transfer property to the Board to hold on trust for the benefit of a specified public health entity, or part of a public health entity. Property transferred to the Board under this clause is free from any trust to which it was subject and is held on trust by the Board for the benefit of the specified public health entity, or part of the entity. It also allows the Minister to require the Board to return such property. 19—Board may establish charitable health trusts The clause enables the Minister to direct the Board to establish a charitable health trust on terms determined by the Minister. The clause also provides for property to be transferred to a charitable health trust as follows: the Minister may transfer property of the Crown to the Board to hold on trust for the purposes of a charitable health trust; the Minister may determine that certain property (specified in Schedule 1 clause 2), instead of being held by the Board as part of the charitable assets, be held by the Board on trust for the purposes of a particular charitable health trust; if a determination has been made under proposed subsection (4), the Minister may direct that, despite clause 15, property referred to in paragraph (b) or (d) of the definition of prescribed gift in proposed section 15(7) will, if given after the commencement of the clause, be taken to vest in the Board on trust for the purposes of the charitable health trust to which the determination relates (and the property will not form part of the charitable assets). The clause provides that the Minister may vary the terms of a charitable health trust or direct the Board to wind up a charitable health trust in accordance with any requirements prescribed by the regulations and any other directions of the Minister. The clause also makes provision for certain procedures relating to charitable health trusts. 20—Board may act as trustee or co-trustee This clause provides that the Board may act as a trustee or co-trustee in respect of a trust where the Board is named or otherwise asked to act as a trustee or co-trustee. 21—Trusts administered by Board This clause provides that, to avoid doubt, if property is held on trust by the Board under proposed section 18, 19 or 20, the property does not form part of the charitable assets and the Trustee Act 1936 (subject to any exclusions or modifications prescribed by regulation) applies in relation to such trusts. Part 4—Miscellaneous 22—Advisory committees This clause requires the establishment of the Investment Advisory Committee and provides that the Board may establish other committees to provide advice on any matter affecting the administration of the Act as the Board thinks fit. The clause also makes provision for the appointment of members and procedures of a committee established by the Board. 23—Town Acre 86 fund This clause provides that land described as 'Town Acre 86, City of Adelaide, Hundred of Adelaide', being the whole of the land comprised in Certificate of Title Volume 5191 Folio 871, held by the Commissioners of Charitable Funds under the repealed Act continues to be held by the Board under the Act in perpetuity for the benefit of the Royal Adelaide Hospital. 24—Board to transfer specified property to HAC on application This clause provides that a HAC may, with the agreement of the Minister, apply to the Board for the transfer of specified property forming part of the charitable assets if the property was, immediately before the commencement of the Act, held on trust by the Commissioners of Charitable Funds under the repealed Act for the benefit of a particular health service. The clause requires the Board to give effect to an application by transferring the specified property to the HAC. 25—Duty of Registrar-General This clause will facilitate the registration of the vesting of any land in the Board or a HAC under the Act. 26—No duty or tax payable This clause provides that no duty or tax is payable under a law of the State in respect of any vesting, transfer, assignment, receipt given or anything else done under the Act 27—Accounts and audit The Board must keep proper accounts and prepare financial statements. 28—Reports The Board must prepare an annual report, which must include the annual report of the Investment Advisory Committee. 29—Delegations The Board will have the ability to delegate functions and powers. 30—Regulations The Governor will make regulations for the purposes of the Act. Schedule 1—Specified bodies and parts of the charitable assets 1—Specified bodies (section 15) This clause specifies certain bodies for the purposes of proposed section 15. 2—Property that may be held for the purposes of a charitable health trust (section 19) This clause specifies certain property for the purposes of proposed section 19. Schedule 2—Investment Advisory Committee (section 22) This schedule relates to the members and proceedings of the Investment Advisory Committee. Schedule 3—Repeal and transitional provisions This schedule repeals the Public Charities Funds Act 1935 and sets out transitional provisions associated with the enactment of this measure. Debate adjourned on motion of Hon. J.M.A. Lensink.