Trustees of Sir Howell Jones Williams' Trusts v. Inland Revenue Commissioners

[1947] 1 All ER 513

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Between: Trustees of Sir Howell Jones Williams' Trusts
And: Inland Revenue Commissioners

Court:

Judges: Viscount Simon
Lord Wright
Lord Porter
Lord Simonds
Lord Normand

Subject References:
taxation
trusts
Income Tax
Exemption
Charity
Trust to maintain institute in London to give social, educational and other amenities to Welsh people or people connected with Wales
Trust property comprising houses
Direction to trustees to apply rents and profits from settled properties to carrying on institute and maintaining properties
Rents and properties so applied
Whether trust for charitable purposes
Whether moneys applied for charitable purposes only
Charities
Charitable trusts
Charitable purposes
Trust to maintain institute to give social educational etc, amenities to Welsh people

Legislative References:
Income Tax Act, 1918 (c 40) - s 37(1)(a); sched A

Case References:
Income Tax Special Purposes Comrs v Pemsel - [1891] AC 531; 61 LJQB 265; 65 LT 621; 55 JP 805; 3 Tax Cas 53; 8 Digest 241, 1
Re Macduff, Macduff v Macduff - [1896] 2 Ch 451; 65 LJCh 700; 74 LT 706; 8 Digest 296, 731
A-G v National Provincial and Union Bank of England - [1924] AC 262; sub nom Re Tetley, A-G v National Provincial and Union Bank of England; 93 LJCh 231; 131 LT 34; HL, affg, SC, sub nom Re Tetley, National Provincial and Union Bank of England Ltd v Tetley; [1923] 1 Ch 258, CA
Houston v Burns - [1918] AC 337; 87 LJPC 99; 118 LT 462; 8 Digest 297, 739
Dolan v MacDermot - (1867), LR 5 Eq 60; (1868), LR 3 Ch App 676, LC; 8 Digest 298, 751
Dunne v Byrne - [1912] AC 407; 81 LJPC 202; 106 LT 394; 8 Digest 294, 718
Baker v Sutton - (1836), 1 Keen, 224; 5 LJCh 264; 8 Digest 298, 750
Farley v Westminster Bank - [1939] 3 All ER 491; [1939] AC 430; 108 LJPC 307; 161 LT 103
Verge v Somerville - [1924] AC 496; 131 LT 107; sub nom, Verge v Somerville, A-G for Australia v Somerville; 93 LJPC 173; Digest Supp
Keren Kayemeth Le Jisrael Ltd v Inland Revenue Comrs - [1932] AC 650; 101 LJKB 459; 147 LT 161; 17 Tax Cas 27; Digest Supp
Re Grove-Grady, Plowden v Lawrence - [1929] 1 Ch 557; 98 LJCh 261; 140 LT 659, CA; varied on appeal, sub nom A-G v Plowden; [1931] WN 89; 171 LTJo 308, HL; Digest Supp
Re Smith, Public Trustee v Smith - [1932] 1 Ch 153; 100 LJCh 409; 146 LT 145; Digest Supp
Goodman v Saltash Corpn - (1882), 7 App Cas 633; 52 LJQB 193; 48 LT 239; 47 JP 276; HL, revsg, SC, sub nom Saltash Corpn v Goodman; (1881), 7 QBD 106, CA; 8 Digest 327, 1099
Inland Revenue Comrs v Falkirk Temperance Cafe Trust - 1927 SC 261; 11 Tax Cas 353; Digest Supp

Hearing date: 28, 30 January 1947
Judgment date: 21 March 1947

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Under a trust deed dated 12 October 1937, certain freehold property in London was held by the trustees to maintain an institute in London for the benefit of Welsh people resident in or near or visiting London with a view to creating a centre in London for promoting the moral, social, spiritual and educational welfare of the Welsh people and fostering the study of the Welsh language and Welsh history, literature, music and art. "Welsh people" meant and included persons of Welsh nationality by birth or descent, or born or educated or at any time domiciled in the Principality of Wales or the county of Monmouth. Without prejudice to the general purpose the deed provided that the institute might be used for particular purposes, which included the provision of a meeting place where Welsh people could obtain facilities for social intercourse, study, reading, rest, recreation and refreshment; the holding of concerts, lectures and other forms of instruction, discussion and entertainment; educational purposes connected with the Welsh language or subjects; the establishment of a library; the provision of a hostel for the accommodation of Welsh people in London; and generally for such other purposes, being charitable and for the benefit of Welsh people, as the trustees might think fit. The trust property was maintained in two blocks-the institute block which was occupied by an association incorporated in 1925 for substantially the same purposes as those recited in the deed of trust, and a second block which was let out to tenants. The trust deed directed the trustees to apply the rents and profits arising from the settled properties in carrying on the institute and towards the maintaining, equipping and using the settled properties for the purposes of the institute and generally for carrying into effect all or any of the trusts of the deed.

The trustees made two donations to the association, the objects to which they were intended to be directed being certain activities of the association including public lectures and debates, a music club, literary and educational classes, the maintenance of the headquarter premises, comprising lounge and writing rooms, library, billiard room, tea and games rooms, badminton and table tennis clubs, dances, socials, whist, and bridge drives and a central information bureau. The trustees claimed that, though the association was not established for charitable purposes, they themselves were so established, and that, in applying the rents of the second block of trust property to the purposes of the association, they had applied them to charitable purposes only, and consequently, they were entitled to exemption from income tax, sched A, in respect of the rents of that property. The claim of the trustees that the property was vested in them for charitable purposes was based on the contentions

(a)

that the dominant purpose of the trust was the fostering of Welsh culture, which was a purpose beneficial to the community composed of the people of the United Kingdom,

(b)

that that purpose was beneficial to the community composed of the people of the Principality of Wales and the county of Monmouth which is an integral part of the United Kingdom and in itself constitutes a political body settled in a particular territorial area, and

(c)

because the maintenance of the institute (the expressed method of effectuating that purpose) was itself a purpose beneficial to a section of the British community which was determined by reference to impersonal qualifications (namely, persons with Welsh connections who were resident in or near or visiting London) and was not a selection of private individuals chosen on account of personal qualifications:-

Held-

(i)

in determining whether a trust was charitable, two propositions must be borne in mind, viz,

(a)

that it was still the general law that a trust was not charitable and entitled to the privileges which charity confers unless it was within the spirit and intendment of the preamble to 43 Eliz c 4, which was expressly preserved by the Mortmain and Charitable Uses Act, 1888, s 13(2); and

(b)

that the classification of charity in its legal sense into four principal divisions by Lord MacNaghten in Income Tax Special Purposes Commissioners v Pemsel ([1891] AC 583), must always be read subject to the qualifications appearing in the judgment of Lindley LJ in Re Macduff ([1896] 2 Ch 466), as expanded in the opinion of Viscount Cave LC in A-G v National Provincial Bank ([1924] AC 265), namely, that Lord MacNaghten did not mean that all trusts beneficial to the community were charitable, but that there were certain beneficial trusts which fell within that category, with the result that it was not enough to say that a particular trust was for public purposes beneficial to a community or for the public welfare, but it must also be shown to be a charitable trust.

(ii)

in the present case the charitable character of the trust was asserted simply because the purpose of the deed was said to be beneficial to the community or a section of the community; it was not alleged that the trust was for the benefit of the community and beneficial in a way which the law regards as charitable; and, therefore, in its mere statement, the claim was imperfect and must fail.

(iii)

on a true construction of the trust deed the property was not vested in the trustees for charitable purposes only, and, on the facts, the rents applied to the purpose of the association were not applied for charitable purposes only.

Decision of the Court of Appeal ( [1945] 2 All ER 236 ), affirmed.

Notes As to Charitable Purposes, see Halsbury, Hailsham Edn, Vol 4, pp 111-127, 136, 137, paras 617-624; and for Cases, see Digest, Vol 8, pp 241-265, Nos 1-272.

As to Meaning of Charity for Income Tax Purposes, see Halsbury, Hailsham Edn, Vol 17, pp 210-317, paras 617-624; and for Cases, see Digest, Vol 28, pp 10, 11, 82-84, Nos 51-554, 469-483.

Appeal

Appeal by the taxpayers from a decision of the Court of Appeal (Scott, Lawrence and Morton LJJ) dated 13 June 1945 and reported [1945] 2 All ER 236 .

The appellants were trustees of a trust to maintain an institute in London to give social, educational and other amenities to Welsh people. The trust property comprised certain houses let to tenants and the trustees were directed by the deed to apply the rents and profits of those houses to carrying on the institute and maintaining the properties. The trustees claimed exemption from income tax under sched A in respect of those houses on the ground that

(i)

the trust under which the houses fell was for charitable purposes, and

(ii)

that the rents and profits of the houses were applied for charitable purposes only within the meaning of the Income Tax Act, 1918, s 37(1)(a).

The decision of the general commissioners disallowing the claim was upheld by the special commissioners, by MacNaghten J and by the Court of Appeal. The facts appear in the opinion of Lord Simonds.

Their Lordships took time for consideration

Appeal dismissed.