Inland Revenue Commissioners v City of Glasgow Police Athletic Association
[1953] 1 All ER 747(Decision by: Lord Normand)
Inland Revenue Commissioners
v City of Glasgow Police Athletic Association
Judges:
Lord NormandLord Oaksey
Lord Morton of Henryton
Lord Reid
Lord Cohen
Judgment date: 9 March 1953
Decision by:
Lord Normand
My Lords, the question in this appeal is whether the respondent association is a body of persons established "for charitable purposes only". If so, it is agreed that the profits of a trade, namely, the holding of annual athletic sports, carried on by them, will be exempt from income tax under sched D, by virtue of the Finance Act, 1921, s 30(1)(c), as amended by the Finance Act, 1927, s 24.
I will first summarise the facts found in the Case stated by the Special Commissioners. Before 1938 there were various clubs connected with the City of Glasgow Police. In February, 1938, they were merged in the respondent association, which was established at that time in order to co-ordinate the various athletic and sporting activities of the members of the police force. Attention must be drawn to certain excerpts from the general rules of the association.
"Rule 2. Objects.-The objects of the association shall be to encourage and promote all forms of athletic sports and general pastimes. Rule 3. Officers.- ... The chief constable shall be president and the assistant chief constables and superintendents of the force shall be vice-presidents. Rule 4.-Management of the association shall be vested in an executive committee, divisional activities by a divisional committee, and each branch of sport or pastime by a sectional committee. Rule 5. Committees.-(1) Executive committee.-The executive committee shall consist of the president, two vice-presidents, one representative from each divisional committee, one representative from each sports sectional committee, the honorary general secretary and the honorary treasurer, ten to form a quorum. (2) Divisional committees.-The annual general meeting of each division shall be held in the second week of September ... The business to be transacted at such meetings shall be ... (b) to elect the divisional committee, consisting of superintendent, lieutenant, inspector, two sergeants and five constables. Rule 8. Membership.-Ordinary membership shall be restricted to officers and ex-officers of the City of Glasgow Police Force. Rule 10. Subscriptions.-The subscription for each saving member shall be 3d. per week deducted from pay. Rule 21. Alteration of rules.-None of the foregoing rules shall be altered or revoked save by a two-thirds majority of those present at the annual general meeting or at a special meeting called for the purpose. Rule 23. Sanction of the Chief Constable.-All resolutions and decisions passed at all meetings of the association are subject to the approval of the chief constable."
Membership of the association was, until 1947, a condition of service for all new entrants into the Glasgow Police Force. In 1949 membership became voluntary but in fact all recruits have continued to join the association. The present membership is about eighty-five per cent of the force, and there were in September, 1950, nine ex-officers who retained their membership. Ex-officers can render useful services as coaches. The activities of the association include angling, athletics, badminton, billiards, bowling, boxing and wrestling, cricket, association football, golf, rugby football, shooting, swimming and training in life saving, table tennis, dances, omnibus runs, "mystery tours" by omnibus, and whist drives. Sports are held in May of each year as a preparation for the annual sports, the "trade" carried on by the association for the purpose of raising funds. These annual sports are held on the ground of an amateur association football club, the use of which is given without charge. There is an attendance of about fifty thousand people, who pay for entry, and the profits are applied solely to the purposes of the association. Some events are confined to members of the association, others to members of other police clubs in Great Britain. But the majority of the events are open to all amateurs, including members of the association. Efforts are made to have some outstanding competitors to attract the public. The members of the association control the sports, the spectators and the traffic, and no charge is made for their services. The net proceeds are paid into the general fund of the association. In the year ended 30 September 1950, the total revenue of the association was £2,778, of which £1,225 was derived from members' subscriptions and £1,214 from profits of the annual sports. The association is affiliated to the Police Athletic Association, a body whose rules are approved by the Home Secretary and the Secretary of State for Scotland, and whose objects are to encourage the development of all forms of amateur sport in the police forces and to promote and control suitable competitions and championships. The relations between the respondent association and the Glasgow Police Force are close, and the association is regarded as an essential part of the police organisation. It plays a valuable part in maintaining health, morale and esprit de corps. It helps to bring the force into friendly contact with the public, and it enables the members of the association to mix with members of other professions and trades. The hours of police duty make it almost essential that some special provision should be made for the recreation of the police. The activities of the association are thus conducive to a contented, fit and efficient police force; they are a help towards recruiting, and to the promotion of good relations with the public. By these means, also, the association has directly benefited the public.
The Special Commissioners, having found these facts, rejected the only contention then put forward on behalf of the Crown that, by reason of the wide nature and extent of the objects of the association, it was not a body of persons established for charitable purposes only. They were aided in arriving at this conclusion by such cases as Re Good and Re Gray . As I shall not have occasion to refer to these cases again I will say now that so far as they are founded on the principle that gifts exclusively for the purpose of promoting the efficiency of the armed forces are good charitable gifts, they are, in my opinion, unassailable, but that the decision that the actual gifts were of that nature is more doubtful. I would hold further that gifts or contributions exclusively for the purpose of promoting the efficiency of the police forces and the preservation of public order are by analogy charitable gifts.
The State Case came before the First Division of the Court of Session. Their Lordships did not address themselves to a discussion and decision of the question of law submitted for their opinion:
"... whether the City of Glasgow Police Athletic Association is, within the meaning and for the purposes of s. 30 of the Finance Act, 1921 (as amended by s. 24 of the Finance Act, 1927), a charity, namely a body of persons established for charitable purposes only."
The Lord President pointed out that Income Tax Special Purposes Comrs v Pemsel , decided that the words "charity" and "charitable" in the Income Tax Act, 1842, must be construed in their technical meaning according to English law. The words which have to be construed under the Acts now in force are the same. Pemsel's case also disapproved of Baird's Trustees v Lord Advocate in which Lord President Inglis had held that the words "charitable purposes" in the Act of 1842 were to be interpreted in their popular signification as meaning the relief of poverty. Plainly, Pemsel's case laid down the rule for construing "charity" and "charitable" as one to be observed both by the courts in England and by the Court of Session. The advantage for Scottish taxpayers of this rule over the construction accepted in Baird's Trustees is obvious and considerable. The Lord President proceeds to say that the general law of charities has progressed in England and Scotland since Pemsel's case was decided and that there is a considerable and growing divergence. His conclusion is that the Court of Session cannot invest itself with the unique attributes of the Chancery Division or perform the functions which belong to the system of law there administered, and that the difficulty in which the Court of Session finds itself, hitherto evaded, must now be faced. His solution of the problem is that the English law of charities is foreign law and a matter of fact for the Court of Session, and, therefore, that the only course open to him was to take the determination of the Special Commissioners as a finding of fact for the Scottish Courts. With this mode of disposing of the Stated Case the other members of the court agreed. They professed a sense of incapacity to deal with the case in any other way.
My Lords, I will not disguise that I have a certain sympathy with the Scottish judges, who feel embarrassed at having to administer as part of the law of Scotland a difficult and technical branch of English law. For I have had in the Court of Session some, though not a large, experience of this jurisdiction, and I felt the embarrassment. Nevertheless, I must at once say that there has been here a failure to exercise a jurisdiction which the court had a plain duty to exercise. In Pemsel's case it was decided authoritatively that it was part of the jurisdiction of the Court of Session as Court of Exchequer in Scotland to administer this branch of English law in claims for exemption by charities. Since then the Finance Act, 1925, s 19, has provided that claims for exemption by charities were in future to be made to the Inland Revenue Commissioners and were to be determined by the Special Commissioners in like manner as an appeal made to them against an assessment under sched D, and that all the provisions of the Income Tax Acts relating to such an appeal (including the provisions relating to the statement of a Case for the opinion of the High Court on a point of law) shall apply accordingly with any necessary modifications. For Scottish subjects the appeal on law is, of course, to the Court of Session (Income Tax Act, 1918, s 235 and s 149(3)). The Court of Session has, therefore, a statutory duty to decide any question of law that may come before it in a claim to exemption, and the law which it must administer is the English law of charity.
The necessary effect of Pemsel's case and now also of the provisions of s 19 of the Act of 1925 is that the English law of charity has, for income tax purposes and for them alone, to be regarded as part of the law of Scotland and not as a foreign law. The practical difficulties for a Scottish lawyer are considerable, but I would not have them exaggerated. These difficulties spring mainly from the nature of charity and from the way in which the law of charity has grown up. I need not enlarge on this for it is an aspect of the English law which has been recently sufficiently commented on with special authority by Lord Simonds in Gilmour v Coat ( [1949] 1 All ER 856 ) and in Oppenheim v Tobacco Securities Trust Co Ltd ( [1951] 1 All ER 34 ). I venture, however, to say that many of the difficulties felt by Scottish lawyers in administering this law, are scarcely less felt by English equity lawyers, and that the general Scots law of charities likewise has difficulties of its own. It has never yet, for example, been found possible to define in generally accepted terms what is the precise meaning of charity in Scottish law, and one reason is that the Scots law of charities owes nothing to the great institutional writers, and much of it, like its counterpart in England, has been built up piecemeal by the decisions of the courts.
The duty of the Court of Session to apply the English law of charities in income tax cases has been expressly recognised in Jackson's Trustees v Inland Revenue by Lord President Clyde and Lord Sands. In that case the limits of the rule were defined. It was also recognised and applied in Trustees for Roll of Voluntary Workers v Inland Revenue . Among the consequences of the action taken by the First Division in this case is to cast some doubt on these cases and to deprive Scottish claimants of an effective right to appeal from the determination of the commissioners. In certain respects the jurisdiction is less embarrassing than their Lordships seem to have supposed. They are technically not bound by the decisions of the English courts in the matter of charities and it is not improper for them to discuss or criticise English decisions. The Court of Session is not reduced to the role of an obsequious follower of decisions either of a judge of first instance or of the Court of Appeal, though it is only good sense to pay special regard and respect to the decisions and opinions pronounced by the English courts on a branch of the law built up by English judges, and familiar to them by long training and experience.
I come now to the merits of the appeal and I unfeignedly regret that I must do so without the aid of the opinions of the learned judges of the First Division, especially as the issue, though not easy, owes none of its difficulty to technicalities of English law. The respondents contention is that the association falls within the last category of Lord Macnaghten's classification of charities, and that it is established for charitable purposes only. In looking for the purposes for which it is established I begin with the rules. The objects set out in r 2, to encourage and promote all forms of athletic sports and general pastimes, are not charitable purposes. But it will not do to stop there. The next step is to notice that the members' subscriptions are exclusively spent on their own sports and recreations. In order to augment the fund expendable for these purposes the members carry on the trade of holding the annual sports. So far, again, there is no element of charity and the purposes are self-regarding. In Re Hobourn Aero Components Ltd's Air Raid Distress Fund , voluntary collections from employees of the munition factories belonging to a certain company were to be used to relieve without a means test the distress suffered by the employees from air raids. It was held by Cohen J that this was not a charity and this decision was affirmed by the Court of Appeal. Lord Greene MR said ( [1946] 1 All ER 506 ):
"The point, to my mind, which really puts this case beyond reasonable doubt is the fact that a number of employees of this company, actuated by motives of self-help, agreed to a deduction from their wages to constitute a fund to be applied for their own benefit without any question of poverty coming into it. Such an arrangement seems to me to stamp the whole transaction as one having a personal character, money put up by a number of people, not for the general benefit, but for their own individual benefit."
Morton LJ said (ibid, 511):
"... those eligible to receive benefits were not even all the employees of the particular company. They were those who chose to join in the scheme ... "
In Oppenheim's case Lord Simonds expressed his full agreement with all that was said by Lord Greene MR and Morton LJ in Hobourn's case. The case is an authority against recognising as a charity a body that merely applies the subscriptions of its members to their own recreation. It does not, of course, prejudice the question whether in certain circumstances the benefit of members is not subsidiary and incidental to another and charitable purpose.
It would be unjust to the respondent association to represent it as having no purpose beyond the recreation and amusement of the individual subscribers constituting its membership. No one can read the rules without perceiving that the association was regarded as having an official importance and a public aspect. And in order to ascertain what the purposes of an association are, the court is not limited to consideration of its rules or its constituent documents. They are very important and it would be difficult for an association to say that something declared in its rules to be its object was not one of its purposes. But it is quite in order for the association to prove by parol evidence that it had other purposes than that set down in the rules. The Special Commissioners had evidence before them which entitled them to find that among its purposes were the encouragement of recruiting, the improvement of the efficiency of the force, and the public advantage. This is a purpose which the Special Commissioners were entitled to hold in law to be a public charitable purpose, but there remains the non-charitable purpose of providing recreation to the members. The question is whether this non-charitable purpose is incidental to the public charitable purpose. If not, it cannot be said that the association was a body established for charitable purposes only. This is not a matter of the motive of the members of the association or of the high police officials who took a part in furthering the association, though there is a natural probability that their motives agree with the purposes of the association. The question is what are the purposes for which the association is established, as shown by the rules, its activities and its relation to the police force and the public. And what the respondents must show in the circumstances of this case is that, so viewed objectively, the association is established for a public purpose, and that the private benefits to members are the unsought consequences of the pursuit of the public purpose, and can therefore be disregarded as incidental. That is a view which I cannot take. The private benefits to members are essential. The recreation of the members is an end in itself, and without its attainment the public purpose would never come into view. If the result of establishing the association had been that the members had, instead of being interested, found themselves involved in wearisome and lifeless activities, their efficiency would have suffered, the membership would have fallen off, and there would have been public detriment instead of public benefit. The private advantage of members is a purpose for which the association is established and it therefore cannot be said that this is an association established for a public charitable purpose only. In Inland Revenue Comrs v Yorkshire Agricultural Society Atkin LJ considered the problem of societies having more than one purpose. He says ( [1928] 1 KB 631 ):
"First of all it is said: No, this society was in fact formed for the purpose of giving benefit to its members; it is nothing but a club for the mutual advantage of the members of the club. If that were so I agree that the claim of the society would fail, both because it could not be said that the society was established for a charitable purpose, and because it certainly could not be said that it was established for a charitable purpose only. 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."
In principle, therefore, if an association has two purposes, one charitable and the other not, and if the two purposes are such and so related that the non-charitable purpose cannot be regarded as incidental to the other, the association is not a body established for charitable purposes only. I would allow the appeal.