Thompson v Federal Commissioner of Taxation
102 CLR 3151959 - 1204C - HCA
(Decision by: Dixon CJ)
Between: Thompson
And: Federal Commissioner of Taxation
Judges:
Dixon CJMcTiernan J
Fullagar J
Kitto J
Menzies J
Subject References:
Taxation and revenue
Estate duty
Exemption
Estate bequeathed for 'public educational purposes'
Masonic schools
Whether 'public'
Legislative References:
Estate Duty Assessment Act 1914 (Cth) (No 22) - s 8
Judgment date: 4 December 1959
SYDNEY
Decision by:
Dixon CJ
This case stated raises a question whether a claim under s. 8 (5) of the Estate Duty Assessment Act 1914-1947 to exemption from duty is well founded. The claim is for the exemption of a share of residue bequeathed to certain masonic schools by the will of a testatrix who died on 3rd August 1948. By the fifth clause of her will she gave devised and bequeathed the residue of her real and personal property to her trustees upon trust, after discharging (to state it briefly) all liabilities of her estate, to divide the net residue equally among certain named institutions, fourteen of them in all. According to the valuation of the estate for duty that would mean that the share of each institution would amount to about PD5,000. Among the institutions named in the list contained in the residuary devise and bequest is The William Thompson Masonic Schools, Baulkham Hills.
Sub-section (5) of s. 8 of the Act provides that estate duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement for religious, scientific, or public educational purposes in Australia or to a public hospital or public benevolent institution in Australia or as or to a fund established and maintained for the purpose of providing money for use for such institutions or for the relief of persons in necessitous circumstances in Australia. Sub-section (8) of s. 8 purports to amplify the application of the expression "public educational purposes" in the Act. At one time the expression occurred in two provisions of the Act, in s. 35 as well as in s. 8 (5), but now it has lost its place in s. 35 and seems only to occur in s. 8 (5). Sub-section (8) provides that in the Act "public educational purposes" includes the establishment or endowment of an educational institution for the benefit of the public or a section of the public. The executors of the will claim that the share of net residue payable to The William Thompson Masonic Schools forms part of the estate devised or bequeathed for "public educational purposes" within the meaning of sub-s. (5) with or without the help of sub-s. (8) of s. 8. The question before us is whether this claim is correct.
It appears that in 1922 the United Grand Lodge of New South Wales of Ancient Free and Accepted Masons founded the William Thompson Masonic Schools and Hostels, which are commonly referred to as the William Thompson Masonic Schools, Baulkham Hills. They are administered under the control of a council appointed by the United Grand Lodge. Separate accounts are kept in respect of such schools and hostels. The rules of the Grand Lodge in operation at the time of the death of the testatrix provided that the William Thompson Masonic Schools and Hostels were for the free education and maintenance of the children of deceased brethren who at the time of death were members of a lodge under the jurisdiction of the Grand Lodge, the children of brethren who whilst such members were prevented by permanent incapacity from supporting their children, and children, admitted by the council in special circumstances, of deceased brethren who had been, but at the time of death were not, members of a lodge under the jurisdiction of the Grand Lodge. The children admitted must, in the case of boys, be between the age of five and twelve years and in the case of girls five and fourteen years. Boys after doing their full primary course and girls after attaining the intermediate certificate standard attended the local public school or the nearest high school or technical school as the case might be, to continue and complete their education. But while doing so they were maintained at the William Thompson Schools and Hostels, which provided shelter, food, clothing, medical and dental attention for the children and supplied them with text books, note books and the like, as well as sporting accessories and pocket money.
In 1948 when the testatrix died there were about one hundred and fifty children at the William Thompson Masonic Schools and Hostels. Much turns in this case, needless to say, upon the fact that the schools and hostels are restricted to the children of freemasons and for that reason the rules governing admission to the craft in New South Wales are annexed to the case stated. For the purpose of the question raised it is enough to say that a candidate for membership must be nominated by two master masons, and his qualifications and moral and general character are inquired into by a committee and his admission is determined by a ballot of the lodge. To be qualified he must be in reputable circumstances and he must have resided in New South Wales for twelve months and be of full age. The rule as to residence is not absolute: exceptions may be made by dispensation of the Grand Master.
It will be seen from the foregoing account of the case that it may not be entirely clear that the hostels are used for educational purposes in so far as they house senior children who go outside to public schools, high schools or technical colleges. But no point was made of this on the part of the Commissioner.
The fact that sub-s. (8) refers only to the establishment or endowment of an educational institution makes it a question whether the provision applies to the gift, in this case, to the "schools," a gift consisting in effect of a pecuniary legacy which might be taken to general revenue or applied in any manner the council of the schools might think fit. So far as the executors seek to rely upon sub-s. (8) as directly applicable it seems necessary for them to make out that the bequest amounts to an "endowment". But for the Commissioner it was not made a ground for resisting the claim to exemption from duty. Perhaps it does not matter. For it is difficult to suppose that the expression in sub-s. (5) "devised or bequeathed ... for public educational purposes" would not cover all that is included in sub-s. (8) in any case. One may suppose too that the expression "section of the public" in sub-s. (8) is used in the same sense as the words are used, as they not infrequently are, in the law of charitable trusts and that the words "public educational purposes" in sub-s. (5) would receive an interpretation as wide as they properly possess in that head of equity. But it seems necessary to say that it is very difficult to regard the trust in the present case as amounting to an "endowment". "Endowment" no doubt is not an inflexible word, but prima facie it connotes some provision of an enduring character, the income or other benefit of which would contribute to the support of the institution or object endowed. In Edwards v Hall [F1] Lord Cranworth L.C. was distinguishing between acquiring land, or land and buildings, for a charity and endowing it. In doing so he said: "By the endowment of a school an hospital or a chapel, is commonly understood, not the building or purchasing a site for a school an hospital or a chapel, but the providing of a fixed revenue for the support of those institutions." [F2] This accords with what Higgins J. said in Fielding v Houison, [F3] namely that the word "endow" connotes permanency of provision. In sub-s. (8) the context supports the view that endowment refers to a provision possessing some degree of permanence or enduring for some future time; for in the sub-section "endowment" is the alternative to the "establishment" of an educational institution.
The claim to exemption from estate duty turns therefore upon the words in sub-s. (5) "so much of the estate as is devised or bequeathed for public educational purposes". In the classification of charitable trusts which the law will enforce the category of educational purposes has been a little strained by the inclusion of unexpected pursuits as subjects of instruction or encouragement. Cf. In re Dupree's Deed of Trusts; Daley v Lloyds Bank [F4] and cf. per Viscount Simonds in Inland Revenue Commissioners v Baddeley. [F5] But putting aside any marginal questions about the field of education (cf. Lloyd v Commissioner of Taxation [F6] and particularly per Fullagar J.) [F7] there is no reason to doubt that a trust which would be upheld as charitable solely on the ground that it was for the advancement of education would obtain the exemption given by s. 8 (5) to devises and bequests etc. for public educational purposes, that is of course provided that the purposes were in Australia. The tendency of the trust must be to benefit the public, a condition that is satisfied if it tends to the benefit of the public at large, or a class or section of the public. The trusts may be limited in their operations by reference to locality, to conditions of people, to their disabilities, defects or misfortunes and by reference to many other attributes of men and things, yet the trusts may retain their "public" character. Not a little difficulty has been felt in defining the conception of "public", "public charity" or "public benefit" which this involves but the contrast is, of course, to private advantage. It is not the occasion to enter upon the discussion of the difficulty; it is enough to refer to some of the leading modern cases dealing with it-In re Compton; Powell v Compton; [F8] Williams' Trustees v Inland Revenue Commissioners, [F9] per Lord Simonds; [F10] In re Hobourn Aero Components Ltd's Air Raid Distress Fund; Ryan v Forrest; [F11] Oppenheim v Tobacco Securities Trust Co Ltd; [F12] per Lord Simonds; [F13] In re Scarisbrick; Cockshott v Public Trustee; [F14] In re Koettgen's Will Trusts; [F15] In re Cox dec'd.; Baker v National Trust Co Ltd; [F16] Inland Revenue Commissioners v Baddeley. [F17] See further Some Recent Developments in the Law of Charity by Mr. Geoffrey Cross Q.C. (1956) 72 L.Q.R. 187. In In re Scarisbrick; Cockshott v Public Trustee [F18] Jenkins L.J. set out five general propositions upon this subject, in relation however to a case concerned with the relief of poverty. His Lordship in doing so said: "An aggregate of individuals ascertained by reference to some personal tie (e.g., of blood or contract, such as the relations of a particular individual, the members of a particular family, the employees of a particular firm, the members of a particular association, does not amount to the public or a section thereof for the purposes of the general rule". [F19] (The italics are mine.)
The words I have italicized apply to the facts here. Of course the foregoing considerations operate directly only upon the law of charity, not upon the application of s. 8 (5). But they do provide something more than an analogy. For it is obvious that the statutory exemption is in pari materia.
For myself I would reject the view that a trust in favour of the William Thompson Masonic Schools and Hostels is to be considered a charitable trust because it is for the advancement of education. I would reject it because such a trust would lack the "public" element, the element of public benefit or advantage that is necessary. That of course means that the share of residue goes to the authorities of the William Thompson Masonic Schools and Hostels as a gift depending upon the ordinary law governing testamentary disposition. See Re Turkington. [F20] The same reasons as govern this view lead me to the further conclusion that the gift does not amount to a devise or bequest for public educational purposes so as to be exempt from estate duty under s. 8 (5).
Large as is the membership of the masonic order in New South Wales it forms but a society of persons bound together as a voluntary association into which members are admitted by the election of the existing members as provided by the rules adopted contractually for the government of the society. The size and importance of the order cannot give it any different character.
It is true that the benefit of the William Thompson Masonic Schools and Hostels is enjoyed by the children of deceased or incapacitated brethren, not the brethren themselves. But as was remarked by Lord Normand in refusing to regard as material a similar distinction in Oppenheim's Case [F21] there is no public relationship between parent and child. On the same point Lord Simonds said in that case: "I can make no distinction between children of employees and the employees themselves. In both cases the common quality is found in employment by particular employers." [F22]
The fact is that it is part of the advantages which a member of the masonic order obtains in virtue of his membership that his child should become eligible thus to be provided with part of his education and upkeep.
In In re Income Tax Acts (No. 1) [F23] the Full Court of Victoria decided that a benevolent asylum to which none other than freemasons and their wives or the widows of freemasons were eligible for admission was not a "public benevolent asylum" within a Victorian enactment giving a deduction from income tax in respect of gifts to a public benevolent asylum. This decision appears to be directly in point and is in my opinion correct. I refer in particular to the following passage in the judgment of Lowe J.: "It may not be easy or even possible to enumerate in advance the differentiae of a 'section of the public' within this rule, but I illustrate along what lines a conclusion may be arrived at. Having regard to the composition of the public, certain large groups may readily be recognized, the members of which have a common calling or adhere to a particular faith or reside in a particular geographical area. There is no bar which admits some members of the public to those groups and rejects others. Any member of the public may, if he will, follow a particular calling, adhere to a particular faith, or reside within a particular area. Of the members of such a group it may be said in a real sense that they are primarily members of the public, and such a group may well constitute a section of the public. They stand on one side of the line. Each group, it is true, may consist of many individuals, but number alone is not the criterion by which to determine whether the group constitutes a section of the public. A club, a literary society, a trade union may all have numerous members, but I think that none of these could properly be called a section of the public. They stand on the other side of the line. The distinguishing feature of each of these latter bodies is that it is an association which takes power to itself to admit or exclude members of the public according to some arbitrary test which it sets up in its rules or otherwise. Each of them does oppose a bar to admission within it. It is not one of the groups into which the community as a matter of necessary organization or by convention is divided, but it is in a sense an artificial entity which exists for the benefit of its members as members thereof and not as members of the public." [F24]
In my opinion the first question in the case stated should be answered No.
As I understand, it is agreed that the second question must be answered No.
In that view the third does not arise.