Between: Lloyd
And: Federal Commissioner of Taxation

Judges: Dixon CJ
McTiernan J
Webb J
Fullagar J

Kitto J

Subject References:
Succession
Estate duty
Exemption
Public educational purposes
Navy League Sea Cadet Corps

Legislative References:
Estate Duty Assessment Act 1914 (No 22) - the Act

SYDNEY

Judgment by:
Kitto J

Edward Norman Belcher died possessed of a one-quarter share in certain real estate known as Belcher's Corner. He left a will, by cl. 25 of which he directed his trustees to hold the income from his share in Belcher's Corner in trust for "the Navy League Sea Cadets Geelong Branch or other youth welfare organization male or female as in their wisdom they deem fit". On an originating summons it was held in the Supreme Court of Victoria that the gift so made was not void for uncertainty or for any other reason; that so far as it related to the Navy League Sea Cadets, Geelong Branch, but not otherwise, it was a valid charitable bequest; that there was no intestacy as to the testator's share in Belcher's Corner; and that the trustees should apply the whole of it for the benefit of the Navy League Sea Cadets Geelong Branch: In re Belcher dec'd. ^[F18]

An appeal against the assessment of estate duty in respect of the testator's estate was brought to this Court, and in the course of it the question arose whether the gift contained in cl. 25 of the will was a devise or bequest for public educational purposes in Australia, within the meaning of s. 8 (5) of the Estate Duty Assessment Act 1914-1947. If it was, estate duty is not assessable or payable upon the property to which given, for s. 8 (5) provides that "Estate duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed ... for religious, scientific, or public educational purposes in Australia ...". The question now comes before the Full Court by way of case stated under s. 28 of the Act.

In construing the crucial words of s. 8 (5) no assistance is afforded by any other provision of the Act, except s. 8 (8) which provides that "In this 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". It is clear from this provision that where a devise or bequest is made to an educational institution it is not necessary to find that the institution is subject to some form of public control in order to conclude that its purposes satisfy the description "public educational purposes". Reasoning such as that which led the majority of the Court to hold, in The Little Company of Mary (S.A.) Incorporated v  The Commonwealth, ^[F19] that the institution there being considered was not a "public hospital" within the meaning of a National Security Regulation has no place under s. 8 (8). The test which the Act makes sufficient is that which Jordan C.J. stated in O'Connell v  Newcastle Municipal Council: ^[F20] "it is the purposes to which the (institution) is directed, not the manner in which it is controlled, which determines whether it should be regarded as a public (institution)". ^[F21] This was re-stated by Williams J. when he said with the concurrence of Rich J. in Maughan v  Federal Commissioner of Taxation: ^[F22] "an institution which aims at benefiting an appreciable ... section of the community is a public institution": ^[F23] see also Lemm v  Federal Commissioner of Taxation. ^[F24]

Such being the situation which the Act specifically creates with respect to educational institutions, the conclusion almost necessarily follows that the "public" element in the conception "public educational purposes" is present, even in the case of a devise or bequest which is not for the establishment or endowment of an institution, whenever the educational purposes aimed at are for the benefit of the public or a section of the public. The submission was made on behalf of the commissioner that the meaning of the compound expression "public educational purposes" is not to be found by asking first whether the purposes in view are educational and secondly whether they are public. It is true that the expression is a compound one, the words "public educational" going together as the adjectival form of public education; but "public education" is not an expression which in common understanding in Australia has any special signification different from the aggregate of the meanings of its components. Moreover, it is not unambiguous. In some contexts, no doubts, no doubt, it may refer to education of the kind usually offered by schools, colleges and universities when provided, controlled, supervised, approved or recognized in some manner or degree by a department of State or a body exercising governmental or statutory authority. But to give the expression any such shade of meaning in the context of s. 8 (5) in so far as it applies to a devise or bequest which is not to an institution, and yet to give full effect to s. 8 (8) where the gift is to an institution, would be to treat the one exemption provision as intended to effectuate two divergent policies according as the educational purposes of a devise or bequest are or are not to be served through the medium of an institution. Whatever view might have been taken if s. 8 (8) were not in the Act, that sub-section really necessitates separate consideration of the public element and the educational element in a purpose for which the exemption is claimed. The conclusion would seem to be that educational purposes for the benefit of the public or a section of the public are public educational purposes in the intended sense, and that the office of s. 8 (8) is to make it clear that where the devise or bequest is to an institution it is not necessary to find a public element in the control of the institution itself, so long as the institution is characterized by educational purposes which are for the benefit of the public or a section of the public. The words "public" and "benefit" point to two essentials: first, that the education must be provided for persons selected as members of the public or a section of the public and not selected for reasons of private concern or as members of some private class; and, secondly, that the provision of the education must not be a means of obtaining private profit for those who provide it. To use the language of the Privy Council in Dilworth v  Commissioner of Stamps ^[F25] the devise or bequest must be such that "the beneficial interest in it is not vested in any private person, but belongs inalienably to the public". ^[F26] Those who receive education provided under such a gift cannot "with propriety be described as the recipients of private education": ^[F27] and the effect of s. 8 (8) seems to be that they may with propriety be described as the recipients of public education, in the sense which is relevant under s. 8 (5).

On this construction of the legislation it is neither here nor there whether a body to which a devise or bequest is made is an "institution". Section 8 (8) does not make the exemption in s. 8 (5) more extensive where the gift is to an institution than where it is not; it only ensures that the exemption is equally extensive in the one case as in the other by making irrelevant the question of public or private control. Whether the application of the property to the purposes of the gift is entrusted to an individual, a group of individuals otherwise unassociated, an association of persons, or a corporation, it seems to me that the one question determines the right to the exemption: are the purposes for which the devise or bequest is made educational purposes for the benefit of the public or a section of the public? In the case of a gift to an individual or individuals it is necessary to find that by the terms of the gift he or they are effectually restricted in the application of the property given so that the gift satisfies the description in s. 8 (5). In the case of gift to a body, incorporated or unincorporated, it is necessary to find that the constitution of the body prescribes a similarly restricted scope of application. In neither case is the restriction as precise as it would be if the word "exclusively" or "only" were found in s. 8 (5) after "public educational purposes", for then no gift could attract the exemption if any part of the corpus or income of the property given could be applied, consistently with the gift, for any purpose, however minor in importance, which was collateral or independent as distinguished from being a purpose of or incidental to public education: cf. Inland Revenue Commissioners v  City of Glasgow Police Athletic Association; ^[F28] Metropolitan Borough of Battersea v  British Iron & Steel Research Association. ^[F29] But even without any such word having been "anxiously introduced", ^[F30] the exemption extends only to cases in which purposes of public education characterize the gift; and that cannot be the case unless the gift so deals with the property that it is devoted to such purposes, if not exclusively, at least chiefly: Commissioners of Inland Revenue v  Forrest; ^[F31] Public Trustee (N.S.W.) v  Federal Commissioner of Taxation, ^[F32] at p. 100; Royal Australiasian College of Surgeons v  Federal Commissioner of Taxation; ^[F33] Salvation Army (Victoria) Property Trust v  Fern Tree Gully Corporation, ^[F34] at p. 172; Royal College of Surgeons of England v  National Provincial Bank Ltd, ^[F35] at pp. 655-659, 661; Minahan v  Commissioner of Stamp Duties. ^[F36]

With these considerations in mind, I turn to the gift made by cl. 25 of the will. There is an unincorporated body known as "The Navy League Sea Cadet Corps, Victoria", and it has a Geelong branch which is conceded to be the body referred to. The Navy League Sea Cadet Corps, Victoria, was established and is conducted under the auspices of another unincorporated organization, known as "The Navy League Victorian Branch". The latter is in turn associated with a wider organization, known as "The Navy League" which has its head office in London. We have no information concerning the Navy League, but the constitution of the Navy League Victorian Branch is before us. The objects and purposes of that body (which may be referred to as the league) include maintaining and developing the Sea Cadet Corps in Victoria. The league is declared by its constitution to be free from party politics and unconnected with any political organization. The general direction of its policy and administration are vested in an executive committee, which is given power to make such by-laws and regulations as it thinks fit for carrying out the league's objects.

In some manner which does not appear, but possibly by an exercise of the powers of this executive committee, a constitution has been provided for the Navy League Sea Cadet Corps, Victoria, which will be referred to as the corps. This document is entitled "Organization and Regulations of the Navy League Victorian Branch Concerning the Navy League Sea Cadet Corps of Victoria". It commences by naming the corps and providing that it shall be strictly non-political and non-sectarian and that all positions shall be honorary. The aims of the corps are stated to be

"To keep alive the sea spirit of our race, also to assist cadets to become good citizens of Australia and the Empire by voluntarily accepting discipline and by doing their duty in the spirit of the motto, 'For God, Queen, The Empire and Australia'."

This general statement is followed immediately by a list headed "Training". The list is:

1.

character building;

2.

swimming, life saving (first aid);

3.

squad drill, marching;

4.

mariners' compass construction and uses;

5.

helm, construction and uses;

6.

anchors, construction and uses;

7.

boat management, oars and sail;

8.

knots, bends, hitches and splices;

9.

rule of the road;

10.

lead line and markings;

11.

semaphore signalling;

12.

healthy recreation.

An executive organization is provided for, consisting of a State Commandant, a State Commander and Assistant State Commandant, a District Officer and company officers. All appointments to these ranks are to be made by the executive committee of the league. That committee is to control the corps and its decisions are binding on all officers and ratings. Branch organization is to consist of an executive committee, a welfare executive committee, a welfare committee and associates, but any of these may be omitted, and all or any of them which are in existence may be terminated, at the discretion of the executive committee of the league. The members of the corps are organized in ranks which are given naval titles. It is inferred rather than provided that the unit of local organization is a branch, having attached to it a company under the command of a company officer. The effective strength of a company is not less than twenty or more than seventy-five petty officers and cadets, though double companies may be formed which are to be separate for internal organization and drill but under the supreme command of a senior company officer. It is declared to be desirable that company officers, who are not to be less than twenty-one years of age unless holding acting appointments, shall have had some service at sea, and if possible with the naval forces. A company officer is responsible for the training of cadets, the cleanliness of the depot, the safe custody of all equipment and the housing and mooring of boats used by his company. He is to cause a roll to be kept, showing the strength of the company, and in respect of each boy his age, his date of enlistment and date of departure. In addition to other duties, he is to endeavour to secure the interest of religious, civic and educational bodies, and of parents' and citizens' associations and other recognized bodies interested in the welfare of the boys, and is to "encourage the boys under his charge to acquire a wider understanding of the value of the British Empire and of right citizenship, i.e. that discipline, courtesy and service to one's fellows produce the most worthy citizens". Boys are to be enlisted between the ages of ten and seventeen. The wearing of uniforms is provided for. Cadets are to learn to swim as soon as practicable. There are regulations concerning the holding of company camps. It is provided that classes shall be formed by the company officer or his deputy as circumstances and the exigencies of the occasion demand, variety, it is stated, being necessary to hold the interest of the boys. The company officer is responsible for the training of cadets and for the discipline of all those placed under him, and he and all his senior officers are to hold a meeting at least six times a year for the purpose of discussing matters affecting training and the welfare of cadets and of the corps generally.

The constitution prescribes, as the method of forming a company, that a public meeting shall be convened under the official patronage of the executive committee of the league, at which all interested shall be asked to join as associate members of the branch, sign a declaration recognizing the authority of the executive committee of the league in all matters pertaining to the corps, and pay an annual subscription of one shilling. The associate members have the right to vote for the election of officers for a local committee, which has the duties of creating an atmosphere favourable to the establishment and growth of the corps, assisting the appointed officers of the corps to carry out their duties, and using its best endeavour to secure progressive and harmonious working with religious, civic and educational authorities, parents' and citizens' associations and all recognized organizations devoted to the welfare of boy life.

As required by this constitution, the Geelong branch of the corps was formed at a public meeting convened under the official patronage of the executive committee of the corps. It was formed in April 1932, and a local committee which was then elected met in the following month. In each subsequent year a general meeting of the associate members has been held and has elected a committee. The number of boys who have been sea cadets belonging to the branch, and the number of instructors attached to it, have varied from time to time. In 1940 there were fifty cadets and four instructors; in 1941, eighty-one cadets and four instructors; in 1946, fifty-two cadets and five instructors; in 1951, thirty-four cadets and four instructors; and in 1954, ninety cadets and seven instructors. There is a waiting list for cadets.

Ever since its formation, the branch has been engaged continuously in carrying out the aims and training described in the constitution of the corps. Its activities include mid-week evening parades and Saturday afternoon parades, at which there are lectures on hygiene, conduct, citizenship and subjects of general education and instruction is given in knots and splices, bends and hitches, the rule of the road as applying to navigation, and the following specific subjects: sea history, general seamanship, compass and steering, squad drill, rigging, service and leadership, first aid, life saving and physical and recreational training. In addition there is some study of British naval traditions, recreation by indoor games and sports, sailing and rowing.

An organization such as this is plainly charitable in the legal sense of the term, as the Supreme Court of Victoria has held, and property given to it is therefore held upon trust for charitable purposes and cannot lawfully be diverted therefrom: In re Manchester Royal Infirmary; Manchester Royal Infirmary v  Attorney-General, ^[F37] at p. 428. The gift made by cl. 25 of the testator's will is accordingly a gift for those purposes. Are those purposes wholly or predominantly purposes of public education in the sense which has already been discussed? They undoubtedly are purposes for the benefit of a section of the public, for they have to do with the development, along the lines which the constitution of the corps describes, of boys drawn from the public generally and not selected by reference to any restrictive qualification. No element of private profit-making is involved, for every position in the organization is honorary and none of the money or other property of the corps could legitimately be appropriated to the private use of any individual. As to whether the purposes are educational in character, it is in point to recall that in the Supreme Court of Victoria Fullagar J. said of the trust created by cl. 25 that it is "primarily and essentially" a trust for the advancement of education. ^[F38] It seems to me to be aptly so described. The account which has been given of the subjects in which training is contemplated by the constitution of the corps, and of the activities in which the cadets engage, is sufficient to show that instruction in certain practical and theoretical subjects and the development of the mind in particular directions are the pre-occupation and chief concern of the corps in general and of the Geelong branch in particular. In Chesterman v  Federal Commissioner of Taxation, ^[F39] Isaacs J. spoke of the general understanding of the words "public education" in the context of s. 8 (5) as having the sense of "imparting knowledge or assisting and guiding the development of body or mind"; ^[F40] and Starke J. said that "the essential idea of education is training or teaching". ^[F41] The conception is unquestionably much wider than mere book-learning, and wider than any category of subjects which might be thought to comprise general education as distinguished from education in specialized subjects concerned primarily with particular occupations. The case of In re Corbyn; Midland Bank Executor & Trustee Co  v  Attorney-General ^[F42] to which Fullagar J. referred in his judgment, contains an expression of Morton J.'s inclination to consider that a gift to enable boys from a training ship to be trained elsewhere with a view to their taking commissions in the Royal Navy or becoming officers in the mercantile marine is in the nature of a gift "for education in a particular branch of study" and for that reason charitable. So, too, tuition for a commercial career has been recognized as educational in the charity sense of the word: In re Koettgen's Will Trusts. ^[F43] The training which is the raison d'etre of the corps is such as would teach a lad whose ambitions lie towards a sea-going career some of the rudiments of his intended craft and afford him some intellectual equipment and some stimulus towards further preparation. It is evident, of course, that the majority of cadets will not be of this kind and will join and continue in the corps for the sake of the interest, and the fun, which they get out of its activities. That fact, however, seems to me to be irrelevant, for it cannot affect the true characterization of the purposes to which property is devoted when given to a branch of the corps. Those purposes, seriously pursued as they are by a responsible body acting in an organized and disciplined manner, appear to me to be essentially and predominantly  educational. I have not forgotten that the constitution, almost at the outset, describes as an aim of the Sea Cadet Movement the objective of keeping alive the sea spirit of the race; but I should agree with Fullagar J. that this is "rather a justification put forward for the educational aims and objects of the Sea Cadets than a statement of aims and objects as such". ^[F44] And the statement of the additional objective to assist cadets to become good citizens by voluntarily accepting discipline and by doing their duty in the spirit of the motto which is quoted, is of the same kind. Coupled with the injunction to company officers to encourage a wider understanding of the value of the British Empire and of right citizenship, it simply sets ideals before those who take part in the training and instruction which form the immediate purposes of the corps.  

In my opinion the question in the case stated should be answered: Yes.