Commissioners for Special Purposes of Income Tax v Pemsel
[1891] A.C. 531(Judgment by: Lord Watson)
Between:Commissioners for Special Purposes of Income Tax - Appellants
And: John Frederick Pemsel - Respondent
Judges:
Lord Halsbury LC
Lord WatsonLord Bramwell
Lord Herschell
Lord MacNaughten
Lord Morris
Subject References:
REVENUE
INCOME TAX
Allowances
'Charitable Purposes'
Certificate
Procedure
Mandamus to Commissioners
5 & 6 Vict. c. 35, Sched. A, s. 61, No. VI., s. 62
Judgment date: 20 July 1891
Judgment by:
Lord Watson
My Lords, by indenture executed in 1813 and 1815, Mrs. Elizabeth Mary Bates settled real estate in England upon trust for purposes connected with the church of the United Brethren, commonly known as Moravians. The larger share of the trust income is appropriated to the support of the missionary establishments of the church among heathen nations. The other objects of the trust are the maintenance and education of children of ministers and missionaries, special regard being had to the children of those ministers who are least able to bear the expense, and the choir houses of the church, which provide homes for female teachers who have become incapacitated for work, for widows of ministers, missionaries, and poor members, and also for single men engaged in attending to the young and assisting in their education.
Down to the year 1886, income tax upon the annual value of the trust estate was paid in the first instance by their tenants, and was then repaid to the trustees, under the enactments of Sched. A. Rule VI., of 5 & 6 Vict. c. 35, which provides that, in charging duty, allowances shall be granted in respect of "the rents and profits of lands, tenements, hereditaments, or heritages, belonging to any hospital, public school, or almshouse, or vested in trustees for charitable purposes, so far as the same are applied to charitable purposes." An application made to the appellants for allowance of the tax for the year ending 5th of April, 1886, which had been paid by the tenants, was rejected upon the ground that the purposes to which the trust income is appropriated and applied do not bring it within the scope of these exemptions. In consequence of their refusal, the respondent, who is treasurer of the Church of the United Brethren, upon the 12th of April, 1888, obtained an order nisi for a writ of mandamus to compel the appellants to grant the allowance, and with that view, to give a certificate, with an order for repayment in terms of the statute. It does not seem to admit of serious dispute that, if the purposes of Mrs. Bates' Trust are "charitable purposes" within the meaning of the Act of 1842, the appellants have declined to perform their statutory duty, and a mandamus must issue.
Had 5 & 6 Vict. c. 35 been an English statute the present controversy would, in all probability, never have arisen. The expression "charitable purposes" is commonly, if not invariably, used, both in English law and English legislation, in a sense wide enough to include the missionary enterprises and the choir houses of the Unitas Fratrum, as well as the maintenance and education of the children of its ministers and missionaries. But the Act applies to Scotland as well as to England; and the argument of the appellants in the Courts below, and at your Lordships' Bar, has been founded on the assumption that in Scotch law the expression cannot, according to any legitimate construction, include the objects of Mrs. Bates' Trust settlements. That proposition is not without some authority to support it; and hence the difficulty which the Courts below have experienced in dealing with the present case.
The statutory words of exemption upon which the result of this appeal depends were, for the first time, made the subject of judicial interpretation in Baird's Trustees v. Lord Advocate which was decided by the First Division of the Court of Session in 1888. The truster in that case had directed that the funds settled by him, amounting to half a million sterling, should be expended for the support of objects and purposes in connection with the Established church of Scotland, all of a religious character, and for the aid of institutions having the promotion of such purposes in view; his desire being to mitigate spiritual destitution among the poor and working population of Scotland, through efforts for securing the godly upbringing of the young, the establishing of parochial pastoral work, and the stimulating of ministers and agencies of the Church to sustained devotedness in the work of carrying the Gospel to the homes and hearts of all. The Inner House, affirming the judgment of the Lord Ordinary (the late Lord Fraser), held that the income of heritable estate vested in the trustees for these purposes was not within the statutory exemption.
The learned judges of the Court of Session refused to attach to "charitable purposes" the comprehensive meaning which the words admittedly bear in English law, being of opinion that they have no technical significance in the law language of Scotland. Accordingly, they held that in the Act of 1842, which is an Imperial statute, the words must be read in their ordinary and popular acceptation. The meaning of the words, when interpreted in that sense, was thus defined by the Lord President (Inglis): "Charity is relief of poverty, and a charitable act or a charitable purpose consists in relieving poverty, and whatever goes beyond that is not within the meaning of the word 'charity' as it occurs in this statute." Lord Shand, adopting a still narrower definition, said:
"I think it (i.e., the statutory exemption) relates to funds dedicated to the relief of physical necessity or want; to funds given as alms, or as a provision for the relief of persons from physical privations or suffering arising from poverty, and that it goes no farther." Lord Adam, in agreeing with his brethren, observed: "It appears to me to be quite impossible to extend the term 'charitable purposes,' used in this Act, so as to cover religious purposes."
In this case Lord Coleridge C.J. adopted the same construction of "charitable purposes" which had commended itself to the Court of Session. Grantham J. dissented, upon the ground apparently that the Government by which the Act was introduced, and its successors in office, had, for more than forty years, invariably construed the words in the sense of English law, and allowed the exemptions which are now in dispute. In these circumstances the opinion of the senior judge prevailed, and the order nisi of the 12th of April 1888 was discharged by the Divisional Court; but in the Court of Appeal that judgment was unanimously reversed, and it was decreed that a peremptory mandamus should issue to the effect specified in the respondent's original application.
Lord Esher M.R. and Lopes L.J. recognised the authority of Baird's Trustees v. Lord Advocate as settling that, in Scotland, the term "charitable purposes" has not the meaning which is attributed to it by English Courts. They therefore discarded that meaning; but in determining what, in a popular sense, constitutes a "charitable purpose," they adopted a much more liberal definition than the learned judges of the Court of Session. They held that, in its ordinary acceptation, "charity" comprehends all benefits, whether religious, intellectual, or physical, bestowed upon persons who, by reason of their poverty, are unable to obtain such benefits for themselves without assistance. Fry L.J. did not accept the authority of the decision in the case of Baird's Trustees, and came to the conclusion that the words "trusts for charitable purposes" have, for all practical purposes, the same legal significance in Scotland as in England or Ireland.
If I could accept, without reserve, the opinions expressed in Baird's Trustees with respect to the meaning of the term "charitable," I should still entertain doubts as to the rule applied to its decision, which has been followed in this case by the majority of the English judges. The only principle derivable from Lord Saltoun v. Lord Advocate, which can aid in the decision of this case, appears to me to be this - that the Act of 1842 must, if possible, be so interpreted as to make the incidence of its taxation the same in both countries. In that case the language which the Court had to construe, which was not technical, had, when read in the light of the context, the effect of producing the equality which the legislature presumably contemplated.
But there existed outside the Act a technical rule of Scotch feudal conveyancing, which would, if permitted to qualify the language of the Act, have disturbed that equality; and this House held, reversing the judgment of the Court of Session, that an extrinsic technicality productive of that result ought to be disregarded. It does not, in my opinion, necessarily follow from that decision that the popular meaning of a word employed in a taxing statute must be adopted, in cases where the word has a definite legal meaning in England and no definite popular meaning either in England or Scotland. I have been unable to find that the word "charitable," taken by itself, has any well-defined popular meaning in Scotland or elsewhere. It is a relative term, and takes its colour from the specific objects to which it is applied. Whilst it is applicable to acts and objects of a purely eleemosynary character, it may with equal propriety be used to designate acts and purposes which do not exclusively concern the poor, but are dictated by a spirit of charity or benevolence. In the latter sense the meaning of the term is practically, although not absolutely, co-extensive with that which has been attributed to it by the Courts of Chancery.
Assuming, as the Court of Session has decided, that the term has no technical meaning in Scotch law, ought "charitable," as it occurs in the Act of 1842, to receive that wide yet legitimate popular interpretation which practically harmonises with its import in English law, or must its narrowest conventional use be accepted as matter of fixed legal construction? I have not found it necessary for the purposes of this case to determine these questions, because I am satisfied that, in legislative language, at least, the expression "charitable" has hitherto borne a comprehensive meaning according to Scotch as well as according to English law. On this point I have the less hesitation in differing from the learned judges of the Court of Session, because I do not find that the considerations which have led me to that conclusion were entertained by them, or were even submitted to them in argument.
So far as I am able to discover, "godly" and "pious" as applied to trusts or uses, had, in early times much the same significance in Scotland as in England. Their meaning was not limited to objects of a religious or eleemosynary character, but embraced all objects which a well-disposed person might promote from motives of philanthropy. For instance, the Scotch Act, 1592, c. 162, applies the epithet "godly" to a gift by Queen Mary of lands and annual rents for sustentation of the ministry within the burgh of Edinburgh and the entertainment of its hospitals. The extensive signification of "pious" may be illustrated by the terms of the Act 1685 c. 18, which deprived patrons of their right to stipend accruing during the vacancy of a cure, and enacted that it should in future be employed by them "on pious uses within the respective parishes." Of these pious uses three are "more particularly" specified, these being "the building and repairing of bridges, repairing of churches or entertainment of the poor." In the case of Lord, Saltoun v. Lady Pitsligo the Court of Session held that the repair of a public harbour was a pious use within the meaning of the Act, although they disallowed the patron's outlay on the ground that the harbour was beyond the limits of the vacant parish.
The expression "charitable," which is used in the Act of Elizabeth as a synonym of "godly," is employed in the same sense with "pious" in the Scottish Statute 1633 c. 6 which is entitled an Act against "the inverting of pious donations." It proceeds on the preamble that certain gifts in lands, heritages, and sums of money, "in favour of colleges, schools, hospitals, and other pious uses," had been inverted to other purposes, "to the evil example of others and the hindrance of such and the like charitable works against all reason and conscience." It accordingly enacts that such inversions shall cease; and that action shall be competent to the "said kirks, colleges, and others," and to "the bishops and ordinaries within the dioceses where the said kirkes, schools, and others lye," against the heirs, executors, or others entrusted with the administration of the gift; and also provides that on application to the Court letters of horning shall issue without citation of parties.
According to the plain language of the Act of 1633, all donations for pious purposes, including gifts made to the Church for religious purposes, were regarded as charitable donations. I see no reason to doubt that the word "charitable" was so used in its ordinary and legal sense, or that Mr. Baird's trust would have been considered a trust for charitable purposes by the legislators who passed the Act. If the Income Tax statute of 1842 had been enacted by the Scottish Parliament in 1633, I do not think the Lords of Session would at that time have adopted the narrow construction put upon the word "charitable" by their successors in the year 1888.
The use of the word in the early law of Scotland, or in statutes of the Scottish Parliament, would, no doubt, be of little relevancy to the present question, if it could be shewn to have acquired a more restricted meaning in the modern law language of that country. The reported decisions of the Court of Session throw little, if any, light upon the question, for a reason which is sufficiently obvious. Ever since its institution the Court has exercised plenary jurisdiction over the administration of all trusts, whether public or private, irrespective of the particular purposes to which the estate or income of the trust may be appropriated, and there has consequently been no room for those numerous questions, as to a trust being charitable or not, which have arisen in England under the statute of Elizabeth. Whilst the Scotch cases cannot be said to afford any precise definition of what constitutes a charitable trust purpose, some of them do appear to point to a more liberal interpretation than that which was adopted by the Court in the case of the Baird trust. In Ferguson v. Marjoribanks, which was decided in 1853, a testator had bequeathed a sum of money to trustees, with directions to apply the annual interest "in the erection of a free school in such part of the parish of Bathgate as my said trustees or the major part of them shall think fit and proper, for the education of the youth of the said parish." The benefits of the foundation were not confined to the poor, nor could they reasonably be said to be in the main intended for the poor. Yet the Lord President McNeill (afterwards Lord Colonsay) describes the bequest as one "in perpetuity for a charitable purpose;" and, in the note appended to his judgment as Lord Ordinary, Lord Rutherfurd, the most learned Scotch lawyer of the period, speaks of it as "the charity."
In this House, noble and learned Lords, in disposing of appeals from Scotland, have expressed themselves in terms which point in the same direction. Lord Gifford, delivering judgment in Hill v. Burns, uses the expression "charitable" as equivalent to "charitable and benevolent." In University of Aberdeen v. Irvine, a trust for college bursars, who did not necessarily belong to the class of indigent persons, was dealt with as a charity, and the rules prevalent in England in cases of charitable trusts were applied to its decisions. On the other hand, in Magistrates of Dundee v. Presbytery of Dundee, where the trust under consideration was chiefly for the sustentation of ministers of the Established Church, the words "charity" or "charitable" do not occur in the judgments delivered by the House. I do not lay great stress on these authorities, or upon the decisions of this House which were cited at the bar in Clephane v. Lord Provost and Magistrates of Edinburgh, and similar cases, because in the latter class the main objects of the trust consisted in ministering to the wants, physical or educational, of the really poor, and in neither class was the meaning of the word "charitable," in Scotch law, an issue distinctly raised for the determination of the House. At the same time it does appear to me to be a relevant observation that Scotch trusts, which are ejusdem generis with trusts falling within the statute of Elizabeth, are charitable in this sense, that they are all governed by the same rules which are applicable to charitable trusts in England.
If the cases to be found in the books afforded the only material for determining the meaning of "charitable" in a statute applicable to Scotland, they might be insufficient to warrant the conclusion which I have come to. But these authorities appear to me to go this length. In the first place, they establish positively that charity is not limited to relief of the physical wants of the poor, but includes their intellectual and moral culture; and, in the second place, they suggest very strongly that purposes which concern others than the poor may nevertheless be charitable purposes in the sense of Scotch law. They do not contain any definition of the word "charitable," yet they do not, by any fair inference, exclude the legal meaning attached to it in the old Scotch statutes. The matter does not rest there, because, in British statutes applicable to Scotland in which the words "charity" and "charitable" occur, they are employed in the wider sense in which they were used by the Scottish Parliament.
In the year 1832 a statute was passed, intituled, "An Act for the better securing the charitable donations and bequests of His Majesty's subjects in Great Britain professing the Roman Catholic religion." The first section, which recites that doubt had been entertained whether it was lawful for Roman Catholics in Scotland to acquire and hold in real estate the property necessary "for religious worship, education and charitable purposes," enacts that His Majesty's subjects professing the Roman Catholic religion in respect to their schools, places for religious worship, education and charitable purposes, in Great Britain, and the property held therewith, and the persons employed in or about the same, shall in respect thereof be subject to the same laws as the Protestant Dissenters are subject to in England in respect to their schools and places for religious worship, education and charitable purposes, and not further or otherwise." Comment upon that language is almost superfluous. "Charitable" is used in the same comprehensive sense with reference to England and Scotland alike. According to the title of the Act, donations and bequests for the promotion of any of the objects specified in the first clause, including education and the maintenance of public worship, are "charitable," and the section I have cited plainly shews that Roman Catholics in Scotland are, so far as concerns property held for "charitable purposes," entitled to have as wide a construction put upon these words as Protestant Dissenters in England. The word is again used in the same way, and with the same meaning, in the enactments of the Imperial Statute, 9 & 10 Vict. c. 59, which was passed in order to place Her Majesty's subjects in the United Kingdom, professing the Jewish religion, on the same footing as these English Dissenters with respect to their "schools, places for religious worship, education, and charitable purposes."
The only other Act I shall refer to is a taxing statute, viz.: the Succession Duty Act of 1853 (16 & 17 Vict. c. 51). Section 16 imposes a duty of 10 per cent. upon real estate which shall become subject to a trust "for any charitable or public purposes, under any past or future disposition, which, if made in favour of an individual, would confer on him a succession." The clause then provides means for enabling the trustees of estates settled to these purposes to procure funds for payment of the tax, in these terms: "And it shall be lawful for the trustee of any such property to raise the amount of any duty due in respect thereof, with all reasonable expenses, upon the security of the charity property, at interest, with power for him to give effectual discharges for the money so raised." This is an Imperial Act, and it specifically describes heritable estate in Scotland, held in trust for any public purpose unconnected with the poor, as "charity property."
The authorities to which I have referred appear to me to justify the conclusion that, whilst in litigated cases there has been no occasion to determine, and, therefore, no determination of the precise import of the word "charitable" in Scotch law; it has been employed, in the legislative language of the Scottish Parliament, and of the British Parliament when legislating for Scotland, in substantially the same sense in which it has been interpreted by English courts. It must, therefore, in my opinion, receive that interpretation in the Income Tax Act of 1842.
Whilst I have found these reasons to be sufficient for the disposal of this appeal, I desire to express my entire concurrence in the opinions to be delivered by my noble and learned friends, Lords Herschell and Macnaghten, which I have had ample opportunity of considering in print. I move that the Order appealed from be affirmed, and the Appeal dismissed with costs.