Conservative and Unionist Central Office v Burrell (Inspector of Taxes)
[1982] 2 All ER 1(Decision by: Brightman LJ)
Between: Conservative and Unionist Central Office
And: Burrell (Inspector of Taxes)
Judges:
Lawton LJ
Brightman LJFox LJ
Subject References:
Constitutional
Other Constitutional
Taxation
Corporation Tax
Unincorporated association
Requirements of an unincorporated association
Political party constituted by members of local constituency associations and both Houses of Parliament
Funds raised by party treasurers held by party's central office which provided administrative services to party
Expenditure of funds under control of party leader
Party leader providing link between members of party
Whether party an unincorporated association
Whether central office holding income from funds on behalf of an unincorporated association
Whether central office liable to corporation tax on income from funds
Legislative References:
Income and Corporation Taxes Act 1970 - 526(5)
Case References:
Recher's Will Trusts, Re, National Westminster Bank Ltd v National Anti-Vivisection Society Ltd - [1971] 3 All ER 401; [1972] Ch 526; [1971] 3 WLR 321; 8(1) Digest (Reissue) 297, 398
Bucks Constabulary Widows' and Orphans' Fund Friendly Society, Re, Thompson v Holdsworth - [1978] 2 All ER 571; [1978] 1 WLR 641
Caledonian Employees' Benevolent Society, Re - 1928 SC 633
Clarke v Dunraven (Earl), The Satanita - [1897] AC 59, HL
Forbes v Eden - (1867) LR 1 Sc & Div 568
General Assembly of Free Church of Scotland v Lord Overtoun, Macalister v Young - [1904] AC 515, HL
Gillingham Bus Disaster Fund, Re, Bowman v Official Solicitor - [1958] 2 All ER 749; [1959] Ch 62, CA
Harington v Sendall - [1903] 1 Ch 92I
Leahy v Attorney General of New South Wales - [1959] 2 All ER 300; [1959] AC 457, PC
Price, Re, Midland Bank Executor and Trustee Co Ltd v Harwood - [1943] 2 All ER 505; [1943] Ch 422
Rigby v Connol - (1880) 14 Ch D 482; [1874-80] All ER Rep 592
Smith, Re, Johnson v Bright-Smith - [1914] 1 Ch 937
Smith v Anderson - (1880) 15 Ch D 247; [1847-80] All ER Rep 1121, CA
Thackrah, Re, Thackrah v Wilson - [1939] 2 All ER 4
Judgment date: 10 December 1981
Decision by:
Brightman LJ
The issue is whether or not the investment income of the Conservative Party Central Office funds during the relevant years was the income of an unincorporated association. The Crown does not allege that the Central Office itself is an unincorporated association. The assertion is that Central Office funds are held for the purposes of an organisation known as the Conservative Party, or more fully as the Conservative and Unionist Party, that such organisation has all the necessary requirements for qualifying as an unincorporated association and that the Special Commissioners were justified in finding that it is such an association. The members of the association are said to be
- (i)
- all the persons who are members of the local constituency associations (which local associations are themselves unincorporated associations) and
- (ii)
- the members of both Houses of Parliament who accept the Conservative Party whip.
The contract which is alleged to bind together the members of this unincorporated association known as the Conservative Party is said to consist of the rules forming the constitution of the National Union of Conservative and Unionist Associations, the rules regulating 'party meetings' at which the candidate chosen by the Parliamentary Conservative Party as leader of the party is presented for election as party leader and the rules forming the respective constitutions of the local constituency associations. I agree, for the reasons given by Lawton LJ, that no such overall unincorporated association exists.
Before, however, that conclusion is accepted, I think that a critical observer is entitled to ask the question what, on that hypothesis, would be the legal relationship between a contributor to Central Office funds and the recipient of the contribution so made.
Strictly speaking, this court does not have to answer that question; it has only to decide the issue whether the Special Commissioners were entitled to find that the Conservative Party is an unincorporated association. But, if no realistic legal explanation of the relationship is forthcoming except the existence of an unincorporated association, one might justifiably begin to entertain doubts as to the credibility of the hypothesis on which the question is asked. I will therefore attempt an answer.
If the Conservative Party is rightly described as an unincorporated association with an identifiable membership bound together by identifiable rules, and Central Office funds are funds of the Conservative Party, no problem arises. In that event, decided cases say that the contribution takes effect in favour of the members of the unincorporated association known as the Conservative Party as an accretion to the funds 'which are the subject matter of the contract which such members have made inter se: see, for example, Re Recher's Will Trusts [1971] 3 All ER 401, [1972] Ch 526. If, however, the Conservative Party is not an unincorporated association, that easy answer is not available.
I will consider the hypothesis by stages. No legal problem arises if a contributor (as I will call him) hands to a friend (whom l will call the recipient) a sum of money to be applied by the recipient for political purposes indicated by the contributor, or to be chosen at the discretion of the recipient. That would be a simple case of mandate or agency. The recipient would have authority from the contributor to make use of the money in the indicated way. So far as the money is used within the scope of the mandate, the recipient discharges himself vis-à-vis the contributor. The contributor can at any time demand the return of his money so far as not spent, unless the mandate is irrevocable, as it might be or become in certain circumstances. But once the money is spent, the contributor can demand nothing back, only an account of the manner of expenditure. No trust arises, except the fiduciary relationship inherent in the relationship of principal and agent. If, however, the recipient were to apply the money for some purpose outside the scope of the mandate, clearly the recipient would not be discharged. The recipient could be restrained, like any other agent, from a threatened misapplication of the money entrusted to him, and like any other agent could be required to replace any money misapplied.
The next stage is to suppose that the recipient is the treasurer of an organisation which receives and applies funds from multifarious sources for certain political purposes. If the contributor pays money to that treasurer, the treasurer has clear authority to add the contribution to the mixed fund (as l will call it) that he holds. At that stage I think the mandate becomes irrevocable. That is to say, the contributor has no right to demand his contribution back, once it has been mixed with other money under the authority of the contributor. The contributor has no legal right to require the mixed fund to be unscrambled for his benefit. This does not mean, however, that all contributors lose all rights once their cheques are cashed, with the absurd result that the treasurer or other officers can run off with the mixed fund with impunity. I have no doubt that any contributor has a remedy against the recipient (ie the treasurer, or the officials at whose direction the treasurer acts) to restrain or make good a misapplication of the mixed fund except so far as it may appear on ordinary accounting principles that the plaintiff's own contribution was spent before the threatened or actual misapplication. In the latter event the mandate given by the contributor will not have been breached. A complaining contributor might encounter problems under the law of contract after a change of the office holder to whom his mandate was originally given. Perhaps only the original recipient can be sued for the malpractices of his successors. It is not necessary to explore such procedural intricacies.
So in the present case it seems to me that the status of a contribution to the Conservative Party central funds is this. The contributor draws a cheque (for example) in favour of, or hands it to, the treasurers. The treasurers are impliedly authorised by the contributor to present the cheque for encashment and to add the contribution to Central Office funds. Central Office funds are the subject matter of a mandate which permits them to be used for the purposes of the Conservative Party as directed by the leader of the party. The contributor cannot demand his money back once it has been added to Central Office funds. He could object if Central Office funds were used or threatened to be use otherwise than in accordance with their declared purposes, unless it is correct to say, on ordinary accounting principles, that his contribution has already passed out of Central Office funds.
This discussion of mandates, and complaining contributors, is all very remote and theoretical. No contributor to Central Office funds will view his contribution in this way, or contemplate even the remotest prospect of legal action on his part. He believe he is making an out and out contribution or gift to a political party. And so he is in practical terms. The only justification for embarking on a close analysis of the situation is the challenge, which was thrown down by counsel for the Crown in opening, to suggest any legal framework which fits the undoubted fact that funds are held by the Central Office and are administered for the use and benefit of the Conservative Party, except the supposition that the Conservative Party is an unincorporated association.
I see no legal difficulty in the mandate theory. It is not necessary to invent an unincorporated association in order to explain the situation. The only problem which might arise in practice under the mandate theory would be the case of an attempted bequest to Central Office funds, or to the treasurers thereof, or to the Conservative Party, since no agency could be set up at the moment of death between a testator and his chosen agent. A discussion of this problem is outside the scope of this appeal and, although I think that the answer is not difficult to find, I do not wish to prejudge it.
I would dismiss the appeal.