Stratton v Simpson
125 CLR 138[1970] HCA 45
[1971] ALR 117
44 ALJR 487
(Decision by: WINDEYER J)
Between: STRATTON
And: SIMPSON
Judges:
Barwick CJ
Menzies J
Windeyer JWalsh J
Gibbs J
Subject References:
Trusts
Charitable
Indefinite and uncertain objects
Validity
Legislative References:
Trustees Act 1962 (WA) - s 102
Judgment date: 12 November 1970
Sydney
Decision by:
WINDEYER J
I have had the advantage of reading the judgment of Gibbs J. I am relieved by it of the need to state the facts. I agree in his Honour's conclusion that, if the testator's direction as to the disposition of his residuary estate does not by its terms create a valid charitable trust, then s. 102 of the Trustees Act, 1962 (W.A.) saves it from invalidity. I concur too in his Honour's reasons for that conclusion. But I do not think that this statutory saviour was needed to rescue the trust from invalidity. In this I differ from his Honour and from Lavan J., the learned judge at first instance. I shall explain why I consider that, the Trustees Act apart, the will created a valid charitable trust. It is not necessary to do so as it cannot affect the result of this appeal. Nevertheless I do so as I am not able to accept a construction of the words of the will and of provisions of the Administration Act, 1903-1965 (W.A.) which I consider mistaken and which I think ought not to govern cases that may arise in the future.
In the first place I cannot without some qualifications accept the view that the trustees of the testator's residuary estate, which he called the "J. P. Stratton Trust", could not distribute any of the trust income for the maintenance of a free ward in a hospital. Certainly they could not lawfully give any money to a "public hospital" for the general purposes of such hospital. That is because the testator has expressly put such hospitals outside the permissible range of his bounty. By cl. 15 of his will the testator directed that the income of his residuary estate be from time to time distributed by his trustees between the institutions and bodies (except any public hospital within the meaning of the Hospital Act, 1927) in respect of which at the date of his death any gift, bequest or legacy was by s. 134 (1) of the Administration Act exempt from estate, succession or other duty under that Act. The sense in which the word "institutions" is used in the will in cl. 15 appears from the reference in the prefatory recital (cl. 2) to "charitable Institutions as hereinafter mentioned". It is said that the words of par. (b) of s. 134 (1), "the maintenance of a free ward in any hospital", describe a purpose, not an institution. That is of course true. But every charitable trust is a trust for a purpose or purposes that are charitable, not a trust for a person or persons, although persons benefit from the fulfilment of the purpose. A body or organization which holds property upon a charitable trust and carries out the trust purposes is commonly called a charitable institution or a charity. It is really but the instrument for carrying a purpose into effect. Confusion can occur from want of remembering this, as Else-Mitchell J. observed in McGarvie Smith Institute v Campbelltown Municipal Council. [F1] The word "institution" is a word of wide denotation. It is not uncommonly used in collocation with other words as here "institutions and bodies": see, for example, Smith v West Australian Trustee Executor & Agency Co Ltd. [F2] In that case Fullagar J. declined to recognize any distinction between a charitable purpose and a charitable institution. It has been said that every charitable trust is not necessarily to be regarded as a charitable institution. My brother Walsh said so in the Supreme Court of New South Wales in Christian Enterprises Ltd v Commissioner of Land Tax, [F3] founding his statement upon a passage in the judgment of the Privy Council in Minister of National Revenue v Trusts and Guarantee Co Ltd [F4] as follows:
"It is by no means easy to give a definition of the word `institution' that will cover every use of it. Its meaning must always depend upon the context in which it is found. It seems plain, for instance, from the context in which it is found in the subsection in question that the word is intended to connote something more than a mere trust."
The context there was such that their Lordships said that the charitable institutions in question are "those which are institutions in the sense in which boards of trade and chambers of commerce are institutions, such, for example, as a charity organization society, or a society for the prevention of cruelty to children". The similarity of a society as last mentioned to a chamber of commerce may not be at once apparent, although the distinction there made between such institutions and "mere trusts" is clear enough. But I can see no reason why, unrestrained by context, a fund raised by public contributions and administered by trustees could not be properly called an institution. Whether or not it would be a charitable institution would, of course, depend upon the trusts on which it was held. Funds raised for the relief of distress caused by bushfires or other disasters are well known. If the object to which the fund must be devoted is the continuing advancement of charity in the legal sense, it is a charitable institution. The Gowrie Scholarship Trust Fund and the Winston Churchill Memorial Trust come to my mind as examples. I do not think that the absence of the word "institution" in s. 134 (1) (b) means that the objects to which the income of the testator's residuary estate can be devoted do not include a fund established for the maintenance of a free ward in a hospital. I do not suggest that the trustees could themselves set up a trust for that purpose. Their power is to distribute the trust income to existing institutions.
The next question is whether all the institutions and bodies to which the trustees are authorized to distribute income are charities in the legal sense. The question arises in relation to two matters. One is the reference to schools in par. (f) of s. 134 (1). The other is the presence of the words "the main object" in pars. (d) and (e). I shall consider each of these in turn, but first as a general proposition I quote Lord Davey's words in Hunter v Attorney-General, [F5] referring to
"... a ... class of cases ... of which Sinnett v Herbert [F6] and In re Douglas; Obert v Barrow [F7] are examples, in which there is a general overriding trust for charitable purposes, but some of the particular purposes to which the fund may be applied are not strictly charitable, or one of two alternative modes of application is invalid in law." "In such cases", his Lordship said, "the trust is good, and the Court will give effect to the general charitable trust, but the trustees are restricted from applying the fund to the purposes or in the manner which are objectionable."
In In re Douglas; Obert v Barrow, [F8] Lord Lindley, then Lindley L.J., had approved the proposition that
"when you understand the testatrix to mean by charities, societies, and institutions, nothing but charitable societies and charitable institutions, the mere addition of one or two institutions which are named which may not be charitable does not introduce such an element of uncertainty as to make that part of her will void."
That is directly apposite here. The testator in the prefatory recital in cl. 2 of his will expressed, as his reason for the dispositions he made, his "desire that charitable Institutions as hereinafter mentioned shall as far as possible receive the benefit of the whole of my residuary estate". Clearly he meant that any of the "institutions and bodies", as he called them, mentioned in s. 134 (1) of the Administration Act to which his trustees distributed any income should be a "charitable institution".
Paragraph (f) of the sub-section reads:
"any school which pursuant to the provisions of the Education Act, 1928, is included in the latest list of schools published in the Gazette that have been inspected and found efficient or have been certified to be efficient for the purposes of that Act."
Speaking generally, a school may or may not be a charitable institution in a legal sense. That depends upon its character and the purpose for which it is conducted. For it to be a charity the pupils must be drawn from the public at large, or from a sufficient class or section of the public; and it must exist for the advancement of education in a broad sense and not for the private profit of individuals. The judgment of Danckwerts J. in The Abbey Malvern Wells Ltd v Ministry of Local Government and Planning [F9] is a good pointer to the distinction, which is firmly established in law, between schools which are and those which are not charitable, although, as Lord Denning M.R. observed in Inland Revenue Commissioners v Educational Grants Association Ltd, [F10] "when we come down to earth, we run into difficulties" for the distinction in practice becomes illogical. No doubt very many schools that answer the description in s. 134 (1) (f) are charitable institutions in the legal sense. But it may be that some are not. Of that we have no evidence one way or the other. It may be that the statute means that to escape duty a gift to a school must be to the school as an educational institution, that is to say that such gifts must be in trust for the purposes of the school and not capable of being used to augment the profits of private persons. However that may be, when the testator's will is read in the light of the principles stated by Lord Lindley and Lord Davey, I consider that, without resort to s. 102 of the Trustees Act, the trustees' power to apply income in favour of schools is restricted to such schools as are in the legal sense charitable institutions. This is not a case where the "general overriding trust for charitable purposes" necessary to produce that result is seen simply as a reflection from particular provisions. It is not implicit in the will. It is plainly expressed there. I differ here from the opinion that my brother Gibbs has expressed. I consider that the testator made it clear that the income of the trust he established must go to "charitable institutions". And then, as Lord Hanworth said in a case where a testator's overriding charitable purpose was made clear by a recital of his wishes and intention, "it is a principle of the law long established, that where there is an intention to devote property to charity, effect must be given to it": In re Hood; Public Trustee v Hood. [F11] The Master of the Rolls there said that the recital was "of dominant force". Bennett J., who had heard the case at first instance, had said it expressed "the dominating purpose" of the will. Lawrence L.J. spoke of it as stating "the main object", Romer L.J. "the dominant object".
I pass now to pars. (d) and (e) of s. 134 (1) of the Act. They are as follows:
- "(d)
- any incorporated public body in the State the main object of which is to dispense or provide voluntary aid to indigent, aged, sick, blind, halt, deaf, dumb, or maimed persons;
- (e)
- any publicly subscribed medical service or fund in the State, the main object of which is the relief of the sick, or any public medical service or fund in the State which is assisted by any Government grant or subsidy."
In each case the main object that the institution or body must have is a charitable object. But it was said that the words "main object" by their very presence prevent the body or institution being a charity, because it is said they imply that it has other objects, and that these may not be charitable. For reasons that I shall give, I do not think that is the true meaning of the statutory language. But first I say that even if it be so, then for reasons I have given earlier I consider that, in selecting the recipients of the testator's bounty, the trustees are, by the words of cl. 2 of the will, confined in their choice to charitable bodies and institutions which answer one or other of the descriptions in s. 134 (1) (except public hospitals).
However, I consider that pars. (d) and (e) of the sub-section by their terms describe charities. The phrase "main object" has long been part of the vocabulary of lawyers concerned with charitable trusts; and it has been taken to express a criterion of their validity. Furthermore I cannot escape from misgivings which arise because the contrary view involves an interpretation of the provisions of the Administration Act which might have serious consequences in other cases as it enlarges the exemptions from death duty under paragraphs (d) and (e) of s. 134 (1) beyond the scope that, as I read them, they properly have. For these reasons I now go at some length into this aspect of the case.
In itself the phrase "main object", as used in legal writings, is ambiguous: but in any particular case the context or the topic ordinarily shews in which of two senses it is used. Sometimes it means the principal object of an institution having also secondary objects or activities which, although of less importance, are capable of being lawfully pursued independently of and without their having any essential bearing upon the pursuit of the main object. On the other hand the words can postulate a dominant object, other objects being all incidental, subservient and ancillary, only lawfully to be pursued as conducive to promoting the main object. This latter sense of the words "main object" seems to have first come into currency in company law. It there became a rule for the construction of a company's memorandum of association. It is of little importance in that field today, because it is ordinarily excluded by the sophisticated form of modern memoranda of association: but it still makes an occasional appearance in arguments, as it did for example in Anglo-Overseas Agencies Ltd v Green. [F12]
The doctrine, and with it the phrase, has moved from company law into the law of charity. A gift to an institution that has several objects or purposes, some charitable some not, one or more of which it can lawfully pursue independently of others, is not a gift to charity. It does not become charitable simply because one of the objects, being charitable, is called the main object of the institution. That is entirely logical: but unfortunately it seems to have led sometimes to a supposition that the description of a charitable purpose of an institution as its main object suggests that it has other objects which are not ancillary to the main object. I do not see why that should be so. It is not supported by the case that is often cited, Oxford Group v Inland Revenue Commissioners. [F13] Professor Keeton in his book The Modern Law of Charities (1962), p. 111, in the course of sharp criticisms, has said that the decision in that case, which he calls "unfortunate", was "unexpected". It seems to me that, whether expected or not, it did not depart from well-established principles. What I think is surprising is not the decision itself, but what seems to be sometimes taken to be its effect and what it has been sought to build upon it. The case arose in this way. The Oxford Group was a company limited by guarantee. It claimed an exemption from income tax on the ground that it was "a body of persons established for charitable purposes only" within the meaning of s. 37 of the Income Tax Act 1918 (U.K.). The first of the objects set out in its memorandum of association was a good charitable purpose (the advancement of the Christian religion). The second was held, after argument, not to be charitable, for in the pursuit of it the company could engage in secular activities and expend its funds on matters which were not charitable. Yet, as Tucker L.J. said, [F14] it was common ground that the two objects mentioned were both "main objects". And there were too other objects which it was held were not, upon the true construction of the memorandum, themselves charitable and which were not merely ancillary to the charitable object. The Court of Appeal, having taken that view of the memorandum, naturally held that the company was not established for charitable purposes only. After that case there were in England several others in which the same question was raised under other statutes exempting charitable institutions from taxes and charges: see Crystal Palace Trustees v Minister of Town and Country Planning; [F15] Associated Artists Ltd v Inland Revenue Commissioners; [F16] North of England Zoological Society v Chester Rural District Council. [F17] In each of these the question was whether the non-charitable objects or purposes of a corporate body were independent of or ancillary to its charitable object or objects. That question was resolved upon the construction of its memorandum of association or other incorporating instrument. In none of these did the words "main object" appear. But the last-mentioned case is of significance because the statutory exemption from rates, upon which the plaintiff Zoological Society there relied, was given to bodies "not established or conducted for profit and whose main objects are charitable ...".
The words in the Administration Act are "the main object". This presupposes that the institution has a main object as described, and that it is its only main object. The question is then whether in s. 134 (1) these words denote the principal object or purpose of an institution that has also other lesser objects which are independent; or do they denote the dominant object or purpose of an institution, other permissible activities being all ancillary to the accomplishment of that main object. I think the latter is the true meaning. I say that remembering that it has often been said in this Court, as it has in the House of Lords, that, when the question is whether any institution is a charitable institution, the test lies in ascertaining what is its main object: see Royal Australasian College of Surgeons v Federal Commissioner of Taxation; [F18] Salvation Army (Victoria) Property Trust v Fern Tree Gully Corporation; [F19] Congregational Union of New South Wales v Thistlethwayte; [F20] Royal College of Surgeons of England v National Provincial Bank Ltd. [F21] In Keren Kayemeth Le Jisroel Ltd v Inland Revenue Commissioners, [F22] Lord Tomlin said: [F23]
"I well appreciate the argument which says that if you once find that the main object is charitable you cannot destroy the charitable character of the main object, because the ancillary powers, which are incidental to it, are, some of them, in themselves, not charitable."
And in this Court, Dixon C.J., McTiernan, Williams and Fullagar JJ. said in Thistlethwayte's Case: [F24]
"An institution is a charitable institution if its main purpose is charitable although it may have other purposes which are merely concomitant and incidental to that purpose."
I interpolate here that the word "purpose" is perhaps more appropriate than "object" in relation to trusts for charity, for objects of charity is a term sometimes used to denote the recipient of charitable benefit or bounty. But in the context with which we are here concerned the words "object" and "purpose" are equivalents. An institution that is within par. (d) of s. 134 (1) of the Act must be "an incorporated public body". One that is within par. (e) need not. However, in each case the description of the institution by reference to a specific form of charity as its main object means, in my opinion, that the term "main object" is to be read in the sense in which it has been so often used to express the test by which the legal character of an institution, whether it be charitable or not, is determined.
The decision in In re Harpur's Will Trusts [F25] was relied upon for a different conclusion. That case is not binding upon us. But it carries the high persuasive authority of the opinions of Cross J. at first instance and of Lord Evershed M.R., Harman and Donovan L.JJ. in the Court of Appeal. It therefore must have careful and respectful consideration. It arose in this way: a testatrix directed that her residuary estate should be divided between "institutions and associations having for their main object the assistance and care of soldiers, sailors, airmen and other members of H.M. Forces who have been wounded or incapacitated during the recent world wars". On a summons to determine whether that gift was valid [F26] - Cross J., relying upon the Oxford Group Case, [F27] said that the fact that the main object of an institution or association is charitable does not mean that it is necessarily established for charitable purposes only, as it might have subsidiary objects which are not charitable and which are not merely ancillary. In the absence of evidence that none of the bodies having the main object specified by the testatrix had any subsidiary non-charitable objects, his Lordship said that he could not hold that the residuary estate must go to exclusively charitable institutions or associations. He also held that the gift was not saved by the Charitable Trusts (Validation) Act, 1954 (U.K.). The Attorney-General appealed, in the interest of charity, to the Court of Appeal. The appeal was however limited to the second point above mentioned. There was no appeal as to the first, counsel for the Attorney-General saying, for some reason that is not to me clear, that it was concluded by the decision in the Oxford Group Case. [F28] The appeal was dismissed. Whether or not it was rightly dismissed may be arguable academically as a moot point: see the view of the Act that had been taken by Buckley J. in In re Wykes, deceased. [F29] However, that question need not trouble us, because, as Gibbs J. has pointed out, s. 102 of the Trustees Act, 1962 (W.A.) differs from the corresponding English provisions: and its validating effect in the present case, if validation be needed, is not I think doubtful. But is validation needed? I do not think so, notwithstanding what was said by Cross J. and in the Court of Appeal. I do not seek to distinguish the present case from Harpur's Case [F30] on purely literal grounds, although perhaps something might be made of the difference between institutions and associations having for their main object charity and a body the main object of which is charity. I say of the decision in Harpur's Case [F31] that I do not think that the words "main object" are a term of art. I certainly do not think that the Oxford Group Cases [F32] made them so. I do not think that it can be said that always they must be taken to predicate other and independent objects. Nor on the other hand do I think that in every case they necessarily predicate other objects that are ancillary to the main object. As I have said, they are ambiguous: and the ambiguity must be resolved by the context of the particular topic. It may be that Cross J. was aware that some associations having as their main object the assistance and care of sailors, soldiers and airmen wounded in war were associations of old comrades having also social or other activities which might on occasions be pursued independently of the main object. However that may be, that his Lordship gave a meaning to the words "main object" in the will that was before him does not persuade me that the same meaning must be given to them in the statute that is before us. Mrs. Harpur's use of words in her will ought not I think to govern the use of words by the Parliament of Western Australia. Another meaning is open: and I think it is the natural one. I make two further observations about Harpur's Case. [F33] It was said by Harman L.J. to be "a tragic case"; for, his Lordship said, "I can feel little doubt that the testatrix meant in effect to benefit members of His Majesty's Forces disabled in the wars of 1914 and 1939". And Lord Evershed said that "had the word `main' been omitted, or the epithet `charitable' been inserted before the various institutions and associations, all would have been well". His Lordship emphasized that, having regard to the concessions made on behalf of the Attorney-General, the sole question for the Court of Appeal was whether the Act of 1954 was applicable. I am not prepared to base any conclusion in the present case upon the proposition, which passed by concession in that case, that the presence of the word "main" there defeated the charitable intent of the testatrix. On the contrary, I would add the case to what MacKinnon L.J. once spoke of as "a number of authorities in most of which the manifest intentions of various testators seem to me to have been defeated by their artless use of language": Re Ward. [F34] In the Administration Act the true effect of the words "the main object" is I think to confine exemptions from death duty to gifts to institutions that are charitable, not to enable gifts to institutions that are not exclusively charitable to escape duty.
Although I have followed a path different from that taken by Lavan J., I agree in his conclusion and would dismiss this appeal.