Chesterman v Federal Commissioner of Taxation
32 CLR 362(Decision by: KNOX CJ)
Between: CHESTERMAN
And: FEDERAL COMMISSIONER OF TAXATION
Judges:
Knox CJIsaacs J
Higgins J
Rich J
Starke J
Subject References:
Succession
Estate duty
Exemption
'Charitable purposes'
Annuity
Legislative References:
Estate Duty Assessment Act 1914 (No 22) - the Act
Judgment date: 6 June 1923
MELBOURNE
Decision by:
KNOX CJ
The first question submitted for the opinion of this Court is as follows: Is the part of the estate which is subject to the Peter Mitchell Trust property devised or bequeathed to religious, scientific, charitable or public educational purposes within the meaning of the Estate Duty Assessment Act 1914-1916, s. 8 (5)? To answer this question it is necessary to consider two separate and distinct questions, namely,
- (a)
- What is the true meaning of the word "charitable" in s. 8 (5) of the Estate Duty Assessment Act 1914-1916? and
- (b)
- reading the word "charitable" in that meaning, is the part of the testator's estate which is subject to the Peter Mitchell Trust within the exemption allowed?
The first question depends on the construction of the sub-section, the latter on the construction of the will. My reason for dealing separately with these questions will appear later.
1 (a). The contest as to the meaning to be given to the word "charitable" in the context in which it is found is, substantially, whether that word is to have its technical or legal meaning or, on the other hand, is to be construed in what has been referred to as its popular sense-a sense which has never been exactly defined but which is assumed to be less extensive than the technical or legal meaning. The appellants support the former view; the respondent the latter. In Pemsel's Case [F1] Lord Macnaghten said:
"In construing Acts of Parliament, it is a general rule ... that words must be taken in their legal sense unless a contrary intention appears. ... That according to the law of England a technical meaning is attached to the word `charity,' and to the word `charitable' in such expressions as `charitable uses,' `charitable trusts,' or `charitable purposes,' cannot. I think, be denied."
This passage was applied in this Court in Swinburne v Federal Commissioner of Taxation, [F2] by my brothers Isaacs, Gavan Duffy, Rich and Starke, as leading to the conclusion that, in a statute where the phrase "charitable use," or its equivalent "charitable trust" or "charitable purpose," is used, the technical meaning is now the primary and, therefore, the natural meaning, requiring context to vary it. So much is clear. But what kind of context is required in order to justify a departure from the technical meaning of the words used? The rule to be applied is the same, whether the document to be construed be a will or a deed or a statute, and may, I think, be fairly stated thus: that technical words or words of known legal import shall have their proper legal meaning given to them unless by the express words of the document or by necessary implication therefrom it appears clearly that they were meant to be used in some other sense. There is no dispute as to the grammatical construction of the sub-section. It is agreed on all hands that the exemption extends to property given for either
- (a)
- religious purposes or
- (b)
- scientific purposes or
- (c)
- charitable purposes or
- (d)
- public educational purposes or
- (e)
- purposes wholly within the limits of one or more of the four purposes named.
In other words, it is conceded that Parliament said, and must be taken to have meant, that, if a person gave property to be applied either wholly to one of the four classes of purposes named or partly to one and partly to another of such classes exclusively of any other purpose, that property should be exempt from payment of duty. But, if the contention of the respondent as to the meaning to be attributed to the word "charitable" in the sub-section be adopted, the extraordinary result follows that in the case of a gift expressed to be for "charitable purposes"-for instance, a gift of a fund on trust to apply the income in perpetuity to charitable purposes or to such charitable purposes as the trustees might select-the exemption could never operate, for the gift could only be valid if the word "charitable" in the will were given its technical meaning, and in that case it would be outside the protection of the sub-section, which is said to be confined to gifts for a different and more limited class of charitable purposes. A construction which leads to such a result and involves a departure from the primary meaning of the words used can, I think, only be justified by necessity. Does the context render such a construction necessary? As I understand the argument for the respondent in the present case, the only words relied on as modifying the primary meaning of the expression "charitable purposes" are the words "religious, scientific, or public educational" found in collocation with that expression. It is said that if "charitable" be given its legal meaning the other words are inappropriate or superfluous, because "charitable" in the legal sense covers the whole ground, and that therefore some other meaning must be given to it.
The assumption that "charitable purposes" include all religious, scientific and public educational purposes is, in my opinion, unwarranted. Instances of religious and scientific purposes which are not "charitable" in the legal sense are given by my brother Higgins in his opinion; which I have had the advantage of reading. I add two other instances. In Commissioners of Inland Revenue v Forrest [F3] it was held that the property of the Institution of Civil Engineers was within an exemption allowed in respect of property applied to the promotion of science, i.e., for a scientific purpose, but neither in the House of Lords nor in the Court of Appeal was it suggested that it was within the exemption allowed by the same statute in respect of property applied to charitable purposes. So, too, a trust for the endowment and maintenance of a private chapel is a trust for a religious purpose, but not charitable in the legal sense (Hoare v Hoare [F4] ). It is true that charitable purposes in the legal sense include most religious, scientific and educational purposes, but this is not enough to support the argument, for, even if charitable be given its legal meaning, the exemption given in respect of religious, scientific and educational purposes will still operate on gifts for any of those three purposes which are not charitable. On the context of this sub-section it is impossible to treat "religious" or "scientific" purposes as confined to purposes of a public nature, having regard to the introduction of the word "public" to qualify "educational." The circumstance that exemptions given in a taxing Act may overlap if construed in a particular way is of no great importance as an argument against construing it in that way, as is shown by the observations of Lord Herschell and Lord Macnaghten in Pemsel's Case. [F5]
Counsel for the respondent placed great reliance on the decision of the Court of Appeal in Commissioners of Inland Revenue v Scott, [F6] as an authority in favour of his contention. In my opinion, the decision in that case is distinguishable. The exemptions given by the Act then under discussion (Customs and Inland Revenue Act 1885) were
- (a)
- property or the income thereof legally appropriated and applied for the benefit of the public at large, or of any county, shire, borough, or place, or the ratepayers or inhabitants thereof, or in any manner expressly prescribed by any Act of Parliament (sub-s. 2 of s. 11), and
- (b)
- property or the income thereof legally appropriated and applied for any purpose connected with any religious persuasion, or for any charitable purpose, or for the promotion of education, literature, science or the fine arts, or in the manner expressly prescribed by any Act of Parliament (sub-s. 3 of s. 11).
The Court held that "charitable" ought not to be given its technical meaning. But in that case Lord Herschell, with whom the Lords Justices concurred, said [F7] that
"if that extended meaning were given to the words `charitable purpose' the whole of sub-s. 2, except perhaps the exemption of property `applied in the manner expressly prescribed by Act of Parliament,' would be wholly unnecessary, and the terms in which the exemption is provided for ... appear to indicate that property described in sub-s. 2 was not regarded as within the description contained in sub-s. 3."
It is true that he gave as an additional reason for the conclusion at which he arrived, that the words in sub-s. 3 which immediately preceded and followed the words "for any charitable purpose" would be unnecessary if "charitable purpose" were given the extended meaning. It is, I think, by no means certain that the Court would have come to the same conclusion in the absence of the provision of sub-s. 2. I am confirmed in this view by the fact that Lord Herschell, in discussing the decision in Pemsel's Case, [F8] said that it could scarcely be supposed that the exemptions contained in sub-s. 2 were inserted ex majori cautela.
Counsel for the respondent relied also on the opinion of the Judicial Committee in Attorney-General for New Zealand v Brown. [F9] It is true that the opinion was expressed in that case that the word "charitable" in the will then under discussion must be read in its eleemosynary, and not in its technical, meaning, because of the collocation with the words "religious" and "educational," but I do not think the decision can be taken as laying down a rule that the collocation of these three words in any document is of itself sufficient to show that "charitable" is used in its non-technical sense. It must be remembered that in that case the real obstacle to be overcome by the appellants was, as Lord Buckmaster pointed out, the use of the word "benevolent," and the contention was in effect that the words of the will should be read as if they were "charitable and benevolent, charitable and religious, charitable and educational." The real ground of the decision seems to me to have been that the context showed that "and" must be read as "or." This conclusion was sufficient to dispose of the case, having regard to the meaning given to "benevolent." In any event, as was said by Lord Herschell in Scott's Case, [F10] each statute must be looked to by itself for the purpose of ascertaining its meaning. In Pemsel's Case [F11] Lord Macnaghten pointed out the difficulty which the adoption of the popular meaning of the word "charity" would cause in the administration of the Act; and these observations apply with equal force to the Act under discussion in the present case.
The conclusion at which I have arrived is that the context does not require that the expression "charitable purposes" in s. 8 (5) of the Act shall not be given its technical or legal meaning.
1 (b). As the majority of the Court is of the opinion that the technical meaning should not be given to the expression "charitable purposes," no useful purpose can be served by discussing the question whether the Peter Mitchell Trust is a valid charitable gift in the technical sense. Any expression of opinion by me on that question is. I think, not only unnecessary but undesirable. It is unnecessary because whichever way that question is decided the decision cannot affect the result in this case. Whether the Peter Mitchell Trust is a charitable trust in the technical sense or not, I think it cannot be disputed that the gift over, in the event of the failure wholly or in part of that Trust, "upon trust for such non-sectarian charitable uses purposes or institutions as my trustees shall in their absolute and uncontrolled discretion decide upon" is technically a good charitable gift. The Peter Mitchell Trust is either a good charitable gift in the technical sense, or it fails. In the latter event the gift over takes effect. It follows that, whether the Peter Mitchell Trust is a good charitable gift or not, the property comprised in it is devised or bequeathed to charitable purposes in the technical sense, and is therefore, in my opinion, within the exemption given by the Act. It is undesirable because the question has not been argued, counsel for the respondent having declined to argue it, and because the very question may hereafter come before this Court on appeal from the Supreme Court, and in that event the Court will have the advantage of having the matter fully argued on both sides.
In my opinion question 1 should be answered Yes.
2. I feel no doubt that part of the testator's estate equivalent in value to the annuity given to his widow must be regarded as passing to her within the meaning of s. 8 (6) of the Act. There is a gift to the widow of PD5,000 a year which can only be satisfied out of the estate and must therefore be treated as a gift of a corresponding part of the estate. The answer to question 2 should be Yes.
3. It follows from the answer given to question 2 that question 3 should be answered Yes.
4 and 5. In my opinion question 4 should be answered No. The regulation provides for the assessment of the value of an annuity on an arbitrary basis of four and a half per cent., without regard to circumstances which may affect the amount required to purchase at the relevant time an annuity corresponding to that given by the will. By the Act duty is to be levied on the "value," i.e., the true value of the estate. This must be ascertained in the ordinary way having regard to the circumstances existing at the relevant time and to the provisions of the will.