Perpetual Trustee Co Ltd v Federal Commissioner of Taxation

45 CLR 224

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(Decision by: McTiernan J)

Perpetual Trustee Co Ltd v Federal Commissioner of Taxation

Court:

Judges: Starke J
Dixon J
Evatt J

McTiernan J

Subject References:
Taxation and revenue
Estate duty
Exemption
Institute for benefit of naval ratings

Legislative References:
Estate Duty Assessment Act 1914 (Cth) - Subsection 8(5)

Judgment date: 23 April 1931

SYDNEY

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Decision by:
McTiernan J

The appellant, which is the executor of the will of the late Arthur Ernest Hezlet, claims that a bequest of one quarter of the residuary trust funds in the testator's estate, which was bequeathed by him to the Royal Naval House, Grosvenor Street, Sydney, is exempt from the assessment or payment of estate duty under the Estate Duty Assessment Act 1914-1928, on the ground that the Royal Naval House is a "public benevolent institution in Australia" within the meaning of s. 8 (5) of the above-mentioned Act. It was contended on behalf of the respondent that a public benevolent institution is an institution which ministers to the poor and needy, and that therefore on the facts and circumstances disclosed by the special case the appeal must fail. The phrase"public benevolent institution" is not defined in the Act, nor is it a term of art. There does not appear to be any definite understanding as to what is the precise meaning of the expression. Thus the soundness of the method of approaching the solution of the question for decision in the present appeal, by propounding one test to which the Royal Naval House should answer, may be estimated by a consideration of the following passage from the judgment of Lord Warrington of Clyffe in the case of the Girls' Public Day School Trust v Ereaut ^[F6] , at p. 27.

His Lordship said:"The Act" (Income Tax Act 1918, 8 & 9 Geo. V. c. 40) "contains no definition of 'public school,' and it is therefore the function of the tribunal in each case to say whether the school in question is properly so described. In arriving at a conclusion there are obviously many elements to be taken into consideration, and to say that, whatever the other circumstances may be, the existence or non-existence of one element affords an irrefutable test is open to the objection that by doing so the tribunal pro tanto binds itself by a definition which the statute does not contain." The Royal Naval House has, in my opinion, characteristics which entitle it to be described as "public" (Shaw v Halifax Corporation ^[F7] ; Girls' Public Day School Trust v Ereaut). Judicial authority however affords no such clear guidance as to what the expression "public benevolent institution" signifies.

Some instances may be given of the use of the word "benevolent" in the statutes of this and other States of the Commonwealth as an adjective qualifying the words "institution," "society" and "asylum." In McLaughlin v Council of the Municipality of Randwick ^[F8] Campbell J. decided that an institution known as "Our Lady's Home" was a "public benevolent institution" within the meaning of s. 132 (1) (d) of the Local Government Act of New South Wales, No. 41 of 1919. The special case upon which his Honour gave his decision stated:"The institution known as 'Our Lady's Home' is an establishment for nurses" who "went out and nursed the sick poor in their own homes. It is a home for nurses to live in and is supported by voluntarycontributions from the general public. The nurses live permanently and free on the premises, and get board and lodging and are clothed by the institution but receive no remuneration. The institution does not receive money from patients and does not minister to those who can pay. The nurses are obliged to be Roman Catholics but do not take any religious vows. Members of all religions are treated." His Honour said ^[F9] : "I think the association, voluntary as it is, with its declared objects and its actual operations, is a public benevolent institution, and the only question seriously argued before me was whether the purposes of the institution could be said to extend to and include the occupation of the subject property by the members, primarily as a headquarters and residence. I think they can." His Honour held that the housing of the establishment was a vital part of the purpose of the institution, and for that reason decided in its favour.

The preamble of the Benevolent Society of New South Wales Act 1902, which is "an Act to incorporate and otherwise promote the objects of the Benevolent Society of New South Wales," has the following recital, inter alia, namely, "Whereas a society was in the year one thousand eight hundred and nineteen established, known as the Benevolent Society of New South Wales, having for its object the relieving of poor, aged, and distressed persons and others requiring such aid:" Section 5 of the Child Welfare Act 1923 of New South Wales contains the following definition: " 'Asylum' includes the Benevolent Asylum, every asylum for destitute children, or industrial asylum, and every charitable institution supported wholly or in part by grants from the Consolidated Revenue."

The Adoption of Children Act 1925 of South Australia (s. 15 (1)) is in these terms: "Upon the application in writing of the manager for the time being of any benevolent or other institution, established in connection with any religious denomination, who is desirous of adopting any deserted child in connection with such institution, any Court on being satisfied-(a) that such child is deserted; (b) that such child is of the same religious denomination as that of the institution whose manager makes the application, and (c) that such institution is properly conducted, and is capable of properly bringing up such child, may make an order authorizing the manager for the time being of such institution to adopt such child in connection with such institution, such child retaining his or her own name, and in no manner inheriting or succeeding to any property, real or personal, or otherwise howsoever, of such manager or institution." Another instance is s. 3 of the Hospitals and Charities Act 1928 of Victoria: " 'Benevolent Society' means any society or association of persons the funds of which are obtained in whole or in part by voluntary contributions and which has as its object or among its objects the affording of charitable relief to diseased infirm incurable poor or destitute persons (including children) and is not exempted from the operation of this Act; but does not include-(a) any 'institution' within the meaning of this Act; (b) any such society or association whose funds are wholly obtained from collections made at religious services; or (c) any association of two or more persons acting together temporarily for any specific charitable object."

The Hospitals and Charities Act 1928 of Victoria, s. 67 (1), provides under the heading "Philanthropic Societies or Associations" that "any society or association of persons formed or to be formed having for its object the saving of human life, the promotion of health temperance or morality, the prevention of cruelty or vice, or other cognate objects of a philanthropic or humane nature, shall subject to the requirements as to voluntary contributors contained in Division one of this Part as to institutions capable of incorporation thereunder be and be deemed to be an institution capable of incorporation under this Part and may be incorporated accordingly." Section 8 (4) of the Friendly Societies Act of Queensland, 58 Vict. No. 17, provides that societies for any "benevolent or charitable purposes," therein called "benevolent societies," may be registered under that Act. The word "benevolent" or "benevolence" appears in the following statements, which have been culled from the decisions. In the Commissioners for Special Purposes of Income Tax v Pemsel ^[F10] , at p. 558 Lord Watson said:"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 Attorney-General for New South Wales v Adams ^[F11] Higgins J. said: "But gifts to assist people who are not poor are not charitable, though they may well be benevolent or philanthropic."

His Honour was explaining the technical meaning of the word "charitable." At p. 131 his Honour said: "Again, a club for ex-militia officers, merely because they have been militia officers, and irrespective of their wealth and poverty, could hardly be called a charitable institution, though it may be benevolent."

Mr. Jordan has submitted that the meaning of the expression "public benevolent institution" should not be construed by piecing together the respective meanings of the three words of which it is composed. That submission is, I think, a sound one. It should be noted, however, that the dictionaries do not strictly confine the meaning of "benevolent" or "benevolence" within the area of purely eleemosynary acts. In the Oxford Dictionary, "benevolent" is said to mean: "desirous of the good of others, of a kindly disposition, charitable, generous." In the same dictionary "benevolence" is said to mean:"1. Disposition to do good, desire to promote the happiness of others, kindness, generosity, charitable feeling (as a general state or disposition towards mankind at large). 2. Favourable feeling or disposition, as an emotion manifested towards another; affection; goodwill (towards a particular purpose or on a particular occasion). 3. An expression of goodwill, an act of kindness; a gift or grant of money; a contribution for the support of the poor." Indeed, the signification of the word "benevolent" has been said to be influenced by the substantive to which it is attached. "But, even upon this assumption, the appellant's difficulties are not removed, for this reasoning would not endow the word 'benevolent' with the same signification, when it is-as it must be in the present will-attached to the word 'objects,' and their Lordships cannot accept the appellant's argument that if benevolent institutions and benevolent associations in New Zealand are properly regarded as charitable this involves theconclusion that benevolent objects, where the adjective has no such local limitation of meaning, are necessarily charitable also" (Attorney-General for New Zealand v Brown ^[F12] ).

It does not appear to me that there is any "common understanding" (Girls' Public Day School Trust v Ereaut ^[F13] ) of which the Legislature must be taken to have had cognizance that an institution would not be properly described as a "public benevolent institution" unless its object was to minister to the poor and needy members of society. There appears to me to be much force in the submission of Mr. Maughan that if the expression "public benevolent institution" bears the meaning for which respondent's counsel contends, the concluding words of the sub-section, namely, "or for the relief of persons in necessitous circumstances in Australia" are unnecessary. However, it cannot be predicated that the Legislature always intends to use mutually exclusive words in a context such as that contained in the sub-section. (See Chesterman v Federal Commissioner of Taxation ^[F14] .)

"Public benevolent institution" is, in my opinion, a wider term than "benevolent asylum." I do not imagine that it is possible to enumerate all the services which may be rendered by human benevolence operating through the agency of a public benevolent institution. While I do not think that the Legislature intended strictly to confine the exemption to gifts to an institution of a strictly eleemosynary character, yet it may be difficult to bring within the scope of the exemption which has been granted in aid of a public benevolent institution, a gift to an institution which is of a public character, but does not exist for the relief of distress or misfortune occasioned by poverty. But, I am of opinion, that the present case is one in which such a difficulty is disposed of by the facts and circumstances stated in the special case.

It was decided in Chesterman v Federal Commissioner of Taxation ^[F15] that the word "charitable" which was in s. 8 (5) of the Estate Duty Assessment Act 1914 must be construed in its technical sense. The last-mentioned sub-section was in these terms: "Estate duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement for religious, scientific, charitable or public educational purposes." Subsequently the Parliament repealed that sub-section and enacted s. 8 (5) of the Estate Duty Assessment Act 1914-1928. A comparison of the two sub-sections appears to show that the Legislature intended to exclude from the benefit of the exemptions granted by the Act a number of gifts which, though good charitable gifts in the technical sense, were not for religious or scientific or for public educational purposes or were not made upon the principle of giving direct relief or assistance to mankind in sickness or in need.

The men for whose care and assistance the Royal Naval House is established have as a class peculiar needs and disabilities, which arise from the circumstances of their calling. By affording accommodation, protection and comfort necessary to provide for those needs, and to avert the consequences of those disabilities, the Royal Naval House is, in my opinion, exercising a function which distinguishes it as a "public benevolent institution." In view of the identity of the class to whose needs it ministers, this institution is perhaps sui generis. It has been established to provide for the petty officers and lower ratings of the Royal Navy, and the Royal Australian Navy, and for the petty officers and men, who serve on the public ships of other nations, which visit Sydney from time to time. If this institution were not open to them, these men would be left to their own devices when they came ashore, and they would be exposed to dangers, temptations and impositions, from which this "House" safeguards them. The special case indicates that the institution would not be able to sustain the financial burden of its operations if the land upon which it is built had not been granted to it by the State, and if it did not receive an annual subsidy from the Commonwealth and donations from the public. The fact that it makes a charge for some of the services which it renders does not destroy its character as a "benevolent institution" (Borough of Leichhardt v Moran ^[F16] ).

Seamen engaged on merchant ships have been recognized by the Legislature as a class which needs special protection. Thus the Merchant Shipping Act 1894 contains, inter alia, provisions for the protection of seamen from imposition (ss. 212 and 163). Under s. 214 the Board of Trade or a local authority may make by-laws relating, inter alia, to the licensing, inspection and sanitary conditions of seamen's lodging-houses. Lodging-house keepers may be fined for charging a seaman for a longer period than that for which he has resided in the house, or for detaining money or effects in payment (ss. 215, 216). It is also an offence to solicit a seaman to become a lodger, within twenty-four hours of the arrival of the ship at a home port, or to go on board for such purpose without leave when a ship is about to arrive, is arriving or has arrived at the end of her voyage (ss. 217, 218). Division 16 of Part II. of the Navigation Act, passed by the Parliament of the Commonwealth, which is entitled "Protection of Seamen" contains provisions, a number of which are similar to those which have been made in the Merchant Shipping Act for the protection of seamen, and the Governor-General was empowered by s. 425 to make regulations, inter alia, for the inspection, management and control of seamen's homes.

It is interesting to recall the views of Lord Chancellor Hardwicke expressed in Baldwin and Alder v Rochford ^[F17] , in which the plaintiffs who were sailors on board the "Prince Frederic" privateer, "which took a great prize called the 'Marquis D'Antin' the cargo whereof was chiefly gold" claimed that a contract with them for the sale of their prize-money be set aside "upon the foot of imposition and public inconvenience." His Lordship said:"There cannot be a more useful set of men to the public, nor a more unthinking sort of people, than common sailors, who, as soon as ever they get on shore, for the sake of a little immediate pleasure are willing to part with their right to anything in expectation, for a very little in possession; and this is the sense of the Legislature, both from the Stat. 1 Geo. II., and the 20 Geo. II., c. 24, whereby they have taken notice of them as a set of men not fit to take care of themselves, and therefore have taken care of them against themselves. I do not say that every contract with a sailor is void, or ought to be set aside, but every contract with them must be fair. A sailor shall not be held to bail for less than PD20, and therefore nobody will lend one of them twenty shillings unless he gives his note for PD20, which none of them ever refuse, and do it every day in Wapping, which shows what I have before said to be true, that they will do anything for a little ready money to enable them to take their pleasure."

The men who resort to this Royal Naval House are placed in such a position by the circumstances of their calling, that they have a special need of the assistance which this Royal Naval House provides for them; and while it provides that assistance, in my opinion, that part of an estate which is given to it, is entitled to be exempt from estate duty on the ground that the gift is made to an institution of the kind which the Legislature intended to denote by the expression "public benevolent institution."

No argument was addressed to us, on behalf of the appellant, in support of an affirmative answer to the second part of the question contained in the special case. Upon the view I have taken, I do not deem it necessary to answer that part of the question. The first part of the question, that is to say, whether the bequest of one-fourth of the residuary trust funds in the estate to the Royal Naval House, Grosvenor Street, Sydney, is a bequest to a public benevolent institution in Australia, should, in my opinion, be answered in the affirmative.