Between: Thompson
And: Federal Commissioner of Taxation

Judges: Dixon CJ
McTiernan J
Fullagar J
Kitto J

Menzies J

Subject References:
Taxation and revenue
Estate duty
Exemption
Estate bequeathed for 'public educational purposes'
Masonic schools
Whether 'public'

Legislative References:
Estate Duty Assessment Act 1914 (Cth) (No 22) - s 8

SYDNEY

Decision by:
Menzies J

By her last will dated 8th July 1948, Elsie May Almond, who died on 3rd August 1948, bequeathed the net residue of her estate for division among a number of institutions so that one-fourteenth was to be paid to the William Thompson Masonic Schools, Baulkham Hills.  The value of this gift was about PD5,000.  The Commissioner disallowed an objection that this part of the estate of the deceased was exempt from estate duty by virtue of sub-ss. (5) and (8) of s. 8 of the Estate Duty Assessment Act 1914-1947 as a bequest for public educational purposes.  Upon an appeal to this Court, the Chief Justice, pursuant to s. 28 of the Estate Duty Assessment Act, stated a case for the opinion of the Full Court upon certain questions of law of which only the first is now material:  it is "Was the said bequest a bequest for public educational purposes in Australia?"  

From the case stated, it appears that in 1922 the United Grand Lodge of New South Wales of Ancient Free and Accepted Masons founded at Baulkham Hills the William Thompson Masonic Schools and Hostels, which are commonly called the William Thompson Masonic Schools, Baulkham Hills.  They are schools and hostels for boys and girls which provide free education and maintenance for (1) children of deceased freemasons who at the time of their death were members of a lodge under the jurisdiction of the Grand Lodge; (2) the children of freemasons who whilst members of such a lodge are prevented by permanent incapacity from supporting their children; and (3) after (1) and (2) and in special circumstances, the children of deceased freemasons who had been, but were not at the time of their death, members of such a lodge.  Some of the boys and girls resident in the hostels attend the William Thompson Masonic Schools, and some, having finished their education at those schools to intermediate standard, attend other schools. The schools have for many years, pursuant to Pt. III of the Public Instruction (Amendment) Act 1916 (N.S.W.), been recognized by the Department of Education as qualified to prepare pupils to the standard of the intermediate certificate.  In addition to these facts, the case also states that the masonic order in New South Wales in 1948 had a membership of 99,646 and, from the extract from the regulations for the government of the masonic order annexed to the case stated, it appears that the name of every candidate for membership of the masonic order is, after exhaustive scrutiny, submitted to ballot at a lodge for acceptance or rejection and that rejection follows three, and in some cases two, black balls.  Notwithstanding this, I think it is correct to say that freemasonry is open to the public in the same way as is a church or a political party or a public school, notwithstanding that only a limited number want to join and not all who may want to join are admitted to membership.  

There is no doubt that in 1948 the Williams Thompson Masonic Schools (i.e. the schools and hostels together) constituted an educational institution.  In support of the contention that the gift to the schools was for "public educational purposes", some reliance was placed upon sub-s.  (8) of s. 8 of the Act, which is as follows: "In this Act 'public educational purposes' includes the establishment or endowment of an educational institution for the benefit of the public or a section of the public".  I am by no means satisfied that if the gift was not otherwise for "public educational purposes", it could be brought within that description by virtue of the direct operation of this sub-section because the gift was a straight-out gift to an existing institution without any requirements that the capital should be held for any particular purpose or to provide income for the institution; accordingly it might fall outside the ordinary conception of an "endowment".  In Fielding v  Houison ^[F25] Higgins J. said that the word "endow" connotes permanency of provision and he cited the following definition of "endow" from Webster's dictionary: "To furnish with money or its equivalent, as a permanent fund for support; to make pecuniary provision for; to settle an income on". ^[F26]   In In re Clergy Orphan Corporation, ^[F27] Davey L.J., speaking for Lord Herschell L.C., Lindley L.J. and himself, refused to limit the word "endow" in s. 66 of the Charitable Trusts Act 1853 to property held upon some special purpose or trust in connection with the charity as distinguished from the general purposes of the charity and applied it to all property belonging to or held in trust for a charity, whether held upon trusts or conditions which render it lawful to apply the capital to the maintenance of the charity or upon trusts which confine the charitable application to the income.  I do not find it necessary, however, to reach a final conclusion upon whether the gift here under consideration is or is not an endowment because I accept the following passage from the judgment of Kitto J. in Lloyd v  Federal Commissioner of Taxation: ^[F28] "Whatever view might have been taken if s. 8 (8) were not in the Act, that sub-section really necessitates separate consideration of the public element and the educational element in a purpose for which the exemption is claimed.

The conclusion would seem to be that educational purposes for the benefit of the public or a section of the public are public educational purposes in the intended sense, and that the office of s. 8 (8) is to make it clear that where the devise or bequest is to an institution it is not necessary to find a public element in the control of the institution itself, so long as the institution is characterized by educational purposes which are for the benefit of the public or a section of the public.  The words 'public' and 'benefit' point to two essentials:  first, that the education must be provided for persons selected as members of the public or a section of the public and not selected for reasons of private concern or as members of some private class; and, secondly, that the provision of the education must not be a means of obtaining private profit for those who provide it". ^[F29]   It follows from this that a gift to an institution which provides education for the benefit of the public or a section of the public falls within s. 8 (5) of the Act as a gift "for ... public educational  purposes", even if it is not to establish or endow such an institution in a strict sense.  Although it may be thought that this conclusion deprives sub-s. (8) of s. 8 of very much direct significance, it recognizes that it has some significance in the construction of sub-s. (5).  In any event, however, it is difficult to envisage any case that would fall within sub-s. (8) which would not fall naturally within the description of a public educational purpose.  

In considering what is a public educational purpose, there is one proposition established by Lloyd's Case ^[F30] which has consequence here.  It is that recognition by the State as an educational institution does not determine whether or not an institution providing education is serving a public educational purpose.  The recognition which the William Thompson Masonic Schools has, and had, from the Department of Education under Pt. III of the Public Instruction Amendment Act (N.S.W.) is not, therefore, of decisive significance, and, if a gift to the William Thompson Masonic Schools is a gift for public educational purposes, it must be because of something beyond the State recognition of these schools.  

It was argued in the first place that any institution which provides free education for fatherless children or children whose fathers are permanently incapacitated as regards supporting them, notwithstanding that for the children to be eligible the fathers must have belonged, or belong, to a particular group in the community, is an institution which provides education for the benefit of the public generally because it provides education at no cost to the public for those who are likely to need public assistance.  I regard such a benefit as altogether too remote and think that the education provided by an institution must be for the benefit of the public or a section of the public if a gift to that institution is to fall within the description of a gift for public educational purposes.  

Are, then, the William Thompson Masonic Schools such an institution?  The education there provided, although free (so the schools are clearly not run for profit), cannot be said to be for the benefit of the public generally because the doors are not wide open; they admit only the children of freemasons.  Are, then, the children of freemasons a section of the public?  Upon this question, authority was cited to us tending to support a negative answer.  The case most directly in point is In re Income Tax Acts (No. 1), ^[F31] where the Full Court of the Supreme Court of Victoria decided that a benevolent asylum to which none other than freemasons and their wives or the widows of freemasons were eligible for admission, was not a public benevolent asylum for the purposes of s. 29 of the Income Tax Act 1915 (Vict.).  Macfarlan J. at the end of his discussion of the meaning of "a section of the public", said: "What is clear is that, generally speaking, if admission to membership of a body or inclusion in a class depends on the consent of the other members or of some of the members (e.g., a committee) of the body or class it is not 'a section of the public' in the relevant sense of the term:  and I prefer to express it in that negative form." ^[F32]   Lowe J. considered that an association "which takes power to itself to admit or exclude members of the public according to some arbitrary test which it sets up in its rules or otherwise" ^[F33] is not a section of the public.  It is to be observed, however, that in the course of his judgment his Honour said: "Having regard to the composition of the public, certain large groups may readily be recognized, the members of which have a common calling or adhere to a particular faith or reside in a particular geographical area.  There is no bar which admits some members of the public to those groups and rejects others.  Any member of the public may, if he will, follow a particular calling, adhere to a particular faith, or reside within a particular area.  Of the members of such a group it may be said in a real sense that they are primarily members of the public, and such a group may well constitute a section of the public.  They stand on one side of the line.  Each group, it is true, may consist of many individuals, but number alone is not the criterion by which to determine whether the group constitutes a section of the public.  A club, a literary society, a trade union may all have numerous members, but I think that none of these could properly be called a section of the public.  They stand on the other side of the line". ^[F34]   His Honour's conclusion was that the evidence did not establish that the order of masons was an association falling within the former category.  

Our attention was also directed to the decision of the House of Lord in Oppenheim v  Tobacco Securities Trust Co  Ltd, ^[F35] where it was held that a gift to provide for the education of children of employees or former employees of the British American Tobacco Co  Ltd  or any of its subsidiary or allied companies was not a charitable gift because, although the employees numbered over 110,000, the only nexus between them was employment by particular employers.  So too in Inland Revenue Commissioners v  Baddeley, ^[F36] the House of Lords decided that a trust for the social and physical training and recreation of Methodists resident in two county boroughs was not charitable because the necessary element of public benefit was lacking.  Viscount Simonds went further and said that a trust "cannot qualify as a charity within the fourth class in Income Tax Commissioners v  Pemsel ^[F37] if the beneficiaries are a class of persons not only confined to a particular area but selected from within it by reference to a particular creed." ^[F38]   In a dissenting judgment, Lord Reid took the opposite view and said that the members of a particular church constitute a section of the community for the purposes of the fourth head just as much as for those of the third, viz. the advancement of religion.  The latest case that has a bearing on this matter is Davies v  Perpetual Trustee Co  (Ltd ) ^[F39] in which the Privy Council decided that a gift "to the Presbyterians the descendants of those settled in the Colony hailing from or born in the North of Ireland to be held in trust for the purpose of establishing a college for the education and tuition of their youth in the standards of the Westminster Divines as taught in the Holy Scriptures", was not a charitable gift because the qualifications for eligibility for education at the proposed college made the beneficiaries nothing more than "a fluctuating body of private individuals". ^[F40]   It is to be deduced, however, from what Lord Morton of Henryton said ^[F41] that if the words "the descendants of those settled in the Colony hailing from or born in the North of Ireland" could have been disregarded, so that the gift would stand as one to establish a school for the education of Presbyterian boys, the gift would have been saved.  The gift failed, therefore, not because it was for the benefit of children of Presbyterians, but because the beneficiaries had to trace descent from particular persons living at a particular date, so that the decision was but an application of Lord Simonds' observation in Oppenheim's Case: ^[F42] "A group of persons may be numerous but, if the nexus between them is their personal relationship to a single propositus or to several propositi, they are neither the community nor a section of the community for charitable purposes." ^[F43]  

The decision in Baddeley's Case, ^[F44] however, is far from decisive in the present case, concerned as it was with whether a particular gift fell within the fourth class in Pemsel's Case ^[F45] (Inland Revenue Commissioners v  Baddeley, ^[F46] per Viscount Simonds, ^[F47] per Lord Reid, ^[F48] per Lord Somervell of Harrow, ^[F49] while the cases of Oppenheim (3) and Davies ^[F50] were both cases where the beneficiaries indicated could be regarded as a group by reason of their relationship to particular propositi.  Further, these were all cases of "charitable purposes", whereas here we are concerned to construe a particular statutory provision.  

In this connection, it is worth noticing that in Trustees of Royal Masonic Institution for Boys v  Parkes ^[F51] it was held that a masonic school for the sons of freemasons was a public institution for the purposes of the Factory and Workshop Act 1907, and Darling  J., à propos of the fact that the school was almost entirely maintained by the subscriptions of freemasons, said: "To be a Freemason does not appear to me to be an entirely private matter; it is a very large body from which subscriptions are collected even if nothing is taken from people who are not Freemasons.  I cannot think that, so far as this is an appeal to Freemasons, it is anything but a public appeal to a limited class." ^[F52]   The Divisional Court, in reaching the conclusion that the school was a public institution, followed an earlier decision upon the same Act, viz. Seal v  Trustees of the British Orphan Asylum ^[F53] where Hamilton J. quoted with approval from A.L. Smith J. in Hall v  Derby Sanitary Authority ^[F54] a passage to the effect that a public charity means a charity for public purposes as distinguished from private.  In the case last cited, as was pointed out by the Court of Appeal in Shaw v  Halifax Corporation ^[F55] great stress was laid upon extensiveness as the mark of a public, as distinct from a private, charity.  When in Dilworth v  Commissioner of Stamps ^[F56] the Privy Council had to decide whether a school called the Ulster Institute was a "public" institution, attention was directed not to the scholar to be educated but the terms in which and the circumstances in which education is given, but, adverting to the scholars, Lord Watson said: "All schools, whether public or private in the strictest sense of the words, which have a reasonably large attendance of scholars have one feature in common.  They give instruction to the public, or, in other words, to the children of different sections of the public". ^[F57]   Dilworth's Case ^[F58] was distinguished by Rowlatt J. in Ackworth School v  Betts ^[F59] where it was decided that a school established by the Society of Friends for the education of children who were members of the Society and were not in affluence was not a "public school" within the Income Tax Act for exemption purposes.  His Lordship, after examining the constitution of the school, said: "... nor do I think it is meant to follow the lines of an ordinary public school." ^[F60]   In 1920 Rowlatt J. in Trustees of the Cardinal Vaughan Memorial School v  Ryall ^[F61] decided upon the same Act that notwithstanding that the school there in question was denominational, it was nevertheless a public school and said: "I think if you have got a school for the benefit of a denomination, providing it was not something absolutely, I was going to say, ridiculous, I do not speak offensively, but some very small denomination which did not really number any large number of adherents among the human race, any denomination which appealed to mankind, I should have thought that that would be a public school." ^[F62]   In explanation of the Quaker Case, his Lordship said:

"... I did not intend to decide that Case because it was denominational in the sense that it was for Quakers, but what I did think was present there was-and the whole point was-that these people did not want this school to be identified with even the Quakers throughout the community; they wanted to keep it, I thought-I may have been wrong in my judgment on the fact, but that is the reason I came to the conclusion-essentially private, essentially domestic- 'peculiar' I said; 'particular' the Solicitor-General says, but essentially private, essentially apart from the current national life, that is why I decided as I did in that Case".

The references I have made to decided cases show the different ways in which similar problems have been approached and indicate that the question here cannot be resolved by reference to cases decided upon other Acts or in relation to the legal conception of what is charitable.  The authorities are of value only in a general way in considering the particular question that arises here upon the statute.  

That question, strictly speaking, is not whether freemasons constitute a section of the public, but whether the children of freemasons do, although it must be observed that in the Oppenheim Case, ^[F64] Lord Simonds did say ^[F65] that he could see no distinction between the children of employees of the British American Tobacco Co  Ltd  and the employees themselves because the common quality distinguishing the group must be found in employment by particular employers.  Furthermore, although it is not every child of a freemason who can attend the William Thompson Masonic Schools, I am satisfied that if the children of freemasons do constitute a section of the public, then the purposes of the schools can properly be said to be to provide education for that section of the public.  Any child of a freemason who is of an age for the education which the schools provide could become eligible for education there.  The critical question is, therefore, whether the children of freemasons constitute a section of the public so that provision for their education should be regarded as a public rather than a private purpose.  

It is at this point that I return to the passage already quoted in the judgment of Kitto J. in Lloyd's Case ^[F66] and in accordance therewith I pose the question whether children of freemasons are members of the public or are a private group.  The conclusion I have reached is that they are the former, notwithstanding that their fathers' admission as freemasons did depend, inter alia, upon the consent of the other members of the order.  In reaching this conclusion, I am not ready to accept the view that because admission to a group in the community depends upon the consent of existing members, the group cannot be regarded as a section of the public.  I think it would be contrary to common usage to deny to members of a church or to members of a political party or to trade unionists, the description of a section of the public, although in each case membership may be said to depend upon the consent of existing members.  This view is inconsistent with that taken by Macfarlan J. in In re Income Tax Acts (No. 1) ^[F67] although not necessarily, I think, with that taken by Lowe J.  

In Lloyd's Case ^[F68] Kitto J. said the purposes of the Geelong Branch of the Sea Cadet Corps were purposes for the benefit of a section of the public because they had to do with the development of boys "drawn from the public generally and not selected by reference to any restrictive qualification". ^[F69]   The lastmentioned element was, no doubt, a consideration in favour of deciding that a body to which entrance was by enlistment was a section of the public, but, in my opinion, what his Honour said cannot be extended, reversed and regarded as a denial that those who belong to a group by virtue of what might be called a restrictive qualification can form a section of the public.  The very phrase "section of the public" connotes both inclusion and exclusion; some of the public are within the section, the rest are outside it because they do not possess a particular qualification.  I would accord the description of a section of the public to groups such as doctors and university undergraduates, notwithstanding that entrance to the group depends upon what might be described as a restrictive qualification.  

Looking at the matter positively, it appears to me that the children of freemasons do constitute a section of the public because of their number, i.e. the extensiveness of the group, and because, although freemasons do belong to a restricted association, it would not be in accordance with common understanding to regard them as belonging to a private association or their children so described as belonging to a private group, and in particular it would be unreal to treat the children of freemasons as a group who are bound together by their personal relationship to particular persons, just as it would so to regard children of doctors or of Presbyterians or of trade unionists.  

It is for these reasons that I think that the bequest was for public educational purposes and the question should be answered Yes.