SUPREME COURT OF NEW ZEALAND

MOLLOY v INLAND REVENUE COMMISSIONER (NZ)

MAHON J

1 June, 6 October 1977 - Auckland

Mahon J This is a case stated under s 32 of the Land and Income Tax Act 1954. In furnishing her return of income to the Commissioner for income tax purposes for the year ended 31 March 1974, the objector claimed a deduction by way of special exemption under s 84B of the Land and Income Tax Act 1954 in respect of a donation of $5 to the New Zealand Society for the Protection of the Unborn Child (hereinafter referred to as "the Society"). The Commissioner was of the opinion that the funds of the Society are not applied wholly or principally to any charitable, benevolent, philanthropic or cultural purposes within New Zealand, as required by the said s 84B (now s 58 of the Income Tax Act 1976). The Commissioner accordingly, in assessing the objector for income tax in respect of the said year, disallowed the claim for a special exemption in respect of the said donation to the Society. The objector lodged an objection to the assessment in so far as it was based upon the refusal of the Commissioner to allow the special exemption, the grounds of the objection being the contention of the objector that the funds of the Society were applied wholly or principally to charitable purposes within New Zealand.

The nature of the objection requires a determination to be made of the constitution and activities of the Society and the purpose for which its funds are disbursed from time to time. The evidence in the case is restricted to an affidavit by Sir William Liley, the distinguished gynaecologist who was one of the founders of the New Zealand Society and who was elected to the office of Founder-President. His affidavit and the exhibits annexed thereto sufficiently describe the history of the Society and its mode of operation. From 1968 there were being exerted in the United Kingdom and elsewhere various pressures for relaxation of protective abortion laws. The main proponent of such views in New Zealand is the Abortion Law Reform Association. But many medical practitioners and other interested persons were concerned to ensure that the present law remained in force and was upheld, and they were also concerned to seek ways of informing the general public of the principle that an unborn child had a right to life and that it was not only legally but morally wrong to permit the practice of abortion except in such special cases as were permitted by law. Accordingly, on 8 March 1970, the New Zealand Society was formed at a meeting and a constitution was approved. The objects of the Society were recorded as follows:

"(a) To uphold the sanctity of human life.

"(b) To uphold the right to life of all people, including unborn children.

"(c) To maintain and improve the legal and other safeguards for preserving the right to life.

"(d) To receive and disseminate information, views and opinions on the fundamental importance and inviolability of human life, and to inform the public on these matters.

"(e) To co-operate with and assist other bodies engaged in the fostering of respect for human life."

Education of the public has been a leading object of the Society. In a newsletter published by the Society in July 1970 the following extract appears: "Liberal abortion has been proposed at both the Labour and National conferences recently, and the motions have been either modified or narrowly defeated (57 votes to 43 at the Wellington division of the National Party). The fascination of personal freedom, especially in the field of sexuality, blinds people to the implications of the legislation they are seeking.

"Education to these realities is therefore one of the main functions of our Society."

The affidavit of Sir William Liley goes on to expand this concept of the educational function of the Society. The thesis upon which the Society operates is that pre-natal human life must be properly understood and that in order to dispel prevailing ignorance on this topic it is necessary to enlighten the public as to the existence of rights in the unborn child, and the social and medical reasons which support the view that the right to life is one of those rights. In the absence of suitable instruction on these points then the view might be taken that the only person who has rights is the mother of the unborn child, from which it would follow, as a logical consequence, that upon the issue of abortion the only person held to have a determinative right would be the prospective mother. If that view were right, then the aims of the Abortion Law Reform Association would be vindicated. In brief, therefore, the Society sees as one of its major functions the dissemination of enlightened instruction on the legal, social and medical aspects of the question of abortion as a social issue to the intent that without such dissemination of knowledge it would be easy for our country to act and even to legislate in a manner which might later be seen as a regression in the forward course of civilization. In harmony with that view, the Society took steps from its inception to inculcate among the public the concept of a right to life in the case of the unborn child, such measures being pursued by the distribution of literature, the publication of advertisements, the posting of circulars, and the delivery to members of periodic newsletters which kept them in touch with the progress of the Society's campaign and the effects being achieved and sought to be achieved in the social and political areas.

It was emphasized by Sir William Liley in his affidavit (para 27) that it was not a purpose of the Society to seek a change in the law. It was alleged to be fundamental to the Society's objects that the present law, which comprises the penal sections of the Crimes Act 1961, was entirely adequate and that the principal purpose of the Society was to see that the statute law was upheld. The Society's function could therefore only be effectively fulfilled by the education of all New Zealanders in the nature of human life, particularly before birth, and in the foundations for the social and legal proposition that the unborn child has a right to live.

The exhibits annexed to the affidavit illustrate the nature of the activities in which the Society has been engaged since its inception. For example, the Society's newsletter of July 1972 contains the following extract: "In recent weeks the Prime Minister, the Leader of the Opposition and the Minister of Justice have all stated independently that they have no plans to change the present law relating to abortion. The Minister of Justice explained that there appeared to be 'a considerable body of opinion which was opposed to such a move'. He would have no source of information about the strength of national feeling opposing any relaxation of present laws unless it came from this Society and from our courageous individual members up and down the country who speak for the unborn child on every possible occasion. They write and fight for justice tirelessly."

Then in 1972 there was introduced into the House of Representatives a private member's bill, entitled the Hospitals Amendment Bill, by which it was proposed to restrict abortions to public hospitals except in the case of emergency. The object of this proposed enactment was to close down the Auckland Medical Aid Trust Clinic where abortions were said to be taking place upon a very liberal construction of the restrictive legislation contained in the Crimes Act. On 30 August 1974 large numbers of the Society's members marched on Parliament in support of that bill, which subsequently was enacted as the Hospitals Amendment Act 1974. Then, as the 1975 Parliamentary Election approached, the members of the Society throughout New Zealand were encouraged to submit a settled form of questionnaire to Parliamentary candidates so that their respective views on the abortion issue could be ascertained, it being remembered that for the purposes of any new legislation which might be introduced Members of Parliament would have a free vote as opposed to voting upon party lines.

A study of all the exhibits reveals that the principal activity of the Society, for a good part of its existence, has been to oppose by all possible means the activities of the Abortion Law Reform Association. The following extract from the Report of the Commission illustrates the essential point of contention on the abortion issue: "We do not overlook the rights of the pregnant woman when we say that the status of the unborn child is the cornerstone of the abortion argument. If the child has no status, other issues resolve themselves" (p 180).

The tax assessment under review in the present case is in respect of the year ended 31 March 1974 and I considered whether I am entitled to look at the Society's activities after that date, but it was common ground that the objects of the Society had not in any way changed over the years and that the purposes for which its funds were disbursed have been the same before and after 31 March 1974. Looking at the documentary material which has been produced, it seems a fair conclusion that the dominant object of the Society has been to frustrate the attempts of organizations like the Abortion Law Reform Association to liberalize the law relating to abortion and to persuade the public mind by every available means towards the validity of the proposition that the unborn child has a right to life and that such right ought not, as a matter of law, be suppressed or cast aside by the wishes of that child's mother. It is against that background that I must consider the question for determination arising on this case stated.

The case involves the consideration of s 84B(2)(a) of the Land and Income Tax Act 1954 (now s 58 of the Income Tax Act 1976) which provides:-

"(2) For the purpose of assessing income tax, every taxpayer, … shall be entitled to a deduction by way of special exemption from his assessable income of the amount of any gift … of money of the amount of Two Dollars ($2) or more made by him in the income year to any of the following societies, institutions, associations, organisations, trusts, or funds (being in each case a society, an institution, an association, an organisation, a trust, or a fund in New Zealand), namely:

"(a) A society, institution, association, organisation, or trust which is not carried on for the private pecuniary profit of any individual and the funds of which are, in the opinion of the Commissioner, applied wholly or principally to any charitable, benevolent, philanthropic or cultural purposes within New Zealand."

By s 2 of the Land and Income Tax Act 1954 there is a definition of "charitable purpose" which reads as follows-

" 'Charitable purpose' includes every charitable purpose, whether it relates to the relief of poverty, the advancement of education or religion, or any other matter beneficial to the community:"

The statutory definition is thus seen to have been taken from the classification of charitable trusts defined by Lord Macnaghten in Pemsel's case [1891] AC 531, which in turn was a distillation of the four charitable objects or purposes falling within the letter or intendment of the preamble to the Statute of Elizabeth, otherwise known as the Charitable Uses Act 1601.

The considerable body of case law since 1891 rests upon Lord Macnaghten's classification. In determining whether a particular trust is a charitable trust, or whether the funds of an association are being disbursed for charitable purposes, it is relevant to inquire not only as to the stated objects of the trust or society but also the manner in which the relevant purposes are being carried out: Cf Royal Australian College of Surgeons v FCT (1943) 68 CLR 436; 2 AITR 490; 7 ATD 289 and A & S Ruffy Pty Ltd v FCT (1958) 98 CLR 637; 7 AITR 238; 11 ATD 452. This was the approach adopted here by both counsel, the exhibits sufficiently revealing not only the objects of the Society but the nature of its activities from the time of its inception.

The argument of Mr Molloy, on behalf of the objector, proceeded in this manner. He first conceded that if the dominant purpose or one of the main purposes of the Society was a political purpose, then the application of the Society's funds could not be said to relate to charitable purposes. The controlling authority in this respect is Bowman v Secular Society Ltd [1912] AC 406, in which the speech of Lord Parker of Waddington at 442 states the proposition that a trust for the attainment of political objects cannot be a valid charitable trust, not because it is illegal, but because the court has no means of judging whether a proposed change in the law will be for the public benefit. The phrase "political objects" is not in this context necessarily restricted to its popular meaning. In National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31, Lord Wright (at 51-2) referred to Lord Parker's speech in Bowman v Secular Society Ltd, supra, and then went on to say: "The illustrations given by Lord Parker in the passage quoted above show clearly what meaning he attached to the word political. It was not limited to party political measures but would cover activities directed to influence the legislature to change the law in order to promote or effect the views advocated by the society."

It may be also desirable to recall that the word "charitable" in the present context has a technical or legal meaning and not a popular meaning, that view being recently re-stated by the Judicial Committee in Ashfield Municipal Council v Joyce (1977) 51 ALJR 117. The word has a legal meaning derived by reference to the preamble to the Statute of Elizabeth. Having, therefore, accepted the general and well-known proposition that the Society in the present case would not qualify as one whose funds were applied for charitable purposes if its predominant object or one of its main objects was political, Mr Molloy then proceeded to advance the following four submissions:

(1) It was submitted that the Society had no aims that were "political" in the relevant sense.

(2) If the Society did have any "political" aim or object then those were merely incidental to the main objects of the Society which were charitable and not political.

(3) On the assumption that either the first or second submission was correct, then the Society qualified as a charity because its purposes were either the advancement of education within the second classification in Pemsel's case, supra, or were in any event purposes beneficial to the community within the fourth classification.

(4) Even assuming that the Society did not qualify as a charity in terms of submission (3) above, it was nevertheless a charity for income tax purposes by reason of the text of s 84B(2)(a) of the Land and Income Tax Act 1954 which, by referring to "benevolent, philanthropic, or cultural purposes" clearly enables societies which are not strictly charitable to qualify as charities for income tax purposes.

I turn now to consider the first of these submissions. It was argued by Mr Molloy in this connection that the principal purpose of the Society, which is to promote respect for pre-natal human life, does not involve the courts having to judge whether any change in the law relating to this topic would be for public benefit. This is the foundation for the exclusion of political objects from the category of charitable purposes, and it was one of the two reasons adopted by the House of Lords in National Anti-Vivisection Society v Inland Revenue Commissioners, supra, in holding that the purposes of that society were not charitable because its principal object was to secure the passing of legislation which would prohibit vivisection. It was therefore contended by Mr Molloy that because the common law had always opposed the practice of abortion, no question could arise of the courts having to make a value judgment of public benefit in relation to the Society's principal object. It was therefore contended that the Society's opposition to abortion was not a "political" purpose or object. Mr Bridger, on behalf of the Commissioner, submitted that the one and only object of the Society was to oppose the proposals for abortion law reform which were being promulgated throughout New Zealand and which had indeed been the cause of the formation of the Society, and since those proposals for reform envisaged the abolition of those sections of the Crimes Act 1961 which constituted the procurement of abortion as a crime, it followed that the Society's main object was political because it was aimed at frustrating admittedly political proposals. Some support for that submission is to be found in an observation of Vaisey J in Re Hopkinson [1949] 1 All ER 346 at 350. The learned Judge referred to the dictum of Lord Parker in Bowman v Secular Society Ltd, supra, to the effect that promoting a change in the law is not a charitable object, and went on to say in respect of that dictum: "that it would be equally true to apply it to the advocating or promoting of the maintenance of the present law, because the court would have no means in that case of judging whether the absence of a change in the law would or would not be for the public benefit."

I have come to the conclusion that the argument for the Commission on this branch of the case ought to be accepted. I place on one side such parts of the evidence which seem to indicate occasional political involvement by the Society in the popular sense, such as representations made to Members of Parliament and questionnaires addressed to Parliamentary candidates and the like. Confining my attention solely to the clear purpose of the Society in seeking to prevent the changes in the statute law advocated by the Abortion Law Reform Association, I think that such purpose, being aimed at frustrating an obvious political object, must be itself a "political" object within the meaning attributable to that word in the law of charities.

I turn now to consider Mr Molloy's second submission. He contended that if any aim or object of the Society was in fact "political" it was, in any event, merely incidental to the main objects of the Society, which were devoted to the principal end of educating the public mind as to the true basis of social and moral opposition to abortion. It was submitted that such of the objects of a society which involved the maintaining and the improving of legal safeguards were only means to the principal end of the society. In this regard, considerable reliance was placed upon the following passages from the speech of Lord Normand in National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31, at pp 75-76:

"The distinction between a political association and a charitable trust has not been defined and I doubt whether it admits of precise definition. The Attorney-General however submitted that any association which included among its objects the passing by Parliament of any legislation, unless it were an uncontroversial enabling act, was to be considered a political association, and it must be refused the privileges which the law allows to charities. But no authority was cited which would warrant so extreme a proposition. The formation of voluntary associations for the furtherance of the improvement of morals is familiar, and such associations are a well recognized sub division of the fourth of Lord Macnaghten's divisions of charities in Pemsel's case (Comrs for Special Purposes of the Income Tax v Pemsel) [1891] AC 531, 583 …. Societies for the amelioration of the condition of animals like other societies for the improvement of human morals do not as a rule limit their activities to one particular method of advancing their cause. Commonly they hope to make voluntary converts, and they also hope to educate public opinion and so to bring its influence to bear upon those who offend against a humane code of conduct towards animals. But they seldom disclaim and frequently avow an intention of inducing Parliament to pass new legislation if a favourable opportunity should arise of furthering their purpose by that means. A society for the prevention of cruelty to animals, for example, may include among its professed purposes amendments of the law dealing with field sports or the taking of eggs or the like. Yet it would not, in my view, necessarily lose its right to be considered a charity, and if that right were questioned, it would become the duty of the Court to decide whether the general purpose of the society was the improvement of morals by various lawful means including new legislation, all such means being subsidiary to the general charitable purpose …. The problem is therefore to discover the general purposes of the society and whether they are in the main political or in the main charitable. It is a question of degree of a sort well-known to the Courts."

It is settled law that the existence of subsidiary political objects will not affect the otherwise charitable status of an association. Cf: Congregational Union of New South Wales v Thistlethwayte (1952) 87 CLR 375, 441-443. Consequently, it was argued by Mr Molloy that because the one general object of the society is to educate the public by providing it with facts which it sees to be the subject of considerable ignorance or misunderstanding, such object is therefore charitable under either the second or fourth branches of the Pemsel classification and cannot be affected by any subsidiary "political" object or aim which the Society's constitution or activities may seem to reveal.

Notwithstanding this persuasive and closely-reasoned argument advanced on behalf of the objector, I have reached the view that the argument for the Commissioner must again prevail. As I see the evidence in the case, the activities of the Society in disseminating facts and opinions for the improvement of public understanding on this serious moral issue do not in themselves constitute an end to which various means are directed. I see those activities as only being the means by which one end or object is to be attained, namely, the prevention of any change by Parliament in the penal sanctions controlling the procurement of abortion. It was the activity of the abortion law reformers which instigated the formation of the Society, and the professed single object of the Society, as I see it, is to maintain the law in its present form and even to encourage further legislative safeguards. In my opinion, this is exclusively a "political" object, and it is not merely a main object of the Society but in fact constitutes its one principal object. I therefore cannot accept Mr Molloy's second submission.

My conclusions on the first two submissions for the objector make it unnecessary for me to consider the third submission, which is based on the premise, which I have rejected, that the Society has either no political objects or merely subsidiary political objects.

There remains for consideration the fourth and final submissions advanced for the objector. I think it is certainly correct to say, as submitted by Mr Molloy, that s 84B(2)(a) reflects a legislative intention to grant the special exemption in respect of donations to a society which is not a charity in the strict sense or whose funds are not applied for strictly charitable purposes. Trusts for "benevolent" or "philanthropic" purposes are not charitable trusts in the strict sense. But, as I read the section, the effect of the enactment is not to weaken the legal concept of charitable purpose as a qualification for the statutory exemption, even though the definition in s 2 is drafted in an inclusive sense. It is not suggested that the Society in the present case distributed funds wholly or principally for any benevolent, philanthropic, or cultural purposes. A donation to the Society can therefore only qualify for exemption if the Society's funds are applied wholly or principally to any charitable purposes, and the argument for the objector on this fourth submission is that the purposes of the Society, even if not charitable in the strict sense, approach that description so closely as to be "charitable" in the fiscal sense.

One may start with the safe assumption that the reference to "charitable purposes" in the Land and Income Tax Act was not intended to attach a popular meaning to that phrase. A trust for the advancement of education, for example, is charitable in the legal sense but not in the popular sense. The advancement of education stands far apart from the popular concept of charity. The argument for the objector must therefore be that the main purpose of the Society is so closely identified with a legal charitable purpose as to fall within the more extended meaning to be given to the statutory expression. But even assuming that "charitable purposes" in the income tax legislation is to be more liberally interpreted than the law of charities will allow, a proposition which I doubt, the activities of the Society seem clearly not to qualify. The advancement of education does not include indoctrination with the merits of a cause, and it is not for the public benefit, in the charitable sense, to take one side in a public controversy, even when the advancement of moral thinking is the means adopted to incline public opinion towards the desired direction. What the Society has really done is to take a decisive stand on a controversial public issue. All its activities are directed towards attracting allegiance to its views. The issues which arise are social, legal and philosophical. Religious principles are also in question, and each argument propounded on one side or the other is met by the rancour of intractable opposition. The dispute resembles the ceaseless controversy described by Dante in the "Paradiso":

"One for statutes, and one for aphorisms Was hunting; this argument, the priesthood follows; That argument, by force or sophistry, aspired to rule …"

(Canto XI).

The differences between the Society and its opponents are indeed profound, and it must be in the national interest to impress the depth of the controversy upon the public mind. But in my opinion the purposes of the Society are not charitable purposes, either directly or collaterally, and the objection must be dismissed. I make no order as to costs.