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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> The Society of Writers to the Signet v. Petitioners [1886] ScotLR 24_27 (3 November 1886)
URL: http://www.bailii.org/scot/cases/ScotCS/1886/24SLR0027.html
Cite as: [1886] ScotLR 24_27, [1886] SLR 24_27
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SCOTTISH_SLR_Court_of_Session
Page: 27↓
Court of Session Inner House First Division.
v.
Facts:
The 11th section of the Customs and Inland Revenue Act 1885 imposes in lieu of succession-duty a tax of 5 per cent. on all real and personal property of bodies corporate or unincorporate, after deducting “necessary outgoings, including the receiver's remuneration,” and costs, charges, and expenses incurred in the management of such property. Exemption from such duty is granted in favour of …“(3) Property which, or the income or profit whereof, shall be 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.… (6) Property acquired by or with funds voluntarily contributed to any body corporate or uniucorporate within a period of thirty years immediately preceding.” In an appeal by the Society of Writers to the Signet against the duty imposed on them, held (1) that as its members joined it for the purpose of prosecuting a profession, and not merely of education or literature, its property, including its library, was not exempt as “legally appropriated to the promotion of education or literature;” (2) that the money paid by entrants was not “voluntarily contributed,” which words mean gratuitously gifted; (3) that landlord's taxes, insurance, and repairs on the library buildings fell to be deducted as necessary outgoings, but no other taxes, nor salaries of librarians, nor insurance on the books in the library.
The Society of Writers to Her Majesty's Signet are the owners of real and personal property consisting of the Signet Library Buildings in Edinburgh, and certain funds and investments.
By the Customs and Inland Revenue Act 1885, 48 and 49 Vict., cap. 51, section 11, it is, inter alia, enacted as follows:—“Whereas certain property, by reason of the same belonging to or being vested in bodies corporate or unincorporate, escapes liability to probate, legacy, or succession-duties, and it is expedient to impose a duty thereon by way of compensation to the Revenue: Be it therefore enacted that there shall be levied and paid to Her Majesty in respect of all real and personal property which shall have belonged to or been vested in any body corporate or unincorporate, during the yearly period ending on the 5th day of April 1885, or during any subsequent yearly period ending on the same day in any year, a duty at the rate of £5 per centum upon the annual value, income, or profits of such property accrued to such body corporate or unincorporate, in the same yearly period, after deducting therefrom all necessary outgoings, including the receiver's remuneration, and costs, charges, and expenses properly incurred in the management of such property.” The same section also provides that there shall be subject to exemption from such duty property of the description specified in various clauses thereof, and, among others, the following, viz.—Clause (3), “Property which, or the income or profits whereof, shall be legally appropriated and applied for any purpose connected with any religious persuason, or for any charitable purpose, or for the promotion of education, literature, science, or the fine arts;” and clause (6), “Property acquired by or with funds voluntarily contributed to any body corporate or unincorporate, within a period of thirty years immediately preceding.”
By section 15 the Act provides for the giving in by bodies corporate or unincorporate liable to the duty of an account of the property in respect whereof it is payable, and of the deductions claimed. section 17 (clause 1) provides for this course to be taken by the commissioners if dissatisfied with the account rendered; and section 19 (clause 2) of the Act, and section 50 of the Succession Act 1853 (16 and 17 Vict. cap. 51), provide machinery for appeal, which is of the same nature as in appeals regarding succession-duty.
The Society delivered to the Commissioners an account, in the form supplied under the provisions of the Act, of all their property in respect of which duty imposed by The Customs and Inland Revenue Act 1885 was payable, and of the gross annual value, income, or profits thereof accrued to them for the yearly period ending on the 5th day of April 1885, and of all deductions claimed in respect thereof, whether by relation to any of the exemptions from duty mentioned in the Act or as necessary outgoings.
The property of the, Society detailed in this account as chargeable with duty under the Act was as follows:—
I.— Real Estate
Gross annual value, income, or profits for year to 5th April 1885,
£241
0
0
Amount of deductions,
214
13
3½
Net annual value, income, or pro—fits, chargeable with duty,
£26
6
8½
II.— Personal Estate.
Gross yearly income,
£909
19
10
Amount of deductions,
1,076
12
0
Net annual income, chargeable with duty,
Nil.
Summary.
Total gross annual value of real estate,
£241
0
0
Total gross income of personal estate,
909
19
10
£1,150
19
10
Total amount of deductions or outgoings claimed,
1,991
5
3
Nil.
The deductions, amounting to £214, 13s. 3½d., under the first head (real estate), were made up as follows:—
Land tax,
£0
15
7
Insurance on buildings and books,
36
5
1
Rates and taxes,
57
11
9½
Repairs,
117
19
1
Gas,
2
1
9
£214
13
3½
Page: 28↓
And the deductions, amounting to £1076, 12s., under the second head, were made up as follows:—
Salaries and Wages—Treasurer,
£105
0
0
Professor of Conveyancing in the University of Edinburgh,
105
0
0
Librarians, Hall-keeper, &c.,
866
12
0
£1,076
12
0
The Commissioners not being satisfied with the account, made an assessment of the Society's property on the net sum of £1104, 8s. 10d., the duty on which, at the rate of 5 per cent., amounted to, and was assessed at, £55, 4s. 5d. The Commissioners explained that said assessment was arrived at in the following manner:—
Gross value of real estate,
£250
0
0
Dividends,
909
19
10
£1,159
19
10
Less—
Insurance on buildings,
£9
11
0
Repairs—10 per cent.,
25
0
0
One-fifth treasurer's Salary,
21
0
0
55
11
0
Amount assessable,
£1,104
8
10
The Society, feeling aggrieved by this assessment, presented this appeal.
It appeared from the admissions made during the course of the argument that the whole property of the Society had been acquired subsequently to 1862, and that it was created by the sums paid by intrants on admission to the membership of the Society. It further appeared that the Society were bound by an agreement with the Town Council to contribute to the Chair of Conveyancing. The minutes of the Society containing this agreement were incorporated in an Act of the Town Council.
Argued for the petitioners—I. Exemptions:—This property fell under the third clause of exemption, its use being educational so far as the library and the Chair of Conveyancing were concerned, both institutions being for the benefit of the entrants and apprentices. It fell also under the fourth exemption. The fund had been voluntarily contributed since 1862, so that the time had not arrived for the incidence of duty. It was “legally appropriated.” “Legally” meant lawfully. Even if it inferred matter of obligation, the Society was bound not only to its entrants but to the Town Council. II. Necessary Outgoings:—The deduction of the librarians' salaries was given up. The treasurer's salary should be deducted to the extent of £50— i.e., 5 per cent. on the property managed.
Argued for the respondents—A corporation possessing a library did not necessarily fall within the exception unless the funds of that body were devoted solely to the purposes of education, literature, science, or art. Here the books, like the buildings, were primarily for the convenience of members in carrying on their profession. “Legally appropriated” inferred that the appropriation be binding; and there was not sufficient evidence that there was an obligation binding on the Society to pay even the salary of the Professor of Conveyancing. “Voluntarily” was not the converse of “compulsorily.” The entrant was simply in the position of a purchaser, and his entry-money was the price to be paid.
Petitioners' authorities— In re Elwes, 1858, 28 L.J. Exch. 46; Earl Cowley's Succession, 1866, L.R. 1 Exch. 288.
Respondents' authorities— The Governors of the Russell Institution v. The Vestrymen of St Giles-in-the-Eields and St George, Bloomsbury, 1853, 18 Engl. Jur. 597; Hanson on Probate, 3d ed. p. 300.
At advising—
But there are certain exemptions; and the first question is, whether the Society of Writers to the Signet can take the benefit of any of these exemptions?
Now, exception is sought under the third head, viz., “Property which, or the income or profits whereof, shall be 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.”
It is said that the property of this Society is “legally appropriated” to educational, literary, scientific, and artistic purposes. Leaving out of view the meaning of the words “legally appropriated,” the question arises whether this property or income is so applied. There may be cases in which property or income may conduce indirectly to the advancement of education, &c., and yet certainly not fall under this exemption. Almost every institution created for the benefit of its members, of which a library formed part, would fall under that exemption if it were enough to show that indirectly the property would promote education, &c. But I apprehend the meaning of this exception to be that the property or income be, if not exclusively, at least in the main and as its chief object, devoted to those purposes. Now, can that be said to be the case with regard to this Society? Its members join it, not to study law, or for purposes of education, but for the purpose of making pecuniary gain by the exercise of a profession.
Page: 29↓
Still further, it may be questioned on the very same ground whether, even if the money was so applied, it is legally appropriated to that purpose— i.e., so as to be legally binding upon the parties.
The Society may be, and I think is, a customary corporation. I think it pretty well established that they are so, but that does not make much difference in the matter, for if it should be in the interest of the profession that this money should be applied to a different purpose, I doubt if they would be disabled from so applying it, and thus diverting it from its application to educational purposes.
For these reasons I am of opinion that exemption cannot be claimed, viz., first, because this money is not applied to educational purposes; and 2dly, because it is not “legally appropriated or applied for the promotion of education, literature,” &c., within the true meaning of the statute.
Another ground of exemption is claimed under the sixth head, viz., “Property acquired by or with funds voluntarily contributed to any body corporate or unincorporate within a period of thirty years immediately preceding.”
Now, the money which is said to be “voluntarily contributed” is the money paid by intrants as the condition of obtaining admission. A considerable part is paid by the apprentice on entering on his indenture, and the balance is paid on admission as a full member of the Society. Can this payment be said to be voluntary? In one sense, all money paid without compulsion is paid voluntarily. But that cannot be the meaning of the clause. Everything paid under a contract is paid voluntarily, unless some dispute arise as to the meaning or effect of the contract. But “voluntarily” has another meaning. When we speak of money “voluntarily” gifted, we mean “gratuitously.” Now, I think if money were presented to the Society without consideration, and if property were within a certain period of years purchased with that money, that property would fall under the exception. It would not be paid under a contract. But in the case before us the money was paid as the price of admission to the Society. When an apprentice signs his indenture, he enters into a contract not merely with his master but with the Society. The obligation under the contract is on the one hand to pay, and on the other hand to take on trials and admit if qualified. It is just as involuntary a payment as that of any money that one is obliged to pay. And what is to be said of the last instalment that falls to be paid? The intrant will not be admitted until it is paid. He has already a vested interest; but that interest he forfeits if he do not make the last payment. It is as compulsory a payment as anything can be, and accordingly I think neither of these clauses apply to this Society's property in general. There is, however, one part of the property that stands in a different position. I refer to the money applied to the endowment of the Chair of Conveyancing. Enough evidence has been supplied to satisfy the Court that the Society is bound by agreement with the Town Council to continue its contributions. That seems very clearly to fall under the third clause of exemptions.
With regard to the question of outgoings, I do not think there is any serious difference between the parties. It is plain that the account given in by the petitioners must be largely modified. They claim land-tax and insurance, of which great part is on the books in the library, and insurance will be allowed to the full amount in so far as it is on the buildings.
As to the salary of the treasurer or “receiver,” I agree with the argument of the Lord Advocate. All that the treasurer has to do as receiver is to draw the rents, if any, of heritable property and receive payment of interest and dividends on personal estate; and I should say that the allowance of 20 guineas as fixed by the Commissioners is a very fair proportion of the salary to be deducted on these grounds.
With regard to rates, all I think it necessary to say is that landlord's rates must be deducted. As to repairs, £25 seems a fair estimate.
The Court pronounced this interlocutor:—
“Find that the real and personal property of the petitioners mentioned in the appeal, the gross annual value of which amounts to £1159, 19s. 10d. sterling, is liable to the duty on property of bodies corporate and unincorporate under the Customs and Inland Revenue Act 1885: Find that the annual value of the real property for the year ending 5th April 1885 is £250, and that the income or profits of the personal property for the same year is £909, 19s. 10d.: Find that the annual payment of £105 granted by the petitioners under contract for the perpetual endowment of the Chair of Conveyancing in the University of Edinburgh is to be allowed as legally appropriated and applied for the promotion of education: Find that there should be included in the necessary outgoings to be deducted in reference to the annual value of the real property the sum of £13, 18s. 7d., being the land-tax and the owner's proportion of the rates chargeable in respect of such real property: Find that the sum of £21 proposed by the Commissioners of Inland Revenue to be deducted as receiver's remuneration is reasonable: Find that the deduction for insurance and repairs is to be limited to such part of the sums claimed as is applicable to the real property, and accordingly that the sum to be deducted for insurance is £9, 11s., and that the sum of £25, being 10 per cent. on the annual value of the real property, is a reasonable allowance for repairs: Find, in accordance with the foregoing findings, that the nett annual value of the real and personal property of the petitioners for the said year liable to assessment under the said Act amounts to £985, 10s. 3d., and that the duty of 5 per cent. chargeable thereon for the year 1885–86 in terms of the said Act amounts to £49, 5s. 6d.: Ordain the respondents to repay to the petitioners the sum of £5, 18s. 11d., being the difference between the said sum of £49, 5s. 6d. and the sum of £55, 4s. 5d., which was paid by the petitioners to the respondents in respect of said duty 12th
Page: 30↓
Counsel for Petitioners— D.-F. Mackintosh, Q.C.— Graham Murray. Agent— C. B. Logan, W.S.
Counsel for Respondent—Lord Adv. Macdonald, Q.C.— A. J. Young. Agent— David Crole, Solicitor of Inland Revenue.