Scottish Court of Session Decisions

At advising on 19th December 1951,—

LORD CARMONT .—The respondents in this case claim to be a body of persons "established for charitable purposes only" and therefore that the profits of the holding of an annual sports meeting were exempt from income tax, under section 30 (1) (c) of the Finance Act, 1921, as amended.

The annual sports are held under the auspices of the City of Glasgow Police Athletic Association, which has been formed to encourage all forms of athletic sports and general pastimes. Included in the aforementioned generality are angling, badminton, billiards, bowls, boxing and wrestling, and cricket, football, and golf, and also table tennis, photography, and art, together with the holding of dances and participation in mystery-tours in motor vehicles.

As a lawyer without any pretensions to the knowledge of any other system of law, I was at first inclined to regard the respondents' claim as somewhat, if not wholly, ridiculous. I find, however, that the Special Commissioners who decided this case, while starting from the view that an Association formed to encourage and promote all forms of athletic sports and pastimes had not per se a charitable object, reached

the conclusion that there were here "special concomitants" the existence of which justified the respondents' exemption from tax as an Association established for charitable purposes only. The concomitants referred to are:—That the Association is exclusively for the officers and ex-officers of the Glasgow Police Force under the control of the chief constable and regarded as being an essential part of the police organisation; that the Secretaries of State for the Home Department and for Scotland have approved of the constitution and rules of the Association so as to encourage the development of all forms of amateur sport throughout the police forces of the United Kingdom; that the existence and activities of the Association play an important part in the maintenance of physical fitness, health, morale and esprit de corps within the force and attract recruits to it and so help to maintain strength and efficiency by conducing to a contented force, keep the members of it happy and induce them to continue in it rather than leave it. Finally it is said that the Association conduces to public order by promoting good relations between the force and the general public, and, by increasing the efficiency of the force generally, directly benefits the public. It only remains to add that on the success of the annual police sports depends the financial stability of the Association.

Put in the smallest compass, it is said that the beneficiaries of this charity are the public—the benefit being conferred through the creation and continuance of a happy and contented police force.

The legal bridge used by the Special Commissioners to reach their conclusion in favour of the respondents is a group of cases decided in the Chancery Division of the High Court of Justice in England which sustained as charitable gifts which had the effect of increasing the efficiency of the British Army and so conferring a direct benefit on the public. As the gifts in question were (1) to a regimental fund for the promotion of sport—In re Gray—and (2) of a library and plate to an officers' mess—In re Good—it seems to me that the benefit can hardly be described as direct when considered with reference to the public. But it may be that a gift which confers some benefit on the public, however remotely, may in England satisfy the tests touching charity, and it may be that the decisions referred to are valid even if only a remote public benefit is secured.

Let me say at once, in order to make my opinion plain, that if the two decisions which I have cited had been decisions of a single Judge in the Outer House of the Court of Session I personally would not have followed them. It is said, however, by the respondents in this case that these decisions are the accepted law of England and that it is the law of England which must be applied when we are interpreting a Finance Act of general application to the United Kingdom when the field of interpretation is:—

"What are charitable purposes?"

I must ask your Lordships' forbearance in considering our position in this Court in regard to this matter.

It requires no more than a statement to secure agreement that it is highly desirable that in the interpretation of a United Kingdom statute, particularly as regards taxing matters, there should be uniformity as between the jurisdictions affected. Pemsel'scase informed us, in an authoritative decision in 1891, that the words "charitable Athletic purposes" in a Finance Act (also applicable to Scotland) must be construed according to the legal and technical meaning given to those words by English law. This was decided by a bare majority, the dissenting Judges, Lord Chancellor Halsbury and Lord Bramwell, taking the view that the technical construction of the words "charitable purposes" imputed by the majority to English law could not be accepted as the right interpretation, as that meaning had not been adopted in Scots law. It would have been easy for the majority to have said:—

"It matters not that Scots law puts another meaning on the words ‘charitable purposes’ in trust law and other connexions in this Finance Act you must read ‘charitable purposes’ as meaning what it does on the technical construction put on the words by English law."

To have said that would have been tantamount to saying the Scots Judges must learn English Chancery law, and, as we only know what foreign law is by being informed of it as a matter of fact, the majority Judges carefully avoided saying it. They supported their decision by the statement that Scottish Judges did not need to be informed as to the technicality of Chancery law on the point because, said Lord Watson (at p. 558):

"I am satisfied that, in legislative language, at least, the expression charitable has hitherto borne a comprehensive meaning according to Scotch (sic) as well as according to English law."

And Lord Watson added later (at p. 563) that "the word charitable has been employed in the legislative language of the Scottish Parliament, and of the British Parliament when legislating for Scotland, in substantially the same sense in which it has been interpreted by English Courts. It must, therefore, in my opinion, receive that interpretation in the Income Tax Act of 1842." But Lord Watson does not say what is to take place as regards those points in which the law is not the same. Lord Macnaghten says (at p. 587):

"I have come to the conclusion that the expression ‘trust for charitable purposes’ in the Act of 1842, and the other expressions in the Act in which the word ‘charitable’ occurs, must be construed in their technical meaning according to English law."

After sketching with cynical amusement Scotland's inferior position in legislative enactments since the time when Lord Hardwicke stuck polite pins into Lord Kames, when he pointed out that, when there are two countries with different systems of jurisprudence under one Legislature, the expressions in statutes applying to both are almost always taken from the language or style of one and do not harmonise equally with the genius or terms of both systems of law, Lord Macnaghten softens what he has had to say by borrowing (at p. 582) the words of Lord

Chelmsford:

"I cannot discover that there is any great dissimilarity between the law of Scotland and the law of England with respect to charities."

But whether or not the dissimilarity was less rather than great in Lord Chelmsford's time, the law regarding charities was different and it seems to me to have been growing not less but more different ever since. It seems to me to be inevitable that this should be so, for the Court of Chancery seems to boast of broadening its principles from precedent to precedent. Even if it be taken that the differences were not great in 1891, and that it is the duty of the Court of Session to accept under the Pemsel decision the meaning of "charitable purposes" as interpreted technically under English law and as settled down to that date, and only as extended by decisions in the House of Lords which must be accepted as authoritative by our Courts, must we go on trying to follow the technical development of the meaning of charitable purposes as decided in the Court of Chancery? Lord Macnaghten had a view on this matter which was expressed in Pemsel's ease. "I cannot help," he said (at p. 590), "reminding your Lordships, in conclusion, that the Income Tax Act is not a statute which was passed once for all. It has expired, and been revived, and reenacted over and over again; every revival and re-enactment is a new Act. It is impossible to suppose that on every occasion the Legislature can have been ignorant of the manner in which the tax was being administered by a department of the State under the guidance of their legal advisers.…The point, of course, is not that a continuous practice following legislation interprets the mind of the Legislature, but that when you find legislation following a continuous practice and repeating the very words on which that practice was founded it may perhaps fairly be inferred that the Legislature in re-enacting the statute intended those words to be understood in their received meaning. And perhaps it might be argued that the inference grows stronger with each successive re-enactment."

If this is the correct approach to the matter, then it would appear that the Finance Act of 1921 carried within it the technical interpretation of the Court of Chancery up to that year, including In re Good, which is relied on by the Special Commissioners in this case. Further, accepting Chitty, J., in In re Foveaux, "Institutions whose objects are analogous to those mentioned in the statute [of Elizabeth] are admitted to be charities; and, again, institutions which are analogous to those already admitted by reported decisions are held to be charities." It was because of the combination of "special concomitants" specified by the Special Commissioners that they have found that the respondent Association constitutes a charity. I have no legal qualification to say whether or not the Chancery decisions relied on correctly state the English law and give the technical meaning to "charitable purposes" as that phrase is used to-day. Many Chancery decisions regarding trusts are couched in language which I do not pretend to understand. The law seems to me to be as stated by the Special Commissioners, but I am quite without qualification to say that it is so. If Pemsel'sdecision has to be read as stated and carried up to date, then the present appeal to this Court from the Special Commissioners seems an idle formality and to accord ill with the dignity of an Appeal Court.

LORD RUSSELL. —The question of law to be decided is whether the respondent Association has been rightly held to be a charity as being a body of persons "established for charitable purposes only" within the meaning of section 30, subsection (1) (c) (as amended), of the Finance Act, 1921. In a Scottish Court the words "charity" and "charitable" occurring in an instrument are construed in accordance with the canons of construction and the principles of trust law recognised by the law of Scotland. For a brief and succinct account of the conflicting judicial pronouncements preceding the latest judicial approval of that proposition I may refer to the opinion of the Lord President in Wink's Executors. But it is the case that where those words occur in a United Kingdom taxing statute a Scottish Court must give them the meaning accorded by the law of England. That was so laid down in the House of Lords in 1891 in the case of Pemsel In Jackson's Trustees in which a question was raised as to the meaning of the words "charitable purposes only" occurring in section 37 (1) (b) of the Income Tax Act, 1918, Lord President Clyde stated (at p. 587):

"What is the meaning of ‘charitable purposes’ as used in the section? As was made clear by the decision in the case of Pemsel,that is a question which must be answered according to the meaning of the expression ‘charitable purposes’ in the law of England, and not with regard to the meaning which those words naturally bear in the law of Scotland."

In the same case Lord Sands said (at p. 587):

"Accepting as we must do the case of Pemsel as binding upon us, it follows that, in determining what is charitable within the meaning of the taxing Act, we must consider what is within the definition of charity in the law of England."

In the more recent case of Trustees for the Roll of Voluntary Workers similar views are expressed in the opinions delivered by Lord President Normand and Lord Fleming. I venture to quote one sentence from the opinion of Lord Moncrieff (at p. 55):

"I recognise, however, that… we must for income tax purposes disregard the law of charity in Scotland and endeavour to apply the requirements of a system (the law of England) with which we do not profess to be familiar."

In a Scottish tribunal the law of England is regarded as a foreign law. Its ascertainment is matter of fact (see, for example, Dickson on Evidence, para. 394), to be determined by evidence or by joint admission furnished by the, litigants. Moreover, statutory provision exists whereby a case may be presented to the foreign Court for the ascertainment of the law on a particular question. A perusal of the facts found in the present case shows that no evidence was led and no admission made as to the requirements of English law in respect of the activities and purposes of a body like the respondent Association relevant to determine its claim to be established for charitable purposes only. Of the decisions cited to us by counsel during the debate the recent case of the National Anti- Vivisection Society reveals, inter alia, that on this branch of the law the decisions pronounced by the English Court are numerous and not easily reconcilable. It seems plain that the Special Commissioners in arriving at their decision in this case did so by applying, as they were bound to do, the English law of charitable trusts with which no doubt they are familiar. We are invited to hold that their decision is wrong in that it is not supported by that law—a law as to which I at least am not competent to pronounce a reasoned judgment. The perplexity in which this Court is thus placed in the present case has been more fully discussed and commented on in the opinions of your Lordships which I had an opportunity of considering. I respectfully agree with the analysis of the situation, and I desire to associate myself with the comments made therein by your Lordships upon the embarrassing position of the Court in this case. I think it right, however, in deference to the arguments presented to us by counsel, to state shortly the essential facts which seem relevant to the question raised for our decision. In doing so I note that counsel on both sides were agreed that the Association's claim to be a charity depends on its being shown that it is a body established for purposes beneficial to the community or to some sufficiently defined portion of the community—and so falling within the fourth category of Lord Macnaghten's classification of charity as expounded in the case of Pemsel. Further, I accept, as did the Commissioners, the dictum of Lord Wright in the Anti- Vivisection case to the effect that "healthy and manly sports are certainly in fact beneficial to the public, but apart from special concomitants are not generally entitled to qualify as charitable objects."

Turning now to the facts—it appears that the Association formed in 1938 was established with the purpose of co-ordinating the various athletic and sporting activities of the members of the City of Glasgow Police Force. Its object is to encourage all forms of athletic sports and general pastimes, and its membership, at first compulsory to all new entrants to the force but since 1948 voluntary, comprises 85 per cent of the entire force, including all post-1948 recruits. It is administered by, and all its office-bearers are members of, the force, of whom the chief constable as president must approve all resolutions and decisions passed at all meetings of the Association. Each serving member of the force pays a weekly subscription and each ex-member of the force—these being also eligible for membership—pays an annual subscription. The rules and activities of the Association are very fully described in the case and need not be further particularised save to mention that in each year the Association organises and holds an open amateur sports meeting in Glasgow for the purpose, inter alia, of raising funds which are applied for the Association's purposes. For the year ending 30th September 1950 the Association's total revenue was £2778, derived as to £1225 from members' subscriptions and as to £1214 from the profit on the annual sports meeting. Prima facie the latter sum represents the profits of a trade—in regard to which exemption from income tax is claimed. From the detailed findings of fact in the case it appears to me that the Association may not inaptly be described as an officially recognised branch of activity participated in by 85 per cent of the members of the Glasgow Police Force, aimed at and resulting in the increase of the efficiency of the force. The Special Commissioners have found that in fact the increased efficiency of the force so resulting directly benefits the public in respect of four different matters. These shortly stated are (1) fitness, morale and esprit de corps within the force; (2) the attraction of recruits; (3) the retention in the force of members rendered contented and happy at their work; and (4) the promotion of good relations between the force and members of the public—a circumstance conducive to public order.

If I accept the facts thus enumerated, am I in a position to affirm that the Special Commissioners were bound by the law of England to hold that the Association is not a body of persons established for charitable purposes? It was suggested in argument that, since in 1891 it was authoritatively affirmed in the House of Lords that there was little, if any, difference between the law of England and the law of Scotland in regard to the legal meaning of charity, the law of England to be applied to the present case is the law of England as it existed in 1891; and that accordingly this case is capable of being decided by the application of Scots law. I do not feel able to assent to the view so presented, since it is clear that, in repeated decisions pronounced in the English Courts subsequent to 1891, the concepts of what is embraced by charity in English law have been altered, adapted and extended by legal decisions from time to time. I am therefore forced to the conclusion that the law of England which falls to be applied is the law as expounded and illustrated by decisions given in the English Courts both before and since 1891. In that situation I may mention some of the decisions founded upon by counsel for the Association in support of their argument that this appeal should be refused. In Halsbury's Laws of England it is stated that gifts tending to increase the efficiency of the army are now a recognised category of charitable gifts in England. That statement seems to be supported by decisions pronounced in the Chancery Courts in such cases as In re Good;In re Donald; In re Gray; In re Lord Stratheden and In re Stephens.It appears also from the speeches delivered by their Lordships in the Anti-Vivisection case that the original objects of charity contained in the Statute of Elizabeth are from time to time diminished or enlarged by decisions pronounced in the Court of Chancery to meet changes in social habits, knowledge and the like, and that these original objects are thus capable of being augmented by way of analogy. If the purpose of a gift is the promotion of physical efficiency in the members of a regiment by means of the provision of facilities for engaging in sport and is therefore a valid charitable purpose as being beneficial to the community (see, e.g., In re Gray), it may be arguable by way of analogy that a similar purpose directed to the promotion of such efficiency in the members of a police force is also a charitable purpose as being beneficial to a defined section of the community. The respondent Association consists of a body of persons representing a section of a uniformed, disciplined, force organised for the maintenance of law and order among the citizens of Glasgow. If, therefore, it is permissible to expand the concept of purposes which are "beneficial to the public" as covering purposes which aim at and result in the promotion of efficiency of an army unit, it may be difficult to distinguish between the army on the one hand and the members of the police force on the other hand so as to exclude the latter from the category so expanded. The Special Commissioners appear to have been able to apply that principle; and they have also found that the "special concomitants" referred to in the above-quoted dictum of Lord Wright are in fact present as features of the activities and purposes of the Association.

I need not pursue the matter further. If the case is a narrow one the decision of the Special Commissioners is not one to be lightly overruled. If I felt myself free to decide this case by reference to the law of Scotland I would be disposed to sustain the appeal. Since, however, I am bound to reach a decision by applying the law of England—the knowledge of which I do not profess—I do not feel justified in differing from the conclusions arrived at by the Special Commissioners and I therefore agree that the appeal should be refused.

LORD PRESIDENT (Cooper).—The question raised by this appeal is whether the Special Commissioners were right in holding that this athletic and recreational Association is entitled to exemption from income tax as a "charity" by virtue of section 30 of the Finance Act, 1921, as amended by section 24 of the Finance Act, 1927, the issue being whether the Association is a body of persons "established for charitable purposes only."

My difficulty is to determine what function a Scottish Court is under a duty to discharge in a case of this kind, and I feel bound to state this difficulty fully.

It has long been recognised that taxing statutes applicable to both Scotland and England tend to utilise the vocabulary of English law, and in dealing with an estate duty problem Lord Dunedin in Lord Advocate v. Earl of Moray's Trustees said that "the Scottish Court must do its best to give effect to the meaning of the statute, not by treating English law terms as unmeaning symbols, but as terms which, although not terms of art in Scotland, may be taken as words of ordinary popular signification and as such are capable of application to the Scottish system." Substantially the same rule had been laid down by Lord President Inglis in Baird's Trustees as regards income tax. In Gunning's Trustees this Court under the leadership of Lord Dunedin had no difficulty in holding that a United Kingdom taxing Act dealing with estate duty might have a different application in Scotland and in England, because of the difference in the law. But in income tax law a very different rule was laid down in the speech of Lord Watson in Pemsel, an English appeal from which three conclusions flow, viz.— (1) That Baird's Trustees was wrongly decided, the headnote expressly stating that it was "disapproved"; (2) that the meaning of the word "charitable" in income tax cases should be ascertained according to English law and the practice of the Court of Chancery, and (3) that the meanings assigned in 1891 to the word "charity" and "charitable" both in England and Scotland were not the same but that the terms were "practically although not absolutely co-extensive" (p. 558), "substantially the same" (p. 563), "practically co-extensive" (p. 573), and "without any great dissimilarity" (p. 582).

So matters were left in 1891, and development proceeded upon the basis of accepting in Scotland Lord Macnaghten's celebrated definition. But the law has not stood still either in Scotland or in England during the last sixty years, and the perplexities involved in the application of the rule in Pemsel have greatly multiplied.

For one thing, Baird's Trustees was partially exhumed by Lord Halsbury in 1902—Blair v. Duncan —and inferentially by the decision of the House of Lords in 1905—Grimond—in which the House approved of the dissenting judgment of Lord Moncreiff who had relied upon Baird's Trustees as still authoritative. The embarrassment created by this seeming contradiction is evidenced by Allan's Executor and Anderson's Trustees v. Scott and it is noteworthy that Baird's Trustees was still being judicially relied upon in 1929— Reid's Trustees v. Cattanach's Trustees . I am fully aware that these were not income tax cases, but the point is that these later Scottish appeals and decisions are very difficult to reconcile with the views expressed in the English appeal in Pemsel to the effect that the meanings assigned to "charity" and "charitable" on both sides of the border were "substantially the same" or with the formal "disapproval" of Baird's Trustees.

Again, the development of the general law as to "charities" in Scotland and in England has progressed since 1891 in the direction of a widening divergence and the social and economic background has been transformed since Victorian days. For instance, Hay's Trustees cannot be reconciled with Chichester Diocesan Fund, but in Wink's Executors v. Tallent, where the matter was fully considered, Hay's Trustees was followed. So far as England is concerned, we have the high authority of Lord Simonds for the proposition—National Anti—Vivisection Society v. Inland Revenue (at p. 75)—that "the cases decided on this branch of the law are legion in number and are not easy to reconcile"—a proposition with which, after listening to the argument in this case, I would venture to express my humble concurrence. Moreover it clearly appears from the Anti-Vivisection decision that ever since the days of the Statute of Elizabeth the Court of Chancery has been engaged, and its successor the Chancery Division still is engaged, in the light of "changing social habits," "changes in the law" and "increasing knowledge," upon the unending task of contracting or expanding by successive analogies "one by one" the concepts enshrined in the original enumeration contained in the old statute, and that "a crucial test" in determining whether a trust is charitable is to be sought in the competence of the intervention of the Attorney-General on behalf of the King as parens patriœ. Quoting from Tyssen on Charitable Bequests, Lord Simonds observes (at p. 64) that the determination of what are and are not charitable objects is the duty of the Court of Chancery (acting on the principles briefly summarised above), and that from time to time it may be the duty of that Court to decline to regard as charitable a purpose to which in an earlier age that quality would have been ascribed.

All this I need hardly say I unreservedly accept. But the question is how the Court of Session can invest itself with the unique attributes, traditions and duties of the Chancery Division and with a competent knowledge of the English law of charitable trusts with a view to performing a function which belongs to a different system of law by reference to a "crucial test" which has no counterpart in Scots law or practice. In the fiscal cases relating to charities which have so far occurred in Scotland, this issue has proved capable of evasion or has been passed by in silence, though it nearly became critical in Jackson's Trustees in which the Lord Ordinary sharply raised the point. In the present case I cannot see how it can be evaded. We are invited for the first time to deal with a type of enterprise which has never previously come before the Courts in either country, and which would seem to afford scope for the typical exercise of the special function of the Chancery Division; and the respondents have in terms urged us that it is our duty to apply English law and English law alone, and to follow unquestioningly certain decisions in the Chancery Division (a statement which has the support of the latest Scottish textbook, Encyclopædia of Laws of Scotland, Supplement Vol. s.v. "Income Tax"), and to expand the analogy which in their view these decisions afford so as to harmonise with the social outlook of 1951. English law for us is a question of fact. It seems to me that it would be as improper for us to criticise the English decisions laid before us, as it would be inconsistent with our position as a Scottish Court administering only Scots law to accept and apply doctrines of foreign law otherwise than as inferences in fact. I therefore see no alternative to refusing this appeal, solely upon the ground that the Special Commissioners had material before them to warrant their decision. Whether they were right in law I do not know, and am not qualified to say. In substance the question put to us is:—What would the Chancery Division do in this case?—and that is not a question of law for a Scottish Court.

This Court has always endeavoured, and will always endeavour, to yield unquestioning obedience to the decisions of the House of Lords and also to execute faithfully all statutory jurisdictions confided to us. But in this instance we are presented with a painful dilemma from which only legislation can afford an escape by a definition of "charity" capable of application by both Scottish and English Courts, unless it is to be accepted either that no effective appeal lies in a Scottish case of this type to any Court short of the House of Lords, or else that all such Scottish appeals should be taken to the Chancery Division and not to the Court of Session. The adoption of the latter expedient would of course be a direct violation of Article XIX of the Treaty of Union.