Die Lunae, 9° Martii 1953
Parliamentary
Archives,
HL/PO/JU/4/3/1019
Lord
Normand
Lord
Oaksey
Lord
Morton of
Henryton
Lord
Reid
Lord
Cohen
HOUSE OF LORDS
COMMISSIONERS OF INLAND REVENUE
v.
CITY OF GLASGOW POLICE ATHLETIC
ASSOCIATION
9th March, 1953.
Lord Normand
MY LORDS,
The question in this appeal is
whether the Respondent Association is a body
of persons
established " for charitable purposes only ". If so, it is
agreed
that the profits of a trade, namely the holding of annual
athletic sports,
carried on by them, will be exempt from income
tax under Schedule D,
by virtue of section 30 (1) (c) of
the Finance Act, 1921, as amended by
section 24 of the Finance
Act, 1927.
I will first summarize the facts
found in the Case Stated by the Special
Commissioners. Before 1938
there were various clubs connected with the
City of Glasgow
Police. In February, 1938, they were merged in the
Respondent
Association, which was established at that time in order
to
co-ordinate the various athletic and sporting activities of the
members of the
Police Force. Attention must be drawn to certain
excerpts from the General
Rules of the Association.
Rule 2. Objects.—The
objects of the Association shall be to encour-
age and promote all
forms of athletic sports and general pastimes.
Rule 3. Officers.—.
. . The Chief Constable shall be President and
the Assistant
Chief Constables and Superintendents of the Force shall
be
Vice-Presidents.
Rule 4. Management.—The
Management of the Association shall be
vested in an Executive
Committee, Divisional activities by a Divisional
Committee and
each branch of sport or pastime by a Sectional Com-
mittee.
Rule 5. Committees.
(1) Executive Committee.—The Executive
Committee
shall consist of the President, two Vice-Presidents, one
repre-
sentative from each Divisional Committee, one
representative from each
Sports Sectional Committee, the Honorary
General Secretary and the
Honorary Treasurer, ten to form a
quorum.
(2) Divisional
Committees.—The Annual General Meeting of each
Division
shall be held in the second week of September. . . . The business
to
be transacted at such meetings shall be ... (b) to elect the
Divisional
Committee, consisting of Superintendent, Lieutenant,
Inspector, two
Sergeants and five constables.
Rule 8.
Membership.—Ordinary membership shall be restricted
to
officers and ex-officers of the City of Glasgow Police Force.
Rule 10.
Subscriptions.—The subscription for each serving
member
shall be 3d. per week deducted from pay.
Rule 21. Alteration of
Rules.—None of the foregoing Rules shall be
altered or
revoked save by a two-thirds majority of those present at the
Annual
General Meeting or at a Special Meeting called for the purpose.
Rule 23. Sanction of
Chief Constable.—All resolutions and decisions
passed at
all meetings of the Association are subject to the approval
of the
Chief Constable.
Membership of the Association
was, until 1947, a condition of service
for all new entrants into
the Glasgow Police Force. In 1948 membership
became voluntary but
in fact all recruits have continued to join the
Association. The
present membership is about 85 per cent, of the Force,
and there
were in September, 1950, nine ex-officers who retained
their
membership. Ex-officers can render useful services as
coaches. The
2
activities of the Association
include angling, athletics, badminton, billiards,
bowling, boxing
and wrestling, cricket, association football, golf, rugby foot-
ball,
shooting, swimming and training in life saving, table tennis,
dances,
'bus runs, " mystery tours " by 'bus, and whist
drives. Sports are held in
May of each year as a preparation
for the Annual Sports, the "trade"
carried on by the
Association for the purpose of raising funds. These Annual
Sports
are held on the ground of an amateur association football club,
the
use of which is given without charge. There is an attendance
of about 50,000
people, who pay for entry, and the profits are
applied solely to the purposes
of the Association. Some events
are confined to members of the Association,
others to members of
other police clubs in Great Britain. But the majority
of the
events are open to all amateurs, including members of the
Association.
Efforts are made to have some outstanding competitors
to attract the public.
The members of the Association control the
Sports, the spectators and the
traffic, and no charge is made for
their services. The net proceeds are
paid into the general fund
of the Association. In the year ended 30th Septem-
ber, 1950,
the total revenue of the Association was £2,778, of which
£1,225
was derived from members' subscriptions and £1,214
from profits of the
Annual Sports. The Association is affiliated
to the Police Athletic Associa-
tion, a body whose rules are
approved by the Home Secretary and the
Secretary of State for
Scotland, and whose objects are to encourage the
development of
all forms of amateur sport in the Police Forces and to
promote and
control suitable competitions and championships. The
relations
between the Respondent Association and the Glasgow
Police Force are close,
and the Association is regarded as an
essential part of the police organization.
It plays a valuable
part in maintaining health, morale and esprit de corps.
It helps
to bring the Force into friendly contact with the public, and it
enables
the members of the Association to mix with members of
other professions and
trades. The hours of police duty make it
almost essential that some special
provision should be made for
the recreation of the police. The activities
of the Association
are thus conducive to a contented, fit and efficient police
force;
they are a help towards recruiting, and to the promotion of good
rela-
tions with the public. By these means, also, the
Association has directly
benefited the public.
The Special Commissioners,
having found these facts, rejected the only
contention then put
forward on behalf of the Crown that by reason of the
wide nature
and extent of the objects of the Association, it was not a body
of
persons established for charitable purposes only. They were aided
in
arriving at this conclusion by such cases as in re Goode
[1905] 2 Ch., 60 and
re Gray [1925] 1 Ch., 362. As I
shall not have occasion to refer to these
cases again I will say
now that so far as they are founded on the principle
that gifts
exclusively for the purpose of promoting the efficiency of the
armed
forces are good charitable gifts, they are, in my opinion,
unassailable, but
that the decision that the actual gifts were of
that nature is more doubtful.
I would hold further that gifts or
contributions exclusively for the purpose
of promoting the
efficiency of the police forces and the preservation of public
order
are by analogy charitable gifts.
The Stated Case came before the
First Division of the Court of Session.
Their Lordships did not
address themselves to a discussion and decision of
the question of
law submitted for their opinion, " whether the City of Glasgow
"
Police Athletic Association is, within the meaning and for the
purposes of
" section 30 of the Finance Act, 1921 (as amended
by section 24 of the
" Finance Act, 1927) a charity, namely a
body of persons established for
" charitable purposes only ".
The Lord President pointed out that Pemsel's
case, [1891]
A.C., 531, decided that the words " charity " and "
charitable " in
the Income Tax Act, 1842 must be construed in
their technical meaning
according to English law. The words which
have to be construed under
the Acts now in force are the same.
Pemsel's case also disapproved of
Baird's Trustees 15
R., 682, in which Lord President Inglis had held that
the words
"charitable purposes" in the Act of 1842 were to be
interpreted
in their .popular signification as meaning the
relief of poverty. Plainly,
Pemsel's case laid down the
rule for construing " charity " and " charitable ''
as
one to be observed both by the Courts in England and by the Court of
3
Session. The advantage for
Scottish tax payers of this rule over the construc-
tion accepted
in Baird's Trustees is obvious and considerable. The Lord
President
proceeds to say that the general law of charities has progressed
in
England and Scotland since Pemsel's case was decided and that there
is a
considerable and growing divergence. His conclusion is that
the Court of
Session cannot invest itself with the unique
attributes of the Chancery Division
or perform the functions which
belong to the system of law there administered
and that the
difficulty in which the Court of Session finds itself,
hitherto
evaded, must now be faced. His solution of the problem is
ithat the English
law of charities is foreign law and a matter of
fact for the Court of Session,
and therefore that the only course
open to him was to take the determination
of the Special
Commissioners as a finding of fact for the Scottish Courts.
With
this mode of disposing of the Stated Case the other members of
the
Court agreed. They professed a sense of incapacity to deal
with the case
in any other way.
My Lords, I will not disguise
that I have a certain sympathy with the
Scottish judges, who feel
embarrassed at having to administer as part of the
law of Scotland
a difficult and technical branch of English law. For I have
"had
in the Court of Session some, though not a large, experience of
this
jurisdiction, and I felt the embarrassment. Nevertheless I
must at once say
that there has been here a failure to exercise a
jurisdiction which the Court
had a plain duty to exercise.
My Lords, in Pemsel's case it
was decided authoritatively that it was part
of the jurisdiction
of the Court of Session as Court of Exchequer in Scotland
to
administer this branch of English law in claims for exemption by
charities.
Since then the Finance Act, 1925, section 19, has
provided that claims for
exemption by charities were in future to
be made to the Commissioners of
Inland Revenue and were to be
determined by the Special Commissioners in
like manner as an
appeal made to them against an assessment under Schedule
D, and
that all the provisions of the Income Tax Acts relating to such
an
appeal (including the provisions relating to the Statement of a
Case for the
opinion of the High Court on a point of law) shall
apply accordingly with
any necessary modifications. For Scottish
subjects the appeal on law is, of
course, to the Court of Session
(Income Tax Act 1918 s. 235 and s. 149 (3)).
The Court of Session
has, therefore, a statutory duty to decide any question
of law
that may come before it in a claim to exemption, and the law which
it
must administer is the English law of charity.
The necessary effect of Pemsel's
case and now also of the provisions of
section 19 of the Act of
1925 is that the English law of charity has, for income
tax
purposes and for them alone, to be regarded as part of the law of
Scotland
and not as a foreign law. The practical difficulties for
a Scottish lawyer are
considerable, but I would not have them
exaggerated. These difficulties
spring mainly from the nature of
charity and from the way in which the
law of charity has grown up.
I need not enlarge on this for it is an aspect
of the English law
which has been recently sufficiently commented on with
special
authority by Lord Simonds, as he then was, in Gilmour v. Coats
[19491]
A.C. 426 at 449 and in Oppenheim v. Tobacco Securities
Trust Company,
Limited [1951] AC 297 at 307. I venture, however,
to say that many of the
difficulties felt by Scottish lawyers in
administering this law, are scarcely less
felt by English equity
lawyers, and that the general Scots law of charities like-
wise
has difficulties of its own. It has never yet, for example, been
found
possible to define in generally accepted terms what is the
precise meaning of
charity in Scottish law, and one reason is that
the Scots law of charities owes
nothing to the great Institutional
writers, and much of it, like its counterpart
in England, has been
built up piecemeal by the decisions of the Courts.
The duty of the Court of Session
to apply the English law of charities in
Income Tax cases has been
expressly recognized in Jackson's Trs. 1926 S.C.
579 by
Lord President Clyde and Lord Sands. In that case the limits of
the
rule were defined. It was also recognised and applied in
Trustees for the Roll
of Voluntary Workers 1942 S.C., 47. Among
the consequences of the
18878 A
2
4
action taken by the First
Division in this case is to cast some doubt on these
cases and to
deprive Scottish claimants of an effective right to appeal from
the
determination of the Commissioners.
In certain respects the
jurisdiction is less embarrassing than their Lordships
seem to
have supposed. They are technically not bound by the decisions of
the
English Courts in the matter of charities and it is not improper for
them
to discuss or criticize English decisions. The Court of
Session is not reduced
to the role of an obsequious follower of
decisions either of a judge of
first instance or of the Court of
Appeal, though it is only good sense
to pay special regard and
respect to the decisions and opinions pronounced
by the English
Courts on a branch of the law built up by English judges,
and
familiar to them by long training and experience.
I come now to the merits of the
appeal and I unfeignedly regret that I must
do so without the aid
of the opinions of the learned judges of the First
Division,
especially as the issue, though not easy, owes none of its
difficulty
to technicalities of English law. The respondents'
contention is that the
Association falls within the last category
of Lord Macnaghten's classifica-
tion of charities, and that it is
established for charitable purposes only. In
looking for the
purposes for which it is established I begin with the Rules.
The
objects set out in Rule 2, to encourage and promote all forms of
athletic
sports and general pastimes, are not charitable purposes.
But it will not
do to stop there. The next step is to notice
that the members' subscriptions
are exclusively spent on their own
sports and recreations. In order to augment
the fund expendable
for these purposes the members carry on the trade of
holding the
Annual Sports. So far, again, there is no element of charity
and
the purposes are self-regarding. In Hobourn Aero
Components
Limited's Air Raid Distress Fund [1946] 1 Ch., 87,
voluntary collections from
employees of the munition factories
belonging to a certain company were
to be used to relieve without
a means test the distress suffered by the employees
from air
raids. It was held by Cohen, J., as he then was, that this was
not
a charity, and this decision was affirmed by the Court of
Appeal (1946,
1 Ch. 194). Lord Greene, M.R., said (p. 200): "
The point to my mind which
" really puts this case beyond
reasonable doubt is the fact that a number
" of employees of
this company, actuated by motives of self-help, agreed
" to a
deduction from their wages to constitute a fund to be applied for
their
" own benefit without any question of poverty coming
into it. Such an
" arrangement seems to me to stamp the
whole transaction as one having
" a personal character, money
put up by a number of people, not for the
" general benefit,
but for their own individual benefit." Morton, L.J., as
he
then was, said (p. 209): " Those eligible to receive
benefits were not even
" all the employees of the particular
company. They were those who chose
" to join in the
scheme." In Oppenheim (supra) Lord Simonds
expressed
his full agreement with all that was said by Lord
Greene, M.R. and Morton,
L.J., in Hobourn. The case is an
authority against recognising as a charity
a body that merely
applies the subscriptions of its members to their own
recreation.
It does not of course prejudice the question whether in
certain
circumstances the benefit of members is not subsidiary and
incidental to
another and charitable purpose.
It would be unjust to the
Respondent Association to represent it as having
no purpose beyond
the recreation and amusement of the individual
subscribers
constituting its membership. No one can read the rules
without
perceiving that the Association was regarded as having an
official importance
and a public aspect. And in order to ascertain
what the purposes of an
association are, the Court is not limited
to consideration of its Rules or
its constituent documents. They
are very important, and it would 'be difficult
for an association
to say that something declared in its rules to be its object
was
not one of its purposes. But it is quite in order for the association
to
prove by parole evidence that it had other purposes than that
set down in the
Rules. The Special Commissioners had evidence
before them which entitled
them to find that, among its purposes,
were the encouragement of recruiting,
5
the improvement of the
efficiency of the Force, and the public advantage.
This is a
purpose which the Special Commissioners were entitled to hold
in
law to be a public charitable purpose. But there remains the
non-
charitable purpose of providing recreation to the members.
The
question is whether this non-charitable purpose is incidental
to the
public charitable purpose. If not, it cannot be said that
the Association
was a body established for charitable purposes
only. This is not a matter
of the motive of the members of the
Association or of the high police officials
who took a part in
furthering the Association, though there is a natural
probability
that their motives agree with the purposes of the Association.
The
question is what are the purposes for which the Association is
established, as
shown by the Rules, its activities and its
relation to the police force and the
public. And what the
Respondents must show in the circumstances of this
case is that so
viewed objectively the Association is established for a
public
purpose, and that the private benefits to members are the
unsought conse-
quences of the pursuit of the public purpose, and
can therefore be disregarded
as incidental. That is a view which I
cannot take. The private benefits to
members are essential. The
recreation of the members is an end
in itself, and without its
attainment the public purpose would never come into
view. If the
result of establishing the Association had been that the
members
had, instead of being interested, found themselves involved
in
wearisome and lifeless activities, their efficiency would have
suffered, the
membership would have fallen off, and there would
have been public detri-
ment instead of public benefit. The
private advantage of members is a purpose
for which the
Association is established and it therefore cannot be said
that
this is an Association established for a public charitable purpose
only. In
the Yorkshire Agricultural Society's case [1928] 1
K.B., 611, Atkin, L.J., con-
sidered (p. 631) the problem of
societies having more than one purpose. He
says: " First of
all it is said: No, this Society was in fact formed for the
"
purpose of giving benefit to its members; it is nothing but a club
for
" the mutual advantage of the members of the club. If
that were so, I
" agree that the claim of the Society would
fail, both because it could
" not be said that the Society
was established for a charitable purpose and
" because it
certainly could not be said that it was established for a
charitable
" purpose only. There can be no doubt that a
society formed for the purpose
" merely of benefiting its own
members, though it may be to the public
" advantage that its
members should be benefited by being educated or having
"
their aesthetic tastes improved or whatever the object may be, would
not
" be for a charitable purpose, and if it were a
substantial part of the object
" that it should benefit its
members I should think that it would not be estab-
" lished
for a charitable purpose only. But, on the other hand, if the
benefit
" given to its members is only given to them with a
view of giving encourage-
" ment and carrying out the main
purpose, which is a charitable purpose, then
" I think the
mere fact that the members are benefited in the course of
"
promoting the charitable purpose would not prevent the society being
estab-
" lished for charitable purposes only." In
principle, therefore, if an association
has two purposes, one
charitable and the other not, and if the two purposes
are such and
so related that the non-charitable purpose cannot be regarded
as
incidental to the other, the Association is not a body established
for
charitable purposes only.
I would allow the appeal.
Lord Oaksey
MY LORDS,
I agree with what has been said
by the noble Lord on the Woolsack as
to the function of the Court
of Session in tax cases.
On the merits of the appeal I
have had much difficulty, and have come
to the conclusion that the
appeal ought to be dismissed.
In my opinion, the efficiency of
a police force is largely dependent upon
the activity and physical
fitness of its members, and athletic and other
6
sports ought to be and are
encouraged by those responsible for such forces.
It is clear, too,
that the efficiency of the police is, a matter of public
import-
iance which falls within the class of charitable purposes
to which the
exemption in section 30 of the Income Tax Act, 1918,
applies. The ques-
tion then is whether the City of Glasgow Police
Athletic Association is a
body of persons established for public
charitable purposes only.
Now
it is clear that " purposes " are not the same as "
results" and
there is ample authority that a body of persons
or trust may be established
for charitable (purposes only although
its establishment has results which
are not charitable, for
instance, the benefits derived by the officers in the
cases in re
Good [1905] 2 Ch., 60, in re Gray [1925] 1 Ch., 362, and
by the
surgeons in the Royal College of Surgeons v.
National Provincial Bank [1952]
AC. 631.
As Lord Macnaghten said in Institution of Civil Engineers
v.
Forrest 15 A.C., 334 p. 354: " It cannot, I
think, be doubted that the Institu-
" tion has raised the
standard of the profession, and that to a civil engineer
" it
is of advantage and probably of pecuniary advantage to be a member.
"
But is that result the purpose of the Society, or is it an
incidental, though
" an important and perhaps a necessary,
consequence of the way in which
" the Institution does its
work in the pursuit of science?"
The purposes for which a body of
persons is established can only be dis-
covered from the
constitutional document, if there is one, which establishes
the
body.
In the present case, in my
opinion, the constitution and general rules
of the Respondents
indicate that the purpose of the body was the efficiency
of the
force. There can, in my opinion, have been no other reason for
Rule
23 which makes every resolution and decision subject to the
approval
of the Chief Constable. The Chief Constable is only
concerned with the
amusement of his men for the purpose of having
a contented and efficient
force. All the rules are framed to meet
the needs of a disciplined force.
It is, in my opinion, impossible
to imagine that such rules would have
been drawn up by anyone or
by any body of men who were not intending
to promote discipline.
Decisions are not confided to the majority or even
to an unanimous
vote, but to the Chief Constable.
It is true that no one need
belong to the Association but that is equally
consistent with it
being the view of the Chief Constable or other authority
who
devised the scheme, which was originally compulsory, that a
voluntary
scheme was from its nature more likely to create
keenness and esprit de
corps which have the necessary
result of efficiency.
The matters to which I have
referred are all found as facts by the
Special Commissioners in
Par. II (10) and (13) and Par. V of the Special
Case.
It has been argued for the Crown
that the Association is nothing but
a club or mutual society for
the benefit of the subscribers, but, in my
opinion, the Chief
Constable's veto is absolutely inconsistent with any
such idea.
It is true that the money
subscribed comes from the members and is
used for their immediate
benefit, and it is argued that this negatives the
idea of any
public charitable purpose, but, in my opinion, it is not any
more
a necessary inference that the purpose of the members was their
own
enjoyment than that their purpose was their own efficiency.
The purposes
of a body of persons can only be inferred from the
facts as to their associa-
tion as a body; some may have one
purpose, others another ; but when they
all submit themselves to
the dictation of their commanding officer it appears
to me that
the reasonable inference is that they are prepared to
subordinate
their private purposes to his and that his purpose
must be inferred to be
the efficiency of the force and not its
amusement.
Lord Morton of Henryton
my lords.
The only question arising for
decision on this Appeal is whether the
Respondent Association is a
" body of persons .... established for charit-
" able
purposes only " within the meaning of section 30 (3) of the
Finance
7
Act, 1921. If the Association is
such a body, it is not disputed that the profit
of £1,214
resulting from its annual Amateur Sports Meeting, held during
the
year ending 30th September, 1950, is exempted from income tax
by section
30 (1) (c) of the Finance Act, 1921 as amended
by section 24 of the Finance
Act, 1927.
The facts as to the
establishment of the Association are set out in para-
graph
II (1) of the Case Stated as follows:-
" Prior to 1938 there were
various clubs connected with the City of
" Glasgow Police. In
February, 1938, these clubs were merged in the
" Association,
which was established at that date with the purpose of
"
co-ordinating the various athletic and sporting activities of the
"
members of the Police Force."
Starting from this point, I have
carefully considered the constitution and
general rules of the
Association, and the facts as to its activities which are
set out
in the Case Stated, and I am quite unable to hold that this body
of
persons is established for charitable purposes only.
Rule 2 provides that " The
objects of the Association shall be to
" encourage and
promote all forms of athletic sports and general pastimes ".
It
was accepted by the Special Commissioners, and it is not disputed by
the
Respondent Association, that these objects, stated in such
general terms, are
not objects which the law regards as
charitable. It is rightly said, however,
that the constitution and
rules must be read as a whole and construed in the
light of such
evidence of surrounding circumstances as may be admissible.
So
reading them and so construing them I arrive at the conclusion that
the
purpose for which the Association is established is to provide
for its
members and their friends facilities for taking part in
athletic sports and
general pastimes, both out door and in door. I
cannot detect in this purpose
any element of charity. The members
pay their subscriptions and get certain
benefits in return ; they
make a profit by running the annual Amateur Sports
Meeting already
mentioned, and that profit is applied to carrying out the
purpose
which I have just stated. So far, the Association would not appear
to
be any more a charity than is any other athletic or social
association or
club established for the like purpose. The
Association does not, in my view,
fit into any of the four
"principal divisions" mentioned by Lord
Macnaghten in
Pemsel's case [1891] AC 531 at page 583, and the
purpose
first stated is far indeed from the " spirit and
intendment " of the preamble to
the statute 43 Elizabeth c.
4.
Counsel for the Respondent
Association rely strongly upon the facts found
in paragraph V of
the Special Case and especially upon sub-paragraph (f)
which
is as follows: -
" (f) The existence
and activities of the respondent Association: —
(i) played an important part in
the maintenance of physical fitness,
health, morale and
esprit-de-corps within the Force,
(ii) attracted recruits to the
Force,
(iii) helped to maintain the
strength and efficiency of the Force,
by conducing to a contented
Force, keeping members happy in their
work and inducing them to
continue in the Force, rather than
leave it.
(iv) conduced to the public
order by promoting good relations
between the Force and the
general public.
(v) increased the efficiency of
the Force, generally, and thereby
directly benefited the public."
They contend that the
achievement of the results just stated is the purpose
for which
the Association is established, and that this is a charitable
purpose.
I do not doubt, my Lords, that a gift made for the sole
purpose of increasing
the efficiency of the Police Force would be
a charitable gift, but the task
before your Lordships is first to
determine the purpose or purposes for
which the Association is
established and then to determine whether the sole
purpose, or all
the purposes, are charitable. In my view, the purpose for
which
the Association is established, within the meaning of section 30 (3)
of
8
the Finance Act, 1921, is the
non-charitable purpose which I have already
stated and the
achievement of the results set out in paragraph V is simply
a
consequence which will follow if the purpose "for which the
Association is
established is carried out successfully and
efficiently.
Even if I were satisfied that
there exists some other purpose for which
the Association was or
is established, for instance, the purpose of main-
taining the
strength and efficiency of the Police Force, I should find
it
impossible to say that the sole purpose of the
Association is a purpose which
is nowhere even mentioned in the
constitution and general rules, and that the
purpose which emerges
so clearly in the rules and upon which the income
of the
Association appears to have been expended ever since it came
into
existence, is either non-existent or merely incidental.
Observations have been made by
my noble and learned friend on the
Woolsack as to the course which
this case took in the First Division of the
Court of Session. I
agree with these observations and do not desire to add
to them. I
agree also with my noble and learned friend's comments upon
the
cases of re Good [1905] 2 Ch., 60, re Gray [1925] 1
Ch., 362 and re
Hobourn Aero Components Limited's Air Raid
Distress Fund [1946]
1 Ch., 87.
I would allow the appeal.
Lord Reid
MY LORDS,
The Respondents claim that they
are entitled to exemption from Income
Tax under section 30 of the
Finance Act, 1921, as amended by section 24
of the Finance Act,
1927. It is admitted that if they are " a body of
"
persons . . . established for charitable purposes only " they
are entitled
to exemption, the other requirements of the section
being satisfied.
The Respondents' Association was
formed in 1938, apparently under
official guidance. From then
until 1947 membership of the Association was
a condition of
service for all new entrants to the Glasgow Police Force.
Compulsory
membership was abolished in 1947, but it appears that all
new
entrants since that date have in fact become members.
Membership is
restricted to officers and ex-officers of the Force:
only a few ex-officers
remain members and they give valuable
service in coaching other members.
Under the Rules the management
of the Association is largely in the hands
of senior officers of
the Force, and all resolutions passed at meetings of the
Association
are subject to the approval of the Chief Constable.
The objects of the Association,
set out in Rule 2, are to encourage and
promote all forms of
athletic sports and general pastimes, and later rules
show that
this means to provide facilities for the members to take part
in
those activities and to encourage them to do so. The Special
Commissioners
have found that the Association is regarded as an
essential part of the Police
Organisation, that it plays an
important part in the maintenance of health,
morale and
esprit-de-corps within the Police Force, that it attracts recruits
to
the Force and that it helps to induce members of the Force to
continue
in the Force rather than leave it. Those findings amply
justify the conclusion
that the existence and activities of the
Association increase the efficiency of
the Force generally and
thereby directly benefit the public.
I do not doubt that the purpose
of increasing or maintaining the efficiency
of a police force is a
charitable purpose within the technical meaning of
those words in
English law. It appears to me to be well established that
the
purpose of increasing the efficiency of the Army or a part of it is
a
charitable purpose. It may be that in some cases the facts
hardly justified
the conclusion that this was the purpose of the
gift in question, but that
does not affect the principle. I can
see no valid distinction between the
importance or character of
the public interest of maintaining the efficiency
of the Army and
that of maintaining the efficiency of the Police.
9
But it is not enough that one of
the purposes of a body of persons is
charitable: the Act requires
that it must be established for charitable
purposes only. This
does not mean that the sole effect of the activities of
the body
must be to promote charitable purposes, but it does mean that
that
must be its predominant object and that any benefits to its
individual
members of a non-charitable character which result from
its activities must
be of a subsidiary or incidental character.
It was argued that this
Association could not be regarded as established
for charitable
purposes because its revenue is all spent on activities in which
its
members alone take part. I am not satisfied that in every case that
would
be enough by itself to prevent the body from being held to
be established for
charitable purposes only, and I prefer to base
my opinion on the facts of
this case.
The peculiarity of this case is
that the same activities have a double result.
They are beneficial
to the public by increasing the efficiency of the Force
and they
are beneficial to the members themselves in affording to them
recrea-
tion and enjoyment: and all the relevant facts appear to
me to indicate that
the purpose was to produce this double result.
It may well be that considera-
tions of public interest were the
primary cause of the Association being
established and maintained:
but I think that it is clear that all or most of
the activities of
the Association are designed in the first place to confer
benefits
on its members by affording to them recreation and enjoyment. It
is
only as a result of these benefits that the purpose of increasing the
efficiency
of the Force is achieved. In some cases where the end
is a charitable purpose
the fact that the means to the end confer
non-charitable benefits may not
matter ; but in the present case I
have come to the conclusion that conferring
such benefits on its
members bulks so largely in the purposes and activities
of this
Association that it cannot properly be said to be established
for
charitable purposes only. I therefore agree that the Appeal
should be
allowed.
There is one other matter that I
must notice. The First Division have
held that they are not
competent to decide what is a charitable purpose
because that is
purely a question of English Law. In this I think that they
were
mistaken. It has commonly been accepted since Pemsel's case
([1891]
A.C. 531) that the words charity and charitable in Income
Tax legislation
must be interpreted according to English Law, but
I do not think that that
is a full or accurate statement of the
position. In my judgment holding that
those words must be
interpreted according to English Law must mean that
it is to be
held that Parliament enacted that on that matter the law of
England
should also become the law of Scotland, and it must follow
that
Parliament must be held to have placed on the Courts of
Scotland the duty
of administering what was formerly only the law
of England but what has
been made by Act of Parliament the law of
both countries. It is true that
this form of legislation by
reference puts the Scottish Courts in some difficulty,
because it
may not always be easy for them to discover what are the
principles
to be applied in a particular case—incidentally
that is not always easy
even for an English Court. But whatever
the practical difficulties may be,
and whether or not those
difficulties were ever appreciated by Parliament or
by this House
in determining what Parliament must be held to have enacted,
the
fact remains that Parliament must be held to have required the
Scottish
Courts to surmount those difficulties, and the duty so
placed on the Scottish
Courts can now only be removed by
legislation.
Lord Cohen
MY LORDS,
The question at issue in these
proceedings is whether the Respondent
Association is a "body
of persons . . . established for charitable purposes
" only "
and is therefore entitled to exemption under section 30 of
the
Finance Act, 1921, as amended by section 24 of the Finance
Act, 1927.
10
The Special Commissioners
answered this question in favour of the Associa-
tion but stated a
case at the instance of the Appellants, the question for the
decison
of the Court being framed as follows:'—
" The question of law for
the opinion of the Court is whether the
" City of Glasgow
Police Athletic Association is, within the meaning
" and for
the purposes of section 30 of the Finance Act, 1921 (as
"
amended by section 24 of the Finance Act, 1927), a charity,
"
namely a body of persons established for charitable purposes only."
The First Division of the Court
of Session answered this question in the
affirmative. They arrived
at their conclusion by treating the question as one
of fact, on
the ground that your Lordships' House had held in Pemsel's
case
(see (1891) A.C. 583) that the question whether a body of persons
was
a charity for the purposes of the Income Tax Acts fell to be
determined
according to English Law and that English Law in a
Scottish Court was a
question of fact. Mr. Hunter for the
Association did not attempt to support
that line of reasoning, and
I have nothing to add to what has been said by
my noble and
learned friend on the Woolsack on this aspect of the question.
I
turn, therefore, to the question stated by the Special Commissioners.
They based their conclusion in
favour of the Respondent Association in
substance on the decisions
in the Chancery Division in the eases of re
Goode [1905] 2
Ch., 60 and re Gray [1925] 1 Ch., 362. In both those cases
the
question at issue was the validity of a gift contained in the will of
a
testator, the gift in the former case being of a library and
plate for an
•officers' mess and in the latter of a fund for
the promotion of sport in a
regiment. The ratio decidendi of
the two cases is conveniently stated by
Farwell, J., in re
Goode (see p. 60) in the passage cited by the
Special
Commissioners, which reads as follows: —
" I have come to the
conclusion that this is a good charitable gift
" on the first
ground—namely, that it is a direct public benefit to increase
"
the efficiency of the Army, in which the public is interested, not
only
" financially, but also for the safety and protection of
the country."
The Commissioners then observed
that the increase of the efficiency of police
forces appeared to
them analogous to the increase of the efficiency of the
Army, and
on this ground decided in favour of the Association. They
omitted,
however, to notice that they were not concerned with the
question
whether a gift for the promotion of efficiency in the
police force was a valid
charitable gift but with the different
question whether the Respondent Asso-
ciation was formed for
charitable purposes only.
This question has to be
determined upon the construction of the constitu-
tion and rules
of the Association and of the findings of fact contained in
the
stated case, but before I turn to them it will be convenient to
refer
briefly to some of the authorities to which your Lordships'
attention was
directed in the course of the argument. From them
certain .principles appear
to be settled.
If the main purpose of the body
of persons is charitable and the only
elements in its
constitution and operations which are non-charitable are
merely
incidental to that main purpose, that body of persons is a
charity notwith-
standing the presence of those elements—Royal
College of Surgeons v.
National Provincial Bank [1952]
A.C., 631.
If, however, a non-charitable
abject is itself one of the purposes of the
body of persons and
is not merely incidental to the charitable purpose, the
body of
persons is not a body of persons formed for charitable purposes
only
within the meaning of the Income Tax Acts—Oxford
Group v. Inland
Revenue Commissioners [1949] 2
A.E.R., 537.
(3) If a substantial part of the
objects of the body of persons is to benefit
its own members, the
body of persons is not established for charitable
purposes
only—Inland Revenue Commissioners v. Yorkshire
Agricultural
Society [1928] 1 K.B., 611. The distinction
between this class of case and
that contemplated in the first
principle I have stated is aptly pointed out by
Atkin, L.J., in
the case last cited, when he says at p. 631:
11
" There can be no doubt
that a society formed for the purpose merely
" of benefiting
its own members, though it may be to the public
" advantage
that its members should be benefited by being educated or
"
having their aesthetic tastes improved or whatever the object may
be,
" would not 'be for a charitable purpose, and if it were
a substantial
" part of the object that it should benefit its
members I should think
" that it would not be established for
a charitable purpose only. But,
" on the other hand, if the
benefit given to its members is only given
" to them with a
view of giving encouragement and carrying out the
" main
purpose which is a charitable purpose, then I think the mere
"
fact that the members are benefited in the course of promoting the
"
charitable purpose would not prevent the Society being established
"
for charitable purposes only."
With these principles in mind I
turn to the Constitution and Rules of
the Respondent Association.
Rule 2 declares the objects of
the Association to be " to encourage and
" promote all
forms of athletic sports and general pastimes". It was
common
ground between the parties that if this object had to be
considered in vacuo
it would not be a good charitable
purpose, but Mr. Hunter argued, and I
think rightly, that, read in
its context, it must be limited to the promotion
of sports and
pastimes among the Glasgow police; not, however, as I read
the
document, all the Glasgow police, but only such of them and such
ex-
members of the Glasgow police as become and remain members of
the
Association. So limited, said the Lord Advocate and Mr. Stamp,
for the
Appellants, the Association is merely a private club and
the observations
of Lord Greene, M.R., in Hobourn Aero
Components Limited's Air Raid
Distress Fund [1946] 1 Ch., 184
were in point. In that case at p. 203 Lord
Greene after citing a
passage from Tudor on Charities, 5th ed., p. 18, said the
particular
association of persons with which the Court was there concerned
could
properly be described as a mutual benefit society, which could not
be
charitable unless poverty is an essential qualification for
participation in the
benefits.
There is no element of poverty
to be found in the present case. Therefore,
said the Lord
Advocate, the Respondent Association is stamped with the
character
of a private trust.
Mr. Hunter and Mr. Hunt did not
dispute the correctness of that decision,
but argued that in the
present case the purpose of the Association was to
maintain the
strength and the efficiency of the Glasgow police force and
the
benefits to the membership of the Association were merely
incidental to
that purpose.
Mr. Hunter relied on the
findings of the Commissioners as expressed in
para. V of the Case
Stated as establishing the correctness of this contention.
He
relied also on the following rules: —
Rule 3 giving the superior
officers of that force strong representation
on the executive
committee and the divisional committees
Rule 10 providing for deduction
of serving members' subscriptions
from their pay, and above all
Rule 23 giving the Chief
Constable a power of veto on all resolutions
and decisions passed
at meetings of the Association.
He referred also to the finding
that the sports meetings of the Association
received specially
favourable treatment in that no charge was made for the
services
of the police in connection therewith. It is, I think, a fair
inference
from these matters and from other evidence that was
before the Commis-
sioners that the Association was regarded by
the authorities as an essential
part of the police organisation
and as playing an important part in the
maintenance of (health,
morale, and esprit de corps in the police force:
but the
achievement of this end was more the result of the operations of
the
Association than an achievement of its purpose, and I am unable
to
draw from the evidence the conclusion that the benefits to the
members
12
were given with a view only to giving
encouragement to the maintenance
of the strength and efficiency of
the Glasgow police force. These benefits
were and could be given
to the members and to no one else. Reading the
case stated and the
documents annexed thereto I am forced to the conclusion
that the
conferment of those benefits was a substantial part of the objects
of
the Association. In my opinion, therefore, the Association cannot
be
said to have been established for a charitable purpose only. I
agree that
the appeal should be allowed.
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