Later decisions that cite Edwards (Inspector of Taxes) v Bairstow
July 28. Lorp Morton or Henryton. My Lords, the appellant foundation was incorporated under the Membership Corporation Law of the State of New York in the United States of America. In the years 1946-47 to 1950-51 inclusive the foundation received substantial royalties from British Celanese Ld. It is not in doubt that the foundation is liable to pay income tax on these royalties under Schedule D unless it can establish that it is entitled to exemption under the provisions of section 37 of the Income Tax Act, 1918. That section is in the following terms: '' Exemption shall ""be granted—(a) from tax under Schedule A in respect of the ""rents and profits of any lands, tenements, hereditaments, or "heritages belonging to any hospital, public school or almshouse, ''or vested in trustees for charitable purposes, so far as the ""same are applied to charitable purposes only: Provided that ""any assessment upon the respective properties shall not be '"vacated or altered, but shall be in force and levied, notwith- "" standing the allowance of any such exemption; (b) from tax '"under Schedule C in respect of any interest, annuities, divi- '* dends or shares of annuities, and from tax under Schedule D in '' respect of any yearly interest or other annual payment, forming ''part of the income of any body of persons or trust established 'for charitable purpose only, or which, according to the rules '* or regulations established by Act of Parliament, charter, decree, 'deed of trust, or will, are applicable to charitable purposes "only, and so far as the same are applied to charitable purposes '' only; (c) from tax under Schedule C in respect of any interest, '' annuities, dividends or shares of annuities, in the names of '' trustees, applicable solely towards the repairs of any cathedral, 6 [1954] Ch. 672, 690; [1954] 2 7 [1954] Ch. 672, 700-1. All E.R. 466. 43 Hy Li. (BS) 1955 CAMILLE AND HENRY DREYFUS FOUNDATION Inc. v. INLAND REVENUE ComMISs- SIONERS. 44 Pein KES 1955 CAMILLE AND HENRY DREYFUS FOUNDATION INc. 0. INLAND REVENUE ComMISs- SIONERS. Lord Morton of Henryton, HOUSE OF LORDS | [1956 | ''gollege, church or chapel, or any building used solely for the '' purpose of divine worship, and so far as the same are applied '" to those purposes."' The foundation claims that it is a '"' body of persons. . . '* established for charitable purposes only '' and therefore comes exactly within the words of subsection (1) (b) of section 37. It is not in dispute that the foundation is '' established '' in the United States of America, and the first question which arises for decision is whether (as the foundation contends) the words just quoted cover a body of persons or trust '' established for 'charitable purposes only'' in any part of the world, or are limited (as the Crown contends) to a body of persons or trust established for the like purposes in the United Kingdom. If the former view is correct, a further question will arise, viz., whether the objects of the foundation, as expressed in its certificate of incorporation, are exclusively charitable purposes. It has rightly been conceded on behalf of the foundation that this question has to be decided according to the law of England. The first question was considered by Lawrence J. (as he then was) in the case of Inland Revenue Commissioners v. Gull.? That learned judge felt himself constrained, by reason of the terms of certain later enactments, to hold that the exemption afforded by section 37 (1) (b) "' applies only to the income of '" bodies of persons or trusts established in the United Kingdom,"' although he decided in favour of the taxpayer on the ground that the trust there in question was in fact established in the United Kingdom. The later enactments which so constrained the learned judge are referred to by Jenkins L.J. in his judgment in the present case, in terms which I gratefully adopt?: '' The "" consideration, which Lawrence J. regarded as constraining him "to construe section 87 as he did, was the legislative interpreta- 'tion placed on section 87 by section 21 of the Finance Act, '1923, which provided for the exemption of charities in the Irish "Free State in respect of income tax for the year 1923-24, and '"by section 32 of the Finance Act, 1924, and section 21 of the '""Finance Act, 1925, which respectively provided for a like '"exemption for the years 1924-25 and 1925-26, 1926-27 and '* 1927-28, and finally by the Finance Act, 1926, section 23, and '"Part II of the Second Schedule to that Act which provided '""under paragraph 3 of the latter that ' section 21 of the Finance *"* Act, 1925, which grants an exemption for charities in the 1 (1987) 54 T.L.R. 52, 53; [1937] 2 [1954] Ch. 672, 695-6; [1954] 2 4 All E.R. 290. All H.R. 466. A.C. AND PRIVY COUNCIL. "Trish Free State shall cease to have effect.' To appreciate 'the force of this consideration it is necessary to read at length "" section 21 of the Finance Act, 1923.'' Jenkins L.J. read the section, which is in the following terms: '' Subject as hereinafter "" provided, section 37 of the Income Tax Act, 1918 (which grants "exemption in respect of charities), shall, in the case of rents "and profits of any lands, tenements, hereditaments, or heritages "belonging to any hospital, public school, or almshouse in the "Trish Free State, or vested in trustees in the Irish Free State "' for charitable purposes, and in the case of a body of persons or "" trust established in the Irish Free State for charitable purposes "only, and in the case of income which according to rules or "regulations established by Act of Parliament, charter, decree, ""deed of trust or will in the Irish Free State, is applicable to '"" charitable purposes only, or which, in the names of trustees in "" the Irish Free State, is applicable solely towards the repairs of ""any cathedral, college, church or chapel, or any building used ""solely for the purpose of divine worship, apply, as respects "" income tax chargeable for the year 1923-24, as if the Irish Free "* State had not been constituted: Provided that this section shall "not apply except where the lands, tenements, hereditaments, or "" heritages belonged to the hospital, public school, or almshouse, '* or were vested in the trustees, on April 5, 1923, or the interest, '" annuities, dividends, shares of annuities, yearly interest or other "" annual payment arise from investments which were held by the ""body of persons, trust, or trustees, or were subject to rules or ""reoulations as aforesaid, on April 5, 1923.'' The learned Lord Justice then observed: ''It is clear that, for the purposes of '' this section and the subsequent legislation on the same topic, ''it was assumed that the exemption afforded by section 37 to 'bodies of persons or trusts established for charitable purposes '' only was limited to bodies of persons or trusts established in ''the United Kingdom, and that the secession of the Irish Free '' State from the United Kingdom would consequently have the '' effect of depriving bodies of persons or trusts established in '' the Irish Free State of the exemption in the absence of legisla- '* tion continuing it in their favour."' The foundation's claim to exemption under section 87 (1) (0) was rejected by the Special Commissioners. They felt that they were bound by the decision of Lawrence J. in Gull's case,* and accordingly held that the exemption applied only to the income 344 T.L.R. 52. 45 H. L. (E.) 1955 CAMILLE AND HENRY DREYFUS FOUNDATION Inc. v. INLAND REVENUE ComMISs- SIONERS. Lord Morton of Henryfon. 46 Jel. 1M (de) 1955 CAMILLE AND HENRY DREYFUS FouNDATION Inc. v. INLAND REVENUE CoMMIS- SIONERS. Lord Morton of Henryton. HOUSE OF LORDS [1956 | of bodies of persons or trusts established in the United Kingdom. Wynn-Parry J. took the same view. The Court of Appeal, not being bound by Gull's case,* considered the matter fully, and dismissed the appeal. The main points of the argument presented to the Court of Appeal by Mr. Heyworth Talbot were summarized by Jenkins L.J. in his judgment. The argument followed the same lines in this House and counsel accepts that summary as being fair and accurate. My Lords, the question now before the House is one which turns upon the language of the relevant statute. It is at once apparent that the phrase in section 37 (1) (b) "' any body of '' persons or trust established for charitable purposes only '' is not expressly limited to bodies of persons or trusts established in the United Kingdom, but the Court of Appeal held that it should be construed as being so limited. This conclusion was based entirely upon a consideration of the true construction of the Act of 1918, and your Lordships have had the advantage of reading and considering three full and clear judgments delivered in the Court of Appeal, expressing this view and dealing very fully with the argument presented by Mr. Heyworth Talbot in that court and in your Lordships' House. I agree with the con- clusion reached by the Court of Appeal, and as no question of principle arises in this case, and my reasons are in substance the same as those appearing in the judgments of that court, I shall not detain your Lordships by setting them out in my own words. I shall only add that if I had been of opinion that the words in question were "' open to two perfectly clear and plain con- "" structions '' (to quote Lord Buckmaster in Ormond Investment Co. Ld. v. Betts*) I should have felt no hesitation in deciding that the Crown's construction gave effect to the intention of the legislature, having regard to the language of the later enactments to which I have already referred. As your Lordships did not find it necessary to call upon counsel for the respondents to present any argument, I express no opinion upon the question whether the objects of the foundation are exclusively charitable purposes according to the law of the United Kingdom. This question does not arise if your Lordships agree with my opinion upon the first question, but the Special Commissioners answered it in the affirmative, and the Court of Appeal saw no good reason for disturbing that finding. I move that the appeal be dismissed with costs. 3 54 T.L.R. 52. 4 [1954] Ch. 672, 700-1. 5 [1928] A.C. 143, 164. A.C. AND PRIVY COUNCIL. Lorp Porter. My Lords, I agree with the opinion which has just been expressed by the noble Lord on the Woolsack, and I also agree with the opinion, about to be expressed, of my Lord Normand which I have had an opportunity of reading. Lorp Normanp. My Lords, I agree with the speech delivered by my noble and learned friend on the Woolsack. I have only a few observations to add. They are prompted by a passage in the judgment of the Master of the Rolls on the word "' trust.'' He says ® that in section 37 (1) (b) of the Income Tax Act, 1918, '' the word ' trust' is a word peculiarly referable ""to our own system of law. It is true that to other countries, ""which have adopted our own legal system and essential "" characteristics, the word 'trust' would have a precise and "certain significance. But if the foundation's argument is sound, ""the formula in question should have a universal application, so "that the term ' body of persons or trust' would be intelligible "*in reference to countries other than those which have embraced ""our legal conceptions.'' It seems that in this passage "' our ""own system of law' and "' our legal conceptions '' must mean the English system of law and English legal conceptions. He says elsewhere,' following the same train of ideas, that it is ''a "" significant characteristic of our system that to the Attorney- "* General representing the Crown, as parens patriae, belongs the "right and duty of invoking the powers of the courts to secure ''the due execution of charitable trusts,'' and there it is clearly the English system that he has in mind, for it goes without saying that the Attorney-General has no right to invoke the powers of the courts beyond the boundary of England, and in Scotland the Lord Advocate has no general right or duty to intervene comparable to the right and duty of the Attornev- General in England. It should be beyond doubt that Scottish trusts are '* trusts "' within the meaning of that term as used in section 87 (1) (0). The history of the origin and development of the law of trusts in Scotland is not at all the same as the history of the origin and development of the law of trusts in England, and since the term '' trusts '' applies proprio vigore and without any interpretation clause to Scottish trusts, it must be understood in a sense which embraces trusts under both systems of law, and must not be held to connote any specialties of the English law. For this reason it di 6 [1954] Ch. 672, 686. 7 Ibid. 684. 47 H. L. (8.) 1955 CAMILLE AND HENRY DREYFUS FOUNDATION Inc. v. INLAND REVENUE CoMMIS- SIONERS. 48 HL. (2) 1955 CAMILLE AND HENRY DREYFUS FOUNDATION Inc. v. INLAND REVENUE CoMMIS- SIONERS. Lord Normand. HOUSE OF LORDS [1956 | must cover the case in which a fund is held as their property in law by persons who are directed to hold it, subject to purposes which operate as a qualification of their rights and constitute a burden on the property preferable to all claims by or through them, and subject also to a reversionary right remaining with the truster, his heirs and assignees, so far as the estate is not exhausted by the purposes. I do not put forward this as a definition of '' trust,'' but it is a description of a typical trust according to Scots law, and it contains, I believe, nothing repugnant to the English conception of trust. If, however, 'trust'? must be understood in so general a sense as this, it may well be impossible to deny that it is a term which would be intelligible in reference to many other systems of law which do not derive from the law of England. I respectfully accept Jenkins L.J.'s statement * that "' ' trust ' . . must be taken as referring to trusts taking effect and ""enforceable under the law of the United Kingdom."' 'This statement of the meaning of '' trust '' depends on the context of section 37, and not on the connotation of the word "' trust '' alone. I have dealt with this point at greater length than is necessary for the purpose of deciding this appeal, because difficulty enough has already been created for the courts in Scotland by the duty to apply characteristically English law in determining whether a Scottish trust is for the purpose of income tax a charitable trust, and it would be a great misfortune if any shadow of suspicion were to arise that a Scottish trust could not enjoy the benefits of section 87 (1) (b) unless it possessed the special characteristics of a trust under the law of England. ee Lorp Keira or Avonuotm. My Lords, I agree that this appeal fails, for the reasons stated by my noble and learned friend on the Woolsack. I would only add that I concur in the observations made by my noble and learned friend, Lord Normand. Lorp SoMERVELL oF Harrow. My Lords, I have had the advantage of reading the opinion that has just been delivered by my noble and learned friend on the Woolsack. I agree with it and do not desire to add anything to it. Abaeatdermienee: