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Commissioners of Inland Revenue Vs. City of Glasgow Police Athletic Association - Court Judgment

LegalCrystal Citation
CourtHouse of Lords
Decided On
Case NumberNo.
Judge
AppellantCommissioners of Inland Revenue
RespondentCity of Glasgow Police Athletic Association
Excerpt:
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......
Judgment:

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 encourage 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 Committee.

Rule 5. Committees. (1) Executive Committee.—The Executive Committee shall consist of the President, two Vice-Presidents, one representative 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. Theactivities 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 September, 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 Association, 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 relations 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 intheir 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 Englandand by the Court ofSession. The advantage for Scottish tax payers of this rule over the construction 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 that 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 Scotlanda 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] A.C. 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 theaction 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 classification 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, 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 consequences 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 detriment 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., considered (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 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." 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 othersports 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 importance which falls within the class of charitable purposes to which the exemption in section 30 of the Income Tax Act, 1918, applies. The question 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 Institution 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 discovered 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 association 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 charitable purposes only within the meaning of section 30 (3) of the FinanceAct, 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 inparagraph 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] A.C. 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) ofthe 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 maintaining 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.

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 recreation 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 considerations 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.

The Special Commissioners answered this question in favour of the Association but stated a case at the instance of the Appellants, the question for the decision 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 Association was formed for charitable purposes only.

This question has to be determined upon the construction of the constitution 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.

1. 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 notwithstanding the presence of those elements—Royal College of Surgeons v. National Provincial Bank [1952] A.C., 631.

2. 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:

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 Glasgowpolice 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 committeesRule 10 providing for deduction of serving members' subscriptions from their pay, and above allRule 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 Commissioners 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 memberswere 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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