Williams Trustees v Inland Revenue Commissioners [1947] UKHL 1

House of Lords

Between

Williams TrusteesAppellant

Inland Revenue CommissionersRespondent

Before

Lord Wright

Lord Porter

Lord Simonds

Lord Normand

[1]Die Veneris, 21° Martii, 1947. Parliamentary Archives, HL/PO/JU/4/3/987 Viscount Simon Lord Wright Lord Porter Lord Simonds Lord Normand TRUSTEES OF SIR HOWELL JONES WILLIAMS' TRUST v. COMMISSIONERS OF INLAND REVENUE Viscount Simon MY LORDS, I have had the great advantage of reading in print and of studying the exhaustive Opinion prepared in this case by my noble and learned friend Lord Simonds. I agree with it, and need say no more except that I move that the appeal be dismissed, with costs. Lord Wright MY LORDS, I also have had the advantage of studying the Opinion about to be delivered by my noble and learned friend Lord Simonds. I agree with it, and have nothing to add. Lord Simonds MY LORDS, My noble and learned friend Lord Porter has asked me to say that he concurs in the Opinion which I am about to deliver. [2] Lord Simonds MY LORDS, The question raised in this appeal is whether under a trust deed dated the 12th October, 1937, and made between Howell J. Williams Ltd. as trustees of the one part and Sir Howell Jones Williams, therein called the settlor, of the other part, certain properties were vested in the trustees for charitable purposes within the meaning of Section 37 (1) (a) of the Income Tax Act, 1918, and whether the rents of those properties were in the years 1940-41 and 1941-42 applied by them to charitable purposes only. Section 37 (1) of the Income Tax Act, 1918, is as follows:

" 37.—(1) 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."

. I will now state the relevant provisions of the Trust Deed. It begins by reciting that it is supplemental to a transfer of the 16th January, 1930, whereby certain freehold property specified in the Schedule (together with other property) was transferred to the trustees. This property consisted of certain premises in the Gray's Inn Road in the Parish of St. Pancras and No. 11 Mecklen- burgh Square and Nos. 29, 30 and 31 Doughty Street in the same parish. It further recites that the property had been purchased by the trustees out of moneys provided by the settlor, and that the Young Wales Association (London) Ltd. (thereinafter called " the Associa- " tion ") had been incorporated on the 21st March, 1925, with (inter alia) the following objects, namely: (i) to promote Welsh interests in London and to provide means of social intercourse between persons of Welsh nationality birth domicile education or sympathies; (ii) to consider and discuss all questions affecting Welsh interests; (iii) to foster the study of the Welsh language and to procure the delivery of lectures on subjects connected with Welsh history literature music and art; (iv) to form and maintain a library of periodical historical and other literature in the Welsh language or relating to Wales, and, finally, that the property had for some time past been and was then occupied used and enjoyed by the Association with the consent of the settlor for the purposes of the Association. I come to the operative part of the Deed. Clause 1 contains an important definition. " The expression ' Welsh people ' shall mean " and include persons of Welsh nationality by birth or descent " or born or educated or at any time domiciled in the Principality " of Wales or the County of Monmouth ". Clauses 2 and 3 I can pass over. Clauses 4 and 5 cannot fairly be summarised and I state them in extenso. " 4. The Trustees shall hold the Settled Properties and the " Endowment Fund for the purpose of establishing and main- " taming an Institute and meeting place in London to be " known as ' The London Welsh Association ' (hereinafter " called ' the Institute') for the benefit of Welsh people resident " in or near or visiting London with a view to creating a centre " in London for promoting the moral social spiritual and [3] 2 " educational welfare of Welsh people and fostering the study " of the Welsh language and of Welsh history literature music " and art ". "5. Without prejudice to the generality of the foregoing " provisions the Trustees may use or permit such part of the " Settled Properties as is required to be used as the Institute " for all or any of the following purposes: — " (a) For providing a meeting place for Welsh people in " London and their friends where they can obtain facilities " for social intercourse study reading rest recreation and " refreshment. " (b) For meetings concerts lectures and other forms of " instruction discussion or entertainment especially in " relation to subjects connected with the Welsh language " and Welsh history literature music and art. " (c) For any educational purposes connected with the " Welsh language or Welsh subjects or likely to be of value " or interest to Welsh people. " (d) For establishing and maintaining a library of " periodical historical and other literature in the Welsh " language or relating to Wales or which is likely to be of " use to Welsh people. " (e) As a hostel for the accommodation of Welsh people "in London. " (f) For any of the purposes of the Association or of " any similar association which may be formed for the " benefit of Welsh people in London and which purposes " may be within the general scope of the Trusts declared " in Clause 4 hereof. " (g) Generally for such other purposes being charitable " and for the benefit of Welsh people as the Trustees may " from time to time think fit provided always that the " Trustees shall not permit any alcoholic liquor to be sold " or consumed on any part of the Settled Properties for " the time being occupied or used for the purposes of the " Institute ". Clause 9 will be found to be important and I set out the substantive part of it. " 9. The Trustees shall apply the income arising from the " Endowment Fund and any rents and profits arising from " the Settled Properties and any other profits income or contri- " butions which may be received by the Trustees in carrying " on the Institute and otherwise for the maintenance repair " and insurance of the Settled Properties and in payment of " the rates and other outgoings and towards the cost of main- " taining equipping and using the Settled Properties for the " purposes of the Institute and generally for carrying into " effect all or any of the trusts of this Deed. Clause 10 provided that the Institute should not be used for meetings of any political party or for the purposes of any such party and that no part of the property capital or income for the time being subject to the trusts thereof should at any time be used or applied for any such purposes or for any other purposes not being charitable, with a proviso that that prohibition should not prevent any application of money or property for purposes necessarily incidental to carrying out the charitable trusts of the Deed. 3 [4] Clause 13 authorised the Trustees to delegate their power to carry on the Institute by appointing Managers and Clause 14 to exercise that power by appointing the Association to act as Managers of the Institute. I do not think it necessary to refer to any other provisions of the Deed. On the day following its execution Howell J. Williams Ld. resigned the trusteeship of the Deed and in their place seven individuals (including the Settlor) were appointed trustees. The survivors of them are the present appellants. The relevant facts as found by the Commissioners for the special purposes of the Income Tax Acts are these. I take them from the Case stated, which will at the same time conveniently show the nature of the claim which is the subject of appeal to this House. Paragraph 4 of the Case states that the trust property had always been maintained as two blocks, that the first block (therein- after referred to as " the Institute Block ") consisted of property in Gray's Inn Road and Mecklenburgh Square which was adapted for use as an Institute in accordance with the trusts of the Deed, that the second block consisting of 29, 30 and 31 Doughty Street was let out to tenants, that the first block only—and not, as incorrectly indicated in the recitals to the deed, the whole of the trust property—was until May, 1941 occupied by the Young Wales Association (London) Ld., which later changed its name to London Welsh Association Ld., and was thereinafter referred to as the Association. In the next paragraph of the Case the claim is stated. I think it worth while to set it out " The Trustees were not on this claim contending that this " Association was established for charitable purposes only. " The claim before us was that not the Association but the " Trustees were so established; that in applying the rents of " 29, 30 and 31 Doughty Street to the purposes of the before- " mentioned Association (which they claimed was an application " of income of the Trust under clause 9 of the Trust Deed) they " had applied the same to charitable purposes only and that " consequently they were entitled to exemption from Income " Tax, Schedule A, in respect of the rents of the said " properties ". From paragraph 7 of the Case it appears that the Trustees in exercise of their powers under the deed allowed the Association to occupy the Institute block and to act as managers of the Institute, and that the Association so acted until May, 1941, and that before that date they made two donations to the Association for the purposes of the Institute, but that after that date the Association had been unable to continue in occupation of the premises, which had been let to the Welsh Services Club, and similarly after that date no further donations had been made. In paragraph 11 of the Case there is a summary of the evidence given before the Commissioners by a Mr. V. J. Lewis, one of the Trustees of the Deed, and at one time Secretary of the Association. Since the question raised in this appeal appears in one aspect to turn on findings of fact, I cannot omit a reference to this evidence. It appears that Mr. Lewis and two of his co-trustees met and con- sidered what should be done with the funds which they held under the Deed and they decided to make two donations to the Institute. They considered that they were carrying out the purposes of the Deed, because it was necessary that the Institute should be maintained. The Association were running the headquarters premises at a loss, although making a profit on their other activities, [5] 4 and he and his co-trustees knew that any donation which they made would be paid into the Headquarters Account, from which the activities of the Institute were financed. This was one of two accounts, the other being the General Account. On the Head- quarters account there was a debit balance. On the General account there was a credit balance; into this account the sub- scriptions of members of the Association were paid, and also donations from another distinct trust, and out of it was paid printing, postage and secretarial expenses, Corporation duty, etc. The Association did not keep separate accounts as to the expendi- ture of the donations. The objects (said Mr. Lewis) to which the donations were intended to be devoted were numbers I, 4, 5, part of 7, and 8 and 11 of the activities of the Association, as set out in its booklet which was annexed to the Case. These activities are there described as follows: — " 1. Public lectures and debates, a Music Club, and literary " and educational classes. " .... " 4. The maintenance of Headquarters premises at 11 Meck- " lenburgh Square, W.C.1, comprising Lounge and Writing " Room, Library (where current Welsh and English periodicals " and newspapers may be found), Billiard Room, Tea and " Games Rooms, etc., available for the use of Headquarters " Members of the Association, and of all Donors and " Subscribers. " The Headquarters Premises and in particular the London " Welsh Hall are increasingly becoming the meeting place of " the committees and functions of the various London Welsh " societies and other organisations. " 5. Badminton and Table Tennis Clubs are maintained in " connection with the Headquarters Premises. " .... " 7. Dances, whist and bridge drives, and annually a dinner " and a garden party. " 8. A weekly Social and Dance is held for headquarters " members in the London Welsh Hall, on Saturday evenings. " The charge made for admission is only 6d. (ordinary " members, and visitors on the introduction of a member, may " obtain admission at 2s.): a dance band is provided, and " the popularity of these weekly functions among the younger " members of the London Welsh community is undoubted. " .... " ii. The Headquarters office of the Association serves in " many ways as a Central Information Bureau for London " Welsh people and visitors to the metropolis ". Mr. Lewis said that in making these donations the trustees regarded themselves as contributing to dances, whist and bridge drives held at the Institute, and as part of the activities taking place there, and not to any such activities held elsewhere. A prominent part of the activities of the Institute consisted of lectures, debates, music club and literary and educational classes. Classes were held in the Welsh language, history, and literature. The Trustees did not contribute towards the Theatre Guild referred to in No. 2 of the list of the activities. I must assume that the Commissioners accepted as facts the statements which they set out without comment in this Case. The Commissioners then state (as should always be done with clearness and particularity) the rival contentions of the trustees and the Crown. I have referred earlier in this opinion to the claim made by the trustees. Of the Crown it is only said that the contention of the trustees was resisted on its behalf. 5 [6] The decision of the Commissioners was as follows: — "Under the terms of the trust deed the purposes of the " Institute, to which the rents of the properties in question " held by the trustees have been applied, are wide and inclusive. " While certain of its features conform to the idea of a charity, " we have come to the conclusion that these features are " not so dominating, nor is the general character of the " Institute such, as effectively to distinguish it from an ordinary " social club. We are unable to say that it is established for " charitable purposes only, and the application accordingly "fails" . I have thought it necessary to state the facts at this length because it has been a matter of some controversy what the Commissioners really decided. The issues being two-fold, (a) whether the trust property was vested in the trustees for charitable purposes, and (b) whether the rents were applied for charitable purposes only, it is at least arguable that the Commissioners, notwithstanding that the facts stated in the Case related mainly to the second issue, yet decided only the first issue. It is not clear what view was taken upon this point by Macnaghten J., before whom came the appeal from the Commissioners. He found it sufficient to say that he saw no ground for questioning their conclusion, adding that, if their decision was open to criticism at all, it was that it might have been expressed in even stronger terms. When the matter came before the Court of Appeal, the con- fusion was made apparent, and there was some difference of opinion between the members of that Court, Scott L.J. thinking it possible to read into the decision of the Commissioners a plain find- ing of fact that the income in question was not applied to charitable purposes only, while Morton, L.J. (if I read his judgment correctly) was prepared to assume that there was no finding of fact fatal to the appellants' case. In these circumstances, while I cannot entertain any doubt that upon the facts stated in the case it was not open to the Commis- sioners to come to any other conclusion on the second issue than that the rents in question were not applied for charitable purposes only, I think it right also to examine the question whether, irrespective of the application of the rents in any year, the trust property itself is vested in the appellants for charitable purposes. That this expression means "for charitable purposes only" is conceded by the appellants. My Lords, the claim of the appellants that the property is vested in them for charitable purposes is based on these contentions: (a) that the dominant purpose of the trust is the fostering of Welsh culture, which is a purpose beneficial to the community composed of the people of the United Kingdom, (b) that the purpose afore- said is beneficial to the community composed of the people of the Principality of Wales and the County of Monmouth, which is an integral part of the United Kingdom and in itself constitutes a political body settled in a particular territorial area; and (c) because the maintenance of the Institute (the expressed method ot effectuating the purpose aforesaid) is itself a purpose beneficial to a section of the British community which is determined by reference to impersonal qualifications (namely persons with Welsh con- nections who are resident in or near or visiting London) and is not a selection of private individuals chosen on account of personal qualifications. I have taken this statement of the appellant's contentions from the formal reasons in their written case, because in them so clearly appears the fallacious argument upon which, in this and other cases which it has been my fortune to hear, an attempt has been made to establish the charitable character of a trust. [7] 6 My Lords, there are, I think, two propositions which must ever be borne in mind in any case in which the question is whether a trust is charitable. The first is that it is still the general law that a trust is not charitable and entitled to the privileges which charity confers, unless it is within the spirit and intendment of the pre- amble to the Statute of Elizabeth, (43 Eliz. c. 4), which is expressly preserved by S. 13(2) of the Mortmain and Charitable Uses Act, 1888. The second is that the classification of charity in its legal sense into four principal divisions by Lord Macnaghten in Pemsel's case (1891 AC 531 ) must always be read subject to the qualification appearing in the judgment of Lindley L.J. in re Macduft (1896 2 Ch 451 at p. 466) "Now Sir Samuel Romilly did " not mean, and I am certain Lord Macnaghten did not mean, " to say that every object of public general utility must necessarily " be a charity. Some may be and some may not be ". This observation has been expanded by Lord Cave in this House in these words:

" Lord Macnaghten did not mean that all trusts for "purposes beneficial to the community are charitable, but that " there were certain beneficial trusts which fell within that category: " and accordingly to argue that because a trust is for a purpose " beneficial to the community it is therefore a charitable trust is to " turn round his sentence and to give it a different meaning. So " here it is not enough to say that the trust in question is for public " purposes beneficial to the community or for the public welfare: " you must also show it to be a charitable trust". see A.G. v. National Provincial Bank (1924 A.C. 262 at p. 265). But it is just because the purpose of the trust deed in this case is said to be beneficial to the community or a section of the com- munity, and for no other reason, that its charitable character is asserted. It is not alleged that the trust is (a) for the benefit of the community and (6) beneficial in a way which the law regards as charitable. Therefore, as it seems to me, in its mere statement the claim is imperfect and must fail. My Lords, the cases in which the question of charity has come before the Courts are legion, and no one who is versed in them will pretend that all the decisions, even of the highest authority, are easy to reconcile, but I will venture to refer to one or two of them to make good the importance of my two general propositions. In Houston v. Burns (1918 A.C. 337) the question was as to the validity of a gift " for such public, benevolent, or charitable purposes in " connection with the parish of Lesmahagow or the neighbour- " hood " as might be thought proper. This was a Scotch case, but upon the point now under consideration there is no difference between English and Scotch law. It was argued that the limitation of the purpose to a particular locality was sufficient to validate the gift, that is to say, though purposes beneficial to the community might fail, yet purposes beneficial to a localised section of the community were charitable. That argument was rejected by this House. If the purposes are not charitable per se, the localisation of them will not make them charitable. It is noticeable that Lord Finlay at p. 341 expressly overrules a decision or dictum of Lord Romilly to the contrary effect in Dolan v. Macdermot ( L.R. 5 Eq . 60). Next I will refer to a case in the Privy Council which is the more valuable because Lord Macnaghten himself delivered the judgment of the Board. In that case the question was of the validity of a residuary gift " to the Roman Catholic Archbishop of Brisbane " and his successors to be used and expended wholly or in part " as such Archbishop may judge most conducive to the good of " religion in the diocese "

. What could have been easier than to say that such a trust was beneficial to the community, and more- over to a section of the community sufficiently defined by a reference to the diocese; and was therefore charitable? Yet the 7 [8] only argument was that the benefit to the community was of a character which fell within the preamble to the Statute of Elizabeth, i.e. for religious purposes, and therefore was charitable. And it is to be observed that this contention was rejected on the narrow ground that the terms of the bequest were not identical with religious purposes. " The language of the bequest", said Lord Macnaghten, " would (to quote Lord Langdale's words) be ' open " ' to such latitude of construction as to raise no trust which a " ' Court of Equity could carry into execution ' ". (Dunne v. Byrne, 1912 AC 407 , at p. 411.) One more decision out of many to the same effect may be cited. In Farley v. Westminster Bank (1939 AC 430 ) a testatrix had bequeathed the residue of her estate in part to the respective vicars and church-wardens of two named churches " for parish work " Could it be doubted that the purpose of the gift was beneficial to the community ? It could fairly be described in the very words in which the appellants here assert the charitable nature of their trust. Yet the gift failed. It was, in the words of Lord Russell of Killowen, " for the assistance and furtherance of those various " activities connected with the parish church, which are to be " found in every parish". It would be unduly cynical to say that that is not a purpose beneficial to the community. Yet it failed. And it failed because it did not fall within the spirit and intendment of the preamble to the Statute of Elizabeth. My Lords, I must mention another aspect of this case, which was discussed in the Court of Appeal and in the argument at your Lordships' bar. It is not expressly stated in the preamble to the Statute, but it was established in the Court of Chancery, and, so far as I am aware, the principle has been consistently maintained, that a trust in order to be charitable must be of a public character. It must not be merely for the benefit of par- ticular private individuals: if it is, it will not be in law a charity, though the benefit taken by those individuals is of the very character stated in the preamble. The rule is thus stated by Lord Wrenbury in Verge v. Somerville (1924 AC 496 at 499):

" To " ascertain whether a gift constitutes a valid charitable trust so " as to escape being void on the ground of perpetuity, a first " enquiry must be whether it is public—whether it is for the benefit " of the community or of an appreciably important class of the com- " munity. The inhabitants of a parish or town, or any particular " class of such inhabitants, may, for instance, be the objects of such " a gift, but private individuals, or a fluctuating body of private "individuals, cannot"

. It is, I think, obvious that this rule, necessary as it is, must often be difficult of application, and so the Courts have found. Fortunately, perhaps, though Lord Wrenbury put it first, the question does not arise at all, if the purpose of the gift, whether for the benefit of a class of inhabitants or of a fluctuating body of private individuals, is not itself charitable. I may however refer to a recent case in this House which in some aspects resembles the present case. In Keren v. Commis- sioners of Inland Revenue (1932 AC 650 ) a company had been formed which had as its main object (to put it shortly) the purchase of land in Palestine, Syria or other parts of Turkey in Asia and the peninsula of Sinai for the purpose of settling Jews on such lands. In its memorandum it took numerous other powers which were to be exercised only in such a way as should, in the opinion of the company, be conducive to the attainment of the primary object. No part of the income of the company was distributable among its members. It was urged that the company was established for charitable purposes for numerous reasons, with only one of which I will trouble your Lordships, viz. that it was established for the benefit of the community or of a section of the community, viz. Jews, whether the association was for the benefit of Jews all over the world or of the Jews [9] 8 repatriated in the Promised Land. Lord Tomlin, dealing with the argument that I have just mentioned upon the footing that, if benefit to " a community" could be established, the purpose might be charitable, proceeded to examine the problem in that aspect and sought to identify the community. He failed to do so, finding it neither in the community of all Jews throughout the world nor in that of the Jews in the region prescribed for settlement It is perhaps unnecessary to pursue the matter. Each case must be judged on its own facts, and the dividing line is not easily drawn. But the difficulty of finding the community in the present case, when the definition of " Welsh people " in the first deed is remem- bered, would not, I think, be less than that of finding the community of Jews in Keren's case. At an early stage in this opinion I said that cases on the law of charity are not easy to reconcile. I would not be taken as suggest- ing that there is any doubt about the present case. I agree with the learned Judges of the Court of Appeal that, upon the construction which they have adopted of the trust deed—and it is the only pos- sible construction—the property is not vested in the appellants for charitable purposes only. It is clear, as I have already said, that they have not applied the income for charitable purposes only, and I do not doubt that they have applied them strictly in accordance with their trust. " Matters", said Lord Russell of Killowen (then Russell L.J.), " have been stretched in favour of " charities almost to bursting point"; see re Grove-Grady (1929 1 Ch. 557). That point would be reached if your Lordships held that this trust deed has a purpose which falls within the spirit and intendment of the preamble. It clearly does not, and, if it does not, let the community be what you will, let the purpose be as beneficial as you like; here is no charity. My Lords, it would not be right for me in a case which raises in such a general form the broad question of charitable trusts to ignore a line of authorities relied on by the appellants. More accurately, I think, there are two lines of authorities which are apt to converge and cross each other. There is, first, the class of case of which re Smith (1932 I Ch. 153) is typical. In that case the testator gave his residuary estate " unto my country, England for— " own use and benefit absolutely " (sic). This was held to be a good charitable trust. Here no particular purpose or benefit was defined. Secondly, there is the class of case, of which Goodman v. Saltash (7 A.C. 633) may be regarded as the prototype. There Lord Selborne L.C. used the words cited so often in the reports:

" A " gift subject to a condition or trust for the benefit of the inhabitants " of a parish or town or of any particular class of such inhabitants " is (as I understand the law) a charitable trust"

. In the one class of case there is no particularity of benefit and the widest range of beneficiary, in the other the beneficiaries are localised and the nature of the benefit defined. How are these cases to be reconciled with the decisions of this House to which I earlier referred ? In the last edition of Tudor on Charities at p. 45 it is said, " It is " hard to avoid the conclusion that the foregoing cases, which " establish that gifts for the benefit of particular districts are " charitable, are anomalous. They cannot be related to the Statute " of Elizabeth, and they logically involve the proposition that pur- " poses which are not charitable in the world at large are charitable " if their operation is confined to a specified locality; for, public or " benevolent purposes are not charitable, while there is nothing to " prevent the trustees of a fund given for the benefit of a parish from " spending it upon public or benevolent purposes, and yet the gift " of such a fund is charitable. Nevertheless, a gift for public pur- " poses in a particular parish is not charitable ". Your Lordships may think that this sounds like a cry of despair, and, in truth, there 9 [10] is some ground for it. But I would suggest that it is possible to justify as charitable a gift to " my country England " upon the ground that, where no purpose is defined, a charitable purpose is implicit in the context; it is at least not excluded by the express prescription of " public " purposes. Where the gift is localised but the nature of the benefit is defined, no reconciliation is possible except upon the assumption that the particular purpose was in each case regarded as falling within the spirit and intendment of the preamble to the Statute of Elizabeth, though I find it difficult to ascribe this quality to the benefit taken by the freemen of Saltash. If this affords no solution of the problem, I can only invite your Lordships to maintain the principles which have consistently been asserted in this House over the last 50 years in this difficult and intricate branch of the law. I would dismiss this appeal. [11] Lord Normand I respectfully agree with my noble and learned friend Lord Simonds. Discordant decisions have resulted from the occasional failure to keep in mind the two propositions which my lord has now re-asserted and from the tacit assumption that all trusts beneficial to the public at large or to some section of it are entitled by a benevolent construction to the special privi- leges of charitable trusts. Yet the line between charitable and non charitable trusts is sometimes difficult to draw, even when correct principles are applied, particularly where the claim is made that the trust is charitable because its purpose is the furtherance of the moral improvement of the community. The decision in The Inland Revenue against Falkirk Temperance Cafe Trust 1927 s.c. 261, a case which has some resemblance to the present, must, I think, rest on the ground that the predominant purpose of the trust was the moral improvement by means of temperance of the inhabitants of Falkirk and that the cafes and temperance hotel provided by the Trust were so subordinated to the predominant purpose that it was possible to distinguish them from an ordinary commercial venture in catering and hotel-keeping. In the present case the decision of the Commissioners was that, while certain features of the Institute conformed to the idea of charity, they were not so dominating, nor was the general character of the Institute such, as effectively to distinguish it from an ordinary social club. In my opinion this conclusion is amply supported by the facts and is well founded in law. (57936) Wt . 8047—45 25 4/47 DL. G. 338 I have had the great advantage of reading in print and of studying the exhaustive Opinion prepared in this case by my noble and learned friend Lord Simonds. I agree with it, and need say no more except that I move that the appeal be dismissed, with costs. Lord Wright MY LORDS, I also have had the advantage of studying the Opinion about to be delivered by my noble and learned friend Lord Simonds. I agree with it, and have nothing to add. Lord Simonds MY LORDS,

[2]My noble and learned friend Lord Porter has asked me to say that he concurs in the Opinion which I am about to deliver. [2] Lord Simonds MY LORDS,

[3]The question raised in this appeal is whether under a trust deed dated the 12th October, 1937, and made between Howell J. Williams Ltd. as trustees of the one part and Sir Howell Jones Williams, therein called the settlor, of the other part, certain properties were vested in the trustees for charitable purposes within the meaning of Section 37 (1) (a) of the Income Tax Act, 1918, and whether the rents of those properties were in the years 1940-41 and 1941-42 applied by them to charitable purposes only.

[4]Section 37 (1) of the Income Tax Act, 1918, is as follows:

" 37.—(1) 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."

[5]. I will now state the relevant provisions of the Trust Deed.

[6]It begins by reciting that it is supplemental to a transfer of the 16th January, 1930, whereby certain freehold property specified in the Schedule (together with other property) was transferred to the trustees. This property consisted of certain premises in the Gray's Inn Road in the Parish of St. Pancras and No. 11 Mecklen- burgh Square and Nos. 29, 30 and 31 Doughty Street in the same parish.

[7]It further recites that the property had been purchased by the trustees out of moneys provided by the settlor, and that the Young Wales Association (London) Ltd. (thereinafter called " the Associa- " tion ") had been incorporated on the 21st March, 1925, with (inter alia) the following objects, namely:(i) to promote Welsh interests in London and to provide means of social intercourse between persons of Welsh nationality birth domicile education or sympathies;

(ii) to consider and discuss all questions affecting Welsh interests;

(iii) to foster the study of the Welsh language and to procure the delivery of lectures on subjects connected with Welsh history literature music and art;

(iv) to form and maintain a library of periodical historical and other literature in the Welsh language or relating to Wales, and, finally, that the property had for some time past been and was then occupied used and enjoyed by the Association with the consent of the settlor for the purposes of the Association.

[8]I come to the operative part of the Deed. Clause 1 contains an important definition. " The expression ' Welsh people ' shall mean " and include persons of Welsh nationality by birth or descent " or born or educated or at any time domiciled in the Principality " of Wales or the County of Monmouth ". Clauses 2 and 3 I can pass over. Clauses 4 and 5 cannot fairly be summarised and I state them in extenso. " 4. The Trustees shall hold the Settled Properties and the " Endowment Fund for the purpose of establishing and main- " taming an Institute and meeting place in London to be " known as ' The London Welsh Association ' (hereinafter " called ' the Institute') for the benefit of Welsh people resident " in or near or visiting London with a view to creating a centre " in London for promoting the moral social spiritual and [3] 2 " educational welfare of Welsh people and fostering the study " of the Welsh language and of Welsh history literature music " and art ". "5. Without prejudice to the generality of the foregoing " provisions the Trustees may use or permit such part of the " Settled Properties as is required to be used as the Institute " for all or any of the following purposes: — "(a) For providing a meeting place for Welsh people in " London and their friends where they can obtain facilities " for social intercourse study reading rest recreation and " refreshment. "

(b) For meetings concerts lectures and other forms of " instruction discussion or entertainment especially in " relation to subjects connected with the Welsh language " and Welsh history literature music and art. "

(c) For any educational purposes connected with the " Welsh language or Welsh subjects or likely to be of value " or interest to Welsh people. "

(d) For establishing and maintaining a library of " periodical historical and other literature in the Welsh " language or relating to Wales or which is likely to be of " use to Welsh people. "

(e) As a hostel for the accommodation of Welsh people "in London. "

(f) For any of the purposes of the Association or of " any similar association which may be formed for the " benefit of Welsh people in London and which purposes " may be within the general scope of the Trusts declared " in Clause 4 hereof. "

(g) Generally for such other purposes being charitable " and for the benefit of Welsh people as the Trustees may " from time to time think fit provided always that the " Trustees shall not permit any alcoholic liquor to be sold " or consumed on any part of the Settled Properties for " the time being occupied or used for the purposes of the " Institute ". Clause 9 will be found to be important and I set out the substantive part of it. " 9. The Trustees shall apply the income arising from the " Endowment Fund and any rents and profits arising from " the Settled Properties and any other profits income or contri- " butions which may be received by the Trustees in carrying " on the Institute and otherwise for the maintenance repair " and insurance of the Settled Properties and in payment of " the rates and other outgoings and towards the cost of main- " taining equipping and using the Settled Properties for the " purposes of the Institute and generally for carrying into " effect all or any of the trusts of this Deed.

[9]Clause 10 provided that the Institute should not be used for meetings of any political party or for the purposes of any such party and that no part of the property capital or income for the time being subject to the trusts thereof should at any time be used or applied for any such purposes or for any other purposes not being charitable, with a proviso that that prohibition should not prevent any application of money or property for purposes necessarily incidental to carrying out the charitable trusts of the Deed. 3 [4]

[10]Clause 13 authorised the Trustees to delegate their power to carry on the Institute by appointing Managers and Clause 14 to exercise that power by appointing the Association to act as Managers of the Institute. I do not think it necessary to refer to any other provisions of the Deed.

[11]On the day following its execution Howell J. Williams Ld. resigned the trusteeship of the Deed and in their place seven individuals (including the Settlor) were appointed trustees. The survivors of them are the present appellants.

[12]The relevant facts as found by the Commissioners for the special purposes of the Income Tax Acts are these. I take them from the Case stated, which will at the same time conveniently show the nature of the claim which is the subject of appeal to this House.

[13]Paragraph 4 of the Case states that the trust property had always been maintained as two blocks, that the first block (therein- after referred to as " the Institute Block ") consisted of property in Gray's Inn Road and Mecklenburgh Square which was adapted for use as an Institute in accordance with the trusts of the Deed, that the second block consisting of 29, 30 and 31 Doughty Street was let out to tenants, that the first block only—and not, as incorrectly indicated in the recitals to the deed, the whole of the trust property—was until May, 1941 occupied by the Young Wales Association (London) Ld., which later changed its name to London Welsh Association Ld., and was thereinafter referred to as the Association.

[14]In the next paragraph of the Case the claim is stated. I think it worth while to set it out " The Trustees were not on this claim contending that this " Association was established for charitable purposes only. " The claim before us was that not the Association but the " Trustees were so established; that in applying the rents of " 29, 30 and 31 Doughty Street to the purposes of the before- " mentioned Association (which they claimed was an application " of income of the Trust under clause 9 of the Trust Deed) they " had applied the same to charitable purposes only and that " consequently they were entitled to exemption from Income " Tax, Schedule A, in respect of the rents of the said " properties ".

[15]From paragraph 7 of the Case it appears that the Trustees in exercise of their powers under the deed allowed the Association to occupy the Institute block and to act as managers of the Institute, and that the Association so acted until May, 1941, and that before that date they made two donations to the Association for the purposes of the Institute, but that after that date the Association had been unable to continue in occupation of the premises, which had been let to the Welsh Services Club, and similarly after that date no further donations had been made.

[16]In paragraph 11 of the Case there is a summary of the evidence given before the Commissioners by a Mr. V. J. Lewis, one of the Trustees of the Deed, and at one time Secretary of the Association. Since the question raised in this appeal appears in one aspect to turn on findings of fact, I cannot omit a reference to this evidence. It appears that Mr. Lewis and two of his co-trustees met and con- sidered what should be done with the funds which they held under the Deed and they decided to make two donations to the Institute. They considered that they were carrying out the purposes of the Deed, because it was necessary that the Institute should be maintained. The Association were running the headquarters premises at a loss, although making a profit on their other activities, [5] 4 and he and his co-trustees knew that any donation which they made would be paid into the Headquarters Account, from which the activities of the Institute were financed. This was one of two accounts, the other being the General Account. On the Head- quarters account there was a debit balance. On the General account there was a credit balance; into this account the sub- scriptions of members of the Association were paid, and also donations from another distinct trust, and out of it was paid printing, postage and secretarial expenses, Corporation duty, etc. The Association did not keep separate accounts as to the expendi- ture of the donations. The objects (said Mr. Lewis) to which the donations were intended to be devoted were numbers I, 4, 5, part of 7, and 8 and 11 of the activities of the Association, as set out in its booklet which was annexed to the Case. These activities are there described as follows: — " 1. Public lectures and debates, a Music Club, and literary " and educational classes. " .... " 4. The maintenance of Headquarters premises at 11 Meck- " lenburgh Square, W.C.1, comprising Lounge and Writing " Room, Library (where current Welsh and English periodicals " and newspapers may be found), Billiard Room, Tea and " Games Rooms, etc., available for the use of Headquarters " Members of the Association, and of all Donors and " Subscribers. " The Headquarters Premises and in particular the London " Welsh Hall are increasingly becoming the meeting place of " the committees and functions of the various London Welsh " societies and other organisations. " 5. Badminton and Table Tennis Clubs are maintained in " connection with the Headquarters Premises. " .... " 7. Dances, whist and bridge drives, and annually a dinner " and a garden party. " 8. A weekly Social and Dance is held for headquarters " members in the London Welsh Hall, on Saturday evenings. " The charge made for admission is only 6d. (ordinary " members, and visitors on the introduction of a member, may " obtain admission at 2s.): a dance band is provided, and " the popularity of these weekly functions among the younger " members of the London Welsh community is undoubted. " .... " ii. The Headquarters office of the Association serves in " many ways as a Central Information Bureau for London " Welsh people and visitors to the metropolis ". Mr. Lewis said that in making these donations the trustees regarded themselves as contributing to dances, whist and bridge drives held at the Institute, and as part of the activities taking place there, and not to any such activities held elsewhere. A prominent part of the activities of the Institute consisted of lectures, debates, music club and literary and educational classes. Classes were held in the Welsh language, history, and literature. The Trustees did not contribute towards the Theatre Guild referred to in No. 2 of the list of the activities. I must assume that the Commissioners accepted as facts the statements which they set out without comment in this Case. The Commissioners then state (as should always be done with clearness and particularity) the rival contentions of the trustees and the Crown. I have referred earlier in this opinion to the claim made by the trustees. Of the Crown it is only said that the contention of the trustees was resisted on its behalf. 5 [6] The decision of the Commissioners was as follows: — "Under the terms of the trust deed the purposes of the " Institute, to which the rents of the properties in question " held by the trustees have been applied, are wide and inclusive. " While certain of its features conform to the idea of a charity, " we have come to the conclusion that these features are " not so dominating, nor is the general character of the " Institute such, as effectively to distinguish it from an ordinary " social club. We are unable to say that it is established for " charitable purposes only, and the application accordingly "fails" . I have thought it necessary to state the facts at this length because it has been a matter of some controversy what the Commissioners really decided. The issues being two-fold,(a) whether the trust property was vested in the trustees for charitable purposes, and

(b) whether the rents were applied for charitable purposes only, it is at least arguable that the Commissioners, notwithstanding that the facts stated in the Case related mainly to the second issue, yet decided only the first issue. It is not clear what view was taken upon this point by Macnaghten J., before whom came the appeal from the Commissioners. He found it sufficient to say that he saw no ground for questioning their conclusion, adding that, if their decision was open to criticism at all, it was that it might have been expressed in even stronger terms. When the matter came before the Court of Appeal, the con- fusion was made apparent, and there was some difference of opinion between the members of that Court, Scott L.J. thinking it possible to read into the decision of the Commissioners a plain find- ing of fact that the income in question was not applied to charitable purposes only, while Morton, L.J. (if I read his judgment correctly) was prepared to assume that there was no finding of fact fatal to the appellants' case. In these circumstances, while I cannot entertain any doubt that upon the facts stated in the case it was not open to the Commis- sioners to come to any other conclusion on the second issue than that the rents in question were not applied for charitable purposes only, I think it right also to examine the question whether, irrespective of the application of the rents in any year, the trust property itself is vested in the appellants for charitable purposes. That this expression means "for charitable purposes only" is conceded by the appellants. My Lords, the claim of the appellants that the property is vested in them for charitable purposes is based on these contentions: (a) that the dominant purpose of the trust is the fostering of Welsh culture, which is a purpose beneficial to the community composed of the people of the United Kingdom, (b) that the purpose afore- said is beneficial to the community composed of the people of the Principality of Wales and the County of Monmouth, which is an integral part of the United Kingdom and in itself constitutes a political body settled in a particular territorial area; and

(c) because the maintenance of the Institute (the expressed method ot effectuating the purpose aforesaid) is itself a purpose beneficial to a section of the British community which is determined by reference to impersonal qualifications (namely persons with Welsh con- nections who are resident in or near or visiting London) and is not a selection of private individuals chosen on account of personal qualifications. I have taken this statement of the appellant's contentions from the formal reasons in their written case, because in them so clearly appears the fallacious argument upon which, in this and other cases which it has been my fortune to hear, an attempt has been made to establish the charitable character of a trust. [7] 6

[17]My Lords,

[17]there are, I think, two propositions which must ever be borne in mind in any case in which the question is whether a trust is charitable. The first is that it is still the general law that a trust is not charitable and entitled to the privileges which charity confers, unless it is within the spirit and intendment of the pre- amble to the Statute of Elizabeth, (43 Eliz. c. 4), which is expressly preserved by S. 13(2) of the Mortmain and Charitable Uses Act, 1888. The second is that the classification of charity in its legal sense into four principal divisions by Lord Macnaghten in Pemsel's case (1891 AC 531 ) must always be read subject to the qualification appearing in the judgment of Lindley L.J. in re Macduft (1896 2 Ch 451 at p. 466) "Now Sir Samuel Romilly did " not mean, and I am certain Lord Macnaghten did not mean, " to say that every object of public general utility must necessarily " be a charity. Some may be and some may not be ". This observation has been expanded by Lord Cave in this House in these words:

" Lord Macnaghten did not mean that all trusts for "purposes beneficial to the community are charitable, but that " there were certain beneficial trusts which fell within that category: " and accordingly to argue that because a trust is for a purpose " beneficial to the community it is therefore a charitable trust is to " turn round his sentence and to give it a different meaning. So " here it is not enough to say that the trust in question is for public " purposes beneficial to the community or for the public welfare: " you must also show it to be a charitable trust". see A.G. v. National Provincial Bank (1924 A.C. 262 at p. 265). But it is just because the purpose of the trust deed in this case is said to be beneficial to the community or a section of the com- munity, and for no other reason, that its charitable character is asserted. It is not alleged that the trust is (a) for the benefit of the community and (6) beneficial in a way which the law regards as charitable. Therefore, as it seems to me, in its mere statement the claim is imperfect and must fail. My Lords, the cases in which the question of charity has come before the Courts are legion, and no one who is versed in them will pretend that all the decisions, even of the highest authority, are easy to reconcile, but I will venture to refer to one or two of them to make good the importance of my two general propositions. In Houston v. Burns (1918 A.C. 337) the question was as to the validity of a gift " for such public, benevolent, or charitable purposes in " connection with the parish of Lesmahagow or the neighbour- " hood " as might be thought proper. This was a Scotch case, but upon the point now under consideration there is no difference between English and Scotch law. It was argued that the limitation of the purpose to a particular locality was sufficient to validate the gift, that is to say, though purposes beneficial to the community might fail, yet purposes beneficial to a localised section of the community were charitable. That argument was rejected by this House. If the purposes are not charitable per se, the localisation of them will not make them charitable. It is noticeable that Lord Finlay at p. 341 expressly overrules a decision or dictum of Lord Romilly to the contrary effect in Dolan v. Macdermot ( L.R. 5 Eq . 60). Next I will refer to a case in the Privy Council which is the more valuable because Lord Macnaghten himself delivered the judgment of the Board. In that case the question was of the validity of a residuary gift " to the Roman Catholic Archbishop of Brisbane " and his successors to be used and expended wholly or in part " as such Archbishop may judge most conducive to the good of " religion in the diocese "

[18]One more decision out of many to the same effect may be cited. In Farley v. Westminster Bank (1939 AC 430 ) a testatrix had bequeathed the residue of her estate in part to the respective vicars and church-wardens of two named churches " for parish work " Could it be doubted that the purpose of the gift was beneficial to the community ? It could fairly be described in the very words in which the appellants here assert the charitable nature of their trust. Yet the gift failed. It was, in the words of Lord Russell of Killowen, " for the assistance and furtherance of those various " activities connected with the parish church, which are to be " found in every parish". It would be unduly cynical to say that that is not a purpose beneficial to the community. Yet it failed. And it failed because it did not fall within the spirit and intendment of the preamble to the Statute of Elizabeth.

[19]My Lords,

[19]I must mention another aspect of this case, which was discussed in the Court of Appeal and in the argument at your Lordships' bar. It is not expressly stated in the preamble to the Statute, but it was established in the Court of Chancery, and, so far as I am aware, the principle has been consistently maintained, that a trust in order to be charitable must be of a public character. It must not be merely for the benefit of par- ticular private individuals: if it is, it will not be in law a charity, though the benefit taken by those individuals is of the very character stated in the preamble. The rule is thus stated by Lord Wrenbury in Verge v. Somerville (1924 AC 496 at 499):

" To " ascertain whether a gift constitutes a valid charitable trust so " as to escape being void on the ground of perpetuity, a first " enquiry must be whether it is public—whether it is for the benefit " of the community or of an appreciably important class of the com- " munity. The inhabitants of a parish or town, or any particular " class of such inhabitants, may, for instance, be the objects of such " a gift, but private individuals, or a fluctuating body of private "individuals, cannot"

[20]At an early stage in this opinion I said that cases on the law of charity are not easy to reconcile. I would not be taken as suggest- ing that there is any doubt about the present case. I agree with the learned Judges of the Court of Appeal that, upon the construction which they have adopted of the trust deed—and it is the only pos- sible construction—the property is not vested in the appellants for charitable purposes only. It is clear, as I have already said, that they have not applied the income for charitable purposes only, and I do not doubt that they have applied them strictly in accordance with their trust. " Matters", said Lord Russell of Killowen (then Russell L.J.), " have been stretched in favour of " charities almost to bursting point"; see re Grove-Grady (1929 1 Ch. 557). That point would be reached if your Lordships held that this trust deed has a purpose which falls within the spirit and intendment of the preamble. It clearly does not, and, if it does not, let the community be what you will, let the purpose be as beneficial as you like; here is no charity. My Lords, it would not be right for me in a case which raises in such a general form the broad question of charitable trusts to ignore a line of authorities relied on by the appellants. More accurately, I think, there are two lines of authorities which are apt to converge and cross each other. There is, first, the class of case of which re Smith (1932 I Ch. 153) is typical. In that case the testator gave his residuary estate " unto my country, England for— " own use and benefit absolutely " (sic). This was held to be a good charitable trust. Here no particular purpose or benefit was defined. Secondly, there is the class of case, of which Goodman v. Saltash (7 A.C. 633) may be regarded as the prototype. There Lord Selborne L.C. used the words cited so often in the reports:

" A " gift subject to a condition or trust for the benefit of the inhabitants " of a parish or town or of any particular class of such inhabitants " is (as I understand the law) a charitable trust"

[21]In the last edition of Tudor on Charities at p. 45 it is said, " It is " hard to avoid the conclusion that the foregoing cases, which " establish that gifts for the benefit of particular districts are " charitable, are anomalous. They cannot be related to the Statute " of Elizabeth, and they logically involve the proposition that pur- " poses which are not charitable in the world at large are charitable " if their operation is confined to a specified locality; for, public or " benevolent purposes are not charitable, while there is nothing to " prevent the trustees of a fund given for the benefit of a parish from " spending it upon public or benevolent purposes, and yet the gift " of such a fund is charitable. Nevertheless, a gift for public pur- " poses in a particular parish is not charitable ". Your Lordships may think that this sounds like a cry of despair, and, in truth, there 9 [10] is some ground for it. But I would suggest that it is possible to justify as charitable a gift to " my country England " upon the ground that, where no purpose is defined, a charitable purpose is implicit in the context; it is at least not excluded by the express prescription of " public " purposes. Where the gift is localised but the nature of the benefit is defined, no reconciliation is possible except upon the assumption that the particular purpose was in each case regarded as falling within the spirit and intendment of the preamble to the Statute of Elizabeth, though I find it difficult to ascribe this quality to the benefit taken by the freemen of Saltash. If this affords no solution of the problem, I can only invite your Lordships to maintain the principles which have consistently been asserted in this House over the last 50 years in this difficult and intricate branch of the law. I would dismiss this appeal. [11] Lord Normand

[22]I respectfully agree with my noble and learned friend Lord Simonds. Discordant decisions have resulted from the occasional failure to keep in mind the two propositions which my lord has now re-asserted and from the tacit assumption that all trusts beneficial to the public at large or to some section of it are entitled by a benevolent construction to the special privi- leges of charitable trusts. Yet the line between charitable and non charitable trusts is sometimes difficult to draw, even when correct principles are applied, particularly where the claim is made that the trust is charitable because its purpose is the furtherance of the moral improvement of the community. The decision in The Inland Revenue against Falkirk Temperance Cafe Trust 1927 s.c. 261, a case which has some resemblance to the present, must, I think, rest on the ground that the predominant purpose of the trust was the moral improvement by means of temperance of the inhabitants of Falkirk and that the cafes and temperance hotel provided by the Trust were so subordinated to the predominant purpose that it was possible to distinguish them from an ordinary commercial venture in catering and hotel-keeping. In the present case the decision of the Commissioners was that, while certain features of the Institute conformed to the idea of charity, they were not so dominating, nor was the general character of the Institute such, as effectively to distinguish it from an ordinary social club. In my opinion this conclusion is amply supported by the facts and is well founded in law. (57936) Wt . 8047—45 25 4/47 DL. G. 338