The Court considered whether it had jurisdiction to make an order with respect to a company registered in New York for objects which were charitable according to the laws of England.
Held: The Revenue’s appeal against a finding that the objects would be charitable under English law failed. However, the Special Commissioners had also decided that, in order to obtain the privilege of exemption under the sedtion of the 1918 Act, the body claiming the privilege must be one established under and in accordance with the laws of the United Kingdom. The foundation, being a foreign corporation and not subject to the jurisdiction, was debarred from claiming the benefit of the exemption. The foundation’s own appeal against this point failed.
Jenkins LJ said: ‘I have already expressed the view that ‘trust’ in an Act of the United Kingdom Parliament means a trust taking effect and enforceable under the law of the United Kingdom. It follows that, in my opinion, a ‘trust established for charitable purposes only’, must here mean a trust taking effect and enforceable under the law of the United Kingdom and creating an obligation enforceable in the courts of the United Kingdom to apply its funds for the purposes which are, according to the law of the United Kingdom, exclusively charitable. I can attribute no different meaning to the phrase ‘established for charitable purposes only’ when applied to a body of persons. So applied, I think it is only satisfied by a body of persons which is under the law of the United Kingdom subject to an obligation enforceable in our courts to apply its funds for purposes which are according to that law exclusively charitable. Accordingly, I would hold that the foundation is not ‘established for charitable purposes only’ within the meaning of section 37(1)(b) of the Income Tax Act 1918.’ Lord Evershed: ‘To my mind, the words ‘charities’ or ‘charitable institutions’ in an ordinary context in an English Act of Parliament or any English document must (prima facie at least) mean institutions regulated by, and subject to the jurisdiction of, the laws or the courts of the United Kingdom and constituted for the carrying out of objects or purposes which, in the courts of the United Kingdom and nowhere else, would be held to be ‘charitable’. In my judgment the two aspects or characteristics are almost inseparable. The law relating to charities or charitable trusts is a peculiar and highly complex part of our legal system. An Act of Parliament which uses the words ‘charity’ or ‘charitable’ must be intending to refer to that special and characteristic, if not in some respects artificial, part of our law.’ and ‘I am considering what, as a matter of ordinary language and common sense, is intended (in the absence of a special context) by the phrase, in an English Act of Parliament or other document, ‘body of persons established for charitable purposes only.’ In my judgment, applying the test I have formulated, once it is conceded that ‘for charitable purposes only’ means ‘for purposes which are what the laws of the United Kingdom define as charitable and hold to fall within the special and somewhat artificial significance of that word,’ then it seems to me, prima facie, that a body cannot be ‘established’ for such purposes, unless it is so constituted or regulated as to be subject to the jurisdiction of the courts which can alone define and regulate those purposes.’
Sir Raymond Evershed MR explained that it would be awkward and artificial to consider a body of persons established under the law of a foreign country as falling within the scope of the legislation and that, administrative difficulties aside, there was ‘an inherent incompatibility’ in the conception of a corporation regulated according to the laws of a foreign country and carrying on the whole of its activities in that country being able to show that it was ‘established for charitable purposes only’: ‘I am considering what, as a matter of ordinary language and common sense, is intended (in the absence of a special context) by the phrase, in an English Act of Parliament or other document, ‘body of persons established for charitable purposes only.’ In my judgment, applying the test I have formulated, once it is conceded that ‘for charitable purposes only’ means ‘for purposes which are what the laws of the United Kingdom define as charitable and hold to fall within the special and somewhat artificial significance of that word,’ then it seems to me, prima facie, that a body cannot be ‘established’ for such purposes unless it is so constituted or regulated as to be subject to the jurisdiction of the courts which can alone define and regulate those purposes.’
Sir Raymond Evershed MR discussed the use within the section of the word ‘any’ before ‘body of persons’, saying: ‘Still more significant to my mind is the circumstance that the formula ‘any body of persons or trust established for charitable purposes only’ is followed by the alternative ‘or which, according to the rules or regulations established by Act of Parliament, charter, decree, deed of trust or will are applicable to charitable purposes only.’ It is, in my judgment, reasonably clear that the alternative was added in order to cover those cases in which only a part of the income is, by virtue of the Act of Parliament or other instrument named, applicable to charitable purposes, in contradistinction to those bodies of persons or trusts which are exclusively established for such purposes.
In my view, however, the alternatives are true alternatives; the distinction, that is to say, is between institutions, in other respects alike, whose income is either, on the one hand, wholly applicable to the purposes named, or, on the other hand, is, as to the relevant part only, so applicable. And since, in my judgment, it cannot be in doubt that by ‘Act of Parliament’ is meant an Act of the United Kingdom Parliament, so it follows, in my view, that by ‘charter, decree, deed of trust or will’ is meant an instrument of the kind specified subject to, and taking effect according to, the laws of the United Kingdom. The alternative formula must therefore be regarded as wholly limited by reference to our local law; and, if this is so, then, as it seems to me, the earlier phrase ‘any body of persons or trust established, etc.’ must be regarded as equally so limited.
In my judgment, therefore, the bodies of persons mentioned in the paragraph cannot comprehend foreign institutions such as the foundation. I have earlier stated my view that the essential word is ‘established.’ In my judgment, whatever might be the true significance of the four words ‘any body of persons’ taken in isolation, those words in the context of paragraph (b) of section 37(1) of the Act of 1918, and particularly when immediately followed by the words ‘or trust established for charitable purposes only,’ must be limited to bodies of persons so constituted and regulated as to be (in reference to the income in question) subject to the jurisdiction of the United Kingdom courts.’
Hodson LJ considered that, in context, the phrase ‘any body of persons or trust established for charitable purposes only’ must be a body of persons constituted under the law of the United Kingdom. He also found support for his conclusions in the practical difficulties involved in the contrary view. He thought the Commissioners would be set a difficult task if they had to apply the law of any part of the world in order to ascertain the purposes for which a particular body of persons was established before determining whether those purposes were charitable within the meaning of United Kingdom law.
Jenkins LJ, Hodson LJ, Lord Evershed MR
[1954] 1 Ch 672
Income Tax Act 1918 37(1)(b)
England and Wales
Cited by:
Appeal from – Camille and Henry Dreyfus Foundation Inc v Inland Revenue Commissioners HL 1956
The company was a foreign corporation constituted according to the laws of the state of New York for objects which were exclusively charitable according to the law of the United Kingdom.
Held: The term ‘charity’ does not include an institution . .
Cited – Gaudiya Mission and others v Brahmachary CA 30-Jul-1997
The High Court had found the plaintiff to be a charity, and ordered the Attorney-General to be joined in. The A-G appealed that order saying that the plaintiff was not a charity within the 1993 Act. The charity sought to spread the Vaishnava . .
Cited – Routier and Another v Revenue and Customs ChD 18-Sep-2014
Executors appealed against rejection of their claim that a gift in the will qualified for relief against Inheritance Tax as being a charitable gift. The Trusts concerned assets in Jersey.
Held: The appeal failed: ‘The expression ‘held on trust . .
Cited – Routier and Another v Revenue and Customs CA 16-Sep-2016
Executors appealed against a decision that a residual gift in a will was not charitable and that it was therefore subject to Inheritance Tax arguing that the section if construed in this way was an unlawful restriction on the free movement of . .
Lists of cited by and citing cases may be incomplete.
Updated: 24 August 2021; Ref: scu.200677
