Associated Artists v. Inland Revenue Com'rs 1956 (original) (raw)
Associated Artists Ltd. v. Commissioners of Inland Revenue
Reported [1956] 1 W.L.R. 752; 100 S.J. 450; [1956] 2 All E.R. 583; 221 L.T. Jo. 312.
Income Tax - Exemption - Charitable purposes - Income Tax Act, 1952 (15 & 16 Geo. VI & 1 Eliz. II, c. 10), Section 448 (1) (c) and (3).
The Appellant Company was incorporated in 1946 as a company limited by guarantee. Its objects as set out in clause 3 of its memorandum of association included:- "(a) To present classical, artistic, cultural and educational dramatic works in the United Kingdom of Great Britain and Northern Ireland and elsewhere. (b) To foster, promote and increase the interest of the public in the dramatic art and in the co-related arts... (c) To encourage and promote the creation of, and to arrange for the presentation of new dramatic works and to foster and enhance the art of affording advanced students facilities for training, and for gaining practical stage experience... (l) To do all such other things as are incidental or which the Association may think conducive to the attainment of any of the above objects."
The Company claimed exemption from Income Tax under Section 448 (1) (c), Income Tax Act, 1952, in respect of its profits from drama production for the years 1950-51 to 1953-54 inclusive, on the grounds that its objects were wholly charitable, or, alternatively, that those objecls which were not charitable could be disregarded through the application of the Charitable Trusts (Validation) Act, 1954. The claim was refused by the Commissioners of Inland Revenue and on appeal, by the Special Commissioners, who held that the Company was not established for charitable purposes only and that the Act of 1954 did not apply.
Held, that the Company was not established for charitable purposes only.
Stated under the Income Tax Act, 1952, Section 64, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 15th July, 1955, Associated Artists, Ltd., hereinafter called "the Appellant Company", being aggrieved by a decision of the Commissioners of Inland Revenue on a claim made for exemption from Income Tax under the provisions of Section 448 (1) (c) of the Income Tax Act, 1952, in respect of profits derived from drama production for the years 1950-51 to 1953-54 inclusive, applied to have the said claim for exemption heard and determined by the Special Commissioners. The question for our determination was whether or not the Appellant Company was a body established for charitable purposes only.
2. (a) The following documents were produced and admitted or proved at the hearing of the appeal:
A. Copy of the memorandum (as altered by special resolution of the Company passed 5th April, 1950) and articles of association of the Appellant Company.
B. Copy of the standard drama agreement made between the Arts Council of Great Britain and the Appellant Company on 2nd June, 1950.
C. Copies of the annual reports of the council of management of the Appellant Company for the years 1947 to 1953 inclusive.
Such of these documents as are not attached to and do not form part of this Case are available if required for the use of the High Court.
(b) Oral evidence was given by the following:
(i) Mr. John Selby Clements, actor and producer, who conceived the idea of forming the Appellant Company and who has been the administrator of the Appellant Company ever since its incorporation;
(ii) Sir Kenneth Ralph Barnes, for forty-six years principal of the Royal Academy of Dramatic Art, trustee of the Shakespeare Memorial Fund, member of the Joint Council of the Old Vic. and a member of the council of management of the Appellant Company since its incorporation;
(iii) Mr. John Percivale Moody, drama director of the Arts Council of Great Britain from April, 1939, to July, 1954, and now director of the Bristol Old Vic;
(iv) Mr. Matthew James McRobert, deputy secretary of the Arts Council of Great Britain since 1951.
The facts proved or admitted before us are as hereinafter set out in paragraphs 3 to 8 inclusive.
3. The Appellant Company was incorporated on 23rd January, 1946, as a company limited by guarantee. The idea of forming such a company was conceived by Mr. John Clements who, whilst playing in the commercial theatre, considered that there was a need for a non-profit-making organisation with a policy of putting on plays of the highest standard both in London and in the provinces, with a bias towards classical plays. Such an organisation should provide opportunities to young players of ability to play in better class works. At that time there were few such opportunities for young players except at the Old Vic and the Stratford Memorial Theatre, which specialised mainly in Shakespeare's works. The Arts Council of Great Britain, hereinafter called "the Arts Council", approved of Mr. Clement's idea and from its incorporation the Appellant Company has worked very closely with the Arts Council. He has, in fact, produced and acted in all the plays put on by the Appellant Company.
4. The objects for which the Appellant Company was established are set out in clause 3 of its memorandum of association. A copy of the memorandum and articles of association is annexed hereto, marked "A", and forms part of this Case. Our attention was drawn in particular to clauses 3 (a) and 3 (c) of the memorandum of association (although other clauses were referred to in argument), which read as follows:
"(a) To present classical, artistic, cultural and educational dramatic works in the United Kingdom of Great Britain and Northern Ireland and elsewhere.
(c) To encourage and promote the creation of, and to arrange for the presentation of new dramatic works and to foster and enhance the art of affording advanced students facilities for training, and for gaining practical stage experience".
5. The defined purpose of the Arts Council, as set out in its standard drama agreement, a copy of which is annexed hereto, marked "B", and forms part of this Case, is
"to extend the knowledge and practice of the arts, to make them more accessible and to maintain the highest possible artistic standards. The Council hopes to enlist in this policy the co-operation of theatre companies which have before them the same ideals of service to the community; which are anxious to spread the knowledge and appreciation of all that is best in the theatre, and thus to bring into being permanent educated audiences all over the country."
This agreement stipulates that
"only properly constituted non-profit-sharing companies and bodies functioning under charitable trusts are eligible for association with the Council."
6. The Appellant Company entered into association with the Arts Council and, in accordance with the obligations set out in clause 4 of the standard drama agreement, the drama director of the Arts Council acted as an assessor and approved of the activities of the Appellant Company. The Arts Council provided an interest-free loan of £1,500 to the Appellant Company. Mr. Clements provided £1,500 and two commercial theatrical enterprises each provided £3,000 as interest-free loans to the Appellant Company.
7. (a) The Appellant Company produced "The Kingmaker" and "Marriage a la Mode" in 1946. The former was the first and only new play produced by the Appellant Company. It was chosen because, besides having artistic merit and being historically accurate, it had thirty-four speaking parts. Such a production could not have been attempted in the commercial theatre. Neither of these plays was successful, and, in order to enable the Appellant Company to continue, the Arts Council gave a further interest-free loan of £2,000 and Mr. Clements agreed to waive his salary as administrator of the Appellant Company and also his fees as producer. At this time the British Council suggested that these two plays should be taken on a tour of the United States of America and Canada but this proposal was turned down by the Appellant Company with the approval of the Arts Council.
(b) In 1947 rehearsals were started of "The Beaux Stratagem", but owing to the illness of the leading lady, Mr. Clements's wife, Miss Kay Hammond, its production was postponed. After touring the provinces for five months "The Beaux Stratagem" was produced in London in May, 1949. It started badly but the Appellant Company considered it a good play and Mr. Clements again waived his salary as administrator and his fees as producer and also agreed to take only half his salary as an actor. The Appellant Company made further borrowings to meet current expenses. and subsequently the play was very successful and resulted in a profit of £26,000.
(c) In 1951 the Appellant Company produced "Man and Superman" during the Festival of Britain and included the "Don Juan in Hell" scene; although this was acclaimed as a great artistic success it resulted in a financial loss. This was the last play produced in association with the Arts Council because earlier in 1951 the Arts Council had decided to dissociate itself from certain London companies, of which the Appellant Company was one.
(d) In November, 1953, the Appellant Company produced "Pygmalion" which also resulted in a financial loss. Much emphasis had been placed on the historical accuracy of the setting of this play. Since that time no plays have been produced but the Appellant Company had acquired the rights in "The Wit to Woo", a new play. Except for "The Beaux Stratagem" all the plays produced by the Appellant Company had resulted in losses. The Appellant Company had been granted exemption from entertainments tax for all its productions.
(e) The Appellant Company has not arranged any formal lectures or classes for instruction and study of the dramatic art, but during all productions informal instruction has been given to members of the casts in the arts connected with the theatre.
(f) Sir Kenneth Barnes, who was familiar with all the productions of the Appellant Company, was of the opinion that such productions had undoubtedly done much to advance the theatre and dramatic taste.
8. When the Arts Council decided to dissociate itself from the Appellant Company in 1951 the future disposition of the funds of the Appellant Company in accordance with clause 8 (b) of the Arts Council's standard drama agreement required to be considered. The Arts Council was informed that the Appellant Company intended to continue its previous policy and that there would be no lowering of the standard of the plays that it produced. The Arts Council accordingly agreed that the Appellant Company should retain all its funds.
9. It was contended on behalf of the Appellant Company:
(i) that its objects were wholly charitable:
(ii) in the alternative, if any of its objects were found to be outside charitable purposes, then, as the activities of the Appellant Company were wholly charitable, such non-charitable purposes could be disregarded through the application of the Charitable Trusts (Validation) Act, 1954; and
(iii) that the Appellant Company was exempt from Income Tax under the provisions of Section 448 (1) (c), Income Tax Act, 1952.
10. It was contended on behalf of the Commissioners of Inland Revenue:
(i) that, on the true construction of the words used in the memorandum of association, the objects for which the Appellant Company was established were too wide and too vague to be restricted to charitable purposes only;
(ii) that the Charitable Trusts (Validation) Act, 1954, did not apply because there was no trust nor was there any question of the memorandum being void for uncertainty;
(iii) that the claim for exemption should be disallowed.
11. The following cases were referred to at the hearing of the appeal:
(i) In re Shakespeare Memorial Trust [1923] 2 Ch. 398.
(ii) Keren Kayemeth Le Jisroel Ltd. v. Commissioners of Inland Revenue, 17 T.C. 27.
(iii) Royal Choral Society v. Commissioners of Inland Revenue 1943, 25 T.C. 263.
(iv) Tennent Plays Ltd. v. Commissioners of Inland Revenue 1947, 30 T.C. 107.
(v) Camille and Henry Dreyfus Foundation Inc. v. Commissioners of Inland Revenue, (C.A.) [1954] Ch. 672; (H.L.) [1955] 3 W.L.R. 451.
(vi) Baddeley and Others (Trustees of the Newtown Trust) v. Commissioners of Inland Revenue 35 T.C. 661.
(vii) In re Levien [1955] 3.All E.R. 35.
12. We, the Commissioners who heard this application, having considered all the arguments and the evidence, gave our decision in writing on 7th September, 1955, as follows:
(1) The question for determination in this claim made under Section 450, Income Tax Act, 1952, is whether or not the Appellant Company is entitled toexemption from Income Tax under Schedule D for the years 1950-51 to 1953-54 inclusive, by virtue of the provisions of Section 448 (1) (c), Income Tax Act, 1952. It is not disputed that the activities carried on by the Company, if carried on under different objects might be charitable but it is contended for the Crown that the objects are not restricted to charitable purposes only.
(2) Object 3 (a) in the Company's memorandum of association is "to present classical, artistic, cultural and educational dramatic works in the United Kingdom of Great Britain and Northern Ireland and elsewhere". We think that in order for this object to be considered to be wholly charitable the words "classical, artistic, cultural" must be governed by the word "educational" or be synonymous with it. We do not think, upon the true construction of the clause, that these words are governed by "educational" but that they must be read disjunctively, and we think also that these words have a wider meaning than "educational" so that we find that the effect of the inclusion of these words allows the Company to present plays that are not wholly educational and therefore not charitable. We are confirmed in this view by the words of Viscount Simonds, L.C., in the House of Lords, in Baddeley and Others (Trustees of the Newtown Trust) v. Commissioners of Inland Revenue, 35 T.C. 661, at page 696:
"The short answer appears to me to be that, regarded as a whole, the sum of the activities permissible under the deed can only be regarded as educational in the sort of loose sense in which all experience may be said to be educative, and that, if such activities are examined one by one, it would be impossible to regard many of them as in even the loosest sense educational."
(3) In view of the conclusion to which we have come that object 3 (a) is not confined to charitable purposes, it is not necessary for us to refer to the arguments addressed to us concerning the remaining objects in the Company's memorandum of association.
It was, however, contended that if the objects were not confined to charitable purposes, nevertheless by virtue of the Charitable Trusts (Validation) Act, 1954, the Company's memorandum of association should have effect as if the whole of the declared objects were charitable. We cannot agree with this contention. That Act (by Section 2 thereof) applies to any disposition or covenant to make a disposition which (apart from that Act) is invalid under the law of England and Wales, but would be valid if the objects were exclusively charitable. In our opinion, it cannot apply to the Company's memorandum of association which is valid whether the objects set out therein are exclusively charitable or not.
4. We hold that the Company is not established for charitable purposes only and that the claim accordingly fails.
13. The Appellant Company, immediately after the determination of the application, declared to us its dissatisfaction therewith as being erroneous in point of law and in due course required us to state a Case for the opinion of the High Court pursuant to the Income Tax Act, 1952, Section 64, which Case we have stated and do sign accordingly. The question of law for the opinion of the High Court is whether the Appellant Company is a body of persons established for charitable purposes only.
H. G. Watson, R. A. Furtado, Commissioners for the Special Purposes of the Income Tax Acts. Turnstile House, 94-99. High Holborn, London, W.C.1. 18th January, 1956.
The case came before Upjohn, J., in the Chancery Division on 7th and 8th May. 1956, when judgment was given in favour of the Crown.
Mr. G. G. Honeyman, Q.C., and Mr. David Wilson appeared as Counsel for the Company, and Sir Lynn Ungoed-Thomas, Q.C., Sir Reginald Hills and Mr. E. Blanshard Stamp for the Crown.
Upjohn, J. This is an appeal by the taxpayer, Associated Artists Ltd., from a decision of the Special Commissioners of Income Tax. who heard a claim for exemption from tax under Section 448 (1) (c) of the Income Tax Act, 1952, in respect of certain profits of the Appellant, which claims to be constituted for exclusively charitable purposes. The Special Commissioners held that the Appellant was not such a body.
The whole question depends upon the proper interpretation of the memorandum of association of the Appellant, and I will turn straight to clause 3 of the memorandum. The objects for which the Association is established are:
"(a) To present classical, artistic, cultural and educational dramatic works in the United Kingdom of Great Britain and Northern Ireland and elsewhere.
(b) To foster, promote and increase the interest of the public in the dramatic art and in the co-related arts as well by the presentation of dramatic works as by other means, such as giving of lectures, the institution of competitions, the establishment of classes for instruction and study, the offering of special terms of admission to the Association's performances or other privileges to educational establishments, and by any other lawful means calculated to promote any of the objects for which the Association is established.
(c) To encourage and promote the creation of and to arrange for the presentation of new dramatic works and to foster and enhance the art of affording advanced students facilities for training, and for gaining practical stage experience."
I do not think I need to read the next few sub-paragraphs. The next one I will read is (f):
"To enter into agreements with authors composers playwrights and others for the acquisition of any rights in any classical, artistic, cultural or educational dramatic work or works and with artists actors theatre managers and others for the presentation, production and performance of any such work or works."
Then (j):
"To establish, subsidise, promote, co-operate or federate with or become affiliated to, or lend money or other assistance to any association, society or other body corporate or unincorporate whose objects are altogether similar to the objects of this Association, but so far that none of the funds of the Association shall be paid to any federated, affiliated or co-operating Association society or other body which does not prohibit the payment of dividends or profit to its members to an extent at least as great as is imposed on the Association under or by virtue of clause 4 hereof.
(k) To establish and support or aid in the establishment and support of any charitable associations or institutions and to subscribe or guarantee money for charitable purposes in any way connected with the purposes of the Association or calculated to further any of its objects.
(l) To do all such other things as are incidental or which the Association may think conducive to the attainment of any of the above objects."
Then clause 4 provided that the income and property of the Association should be devoted solely towards the promotion of the objects of the Association as set forth in the memorandum, and that no portion should be paid or transferred
"directly or indirectly by way of dividend bonus or otherwise howsoever by way of profit to the members of the Association."
The Association was limited by guarantee, the members undertaking to subscribe such amount as may be required not exceeding £5 in the event of a winding up. Then, upon the dissolution of the Association, the property and assets were to be transferred to institutions having objects similar to the objects of the Association which would prohibit the distribution
"of its or their income and property among its or their members to an extent at least as great as is imposed on the Association under or by virtue of clause 4 hereof".
Then it was provided that the institutions might be selected by members of the Association, and in default as a Judge of the High Court might direct to some charitable object.
The Company was in fact incorporated by Mr. John Clements, who is a well-known actor, in order to promote the objects which I have read, and he gave evidence. Sir Kenneth Barnes, who for 46 years was principal of the Royal Academy of Dramatic Art, also gave evidence. Sir Kenneth's view was that undoubtedly the productions which the Company had engaged upon had done much to advance the theatre and dramatic taste. No question arises that in fact all the productions, which I do not propose to describe in detail as they are fully set out in the Stated Case, have in fact had a charitable object. But that is not the point before me. The only question is whether the Company is incorporated for the purpose of carrying out exclusively charitable objects.
The Special Commissioners decided, as I have already said, that it was not incorporated exclusively for charitable objects, and they decided that the opening words in clause 3 (a) must be read disjunctively, and that the words had a wider meaning than "educational". I quote their finding:
"...we find that the effect of the inclusion of these words allows the Company to present plays that are not wholly educational and therefore not charitable."
Then they quote an extract from the speech of Lord Simonds in Baddeley and Others (Trustees of the Newtown Trust) v. Commissioners of Inland Revenue, 35 T.C. 661, at page 696.
Before me the argument has taken rather a different course. Sir Lynn Ungoed-Thomas for the Crown attacks clause 3 (a) in this way. Having regard to In re Shakespeare Memorial Trust [1923] 2 Ch. 398, and Royal Choral Society v. Commissioners of Inland Revenue 1943 25 T.C. 263, he does not challenge the view that if the objects were lo present "classical, cultural and educational dramatic works", taking the clause by itself, that would be a good charitable object even reading the words disjunctively. His main attack relates to the word "artistic".
The first matter to be considered is whether this phrase
"to present classical, artistic, cultural and educational dramatic works"
is to be read conjunctively so that the dramatic works must all be classical and artistic and cultural and educational, or whether it can be read disjunctively. I have been referred to some observations of Andrews, L.C.J.. in the Irish case of Trustees of the Londonderry Presbyterian Church House v. Commissioners of Inland Revenue 27 T.C. 431, upon this question of reading clauses conjunctively and disjunctively, and I have also been referred to the observations of Hodson, L.J., in Baddeley and Others (Trustees of the Newtown Trust) v. Commissioners of Inland Revenue , where he did not agree with the views of Andrews, L.C.J.
But in each case it is a pure question of construction, and I do not think either of those cases lays down any principle except this, that the words must be read grammatically. I observe that there are commas after the words "classical, artistic," and I think that is not unimportant. I also bear in mind that in sub-clause (f) the disjunctive "or" appears. The Company can enter into agreements with authors and others
"for the acquisition of any rights in any classical, artistic, cultural or educational dramatic work or works".
Also, I must bear this in mind. The object here is not to promote in terms some charitable object, but to present plays. Further, I have to construe the memorandum of association to see whether it would be ultra vires for the Company to put on a production which, for example, was classical and artistic, but not cultural and educational. I think on the whole that the only way to read the words of sub-clause (a) is disjunctively, and that the Company could put on a classical play, an artistic play, a cultural play, or an educational play.
Sir Lynn and his learned Junior submitted that presenting an artistic dramatic work is so wide and vague a phrase that you could put on almost any type of play, and certainly a play which would not in any ordinary concept of the word be charitable in the sense that it would improve the public's taste in the theatre and advance the dramatic art in the theatre. I have the greatest difficulty in this context in understanding exactly what is meant by "artistic". Lord Greene, M.R., in Royal Choral Society v. Commissioners of Inland Revenue 1943 25 T.C. 363, said this, on page 273:
"In the case of artistic taste, one of the best ways of training it is by presenting works of high class, and gradually training people to like them in preference to works of an inferior class."
But this memorandum does not in terms state that the object is to promote artistic taste; it is to present artistic plays. As I have said, I find it difficult to attach any real charitable concept to an artistic dramatic work. I think it is too wide and too vague, and, therefore, is not charitable.
However, the matter does not end there. Sir Lynn attacks sub-clause (b), and he says that the words
"To foster, promote and increase the interest of the public in the dramatic art and in the co-related arts as well by the presentation of dramatic works as by other means"
is of itself too vague. I do not agree with that. It seems to me that if the object be to foster, promote and increase the interest of the public in the dramatic art, that is an excellent way of increasing the artistic taste of the public in the way Lord Greene mentioned.
With regard to sub-clause (c), that seems to me, taken by itself, to be covered by the Shakespeare Memorial Theatre case.
The next attack is made upon sub-clause (j), and it is said that the object
"To establish, subsidise, promote, co-operate or federate with"
others having objects which are altogether similar is too vague and will enable the society, assuming it to have otherwise good charitable objects, to promote some non-charitable society: for example, to expend funds on the promotion of a play to be given by members of some works in their canteen. I do not agree with that. If you find aliunde that the company is incorporated for a charitable purpose, it seems to me that the objects of any other body which are to be altogether similar must themselves be charitable.
Finally, the attack is made upon sub-clause (l):
"To do all such other things as are incidental or which the Association may think conducive to the attainment of any of the above objects".
On this matter I have the assistance of authority in Oxford Group v. Commissioners of Inland Revenue, [1949] 2 All E.R. 537. I need not read the whole of the headnote, but the memorandum of association is set out there, and sub-clause (C) (9) and (10) reads:
"(9) To establish and support or aid in the establishment and support of any charitable or benevolent associations or institutions and to subscribe or guarantee money for charitable or benevolent purposes in any way connected with the purposes of the Association or calculated to further its objects. (10) To do all such other things as are incidental, or the association may think conducive, to the attainment of the above objects or any of them".
It is to be observed that there is a complete contrast between paragraph (9) in the Oxford Group case, which was in itself plainly non-charitable, and sub-clause (k) in this case, which taken by itself is plainly charitable in that the Company could only support charitable associations or institutions or subscribe to or guarantee money for charitable purposes. On the other hand, save for immaterial verbal differences, there is no difference between paragraph (10) in the Oxford Group case and sub-clause (l) in this case.
The headnote continues, so far as relevant:
"the objects set forth in cl. 3 (C), paras. (9), (10), of the memorandum of association were not merely ancillary to the main objects expressed in sub-cll. (A) and (B), but themselves conferred powers on the company which were so wide that they could not be regarded as charitable."
From the judgment of Croom-Johnson, J., in that case (31 T.C. 221), I think it is clear that his judgment proceeded upon this footing, that paragraph (9) was plainly bad because it permitted contributions to non-charitable institutions, and, therefore, paragraph (10) enabled the company to do that which was most conducive to attain any such objects, and also necessarily meant that the company could apply its funds to the non-charitable purposes of paragraph (9).
However, when the matter came to the Court of Appeal, it seems to me that the judgment of Cohen, L.J., dealt with these clauses independently. I now turn again to the report in the All England Reports ([1949] 2 All E.R. 537). He deals on page 544 with paragraph (9). Then at the bottom of that page he goes on to deal with paragraph (10) and says this:
"Then again, under paragraph (10) of sub-cl. (C), the association is empowered to do, not merely things which are incidental or conducive to the attainment of the main object, but also such things as the association may think conducive to it. In other words, the question which the court would have to decide, be not whether, in the opinion of the court, the activity was conducive to the main object, but whether the association, in undertaking it, had thought it conducive. It seems to me that in this case the observations of Lawrence, L.J., in the Keren Kayemeth case are directly in point".
Then he quotes from the judgment of Lawrence, L.J.:
"The company can exercise any or all of these powers whenever in its opinion such an exercise would be conducive to the attainment of the so-called primary object, which from a practical point of view means that it can be exercised whenever it is minded to do so, and whether such exercise is in fact conducive to the attainment of that object or not, as neither the court nor anyone else can control the company's opinion or otherwise interfere with the manner in which it chooses to carry out its objects. It would be difficult in any case to determine whether any particular enterprise undertaken by the company under its wide powers was or was not in fact conducive to the attainment of the primary object, but when the question of whether it is or is not so conducive is left to the company itself I cannot avoid the conclusion that the objects mentioned in sub-cll. 2 to 22 can be carried out by the company just as freely as the object mentioned in sub-cl.1, and that there is no substantial difference in degree between them."
Then Cohen, L.J., continues:
"'The decision of the Privy Council in Dunne v. Byrne 17 T.C. 27 reinforces my opinion that the inclusion of paragraph (10) of sub-cl. (C) makes it impossible to hold that the association was established for charitable purposes only. In that case the testator had bequeathed a legacy '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 this diocese'. The Board held the gift to be invalid. Lord Macnaghten, in giving the opinion of the Board, said ([1912] A.C. 410): 'It can hardly be disputed that a thing may be 'conducive', and in particular circumstances 'most conducive', to the good of religion in a particular diocese or in a particular district without being charitable in the sense which the Court attaches to the word, and indeed without being in itself in any sense religious'".
Cohen, L.J., then quoted from Lord Tomlin's speech in the Keren Kayemeth case ([1932] A.C. 650), and finally pointed out that in his view the powers given by the memorandum were independent, and that he could not hold paragraphs (9) and (10) were merely ancillary to the main objects.
It seems to me that the Oxford Group case decided two things. First, it is a matter of construction in each case as to whether (to return momentarily to this case) sub-clauses (a) and (l) are ancillary or independent, but that consistently with that case I must hold them to be independent. Secondly, I think it is clear that the Oxford Group case decided that paragraph (10) taken by itself would render the objects of the group non-charitable even had paragraph (9) been charitable. As I have said, Cohen, L.J., dealt with paragraphs (9) and (10) quite independently. That decision binds me. It seems to me consistently with that decision and with the authorities quoted by Cohen, L.J., that the presence of sub-clause (l) in this case is in itself and by itself sufficient to render this Company non-charitable. I should add that this point for some reason was not taken before the Special Commissioners. Accordingly, I agree, although for rather different reasons, with the Commissioners, and I must dismiss the appeal.
What about the costs?
Sir Lynn Ungoed-Thomas: On the question of costs, as I indicated, the Commissioners place themselves in your Lordship's hands on the question of costs, but perhaps I may make this observation as it is right that it should be said. Your Lordship has decided that the appeal has failed both on (a) and on (l). Therefore, even if the Appellant had succeeded on (l), he would nevertheless have failed on (a); consequently, in those circumstances, it is difficult to say that the Appellant has been prejudiced.
Upjohn, L.J.: I think he was because - I did not press Mr. Honeyman too much about it - I have a suspicion that he might have felt, unless this case was to be taken to the House of Lords, that paragraph (l) was a stumbling block.
Sir Lynn Ungoed-Thomas: It was a stumbling block.
Upjohn, L.J.: I had a very attractive argument from him about it, but it seems to me that I was clearly bound to take the view I have taken. I may be wrong - I do not know. What do you say about this, Mr. Honeyman?
Mr. G. G. Honeyman: There are two features about it, and one is this. It is an unfortunate feature that a concession - let it be assumed to be a concession - is deliberately made before the Commissioners, and then perhaps accidentally - I do not know - when people go on the faith of that concession it is withdrawn. That is always an unfortunate position. Whatever else may have happened - I do not want to put it any higher than that - the existence of sub-clause (l) and the removal of that difficulty was a substantial cause of satisfaction to those advising the Appellant.
Upjohn, L.J.: I am not going to order you to pay anything, but I am not quite sure whether I should go so far as to say that they should pay your costs.
Mr. Honeyman: I ask that the Revenue be ordered to pay my costs, and I do it for this reason. I do not enquire into what happens in the higher regions, but there must be some reason for this concession. It is conceded in this case that what we have done was entirely charitable. The point taken against us - I am not complaining about it - is a technical point. I may add this for the purposes of history, which is not in the Case, that in fact from the very time this company was established we sought to get the assistance of the Commissioners so as to rule what our status was, but they consistently declined to do it. It was only after this one particular production bore a profit that we found ourselves being assessed to tax. The position could have been cleared right at the beginning of the foundation of the Company. That is all I have to say upon the point.
Upjohn, L.J.: I am not sure about this, but I think I shall be doing justice if I order the Crown to pay one-third of your costs.
Mr. Honeyman: If your Lordship pleases.
Upjohn, L.J.: I dismiss the appeal, and order the Crown to pay one-third of the Appellant's costs.
[Solicitors: Campbell, Hooper & Todd and Fournier & Roberts of Inland Revenue]
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