Downing v Commissioner Of Taxation

I give devise and bequeath the whole of the balance of my residuary Estate unto the Roman Catholic Archbishop of the Diocese of Melbourne for the time being to be distributed by him at his discretion for any one or more of the following purposes, namely, for religious or public scientific or public educational purposes in Victoria, or to a hospital not conducted for profit or the Victorian Bush Nursing Association or any public benevolent institution or public benevolent society in Victoria; or to the Lord Mayor's Fund or to any organization or fund established and maintained for the purposes of providing money for any of the foregoing purposes, or for the use of any such hospital institution or society, or for the relief of persons in necessitous circumstances in Victoria, or for the amelioration of the condition of the dependants of any member or ex-member of Her Majesty's naval military or air forces or the naval military or air forces of the Commonwealth. The will was made in 1959. It is plain that the description in the residuary clause of the purposes for any one or more of which the property might be distributed was taken from s. 117 of the Administration and Probate Act 1958 Vict. by which it was enacted that where any property is devised or bequeathed for such purposes, the duty otherwise payable under that Act shall be reduced.

The question whether the property is exempted from estate duty by s. 8 (5) depends upon whether the trust created by the residuary clause is such that, whatever one or more of the specified purposes may be selected by the Roman Catholic Archbishop of Melbourne as the purpose or purposes for which the property will be distributed, it will all be distributed for some purpose or to or for the benefit of an institution mentioned in s. 8 (5).

When the matter was argued in the Supreme Court it was agreed that, except for the purpose lastly enumerated in the residuary clause, all the purposes stated therein fell within the exemptions set out in s. 8 (5). The arguments in this Court have proceeded upon the basis that this is common ground. The submissions that we have heard have been directed to the question whether the final part of the trust, to which I shall refer as the amelioration clause, permits the application of the property or part of it in a manner not falling within any of the exempting provisions of s. 8 (5). The appellant contends that no part of the property could be lawfully applied to any purpose stated in the amelioration clause. He contends, first, that, if so applied, it would not be applied for any purpose recognized by the law as a good charitable purpose, and, secondly, that s. 131 of the Property Law Act 1958 Vict. cannot be applied so as to effect a partial saving from invalidity of the trust purposes stated in the clause and so as to permit an application of the trust property to a purpose which is charitable, in the legal sense, to the exclusion of any purpose that is not. The appellant does not assert that s. 131 has no application to the residuary trust considered as a whole. On the contrary, he contends that it does apply and that its operation is to excise from the trust the whole of the amelioration clause and to allow effect to be given to the trust for such charitable purposes as are described in the preceding part of the residuary gift. Since the primary submission of the appellant is that the amelioration clause describes a non-charitable purpose, it is essential for his success in the appeal that the trust of the residue should be saved by the application of s. 131 from total invalidity. But the appellant denies that the amelioration clause itself can be limited in its operation by the application of s. 131 and can take effect subject to such limitation.

In the Supreme Court the argument took a different course. The learned judge indicated the opinion that he should follow an unreported decision of Dean J. in Re Laidlaw; Whitelaw v. Attorney-General (Vict.) [1] , in which it was held that as a matter of construction the words used in a clause in like terms showed the intention that it should be confined to the amelioration of the condition of persons who needed assistance because of poverty or distress, that is to say, the purpose of the clause was treated as being the relief of poverty and as being therefore a valid charitable purpose. The appellant appears to have accepted, for the purpose of his argument in the Supreme Court, that the decision of Dean J. ought to be followed. The principal subject of debate in that Court was whether the benefit of the application of the property for that purpose must be confined to persons within Australia, so that the terms of par. (c) (ii) of s. 8 (5) of the Act would be satisfied. Under that provision duty is not to be assessed upon so much of the estate as is devised or bequeathed "for the purpose of providing money for the relief of persons in necessitous circumstances in Australia". Anderson J. rejected the submission on behalf of the appellant that under the amelioration clause the only dependants of any member or ex-member of the forces mentioned, to whom any benefit could be provided, were dependants who were in Victoria. He held that there was no justification for reading into the clause that limitation. I do not think it is necessary to examine the cases to which his Honour referred when considering that question. His conclusion upon it was not challenged before us and it was in my opinion correct.

1. Unreported (Supreme Court of Victoria, 8th April 1960).

It is necessary now to consider the question upon which Anderson J. followed the decision of Dean J. in Laidlaw's Case. Although counsel for the appellant did not press the contrary view before his Honour, it is not suggested that the course which was then taken precludes the appellant from submitting, in this Court, that the objects of benefit under the amelioration clause are not confined to persons who are in necessitous circumstances. It was submitted for the appellant that the clause should not be confined in that way. It was argued that the word "amelioration" does not convey necessarily the notion of providing relief from poverty nor does the word "dependants" point necessarily to persons who are impoverished. A person might be, for example, a dependant of a wealthy ex-member of the forces, with ample resources available for his maintenance and advancement, and yet it would be permissible to apply funds for the "amelioration" of his "condition".

The question thus raised is one of some difficulty. The terms of the clause contain no express reference to necessitous circumstances or to poverty. But an intention to provide for the relief of persons from poverty need not be stated in express terms. It may be implicit in a gift: see Union Trustee Co. of Australia Ltd. v. Federal Commissioner of Taxation [1] , and the cases there cited. The question is whether or not such an implication can be obtained from the words used in the clause with which we are now concerned. In my opinion it can. A person may be in need without being destitute. The word "poverty" and similar expressions, as used in the law in relation to charities, refer to persons who, although they may not be in abject poverty, are subject to some degree of financial necessity. That view accords with the view stated by Kitto J. in Ballarat Trustees Executors and Agency Co. Ltd. v. Federal Commissioner of Taxation [1] , and also with that stated by Vaisey J. and by the Court of Appeal in In re Coulthurst, deceased; Coutts and Co. v. Coulthurst [2] . In the latter case there was a discussion of the degree of need in which persons must be, in order that a gift for the purpose of assisting them financially may be held to be a gift for the relief of poverty. Evershed M.R. stated [3] that the word "poverty" was a word of wide and somewhat indefinite import and that it may not unfairly be paraphrased as meaning persons who have to "go short" in the ordinary acceptation of that term, due regard being had to their status in life. When the clause refers to the amelioration of the condition of dependants, I think it is right to regard those words, in their context as part of the whole trust which, in my opinion, has a character which is predominantly charitable, as indicating that the object of the amelioration clause is to benefit persons whose lot needs improvement. In coming to that conclusion I have considered such cases as Attorney-General (N.S.W.) v. Adams [4] ; Muir v. The Open Brethren [5] ; and in Re Gillespie (deceased) [6] , where somewhat similar questions, as to what will constitute a gift for the relief of poverty, were discussed. The question is always one of the construction of a particular gift or trust, upon which a conclusion can rarely be reached by considering decisions upon other gifts or trusts. Upon the view that I take of the meaning of the clause under consideration, any application of the property for the purpose stated in it would be an application for a charitable purpose. Once the purpose is seen to be the relief of poverty, there is no ground upon which it could be denied that the gift, so far as it may be devoted to that purpose, is valid as a charitable gift. The class of potential objects of benefit under the clause is not so small and is not of such a character that the requirements of a valid charitable trust for the relief of poverty would not be satisfied.

1. (1962) 108 C.L.R. 451, at p. 456. 2. (1950) 80 C.L.R. 350, at p. 355. 3. [1951] Ch. 193; [1951] Ch. 661. 4. [1951] Ch., at p. 666. 5. (1908) 7 C.L.R. 100. 6. (1956) 96 C.L.R. 166, esp. at p. 169. 7. [1965] V.R. 402.

The conclusions which I have stated are enough to dispose of the appeal adversely to the appellant. They have the consequence that the Archbishop might lawfully apply any part of the property for "the amelioration of the condition" of dependants of members or ex-members of the specified forces, outside Australia. But if, contrary to my view, the clause upon its proper construction does not refer exclusively to dependants who are poor persons in the relevant sense, the intention is nevertheless sufficiently indicated, in my opinion, that its main object is to enable relief to be given to persons of the specified description, who are through poverty in real need of such relief. If the clause had stood alone as the sole description of the purpose for which the property was to be used, the trust, upon the assumption that it would have been proper to apply the property or part of it for the benefit of members of the specified class who were not suffering the disadvantages of poverty, would have been, I think, a trust answering the description, in s. 131 (1), of the trusts to which that section refers. The trust would have been one of which it could be said that some non-charitable and invalid purpose was or could be deemed to be included in the purpose for which an application of the trust funds, or part thereof, was by the trust directed or allowed. Therefore, in my opinion, the section would apply and effect would be given to the trust in the manner stated in sub-s. (2) thereof. The trust would be treated, upon the assumption as to its construction which is now being made, as if by its terms it allowed the application of the trust property for the amelioration of the condition of the dependants, whether poor or not, of any member or ex-member of the named forces and s. 131 would apply to render the trust valid as a charitable trust. If the views which I have stated as to the applicability of s. 131 to a trust, in which the purposes were stated solely in the terms of the amelioration clause, be correct, I know of no reason why that section should not apply likewise to a clause in the same terms, which constitutes only a part of the statement of the purposes for which the trust property may be used.

It is not necessary to consider in this case to what extent s. 131 applies to earlier sections of the trust of the residuary estate. In Laidlaw's Case [1] , Dean J. examined each part of the trust and held that, but for s. 131, the inclusion of the references to any public benevolent institution or public benevolent society in Victoria and to the Lord Mayor's fund would permit the application of the property for purposes which were not in the legal sense charitable. In this case it does not matter whether those conclusions were correct or not and I express no opinion upon them. But if they were correct there is no reason, in my opinion, why s. 131 should not be applied to each part of the trust so as to confine its operation in order that no application of the property should be allowed for those purposes, included in the purposes described in that part of the trust, which are non-charitable. In this case there is but one trust of the residuary estate. There are not several trusts. It is a trust for such one or more of the nominated purposes as is or are selected by the Archbishop. In relation to every non-charitable purpose included in the nominated purposes, whether it is included as part of a composite expression or by means of a separate description, s. 131 may operate, provided that where a composite expression is used, it comprehends within it charitable and non-charitable elements which can be discerned and can be separated. In this way all that is non-charitable, whether mentioned separately or associated in one expression with a charitable purpose, may be in effect excised, leaving available only those purposes which are charitable. The opinions which I have just stated as to the operation of s. 131 are, in my opinion, in conformity with the interpretation of that provision and corresponding provisions in other legislation, which after a great deal of divergence of judicial opinion, has now been accepted. It is, in my opinion, in conformity with the decision of the Privy Council in Leahy v. Attorney-General (N.S.W.) [1] , in which the relevant part of the joint judgment of Dixon C.J. and McTiernan J. in Attorney-General (N.S.W.) v. Donnelly [2] , was approved. See also Stratton v. Simpson [3] .

1. Unreported. (Supreme Court of Victoria, 8th April 1960). 2. [1959] A.C. 457; (1959) 101 C.L.R. 611. 3. (1958) 98 C.L.R. 538. 4. (1970) 125 C.L.R. 138.

What I have said about s. 131 does not mean that every gift for the purpose of providing benefits to members of a specified class of persons may be treated as capable of separation into a gift for the benefit of the poor members of that class and a gift for the benefit of those who are not poor. It does not mean, as was suggested in argument, that a gift for the benefit of stockbrokers may be remoulded by means of s. 131 into a valid charitable gift for the benefit of poor stockbrokers. On this aspect of the matter, I adopt respectfully the statement of Dixon C.J. and McTiernan J. in Attorney-General (N.S.W.) v. Donnelly. Their Honours said:

It appears to us that what must be found in order to justify an application of the provision is a distinct or sufficient indication of an intention to authorise the application of the income or corpus of the fund or other property to what is clearly a charitable purpose even although the description which embraces the purpose is so wide that it may go beyond charitable purposes or there is associated with the description a description of non-charitable purpose or purposes capable of going beyond the legal conception of charity. [4] Their Honours in the same judgment said [5] that in both the trusts then being considered there was "reference to a distributable class which, while not exclusively charitable, is predominantly charitable in its character". That statement was quoted with approval in Leahy v. Attorney-General (N.S.W.) [1] , in the course of a discussion by their Lordships of the problem which may arise where " the permissible objects of choice are described in a composite expression which, though not so vague and general as to amount to a delegation of testamentary power, does not very clearly indicate a charitable intention on the part of the testator." When the tests there suggested are applied to the present case, the result is, in my opinion, that s. 131 operates upon the terms of the amelioration clause, if it be assumed that the purposes which it describes go beyond the legal conception of charity. On that assumption, the clause still indicates, in my opinion, an intention to authorize the application of the property to what is predominantly a charitable object. 1. (1958) 98 C.L.R., at p. 560. 2. (1958) 98 C.L.R., at p. 559. 3. [1959] A.C., at pp. 475-476.

What I have written so far, concerning the application of s. 131, depends upon the assumption that without the aid of that section the amelioration clause would permit the application of the trust fund or part of it to purposes which are not charitable, within the first class of charitable objects described by Lord Macnaghten in Commissioners for Special Purposes of the Income Tax v. Pemsel [2] . But it depends, also, upon the assumption that the purposes described in the clause are not exclusively charitable purposes within the fourth class in his Lordship's classification. For if they are, there is no need and no justification for the operation of the section. I proceed to consider the question whether or not the clause does describe purposes which fall within the fourth class of charitable purposes.

The appellant denies that the clause describes any charitable purpose coming within the fourth class and denies that it may be modified, by restricting the class of persons of whom those taking a benefit must be dependants, so as to confine its operation to what is exclusively a charitable purpose within that class. It has been submitted that it is not sufficient to bring a trust within that class that it can be affirmed that its purpose is beneficial to the community. It is necessary, also, that it should be within the spirit and intendment of the preamble to the statute of Elizabeth (43 Eliz. c. 4). It must be "beneficial in a way which the law regards as charitable", as was stated in Williams' Trustees v. Inland Revenue Commissioners [3] . I accept that submission. It is supported by the case just cited and by other cases of high authority. But the question which then arises is whether those requirements are satisfied by the purposes described in the amelioration clause. This question is, I think, complicated by the fact that the clause extends to dependants of any person who has been at any time a member of any of Her Majesty's forces anywhere in the world.

The cases relating to trusts in aid of servicemen and ex-servicemen do not provide a coherent and satisfactory set of principles. It has been accepted that a trust for purposes which promote the efficiency of the armed forces or a part of them is a valid charitable trust: see In re Meyers; London Life Association v. St. George's Hospital [1] ; In re Gray; Todd v. Taylor [2] ; and Inland Revenue Commissioners v. City of Glasgow Police Athletic Association [3] . In the latter case there are indications of the true reason for regarding that purpose as a charitable one, within the fourth class. Lord Normand, after referring to In re Good; Harington v. Watts [4] , and In re Gray [5] said: "I would hold further that gifts or contributions exclusively for the purpose of promoting the efficiency of the police forces and the preservation of public order are by analogy charitable gifts" (my emphasis) [6] . Lord Reid said that he could see no valid distinction between "the importance or character of the public interest of maintaining the efficiency of the army and that of maintaining the efficiency of the police" [7] . Lord Cohen [8] referred to the judgment of Farwell J. in In re Good [4] . There it was said, [9] , that "it is a direct public benefit to increase the efficiency of the army, in which the public is interested, not only financially, but also for the safety and protection of the country " (my emphasis).

1. [1951] Ch. 534, at p. 544. 2. [1925] Ch. 362, at p. 368. 3. [1953] A.C. 380, at pp. 391, 401, 402 and 404. 4. [1905] 2 Ch. 60, at p. 66. 5. [1925] Ch. 362. 6. [1953] A.C., at p. 391. 7. [1953] A.C., at p. 402. 8. [1953] A.C., at p. 404. 9. [1905] 2 Ch. 60, at p. 66. 10. [1905] 2 Ch., at p. 66.

The rule that the promotion of the efficiency of the armed forces is a good charitable purpose may have been derived from the notion that gifts for that purpose tend towards the aid or ease of "poor inhabitants" concerning "setting out of soldiers, and other taxes" and so come within the very words of the preamble to the Statute of Elizabeth. But that does not seem to be a satisfactory basis for the rule as it has developed and, in my opinion, trusts which tend to increase the efficiency of the armed forces, as well as trusts which tend to encourage recruitment to them (see In re Meyers [1] ), may be regarded as beneficial to the public in a way which the law regards as charitable, because they assist in the promotion of public defence and security.

In the cases already mentioned of In re Good [1] and In re Gray [2] it was held that certain gifts for the benefit of former members of the armed forces were not charitable. But in the first of those cases this was conceded and in the second the point was treated as governed by the decision in the earlier case. In my opinion, a decision whether a trust for the benefit of former members of the services is or is not a valid charitable trust must depend upon the nature and the terms of the gift. I am of opinion that there is no justification for laying down a rule that either a trust for the benefit of ex-servicemen or a trust for the benefit of the dependants of ex-servicemen cannot be a valid charitable trust. I do not accept the cases to which I have just referred as authorities which on that point should be followed. A trust of either of those kinds may tend to promote the efficiency of the armed forces and to promote the security of the country and may be held for that reason to be charitable.

The important case of Verge v. Somerville [3] , stands in the way of holding that no trust for the benefit of ex-servicemen can be a valid charity of the fourth class. In holding that a gift to the trustees of the Repatriation Fund or other similar fund for the benefit of New South Wales soldiers was a valid charitable gift, their Lordships stated the opinion [4] that it was not necessary, in order to support the gift, to find that it was charitable in the sense of assisting the needy. The appellant seeks to explain that case as warranting only the conclusion that it is a charitable purpose to re-establish servicemen in civilian life and submits that there is no basis in this or in other authorities for treating as charitable the purpose of providing any other types of benefit to ex-servicemen. It was said that a gift for the setting up again in civilian life of ex-servicemen could be regarded as analogous to "the maintenance of sick and maimed soldiers and mariners", mentioned in the preamble. But I am unable to agree that the re-establishment of ex-servicemen is analogous to the preamble in a way in which other forms of assistance to them cannot be, or that re-establishment (independently of indigence) should be placed in a special category governed by a special rule. Nor do I think it is fatal to the validity of a trust in which the object is indicated of assisting ex-servicemen, that an application of the fund for the benefit of their children or of their dependants is also permitted. It is to be noticed that although the gift in Verge v. Somerville [3] was "for the benefit of New South Wales returned soldiers" and did not mention their dependants, their Lordships referred [1] , to the Acts under which repatriation benefits were provided, and those benefits included the assistance of dependants. In In re Elgar (deceased) [2] , the primary object of the trust was the re-establishment of members of the forces but the trust allowed the trustees to apply the fund otherwise for their benefit or for the benefit of their children. It was held to be a good charitable trust. That decision was not challenged when an appeal on other grounds was brought [3] . In my opinion the decision was correct. It is in keeping with the generally accepted view that it is part of the responsibility of the community to care for the welfare not only of servicemen but also of their dependants.

1. [1924] A.C. 496. 2. [1924] A.C., at p. 506. 3. [1924] A.C. 496. 4. [1924] A.C., at pp. 505-506. 5. [1957] N.Z.L.R. 556. 6. [1957] N.Z.L.R. 1221.

The case of Barby v. Perpetual Trustee Co. Ltd. [4] , is not decisive upon the question which I am now considering. But I consider that the observations of Latham C.J. [5] , of Dixon J. [6] , and of Evatt J. [7] , are not compatible with the argument for the appellant or with the limited effect which it seeks to give to the decision in Verge v. Somerville [8] .

1. (1937) 58 C.L.R. 316. 2. (1937) 58 C.L.R., at p. 320. 3. (1937) 58 C.L.R., at p. 324. 4. (1937) 58 C.L.R., at p. 327. 5. [1924] A.C. 496.

I do not doubt that there may be gifts for the benefit of a class of ex-servicemen which are not good charitable gifts. For example, the object of a gift may be merely of a social or of a sporting character or of some other character such that the purpose could not be classed as one which the law would recognize as charitable. But I am of opinion that valid charitable trusts may be created for purposes relating to the welfare and to the assistance of ex-servicemen or of their dependants, as well as for the welfare and assistance of persons who are still serving members of the forces, if the purposes can reasonably be considered to advance the safety and security of the country. I am of opinion that a trust may be considered to tend towards that result by means of providing aid comfort and encouragement to the armed forces or a section of them, notwithstanding that those who will directly benefit from the trust are those who have ceased to serve or their dependants.

As I have said, I think that the question now under consideration is complicated by the fact that the objects of benefit are not confined to the dependants of the members or the ex-members of the armed forces of this country.

It is not necessary to decide whether to render aid and encouragement to any of the armed forces of Her Majesty anywhere in the world, by making provision for their dependants, is to be regarded as capable of promoting the safety and security of this country, which, upon the view that I have taken is the ground upon which a trust of this kind may be held to be for a purpose "beneficial to the community", and as such to be charitable. It is true that a valid charitable trust may be created, although it is to take effect outside the country of the person creating it and for the benefit of a foreign community: see e.g., Armenian General Benevolent Union v. Union Trustee Co. of Australia Ltd. [1] , and Kytherian Association of Queensland v. Sklavos [2] . But a question which need not be decided here is whether the inclusion, amongst the potential recipients of bounty, of the dependants of persons having no connexion with the armed forces of this country who, although they are, or have been at some time, members of Her Majesty's forces, may have never been concerned, even indirectly, with the defence or the security of Australia, extends the permissible application of the trust property beyond what would serve the particular kind of trust purpose with which I am here dealing. But if for that reason the trust would be non-charitable and invalid, I am of opinion that it is for that reason only that it would fail, and that there is a clear case for the operation of s. 131, to confine the application of the property to purposes that are charitable. (It is here assumed, of course, that the clause is not construed as referring only to necessitous dependants.)

1. (1952) 87 C.L.R. 597. 2. (1958) 101 C.L.R. 56.

There is, in my opinion, no room in this case for the operation of the rule that a class defined by reference to a personal relationship to a single propositus or to several propositi does not constitute a section of the community, for the purposes of satisfying the requirement of public benefit: cf. Re Gillespie (deceased) [3] , where the authorities dealing with that rule which is, I think, applicable to a different type of trust from that with which we are here concerned, are discussed.

I sum up my conclusions as follows. As a matter of construction the amelioration clause is not to be read as if the words "in Victoria" or "in Australia" appeared after the word "dependants". Therefore the inclusion of this clause in the trust would allow (subject to questions as to validity), an application of the trust property which could not fall within any of the exempting provisions of s. 8 (5) of the Act. That would be so, even if the clause were treated as applying only to necessitous dependants. It is necessary, if the appeal is to succeed, that the whole of the amelioration clause must be treated as being excised, by the operation of s. 131, from the trust. This means that it must be held that no application of the trust property can be lawfully made, in accordance with the clause. In my opinion the appeal fails for the following reasons:

(1) On its proper construction the amelioration clause is confined to the assistance of those who are in need of assistance and are dependants of the persons in the classes specified in the clause and, therefore, the purpose which the clause expresses is the relief of poverty;

(2) If upon its proper construction the clause applies to all such dependants whether in need of assistance or not, its operation is confined by s. 131 to the amelioration of the condition of necessitous dependants (assuming that the clause does not state a purpose which is a good charitable purpose independently of the relief of poverty);

(3) The clause expresses purposes which include a charitable purpose, independently of the relief of poverty, namely, the purpose of ameliorating the condition of the dependants of the naval military or air forces of the Commonwealth, which is beneficial to the community and is within the fourth class in the classification in Pemsel's Case; and

(4) If the inclusion in the clause of the reference to the dependants of members or ex-members of naval military or air forces of Her Majesty other than those of the Commonwealth has the result that the trust property could be applied in a manner going beyond a valid charitable purpose of the kind mentioned in (3), s. 131 operates (assuming that proposition (1) above is wrong) to confine the application of the trust property, which the clause permits, to its application for the charitable purpose mentioned in (3).

I am of opinion that the appeal should be dismissed.

I have had the advantage of reading the reasons for judgment prepared by my brother Walsh and am in agreement with them. I would dismiss the appeal.