Lloyd v Commissioner of Taxation

Lloyd v Commissioner of Taxation - [1955] HCA 71 - HCA 1955 case summary — Zoe

[6]

The Geelong branch forms part of the Navy League Sea Cadet Corps, Victoria. The Navy League, Victorian Branch, is a voluntary association the objects of which are directed to the maintenance of British naval strength and kindred policies. Among the purposes enumerated in the constitution of the Victorian branch of the league are the teaching of the history, spirit and traditions of the sea services in all schools and elsewhere by such means as may be deemed most expedient and the maintenance and developing of the Sea Cadet Corps in Victoria. Pursuant to this last object the league established the body called the Navy League Sea Cadet Corps, Victoria, with a branch organization at Geelong. The league entrusts the general direction of its own policy and administration to an executive committee which it elects annually. The Navy League Sea Cadet Corps of Victoria is governed by a constitution which may be amended by the Navy League Executive Committee and doubtless owes its origin to that body. The control of the corps is placed in the executive committee of the league, and it appoints the more senior officers. There is a State Commandant or Captain, a State Commander and an Assistant State Commander and district lieutenant commanders so appointed and these form a senior officers committee, with which the State Captain consults. Company officers, who rank as "Lieutenants Navy League", are responsible for the training and discipline of the cadets of the company as well as the care of the depot, equipment, boats and the like. A company is or may be part of a branch organization, as it is in Geelong. The Executive Committee of the Navy League may convene a public meeting where a company is to be formed and invite persons interested to become associate members of the Sea Cadet Corps branch in that place. The associate members may then elect a local committee. The company officer must be one of its members. The work of a local committee includes the raising of funds for the Sea Cadet Company, the assisting of the officers in carrying out their duties "in order to ensure the spirit of comradeship and complete co-ordination of effort essential to the well being of the sub-branch and company and the corps as a whole" and the endeavouring "to secure progressive and harmonious working with religious civic and educational authorities parent and citizens' associations and all recognized organizations devoted to the welfare of boy life".

[9]

The question we have to decide does not concern the value or merit of the organization, the importance of its contribution to youth welfare, sea training and loyal citizenship, or the advantage to the community of its work. It is concerned only with the claim to apply to the Sea Cadet Corps the description "public educational purposes" as that expression is used in s. 8 (5) and (8) of the Estate Duty Assessment Act. For myself I find it too difficult to give the expression a sufficiently wide meaning to comprehend the objects and operations of the Navy League Sea Cadets Corps, Victoria. It is a compound phrase and like most compound phrases its application cannot safely be ascertained by taking each separate word of which it is composed and then exploring the uses of which by itself the word is capable. No doubt the word "educational" may be used with reference to any process of instruction direction or control to which the young are submitted, however intermittently, if it has a purpose or tendency, or supposed tendency, of developing some of the faculties or of forming character. Again the word "public" is not incapable of a use which implies nothing more than that the thing to which it refers must not be "private" either in the sense of being conducted for private profit or of being established for the private advantage of a class of individuals and not for the benefit of the public at large or a section of the public. It seems to me that only by first attaching large constructions like these to the respective terms and then combining them is it possible to fit the Navy League Sea Cadet Corps, Victoria, within their meaning. But the application to the corps of the expression "public educational purposes" as a compound expression strikes one as most unnatural. The central or basal characteristics to which the exemption is directed may be seen in the schools, colleges, universities, technical schools and schools of art which are so familiar to us. It may be conceded that the application of the exemption is not restricted to such institutions. Instruction and training of the young may take many different forms and no doubt the expression "public educational purposes" will find applications to systematic methods or procedures for the inculcation of knowledge, whether scholastic or vocational, for the cultivation of the mental and physical powers and for the development of character although they may vary widely from those practised or illustrated in the examples of formal education that are more familiar to the community. But even so the Sea Cadet Corps seems remote indeed in objects organization and procedure from anything which may be supposed to fall within the denotation of the expression. Its organization and discipline are reflected from the Navy. The cadets assemble for comparatively brief periods twice a week. There is no organized course of study, no systematic preparation for a defined end. What is done is for the promotion of the welfare of youth by providing associations, interests and discipline arising from the sea and the naval and maritime services. Highly as this may be commended, it does not seem to me to be what the legislature meant by "public educational purposes".

[17]

Since its formation the Geelong Branch has been engaged continuously in carrying out the aims and training set forth in a document entitled "Organization and Regulations of the Navy League Victorian Branch governing the Navy League Sea Cadets of Victoria". The activities of the branch include the formation of a company of cadets somewhat along the lines of naval cadets. The age of entry is between ten and seventeen years. Parades in uniform take place twice weekly and there are lectures to cadets on hygiene, conduct, citizenship and subjects of general education, instruction in knots and splices, bends and hitches, rule of the road as applying to navigation, navigation lights and signalling. There is also some study of British naval traditions. Sailing, rowing, games and sports are also part of the curriculum. Instruction has been given in sea history, general seamanship, compass and steering, squad drill, rigging, service and leadership, first aid and life saving, physical and recreational training. The money required for conducting the branch has been obtained mainly from donations and subscriptions from the public, the proceeds of functions and street appeals. The Navy League Sea Cadet Corps of Victoria is an unincorporated body established and conducted under the auspices of another unincorporated organization known as "The Navy League Victoria Branch". The latter body is associated with an organization known as "The Navy League" which has its head office in London, England. As to the constitution and activities of the English body we have no particulars. However, the aims and organization of "The Navy League Sea Cadets Corps Victoria" are set forth in the above document, which, in addition to the matters already mentioned, refers to the Navy League Sea Cadets Corps Victoria as a "Movement" and states that the aims of the movement are "to keep alive the sea spirit of our race, also to assist cadets to become good citizens of Australia and the Empire by voluntarily accepting discipline and by doing their duty in the spirit of the motto "For God, the Queen, the Empire, and Australia" ". It provides for training under the following headings: - (1) character building, (2) swimming, life saving (first aid), (3) squad drill, marching, (4) marine compass construction and uses, (5) helm construction and uses, (6) anchor, construction and uses, (7) boat management, oars and drill, (8) knots, bends, hitches and splices, (9) rule of the road, (10) lead line and marking, (11) semaphore signalling, and (12) healthy recreation.

[21]

I think the constitution and activities of the Geelong branch as revealed by the case and its annexures sufficiently show that it is established for "public educational purposes", as it is "an educational institution for the benefit of the public or of a section of the public" and is confined to such purposes by appropriate documents: Royal Choral Society v. Commissioners of Inland Revenue [1] , per Lord Greene M.R. [2] . A liberal construction should be given to words of exception from tax: Armytage v. Wilkinson [3] ; Burt v. Commissioner of Taxation [4] , per Higgins J. [5] . Now from the documents referred to I conclude that it is an institution: see Minister of National Revenue v. Trusts & Guarantee Co. [6] ; Royal Choral Society's Case [1] . It is also, I think, an educational institution in as much as its main purpose is systematically to impart useful knowledge of a technical nature to youths with a view to such knowledge being employed eventually to the public advantage as well as their own. It is not necessary that the instruction imparted should be of a general educational nature: Royal Choral Society's Case [1] . The recreation provided for is merely incidental to the main purpose. Lastly it is clearly for the benefit of a section of the public. However, but for the extension of the definition of "public educational purposes in Australia" by s. 8 (8) of the Act, I would have had some difficulty in holding that the Geelong branch is constituted or conducted for such purposes. No doubt there is public control of the branch, of the "Movement" and of the parent body that brought it into existence in the sense that public control was exercised in Maughan v. Federal Commissioner of Taxation [7] ; that is to say because their constitutions provide for those members of the public who are sufficiently interested in the work of these associations or societies to subscribe to their funds and thereby become annual members and as such eligible to vote at the elections of the controlling bodies. But the compound expression "public educational purposes in Australia", according to the common understanding of that expression as revealed more particularly in the public statutes, seems to me to imply some State control, exercised either directly or indirectly, and there is no such control of the Geelong branch, or of the "Movement" or of the parent body through which it came into existence, or of their activities.

[27]

In considering in In re Belcher dec'd. [1] the question whether the trust for the Navy League Sea Cadets was a charitable trust I do not think that I was greatly concerned to determine whether that trust would be more correctly placed in the second or in the fourth of the "categories" in Commissioners for Special Purposes of Income Tax v. Pemsel [1] , or partly in the one and partly in the other. It seemed to me clear enough that it was a charitable trust. But the second category has always been regarded as casting a very wide net, and I thought that the purposes of the Navy League Sea Cadets were educational in the relevant sense. I have not seen any reason to doubt the correctness of this view, nor did I understand it to be in any way challenged. It does not, however, follow from this view that the purposes of the Navy League Sea Cadets are "public educational purposes" within the meaning of s. 8 (5) of the Estate Duty Assessment Act. In considering whether the trust is charitable, we are concerned with the meaning of the word "education" as used in a judgment, and as intended merely to describe in a very broad and general way one particular kind of purpose which should be held to be within the "spirit and intendment" of the statute of Elizabeth I. In considering whether the subject matter of the trust is dutiable, we are concerned with a compound expression - "public educational purposes" - used in a statute, and intended to define the nature of certain gifts which are to be exempt from duty. The elements which make up that compound expression cannot be separated and considered in isolation from one another. There is one single question, and that question is whether the trust for the Navy League Sea Cadets, Geelong Branch is a trust for "public educational purposes". That question is not answered by saying that there is an educational element in the trust, or that the work which the trust is designed to forward has a high educational value - as indeed I think it has.

[36]

Such being the situation which the Act specifically creates with respect to educational institutions, the conclusion almost necessarily follows that the "public" element in the conception "public educational purposes" is present, even in the case of a devise or bequest which is not for the establishment or endowment of an institution, whenever the educational purposes aimed at are for the benefit of the public or a section of the public. The submission was made on behalf of the commissioner that the meaning of the compound expression "public educational purposes" is not to be found by asking first whether the purposes in view are educational and secondly whether they are public. It is true that the expression is a compound one, the words "public educational" going together as the adjectival form of public education; but "public education" is not an expression which in common understanding in Australia has any special signification different from the aggregate of the meanings of its components. Moreover, it is not unambiguous. In some contexts, no doubt, it may refer to education of the kind usually offered by schools, colleges and universities when provided, controlled, supervised, approved or recognized in some manner or degree by a department of State or a body exercising governmental or statutory authority. But to give the expression any such shade of meaning in the context of s. 8 (5) in so far as it applies to a devise or bequest which is not to an institution, and yet to give full effect to s. 8 (8) where the gift is to an institution, would be to treat the one exemption provision as intended to effectuate two divergent policies according as the educational purposes of a devise or bequest are or are not to be served through the medium of an institution. Whatever view might have been taken if s. 8 (8) were not in the Act, that sub-section really necessitates separate consideration of the public element and the educational element in a purpose for which the exemption is claimed. The conclusion would seem to be that educational purposes for the benefit of the public or a section of the public are public educational purposes in the intended sense, and that the office of s. 8 (8) is to make it clear that where the devise or bequest is to an institution it is not necessary to find a public element in the control of the institution itself, so long as the institution is characterized by educational purposes which are for the benefit of the public or a section of the public. The words "public" and "benefit" point to two essentials: first, that the education must be provided for persons selected as members of the public or a section of the public and not selected for reasons of private concern or as members of some private class; and, secondly, that the provision of the education must not be a means of obtaining private profit for those who provide it. To use the language of the Privy Council in Dilworth v. Commissioner of Stamps [1] the devise or bequest must be such that "the beneficial interest in it is not vested in any private person, but belongs inalienably to the public" [2] . Those who receive education provided under such a gift cannot "with propriety be described as the recipients of private education" [1] : and the effect of s. 8 (8) seems to be that they may with propriety be described as the recipients of public education, in the sense which is relevant under s. 8 (5).

[38]

On this construction of the legislation it is neither here nor there whether a body to which a devise or bequest is made is an "institution". Section 8 (8) does not make the exemption in s. 8 (5) more extensive where the gift is to an institution than where it is not; it only ensures that the exemption is equally extensive in the one case as in the other by making irrelevant the question of public or private control. Whether the application of the property to the purposes of the gift is entrusted to an individual, a group of individuals otherwise unassociated, an association of persons, or a corporation, it seems to me that the one question determines the right to the exemption: are the purposes for which the devise or bequest is made educational purposes for the benefit of the public or a section of the public? In the case of a gift to an individual or individuals it is necessary to find that by the terms of the gift he or they are effectually restricted in the application of the property given so that the gift satisfies the description in s. 8 (5). In the case of gift to a body, incorporated or unincorporated, it is necessary to find that the constitution of the body prescribes a similarly restricted scope of application. In neither case is the restriction as precise as it would be if the word "exclusively" or "only" were found in s. 8 (5) after "public educational purposes", for then no gift could attract the exemption if any part of the corpus or income of the property given could be applied, consistently with the gift, for any purpose, however minor in importance, which was collateral or independent as distinguished from being a purpose of or incidental to public education: cf. Inland Revenue Commissioners v. City of Glasgow Police Athletic Association [2] ; Metropolitan Borough of Battersea v. British Iron & Steel Research Association [3] . But even without any such word having been "anxiously introduced" [4] , the exemption extends only to cases in which purposes of public education characterize the gift; and that cannot be the case unless the gift so deals with the property that it is devoted to such purposes, if not exclusively, at least chiefly: Commissioners of Inland Revenue v. Forrest [5] ; Public Trustee (N.S.W.) v. Federal Commissioner of Taxation [6] ; Royal Australasian College of Surgeons v. Federal Commissioner of Taxation [7] ; Salvation Army (Victoria) Property Trust v. Fern Tree Gully Corporation [1] ; Royal College of Surgeons of England v. National Provincial Bank Ltd. [2] ; Minahan v. Commissioner of Stamp Duties [3] .

[41]

In some manner which does not appear, but possibly by an exercise of the powers of this executive committee, a constitution has been provided for the Navy League Sea Cadet Corps, Victoria, which will be referred to as the corps. This document is entitled "Organization and Regulations of the Navy League Victorian Branch Concerning the Navy League Sea Cadet Corps of Victoria". It commences by naming the corps and providing that it shall be strictly non-political and non-sectarian and that all positions shall be honorary. The aims of the corps are stated to be "To keep alive the sea spirit of our race, also to assist cadets to become good citizens of Australia and the Empire by voluntarily accepting discipline and by doing their duty in the spirit of the motto," "For God, Queen, The Empire and Australia". This general statement is followed immediately by a list headed "Training". The list is: 1. character building; 2. swimming, life saving (first aid); 3. squad drill, marching; 4. mariners' compass construction and uses; 5. helm, construction and uses; 6. anchors, construction and uses; 7. boat management, oars and sail; 8. knots, bends, hitches and splices; 9. rule of the road; 10. lead line and markings; 11. semaphore signalling; 12. healthy recreation. An executive organization is provided for, consisting of a State Commandant, a State Commander and Assistant State Commandant, a District Officer and company officers. All appointments to these ranks are to be made by the executive committee of the league. That committee is to control the corps and its decisions are binding on all officers and ratings. Branch organization is to consist of an executive committee, a welfare executive committee, a welfare committee and associates, but any of these may be omitted, and all or any of them which are in existence may be terminated, at the discretion of the executive committee of the league. The members of the corps are organized in ranks which are given naval titles. It is inferred rather than provided that the unit of local organization is a branch, having attached to it a company under the command of a company officer. The effective strength of a company is not less than twenty or more than seventy-five petty officers and cadets, though double companies may be formed which are to be separate for internal organization and drill but under the supreme command of a senior company officer. It is declared to be desirable that company officers, who are not to be less than twenty-one years of age unless holding acting appointments, shall have had some service at sea, and if possible with the naval forces. A company officer is responsible for the training of cadets, the cleanliness of the depot, the safe custody of all equipment and the housing and mooring of boats used by his company. He is to cause a roll to be kept, showing the strength of the company, and in respect of each boy his age, his date of enlistment and date of departure. In addition to other duties, he is to endeavour to secure the interest of religious, civic and educational bodies, and of parents' and citizens' associations and other recognized bodies interested in the welfare of the boys, and is to "encourage the boys under his charge to acquire a wider understanding of the value of the British Empire and of right citizenship, i.e. that discipline, courtesy and service to one's fellows produce the most worthy citizens". Boys are to be enlisted between the ages of ten and seventeen. The wearing of uniforms is provided for. Cadets are to learn to swim as soon as practicable. There are regulations concerning the holding of company camps. It is provided that classes shall be formed by the company officer or his deputy as circumstances and the exigencies of the occasion demand, variety, it is stated, being necessary to hold the interest of the boys. The company officer is responsible for the training of cadets and for the discipline of all those placed under him, and he and all his senior officers are to hold a meeting at least six times a year for the purpose of discussing matters affecting training and the welfare of cadets and of the corps generally.

[45]

An organization such as this is plainly charitable in the legal sense of the term, as the Supreme Court of Victoria has held, and property given to it is therefore held upon trust for charitable purposes and cannot lawfully be diverted therefrom: In re Manchester Royal Infirmary; Manchester Royal Infirmary v. Attorney-General [1] . The gift made by cl. 25 of the testator's will is accordingly a gift for those purposes. Are those purposes wholly or predominantly purposes of public education in the sense which has already been discussed? They undoubtedly are purposes for the benefit of a section of the public, for they have to do with the development, along the lines which the constitution of the corps describes, of boys drawn from the public generally and not selected by reference to any restrictive qualification. No element of private profit-making is involved, for every position in the organization is honorary and none of the money or other property of the corps could legitimately be appropriated to the private use of any individual. As to whether the purposes are educational in character, it is in point to recall that in the Supreme Court of Victoria Fullagar J. said of the trust created by cl. 25 that it is "primarily and essentially" a trust for the advancement of education [2] . It seems to me to be aptly so described. The account which has been given of the subjects in which training is contemplated by the constitution of the corps, and of the activities in which the cadets engage, is sufficient to show that instruction in certain practical and theoretical subjects and the development of the mind in particular directions are the pre-occupation and chief concern of the corps in general and of the Geelong branch in particular. In Chesterman v. Federal Commissioner of Taxation [3] , Isaacs J. spoke of the general understanding of the words "public education" in the context of s. 8 (5) as having the sense of "imparting knowledge or assisting and guiding the development of body or mind" [4] ; and Starke J. said that "the essential idea of education is training or teaching" [5] . The conception is unquestionably much wider than mere book-learning, and wider than any category of subjects which might be thought to comprise general education as distinguished from education in specialized subjects concerned primarily with particular occupations. The case of In re Corbyn; Midland Bank Executor & Trustee Co. v. Attorney-General [6] to which Fullagar J. referred in his judgment, contains an expression of Morton J.'s inclination to consider that a gift to enable boys from a training ship to be trained elsewhere with a view to their taking commissions in the Royal Navy or becoming officers in the mercantile marine is in the nature of a gift "for education in a particular branch of study" and for that reason charitable. So, too, tuition for a commercial career has been recognized as educational in the charity sense of the word: In re Koettgen's Will Trusts [1] . The training which is the raison d'être of the corps is such as would teach a lad whose ambitions lie towards a sea-going career some of the rudiments of his intended craft and afford him some intellectual equipment and some stimulus towards further preparation. It is evident, of course, that the majority of cadets will not be of this kind and will join and continue in the corps for the sake of the interest, and the fun, which they get out of its activities. That fact, however, seems to me to be irrelevant, for it cannot affect the true characterization of the purposes to which property is devoted when given to a branch of the corps. Those purposes, seriously pursued as they are by a responsible body acting in an organized and disciplined manner, appear to me to be essentially and predominantly educational. I have not forgotten that the constitution, almost at the outset, describes as an aim of the Sea Cadet Movement the objective of keeping alive the sea spirit of the race; but I should agree with Fullagar J. that this is "rather a justification put forward for the educational aims and objects of the Sea Cadets than a statement of aims and objects as such" [2] . And the statement of the additional objective to assist cadets to become good citizens by voluntarily accepting discipline and by doing their duty in the spirit of the motto which is quoted, is of the same kind. Coupled with the injunction to company officers to encourage a wider understanding of the value of the British Empire and of right citizenship, it simply sets ideals before those who take part in the training and instruction which form the immediate purposes of the corps.

At a glance

Court

Decision date

Before

Source

Judgment (47 paragraphs)

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