010-NLR-NLR-V-63-M.-FALIL-ABDUL-CAFFOR-and-others-Trustees-of-the-Abdul-Gaffoor-Trust-Appellan.pdf
56
Falil Abdul Caffoar v. The Commissioner of Income Tax
[In the Privy Council]
Present: Lord Morton of Henryton, Lord RadclifTe,
Lord Morris of Borth-y-Gest, Mr. L. M. D. de Silva
M. FALIL. ABDUL CAFFOOR and others (Trustees of the Abdul GaffoorTrust), Appellants, and THE COMMISSIONER OF INCOME TAX,
Respondent
Privy Council Appeal No. 53 of 1959S. C. 3—Income Tax Case Staled B. R. A.}248
Income tax—Res judicata—Applicability of principle to appeals in successive yearsagainst tax assessments—Exemptions from tax—“ Trust of a public characterestablished solely for charitable purposes ”—“ Charitable trust ”—Applicabilityof English law—Trusts Ordinance, s. 99 (l)—Income Tax Ordinance No. 2of 1932 (as subsequently amended), ss. 2, 7 (I) (e), 73, 75.
(i) In matters of a recurring annual tax a decision on appeal with regardto one year’s assessment cannot operate as res Judicata in respect of an assessmentfor another year. Although the process of arriving at the necessary decision
Falxl Abdul Caffoor v. The Commissioner of Income Tax
57
is likely to involve the consideration of questions of law, all such questionshave to be treated as collateral or incidental to one subject only, namely,the amount of the assessable income for the year in which the assessment ischallenged.
Accordingly, ; decision in one year by the Board of Review, (constitutedunder the Income Tax Ordinance) or by the Supreme Court (on a case stated)that certain income is that of a trust of a public character es ablished solelyfor char.table purposes and is therefore liable to be exempted from tax by virtueof section 7 (1) (c) of the Incomj Tax Ordinance cannot operate as res judicataon the question of the trust income’s right to be exempted from tax for othreand later years.
(ii) By section 7(1) (c) of the Income Tax Ordinance :—
“ There shall be- exempt from the tax the income of any institutionor trust of a public character established solely for charitable purposes
Held : To qualify for exemption under section 7(1) (c) there must be incomerf an “ established ” trust. A trust such as the one in the present case cannotbe validly established unless it falls within the definition of “ charitable trust ”contained in section 99 (1) of the T usis Ordinance. This definition includesany trust “ for the benefit of the public or any section of the public ” failingwithin any one of a number of categories which extend to such purposes asthe relief of poverty and the advancement of education or knowledge. Tosatisfy the definition contain d in the Income Tax Ordinance therefore thetrust must be a charitable trust " of a public character to be a subsistingcharitable trust at all it must be a trust for the benefit of the public or somesection of it.
In order to determine this question the following principles may be appliedin the interpretation of the Ceylo i Ordinances. First, the general principlesthat govern the English law as to the validity of charitable trusts can be invoked.Secondly, there is no necessity to include in those general principles rules ofthe English law tha t appear to be specially associated with English local conditionsor English history or which appear to be now accepted as anomalous incidentsof the general law. Thirdly, there is no significant difference between themeaning of “ of a public character ” and the meaning of “ for the benefit ofthe public or any section of it Fourthly, although educational purposesare themselves charitable purposes (see the definition of “ charitable purpose ”in section 2 of the Income Tax Ordinance), no trust under which the beneficiariesare defined by reference to a purely personal relationship with a named proposituscan be a valid charitable gift. If, therefore, persons for whose benefit aneducational trust is created, derive their title to their benefits by provingtheir qualifications in this way, whether as descendants of a named personor as employees of a named company, the trust must be regarded merely as afamily trust and not as one for the benefit of a section of the community.
_ Held further : (a) To test whether any particular trust is a charitable onewhat must be asked is whether the income is bound with certainty to be appliedto charitable purposes, not whether it may be so applied.
(6) Although, in the present case, the trust was for an educational purposeand the recipients of the benefit were “ deserving youths of the Islamic faith ”,the primary disposition of the trust income was in favour of the family of thegrantor. Such a trust is not a trust of a public character established solely forcharitable purposes.
58 LORD RADCLIFFE—Falil Abdul Caffoor v. The Commissioner of Income Tax
Appeal from a judgment of the Supreme Court reported in{1958) 60 N. L. B. 361.
F. N. Gratiaen, Q.C., with Michael Nolan, S. S. Basnayake andS. Sanmuganathan, for the Assessee-Appellants.
Sir John Senter, Q.C., with Walter Jayawardena, for the Assessor-Respondent.
Cur. adv. vult.
April 19, 1961.[Delivered by Lord Radcuffe]—
This appeal from a Judgment of the Supreme Court of Ceylon dated26th November, 1958 concerns five assessments to income tax for therevenue years 1950/51 to 1954/55 which have been made upon the incomeof a trust, styled the Abdul Gaffoor Trust, of which the appellants arethe Trustees. The Appellants’ case is that these assessments ought to bedischarged because the Trust is an “ institution or trust of a public characterestablished solely for charitable purposes ” within the meaning of S. 7(1 )(c)of the Ceylon Income Tax Ordinance, 1932 (No. 2 of 1932, as subsequentlyamended) and its income is accordingly exempt from liability to the tax.For the moment it is sufficient to note that by virtue of the Interpretationsection of the Ordinance, S. 2, “ charitable purpose ” is to be held to include“ relief of the poor, education and medical relief ”.
The Trust in question was set up by a Deed dated 24th December, 1942executed by one Noor Deen Hadjiar Abdul Caffoor, the Grantor, of the onepart and certain persons of the other part who were to act as the intendedtrustees. The trust property was stated to be of the value of Rs. 2,050,000,lawful money of Ceylon, at the date of the Deed. The overriding trust inthe Deed was that during the life of the Grantor the Trustees were toapply the whole of the income for such purposes and in such manner asthe Grantor himself should in his absolute discretion direct, whetheror not such purposes should fall within those directed by the Deed to beoperative after the Grantor’s death. It is plain therefore that untilhis death, which took place on 1st November, 1948, the current trustincome was not in any sense devoted to charitable purposes. Accordinglyit can be argued that for this reason alone the Abdul Gaffoor Trust isnot capable of being described as “ established solely for charitablepurposes ”. This argument was placed before the Supreme Court bythe Respondent and was there rejected on the ground that the word" established ” had no essential connection with the date of the founding.Trust Deed and that the critical test for the purposes of the exemptionof income from tax was the nature of the trusts that were operative inthe year to which the claimed exemption related. The respondent’ssubmission was repeated to their Lordships on the ground that it was
LORD RADCLLFFE—FalU Abdul Caffoor v. The Oommissioner of Income Tax 69
desired to keep the point open. The point was not fully developedin argument and, for reasons which will shortly appear, their Lordshipsfind it unnecessary to express any opinion upon it.
Once the Grantor was dead his overriding trust came to an end. Thetrust income thereafter was to he held by the Trustees upon trust, afterreserving a sum of Its. 1,000 a month for upkeep and maintenance of thetrust property, for all or any of a number of enumerated purposes whichwere set out in subheads (a) to (gr) inclusive of paragraph 2 of the TrustDeed. The application of the income for or among these purposes wasleft to the absolute and uncontrolled discretion of a Board, to be set upunder the Trust, consisting of the Trustees and certain other namedpersons.
It is more convenient to set out these trust purposes in full as expressedin the Deed than to try to reduce the expression of them by anabridgement.
They are as follows :—
(а)A sum not exceeding one thousand rupees (Rs. 1,000/-) a month
for the remuneration of the Trustees and the expenses incurredby them in connection with the administration of the trustand for the payment of the costs of professional AccountantsSolicitors Counsel or Agents or Managers or other personswhomsoever for or relating to any services rendered or otherthings done in connection with matters relating to the trustshereby created or the trust property.
(б)A sum not exceeding in all one thousand rupees (Rs. 1,000/-) a
month for the education instruction or training in England orelsewhere abroad of deserving youths of the Islamic Faith insuch professions vocations occupations industries arts or craftstrades employments subjects lines or any other departmentsof learning or human activity whatsoever as the Board mayin its aforesaid discretion decide in the case of each such deservingyouth with a like discretion in the Board from time to timechange modify or alter or completely discontinue in the caseof each such youth either the object or objects of instructioneducation or training selected for him by the Board (fromamong the objects enumerated above) or the place or placesor countries whereat such education training or instructionis being given from time to time. The Board may under alike discretion partially or wholly discontinue any assistance itmay have given or may be giving in the case of any such youths.It- shall be lawful for the Board out of the said sum to pay for orprovide the whole or any part of the cost of any such youth goingabroad from or in returning to Ceylon once or oftener as theBoard may under such discretion aforesaid from time to time
60 LORD RADCLIFFE—Falil Abdul Caffoor v. The Commissioner of Income Tax
decide. The recipients of the benefits provided for in thisClause shall be selected by the Board from the following classesof persons and in the following order :—
male descendants along either the male or female line of
the Grantor or of any of his brothers or sisters failingwhom
youths of the Islamic Faith not being male descendants as
aforesaid of the Grantor or of his brothers or sisters bomof Muslim parents of the Ceylon Moorish Communitypermanently resident in the City of Colombo (whereversuch youths may have been or be resident from time totime) failing whom
youths of the Islamic Faith not being male descendants asaforesaid of the Grantor or of his brothers or sisters bomof Muslim parents of the Ceylon Moorish Communitypermanently resident anywhere else in the said Island ofCeylon other than in Colombo (wherever such youths mayhave been or be resident from time to time).
A sum not exceeding two hundred and fifty rupees (Rs. 250/-) a
month for the education of deserving youths of the Islamic Faithborn of Muslim parents of the Ceylon Moorish Communitypermanently resident in Ceylon at either the University ofCeylon or any Institution associated with or affiliated to it orthe Ceylon Law College or any other scholastic or vocationalor professional or agricultural or industrial or other technicalinstitution public or private in Ceylon.
A sum not exceeding two hundred and fifty rupees (Rs. 250/-) a
month for providing dowries for poor girls of the Islamic Faithwherever resident bom of Muslim parents of the Ceylon MoorishCommunity permanently resident in the City of Colombo.
A sum not exceeding two hundred and fifty rupees (Rs. 250/-) a
month for supplementing the income of the Ghaffooriyah ArabicSchool at Maharagama in the said Island founded by the Grantorin the event of the funds already provided for the said Schoolunder the relative trusts proving insufficient.
(/) A sum not exceeding one thousand rupees (Rs. 1,000/-) a monthto be accumulated from month to month and distributed forcharity once a year during the month of Ramadan.
Any surplus or any sums not expended on any of the above objectsshall be credited to a reserve fluid to be used in such proportionsto such extents at such time or times and from time to time andin such manner as the Board may in its absolute and uncontrolleddiscretion decide (1) for the purpose of meeting any unforeseenexpenditure or contingency in connection with the trust property
LORD RADCLLFFE—Falil Abdul Caffoor v. The Commissioner of Income Tax 61
in furtherance of all or any one or more of the various objectsof the trust (3) for educating in a secondary school or secondaryschools in Ceylon poor deserving boys of the Islamic Fauh bomof Muslim parents permanently resident in Ceylon (whereversuch boys may have been or be resident from time to time)and (4) for the relief of poverty distress or sickness amongstmembers of the Islamic Faith in Ceylon.
If one accepts, as their Lordships do, the Supreme Court’s readingof the words " for charity ” in subhead (/) as meaning no more than“ for the relief of the poor ”, it appears that in any year after the Grantor’sdeath the whole of the trust income, after allowing for administrativeexpenses, was destined to be applied for purposes that can broadly bedescribed as serving education or the relief of poverty or of sickness ordistress. Prima facie, these would qualify as charitable purposes.
The first main point taken on behalf of the appellants is that as betweenthemselves and the Respondent the question of exemption has beenconclusively decided in their favour by a decision of the Board of Review,constituted under the Income Tax Ordinance, which decision was givenon the 22nd December, 1954 upon an appeal made by them to that Boardagainst assessment for the revenue year 1949/50. It is not in disputethat this decision was given or that the ground upon which exemptionwas allowed was that the income was that of a trust of a public characterestablished solely for charitable purposes.
The appellants therefore are seeking to treat the decision of the Boardof Review as setting up an estoppel per rem judicatam on tfc^ questionof the trust income’s right to be exempted from tax. This plea hasnot hitherto prevailed in the various hearings in Ceylon, it has beenrejected in turn by the Commissioner of Income Tax, acting under S. 69of the Ordinance, by the Board of Review, acting under S. 73, and by theSupreme Court, under S. 74. For the reasons which will appear theirLordships are also of opinion that it cannot succeed.
The grounds for rejecting the estoppel in the Courts of Ceylon havebeen stated either as “ the previous decision of the Board of Reviewwhich relates to an assessment for a year previous to the years ofassessment which are now before us is not binding on us ” (Decision ofthe Board of Review, paragraph 2) or as depending upon the questionwhether the Board of Review performs judicial and not merely adminis-trative functions or, to put it in yet another way. upon the questionwhether the Board was intended to function as a Court of competentjurisdiction to decide litigation between the subject and the Crown(Judgment of the Supreme Court). These different ways of approachingthe issue reflect differences of formulation which are to be found injudgments in this country on similar or analogous issues. It is to beobserved however that such differences could well lead to differentconclusions in certain circumstances ; for, if the fundamental reason whythere is no estoppel is based upon the' idea that the Board of Review
62 LORD RADCLIFFE—FaZil Abdul Gaffoor v. The Commissioner of Income Tax
does not possess adequate status as a judicial court of competent juris-diction, it might seem to follow that a decision of the Supreme Courton the other hand when given on a Case stated to it would set up anestoppel per rem judicatam in respect of tax for other years ; whereasif the essence of the matter is that a question of liability to tax for oneyear is always to be treated as inherently a different issue from that ofliability for another year, even though there may appear to be similarityor identity in the questions of law on which they respectively depend,it would seem to be the consequence on the contrary that a SupremeCourt decision would no more be capable of setting up an estoppel thanwould one made by the Board of Review, whatever its precise status asa judicial tribunal.
In their Lordships’ opinion the question of estoppel cannot be decidedmerely by inquiring to what extent the Board of Review exercises judicialfunctions. The critical test is not the bare issue whether or not such aBoard exercises judicial power, an issue which can indeed arise in othercontexts, such as the constitutional question decided in Shell Co. ofAustralia Ltd. v. Federal Commissioner of Taxation>. What is importanthere is that the Board of Review is a tribunal set up under the IncomeTax Ordinance for the purpose of deciding income tax appeals at a certainstage of their prosecution, and that decisions given with regard to suchappeals are effective only within the limited jurisdiction that the Ordinancecreates for all tribunals that deal with the matter of an appeal. Allsuch appeals remain in one sense a part of the process of assessmentsince all the tribunals, including the Supreme Court, have independentpower to increase or reduce the assessment under appeal. While thereforeit is unexceptionable to say that the Board of Review when exercisingits powers under S. 73 is acting in a sense judicially, that the disputewhich it has to determine is at any rate somewhat analogous to a lis interpartes and that the assessor who made the assessment or some otherrepresentative of the Commissioner (S. 73 (3) ) resembles a party hostileto the appellant, these considerations are not those that are critical tothe issue of estoppel. The critical thing is that the dispute which alonecan be determined by any decision given in the course of these proceedingsis limited to one subject only, the am omit of the assessable income forthe year in which the assessment is challenged. It is only the amountof that assessable income that is concluded by an assessment or by adecision on an appeal against it (see S. 75). Although, of course, theprocess of arriving at the necessary decision is likely to involve theconsideration of questions of law, turning upon the construction of theOrdinance or of other statutes or upon the general law, and the tribunalwill have to form its view on those questions, all these questions haveto be treated as collateral or incidental to what is the only issue thatis truly submitted to determination (cf. Reg v. Hutchings2).
» [2937] A. C. 275.
• 6 QJB^D. 300.
L.OR-D R.ADCLIFFEI—ITalii Abdul Caffoor v. The Commissioner of Income Tax 63
It is in this sense that in matters of a recurring annual tax a decisionon appeal with regard to one year’s assessment is said not to deal with“ eadem quaestio ” as that which arises in respect of an assessment foranother year and, consequently, not to set up an estoppel. It is preciselythat point that was raised and accepted by this Board in 1926 in BrokenHiU Proprietary Co. Ltd. v. Broken HiU Municipal Council-l, where it issaid (p. 100) “ The decision of the High Court related to a valuation anda liability to a tax in a previous year, and no doubt as regards that yearthe decision could not be disputed. The present case relates to a newquestion—namely the valuation for a different year and the liabilityfor that year. It is not eadem quaestio, and therefore the principle ofres judicata cannot apply
The Broken HiU decision is in itself a striking application of the principleinvolved, since the earlier judgment which it was sought to set up as anestoppel was one given by the High Court of Australia on a ratingassessment referred to it by way of appeal under the tax procedure.It underlines the point that it is not the status of the tribunal itself,judicial or administrative, that forms the determining element for estoppelin cases of this kind but the limited nature of the question that is withinthe tribunal’s jurisdiction. The judgment of the High Court that hadbeen given in the earlier year was explicitly directed to the constructionof a particular section of the rating Act and to the correct measurementof the liability in the light of that construction. Precisely the samepoint arose in the later year and was ultimately decided by this Boardin a sense contrary to that which had previously been adopted.
So, in the present appeal, the earlier decision of the Board of Reviewgoverning the 1949/50 assessment was based upon a construction ofS. 7 (1) (c) of the Income Tax Ordinance as applied to the income of theAbdul Gaffoor Trust; and the same point of construction now arisesagain but in respect of assessments of that income for other and lateryears. In their Lordships’ opinion it is not possible to distinguish theprinciple of the Broken Hill decision from that which should prevailin the present case on any such ground as that here the earlier decisionrelated to the taxpayer’s “ status ” as an exempt person while in theBroken Hill the decision “ merely ” related to the correct amount ofthe assessment : for in truth, as has been explained, in all these caseswhich arise under income tax or rating appeal procedure the decision isessentially as to the correct amount (if any) of the assessment and in theone case as much as in the other the decision was based upon a questionof law, the proper interpretation of one of the provisions of the taxingAct.
To apply the principle of the Broken Hill decision to the case now beforetheir Lordships is to bring it into line with what seems to be by now theregular course of authority with regard to appeals in successiveyears against income tax or rating assessments—See Inland Revenue
i[1926] A. C. 94.
64 LORD RADCLIFFE—Falil Abdul Caffoor v. The Commissioner of Income Tax
Commissioners v. Sneaih1; Patuclc v. Lloyd2; Peg v. Hutchings, supra;Society of Medical Officers of Health v. Hope?. It may be that the principlesapplied in these cases form a somewhat anomalous branch of the generallaw of estoppel per rem judieatam and are not easily derived from or trans-ferred to other branches of litigation in which such estoppels have to beconsidered ; but in their Lordships’ opinion they are well established intheir own field and it is not by any means to be assumed that the result isone that should be regretted in the public interest.
The decision of this Board in Hoy stead v. Commissioner of Taxation 4is not consistent with this line of authority and the appellants naturallyrelied upon it in their argument. What happened in that case was thatan assessment to federal land tax in Australia for the year 1918/19 hadbeen the subject of appeal and a case was stated for the opinion of theHigh Court on a point of law that determined the assessment, the correctinterpretation of the taxing statute with regard to joint interests in landtaken by the assessees under their father’s will.
There was a later appeal in respect of the assessment for the year1920/21 ; and the question that was brought to this Board was whetherthe Commissioner of Taxation was estopped in the matter of that assess-ment by the judgment that had been delivered by the High Court in theearlier proceedings. The Board decided that he was. Unfortunatelyhowever the argument that the determination of an assessment for oneyear could not set up an estoppel upon an assessment for another year, anargument that was accepted by the Board at almost the same time in theBroken Hill case, does not appear either to have been presented to theBoard or to have been noticed or adjudicated upon in the opinion whichwas delivered by Lord Shaw. It is not possible to explain why the matterwas dealt with in this way ; and it is fair to note that in the majority judg-ment of the High Court, which was reversed on the appeal, there isa reference, though a passing one, to the point of “ eadem quaestio ”. Inthe result however the attention of the Board in delivering its opinion waswholly occupied with a discussion of what is quite a different issue in con-nection with estoppel, whether there can in law be estoppel per remjudieatam in respect of an issue of law which, though fundamentalto the issue, has been conceded and not argued in an earlier proceeding.
Their Lordships are of opinion that it is impossible for them to treatHoystead’s case as constituting a legal authority on the question ofestoppels in respect of successive years of tax assessment. So to treat itwould bring it into direct conflict with the contemporaneous decision in theBroken Hill case ; and to follow it would involve preferring a decision inwhich the particular point was either assumed without argument or notnoticed to a decision, in itself consistent with much other authority, inwhich the point was explicitly raised and explicitly determined. *
*[1960] A. C. 551.
[.1926] A. C. 155.
» [1932] 2 K. B. 362.» 171 L. T. 340.
LORD RADCLTFFE—Falil Abdul Gaffoor v. The Commissioner of Income Tax 05
For these reasons their Lordships are satisfied that the respondent is notestopped by the 1954 decision of the Board of Review from challenging theappellants’ claim that the income of the Abdul Gaffoor Trust is exemptfrom tax under S. 7 of the Income Tax Ordinance.
It is necessary now to turn to the question of exemption. To qualify atall there must be income of an “ established ” trust. Having regard to thenature of the Abdul Gaffoor Trust it cannot be validly established unless itfalls within the definition of ** charitable trust ” which is contained inS. 99 (1) of the Trusts Ordinance 1918. This definition includes any trust“ for the benefit of the public or any section of the public ” falling withinany one of a number of categories which extend to such purposes as therelief of poverty and the advancement of education or knowledge. Tosatisfy the definition contained in the Income Tax Ordinance therefore theAbdul Gaffoor Trust must be a charitable trust “ of a public character ” :to be a subsisting charitable trust at all it must be a trust for the benefitof the public or some section of it.
In order to determine this question their Lordships think that thefollowing principles may safely be applied in the interpretation of theCeylon Ordinances. First, the general principles that govern the Englishlaw as to the validity of charitable trusts can be invoked. It seems plainthat both the conception of a trust itself and the conception of what con-stitutes a charitable trust have been much influenced by English law.Secondly, there is no necessity to include in those general principles rulesof the English law that appear to be specially associated with Englishlocal conditions or English history or which appear to be now accepted asanomalous incidents of the general law. Thirdly, there is no significantdifference between the meaning of “ of a public character ” and themeaning of “ for the benefit of the public or any section of it The twophrases are often used interchangeably in English decisions and textbooks—see, e.g., the quotation from Tudor. Charities, 5th Ed., p. 11,employed by Lord Greene M.R. in Re Compton 1—“ a universal rule thatthe law recognises no purpose as charitable unless it is of a public character.That is to say a purpose … must be directed to the benefit of the
community or a section of the community ”. Charitable trusts must be“ trusts of a public nature ” (see Lord Macnaghten in PemseVs case2).Fourthly, although educational purposes are themselves charitable pur-poses, no trust under which the beneficiaries are defined by reference to apurely personal relationship with a named propositus can be a valid charit-able gift. If, therefore, persons for whose benefit an educational trust iscreated, derive their title to their benefits by proving their qualificationsin this way, whether as descendants of a named person or as employees ofa named company, the trust must be regarded merely as a family trust andnot as one for the benefit of a section of the community (see Re Comptonsupra, Oppenheim v. Tobacco Securities Trust Co. Ltd. 3).
iCh. D. 123 at 128.8 [18911 A. C. 531 at 580.
8 [2P5i] A. C. 297.
66 LORD RADCLTFFE—Falil Abdul Caffoor v. The Commissioner of Income Tax
Their Lordships do not think that it would be consistent with theseprinciples to apply to the law of Ceylon any doctrine that had as itsfoundation the ancient English institution of educational provision for“Founders Kin ” in certain schools and colleges or old English decisionsabout charitable relief for poor relations of a testator. The formerprovisions were commonly accepted as validly instituted, though thereseems to be virtually no direct authority as to the principle upon whichthey rested and they should probably be regarded as belonging more tohistory than to doctrine : the latter are today treated as no more than ananomaly in the general law.
Is then the Abdul Gaffoor Trust a charitable trust ? It was not dis-puted that to determine this it is necessary to treat the whole trust incomeas if it were appropriated for the purposes specified in clause 2 (6). Thisis so because the form in which the various trust sub-heads are expressedis such that no definite sum of money is dedicated to any one and thepower given by sub-head (g) makes it possible for the whole of the income tobe carried to a reserve fund which could then be expended as from time totime the Board thought proper in the exclusive implementation of thepurposes of sub-head (&). To test whether any particular trust is a charit-able one what must be asked is whether the income is bound with certaintyto be applied to charitable purposes, not whether it may be so applied.Unless therefore sub-head (6) itself declares a valid charitable purpose,no part of the Trust comes within the exempting provision of theOrdinance.
There are several material constituents in this particular purpose. Themoney is to be used for “ education, instruction or training ” in any depart-ment of human activity. Their Lordships wall assume, without deciding,that this could be called an educational purpose. The recipients of thebenefit are “ deserving youths of the Islamic Faith ”. So long, however,as there are male descendants in either the male or female line of theGrantor or any of his brothers or sisters for whose education the Board areprepared to provide or reserve money on the ground that they qualify asdeserving youths of the Islamic Faith, no other youth of that Faith canobtain any benefit under the trust purpose. They can only come in“ failing ” the line of the descendants.
It was argued with plausibility for the appellants that what this trustamounted to was a trust whose general purpose was the education ofdeserving young people of the Islamic Faith and that its required publiccharacter was not destroyed by the circumstance that- a preference in theselection of deserving recipients was directed to be given to members ofthe Grantor’s own family. Their Lordships go with the argument so faras to say that they do not think that a trust which provides for the edu-cation of a section of the public necessarily loses its charitable status or itspublic character merely because members of the founder’s family arementioned explicitly as qualified to share in the educational benefits oreven, possibly, are given some kind of preference in the selection. Theypart with the argument, however, because they do not consider that thetrust which is now before them comes ■within the range of any such
LORD KADCLTFFE—Falil AbdxtlCaffoor v. The Commissioner of Income Tax 67
qualified exception. Considering what is in effect the absolute priorityto the benefit of the trust income which is conferred on the Grantor’sown family by clause (i) of sub-head (6), the only fair way to describethis Trust is as a family trust under which the income is made availableto provide for the education or training of relatives of the propositus,in this case the Grantor himself, provided only that they are young,deserving and of the required Faith. These conditions do not make it theless a family trust. Such a trust is not a trust of a public character solelyfor charitable purposes.
In the Supreme Court judgment much consideration was given to theEnglish decision Re Koettgen s Will Trusts l, the facts of which have muchin common with those of the present case. The trust there created wasexpressed to be for the promotion and furtherance of commercial educa-tion ; the persons eligible were British bom subjects without sufficientmeans to obtain at their own expense an education for a higher commer-cial career ; and in selecting beneficiaries the trustees were directed togive preference to employees or members of the families of employeesof a named company. It is evident that the Court’s decision, whichupheld the trust as a valid trust for charitable purposes, turned on theexact construction which was given to the words of the will. It wasargued that the trust was one “ primarily for the benefit of the employees… and their families, and that it was only if there were insufficient
employees or members of their families that the public could come in asbeneficiaries under the trust ”. The learned judge says in his judgmentthat he did not accept that as the true construction of the clause inquestion ; if he had accepted it, it is evident that he would have rejectedthe trust as a charitable bequest. The construction that he adopted ascorrect was that the primary class of beneficiaries consisted of personswithout sufficient means to obtain commercial education at their ownexpense and that the preference given merely amounted to a duty in thetrustees to select employees or members of their families, if available,out of this primary class.
It is not necessary for their Lordships to say whether they would haveput the same construction on the will there in question as the learnedJudge did or whether they regard the distinction which he made as ulti-mately maintainable. The decision edges very near to being inconsistentwith Oppenheim's case, but it is sufficient to say that the construction ofthe gift which was there adopted does not tally with the constructionwhich their Lordships are bound to place upon the Trust which is nowbefore them. Here the effect of the wording of clause 2 (b)(i) is to
create a primary disposition of the trust income in favour of the family ofthe Grantor.
For the reasons which have been set out above* their Lordships willhumbly advise Her Majesty that the appeal should be dismissed. Theappellants must pay the Respondent’s costs of the appeal.
Appeal dismissed.
i [1954] 1 Ch. 253.