George Drexler Ofrex Foundation Trustees v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 23 July 1965 |
| Date | 23 July 1965 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Income Tax - Charity - Whether trust established for charitable purposes only - Whether income applied for charitable purposes only - Severance of non-charitable gift over as void for perpetuity - Income Tax Act, 1952 (15 & 16 Geo. VI & 1 Eliz. II, c.10), Section 447(1) (b).
In 1959 shares in a company were settled by the principal shareholder on trusts "for charitable purposes in connection with the advancement of education and the relief of poverty" as set out in the trust deed. The trustees (the Appellants in this case) were directed, apart from powers of accumulation, firstly, to provide an annual award to enable a student of commercial subjects who had obtained a stated qualification to study those subjects abroad, and, secondly, to apply surplus income for charitable purposes connected with the advancement of commercial education or the relief of poverty among persons formerly employed in commerce and their families as the settlor might direct or as the trustees might think fit. The deed further provided that, if the board of the settlor's company should so direct, the trustees should be bound thereafter to apply up to 60 per cent. of the surplus income for, inter alia, the advancement of education among the company's employees and former employees and their families and the relief of poverty among such former employees and their families. The trustees were empowered within 21 years to amend the provisions of the trust deed if necessary to ensure that the fund was held on valid charitable trusts.
The board of the company took no steps to exercise their power of direction. In the period 9th December, 1958, to 31st March, 1963, the trustees made payments (a) for the travelling award, (b) to certain employees of the company for the education of their children, (c) at the settlor's request, to an employee's widow, as to whose circumstances no evidence was given, and (d) to a charity. The Commissioners of Inland Revenue refused the trustees' claim to exemption from Income Tax as a charity for the years 1958-59 to 1961-62.
On appeal, the trustees conceded, in view of Oppenheim v. Tobacco Securities Trust Co., Ltd., [1951] A.C. 297, that the grants to employees of the company towards the education of their children were not charitable applications of income, but they contended (inter alia) (a) that the trust deed showed an overriding charitable intention and any conflicting subsidiary object must be disregarded both as conflicting and as offending the perpetuity rule, and (b) that the travelling award was a charitable object. For the Crown it was contended that the trust was not established for charitable purposes only, nor had the income been applied only to such purposes, since neither the trust for the education of children of the company's employees nor the travelling award was a charitable object. The Special Commissioners expressed no opinion on the travelling award, but otherwise accepted the Crown's contention.
Held, that the power of the board of the company to direct application of income was a gift over and was void for perpetuity; (2) that, the travelling award being charitable, the trust was established for charitable purposes only; (3) that the payments to employees of the company for the education of their children and to the widow were not charitable applications of income.
Stated under the Income Tax Act, 1952, Section 64, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 5th and 6th February, 1964, the Trustees of the George Drexler Ofrex Foundation (hereinafter called "the Appellants") appealed against the refusal of the Commissioners of Inland Revenue to allow exemption from tax under Section 447(1)(b) of the Income Tax Act, 1952, in respect of taxed dividends and untaxed interest received during the years 1958-59 to 1961-62 inclusive by the Appellants as trustees of the George Drexler Ofrex Foundation (hereinafter called "the Foundation"), constituted by the trust deed hereinafter referred to.
2. Shortly stated, the questions for our decision were:
(a) whether the Appellants were a body, or whether the Foundation was a trust, established for charitable purposes only; or
(b) whether the income of the Foundation, comprised of such dividends and interest, was applicable and applied to charitable purposes only.
3. The following witnesses gave evidence before us:
(a) Thomas William Perry, certified accountant, employee of Messrs. Booth and Blackwell (solicitors to the Foundation), and secretary to the Foundation since 26th July, 1962.
(b) David Alfred Chatt, secretary of the Institute of Marketing and Sales Management for the past seven years.
4. The following documents were proved or admitted before us(1):
(a) a copy of a trust deed (hereinafter called "the trust deed") dated 19th January, 1959, and made between (1) George Drexler and (2) the Appellants;
(b) copies of trust accounts for the period 9th December, 1958, to 31st March, 1962, and for the year ended 31st March, 1963;
(c) a copy of the minutes of the three meetings of the Appellants held on 25th February, 1960, 24th July, 1962, and 16th July, 1963;
(d) a copy of the memorandum and articles of association of the Institute of Marketing and Sales Management (hereinafter called "the Institute");
(e) a copy of the syllabus and regulations for the Diploma in Marketing;
(f) copy notice of George Drexler Travelling Award circulated to the press and dated 27th February, 1961.
Copies of such of the above as are not attached to this Case as exhibits are available for inspection by the Court if required.
5. As a result of the evidence, both oral and documentary, adduced before us we find the following facts:
(a) The foundation was constituted by the trust deed. George Drexler (therein and hereinafter called "the founder") is a director and the principal shareholder of Ofrex, Ltd. One of the Appellants, Arthur Harold Lenham (hereinafter called "Mr. Lenham") is also a director of Ofrex, Ltd.
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(b) After reciting that the founder was desirous of establishing a charitable foundation to be known as the George Drexler Ofrex Foundation and for that purpose had transferred 10,684 ordinary shares of £1 each in Ofrex, Ltd., into
the names of the Appellants to be held upon the trusts thereinafter declared, the said trust deed provided (inter alia) as follows-
1. The Trustees shall stand possessed of the said shares and any other moneys investments or property which may hereafter be received by the Trustees on account of or by way of addition to the trust premises and of the investments and property from time to time representing the same respectively (hereinafter together called "the Fund") In Trust to pay or apply the income of the Fund for charitable purposes in connection with the advancement of education and the relief of poverty in manner hereinafter appearing.
(i) The Trustees shall in each year beginning with the year 1959 set aside out of the income of the Fund such sum as is hereinafter mentioned to provide an Award (to be known as The George Drexler Ofrex Travelling Award) for a student who in that year shall have passed the final examination of the Incorporated Sales Managers Association of 51 Palace Street in the City of Westminster or (if in the opinion of the Trustees that body shall have ceased to hold a final examination requiring candidates to exhibit a high standard of education in commercial subjects) of some other body providing in the opinion of the Trustees a general commercial education of high standard and to be used by such student for the purpose of travelling abroad to acquire personal and practical experience in the commercial and selling methods used and the standards aimed at and achieved by high class corporate bodies outside the United Kingdom engaged in commerce.
(ii) The Trustees may pay such sum to the said Association or other body for the purposes aforesaid without seeing to the application thereof with power for the National executive committee of the Council of the said Association (hereinafter called "the Council") or other the governing body thereof (a) to select the recipient of The George Drexler Ofrex Travelling Award for that year and (b) if the Council or other such governing body shall consider there to be no candidate worthy to receive the same to retain the said sum and use it to make an increased or additional award in the next following year or in such other manner for the advancement of commercial education as the Council or such governing body shall think fit.
(iii) The annual sum applicable under this clause shall be (a)for the years 1959 to 1963 inclusive such sum (not being less than one hundred guineas) as the Trustees shall consider to be reasonably required for the travelling and living expenses of the recipient of a George Drexler Ofrex Travelling Award of and during a visit of two weeks duration to the continent of Europe and/or such other countries as the Council or such governing body shall nominate for the purposes of study and (b) for the year 1964 and each year thereafter such sum (not being less than three hundred guineas) as the Trustees shall consider to be reasonably required for the travelling and living expenses of the recipient of a George Drexler Ofrex Travelling Award of and during a visit of four weeks duration to the North American Continent and/or such other countries as the Council or such governing body shall nominate for the purposes of study.
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3. Subject as aforesaid the Trustees shall apply any surplus income of the Fund in any year for such charitable purposes connected with the advancement of commercial education (including without prejudice to the...
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