Trustees of the William Vernon & Sons, Ltd Employees Fund v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 03 May 1956 |
| Date | 03 May 1956 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
Income Tax - Charity - Claim for exemption refused by Commissioners of Inland Revenue - Whether Commissioners estopped from denying charitable nature of trusts.
A testator by his will bequeathed shares in a firm to be divided between four persons on the condition that they paid 20 per cent. of all moneys received "to some organisation or charity at their discretion for the benefit of employees of the firm…or for an Institute or other object for the recreation of the employees at the discretion of the several beneficiaries to the separate amount of 20 per cent. of their share".
Questions having arisen on the construction of the will, an Originating Summons was taken out to which the Attorney-General (representing the Crown as parens patriae) was joined as a defendant. A compromise between the parties was sanctioned by an Order dated 11th December, 1919, providing that a scheme should be prepared for the administration of the employees fund and that its objects should be limited to charitable purposes. A scheme was prepared and was approved by an Order dated 23rd June, 1921. Each of the Orders of 1919 and 1921 recited that the Attorney-General raised no objection to the Order.
On appeal to the Special Commissioners against the refusal of the Commissioners of Inland Revenue to allow a claim to exemption from Income Tax under Sections 447 and 448, Income Tax Act, 1952, for the years 1951-52 and 1952-53 it was not disputed that in view of the decision in Oppenheim v. Tobacco Securities Trust Co., Ltd., [1951] A.C. 297, the objects of the scheme were not charitable only. It was, however, contended that by reason of the Orders of 1919 and 1921 the Commissioners of Inland Revenue were now estopped from denying that the objects of the fund were charitable only. The Special Commissioners decided that there was no estoppel.
In the High Court the Trustees advanced the further contention that the trusts were validated by the Charitable Trusts (Validation) Act, 1954.
Held, that the trusts were not validated by the Charitable Trusts (Validation) Act, 1954, and that the Special Commissioners' decision was correct.
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 meetings of the Commissioners for the Special Purposes of the Income Tax Acts held on 25th and 26th November, 1953, the Trustees of
the Employees Fund (hereinafter called "the Trustees" and "the fund" respectively) of William Vernon and Sons, Ltd. (hereinafter called "the company"), made an application under the provisions contained in Section 450, Income Tax Act, 1952, against the refusal of the Commissioners of Inland Revenue to grant exemption from Income Tax to the fund under the provisions of Sections 447 (1) (a) and (b) and 448 (1) (a) and (b) of that Act in respect of the income of the fund for the years 1951-52 and 1952-53.2. The question for our determination was whether or not the Commissioners of Inland Revenue are estopped from denying that the objects of the fund are charitable by reason of the Orders made in the Chancery Division of the High Court on 11th December, 1919, and 23rd June, 1921, in proceedings arising out of the trusts of the will of the late Thomas Thornycroft Vernon (hereinafter called "the testator").
3. The following documents were produced and admitted or proved at the hearing of the application:
(i) Copy of an affidavit of Thomas Cooper, one of the executors of the testator's will, including a copy of the will, sworn on 12th June, 1919.
(ii) Copy of an originating summons dated 20th May, 1919, entitled
In the Matter of the Trusts of the Will dated 3rd day of March 1913 of Thomas Thornycroft Vernon, deceased.
(iii) Copy of the Order of Peterson, J., of 11th December, 1919, with the schedule thereto.
(iv) Copy of a joint affidavit of William Norman Vernon and Jerome Twomey sworn on 13th and 14th April, 1921, respectively.
(v) Copy of the Order of Eve, J., of 23rd June, 1921, with the schedule thereto.
(vi) Copy of the rules of the Vernon Club House and Recreation Ground issued 29th September, 1944.
(vii) Copy of the rules of the Connaught Garden Club as adopted 11th June, 1936.
(viii) Accounts of the fund for the years ended 31st January, 1951, 1952 and 1953.
Such of the above documents as are not attached to and do not form part of this Case are available for the use of the High Court if required(1).
The facts found by us on the foregoing evidence or agreed between the parties are set out in the following paragraphs numbered 4 to 10 inclusive.
4. The testator who died on 24th January, 1919, by his will dated 3rd March, 1913, bequeathed certain shares in the firm of W. Vernon and Sons to four legatees subject to certain conditions including the following:
This condition is imposed on each of the above four beneficiaries-that they shall pay 20 per cent (twenty per cent) of all moneys received to some organisation or charity at their discretion for the benefit of the employees of the firm of William Vernon & Sons in reward of long or meritorious service with the firm or for an Institute or other object for the recreation of the employees at the discreation of the several beneficiaries to the separate amount of 20 per cent of their share.
A copy of the will is annexed hereto, marked "A", and forms part of this Case(1).
5. An application was made by originating summons to the High Court on 20th May, 1919, for the determination of certain questions arising out of the trusts of the will. One of these questions was whether the conditions set out in paragraph 4 above created a valid charitable trust of the fund so constituted and, in any event, asking for the directions of the Court as to this fund. The Attorney-General was joined as a defendant to the summons. A copy of the originating summons is annexed hereto, marked "B", and forms part of the Case(1).
6. Before this question had been determined by the Court the executors and beneficiaries under the will agreed, after negotiations, to a compromise upon terms which included a proposal that a scheme should be prepared for the administration of this fund as a charitable bequest to be settled and approved by the Court.
7. By an Order of 11th December, 1919, Peterson, J., sanctioned a compromise of the various questions raised by the said summons upon the terms set out in the schedule thereto and ordered that a scheme be prepared by the four legatees and settled by the Judge for the administration and management of the fund with its objects limited to charitable purposes as provided by the terms of compromise. This Order was prefaced by (amongst other things) a recital
the Attorney-General by his Counsel not objecting to the Order hereby made and the other parties consenting.
The relevant terms of compromise were as follows:-
2. Out of each payment to be received by the Defendants Sir John Herbert Vernon William Allen Vernon Elizabeth Cooper Vernon and the Reverend Henry Richard Cooper Vernon the four legatees of the said shares in the said partnership from William Vernon & Sons in respect of the said capital sum of £150,000 or any interest thereon 20% thereof is to be set aside as a Fund (hereinafter referred to as "the Employees Fund") for complying with and in full satisfaction of the condition in the said Will contained which is referred to in questions 3 4 and 5 in the within mentioned Originating Summons.
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3. A Scheme to be prepared by the said four legatees for administration of the said Employees Fund is to be settled and approved by the Judge in this Action The objects of the Scheme are to be limited to Charitable Purposes which are primarily to be for the benefit of:-the persons hereinafter designated under (1) and (2) and may include the provision of a Recreation ground and/or a Workingmen's Club.
(2) Persons for the time being and from time to time in the employ of William Vernon and Sons or any Company which may take over and carry on the business of the said firm and/or their wives children or other dependants
(3) Any person who at any time has been or shall have been in the employ of the said firm or of any such Company as aforesaid and/or the wives children or other dependants of any such past employees or of any deceased employees.
The said Fund except so far as under the said Scheme the same shall be required for Capital Expenditure and except so much thereof as represents income shall be invested in Trustee Investments in the name of the Official Trustee of Charitable Funds And shall subject to the provisions contained in the said Scheme be administered by the partners for the time being in the said firm or the Directors of any Company which may take over and carry on the said business of the said firm or failing them by such Trustees as may upon the application of any person interested be appointed by the Charity Commissioners and the income of the Employees Fund shall be paid to such partners Directors or last mentioned Trustees (as the case may be) upon the trusts of such Scheme as aforesaid.
A copy of the Order of 11th December, 1919, is annexed hereto, marked "C", and forms part of this Case(1).
8. In 1920 the business of the firm of W. Vernon & Sons was sold to the company which was incorporated on 10th February, 1920.
In 1920, whilst the scheme ordered by the Court to be prepared had not been approved by the Court, the members of the Vernon family who had been proposed as the original trustees of the scheme took the opportunity to acquire the Heathbank Estate which was most suitable as a club and recreation ground and which was on the market at a price that was considered to be reasonable.
The purchase money was advanced by the company for the purposes of the fund.
A club was formed...
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