LELAND STANFORD JUNIOR UNIVERSITY PUBLISHED FOR THE PROPRIETORS AT THE OFFICE OF THE LAW JOURNAL REPORTS, 119 CHANCERY LANE, LONDON. 1899. 1898. July 5, 7. Nov. 26. DILWORTH AND OTHERS v. NEW Revenue-Testamentary Gift to Charity -Death Duty-Income Tax-Exemptions -Charitable Gifts Duties Exemption Act, 1883, ss. 2 and 3-Land and Income Assessment Act, 1891, s. 16, sub-s. 1-Land and Income Assessment Act Amendment Act, 1892, s. 3, sub-s. 4. A bequest to found an institution for the training of boys who are either destitute orphans, or the children of persons of good character and straitened circumstances, is a "charitable" bequest within the meaning of section 3 of the Charitable Gifts Duties Exemption Act, 1883, and the institution so founded is a "public" school within section 2 of that Act, although the recipients of the benefit are to be trained in a particular church and chosen from specified localities, and is as such entitled to the exemption from taxation granted by the Act. 66 Such an institution is also exempt from income tax as a "public charitable institution .. carried on for" a public charitable purpose, and not for any gain or profit," under section 3, sub-section 4 of the Land and Income Assessment Act Amendment Act, 1892. * Coram, Lord Watson, Lord Hobhouse, and Lord Davey. VOL. 68.-P.C. These were two appeals from decisions of the Court of Appeal of New Zealand, in which the appellants, testamentary trustees and executors of James Dilworth, ho died December 23, 1894, claimed exemption from death duties and also from income tax, in respect of the residue of the testator's real and personal estate. The facts are fully stated in the judgment of the Board. Cozens-Hardy, Q.C., and Vaughan Hawkins, for the appellants. Haldane, Q.C., and A. W. Rowden, for the respondent. Nov. 26.-LORD WATSON delivered the judgment of their Lordships: The appellants, in both these cases, are the testamentary trustees and executors of the late James Dilworth of Remuera, near Auckland, in the colony of New Zealand, who died on December 23, 1894. Before the commencement of either of the suits in which these appeals are taken, the appellants had obtained probate and had carried out the whole directions of the testator, with the single exception of his instructions with regard to disposal of the residue of his estate, real and personal. The testator, after making due provision for all persons whom he conceived to have B DILWORTH V. NEW ZEALAND COMMISSIONER OF STAMPS. a moral claim upon him, declared his intention of establishing an institution, to. be called the Dilworth Ulster Institute, with the object of affording to boys of the classes thereinafter mentioned such maintenance, education, and training as would enable them to become good and useful members of society; and for that purpose he bequeathed to the appellants the whole of the residue of his real and personal estate which he had power to dispose of by will. At the time of the testator's death the residue of his trust estate, both real and personal, was certified by the Commissioner of Stamps to be of the value of 100,6551. 2s. 3d. The testator directed the appellants to reserve not less than twenty-five acres of his land at Remuera, known as Graham's Hill, for the purpose of erecting suitable buildings for the Dilworth Ulster Institute; and also, in the event of their resolving to establish an industrial branch of the institute at Waitakerei, to reserve sufficient land for that purpose. Instructions were given to the appellants that, in order to prevent the net income derivable from the residue falling below the sum of 5,000l. per annum, they should accumulate and invest such sum of money as they might think necessary, before proceeding to erect any buildings for the purposes of the institute. And they were directed that whenever the net income of the residue amounted to not less than 5,000l. per annum, and the money in their hands amounted to not less than 10,000l. over and above any sums which they had invested for the purpose of securing the net income of 5,000l., they should proceed to erect a substantial building upon the testator's lands at Auckland, known as Graham's Hill. The testator further directed that as soon as the buildings at Auckland were completed, and all liabilities incurred in the erection thereof discharged, the appellants should select so many boys of sound bodily and mental health, being orphans or sons of persons of good character and of any race, as in the opinion of the appellants that portion of the income available for the purpose will be sufficient from time to time to support, train, and educate. All boys selected must be either destitute orphans or the children of persons in straitened circumstances resident in the provincial district of Auckland or in the province of Ulster in Ireland; and, ceteris paribus, a preference is to be given to boys resident in or near the town of Dungannon, in the province of Ulster. Boys selected from the provincial district of Auckland must not be under three nor above five years of age, and those selected in the province of Ulster must be between five and eight years of age. The Ulster boys are to be selected by the minister for the time being of a church in Dungannon in connection with the General Synod of the Anglican Church called the Church of Ireland, and failing his nomination by the appellants themselves. Provision is made for supplying the Ulster boys with an outfit, and forwarding them to the Dilworth Ulster Institute at Auckland. No pupil is to remain in the institute after he has attained the age of fifteen, but in the case of pupils distinguished by their industry and natural talents the appellants are empowered to make arrangements for their maintenance and the prosecution of their studies at any university in New Zealand or in Dublin, or in or near the city of Belfast in Ireland, and to allow such pupils in the meantime to remain resident in the institute. All boys selected as pupils of the institute are to be maintained in the buildings of the institute, are to be clothed in a suitable uniform dress, are to be brought up and educated in the tenets of the Church of the province of New Zealand, commonly called the Church of England, and are to be instructed in such branches of learning and industry as shall be considered likely to make them good and useful members of society. It is expressly declared that no person shall be appointed chaplain, secretary, master, teacher, or other officer of the institute, until he shall have signed a declaration that he is a member of the Church of the province of New Zealand, commonly called the Church of England, and that he accepts and maintains the principles of the Reformation accomplished in the Church of England in the sixteenth century of the Christian era. The appellants have hitherto been accu DILWORTH V. NEW ZEALAND COMMISSIONER OF STAMPS. mulating the income of the residue, in accordance with the directions of the testator; and they have not yet commenced to erect the buildings of the Dilworth Ulster Institute. So far as hitherto stated, the facts are common to both appeals; but the questions raised by these appeals depend upon the construction of different Acts of the Legislature of New Zealand, and must now be separately considered. FIRST APPEAL. Under the provisions of the Deceased Persons Estates Duties Act, 1881, the Commissioner of Stamps for the colony, who is the respondent in this appeal, assessed the death duty payable by the appellants in respect of the residue of the testator's estate at the sum of 12,7351. 138. 6d. The appellants declined to pay, upon the ground that they were exempted from liability by the Charitable Gifts Duties Exemption Act, 1883; but the respondent held that they were not entitled to exemption, inasmuch as the bequest to the Ulster Institute is a gift to a sect or class, and is not a devise or bequest to a public institution, or a charitable bequest within the meaning of the Act. A case was accordingly prepared for the opinion of the Supreme Court of the colony. The questions submitted to the Court were: 1. Is the bequest to the Dilworth Ulster Institute so made as aforesaid exempt from the payment of duty chargeable under the Deceased Persons Estates Duties Act, 1881, and its amendments? 2 What refund of duty (if any) are the said executors entitled to demand in respect of said assessment? The case was first heard before Mr. Justice Connolly, who, on December 18, 1895, answered both these questions in the negative. On April 27, 1896, his judgment was affirmed by the Court of Appeal, who unanimously held that the testator's bequest of residue did not come within the exemption provided by the Act of 1883. The controversy between the parties turns upon the construction of two clauses in the Charitable Gifts Duties Exemption Act, 1883, which are in these terms: Section 2. "In this Act the term charitable bequests' includes devises, bequests, and legacies of real or personal property respectively of whatever description to public institutions such as libraries, museums, institutions for the promotion of science and art, colleges and schools, or to hospitals, orphan, lunatic, or benevolent asylums, dispensaries." Section 3. "Notwithstanding anything contained in the Deceased Persons Estates Duties Act, 1881, or in any other Act of a like character, no duty whatsoever shall be payable in respect of any charitable devise or bequest." These two clauses form the substance of the exempting Act of 1883, which contains only four sections. Section 1 relates to the short title of the Act, and section 4 to the date on and after which its provisions were to be operative. Section 3, which enacts exemption from the duty imposed by the Deceased Persons Estates Act, 1881, or by any Act of a like character, is expressed in very wide and general terms. It provides that no duty whatsoever shall be payable "in respect of any charitable devise or bequest." The only test of immunity required by that enactment, when considered per se, is that the devise or bequest shall be of a "charitable" nature. It does not appear to their Lordships to admit of reasonable doubt that the gift of residue to the Ulster Institute is charitable, in the popular sense of that word. It provides for the maintenance and education of boys who are orphans, or the sons of parents who are in straitened circumstances; and it does not, in their Lordships' opinion, derogate from the charitable nature of the gift, that the institution is to be managed by persons of a particular religious persuasion, or that its inmates are to be instructed in the tenets of the same sect. But, in the argument addressed to their Lordships, a question was raised in regard to the true legal construction of section 2, and to what extent, if any, its provisions qualify the enactments of the succeeding clause. Section 2 is, beyond all question, an interpretation clause, and must have been intended by the Legislature to be taken into account in construing the expression |