Oppenheim v. Tobacco Securities Trust Co Ltd and Others

[1951] 1 All ER 31

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(Judgment by: Lord Simonds)

Between: Oppenheim
And: Tobacco Securities Trust Co Ltd and Others

Court:

Judges:
Lord SimondsLord Normand
Lord Oaksey
Lord Morton of Henryton
Lord MacDermott

Subject References:
Charity
Education
Public character
Public nature of bond between beneficiaries
Gift for the education of the children of past and present members of limited company

Case References:
Re Compton - [1945] 1 All ER 198; [1945] Ch 123; 114 LJCh 99; 172 LT 158; 2nd Digest Supp
Re Hobourn Aero Components Ltd's Air Raid Distress Fund - [1946] 1 All ER 501; [1946] Ch 194; 115 LJCh 158; 174 LT 428; 2nd Digest Supp
Gilmour v Coats - [1949] 1 All ER 848; [1949] AC 426; [1949] LJR 1034; 2nd Digest Supp
Jones v Williams - (1767), Amb 651; 27 ER 422; 8 Digest 244, 36
Income Tax Special Purposes Comrs v Pemsel - [1891] AC 531; 61 LJQB 265; 65 LT 621; 55 JP 805; 3 Tax Cas 53; 8 Digest 241, 1
Re Grove Grady - [1929] 1 Ch 557; Digest Supp
Re Drummond - [1914] 2 Ch 90; 83 LJCh 817; 111 LT 156; 8 Digest 244, 28
Re Rayner - (1920), 89 LJCh 369; 122 LT 577; 84 JP 61; Digest Supp
Admiralty Comrs v Valverda (Owners) - [1938] 1 All ER 162; [1938] AC 173; 107 LJKB 99; 158 LT 281; Digest Supp
Hall v Derby Sanitary Authority - (1885), 16 QBD 163; 55 LJMC 21; 54 LT 175; 50 JP 278; 8 Digest 243, 26
Isaac v Defriez - (1754), Amb 595; 27 ER 387; 44 Digest 890, 7479
Gibson v South American Stores (Gath and Chaves) Ltd - [1949] 2 All ER 18; [1949] Ch 572; [1949] LJR 1228; affd in part and revsd in part; [1949] 2 All ER 985; [1950] Ch 117; 2nd Digest Supp
Spiller v Maude - (1881), 32 ChD 158 n; 8 Digest 348, 1412
Re Gosling - (1900), 48 WR 300; 8 Digest 244, 27
Re Buck - [1896] 2 Ch 727; 65 LJCh 881; 75 LT 312; 60 JP 775; 8 Digest 262, 246
Re Sir Robert Laidlaw's Will Trusts - (1935), unreported
Verge v Somerville - [1924] AC 496; 131 LT 107; sub nom A-G for Australia v Somerville; 93 LJPC 173; Digest Supp

Hearing date: 2, 3, 6 November 1950
Judgment date: 13 December 1950

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Judgment by:
Lord Simonds

My Lords, once more your Lordships have to consider the difficult subject of charitable trusts, and this time a question is asked to which no wholly satisfactory answer can be given. On 24 March 1930, John Phillips and Elizabeth Miller Phillips, his wife, executed a settlement whereof the respondent, Tobacco Securities Trust Co Ltd were and are the trustees, and thereby assigned to them certain investment in the British-American Tobacco Co Ltd (which I will call "the company"), and its subsidiary and allied companies and certain real estate in Trinidad (together with certain heritable property in Scotland as to which no question arises in this appeal) to be held on certain trusts during the lives of the grantors and the survivor of them and thereafter on trust to apply the income of the trust premises

"in providing for or assisting in providing for the education of children of employees or former employees of British-American Tobacco Co. Ltd ... . or any of its subsidiary or allied companies in such manner and according to such schemes or rules or regulations as the acting trustees shall in their absolute discretion from time to time think fit and also at the discretion from time to time of the acting trustees to apply all or any part of the corpus of the said trust for the like purposes."

The expression "acting trustees" meant the grantors during their lives and the directors for the time being of the company, or, in the event of the re-construction or amalgamation of the company, such other persons as were therein mentioned, in which event a variation was made also in the beneficiaries under the trust. Elizabeth Miller Phillips died on 8 October 1940, leaving John Phillips, her universal legatee and devisee. He died on 26 June 1947, and his will was duly proved by the respondent, Barclays Bank (Dominion, Colonial and Overseas). The probate value of the trust premises was over £125,000, including £2,000 which represented the proceeds of the property in Scotland. It appears that in Trinidad the English common law and doctrines of equity have been in force since 1848.

In these circumstances the question arose whether the trust that I have set out is a valid trust. It is clear that it creates a perpetuity. It is, therefore, invalid unless it can be supported as a charitable trust. The appellant, as one of the directors of the company, and, accordingly, an "acting trustee," contends in favour of its validity. The contrary is contended by the respondent bank, since in the event of invalidity there is a resulting trust of the trust premises to the estates of the grantors. No evidence was given of any connection of the grantors with the company except that John Phillips was clearly a large stockholder. It appears that the number of employees of the company and its subsidiary and allied companies was large. It exceeded 110,000. This question coming before Roxburgh J in the Chancery Division, it was conceded, and he held, that, having regard to the decisions of the Court of Appeal in Re Compton, and Re Hobourn Aero Components Ltd's Air Raid Distress Fund, he was bound to declare the trust void except as to the property in Scotland, and on 10 February 1949, he made an order accordingly. On appeal to the Court of Appeal the same view was taken and the appeal was dismissed. In neither court was more than a formal decision given. Your Lordships must look to the cases that I have cited for the reasoning which led to it.

Before I turn to these authorities I will make some preliminary observations. It is a clearly established principle of the law of charity that a trust is not charitable unless it is directed to the public benefit. This is sometimes stated in the proposition that it must benefit the community or a section of the community. Negatively it is said that a trust is not charitable if it confers only private benefits. In the recent case of Gilmour v Coats this principle was re-asserted. It is easy to state and has been stated in a variety of ways, the earliest statement that I find being in Jones v Williams in which Lord Hardwicke LC is briefly reported as follows ((1767) (Amb 652)):

"Definition of charity; a gift to a general public use, which extends to the poor as well as to the rich ... "

With a single exception, to which I shall refer, this applies to all charities. We are apt now to classify them by reference to Lord Macnaghten's division in Income Tax Special Purposes Comrs v Pemsel, and, as I have elsewhere pointed out, it was at one time suggested that the element of public benefit was not essential except for charities falling within the fourth class "other purposes beneficial to the community." This is certainly wrong except in the anomalous case of trusts for the relief of poverty with which I must specifically deal.

In the case of trusts for educational purposes the condition of public benefit must be satisfied. The difficulty lies in determining what is sufficient to satisfy the test, and there is little to help your Lordships to solve it. If I may begin at the bottom of the scale, a trust established by a father for the education of his son is not a charity. The public element, as I will call it, is not supplied by the fact that from that son's education all may benefit. At the other end of the scale the establishment of a college or university is beyond doubt a charity. "Schools of learning, free schools, and scholars in universities" are the very words of the preamble to the Charitable Uses Act, 1601(43 Eliz c 4). So also the endowment of a college, university or school by the creation of scholarships or bursaries is a charity, and none the less because competition may be limited to a particular class of persons. It is on this ground, as Lord Greene MR pointed out in Re Compton ([1945] 1 All ER 206) that the so-called "founder's kin" cases can be rested. The difficulty arises where the trust is not for the benefit of any institution either then existing or by the terms of the trust to be brought into existence, but for the benefit of a class of persons at large. Then the question is whether that class of persons can be regarded as such a "section of the community" as to satisfy the test of public benefit. These words "section of the community" have no special sanctity, but they conveniently indicate

(i)

that the possible (I emphasise the word "possible") beneficiaries must not be numerically negligible, and

(ii)

that the quality which distinguishes them from other members of the community, so that they form by themselves a section of it, must be a quality which does not depend on their relationship to a particular individual.

It is for this reason that a trust for the education of members of a family or, as in Re Compton, of a number of families cannot be regarded as charitable. A group of persons may be numerous, but, if the nexus between them is their personal relationship to a single propositus or to several propositi, they are neither the community nor a section of the community for charitable purposes.

I come, then, to the present case where the class of beneficiaries is numerous, but the difficulty arises in regard to their common and distinguishing quality. That quality is being children of employees of one or other of a group of companies. I can make no distinction between children of employees and the employees themselves. In both cases the common quality is found in employment by particular employers. The latter of the two cases to which I first referred, the Hobourn case, is a direct authority for saying that such a common quality does not constitute its possessors a section of the public for charitable purposes. In the former case, Re Compton, Lord Greene MR had by way of illustration placed members of a family and employees of a particular employer on the same footing, finding neither in common kinship nor in common employment the sort of nexus which is sufficient. My Lords, I am so fully in agreement with what was said by Lord Greene in both cases and by my noble and learned friend, then Morton LJ in the Hobourn case that I am in danger of repeating its purport without improving on their words. No one who has been versed for many years in this difficult and very artificial branch of the law can be unaware of its illogicalities, but I join with my noble and learned friend in echoing the observations which he cited ([1946] 1 All ER 510) from the judgment of Russell LJ in Re Grove Grady ([1929] 1 Ch 582), and I agree with him that the decision in Re Drummond (7)

" ... imposed a very healthy check upon the extension of the legal definition of 'charity' ... "

It appears to me that it would be an extension, for which there is no justification in principle or authority, to regard common employment as a quality which constitutes those employed a section of the community. It must not, I think, be forgotten that charitable institutions enjoy rare and increasing privileges, and that the claim to come within that privileged class should be clearly established. With the single exception of Re Rayner, which I must regard as of doubtful authority, no case has been brought to the notice of the House in which such a claim as this has been made, where there is no element of poverty in the beneficiaries, but just this and no more, that they are the children of those in a common employment. Learned counsel for the appellant sought to fortify his case by pointing to the anomalies that would ensue from the rejection of his argument. For, he said, admittedly those who follow a profession or calling-clergymen, lawyers, colliers, tobacco-workers and so on-are a section of the public, and how strange then it would be if, as in the case of railwaymen, those who follow a particular calling are all employed by one employer. Would a trust for the education of railwaymen be charitable, but a trust for the education of men employed on the railways by the Transport Board not be charitable? And what of service of the Crown, whether in the civil service or the armed forces? Is there a difference between soldiers and soldiers of the King? My Lords, I am not impressed by this sort of argument and will consider on its merits, if the occasion should arise, the case where the description of the occupation and the employment is in effect the same, where in a word, if you know what a man does, you know who employs him to do it. It is to me a far more cogent argument, as it was to my noble and learned friend in the Hobourn case, that, if a section of the public is constituted by the personal relation of employment, it is impossible to say that it is not constituted by a thousand as by 100,000 employees, and, if by a thousand, then by a hundred, and, if by a hundred, then by ten. I do not mean merely that there is a difficulty in drawing the line, though that, too, is significant. I have it also in mind that, though the actual number of employees at any one moment might be small, it might increase to any extent, just as, being large, it might decrease to any extent. If the number of employees is the test of validity, must the court take into account potential increase or decrease, and, if so, as at what date?

I would end, my Lords, where I began-by saying that I concur in the reasoning of the Court of Appeal in the Hobourn case, but there are certain points in the argument for the appellants about which I should say a few words. It was urged by counsel for the Attorney General, who was allowed to address the House, that there was here a valid charitable trust created, since there was no private person who could sue to enforce the trust. I am not persuaded that this would be so, if the trust were otherwise enforceable, but, in any case, the test is not a valid one. If this trust is charitable, the Attorney General can sue to enforce it. It does not follow that it is charitable because no one else can sue to enforce it.

I would also, as I have previously indicated, say a word about the so-called "poor relations" cases. I do so only because they have once more been brought forward as an argument in favour of a more generous view of what may be charitable. It would not be right for me to affirm or to denounce or to justify these decisions. I am concerned only to say that the law of charity, so far as it relates to "the relief of aged, impotent and poor people" (I quote from the Charitable Uses Act, 1601) and to poverty in general, has followed its own line, and that it is not useful to try to harmonise decisions on that branch of the law with the broad proposition on which the determination of this case must rest. It is not for me to say what fate might await those cases if in a poverty case this House had to consider them, but, as was observed by Lord Wright in Admiralty Comrs v Valverda (Owners) ([1938] 1 All ER 174):

"This House has, no doubt, power to overrule even a long-established course of decisions of the courts, provided it has not itself determined the question ... but in general this House will adopt this course only in plain cases, where serious inconvenience or injustice would follow from perpetuating an erroneous construction or ruling of law."

I quote with respect those observations to indicate how unwise it would be to cast any doubt on decisions of respectable antiquity in order to introduce a greater harmony into the law of charity as a whole. The appeal should, in my opinion, be dismissed with costs.