Re Duty on the Estate of the Incorporated Council of Law Reporting for England and Wales

(1888) 22 Q.B.D. 279

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(Judgment by: Lord Coleridge CJ (including background))

Re: Duty on the Estate of the Incorporated Council of Law Reporting for England and Wales

Court:

Judges:
Lord Coleridge CJManisty J

Subject References:
REVENUE
Associations established for Trade or Business
Duty
Exemptions
Liability to render an Account

Legislative References:
Customs and Inland Revenue Act, 1885 (48 & 49 Vict. c. 51) - ss. 11, 15

Judgment date: 11 December 1888

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Judgment by:
Lord Coleridge CJ (including background)

A body corporate or unincorporate "established for any trade or business" within the meaning of the Customs and Inland Revenue Act, 1885, s. 11, sub-s. 5, is not bound to deliver any account of its property under s. 15.

In 1870 the Council of "The Law Reports" were incorporated under the provisions of the Companies Act, 1867, obtaining a licence under s. 23 to be registered as a limited company without the addition of the word "limited." The association was established for the objects of preparing and publishing, under gratuitous professional control, reports of judicial decisions; of issuing digests and other publications relating to legal subjects, including the statutes; of continuing the series of reports then called "The Law Reports"; of acquiring the copyright of any other reports, and of doing any other things incidental or conducive to those objects. In carrying them out the association employed editors, reporters, printers, and publishers, and prepared, printed, and published reports and other legal publications, and supplied them to subscribers and others for payment. By the memorandum of association all the property and income of the association were applicable solely to the promotion of the above objects, and no part thereof could be paid as dividend, bonus, or otherwise, to any member:-

Held, that the association was established for a trade or business within the meaning of sub-s. 5 of s. 11 of the Customs and Inland Revenue Act, 1885, and was therefore entitled to exemption from the duty imposed by that section.

Writ of Summons by the Crown, directed to the secretary of the Incorporated Council of Law Reporting for England and Wales, and claiming delivery of an account, pursuant to the Customs and Inland Revenue Act, 1885, ^[F1] of all property belonging to or vested in the Council, and of the gross annual value, income, or profits of such property, and of all deductions claimed in respect thereof, whether as necessary outgoings or under the exemptions allowed by the Act, and claiming also payment of the duty chargeable on such property.

The secretary appeared to the writ, and made an affidavit stating the material facts of the case as follows:-

"1.

At a meeting of the members of the Bar of England, held in Lincoln's Inn Hall, on November 28, 1864, a scheme of reporting the decisions of the Superior Courts of Law and Equity was adopted, and a Council composed of members of the Inns of Court and the Incorporated Law Society was subsequently constituted, and under the management of such Council a series of reports of the decisions of the various Courts of Law and Equity was, from the year 1866 until the year 1870, published, such reports being known as 'The Law Reports.'

"2.

In the year 1870 it was considered desirable that the Council of Law Reporting should be incorporated, and accordingly application was made to the Board of Trade under the provisions of s. 23 of the Companies Act, 1867, for a licence for the registration of an association to be called 'The Incorporated Council of Law Reporting for England and Wales,' with limited liability, but without the addition of the word 'limited' to its name; and on July 21, 1870, a licence was accordingly granted by the Board of Trade, directing the Incorporated Council of Law Reporting for England and Wales to be registered with limited liability without the addition of the word 'limited' to its name, upon proof that it was formed for the purpose of promoting objects of the nature contemplated by s. 23 of the Act, and that the intention was to apply its income and property solely towards the promotion of its objects, and that the payment of any dividend was prohibited.

"3.

The association was duly incorporated, and its memorandum of association stated the objects for which it was established to be:-

"(1.)

The preparation and publication in a convenient form at a moderate price and under gratuitous professional control of reports of judicial decisions of the Superior and Appellate Courts in England.

"(2.)

The issue, periodically or occasionally, of any subsidiary or other publications relating to legal subjects which it may be considered expedient to combine with the publication of such reports, including the statutes of the realm, or any part thereof, if deemed expedient.

"(3.)

The continuation (in furtherance of the above objects) of the series of reports called 'The Law Reports,' (now in course of publication by the present Council of Law Reporting) under their present or any other name, and either in their present form and according to the present system, or subject to any alteration of form or system that may be considered conducive to the promotion of the above objects; and the issue, periodically or occasionally, of any legal digests or other publications connected with 'The Law Reports,' or subsidiary thereto, or which may be considered likely to increase the utility thereof; and the acquiring, by purchase or otherwise, on such terms or conditions as shall be considered expedient, the copyright of any rival or other publication of law reports which may now or shall hereafter exist or be in course of publication, and the making any agreement or arrangement for the purpose of procuring the discontinuance of such reports, or the publishing thereof, or the discontinuance of preparing reports for any such publication by any other persons. The taking over and assuming all the assets and liabilities of the existing Council of Law Reporting.

"(4.)

The doing all such other lawful things as are incidental or conducive to the attainment of the above objects.

"4.

On the 2nd of August, 1870, the Incorporated Council of Law Reporting for England and Wales accepted the transfer of 'The Law Reports,' and the other publications vested in the Council of Law Reporting, and the copyrights thereof, and the property in the unsold copies of the same, and of the statutes, and all contracts and engagements of such Council of Law Reporting, under the aforesaid scheme, with their editors, reporters, publishers, printers, secretary, and others employed by the said Council of Law Reporting, and all the moneys and assets whatsoever of the said Council, and assumed all the liabilities and obligations of that body, and from that date forward the said Incorporated Council have, in accordance with their objects as specified in their memorandum of association, continued the publication of the said 'Law Reports.'

"5.

For the purpose of so doing the Incorporated Council have carried on the trade or business of publishers and sellers of 'The Law Reports,' and also the business of publishers of and dealers in other works which are more particularly hereinafter referred to.

"6.

The business has been carried on upon the following system:- The Incorporated Council receive from the Government, and from barristers, solicitors, and the public generally, subscriptions of various amounts, and in return for these they compile, edit, publish, and supply to their subscribers, under the superintendence and control of the said Incorporated Council, and competent editors and reporters appointed by them, reports of judicial decisions of the Superior and Appellate Courts in England. The Incorporated Council also from time to time, through their publishers, sell and dispose of such portions of their stock of 'Law Reports' as are not required for the purpose of supplying their subscribers to any members of the public who may be desirous of purchasing them at such prices as the Council from time to time consider expedient.

"7.

The annual subscription required by the Incorporated Council from subscribers to entitle them to the entire series of 'Law Reports' and 'Weekly Notes' published by the Council during each year, and to a copy of the Statutes for the year, was until the year 1885, five guineas, and the annual subscription to the 'Indian Appeals,' a separate publication, being reports of the decisions of the Privy Council on Appeals from the East Indies, was, and is, one guinea per annum.

"8.

In the year 1885, it having been found that the amount of revenue arising from this source exceeded the actual wants of the Incorporated Council for the purpose of carrying on its business and paying its outgoings as hereinafter mentioned, the Council in that year reduced the annual subscription to the 'Law Reports,' 'Weekly Notes,' and Statutes to the sum of four guineas, and that amount has continued to be the annual subscription ever since, but made no alteration in the amount of subscription to 'The Law Reports (Indian Appeals).' All subscriptions are required by the Incorporated Council to be prepaid.

"9.

The only other sources of revenue of the Incorporated Council are the interest upon money which they may from time to time have on deposit at their bankers, and the income derived by them from certain investments in the government funds and in metropolitan stock, which they have from time to time made out of accumulations of income in excess of the expenditure for the purpose of their business. Such investments have from time to time been augmented or reduced by the Council in carrying on their business according as they had surplus funds at their disposal or the contrary. Save and except as above stated, and save and except the stock of 'Law Reports,' 'Indian Appeals,' and other books hereinafter referred to, which they may have in hand from time to time, together with an iron safe and a few insignificant articles of little value, the Incorporated Council have no real or personal property whatever.

"10.

In addition to printing and publishing 'The Law Reports' and Statutes as above mentioned, the Incorporated Council have from time to time compiled, edited, and published Digests of 'The Law Reports' and other works, and contracted with the Queen's Printers for the statutes for the year, and have also issued other publications which they have considered would be useful or of interest to the members of the legal profession, and they have also purchased from the Government tables and indices to the statutes which have from time to time been published by the Government, and they have either supplied such works as are in this paragraph referred to to their subscribers gratis, as being covered by their subscription, or have sold them and the surplus copies to their subscribers and the public at such prices as they have considered expedient, having regard to the financial requirements of the business.

"11.

The outgoings of the Incorporated Council consist of:-

(a.)

The cost of printing and delivery of Reports, Statutes and Digests as above-mentioned.

(b.)

Payment to Her Majesty's Government or others for works which they have from time to time considered it expedient to purchase and circulate and resell as above mentioned.

(c.)

Remuneration of the editors and reporters, the secretary, and other officers or servants employed by the Council for the purpose of producing 'The Law Reports' and other works above referred to.

(d.)

Office and other general expenses connected with the carrying on of the business.

"12.

The business transacted by the Incorporated Council has in all its essential features been, and now continues to be, of the same character as the business carried on by publishers of other series of law reports, who publish such reports with the object of making for their own benefit profits out of such publication. The Incorporated Council have carried on their business at a considerable profit, which however has been accumulated and invested, but no portion of any such profit or accumulations has been divided amongst the members of the Council, such division being prohibited by the terms under which the permission of the Board of Trade to its incorporation was given, and by the memorandum and articles of association.

"13.

I verily believe that the only respects in which the business of the Incorporated Council differs from that of any other publisher of law reports is that the supervision exercised over the business by the Council is gratuitous, as provided by its constitution, and the profits which are made are not divided amongst its members, but are either accumulated, or applied in furthering the objects for which the Incorporated Council was established as set forth in the memorandum of association.

"14.

The Commissioners of Inland Revenue have contended that the Incorporated Council are liable to be assessed for, and to pay income tax upon, the surplus of their income over their expenditure, as being the balance of their profits or gains within the meaning of 5 & 6 Vict. c. 35, s. 100, Schedule D, and the Incorporated Council have made the returns required of them under that Act, and have been assessed thereunder, and have paid the amount of income tax for which they have been so assessed. No such income tax was payable for the year 1887-8, because it appeared by the return so made as aforesaid, and was the fact, that the income of the Incorporated Council did not exceed its expenditure."

Sir E. Clarke, S.G., and Dicey, for the Crown. There are two questions in this case which it will be convenient to have argued and decided separately. The first is whether this society is bound to make a return of its property under s. 15 of the Customs and Inland Revenue Act, 1885. The society claim that, by s. 11, sub-s. 5, all their property is exempt, and that therefore they are not bound to make any return whatever. But assuming all their property to be exempt, they are still bound to make a return under s. 15 in order that the Crown may be satisfied that they are entitled to the exemption. If that was not the effect of s. 15, then such a body as this would be entitled to decide for themselves whether or not they are taxable. By the Act the duty is imposed upon bodies corporate or unincorporate, and not upon property, and every such body is bound to make a return of all its property; and, if entitled to do so, to claim exemption under the Act, stating their grounds. The case of Re Duty on the Estate of the New University Club ^[F2] really decides the point, as appears from the order made by the Court. ^[F3] The general object of the statute was to bring into contribution to the revenue the property of all bodies corporate or unincorporate who are not subject to pay legacy or succession duty. If any doubt exists as to the true construction of s. 15 such a construction should be applied as would favour that general object.

Rigby, Q.C., and Tyrrell Paine, for the Council. If the Council were bound to make a return, it could only be that they had no property chargeable with the duty, because they were entitled to exemption as regarded all their property on the ground that they were established for a trade or business within the meaning of s. 11. Where the question of liability to duty depends upon the particular class of property, or the mode in which it was acquired, a return becomes important; but where, as in this case, all the property, of whatever kind and however acquired, is exempt from duty by reason of the constitution and nature of the society, a return is needless. In the case of the New University Club ^[F2] the question whether the duty was payable did not depend upon the constitution or nature of the society, but upon the nature of the property in respect of which exemption was claimed. That case therefore is wholly different from this. It will be seen that most of the sub-sections of s. 11 refer to particular classes of property, but that sub-ss. 4 and 5 refer to the property of particular kinds of bodies, and exempt the whole property of those bodies. The case of the New University Club ^[F4] was decided upon one of the former class of sub-sections, sub-s. 6, whereas this society claims exemption under one of the latter class, namely, sub-s. 5. This society is not a body "chargeable with the duty hereby imposed" within the meaning of s. 15, and is therefore not bound to make a return.

Sir E. Clarke, S.G., in reply. By s. 11 the duty is imposed upon every body corporate or unincorporate the property of which is not liable to legacy or succession duty; and by s. 15 every such body must make a return of all property in respect whereof the duty is payable, "and of all deductions claimed in respect thereof, whether by relation to any of the before-mentioned exemptions from such duty or as necessary outgoings." Those words shew the intention that if any body claims exemption under any of the sub-sections, it must make a return, and claim such exemption in that return.

Lord Coleridge, C.J. I have come to the conclusion that the point now submitted to the Court is not concluded by the decision in the case of the New University Club. ^[F4] If that case had not been distinguishable, I should, of course, have been bound to follow it. However, I have been satisfied by the argument of Mr. Rigby that that case is not directly in point, and we are therefore left free to give our own opinion upon the construction of the Act in reference to this preliminary point as to the Council's duty to make a return.

The argument on behalf of the Crown, as I understand it, is this: It is said that the general object of the Act, or of s. 11, being to bring into contribution to the revenue the property of bodies corporate or unincorporate who are not liable to probate, legacy, or succession duties, wherever there is a fair doubt upon the construction, such a construction must be applied as will favour, rather than disfavour, that general object. I agree that the rule of construction is a good one: I agree that the right way is, first, to ascertain what is the main object of the statute, and then, if any doubt arises, to construe the doubtful passage so as to effectuate the main object of the Act rather than to contradict or contravene it. But although the main object of the Act is clearly that which I have stated, yet it is equally clear that certain classes of property are broadly and distinctly exempted from the operation of the taxing portion of s. 11. I agree that the exemptions apply only to property and not to bodies corporate or unincorporate. The words are:

"Subject to exemption from such duty in favour of property of the descriptions following."

Then sub-ss. 4 and 5 (which I think are properly to be classed together) provide exemptions in respect of the "property of any friendly society or savings bank," and "property belonging to or constituting the capital of a body established for any trade or business." Now those are the words upon which we have to decide in this case. The words upon which my learned Brothers had to decide the case of the New University Club ^[F5] were those of sub-s. 6, which are:

"Property acquired by or with funds voluntarily contributed to any body corporate or unincorporate within a period of thirty years immediately preceding."

It is obvious that a body corporate or unincorporate might have a great deal of property not acquired by funds voluntarily contributed to it within a period of thirty years. There is no reason that I am aware of why a member of a club might not leave books or pictures or other property to the club for the purpose of lightening the members' subscriptions or increasing their comforts. It is also obvious that where there was property acquired by or with funds voluntarily contributed during the period of thirty years, and property which was not so acquired, the Crown could only judge what property did, and what did not, come within the exemption by having a return made of the whole. It seems to me, therefore, looking carefully at the words of sub-s. 6, that the decision in the case of the New University Club ^[F5] was perfectly right. But we have here to deal with perfectly different words. It signifies nothing, under the 4th and 5th sub-sections, how the property has been acquired. In order to entitle the corporate or unincorporate body to exemption it is sufficient if the property, however acquired, belongs to one of the specified bodies, namely, a friendly society or savings bank, or a body established for any trade or business. If it does belong to one of those specified bodies, it seems to me that the whole property of such body is absolutely exempt from the duty, and the only question which could arise would be whether or not the particular body on whom it was sought to impose the duty was, in fact, either a friendly society or a savings bank, or established for any trade or business. One must come, then, to the consideration of s. 15, which provides for a return, with one's mind already satisfied that the whole of the property, no matter how it has been acquired, of the body called upon to make the return is already exempted from the duty by the express words of the Act.

That being so, the body is not a body "chargeable with the duty hereby imposed" within the meaning of those words in s. 15. I admit that that is only an inference. But by s. 11 the property only is chargeable, and where the body has no property which is chargeable it follows that it is not chargeable with the duty imposed by the Act. As it is only chargeable in respect of its property, and it has no property which is chargeable, it is not within the direction of s. 15, which says that a body chargeable with duty shall deliver a full and true account "of any property in respect whereof any such duty shall be payable," & c. By the hypothesis in the present case there is no property in respect of which any duty is payable, and therefore the Council is not a body chargeable, nor bound to deliver an account. I do not deny that the concluding words of clause 1 of s. 15, "and of all deductions claimed in respect thereof, whether by relation to any of the before-mentioned exemptions from such duty or as necessary outgoings," raise an argument against the view I have expressed. But that argument is not, to my mind, of sufficient strength to overbear the plain and direct result of the enactments of the statute; and when I consider that, if the argument for the Crown be correct, every friendly society and every savings bank in this kingdom must make a return, although it was admitted that such a return would be perfectly otiose, because the whole of their property by the plain words of the Act is absolutely exempt, I cannot believe that the legislature intended any such result.

It cannot have been intended that bodies whose whole property is exempted by the Act itself should make a return which would be perfectly needless and idle. I am therefore of opinion that the Council is not bound to make a return in this case.