Incorporated Council of Law Reporting (Q) v Federal Commissioner of Taxation

[1971] HCA 44

HIGH COURT OF AUSTRALIA

Barwick C.J., McTiernan and Windeyer JJ.

INCORPORATED COUNCIL OF LAW REPORTING (Q.) v. FEDERAL COMMISSIONER OF TAXATION

(1971) 125 CLR 659

1 October 1971

Income Tax (Cth)—Charities

Income Tax (Cth)—Exempt income—Charitable institution—Body publishing law reports not for profit of members—Income Tax and Social Services Contribution Assessment Act 1936-1962 (Cth), s. 26 (e). Charities—Charitable purposes—Body publishing law reports otherwise than for profit of members.

Decisions

1971, October 1.
The following written judgments were delivered:-
0 BARWICK C.J. This is a case stated for the opinion of the Full Court in which the principal question asked is:
"(a) Is the income of the Council exempt as income of a 'scientific charitable or public educational institution' within the meaning of s. 23(e) of the Income Tax and Social Services Contribution Assessment Act 1936-1962?" (at p661)

2. Section 23(e) of the Income Tax and Social Services Contribution Assessment Act 1936-1962 (the Act) provides:

"23. The following income shall be exempt from income tax-: (e) the income of a religious, scientific, charitable or public educational institution;" (at p661)

3. After the case was argued before the Court some years ago and after the Court had reserved judgment, the Court was requested not to proceed further in the matter to enable the parties to supplement the case stated by additional facts which had come to their notice. A supplementary statement was subsequently filed. More recently the Court has been asked if it would now proceed to consider the matter, the parties having been unable to resolve their differences and not desiring to present further argument. (at p661)

4. The Incorporated Council of Law Reporting for the State of Queensland (the Council) was incorporated on 7th November 1907 under the provisions of The Companies Acts, 1863 to 1896 (Q.), as a company limited by guarantee. The objects of the Council according to its memorandum of association, so far as presently relevant, are as follows:

"3. The objects for which the Association is established are-: (a) The preparation and publication in a convenient form, at a moderate price, and under gratuitous professional superintendence and control, of Reports of Judicial Decisions of the Supreme Court in the State of Queensland.

(b) 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.

(c) The continuation (in furtherance of the above object) of the Reports called 'The State Reports (Queensland)' (with the year of publication added thereto) and 'The Weekly Notes' now in course of publication by or by the permission of 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 alterations of form or system that may be considered conducive to the promotion of the above objects; and the issue periodically or occasionally of reprints thereof and of any legal Digests or other publications in connection with 'The State Reports, Queensland' (with the year of publication added thereto) and 'The Weekly Notes' 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 may be considered expedient the copyright of the earlier numbers of the said Reports and Weekly Notes or any serial or other publication of Law Reports which now or shall hereafter exist or be in course of publication and the making of any agreement or arrangement for the purpose of the discontinuance of such Reports or the publishing thereof or the discontinuance of preparing Reports for any such publication by any other persons or Company. The acquisition of the newspaper called 'The Queensland Law Reporter' and the publication of the same and the taking over of the assets and liabilities of the present Council of Law Reporting.

(d) To supplement or assist any of the libraries of the Supreme Court of the State of Queensland by gifts of any of the publications of the Association or publications received by it or of such profits of the Association as the Council shall from time to time determine to donate.

(e) The doing of all such other lawful things as are incidental or conducive to the attainments of the above objects.

4. The income and property of the Association, whencesoever derived, shall be applied solely towards the promotion of the objects of the Association as set forth in this Memorandum of Association, and no portion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise howsoever by way of profit to the persons who at any time are or have been Members of the Association or to any of them or to any person claiming through them: Provided that nothing herein shall prevent the payment in good faith of remuneration to any Editors, Reporters, Secretaries, officers or servants of the Association, or to any member of the Association or other person, in return for any services actually rendered to the Association. 5. . . . 6. . . . 7. . . . 8. If after the dissolution of the Association there remains after the satisfaction of all its debts and liabilities any property whatever the same shall not be paid to or distributed among the members of the Association, but shall be given or transferred to the Committee of the Library of the Supreme Court of the State of Queensland at Brisbane to be distributed amongst the Committees of the Libraries of the Supreme Courts of the said State in such proportions as the Committee of the said firstmentioned Library shall determine or if at that time such lastmentioned Committee shall not be in existence to such Public Legal Library or Libraries in the State of Queensland and in such proportions as a Justice of the Supreme Court of the said State having jurisdiction in the matter may determine for the purpose of purchasing legal or other works for the said Library or Libraries." (at p663)

5. According to the articles of association of the Council it consists of three members of the Bar of Queensland practising in the city of Brisbane, three solicitors of the Supreme Court of Queensland practising in that city to be appointed by three of the judges of the Supreme Court, the Attorney-General, the Solicitor-General and the Registrar of the Supreme Court at Brisbane. (at p663)

6. Article 13 provides:

"13. The Reports shall be prepared by one or more Reporters and shall be under the supervision of an Editor or Editors if the Incorporated Council shall so direct and the copyright shall be vested in the Incorporated Council or in Trustees to be named by them." (at p663)

7. Article 14 provides that editors and reporters shall be barristers appointed and removable by the Council. Article 19 provides for the application of profits and is as follows:

"19. The proceeds of the sale of Reports and other profits of the Incorporated Council shall be applied as follows-: (1) In paying the current expenses, costs, charges and other disbursements of the Incorporated Council in the conduct and management of the affairs of the Association or relating thereto including all liabilities of the existing Council of Law Reporting.

(2) In paying the salaries of the Editors and Reporters, Secretary and other officers in such manner as shall from time to time be arranged or agreed upon with them.

(3) In defraying the other expenses of the publication, sale and distribution of 'The Queensland Law Reporter' and of the Reports and other publications.

(4) In paying the rent of any lands or tenements hired or taken on lease as aforesaid or any repairs, alterations and other outgoings in respect of such premises.

(5) In supplementing the funds of the Committees of the Libraries of the Supreme Court of Queensland or in forming a Reserve Fund to meet future contingencies or in reducing the cost of any of the publications of the Incorporated Council to subscribers or others or in such other way as the Incorporated Council in their discretion shall from time to time consider best calculated to improve the Libraries of the Supreme Courts of the State of Queensland or the present system of Law Reporting or otherwise provide for the purposes expressed in the Memorandum of Association." (at p663)

8. Article 20 provides as follows:

"20. The application of the proceeds of the sale of Reports and other profits of the Incorporated Council may without prejudice to existing engagements be varied as the Incorporated Council shall from time to time determine or as the course of their operations shall from time to time require or render expedient but so as always strictly to adhere to the Rule prescribed by the Memorandum of Association that the income and property of the Association whencesoever derived shall be applied solely towards the promotion of the objects of the Association as set forth in the Memorandum of Association." (at p664)

9. The Council has throughout the intervening years prepared and published at a moderate price and under gratuitous professional superintendence and control reports of judicial decisions of the Supreme Court of the State of Queensland and has assisted the libraries of the Supreme Court of the State by distribution of its profits by way of grants to the libraries. This has been the only distribution made by the Council of its profits. (at p664)

10. The Supreme Court Library at Brisbane was established on 1st July 1862 and rules for its conduct have been made by the Supreme Court of Queensland. Under the Supreme Court Library Rules there is a committee for the management of the Library at Brisbane consisting of one of the judges of the Supreme Court, the members of the Barristers' Board, members of the Solicitors' Board and the members of the Board of Examiners for Conveyancers. The Rules provide for a Supreme Court Library Fund and for the regulation and management of that fund. In addition to the Supreme Court Library at Brisbane, Supreme Court libraries were established in 1897 at Rockhampton and at Townsville with rules comparable to those I have briefly described in relation to the Supreme Court at Brisbane. (at p664)

11. The Supreme Court Library at Brisbane was established with money voted for that purpose by the Parliament of Queensland and was in part maintained by an annual sum provided by the Parliament until the year 1869 when the parliamentary vote was discontinued. Until the year 1893 Parliament voted an annual sum for the keeper of the Library but this was discontinued in that year. The position of the libraries at Rockhampton and Townsville was similar. Since 1893 the only sources of income of the Supreme Court libraries other than payments made to it by the Council have been payments made by students at law on application for enrolment as such, payments by students for examination fees for examinations conducted by the Barristers' Board and the Solicitors' Board, the fees paid by persons seeking admission as barristers or solicitors of the Supreme Court of Queensland and interest on investments and profits from the sale of books. (at p665)

12. Since their inception the Supreme Court libraries have been conducted as libraries holding law reports, text books, legal journals and periodicals, legal papers and articles from many parts of the world for reference, research and for citation in court free of any charge. They have been the only libraries of their kind in the State of Queensland. The resources of the libraries are available to and are used by members of the judiciary, the legal profession, students of law, university law students, articled clerks and solicitors' clerks, Crown Law officers, court officials, stipendiary magistrates, clerks of the magistrates' courts and litigants who have no legal advisers. (at p665)

13. The Council's gross income is derived from (a) legal advertisements inserted in the Council's weekly publication "The Queensland Law Reporter" which is a publication approved by the Chief Justice of Queensland for the insertion of legal notices pursuant to Rules of Court; (b) sales of past editions of Queensland Reports and Queensland Weekly Notes and from sales of the Council's annual publication "The Queensland Law Almanac"; (c) subscriptions from annual subscribers to the Queensland Law Reporter which includes the Queensland Reports and the Queensland Weekly Notes. (at p665)

14. The Council was assessed under the Act as a non-profit company as defined in s.3 of the Income Tax and Social Services Contribution Act (No.2) 1960 (Cth) in respect of its income for the year ended 31st December 1961. The Council's objection to this assessment, duly made, was disallowed. The Council thereupon duly requested the Commissioner to treat its objection as an appeal to be forwarded to this Court. It is in this appeal that the case has been stated for the opinion of a Full Court. (at p665)

15. The Council is an incorporated body limited in its activities by its memorandum of association. There is no difficulty, in my opinion, in concluding that it is an "institution" within the meaning of s. 23 (e) of the Act. See Manchester Corporation v. McAdam (1896) AC 500 . It is not in my opinion a "scientific or public educational institution". I agree with the conclusion reached in this respect by the Court in Incorporated Council of Law Reporting (Q.) v. Federal Commissioner of Taxation (1924) 34 CLR 580 . The Court there said of the Council, "But this company clearly is not a public body and, in our opinion, it is not a public educational institution". However much a student may and should profit by reading the law reports, the purpose of their production cannot, in my opinion, be held to be educational. Further, in my opinion, their function for the judiciary is informative rather than educational. (at p666)

16. But is the Council nonetheless, a "charitable institution" within the meaning of s. 23(e)? If its purposes are charitable, it will be such an institution for the nature of the institution inheres in the purposes it is created to and does pursue. There is no need in this connexion to consider what is the main purpose of the Council as, in my opinion, it has in substance but one purpose, namely the production of law reports, both in the form of weekly or periodical notes and of annual volumes. Clause 3(d) though expressed as an object is really related to the disposal of the income of the Council: but it qualifies the purpose of producing law reports in that it negatives private gain as a part of that purpose. The application of the net proceeds of the pursuit of its purpose in producing law reports does not in itself in my opinion relevantly form a purpose of the Council, though that application bears upon the ultimate conclusion whether or not the Council is a charitable institution. (at p666)

17. The Act attempts no definition of charity or of what for its purposes will be charitable. But having regard to the decision of the Privy Council in Chesterman v. Federal Commissioner of Taxation (1925) 37 CLR 317 it must be taken that whether or not the institution is relevantly charitable will be determined according to the principles upon which the Court of Chancery would act in connexion with an alleged charity. That means that the indications contained in the preamble to the Statute of Elizabeth 1601 and the classifications in Lord Macnaghten's speech in Commissioner for Special Purposes of Income Tax v. Pemsel (Pemsel's Case) (1891) AC 531, at p 583 are to be observed in deciding whether or not the institution is charitable for the purposes of the Act. (at p666)

18. The reported cases may in some instances afford a guide by analogy to the decision whether a particular trust, or a particular purpose is charitable. In addition, the many dicta found in the reasons for judgment in such cases, though by no means of one accord, provide valuable assistance in resolving such a question. But in the long run, it seems to me, it is a matter of judgment whether the trust or purpose fairly falls within the equity, or as it is sometimes said, "within the spirit and intendment" of the preamble to the Charitable Uses Act 1601 (Imp.). This is clearly so in Australia and it would appear still to be so in England where that preamble appears to have been repealed by the operation of the Charities Act 1960 (U.K.). See generally, Keeton, Law of Trusts, 9th ed. (1971), at pp. 163, 164; Tudor on Charities, 6th ed. (1967), pp. 1 et seq. (at p667)

19. The instances given in that preamble are not exhaustive. Charity is not limited to activities eiusdem generis with those instances, if indeed a genus is really to be found in them. But the preamble does give an indication and, it would seem, a definitive indication, of what will be charitable, whether in point of trust or of purpose. Lord Macnaghten in Pemsel's Case (1) extracted from this indication four heads or categories of charity of which the first three heads or categories are capable of more certain application than the last category, which is the one with which the Court must be concerned in this case. (at p667)

20. The question here is whether the production not for private gain of law reports, recording the decisions of a superior court in a judicial system in which the decision of an earlier case may itself in terms or by analogy, or in association with other such decisions determine the result of a later case, is a purpose beneficial to the community within the scope of the fourth head of charity as expressed in Pemsel's Case (1891) AC 531 . (at p667)

21. Not every purpose beneficial to the community is a charitable purpose but only those which are within the equity of the preamble to the Statute of Elizabeth. The purpose must not merely be beneficial: it must also be charitable. See In re Macduff; Macduff v. Macduff (1896) 2 Ch 451 ; Attorney-General v. National Provincial and Union Bank of England (1924) AC 262 ; Williams' Trustees v. Inland Revenue Commissioners (1947) AC 447 and In re Strakosch, deceased; Temperley v. Attorney-General (1948) Ch 37 . In this connexion however we are reminded by Lord Wrenbury in Chesterman v. Federal Commissioner of Taxation (1926) AC 128, at p 132; (1925) 37 CLR 317, at p320 that "the word 'charitable' in the Elizabethan sense is larger and more comprehensive than the other words in the context". (at p667)

22. I do not find it necessary in this case to pursue the question whether Lord Macnaghten's formulation of this fourth head of charity extended or merely re-expressed Sir Samuel Romilly's phrase "objects of general public utility" which he used in argument in Morice v. Bishop of Durham (1805) 10 VesJun522, at p532 (32 ER 947, at p 951) ; see the speech of Lord Reid in Inland Revenue Commissioners v. Baddeley (1955) AC 572, at p608 . Here, as I shall shortly point out, the benefit of the production of law reports is not limited to any section of the community but accrues to the community as a whole. Nor need the Court, in my opinion, in this case, for reasons I shall later express, seek for analogy to the production of law reports in the circumstances of some authoritatively decided case. (at p668)

23. It is important, and indeed crucial for the resolution of the question posed in the case to recall the function which the reports of decided cases, particularly by superior courts, performs in our system of law. Foster J. in his reasons for judgment in Incorporated Council of Law Reporting for England and Wales v. Attorney-General (1971) Ch 626, at pp 638-641 quotes extensively, and for present purposes most helpfully, from the reports made in 1849 and in 1853 by the Society for Promoting the Amendment of the Law. In that case, his Lordship had before him an account by Professor Goodhart of the history of what Professor Goodhart called "judge-made law" to which, though not formally before this Court, reference may properly be made as an exact and useful summary of the development of the law reports and of the place they occupy in the administration of the law. The facts to which the professor refers are historical and, in my opinion, of that notoriety which brings them within judicial notice. The extracts which his Lordship has included in his reasons for judgment make unnecessary any extensive reference by me to the function of the law reports in our system of law. (at p668)

24. In Queensland the only available reports of the decisions of the Supreme Court of Queensland are those produced by the Council. Without them it would not be possible to ascertain what in any particular field of law had been decided without a time-consuming search of court records, assuming that the reasons given in decided cases are kept by the offices of the Court not as part of the formal record of the case but as archival material. For myself I doubt whether such reasons, particularly when orally expressed, have always been so kept. But such research is not practicable in the exigencies of the daily administration of the law. Thus, in my opinion, it can confidently be said that in modern times without the availability of law reports in book form the law could not be adequately administered. Justice according to law would be in danger of being supplanted by justice according to whim which is in reality a contradiction in terms. Thus the production of law reports is, in my opinion, clearly beneficial to the whole community because of the universal importance of maintaining the socially sustaining fabric of the law,. (at p668)

25. Yet it must be considered whether that benefit is charitable in the Elizabethan sense. Out of certain of the instances given in the preamble to the Act of 1601 a broad concept emerges of the kind of object of public utility which will satisfy the quality of charity. Any notion that that concept is of an eleemosynary nature is seen to be untenable by some of those very instances themselves, e.g. the repair of bridges, havens, causeways, seabanks and highways and the setting out of soldiers. Further, these instances seem to regard the provision of some of the indispensables of a settled community as charitable. The ability to move from place to place and to do so without let of rivers and streams, protection of the land from the ravage of the sea, security against enemies, are fundamentals of the society seen to be within the concept of charitable public benefit as much as assistance to the needy and as education of the generations. Consistently with the spirit and width of this concept of charity the promotion of agriculture is seen to be charitable (Inland Revenue Commissioners v. Yorkshire Agricultural Society (1928) 1 KB 611 ): and even the promotion of horticulture (Re Pleasants (1923) 39 TLR 675 ). Agriculture partakes of that fundamental social quality which can give a charitable nature to a trust or purpose relating thereto which is beneficial to the community. So it would seem does horticulture. On occasions, a benefit of that kind to a section of the public less than the whole community by the trust or purpose may be enough: but, as I mentioned before, I am not here concerned with such a case. The sustenance of the law is a benefit of a material kind which ensures for the benefit of the whole community. Is not its administration, with regularity, and with as much consistency as a system based on human judgment can attain, as socially fundamental as the instances which I have taken from the preamble? Surely it is. Though perhaps not now universally accepted because no doubt not properly understood, it is true that the society cannot exist as such if it is not based upon and protected by justice under law: and nurtured by obedience to law. As I have said, justice under law requires, according to the system of law which we have entrenched in Australia, and I think enhanced, the ready availability of reports of the decisions of the superior courts. (at p669)

26. Thus, to my mind, without seeking any analogy in cases which have gone before, the production of law reports of a superior court is within the equity and the spirit and intendment of the preamble and thus capable of forming a charitable purpose. (at p669)

27. All that remains is to add the lack of private gain by the members of the Council. That the Council itself should profit by the production of the law reports cannot prevent the Council being a charitable institution. Indeed, the very fact that the Act exempts the income of a charitable institution concedes that such an institution may derive profits from its activities. (at p670)

28. Here there are two significant matters. First, the memorandum of association forbids any distribution of the profits of the Council to or amongst its members. No doubt the presence of such a provision was material to the incorporation of the Council as a company limited by guarantee. Second, the actual distributions of the Council's profits have been confined to grants to the libraries of the Supreme Court of Queensland. Those libraries are themselves important adjuncts to the administration of the law. They facilitate the very purpose the production of the law reports is designed to achieve. They do so none the less because their holdings are not available to every member of the public but only to those with or seeking training in the law. Indeed they are available to all those groups of the community who in general can profit by their use. The application of the profits of the Council to the support of the Supreme Court libraries is itself, in my opinion, an application to charity. (at p670)

29. In sum, we have here an incorporated body, an institution, not carried on for private gain which produces reports of the decisions of the Supreme Court of Queensland in book or magazine form. The production of such law reports is its sole purpose. In my opinion, that purpose is within the equity, or the spirit and intendment of the preamble to the Statute of Elizabeth and, being of general public benefit, is charitable. This conclusion is reinforced by but does not to my mind depend upon the circumstances that the reports which the Council produce are the only reports available of the decisions of the Supreme Court of Queensland and that the only distribution of profits made by the Council is by way of grant to the funds of the libraries of the Supreme Court of Queensland. (at p670)

30. In my opinion, the question asked in the case stated should be answered in the affirmative. (at p670)

McTiernan J. I agree in the judgment of the Chief Justice. The question in the case stated, set out in his Honour's judgment, should, in my opinion, be answered: Yes. (at p670)

Windeyer J. I need not repeat the facts stated in the judgment of the Chief Justice. They lead, inevitably I think, to the conclusion that his Honour reaches for the reasons that he gives. The question is whether the Incorporated Council of Law Reporting of the State of Queensland, which I shall call the Council, is a "charitable institution" for the purposes of the Income Tax Assessment Act making its income exempt from income tax. Charity is for law a concept of purpose. A charitable institution is an instrument designed for carrying a charitable purpose into effect: see Stratton v. Simpson (1970) 138 CLR 165 . What in law is a charitable purpose is to be gathered from the miscellany of objects set out in the preamble to the statute, 43 Eliz, I., c.4. The spirit and intendment of that enactment, as well as its words, have for centuries dictated the meaning of charity in law. (at p671)

2. It was held in 1924 that the Council was not a "public educational institution" for the purposes of the income tax law: Incorporated Council of Law Reporting (Q.) v. Federal Commissioner of Taxation (1924) 34 CLR 580 . No authorities were cited in that case: but the decision is readily understandable. A public educational institution is generally understood to be an establishment, in which instruction is given in some branch of knowledge or in some art or science, the pupils being drawn from the public generally or from some substantial and significant section of the public. That the Council is not a public educational institution does not mean that it is not a charitable institution. The collocation of words in s.23 of the Act-" a religious, scientific, charitable or public educational institution"-may suggest four kinds of institutions, each distinct from the others. But that cannot be so if the word charitable is here given its legal sense, as the decision in Chesterman's Case (1925) 37 CLR 317 requires; for many scientific institutions are charitable; and I suppose that most, if not all, public educational institutions are charitable. There is thus an overlapping in the statutory language: but we are not on that account to read the adjective "charitable" there as departing from the legal sense of charity. (at p671)

3. Although the Council is not "a public educational institution", the educational aspects of its objects tell in favour of its being a charitable institution. The advancement of education was the second of Lord Macnaghten's four heads of charity. Its generality should, I consider, be understood as Lord Wilberforce, then Wilberforce J., understood it in In re Hopkins' Will Trust (1965) Ch 669 . As an element of legal charity education is I consider synonymous with learning in the sense that that word has in the preamble to the statute of Elizabeth. The promotion of the learning of the law and adding to the number of men learned in the law and augmenting their learning are in themselves charitable objects and beneficial to the community. That was taken by the Court of Appeal to be indisputable in Smith v. Kerr (1902) 1 Ch 774 . The existence of a well-stocked library of law books available for the use of lawyers and students of law is a means of advancing legal learning: cf. Attorney-General v. Marchant (1866) LR 3 Eq 424, at p 431 . The main object which the Council exists to carry into effect is the publication of law reports. Any profits it makes by so doing must be devoted to aiding the law libraries of the Supreme Court of Queensland. They cannot be diverted into the pockets of individuals. In any country governed by the common law, the publication of the reports of decisions of the superior courts is essential for the continuance of the rule of law. The continuity of the common law and its characteristic capacity for development and change depend upon those who are concerned with its administration having a means of knowing the current course of precedents. Without that the law would become stagnant and cease to be a living stream. Ever since the time of the Year Books law reports have been the essential nourishment of the life of the common law. Their publication has always been for the public benefit; but in times past it was not a charitable undertaking because it was done for private profit. The purpose that the Council serves is a purpose of public utility, the advancement of legal learning by publishing reports. Profits it thereby gains are devoted to the further advancement of legal learning. This combination of objects and purposes suffices to make it a charitable institution. (at p672)

Orders

Question asked in the case stated namely, "(a) Is the income of the Council exempt as income of a 'scientific charitable or public educational institution' within the meaning of s.23 (e) of the Income Tax and Social Services Contribution Assessment Act 1936-1962?" answered 'Yes'.
Respondent to pay the appellant's costs of the case stated.