The Trusts of The Arthur McDougall Fund. Thompson v Fitzgerald

The Trusts of The Arthur McDougall Fund Thompson and Others v. Fitzgerald and Another

Judgment by: Upjohn J Re The Trusts of The Arthur McDougall Fund Thompson and Others v. Fitzgerald and Another

Court: Chancery Division

Hearing date: 30, 31 October, 1 November 1956 Judgment date: 1 November 1956

This summons raises a question of the validity of certain trusts declared by a trust deed dated 6 October 1948, the sole question being whether the trusts thereby declared are valid charitable trusts or not.

In view of the argument which has taken place before me, the history of this matter assumes an unusual importance. The trusts were declared as a result of the bounty of the late Sir Robert McDougall, who died in 1938. Sir Robert had been a member since 1906 of a well-known society, called the Proportional Representation Society. He remained a member all his life. He was a member of the executive committee from 1926 onwards and a vice-president from 1934. He made a contribution each year to the society, sometimes of substantial amounts. On three occasions they exceeded £1,000. By a third codicil to his will, which was dated 5 May 1938, Sir Robert bequeathed to the Proportional Representation Society a one-seventh share of a sum of £50,000, subject to the life interest therein of his widow

"for the creation of a separate fund in connection with the society to be held at the disposal of the governing body thereof for a specific purpose at the choice and in the discretion of such governing body such fund to bear the name of 'the Arthur McDougall Fund'."

Pausing there, Arthur McDougall was the son of Sir Robert McDougall who had unhappily been killed in the 1914-18 war. He had no connection with the Proportional Representation Society. Sir Robert died on 15 December 1938, and his widow died on 4 April 1945. Shortly after that, the Public Trustee, who was the executor of his will and codicils, transferred into the name of two gentlemen who were parties to the trust deed, Sir Leslie Boyce and Mr Aneurin Williams, the money to which they were entitled under the terms of the third codicil which they held in trust for the society.

Before I come to the terms of the trust deed, it may be convenient to say a few words about the society. The objects of the society are to secure the adoption of the principle of proportional representation by the method of the single transferable vote in national, local and other elections. That may be a very laudable object, but it is clear that it is not a charitable object for the simple reason that, as the society is seeking to alter the method of voting at present in force, legislation would be required, and, therefore, their principal object is to alter the law of this country. On the authorities it is clear that that cannot be a charitable object.

I will now turn to the trust deed. The parties of the first part were called the officers. The parties of the second part were the trustees to whom the Public Trustee had transferred the legacy. Then there follow as parties of the third part a number of gentlemen all of whom were constituted trustees for the purposes of the deed. After reciting the will and codicil and the deaths of the testator and his widow, the recitals continue:

"(v) At the annual general meeting of the society held on 7 June, 1945, it was unanimously resolved that the governing body of the society was the executive committee thereof. (vi) The Public Trustee transferred into the names of the present trustees the stocks and shares specified in the schedule hereto (hereinafter called 'the fund' which expression shall be deemed to include the investments for the time being representing the same and of all or any augmentations thereof). (vii) The said executive committee having considered the terms of the recited codicil and the facts relating to the testator's association with the society believe that the wishes of the testator would be best carried out by the creation of a permanent endowment or fund capable of augmentation by donation or description and otherwise and being the name of 'the «Arthur» «McDougall» Fund' and consequently that the fund and the income thereof should be devoted solely to charitable purposes. (viii) In pursuance of the facts lastly hereinbefore recited the said executive committee resolved at a meeting held on 4 December 1947, that the trusts herein declared should be agreed and confirmed that the officers were thereby authorised and directed to execute this deed for and on behalf of the said executive committee and that the trustees should be appointed trustees for the purposes of this deed and the trustees have agreed to act in the trusts in witness whereof they have executed these presents. (ix) In further pursuance of the premises the trustees have agreed with the said executive committee to hold the fund upon the trusts hereinafter declared concerning the same and it is intended that the fund shall forthwith be transferred into the names of the trustees."

Now follows the operative part:

"1. The fund shall be called 'the Arthur McDougall Fund'. 2. The trustees shall hold the fund together with all income arising therefrom upon trust to pay and apply such income from time to time for such charitable purposes including grants to persons or institutions to be employed for such charitable purposes as in the absolute discretion and opinion of the trustees (i) shall best advance and encourage education or other charitable purpose beneficial to the community in connection with the art or science of government or other branches of political or economic science, (ii) shall most tend to encourage the study of methods of government or civil commercial or social organisations. 3. Not so as to limit the generality of the provisions of cl 2 hereof the trustees may apply the whole or any part of the income of the fund for any or all the purposes hereinafter declared so far as the same may lawfully be applied for charitable purposes namely:- (a) the advancement of learning in matters affecting forms of government and representative assemblies whether or not such forms of government and representative assemblies shall be actual or theoretical and whether or not the same shall exist or have existed (b) the encouragement of interest in and knowledge of the science of government and civics."

Then follow three sub-clauses (c), (d) and (e) enabling the trustees to make provision for the payment of lecturers and for the provision of scholarships and prizes, for the provision and maintenance of a lecture room or lecture rooms and a reading room or reading rooms and a library or libraries, and for the preparation and publication and grants towards the preparation and publication of books, pamphlets and periodicals for the promotion of the foregoing objects. Then follow a large number of administrative clauses to which I do not think that I need refer except to point out that by those provisions the trustees were entitled to delegate certain powers of management to a body of persons called the administrative trustees.

Now follow two very important clauses. Clause 10 provides:

"No trustee shall be or remain a trustee and no administrative trustee shall be or remain an administrative trustee unless such trustee shall be and remain a member of the society and cessation of membership of the society shall be a ground of unfitness to act in the trusts for the purposes of s 36 of the Trustee Act, 1925 but no purchaser shall be concerned to see that any person removed from the trusts hereof in accordance with this clause shall have ceased to be a member of the society."

Then follow further conditions regarding the protection of purchasers. Clause 11 provides:

"(i) The majority of the chairman deputy chairman treasurer and secretary for the time being of the said executive committee shall have power to nominate a new or additional trustee or new additional trustees and effect shall be given to such nomination by a deed executed by the secretary for the time being of the said executive committee and for the purposes aforesaid such secretary shall have power to appoint a new or additional trustee or new or additional trustees hereof and to vest the property in the new and continuing trustees and the provisions of the Trustee Act, 1925, shall apply accordingly."

It is provided that additional trustees may be appointed notwithstanding that there is no vacancy in the office of trustee, and there is provision that a trustee or administrative trustee may resign at any time. Clause 11 further provides:

"(v) Any trustee may be removed by a resolution passed at a meeting of the said executive committee by a majority of the said committee present and voting at the meeting. (vi) Nothing herein shall affect the power of the trustees to appoint or remove the administrative trustees if any as provided by cl. 7 hereof."

Apparently some years after that deed was executed doubts were raised as to its validity, it being clear that if the trusts were not valid charitable trusts the deed was altogether void, and the executive committee were advised to execute a second trust deed. I am not directly concerned with that, but according to the evidence that was a deed in a very different form because it provided that, unless otherwise directed, the trustees were "to provide out of the income and capital" of the fund "the salary of the secretary of the society", and the income or capital was to be applied in accordance with the secretary's direction in writing.

The main attack which is made on the validity of this deed is that it is said, when you look at the whole of the deed and take into account the history and the surrounding circumstances, it is clear that the real dominant purpose of this deed was not to create a charitable trust at all but to further the political objects of the society. It was not put so much as a matter of the minute construction of the deed but as a view which ought to be taken bearing in mind all its provisions.

However, counsel on behalf of the first defendant, who represents the society, quite properly pointed out a good deal of vagueness and uncertainty in the provisions of the deed. He used that argument coupled with those important clauses, cl 10 and cl 11, to show that the whole object of the deed was really political; for he recognised that after the passing of the Charitable Trusts (Validation) Act, 1954, it would not avail him merely to say that some of the trusts went beyond the conception of a valid charitable trust.

The first uncertainty to which he drew my attention was in cl 2 (ii). He said that notwithstanding that that sub-clause was plainly governed as a matter of grammar by the earlier words "charitable purposes", the gift encouraging "the study of methods of government", and so on, was really not a charitable purpose at all: for a gift merely to promote the study of methods of government of the state, if it gave no advantage to the public, would not be a charitable purpose. He referred me to the opening words of cl 3, and certainly it is difficult to read those words as entirely grammatical. Again, he commented on "the advancement of learning", submitting that the mere advancement of learning by itself was not necessarily charitable. He drew attention to the very vague form of sub-cl. (a) and he said that the "advancement of learning" in matters affecting forms of government which had existed in the past also covered entirely theoretical forms of government whether or not they had ever existed. He also commented on the vagueness of sub-cl. (b), pointing out that it was merely to encourage "interest in and knowledge of the science of government and civics". "Civics", he said, so far as the Oxford Dictionary was concerned, only appeared in publications in the United States of America and Canada. Those vague and uncertain terms, coupled with the complete power of the society, through its executive committee, over the personnel of the trustees, showed that the powers of the executive of the society were very great. Whether the cessation by a trustee of membership of the society would be a valid ground of unfitness for the purposes of s 36 of the Trustee Act, 1925, I think that I need not consider. Certainly it is quite plain in cl 10 that the intention was that anyone who ceased to be a member of the society from lack of interest or something else could instantly be removed. What is even stronger, perhaps, is that under cl 11 (v) any trustee who is proving a deviationist from the majority of the executive committee could be removed by them, and they could appoint under cl 11 (i) persons i his place or additional to him. Therefore, there is no doubt that the society had complete control of the personnel of the trustees.

Counsel further submitted to me that the mere fact that the settlor or trustee under the trust deed used expressions such as "charitable purposes" or "educational purposes" is by no means conclusive that the trusts are in fact charitable, and he referred me to three cases to illustrate that point. The first was Bonar Law Memorial Trust v Inland Revenue Comrs ((1933), 17 Tax Cas 508). In that case the fund had been formed by Mr Broughton and with it Ashridge Park was purchased (and called the Bonar Law Memorial College) on certain trusts that were created. Finaly J came to the conclusion that, although one of the principal objects of the trust was the provision and maintenance of an education centre, on the true construction of the whole document its primary purpose was to promote the views of the Conservative Party. Dealing with the clause providing for the setting up of this educational centre, he said (ibid, at p 517):

"The fact that the education was entrusted to the Conservative Party would not, I think, affect the validity of the trust if in truth it was a trust for education; but, on the other hand, if the true view is that the trust was a trust for the promotion of Conservative principles-by that I mean, I need hardly say, the principles of the political party commonly called the Conservative Party-and that the education, the lectures, and so forth, were subsidiary to that which was the main and dominating purpose, then the fact that the lectures, and so forth, would be educative would not be sufficient to make the trust a trust for charitable purposes only."

He came to the conclusion, having considered the terms of the trust, that, taking it as a whole, it was a trust to promote political principles and, therefore, was bad. I need not consider that further, because Finlay J was considering an entirely different deed. The point is also well illustrated by a more recent case, Re Hopkinson, Lloyds Bank Ltd v Baker ([1949] 1 All ER 346). That was on the other side of the line in the sense that it was dealing with the Labour Party. There the testator gave his residuary estate to four prominent members of the Labour Party

"as trustees of the educational fund hereinafter mentioned upon trust that they shall stand possessed of the same as an educational fund and shall apply the same both capital and income at their absolute discretion for the advancement of adult education with particular reference to the following purpose (but in no way limiting their general discretion in applying the fund for adult education), that is to say, the education of men and women of all classes (on the lines of the Labour Party's memorandum headed 'A Note on Education in the Labour Party', a copy whereof is annexed to this my will and signed by me) to a higher conception of social, political and economic ideas and values and of the personal obligations of duty and service which are necessary for the realisation of an improved and enlightened social civilisation."

It is to be observed that the Labour Party memorandum was made part of the will. Vaisey J having set out the relevant terms of the will, said (ibid, at p 348):

"In my judgment, there are two ways of reading the words which I have quoted. They may be read, first, as equivalent to a general trust for the advancement of adult education which, standing alone, would admittedly be charitable, the super-added purpose being treated merely as a rough guide to be followed or as a hint to be taken as to the kind of adult education which the testator had in mind, the strictly educational main purpose always being adhered to, or, secondly, they may be read as indicating that the first part is to be taken as a general direction and the second part beginning with the words 'with particular reference to' as the particular direction dominating the whole of the trust. The second of these alternative views seems to me to be the right one."

So that although the testator's will began by declaring a trust of an educational fund, the learned judge came to the conclusion on the construction of the whole will that in fact the dominating intention was to promote the views of the Labour Party and as such it was bad. There again the precise words are entirely different from the words I have to consider, so I need not consider that case further.

Re Cox, Baker v National Trust Co Ltd ([1955] 2 All ER 550), a decision of the Judicial Committee of the Privy Council, is another example of the point that the use of the word "charitable" is not conclusive. I think it will be sufficient if I say that in that case their Lordships came to the conclusion that, on its true construction, when the testator gave the income of certain property for charitable purposes for the benefit of the employees of a certain company, he used the expression "charitable purposes" not as meaning merely the relief of poverty but he included all four heads in Lord MacNaghten's celebrated definition (See Income Tax Special Purposes Comrs v Pemsel, [1981] AC 531 at p 583). As the gift was confined to the employees of a company, it followed that there could in fact be no valid charitable bequest because it lacked the necessary public element.

In the end it comes down to a question as to the proper construction in each case. I must approach the deed trying to give a fair construction to its operative parts. The recital makes it quite plain that a charitable trust was intended to be set up, but that cannot control the operative part. It seems to me clear that so far as cl 2 (i) is concerned, taken by itself, that is plainly a charitable trust, and the contrary was not really suggested. In my judgment, so is cl 2 (ii), for grammatically it reads:

"The trustees shall hold the fund together with all income arising therefrom upon trust to pay and apply such income from time to time for such charitable purposes ... as in the absolute discretion and opinion of the trustees ... (ii) shall most tend to encourage the study of methods of government or civil commercial or social organisations."

That seems to me, standing by itself, to be a charitable trust. It is not a trust to promote the study among closed orders in some monastery; it is a charitable trust to encourage the study of methods of government for the general benefit of the public. With regard to cl 3, there is a grammatical difficulty on which counsel for the first defendant relied, but I do not think that there can be any real doubt as to what is meant and I think that what is meant is this: not so as to limit the generality of the provisions of cl 2, the trustees may apply the fund for the purposes set out in sub-cl (a) and sub-cl (b) so far as those purposes are charitable. There again, looking at cl 3, it seems to me that sub-cl (a) and sub-cl (b) set out trusts which, having regard to the opening words of the clause, are plainly charitable. The fact that theoretical forms of government may be studied does not, I think, detract from that in the least. It seems to me that, as a matter of construction, the trust deed was trying to provide for public instruction in the matters set out and not to create some merely private study and knowledge. I think that is clear from the terms of sub-cl (c), sub-cl (d) and sub-cl (e). Therefore, on the true construction of those two clauses, standing alone, I should come to the conclusion that this constituted a valid charitable trust.

But counsel for the first defendant rightly urged on me that I must not look at those clauses alone. I must look at the whole of the deed and all the surrounding circumstances. I have summarised cl 10 and cl 11 and I need not repeat their substance. Counsel says that the existence of those clauses, coupled with the testator's well-known interest in the society, entitles me to give a different construction to cl 2 and cl 3 from that which I have already stated. It must be noticed that, unlike Bonar Law Memorial Trust v Inland Revenue Comrs and unlike Re Hopkinson there is no context in cl 2 and cl 3 dealing with the substance of the trusts which shows that in fact the trusts were intended to further political objects and promote the purposes of the society. It seems to me an entirely different case from those which I have mentioned. I cannot see anything in cl 10 and cl 11 which controls the trusts in cl 2 and cl 3. Where one finds a charitable trust declared, the fact that the trustees must be persons of a certain persuasion cannot really affect the matter. They are always subject to the control of the Attorney General. The principle is quite clearly stated in Dunne v Byrne ([1912] AC 407 at p 410):

"It is difficult to see on what principle a trust expressed in plain language, whether the words used be sufficient or insufficient to satisfy the requirements of the law, can be modified or limited in its scope by reference to the position or character of the trustee."

It seems to me these trusts in cl 2 and cl 3 are reasonably described as educational trusts. I think that has been made sufficiently clear by making it plain that they are in express terms to be for "charitable purposes". There are a very large number of charitable purposes which can be carried out in compliance with the provisions of cl 2 and cl 3, and I cannot see that the fact that the trustees have to be persons who are members of the society can alter that. I venture to think that the contrary argument really comes to this: that the trustees might commit a breach of trust and might, therefore, apply the moneys wrongly in furthering the objects of the society. I should add this. No one in fact suggests that they have committed any breach of trust. No one suggests that this is a sham deed to hide the real purpose, which is to further the objects of the society. It is a deed which is to be read on its true and fair construction, and I come to the conclusion that valid charitable trusts are thereby declared and I must declare accordingly.