The Commissioner of Income Tax v Blue Cross of Jamaica
| Jurisdiction | Jamaica |
| Judge | Campbell, J.A.,Downer, J.A.,Wright, J.A. |
| Judgment Date | 11 December 1989 |
| Neutral Citation | JM 1989 CA 161 |
| Docket Number | Civil Appeal No. 85 of 1987 |
| Court | Court of Appeal (Jamaica) |
| Date | 11 December 1989 |
Court of Appeal
Campbell, J.A.; Downer, J.A.; Wright, J.A.
Civil Appeal No. 85 of 1987
H. Hamilton and W. Alder for the appellant.
A. Hudson-Phillips, Q. C. and Tracey Barnes for the respondent.
Revenue Law - Income tax — Assessment — appellant assessed the respondent to income tax on chargeable incomes of $2,083,736.00 and $3,000,000.00 for the years of assessment 1982 and 1983 respectively — respondent appealed the assessment to the Revenue Court — Trial judge allowed the appeal — Whether the trial judge erred in law and on the facts and/or misdirected himself in law in holding that the respondent was a corporation or association organised and operated exclusively for charitable, scientific or educational purposes within the meaning of s.12(h) of the Income Tax Act — Whether the trial judge erred in law in failing to give any or the necessary consideration and effect to the application of the proviso to s.12(h) of the Income Tax Act — Whether the trial judge erred and/or misdirected himself in law in properly ascertaining and applying the law relating to charities in Jamaica — Finding of the Court that the respondent was organised and operated predominately for the benefits of its policy-holders and was not organised and operated for charitable purposes — respondent was not eligible for exemption under s.12(h) of the Income Tax Act — Appeal was allowed — Order to be set aside.
The appellant assessed the respondent to income tax on charitable incomes of $2,083,736.00 and $3,000,000.00 for the years of assessment 1982 and 1983 respectively.
The respondent appealed the assessment to the Revenue Court. It expressly relied in support of its appeal on the meaning of charitable purposes in English law. Thus the principal ground of appeal was stated thus:
“5(1) That the appellant is a corporation limited by guarantee, organised and operated exclusively for charitable or scientific or educational purposes and no part of its net income enures to the benefit of any private stock-holder or individual. More particularly, the appellant is organised and operated exclusively for charitable purposes within the meaning of that term as defined and established in the case of Special Commissioners Income Tax v. Pemsel, [1891] A.C 531, 3 T.C. 53, and in particular, within Lord Macnaghten's fourth class therein. Accordingly, the appellant's income ought properly to be exempted from taxation pursuant to section 12(h) of the Income Tax Act.”
In that case, hereafter referred to as Pemsel's case, Lord Macnaghten classified charity in these words:
“Charity in its legal sense comprises four principal divisions: trusts for relief of poverty, trust for advancement of education, trusts for the advancement of religion, and trusts for other purposes beneficial to the community not falling under any of the preceding heads”.
Down to the stage of reply, Blue Cross of Jamaica hereafter referred to as Blue Cross relied on Pemsel's case in support of its claim that it was a charity. Thus at page 22 of the record Mrs. Hudson-Phillips is quoted as saying: “‘Charitable’ — several judicial interpretations. We say it (Blue Cross) falls within the meaning stated by Lord Macnaghten in Pemsel's case.”
Mr. Alder for the commissioner of income tax also relies on Pemsel's case to refute the claim of Blue Cross. At Page 40 he is recorded as submitting thus:
“The question which the Court has to decide is whether the appellant is organised and operated exclusively for charitable purposes within the legal meaning of the term ‘charitable purposes’. In determining what is a charitable purpose we look to the preamble of the Statute of Uses Act, (1601) U.K. Authorities state that to qualify as a charity ‘one has to bring oneself within the meaning of the words in the preamble.
Refers to Special Commissioner v. Pemsel 3 T.C. 53 submits: appellant to qualify as charity, can only qualify under the fourth category stated in Pemsel's case by Lord Mcnaghten.”
At some stage in the final addresses the learned judge appeared to have entertained doubts on the applicability to the determination of the issue before him, of the preamble to the Act of 1601(43 Eliz. 1C.4) together with the line of English cases originating with Pemsel's case. Mrs. Hudson-Phillips, as a result of the doubt expressed by the learned judge reached the point. She became satisfied that the learned judge's doubt was well-founded, in consequence she reneged from her reliance on the English law of charity on which her appeal was grounded. She accordingly in her closing address at page 50 said: “We say it ( Statute of Elizabeth) does not apply to Jamaica prior to 1728. Therefore, English authorities require English Courts to consider legal meaning of charity under Statute of Elizabeth. We are subject to no such requirement. Our research supports this.”
The learned judge in his judgment concluded that the English law on ‘charitable purposes’ was not applicable. This provided a ground of appeal to which I will later return. Before the learned judge, Mrs. Hudson-Phillips submitted, and this was not disputed by Mrs. Alder, that in order to determined whether Blue Cross was organised exclusively for charitable, scientific or educational purposes it was necessary to examine its objects as stated in its constitution namely its memorandum of association; and to determine whether it was operated exclusively for those purposes it was also necessary to have regard to the evidence, oral and documentary, on what it did, pursuant to the stated objects. There was however, in that Court, as in this Court, no agreement on the paragraph in clause 3 of the memorandum of association which constituted objects as distinct from mere ancillary powers.
Mrs. Hudson-Phillips in the Revenue Court as she has done before us, submitted that the object of Blue Cross are to be found in clauses 3(a)-(f). These are the main or predominant purposes for which it is established. The other objects are really in the nature of enabling powers which need not necessarily manifest purposes. Clauses 3(a)-(f) of the memorandum of association are set out hereunder:
“3. The objects for which The Company is established are as follows:
(a) To provide voluntary, non-profit mechanism for obtaining an adequate level of necessary and appropriate health service in an effective and economical manner; and to promote, establish, maintain and operate a medical care plan for the payment of the costs of hospital, surgical and medical care and attention received by policy-holders of the said plan or by such other person or persons or groups as The Company may think fit.
(b) To provide and supply policy-holders of the said plan or to such other person or persons or group of persons as The Company may think it fit, necessary and proper medical and surgical attendance, appliances, nursing and comforts and hospital and convalescent care.
(c) To provide and supply to policy-holders of such plan or such other person or persons or group of persons as The Company may think fit, any other similar or related benefits or assistance.
(d) To provide for the improvement, upkeep and assistance of hospitals and to promote and assist in developing the efficiency and standards of medical care and attention generally and in particular in the island of Jamaica.
(e) To collect, arrange, index and publish information, statistics, and data and to compile reports and print and publish any newspaper periodicals, books or leaflets that any Company think desirable or likely to be useful to policy-holders of the plan and the furthering the objects of The Company, and to establish and maintain a bureau of information for the benefit of policy-holders of the plan.
(f) To be of assistance in the promotion of such benevolent, scientific, educational relief and other activities as are considered by The Company to be for the best interests of the community in relation to the health and welfare of the people.”
The above stated objects, except for the insertion by amendment in 1980 of the first sentence in 3(a), and the substitution in the paragraph of the words ‘policy-holders’ for ‘subscriber’ to the medical care plan, are identical to clauses 3(a) to 3(f) of the original memorandum of the precursor of Blue Cross namely “The Federated Health Insurance Association Limited” which was incorporated on 27 th December, 1956. The name was changed to Blue Cross of Jamaica on February 17th, 1976.
Having isolated the main objects of Blue Cross, Mrs. Hudson-Phillips encapsulated them at page 26 of the record in these words: “The Company is established for the relief of sickness, educational and scientific purposes relating to the relief of sickness, and further for purposes beneficial to the community within the spirit and intendment of the Statute of Elizabeth namely ‘relief of the sick’.”
Mr. Alder's submissions in the Revenue Court as earlier stated, are also premised on the concept of charitable purposes derived from the preamble to the Charitable Uses Act, (1601) 43 Eliz. 1.C4 which purposes were classified in Pemsel's case. On the basis of that case, he submitted, Blue Cross could only succeed if it could bring itself within the fourth head of Lord Macnaghten's classification in the said case. Further, Mr. Alder submitted that even accepting for the purposes of argument that the objects in clauses 3(a–f) of the Memorandum of Blue Cross were alone the main objects, these were neither singly nor collectively for charitable purposes much less they exclusively so. Thus Blue Cross was not eligible for exemption under section 12(h) of the Income Tax Act. Section 12(h) of the Income Tax Act so far as is relevant reads as follows:
“(h) The income of any corporation… organised and operated exclusively for...
To continue reading
Request your trial