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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Musgrave (Surveyor of Taxes) v. Dundee Royal Lunatic Asylum [1895] ScotLR 32_579 (26 June 1895) URL: http://www.bailii.org/scot/cases/ScotCS/1895/32SLR0579.html Cite as: [1895] ScotLR 32_579, [1895] SLR 32_579 |
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Page: 579↓
[Court of Exchequer.
Case 4 of 48 Geo. III. c. 55, exempts from inhabited-house-duty “any hospital, charity school, or house provided for the reception or relief of poor persons.”
Dundee Royal Lunatic Asylum was originally founded by charitable donations, and was governed gratuitously. It possessed two small mortifications, out of the annual proceeds of which two indigent lunatics were in part maintained. The other inmates of the asylum consisted either of private patients paying board, or pauper lunatics for whom board was paid by the District Board of Lunacy, at a rate estimated to meet the cost of their maintenance and clothing. The accounts of the asylum showed that for some years the establishment had been maintained out of the board paid for patients without the aid of voluntary subscriptions. Held that the asylum being a self—supporting institution was not entitled to the exemption conferred by the clause above quoted.
At a meeting of the Income-Tax Commissioners for Dundee on 5th April 1894 the treasurer of the Dundee Royal Lunatic Asylum appealed against an assessment for inhabited-house-duty on £1300 as the full annual value of the Dundee Royal Lunatic Asylum for the year ending 21th May 1894, on the ground that the asylum was a charity and entitled to the exemption conferred by case 4 of 48 Geo. III. cap. 55, upon “any hospital, charity school, or house provided for the reception or relief of poor persons.”
The Commissioners decided that the asylum was entitled to the exemption claimed, and the Surveyor of Taxes being dissatisfied with this decision, the present case was stated for the opinion of the Court of Exchequer, the question for the Court being— “Whether the Dundee Royal Lunatic Asylum is an hospital or house provided for the reception or relief of poor persons within the meaning of the Exemption stated under 48 Geo. III. c. 55, Case 4?”
The case contained the following statements:—“2. Hitherto the assessment for house-duty has been restricted to the portion of the asylum buildings estimated to have been used by private patients, amounting to £217.
3. The asylum was originally founded in conjunction with an infirmary by charitable donations and subscriptions—a royal charter having been obtained in 1819 by which a body of contributors and donors were incorporated by the name of the Dundee Infirmary and Asylum. The corporation was to consist of two separate establishments, the estates and funds whereof were to be kept distinct from each other, the one to be called The Dundee Infirmary Establishment, and the other the Dundee Lunatic Asylum Establishment. As stated in the charter of 1819, the object of the infirmary was to provide for the relief of indigent sick and hurt persons, and the object of the lunatic asylum was to extend this relief to lunatics.
4. In 1875 the directors of the asylum establishment applied for a charter separating the asylum from the infirmary establishment, and constituting the directors of the asylum a corporation. In the petition for the charter it was set forth that the asylum buildings had become insufficient for the purposes which they were intended to serve, and the new charter was desired in order that the
Page: 580↓
directors should be enabled to carry out their intention of erecting a new asylum at some distance from the town of Dundee, and to feu or sell the ground on which the present building was erected. 5. Accordingly a new charter was granted in favour of the then directors by the name of the Dundee Royal Lunatic Asylum. They were empowered to acquire … lands, tenements, and any other heritage in feu or absolutely, or in lease … and also any other property and estate, heritable and move—able, real and personal, and to erect … and maintain all such houses and buildings as might be necessary or proper for the objects or purposes of the corporation, to sell, or feu, or lease any or any parts of any such lands and other property. They were also empowered to receive and hold and administer donations and legacies or other bequests for the purpose and benefit of the corporation. The establishment was separated from the infirmary establishment. …
6. In the autumn of 1874 the directors took in feu the farm of West Green, situated about four miles to the west of Dundee, … and tenders were taken for the building of a new asylum — the old asylum having become unsuitable for patients, from the grounds being so much surrounded and overlooked by the tenants of dwelling-houses. The building of the new asylum was finished in 1882, and the patients removed into same. After the removal of the patients the directors proceeded to sub-feu the old asylum grounds, … of the 15 acres which belonged to the asylum, about 5 acres only remain to be disposed of.
7. The feu-duties are being sold from time to time, and the proceeds applied in reducing the debt of the asylum.
8. The debt … amounted at 31st March 1890 to £54,583, 18s. 6d.; at 31st March 1893 to £38,851, 19s. 2d., having been reduced to this amount by the proceeds of the sale of feu-duties, amounting to £14,065, 5s. 4d., … a donation of £1000; and the appropriation as ‘rent’ of a sum of £2000, out of the revenue of the institutions, said sum being applied, in the first place, in payment of the interest on the debt, and in the second place, in reducing the capital amount of the debt.
9. According to the printed accounts of the asylum, the income for 1890–91 from board of patients was
£11,551
2
4
From rent of old asylum property
19
10
0
From feu-duties from old asylum property
42
16
4
And from sales
87
1
3
£11,700
9
11
The expenditure during the same period was
11,698
2
7
Leaving a balance, which is entered as ‘Profit on the Year.’ of
£11
7
4
The expenditure includes the above-mentioned sum of £2000 for ‘Rent,’ which, however, was less than the interest due to the bank on building account for the year by £94, 14s. 2d.
10. In 1891–92 the income was:—
Board of Patients
£12,165
14
6
Rent of old asylum buildings
9
7
5
And sales
108
0
4
£12,283
2
3
And the expenditure
12,385
15
4
The balance of being entered as ‘Loss on Year.’
£102
13
1
The expenditure included the sum of £2000 for ‘Rent,’ said sum being applied in payment of interest to the bank
£1848
10
1
And reduction of debt
151
9
11
£2000
0
0
11. The income for 1892–93 was: —
Board of patients
£12,201
8
11
Feu-duties from ground at old asylum
135
12
2
And sales from the farm
191
6
8
£12,528
7
9
And expenditure (excluding a sum of £1386, 9s. 6d., ‘special outlay on entry to Whitelawston Farm,’ stated in the report to have been met out of two legacies amounting to £1574, 1s.).
£12,126
9
5
Surplus
£401
18
4
The expenditure also includes as ‘Rent’ £2000applied towards interest
£1447
19
5
And reduction of debt
552
0
7
£2000
0
0
But in none of the accounts before referred to is anything debited or allowed for depreciation of buildings, furniture, &c. It is averred by the asylum that £1000 a-year should be allowed for depreciation.
12. The board of patients in the three years was as follows :—
1890-91.
Private
£2956
Pauper
8594
1891-92.
Private
2761
Pauper
9404
1892-93.
Private
3192
Pauper
9008
The pauper patients are boarded for the sum of £30, 11s. per annum, which is estimated to meet the cost of their maintenance and clothing.
The number of patients may be taken as 355, in the proportion of 289 pauper patients to 66 private patients.”
13. It is provided by sec. 59 of the Lunacy (Scotland) Act 1857 that if there is an asylum established in a lunacy district having sufficient accommodation for the reception of the pauper lunatics of the district, or which can be easily rendered adequate to the reception of such pauper lunatics or a portion of them, the district lunacy board (on whom devolves the duty of providing
Page: 581↓
accommodation for the reception and treatment of the lunatics in their district) is, before proceeding to assess for or erect any district asylum, to contract with the proprietors or parties interested in any such asylum for the use of the whole or any part of the same, or for the reception and maintenance of the pauper lunatics of the district, or any portion of them, on such terms as shall be arranged between the district board and the proprietors or parties interested, and in the case of difference such difference to be subject to the decision of the General Board of Lunacy, but the portion of the asylum which in terms of any such agreement is appropriated to the reception of the pauper lunatics is to be and remain under the care and management of the proprietors or parties interested therein, subject to the power of inspection, visitation, and power of making regulations conferred by the Act upon the General Board. The pauper lunatics of the district in which the Dundee Royal Lunatic Asylum is situated are boarded therein or in another smaller public asylum in the district under agreement in terms of the foregoing section, but the district board of lunacy and the parochial boards are not represented on the directorate of the Dundee Royal Lunatic Asylum, and have no control of the asylum or any part of it or of its expenditure. 14. The asylum has two mortifications, each for the maintenance of an indigent lunatic, and amounting together to £841, 19s. 3d. There is no separate investment to represent this sum, the amount having been applied towards the expenditure on the buildings. In respect of these, two indigent lunatics are maintained at less than their cost to the asylum, other patients, who having seen better days are yet not paupers, being esteemed deserving of the charitable operations of the asylum, are maintained at less than their cost. The number of these patients at present is sixteen.
15. The asylum was originally founded by charitable donations; it is governed gratuitously, and no private person has any eventual interest in the property; during the seventy-three years of its existence sums amounting to about £23,000 have been raised in donations and subscriptions to the asylum, and the asylum property is still subject to a debt of about £25,000.
16. It was contended on behalf of the asylum:—(1) That it is a charity, and exempt under 48 Geo. III. cap 55, Case 4, being an hospital or house provided for the reception or relief of poor persons; (2) that the proportion of pauper patients to private patients in the asylum being as 289 is to 66, the asylum is really for the reception and relief of poor persons; and (3) that the asylum is not a self-supporting institution, notwithstanding the accounts show apparent profits in some years, and is exempt in accordance with the decisions of the Judges in the cases of Blake v. Mayor, &c., of London, L.R., 19 Q.B.D., 79; and Cawse v. The Committee of the Lunatic Hospital, Nottingham, L.R. (1891), 1 Q.B., 585.
17. The surveyor of taxes, Mr Philip Musgrave, contended:—(1) That the asylum is self-supporting, and thus falls under the ruling in the case of Needham v. Bowers, 21 Q.B.D. 437; there have been profits during the last three years, according to the annual accounts (and allowing deductions conform to the Income Tax Acts, including repairs and renewals of plant and furniture, and repairs and upkeep of asylum buildings), out of payments by both classes of patients, as follows:—
Year 1891
£1591
1892
1520
1893
1703
and the profits have been expended in gradually reducing the debt on the asylum; and (2) that the asylum has no endowment; the feu-duties which remain unsold represent the old site, and, being a temporary conversion of capital, the proceeds of which will be applicable to clearing off the debt on the new buildings, not the creation of an endowment to yield an annual revenue. The mortifications are not separately invested.
After hearing parties, the Commissioners find that profits were made in terms of the Income Tax Acts, per accounts appended to this amended case, as follows:—
Year 1891
£1591
1892
1520
1893
1703
without giving effect to the deduction claimed on account of the annual charge of £2000 including interest, mentioned under heads VIII., IX., X., and XI, of this amended case, and on which the bank does not, according to usual practice, allow deduction of income-tax. But, considering the nature of the institution, and being of opinion that the site of the old asylum buildings, which is of the value of about £36,000, is (along with the new asylum property) subject to the debt of about £25,000, mentioned in head XV., to be regarded as an endowment, decided that the asylum came under the exemption in Case 4 of 48 Geo. III. cap 55, and discharged the assessment.”
Argued for Surveyor of Taxes—This was practically a self-supporting institution taking in no patients gratuitously, and therefore fell under the ruling of Needham v. Bowers, 1888, L.R., 21 QBD 436. It did not matter how the institution was founded originally. In the above case the institution was originally started by charity; and, moreover, there were points there in favour of exemption, viz., the fact that some patients were taken in gratuitously, which did not exist in the present case. What the respondents here called an endowment was not so regarded in that case. In the case of the Governors of Charterhouse School v. Lamarque, 1890, L.R., 25 QBD 121, there was an element of charity, and yet the institution was held liable. In the case of Cawse v. Nottingham Lunatic Asylum, L.R., 1891, 1 Q.B. 585, where the right to exemption was sustained, there was a large endowment fund, and the ground of the Court's decision was that the income and maintenance of the institution depended
Page: 582↓
on charity, which it certainly did not in the present case. Argued for the respondents—The exemption was expressed in general terms, and the Court was not bound to interpret it strictly. This asylum was none the less an “hospital” because the patients were able to pay. It came into existence as the result of charity, and was managed gratuitously, and no private person made any profit. This was not a question of assessing “profits” under Schedule B of the Income—Tax Acts. It was partly supported by donations. The money received from the parochial authorities was not of the same nature as that paid for board by private patients. They were bound to receive the Dundee paupers—Lunacy Act 1851 (20 and 21 Vict. c. 71), sec. 59, and if the latter were not admitted to the asylum they would be in the poor—house, which was admittedly exempt. This was an enforced charity, the asylum authorities being the medium through which the Board distributed charity. It was therefore an “hospital” devoted mainly to paupers, and was entitled to the exemption just as an institution not wholly charitable had been held exempt from property tax under Schedule A of the Income—Tax Act— Blake v. Mayor of London, 1886, L.R., 18 QBD 437. Needham was a different case, because the hospital there in question was designed originally for people who were not paupers, but who could and did pay, and the establishment yielded a profit, while here there was no real profit, and the asylum was founded for charitable purposes. In Cawse the same features were present as here, and the Court allowed the exemption. There really was an endowment here, consisting of the buildings and payments received from the district Board for paupers, and the question of the greater or less amount of the endowment did not signify. In the case of the Surveyor of Taxes v. Fasson, May 19, 1883, 10 R. 870, there were dicta to the effect that such questions as this were not to be looked at too strictly, but “with the eye of common-sense.” In Chalmers' Hospital v. Magistrates of Edinburgh, March 8, 1881, 8 R. 577, there was a wing for paying patients, but that fact did not deprive the hospital of the character of a building “solely occupied for purposes of charity,” and as such entitled to exemption from burgh assessment.
At advising—
Page: 583↓
Now, I think it is impossible to maintain that the circumstance that two lunatics are gratuitously maintained in this large establishment is sufficient to impress upon the building as a whole, and the administration as a whole, the character of a charitable institution; and so the argument maintained to us was that, because this institution maintains pauper patients, it is in terms of the exemption an hospital or house provided for the reception or relief of poor persons. I think that on a fair construction the meaning of the exemption is, that out of the funds of the hospital poor persons are entertained, either because it was expressly founded for the benefit of the poor, or because it is used for the purpose of the gratuitous or charitable entertainment of poor persons requiring medical relief. But this case, I apprehend, cannot fairly be brought within the exemption, because the poor persons who are boarded in the asylum are not in any way maintained out of the funds of the asylum, but are maintained under contract by the District Board of Lunacy, and if they were not so maintained the inhabitants of the district would be assessed for their maintenance in a building provided by public taxation for the purpose. It is only in virtue of the statute referred to that use is made of the existing asylum as an establishment which is put under obligation to contract for the reception of pauper patients. The view which I present to your Lordships is, that the maintenance of these pauper lunatics being under contract with the District Board, and being paid for by money raised by public taxation, such maintenance in the asylum cannot be considered as charity, and accordingly that the case does not fall under the statutory exemption. If your Lordships agree with me, then the determination of the Commissioners must be reversed, because they have held that the asylum is entitled to exemption in terms of 48 George III., cap. 55, Case 4.
The object of the infirmary was to provide for the relief of indigent sick and hurt persons, and the object of the asylum was to extend this relief to lunatics.
Ground was acquired and an asylum built, but it had become surrounded with houses and otherwise unsuitable for patients, and in 1875 the then directors obtained a new charter by which they were incorporated under the name of the. Dundee Royal Lunatic Asylum, and by which they were empowered to erect a new asylum at some distance from the town of Dundee, and to feu or sell the ground on which the existing asylum was erected.
The directors accordingly acquired ground in the neighbourhood of Dundee, and erected thereon the present asylum, which was finished and occupied in 1882. They have since feued about two-thirds of the old asylum grounds.
It appears that in 1890 the asylum was in debt to the amount of £54,583, 18s. 6d., and that in 1893 this debt had been reduced to £30,851, 9s. 2d. by the sale of feu-duties of the old asylum grounds, a donation of £1000, and an annual payment from the revenue of the institution of £2000. It is stated that the asylum property is still subject to a debt of £25,000.
As I have said, the asylum was originally founded by charitable donations and subscriptions, which during the 73 years of its existence have amounted to about £23,000, but during the years embraced in this case
Page: 584↓
The asylum is governed gratuitously, and no person has any eventual interest in the property.
The number of patients in the asylum is to be taken as 355, in the proportion of 289 pauper patients to 66 private patients.
The pauper patients are boarded at a sum which is estimated to meet the expense of their maintenance and clothing.
The receipts from the patients during the years from 1891 to 1893 inclusive were £11,551, 2s. 4d., £12,165, 14s. 6d., and £12,201, 8s. 11d. respectively, and the net profits (ascertained in terms of the Income Tax Acts), amounted to £1591, 5s. 10d., £1520, 10s., and £1703, 8s. 3d.
Such would appear to be the material facts as regards this institution with reference to which we are asked to decide whether it is an hospital or house provided for the reception or relief of poor persons within the meaning of the exemption stated under 48 Geo. III. c. 55, Case 4, and so not liable for inhabited-house-duty.
With reference to the question whether it is a house provided for the reception or relief of poor persons—there are in fact 289 pauper patients maintained in the asylum. But these do not appear to me to be “poor persons” in the sense of the Act. The whole cost of their maintenance and clothing is paid to the asylum by the District Lunacy Board, which is bound to maintain them, and I see no element of charity in the transaction.
The case therefore appears to me to turn upon the question whether the asylum is or is not an hospital in the sense of the Act?
We were referred to the cases of Needham, L.R., 21 QBD 436, and Cawse, L.R., 1891, 1 Q.B. 585, as throwing light on the construction of the word “hospital” as used in the Act. In the first of these cases it was held that an institution wholly self-supporting, although originally built by charitable contributions and carried on gratuitously, was not exempt as an “hospital” in the sense of the Act, which must, it was decided, be restricted to hospitals maintained wholly or in part by charity, and in the subsequent case of Cawse, Mr Justice Charles, who delivered the opinion of the Court in the case of Needham, further said that the word “hospital” did not include the case of an hospital with no charitable endowment, but did include an hospital with a substantial charitable endowment.
No doubt his Lordship used the word “substantial” in that case because he was dealing with a case in which the endowment was substantial. But I do not think that any endowment, however small, relatively to the other funds, applied to the maintenance of an institution would necessarily bring it under the exemption in the statute. It may no doubt be difficult to determine, in any particular case, what amount or proportion would be sufficiently substantial to produce that result, but I agree with Mr Justice Charles' opinion—with this modification or addition — that I do not think it necessary that there should be an endowment in the technical sense of the word, but that it will be sufficient to bring an institution within the exemption of the Act if it be maintained in whole or in part by voluntary contributions.
There is another point on which the case of Needham is an authority in this case. In that case, as in this, the asylum was originally founded by charitable donations and subscriptions. It was urged on us, says Mr Justice Charles, “that as the hospital buildings and premises were originally purchased out of money subscribed by benevolent persons, there is a charitable element in this sense that the hospital has no rent to pay. But we do not think the fact that in its origin the institution was founded by voluntary charitable donations is sufficient to constitute it an institution partly maintained by charity.” As I have said, the Dundee Royal Lunatic Asylum is not being, and has not been, during the years set out in the case, to any extent maintained by charitable donations or subscriptions.
The question then is, whether this asylum has any endowment applicable and applied to its maintenance. The Commissioners think that it has. They say that they are of opinion that the site of the old asylum buildings, which is of the value of about £36,000, is (along with the new asylum property) subject to the debt of about £25,000 to be regarded as an endowment. Now, it appears from the case that no part of the income from the old site of the asylum has ever been applied to the maintenance of the hospital. It has been applied towards payment of the principal and interest of the debt for which it is liable. It may be that in the future there may be a fund from this source applicable and applied to the maintenance of the asylum, but the asylum has been in the past and is being wholly maintained, except to the extent I shall presently mention, from the surplus profits derived from the inmates. I cannot, therefore, agree with the Commissioners that this is an endowment which brings the hospital under the exemption in the Act.
It appears from the case that the asylum has two mortifications each for the maintenance of an indigent lunatic, and amounting together to £841, 19s. 3d., and that in respect of these mortifications two indigent lunatics are maintained at less than their cost in the asylum.
It appears that there is no separate investment to represent this sum, as no doubt there ought to have been, but I do not think that fact material.
I do not think, however, that the fact of the existence of this small mortification or endowment, having regard to the small proportion it bears to the other funds applied to the maintenance of the asylum, is sufficient to bring the asylum under the exemption of the Act. I think it does not alter or modify the character of the asylum as being truly a self-supporting institution.
Page: 585↓
The Lord President concurred.
The Court reversed the determination of the Commissioners, and sustained the assessment.
Counsel for the Lunatic Asylum— Ure— Salvesen. Agents— Morton, Smart, & Macdonald, W.S.
Counsel for the Surveyor of Taxes— A. J. Young. Agent—The Solicitor of Inland Revenue.