Scottish Court of Session Decisions

George Chalmers died in the year 1836, and in a holograph codicil to his trust-settlement he directed that the whole residue of his estate should be paid over to the Dean and Faculty of Advocates “for the express purpose of founding a new infirmary or sick and hurt hospital,” by whatever name it might be designed, and that the members of the Faculty of Advocates should lay out the proceeds of his estate accruing to them to the best advantage in any of the public funds till such time as that boar should see fit to commence such an undertaking. Accordingly, the Dean and Faculty of Advocates of 1862 adopted a scheme for an hospital to be called “Chalmers’ Hospital for Sick and Hurt,” and proceeded with the erection of a building upon a site adjoining Lauriston Place, which had been purchased from the Earl of Weymss and March, conform to disposition dated 16th December 1854. The hospital was completed in 1863, and has since been carried on in terms of the above scheme. The title to the ground and building was in name of the Treasurer of the Faculty of Advocates and his successors in office for behoof of the Dean and Faculty, as trustees under Mr Chalmers’ codicil. In accordance with Mr Chalmers’ will the building was devoted to purposes of public charity. It was open to persons of all nations for surgical cases of all kinds, and also for medical cases of all kinds excepting certain specified infectious diseases. It is one of the rules of the institution that no one connected with it shall on any pretence directly or indirectly take any fee or gratuity from any patient or the friends of any patient. It is conducted as a charitable institution for the relief of the sick and hurt. Its funds amount to £43,000, are administered for the purposes of maintaining it as such, and when donations are made they are applied to the general fund of administration. During the year 1870–1871 the directors fitted-up and furnished two wards (one male and the other female), which afforded accommodation for eight patients, for the benefit of persons who while requiring hospital treatment could afford to contribute towards the cost of their board, which was estimated at 3s. per diem During a period of five years the average annual number of patients treated in the hospital was 267, of whom 32 on an annual average contributed a small board. The funds of the hospital were so limited that the directors would be unable to keep the upper wards open unless the patients in them made some contribution towards payment of their board, but as regards medicine and medical attendance no such contribution is made or asked, the aid quoad these being purely charitable and eleemosynary.

By the Edinburgh Municipal and Police Act 1879, the Lord Provost, Magistrates, and Council are ( sec. 67) authorised to lay on an assessment, sufficient to provide the sums of money estimated as therein required for the purposes therein specified, upon the owners and occupiers, as the case may be, of all lands and heritages within the burgh, but “subject to the restrictions in this Act contained,” and subject also to the exceptions therein provided. By the said Act (section 70) it is enacted as follows:—“The burgh assessments shall not be imposed in respect of the Royal Palace of Holyrood, Queen's Park, Arthur's Seat, Duddingston Loch, nor houses or buildings in the Castle of Edinburgh; nor the Courts of Justice, General Register House, City Chambers, County Buildings, Prison of Edinburgh, nor the University of Edinburgh, and the buildings connected therewith, except those parts which are used as houses; nor the Royal Infirmary, the Royal Edinburgh Hospital for Sick Children; nor the Assembly Hall of the Church of Scotland, the Free Church College, the Free Church Assembly Hall, the Synod Hall of the United Presbyterian Church, and the buildings connected therewith, so long as these shall continue to be solely used for ecclesiastical purposes, or shall not be let for hire or other purposes, except those parts which are used as houses; or in respect of any house or building which is solely occupied for purposes of public charity, or any premises exempted from taxation by public law,” &c. Prior to the year 1879 no assessment was made on the hospital, it being dealt with as a building solely occupied for the purposes of public charity, and further exempt from taxation by public law, and particularly by the statutes relative to the house-tax. In that year, however, the Magistrates and Council of Edinburgh assessed it in virtue of the powers conferred by the Edinburgh Municipal Police Act 1879, alleging that the payment exacted in 1870 for the first time of 3s. per diem from those persons who could afford to contribute towards the cost of their board, changed the original character of the hospital, and therefore that it should not be exempted from taxation as a building solely occupied for purposes of public charity. This action was therefore raised by the Dean of the Faculty of Advocates and others, as the directors of the hospital, against the Lord Provost, Magistrates, and Council of the City of Edinburgh, for the purpose of having it declared that the hospital was a house or building solely occupied for the purposes of public charity within the meaning of the 70th section of the Edinburgh Municipal and Police Act 1879, and as such exempted from taxation.

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The pursuers pleaded—“(1) The building or premises in question being solely occupied by the pursuers for purposes of public charity, no burgh assessment can be imposed in respect thereof under the ‘Edinburgh Municipal and Police Act 1879.’ (2) In respect that the premises in question are, as an hospital, exempted from taxation by public law, and particularly by the statutes relative to the inhabited-house-duty, they are not assessable under the said ‘Edinburgh Municipal and Police Act.’”

The Lord Ordinary ( Adam) assoilzied the defenders from the conclusions of the action, and appended the following note to his interlocutor:—“The question in this case is, whether the buildings known as Chalmers’ Hospital are liable to have burgh assessments imposed upon them under The Edinburgh Municipal and Police Act 1879.’ That, again, depends upon whether or not they are solely occupied for purposes of public charity, or are exempted from taxation by public law. In either of these cases they will fall within the exceptions specified in section 70 of the Police Act, and will be free from the imposition of such assessments; otherwise they will be liable to assessment.

“The facts which raise the question are these:—Mr George Chalmers, who died in 1836, left the residue of his estate to the Dean and Faculty of Advocates for the purpose of founding a new infirmary or sick and hurt hospital.

The Dean and Faculty accepted the trust, and in 1863 they erected the buildings now occupied as ‘Chalmers’ Hospital for Sick and Hurt.’ The building contains four wards—one for males and one for females on the lower storey, and the same on the upper storey. Each ward affords accommodation for eight patients.

There are no limitations as to the persons who are admitted to the benefits of the charity. All kinds of surgical cases are admitted, and all kinds of medical cases except certain cases of infectious disease.

When the hospital was opened in 1863 the funds at the disposal of Chalmers’ trustees were insufficient to enable them to make use of all the wards, and the two lower wards only were used. In the year 1870–71 the trustees fitted up and furnished the two upper wards for the benefit of those who could afford to contribute to the expense of their board. The sum which they contribute is 3s. a-day.

The daily average number of patients in the paying wards for the years 1877–78–79 was four, five, and eight respectively, and the sums received for their board in these years respectively were £209, 14s., £241, 4s., and £434, 5s.

It appears to the Lord Ordinary that hitherto the trustees have not derived any profit from these paying patients, as from the smallness of their numbers the expense which they occasioned is considerable. Were these patients to become more numerous the Lord Ordinary thinks that the result would probably be different, and that the present rate of charge would probably yield a surplus. It also appears that so long ago as 1864 some pauper patients were sent to the infirmary by the parochial board, for whom payment was made. But that has not occurred since, and the Lord Ordinary thinks may be left out of view in the present question.

The Lord Ordinary accordingly thinks that the question truly at issue is, whether the use which is thus made of the hospital for paying patients takes it out of the category of buildings solely occupied for purposes of public charity?

That the scheme which the trustees have thus initiated is a most benevolent and excellent one the Lord Ordinary does not doubt. It no doubt has proved of the greatest benefit to the persons who, as appears from the evidence of the Vice-Dean of Faculty, have already taken advantage of it, and the Lord Ordinary has no doubt that as it becomes better known it will be more extensively made use of.

If this result be attained, the Lord Ordinary thinks that the success will probably be attributable to the fact that those who make such use of the hospital are making a return for the benefits derived from it, and will not regard it in the light of an institution from which they are receiving charity. In order to be exempt from assessment the buildings must be solely used for purposes of public charity. The case may be taken, therefore, as if the hospital were solely used for paying patients. The Lord Ordinary has the greatest difficulty in seeing that such an institution could be considered as a public charity.’ The rate of board charged-3s. a-day—must necessarily exclude the immense majority of the public and all the most necessitous.

The word ‘charity’ has a wider and a more limited meaning. In its wider sense all benevolent schemes and institutions may be considered as charitable schemes and institutions, and in this sense the scheme of the trustees is a charitable one. But in its more limited sense charity means relief given to the poor gratuitously; and the Lord Ordinary thinks that in this Act of Parliament the word is used in this more limited sense. The Lord Ordinary has already said that in this case no profit is at present derived from the paying patients. Were it otherwise he does not suppose that it could be contended that this or any similar institution was solely a public charity. He does not see that its character as a public charity can depend upon the fact of whether or not in any particular year the contributions of the patients did or did not meet their expenses, or that any inquiry could be gone into on that matter. He thinks that there is involved in the idea of public charity that there shall be no return in money for the relief or benefit given. He is therefore of opinion that the hospital is not exempt from assessment in respect that the buildings are solely used for purposes of public charity.

The next question is, whether the hospital buildings are premises exempt from taxation by public law? The pursuers contend that the buildings are exempt from taxation by public law, because they are exempt from taxation under the statutes relative to the House Tax and the Property and Income Tax Acts. The Lord Ordinary does not think that the meaning is to exempt from assessment buildings that may be exempt from taxation under any particular statute or statutes. He thinks the meaning is that they shall be exempt from taxation by public or general law, apart from statute—as, for example, property in the occupation of the Crown, or of persons using it exclusively in or for the service of the Crown. After the decision in the case of The Mersey Docks, 3 Macph. (H.L.) 102, note, it

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may be difficult to say that any other class of property falls under this exemption, but in the opinion of the Lord Ordinary it is to property so exempted that the exception in the 70th section of the Police Act is intended to apply.”

The pursuer reclaimed, and argued—The payment of 3s. a-day by patients able to afford it, made for the purpose of defraying the proper expenses incident to the keeping up of a ward which could not otherwise have been opened, did not divest the hospital of its charitable character.

Authorities— The Queen v. St George the Martyr, Southwark, 1st May 1847, 16 L.J. 129, Mag. cases; M'Donald v. The Massachusetts General Hospital, June 1876, 21 American Reports, 529; The Manchester School case, 1867, L.R. 2 Chan. App. 497; In re Latymer's Charity, 1869, L.R., 7 Equity Cases, 353.

Argued for defenders—The hospital was competently assessable, inasmuch as it was not a building used solely for public charity.

Authorities— Governors of St Thomas Hospital v. Stratton, 1875, 7 H. of L. Cases, 477; Greig v. University of Edinburgh, June 8, 1861, 1 L.R., Scottish App. 348; Guthrie Smith's Poor Law, 131; The Queen v. Sterry, 1840, 12 Adolph. and Ellis, 84; The King v. Inhabitants of the Parish of St Giles, May 5, 1832, 3 Barn. and Adolph. 573; Mersey Docks, 3 Macph. (H.L.) 10 2.