Ref. SLR 1524/76/JSC

CAMBRIDGE UNIVERSITY PRESS

1. I am sorry that it has taken me so long to deal with this case. It was first left until the rush of work on the Finance Bill was over, and then until after the long vacation. The great volume of supporting documents submitted in support of the claim for exemption did not encourage me to embark upon it lightly, but having waded through this material (and found much of it of considerable intrinsic interest), I agree with Claims Branch that exemption should be conceded.

2. Without knowing what evidence was before the Special Commissioners when they turned down a similar claim for exemption in 1940 it is difficult to understand why they should have decided that the Press could only be regarded as serving the general educational purposes of the University in so far as it concerned itself with the printing of material for internal use in the University. In his generally sympathetic report of the 23rd April 1976 [missing], Mr Maddocks of Claims Branch suggested that the argument advanced by Mr Cass, the Chief Executive of the Press, to the effect that: "the Press is part of the University; the Press disseminates learning; therefore it is the purpose of the University to disseminate learning" - amounted to a false syllogism. So stated it may have this appearance; but it seems to me impossible to regard the Charter granted to the University by Henry VIII in 1534 in any other light than as conferring upon the University authority, by its "stationers and book printers", to print all manner of books approved by its properly appointed officers, and to sell them inside or outside the University. It is true that Henry's Charter referred only to sales "elsewhere in our realm", as well as in the University; but later Charters, including that of Charles I granted in 1628, specifically empowered the University stationers and printers to sell their authorised books "elsewhere within any of his Majesty's dominions", as well as within the University. In the light of these Charters and the subsequent history of the University and its Press, I think it fair to say that the University's Press Syndicate controls the Press as a constituent part of the University, and has no purpose or authority separate from the University.

3. It appears to have been implicit in the 1940 decision of the Special Commissioners, and presumably in the attitude of the Revenue at that time, that the trade of publishing and selling books carried on by the Press was not exercised in the course of actually carrying out a primary purpose of the University. This view could have been founded in the belief that it was not a primary purpose of the University to advance education in the broad sense of that word, through the publication and sale of books - outside as well as inside the University; or in the belief that the trade carried on by the Press was not exercised in the carrying out of such a primary purpose. As already indicated I do not see how the first of these beliefs can survive the information now available as to the origins of the Press and its constitutional relationship with the University. As regards the second, there now seems to be abundant and irrefutable evidence that the Press publishes only academic and educational books, learned journals, Bibles and prayer books, all of which are individually approved in advance, title by title, by the Syndics of the Press as the properly authorised officers of the University; and I cannot see how their activities can be denied the description of "actually carrying out a primary purpose" of the University.

4. On the second page of his letter of the 18 December 1975, Mr Cass suggested that it could be argued that the business of the Press does not amount to a "trade" because the Syndics do not carry on the printing and publishing activities for "livelihood or gain". The Press is non-profit making, in the sense that there are no members or directors who may benefit financially from its activities and that all its surpluses are ploughed back into the business itself. But as appears from the extract from the Annual Report for 1974, set out at page 43 of Mr Cass's letter of the 21st November 1976, the press aims at "progressive financial viability", which entails making sufficient "profits" to produce credit-worthy results and to make provision for development and expansion. This does not, however, disentitle it to exemption under Section 360(1)(e), the very terms of which presuppose the carrying on of a trade. As Russell LJ said of the Association in Incorporated Council of Law reporting in England and Wales v. Attorney General 47 TC 320 at page 336: "the fact that the Association carries on a trade or business is admittedly not inconsistent with the charitable character in its objects... The element of unselfishness is well recognised as an aspect of charity, and an important one. Suppose on the one hand a company which publishes the Bible for profit and the profit and its directors and shareholders - plainly the company would not be established for charitable purposes. But suppose an association or company which is non-profit making, whose members or directors are forbidden to benefit from its activities, and whose object is to publish the Bible - equally plainly it would seem to me that the main object of the association or company would be charitable - the advancement or promotion of religion". By the same test I think the primary purpose of the Press, in the actual carrying out of which it exercises its trade, may equally plainly be said to be the advancement of education in the charitable sense.

5. On the scope of "education" in this context and the range of publications which may be said to serve this purpose, there are certain dicta in decided cases which may serve as guidelines. In Re Shaw, Public Trustee v. Day [1957] 1 All ER 745, Harman J took the view that the mere increase of knowledge was not in itself education. By this he appears to have meant that not every dissemination of ideas or information is to be regarded as serving the advancement of educational learning; and it follows that not every publishing or bookselling enterprise carried out with altruistic motives is necessarily to be regarded as charitable. But in Re Hopkins' Will Trusts [1964] 3 All ER 46, Wilberforce J said: "I think the word "education" as used by Harman J in Re Shaw must be used in a wide sense, certainly extending beyond teaching, and that the requirement is that, in order to be charitable, research must be either of educational value to the researcher or must be so directed as to lead to something which will pass into the store of educational material, or so as to improve the sum of communicable knowledge in an area which education may cover - education in this last context extending to the formation of literary taste and appreciation: (compare Royal Choral Society v. Inland Revenue Commissioners 25 TC 263)." In this broad sense, the evidence now submitted on behalf of Cambridge University Press seems to me to justify the view that the continuing activities of the Press satisfy the high educational purposes declared in the various Charters conferring upon the University powers to print and sell books.

6. I agree that the modest "surplus capacity" of the Press applied to commercial printing and said to bring in less than 2% of its total receipts, is insufficient to affect the general entitlement to exemption in respect of the profits of the trade under Section 360(1)(e). It may seem fair enough to treat the small part of the Press's profits attributable to this part of its trading activities as outside the primary charitable purpose and to restrict the exemption accordingly, as suggested in paragraph 9 of the Claims Branch memo of 7 May 1976 [missing]; but this activity is clearly ancillary to the main charitable purpose and I see no justification in the terms of paragraph (e) for such a dichotomy.

J. S. Clarke
4 November 1976
SLR 1524/76/JSC

HANDWRITTEN NOTES ADDED AT THE LEFT-HAND SIDE OF PAGE 1:

Mr Rawson (T3/4): In the light of Mr Clarke's advice it is clear we should now concede charity status (and we must do so without the minor restriction mentioned in para 6 of the Opinion), but you may like to see before I formally advise Mr Cass of the outcome. (As I read the minutes, Claims Branch will be neither surprised nor depressed by the decision to concede.)

5/11/76

Mr Briddon: I agree.

8/11/76

Clarke, like McRobert, says that the law has significantly moved in CUP's favour since 1950 with the Law Reporters' case of 1971 and others, but if so, why does he rely so heavily upon the ancient charters of Henry VIII and Charles I? I was emphatically taught that in law-evolution terms, ancient cases and statutes, for obvious contextual reasons, always carry less weight than recent ones. Still, if the UP context is to be regarded as an exception to this rule and it is agreed on all hands in 2009, with the Middle East about to go nuclear and the Internet about go galactic, that the structure of UK publishing should be decided - that is, skewed - by a 500-year-old Henrician dictat, then another odd consequence should be noted. This would mean that other university presses like Manchester's, which don't enjoy Oxford's 16th century privilege, would not qualify. It would be a magnificent irony if, to indulge the obsessively-commercial OUP, the criteria were so distorted that they penalised the few UK presses that do actually behave like academic charities.

But now let us look properly at the assertion, made by all the 1970s IR officers, that Charity Law has moved in CUP's favour since 1950. Geoffrey Cass in his 50+ page submission mentioned only the Law Reporters' case of 1971 in this connection, while Clarke, following McRobert, mentions the Choral Society case, which was heard in 1942, and so in fact did not occur after CUP's and OUP's previous round of rejections in the decade from 1940. It is noteworthy, and odd, that neither McRobert nor Clarke mentions the date of the Choral Society case; I guess this is because, if they had, it would have appeared chronologically anomalous. It is noteworthy too that neither university press itself mentions the case, presumably because it was thought weak and/or irrelevant. Clarke, on the other hand, goes further, also mentioning two more cases that concern bequests made to contentiously charitable societies, neither of which is cited by either of the university presses, who certainly took copious legal advice.

Re Shaw, Public Trustee v. Day (1957) concerns George Bernard Shaw's will to endow a trust set up to investigate and promote the substitution of a proposed new English alphabet containing at least 40 letters, and to transliterate into it one of his plays (Androcles and the Lion). Re Hopkins' Will Trusts (1964) concerns the will of one Evelyn Hopkins, who left £6,000 to the Francis Bacon Society, dedicated to the promotion of the theory that Bacon was the true author of many of the plays usually attributed to Shakespeare. Briefly, the question in each case was whether its designated purpose should be classified as "educational" and therefore charitable. Harman J said "no" in the Shaw case, Wilberfore J said "yes" in Hopkins. Both bequests are so highly defined and specialised, even verging on the cranky, that, whatever the arguments put for and against, it surely seems doubly cranky to infer from them any principles affecting charity law in general or the definition of "education" to be generally applied in it. Invoking these two cases looks very much like wilfully scraping the legal barrel, and neither is mentioned, by either side, in any of the subsequent cases in this field.

The 1942 Choral Society case, on the other hand, certainly does raise questions about, and extend, the general limits of what can in charity law count as "education". The Royal Choral Society was formed in 1871 (originally as The Royal Albert Hall Choral Society) to promote the practice and performance of choral works in the Albert Hall. In 1939 a constitution was drawn up and a governing committee formed, limited to ten; chorus members (numbering about 730) received no fees and paid no subscription. The income of the Society, derived from ticket sales and recording and broadcast fees, was to be applied solely to the objects of the Society and none was to be distributed to its members. In the event of dissolution its assets were to be given to a body with similar objects or to an institution for the relief of distressed musicians. In 1940 the Society presented eight to ten concerts a year, of works either generally considered "classics" or which the committee hoped would become considered "classics". The question in the case was: could this Society be considered an educational charity and exempted from income tax? In his judgment Lord Greene (then Master of the Rolls) made the following telling remarks:

"The maintenance of the choir may be regarded in two aspects: first as an educative process for the members of the choir; and, secondly, as an instrument by which the performance of this type of music is presented to the public. I should have said that there is no flavour of commercial profit, or anything of that kind, about this Society... In my opinion, a body of persons established for the purpose of raising the artistic taste of the country and established by an appropriate document which confines them to that purpose, is established for educational purposes, because the education of artistic taste is one of the most important things in the development of a civilised human being... In the case of artistic taste, one of the best ways of training it is by presenting works of high class, and gradually training people to like them in preference to works of an inferior class... It is the purpose of the people who provide it which is important. If the people who are providing the performance are really genuinely confining their objects to the promotion of aesthetic education by presenting works of a particular kind, or up to a particular standard, it seems to me that that is just as much education (and in fact, having regard to the subject-matter, the best available method of education) as lecturing or teaching in a class, or anything of that kind."

Apart from the highly controversial extension of the definition of "education" from "teaching" to "artistic performance" we also see the law embarking here on the dubious, perilous business of distinguishing between "high" and "low" art. The Choral Society, naturally, made much of its usually loss-making "classic" repertoire, Bach's St. Matthew Passion, Handel's Messiah, Beethoven's Mass in D, and so forth, while the Inland Revenue was apparently much more interested in its recent presentation of Coleridge Taylor's highly popular and lucrative extravaganza of the 1930s the Hiawatha Trilogy, a work which, in passing, elicits some amusing who-are-the-Beatles?-type pomposity from Lord Greene. Note, however, that even Greene, whose sympathies from the outset were clearly with the choristers, stipulates that the Society is "established by an appropriate document which confines them to [their] purpose" and "genuinely confines [its] objects... by presenting works of a particular kind, or up to a particular standard."

Obviously, Lord Greene's decision in favour of the Choral Society was of considerable interest to rival promoters of music, classical and otherwise, whose profits were liable to taxation, and the Revenue expected a flood of similar claims to follow, as demonstrated by the final note in their internal legal opinion of 7th July 1944 on OUP's unsuccessful claim of that year for exemption from wartime Excess Profits Tax:

"These Presses [CUP and OUP] are in competition with other commercial printing and publishing concerns, and to admit exemption unless forced to on appeal may raise political issues of the kind we may yet get in the field of theatrical activities following the results of the Royal Choral Society decision."

Sure enough, soon afterwards along came Tennent Plays Ltd. v. IR Commissioners (1947) followed by Associated Artists Ltd. v. IR Commissioners (1956), both of which proved unsuccessful for the artist applicants. In short, the Choral Society case seems, to me at least, to be an aberrant, flawed anomaly with little relevance to the position of an international commercial bookselling operation.

This leaves only the Law Reporters' case of 1971, the one case cited by Cass. In the 5th Appendix to The Remedy (1999), I wrote:

Lawyers may at this point be interested to learn that the chief legal authority hypothetically relied upon by Cass was an appeal for charitable status successfully made four years earlier by a team of (less than twenty) law reporters, and without going too deeply into the minutiae of charity law, a glance at the other similar claims therein cited - the City of Glasgow Police Athletic Association, for instance - leads at least this lay-lawyer to doubt the relevance of such a case to the business operations of an international general publisher which has over 1,200 staff on its payroll and whose annual turnover is presently hitting £300 million.

This may sound flippant, but was it wide of the mark? With OUP's international staff up to 5,000 and its annual profits up to £80 million, is it wide of the mark now? I might have added, even more flippantly, that to ask lawyers to pass judgment on the charitable nature of their colleagues' work is surely to invite the perfect conflict of interest, something like allowing a quasi-charitable publisher to publish textbooks on charity law.

Whatever one thinks of the law reporters' altruism, the main point, it seems to me, about all three of these claimed favourable precedents is that each is highly restrictive. The reporters numbered less than twenty and their specialist work is confined to law cases. The choral society was founded to perform at the Albert Hall and its presentations are limited (it was claimed) to "high art classics". The Hopkins bequest, deemed charitable, was specifically and exclusively for the promotion of the Bacon-authored-Shakespeare theory. By contrast, Henry VIII's Charter, which Clarke invokes, is expressly unrestrictive, authorising the two university presses to print and sell "books of every kind". So to repeat, it is hard to see how any of these cases could possibly have any bearing upon the unlimited activities of the UK's largest open-market book-publishing house, or even upon those of its medium-sized sister at Cambridge.

Returning to that Cambridge sister, at least Clarke does tacitly concede that CUP's claim to tax-exemption depends on whether its output is judged to be of "high" or "low" quality, saying (in paragraph 3) "there now seems to be abundant and irrefutable evidence that CUP publishes only academic and educational books, learned journals, Bibles and prayer books, all of which are individually approved in advance, title by title, by the Syndics of the Press", but where is that evidence? Only, of course in CUP's own unopposed submission, which is hardly likely to advertise its staff-approved general publishing or to mention the many titles that are 'packaged' for it by firms quite unconnected with the university. And who, one must immediately ask, is going to monitor and judge the continued quality of CUP's publishing, and on what criteria? Try, for example, uttering with a straight face Clarke's same sentence with respect to OUP's list of 1978, let alone its list of 2009. Perhaps Clarke, if he's still alive, will enjoy rubbing his straight face in Rachel Riley's Minky.

Then there is the point that the Choral Society and the Law Reporters' Association are both stand-alone bodies, that is, neither of them is part of or owned by a larger charity, educational or otherwise. The principle, if any, that their cases establish seems to be that the presentation of music and the compiling of reports can be regarded as educational and charitable provided, inter alia, the music is of sufficiently high quality and the reports concern a sufficiently academic discipline. Put together with the principle implicit in the Oxbridge ruling that this can be further extended to book-publishing, the way is now apparently open to other high-quality and academic-specialist publishers to claim the same dispensation. Thames & Hudson (art) and Sweet & Maxwell (law) might, for example, wonder why they are still liable for corporation tax, and it would be interesting to know whether they have ever taken legal advice on the question. Concerning Oxford's chief moneyspinning operation ELT, as I said in The Remedy, if OUP were able to persuade the Inland Revenue or a court that teaching the Chinese to speak English is a legitimate charitable aim within the remit of Oxford University, then it would presumably become a legitimate charitable aim for everyone else.

Moving on from the question of how far charity law shifted between the 1940s and 1970s, there is of course the question of if/how it has changed since then. Because CUP's and OUP's tax-exemption have never been tested in the courts, they can provide no precedent, one way or the other, for any other organisations wishing to claim a similar dispensation, and as far as I know, since 1978 there have been no new cases at all (except possibly mine) that bear upon the charity law relating to book-publishing. In Statute Law, by contrast, there has been something of a revolution most unfavourable to the university presses. As is presently being discovered by the private schools, some of which have already been stripped of their charity status, the 2006 Charities Act has come into force, requiring all charities to demonstrate that they provide "public benefit". CUP has stated publicly that it believes it will be able to satisfy this new test, but OUP has not, instead claiming, bizarrely, that it expects to be regulated by the Higher Education Funding Council. By anything, in short, but the law.