Davis v Superioress, Mater Misericordiae Hospital

• Jurisdiction: Ireland
• Judgment Date: 01 January 1936
• Date: 01 January 1936
• Court: Supreme Court (Irish Free State)

Davis v. Superioress Mater Misericordiaæ Hospital

R. G. DAVIS, Inspector of Taxes

Appellant

THE SUPERIORESS, MATER MISERICORDIÆ HOSPITAL, DUBLIN, Respondent (1)

High Court.

Supreme Court.

Revenue - Income Tax - Assessment - Case Stated - Private nursing home carried on in conjunction with public hospital - Unity of control - No segregation of accounts - Application of profits of nursing home to charitable purposes - Income Tax Act, 1918 (8 & 9 Geo, 5, c. 40), sect. 149,Sch. D., Case 1.

The respondent was the Superioress of a religious community which carried on a public hospital for the relief of the sick and dying poor. In addition to this undertaking, the community owned and controlled private nursing homes in buildings communicating with one another and with the public hospital. The receipts from the private nursing homes and the voluntary contributions of patients in the public hospitals were pooled in one fund, out of which all expenditure was drawn. The expenditure in respect of each class of patient was not segregated in the accounts. The Special Commissioners for the Special Purposes of the Income Tax Acts found that the institutions were carried on as one undertaking, that the treatment of private patients was incidental to the main purpose of the undertaking, and that no line of demarcation could be drawn for the purpose of separating the profitable from the non-profitable part of its activities. They concluded that the Superioress was not carrying on a trade in respect of the private nursing homes and that an assessment to income tax in relation thereto should be discharged. They stated a case on this conclusion for the opinion of the High Court.

Held by the High Court and, on appeal, by the Supreme Court, that the Commissioners were wrong in their determination and that the matter should be remitted to the Commissioners to determine the assessment.

Carlisle and Silloth Golf Club v. Smith, [1912] 2 K. B. 177; [1913] 3 K.B. 75, applied.

Case Stated by the Commissioners for the Special Purposes of the Income Tax Acts, under the Income Tax Act, 1918, sect. 149, for the opinion of the High Court.

"1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on the 21st November, 1929, at Dublin, for the purposes of hearing appeals, the Superioress of the Mater Misericordiæ Hospital, Dublin (hereinafter referred to respectively, as 'The Superioress' and 'The Hospital'), appealed against an estimated assessment to income tax in the sum of £5,000 made upon the Superioress, Mater Private Nursing Homes, Eccles Street, Dublin, under Case 1 of Sch. D of the Income Tax Act, 1918, for the year of assessment, 1923-24, in respect of profits or gains arising or accruing from Private Nursing Homes.

2. The following facts were admitted or proved:—

The Mater Misericordiæ Hospital, situate in Eccles Street, Dublin, was opened for the relief of the sick and dying poor in the year 1861. At that time the accommodation

was limited to 50 beds. It was then and has since been carried on by the members of the Community of the Sisters of Mercy, the purpose of the Hospital being, as the name implies, the assistance of the suffering poor. It is open at all hours for the reception of urgent and accident cases.

3. From time to time, by means of moneys obtained by public subscriptions, donations and bequests, the original Hospital premises have been considerably extended and enlarged. In 1889 a private House, No. 38 Eccles Street, and in 1894, four private houses, Nos. 34, 35, 36 and 37 Eccles Street, were acquired and added to the Hospital building. All these acquired houses have been structurally connected with the main building and with each other, and there is inter-communication from the main building to each of these houses, so that in substance the whole now constitutes one building, although originally, and before being added to the Hospital, the acquired houses were occupied as separate buildings.

4. All the lands and buildings and property of the Hospital are vested in one set of Trustees who are members of the Community of the Sisters of Mercy. These Trustees have no active duties to perform, the management and control of the Hospital and its staff being vested in the Superioress for the time being, who is always a member of the Community of the Sisters of Mercy.

5. The accommodation available in the Hospital for the treatment of patients having always been in excess of the accommodation required for the sick poor for whom the funds at the disposal of the Hospital could afford treatment, it has been customary since about the year 1894 to admit a limited number of patients who could afford to pay for the services rendered to them. While the number of paying patients increased gradually and steadily from the year 1894 to the year 1923-24 there was a corresponding increase in the number of non-paying patients also.

6. In the year of assessment, 1923-24, the total number of beds available for patients of all classes was 412, of which 320 were in the main building and 92 in the other buildings in Eccles Street.

In the main building there were three private wards in each of which there were 4 beds available for paying patients and 15 public wards containing 308 beds. In the buildings in Eccles Street there were private rooms affording accommodation for 92 paying patients and, although there are no public wards there, these private rooms are frequently occupied by non-paying patients while paying patients are awaiting admission. During the year 1923-24 46 non-paying patients were accommodated in these rooms. The aggregate number of days during which these 46 non-paying patients were accommodated in the buildings in Eccles Street during the year 1923-24 was 470. When simultaneous applications for accommodation in the buildings in Eccles Street are made by paying and non-paying patients, and there is not sufficient accommodation available for all, preference is sometimes given to a non-paying patient, especially if the case is an urgent and deserving one.

7. In 1923-24 paying patients were charged at the following rates per week:—

Main building, 12 beds Buildings in Eccles Street—	£3 3 0
6 cots	£3 3 0
33 beds	£3 13 6
8 beds	£4 4 0
30 beds	£5 5 0
11 beds	£6 6 0
4 beds	£7 7 0

8. In 1923-24 249 patients were admitted to the Hospital upon the application of County Boards of Health. These patients were treated in the public wards of the main building and a sum of 28s. per week was received from each County Board of Health on behalf of each patient.

Non-paying patients and their friends frequently made voluntary contributions to the Hospital Funds in return for the services rendered to such patients. In this way a number of patients from the country and city who were accommodated in the public wards of the main building contributed varying sums from 10s. to 42s. per week.

9. The treatment of non-paying patients considered separately from the rest clearly resulted in losses. These losses were met in part by public subscriptions, donations and bequests. The charges for paying patients envisaged in bulk and apart from the rest should—it was thought— leave a surplus over and above the actual expenditure incurred in the treatment of such patients. Any such surplus being merged in the common funds went to the benefit of those who were unable to pay for their treatment. No separate accounts were kept showing the amounts received from and expended on behalf of paying patients. As the nature of the nursing and attendance supplied and the work done for paying and non-paying patients was identical, the segregation of the accounts would have served no useful purpose.

10. All receipts from patients and all other receipts were paid into a common fund and all expenditure incurred by the Hospital was paid out of this fund.

The Hospital accounts show receipts and expenditure, but they do not distinguish expenditure incurred in providing food, services, and other requirements for paying patients from such expenditure incurred on behalf of non-paying patients.

While it is possible to state definitely the amount received from patients who are under a contractual liability to pay for their treatment, it would be quite impossible, owing to the method of keeping the accounts, to identify the expenditure incurred on behalf of such patients where such expenditure has reference to maintenance, attendance and nursing, or the supply to such patients of food or surgical or medical applicances, etc.

The receipts from the paying patients would be wholly insufficient to maintain or run the hospital in any year. The expenditure of the Hospital is always in excess of the combined receipts from paying patients, from County Boards of Health and from non-paying patients by way of voluntary contributions, and were it not for the revenue from other sources, principally from public subscriptions, donations and bequests, it would be impossible to carry on the Hospital as it has been carried on. In the absence of funds from charitable sources a number of sick poor would have to be refused admission to the Hospital.

The Hospital has no endowment fund in the strict sense, but from time to time bequests have been received and funds so bequeathed are held by Trustees and the income therefrom is applied for the benefit of the Hospital. The Hospital has never been carried on for the purpose of making a profit. A copy of the Receipts and Payments Account of the Hospital for the year ended 31st December, 1922, is annexed hereto and forms part of this case.

11. In 1923-24 there were about 286 persons engaged in carrying on the work of the Hospital, of whom 42 were members of the community and 131 were lay nurses. The remainder were employed in such capacities as domestic servants, porters, laundry hands, etc. The following members of the...