National Tourism Development Authority v Coughlan

• Jurisdiction: Ireland
• Judge: Mr. Justice Charleton
• Judgment Date: 17 February 2009
• Neutral Citation: [2009] IEHC 53
• Date: 17 February 2009
• Court: High Court
• Docket Number: [2007 No. 7760P]

[2009] IEHC 53

THE HIGH COURT

[No. 7760 P/2007]

National Tourism Development Authority v Coughlan & Ors

COMMERCIAL

BETWEEN

THE NATIONAL TOURISM DEVELOPMENT AUTHORITY

PLAINTIFF

AND

J.P. COUGHLAN, MICHAEL FITZPATRICK, JAMES FLEMING, LEO MALONE, PATRICK MORIARTY, DAVID O'NEILL AND D. IVO O'SULLIVAN

DEFENDANTS

O'CONNELL v BANK OF IRELAND 1998 2 IR 596 1996/7/2058

JULIAN, IN RE 1950 IR 57

IGOTE LTD v BADSEY LTD 2001 4 IR 511 2001/12/3308

GULBENKIAN'S SETTLEMENT TRUSTS, IN RE (NO 1); WHISHAW & ANOR v STEPHENS & ORS 1970 AC 508 1968 3 WLR 1127 1968 3 AER 785

CMSN OF INLAND REVENUE v OLDHAM TRAINING & ENTERPRISE COUNCIL 69 TC 231

TRINITY COLLEGE DUBLIN v AG (IN RE WORTH LIBRARY) 1995 2 IR 301 1994 1 ILRM 161 1996/15/4689

MCNAMARA, IN RE; COE v BEALE 1943 IR 372

HORLEY TOWN FOOTBALL CLUB, IN RE; HUNT & ANOR v MCLAREN & ORS 2006 AER (D) 34 (Oct) 2006 EWHC 2386 (CH)

CMRS FOR SPECIAL PURPOSES OF INCOME TAX v PEMSEL 1891 AC 531

TOURIST TRAFFIC ACT 1939 S14

TOURIST TRAFFIC ACT 1952 S5

VERGE v SOMERVILLE 1924 AC 496

NOTTAGE, IN RE (NO 1) 1895 2 CH 649

TRAVEL JUST v CANADA (CANADA REVENUE AGENCY) 2006 FCA 343

CRYSTAL PALACE TRUSTEES v MINISTER OF TOWN & COUNTRY PLANNING 1951 CH 132 1949-51 1 P & CR 247 1950 2 AER 857

CRYSTAL PALACE ACT 1914 (UK)

INLAND REVENUE CMRS v YORKSHIRE AGRICULTURAL SOCIETY 1928 1 KB 611 1927 AER REP 536

TASMANIAN ELECTRONIC COMMERCE CENTRE PTY LTD v CMSR OF TAXATION 2005 FCA 439

EQUITY

Trusts

Charitable - Benefit to community - Whether trust with tourism as its object may be charitable - Whether trust with sport as object may be charitable - Construction of trust - Clearly expressed intention - Whether extrinsic evidence may be considered- Rule against perpetuities - Re Horley Town Football Club: Hunt v. McLaren [2006] EWHC 2386 (Ch), (Unrep, Lawrence Collins J, 4/10/2006), In re Nottage [1895] 2 Ch 649 and Commissione of Income Tax v Pemsel [1891] 1 A.C. 531 approved; Verge v Somerville [1924] AC 496 and Travel Just v Canada (Revenue Agency) [2006] FCA 343 approved; Crystal Palace Trustees v Minister of Town and Country Planning [1951] Ch 132, O'Connell v Bank of Ireland [1998] 2 IR 596 and In re Julian [1950] IR 57 applied; Commissioners of Inland Revenue v Yorkshire Society [1928] 1 KB 611, Tasmanian Electronic Commerce Centre Pty Ltd v Commissioner of Taxation [2005] FCA 439, Igote Ltd v Badsey Ltd. [2001] 4 IR 511 and In re the Worth Library [1995] 2 IR 336 and In re McNamara [1943] IR 372 considered; In re Gulbenkian's Settlements [1970] AC 508 approved; Inland Revenue Commissioners v Oldham Training and Enterprise Council (1996) 69 TC 231 distinguished - Trust held not to be charitable (2007/7760P - Charleton J - 17/2/2009) [2009] IEHC 53

National Tourism Development Authority v Coughlan

Facts: The plaintiff was responsible for promoting tourism in Ireland and owned shares in a company that held the land on which three golf courses and a club house were situated. Due to concerns regarding its ability to hold shares, the plaintiff set up a trust to hold the relevant shares in the company in trust and the defendants were the trustees and held shares for the benefit of the trust objects. Part of the motivation in founding the trust was to preserve a stretch of countryside free from a building programme. The issue before the Court was whether the trust comprising as its subject matter a set of scenic golf courses and a club house was a charitable trust? It was argued that the trust herein was charitable because it was intended to be and had been beneficial to the community in Killarney and that it resulted in the preservation of a lake vista that would otherwise have been subject to suburban-style development.

Held by Charleton J.:That that while a golf course was a nice facility and was here a tourist draw, the golf club was not there to benefit anyone other than its members and those who could afford to pay the green fees as visitors. In reality, this facility was far more exclusive than joining in the work of a charity by paying a modest fee. It was clear from caselaw that sport was never recognized as an object of sufficiently wide benefit to the community as to enjoy charitable status. It was also clear that exclusivity, in the terms of a benefit to be conferred, was an indication against charitable status. Applying those observations to the trust herein, the activity being carried on by the defendants was nothing other than sport and recreation. The subject matter of the trust was an ordinary golf club, which although it benefited the community and attracted tourists, was not a charitable trust.

Reporter: L.O'S.

1 JUDGMENT of Mr. Justice Charleton delivered on 17th February, 2009

2 1. Can a trust can be charitable when its subject matter is a set of scenic golf courses in Killarney? That is the question for decision in this case. The plaintiff promotes tourism in Ireland and owns the shares in the company that holds the land on which this facility is situated. The defendants are the trustees, holding the shares for the benefit of the trust objects. Three golf courses and a club house are the property involved. The documents to which I shall refer make it clear that part of the motivation in founding the trust was to preserve a stretch of countryside, amounting to around 400 acres, free from the short-sighted building programme of bungalows that has undermined the resource for tourism that Ireland's landscape once widely represented. All the parties in this case are genuine. The plaintiff, in its previous statutory form, was Bord Fáilte Éireann and fulfilled the same function as is now apparent from its current name. The defendants are concerned and committed local people who have, on a voluntary basis, heavily involved themselves in the management of the trust. It is beyond doubt that the motivation of the plaintiff in setting up the trust was to have golf course facilities available for visiting tourists, who would be thereby be drawn to visit Killarney and to extend their stay in order to use, and perhaps to reuse, the three golf courses of outstanding quality that are the subject matter of this case. The trust in question has succeeded in preserving a small stretch of countryside. While all of this is clearly desirable, as a matter law, however, it does not necessarily mean that a trust facilitating such objects is charitable in nature.

The Documents

3 2. Three golf courses are involved here. All are of championship quality with sand based greens that allow them to be played in most weather conditions. They are the Killeen course, the Mahoney's Point course and the Lackabane course. The original course was constructed by the fifth Earl of Kenmare in 1938. Killarney Golf Club Limited ("the company") was incorporated at this time to hold these lands and the earl retained about 75% of the shares in that company. The club was, and is still, actually run by the Killarney Golf and Fishing Club, ("the club") which is an unincorporated association subject to a rule book. In all that follows, the company remains responsible for maintaining the golf courses, the club house and buildings and making all relevant capital investment to maintain and improve standards. Killarney Golf Club Limited amended its memorandum of association in November, 1964 by adding a new objects clause which was:-

"To provide amenities and facilities at the tourist resort of Killarney and to develop tourist traffic at or to the same resort."

4 3. In 1968, Bord Fáilte Éireann (the plaintiff, as then named) bought 125 acres of the estate of the Earl of Kenmare from his grandniece and successor, Mrs. Beatrice Grosvenor. The purpose of the plaintiff was to give the lands to the Office of Public Works so as to extend the national park in Kerry and to allow the road to be widened. The substantial part of those 125 acres was then provided to the company to allow a second golf course to be laid out in conjunction with the existing land held by the company. For this purpose a grant of £46,494 was given by Bord Fáilte to the company towards the construction costs of the new course. By inter-mingling the first golf course with the new land, clever design allowed the opening in 1971 of two 18 hole, par 72 courses. Later, a third course was added.

5 4. There was concern that under its then existing statutory powers, Bord Fáilte did not have the ability to hold shares in the company. Back in 1969, Mrs. Beatrice Grosvenor had agreed to transfer all of her shares in the company, with the exception of ten ordinary shares, to Bord Fáilte for the nominal sum of £360.75. Therefore, Bord Fáilte held around 73% of the shares in the company. Legally, these were held by a named employee on its behalf, Mr. Niall Miller. Concerns began to emerge, on a purely precautionary basis, about staff at Bord Fáilte holding assets on trust for it. Not being able, as it thought, to hold shares itself, Bord Fáilte proposed to dispose of them. Given the benevolent disposition of Mrs. Grosvenor, Bord Fáilte wrote to her to ask her whether there were moral obligations concerning the land which she might feel had arisen. The text of that letter dated 8 ^th November, 1984, includes the following:-

"We are reviewing our involvement in companies, property, etc. As you know, we have a controlling interest in your Company's shares. What would you and [the board of Killarney Golf and Fishing Club Limited] think about us getting rid of those shares?

Your views would be particularly relevant because we acquired the shares from you.

To avoid any misunderstanding I should say that this is not an offer to sell the shares. However, informal consultation with you will help us to arrive at a decision about them. The share transfer took place many years ago, and it would also...