Tourism Development Authority -v- Coughlan Ors
High Court
Judgment was delivered by Mr Justice Peter Charleton on February 17th, 2009.
Judgment
A trust set up to control the land on which golf courses were constructed in Killarney, and which charge high membership and green fees, could not be regarded as a charitable trust, and did not deserve to be treated as such in law.
Background
The case concerned the status of the trust which owns the land on which three golf courses, the Killeen course, the Mahoney’s Point course and Lackabane course, were built.
The original course was constructed by the fifth Earl of Kenmare in 1938. The Killarney Golf Club (the company), of which he owned about 75 per cent of the shares, was set up at this time to hold the land.
This club was run by the Killarney Golf and Fishing Club.
In 1968, Bord Fáilte bought 125 acres from the earl’s niece and successor, Beatrice Grosvenor, intending it to be used to extend the national park and widen the road. A substantial part of this land was provided to Killarney Golf Club to extend the course, leading to the construction of a second course, to which a third was later added.
Bord Fáilte was concerned that it did not have the statutory power to hold shares in the company and it nominated an employee to hold them on its behalf. The board was not happy about this arrangement, and consulted Ms Grosvenor.
She replied stating that it was the understanding of the directors that “the golf club property in Killarney would be protected permanently from any possibility of exploitation arising from private ownership” and that she, agreeing with this view, had therefore transferred her shares to Bord Fáilte for a nominal sum.
She said that she and the directors therefore thought that the shares should be held in perpetuity by a type of trust, possibly formed by the local ordinary shareholders.
She suggested that Bord Fáilte acquire all the shares held by another shareholder, then transferring the shares to such a trust.
Bord Fáilte set about establishing such a trust. The subject matter of the trust, therefore, is the shares held by the National Tourism Development Authority (formerly Bord Fáilte) in Killarney Golf Club Ltd.
The purpose of the trust was to promote the amenities of the club for its members and visiting golfers. The club is run under the rule book by Killarney Golf and Fishing club, the relationship of the members of the club is with the club, not with the company (Killarney Golf Club Ltd) or the trust.
A person joining does not buy shares in the company, but joins the club, at a cost of €7,000 joining fee (for which there is a long waiting list) or €100 a day green fee.
Mr Justice Charleton said he was satisfied tourism was a major industry in Killarney and that golf featured prominently in tourism there. The question was whether the trust was a charitable one.
“If this trust was not set up for a charitable purpose then the interested parties, the golf and fishing club, the trustees and the company, will, together with the plaintiff, reorder their affairs,” he said.
He pointed out that, under the rule against perpetuities, a settlement by trust cannot take effect outside the period of the lives in being plus 21 years, while a charitable trust can be set up so as to act in perpetuity.
He examined in detail the case law on charities.
In this case, the defendants pleaded that the trust allowing the golf course to be used by its members, where all profits were ploughed back into the facilities, had a major benefit to Killarney as a tourist facility bringing high- spending visitors to the area.
The creation of the golf course, it was also argued, had a major benefit in that it led to the preservation of a lake vista that would otherwise have been churned up in ugly suburban-style development.
Decision
Having examined the function of Bord Fáilte as defined by statute, Mr Justice Charleton, said: “While the plaintiff has as its principal object the promotion of tourism, this does not mean that tourism is a class of charitable trust beneficial to the community.”
It did not mean, either, that anything done by the plaintiff to benefit tourism was necessarily charitable, he said.
For example, providing a grant to a small hotel to improve its facilities might improve the tourist-drawing potential of the area, but as a matter of reality, it primarily benefited the commercial enterprise that ran the establishment.
Considering whether the support of sporting and cultural activities might be charitable activities, he said: “The fees in the decided cases are modest. It seems to me that the line shades across towards consideration that a trust is not charitable in purpose the more exclusive a facility is for which that exemption is sought.
“My basic problem in this case is that while a golf course is a nice facility and can be, and is here, a tourist draw, a golf club is not there to benefit anyone other than its members and those who can afford to pay the green fees as visitors.”
Summing up, Mr Justice Charleton said that the trust was set up by the plaintiff to benefit tourism in the area by having available a cluster of three golf courses. The manner in which the club interacted with the trustees contained elements that hinted at a charitable purpose.
By preserving the land around Loch Lane it was protected from unsightly buildings and rural destruction.
However, it was difficult to conceive of a trust for the purposes of tourism as being, of itself, of sufficient benefit to the community as to attract charitable status. Sport was not recognised as meriting charitable status.
The object of a trust had to be exclusively charitable for it to enjoy charitable status – almost any economic activity could be regarded as of benefit to the community.
In this case there was a clear intention to use this land exclusively for a golf course, as shown by the wording of the trust document stating that those who wished to wander the land or take refreshment were to be denied entry.
“It is clear from the case law that exclusivity, in the terms of the benefit to be conferred, is an indication against charitable status,” he said.
Applying these principles to this case, he failed to see the activity being carried out as anything other than sport and recreation.
“There is no question but that all parties are decent people who were at all times motivated towards the betterment of our society.”
But a golf club could not be the subject of a charitable trust under ordinary circumstances, though an exception could arise if, for example, it was for the use of people with disabilities.
This golf club was an ordinary golf club which people could join, or pay green fees, and the trust could not be declared a charitable one.
The full judgment is on www.courts.ie
Paul Sreenan SC and Nessa Cahill BL, instructed by Arthur Cox Co, for the plaintiff; Denis McDonald SC and Jacinta Heslin BL, instructed by A L Goodbody, for the respondent.