Agricultural Mortgage Corporation Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BUCKLEY,LORD JUSTICE GOFF,LORD JUSTICE SCARMAN |
| Judgment Date | 13 July 1977 |
| Judgment citation (vLex) | [1977] EWCA Civ J0713-1 |
| Docket Number | 1974 A No. 5143 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 July 1977 |
In the Matter of the Finance Act 1899 as amended
In the Matter of the Memorandum of Association of the Agricultural Mortgage Corporation Limited
In the Matter of Five Agreements made between the Minister of Agriculture Fisheries and Food (or Minister of Agriculture and Fisheries) (1) and the Agricultural Mortgage Corporation Limited (2) dated respectively 24th January 1929, 20th March 1945, 14th February 1957, 1st May 1961 and 8th September 1967.
[1977] EWCA Civ J0713-1
Lord Justice Buckley
Lord Justice Scarman and
Lord Justice Goff
In The Supreme Court of Judicature
Court of Appeal
On Appeal from the High Court of Justice
Chancery Division
Group A
(Mr. Justice Walton)
MR. PETER CURRY Q.C., MR. ANDREW MORRITT and MR. DAVID UNWIN instructed by Messrs. Linklaters & Paines, Solicitors, London) appeared on behalf of the Plaintiffs (Appellants).
MR. L. BROMLEY Q.C. and MR. MARK BLACKBURN (instructed by The solicitor of Inland Revenue, London) appeared on behalf of the Defendants (Respondents).
I have asked Lord Justice Goff to deliver the first judgment.
This is an appeal from a judgment of Mr. Justice Walton, dated 28th February 1975, reported in (1975)2 Weekly Law Reports, 1027.
It was given at the hearing of an originating summons issued on the 30th September 1974 by the Agricultural Mortgage Corporation Ltd., naming the Commissioners of Inland Revenue as defendants and asking: "That it may be determined whether upon the true construction of the above mentioned act (i.e. The Finance Act, 1899 as amended) and documents (i.e. five agreements between the Minister of Agriculture and Fisheries and the Company) the liability of the plaintiff in respect of the sums of £1,500,000, £1,805,000, £1,700,000, £1,270,000 and £665,000 advanced to the Plaintiff by the Minister on 1st May, 1968, 16th April, 1969, 4th March, 1970, 11th March, 1971 and 31st August, 1971 respectively as additions to the Plaintiff's Guarantee Fund was or was not at the respective dates of such advances loan capital within the meaning of Section 8 of the said Act".
That section as amended before, and as it therefore was at the time of each of the said advances, and so far as material, reads as follows: "(1) Where any corporation, company, or body of persons formed or established in the United Kingdom propose to issue any loan capital, they shall, before the issue thereof, deliver to the Commissioners a statement of the amount proposed to be secured by the issue". Sub-section (2): "Subject to the provisions of this section every such statement shall be charged with stamp duty of 50 pence for every £100 and any fraction of £100 over any multiple of £100 of the amount proposed to be secured by the issue, and the amount of the duty shall be a debt due to Her Majesty".
Sub-section (5): "In this section the expression 'loan capital' means any debenture stock, corporation stock, or funded debt, by whatever name known, or any capital raised by any corporation, company, or body of persons formed or established in the United Kingdom, which is borrowed, or has the character of borrowed money, whether it is in the form of stock or in any other form and whether the loan thereof is secured by a mortgage, marketable security or other instrument or is unsecured, but does not include any overdraft at the bank or other loan raised for a merely temporary purpose for a period not exceeding twelve months".
As the section was originally enacted it applied to "any local authority corporation company or body of persons" but the amendments made by the Finance Act 1967 section 28 (2) deleted local authorities.
The amendments also added to subsection (5) the words "whether the loan thereof is secured by a Mortgage marketable security or other instrument or is unsecured" but did not delete the words "the amount proposed to be secured by the issue" in subsections (1) and (2) or "the loan capital proposed to be issued" in subsection (3), and of course, the reference to County Council or Municipal Corporation bills was deleted from subsection (5). It is therefore clear, because Parliament has itself said so, that to be loan Capital or funded debt it does not have to be secured by a Charge.
The history of the matter begins with The Agricultural Credits Act 1928.
This provided, so far as material, as follows: "1.(1) With a view to the incorporation of a company having for its principal objects - (a) the making of loans on mortgages of agricultural land; (b) the making of loans under the Improvement of Land Acts, 1864 and 1899, for agricultural purposes; and with a view tosecuring that loans by such a company shall be made on terms most favourable to the borrowers, it shall be lawful for the Minister of Agriculture and Fisheries (hereinafter referred to as the Minister) with the approval of the Treasury to undertake that if such a company having such objects and complying with the provisions hereinafter contained is incorporated, he will - (i) make advances to the company (for the purpose of establishing a guarantee fund), not exceeding in the aggregate seven hundred and fifty thousand pounds, and not at any time exceeding in the aggregate the amount at that time of the paid-up share capital of the company; such advances - (a) to be payable in instalments so, however, that the aggregate amount paid shall not exceed" - and then follow certain limits which have been greatly increased by later Acts - "(b) to be free from interest for a period of sixty years, and thereafter to carry interest at such rate, not exceeding the average yield of such Government funded stocks as the Treasury from time to time may determine; 3. Section 2 of the said Act provided that the Company to be so formed should be a company limited by shares and registered under the Companies Acts 1908 to 1917 and that its Memorandum and Articles should be subject to the approval of the Minister and alterable only with his approval and should make provision for regulating the use of the guarantee fund to which the advances made by the Minister were to be carried for the repayment of advances made by the Minister and for providing that on a winding up the Company's liability to the Minister should rank after other liabilities of the Company to creditors but in the event of a deficiency pari passu with the paid up share capital".
It will be seen that this Act was an enabling Act authorising the Minister to make advances for certain purposes; it did not bind him to make them.
The plaintiff company was incorporated on 12th November 1928. The shares have at all material times been held by the Bank of England and the leading clearing Banks. It is of course the company envisaged by the 1928 Act. Its Memorandum of Association has been lawfully altered from time to time but at all material times it has been, so far as it is necessary to state it, as follows: Its first express objects (clause 3 paragraph 1 of the Memorandum of Association) are "to raise money by the issue of Debentures Debenture stock or other like securities constituting a general charge upon the whole of the company's undertaking property and assets and to apply the net monies so raised and any other available monies (excluding monies raised as mentioned in paragraph 3 in (a) making loans or advances on first mortgages of agricultural or farming estates properties or lands in Great Britain.
(b) in making loans or advances under and in accordance with the Improvement of Land Acts 1854 and 1899 and certain other ancillary purposes.
Paragraph 3 of the objects clause (clause 3) I should read in full. It is as follows: "To raise money on loan from His Majesty's Government or any Department thereof and to invest the money so raised in any 'stocks funds or obligations of the British Government (with power to vary any such investments) and to hold such investments as a guarantee or security fund for further securing the debentures or debenture stocks of the Company issued pursuant to paragraph (1) of this Clause, but with full power to resort to such investments to pay the interest on any such debentures or debenture stock or for such other purposes if any as may be agreed upon between the Company and the Minister of Agriculture and Fisheries".
Then there are two provisos (A) and (B) to clause 3, thefirst of which was to operate at the expiration of the first 15 years only and is now spent. So far as material they read as follows: "(A) That if at the expiration of 15 years from the date of the incorporation of the Company the amount on loan from the Minister of Agriculture and Fisheries (hereafter called 'the Minister') under the Agricultural Credits Act 1928 shall exceed 7½ per cent of the aggregate amount of the loans made by the Company on mortgages and land charges up to that date the excess of the amount so on loan from the Minister shall, if the Minister so requires, be repaid.
"(B) That if in any year after the year 1958 in which the total reserves of the Corporation as shown by the audited accounts for such year (which reserves shall for this purpose be deemed to include the share capital of the Corporation and the Corporation's Guarantee Fund) shall exceed 12½ per cent of the liabilities of the Corporation (from which there shall for this purpose be excluded the share capital of the Corporation and the Corporation's Guarantee Fund) there shall be allocated to the repayment of the Corporation's Guarantee Fund one half of the profits remaining after payment of the maximum dividend on the share capital of the Corporation hereby authorised to be paid".
These provisos were no doubt designed to secure that the plaintiff company would make...
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