Ayerst v C. & K. (Construction) Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STAMP,MR JUSTICE BRIGHTMAN |
| Judgment Date | 28 October 1974 |
| Judgment citation (vLex) | [1974] EWCA Civ J1028-1 |
| Court | Court of Appeal (Civil Division) |
[1974] EWCA Civ J1028-1
In The Supreme Court of Judicature
Court of Appeal
CIVII DIVISION
(Revenue Paper)
Lord Justice Stamp
Lord Justice Scarman and
Mr Justice Brightman
On appeal from Order of Mr. Justice Templeman.
Mr. C.N. BEATTLE. Q.C. and Mr. G.R. BRETTEN (instructed by Messrs Masons) appeared on behalf of the Appellant Company.
Mr. L.J. BROMLEY, Q.C. and Mr. PETER GIBSON (instructed by Solicitor of Inland Revenue) appeared on behalf of the Respondent Inspector of Taxes.
This is an appeal from an Order of Mr. Justice Templeman. The case is reported under the name Ayerst (Inspector of Taxes) v. C. & K. (Construction) Limited, which company I will call "C. & K.", in 1974 I All England Reports at page 676. Because the facts, so far as they are known, are fully stated in the report, I need not refer to them in this Judgment; nor need I refer to the terms of Section 17 of the Finance Act, 1954, which are stated in the Judgment of Mr. Justice Templeman.
In this appeal Mr. Beattie, appearing for the taxpayer, I have no doubt rightly felt unable to quarrel with the conclusion of the learned Judge that Mactrac had by the effect of its liquidation ceased to be the beneficial owner of the shares in C. & K., which company was accordingly not a subsidiary of Mactrac at the time of the transfer of the trade. He advanced a wholly new argument in support of the appeal, submitting that the persons carrying on Mactrac's trade as well before, as after, the sale to C. & K. were, within the meaning of Section 17 and by the effect of subsections (4)(b) and (4)(c) and subsection (5) of the section, which were not relied on in the Court below, the same persons, namely, the creditors and shareholders of Mactrac, who it is submitted were collectively the beneficial owners of each of Mactrac's assets within the meaning of the section.
Mr. Bromley, appearing for the Inspector of Taxes, did not object to the new point being raised. The new submissions were, as I have indicated, based on the provisions of subsections (4) (b) and (4) (c) and subsection (5) of the section. Subsection (4) (b) provides: "For the purposes of this section -…(b) a trade or interest therein belonging to any personas trustee (otherwise than for charitable or public purposes) shall be treated as belonging to the persons for the time being entitled to the income under the trust".
Looking at the situation immediately prior to the transfer of Mactrac's trade, it was submitted that the trade belonged to Mactrac as trustee and that the creditors and contributories of Mactrac, as the only persons interested in the assets falling to be dealt with in the liquidation, were collectively entitled to the income under a trust. It followed, so it was submitted, that these persons were for the purposes of the section the beneficial owners of Mactrac's trade.
Looking at the situation immediately after the transfer, reliance was placed on paragraph (c) of subsection (4) and subsection (5) taken together. Paragraph (c) provides that for the purposes of the section "a trade or interest therein belonging to a company shall, where the result of so doing is that the conditions for subsection (1) or subsection (2) of this section to apply to a change are satisfied, be treated in any of the ways permitted by the next following subsection". That takes one to subsection (5), which provides, so far as relied on by Mr. Beattie: "For the purposes of this section, a trade or interest therein which belongs to a company engaged in carrying it on may be regarded - (a) as belonging to the persons owning the ordinary share capital of the company and as belonging to them in proportion to the amount of their holdings of that capital".
Relying on the latter subsection, Mr. Beattie submitted that after the transfer the creditors and shareholders of Mactrac collectively owned the ordinary shares of C. & K. and that accordingly the trade transferred to C. & K. may for thepurposes of Section 17 he regarded as belonging again to the creditors and shareholders of Mactrac. So it is said the trade can be regarded as belonging to the same persons immediately after the transfer as it did, by the effect of subsection (4)(b), immediately before. I emphasise in passing that the analysis of the situation immediately after the transfer so advanced depends upon the proposition that, notwithstanding that Mactrac was in liquidation, the creditors and shareholders were the owners of Mactrac shares in C. & K. within the meaning of subsection (5) (a) and also that the reference to ownership is, by the effect of subsection (6) (a), a reference to beneficial ownership.
Similar submissions to those so put forward were rejected by Mr. Justice Cross (as he then was), in Pritchard v. M. H. Builders Limited, 45 Tax Cases at page 360, in circumstances not dissimilar from the facts in this case. Mr. Beattie accepted that in order to succeed in this appeal he must persuade us that that case was wrongly decided.
Now, a liquidator in a liquidation has the duties imposed upon him by the Companies Acts. The creditors and contributories are entitled to require him to carry out those duties and to deal with the company's assets in accordance with the statutory provisions. But I cannot equate that right with the beneficial ownership of the assets or of any particular asset falling to be administered in accordance with the Acts. It does not, in my judgment, in the least follow that because a...
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