Bank voor Handel en Scheepvaart N.v v Administrator of Hungarian Property
| Jurisdiction | UK Non-devolved |
| Judge | Lord Morton of Henryton,Lord Reid,Lord Tucker,Lord Asquith of Bishopstone,Lord Keith of Avonholm |
| Judgment Date | 01 April 1954 |
| Judgment citation (vLex) | [1954] UKHL J0401-2 |
| Date | 01 April 1954 |
| Court | House of Lords |
[1954] UKHL J0401-2
Lord Morton of Henryton
Lord Reid
Lord Tucker
Lord Asquith of Bishopstone
Lord Keith of Avonholm
House of Lords
Upon Report from the Appellate Committee, to whom was referred the Cause Bank Voor Handel En Scheepvaart N.V. against Administrator of Hungarian Property, that the Committee had heard Counsel, as well on Monday the 14th, Tuesday the 15th, Wednesday the 16th and Thursday the 17th, days of December last, as on Tuesday the 26th, Wednesday the 27th and Thursday the 28th days of January last, upon the Petition and Appeal of the Bank Voor Handel En Scheepvaart N.V., Van Vollenhovenstraat 36, Rotterdam, Holland, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 3d of November 1952, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the printed Case of the Administrator of Hungarian Property, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:
It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 3d day of November 1952, complained of in the said Appeal, be, and the same is hereby, Reversed, and that the Judgment of the Honourable Mr. Justice Devlin of the 18th day of January 1952 thereby varied, be, and the same is hereby, Restored:
And it is further Ordered, That the Respondents do pay, or cause to be paid, to the said Appellants the Costs incurred by them in the Court of Appeal, and also the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Queen's Bench Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.
My Lords,
The Custodian of Enemy property for England and Wales (hereafter referred to as "the Custodian") was assessed to income tax in respect of income derived from certain investments made by him during a period of nearly 10 years, ending in the year 1950. The Custodian paid the tax, amounting to a total of over £70,000. By reason of certain concessions made from time to time since the writ was issued in this action, the only question remaining for decision in your Lordships' House is whether the Custodian was bound to pay that tax or whether he could have claimed immunity by the application of the general principle that the Sovereign, by virtue of the prerogative, is exempted from income tax. The Custodian was a defendant in the action but is not a party to this appeal.
The events leading up to the appeal to this House are as follows:�
The Appellants are and were at all material times bankers, incorporated in the Netherlands and with their head offices at Rotterdam, Holland. Immediately prior to the 20th May, 1940, they were the owners of 585 bars of gold and certain U.S.A. Gold Eagles deposited on their behalf with the City Safe Deposit and Agency Company Limited, Throgmorton Avenue, in the City of London, and they were also the creditors of certain banks in London in sums amounting to £18,790 3s. 8d. being balances standing to the Appellants' credit with such banks. In May, 1940, Germany invaded the Netherlands. On the 20th May, 1940, the Netherlands became "enemy territory" and the Appellants accordingly became "enemies", and the said gold and balances became "enemy property", in each case within the meaning of the Trading with the Enemy Act, 1939. By a Vesting Order dated the 3rd July, 1940, as varied by a further Order dated the 22nd July, 1940, made under the Trading with the Enemy Act, 1939, and the Trading with the Enemy (Custodian) Order, 1939, the Board of Trade vested the legal title to the said gold in the Custodian of Enemy Property and empowered him to sell the same. On the 24th July, 1940, the Custodian sold the gold for nearly 2 million pounds and from time to time thereafter invested and reinvested the proceeds of sale and profits of such investment and reinvestment (together with other funds in his hands as Custodian as one mixed fund) in the purchase at discount of Treasury Bills, such investments producing during the period 24th July, 1940, to 12th April, 1950, profits, or "fruits" as they have been called, amounting to £151,454 17s. 2d. By letter dated the 6th April, 1950, the Respondent, the Administrator of Hungarian Property, demanded the proceeds of the sale of the gold, and also the bank balances, from the Custodian, on the ground that they were subject to a charge under the Treaty of Peace (Hungary) Order 1948, made under the Treaties of Peace (Italy, Rumania, Bulgaria, Hungary and Finland) Act, 1947. On or about the 12th April, 1950, the Custodian, in compliance with this demand, and a certificate accompanying it, transferred to the Respondent the sum of £1,962,852 14s. 9d., being the proceeds of the sale of the gold, plus the bank balances, less the Custodian fee. No part of the sum of £151,454 17s. 2d. representing the "fruits" was transferred by the Custodian to the Respondent. The demand and certificate were based on the assumption that the property in question belonged to or was held or managed on behalf of a Hungarian National, but in the course of the present action Devlin, J. held that this assumption was incorrect.
The Appellants issued their writ in the present action on the 12th January, 1950, against the Custodian and the present Respondent. Against the Custodian they claimed, inter alia, delivery up of the gold or its value. This claim was dismissed by Devlin, J., and there was no appeal against his decision. Against the Respondent the Appellants claimed a declaration that the proceeds of sale of the gold and the bank balances were not subject to any charge imposed by the Treaty of Peace (Hungary) Order, 1948, and that the Appellants were absolutely entitled thereto. They also claimed payment of these monies with interest.
During the course of the trial of the action before Mr. Justice Devlin, the Appellants contended that if they succeeded in their claim against the Respondent they were entitled not only to the capital sum representing the actual proceeds of sale of the gold but also the "fruits" of the investment thereof, namely any interest or other money which the capital sum earned whilst in the hands of the Custodian, even though such "fruits" had not actually been transferred by the Custodian to the Respondent. At this point it was agreed on behalf of the Respondent that these fruits, whatever they were (their precise amount not having been ascertained at this time) should be treated as being part of the actual proceeds of sale in the hands of the Respondent. Mr. Justice Devlin, in giving judgment for payment of the capital sums in question in favour of the Appellants, said�
"The interest payable on the proceeds of the gold bars has not been separately ear-marked, but the Custodian says that while it was in his hands, it would have earned on the average from 1940 to 1950 about three-quarters per cent. per annum. The Solicitor-General is willing to treat these fruits as part of the proceeds in the hands of the Administrator; and accordingly the Judgment that I give will be for the amount which the Administrator actually received increased by that addition."
Mr. Justice Devlin directed that the precise figure for which payment was to be entered should if possible be agreed between the parties, with liberty to apply in the event of such agreement not being reached.
Thereafter correspondence took place between the Solicitors for the respective parties, but no agreement was reached, the dispute being as to whether the proper figure to be taken for the profits or "fruits" was, as the Appellants contended, £151,454 17s. 2d., being the agreed gross amount of the profits earned by the said gold proceeds from the discounting of Treasury Bills by the Custodian during the period in question, namely from the 24th July, 1940, to the 12th April, 1950; or was, as the Respondent contended, the gross amount of such interest less the sum which the Custodian had paid or purported to pay as income tax in respect of the profits in question. The matter was accordingly restored to Mr. Justice Devlin for further consideration.
At the hearing a discussion took place as to whether or not the "concession" or "agreement" made by the Respondent at the trial of the action, that the "fruits" should be treated as part of the proceeds of sale in the hands of the Respondent, was binding. Counsel on behalf of the Respondent eventually conceded that if the Court were to hold that the Custodian was not liable to pay tax, then the sum which had been paid by way of tax should be treated as having passed to the Respondent and should be included in the amount of the judgment. This concession was made subject to certain reservations which are not material for the purpose of this appeal. The only question, therefore, which remained to be decided by Mr. Justice Devlin, and the only question which came before the Court of Appeal, was whether or not the Custodian was liable to play income tax on the sum in question. Devlin, J. held that he was not so liable. The Court of Appeal held that he was. The same question, and no other, is now before your Lordships' House for decision.
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