Barclays Bank Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | Viscount Simonds,Lord Reid,Lord Cohen,Lord Keith of Avonholm,Lord Denning |
| Judgment Date | 21 June 1960 |
| Judgment citation (vLex) | [1960] UKHL J0621-2 |
| Date | 21 June 1960 |
| Court | House of Lords |
[1960] UKHL J0621-2
House of Lords
Viscount Simonds
Lord Reid
Lord Cohen
Lord Keith of Avonholm
Lord Denning
Upon Report from the Appellate Committee to whom was referred the Cause Barclays Bank Limited against Commissioners of Inland Revenue, that the Committee had heard Counsel, as well on Tuesday the 10th, as on Wednesday the 11th and Thursday the 12th, days of May last, upon the Petition and Appeal of Barclays Bank Limited, whose registered office is at 54 Lombard Street, in the City of London, 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 21st of July 1959, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, and that the Petitioners might have the relief prayed for in the Appeal, or such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of the Commissioners of Inland Revenue, 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 21st day of July 1959, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered. That the Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.
My Lords,
This appeal once more demands your Lordships' consideration of section 55 and section 58 of the Finance Act, 1940, and it is not surprising that it raises questions which to me at least appear to be of outstanding difficulty.
At the date of his death on 15th December, 1955, Tom Shipside, whom I will call "the testator", was the registered holder of 1,100 fully paid ordinary shares of £1 each of T. Shipside Ltd. Of these shares he was the beneficial owner. At all times the issued ordinary share capital was 8,350 £1 shares. On the 1st December, 1936, the testator settled 3,650 of these shares upon trusts for the benefit of his wife and children, himself taking no beneficial interest. The original trustees were the testator and two other persons, but upon the retirement of one of them the testator, in exercise of a power reserved to him by the settlement, appointed two more persons to be trustees. Thus at his death there were four trustees registered as the holders of the 3,650 shares and as his name appeared first in the register he was under the articles of association of the company entitled to vote in respect of them. He was therefore entitled to vote in respect altogether of shares amounting to more than half the issued share capital of the company.
The question then arose whether the 1,100 shares which passed on his death should be valued for estate duty in accordance with section 7 (5) of the Finance Act, 1894, that is, by reference to their market value, or with section 55 (2) of the Finance Act, 1940, that is, by reference to the estimated value of the assets of the company. Upon a summons issued for the determination of this question Mr. Justice Danckwerts decided in favour of the former method, the Court of Appeal of the latter. It is necessary, then, to set out and examine closely the relevant sections of the 1940 Act. They are as follows:
"55.—(1) Where for the purposes of estate duty there pass, on the death of a person dying after the commencement of this Act, shares in or debentures of a company to which this section applies, then if—
( a) the deceased had the control of the company at any time during the five years ending with his death;
……
the principal value of the shares or debentures, in lieu of being estimated in accordance with the provisions of subsection (5) of section seven of the Finance Act, 1894, shall be estimated by reference to the net value of the assets of the company in accordance with the provisions of the next succeeding subsection."
(Subsection (2) of section 55 contains provisions for ascertaining the value of the shares by reference to the net value of the assets.)
"(3) For the purposes of this section a person shall be deemed to have had control of a company at any time if he then had—
( a) the control of powers of voting on all questions, or on any particular question, affecting the company as a whole which if exercised would have yielded a majority of the votes capable of being exercised thereon; …
or if he could have obtained such control … by an exercise at that time of a power exercisable by him or with his consent.
(4) …
(5) Control of a company which a person had in a fiduciary capacity shall be disregarded for the purposes of this section.
(6) …
(7) …
58.—(1) …
…
(4) References in this Part of this Act to a disposition's being made by any person, to a power's being exercised or exercisable by any person, or to any other act's being done by any person, include references to its being made, or being exercised or exercisable, or being done, by him and another jointly or by another at his direction or by a company of which he had control within the meaning of subsection (3) of section fifty-five of this Act, whether with or without the consent of any other person; references importing an omission on the part of any person in relation to any such matter as aforesaid shall be construed in like manner; and references in relation to any such matter as aforesaid to its being made, or being exercised or exercisable, or being done or omitted, with the consent of any person include references to its being made, or being exercised or exercisable, or being done or omitted, at his request or with or subject to his acquiescence.
(5) References in this Part of this Act to a person having any power or control or doing any act in a fiduciary capacity shall be construed as references to his having that power or control or doing that act in a fiduciary capacity imposed on him otherwise than by a disposition made by him and in such a capacity only."
The first question—much discussed, though the answer to it may not be decisive—is whether section 55 (3) is an exhaustive definition of the words occurring in section 55 (1), "control of the company", or is an expansive provision, extending the scope of those words beyond their natural meaning. I respectfully suggest that this is a problem which ought not to be allowed to arise, for, profoundly difficult as the drafting of a Finance Act must be, it should be possible at least to indicate clearly into which category such a section as section 55 (3) falls. That the problem does arise in the present case is apparent, for different views are taken upon the question in the Court of Appeal.
I do not think that much assistance is to be got from the solution which has been given to similar questions in other cases such as In re Parsons. Parsons v. Attorney-General [1943] Ch. 12, St. Aubyn and Others v. Attorney-General [1952] A.C. 15, or Public Trustee v. Inland Revenue Commissioners [1960] 2 W.L.R. 203. The answer must depend on the construction of the particular sections under review in the context of the whole Act in which they are found.
In the present case I agree with Romer, L.J. in thinking that the so-called "deeming" provision of subsection (3) is expansive of subsection (1) and that, if a case falls naturally within subsection (1) it is unnecessary to look beyond it. I bear in mind what Lord Radcliffe said in St. Aubyn's case about the word "deem" but nevertheless regard its primary function as to bring in something which would otherwise be excluded. I agree, too, with the learned Lord Justice in thinking that the words in subsection (3) "control of powers of voting on all questions" are singularly inapt to describe the right of a registered shareholder to vote in respect of shares in his name. They are, on the other hand, apt enough if they are intended not to cover such a case but to supplement it. It is said that the reference to subsection (3) in section 58 (4) points in the other direction, but it is, I think, possible that section 58 (4) looks rather to the extended meaning of control given by subsection (3) than to its natural meaning given by subsection (1).
As I have said, I doubt whether the answer that is given to this primary question is conclusive of the problem raised in this appeal, but it leads me to examine it upon the footing that I must ask whether the testator being under the constitution of the company entitled to vote in respect of both the 1,100 and the 3,650 shares "had the control of the company" within the natural meaning of those words. My Lords, in B. W. Noble Ltd. v. Commissioners of Inland Revenue, 12 T.C. 911, the words "controlling interest in the company" occurring in the Finance Act, 1920, were said by Rowlatt, J. to mean the interest of one "whose shareholding in the company is such that he is the shareholder who is more powerful than all the other shareholders put together in General Meeting"; in other words, one who can by his votes control the company in general meeting. His opinion was approved in later cases in this House, see Commissioners of Inland Revenue v. F. A. Clark & Son, Ltd. and British-American Tobacco Co. Ltd. v. Commissioners of Inland Revenue, 29 T.C. 49. I see no difference between the natural meaning of the two phrases "having a controlling interest in the company" and "having control of the company", though it might be desirable, and in the case of the latter, phrase was found to...
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