C. H. W. (Huddersfield) Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS |
| Judgment Date | 22 June 1962 |
| Judgment citation (vLex) | [1962] EWCA Civ J0622-1 |
| Date | 22 June 1962 |
| Court | Court of Appeal |
[1962] EWCA Civ J0622-1
In The Supreme Court of Judicature
Court of Appeal
Revenue Paper
The Master of the Rolls
Lord Justice Donovan and
Lord Justice Pearson
MR H. H. MONROE, Q. C., and MR M. P. NOIAN (instructed by Messrs Malkin, Cullis & Sumption, 52 Mark lane, London, E. C.3) appeared as Counsel for the Appellants.
MR F. HEYWORTH TALBOT, Q. C., MR E. BLANSMRD STAMP and MR AIAN S. ORR (instructed by the Solicitor of Inland Revenue, Somerset House, Strand, London, W. C.2) appeared as Counsel far the Respondents.
I will ask Lord. Justice Donovan to give the first judgment.
LORD JISTICE DONOVAN: I need not repeat the complicated facts of this case. They are set out in the Case Stated itself and summarised in the judgment: of Mr Justice Plowman. The crucial question is whether, on the assumption that this Company is a company within the scope of section 245 of the 1952 Act, could more than half the income of the period 1st April 1956 to 31st January 1957 be apportioned to Mr Garside and Mr Spencer? If so, this will in the first place justify the direction, for the Company will then not be a "subsidiary company". This question of apportionment depends chiefly on the effect of the decision of the House of Lords in Fendoch Investment Trust Co. Limited. v. Commissioners of Inland Revenue, which is reported in the 27th volume of the Tax Cases.
It is conceded far the Appellants, and I think necessarily so, that the Messrs Garside and Spencer must, by virtue of the decision in the ndoch case, be regarded as members of the Company for present purposes, notwithstanding that a few days before the end of the trading period with which the case deals, namely the period ending on the 31st January 19571 the Messrs Garside and Spencer sold all their shares in the Company. But it is argued that nevertheless, when the Special Commissioners come to make the apportionment of the income among the members "in accordance with "their respective interests", to quote the language of section 248, they (that is, the Special Commissioners) must apportion to the Messrs Garside and Spencer no more than a sum equivalent to the dividend on their preference shares - a mere £1,000, which is only a small fraction of the whole income of the period.
I think that the ratio of the decision in the ndoch case compels us to negative this contention and to say that the Special Commissioners were within their statutory rights in making the much larger apportionment to these two individuals which they did.
If this be so, then two questions are decided: one, the validity of the direction; and, two, the competence of the apportionment. As regards the direction, it so happens in this case, as I say, that the competence of the apportionment means that the Company is not a "subsidiary" company within the meaning of section 256 of the Act, and therefore a direction becomes possible: see in particular on this point subsection (4) of section 256 and the proviso thereto.
I confess that I have struggled against this conclusion, but in vain. The courageous argument of Mr Monroe has, I think, much to commend it. Parliament was, at least in my opinion, intending to counteract the non-distribution of profit and to levy surtax on those persons who would have got the income had it in fact been distributed. This legislation was so understood and administered for more thin 30 years, with this exception, that one treated the members who would have got the dividend as being, the members on the last day of the accounting period in question. But once it has been decided that "members" include those persons who may have sold their shares during the relevant period, then I think it is very difficult successfully to contend that in apportioning the income among all the members "in accordance with their respective interests" the Special Commissioners cannot take account of the fact that some members were members for the whole period less three days and load the apportionment accordingly, as has been done in this case.
The question whether the dividend was declared within a reasonable time is a question of fact. Here the Company indicated in February 1957 that it was going to declare no more dividend out of the profits of this period. But after the Commissioners began the proceedings under section 245, the Company declared in December of 1957 a...
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