Carson (Inspector of Taxes) v Cheyney's Executor
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE JENKINS |
| Judgment Date | 21 October 1957 |
| Judgment citation (vLex) | [1957] EWCA Civ J1021-2 |
| Date | 21 October 1957 |
| Court | Court of Appeal |
[1957] EWCA Civ J1021-2
In The Supreme Court of Judicature
Court of Appeal
Lord Justice Jenkins
Lord Justice Parker And
Lord Justice Pearce
Mr H.B. Magnus, Q.C., and Mr Alan Orr (instructed by the Solicitor of Inland Revenue, Somerset House, Strand, London, W.C.2) appeared as Counsel for the Appellant.
The Hen. B.L. Bathurst, Q.C., and Mr C.N. Bbattie (instructed by Messrs Frere, Chelmeley & Nichelsons, 28, Lincoln's Inn Fields, London, W.C.2) appeared as Counsel for the Respondent.
: The judgment I am abeut to read is the judgment of the Court.
This is an appeal by the Crown from a judgment of Mr Justice Barman dated the 6th June, 1957, affirming a decision of the General Commissioners of Income Tax for the division of Bromley, Kent, in favour of the Respondent, who had appealed against assessments to Income Tax, Schedule D, for the years 1951/52 and 1952/55 made upon him as sole surviving Executor of the Will of the late Mr Peter Cheyney, a well known Author of detective fiction, in respect of royalties received by the Respondent after Mr Cheyney's death under contracts with publishers made in his lifetime.
Mr Cheyney died on the 26th June, 1951. It is common ground that down to the date of his death he had been carrying on the profession of an Author, and accordingly that during his lifetime the royalties received by him under his contracts with the various publishers of his Works were properly assessable, under Case II of Schedule D, as profits of his profession, and not as annual payments under Case III or as "annual profits "or gains not falling under any other case and not charged by virtue of any "other Schedule" under Case VI, During the continuance of the profession Case VI was by definition excluded because the royalties fell under Case II, and Case III had no application because Case II applied and accordingly the proper subject of tax was not simply the amount of the royalties received under each of the various contracts considered individually, but consisted of the balance of profit arising from the totality of Mr Cheyney's professional activities, arrived at by deducting from the aggregate of his professional receipts the aggregate of the outgoings properly allovable as expenses of his profession. See Davis v. Braithwaite, 18 T.C. 198. See also Asher v. London Film Productions Ltd., (1944) 1 K.B. atpage 140, whore Lord Greene distinguishes annual payments constituting "pure income profit", and as such payable under Case III, from payments which are merely an element in the computation of profits and accordingly are not so taxable.
This having admittedly, been the position as regards royalties received in Mr Cheyney's lifetime the question in the case is whother (as is contended on the part of the Crown) the discontinuance of Mr Cheyney's profession by reason of his death had the effect of changing the character of the royalties thereafter received from that of profits or gains of Mr Cheyney's profession to that of annual payments taxable under Case III or alternatively of annual profits or gains taxable under Case VI.
This very question was, on closely comparable facts, decided against the Crown by the House of Lords in the case of Purchase v. Stainer's Executors, 32 T.C., 367, 408. The Commissioners and the learned Judge regarded the present case as concluded against the Crown by that Authority, which is, of course, binding upon us as it was upon them.
Mr Magnus on behalf of the Crown sought to persuade us that this case was distinguishable on its facts from Purchase v. Stainer's Executors and that we were free to decide it, and ought on the merits to decide it, the other way.
We are not so persuaded.
In order to do justice to Mr Magnus's submission it wall be necessary to make a comparison between the facts of the two cases, but before doing so we should refer to a passage, quoted in both of them, from the judgment of Mr Justice Rowlatt in the case of Bennett v. Ogston, 15 T.C, 374, 378, which was accepted by the House of Lords in Purchase v. Stainer's Executors as embodying a correct statement of the relevant principle of Income Tax law (see per Lord Simonds, Lord Chancellor, 32 T.C. at page 410. 411, and per Lord Asquith of Bishepstone in the same volume at page 412). In Bennett v. Ogston(supra) at page 378, Mr Justice Rowlatt said this:
"When a trader or a follower of a profession or vocation dies "or goes out of business - because Mr Needham is quite right in "saying the same observations apply hero - and there remain to be "collected sums owing for goods supplied during the existence of the "business or for services rendered by the professional man during the "course of his life or his business, there is no question of assessing "these receipts to Income Tax; they are the receipts of the business "while it lasted, they are arrears of that business, they represent "money which was earned during the life of the business and are taken "to be covered by the assessment rondo during the life of the business, "whother that assessment was made on the basis of bookings or on the "basis of receipts."
We should add that the particular case before Mr Justice Rowlatt was concerned with the question whother the interestt element in installments on promissory notes falling due after the death of a deceased moneylender and collected by his executors was taxable in their hands as "interest of Money" under Case III of Schedule D or was simply a deferred receipt of the discontinued business and as such not taxable under the Case; and that after stating the principle to be applied in the passage quoted abeve he went on to decide that question in favour of the Crown in the following Words:
"But this is not that case; because here the interest in question "is not the accrued earnings of the capital during the life of the "deceased or the time the business was carried on; it is the earnings "of the capital, or so much as is left of it since the death, and this "interest has been earned over the time which has elapsed since the "death."
And on the next page he said:
"I think when you are dealing with what is interest and nothing but "interest you cannot say it is in the nature of business, because it is "payment by time for the use of money."
While accepting as correct Mr Justice Rowlatt's statement of the principle to be applied, Lord Simonds in Purchase v. Stainer's Executors (supra) at peges 410, 411, expressed a doubt, which he found it unnecessary to decide, on the question whother the learned Judge correctly applied the principle in the case before him.
But so for as the principle itself is concerned Purchase v. Stainer's Executors must be taken as establishing the general preposition that whore after the discontinuance of a business or profession sums are received which represent money earned during the life of the business or profession they are not assessable to tax but are taken to be covered by the assessment made "during the life of" (that we take to mean "down to the date of discontinuance "of") "the business". Moreover, in view of the nature of the receipts with which Purchase v. Stainor's Executors was concerned that case must further be regarded as establishimg that this general profession is not displaced by the circumstance that the receipts in question are periodical payments in the nature of royalties or shares of profits which are not payable or quantified or capable of quantification until after the date of discontinuance. After referring to Bennett v. Ogston, Lord Simonds, Lord Chancellor, at page 411, said this:
"If so" (that is to say, if Mr Justice Rowlatt had correctly stated the relevant principle) "there seems to me an end of the case. How also "could these sums come to the hands of Mr Heward or his executors than "as the remuneration for his professional activities, the reward for "services rendered by him during his life and unpaid for at his death? "It appears to no wholly irrelevant that they were not payable until "after his death and equally so that they were not and could not be "quantified until after that event. They retained the essential quality "of being the fruit of his professional activity. If in all the circumstances it was not possible to bring the sums into account in the years "in which they were earned, as I will assume to be the case, the result "is not to change the character of the payment but to exhibit that some "professional earnings may escape the Income Tax net. The withdrawal of "the cross-appeal shows that lump sum payments made in the circumstances "of the present case do so escape."
We will return later to Mr Justice Rowlatt's actual decision in Bennott v. Ogston, on which some reliance was placed by Mr Magnus.
We now pass to a comparison of the facts of the present case with these of Purchase v. Stainer's Executors.
As to the latter, Leslie Heward Stainer (better known by his professional name of Leslie Heward) was a distinguished film actor and producer whose profession was discontinued by his death in 1943. Prior to his death he had in the ordinary course of his profession entered into certain contracts with film producing companies under which he was to render services (in the shape of producing, directing, and acting) in specified films for remuneration which included percentages or shares of the profits or receipts to be derived from the exploitation of the films when made. It appears that in one instance Mr Heward was the owner of the story and shooting script of the proposed film, both of which he was to assign to the company, but no pert of the payments to be made by the company was expressed to be attributable to this assignment as distinct from the services to be...
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