Chibbett (HM Inspector of Taxes) v Joseph Robinson and Sons
| Jurisdiction | England & Wales |
| Judgment Date | 24 June 1924 |
| Date | 24 June 1924 |
| Court | King's Bench Division |
NO. 493.-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION).-
Income Tax, Schedule D - Excess Profits Duty - Ship-managers - Profits of trade - Compensation for loss of employment.
The Respondents, a firm of ship-managers, were employed in that capacity by a certain steamship Company, their remuneration consisting in part of a percentage of the Company's annual net profits, including interest on its investments, which were considerable.
The Company went into voluntary liquidation in 1918, and in general meeting authorised the liquidator to distribute some £800,000 worth of its investments among the shareholders, and to transfer £50,000 of 5 per cent. National War Bonds to the Respondents "as compensation for loss "of office," the Articles of Association having been specifically amended to enable this to be done. The said Bonds were duly transferred to the Respondents in October, 1918. Subsequently, in pursuance of arrangements already made, the undertaking of the old Company, including two ships and its remaining assets, was transferred to a new Company of the same name consisting of the same shareholders.
The Articles of Association of the new Company provided that its first managers should be the Respondent firm, though there had been no bargain to that effect, and that their remuneration should be on similar lines to that formerly received by them from the old Company.
In computing the Respondent firm's liability to Income Tax and Excess Profits Duty, the said sum of £50,000 was treated as part of the profits arising from their business as ship-managers, but, on appeal to the General Commissioners, they contended (inter alia) that the sum in question was a voluntary payment made to them as compensation for the loss of the
profits of their employment under the old Company which had terminated, and that it was not chargeable to Income Tax or Excess Profits Duty. The General Commissioners decided that it was not a profit liable to Income Tax or Excess Profits Duty.Held, that, on the findings of the Commissioners as to the nature of the payment, which there was evidence to support, the said sum of £50,000 was not a profit liable to Income Tax or Excess Profits Duty.
(1)
CHIBBETT v. JOSEPH ROBINSON & SONS.
CASE
STATED under Section 149 of the Income Tax Act, 1918, by the Commissioners for the General Purposes of the Income Tax Acts for the Division of Castle Ward, in the County of Northumberland, for the opinion of the King's Bench Division of the High Court of Justice.
1. At a meeting of the Commissioners for the General Purposes of the Income Tax Acts for the Division of Castle Ward, in the County of Northumberland, held at Cross House, Westgate Road, Newcastle-upon-Tyne, on Monday, the 17th July, 1922, Messrs. Joseph Robinson & Sons (hereinafter called the Respondents) appealed against assessments of £14,397 first assessment and £16,667 additional first assessment for the year 1919-20, and £11,911 first assessment and £16,666 additional assessment for the year 1920-21, and £27,000 first assessment for the year 1921-22, made upon them under Schedule D, Case I, of the Income Tax Acts in respect of the profits of the trade or business of steamship managers and shipbrokers carried on by them at Maritime Chambers, Howard Street, North Shields.
2. The question which we were asked to decide was whether a sum of £50,000 received by the firm was liable to Income Tax or not.
3. The Respondent firm was constituted in succession to a former firm of the same name by a Deed of Co-partnership dated 31st December, 1901, whereby-
Joseph Robinson, first party (now deceased),
Alfred Robinson, second party,
Charles Ogilvie Robinson, third party (now deceased), and
Johnson Robinson, fourth party,
"mutually covenanted and agreed to become partners in the business of steamship managers and shipbrokers (in which business shall be included the contracting for purchase and re-sale of steamships)" upon and subject to the terms, conditions and stipulations therein contained, and, inter alia,-
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(2) The partnership should commence on the first day of January, 1902, and should continue until a dissolution by mutual agreement or until the same should be determined under the provisions therein contained.
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(3) The style or name of the firm should be "Joseph Robinson & Sons."
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(4) The partnership business should be carried on at the offices in Maritime Chambers, North Shields, or in such other place or places as the partners should from time to time agree upon.
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(5) Upon the death of any partner…the partnership should be dissolved so far as regards that partner only, and the share of such deceased…partner in the partnership business…as from the end of the current year of his death…should accrue, go, and belong absolutely and without payment to the remaining partners, and if more than one, in shares proportionate to their then shares in the business.
A copy of the said Agreement is hereto attached, marked "A," and forms part of this Case.(1)
4. The Respondent firm at all dates material to this appeal consisted of the parties of the second, third, and fourth parts.
5. The Respondents at all dates material to this appeal were managers of the Stag Line, Limited, a Company incorporated under the Companies Acts, 1862 to 1890, on the 20th August, 1895, under the terms and conditions contained in paragraphs 66 to 78 of the said Company's Articles of Association. A copy of such Articles is hereto annexed, marked "B," and forms part of this Case.(1) The said Articles provide,inter alia,-
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Art. 66.-The Managers of the Company shall be the person or persons for the time being constituting the firm of Messrs. Joseph Robinson & Sons, of North Shields, who shall carry on and manage the business of the Company.
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Art. 69.-The Managers shall jointly or separately, have power, without the supervision or control of any of the other Members of the Company, save as provided herein, to act as Managers of the vessels belonging to or controlled by the Company, and, save as hereunder excepted, to do all things requisite for the attainment of the objects for which the Company is established, including the power to purchase, charter, or contract for the building of ships or vessels, and to sell, exchange, or dispose of all or any of the vessels or other property of the Company; to bring or defend actions or suits by or against the Company; to settle or refer any
disputed claims, whether for ship, freight, insurance, or cargo, or however arising, to appoint or discharge clerks, agents, brokers, masters, crews, surveyors, superintendents and all other persons required for the purposes of the Company in this country or elsewhere; to contract with any Government or Power for the carriage of mails, troops, stores, or other freight, to invest the funds of the Company, to lend or borrow money, and to make, accept, endorse, negotiate or pay bills of exchange on behalf of the Company, and, generally, to manage the affairs and business of the Company as they, in their discretion, shall think best for the interests of the Company. The Managers shall not have power to purchase the business of or to amalgamate with any other Company, or to purchase ships or shares of ships other than those named in the Memorandum of Association, or to dispose of any ship (except in case of serious damage through accident), or to commence any business as Ship, Engine, and Boiler Builders or Repairers, or to issue Debentures, or to mortgage any of the property of the Company without the consent of a General Meeting. -
Art. 71.-The remuneration of the Managers shall be an annual salary of Two Shillings per gross register ton of each of...
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