Cole Bros. Ltd v Phillips
| Jurisdiction | England & Wales |
| Judge | Lord Chancellor,Lord Wilberforce,Lord Edmund-Davies,Lord Russell of Killowen,Lord Bridge of Harwich |
| Judgment Date | 11 March 1982 |
| Judgment citation (vLex) | [1982] UKHL J0311-1 |
| Date | 11 March 1982 |
| Court | House of Lords |
[1982] UKHL J0311-1
House of Lords
Lord Chancellor
Lord Wilberforce
Lord Edmund-Davies
Lord Russell of Killowen
Lord Bridge of Harwich
My Lords,
The question in this case revolves round the entitlement of the appellants to an initial capital allowance in respect of the installation of various items of electrical equipment in a multiple store at the Brent Cross Shopping Centre. The store was erected by John Lewis Properties Ltd. and the business there is carried on by John Lewis and Company Ltd., a member of the same group as John Lewis Properties Ltd. The appellants, Cole Bros. Ltd., are also a member of this group, and as the result of arrangements between its members, it is not disputed that if capital allowance is attracted by the items remaining in question the appellants are entitled to the advantage of it.
The items still involved in this appeal amount in value to a total of £453,218 out of a total cost of £945,600. The individual items, presented in the form of an agreed document to your Lordships, included lighting fittings, standard and specially designed, with their conduits and cables, trunking, conduits and cables to socket fittings, restaurant lightings and fittings, and sub-main cables and riser cubicles. In the light of what I am about to say the precise details do not matter. The balance of the £945,600, i.e.£492,382 represents items in the installation which now admittedly attract allowance. Some of these were conceded by the Revenue, some accepted by the Special Commissioners, and an additional portion representing switch gear allowed by the Court of Appeal, as to which last, there being no cross-appeal on behalf of the respondent, there is no longer any question before your Lordships' House.
Entitlement to the allowance is claimed under section 41(1)( a) of the Finance Act 1971, which so far as material, provides as follows:
"Subject to the provisions of this Chapter, where
( a) a person carrying on a trade incurs capital expenditure on the provision of machinery or plant for the purposes of the trade, and
( b) in consequence of his incurring the expenditure, the machinery or plant belongs to him … during the chargeable period related to the incurring of the expenditure,
there shall be made to him for that period an allowance (in this Chapter referred to as 'a first year allowance') which shall be of an amount determined in accordance with section 42 below."
Neither the proviso to subsection (1) nor the remaining subsections of section 41 are material to the determination of the instant appeal, and the sole bone of contention arising out of section 41(1)( a) which I have quoted above is whether or not the capital expenditure admittedly incurred in respect of the disputed items was incurred "on the provision of plant". None of the items disputed were incurred on the provision of machinery and all were incurred for the purposes of the trade carried on at the premises in Brent Cross Shopping Centre.
In the course of the numerous authorities cited before us, including the Court of Appeal judgment in the instant case, it has been repeatedly stated that the expression "plant", where it is used in section 41 is an ordinary English word to be interpreted, in the words of Buckley L.J., in Benson v. Yard Arm Club Ltd. [1979] 2 All E.R. 336 at pp.338–9 and [1979] STC 266 at pp.268–9:
"as a man who speaks English and understands English accurately but not pedantically would interpret it in [the] context, applying it to the particular subject matter in question in the circumstances of the particular case."
To this admirable precept Oliver L.J. in delivering the judgment of the Court of Appeal in the instant case at [1981] STC 671 p.682 warily, and perhaps wearily, added the cautionary rider that
"the English speaker must, I think, be assumed to have studied the authorities."
These however, as he cautiously admitted in an earlier passage (ibid. p.676) cannot be pretended to be at all easy to reconcile, and, as he said in a still earlier passage (p.675)
"it is now beyond doubt that [the word 'plant'] is used in the relevant section in an artificial and largely judge-made sense."
In this Oliver L.J. was, perhaps unconsciously, only echoing the words of Mrs. Piozzi in 1789 who first came across the word "plant" in its present signification when applied to "a large portion of ground in Southwark, … destined to the purposes of extensive commerce", and added "but the appellation of a plant gave me much disturbance from my inability to fathom the meaning of it." [Observations and Reflections made in the Course of a Journey through France, Italy and Germany by Hester Lynch Piozzi, London 1789, vol. i. pp 132–133.]
From all this I think it may be inferred that the word "plant" in the relevant sense, although admittedly not a term of art, and therefore part of the general English tongue, is not, in this sense, an ordinary word, but one of imprecise application, and, so far as I can see, has been applied to industrial and commercial equipment in a highly analogical and metaphorical sense, borrowed, unless I am mistaken, from the world of botany.
Since I find it myself helpful in analysing the various authorities beginning with the observations of Lindley L.J. in Yarmouth v. France (1887) 19 Q.B.D. 647 at p.658, I think it worth while spending a moment's time in reflecting briefly on what the botanical analogy is.
In the field of botany "plant" is used in three quite separate contexts. It can mean a vegetable organism synthesizing its nourishment from inorganic materials by the use of chlorophyll. In this sense an oak tree is a plant, whilst the Matterhorn is not. It can mean a vegetable organism with a soft stem. In this sense a bluebell is a plant, but an oak tree is not. Neither of these senses affords the analogy. But the word can mean a vegetable organism deliberately placed in an artificially prepared setting. A gardener can say "I am going to dig my flower beds in readiness for my plants" or: "I am going to buy some plants at my garden centre". It is this sense which gives it its analogical meanings, e.g. in medicine ("an organ transplant"), in crime ("it was planted on me"), or in industry, which is the sense we are now discussing, as the means by which a trade is carried on in an appropriately prepared setting. In each case, the contrast is between the thing implanted, i.e. the plant, and the prepared setting into which it is placed (cf. Oliver L.J. in the instant case at pp.676 and 677, Pearson L.J. in Jarrold v. John Good & Sons Ltd. (1963) 40 T.C. 681 at p.696, I.R.C. v. Barclay, Curle & Co. Ltd. 45 T.C. 221, per Megarry J. in Cooke v. Beach Station Caravans Ltd. [1974] STC 402), from which it has extended even to the horse in Yarmouth v. France ( supra) in the field of employer's liability. It also explains Uthwatt J.'s interpretation of this last authority in Lyons (J.) & Co. Ltd. v. A-G [1944] Ch. 281at p.287 where he cites Yarmouth v. France as contrasting plant not merely with stock-in-trade as stated by Lindley L.J. but with the place in which the business is carried on.
The last citation raises a question which has underlain much of the controversy in the present case and in the other authorities referred to. If "plant" is to be contrasted with the place in which the business is carried on, the line must be drawn somewhere. This is a practical necessity in the case of capital allowances, since plant attracts one type of allowance, rated currently at 100%, whereas the building in which the plant is housed rates another, and lower rated, allowance, and the building in which the business of a retail shop such as that at Brent Cross is carried on is excluded from that type of allowance altogether. There must therefore be a criterion (or criteria) by which the courts define the frontier between the two. Thus arises the analysis of function in the authorities (cf. the analysis of the function of the dry dock in I.R.C. v. Barclay, Curle & Co. Ltd. ( supra) especially at pp.238 and 239 by Lord Reid, which largely guided his decision when your Lordships' committee was split 3–2). Counsel for the appellants in the present case strove mightily to limit the relevance of function to "building or structure" cases, like the dry dock in Barclay, Curle or the swimming pool in the Beach Station Caravans case (Cooke v. Beach Station Caravans Ltd. 49 T.C. 514), or perhaps "place only" cases where, he claimed, the functional test could not be satisfied. The basis of the argument was that if the equipment under discussion was established to be "apparatus" no question as to function could arise. Unfortunately this contention appears to me to beg the question. If the plant is to be distinguished from the housing of the plant ("the place where the business is carried on" as distinct from the means by which it is to be carried on) it is necessary before it is possible to decide whether the disputed object is apparatus or not to look at it in order to see what it is and then consider what, in the context of the business actually being carried on, is its function. This proves to be a trap for the unwary, for in certain cases, notably that of a hotelier and restaurant proprietor, the very thing the trader is selling includes an "ambience" or "setting". This is well illustrated by the decision in I.R.C. v. Newcastle Breweries Ltd. [1981] STC 50, since upheld in your Lordships' House, where the "plant" included some ornamental seagulls and mural decorations. Similarly in Jarrold v. John Good & Sons Ltd. 40 T.C. 681, [1963] 1 All E.R. 141, Donovan L.J., following Pennycuick J., is recorded as saying, p.694 of the former, p. 147 of the latter report:
"I agree with Pennycuick J. that 'setting' and 'plant'...
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