Commissioners of Inland Revenue v Brander & Cruickshank
| Jurisdiction | England & Wales |
| Judge | Lord Reid,Lord Morris of Borth-y-Gest,Lord Guest,Lord Upjohn,Lord Donovan |
| Judgment Date | 08 December 1970 |
| Judgment citation (vLex) | [1970] UKHL J1208-2 |
| Court | House of Lords |
| Docket Number | No. 2. |
| Date | 08 December 1970 |
[1970] UKHL J1208-2
House of Lords
Lord Reid
Lord Morris of Borth-y-Gest
Lord Guest
Lord Upjohn
Lord Donovan
Upon Report from the Appellate Committee, to whom was referred the Cause Commissioners of Inland Revenue against Brander & Cruickshank, that the Committee had heard Counsel, as well on Monday the 26th, as on Tuesday the 27th and Wednesday the 28th, days of October last, upon the Petition and Appeal of the Commissioners of Inland Revenue, of Somerset House, Strand, London W.C.2, praying, That the matter of the Interlocutor set forth in the Schedule thereto, namely, an Interlocutor of the Lords of Session in Scotland, of the First Division, of the 19th of December 1969, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Interlocutor might be reversed, varied or altered, or that the Petitioners might have 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 Brander & Cruickshank, 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 Interlocutor of the 19th day of December 1969, 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 to this House, such Costs to be taxed on a Common Fund Basis, the amount of such Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That unless the Costs, certified as aforesaid, shall be paid to the parties entitled to the same within one calendar month from the date of the Certificate thereof, the Cause shall be, and the same is hereby, remitted back to the Court of Session in Scotland, or to the Judge acting as Vacation Judge, to issue such Summary Process or Diligence for the recovery of such Costs as shall be lawful and necessary.
My Lords,
For the reasons given by your Lordships I would dismiss this appeal.
My Lords,
The Special Commissioners came to the conclusion, on the basis of the facts which they found, that the Respondents' appointments as Registrars of Robert Lawson & Sons (Holdings) Limited, and of its subsidiary company, Robert Lawson and Sons (Dyce) Limited, were appointments to offices. The Respondents were appointed as Secretaries and Registrars of both companies. In the case of one company the salary was £750 and in the case of the other it was £500. In regard to the time the Respondents spent as Secretaries and Registrars of these two companies one third of it related to their duties as Secretaries and two thirds to their duties as Registrars. When proposals were made for taking over the shares held in the two companies the Respondents were informed that, in the event of a take-over, they would be relieved of their secretaryships and registrarships. The arrangement that was later made, when the take-over took place, was that the Respondents should cease to be Registrars, should receive £2,500 upon such termination of their appointments as Registrars but should continue for some time as Secretaries of the two companies. They did so continue for some time and then voluntarily resigned their Secretaryships.
A duty is imposed upon a company to keep a Registrar of Members (Companies Act, 1948, section 110). Even though the Companies Act does not require that there should be an appointment as Registrar, a company must arrange that some person or persons should on its behalf perform the statutory duties of maintaining its Register. In doing so, it may establish a position which successively will be held by different persons. If it does so the company may have created what could rationally for income tax purposes be called an office. In McMillan v. Guest [1942] A.C.561 Lord Atkin, while pointing out that there is no statutory definition of "office" was prepared to accept what Rowlatt J. had said in Great Western Railway Company v. Bates [1920] 3 K.B.266 (as adopted by Lord Atkinson [1922] 2 A.C.1, 15) as being a generally sufficient statement of meaning. Rowlatt J. had referred to "a subsisting, permanent, substantive position, which had an existence independent of the person who filled it, and which went on and was filled in succession by successive holders". Lord Wright in his speech in McMillan v. Guest pointed out that regard must be had to the facts of any particular case and to the ordinary use of language and the dictates of common sense.
In my view, the Special Commissioners were warranted on the facts as they found them in deciding that the Respondents' appointments as Registrars of the two companies were appointments to offices.
Though in fact the fees which certain partners in the Respondent firm received as Directors of certain companies were, by reason of some arrangement that they made between themselves, included in the partnership income and though in fact the Respondents' net receipts from all activities (including legal fees, Directors fees, secretarial salaries, managerial fees, business commissions and registrars' fees) were assessed to income tax under Case II of Schedule D, I think that it must follow from the decision of this House in Mitchell and Edon v. Ross [1962] A.C.813 that tax was chargeable under Schedule E on the emoluments in respect of the two Registrarships.
The payment of £2,500 was clearly made in consideration or in consequence of or otherwise in connection with the termination of the holding of the offices of Registrar (see section 37 (2) of the Finance Act, 1960). Unless it was a payment "otherwise chargeable to income tax" it would be a payment in respect of which income tax would be charged under Schedule E (see section 37(1)) but for the fact that by virtue of section 38(3) tax is not to be charged in respect of a payment of an amount not exceeding £5,000. So the question arises whether the payment of £2,500 was "otherwise" chargeable to income tax. The presence of the words "not otherwise chargeable to income tax" in subsection (2) of section 37 (unless they were introduced unnecessarily or for reasons of caution) would appear to recognise that there could be payments coming within the words of subsection (2), which, independently of subsection (1) would be chargeable to tax. The words do not necessarily denote chargeability under a Schedule other than Schedule E. The contention of the Appellants is that the offices were assets of the Respondents' profession or vocation obtained in the course of carrying on such profession or vocation and that compensation for the loss of those assets should be treated as a receipt of the profession or vocation and taxable under Case II of Schedule D.
My Lords, I cannot think that the appointments to the offices of Registrar were in any real sense to be regarded as assets of the Respondents in respect of their profession. No question has been raised for decision as to whether, if they were so to be regarded, a payment for the loss of them would be of the nature of a capital rather than of an income receipt. The conception of the assets of a trader in carrying on his trade is one that has reality and clarity. It is difficult in the case of a firm carrying on the profession of advocates conducting a substantial general legal business but who incidentally acquire appointments as Registrars of companies to regard such appointments as being "assets" of the firm in their profession. The case here is quite different from that of a trader who might in the course of his trade acquire assets and dispose of them. The case here is quite different on its facts from the case of Blackburn v. Close Bros. Ltd. 39 T.C.164. That was the case of a trader, the profits of whose trade were chargeable under Case I of Schedule D, who had a three year appointment as Secretary and Registrar at a substantial remuneration. The agreement was prematurely terminated and a substantial sum was by agreement paid as compensation. It was held that the compensation was chargeable as a trading receipt of a revenue nature and that this was so even though the remuneration under the agreement would have been chargeable under Schedule E. I do not find it necessary to express any opinion in regard to that case. The finding here is that the Respondents as a firm of advocates in Aberdeen conducted a substantial general legal business and that they also acted as secretaries and /or registrars to a number of companies. They were primarily law agents and secretaries. They had not set out as registrars. Their registrarships were "incidental" to their business as law agents and secretaries. The two registrarships in question had been the consequence of a friendship between the former senior partner of the Respondents and those who conducted the business which became the business of the two companies. When the Registrarships were terminated the Respondents did not consider that they had any entitlement to any payment. Indeed, as is found in the Case Stated, it was only because of the personal friendship between a partner in the Respondent firm and one of the Directors that the former had felt it proper to raise with the latter the question whether there might not be an ex gratia payment. Though these facts have not been made the basis of a separate contention they are, in my view, of relevance when considering whether the registrarships should be regarded as assets of the Respondents' business. The finding is that the registrarships...
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