Corinthian Securities Ltd v Cato
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE WINN,LORD JUSTICE CROSS |
| Judgment Date | 16 July 1969 |
| Judgment citation (vLex) | [1969] EWCA Civ J0716-1 |
| Date | 16 July 1969 |
| Court | Court of Appeal (Civil Division) |
[1969] EWCA Civ J0716-1
In The Supreme Court of Judicature
Court of Appeal
Appeal of Mr. Cato, defendant, from Order of His Honour Judge Beresford at Willesden County Court on 8th May, 1969.
The Master of The Rolls (Lord Denning),
Lord Justice Winn and
Lord Justice Cross
Mr. CATO, the first named defendant, appellant, appeared in person.
Mr. JAMES LECKIE (instructed by Messrs. Rayner, Sherman, Martin & Co.) appeared on behalf of the plaintiffs respondents.
In February 1966 a company called Corinthian Securities Ltd. (which had only been incorporated a month or two) lent money, £2,800, to Mr. Cato to help him finance a shipment of plant and machinery to the West Indies. As security he gave them a mortgage on his house, 38 Garrick Avenue, Golders Green, London, N.W.11. They stipulated for interest at 1% per month (that is, 12% a year), together with a commitment fee of 2%, that is, £56 payable in advance. The terms of repayment were that: "The Facility will be repayable on demand but provided the account is conducted satisfactorily no demand will be made and it is understood that full payment will be effected by two equal instalments of £1,400 each. The First installment to be made six months from the date of the first advance and continuation of the facility to be subject to the first reduction being made on the due date." As part of the arrangement, Mr. Cato gave a banker's order for the interest of £28 a month. He gave it on his own bank, the Westminster Bank, payable to Corinthian Securities Ltd. at their bank - the National Provincial Bank. Mr. Cato did not get the full £2,800. He only got £2,650. The remaining £150 was deducted for costs and so forth.
Corinthian Securities Ltd. claimed to be bankers. They kept what they called a "current account" with Mr. Cato. They debited his with the interest as it became due; and afterwards, interest upon interest. Mr. Cato was not able to keep up the terms of repayment. He did not pay, at the end of the first six months, the stipulated £1,400. So in July 1967 Corinthian Securities Ltd. took proceedings in the County Court for possession. They claimed as mortgagees to be entitled to possession. Mr. Cato submitted that Corinthian Securities Ltd. were moneylenders, Judge Leon was referred to United ( Dominions Trust. Ltd. v. Kirkwood 1966 2 Q.B. 431), and held that Corinthian Securities Ltd. were bankers. On the 27th July, 1967, he made an Orderfor possession of the house to be given up to the mortgagees, but that Order was suspended for six months on terms which were agreed by Counsel, namely: Mr. Cato was to pay £2,000 straight away, and to pay the balance in six months and future interest when it fell due, and so forth. Mr. Cato duly paid the £2,000, but did not manage to pay the rest. So on the 4th September, 1968, Corinthian Securities Ltd. sought to remove the stay.
Counsel then agreed on terms that the stay was to be continued, providing that Mr. Cato paid £1,200 by the 11th September, 1968: £305, and interest, from the 1st July to the 31st October, 1968, to be paid by the 1st November, 1968; the interest being at 12% per annum calculated on a day-to-day basis. The costs were also provided for.
After that agreement of the 4th September, 1968, the solicitors got out the accounts. On the 20th November, 1968, an account was submitted by Mr. Cato's solicitors on his behalf. This showed a balance due from him of £11. 0s. 11d., which they paid. They say that settled the accounts up to the 21st November, 1968. But Corinthian Securities Ltd. said that that was not the right balance. They went to the Court again and sought to remove the stay. On the 19th May, 1969, Judge Beresford held that Mr. Cato had not paid what he ought to have done and made the Order for possession. Mr. Cato sought to appeal. Terms were imposed by which he had to pay money into Court. He did so. And now he appeals in person to this Court. His argument raises a point of considerable interest.
Mr. Cato says that in calculating the amount of the interest outstanding from time to time on this loan, he was entitled to and bound to deduct the tax, and that Corinthian Securities Ltd. were bound to allow it. Section 169 of the income Tax Act, 1952, makes it plain that where "yearly interest of money" is payable out of profits and charges brought into charge for tax, then thepayer is entitled to deduct the tax and the payee is bound to allow it. Mr. Cato says that the payments of interest were "yearly interest of money" on which tax must be deducted. Mr. Leckie on behalf of Corinthian Securities Ltd., submits that they were "short loans", on which tax is not deductible.
Mr. Leckie urged us to say that any loan repayable on demand is a "short loan and that tax is not deductible from it. In support, he cited some words from Lord Anderson in Commissioners of Inland Revenue v. Sir Duncan Hay, Bart., 8 Tax Cases 636. I cannot agree with this contention. The words "short loan" are not used in the Statute: it is a mistake to place too much emphasis on them. The real question is whether the interest payable is "yearly interest of money". Interest is "yearly interest of money" whenever it is paid on a loan which is in the nature of an investment, no matter whether it is repayable on demand or not. An ordinary loan on mortgage is usually in point of law repayable at six months. But it is still "yearly interest of money". On the other hand, when a banker lends money for a short fixed period, such as three months, and it is not intended to be continued, such a loan is not in the nature of an investment. It is not "yearly...
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Re Lehman Bros International (Europe) ((in Administration)) (No 7) Lomas and Others v Revenue and Customs Commissioners
...nor on the supposition that the loans would last for a year, therefore it was not yearly interest. Corinthian Securities Ltd v Cato (1969) 46 TC 93 held that interest on a loan in the nature of an investment was yearly interest even if the loan was repayable on demand whereas lending money ......
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...were referred to in the judgment: Cairns v MacDiarmid (HMIT) TAXTAX(1982) 56 TC 556; [1983] BTC 188 Corinthian Securities Ltd v Cato TAX(1969) 46 TC 93 Eyles v Ellis ENR(1827) 4 Bing 112 Garforth (HMIT) v Newsmith Stainless Ltd TAX(1978) 52 TC 522 IR Commrs v Doncaster TAX(1924) 8 TC 623 IR......
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...of Taxes) [1915] 3 KB 381 is to the same effect (and see especially pages 386 to 387 in the judgment of Rowlatt J). In Corinthian Securities Ltd v Cato [1970] 1 QB 377, the Court of Appeal again emphasised the pre-requisite of some form of investment or loan intended by the parties to rem......
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...tests”. 31 Some further support for the pre-eminence of the investment test is to be found in the judgment of Lord Denning MR in Corinthian Securities Ltd v Cato [1970] 1 QB 377, at 382–383. After referring to Inland Revenue Comrs v Hay, he continued: “The words ‘short loan’ are not used i......