Les Croupiers Casino Club v Pattinson
| Jurisdiction | England & Wales |
| Judgment Date | 24 April 1985 |
| Date | 24 April 1985 |
| Court | Chancery Division |
Chancery Division.
Mr. Gilbert Gray Q.C. and Mr. R. Mathew (instructed by Messrs. Grossman, Hermer & Seligman) for the taxpayers.
Mr. A.G. Moses (instructed by the Solicitor of Inland Revenue) for the Crown.
Before: Scott J.
This was an appeal by the taxpayers against a decision of the Special Commissioners that certain deed boxes kept at a bank by the taxpayers contained money which represented partnership receipts which were liable to income tax.
The taxpayers were partners in a gambling club formed in 1973. In August and November 1975 the taxpayers, using assumed names, each opened small current accounts at a bank different from the one used by the partnership. This entitled each of the taxpayers to keep a deed box in the bank strongroom. In October 1977 the taxpayers agreed to buy out a third partner for approximately £80,000. Just before this, the taxpayers visited the bank and, having examined their deed boxes, demanded to see the bank manager. On 26 October 1977 payments of £5,000 each were made into the current accounts of the taxpayers by order of the bank manager. The manager was subsequently prosecuted and convicted of theft in respect of manipulation of certain accounts at his bank. The bank's own investigator discovered that in October 1977 the manager had cashed two cheques of £5,000 each, drawn on the taxpayers' current accounts. When clearing out the manager's desk he found three blue bank note bands for wrapping £500 in £5 notes which bore the club's stamp.
Following a police enquiry, the tax inspector dealing with the club's accounts was informed that the deed boxes had contained £80,000 belonging to the club which had been omitted from the partnership accounts. The inspector was unable to obtain any explanation from the taxpayers and so raised Sch. D, Case I assessments on them for the years 1975-76 to 1977-78 on the ground that the "stolen" £80,000 represented undeclared partnership receipts.
The taxpayers appealed against the assessments and the Special Commissioners found that the deed boxes contained money but the evidence as to the amount being £80,000 was insufficiently reliable. They inferred, however, that the taxpayers had each deposited £5,000 at the bank, each recovering that amount from or through the manager. This represented gross takings from the club before being banked. They considered that the three note bands provided a strong inference that the deposited sums represented undeclared club receipts of £1,500. They found that such sums had been fraudulently abstracted from the club's takings so that, consequently, the club's profits were understated. They reduced the assessments made by the inspector accordingly.
The taxpayers appealed to the High Court. They contended that the primary facts found by the Commissioners did not justify a finding that the boxes contained club money. The Revenue contended that a legitimate inference from the primary facts was that the taxpayers placed money from the club in the bank deed boxes to escape tax.
Held, dismissing the taxpayers' appeal:
1. The Special Commissioners were entitled to infer that the boxes did contain club money. The circumstances in which the accounts were opened with false names and descriptions justified the inference of a clandestine and improper motive common to both taxpayers. Their evidence was not credible and was rightly rejected.
2. The £5,000 provided to each of the taxpayers justified the inference that the deed boxes contained those sums at least.
3. The evidence did not justify the inference that there was an additional £1,500 and the assessments should be reduced accordingly.
1. At a meeting of the Commissioners for the special purposes of the Income Tax Acts held on 9-12 May and 12 July 1983 Les Croupiers Casino Club (a partnership and hereinafter called "the Club") appealed against the following further assessments to income tax:
1975/76 in the amount of £45,000
1976/77 in the amount of £45,000
1977/78 in the amount of £30,000
2.1 The question for our Decision, our findings of fact upon the evidence adduced, the submissions of Mr. N. Lyell Q.C. on behalf of two of the partners of the Club, the submissions of Mr. J.G.H. Bates on behalf of the inspector, and our final determination, are set out in our Decision which was issued on 12 December 1983 and a copy of which is annexed as part of this Case.
2.2 The reference on p. 19 of our Decision to Mrs. Topham not being a party to the proceedings before us may be misleading. Mrs. Topham was a partner in the Club at the material times, but the allegations made by the Revenue against Mr. McIlroy and Mr. Thompson, the other partners during the relevant years, were not made against Mrs. Topham.
2.3 We record one further finding of fact: winners of substantial sums at the Club were sometimes paid in bundles of notes bound with a blue band of the kind referred to on p. 9 of our Decision.
3. The following witnesses gave evidence before us:
(a) Gordon William McIlroy (Mr. McIlroy), a partner in the Club;
(b) Andrew William Alexander Thompson (Mr. Thompson), also a partner in the Club;
(c) Raymond Francis William Thomas (Mr. Thomas) Senior Inspector at the Midland Bank Ltd. and employed by them since 1943 and now retired.
(d) Kenneth Davies, Detective Chief Inspector of Police (Chief Inspector Davies), Canton, Cardiff.
(e) Mary Elizabeth Thomas (Mrs. Thomas), clerk employed by the Midland Bank.
(f) Anthony David Shackson (Mr. Shackson).
(g) Keith Tunnicliffe, Manager of Williams & Glyn's Bank, High Street, Cardiff.
(h) John Francis Ramsay (Mr. Ramsay), employed by Messrs. Deloitte Haskins & Sells (Deloittes), Chartered Accountants.
(i) Raymond Victor Hill, Detective Superintendent of Police, Rumney Police Station.
4. The following documents or exhibits were proved, admitted or produced before us:
(A) Agreed bundle of documents [set out, but not reproduced here].
5. The following cases were cited to us: Macpherson & Co. v. Moore (Surveyor of Taxes) TAX6 T.C. 107; Ogilvie v. Barron (H.M.I.T.) TAX11 T.C. 503; R. v. Special Commissioners of Income Tax, Ex parte Martin TAX48 T.C. 1
6. Immediately after the determination of the appeal dissatisfaction therewith as being erroneous in point of law was declared to us on behalf of the appellant partnership and on 23 January 1984 we were required to state a case for the opinion of the High Court pursuant to the Taxes Management Act 1970 section 56Taxes Management Act 1970, sec. 56 which Case we have stated and do sign accordingly.
7. The question of law for the opinion of the court is whether the primary findings of facts support the inferences we have drawn and our conclusions.
This is an appeal by Les Croupiers Casino Club (the Club), at that time a partnership, against further assessments to income tax in respect of gambling club profits for the three years 1975/76 to 1977/78 inclusive in the respective amounts of £45,000, £45,000 and £30,000.
The question reported to us for determination was whether the contents of deed boxes held by two of the partners - Gordon William McIlroy (Mr. McIlroy) and Andrew William Alexander Thompson (Mr. Thompson) under assumed names at a different bank from that of the partnership were profits of the partnership not recorded in its accounts.
The evidence before us consisted of three agreed bundles of documents lettered A, B and C and a number of miscellaneous documents lettered D to L. References to numbers in brackets are to the pages in those bundles. We also heard the sworn testimony of Mr. McIlroy, Mr. Thompson and seven other witnesses.
1. Raymond Francis William Thomas (Mr. Thomas) Senior Inspector at the Midland Bank Ltd. and employed by them since 1943 and now retired.
2. Kenneth Davies, Detective Chief Inspector of Police (Chief Inspector Davies), Canton, Cardiff.
3. Mary Elizabeth Thomas (Mrs. Thomas), clerk employed by the Midland Bank.
4. Anthony David Shackson (Mr. Shackson).
5. Keith Tunnicliffe, Manager of Williams & Glyn's Bank, High Street, Cardiff.
6. John Francis Ramsay (Mr. Ramsay), employed by Messrs. Deloitte Haskins & Sells (Deloittes), Chartered Accountants.
7. Raymond Victor Hill, Detective Superintendent of Police, Rumney Police Station.
Bundle C comprised copies of Statements of Witnesses made to the police and agreed between the parties. Of those witnesses only Mrs. Thomas (C6-10), was called by the Revenue, and it was agreed between the parties that none of the others need be called. Statements of the following police witnesses were referred to before us:
Haydn Evans (C1-2).
Brian David Miles (Mr. Miles), Midland Bank Official (C3-5).
Thomas Augustine Latchford (Mr. Latchford) (C11-15).
Katherine Creed (Miss Creed), Midland Bank Official (C16-18).
Susan Patricia Davies (Mrs. Davies), Midland Bank Official (C19-25).
Thomas Sidney Grainger (C26-27).
Michael John Hicks (Mr. Hicks), Casino Manager (C28-30).
We begin with the facts which are admitted, or which we find from the evidence of independent witnesses who were not directly involved in the matters under consideration.
The Club was founded and owned by the late Mr. Alec Thompson, who died on 19 August 1972. Mr. Alec Thompson employed Mr. McIlroy as manager and a few other persons for the tables. Mr. Alec Thompson died intestate, leaving his second wife, now Mrs. Topham, and his son by his first wife, Mr. Thompson, who was in his first year at college on a business studies course and left home within three months of the death. He was then aged 20. To carry on the Club a partnership was formed between (1) Mr. McIlroy, who was the only person with sufficient experience, (2) Mrs. Topham, who had gained a little experience, and (3) Mr. Thompson, who had no experience and wished to continue his studies. In effect Mr. Thompson voluntarily transferred one third of the deceased's business assets to Mr...
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