Dale v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | Lord Normand,Lord Oaksey,Lord Morton of Henryton,Lord Reid,Lord Cohen |
| Judgment Date | 20 July 1953 |
| Judgment citation (vLex) | [1953] UKHL J0720-1 |
| Date | 20 July 1953 |
| Court | House of Lords |
[1953] UKHL J0720-1
House of Lords
Lord Normand
Lord Oaksey
Lord Morton of Henryton
Lord Reid
Lord Cohen
Upon Report from the Appellate Committee, to whom was referred the Cause Dale and others against Commissioners of Inland Revenue, that the Committee had heard Counsel, as well on Thursday the 11th, as on Wednesday the 17th, Thursday the 18th, Wednesday the 24th, Thursday the 25th and Monday the 29th, days of June last, upon the Petition and Appeal of Sir Henry H. Dale, O.M., G.B.E., and the Trustees of the Will of Sir Henry S. Wellcome, deceased, of Empire House, St. Martins-Le-Grand, in the City of London, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 21st of May 1952, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order 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 printed Case of the Commissioners of Inland Revenue, 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 Order of Her Majesty's Court of Appeal, of the 21st day of May 1952, complained of in the said Appeal, be, and the same is hereby, Reversed, and that the Judgment of the Honourable Mr. Justice Harman of the 4th day of July 1951, be, and the same is hereby, Restored: And it is further Ordered, That the Respondents do pay, or cause to be paid, to the said Appellants the Costs incurred by them in the Court of Appeal and also the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the High Court of Justice, to do therein as shall be just and consistent with this Judgment.
My Lords,
We have in this appeal to decide a question of importance in Income Tax law though it arises in relation to the Special Contribution imposed by Part V of the Finance Act, 1948. The question, shortly stated, is whether an annuity bequeathed by the Will of the late Sir Henry Wellcome to the Appellant, Sir Henry Dale, as Executor and Trustee under the Will is "investment income".
The testator appointed five persons, including Sir Henry Dale, to be his executors and trustees, and directed that each trustee was to receive the sum of £1,000 per annum free of tax so long as he should continue to act as trustee. He expressed a desire that as far as possible at all times two of his trustees should be men experienced and well qualified in medicine and allied sciences, and that two should be men of wide practical business experience, one or both being of high standing and ability in the practice of law and with exceptional experience and qualifications in the conduct and administration of large and important estates. The special duties of the trustees included the exercise of wide powers in relation to the control of the Wellcome Foundation Limited, the administration of the Research Fund established by the Will and the application of moneys to and among the various research objects indicated by the Will, and the administration of the Research Museum and Library Fund which were also established by the Will. The testator left a written memorandum which set out his policy and aims for the guidance of his trustees. The trustees held frequent meetings, which were necessary for the performance of their duties, and Sir Henry Dale, who was at one time President of the Royal Society and Chairman of the Scientific Advisory Committee to the War Cabinet, habitually spent about two hours a day dealing with the affairs of the Trust.
Sir Henry Dale's assessment to Special Contribution under the provisions of Part V of the Finance Act, 1948, included, as part of his aggregate investment income, the sum of £1,446, which represented the sum (together with the appropriate additions thereto in respect of income tax and surtax) received by him in the financial year 1947-48 by virtue of the provision by which he was to be paid the sum of £1,000 per annum free of tax so long as he should continue to act as trustee. Sir Henry Dale appealed against this assessment on the ground that the sum of £1,446 was income arising in respect of remuneration from an office of profit within the meaning of Section 14 (3) ( a) or alternatively that it was income from property which formed part of the emoluments of an office of profit within the meaning of Section 14 (3) ( b) of the Income Tax Act, 1918, and that it was therefore "earned income". He and the trustees also appealed against notices given to them under Section 60 (2) ( a) of the Finance Act, 1948, but these are subordinate and consequential appeals, which stand or fall by the decision on the appeal against the assessment of Sir Henry Dale, whom I call hereafter the Appellant. The Special Commissioners held that the source of the income was the bequest of an annuity and not an office of profit. Against this determination an appeal was taken to the High Court. There, Harman, J. allowed the appeal and reversed the determination. In the Court of Appeal, the Master of the Rolls, Romer, L.J. and Birkett, L.J. unanimously reversed the decision of Harman, J. and restored the determination of the Special Commissioners.
The Special Contribution imposed by the Finance Act, 1948, is payable by individuals whose total income for the year 1947-48 exceeded £2,000 and whose aggregate investment income for that year exceeded £250. "Investment income" means income from any source other than a source of earned income (Section 49 (1) of the Finance Act, 1948). Expressions in Part V of the Finance Act, 1948, are, under Section 48 (2) thereof, to have the same meanings as in the Income Tax Acts. Section 14 (3) of the Income Tax Act, 1918, provides—
"For the purposes of this section the expression 'earned income' means—
( a) any income arising in respect of any remuneration from any office or employment of profit held by the individual, or in respect of any pension, superannuation, or other allowance, deferred pay, or compensation for loss of office, given in respect of the past services of the individual or of the husband or parent of the individual in any office or employment of profit, or given to the individual in respect of the past services of any deceased person, whether the individual or husband or parent of the individual shall have contributed to such pension, superannuation allowance, or deferred pay, or not ; and
( b) any income from any property which is attached to or forms part of the emoluments of any office or employment of profit held by the individual ; and
( c) any income which is charged under Schedule B or Schedule D, or the rules applicable to Schedule D, and is immediately derived by the individual from the carrying on or exercise by him of his trade, profession, or vocation, either as an individual, or, in the case of a partnership, as a partner personally acting therein."
The question in the appeal is, in the simplest terms, whether the annual sum receivable by the Appellant under the testator's will is income arising in respect of remuneration from an office of profit. It is not contended that it is income from an "employment of profit", for that contention would encounter the difficulty discussed in several of the reported cases that there is no employer. The words "of profit", I have no hesitation in saying, qualify the word "office". The first point to consider is whether trusteeship is within the ordinary sense of the word an "office", and on this I can only say that "office" is an apt word to describe a trustee's position, or any position in which services are due by the holder and in which the holder has no employer. In Attorney General v. Eyres [1909] 1 K.B. 723 Channell, J. held that a trustee is "the holder of an office" within the meaning of Section 2 (1) of the Finance Act, 1894. The word "office" is used both in Section 14 (3) of the Finance Act, 1948, and in Section 2 (1) of the Finance Act, 1894, in its ordinary sense, uncontrolled by any special context, and I agree with Channell, J. in thinking that it includes trusteeship. If the trustee is given an annuity under a will on condition that he continues to act as trustee, I cannot doubt that he holds an office of profit. The phrase is not a term of art, and there is again no context which prevents it from being understood in its ordinary sense. To my mind, a remunerated office is an office of profit. Equally clearly the income received by the Appellant because he continues to act as trustee is income arising in respect of remuneration from his office of trustee. My conclusion is that the opening words of Section 14 (3) ( a) seem clearly and unambiguously to apply to the disputed income in the present case, and that was, I think, the ground on which Harman, J. decided the case in favour of the Appellant.
What, then, is said on the other side? The learned Master of the Rolls held that a trustee could not be described as the holder of an office of profit because "the office itself involves a denial of any right to make a profit out of its performance". In other words, the receipt of a profit for the performanee of the duties of a trustee is repugnant to the nature of trusteeship.
My Lords, it is with regret that I feel constrained to differ from the Master of the Rolls, but I think that he has here incorrectly described the fiduciary duty of trustees. The...
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