Fairrie v Hall (HM Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 10 June 1947 |
| Date | 10 June 1947 |
| Court | King's Bench Division |
NO. 1376.-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION)-
Income Tax, Schedule D, and Excess Profits Tax - Deduction - Damages and costs in libel action - Income Tax Act, 1918 (8 & 9 Geo. V, c. 40), Schedule D, Cases I and II, Rule 3 (a) and (e).
F, a sugar broker, was selling agent in London for G.L., a Cuban company. R, who was connected with a rival Cuban company, was Deputy Director of Sugar Supplies at the Ministry of Food. F disagreed with the buying policy of the Ministry as adversely affecting the interests of G.L. and himself, and, in consequence of communications passing between F and G.L. in that connection, R brought an action in the High Court against F for libels contained in the said communications. The Court held that F had acted maliciously and that the defence of privilege could not prevail, and awarded damages and costs against him amounting to £3,575.
On an appeal to the Special Commissioners against assessments to Income Tax under Schedule D and to Excess Profits Tax, F contended that the expenditure was laid out wholly and exclusively for the purposes of his trade, or was a loss connected with or arising out of the trade, and was therefore allowable as a deduction in computing the profits for Income Tax and Excess Profits Tax purposes. The Special Commissioners dismissed the appeal.
Held, that the decision of the Special Commissioners was correct.
Stated under the Income Tax Act, 1918, Section 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the King's Bench Division of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 2nd July, 1945, J.L. Fairrie, sugar broker (hereinafter called "the Appellant"), appealed against an assessment to Income Tax under Schedule D for the year 1942-43. He also appealed against an assessment to Excess Profits Tax for the period ended 31st March, 1942, upon the same point, facts and figures, and it is agreed that the decision of this Income Tax appeal will govern and be applied to the appeal against Excess Profits Tax.
2. On 17th September, 1940, in the King's Bench Division, Atkinson, J., gave judgment against the Appellant in an action brought by Mr. William James Rook for libel. Against that judgment the Appellant appealed to the Court of Appeal, and judgment was delivered against him unanimously in that Court by Lord Greene, M.R., and MacKinnon and du Parcq, L.JJ. The damages against the Appellant were £550 and the costs amounted to £3,025 7s. 11d., and the sole question for the opinion of the High Court is whether or no the Appellant was entitled to deduct the total of these two sums, viz.: £3,575 7s. 11d.,from the amount of the said Schedule D assessment under Rule 3 (a) of the Rules applicable to Cases I and II of Schedule D, or alternatively Rule 3 (e).
3. Rule 3 above referred to says that in computing the amount of profits or gains to be charged no sum shall be deducted in respect of-(a) any disbursements or expenses, not being money wholly and exclusively laid out or expended for the purposes of the trade, profession, etc., and (e) any loss not connected with or arising out of the trade, profession, etc.
(a) The Appellant had been a sugar broker for many years and acted as selling agent in this country for Galban Lobo, S.A., of Cuba.
(b) Two other representatives of Galban Lobo were M. Fischel & Co., Ltd., in which the active person was Mr. Oxley, and J.V. Drake & Co., in which the active person was Mr. Fisher.
(c) C. Czarnikow, Ltd. was a large sugar broker in this country and sold for an American company called Czarnikow-Rionda who in their turn sold for the Cuban Trading Company of Havana who were rivals of Galban Lobo.
(d) Mr. Rook, the plaintiff in the libel action against the Appellant, was vice-chairman of the board of directors of C. Czarnikow, Ltd., and soon after the outbreak of war was appointed Deputy Director of Sugar Supplies at the Ministry of Food.
5. The following documents are attached hereto and form part of this Case (1):-
A. Bundle of correspondence, cables, letters, etc., numbered 1 to 100.
B. Ditto, numbered 101 to 200.
C. Ditto, numbered 201 to 228.
D. In the High Court of Justice, Statement of Claim, delivered 26th April, 1940.
E. Ditto, Defence, delivered 17th May, 1940.
F. In the High Court of Justice, Rook v. Fairrieevidence, fourth day- 2nd September, 1940.
G. Ditto, Judgment. Atkinson, J. 17th September, 1940.
H. Court of Appeal Judgment, 5th February, 1941.
6. The cables, copies of which are enclosed in bundle "A", show that Galban Lobo were growing increasingly worried by the idea that the Appellant was proving himself an unsatisfactory agent, was not keeping them properly informed as to what was going on, and that Rook's company, Czarnikow, Ltd., was benefiting to the detriment of Galban Lobo. This was clearly stated in cable 97 in bundle "A". This was the first libel and the publication was that the Appellant showed it to Mr. Oxley and Mr. Drake of J.V. Drake & Co. Other libels complained of are in cables 98, 101, 112, 113, 116, 141, 171, 180 and 193 in exhibits "A" and "B". These libels are clearly set out in the plaintiff's Statement of Claim, exhibit "D", and the Appellant's answer, which was in the result ineffective, is set out in his Defence, exhibit "E"; and the evidence of Mr. Rook in the High Court, at page 48 of exhibit "F", was especially referred to.
7. Atkinson, J., in his judgment (exhibit "G") sets out the facts fully. Of the Appellant he says, at page 5: "Now, I regret that it is necessary to "express my view of Mr. Fairrie. There can be no doubt whatever about his "ability and his agility of mind; he wants to be independent; he is proud of "his independence; he wants to be regarded as the one strong man in the "sugar community, but unfortunately his ideas of strength consist of a readiness "to accuse anybody who does not do what he wants them to do of dishonesty
"and self-seeking, and to insult them beyond...To continue reading
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