Fen Farming Company Ltd v Dunsford
| Jurisdiction | England & Wales |
| Judgment Date | 14 June 1974 |
| Date | 14 June 1974 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
Income tax-Procedure-Appeal-Case Stated-In appeal by Case Stated appellant cannot claim Case a nullity-Case signed by only one Commissioner- A formal defect capable of waiver by the parties-Case not sent to parties in draft- No legal remedy-Case Stated need not recite evidence not relied on by Commissioners and should not recite evidence not accepted by them-Preliminary motion to remit Case for amendment-Effect of delay in giving notice thereof.
The Appellant Company carried on the business of farming. It had been formed in 1921 by one K, who at all material times was its managing director and wholly controlled its operations. Various farming enterprises controlled by K were carried on under various names, including the names of fictitious firms, and the accounts were kept in such a way that it was impossible to distinguish how the trading should be divided. Following a back duty enquiry, in the course of which K gave a certificate as to the bank accounts in which he was interested at 31st July 1948, the Commissioners of Inland Revenue accepted a joint and several offer by the Company, K, one of K's sons and another company controlled by K to pay £20,000 in settlement of tax and penalties for years up to and including 1949-50 and to accept joint assessments on farming profits if necessary. In April 1952, in giving notice of appeal against assessments made on K personally in respect of farming profits, his then agent stated that he was not engaged in husbandry on his own account in the years 1945 to 1950. In 1954 the firm of accountants who acted for K and his companies decided to treat the profits of all the farming enterprises for the two years ended 31st July 1950 onwards as the Company's profits for tax purposes, and appeals by the Company against assessments to income tax for the years 1949-50 and 1955-56 were settled by agreement on that basis.
K died in 1963. It was subsequently discovered that he had operated a bank account not disclosed in the back duty enquiry, which at 31st July 1948 stood at £2,079. At K's death it stood at £37,216. It was common ground that £4,000
of that amount was attributable to an item of "unrecorded sales" in the Company's accounts for the year to 31st July 1952. Assessments to income tax were made on the Company for the years 1949-50 to 1955-56 on the footing that the balance represented profits undisclosed by reason of fraud or wilful default. On appeal, the Crown adduced a schedule of transactions with a customer in one of the fictitious firm names above mentioned, showing that all the relevant cheques which could be traced were either paid to or drawn by the Company and that any untraced cheque was followed a few days later by the entry of a larger sum in the concealed account. The Company adduced no evidence as to its own course of trading and no evidence acceptable to the General Commissioners as to other possible sources of the money. It called witnesses who stated that losses sustained by it through flooding in 1949 should be estimated at £10,000. The Company contended (a) that there was no sufficient evidence of fraud or wilful default, (b) that the money might have been derived from trading by K or other unestablished sources, (c) that by reason of the flooding losses it could not have made the profits alleged. Reference was also made to the question whether the Company was entitled to recover the moneys from K's estate, but the General Commissioners, having been advised that that question was irrelevant, declined to consider it. The General Commissioners found that the Company's audited accounts showed that the flooding losses were to be measured in hundreds rather than thousands of pounds, and that the sums in question represented profits of the Company for the years under appeal which had remained undisclosed through wilful default. They confirmed the assessments, and the Company demanded a CaseOn 24th August 1972 a Case was stated over the single signature of the chairman of the General Commissioners. It had not been shown to the parties in draft and did not contain the customary lists of witnesses and documents and summaries of the parties' contentions. On 14th June 1973 the Company gave notice of a preliminary motion for an order declaring the Case to be a nullity as not properly signed or alternatively remitting it to the Commissioners for amendment. An affidavit sworn on 11th June 1973 was filed in support of the claim to remission. In the High Court the Company eventually waived the defective signature and abandoned the claim that the Case was a nullity. Some of the grounds on which remission was claimed in the affidavit duplicated contentions raised in the main appeal; others related to the omission from the Case of recitals of evidence which the Commissioners either did not regard as significant or did not accept. For the Crown it was contended, inter alia, that the motion should be dismissed by reason of the lapse of time before notice of it was given.
On the main appeal the Company contended in the High Court but not in the Court of Appeal (a) that the assessments failed in limine because the Commissioners had not considered whether the Company could recover the moneys from K's estate; (b) that the settlement under s. 510, Income Tax Act 1952, of appeals against the first assessments for the years under appeal made the matter res judicata and barred any further assessments for those years; (c) that the proceedings were quasi-criminal since they were capable of leading to the imposition of penalties and therefore a higher standard of proof was required than in ordinary civil matters. In the Court of Appeal contention (b) was repeated without the reference to res judicata. The Company contended in both courts (d) that there was no sufficient material on which the Commissioners could conclude that the receipts into the concealed account were the Company's moneys, particularly in that wilful default was in question; (e) that, since wilful default must relate to a statutory duty, there could be no wilful default in relation to the period covered by the back duty settlement; (f) that since the Crown had received estate duty on K's death in respect of the contents of the concealed account it was estopped from contending that they were not K's beneficial property; (g) that since the back duty settlement was on the basis that K was trading in the year 1949-50 the Crown was estopped from saying that he was not; (h) that the Commissioners had misdirected themselves in arriving at their finding on the flooding losses.
Held, on the preliminary motion, in the Chancery Division,
(1) that the Case Stated should have been signed by all the Commissioners who heard the appeal, but the chairman's single signature was a mere formal defect capable of being waived by the parties;
(2) that in proceedings on an appeal by way of Case Stated the appellant cannot claim that the Case which he has set down is a nullity;
(3) that though the Commissioners ought to have sent the Case to the parties in draft there was no legal remedy for their failure to do so;
(4) that, where a preliminary motion for remission of a Case Stated was supported by an affidavit, the effect of delay in giving notice of the motion depended on the nature of the alleged omissions from the Case and the probable difficulty of correcting them, and in the present case it would be sufficient to hold the Company strictly to the allegations in the affidavit;
(5) that one of the exhibits to the affidavit, being a letter from the Clerk to the Commissioners stated to be written with the chairman's consent, which amplified the Case Stated, might, in the absence of objection by the Crown, be treated as material which could be relied on by the Company.
Held, on the preliminary motion, in the Court of Appeal, affirming the decision of the Court below, that there was no ground for remitting the Case, and in particular that a Case Stated need not recite evidence to which the Commissioners attached no importance and should not recite evidence which they did not accept.
Held, on the main appeal, in the Chancery Division,
(1) that it was material whether the moneys in the concealed account were the Company's when received, but not whether at the time of the appeal proceedings it retained the right to recover them from K's estate;
(2) that since the issues in dispute on the first assessments did not relate to the concealed profits the settlement of those issues under s. 510 could not operate as res judicata;
(3) that the present proceedings were simply civil proceedings, with a corresponding standard of proof.
Held, on the main appeal, in the Court of Appeal,
(1) that there was ample evidence of wilful default by K, who controlled the Company's activities, so that the question was whether on the balance of probabilities the moneys in the concealed account represented the proceeds of sales by the Company in the course of its trade;
(2) that on the evidence the Commissioners were well entitled to conclude that the receipts resulted from trading by the Company and not by K personally;
(3) that where in a back duty settlement the liability was estimated by reference to capital statements, the suppression of matters relevant to the capital statements could constitute wilful default;
(4) that the payment of proceeds of sales by the Company into an account concealed from the Revenue by its managing director and de facto controller was wilful default by the Company;
(5) that the payment of estate duty by K's estate could create no estoppel in proceedings between the Company and the Crown;
(6) that the back duty settlement, being made on the basis that the true trading position was unknown, could create no estoppel;
(7) that since the concealed profits were not in issue in the appeals against the first...
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