Furniss (Inspector of Taxes) v D.E.R Dawson ; Furniss (Inspector of Taxes) v G.E. Dawson and; Furniss (Inspector of Taxes v E.B. Dawson (by Order to Carry on Dated 13th July 1981) ; Murdoch (Inspector of Taxes) v R.S. Dawson (Consolidated Appeals)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Fraser of Tullybelton,Lord Scarman,Lord Roskill,Lord Bridge of Harwich,Lord Brightman
Judgment Date09 February 1984
Judgment citation (vLex)[1984] UKHL J0209-1
Date09 February 1984

[1984] UKHL J0209-1

House of Lords

Lord Fraser of Tullybelton

Lord Scarman

Lord Roskill

Lord Bridge of Harwich

Lord Brightman

Furniss (Inspector of Taxes)
(Appellant)
and
D.E.R. Dawson
(Respondent)
Furniss (Inspector of Taxes)
(Appellant)
and
G.E. Dawson
(Respondent)

And

Furniss (Inspector of Taxes)
(Appellant)
and
E.B. Dawson (by Order to Carry on Dated 13th July 1981)
(Respondent)
Murdoch (Inspector of Taxes)
(Appellant)
and
R.S. Dawson
(Respondent)
(Consolidated Appeals)
Lord Fraser of Tullybelton

My Lords,

1

I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Brightman, in these consolidated appeals and I entirely agree with his conclusion and his reasoning. The facts are fully stated in his speech and I do not repeat them. I wish to add only a few comments.

2

The importance of this case is, in my opinion, in enabling your Lordships' House to explain the effect of the decision in W.T. Ramsay v. IRC [1982] A.C. 300 and to dispose of what are, I think, the misunderstandings about the scope of that decision which have prevailed in the Court of Appeal. In Ramsay the House had to consider an elaborate and entirely artificial scheme for avoiding liability to tax. Viewed as a whole, it was self-cancelling. In the present case the scheme was much simpler, and it was not self-cancelling; on the contrary, it had what Vinelott J. described as "enduring legal consequences". But while the cases differ in that respect, it is not a sufficient ground for distinguishing the present case from Ramsay. The true principle of the decision in Ramsay was that the fiscal consequences of a preordained series of transactions, intended to operate as such, are generally to be ascertained by considering the result of the series as a whole, and not by dissecting the scheme and considering each individual transaction separately. The principle was stated in the speech of Lord Wilberforce in Ramsay at page 324 A-C, especially between B & C where his Lordships said this:

"For the commissioners considering a particular case it is wrong, and an unnecessary self limitation, to regard themselves as precluded by their own finding that documents or transactions are not 'shams', from considering what, as evidenced by the documents themselves or by the manifested intentions of the parties, the relevant transaction is. They are not, under the Westminster doctrine or any other authority, bound to consider individually each separate step in a composite transaction intended to be carried through as a whole." (Emphasis added).

3

It was by applying that principle that Lord Wilberforce in the next paragraph of his speech in Ramsay approved of the approach by Eveleigh L.J. to the first stage of the transaction in Floor v. Davis [1978] 1 Ch. 295. I also attempted to apply the same principle when I expressed the opinion ( Ramsay at page 339 B � C) that "it could, in my opinion, have been the ground of decision in Floor v. Davis � in accordance with the dissenting opinion of Eveleigh L.J. in the Court of Appeal � with which I respectfully agree." Eveleigh L.J. and Lord Wilberforce and I all referred only to the first stage of the transaction in Floor v. Davis, and we did not rely to any extent upon the existence of the second stage, as the Court of Appeal in the present case appear to have thought. The first stage, viewed by itself, was clearly more favourable to the argument for the taxpayer than the two stages taken together; if the argument for the taxpayer failed even at the first stage, that would simply be an additional reason for reaching the decision against him. As it happens, the whole transaction in the present case is very similar to the first stage in Floor v. Davis (the only material difference being that Greenjacket has more enduring functions than FMW had).

4

The series of two transactions in the present case was planned as a single scheme, and I am clearly of opinion that it should be viewed as a whole. The relevant transaction, if I may borrow the expression used by Lord Wilberforce, consists of the two transactions or stages taken together. It was a disposal by the respondents of the shares in the operating company for cash to Wood Bastow.

5

I would allow the appeal.

Lord Scarman

My Lords,

6

I would allow the appeals for the reasons given by my noble and learned friend, Lord Brightman. I add a few observations only because I am aware, and the legal profession (and others) must understand, that the law in this area is in an early stage of development. Speeches in your Lordships' House and judgments in the appellate courts of the United Kingdom are concerned more to chart a way forward between principles accepted and not to be rejected than to attempt anything so ambitious as to determine finally the limit beyond which the safe channel of acceptable tax avoidance shelves into the dangerous shallows of unacceptable tax evasion.

7

The law will develop from case to case. Lord Wilberforce in Ramsay's case referred to "the emerging principle" of the law. What has been established with certainty by the House in Ramsay's case is that the determination of what does, and what does not, constitute unacceptable tax evasion is a subject suited to development by judicial process. The best chart that we have for the way forward appears to me, with great respect to all engaged on the map-making process, to be the words of my noble and learned friend, Lord Diplock, in the Burmah case which my noble and learned friend, Lord Brightman, quotes in his speech. These words leave space in the law for the principle enunciated by Lord Tomlin in the Duke of Westminster's case that every man is entitled if he can to order his affairs so as to diminish the burden of tax. The limits within which this principle is to operate remain to be probed and determined judicially. Difficult though the task may be for judges, it is one which is beyond the power of the blunt instrument of legislation. Whatever a statute may provide, it has to be interpreted and applied by the courts: and ultimately it will prove to be in this area of judge-made law that our elusive journey's end will be found.

Lord Roskill

My Lords,

8

I have had the opportunity of reading in draft the speeches delivered or to be delivered and in common with all your Lordships I have reached the clear conclusion that these appeals by the Revenue must be allowed and that the reasoning in the courts below cannot be supported. I respectfully and entirely agree with the speeches of my noble and learned friends, Lord Fraser of Tullybelton and Lord Brightman. I only add to your Lordships' speeches out of respect for all the learned judges from whom the House is differing. Repeated perusal of their long and careful judgments has left me with the impression, which I am comforted to see is shared by my noble and learned friend, Lord Brightman, that they were seeking a route by which they might confine the decisions in Ramsay and Burmah to cases which were similar on their facts, that is to say where the transactions under attack were what have been described in argument as "self-cancelling". Those cases apart, what the learned judges all regarded as the principles long established by the Duke of Westminster's case might continue to reign supreme and unchallenged. They sought to find support for their conclusions in the majority judgments in the Court of Appeal in Floor v. Davis and were not prepared to accept that in Ramsay this House had, at least in principle if not explicitly, approved of the much discussed dissenting judgment of Eveleigh L.J. in the former case. As my noble and learned friends have pointed out, on any view the relevant statements in those majority judgments of Sir John Pennycuick and Buckley L.J. were obiter since this House subsequently decided in favour of the Revenue on another point and therefore had no cause to pronounce upon the rival merits of the views expressed upon what became known as "the first issue".

9

The error, if I may venture to use that word, into which the courts below have fallen is that they have looked back to 1936 and not forward from 1982. They do not appear to have appreciated the true significance of the passages in the speeches in Ramsay of my noble and learned friends, Lord Wilberforce at pages 325/6 and Lord Fraser of Tullybelton at page 337, and, even more important, of the warnings in Burmah given by my noble and learned friends, Lord Diplock and Lord Scarman in the passages to which Lord Brightman refers and which I will not repeat. It is perhaps worth recalling the warning given albeit in another context by Lord Atkin, who himself dissented in the Duke of Westminster's case, in United Australia Ltd. v. Barclays Bank Ltd. [1941] A.C. 1 at page 29, "when these ghosts of the past stand in the path of justice clanking their mediaeval chains, the proper course for the judge is to pass through them undeterred." 1936, a bare half century ago, cannot be described as part of the middle ages but the ghost of the Duke of Westminster and of his transaction, be it noted a single and not a composite transaction, with his gardener and with other members of his staff, has haunted the administration of this branch of the law for too long. I confess that I had hoped that that ghost might have found quietude with the decisions in Ramsay and in Burmah. Unhappily it has not. Perhaps the decision of this House in these appeals will now suffice as exorcism.

10

I would only add, ignoring for the moment that the effect of the Duke of Westminster's case was subsequently nullified by statute, that I express no view whether were that case to arise for decision since 1982, the Duke or the Revenue would emerge as the ultimate victor.

11

My Lords, learned counsel for the taxpayers ultimately found himself constrained to admit that the...

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