Hamblett v Godfrey
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PURCHAS,LORD JUSTICE NEILL,LORD JUSTICE BALCOMBE |
| Judgment Date | 17 December 1986 |
| Judgment citation (vLex) | [1986] EWCA Civ J1217-6 |
| Docket Number | 86/1143 Rev. 27/85 |
| Court | Court of Appeal (Civil Division) |
| Date | 17 December 1986 |
[1986] EWCA Civ J1217-6
Lord Justice Purchas
Lord Justice Neill
and
Lord Justice Balcombe
86/1143
No. 1985 No. 85
Rev. 27/85
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (Revenue)
Royal Courts of Justice,
MR. R. K. MATHEW (instructed by Messrs. Whitelock & Storr, London Agents for Messrs. Lane & Co., Cheltenham, Glos.) appeared on behalf of the Appellant/Appellant.
MR. A. G. MOSES (instructed by The Solicitor to the Inland Revenue, Strand, London) appeared on behalf of the Respondent/Respondent.
This is an appeal by June Winifred Hamblett, the taxpayer from a judgment delivered by Mr. Justice Knox on 3rd March 1986. The judgment was delivered on an appeal from the Commissioners for the special purposes of the Income Tax Acts by way of case stated under section 56 of the Taxes Management Act 1970. The learned judge declared that a sum of £1,000 paid to the tax payer by her employer in the tax year 1983/84 was an emolument from her employment chargeable under Schedule E by virtue of section 181 of the Income and Corporation Taxes Act 1970. ("The 1970 Act") The Special Commissioners had held that the payment was an emolument, but that it qualified for that purpose not under the 1970 Act but under section 61 (1). of the Finance Act 1976. ("The 1976 Act") The facts can be shortly stated I take them from the case stated.
In January 1984, the Government had decided that for security, reasons it was necessary to restrict the staff's right to have recourse to an industrial tribunal, and their rights also in connection with union membership and activities.
The taxpayer was employed at the Government Communications Headquarters at Cheltenham as a trainee typist, starting in that capacity in October 1964. By January 1984, she had risen to the grade of Executive Officer and was responsible for running a section of the office with a number of people under her. Her salary was £8,118.
It is not necessary to go in detail into the conditions of service, except to refer in particular to the relevant aspects so far as this appeal is concerned.
On her starting employment, it was made clear to her that she was permitted and, indeed, encouraged to join a staff association or trade union. Miss Hamblett initially joined a trade union, but she resigned from it in 1972 and has not been a member of any union since that date.
In January 1984, following upon the policy decision to which I have just referred, each member of the staff at Cheltenham received a communication from the Director which has been referred to by a serial number, GN 100/84, accompanied by an option form. The letter informed the staff of the reasons for the Ministers' decision which. I have already mentioned, and it set out a number of paragraphs in a document headed "Changes in Conditions of Service". It is necessary only to refer to two of those paragraphs. I read them in detail. Paragraph 11 reads: " Special Payment to all Staff who continue to work at GCHQ. In recognition of the withdrawal from GCHQ staff of the statutory rights, referred to above"—those were the employment protection legislation provisions—"a special ex-gratia payment of £1,000 (subject to tax) will be made to all full-time U.K. based, industrial and non-industrial staff (in grades and equivalents up to and including Assistant Secretary) who remain with the Department and sign the option form to that effect." There is then a reference to Ministry of Defence Scientists which I need not read.
Paragraph 12 reads: "The payment will be made by the end of March 1984 or as soon as possible thereafter to all staff whose option forms indicating that they wish to remain with GCHQ, have been received by 1st March except that"—then there are a number of special provisions, again which I need not read. Paragraphs 13 to 16 explained that those who elected to leave GCHQ, and had not reached retirement age, would be transferred to another department if possible.. Under paragraph 17, those who refused to express an option or to accept an alternative posting would be dismissed, but would keep their accrued pension rights.
The Option Form required the staff to complete either A or B. Option A was in the following terms—"I,"—and then the name of the individual concerned—"have read and understood General Notice 100/84 and wish to continue to be employed at GCHQ. I agree to resign from membership of any trade union to which I belong. I also undertake not to join a trade union or to engage in its affairs or to discuss with its officials my terms of employment or conditions of service or any other matter relating to my employment at GCHQ. I understand, however, that I may join a Departmental staff association approved for the time being by Director GCHQ."
Option B simply stated that the individual did not wish to continue to be employed at GCHQ, but wished to be considered for a transfer elsewhere in the Civil Service.
As a result of the exercise of the prerogative to withdraw those rights which had been made without prior consultation on the part of the Ministry, the trade unions involved challenged the decision in the courts. That challenge was unsuccessful and is reported in the Council of Civil Service Unions v. Minister for the Civil Service, (1984) 3 W.L.R. 1174.
In the meantime, the matter had attracted publicity. On 21st February 1984, the Director of GCHQ sent a letter to all members seeking to clarify the position and to correct various opinions and inferences that had arisen in the ensuing public debate. The relevant part of the letter reads as follows: "One further point: the £1,000 offered to those of you who accept the new conditions of service is in some quarters being represented as a bribe. It is nothing of the sort and was never intended as such. It represents a genuine recognition that because of the special nature and critical importance of their work, GCHQ staff will lose certain statutory rights under the Employment Protection legislation which they previously enjoyed. It was thought that these rights should not be removed without any recognition and this is why the payment of £1,000 will be made."
Miss Hamblett did not hesitate long over the choice presented to her. She considered that the offer of £1,000 was made so that she would sign away her right to rejoin a union and her statutory rights under the Employment Protection Acts, but that did not worry her. She had no wish to rejoin a union at that time. She knew that the payment was made ex gratia, and presumed that it was offered in order to pacify in advance those who might otherwise have objected to the changes. Although the option form did not include any undertaking by the staff to stay on indefinitely at GCHQ, she considered that acceptance of the £1,000 would impose a moral obligation to remain there, at any rate for some time to come.
Miss Hamblett signed Option A on 26th January 1984. The payment was in fact included, together with her monthly pay cheque, for the period to 31st March 1984.
Those then are the basic facts against which this appeal is brought to this court. It is convenient at this point to refer shortly to the relevant statutory provisions. They are found first of all in the 1970 Act. Section 181, Schedule E, reads: "181.—(1) The Schedule referred to as Schedule E is as follows:
SCHEDULE E 1. Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom which fall under one, or more than one, of the following Cases…" The only relevant case is Case 1 which reads: "Case 1: Where the person holding the office or employment is resident and ordinarily resident in the United Kingdom,…any emoluments for the chargeable period…" There are then exceptions which are not relevant.
The only other section to which I should refer is section 183 (1) which, by reference to Cases 1, 2 and 3 of Schedule E, defines the expression "emolument". It reads as follows: "'Emoluments' shall include all salaries, fees, wages, perquisites and profits what so ever."
The 1976 Act, section 61 (1) provides:
"Where in any year a person is employed in director's or higher-paid employment and—(a) by reason of his employment there is provided for him, or for others being members of his family or household, any benefit to which this section applies; and (b) the cost of providing the benefit is not (apart from this section) chargeable to tax as his income, there is to be treated as emoluments of the employment, and accordingly chargeable to income tax under Schedule E, an amount equal to whatever is the cash equivalent of the benefit."
Section 61 (2) defines the benefits to which the section applies as including entertainment, domestic or other services, or any other benefits or facilities of whatsoever nature. It then mentions other exclusions which are not relevant.
Section 63 (1) merely provides: "The cash equivalent of any benefit chargeable to tax under section 61 above is an amount equal to the cost of the benefit, less so much (if any) of it as is made good by the employee to those providing the benefit."
The Special Commissioners came to the conclusion that whilst the payment was not an emolument within Schedule E of the 1970 Act, it was caught by section 61 of the 1976 Act.
After being referred to a number of leading authorities, some of which I must mention later, the Special Commissioners reached, inter alia, two conclusions which Mr. Moses who appears...
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