Littlewoods Mail Order Stores Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS |
| Judgment Date | 23 June 1961 |
| Judgment citation (vLex) | [1961] EWCA Civ J0623-3 |
| Date | 23 June 1961 |
| Court | Court of Appeal |
[1961] EWCA Civ J0623-3
In The Supreme Court of Judicature
Court of Appeal
The Master of the Rolls (Lord Bvershed)
Lord Justice Harman
Lordjustice Donovan
(Appeal of the Respondents Commissioners of Inland Revenue)
(Appeal of the Appellants, Littlewoods Mail Order Stores, Ltd)
MR PETER FOSTER, Q.C, and MR SVENSON TAYLOR (instructed by Messrs Jacques & Co., 2, South Square, Grays Inn, London, W.C.l) appeared as Counsel on behalf of Littlewoods Mail Order Stores Limited,
THE HON. B. L. BATHURST, Q.C., and MR E. B. STAMP (instructed by The Solicitor of Inland Revenue, Somerset House, Strand, W.C.2) appeared as Counsel on behalf of the Commissioners of Inland Revenue.
We have heard two appeals, and this judgment is jjy judgment upon both.
The appeals have raised problems under the Stamp Duty legislation of no little difficulty, and we are much indebted to learmd Counsel for fhuir assistance and., upon some points, for interesting historical references; but in the end I have come to the conclusion that we should not differ front the decision of Isr.' Justice Danckwerts upon either appeal.
The facts are set out in the Case Stated, and the exhibits to the case. I mrust, however, bri fly refer to the circumstances, particularly since in the first appeal the question has been raised, what in truth was the transaction effected by the instruments in question.
In the year 1958 the Independent Order of Odd fellows, to whom I will. refer hereafter as the 'Oddfellows', were the freehold owners of precise in Oxford Street, London, known as Jubilee House. The premises were subject to a lease made in the year 1947 for 99 years in favour of Littlewoods Mail Order Stores Limited, hereafter called 'Littlewoods'. The lease would therefore expire in 2046. The rent payable under the lease was £23,444. It is not in doubt that the rent which I have mentioned was considerably less than the rent which the premises would have commended in the market, if vacant, in 1953.
Negotiations, therefore, began in the early part of that year, and their nature is stated in a letter written by Littlewoods' solicitors on the 1st Msy, 1959. It is a letter addressed to the Controller of Stamps, in answer to his question what the transaction was, and is as follows:
"In actual fact, however, the 'proposed transaction' which you mention in your letter "was one discussed at a meeting between our clients and the said (Oddfellcws) which took place (in) March, 1958. At that meeting, it was suggested by the Freeholders that the Lease of 1947 for & term of 99 years at a rental of £23,444 should be surrendered by operation of law and that a new lease bo granted for a term of 22 years only at a rental of £42,444 i.e. an increase of £19,000 per annum.
"At that meeting, it was also suggested that the said (Oddfellows) should cease to receive rent at the expiration of the proposed new Lease for 22 years and that our clients (Littlewoods) should be entitled to complete possession of the property thereafter without any further payment of rent."
Put otherwise, then, and very briefly, the nature of the arrangement was that Oddfellows were to get a much larger rant for a shorter period and, subject thereto, that the property would belong exclusively to Littlewoods. in answer to a question which we put to him, Mr. Bathurst was kind enough to find out and toll us that the monetary value of the remaining 88 years' payments of £23,444 at that time could be taken to be £460,000 after discounting in tie usual way, and that similarly the then present monetary value of 22 years' payments of £43,444 was £560,000, or £100,000 more.
The figures are of some interest as showing that the transaction proposed sag not as unfavourable to Oddfellows as at first blush it might have appeared. At that stage, the matter was sent to conveyancing Counsel of agreed selection. The instructions to conveyancing Counsel were never produced, and this was a natter of a little criticism. In fairness, however, to Littlewoods I feel in my own mind clear that nothing more would have emerged which is significant had these instructions been produced; in other words, that there never was anything more behind the transaction than the statement of it which I have already made.
Conveyancing Counsel proceeded to draw the necessary documents in forms which I shall presently mention, and having, no doubt, an eye upon liability to Stamp Duty. But so long as the instruments in question really effected what ftey purported to do, there is, as is well established, nothing wrong in so contriving them that they purported the liability to duty. In a case to which I shall allude on the other appeal, Escoigne Properties Ltd. v. The Inland Revenue Commissioners, reported in 1958 Appeal Cases at page 559) Viscount Simonds gave expression to the well-known principle. "I would remind your Lordships," he said, "that instruments, not transactions, are liable to stamp duty." It is, however, of course nonetheless proper for the Court to sec what, truth the instruments do affect.
There was at this stage a change introduced into the proposed transactions -Men I have stated. Instead of Oddfellows remaining freeholders for 22 years, they parted with their freehold interest at once, and took a lease tiientsalvos for 22 years and 10 days, Littlewoods becoming sub-lessees of Oddfellows at the proposed enhanced rental of £43,444 nctt; that is to say, after deducting the £6 per annum payable under the head lease. To effect that effect there wa3 Introduced into the matter another company known as Fork Manufacturing Company Limited, a company wholly owned by Littlewoods.
(The introduction of that company and its name may be said to have added somewhat to the piquancy or, indeed, if I may berrow my brother Manwan's word in another case, the wizardry of the transaction. It is, however, a fact that although only two of the 20,000 shares of Fork Manufacturing Company Ltd. were ever issued, it was not then and there formed for the purpose. We sere informed by Mr. Foster that it had been in existence for some ton years and was, in fact, a trading company.
I new come to the week beginning Monday, the 8th December 1953. On that day and the five succeeding days, documents were executed, one each day, six in all. I will state shortly the nature of the documents. On Monday, the 8th December, a lease was granted by Oddfellows to Littlewoods for 22 years end '10 days at the rent of £6 per annum. It has been conceded (and authority was referred to in the 23rd volume of Malsoury's Laws of England, page (686} that that instrument operated in law to effect a surrender of the outstanding term of the 99 years' lease.
On Tuesday, the 9th December, the now lease was assigned by Littlewoods to the Fork Company.
On Wednesday, the 10th December, Fork granted an under-lease of 22 years (that is, 10 days less than the term of the head lease) to Littlewoods at a rent of £42,450 per annum.
On Thursday, the 11th December, was executed what is called a Deed of Exchange between Oddfellows and Fork, the effect of which was that Oddfellows assigned to Fork the freehold reversion and Fork assigned to Oddfellows the new lease of the 8th December, with the benefit of the under-lease.
On Friday, the 12th December, was executed a Deed of Guarantee whereby Fork guaranteed the payment by Littlewoods of the rent of £42,450, and chenrged its own freeheld reversion as security for the performance of that covenant.
Finally, on Saturday, the 13th December, by Deed of Indemnity, Littlewoods indemnified Oddfellows against any stamp duties that might be exigible in respect of any of the instruments. It is, therefore, Littlewoods who appear as the appellants in the second appeal, and as respondents in the first. We arc concerned, in the two appeals with the instruments of Tuesday, 9th December,(the Assignment of the new lease to Fork and Thursday, 11th December (the so-called Deed of Exchange) which are exhibits respectively B and D to the case.
Perhaps not unnaturally, in the course of the argument the two documents tfore referred to respectively as 'Tuesday's child' and 'Thursday's child' Since the argument concluded I have been able to refer to the ancient rhyme, and I find that Tuesday's child is full of grace, but Thursday's child has far to go - a description which may or may not; bo thought appropriate by we Crown.
I come now to the first appeal, which is related to document D, namely the namely Deed of Exchange, of Thursday. The parties to it were certain individuals being the then trustees of the Oddfellows of the one part, and the Fork Company Company of the other part. It recited the loose of the previous Monday, the 8th December, and then further recited that the trustees, that is Oddfellows, acre entitled to the premises comprised in and demised by the lease for the estate in foe simple expectant -upon "the determination of the term. It further recited the assignment of the Tuesday from Littlewoods to Fork, and the under-lease of the preceding day, the Wednesday. The final recital is expressed, "Big parties hereto have mutually agreed to exchange their said respective estates and interests in the said property - "
The first clause of the operative part of the deed is: "in consideration of the assignment hereinafter made by (Fork) to (Oddfellows)" (I have substituted those names for their descriptions in the deed) "the parties of the first part as trustees hereby transfer to (Fork) all that land and property comprised in the titles above referred to subject to and with the benefit of the...
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