Mallalieu v Drummond
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE KERR,SIR SEBAG SHAW |
| Judgment Date | 14 December 1982 |
| Judgment citation (vLex) | [1982] EWCA Civ J1214-3 |
| Docket Number | 82/0845 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 December 1982 |
[1982] EWCA Civ J1214-3
The Master of the Rolls
(Sir John Donaldson)
Lord Justice Kerr
and
Sir Sebag Shaw
82/0845
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(REVENUE PAPER)—(FINAL LIST)
(MR. JUSTICE SLADE)
Royal Courts of Justice.
MR. A. PARK, Q.C. and MR. D. MILNE (instructed by Messrs. Penningtons) appeared on behalf of the (Appellant below) Respondent.
MR. P. MILLETT, Q.C. and MR. M. HART (instructed by the Solicitor of Inland Revenue) appeared an behalf of the (Respondent below) Appellant.
Miss Ann Mallalieu ("the taxpayer") is a practising barrister. During her accounting year 1976/77 she expended £564.38 on the replacement, cleaning and laundering of certain items of clothing and she sought to deduct this sum when computing the profits of her profession for the year of assessment. The inspector of taxes disallowed this deduction and the taxpayer appealed. Subject to the minor item of the cost of collars, the General Commissioners upheld the inspector's decision. The taxpayer again appealed, this time to Mr. Justice Slade, and this time she succeeded. His judgment which sets the scene and contains most of the relevant material is reported at (1981) 1 Weekly Law Reports 908. The Crown now appeals.
It is now agreed that all costs relating to collars are deductible and that we need not pursue any possible distinction between shoes and any other form of clothing. It is also agreed that all the expenditure was of a revenue nature. Accordingly the issue is whether the cost of purchasing and cleaning or laundering black tights, black shoes, black suits, black dresses and white shirts is deductible.
It is common ground that if the taxpayer is to succeed she must show that the relevant expenditure was "wholly and exclusively laid out or expended far the purpose of the trade, profession or vocation" (section 130(a) of the Income and Corporation Taxes Act 1970).
The essence of the General Commissioners' decision is contained in the second part of paragraph 9 of their reasons, which is in the following terms:
"We consider, in the present case, that when Miss Mallalieu laid out money on clothes for wearing in court her purpose in making that expenditure was to enable her to earn profits in her profession and also to enable her to be properly clothed during the time she was on her way to chmabers or to court and while she was thereafter engaged in her professional activity, and in the other circumstances indicated in paragraph 2. We do not consider that the fact that her sole motive in choosing the particular clothes was to satisfy the requirements of her profession or that if she had been free to do so she would have worn clothes of a different style an such occasions altered the purpose of the expenditure which remained the purpose of purchasing clothes that would keep her warm and clad during the part of the day when she was pursuing her career as well as the purpose of helping her to earn profits in that career. We think, therefore, that the expenditure had a dual purpose, one professional and one non-professional, and we, therefore, hold that, subject to one matter which we mention hereafter, she is not entitled to deduct the sums claimed."
Might I parenthetically make a small plea that if General Commissioners are stating a case which includes the written reasons which they have previously given to the parties the paragraphs in the case may be so numbered, or those of the written reasons so re-numbered, that there is no confusion between the paragraphs of the case and those of the written reasons.
The essence of Mr. Justice Slade's decision is to be found in the following passage from his judgment at page 521 of the report. He said:
"On the facts as found by the commissioners, the tax-payer, as a human being, neither needed nor wanted the clothes in question. In incurring the expenditure on them, she had no thought of warmth and decency. As the commissioners found, she bought them 'only because she would not have been permitted to appear in court if she did not wear, when in court, them or other clothes like them.' In the circumstances, I think that, with all respect to the commissioners, there was no evidence to support the inference which they finally drew to the effect that she had a dual purpose in mind. On the evidence, I am driven to the conclusion that the relevant expenditure in the present case was incurred by her solely for the purpose of carrying on her profession and that the benefits of warmth and decency, which she would enjoy while wearing the clothes during the various times referred to by the commissioners in paragraph 9 of their decision, were purely incidental to the carrying on of her profession. In these circumstances the expenses are, in my judgment, deductible."
The starting point of the Crown's argument is that the General Commissioners' conclusion was one of fact and degree which it is impassible to characterise as being "erroneous in point of law". Accordingly it is unappealable under section 56(1) of the Taxes Management Act 1970. This submission led, inevitably, to Edwards v. Bairstow (1956) Appeal Cases 14. That case establishes that where the facts warrant a determination either way, the issue is one of degree and is therefore a question of fact (Lord Radcliffe at page 33), but that if the facts found are such that no person acting judicially, and properly instructed as to the relevant law, could have come to the determination under appeal, the court must intervene and that it does so on the basis that there is no evidence to support the determination or that the evidence is inconsistent with and contradictory of the determination or that the true and only reasonable conclusion contradicts the determination (Lord Radcliffe, page 36). Lord Simonds at page 29 of the report dealt with the matter in somewhat more specific terms when he said:
"The primary facts, as they are sometimes called, do not, in my opinion, justify the inference or conclusion which the commissioners have drawn: not only do they not justify it but they lead irresistibly to the opposite inference or conclusion. It is therefore a case in which, whether it be said of the commissioners that their finding is perverse or that they have misdirected themselves in law by a misunderstanding of the statutory language or otherwise, their determination cannot stand."
Without apology, I make one further reference to Lord Radcliffe's speech because, as it seems to me, it epitomises the relationship between the General Commissioners and the courts. That passage is on page 38 where he said:
"I think it is possible that the English courts have been led to be rather over-ready to treat these questions as 'pure questions of fact' by some observations of Warrington and Atkin L.JJ. in Cooper v. Stubbs. If so, I would say, with very great respect, that I think it is a pity that such a tendency should persist. As I see it, the reason why the courts do not interfere with commissioners' findings or determinations when they really do involve nothing but questions of fact is not any supposed advantage in the commissioners of greater experience in matters of business or any other matters. The reason is simply that by the system that has been set up the commissioners are the first tribunal to try an appeal, and in the interests of the efficient administration of justice their decisions can only be upset on appeal if they have been positively wrong in law. The court is not a second opinion, where there is reasonable ground for the first. But there is no reason to make a mystery about the subjects that commissioners deal with or to invite the courts to impose any exceptional restraints upon themselves because they are dealing with cases that arise out of facts found by commissioners. Their duty is no more than to examine those facts with a decent respect for the tribunal appealed from and if they think that the only reasonable conclusion on the facts found is inconsistent with the determination come to, to say so without more ado."
It follows that the judgment of Mr. Justice Slade should only be upheld if on the primary facts found by the General Commissioners they could not properly have concluded that the expenditure was dual-purpose expenditure incurred partly for professional and partly for non-professional purposes, i.e. being warm and decently clad. If they could properly so find, it is nothing to the point that other commissioners or Mr. Justice Slade, or indeed this court, would have reached a different conclusion.
Mr. Millett, for the Crown, accepted that the purpose referred to in the section is the purpose of the taxpayer. In other words, the test is subjective. But he submitted that purpose—"the end in view"—must not be confused with motive—"the reason why". But this distinction does not appear to have been present in the mind of Lord Justice Romer when giving the judgment of the Court of Appeal in Bentley, Stokes & Lowless v. Beeson (1952) 33 Tax Cases 491, as indeed was painted out by Mr. Justice Walton in Robinson v. Scott Bader Co. Ltd. (1980) 1 Weekly Law Reports 755 at page 760, but in deference to Mr. Millett's argument I will eschew any other word or concept than "purpose" which is, after all, the word used by the legislature.
What was the end in view? The General Commissioners had to look into the taxpayer's mind at the moment when the expenditure was incurred and not at the moment when the clothes were...
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