McMillan v Guest (Inspector of Taxes)

JurisdictionEngland & Wales
JudgeLord Atkin,Lord Wright,Lord Porter
Judgment Date27 April 1942
Judgment citation (vLex)[1942] UKHL J0427-4
Date27 April 1942
CourtHouse of Lords
McMillan
and
Guest (Inspector of Taxes)

[1942] UKHL J0427-4

Lord Atkin

Lord Wright

Lord Roche

Lord Porter

House of Lords

After hearing Counsel, as well on Monday the 16th, as on Tuesday the 17th, Thursday the 19th and Monday the 23d, days of February last, upon the Petition and Appeal of James Gellatly McMillan, of 360 North Michigan Avenue, Chicago, in the United States of America, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal, of the 25th of November 1940, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order might be reversed, varied, or altered, and that the Petitioner might have the relief prayed for in the Appeal, or such other relief in the premises as to His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed Case of W. H. Guest (His Majesty's Inspector of Taxes), lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of His Majesty the King assembled, That the said Order of His Majesty's Court of Appeal, of the 25th day of November 1940, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellant do pay, or cause to be paid, to the said Respondent the Costs incurred by him in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.

Lord Atkin

My Lords,

1

This is an Appeal from an order of the Court of Appeal reversing a decision of Lawrence J. who allowed an Appeal by the Appellant, Mr. McMillan, from a determination of Commissioners for fixed purposes of Income Tax upholding an assessment of the Appellant for Income Tax under Schedule E. The sole question is whether the Appellant, who in the years of assessment was a director of a limited company, A. Wander, Ltd., had held a public office of profit within the United Kingdom. The facts are not in dispute, and are set out in paragraphs 4-6 of the Case stated by the General Commissioners, which I will not here repeat. Schedule E of the Income Tax Act, 1918, provides that "Tax under Schedule E shall be charged in respect of every public office or employment of profit." By rule 6, "The Tax shall be paid in respect of all public offices and employments of profit within the United Kingdom … viz. … ( h) offices or employments of profit under any company or society whether corporate or not corporate."

2

It is necessary to consider whether the Appellant

  • (1) held an office

  • (2) held a public office

  • (3) held a public office within the United Kingdom.

    (1) On the first point there was no dispute. There is no statutory definition of office. Without adopting the sentence as a complete definition one may treat the following expression of Rowlatt J. in 1920, 3 K.B. at p. 274 adopted by Lord Atkinson in G.W. Railway v. Bater, 1922, 2 A.C. at p. 28 as a generally sufficient statement of the meaning of the word, "an office or employment which was a subsisting permanent substantive position which had an existence independent of the person who filled it which went on and was filled in succession by successive holders". There can be no doubt that the director of a company holds such an office as is described.

    (2) It was contended by the Appellant that while he held an office yet it was not a public office within the meaning of the Income Tax Act, 1918. It can hardly be said to be obvious that the position of director of a trading company which may carry on business with a very small capital on a very small scale is necessarily a public office. But it is impossible to give effect to the words of Rule 6 ( h) "any company" so as to distinguish between those whose offices are public and those whose offices are not. In particular in reference to companies incorporated under the Companies Acts it has to be remembered that the legislature has thought fit to impose duties upon their officers which attach to them as such, and which are not imposed upon private partnerships, as for instance ss. 27 (2), 37, 112, 122, 217 of the Companies Act, 1929. I can find no reason for distinguishing in this respect between offices held in a private company within the meaning of the Companies Acts (which this is) and a public company. Some of the above sections, though not all, apply to both. The office of director of this company was for the above reasons a "public office."

    (3) Was, then, the office held by the Appellant a public office "within the United Kingdom"? As to this I am completely satisfied by the reasoning of the Master of the Rolls in his judgment delivered in the Court of Appeal. I will only add that we are here dealing with an "office" not with an "employment," the locality of which may be governed by different considerations. The office of director of an English company, the head seat and directing power of which is admitted to be in the United Kingdom, seems to me of necessity to be located where the company is. It is in fact part of the organic structure of the corporation. In such a case I do not think that it is true, as suggested by Rowlatt J. in Proctor v. Ryall (1928), 14 Tax Ca. 204, that "the place of exercise governs." The Appellant, though resident in the U.S.A., while there held office in the U.K.; and though he may have taken his share of the directing power only in attending to the activities of the English company in the U.S.A. and in Canada, he did so by virtue of his English office. From this point of view I think that too much emphasis may be laid upon the source from which the office was remunerated; but the fact that it was English reinforces the view that the locality of the office was in fact English. Like the Master of the Rolls, I derive little assistance from previous cases. I consider it to be clear that the director of an English company which is resident in the United Kingdom, wherever he resides and whether or not he takes any part in directing the affairs of the company, holds an office in the United Kingdom.

    For these reasons I am of opinion that the appeal fails and should be dismissed with costs.

Lord Atkin
3

My noble and learned friend, Lord Roche, wishes me to state that he concurs in the order proposed.

Lord Wright

My Lords,

4

The Appellant was not resident in this country during the years of charge. Accordingly the emoluments derived from his directorship in A. Wander, Limited, are not taxable unless they fall within the words of Schedule E, nor are they affected by the provisions of Section 18 of the Finance Act, 1922, because they could not have been charged under Schedule D. The Crown has therefore to establish that they are profits of a public office or employment within the United Kingdom, which last condition is specified in Rule 6.

5

As Rule 6 ( h) expressly includes offices or employments of profit under a Corporate Company, and as A. Wander, Limited, is a Company registered in England under the Companies Acts, the requirements of Schedule E would seem so far to be satisfied. The Company, further, is one which, as the case finds, is resident and controlled in the United Kingdom. I limit my observations to such a Company, without considering what is the position of a Company registered in the United Kingdom but controlled and managed abroad. The next matter to be examined is whether the directorship held by the Appellant is an office or employment within the meaning of Schedule E. The word "office" is of indefinite content; its various meanings cover four columns of the New English Dictionary, but I take as the most relevant for purposes of this case the following:

"A position or place to which certain duties are attached, especially one of a more or less public character."

6

This, I think, roughly corresponds with such approaches to a definition as have been attempted in the authorities, in particular Great Western Railway Co. v. Bater, 1922, 2 A.C. 1, where the legal construction of these words, which had been in Schedule E since 1803 (43 Geo. III, c. 122, s. 175), was discussed. It was there held that the position of a clerk in a railway company was not an office or employment of profit of a public nature within Schedule E. Lord Wrenbury ( loc. cit.), at p. 35, was content so to hold without attempting to define what type of office or employment would satisfy the language of the Schedule. Lord Sumner ( loc. cit.), at p. 25, said that to hold otherwise would be an abuse of language. To hold that the director of a Company such as A. Wander, Limited (though it is what is called a private Company), does not have an office within the meaning of the Schedule would equally, in my opinion, be an abuse of language. Everyone, I think, would say...

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