Mesco Properties Ltd Re
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BUCKLEY,LORD JUSTICE BRIDGE,LORD JUSTICE TEMPLEMAN |
| Judgment Date | 12 July 1979 |
| Judgment citation (vLex) | [1979] EWCA Civ J0712-6 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | No. 001848 of 1970 |
| Date | 12 July 1979 |
[1979] EWCA Civ J0712-6
In The Supreme Court of Judicature
Court of Appeal (Civil Division)
On Appeal from The High Court of Justice
Chancery Division
Companies Court
(Mr. Justice Brightman)
Lord Justice Buckley
Lord Justice Bridge
and
Lord Justice Templeman
MR. G. B. H. DILLON Q. C. and MR. JAMES MUNBY (instructed by Messrs. Herbert Smith & Co., Solicitors, London EC2R 7JP) appeared on behalf of the Liquidator (Appellant).
MR. PETER GIBSON (instructed by The Solicitor of Inland Revenue, London WC2R 1LB) appeared on behalf of the Commissioners of Inland Revenue (Respondents).
We have before us two appeals from decisions of Mr. Justice Brightman, one in the matter of Mesco Properties Ltd., and the other, notwithstanding the way in which the case is listed, in the matter of Mesco Laboratories Ltd. The appeals arise on decisions of the learned judge on two summonses, each issued in the compulsory liquidation of the company in question. The facts of the two cases are in all significant respects the same, so that the fate of one appeal must dictate the fate of the other; I can confine myself to the appeal in Re Mesco Properties Ltd.
The facts are set out in the report of the learned judge's decision, which is to be found in (1979) 1 Weekly Law Reports, page 558; I need not repeat them at any length.
After the commencement of the winding up of the company, certain immovable properties of the company were sold, some of them by receivers appointed by mortgagees, some by mortgagees and some by the liquidator, at prices which realised profits over the cost of those properties to the company. Consequently the company became liable to corporation tax in the considerable sum of £634,440, in respect of chargeable gains so realised. The liquidator has a balance in hand in the winding up of no more than about £520,000.
In these circumstances the liquidator, by the summons, asks (1) whether the corporation tax is (a) a fee or other expense properly incurred in preserving, realising or getting in the assets of the company within the meaning of Rule 195 (1) of the Companies (Winding-up) Rules 1949; or (b) a necessary disbursement of the liquidator within the meaning of that rule. I need not read paragraphs (c) and (d) of paragraph (1) of the summons: (c)has been abandoned and (d) does not in fact arise.
The liquidator also asks, by paragraph (2) of the summons, whether in any event the liability for the tax is a cost, charge or expense of the winding up within the meaning of section 267 of the Companies Act 1948. The summons also raised a further question about how the liquidator's own remuneration should rank, but we are not now concerned with that.
Mr. Justice Brightman answered paragraph (1) (a) of the summons in the negative, paragraph (1) (b) in the affirmative and paragraph (2) in the affirmative. The liquidator appeals against that decision.
It is common ground that the Crown cannot prove in the winding up for tax the liability for which arose after the commencement of the winding up. It is also common ground that neither the liquidator, nor any mortgagee or receiver is liable for any of the tax: the company alone is liable.
In the events which have happened the liquidator is the proper officer of the company to pay the tax (Taxes Management Act 1970, Section 108 (1) and (3) (a)). Under the Income & Corporation Taxes Act 1970, section 238 (1), corporation tax is charged on a company's profits which, by virtue of subsection (4) means income and chargeable gains. Chargeable gains for this purpose are to be computed in accordance with capital gains tax principles (see section 265 (2) of that Act) and the amount to be included in respect of chargeable gains in a company's total profits for any accounting period are the total amount of chargeable gains accruing to the company in that period after deducting allowable losses. Corporation tax assessed for an accounting period is in general payable within nine months from the end ofthat period or, if later, within one month from assessment (see section 243 (4)).
Mr. Dillon, appearing for the appellant liquidator, submits that the learned judge was wrong to hold that the tax is a disbursement within rule 195 of the Winding-up Rules, because the liquidator has not paid the tax and does not wish to pay it unless, in accordance with the proper priority in which the company's liabilities should be discharged, he is bound to do so; and because the payment of the tax will not advance the liquidation in the sense of making the...
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