Proctor v Ryall (HM Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judgment Date | 16 July 1928 |
| Date | 16 July 1928 |
| Court | King's Bench Division |
NO. 696.-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION).-
Income Tax, Schedule E - Offices and employments within United Kingdom - Director of British Company resident abroad.
The Appellant in the first case was appointed foreign director of a British Company for fourteen years from 1918. The Company had subsidiary companies on the Continent, the principal one being a French company of which the Appellant was managing director. He was also a director of a German company and had control over selling organisations in other European countries. He was thus responsible for the whole of the British Company's Continental business, and his only remuneration was a fixed salary payable by the British Company plus commission on the Company's profits from trading on the Continent.
Since 1918 the Appellant had lived in Paris with his family. He came to London once a month to attend the Company's directors' meetings, his function being to report and advise the directors on questions affecting the Continental business. It was no part of his duty to attend to the general business of the Company.
The Appellant was assessed in respect of salary and commission for each year from 1920-21 to 1926-27 by the General Commissioners for the Division in which the Company's registered office was situated. On appeal the Special Commissioners found that the Appellant exercised a public office or employment within the United Kingdom for all the years under appeal, but that the General Commissioners had no jurisdiction to assess for the years 1920-21 and 1921-22 (i.e., until Rule 18 (5) of the Rules applicable to Schedule E of the Income Tax Act, 1918, was amended by Section 18 (4) of the Finance Act, 1922).
Held, (1) that his office was an office within the United Kingdom; and
(2) that the General Commissioners had jurisdiction to assess for 1920-21 and 1921-22 as well as for later years.
Stated under the Income Tax Act, 1918, Section 149 and the Finance Act, 1922, Section 19, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the King's Bench Division of the High Court of Justice.
1. At a meeting of the Commissioners for the Special Purposes of the Income Tax Acts held on 17th January, 1927, for the purpose of hearing appeals Mr. Charles Archibald Proctor (hereinafter called Mr. Proctor) appealed against the following assessments to Income Tax made upon him under the provisions of the Income Tax Act, 1918, and subsequent enactments namely:-
(2) An assessment in the sum of £7,903 for the year ending 5th April, 1921.
(3) An assessment in the sum of £5,000 for the year ending 5th April, 1922.
(4) An assessment in the sum of £5,000 for the year ending 5th April, 1923.
(5) An assessment in the sum of £5,000 for the year ending 5th April, 1924.
(6) An assessment in the sum of £5,000 for the year ending 5th April, 1925.
(7) An assessment in the sum of £5,000 for the year ending 5th April, 1926.
(8) An assessment in the sum of £5,000 for the year ending 5th April, 1927.
2. The assessments under appeal were made upon Mr. Proctor under Schedule E of the Income Tax Act, 1918, in respect of his office as a Director of the Dunlop Rubber Company, Ltd. (hereinafter called "the Company").
The said assessments were made by the Commissioners for the Parish of Albany in the Division of Holborn.
The Registered Office of the Company is now situate at Dunlop House, 1, Albany Street, London, N.W.1.
3. By an agreement made the 11th April, 1919, between the Company of the one part and Mr. Proctor of the other part it was agreed that the latter should be a foreign director of the Company for the term of fourteen years from 1st September, 1918, at a fixed salary of £3,500 a year and a commission upon all net trading profits of the Company arising out of trading on the continent of Europe (excluding Russia and Finland) outside the United Kingdom of Great Britain and Ireland and the Isle of Man.
The rates of the said commission and the basis for calculating the same are set out in clause 4 of the said agreement (a copy of which, Marked A, is attached to and forms part of the Case stated at the request of Mr. Proctor).
The attention of the Court is directed to clauses 8 and 9 of the said agreement(1).
4. The Memorandum and Articles of Association of the Company were produced in evidence before us, and a copy thereof (marked B) is attached to and forms part of the Case stated at the request of Mr. Proctor.
Our attention was particularly directed to Articles 76, 77, 78, 79, 80, 82, 83, 85, 91, 92, 94, 95, 102 and 104(2).
5. The Appellant was called as a witness before us and proved the following facts:-
(a) Mr. Proctor was appointed a foreign director of the Company under the said agreement of 11th April, 1919.
(b) Since taking up his appointment as a foreign director of the Company he has had no residence in the United Kingdom. Since then he has resided with his family in Paris in a flat which is taken on lease.
(c) It is no part of Appellant's duty to attend to the general business of the Company, his duties being confined to the continental business only.
(d) The Company has subsidiary companies on the continent of which the main one is the French company.
(e) Mr. Proctor is managing director of this company and devotes most of his time to its business.
(f) The Company has another subsidiary company in Germany of which Mr. Proctor is a director. He visits the offices of the German company five or six times a year and controls its sales and mill operations.
(g) In other European countries (except Russia and Finland) the Company has selling organisations the managers of which are responsible to Mr. Proctor. He visits the headquarters of each of these selling organisations about once a year, and generally acts as managing director of the Company's continental business.
(h) Mr. Proctor receives no remuneration from the subsidiary companies or selling organisations which he manages or controls. His remuneration as foreign director for all his duties is paid by the Company under and in terms of the said agreement.
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(i) Mr. Proctor attends Board meetings of the Company in London which are usually held once a month, and remains in England on each occasion about 2 days. At these
Board meetings of the Company he discusses with and advises the Board on questions of policy and other matters affecting the Company's continental business. He does not deal with or discuss any other business of the Company. (j) The Appellant considers himself entitled to vote as a director at Board meetings.
(k) At these Board meetings Mr. Proctor also reports the position of the Company's continental business and he stated in evidence before us that he could carry out his duties as a foreign director of the Company by reporting in writing to the directors in England, but he found it more convenient to make his reports verbally.
6. It was contended on behalf of Mr. Proctor that:-
(a) His office or employment did not involve the exercise of any duties within the United Kingdom.
(b) He did not in any of the years under appeal exercise an office or employment within the United Kingdom.
(c) As Mr. Proctor did not reside or ordinarily reside in the United Kingdom there was no jurisdiction under which assessments could be made upon him; alternatively there was no jurisdiction under which assessments could be made upon him for any year prior to the year 1922-23.
7. It was contended on behalf of the Crown (inter alia) that:-
(a) Mr. Proctor was during each of the years under appeal exercising a public office or employment within the United Kingdom.
(b) The assessments under appeal were correct in principle, were validly made and should be confirmed.
8. Having considered the evidence and arguments adduced before us we held that:-
(a) Mr. Proctor during each of the years under appeal exercised a public office or employment within the United Kingdom.
(b) The Commissioners had no jurisdiction to make the assessments for the years ending 5th April, 1921 and 1922.
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McMillan v Guest (Inspector of Taxes)
...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 ......