R v Inspector of Taxes, ex parte Clarke
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BUCKLEY,LORD JUSTICE ORR,LORD JUSTICE SALMON |
| Judgment Date | 27 October 1971 |
| Judgment citation (vLex) | [1971] EWCA Civ J1027-2 |
| Date | 27 October 1971 |
| Court | Court of Appeal (Civil Division) |
[1971] EWCA Civ J1027-2
Lord Justice Salmon,
Lord Justice Buckley,
Lord Justice Orr
In The Supreme Court of Judicature
Court of Appeal
(On appeal from Queen's Bench Divisional Court)
Mr. MARCUS JONES (instructed by Messrs. Eland Hore Patersons, Agents for Messrs. Holmes & Hills, Braintree) appeared on behalf of the Appellant (Applicant)
Mr. PATRICK MEDD (instructed by The Solicitor of Inland Revenue) appeared on behalf of the Respondent (H. M. Inspector of Taxes).
( )
A LORD JUSTICE SALMON: In January 1967 an assessment was made on Mr. Clark, the present Appellant, in the sum of some £23,000 under Case VII of Schedule in respect of a short-term capital gain arising as a result of the acquisition and subsequent disposal of Muchmore's Farm, Great Saling in Essex. Between January 1967 and January 1969 it appeared that Mr. Clark might be going to say that the profit or gain (if any) was not a short-term capital profit or gain, but was a gain attributable to his trade. It is quite plain from Section 10, Subsection (1) of the Finance Act, 1962, that short-term gains can be chargeable under Case VII only if they are not gains which accrue as profits of a trade. Accordingly in January 1969 another assessment (which in effect was an alternative assessment) was made for a similar sum in respect of the same transaction, but it was made under Case I of Schedule as being a profit or gain in respect of a transaction which was an adventure in the nature of trade.
Mr. Clark appealed against both these assessments. The appeals came on for hearing before the General Commissioners in January 1970 and the hearing appears to have occupied six whole days. At that hearing the Inspector who had made the assessments was represented by Mr. MacKeith, a member of the Bar who is employed in the office of the Solicitor of Inland Revenue. He made it plain to the Commissioners that they could not affirm both assessments; that if they affirmed the assessment under Case I they would have to discharge the assessment under Case VII. At the hearing Mr. Clark had the advantage of being represented by Mr. Marcus Jones and the points taken on his behalf were these: first of all, it was said that he was not engaged in trading in land; then that in any event he had not made a short-term capital gain and indeed that there was no gain of any kind to be taxed; and a number of complex points of law were argued in support of those latter contentions. At the conclusion of the hearing the General Commissioners indicated that they would consider the matter and put their decision into writing and this, according to the affidavit of Mr. Clark's solicitor, was done with the concurrence of both parties to the appeal.
Mr. MacKeith at the conclusion of the hearing asked the Clerk to the Commissioners to send the written decision to him at Somerset House in London. It must have been apparent to Mr. MacKeith that the decision would deal with a number of complex points of law and that it was important that he should see it at the earliest opportunity so as to be able to advise his client what to do and to take the necessary steps on behalf of his client. When he made that request to the Clerk to the General Commissioners he obviously had the ostensible authority of his client to ask that the decision of the Commissioners should be sent to him (Mr. MacKeith) who would receive it on behalf of his client and deal with it for him. Moreover, in the following month of February he telephoned Mr. Jenkins, the Clerk to the Commissioners, and asked him when the decision might be expected and at the same time reminded him that thedecision was to be sent to him (Mr. MacKeith) at Somerset House. There is no suggestion at all that Mr. Jenkins demurred to that request and, of course, there was no reason why he should have done so.
The General Commissioners reached their decision on the 10th March, and a copy was duly sent to Mr. Clait, but unfortunately, through some slip or oversight in the office of the Clerk to the General Commissioners, the decision was not sent to Mr. MacKeith at Somerset House, but was sent direct to the Inspector of Taxes, office at Sudbury. As chance would have it, on that very day, so we are told, Mr. Rivott, who had been attending to this matter as Inspector and who had given evidence at the hearing before the Commissioners, having previously handed all the papers In the appeal over to Mr. MacKeith to deal with, ceased to operate at the office in Sudbury. His place was taken by Mr. Follett, an Inspector of Taxes, who is the nominal Respondent, but he in fact, according to the uncontradicted evidence, had had nothing to do with the appeal. When the decision reached him on the 10th March, not being a lawyer he did not appreciate that there was any urgent action to be taken, so he did not send off the decision to Mr. MacKeith at the office of the Solicitor of Inland Revenue until 20th March. It reached Mr. MacKeith on the 23rd.
Pausing there, the decision (which I do not propose to read) was to the effect that Mr. Clark's repurchase and subsequent sale in 1964 of Muchmore's Farm was an adventure in the nature of trade, I should say the fiscal year in question, in respect of which the assessments were made, was 1964/65. The decision also stated that the profits of the adventure amounting to some £23,000 were properly chargeable to tax under Case I of Schedule D, and therefore the assessment under that Case was affirmed. It followed that the assessment under Case VII of Schedule was discharged. Then the decision goes on to state: "If the repurchase and sale of Muchmore's Farm had not been an adventure in the nature of trade, the profit would have been properly chargeable to tax under Case VII of Schedule D" in the sum of some £23,000 - the exact figure is stated. The decision then goes on to deal with a number of points which had been raised by Mr. Marcus Jones at the appeal? The decision bristles with determinations in respect of points of law.
As soon as this decision reached Mr. MacKeith on the 23rd March, he reacted with exemplary promptitude, because it occurred to him as a lawyer - and I do not believe it would occur to anyone except a lawyer - that if by any chance Mr. Clark asked for a Case Stated in respect of the decision en the assessment under Case I and succeeded in persuading the High Court that there was no material upon which the Commissioners could have come to the conclusion that he had been trading in land, then it would have followed that the Case I assessment would have been discharged, and unless he (Mr. MacKeith) took prompt steps, the decision which had been reached In respect of the Case VII assessment would stand and Mr. Clark, who mightowe very large sums by way of tax end surtax In respect of the adventure, would be in the clear. It wee obvious to Mr. MacKeith that it was necessary to preserve the position of the Inspector so that when the matter came before the High Court it might be argued on behalf of the Inspector - and I cannot for the moment see very much answer to the argument - that if Mr. Clark was not trading in land and therefore could not be assessed to a profit under Case I and had in fact made a profit or gain out of the transaction in question, he had properly been assessed in respect of that profit or gain under Case VII.
So, on the 23rd March, Mr. MacKeith wrote a letter to the Clerk to the General Commissioners and the last paragraph of that letter reads: "Although the Commissioners discharge of the 1967 Case VII assessment was inevitable in view of the confirmation of the 1969 Case I assessment and it may therefore seem illogical at first sight for the Crown to express dissatisfaction, I am doing so as a precaution solely to safeguard the Crown's position in the High Court in the event of Mr. Clark asking your Commissioners to state a case. It does not mean that, as at present advised, we contemplate asking the Commissioners to state a case". He feared that Mr. Clark might ask for a case to be stated in respect of the assessment under Case I, and his fears were justified, because Mr. Clark, having on the 13th March expressed dissatisfaction with the findings of the Commissioners in respect of the assessment under Case I, a few days later requested the Commissioners to state a case. I think that it is a fair inference that this came to the notice of Mr. MacKeith and, accordingly, on 2nd April, 1970, he asked the Commissioners to state a case for the opinion of the High Court in respect of the assessment under Case VII which they had discharged. That was done obviously to protect the position of the Crown should Mr. Clark succeed by way of his Case Stated on the assessment under Case I.
Mr. Clark then applied, by leave, to the Divisional Court to prohibit the Commissioners from stating and signing a case in respect of the decision of the Commissioners relating to the Case VII assessment. The Divisional Court refused the application for prohibition and from that refusal Mr. Clark now appeals to this Court.
In order to understand the points at issue, it is necessary to refer to Section 64 of the Income Tax Act, 1932, which makes provision for an appeal, either by the Crown or the taxpayer, to the High Court by way of Case Stated from any decision of the Commissioners. Subsection (1) reads: "Immediately after the determination of an appeal by the General Commissioners, or by the Special Commissioners, the appellant or the surveyor, if dissatisfied with the determination as being erroneous in point of law, may declare his dissatisfaction to the Commissioners who heard the appeal. (2) The appellant or surveyor, as...
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