Re Herbert Berry Associates Ltd
| Jurisdiction | UK Non-devolved |
| Judge | Viscount Dilhorne,Lord Morris of Borth-y-Gest,Lord Simon of Glaisdale,Lord Russell of Killowen,Lord Scarman |
| Judgment Date | 01 December 1977 |
| Judgment citation (vLex) | [1977] UKHL J1201-2 |
| Date | 01 December 1977 |
| Court | House of Lords |
[1977] UKHL J1201-2
House of Lords
Viscount Dilhorne
Lord Morris of Borth-y-Gest
Lord Simon of Glaisdale
Lord Russell of Killowen
Lord Scarman
Upon Report from the Appellate Committee, to whom was referred the Cause Herbert Berry Associates Limited against Commissioners of Inland Revenue, That the Committee had heard Counsel, as well on Monday the 7th as on Tuesday the 8th, days of November last, upon the Petition and Appeal of Herbert Berry Associates Limited whose registered office is situate at 47 Queen Anne Street, London W.1 (In Liquidation), praying. That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 22nd of February 1977, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen in Her Court of Parliament, might seem meet; as also upon the Case of the Commissioners of Inland Revenue, 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 Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal of the 22nd day of February 1977 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 Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.
My Lords,
I have had the advantage of reading in draft the speeches of my noble and learned friends, Lord Simon of Glaisdale and Lord Russell of Killovven. I agree entirely with them and for the reasons they give, in my opinion this appeal should be dismissed.
My Lords,
I have had the advantage of studying in draft the speeches prepared by my noble and learned friends Lord Simon of Glaisdale and Lord Russell of Killowen.
I fully agree with them and, for the reasons they set out, I would dismiss the appeal.
My Lords,
This is an appeal from an order of the Court of Appeal ( [1977] 1 W.L.R. 617) affirming a judgment and order of Templeman J. ( [1976] 1 W.L.R. 783) whereby he dismissed the appellants' application by originating summons dated 5th May 1975. By that originating summons the appellants had applied for an order that all further proceedings in a distress levied by the respondents on certain property and chattels of the appellants should be stayed, and for a declaration that such property and chattels were available for distribution by the appellants amongst their creditors in accordance with the provisions of the Companies Act 1948.
The appellants were incorporated in 1956 and carried on the business of joiners; their authorised and issued capital was £1,000. In January 1975 they were indebted to the respondents for income tax which, under the PAYE provisions, they had deducted from the emoluments of their employees for the months of April to December 1974, and for national insurance contributions for the same period. By letter dated the 22nd January 1975, the Collector of Taxes informed the appellants that distress would be levied if the debt was not paid by the 29th January 1975. The appellants made some payment to the respondents; but there was a balance of £9,513.71 still due to the respondents on the 29th January 1975. On that day the respondents therefore levied distress on the goods of the appellants for the sum of £9,676.19 (made up of £6,838.57 income tax, £2,675.01 national insurance contributions and £162.48 the costs of the distress). The distress was accompanied by a "walking possession" agreement whereby, for the convenience of the appellants and in consideration of the respondents not leaving a man in possession of the distrained goods, the appellants agreed, inter alia, that the respondents had not abandoned the distraint by not thus leaving a man in possession. By notices dated the 3rd March 1975, pursuant to section 293 of the Companies Act 1948, the appellants convened a meeting of creditors for the 20th March 1975, with a view to going into a creditor's voluntary liquidation. By the 20th March 1975, the debt owed by the appellants to the respondents had been reduced to £5,751.78 as i result of payments made by the appellants. On the 20th March 1975 the appellants went into a creditors' voluntary liquidation. The Statement of Affairs prepared by the appellants' directors showed assets (including the distrained goods) estimated by the directors at £25,741, preferential creditors (including the respondents in respect of the debt for which they had distrained) in the sum of £31,247.26 and unsecured creditors in the sum of £85,655. The respondents had arranged before the beginning of the liquidation that the distrained goods should be sold on the 27th March 1975; but, on being informed that the appellants intended to start the instant proceedings, cancelled the sale; and, at the request of the respondents, the goods were sold by the appellants' liquidator on terms (inter alia) that the respondents retained against the proceeds of sale such rights as they had against the goods themselves.
The main issue that arises upon this appeal is whether the respondents, who duly levied distress on the goods of the appellants in purported exercise of the statutory rights conferred on the respondents, are entitled to retain the benefit of that distress notwithstanding that the appellants went into a creditors' voluntary liquidation after the levying of the distress but before it was completed by sale.
The provision giving the respondents power to distrain in such circumstances as those in the instant case is now contained in section 61 of the Taxes Management Act 1970 (although your Lordships were informed from the Bar that statutory authority for distress by a revenue authority goes back to the eighteenth century; and section 80 of the Taxes Management Act 1880 is substantially the precursor of section 61 of the 1970 Act).
Section 60 of the 1970 Act provides that the collector of taxes should make demand for payment of tax. Section 61 reads as folows:
"61.—(1) If a person neglects or refuses to pay the sum charged, upon demand made by the collector, the collector shall, for non-payment thereof, distrain upon the lands, tenements and premises in respect of which the tax is charged, or distrain the person charged by his goods and chattels, and all such other goods and chattels as the collector is hereby authorised to distrain.
(2) For the purpose of levying any such distress, a collector may, after obtaining a warrant for the purpose signed by the General Commissioners, break open, in the daytime, any house or premises, calling to his assistance any constable.
Every such constable shall, when so required, aid and assist the collector in the execution of the warrant and in levying the distress in the house or premises.
(3) A levy or warrant to break open shall be executed by, or under the direction of, and in the presence of, the collector.
(4) A distress levied by the collector shall be kept for five days, at the costs and charges of the person neglecting or refusing to pay.
(5) If the person aforesaid does not pay the sum due, together with the costs and charges, within the said five days, the distress shall be appraised by two or more inhabitants of the parish in which the distress is taken, or by other sufficient persons, and shall be sold by public auction by the collector for payment of the sum due and all costs and charges.
The costs and charges of taking, keeping, and selling the distress shall be retained by the collector, and any overplus coming by the distress, after the deduction of the costs and charges and of the sum due, shall be restored to the owner of the goods distrained."
It will be noted that subsection (1) is in mandatory terms. It was common ground that this statutory power of distraint extended to the unpaid PAYE deductions and also to the unpaid national insurance contributions.
Some of the arguments which had been advanced to Templeman J. and the Court of Appeal were abandoned before your Lordships. In particular, it was no longer contended on behalf of the appellants that the Crown did not fall within the words "any other person" in section 319(7) of the Companies Act 1948 (quoted hereafter), and it was accepted that that subsection applies only to a compulsory winding-up (not to a creditors' voluntary liquidation). On the other hand one argument was advanced which was not raised in the courts below.
The appellants put forward three main arguments before your Lordships:
(1) Any right of the Crown to distrain for debts due to it and any right of the Crown to claim preferential payment of debts due to it are prerogative powers. But Food Controller v. Cork [1923] A.C. 647, affirming the decision the Court of Appeal sub nom. In re H. J. Webb & Co. (Smithfield, London) Ltd. [1922] 2 Ch. 369, established that the rights of the Crown against the property of an insolvent company are governed by the provisions of the Companies Acts, and that there is now no place for the exercise by the Crown of either of the prerogative powers to which I have referred.
(2) Alternatively, if the right of the Crown to distrain for debts arising from failure to make over to the Inland Revenue tax deducted under PAYE payments and national insurance contributions is a statutory (not a...
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