Russell v Scott
| Jurisdiction | England & Wales |
| Judge | Viscount Simon,Lord Porter,Lord Simonds,Lord Normand,Lord Oaksey |
| Judgment Date | 13 May 1948 |
| Judgment citation (vLex) | [1948] UKHL J0513-2 |
| Date | 13 May 1948 |
| Court | House of Lords |
[1948] UKHL J0513-2
Viscount Simon
Lord Porter
Lord Simonds
Lord Normand
Lord Oaksey
House of Lords
After hearing Counsel, as well on Wednesday the 7th, as on Thursday the 8th, Friday the 9th, Tuesday the 13th and Wednesday the 14th, days of April last, upon the Petition and Appeal of Henry McAlpine Russell, of Customs House, Londonderry, Northern Ireland, His Majesty's Inspector of Taxes, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal in Northern Ireland of the 15th of January 1947, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order might be reversed, varied or altered, or that the Petitioner might have 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 David Scott, 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 in Northern Ireland, of the 15th day of January 1947, 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.
My Lords,
The question in this Appeal is raised by a Case Stated 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 in Northern Ireland.
The Respondent is the owner in fee simple of a farm of some twenty-five acres in the County of Londonderry. It was discovered that, under a portion of the surface of this farm extending to about one acre, sand existed in considerable depth and the Respondent allowed various persons to come on his land, dig sand, and take it away, with the result that a sandpit was formed which was regularly and continuously worked from January, 1941, until about October, 1944, by which time the pit was practically exhausted. The sand was of different qualities and the Respondent's charges varied from between sixpence to one shilling per ton according to the quality of the sand gotten. The hours of working at the pit were from 8 a.m. to 6 p.m. daily. A road to the sand-pit from the County road was, with the Respondent's approval, made by a Mr. Moore who was the earliest and biggest Contractor. The demand for this sand principally arose in connection with the construction of aerodromes in Northern Ireland. The sand was excavated by the various Contractors' men by shovelling, and was loaded into lorries for removal. The Respondent employed a man to record the tonnage of sand taken in each case, and this employee supervised the pit generally and directed the various Contractors to the particular part of the face of the pit where each should work. There was a regular system for rendering accounts, for checking them and for receiving payments.
The profits made by the Respondent from the disposal of sand from this sand-pit amounted to £150 in 1940-41, £1,250 in 1941-42 and £3,750 in 1942-43.
The Revenue contends that the Respondent, in connection with this sand-pit, was carrying on a "concern of the like nature" within the meaning of those words in No. III, rule 3 of the Rules Applicable to Schedule A. If so, income tax would be separately charged by reference to the profits made by him in the preceding year. The Respondent, on the other hand, argues that what he was doing in connection with this sand-pit did not amount to the carrying on of a "concern" at all, and that even if it did, it was not a "concern of the like nature" within the meaning of rule 3. If this contention prevails, income tax would be charged on the annual value of the farm as a whole, calculated as directed for Ireland by section 187 of the Income Tax Act 1918.
The Commissioners decided against the Respondent on both points, but stated a Case which admirably sets out the facts found by them, and formulates their decision thus:
"We find that the sales of sand by the Appellant," (the present Respondent) "which amounted to more than 100,000 tons and extended over three years, were by way of trade, that they were not merely casual and occasional but constituted a series of transactions carried out in pursuance of a regular method and we arrive at the conclusion that the sandpit was a concern carried on by the Appellant. Further, following the decision in the Court of Appeal in Mosley v. George Wimpey & Co. Ltd. (1945) (1 All E.R. 674) we hold that it was a concern of a like nature with those enumerated in Rule 3 of No. III of Schedule A. We accordingly confirm the assessments appealed against in principle and leave the figures to be agreed between the parties."
When the matter came on appeal before Mr. Justice Black, that learned judge considered himself to be bound by the views expressed in an earlier stage of the same controversy by the Court of Appeal in Northern Ireland, and consequently reversed the view of the Commissioners.
In the Court of Appeal the Lord Chief Justice confirmed the Commissioners' view that the Respondent was conducting a "concern", but rejected the Commissioners' other conclusion that it was a "concern of the like nature." Lord Justice Babington considered the Revenue's contention to be wrong on both points, saying as regards the first that he could find no evidence to justify the finding of the Commissioners that the Respondent carried on any "concern" or did anything more than convert his sand into money. Lord Justice Porter agreed with the view that there was no "concern of the like nature" being carried on by the Respondent, and thus the Court of Appeal was unanimous in holding that the Revenue's claim failed. From this decision an appeal is now brought to this House.
In order to reach a correct conclusion in this difficult matter it is necessary to examine the language of parts of Schedule A with much care. It is first to be observed that No. I is the General Rule to which No. III, like No. II, is an exception. There is nothing therefore in the scheme of the Schedule to require that No. III should be given a wider interpretation than its terms on their natural construction require. All that will happen when tax under Schedule A is charged "in respect of the property in all lands, tenements, hereditaments, and heritages in the United Kingdom" is that, if the case does not fall within either of the Rules which constitute exceptions, it will fall under the General Rule No. I and the tax will be calculated on annual value as therein defined.
No. III is headed, "Rules for estimating the annual value of certain other Lands, Tenements, Hereditaments, or Heritages which are not to be charged according to the preceding General Rule" and provides as follows:
"1. In the case of quarries of stone, slate, limestone, or chalk, the annual value shall be understood to be the profits of the preceding year.
2. In the case of mines of coal, tin, lead, copper, mundic, iron, and other mines, the annual value shall be understood to be the average amount for one year of the profits of the five preceding years:
3. In the case of ironworks, gasworks, salt springs or works, alum mines or works, waterworks, streams of water, canals, inland navigations, docks, drains or levels, fishings, rights of markets and fairs, tolls, railways and other ways, bridges, ferries, and other concerns of the like nature having profits from or arising out of any lands, tenements, hereditaments or heritages, the annual value shall be understood to be the profits of the preceding year.
4. Tax under the above rules shall be assessed and charged on the person or body of persons carrying on the concern, or on the agents or other officers who have the direction or management of the concern or receive the profits thereof."
. . . . . . . . .
Section 28 of the Finance Act 1926 transferred the calculation of tax in respect of properties included in No. III to Case I of Schedule D, and consequently the measure is now the profits of the preceding year in rule 2 as well as in rules 1 and 3.
I agree with Lord Chief Justice Andrews that what the Respondent was doing in connection with his sand-pit amounted to the carrying on of a "concern". The question is not, of course, (as the language of the Commissioners, if strictly read, might seem to imply,) whether the sand-pit was itself a "concern" but whether the Respondent's activities in connection with it amounted to the carrying on of a "concern", and this, I think, is what the Commissioners really meant by their finding. "Concern" is a very wide word, and appears to imply an adequate degree of business organisation for the purpose of carrying on the undertaking. But the amount of organisation needed must depend upon the character of the "concern" itself. It will be noted from the language of Rule 4 that all the various enterprises in Rules 1, 2, and 3 are spoken of as "concerns" and it is obvious that the amount of organisation needed for a toll or for streams of water would be vastly less than for a mine of coal or for gasworks. The language of Rule 4 implies that, in order to amount to a "concern" there must be direction or management as well as the receipt of profits. Here the facts found by the Commissioners show that there was a regular system of direction and management sufficient for the exploiting of the sand-pit by its owner, and the Commissioners had...
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