T. & E. Homes Ltd v Robinson
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE ORR,LORD JUSTICE ORMROD,LORD JUSTICE TEMPLEMAN |
| Judgment Date | 31 January 1979 |
| Judgment citation (vLex) | [1979] EWCA Civ J0131-6 |
| Date | 31 January 1979 |
| Court | Court of Appeal (Civil Division) |
[1979] EWCA Civ J0131-6
In The Supreme Court of Judicature
The Court of Appeal
(Chancery Division)
Lord Justice Orr
Lord Justice Ormrod and
Lord Justice Templeman
MR. I. EDWARDS-JONES, Q.C. and MR. P. GIBSON (instructed by the Solicitor of Inland Revenue) appeared on behalf of the Appellant.
MR. M. NOURSE, Q.C. and MR. D. CAMPION (instructed by Messrs. Borneo Martell & Partners of Bedford) appeared on behalf of the Respondent.
This is an appeal by an Inspector of Taxes against a judgment of Goulding J. delivered on the 14th July of last year whereby, reversing a determination of the Special Commissioners, he held that the respondent company, T & E Homes Ltd. (formerly named Besbuilt Ltd. and which I shall call 'the company') is not assessable to income tax under Case VI of Schedule D of the Income Tax Act, 1952, for the year of assessment 1957-58 and the two following years in respect of sums, alleged by the Crown to be "rent payable under a lease" within s. 175 (1) of the Income Tax Act, 1952, received by the company from an associated company, Welford Gravels Ltd. (which I shall call 'Welford') in consideration of rights granted to them by the company to extract sand and gravel from two areas of land owned by the company.
S. 175 (1) of the Income Tax Act, 1952 , re-enacting s. 15 of the Finance Act, 1940, provides as follows:-
"175 (1) If, as respects any year of assessment, the immediate lessor of a unit of assessment is entitled in respect of the unit to any rent payable under a lease or leases to which this section applies, he shall be chargeable to tax under Case VI of Schedule D in respect of the excess, if any, of the amount which would have been the amount of the assessment of the unit for the purposes of Schedule A, as reduced for the purpose of collection, if the annual value of the unit had been determined (in accordance, in whatever part of the United Kingdom the unit is situated, with the provisions of Part III of this Act) by reference to that rent and the other terms of the lease or leases, over whichever is the greater of -
(a) the actual amount of the assessment of the unit for the purposes of Schedule A, as reduced for the purpose of collection; or
(b) the amount of any rent payable by the immediate lessor in respect of the unit under any short lease or short leases."
The facts of the case may be summarised as follows. It was found by the Special Commissioners that in February, 1957, the company had bought 23½ acres of land at Tillinghamin Essex and had done so in order that Welford could extract there from sand and gravel for commercial purposes. Having bought the land, the company at once let Welford into occupation, who by the end of 1957 had extracted from it some 56,000 cu. yards of sand and gravel.
On the 31st December, 1957, two documents were executed, both under seal and both made between the company and Welford, by the first of which, described as a lease, the company demised to Welford the 23½ acres for a term of 21 years from the 1st March, 1957, at a yearly rent of £60 subject to a number of covenants and also to a proviso for re-entry in the event of "the rent hereby reserved" being unpaid and also a further proviso that:
"Nothing in this lease shall be taken to authorise the Tenant to get or carry away sand, gravel, ballast or any other mineral from the said land -."
The second document executed on the same date is described as a licence and begins with a recital of the lease followed by recitals that the lease confers no right on Welford to work sand or gravel, but that the company is desirous of conferring such a right. The first operative clause of the licence confers this right and the second operative clause provides as follows:-
"2. Welford shall during the continuance in force of the said Lease pay to Besbuilt on the first day of January and the first day of July in every year two shillings for every cubic yard of sand gravel or ballast got by them in the half-year ending on such day."
There were executed on the 30th April, 1960, a similar lease and on the 2nd May, 1960, a similar licence with reference to gravel bearing land, the property of the company, in Northamptonshire.
Before the Special Commissioners the contention of the company was that the sums in question were not "rent payable under a lease" within s. 175 (1) of the Income Tax Act, 1952, but were paid as compensation in respect of a licence, and thecontention of the Inspector of Taxes was that it was necessary to look at the two documents together. The Special Commissioners decided, that, although the parties had done all they could to create two distinct relationships, of landlord and tenant and of licensor and licensee, there had been only one bargain and that the factual reality was that the lease and licence formed one transaction whereby the company leased the land with a right to take minerals, and that the royalty must be included in the calculation of rent for the purposes of s. 175. The Commissioner: also, having reached these conclusions, went on to say that, if they had held that the documents gave rise to a relationship of licensor and licensee distinct from the relationship of landlord and tenant, they would have accepted an alternative submission for the Crown that the licence deed was a grant for a term of years of an incorporeal hereditament.
From the Special Commissioners' decision the company appealed by case stated to the High Court and on the 14th July last Goulding J. gave judgment allowing the appeal and discharging the assessments. On the hearing of the appeal leading counsel for the company did not challenge the Special Commissioners' conclusion that the lease and licence together formed one transaction but submitted that the term "rent" in s. 175 is restricted to payments issuing out of land and recoverable by distress, and that the payments here in question did not have that character. The Judge, who was referred to a number of authoritie: on both sides, accepted these submissions and also rejected the Crown's alternative submission that the licence constituted a grant of an incorporeal hereditament.
From that decision the Crown now appeals to this court and in referring sparingly to the many authorities which have been cited I intend no disrespect to the very helpful arguments addressed to us on both sides. The main issue in the appeal has been whether the judge was right in holding that the sums in question were not "rent payable under a lease" for thepurposes of s. 175. Counsel for the Crown rely on the old authority of R. v. Westbrook, 1847 10 Q.B. 205, in which Lord Denman defined rent as "the compensation which the occupier pays the landlord for that species of occupation which the contract between them allows", and in which a mining royalty paid under a lease was held to be rent, and they also rely on the recent authority of Trustees of Tollemache Settled Estates v. Coughtrie, 39 T.C. 454, in which it was held that a mining royalty payable under the terms of a lease was rent for the purposes of s. 175, and the judgment of Uthwatt J. in Samuel v. Salmon and Gluckstein Ltd., 1946 1 Ch. 8, where a shop had been leased in return for an annual premium of £600 and also an annual rent of the same amount and it was held that, for the purpose of assessing war damage contribution, the premium, being a payment for the use of the land, was part of the rent reserved by the lease, and that, while the parties might write the agreement in such terms as they chose, it was for the law to decide, upon the effect of the document, what payments were "rent reserved" and what payments were not.
For the respondents it was, on the basis of this last authority, accepted that the absence of a right of re-entry for non-payment of royalties did not disqualify them from being rent, but it was argued that the royalties here in question could not be rent because, on the authority of Coke on Littleton (see Halsbury's Laws, vol. 23, p. 537, footnote (r)):
"A rent must be reserved out of the lands or tenements whereunto the lessor may have resort for distress".
See also the statement in the text of Halsbury that:
"the possibility of distress is the mark of rent."
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T. & E. Homes Ltd v Robinson (HM Inspector of Taxes)
...Bedford; Solicitor of Inland Revenue.] 1 Reported (Ch D) [1976] 1 WLR 1150; [1976] 3 All ER 497; [1976] STC 462; 120 SJ 754; (CA) [1979] 1 WLR 452; [1979] 2 All ER 522; [1979] STC 351; 123 SJ 1 [1961] AC 880. 1 41 TC 172, at p 185. 2 39 TC 454; [1961] AC 880. 1 30 TC 57. 2Ibid, at p 68. 3 2......
- T. & E. Homes Ltd v Robinson