Thomas v Marshall (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judge | Lord Normand,Lord Morton of Henryton,Lord Reid,Lord Cohen |
| Judgment Date | 20 April 1953 |
| Judgment citation (vLex) | [1953] UKHL J0420-5 |
| Court | House of Lords |
[1953] UKHL J0420-5
House of Lords
Lord Normand
Lord Oaksey
Lord Morton of Henryton
Lord Reid
Lord Cohen
Upon Report from the Appellate Committee, to whom was referred the Cause Thomas against Marshall (Inspector of Taxes), that the Committee had heard Counsel, as well on Monday the 2d, as on Tuesday the 3d and Wednesday the 4th, days of March last, upon the Petition and Appeal of David Cardigan Thomas, of 24 Raith Avenue, Southgate, in the County of Middlesex, 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 13th of May, 1952, 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 Petitioner 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 printed Case of W. A. J. Marshall (Her Majesty's Inspector of Taxes), 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 13th day of May 1952, 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,
I have had the advantage of reading the Opinion about to be delivered by my noble and learned friend, Lord Morton of Henryton, and I agree with him that this appeal must be dismissed for the reasons given by him. He has quoted and commented upon certain observations made by me in St. Aubyn v. Attorney-General [1952] A.C., 15. I must confess that I there used language of a breadth which lends itself to misunderstanding and that I ought to have expressly qualified my words in the manner which my noble and learned friend indicates.
My Lords,
My noble and learned friend, Lord Oaksey, has asked me to say that he concurs in the Opinion which I am about to deliver.
My Lords,
The question which arises on this appeal is whether interest upon two Post Office Savings Bank accounts, one in the name of the Appellant's son Michael, and the other in the name of the Appellant's daughter Heather, and interest upon two holdings of £1,000 3 per cent. Defence Bonds, in the names of Michael and Heather respectively, ought to be treated, for all the purposes of the Income Tax Acts, as the income of the Appellant.
The relevant facts are fully set out in the Case Stated and may be summarised as follows:—
On the 20th December, 1933, a Post Office Savings Bank account was opened by or on behalf of the Appellant in the name of Michael (born 8th September, 1933) with a deposit of £50, and on the 28th May, 1936, another Post Office Savings Bank account was opened by or on behalf of the Appellant in the name of Heather (born 1st February, 1936) with a deposit of £50. Thereafter the Appellant paid further sums into the same bank for each of his children. Various sums were drawn from the accounts from time to time and were expended for the children's benefit. On 31st December, 1948, Michael's account was in credit £844 9s. Od. and Heather's account was in credit £844 8s. 3d. In the year 1945 the Appellant bought £1,000 3 per cent. Defence Bonds for each of the two children. All the sums paid into the children's bank accounts, and the said Defence Bonds, were absolute and unconditional gifts made by the Appellant to his children.
The Inspector of Taxes treated the interest upon the two Savings Bank accounts, exclusive of interest upon interest, and the interest upon the two holdings of Defence Bonds as being income of the settlor for the purposes of the Income Tax Acts. This he did in reliance upon the terms of section 21 of the Finance Act, 1936. That section provides as follows:—
By subsection (1)—"Where, by virtue or in consequence of any settlement to which this section applies and during the life of the settlor, any income is paid to or for the benefit of a child of the settlor in any year of assessment, the income shall, if at the commencement of that year the child was an infant and unmarried, be treated for all the purposes of the Income Tax Acts as the income of the settlor for that year and not as the income of any other person."
By subsection (9):—
"In this section—
( b) the expression 'settlement' includes any disposition, trust. covenant, agreement, arrangement or transfer of assets;
( c) the expression 'settlor', in relation to a settlement, includes any person by whom the settlement was made or entered into directly or indirectly.…"
Counsel for the Appellant sought to rely upon certain other subsections in the course of his argument, but I think it is unnecessary to set them out, as I understand that all your Lordships are of opinion that they throw no light upon the question which arises for decision.
For the sake of simplicity, I shall consider only the gifts to Michael, as the gifts to Heather stand on precisely the same footing.
Counsel for the Appellant does not seek to draw any distinction between the interest on the Bank account in Michael's name and the interest on the Defence Bonds bought in Michael's name, and it is common ground that if the gifts of money and Defence Bonds were "settlements" within the meaning of section 21 of the Finance Act, 1936, the Appellant was the settlor. It is also common ground that income was paid to Michael by virtue or in consequence of these gifts. Thus the only point for determination is—Were the absolute gifts in question "settlements" within the meaning of section 21 of the Finance Act, 1936? This question has been answered in the affirmative successively by the Commissioners, by Donovan, J. and by the Court of Appeal.
My Lords, I too would answer this question in the affirmative. It is true that an absolute gift of money or of an investment would not ordinarily be described as a "settlement", but it is expressly enacted that in section 21 the expression "settlement" includes, inter alia, "Any .. . transfer of assets". For my part, I see no escape from the conclusion that the Appellant made a transfer of assets, in the ordinary meaning of that phrase, when he used his own money to make a payment into Michael's bank account and to purchase Defence Bonds in Michael's name. Sir Andrew Clark, for the Appellant, invited your Lordships to put a limited and special meaning upon this phrase. I shall shortly examine his arguments, but it should be said at once that the matter is by no means free from authority.
In Hood-Barrs v. C.I.R. 27 T.C., 385 the Court of Appeal had to decide whether a gift of shares by a father to each of his two infant and unmarried daughters was a "settlement" within section 21 of the Act of 1936. The Court uanimously held that it was, because it was a "transfer of assets", and declined to give that phrase a limited meaning. That decision is not, of course, binding upon your Lordships' House, but in my view it was correct and is indistinguishable from the present case. It is, I think, unnecessary to consider the decision in Yates v. Starkey [1951] Ch. p. 465 as the facts differed widely from the facts of the present case, but Jenkins, L.J. observed:
"For their meaning"—i.e.
for the meaning of the words "settlement" and "settlor" in section 21—"I must go to the definitions provided by subsection (9), construe those definitions, and apply them according to their true construction, however remote from the ordinary conceptions of 'settlement' or 'settlor' the content of the definitions may in any given instance appear to be."
This observation, with which I agree, is particularly relevant to the argument presented by Sir Andrew Clark in the present case.
Sir Andrew, while conceding that each of the gifts now in question might be described as a transfer of assets, if this phrase were to be given its ordinary meaning, contended that as the word "settlement" was the only word used in the charging subsection (1), it was "the dominant word"; and that a transaction did not come within section 21 unless it was "something in the nature of a settlement". It follows, he said, that a transaction which might ordinarily be described as a transfer of assets did not come within section 21 unless ( a) it was accompanied by some restraint on alienation, such as would subject the transferee to some action at law or in equity if he attempted to alienate the subject of the gift, or ( b) the income and the capital of the subject of the gift were given to different persons, or ( c) the legal title and the equitable interest in the subject of the gift were conferred on different persons. In any one of these three cases, he said, and it may be in other cases, a transfer of assets would be something in the nature of a settlement, but an absolute and unconditional gift is the antithesis of a settlement and cannot be a "transfer of...
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