Unit Construction Company Ltd v Bullock (Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judge | Viscount Simonds,Lord Radcliffe,Lord Cohen,Lord Keith of Avonholm |
| Judgment Date | 30 November 1959 |
| Judgment citation (vLex) | [1959] UKHL J1130-3 |
| Date | 30 November 1959 |
| Court | House of Lords |
[1959] UKHL J1130-3
Viscount Simonds
Lord Goddard
Lord Radcliffe
Lord Cohen
Lord Keith of Avonholm
House of Lords
Upon Report from the Appellate Committee, to whom was referred the Cause Unit Construction Company Limited against Bullock (Inspector of Taxes), that the Committee had heard Counsel, as well on Monday the 2d, as on Tuesday the 3d, days of November last, upon the Petition and Appeal of the Unit Construction Company Limited, whose registered office is situate at 34 St. James's Street, London, S.W.1, 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 12th of February 1959, 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 Vernon William Bullock (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 12th day of February 1959, complained of in the said Appeal, be, and the same is hereby Reversed, and that the Determination of the Commissioners for the Special Purposes of the Income Tax Acts, of the 29th day of May 1957, be, and the same is hereby, Restored: And it is further Ordered, That the Respondent do pay, or cause to be paid, to the said Appellants the Costs incurred by them in the Courts below, and also the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Chancery Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.
My Lords,
The Appellant Company is a wholly-owned subsidiary of an English company, Alfred Booth and Company Limited. So are three companies, Booth and Company (Africa) Limited, Booth and Company Limited and Bulleys Tanneries Limited, all of which are companies registered in Kenya under the laws of that colony. To these three companies, to which I will sometimes refer as "the African subsidiaries", the Appellant Company made certain payments in the years 1952 and 1953 and claims to be entitled under section 20 of the Finance Act, 1953, to deduct them for the purpose of its assessment to income tax under Case I of Schedule D for the relevant years. It is common ground that it is entitled to do so if, and only if, such companies were then "resident in the United Kingdom and carrying "on a trade wholly or partly in the United Kingdom".
My Lords, the claim of the Appellant Company was sustained by the Commissioners for the Special Purposes of the Income Tax Acts, but upon a Case Stated by them was rejected by Mr. Justice Wynn-Parry, whose decision was affirmed by the Court of Appeal.
It will, I think, appear that the point for your Lordships' consideration in the present case is a short one, though any mention of so vexed a question as the residence of a company is likely to give rise to prolonged discussion. Here there are findings of fact which learned counsel for the Crown was constrained to admit that he could not challenge, and the only question is whether the conclusion in law which the Special Commissioners drew from those facts was correct.
I should like at the outset to say that this case was stated with conspicuous clarity for the opinion of the Court and that the detailed and careful review of the facts by the Special Commissioners led them irresistibly to the conclusion which they thus state:
"We find … that the Boards of Directors of the African subsidiaries (who are the people one would have expected to find exercising control and management) were standing aside in all matters of real importance and in many matters of minor importance affecting the central management and control, and we find that the real control and management was being exercised by the Board of Directors of Alfred Booth and Company Limited in London".
This being their conclusion of fact, it is not surprising that as a matter of law they concluded that these companies were resident in London. For it has been trite law for two generations or more that a limited company "resides for purposes of income tax where its real business is carried on" and that its "real business is carried on where the central management and control actually abides". This test has not only been reasserted and applied over and over again in judicial decisions; it has now also received legislative recognition, see section 468 (7) of the Income Tax Act, 1952. It cannot be questioned by your Lordships. The familiar words that I have cited come from Lord Loreburn's speech in De Beers Consolidated Mines Limited v. Howe [1906] A.C. 455 at p. 458. At that time the possibility of an artificial person such as a limited company residing in two countries at one and the same time had not been fully examined. Twenty years later in the Swedish Central Railway Company Limited v. Thompson, 9 T.C. 342 at p. 352, Rowlatt. J., saw no difficulty in such a concept and indeed found it easier for a corporation to have two residences than for a natural person and, though in the same case in the Court of Appeal Lord Justice Atkin (as he then was) said that he felt constrained by authority to come to a different conclusion, and in the House of Lords Lord Atkinson in a powerful dissenting speech took the same view, it must now be regarded as clear law that an artificial person may, like a natural person, have more than one residence. The relevance of this consideration is that at an early stage in the proceedings (before the Special Commissioners, I think) it was admitted on behalf of the Appellant Company that the African subsidiaries were resident in Africa. I do not know what considerations led to this admission being made, but it appears to me to have no weight, if it is conceded as a matter of law that a company may have two residences. It is not necessary for me (and I count it my good fortune) on this occasion at any rate to determine in what sense a company may be said to reside not only in that country in which, and in which alone, the central management of its business is exercised, but in another country also. I share to the full the difficulty entertained and expressed by Sir Owen Dixon in Koitaki Para Rubber Estates Limited v. Federal Commissioner of Taxation 4 C.L.R., to which reference was made in the judgment of the Court of Appeal. I leave to others the reconciliation of the Swedish Central Railway Company case to which I have referred and the Egyptian Delta case, 14 T.C. 119.
What, then, my Lords, were the reasons which led the Courts below to hold in face of this finding of fact and this state of the law that the African subsidiaries were not resident in the United Kingdom? Undoubtedly they raise a difficult and interesting question of law, which if decided in the manner now contended for by the Crown must have far-reaching and probably deplorable consequences for the Revenue. For the contention of learned counsel for the Crown which has so far found favour with the Courts is no less than this, that if by the constitution of the company, that is, by its memorandum and articles of association, interpreted in the light of the relevant law, that is, in this case the law of Kenya, the management of the company's business is contemplated as being exercised and ought therefore to be exercised in Kenya or at any rate outside the United Kingdom, then for the purpose of British income tax law the facts are to be disregarded and the control and management which as a fact are found to abide in the United Kingdom are to be regarded as abiding outside it. There is no doubt, I think, that the management of the African subsidiaries, which were incorporated in Kenya under the Kenya Companies Ordinance and registered in Nairobi, was placed in the hands of its directors and that their Articles of Association expressly provided that directors' meetings might be held anywhere outside the United Kingdom. Nor can there be any doubt—for this is the unchallengeable finding of the Commissioners—that the management of the businesses of the companies was not exercised in the manner contemplated. Whence it follows that the businesses were conducted in a manner irregular, unauthorised and perhaps unlawful. It is this fact which led the learned Judge to say in words that were approved by the Court of Appeal:
"It must follow, to my mind, that … no weight or attention can be given to the activities of the Board of the parent company in relation to Unit—the Appellant Company—and the African subsidiaries for the purpose of considering whether or not any of them are resident in the United Kingdom".
So also the Court of Appeal, observing upon the test of residence laid down in the authorities, said that there was "no reason at all to suppose that the judges had in mind such a case as the present in which de jure management is vested in one company whilst de facto control is vested in another", and again they insisted that it was "acts or other elements … regular and not irregular, constitutionally lawful and not unlawful" that must be regarded in determining the question of management and therefore of residence.
My Lords, I should certainly be prepared to admit that the many judges who in the past have pronounced upon this...
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