Wisdom v Chamberlain
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE HARMAN,LORD JUSTICE SALMON |
| Judgment Date | 08 November 1968 |
| Judgment citation (vLex) | [1968] EWCA Civ J1108-1 |
| Date | 08 November 1968 |
| Court | Court of Appeal (Civil Division) |
[1968] EWCA Civ J1108-1
In The Supreme Court of Judicature
The Court of Appeal
(Civil Division)
T 248
(From: Mr. Justice Goff)
Lord Justice Harman
Lord Justice Salmon and
Mr Justice Cairns
The SOLICITOR-GENERAL (SIR ARTHUR IRVINE, Q.C., M.P.) and Mr. J. RAYMOND PHILLIPS, Q.C. (instructed by Solicitor of Inland Revenue) appeared on behalf of the Appellant Inspector.
Mr. H. MAJOR ALLEN, Q.C. and Mr. BARRY PINSON (instructed by Messrs. Burton & Ramsden) appeared on behalf of the Respondent.
This is an appeal from a decision of Mr. Justice Goff on a Case Stated by the General Commissioners of Inland Revenue. The judge's decision was in favour of the taxpayer. He held that the profit in question was not assessable to income tax. It is a straightforward kind of case, in my view, and no great researches into the taxing Acts are required. The case merely is: Whether tax under Schedule "D" is exigible under Case I of section 123 — "tax in respect of any trade carried on in the United Kingdom…." The only gloss upon that is that, in the definition section (hundreds of sections away - section 526) "'trade' includes every trade, manufacture, adventure or concern in the nature of trade". So that it need not be a trade if it is an adventure in the nature of trade, which enlarges the words of the section.
The case concerns the affairs of an actor of the name of Norman Wisdom, a man making a very large professional income. Having some savings, which no doubt were not of much significance to him at the time, he did not want them, but they were a nest-egg for his future — because after all a comedian's life does not go on for ever and he needs something for his declining years — he, like many of his kind, was not much concerned with the financial aspects of his life, which he entrusted to a chartered accountant, who was accustomed, I suppose, to dealing with that sort of thing: at any rate he carried on his business in the Charing Cross Road. He was the man who regulated the taxpayer's affairs: his name was Halpern.
In 1961, as in many other years since the War, there was talk in the air of a devaluation. It was, as we now know, an event which did not happen at that time, though it has happened since. Mr. Halpern, advising his client about his assets (which amounted to some £200,000 in value, consisting of a house, some investments, a yacht on the stocks then building, and a certain amount of cash) was minded to find some way of providing a cushion against the loss which would be occasioned to his client's capital assets in the event of a devaluation of the pound. He wanted to find something which against dollars would maintain its value and would therefore be saleable at a profit which would stop the hole made by the devaluation of the sterling assets. Casting about for an expedient, he was led to suppose that it might be a good plan for his client to buy ingots or bars of silver. That was, he ascertained, a pretty stable commodity: it had not varied in value more than 5 per cent, over the last six years (this was in 1961), he thought it would maintain its value, and if this country devalued its pound he could still sell it at a good profit against dollars. And so he took the advice of the well-known bullion brokers, Mocatta & Goldsmid, and made an appointment to see them in November of 1961. On the very morning when he was going to see them, there was a sudden rise in the price of silver. That did not deter Mr. Halpern at all. It did, however, derange the bullion market to some extent, and though he wished to purchase £200,000 worth of silver bars the broker would not let him have more than half that amount because the jump which had occurred that morning had somewhat upset the equanimity of the market. However that may be, Mr. Halpern continued his efforts after purchasing the £100,000 worth to double that sum because that was, he thought, the appropriate amount for his client to buy. But it is a most significant feature of this case that it was not intended that Mr. Wisdom should realise his assets, his stocks and shares, his house, his yacht or what-not, and thus furnish the money for the transaction: the plan was to borrow the money at what on the face of it were very high rates of interest — profitable, no doubt, to the broker and the banker who furnished the money, but not so unprofitable as it might seem to Mr. Wisdom, because he was a high surtax-payer. Therefore thetransaction was entirely financed on "borrowed money except for a sum of £10,000 in cash which he put down on the deal.
The price of silver did not alter very much in the next six months or so and eventually in April of 1962 the second transaction (so to call it) was made, which was done in this way: that the first transaction was undone, at a loss to Mr. Wisdom of some £3,000, and the whole £200,000 worth was then purchased on somewhat different terms. The exact terms I need not trouble with, but a year's interest was to be paid in advance and was not to be repayable, and there was an option on the part of Mr. Wisdom to sell back at an enhanced price and a counter-option to the broker hedging him against a loss so that he could call on Mr. Wisdom to exercise his option or to relinquish it.
Now in the autumn of 1962 the pound recovered and all ideas of devaluation for the time being disappeared. But also at the same time and independently of that fact the price of silver began to go up very much: the upshot was that in October, 1962, and January, 1963, the silver bars were sold on Mr. Wisdom's instructions and he realised a profit of some £48,000. Easily got money, one may think. But the Crown now say that that is a taxable profit, and of course that, having regard to Mr. Wisdom's fiscal position, would take most of the gilt off the gingerbread. And that is what this case is about.
The Crown says that this was an adventure in the nature of trade. It was (say they) something in the nature of a speculation: it was never intended to do more than make a temporary incursion into this market and to realise as soon as might be, either (no doubt) at a profit if devaluation occurred or maybe without a profit if it did not, but having had the insurance of the possession of the bars of silver over the period of danger. But in fact the event which happened was not expected, I suppose, by either party, and although the period of danger passed yet for extraneous reasons the value of the bars very much appreciated, with the result that an entirely unexpected windfall flowed into the pockets of Mr. Wisdom. It is nevertheless said that this was a profit realised from an adventure in the nature of trade and the fact that it was not an expected profit is really quite irrelevant to the matter.
When you look at the Commissioners' findings, you find them set out in paragraph 9 of the Case as follows: "We, the Commissioners, found that: (a) The Appellant's original intention was to purchase the silver as a hedge against the devaluation of sterling: (b) At the tine of the second transaction other considerations influenced the purchase, the fear of devaluation having subsided: (c) The commodity was useless, left unallotted in the hands of Mocatta, was not an income-producing investment, was not a long-term investment, and was financed by loans at a high rate of interest, and no organisation was needed to deal in the commodity as this was provided by Mocatta: (d) Whether there was a single transaction or two, by the nature of the subject-matter there was an adventure in the nature of trade: (e) The transaction (or transactions) was (or were) in the nature of trade and therefore assessable under Case I of Schedule "D".
Now if there were facts to justify those conclusions we cannot interfere even if we would. The learned judge did interfere: he thought that the conclusions were or might be vitiated by the fact that (according to him) a consideration influenced the Commissioners which was not supported by any evidence: that is conclusion (b), that "At the time of the second transaction other considerations influenced the purchase, the fear of devaluation having subsided". There was no evidence, it was said, of that.
In this Court it is not alleged that there was any evidence to support that and therefore we must suppose, I think, that the motive behind the second transaction was the same as that behind the first, namely, to provide an insurance against devaluation. What the learned judge thought (he so stated at the end of his judgment and it is the reason of it) was this: "Having regard to that finding of fact and to the conclusion to which the...
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