Wiseburgh v Domville (HM Inspector of Taxes)
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE BIRKETT |
| Judgment Date | 16 February 1956 |
| Judgment citation (vLex) | [1956] EWCA Civ J0216-3 |
| Date | 16 February 1956 |
| Court | Court of Appeal |
[1956] EWCA Civ J0216-3
In The Supreme Court of Judicature
Court of Appeal
The Master of the Rolls
(Lord Evershed)
Lord Justice Birkett and
Mr. Justice Rozburgh
MR. N. E. MUSTOE, O.C. and MR. G. B. GRAHAM (instructed by Messts. Garland-Wells, Riches & Co., 18 Bolton Street, Piccacilly, W. 1) appeared as counsel on behalf on behalf of Mr. Wiseburgh.
SIR LYNN UNGOED-THOMAS, Q.C., M.P. and SIR REGINALD HILLS (instructed by the Solicitor of Inland Revenue, Somerset House, Strand, W.C.2) appeared as Counsel on behalf of H.M. Inspector of Taxes.
In this case I have come to the same conclusion as Mr. Justice Harman and I think, therefore, that this appeal fails.
The subject-matter involved is the sum of £4000 which was paid out to the present Appellant by way of settlement of an action which he had brought against a company, Gordon Mills, Ltd. by way of repudiation of a contract of agency which the Appellant had with them at the time. The question, when properly formulated, is whether, within the language of the applicable Income Tax Act, 1918, Schedule D, paragraph 1(a) (11) this is properly chargeable as being in respect of "the annual profits or gains arising or accruing" to the Appellant from a trade. The trade of the Appellant, in respect of which he admittedly is or was taxable, is that of a sales agent, an agent for selling articles of women's clothing manufactured by various manufacturing Companies.
The facts in this case are fully set out in the Case Stated, and it is unnecessary, for the purposes of my judgment, that I should restate them fully. I can sufficiently state the essentials of the matter by reference first to Appendix D to the Case which shows that curing a number of years beginning in 1939 and ending in 1951 the Appellant had agencies of this character for a number or manufacturers totalling in all twenty. It is, however, necessary to observe at once that at no one time did the Appellant hold agencies for twenty such firms or anything like that number. Indeed, at the relevant date, namely, July 1948, when Gordon Mills, Ltd. terminated the Appellant's agency with them, he had two such agencies, one with a Company called Green Hearne & Co., and the other with this Company, Gordon Mills. However, the importance, to my mind, of this schedule lies in the circumstance that, as appears from it, curing the business life of thirteen years which it covers, the Appellant's agencies varied in their nature and number from time to time. Some were held for a very short time: some, by the look of the figures, may have represented little more than isolated transactions conducted on a commission basis: others lastea longer. In the case of Green Hearne & Co. the agency had continued by 1951 for no less than twelve years, and, similarly, The Gordon Mills agency at the relevant date had lasted for seven years or more. But as I understand the matter, it was in the nature of an agency business of this kind that there might be from time to time changes in the actual agencies held by the substitution of one for another, and so forth. Then I think I need say no more about this particular agency than this: its terms were comprehended in a written agreement, one clause of which provided that it was terminable on either side by twelve months notice ending on the 20th October in any year. It is therefore an incident, I think an incident of importance, in this case, that, if you regard it in any sense as an asset, its quality must be judged by its legal character, and it was an asset liable to determination on relatively short notice. On the other hand, it is fair to say, as Mr. Graham emphasised in his short but, if I may say so, forceful speech, that it was obviously in the ordinary expectation of the parties (and the Case so finds) that, if all went well, the contract in fact as a business matter would be likely to go on, one might say, indefinitely. Unfortunately. for him or perphaps fortunately for him, because I know not the ultimate financial gain or loss, the Appellant engaged himself in the year we are concerned with, 1948, as manager for a business, of which his wire was substantially the proprietor, called K. Wiseburgh, Ltd., which was the business of manufacturing and merchanting garments of the same character, to some extent at least, as those made by Gordon Mills. It was because of that enterprise that Gordon Mills said that he was neglecting his proper obligation to them and had accordingly treated the contract as at an end.
Thereupon Mr. Wiseburgh issued his writ and by his Statement of Claim he asked for damages for breach of contract and also for an account of the commission which he said was at that date due and unpaid in respect of his past work. It is right just to observe that, as pleaded,the damage for breach of contract which the plaintiff alloged was - I refer to paragraph 6 - "damage in that he had lost commission which he would otherwise have earned". He says that the real damage lay not so much in the loss of the commission which would otherwise have been earned but in the loss of the particular contract; but to my mind there is no valid distinction for the present purpose between these two.
The plaintiff might have alleged that the real damage to him, apart from the loss of a certain amount of commission, lay in this: that if the determination were wrongful his goodwill as sales agent in this line of business was seriously impaired thereby. A reference to that matter is found in the Commissioners' Statement of Facts in sub-Paragraph 2 of paragraph 4. If and in so far as damage were claimed because his goodwill as a sales agent had been impaired, I can well conceive, to say the least of it, that the Appellant would have had a strong case for saving that such a sum of damages would not be taxable.
The Order was an Order made by consent. It followed, apparently, after a considerable period of negotiation, for it is dated in April 1950. The Commissioners in their conclusions state that the terms of the judgement had no bearing whatsoever on the question whether the amount awarded was taxable or not. That conclusion was much criticised by Mr. Mustoe, and it was also criticised to some extent by Mr. Justice Harman. If by it the Commissioners meant that the judgment and the language of it were for all purposes wholly irrelevant in any case, I should have agreed with the criticism; but, for my part, I think also that the criticism may be somewhat less than just to the Commissioners. The reason for that view will appear when I have read the Order, which I now do. "Pursuant to the Order of the Registrar whereby it was ordered: That the plaintiff be at liberty to enter judgment against the defendants for the sum of £4,000 as damages for breach of agreement of service and for costs of the action" - I leave out some embroidery about the costs - "That the plaintiff do recover nothing from the defendants in respect of his claim for commission and expenses" - that is a reference to the second head of the claim which Mr. Mustoe called pre-breach commission - "That the sum of £4,000 paid into Court by the defendants… be forthwith paid out to the plaintiff's Solicitors… in satisfaction of the said sum of £4,000 damages: That the action be withdrawn from the list. It is this day adjudged that the plaintiff recover against the said defendants £4,000 and costs of the action throughtout to be taxed" etc. The judgment is at least relevant to this extent. It shows - and I think the parties were entitled to compromise their action in such terms as they chose - that there was no sum being paid for pre-breach commission. Had it been the other way round, Mr. Mustoe conceded that he would have been in difficulty in saying that unpaid commission paid as a result of a law suit to get payment of it is not taxable. But it seems to me, once it is conceded, and the judgement makes it clear (as it does) that this was an agreed sum or damages for breach of this agreement by its repudiation, then the utility of this Order is exhausted for our purposes. In other words, it still remains for the Court to say whether in the circumstances of this case a general sum of damages for breach of this agreement was "profits or gains arising or accruing" to the Appellant from his trade.
There is, I think, one other inference which must be drawn from the form of the judgment read in the light of the Pleadings - and I do not forget that this is a consent Order, a settlement when no doubt both parties considered all their allege rights and their alleged defences - and that is this: I think, on the face of it, it is impossible for the Court to infer that his £4,000 or any part of it must be treated as paid by way or damages for the loss of the Appellant's goodwill. I think the form of the Pleadings plus the amount of the damages really makes that impossible.
Therefore, I return to the question, was this sum paid by way of damages in respect of this agency contract "profits or gains" arising from the trade of the Appellant as a sales agent? Mr. Mustoe's argument had the attraction of simplicity; for in the end, I think, it may be put thus: He said the £4,000 represents what was paid to the plaintiff in exchange for a profit-earning asset which he had lost owing to the breach of the contract by the defendants. That being so, says Mr. Mustoe, it follows that it is a capital item. I have said that there is an attraction in that argument and if the question were resintegrs. it would be more attractive stll; but, I think it clearly will not do as a test in these cases in the light of the authorities to which we have been referred.
It is true that for the most part the authorities are decisions of the Inner House of the Court of Session in Scotland which do not bind...
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