Wood Preservation Ltd v Prior
| Jurisdiction | England & Wales |
| Judge | LORD DONOVAN,LORD JUSTICE HARMAN,LORD JUSTICE WIDGERY |
| Judgment Date | 13 November 1968 |
| Judgment citation (vLex) | [1968] EWCA Civ J1113-3 |
| Date | 13 November 1968 |
| Court | Court of Appeal (Civil Division) |
[1968] EWCA Civ J1113-3
In The Supreme Court of Judicature
The Court of Appeal
(Civil Division)
T 249
(From: Mr. Justice Goff)
Lord Donovan
Lord Justice Harman and
Lord Justice Widgery
Mr. H.H. MONROE, Q.C. and Mr. MAURICE DRAKE, Q.C. (instructed by Messrs. Denton Hall & Burgin) appeared on behalf of the Appellant Company.
Mr. E.I. GOULDING, Q.C, Mr. J. RAYMOND PHILLIPS, Q.C. and Mr. J.P.P. WARNER (instructed by Solicitor of Inland Revenue) appeared on behalf of the Respondent Inspector.
This case has been well presented on both sides, and in consequence my mind has fluctuated during the course of the argument. The crucial question is the date when Silexine Limited ceased to be the beneficial owner of at least 75 per cent, of the shares in Wood Preservation Ltd. If this were before the 9th May, 1960, when Silexine assigned its business to Wood Preservation Ltd., then Wood Preservation Ltd. cannot carry forward and set off for income tax purposes against its own profits trading losses previously suffered by Silexine in the same trade. Per contra, if Silexine remained beneficial owner of at least 75 per cent, of the shares in Wood Preservation Ltd. until some date after the 9th May, 1960, then Wood Preservation Ltd. can so carry forward and set off such trading losses. This result comes about by virtue of section 17 of the Finance Act, 1954, and the provisions of the Third Schedule to that Act, in particular paragraph 3.
The issue turns entirely upon the effect of the contract of 25th March, 1960. By that contract a company called British Ratin Ltd. offered to buy the whole of the share capital of Wood Preservation Ltd., and the offer, slightly amended by agreement as to price, was accepted on the 31st March, 1960, by all the shareholders in Wood Preservation Ltd. If that were all there were to the case, it is clear and undisputed that the beneficial ownership would have passed out of the hands of the previous owners of the shares in Wood Preservation Ltd. (and of these Silexine was the largest with over 75 per cent.) into the hands of British Ratin Ltd., with the consequence that Wood Preservation Ltd. would not have been able to carry forward for tax purposes the previous trading losses of Silexine.
But there were conditions to the offer. Only one of these is relevant to the present case. It is said that it makes all the difference and while it lasted preserved the beneficial ownership of the shares in Wood Preservation Ltd. in Silexine. The condition was a condition that a certain German company, Desowag, would continue in favour of Wood Preservation Ltd. certain rights previously granted by the German company to Silexine Ltd. to market in the United Kingdom a particular preparation for wood preservation which was the property of the German company. The condition (Condition No. 2 in the contract) stipulated that within one month from the 25th March, 1960, a letter should be produced from the German company giving the required assurance. In fact it never was, because British Ratin Ltd. were able, apparently, to assure themselves of the rights they wanted by direct contact with the German company. Accordingly Condition No. 2 in the contract of sale and purchase of the shares was formally waived, in writing, on the 18th May, 1960.
Nine days before this, namely on the 9th May, 1960, Silexine had assigned its business to Wood Preservation Ltd. In these circumstances, was Silexine still the beneficial owner of not less than 75 per cent, of the shares in Wood Preservation Ltd. on the 9th May, 1960 - when the said Condition 2 was still operative?
Yes, says the appellant company in this case: there was no binding contract for sale of the shares until this condition was formally waived nine days later and, that being so, Silexine remained beneficial owner of at least 75 per cent of the shares.
No, says the Crown: it was not the beneficial owner in any sense relevant for the purposes of section 17 of the Finance Act, 1954. The position (they say) even before this condition was waived was this: First, Silexine could not have disposed of the shares to anybody else: had it tried to do so it could have been restrained by injunction. Second, it could not declare orpay any bonus or dividend on its shares: it had...
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Sainsbury (J.) Plc v O'Connor
...of those shares. 36 But there remains one authority on which Mr Park relies strongly, which I have not yet mentioned, namely Wood Preservation Ltd v. Prior [1969] 1 W.L.R. 1077. In that case there was a contract for the sale of a subsidiary company. The subsidiary was the U.K. distributing ......
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