Die Lunae,
25° Julii 1955
Parliamentary
Archives,
HL/PO/JU/4/3/1029
Viscount
Simonds
Lord
Radcliffe
Lord
Tucker
Lord
Somervell
of
Harrow
EDWARDS
(INSPECTOR OF TAXES)
v.
BAIRSTOW
AND ANOTHER
25th
July, 1955.
Viscount
Simonds
MY LORDS,
This
appeal relates to certain assessments for income tax made upon
the
Respondents, Harold Bairstow and Fred Harrison, for the years
of assess-
ment ending respectively the 5th April, 1947, and the
5th April, 1948, in
respect of the profits made by them from sales
of machinery. The assess-
ments had originally been made on the
Respondent Harold Bairstow only,
but it became common ground that
the operations out of which the profits
arose were the joint
venture of both Respondents and the case has through-
out been
argued upon the footing of the assessments being made in their
joint
names.
Against
these assessments, which were in the sum of £10,326 for the
first
year and £5,000 for the second year, appeals were
taken to the Commissioners
for the General Purposes of the Income
Tax for the Division of West Morley
in the County of York. They
discharged the assessments but, the Appellant
having expressed his
dissatisfaction with their decision as being erroneous
in point of
law, stated a Case for the opinion of the High Court.
My Lords,
it would not be right for me, in view of the conclusion which
I
have reached in this appeal, to try to abbreviate the statement of
facts
upon which the Commissioners made their determination and I
therefore
set out verbatim paragraph 3 of the Case which is in
these terms.
3. The
following facts were admitted or proved: —
(1) Mr.
Harrison became aware in 1946 that a Complete Spinning
plant was
for sale at Messrs. Whitworths at Luddenden Foot and had
reason to
believe that the plant could be purchased for a reasonable
figure.
He communicated this information to Mr. Bairstow as he him-
self
was not in a position to finance any purchase. Mr.
Bairstow
expressed himself to be interested but both he and
Harrison agreed
that they had no intention of holding the
plant—what they desired was
a quick purchase and re-sale.
Mr. Bairstow therefore arranged for a
valuation to be made by a
professional valuer in order that he might be
satisfied that the
price asked by Whitworths was one on which he could
make a quick
profit. He also immediately and before purchasing the
plant
made enquiries as to whether he could arrange to sell the plant
even
before it had been purchased. Mr. Harrison was in touch with
an
Indian by name Wattal who was very anxious to purchase some
of the
plant, namely, the Botany Spinning section ; for this he was
prepared
to pay £17,000 but both Harrison and Bairstow were
quite
decided that they had no intention of selling the plant
piece-meal; they
wanted to sell it as a complete unit. Then Mr.
Bairstow began negotia-
tions with the International Export
Company. They said they were
prepared to buy the whole of the
plant. On the 14th November the
International Export Company
wrote to Mr. Bairstow saying that they
were prepared to buy the
plant which was on the fourth floor which
was the Botany Spinning
plant for £15,000 this, of course, being £2,000
less
than the price offered for the same section of the plant by the
Indian
Wattal. The reason why the International Export Company
were pre-
pared to pay £15,000 immediately for that
particular section of the
plant was because although they were
willing to purchase the whole of
the plant it was their intention
to export it and whilst they were confi-
dent that an Import
Licence into China would be forthcoming for the
asking in respect
of the botany spinning section they were not willing
to complete
the purchase of the remainder of the plant until the Import
2
Licences
for such remainder were in fact forthcoming. On the 20th
November
Mr. Bairstow on behalf of himself and Harrison having
negotiated
the purchase of the spinning plant together with two small
items
of warping plant completed the purchase by the payment to
Whitworths
of £12,000. On the 27th November, one week later,
the
International Export Company paid Mr. Bairstow the sum of
£15,000
for the botany spinning plant. Subsequently Messrs.
Bairstow and
Harrison were informed by the International Export
Company that un-
fortunately the Import Licences relating to the
remainder of the plant
could not be obtained and therefore it was
regretted that they could
not purchase the remainder of the plant.
Thus Mr. Bairstow and Mr.
Harrison found themselves with the
remainder of the plant on their
hands (which they had endeavoured
to avoid) and this left them no
alternative but to sell that
remainder in whatever market they could.
The rest
of the plant was sold in two other principal and two
smaller lots
by February 1948 though owing to difficulties the last plant
was
not removed until March 1949. The two smaller lots consisted
of
the two items of warping plant.
Mr.
Bairstow was a Director of a company manufacturing leather.
Mr.
Harrison was an employee of a spinning firm. Neither of them
had
had any transactions in machinery or any other commodity before.
The
profits shown by the accounts (which form part of this Case
and
are annexed hereto, marked 'A') was £18,225 11s. 3d.
The
Respondents' sole purpose in the transaction was to sell the
plant
at a profit.
With
regard to the manner in which the sales were effected: —
Some
commissions were paid for assistance received
in
effecting sales.
There was
no advertising. Customers principally learnt of
the existence
of the plant for sale when they came to inspect the
premises
which were being advertised by the original owners as
becoming
vacant.
(c) About
400 spindles out of the 220,000 which the plant
represented were
replaced because they were missing or damaged.
(d) Insurance
risks were covered by the Respondents while the
plant was in their
hands.
(e) Some
costs for renovation were incurred because of damage
by floods
during their ownership.
(f) When
it was seen that the transaction would not be over in
a matter of
weeks, wages were paid to Mr. Bairstow's Secretary
who kept books
and did other office jobs in connection with these
transactions.
(g) The
Respondents incurred expense in travelling and enter-
tainment in
meeting both the actual persons who would eventually
buy the plant
and others who did not in fact become customers.
A number of
advertisements asking for plant, which appeared in
trade papers,
were answered by the Respondents in an attempt to
sell the plant
remaining after the first main sale.
(h) Owing
to the delay in removing the plant, rent was paid
to the landlords
for the last six months during which the plant
was housed, and it
is thought that a further amount will have to
be paid to put the
premises in order.
EXHIBIT
"A" Case Stated
mr.
HAROLD BAIRSTOW and mr. FRED HARRISON
joint
venture—A spinning plant ex whitworth mill
LUDDENDEN FOOT
.
period
from 20th november, 1946, to 31st march, 1949
£
s. d. £ s. d. £ s. d. £
s. d.
To
Purchase of Plant 12,000 0 0 By Sale of Plant :—
"
Repairs and Replacements 110 18 10 1946—Nov. 27
International Export Co 15,439 13 6
" Commissions:
1947—Jan. 29 H. E. Crabtree & Co.
80 0 0
Cornelius
Lane of Bradford 4,575 4 4 June. 26 Bailey, Verity and
Raynor 12,000 0 0
Mr. and
Mrs. Horace Shaw, Highthorn, Belmont Oct. 22 Stalybridge Vigoyne
Spinning Co. 250 0 0
Rise,
Baildon 751 2 0 1948—Feb. 20 Joseph Cooper
Junr 10,000 0 0
W.
Murgatroyd-address not known, but our
clients
believe he has gone abroad 250 0 0 37,769 13 6
Cash
Commission to a workman 10 0 0
5,584 6 4
„ Insurance 71
15 6
„ Christmas
Boxes ... ... ... ... ... ... 32 0
0
„ Flood
Damage Costs:—
Wages
300 5 11
Renovations
42 16 9
343 2
8
„ Wages
117 5 0
„ Stationery
3 0 0
„ Travelling
and Entertainment 366 13 11
„ Rent
130 0 0
„ Reserve
for cost of dilapidations, legal and accountancy
charges
785 0 0
„
Profit on the
transaction 18,225 11 3
£37,769
13 6 £37,769 13 6
Profit
divisible:—
Harold
Bairstow £9,11215 7
Fred
Harrison £9,11215 7
4
Nor can I
omit a reference to some at least of the contentions which
were
urged before the Commissioners on the one side or the other.
The
Respondents contended that this was a transaction the profits
of
which could not be liable to tax under Case I of Schedule D,
because, as
they said, in the case of Leeming v. Jones
15 Tax Cases 333 (to which I
shall refer later) four
conditions had been approved by the Court, one of
which must be
present to establish liability,
the
existence of an organisation, or
activities
which led to the maturing of the assets to be sold, or
(c) the
existence of special skill, opportunities, in connection with
the
article dealt with, or
(d) the
fact that the nature of the asset itself should lend itself
to
commercial transactions.
And they
contended that none of these conditions was present in the
trans-
action in question. They distinguished certain cases upon
which the
Appellant relied and urged that the profit was a capital
one and that there
was no concern in the nature of trade that
could be taxed.
On behalf
of the Appellant it was contended that the buying and selling
of
the plant constituted a trade or adventure in the nature of a trade
and
that the profits and gains arising therefrom were assessable
accordingly.
The
Commissioners expressed their original determination in these
terms:
" We, the Commissioners, having considered the facts
and evidence
" submitted to us, are of opinion that this was
an isolated case and not
" taxable and discharge the
assessments ".
This, my
Lords, was clearly an unsatisfactory determination, for it
appeared
to suggest that the fact that the transaction was an
isolated one (whatever
that may mean) was by itself conclusive,
and, when the matter came before
Mr. Justice Upjohn upon the Case
Stated, that learned Judge took a course
which he was entitled to
take and remitted the matter to the General Com-
missioners with
the intimation that they were to consider the question whether,
the
transaction being an isolated transaction, there was, nevertheless, "
an
" adventure in the nature of trade " which was
assessable to tax under Case 1
of Schedule D, and he further
directed they should be assisted in their
finding by legal
argument.
I pause
in the narrative to remind your Lordships that tax under Schedule
D
is charged in respect of (inter alia) profits arising "
from any trade, profes-
" sion, employment or vocation "
and that by definition " trade " includes
" every
trade, manufacture, adventure or concern in the nature of trade ".
It
is these words which are echoed in the order of Mr. Justice Upjohn.
The
Commissioners accordingly met again and, having heard legal
argu-
ment and further considered the matter, signed a
Supplemental Case in which
they stated their further decision as
follows: -
" We
find that the transaction, the subject-matter of this Case was not
an
" adventure in the nature of trade ".
The Case
thus supplemented came once more before the High Court, this
time
before Mr. Justice Wynn-Parry. That learned Judge took the view
that
he was bound by authority to hold that the question before the
Court
was purely a question of fact and that the finding of the
Commissioners
could not be upset unless it was so perverse that as
a matter of law it could
not stand, and, holding that it was not
possible for him to take that view
of their decision, dismissed
the Appellant's appeal with costs.
From the
decision of Mr. Justice Wynn-Parry the Appellant appealed to
the
Court of Appeal, which unanimously dismissed the appeal for
the
reasons given by the learned Judge. In the course of his
judgment the
Master of the Rolls made this observation which has
given rise to much
discussion before your Lordships. "Although
the Scottish Courts (as, I
" think, is clear from a citation
from the judgment of the latest of them in the
" judgment of
Mr. Justice Upjohn) may have taken a road which diverges
5
"
from that followed by the English Courts, the two jurisdictions as it
seems
" to me can only now be got together again by the House
of Lords . . ."
And it is clear that the Revenue Authorities
were anxious to bring this case
to your Lordships' House largely
because it was apprehended that the
Courts of England and Scotland
had to some degree diverged in their treat-
ment of this subject.
That there is some ground for this apprehension will
be clear from
a comparison of (for example) the observations of Lord Justice
Atkin
and Lord Justice Warrington in Cooper v. Stubbs, 10 Tax
Cases 29
with those of Lord Russell in C.l.R. v. Reinhold,
34 Tax Cases 389 " In the
" Scottish Courts,
however, it is clear that such a question " [i.e. whether
a
transaction is an " adventure in the nature of trade "]
" is regarded as a
"question of law or at least of mixed
fact and law". It is not to be
doubted that particularly in a
matter of taxation any possible conflict, even
if it be only an
apparent conflict, should be resolved and that is the task
which
now falls to your Lordships.
Before,
however, examining the authorities in any detail, I would make
it
clear that in my opinion, whatever test is adopted, that is whether
the
finding that the transaction was not an adventure in the
nature of trade is
to be regarded as a pure finding of fact or as
the determination of a question
of law or of mixed law and fact,
the same result is reached in this case. The
determination cannot
stand: this appeal must be allowed and the assessments
must be
confirmed. For it is universally conceded that, though it is a
pure
finding of fact, it may be set aside on grounds which have
been stated in
various ways but are, I think, fairly summarised by
saying that the Court
should take that course if it appears that
the Commissioners have acted with-
out any evidence or upon a view
of the facts which could not reasonably be
entertained. It is for
this reason that I thought it right to set out the whole
of the
facts as they were found by the Commissioners in this case.
For,
having set them out and having read and re-read them with
every desire to
support the determination if it can reasonably be
supported, I find myself
quite unable to do so. The primary facts,
as they are sometimes called, do
not in my opinion justify the
inference or conclusion which the Commis-
sioners have drawn: not
only do they not justify it but they lead irresistibly
to the
opposite inference or conclusion. It is therefore a case in
which,
whether it be said of the Commissioners that their finding
is perverse or that
they have misdirected themselves in law by a
misunderstanding of the statu-
tory language or otherwise, their
determination cannot stand. I venture to
put the matter thus
strongly because I do not find in the careful and indeed
exhaustive
statement of facts any item which points to the transaction not
being
an adventure in the nature of trade. Everything pointed the
other
way. When I asked learned counsel upon what, in his
submission, the Com-
missioners could have reasonably founded
their decision, he could do no
more than refer to the contentions
which I have already mentioned. But
these upon examination seemed
to help him not at all. For, if it is a
characteristic of an
adventure in the nature of trade that there should be
an "
organisation ", I find that characteristic present here in the
association
of the two Respondents and their subsequent
operations. I find " activities
" which led to the
maturing of the asset to be sold " and the search
for
opportunities for its sale, and, conspicuously, I find that
the nature of the
asset lent itself to commercial transactions.
And by that I mean what I
think Mr. Justice Rowlatt meant in
Leeming v. Jones, that a complete
spinning plant is
an asset which, unlike stocks or shares, by itself produces
no
income and, unlike a picture, does not serve to adorn the drawing
room
of its owner. It is a commercial asset and nothing else.
Your
Lordships have examined a large number of cases in some of which
the
Commissioners have found an adventure or concern in the nature
of
trade and in others have not. And in each category will be
found cases in
which the Court has upheld and others in which the
Court has reversed the
Commissioners' decision. I do not think it
necessary to review them. It
is inevitable that the boundary line
should not be precisely drawn, but I
think that there has been no
case cited to us in which the question, however
framed, whether
the determination of the Commissioners was maintainable,
could be
answered more clearly and decisively than in the present case
6
I must
turn now to the question of the apparent divergence between
the
English and Scottish Courts and venture to approach it by a
brief considera-
tion of the nature of a problem which has many
aspects, e.g. the finding of
a jury, the award of an arbitrator or
the determination of a tribunal which
is by statute made the judge
of fact. And the present case affords an
exact illustration of the
considerations which I would place before your
Lordships.
When the
Commissioners, having found the so-called primary facts which
are
stated in paragraph 3 of their case, proceed to their finding in the
Supple-
mental Case that " the transaction, the
subject-matter of this Case, was not an
" adventure in the
nature of trade ", this is a finding which is in truth no
more
than an inference from the facts previously found. It could
aptly be preceded
by the word " therefore ". Is it then
an inference of fact? My Lords, it
appears to me that the
authority is overwhelming for saying that it is. Such
cases as
Cooper v. Stubbs 10 T.C. 29 Leeming v. Jones 15 TC 333 and
Lysaght v. C.I.R. 13 TC 511 (a case
of residence) amongst many others are
decisive. Yet it must be
clear that to say that such an inference is one of fact
postulates
that the character of that which is inferred is a matter of fact. To
say
that a transaction is or is not an adventure in the nature of
trade is to say that
it has or has not the characteristics which
distinguish such an adventure. But
it is a question of law not of
fact what are those characteristics, or, in other
words, what the
statutory language means. It follows that the inference can
only
be regarded as an inference of fact if it is assumed that the
tribunal
which makes it is rightly directed in law what the
characteristics are and that,
I think, is the assumption that is
made. It is a question of law what is murder:
a jury finding as a
fact that murder has been committed has been directed on
the law
and acts under that direction. The Commissioners making an
inference
of fact that a transaction is or is not an adventure in
the nature of trade are
assumed to be similarly directed, and
their finding thus becomes an inference
of fact.
If this
is, as I hope it is, a just analysis of the position, the
somewhat
different approach to the question in some but by no
means all of the Scottish
cases is easily explicable. For as the
Lord President (Lord Normand) put it
in Fraser's case 24
Tax Cases 498 at p. 504, "... the Commissioners here
"
have either misunderstood the statutory language (which I think is
the
" probable explanation of their error) or, having
understood it, have made a
" perverse finding without
evidence to support it". He might equally well
have said that
the assumption that they were rightly directed in law was
displaced
by a finding which was upon that assumption inexplicable.
The
misdirection may appear upon the face of the determination. It
did so here.
I think, in the Case as originally stated: for in
effect that determination was
that the transaction was not an
adventure in the nature of trade because it
was an isolated
transaction, which was clearly wrong in law. But sometimes,
as in
the case as it now comes before the Court, where all the admitted
or
found facts point one way and the inference is the other way,
it can only be a
matter of conjecture why that inference has been
made. In such a case it is
easy either to say that the
Commissioners have made a wrong inference of fact
because they
have misdirected themselves in law or to take a short cut and
say
that they have made a wrong inference of law, and I venture to
doubt
whether there is more than this in the divergence between
the two jurisdictions
which has so much agitated the Revenue
authorities.
But, my
Lords, having said so much, I think it right to add that in
my
opinion, if and so far as there is any divergence between the
English and
Scottish approach, it is the former which is supported
by the previous authority
of this House to which reference has
been made. It is true that the decision
of the Commissioners is
only impeachable if it is erroneous in law and it may
appear
paradoxical to say that it may be erroneous in law where no
question
of law appears on the face of the Case Stated. But it
cannot be, and has not
been, questioned, that an inference, though
regarded as a mere inference of
fact, yet can be challenged as a
matter of law on the grounds that I have
already mentioned, and
this is I think the safest way to leave it. We were
7
warned by
learned Counsel for the Respondents that to allow this appeal
would
open the floodgates to appeals against the decisions of the
General
Commissioners up and down the country. That would cause me
no alarm, if
decisions such as that we have spent some time in
reviewing were common
up and down the country. But nothing, I
think, will fall from your Lordships
to suggest that there is not
a large area in which the opinion of the Com-
missioners is
decisive. I would myself say nothing to detract from what was
said
by Lord Sterndale and Lord Justice Scrutton in Currie's case
[1921]
2 K.B. 332 upon the kindred question whether the taxpayer
was carrying on a
profession, for I do not think that any more
precise guidance can be given
in the infinitely complex and ever
changing conditions of commercial
adventures.
In the
result the appeal will be allowed but effect will be given to the
special
arrangement as to costs which was a condition of leave to
appeal being
given.
Lord
Radcliffe
MY LORDS,
The Crown
has sought to charge the Respondents with Income Tax upon
the
profit arising from the purchase and sales of certain spinning
plant
acquired and sold during the period 1946-48. This profit, it
is said,
came from a " trade, manufacture, adventure or
concern in the nature of
" trade " and so is taxable
under Case I of Schedule D of the Income
Tax Act, 1918.
The
Commissioners for the General Purposes of the Income Tax for
the
Division of West Morley in the County of York, to whom the
Respondents
appealed against the assessments, determined that the
" transaction " which
was their subject matter was not
an adventure in the nature of trade and dis-
charged the
assessments. In the High Court the Crown's appeal was dismissed
by
the learned Judge (Wynn-Parry, J.), on the ground that the
determination
was " purely a question of fact " and that
accordingly it was not open to
the Court to interfere with it. The
matter was treated in exactly the same
way in the Court of Appeal.
I should
not myself have thought that the principles which govern a case
of
this sort offered much scope for controversy at this date, whether
they
are sought for in English or in Scottish legal decisions. The
only difficulty
that I see arises from the fact that in some cases
judges have not been at
pains to distinguish in their judgments
what are the conditions which make
the particular question before
them no more than a question of fact.
My Lords,
I think that it is a question of law what meaning is to be given
to
the words of the Income Tax Act " trade, manufacture, adventure
or
" concern in the nature of trade " and for that
matter what constitute " profits
" or gains "
arising from it. Here we have a statutory phrase involving a
charge
of tax, and it is for the Courts to interpret its meaning, having
regard
to the context in which it occurs and to the principles
which they bring to
bear upon the meaning of income. But, that
being said, the law does not
supply a precise definition of the
word " trade ": much less does it prescribe
a detailed
or exhaustive set of rules for application to any particular set
of
circumstances. In effect it lays down the limits within which
it would be
permissible to say that a " trade " as
interpreted by section 237 of the Act
does or does not exist.
But the
field so marked out is a wide one and there are many combinations
of
circumstances in which it could not be said to be wrong to arrive at
a
conclusion one way or the other. If the facts of any particular
case are
fairly capable of being so described, it seems to me that
it necessarily follows
that the determination of the
Commissioners, Special or General, to the effect
that a trade does
or does not exist is not " erroneous in point of law ";
and,
if a determination cannot be shown to be erroneous in point of law,
8
the
statute does not admit of its being upset by the Court on appeal. I
except
the occasions when the Commissioners, although dealing with
a set of facts
which would warrant a decision either way, show by
some reason they
give or statement they make in the body of the
Case that they have mis-
understood the law in some relevant
particular.
All these
cases in which the facts warrant a determination either way can
be
described as questions of degree and therefore as questions of fact.
In
this, I am only saying what was said by Lord Sterndale in
Currie v. C.I.R.
[1921] 2 K.B. 332 and repeated by
Atkin, L.J. in Cooper v. Stubbs 10 T.C. 29
at p. 55.
And, in Scotland, Lord Sands says the same thing in C.I.R.
v.
Livingston 11 T.C. 538 at pp. 545-6. I agree with them.
But, of course,
in proper circumstances a case can be described as
one of fact, or as purely
one of fact (if the testimonial adds
anything), without going through the
procedure of explaining that
is so because it is one of degree and, the facts
fairly admitting
of the determination come to, there is no error which justifies
the
Court's intervention. I see nothing more than this in anything that
was
said in this House in Leeming v. Jones 15 TC 333. The only thing that
I would deprecate is too much
abbreviation in stating the question, as by
asserting that it is
simply a question of fact whether or not a trade exists.
It is not
simply a question of fact. The true clue to the understanding of
the
position lies, I think, in recalling that the Court can allow an
appeal
from the Commissioners' determination only if it is shown
to be erroneous
in point of law.
Nor do I
think that there can be any real divergence of opinion as to
what
constitutes error of law for this purpose. Naturally, judges have
not
always expressed it in exactly the same terms. I will take one
or two
instances. As I have said, where there is an actual
statement in the Case
which shows a misconception of the law, no
one feels any difficulty. But,
equally, no one supposes that the
Court's right, or, as I would say, duty,
to intervene stops at
this. For example, in Cooper v. Stubbs supra, Mr.
Justice
Rowlatt was prepared to overrule the Commissioners'
determination
that no trade existed because, as he said, " If
one were trying a question of
" this sort with a jury, one
would have to say upon these facts, ' Well now
" ' a trade is
proved ', and I think that what the Commissioners have done is
"
merely to give the wrong name to a state of facts which in law amount
to
" something else ". In the Court of Appeal the
majority did not agree with
him, holding, in effect, that it would
not have been right to give such a
direction to the jury on the
facts as found. We are not rehearing the case
of Cooper v.
Stubbs, though one can say, at any rate, " sed victa
Catoni ".
But I see no reason to think that the majority
were following any different
principle. Warrington. L.J., said
that intervention was proper only " in
" very clear
cases where either the Commissioners have come to their con-
"
elusion without evidence which would support it, that is to say, have
come
" to a conclusion which ... no reasonable person could
arrive at. or have mis-
" directed themselves in point of law
". And Atkin, L.J., recognised that
" there may be a
state of facts which can only lead to one conclusion of
" law
". Now if I turn to the Scottish decisions I find that the
Judges are
stating, though sometimes in somewhat different words,
the same principle.
Lord Normand's judgment in the Court of
Session (First Division) in C.I.R.
v. Fraser 24 T.C.
498 has said almost everything that needs to be said on
this
branch of the subject. "In cases", he says (p. 501), "where
it is
" competent for a tribunal to make findings in fact
which are excluded from
" review, the Appeal Court has always
jurisdiction to intervene if it appears
" either that the
tribunal has misunderstood the statutory language—because
"
a proper construction of the statutory language is a matter of
law—or
" that the tribunal has made a finding for which
there is no evidence or
" which is inconsistent with the
evidence and contradictory of it ". And that,
in its turn,
appears to me to propound the same principle as that adopted
by
Lord Cooper in C.I.R. v. Toll Property Co., Ltd. 34
T.C. 13, where he
says (pp. 18-19): "Keeping in view the
nature of the transaction, the pur-
" pose with which the
Company was floated and the objects which were
" prescribed
in the memorandum of association, and the whole of the other
"
circumstances which I have briefly summarised, it seems to me that
the
9
"
majority of the Commissioners were not entitled to reach the
conclusion
" which they did, that they must have misdirected
themselves in law, and
" that the true and only reasonable
conclusion on the facts found is the
" conclusion reached by
the dissenting Commissioner ".
My Lords,
I must apologise for taking so much time to repeat what I
believe
to be settled law. But it seemed to be desirable to say this
much,
having regard to what appears in the judgments in the Courts
below as
to a possible divergence of principle between the English
and Scottish Courts.
I think that the true position of the Court
in all these cases can be shortly
stated. If a party to a hearing
before Commissioners expresses dissatisfaction
with their
determination as being erroneous in point of law, it is for them
to
state a Case and in the body of it to set out the facts that
they
have found as well as their determination. I do not think
that
inferences drawn from other facts are incapable of being
themselves
findings of fact, although there is value in the
distinction between
primary facts and inferences drawn from them.
When the Case comes
before the Court, it is its duty to examine
the determination having regard
to its knowledge of the relevant
law. If the Case contains anything ex facie
which is bad
law and which bears upon the determination, it is,
obviously,
erroneous in point of law. But, without any such
misconception appearing
ex facie, it may be that the facts
found are such that no person acting
judicially and properly
instructed as to the relevant law could have come to
the
determination under appeal. In those circumstances, too, the
Court
must intervene. It has no option but to assume that there
has been some
misconception of the law and that this has been
responsible for the deter-
mination. So there, too, there has been
error in point of law. I do not
think that it much matters whether
this state of affairs is described as one
in which there is no
evidence to support the determination or as one in
which the
evidence is inconsistent with and contradictory of the
determination
or as one in which the true and only reasonable
conclusion contradicts the
determination. Rightly understood, each
phrase propounds the same test.
For my part, I prefer the last of
the three, since I think that it is rather
misleading to speak of
there being no evidence to support a conclusion when
in cases such
as these many of the facts are likely to be neutral in themselves
and
only to take their colour from the combination of circumstances
in
which they are found to occur.
If I apply
what I regard as the accepted test to the facts found in the
present
Case I am bound to say, with all respect to the judgments
under
appeal, that I can see only one true and reasonable
conclusion. The profit
from the set of operations that comprised
the purchase and sales of the
spinning plant was the profit of an
adventure in the nature of trade.
What other
word is apt to describe the operations? Here are two gentlemen
who
put their money, or the money of one of them, into buying a lot
of
machinery, They have no intention of using it as machinery, so
they do
not buy it to hold as an income-producing asset. They do
not buy it to
consume or for the pleasure of enjoyment. On the
contrary, they have no
intention of holding their purchase at all.
They are planning to sell the
machinery even before they have
bought it. And in due course they do
sell it, in five separate
lots, as events turned out. And, as they hoped and
expected, they
make a net profit on the deal, after charging all expenses
such as
repairs and replacements, commissions, wages, travelling and
enter-
ment and incidentals, which do in fact represent the cost
of organising the
venture and carrying it through.
This seems
to me to be, inescapably, a commercial deal in secondhand
plant.
What detail does it lack that prevents it from being an adventure
in
the nature of trade, or what element is present in it that makes it
capable
of being aptly described as anything else? Well, to judge
by the Respondents'
contentions as recited in the Case, there were
some circumstances lacking
in this deal of which the presence has
been regarded as of importance in
other cases. I do not think that
this line of argument is ever very conclusive ;
but, in any event,
it breaks down completely on the facts that are found. It
is said
that there was no organisation for the purposes of the transaction.
10
But in
fact there was organisation, as much of it as the transaction
required.
It is true that the plant was not advertised for sale,
though advertisements
asking for plant were answered by the
Respondents. But why should they
incur the cost of advertising if
they judged that they could achieve the sale
of the plant without
it? It is said that no work had been done on the
maturing of the
asset to be sold. But such replacement and renovation as
were
needed were in fact carried out, and I can see no reason why a
dealer
should do more work in making his plant saleable than the
purposes of sale
require. It is said that neither of the
Respondents had any special skill
from his normal activities which
placed him in an advantageous position
for the purposes of this
transaction. It may be so, though one of them was
the employee of
a spinning firm. In any case the members of a commercial
community
do not need much instruction in the principles and possibility
of
dealing, and I think that, given the opportunity, the existence or
non-
existence of special skill is of no significance whatever. It
is said, finally, that
the purchase and sale of plant lent itself
to capital, rather than commercial,
transactions. I am not sure
that I understand what this is intended to mean.
If it means that
at the relevant period there was no market for second-hand
plant
in which deals could take place., there is no finding to that effect
and
all the facts that are recited seem to be against the
contention. If it means
anything else, it is merely an attempt to
describe the conclusion which the
Respondents would wish to see
arrived at on the whole Case.
There
remains the fact which was avowedly the original ground of
the
Commissioners' decision—" this was an isolated case
". But, as we know,
that circumstance does not prevent a
transaction which bears the badges
of trade from being in truth an
adventure in the nature of trade. The true
question in such cases
is whether the operations constitute an adventure
of that kind,
not whether they by themselves or they in conjunction with
other
operations constitute the operator a person who carries on a
trade.
Dealing is, I think, essentially a trading adventure, and
the Respondents'
operations were nothing but a deal or deals in
plant and machinery.
There is
only one thing more that I wish to add. The appeal was
presented
to us as involving a question of great importance, since it
offered
an opportunity of reconciling what were thought to be
divergences between
the views of the English and Scottish Courts
as to their jurisdiction in dealing
with Cases Stated which
involve the existence or non-existence of a " trade "
under
Case 1 of Schedule D. As I have tried to show, I do not think
that
there has been any such divergence of principle. But I do not
feel equally
confident that there has not been some divergence in
the understanding and
application of the governing principles. I
find it difficult to think that,
had there not been, the Crown
would have been Appellant in the present
case.
I think it
possible that the English Courts have been led to be rather
over-
ready to treat these questions as " pure questions of
fact" by some observa-
tions of Warrington and Atkin LJJ., in
Cooper v. Stubbs supra. If so, I
would say, with
very great respect, that I think it a pity that such a
tendency
should persist. As I see it, the reason why the Courts do
not interfere
with Commissioners' findings or determinations when
they really do involve
nothing but questions of fact is not any
supposed advantage in the Com-
missioners of greater experience in
matters of business or any other matters.
The reason is simply
that by the system that has been set up the Com-
missioners are
the first tribunal to try an appeal and in the interests of
the
efficient administration of justice their decisions can only
be upset on appeal
if they have been positively wrong in law. The
Court is not a second opinion,
where there is reasonable ground
for the first. But there is no reason to
make a mystery about the
subjects that Commissioners deal with or to invite
the Courts to
impose any exceptional restraints upon themselves because
they are
dealing with cases that arise out of facts found by
Commissioners.
Their duty is no more than to examine those facts
with a decent respect for
the tribunal appealed from and, if they
think that the only reasonable con-
clusion on the facts found is
inconsistent with the determination come to,
to say so without
more ado.
I agree
that the appeal should be allowed.
11
Lord
Tucker
MY LORDS,
I agree,
for the reasons which have been stated, that this appeal should
be
allowed.
Lord
Somervell of Harrow
MY LORDS,
I have had
the advantage of reading the Opinion of my noble and learned
friend,
Lord Radcliffe, in which I concur.
(31276)
Wt. 8100-102 35 8/55 D.L./PA/19
