TMI Blog1955 (7) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 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 himself 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 value in order that he might be satisfied that the price asked by Whitworths was one on which he could make a quick profit. He a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebruary, 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. (3) 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. (4) The profits shown by the accounts (which form part of this case and are annexed hereto, marked 'A') was 18,225 11s. 3d. (5) The respondents' sole purpose in the transaction was to sell the plant at a profit. (6) With regard to the manner in which the sales were effected:--(A) Some commissions were paid for assistance received in effecting sales. (B) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stationery 3 0 0 Travelling and Entertainment 366 13 11 Rent 130 0 0 Reserve for costs of dilapidations, legal and accountancy charges 785 0 0 Profit on the transaction 18,225 11 3 37,769 13 6 Profit divisible:- Harold Bairstow 9,112 15 7 Fred Harrison 9,112 15 7 By sale of Plant:- s. d. 1946-Nov. 26 International Export Co. 15,439 13 6 1947-January 29 H.E. Crabtree Co. ... 80 0 0 June 26 Bailey, Verity and Raynor 12,000 0 0 October 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of trade which was assessable to tax under Case I 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, profession, 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 Upjohn J. The Commissioners accordingly met again and, having heard legal argument 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 Wynn-Parry J. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve acted without 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 Commissioners 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 statutory 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 submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Jones v. Leeming and Inland Revenue Commissioners v. Lysaght (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 maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law on the grounds that I have already mentioned, and this is I think the safest way to leave it. We were 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 Commissioners is decisive. I would myself say nothing to detract from what was said by Lord Sterndale M.R. and Scrutton L.J. in Currie v. Inland Revenue Commissioners* 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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 misunderstood 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. Inland Revenue Commissioners and repeated by Atkin L.J. in Cooper v. Stubbs. And, in Scotland, Lord Sands says the same thing in Inland Revenue Commissioners v. Livingston. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 First Division of the Court of Session in Inland Revenue Commissioners v. Fraser# has said almost everything that needs to be said on this branch of the subject. In cases, he says, 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 languagebecause 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 Inland Revenue Commissioners v. Toll Property Co. Ltd.## where he says: Keeping in view the nature of the transaction, the purpose with which the Company was floated and the objects which were prescribed in the memorandum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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