TMI Blog1956 (2) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... of women's clothing manufactured by various manufacturing companies. The facts 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 during a number of years beginning in 1939 and ending in 1951 the taxpayer had agencies of this character for a number of manufacturers totalling in all twenty. It is, however, necessary to observe at once that at no one time did the tax- payer hold agencies for twenty such firms or anything like that number. Indeed, at the relevant date, namely, July 1, 1948, when Gordon Mills Ltd. terminated the taxpayer's agency with them, he had two such agencies, one with a company called Green, Hearn Co., and the other with this company, Gordon Mills Ltd. However, the importance of this schedule lies in the circumstance that during the business life of thirteen years which it covers, the taxpayer's agencies varied in their nature and number from time to time. Some were held for a very short time : some, by the figures, may have represented little more than iso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; but to my mind there is no valid distinction for the present purpose between these two. The taxpayer 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 thereby seriously impaired. If and in so far as damages were claimed because his goodwill as a sales agent had been impaired, I can well conceive, to say the least of it, that the taxpayer would have had a strong case for saying 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 20, 1950. The Commissioners in their conclusions state that the terms of the judgment had no bearing whatsoever on the question whether the amount awarded was taxable or not. That conclusion was much criticized by Mr. Mustoe, and it was also criticized to some extent by Harman J. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore 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 taxpayer as a sales agent? Mr. Mustoe's argument had the attraction of simplicity, for it may be put thus: he said that the ? 4,000 represents what was paid to the taxpayer in exchange for a profitearning asset which he had lost owing to the breach of the contract by the defendants. That being so, Mr. Mustoe contended, it follows that it is a capital item. I have said that there is an attraction in that argument and if the question were res integra it would be more attractive still ; but, 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 this court; but the Income Tax Acts apply indifferently on either side of the border and, therefore, I should in any case be slow to indicate when sitting in this court an entirely new approach to the incidence of taxation in England from that which I think has now been well established in Scotland. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters the present case differs from that case; but I am unable to agree that those differences are of such significance as to bring the case from the territory, so to speak, of Kelsall Parsons [1955] Tax Leaf. 1757 into the land of Barr Crombie 26 T.C. 406. On its facts, if one were content to take the analogy of facts, the present case may be said to be more closely resembling the later case of Inland Revenue Commissioners v. Fleming Co. (Machinery) Ltd. [1951] 33 T.C. 57, and I have already said that I must resist Mr. Mustoe's invitation to refuse to follow the Scottish line of authority. But, to bring the matter over to what I have called the Barr Crombie 26 T.C. 406 land, it must be shown that, in truth and substance, what the taxpayer parted with was not merely his rights and expectations under a contract entered into in the ordinary course of his trade, but was a parting by him with one of his enduring capital assets, as it is called. It is on that sort of consideration, as I said earlier, that this case might well have been different if the ? 4,000 had been paid because the taxpayer's goodwill had been damaged. In the Barr Crombie 26 T.C. 406 case the agency whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils. BIRKETT L.J. I am entirely of the same opinion; but, in view of the arguments of Mr. Mustoe and Mr. Graham, I will say one word by way of supplement. We have been concerned all the time with this sum of ? 4,000. Towards the end of the discussion Mr. Graham invited us to consider the nature of the ? 4,000. That was in the submission that he could distinguish the facts in the Kelsall Parsons case 21 T.C. 608 from the facts of the present case. What he said was that the damages were in the nature of a sum of money, a surrogatum or quid pro quo for the loss of this contract. He also asked us to consider the nature of the business. It is perfectly plain that, in all the cases which have been before the courts on this or on a similar topic, the courts have felt an intense difficulty in laying down anything like a precise line that could be applied to the facts of any given case. But what I think they have done now, as emerges from the cases cited to us by Mr. Mustoe, is this: they have said one's duty is, first of all, to examine with care the facts, come to a decision on the primary facts, make such inference as those facts demand, bearing in mind at all times the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service with the defendants to act as the defendants' sole agent for the export market, the plaintiff during the currency of the said agreement exported articles of a similar nature to those manufactured by the defendants under the name of two firms known as K. Wiseburgh Ltd. and K. Wiseburgh Export Ltd., of each of which said companies the plaintiff had control. Such conduct constituted a breach of his contract with and a dereliction of his duty to the defendants. Then they say that he persistently neglected the agency. Under paragraph (c), I find the gravest allegations are there made: The plaintiff's conduct towards the defendants who were at all material times his employers was such as completely to frustrate the purpose of the contract and to indicate complete lack of faith in and desire to co-operate with them. They refer to certain letters, and say: The plaintiff in terms refused to speak on the telephone upon a matter concerning business affairs with the managing director of the defendants: the plaintiff gave express instructions to his staff... that they were not to have any communication by telephone with the defendants, but that it was only to be by correspo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is this: If one looks at the cases which have been decided, applying them to the facts as they are now known in the present case, the reasonable inference which we ought to draw from those facts is that this was merely a profit from the trade within Schedule D (1)(a)(ii) of the Income Tax Act, 1918, and was not a sale of a capital asset as the taxpayer contends. I have been troubled all the way through in this case on the question of the two Wiseburgh companies. I can understand it being said: I had two contracts and those were the whole of my business. You took one away and you left me with only the one contract, and in that respect you have injured my profit-making apparatus. You have taken away a capital asset of value. But one must remember what are the facts in this case. The contention was raised in the pleadings: that so far as the asset about which this complaint was made, the taxpayer would not go on with it, and it was on that ground the defendants say that they were entitled to write that letter of July 1. He had declined at the height of that season to comply with the agency agreement and they were therefore justified in doing what they did. We do not know what w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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