TMI Blog1940 (3) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... the direction of the board to the appellant informing him that the board had considered his intimation that he intended forthwith to determine his directorship. The letter went on to ask him in the interests of the company not to serve the proposed notice, and stated that in consideration of the appellant acceding to this request the company would within twenty-one days, or by such instalments as he would accept, pay him a sum of 45,000. This undertaking would be embodied in a formal deed reciting the letter The appellant accepted the offer. Accordingly by a deed of December 31, 1934, which recited that the appellant was then a director of the company and that the company had in the circumstances set out in the letter of December 17, annexed to the deed, for the consideration specified in the letter, agreed to make Mr. Cameron two payments amounting in all to 45,000, the first payment on December 31, 1934, and the second on March 31, 1935, the company bound themselves to make these payments. On the same day a board meeting was held, at which the appellant was present, and it was resolved that the appellant should remain on the board of directors in an advisory capacity, and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the arrangements contained in the material documents must be regarded, and not merely the form. Such a suggestion found no favour with the majority of the noble and learned Lords who heard that appeal, and I certainly have no intention of departing in any way from what was there laid down. But how does it help the appellant ? In this case the substance and the form of the documents seem to me to be the sums. The appellant was annxious to retire and, but for the inducement offered to him not to do so, he would have signed a notice of resignation. The company valued his services and they were prepared to pay a large sum to him to induce him -to abstain from his intention to resign, and thus to continue as director. Your Lordships are asked to say that, in these circumstances, the only consideration for the payment was the act of the appellant in acceding to the request of the company not to serve the notice of resignation. If it were not for the approval given by the Master of the Rolls to this submission, I should have thought it only required to be stated to be rejected. I can see no difference between a promise not to be resign and a promise to continue to serve as director. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed with the decision in Dewhurst's Case.[1932] 16 Tax Cas. 605 I agree with all the members of the Court of Appeal, and with Lawrence, J., that that decision does not cover this case. The facts were, as Lord Warrington said, very special. Lord Atkin and Lord Thankerton, who decided that case with Lord Warrington in favour of the taxpayer, treated the payment in question as a sum paid for the release of the company from obligations which they would themselves have to meet. The facts of this case or wholly different and are such as to make it impossible to come to a similar conclusion. The conclusion which I have reached is that the payment in question was a payment arising from the appellant's office. This is, I think, the inevitable result of giving effect to the precise form as well as to the substance of the documents on which the case depends. 6. It follows that in my opinion the order of the Court of Appeal should be affirmed and this appeal dismissed with costs. Viscount Maugham - My Lords, as appears from the case stated by the Commissioners for Special Purposes of the Income-tax Acts, the only question on this appeal is whether the appellant is liable to inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments hereinafter set out and it is hereby agreed between the parties that the company shall pay to Mr-Cameron the following sums on the following dates : On December 31, 1934, the sum of 35,000 and on March 31, 1935, the sum of 10,000. In witness, etc. The letter annexed was the letter of December 17 above referred to. 11. On these facts and findings, the question is whether the 45,000 was paid to the appellant in his capacity as a director and to induce him to continue to hold his office of a director, so that the sum comes within the charging words of Rule 1 of Schedule E, ' all salaries, fees, wages, perquisites or profits whatsoever therefrom (that is, from the office of a director), or whether the sum was paid merely to obtain his agreement not to serve the notice for, say, one day, leaving him perfectly free to retire on the next day, in which case the sum, as the Master of the Rolls held, would not be a profit arising from the office. 12. The Master of the Rolls in his dissenting judgment, to which I have given the most anxious consideration, seems to have thought the case was in effect decided by the findings in the special case. He observed : The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... really meaning that the appellant could have given a notice to retire within a few minutes after he received the 45,000, if not before. We must interpret the findings of the Commissioners in the light of common sense and common knowledge. Apart from this view, I think the inference which I have drawn from the findings is a matter of law, based to a large extent on the well known law relating to directors of a limited company and to their inability to make presents out of the funds of the company to a brother director, or to pay him substantial urns for a clearly nominal consideration. Further, it is important to notice that there was a contemporaneous agreement on the part of the appellant to remain as a directed at a salary of 400 per annum. This circumstance seems to me to afford strong corroboration of the view which Lawrence, J., and Finlay and Luxmoore, L. JJ., have taken of the transaction. 14. If a sum is paid by a company to a man who has long been and still is a director of the company and whose services are greatly valued, and if the consideration is that he will not resign but will continue to act as a director, I cannot myself doubt that in such a case the sum is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... torship. I do not agree. He would have been bound to Serve for a reasonable time, the length of which would be judged on a consideration of all relevant circumstances, including the large amount of the sum paid. The other view imputes to the directors that they paid away this large sum for nothing; in other words, that they made a present to their co-director, a thing which neither they nor the company would have any right to do. 20. It is further said that my view involves a departure from, or a contradiction of, the Commissioners' findings; but that is not the case. Their finding is merely that the deed means what it says, and is not a cloak for some different transaction. But what the deed says is a Question of construction, and I have indicated what, in my opinion, it means and involves. 21. The case is not covered or governed by the decision in Dewhurst's Case. [1532] 16 Tax Cas. 605. The grounds for that decision so far as they are to be found in the speeches of Lord Atkin and Lord Thankerton were that the transaction was the compromise of a money claim against the company by the acceptance of a smaller sum. It bears no resemblance to the present case. 22. Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to resign for a reasonable period. Similarly, under his contemporaneous agreement to serve in an advisory capacity at 400 year, which in my opinion was an integral part of the transaction, I think it was implied that he would so serve for a reasonable period. It seems to me that the company paid the 45,000 to the appellant as an extra remuneration to him for continuing as a director, and he received it on that same footing. In my judgment it fell within the category of profits whatsoever of his directorship. This conclusion follows in law from the facts stated. 24. It was somewhat faintly suggested that the sum was capita not income. I think this contention is untenable. I fail to see what ground there is for that suggestion. The mere fact that the sum is large is not in itself ground. 25. I have not found any help from Dewhurst's Case [1932] 16 Tax Cas. 605 which whatever it decides is on different facts. It is difficult to-elicit any principle from the majority decision of the House. Lord Warrington expressly decided it on its special facts. Lord Atkin and Lord Thankerton based their decision, as I understand it, on the ground that the money paid was not a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether. Taking the deed first, it will-be seen that the consideration for the agreement by the company to pay the 45,000 is expressly stated to be that specified in the letter, and the consideration specified in the letter is the acceding by the appellant to the request of the company not to serve a notice exercising his right under Art. 107 of the company's articles of forthwith determining his directorship. This surely makes it as plain as language can do that in consideration of the payment of 45,000 the appellant will not determine his directorship in other words, for it means precisely the same thing, that he will continue to act as a director. It was submitted on behalf of the appellant that this conclusion as to the consideration moving from him for the company's agreement to pay the 45,000 in effect reverses and disregards findings of fact by the Special Commissioners by which every appellate tribunal was bound. The findings referred to were in the words following : We hold that the respondent received the sum of 45,000 for the consideration expressed in the said letter dated December 17,1934, and embodied in the said deed made December 31, 1934. We accept t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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