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TMI Blog1956 (2) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... nts is qualified and governed as regards assessment by certain of the General Rules - and again I refer only to those material to the present case - applicable to Schedules A, B, C, D and E. Of those rules it will be sufficient to read rules 5 and 10, which have assumed their present form as successors in title (as it were) of the Original Income Tax Act, 1842, as amended by the Act of 1915. Rule 5 states : "A person not resident in the United Kingdom whether a British subject or not, shall be assessable and chargeable in the name of any such trustee, guardian, tutor, curator, or committee, or......." - and these are the more important words - "........ of any factor, agent, receiver, branch, or manager, whether such factor, agent, receiver, branch, or manager has the receipt of the profits or gains or not, in like manner and to the like amount as such non-resident person would be assessed and charged if he were resident in the United Kingdom and in the actual receipt of such profits or gains." But rule 10 provides : "Nothing in these rules shall render a non-resident person chargeable in the name of a broker or general commissioner agent, or in the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination before us were as follows "...." - I leave out (a) - ".... (b) whether Akron was exercising within the United Kingdom a trade of selling tyres to persons outside the United Kingdom; and, if so, (c) whether that trade was carried on by Akron through the agency of Brentford." 8. It is trite observation that in every case which comes before the courts the answer in the end must depend upon its particular facts. The facts of the present case are undoubtedly in many respects special and facts of the present case are undoubtedly in many respects special and peculiar. As Sir James said, the old cases in which the question of taxing non-resident persons came before the courts (for example, the cases compendiously referred to as the "champagne" cases) were cases, generally speaking, where the non-resident sold in the United Kingdom goods made abroad; and it was in particular reference to the cases of that type that Lord Cave L. C., in Maclaine & Co. v. Eccott, used language which has been quoted many times before, as it has been quoted in the present case. "The question," said Lord Cave L. C., "whether a trade is exercised in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esently to the one which we have taken as a sample. But the substance of the obligation put upon such distributors was that they were bound to promote the sales in their countries of FIRESTONE products and not to sell any competing products themselves at the same time. 12. In order that such a distributor should get supplies, Akron have also established, as the case mentions, as part of their organization controlled manufacturing companies (of which Brentford is one) whose function it is to make Firestone tyres and Firestone products according to the strict directions and specifications of Akron, and to dispose of those tyres subject to, and only subject to, the terms imposed by Akron. 13. I will now refer to the distributor agreement which has been called "the master agreement," and is typical of the type of agreement made by Akron with its distributors. I will call it the Swedish master agreement for it is made between the Firestone Tyres and Rubber Export Co. and a company situated in Stockholm. It is desirable that I should read a certain amount of this agreement because a good deal of the argument has turned upon its true effect. The first clause is this : "Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this agreement and has been entered into under the considerations herein expressed and no others, and shall become effective only when executed by the duly authorized representatives of the company at Akron, Ohio, it being agreed that this agreement is to be construed under the laws of the state of Ohio in the United States of America"; and it is not to be altered or modified except by written endorsement, and so forth. There is a power of cancellation which is irrelevant. Upon the face of it, it seems to me clear enough that the effect of that master agreement was, although it was implicit perhaps rather than clearly expressed, that Akron would itself sell to Sweden such tyres and other products as Sweden should require, or at least would provide the tyres and so forth that Sweden would require at the prices and subject to the other conditions contained in the agreement. I pause to observe that throughout the case and in the other documents Sweden has been treated as and called a customer of Akron. 14. I now pass to the second master agreement, again a typical one of a kind, namely, the agreement between Akron and Brentford, which I will call the Brentford master agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y those flowers, will get another florist so to do, and the lady receives in due course the flowers in fact from the second florist. In that case (and I daresay the result would be similar if the arrangement had gone strictly according to the letter of the master agreement) it is at least probable that the second florist never enters into any contractual relations with the customer who orders the flowers. 17. But the fact is that things did not work out quite as the agreements, on the face of them, stated that they should. That, I think, undoubtedly was partly due to the English war-time controls which rendered Brentford unable to comply with any orders for tyres save such as the appropriate governmental authority either permitted or indeed directed them to do. The way in which the main difference in practice arose was this, that the orders were not sent to Akron by Sweden and then passed on to Brentford. They were sent direct to Brentford. It is not in doubt the variation in procedure was authorized, and that in fact Akron gave to those customers or distributors a list of persons or firms in European and other countries to whom they could send, direct, their orders. 18. The meth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of a transaction taking that form ? Sir James has said that there are two results. Either, first, the sole trading operation was an operation between Sweden on the on hand and Brentford on the other, an English contract, becoming in due course an English sale; the arrangement between Brentford and Akron about the subsequent apportionment of the purchase price collected is something altogether outside the scope of the trading operation; it therefore follows, as night the day, that Akron is not trading or carrying on a trade within the United Kingdom. Or, second a contract upon the giving by Sweden of the order comes into existence, a new contract between Sweden and Akron, or alternatively a contract between Brentford and Akron, with the purpose or having the effect that the 1,000 tyres which are to be delivered to Sweden become the property of Akron. In either case there is a point of time when the property passes to Akron, and from that time forward the transaction is exclusively governed by the terms of the Swedish master agreement, which is an agreement made out of England and governed by the laws of the state of Ohio; and, therefore, it follows also that Akron is not carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hink it may be that Sweden could also sue Akron under the Swedish master agreement for having failed to provide the tyres; and it may also be that Sweden could set up against Akron what I have called a subsidiary and ancillary contract also; but having stated as best I can the effect of that supposed breach I think it will be seen at once that on my analysis any such contract between Akron and Sweden is of a purely incidental character. 24. But its possibility has, I think, some aspects of danger about it for Sir James, and for this reason. We do not know the exact arrangements whereby communications passed, and were intended to pass, between Sweden and Akron. Assuming that there was by the Swedish master agreement a continuing offer, it may be that acceptance, so as to create contractual relations, must first be communicated to the offeror, and that it would not suffice to create a contract that Sweden merely put the order in the Swedish post office box. If that is right, then the communication in the case I suppose was - and Sir James, I think, conceded as much - made not to Akron direct but to Brentford, and Brentford must at least be the agent of Akron to receive communication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mately, the profits of those transactions were divided between the Dutch and the English companies, in certain proportions. I do not suggest that that case is entirely parallel with the present case, and the reference in the somewhat obscurely worded agreement between the Dutch company and the English company to del credere certainly lends much force to the view that the English company was, in some respects at any rate, regarded as an agent of the Dutch company. But the case does, I think, show, and it is an illustration of the principle, that the fact that the English company, when it sells particular goods, sells them as a principal to the customers does not negative a proposition that the parent company, from which in some sense or another the goods emanated, may not equally be carrying on or exercising a trade within the United Kingdom. I think that the case which I have mentioned was rightly regarded by Harman J. as lending some support to the view which he formed. 28. There remains the third and final question. If Akron is carrying on this trade within the United Kingdom, then for the purposes of rules 5 and 10 is Brentford its "regular" agent ? To my mind, the an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts stated in the case, or refer again in detail to the distributor agreement or the agreement of February 8, 1936, between Akron and Brentford. 31. The question whether Akron was during the relevant years exercising a trade within the United Kingdom through the agency of Brentford is a question of fact which the Special Commissioners have answered in the affirmative, and their decision upon that question, as the tribunal of fact, in not to be disturbed on appeal, unless the facts as found by the are incapable in law of supporting such a decision. 32. Sir James has argued before us with his usual persuasive force that on the facts found, and on a proper appreciation of the legal effect of the distributor agreement and the agreement of 1936, and of the course of dealing between Akron and Brentford and the various distributors whose orders were dealt with by Brentford, the only proper conclusion as a matter of law is that Akron was not at any material time exercising a trade within the United Kingdom, or at all events was not exercising a trade within the United Kingdom through the agency of Brentford. 33. The effect of Sir James's argument may, I think, be thus fairly summari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a contract outside the United Kingdom with another non-resident for a sale of goods to the latter, obtains those goods from a trader resident in the United Kingdom is not enough to displace the general rule so as to make the trade of either non-resident a trade exercised within the United Kingdom : see Sulley v. Attorney-General, and the distinction drawn by Lord Herschell in Grainger & Son v. Gough between trading with a country and carrying on trade within a country. (v) The fact that the strict terms of the distributor agreements were departed from in practice (both before and after the date of the agreement of 1936), so as to allow distributors to order any tyres they required from any listed manufacturer of Firestone tyres selected by them, does not affect the above conclusion. The distributor's order addressed to any listed manufacturer equally raised a contract made outside the United Kingdom between Akron and the distributor concerned immediately upon the dispatch by letter or cable of the distributor's order, the listed manufacturers simply playing the role of agents empowered to receive such orders on Akron's behalf. (vi) If the foregoing submissions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tributor direct with Brentford as one of the listed manufacturers of Firestone tyres could at most only create a contract between the distributor and Akron to the effect that the distributor would purchase, and Akron would cause the manufacturer to sell to the distributor, the tyres ordered on the terms and condition of the distributor agreement. There was on privity of contract between distributor and manufacturer quoad the distributor agreement, and it is, I think, quite impossible to hold that the mere placing of an order with any one of the listed manufacturers would, without more, oblige that manufacturer to deliver the tyres ordered. As between the distributor and the listed manufacturer the matter must have been one of offer and acceptance, that is to say, an order placed by the distributor with the manufacturer and accepted by the latter. The order and its acceptance would alone constitute the effective contract under which the distributor could call upon the manufacturer to deliver the tyres ordered, and would be bound on his own part to take and pay for them. Such contracts in the case of Brentford would be made in England as the place of acceptance. On applying this view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second question was whether Brentford, that is the wholly-owned subsidiary of Akron in this country, was the authorized regular agent of Akron for that purpose ? 41. Quite clearly, the first question is a question of the greatest importance. If it is answered in the affirmative that Akron was carrying on a trade within the United Kingdom, the second question really becomes academic on the facts of this case. But everybody agreed that the answer to that question, propounded by Sir James and discussed for several days in this court, depended upon the view taken of the facts in the case. 42. As Sir James said, this question of non-resident firms and corporations carrying on business within the United Kingdom had been a matter of very fierce dispute in days past, and, indeed, had been the subject of many decisions which were cited to us. He said, with an air of slight surprise, it was curious that after a long interval of time the ancient question, which all had thought to be settled by these authorities, should be raised again. 43. But the facts of this case are extremely unusual, and many of the cases which were cited to us were cited to try to bring those facts within decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a contract outside the United Kingdom. 46. I am bound to say that, as the argument developed and as its effect developed, it seemed almost impossible to maintain that position, for at some subsequent date - one was never given any very clear view about how it had happened - there was a modification of the written agreement had specified in the beginning, "Whereas the parties hereto are desirous of concluding an arrangement for the fulfilling by the English company of orders obtained in Europe and elsewhere by the American company" and by clause 2, "The American company shall upon each request being made forward to the English company full particulars of such order," which seemed to forecast that the course of business would have been that Sweden would say to Akron, "I want 1,000 tyres" and Akron, therefore, under the agreement would say to Brentford, "Here are particulars of an order which we desire you to fulfill on the terms we have agreed in this agreement as to payment, price, delivery and so on," but there came a moment when that was clearly modified because we had to deal with the case upon the footing that there was no such undoubted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ca and in various parts of the world." If one is going to look at the facts of the case, that I think is one of the overriding and over-mastering facts which enters into every subsequent stage of the matter. Akron is the head and the trunk of all the vast organization, and Brentford a wholly-owned subsidiary of that head, on the terms of the documents before us doing that which Akron had devised and designed that it should do. "Some of its associated and subsidiary corporations manufacture and sell tyres..." - as, indeed, did Brentford - "... in the countries in which they are registered, and others sell in the countries in which they are registered, tyres which have been manufactured in America or by subsidiary corporation in other countries. For convenience, certain matters in regard to the business of the organization carried on outside the United States of America have been conducted by other subsidiary companies of Akron... Brentford is an English company registered in 1922 with an issued capital of Pounds 20,000 in Pounds I ordinary shares. This capital was increased to Pounds 140,000 in 1938. All the shares in Brentford are owned by Akron. The board of di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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