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Wisdom Vs. ChamberlaIn (inspector of Taxes). - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Reported in[1969]74ITR306(Cal)
AppellantWisdom
RespondentChamberlaIn (inspector of Taxes).
Cases ReferredIn Californian Copper Syndicate v. Harris
Excerpt:
- harman l. j. - this is an appeal for a decision of goff j. on a case stated by the general commissioners of income-tax. the judges decision was in favour of the taxpayer. he held that the profit in question was not assessable to income-tax. it is a straight forward kind of case, in my view and no great researches into the taxing acts are required. the case merely is : whether tax under schedule d is exigible under case i of section 123 - 'tax in respect of any trade arrived on in the united kingdom.......... ' the only gloss upon that is that, in the definition section (hundreds of sections away -section 526) 'trade includes every trade, manufacture, adventure or concern in the nature of trade.' so that it need not be a trade if it is an adventure in the nature of trade, which enlarges.....
Judgment:
HARMAN L. J. - This is an appeal for a decision of Goff J. on a case stated by the general commissioners of income-tax. The judges decision was in favour of the taxpayer. He held that the profit in question was not assessable to income-tax. It is a straight forward kind of case, in my view and no great researches into the taxing Acts are required. The case merely is : Whether tax under Schedule D is exigible under case I of section 123 - 'tax in respect of any trade arrived on in the United Kingdom.......... ' The only gloss upon that is that, in the definition section (hundreds of sections away -section 526) 'trade includes every trade, manufacture, adventure or concern in the nature of trade.' So that it need not be a trade if it is an adventure in the nature of trade, which enlarges the words of the section.

The case concerns the affairs of an factor of the name of Norman Wisdom, a man making a very large professional income. Having some savings, which no doubt were not of much significance to him at the time, he did not want them but they were a nest-egg for his future-because after all a comedians life does not go on for ever and he needs something for his declining years - he, like many of his kind, was not much concerned with the financial aspects of his life, which he entrusted to a chartered Accountant, who was accustomed, I suppose, to dealing with that sort of thing : at any rate he carried on his business in the Charging Cross Road. He was the man who regulated the taxpayers affairs : his name was Halpern.

In 1961, as in many other years since the War, there was talk in the air of a devaluation. It was, as we now know, an event which did not happen at that time, though it has happened since. Mr. Halpern, advising his client about his assets (which amounted to some pounds 200,000 in value, consisting of a house, some investments, a yacht on the stocks then building, and a certain amount of cash) was minded to find some way of providing a cushion against the loss which would be occasioned to his clients capital assets in the event of a devaluation of the pound. He wanted to find something which against dollars would stop the hole made by the devaluation of the sterling assets. Casting about for an expedient, he was led to suppose that it might be a good plan for his client to buy ingots or bars of silver. That was, he ascertained, a pretty stable commodity : it had not varied in value more than five per cent. over the last six years (this was in 1961), he thought it would maintain its value, and if this country devalued its pound he could still sell it at a good profit against dollars. And so he took the advice of the well known bullion brokers, Mocatta & Goldsmid, and made an appointment to see them in November, 1961. On the very morning when he was going to see them, there was a sudden rise in the price of silver. That did not daughter Mr. Halpern at all. It did, however, deranger the bullion market to some extent, and though he wished to purchase pounds 200,000 worth of silver bars the silver would not let him have more than half that amount because the jump which had occurred that morning had somewhat upset the equanimity of the market. However that may be, Mr. Halpern continued his efforts, after purchasing the pounds 100,000 worth, to double that sum because that was, he thought, the appropriate amount for his client to buy. But it is a most significant feature of this case that it was not intended that Mr. Wisdom should realise his assets, his stocks and shares, his house, his yacht or what not, and thus furnish the money for the transaction : the plan was to borrow the money at what on the face of it were very high rates of interest - profitable, no doubt, to the broker and the banker who furnished the money, but not so unprofitable as it might seen to Mr. Wisdom, because he was a high surtax-payer. Therefore the transaction was entirely financed on borrowed money except for a sum of pounds 10,000 in cash which he put down on the deal.

The price of silver did not later very much in the next six months or so an eventually in April, 1962, the second transaction (so to call it) was made, which was done in this way : that the first transaction was undone, at a loss to Mr. Wisdom of some pounds 3,000, and the whole pouns 200,000 worth was then purchased on somewhat different terms. The exact terms I need not trouble with, but a years interest was to be paid in advance and was not to be repayable, and there was an option on the part of Mr. Wisdom to sell back at an enhanced price and a counter-option to the broker hedging him against a loss so that he could call on Mr. Wisdom to exercise his option or to relinquish it.

In the autumn of 1962 the pound recovered and all ideas of devaluation for the time being disappeared. But also that the same time and independently of that fact the price of silver began to go up very much : the upshot was that in October, 1962, and January, 1963, the silver bars were sold on Mr. Wisdoms instructions and he realised a profit of some pounds 48,000. Easily got money, one may think. But the Crown now say that is taxable profit, and of course that, having regard to Mr. Wisdoms fiscal position, would take most of the gilt off the gingerbread. And that is what this case is about.

The Crown says that this was an adventure in the nature of trade. It was (say they) something in the nature of a speculation : it was never intended to do more than make a temporary incursion into this market and to realise as soon as might be, either (no doubt) at a profit it devaluation occurred or may be without a profit if it did not, but having had the insurance of the possession of the bars of silver over the period of danger. But in fact the event which happened was not expected, I suppose, by either party, and although the period of danger passed yet for extraneous reasons the value of the bars very much appreciated, with the result that an entirely unexcepted windfall flowed into the pockets of Mr. Wisdom. It is nevertheless said that this was a profit realised from an adventure in the nature of trade and the fact that it was not an expected profit is really quieter irrelevant to the matter.

When you look at the commissioners findings, you find them set out in paragraph 9 of the case as follows :

'The commissioners found that :

(a) The taxpayers original intention was to purchase the silver as a hedge against the devaluation of sterling :

(b) At the time of the second transaction other considerations influenced the purchase, the fear of devaluation having subsided :

(c) The commodity was useless, left unallotted in the hands of Mocatta, was not an income-producing investment, was not a long-term investment, and was financed by loans at a high rate of interest, and no organisation was needed to deal in the commodity as this was provided by Mocatta :

(d) Whether there was a single transaction or two, by the nature of the subject-matter there was an adventure in the nature of trade :

(e) The transaction (or transactions) was (or were) in the nature of trade and there assessable under Case I of Schedule D.'

If there were facts to justify those conclusions we cannot interfere even if we would. The judge did interfere : he thought that the conclusions were or might be vitiated by the fact that (according to him) a consideration influenced the commissioners which was not supported by any evidence : that is conclusion (b), that 'At the time of the second transaction other considerations influenced the purchase, the fear of devaluation having subsided. ' There was no evident, it was said, of that.

In this court it is not alleged that there was any evidence to support that and, therefore, we must suppose, I think, that the motive behind the second transaction was the same as that behind the first, namely, to provide an insurance against devaluation. What the judge thought (he so stated at the end of his judgment and it is the reason of it) was :

'Having regard to that finding of fact and to the conclusion to which the commissioner came as to the taxpayers original intention, and to the fact that in my judgment there was no evidence to support any finding that his intention hanged, it seems to me as a matter of law to follow that this was not an adventure in the nature of trade but was what Mr. Halpern meant it to be, a security to protect his client against devaluation........'

Therefore, the judge held, as I understand it, that because it was a hedge against devaluation it was not a trading adventure; and, notwithstanding the other findings of the commissioners, he holds that, if they had rightly appreciated the facts, that was the conclusion to which (as I think he would have said) they must have come.

For myself I cannot take that view at all. In the first place it seems to me that, supposing it was a hedge against devaluation, it was nevertheless a transaction entered into on a short-term basis for the purpose of making a profit out of the purchase and sale of a commodity, and if that is not an adventure in the nature of trade I do not really know what is. The whole object of the transaction was to make a profit. It was expected that there would be devaluation, and the reason for wanting to make a profit was that there would be a loss on devaluation, but that does not make any difference, it seems to me, to the fact that the motive and object of the whole transaction was to buy on a short-term basis a commodity with a view to its resale at a profit. That, as it seems to me, is an adventure in the nature of trade, and I think the commissioners so found as regards the first transaction as well as the second. As regards the first transaction they rightly supposed that it was a hedge against devaluation : nevertheless when they are assessing the taxpayer to tax they make him an allowance against the loss in which that transaction involved him, and that can only have been on the footing that that too was an adventure in the nature of trade. Therefore, as it seems to me, if they had held (as I take it they should have done) that both transactions were insurances against devaluation, they still would have held that this was an adventure in the nature of trade, and I should have agreed with them.

I, therefore, with the greatest respect, demur to the judges view that, it they had taken a different view of consideration (b), they would have come to another conclusion. I think they did not do so in fact, and I think that the answer is that this, rightly regarded -that is to say regarded as a hedge against devaluation -was nevertheless an adventure in the nature of trade. I would hold that it was taxable accordingly and that the appeal succeeds; and I so move.

SALMON L. J. - I agree. I am afraid that I cannot accept the judges conclusion that it was not open in law to the commissioners to find that the transaction here in question was an adventure in the nature of trade. Whether or not any transaction is an adventure in the nature of trade is essentially a question of fact. The courts from time to time have laid down guidelines for helping to solve that question of fact. For example, in Inland Revenue Commissioners v. Livingston, which was referred to by Rowlatt J. at first instance in Leeming v. Jones, the Lord President, Lord Clyde, said, at p. 255 :

'I think the test which must be used to determine whether a venture such as we are now considering is, or is not, in the nature of trade is whether the operations involved in it are of the same kind, and carried on in the same way, as those which are characteristic of ordinary trading in the line of business in which the venture was made.'

Then again, in Jenkinson v. Freedland, Donovan L. J. said at p. 647 :

'It cannot be right, therefore, to assert, as the Crown did before us, that whenever something is bought to resell at a profit an adventure or concern in the nature of trade necessarily results, and any finding of the commissioners to the contrary must be perverse. Otherwise there would hardly be any need to introduce a capital gains tax. It would virtually be here already. The true position, in my opinion, is that all the facts in each case must be considered, not merely the motive of acquisition, and a conclusion arrived at from such a comprehensive review.'

It is often very difficult for the commissioners to decide on which side of the line the transaction falls. But once they make a finding of fact one way or the other it is quite clear that the court cannot interfere with the finding unless it comes to conclusion not only that it might well have arrived at a different decision but that it is not possible to support the finding made by the commissioners on any reasonable basis. that was laid down in Edwards v. Bairstow following many other case to a like effect.

Here, it seems to me that it would have been possible for the commissioners to come to the view at which they did arrive in favour of the Crown or they might have taken a view of the facts in favour of the taxpayer. On the whole (not that it matters) I think that in the circumstances of this case I should have been inclined to agree with the view taken by the commissioners. With great respect to the judge, it is in my opinion impossible to say that the view expressed by the commissioners was not a view at which any reasonable tribunal could arrive.

The main facts are quite simple. The respondent was a man who was earning a very large income : he was in the top, or very nearly in the top surtax bracket. His asset were in the region of pounds 200,000 in stocks and shares, Government securities, a country house, and a yacht which was in building. Mr. Halpern, who managed the respondents financial affairs, was naturally concerned with what was regarded as a crisis in sterling which developed during 1961 when it appeared that there was a real danger of devaluation. The evidence shows clearly that it was because of his expectation that devaluation would probably come that he entred into the he did not dispose of his Government securities and stocks and shares and redeploy those assets by investing the proceeds in silver. In he had done so, the case might have been quite different. But that is not what happened at all. It obviously occurred to Mr. Halpern that it would be wise to buy a large quantity of silver on behalf if his client because silver had a stable world-wide price and accordingly if the pound were devalued the price of silver would remain constant in dollars but it would be bound to appreciate in devalued pounds. It there were a devaluation, therefore, he had it in mind that he would sell that silver and make a sterling profit. If the danger of devaluation passed - why, he would sell the silver; but as the market appeared to be stable it was unlikely that there would be much movement one way or the other. And so he borrowed pounds 200,000 -which, in spite of the high bank rate, anyone in the surtax bracket which this respondent is fortunate enough to occupy can do quite cheaply - and bought pounds 200,000 worth of silver. He did that in April, 1962. I need not go into the details of the transaction save to say that some months later the fear of devaluation subsided but there was a sharp fortuitous rise on the silver market : Mr. Halpern sold and made a profit of over pounds 48,000 for his client.

It seems to me, as I have already indicated, that that really is a trading adventure - and a very sensible and successful one. I for may part cannot see that it is any the less a trading adventure because you describe it as something to offset the loss incurred should there by a fall in the value of sterling, or as a 'hedge, ' or insurance, against devaluation.

Mr. Major Allen (who has said everything that could be said on behalf of the taxpayer very attractively) seeks to escape for what I fancy he recognises as a difficult position by fastening upon a finding in the case which is admittedly unsupported by the evidence and he has very skillfully got the last ounce out of the finding. That is the finding (b), that 'At the time of the second transaction' - that is, when the pounds 200,000 worth of silver was bought 'other considerations influenced the purchase, the fear of devaluation having subsided. ' (In the finding that occurs immediately before that, the commissioners state that 'The taxpayers original intention was to purchase the silver as a hedge against the devaluation of sterling). ' Mr. Major Allen says that that finding, which is admittedly unsupported, by the evidence, vitiates the finding of the commissioners that this was an adventure in the nature of trade. He says that but for that finding the commissioners might have come to a different conclusion. I cannot agree. They found that the November transaction was entered into with the intention of making a hedge against devaluation but was nevertheless an adventure in the nature of trade. It seems to follow that, if that is the view they took about the November transaction, then they must have taken precisely the same view about the April, 1962, transaction, even if they had not made the finding that at that time other considerations influenced the purchase.

In those circumstances, the point that has been made, very skillfully, in an attempt to support the judgment of the judge, really disappears and we are left with a case in which the commissioners have found - to may mind quite reasonably - that this transaction falls on the side of the line of an adventure in the nature of trade and cannot be classified as a pure investment. As there was ample material to support that finding, it is plain that the judge had no power to interfere; and I would allow the appeal accordingly.

CAIRNS J. - The general commissioners found that 'The transaction (or transaction) was (or were) in the nature of trade. ' If this was a on conclusion that they could reasonably reach on the evidence before them, then the court must accept it, unless it was reached by an inference not justified by the primary facts proved.

It is onceded on behalf of the Crown that one of the findings of the commissioners was not supported by any evident before them - the finding that at the time of the second transaction considerations other than providing a hedge against devaluation influenced the purchase and that at the time of that transaction the fear of devaluation had subsided. It that finding was a necessary step in the reasoning by which the commissioners reached their final conclusion, then that conclusion would not bind the court : but in my view the final conclusion was reached quite independently of this particular finding. I say that for these reasons. The commissioners did not decide whether the whole enterprise involved one transaction or two. Their eventual conclusion was that 'The transaction (or transactions) was (or were) in the nature of trade. ' The commissioners were therefore saying : If there was one transaction it was in the nature of trade : if there were two transactions they were both in the nature of trade. In relation to the first transition, their finding was that the silver was bought was a hedge against devaluation; yet they found it to be a transaction 'in the nature of trade. ' This being so, I do not see that their finding that the second transaction was also in the nature of trade an be said to be dependent on their finding that the second transaction was influenced by other considerations. Alternatively, if there was only one transaction, the commissioners found that it as a whole was a transaction in the nature of trade - not that it began as a non-trading transaction and then later became a trading transaction in the Spring of 1962.

The commissioners reasons for finding the transaction or transactions to be in the nature of trade are contained in paragraph (c) of their findings, the contents of which cannot be impugned and which in my view form a quite adequate foundation for their conclusion.

For these reasons, I agree that the commissioners final conclusion on the facts was binding on the court. The judge held that as a matter of law these were not reading transactions. I cannot agree with that view. In my opinion, the question was one of fact : the commissioners were entitled on the facts to find that it was a trading transaction; and that finding is not one that the court is entitled to set aside.

If, however, I had considered that the court could set aside that finding of the commissioners, the problem would then have arisen whether the right course would be for this court itself to apply its mind to the question 'Was this a trading transaction ?' or whether the right course would have been to have remitted the case to the commissioners for them to consider it again in the light of the opinion of the court.

Mr. Major Allen, on behalf of the taxpayer, invited this court itself to decide the question. Mr. Solicitor, on behalf of the Crown, says that the only property course would be for us to remit the matter to the commissioners. I express no opinion as to which would have been the right course in that event; but I do say that if we had yielded to Mr. Major Allens entreaty that the court should itself decide the facts, I for my part would have reached the same conclusion as the commissioners, for reasons which have been adumbrated in the judgments of my lords.

I agree that the appeal should be allowed.

Appeal allowed with costs in the Court of Appeal and below.

Case remitted to general commissioner for them to restore the assessment.

Leave to appeal refused.

Solicitors : Burton & Ramsden; Inland Revenue Solicitor.

Appendix

GOFF J. - This is a case in which Mr. Halpern, acting for the taxpayer. Mr. Norman Wisdom, was concerned, in the middle of 1961, with the possibility of a devaluation of the pound and the effect which that might have on his clients assets, which were found by the commissioners to be of a value between pounds 150,000 and pounds 200,000. The taxpayer had a very substantial professional income in addition to anything which might be yielded by way of income on his investments. Mr. Halpern, therefore, decided, as is found by the commissioners, that, in looking after the taxpayers affairs, he ought to take steps to find a hedge against devaluation; that is to say, to find an investment which, upon devaluation, would retain its value in the United States and could easily be sold.

Having considered the matter and taken advice, he lit upon the idea of a purchase of, or investment in, silver bullion. The commissioners found as a fact that he had checked that, over the five years prior to the autumn of 1961, the price of silver had not varied by more than three per cent., and that there was then no substantial likelihood of a sudden fall or rise. In those circumstances, in November, 1961, having been introduced to Mocatta & Goldsmid Ltd., who were bullion brokers, Mr. Halpern made an appointment to see them on the afternoon of November 29, 1961.

Despite the fact that silver bullion had remained virtually unchanged in price over some five or six years, there was just at that moment, and before he could keep the appointment, a sharp rise in the price; but the commissioners have found that that was an unexpected rise resulting from certain action taken by the United States Treasury. Mr. Halpern wished to purchase pounds 200,000 worth of silver, but due to the disruption of the market occasioned by that sudden rise in price Mocatta were unwilling to sell more than pounds 100,000 worth, and consequently that was all that Mr. Halpern purchased for his client on that occasion.

The terms of the purchase are set out, and I need not go into them in detail, but it was financed largely but borrowed money at a high rate of interest. That feature is not as significant as it might otherwise be by reason of the income-tax and surtax position of Mr. Wisdom, which made the payment of a high rate of interest less costly to him than it would be to many other persons.

The case further finds that Mr. Halpern persisted in his attempts to purchase pounds 2 00,000 worth of silver, and as early as January, 1962, he saw Mr. Mocatta again for that purpose. Negotiations continued into March, and indeed early April, and eventually Mr. Halpern got his pounds 200,000 worth of bullion but Mr. Mocatta required that the old bargain should be closed by repurchase and a new transaction undertaken. Accordingly, the first lot of bullion was sold on March 30, 1962, with a resulting loss of over pounds 3,000, and a new bargain was made on April 4, 1962, for pounds 200,000 worth of silver. Mr. Mocatta undertook to repurchase the silver at that price increased by pounds 10,000 if called upon to do so at any time prior to October 12, 1962, but there was a proviso, protecting Mocatta against any disastrous fall, that if the price fell by more than four pence an ounce before October 12, 1962, the taxpayer might be called upon to exercise his option, and if he did not then it would lapse. Again, the transaction was financed by loans at a high rate of interest.

There was in fact a great improvement in the monetary position, and in the autumn of 1962 the pound recovered and the price of silver jumped, with the result that Mr. Wisdom, or Mr. Halpern on his behalf, was able to sell the pounds 200,000 worth of silver at a very substantial profit, namely, pounds 48,000, not taking into account the taxpayers liability to pay interest, it having been a term of the transaction that he should pay a years interest in any event.

It was also found by the commissioners that extracts from The Times were produced during the cross-examination of Mr. Halpern.

'Two extracts dated October 31, 1961, forecast a rise in silver prices and a domestic speculative demand following activity of the United States Treasury.'

That is how it is put in the findings, although the extracts do not read precisely like that. So far as domestic speculative demand is concerned, all the extract says is :

'A.......... speculative demand for silver was met at unchanged prices....... for forward delivery.'

Paragraph 4(7) of the case continues :

'A third extract dated March 23, 1962, was about the short-term improvement in the sterling crisis since the credit squeeze of July, 1961. The fourth extract, dated October 20, 1962, announced the new all-time peak in silver prices. Mr. Halpern said he had not read any of these extracts.'

The case does not in terms say that the commissioners accepted that, but I think that is the obvious meaning of that finding; and, indeed, Mr. Solicitor did not dispute that view of the matter.

That is all that is stated in the facts proved or admitted, but in paragraph 9 one finds the commissioners findings which of curse do or may include their inferences from the primary facts. Paragraph 9 is as follows :

'The commissioners found that : (a) The taxpayers original intention was to purchase the silver as a hedge against the devaluation of sterling. (b) At the time of the second transaction other considerations influenced the purchase, the fear of devaluation having subsided. (c) The commodity was useless, left unallotted in the hands of Mocatta, was not an income producing investment, was not a long-term investment, and was financed by loans at a high rate of interest, and no organisation was needed to deal in the commodity as this was provided by Mocatta. (d) Whether there was a single transaction or two, by the nature of the subject-matter there was an adventure in the nature of trade. (e) The transaction (or transactions) was (or were) in the nature of trade and therefore assessable under case I of Schedule D.'

The taxpayer appeals from that conclusion, and I am bound by the findings of fact but not by inference from those findings. I am entitled to go behind the decision if it was wrong in law, which it may be if the conclusion was one to which the commissioners could not, on the fats found, have reasonably come. The relevant principle is stated by Lord Radcliffe in Edwards v. Bairstow. His Lordship :

'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 commissioners 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 commissioners 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 imposed any exceptional restraints upon themselves because they are dealing with case that arise out of facts found by commissioners. Their duty is not more than to examine those facts with a decent respect for the tribunal appealed from and if they think that the only reasonable conclusion on the facts found is inconsistent with the determination come to, to say so without more do.'

Mr. Major Allen has criticised the commissioners finding which I have read because, he says, there was no evidence to support sub-paragraph (b), and that what follows stemmed from the finding in that sub-paragraph (b). That finding was : 'At the time of the second transaction other considerations influenced the purchase, the fear of devaluation having subsided. ' It seems to me, with all respect, that, on the findings of fact, there was no warrant for that inference. It may be that the fear of devaluation had subsided in may minds, but relevant consideration is whether it had subsided in the mind of Mr. Halpern, and there is no evidence that it had. The finding of fact was that Mr. Halpern had not read the relevant extracts in The Times, which were put to him in cross-examination. Mr. Solicitor invited me to say that the commissioners did inter, or could have inferred, that Mr. Halpern, who was applying his mind to the question of the value of the pound and was in close touch with Mr. Mocatta, would have appreciated the changed climate indicated by the relevant extracts from The Times. But if that had been the basis upon which the commissioners were proceeding, one would certainly have expected to find some finding to that effect, and there is none.

I also find no warrant for the first part of the sub-paragraph that 'At the time of the second transaction other considerations influenced the purchase. ' It seems to me that the only possible inference from the facts found - that Mr. Halpern always intended to buy pounds 200,000 worth of bullion, that he was unable to do so wing to an unexpected rise in the market price, that he persisted in his attempts to purchase the pounds 200,000 worth and that in January, 1962, he again saw Mr. Mocatta for that purpose - is that the second transaction was not influenced by other considerations. The fact that there were two transactions was purely other considerations. The fact that there were two transactions was purely fortuitous owing to the unexpected rise in the price of silver.

But that, in my judgment, is not the end of the matter, because in their findings the commissioners have pointed out in sub-paragraph (c) that

'The commodity was useless, left unallotted in the hands of Mocatta, was not an income-producing investment, was not a long-term investment, and was financed by loans at a high rate of interest.'

Then they say :

'Whether there was a single transaction or two, by the nature of the subject-matter there was an adventure in the nature of trade.'

So they are there saying that they draw the inference from the nature of the subject-matter that there was an adventure in the nature of trade, and that, if there were nothing more in the case, would be an inference which they were entitled to draw. The question is not whether I would draw it, but whether there were reasonable grounds on which the commissioners could draw it.

In Inland Revenue Commissioners v. Fraser there are some pertinent observations by the Lord President, Lord Normand. As Mr. Major Allen has pointed out, it is right to observe that, on the findings of fact, that case is plainly distinguishable, because it was found as a fact that the whisky which was the subject-matter of that case' was purchased with the sole object of resale, if possible at a profit, and a profit as undermentioned was in fact made. ' It was found, further : 'The purchase and sale of whisky in circumstances similar to that under consideration was a common type of transaction in the neighbourhood.'

Lord Normand made the following observation :

'But what is a good deal more important is the nature of the transaction with reference to the commodity dealt in. The individual who enters into a purchase of an article or commodity may have in view the resale of it at a profit, and yet it may be that that is not the only purpose for which he purchased the article or the commodity, or the only purpose to which he might turn it if favorable opportunity of sale does not occur. In some of the case the purchase of a picture has been given as an illustration. An amateur may purchase a picture with a view to its resale at a profit, and yet he may recognise at the time or afterwards that the possession of the picture will give him aesthetic enjoyment if he is unable ultimately, or at his chosen time, to realise it at a profit. A man may purchase stocks and shares with a view to selling them at an early date at a profit, but, if he does so, he is purchasing something which is itself an investment, a potential source of revenue to him while he holds it. A man may purchase land with a view to realising it at a profit, but it also may yield him an income while he continues to hold it. If he continues to hold it, there may be as a certain pride of possession. But the purchaser of a large quantity of a commodity like whisky, greatly in excess of what could be used by himself, his family and friends, a commodity which yields no pride of possession, which cannot be turned to account except by a process of realisation, I can scarcely consider to be other than an advanture in a transaction in the nature of a trade; and I an find no single fact among those stated by the commissioners which in any way traverses that view. In my opinion the fact that the transaction was not in the way of the business (whatever it was) of the respondent in no way alters the character which almost necessarily belong to a transaction like this. Most important of all, the actual dealings of the respondent with the whisky were exactly of the kind that take place in ordinary trade.'

Mr. Major Allen also relied upon the case of an option in Leeming v. Jones in which, he points out, the nature of the property was again one which was non-income-producing and one from which you could derive no aesthetic enjoyment; nor, I would have though, a pride of possession. The commissioners there found that the transaction in question was not a concern in the nature of trade, but Lord Hanworth M. R. pointed out that they themselves would have been disposed to take a different view. He said :

'Now Rowlatt J., and I think this court, might perhaps have taken the course of saying that having regard to what he had called attention to in this case, the particular facts, of organising the speculation, of maturing the property, and the diligence in discovering a second property to add to the first, and the disposing of the property. there ought to be and there must be a finding that it was an adventure in the nature of trade; but Rowlatt J. refrained from so the facts are for the commissioners. It would make an inroad upon their sphere if one were to say in a case such as the present that there could be only one conclusion.'

Prima facie, therefore, it would seem that the findings in sub-paragraphs (c) and (d) were warranted by the evidence, but all these case depend upon their facts and it is necessary to consider in this particular case whether that is a possible conclusion having regard to the express finding that the taxpayers original intention was to purchase the silver as a hedge against the devaluation of sterling and the fact, as I have held, that there was no evidence to support the second finding, that other considerations influenced the purchase. Mr. Solicitor has submitted that, in any event, the intention being, as would appear from the high rate of interest, that the silver should be resold at no long distant period, coupled with the fact that the intention was in substance and effect to make a profit on the resale, by having as asset which would retain its value in the United States of America and, therefore, would show a gain in value to offset the loss by the fall in the value of sterling, it was in itself an adventure in the nature of trade; and in my view the crux of this case, in the end, turn upon that. It is submitted by Mr. Major Allen that, on the facts as found and on the conclusion in sub paragraph (a), this was nothing more than insurance. It is submitted by Mr. Solicitor that it is at least a reasonable inference - and that is enough - that it was a transaction in the nature of trade.

In Californian Copper Syndicate v. Harris, the Lord Justice Clerk said :

'It is quite a well settled principle in dealing with questions of assessment of income-tax, that where in owner of an ordinary investment chooses to realise it, and obtains a greater price for it than he originally acquired it at, the enhanced price is not profit in the sense of Schedule D of the Income Tax Act of 1842 assessable to income-tax. But it is equally well established that enhanced values obtained from realisation or conversion of securities may be so assessable, where what is done is not merely a realisation or change of investment, but an act done in what is truly the carrying on, or carrying out, of a business. The simplest case is that of a person or association of person buying and selling lands or securities speculatively, in order to make gain, dealing in such investments as a business, and thereby seeking to make profits. There are many companies which in their very inspection are formed for such a purpose, and in these case it is not doubtful that, where they make a gain by a realisation, the gain they make is liable to be assessed for income-tax. What is the line which separates the two classes of case may be difficult to define, and each case must be considered according to its facts; the question to be determined being - is the sum of gain that has been made a mere enhancement of value by realising a security, or is it a gain made in an operation of business in carrying out a scheme for profit making ?'

I think, on the peculiar facts of this case, one ought to postulate the question : Is the sum of gain that has been made a mere enhancement of value by realising a security, or by realising something acquired as an insurance against devaluation, or is it a gain made in an operation of business in carrying out a scheme for profit-making I have to remember in this case the very important finding that Mr. Halpern had satisfied himself that what he was purchasing was something the price of which had not materially moved for over five years, and the express finding that there was then no substantial likelihood of a sudden fall or rise.

Having regard to that finding of fact and to the conclusion to which the commissioners came as to the taxpayers original intention, and to the fact that in my judgment there was no evidence to support any finding that his intention changed, it seems to me as a matter of law to follow that this was not an adventure in the nature of trade but was what Mr. Halpern meant it to be, a security to protect his client against devaluation, and that the actual profit which he realised was fortuitous. In my judgment, therefore, the appeal succeeds.

Appeal allowed with costs.

Solicitors : Burton & Ramsden; Solicitor of Inland Revenue.


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