LORD EVERSHED M.R. The question which was raised in this case was whether the appellant company could properly make a deduction, in ascertaining the sum for which they were liable to be taxed under Schedule D in respect of their business as road haulage contractors, of a sum of Pounds 1,272, the amount of legal charges fruitlessly (as it turned out) expended by them in an attempt to get a variation of what is called an 'A' road licence in the year 1952 so as to enable them, under that licence, to operate three additional articulated vehicles.
The case stated, which Sir Reginald Hills described as being to some extent a labour-saving operation, expressed in the following lines only the contention of the company;' It was contended on behalf of the company that the legal expenses were incurred in attempts to obtain company that the legal expenses were incurred in attempts to obtain replacement of the said A licence held before the war and as such were admissible expenses.' The reference to 'replacement' arises from the fact that originally in 1939 the 'A' licence which this company had covered seven vehicles; they were, in fact, what are called rigid tipper vehicles. In 1952, when the abortive application was made, their 'A' licence, which, in the meantime, had been renewed with other variations, allowed but four articulated vehicles and the company proposed to increase the figure of four to the figure of seven which originally had been the number allowed in the year 1939.
The answer to the contention so stated which the Crown put forward was that the 'A' licence was in the nature of a capital asset and that, accordingly, the legal expenses which had been incurred were capital expenditure not admissible in computing liability under Schedule D. The commissioners, again observing their terse form, stated their conclusion simply thus : 'that in view of the evidence produced before us the claim of the company had been established.'
The Crown appealed to the High Court and the matter came before Vaisey J. Before him it is not in doubt that the Crown put forward and made the foundation of their argument the point which they had put to the commissioners, namely, that this 'A' licence is a fixed capital asset in the business; that the attempt which the company made in 1952 was in truth to enlarge the capital asset which they had and that, on those grounds, the claim of the company to deduct the Pounds 1,272 was quite untenable. And so Vaisey J. held.
Upon the matter of the licence the judge made use, in the course of his judgment, of expressions indicating that there was, to his mind, an analogy between the 'A' licence which a haulage contractor necessarily requires in order to carry on his haulage contracting business at all, and the excise licence which a publican requires in order that he may carry on the business of a public-house; but he had not before him any evidence as to the precise nature of an excise licence, and he drew attention in one passage of his judgment to the fact that he felt some embarrassment because in the case stated there was no material relating to publicans excise licences. There was produced to him the 'A' licence under the Road and Rail Traffic Act, 1933, and the nature of that licence is, I think, broadly speaking at any rate, not in doubt.
The necessity to obtain such a licence arises under the Road and Rail Traffic Act, 1933, and, as Mr. Talbot explained to us in opening the case, there are, for persons carrying on trades or businesses which require the use of motor vehicles, three classes of licence called 'A', 'B' and 'C.' The 'A' licence is the one peculiar to the requirements of a public carrier or a haulage contractor, such as are the present appellants; for such a licence is required and designed to permit the use of the road vehicles which it specifies or otherwise indicates for the use of the public haulier or carrier of other peoples goods; without such a licence on cannot carry on lawfully such a business at all. Mr. Talbot pointed out that (as is apparent from the document) the practice is, certainly as regards the actual power-driven vehicles, to specify in the licence the precise vehicles which the haulage contractor desires to use. When it comes to the trailers which may be attached to the power-driven vehicles, then, more commonly, I understand (as in this case), without specifying or identifying the exact trailers which the haulage contractor desires to use, the licence will authorize the use of a certain number - four, five or whatever it may be - and the contractor may only carry on his trade as a haulage contractor on the roads by use of the power-driven vehicles specified and with the limited number of trailers allowed.
We have also been told that there is a certain strict control kept in this matter (as the experience of the present appellants makes indeed manifest) : one cannot, so to speak, go and intrude into this business with any very high prospects of success. Apparently the licensing authority is concerned to see that no more persons than are really necessary for the economy of the trade carry on this business and that no more vehicles are used in the business than are really required. So in this case the appellants, who had carried on the business for some years, failed to get the authority to add to their fleet any one of the three additional articulated vehicles for which they sought authority.
One other matter of obvious fact may be mentioned in regard to licences : as must be commonly experienced, these articulated vehicles, like other vehicles, in course of time wear out or may come to grief in other ways. It is, therefore, obvious that occasions may arise from time to time when a carriers licence which operates on the face of it for five years may require to be varied by substituting for one vehicle another.
All that material was before the judge and, having had his attention drawn to a number of cases, including cases relating to excise licences, the judge at the end of his judgment said : 'It seems to me that, quite apart from the cases, the matter must turn on ordinary principles. If a man buys and sells stocks and shares and it is his business to buy and sell stocks and shares, then any losses which he incurs or profits which he makes in the conduct of that business are brought in as income profits or as part of his losses in the computation of his income in carrying on that business. On the other hand, if his purchasing of stocks and shares is not his business but is something which cannot be treated as the carrying of a trade, the profit or loss which he makes in buying an investment is not part of his profit or loss in carrying on any business.' So far it is conceded that those observations are unimpeachable.
He continues : 'Here the purpose for which this sum of Pounds 1,272 was expended was an attempt to make the fleet of lorries owned by the taxpayers more useful and more advantageous as income-winning assets, which is not part of the carrying on of the business at all. It was designed to improve the taxpayers capital position, and I think that this unsuccessful attempt to better the capital position by obtaining the desired variation of the A licence was properly attributable in the accounts to capital and not to income.'
Mr. Talbot drew attention to the words (which I somewhat emphasized in reading) - 'which is not part of the carrying on of the business at all.' On a strict scrutiny that view is not perhaps expressed with complete accuracy : for the operation of improving your capital asset may well be in one sense, of course, part of the conduct of your business. But, apart from that slight criticism (which is, I thinks, simply a criticism of terminology), as a statement of principle that paragraph again seems to be to be unimpeachable.
Then come these final sentences : 'I have hesitated about this case, because I have had to draw inferences and make assumptions which may rest on rather insecure foundations, but, having regard to all the circumstances of the case, I think I am justified in dealing with the matter on the materials before me and forming the conclusion that this A licence is exactly comparable with and analogous to the licence granted in respect of licensed premises under the Licensing Acts, I think that the principle of the cases to which I have referred' - which were cases, inter alia, of licences for licensed premises - 'really governs my decision in the present case. It is unfortunate that I have not some better information about these A licences, although one has been produced to me.'
Mr. Talbot says - and he has really limited himself to this single point - that that judgment is based upon an assumption. The assumption is that the 'A' licence is a capital asset, being (and Mr. Talbot quotes the words the judge used) 'exactly comparable with and analogous to' a publicans excise licence. 'That assumption,' says Mr. Talbot, 'is not in truth well founded; if it were, I should have to concede that the judgment could not be challenged.' But, Mr. Talbot argues, the analogy is not really justified and, in any case, the question (which he says in part, at any rate, was one of fact) was never put before the commissioners and there is no finding upon it to the effect that an excise licence is a fixed capital asset. He has, therefore, confined his argument in this appeal to a request that we should direct this matter to go back to the commissioners for further hearing and a finding upon that matter.
The question whether an 'A' licence in the hands of one carrying on the business of these appellants is a fixed capital asset or not would, in the end, I think, be a question of law rather than fact or, at least, of mixed law and fact. But Mr. Talbot said that there were matters of fact which would be relevant to the conclusion. I asked him to what matters, if the question were further debated, the evidence would be directed and he said, first, that it would be directed to the importance to a business of this sort of such a licence. Well, I daresay something might be said about that though I cannot imagine that there would be much difficulty about it, bearing in mind that, without such a licence the haulage contracting business could not be carried on at all.
Secondly, he said that evidence would be directed to show how frequently these applications were made. I have said something about that already. But I can see that, if it could be shown that licences of this sort, though expressed to be for five years, really required annual renewal, it might be said that the licence had lost its quality of an enduring capital asset.
Thirdly, he said that it would be material to consider the likelihood of opposition when these applications are made. I do not say anything more about that except to point out that in this case the opposition with which the appellants found themselves faced unfortunately prevailed over all their attempts to get the further variation.
I am bound to say, speaking of my impression of the matter as it has been presented to us, that I should somewhat doubt, with all respect to Mr. Talbot, whether, when all such evidence had been given, it would be found to have any material effect upon the assumption which the judge made. But I do not want (and I do not think it would be right for me) to lay down as a rule to govern necessarily all such cases in the future that 'A' licences in the hands of businesses of this kind must be capital assets. I think that is unnecessary for this decision and I therefore do not say it, though I must not be supposed to be encouraging the possibility of a different view.
However that may be, I am satisfied that the assumption which the judge made was an assumption which certainly could be sensibly justified on such material as there was before him and had been before the commissioners : in other words, I am quite satisfied that this is not a case where I feel that the assumption is likely to involve the possibility of real injustice. That is a matter which will be relevant when I consider the question whether we should send it back in any case to the commissioners.
I also add this : that, although the judge did use the language (which I have already read) indicating on the face of it an exact parallel between an 'A' licence and an excise licence and an excise licence, I think it would be unfair to the judge to say that he founded his judgment upon that precise similarity. He founded it, as I think, correctly upon the matter of principle, though he made an assumption of fact which did undoubtedly and, in my opinion, justifiably depend upon a fair similarity between a licence of this kind for a haulage contractor and an excise licence for a publican. Nor do I think that the fact that one is transferable and the other is not is by any means necessarily a relevant distinction. However, I need not pursue that matter; it suffices for me to say that to my mind, on the material that was available, the assumption which the judge made was certainly one which could fairly be made on the evidence.
But, assuming in favour of Mr. Talbot that evidence might have been given which was not given, and assuming that such evidence might have turned out to be such that a conclusion could properly be reached in this particular case that the 'A' licence was not a capital asset -assuming all that - is this a case in which we ought now to direct a remittance of the case to the commissioners I must say I have clearly come to a negative conclusion on that point. I have already said that I think that on the material presented the assumption was certainly not one which makes me feel a doubt whether there may not have been some injustice done. But, further than that, this is a case in which the question whether this was a capital asset was clearly raised before the commissioners. I have read the two passages from the case stated which show that it was in the forefront of the Crowns case that it was a capital asset. The opportunity was there presented for the company, if they wished, to give all this evidence and to challenge on the facts which they could prove the premise of the Crowns contention. They did not do it.
The matter came before Vaisey J. and again no attempt was there made to introduce further evidence, nor did the appellants counsel ask for the case to be sent back. When the judge expressed the slight embarrassment which the paucity of the evidence caused him and thought that he might have to send it back, not unnaturally Mr. Lindsay, as a competent counsel, seized upon that possible relief, as well he might, and said he would welcome it but the suggestion was not formally put to the judge; nor, as we have been informed, was it really made a basis of the appeal to this court until shortly before the case came on. In all those circumstances, I do not think it would be right bow to give to this company, after hearings before the commissioners, the judge and the Court of Appeal, an opportunity to start all over again and try to present on the facts an entirely different case.
The principles on which this court will remit to the commissioners in order that they may, in effect, allow the taxpayer to start again were stated in Murphy v. Australian Machinery and Investment Co. Ltd. Mr. King referred to the language used by Tucker, Somervell and Cohen L.JJ., and I need not take time by referring to it again; it will suffice to say that the members of this court made it plain, I think, that in circumstances such as arise in this case it would not be in accordance with the proper practice of this court to exercise our discretion in the appellants favour : something much more special would have to be presented than has been presented in this case to justify the court taking such a course. I have not forgotten what Lawrence J. said in Burston v. Inland Revenue Commissioners, but I do not think that the judge in that case qualified by his language anything which emerges from the judgments in the Court of Appeal in the Murphy case.
For those reasons, even if it could in the end be fruitful (which, I repeat, I very much doubt, though I forbear from deciding the matter), I do not think it would be right for us now to accede to Mr. Talbots request and remit this case for further hearing to the commissioners and I would accordingly dismiss the appeal.
BIRKETT L.J. I am entirely of the same opinion and I would only add a very few words. It seems to be agreed that the real issue to be determined in this case is the question of whether the 'A' licence was a fixed capital asset of the business or not.
Mr. Talbot, when he opened this case to us put that matter in the very forefront and said, 'The question is : is the A licence in this case a fixed capital asset We say No.' In due course Mr. King presented the argument for the Crown, and he said, in similar language : 'Is the A licence a fixed capital asset We say Yes.' So it appears that that is the issue.
However, the question that we really have to determine is not quite that. The real question, as presented by Mr. Talbot, is : 'Ought this case to be remitted, in all the circumstances, in order that that matter might be the subject of further evidence ?'; and it is really based upon the contention that Vaisey J. in the court below made an unwarranted assumption that there was a perfect identity or, at least, an analogy, or between the 'A' licence under the Act of 1933 and the excise licence commonly known as a public-house licence.
Although the language of the judge, no doubt, in an extempore judgment is not quite as exact as in a considered judgment, he does say : 'It seems to me that quite apart from the cases, the matter must turn on ordinary principles.' Now, those cases were the cases which were introduced by Mr. King and Mr. King was saying, in support of the argument which he was presenting to the judge : 'This is a fixed capital asset : witness the position of the excise licence; this is what has been said about that', and, no doubt, he argued, and with very great force, that there was really no distinction in principle to be made between the two.
That there were distinctions to be made permits of no doubt, and if this case were to be remitted, no doubt evidence could be called to show that in certain respects the 'A' licence under the Road and Rail Traffic Act and the excise licence did differ in certain particulars.
The judge thereupon said : 'It seems to me that, quite apart from the cases, the matter must turn on ordinary principles.' Then he discusses the ordinary principles. But then, a little later, he said : 'this A licence in question is exactly comparable with and analogous to the licence granted in respect of licensed premises under the Licensing Act, and I think that the principle of the case to which I have referred really governs my decision in the present case.' That looks as though he was referring to the fact that he had discussed it on general principles, quite apart from the cases, and that they really governed his decision.
I daresay that, if he had had the opportunity of thinking longer about it, he might - as everybody might in the like circumstances - have phrased it rather differently, but I think it is perfectly plain that what he was saying was this : 'I think there is the closest analogy between the A licence and the excise licence; there is identity between the two and I think that governs my decision; but I also think that, if those cases were left out of consideration and we discussed the matter upon general principles, I should arrive at exactly the same conclusion.'
Mr. Talbot thereupon says that the case ought to be remitted to the General Commissioners because they really did not give that matter any consideration and the judge was not entitled to make the assumption which he did make on the material before him. Indeed, we had passages from the judgment read to us which made it quite plain that Vaisey J. was in some little perplexity about the paucity of the material in certain parts of the case; but he did come to his conclusion, and I think that there was evidence upon which he could so do. He put his conclusion in these words : 'Here the purpose for which this sum of Pounds 1,272 was expended, as I have already mentioned, is an attempt to make the fleet of lorries owned by this company more useful and more advantageous as income-winning assets, is not part of the carrying on of the business at all. It was an expenditure which was designed to improve the capital position of the company, and I think that this unsuccessful attempt to better the capital position by obtaining the desired variation of the A licence was a matter which was properly attributable in the accounts to capital and not to income.'
I am bound to say that, even were we to accede to Mr. Talbots request that this case should be remitted to the General Commissioners and he was permitted to call evidence, I think that Mr. King put it plainly, in his usual moderate way, when he said : 'I think that Mr. Talbot would find great difficulties'; I would be inclined to say that I should think he would find it impossible. But I must agree and do agree with what my Lord has already said upon that matter : that, in this case, I think there was evidence upon which Vaisey J. could so find, and I incline to the view that, even if we were to send it back and allow evidence to the view that, even if we were to send it back and allow evidence to be given, no evidence could be given which would establish that this was not a fixed capital asset.
The other point, I think, is a point of substance too. When the matter came before the General Commissioners it is quite plain, from the case stated and the extracts that my Lord has read, that the case that was made for the company was that these legal expenses were incurred in an attempt to obtain replacement of the 'A' licence which the company had formerly had and the Crown, in answer to that, contended that the 'A' licence was in the nature of a capital asset.
I think that at this stage, having gone from the commissioners to Vaisey J. and now to this court, the words of Lord President Clyde in R. A. Bird & Co. v. Inland Revenue Commissioners are peculiarly apposite. He said : 'It is quite plain from the case, and from what parties say, that the appellant did not put before the commissioners any material other than is reproduced in the case, bearing on the alleged inadequacy. It seems to me that if we were to send this cased back for further inquiry about this, we might be exposed, as far as I see, in almost any case, to an exactly similar application -whenever, in short, the appellant has not presented his case to the commissioners in a way which brings out the point he ultimately desires to make before the Court of Appeal. That would never do. No doubt, if there has been a misunderstanding, we would strain a point to put that right; and if the commissioners had failed to include or to allude sufficiently to some topic that was brought before them by way of evidence we should remit to put that right. But on the grounds I have indicated it is impossible to grant the appellant the indulgence which he asks in this case.'
I agree with the decision which has already been announced by Lord Evershed M.R.
ROMER L.J. I also agree and I only want to say this : that, although it would, I think, perhaps be going too far to say - and it would certainly be going further than the decision of this case requires - that no evidence could possibly be adduced to support the view that an 'A' licence is not a capital asset of a haulage contractors trade, it appears to me that, prima facie, it bears every characteristic and feature of a fixed capital asset. It is an asset which is retained by the company and it is an asset which produces income.
It is quite impossible to suggest that it could form part of the companys circulating capital, because these companies do not trade in 'A' licences, and, accordingly, as I say, I think that prima facie an 'A' licence has a strong complexion of being an item of fixed capital; but, from that, I do not think it is necessary to proceed to a decided view that the contrary could not possibly be shown.
For the rest, I entirely agree with what my brethren have said.
Solicitors : Stanley Wise & Co.; Solicitor of Inland Revenue.