LORD EVERSHED M.R. - stated the facts and continued : Apart from legislation passed in 1955 the Irish company would either certainly or in all probability have been able to recover from the English Revenue not, as we were informed, the actual tax which had been paid in respect of the accumulated profits, but a sum of income-tax (which might even have been larger) claculated by grossing up this vast dividend; but the right so to recover such a sum must - and I put this early in my judgment and in the forefront of it - depend upon some statutory right to be found in English legislation.
A series of agreements had been made between representatives of the Governments, on the one side, of the United Kingdom, and on the other side of what was formerly the Irish Free State and later became the Irish Republic. Those agreements were confirmed in both countries by appropriate legislation. So far as this case is concerned, it will only be necessary to pay regard, except in passing, to the English legislation contained in the consolidating Income-tax Act, 1952, and section 349 of that Act in particular, and in section 4 of the Finance Act, 1955, to which I have earlier alluded. But in order to make more clear the history and, I hope, the arguments, it is necessary to have in mind that the first of the agreements which I have mentioned was made in the year 1926 between the representatives of the two Governments I have named. It is now to be found in Schedule 18 of the Income-tax Act, 1952. The effect of it, so far as relevant, was that a person who should prove to the satisfaction of the Inland Revenue Commissioners in England that he was a resident in the Irish Free State and not a resident in Great Britain or Northern Ireland should be entitled to exemption from British income-tax for the year in question and in respect of properties situated in and profits and gains arising in our from Great Britain and Northern Ireland, and also to exemption from British super-tax for the same year. There was a corresponding arrangement for the benefit of English residents as respects property in the Irish Free State. That was the purpose of the agreement, and it was executed by Ministers on both sides.
Article 8 provided as follows : 'This agreement shall be subject to confirmation by the British Parliament and by' - the Irish Free State Parliament - 'and shall have effect only if and so long as legislation confirming the agreement is in force in both countries.' That, it is hardly necessary to say, was necessary in order that individual citizens of the two countries should, in fact, enjoy the rights which the agreement intended to confer or provide.
That is the agreement, the intended benefit of which the Irish company in this case asserts. The agreement was later modified twice during the relevant period. The first modification came about in the year 1928 and was rendered desirable or necessary because there was in this country substituted for what was called super-tax a new designation, surtax, so that the provision to which I referred above, if and so far as implemented by appropriate United Kingdom legislation, would be inapposite since it referred to super-tax and not surtax. In the same way in 1947 another agreement was made between representatives of the two countries in order to deal with this sort of case : an English company might not in truth have paid a smaller rate, called 'net United Kingdom rate'; and the agreement signed in July, 1947, was intended to make applicable to Irish residents comprehended by the original agreement the net United Kingdom rate of tax instead of the standards British income-tax rate, where applicable.
I have mentioned these later agreements in order that the history may be understood. But, as I said earlier, the claim here rests upon the effect (as implemented in legislation) of the agreement of 1926, and we are not in this case concerned with the later modifications save to the extent that part of Mr. Fosters forcible argument for the Irish company turned in some measure upon what happened in 1945, 1947 and 1948 in connection with this so-called 'net United Kingdom rate,' and to that argument I shall presently return.
The agreement of 1926 was, in acordance with the contemplation of article 8, implemented by English legislation shortly afterwards. That lefgislation was later reproduced in section 349 of the consolidating Act, the Income-tax Act, 1952. [His Lordship read the relevant parts of the section and continued :
Part III of Schedule 18 is headed : 'Provisions forgiving effect to agreements set out in Part I of this Schedule,' including, of course, the agreement of 1926, and it is true to say that it is substantially what one would call a series of mechanical provisions to make appropriate for the cases contemplated the relevant parts of the fiscal legislation in England, which is notoriously complex, in particular to make applicable the terms of Schedule D for the purposes of taxation computations, and so forth. We have not examined closely the precise effect of these provisions, and I am not suggesting that they in any real way quality the prima facie right which would be given to an Irish resident by section 349(2), standing alone, that is to say, by the statement that the agreement and the rights intended to be injoyed by Irish residents should have effect in England. I only observed that by the terms of subsection (3) for the purpose of giving effect to the agreements, the Act should for any year have effect subject to certain modifications. It is sufficient to say that in so far as there was any modification of the rights intended to be conferred, it could obviously not go to the root of the matter, but would be a modification based rather on procedural considerations. Still, I mention it for reasons which may later become more apparent.
It is plain enough so far that what the English Parliament did in 1952 was to say that the terms of the agreement of 1926, as stated in Part 1 of Schedule 18, should be incorporated in the English law as part of the Income Tax Act, 1952, and so should take effect and be effective in English law. It is clear and must not be forgotten (and, indeed, I have already stated it) that if an Irish citizen desires to take advantage of the benefit which the agreement of 1926 intended that he should enjoy, he must be able to invoke for that purpose some provision of the English law, more particularly in this sort of case, some provision of an English statute, and his right in England to enjoy the benefit, to be able to have this exemption (which means to be able to recover income-tax) depends upon and depends exclusively upon the section which I have read.
In the course of opening the case Mr. Foster referred a good deal to matters of international law and international comity, and some references were made to cases. Gracefully, Mr. Foster did not cite all the cases which were cited to Vaisey J. but it must be quite clear, first of all, that it is competent to the legislature of the United Kingdom to impose income-tax in respect of profits or gains which arise in the jurisdiction, and that competence is in no way qualified because the profits and gains may be enjoyed by someone who is himself not so resident. If, therefore, Parliament decides that tax at a certain rate should be levied in respect of that class of property, or, alternatively, decides that in certain cases persons who might otherwise suffer the tax should be entitled to exemption, it cannot be said that Parliament is trying to exert a jurisdiction over foreigners in the sense that it is trying to legislate outside the proper jurisdiction of the English Parliament. I venture to emphasise that the fact that a person who has a statutory right to an exemption in respect of income tax, a statutory right to recover, may be a foreigner, is of itself quite irrelevant, and does not appear to me to involve any question of comity or international law.
So, as I think, the effect of section 349 is on the face of it to say this, by enacting as part of the munilcipal law of England the agreement of 1926, that Irish residents may have certain rights to recover tax which is exigible in respect of property in England or profits and gains arising in England. In so far as Parliament chose in 1952 to confer that statutory right, prima facie it must be equally clear that Parliament by some later statutory provision can modify or wholly revoke or repeal it. Putting it quite briefly, what is said here on behalf of the Crown and was the view formed by Vaisey J., is that in the Act of 1955 Parliament in the exercise of its undoubted sovereign power did so qualilfy the statutory right which section 349 had conferred. [His Lordship read section 4(2) of the Finance (No. 2) Act, 1955, and continued :] That subsection was intended to strike at this so-called 'dividend-stripping' practice. There is no doubt that the shares in Carpet and Textiles (Wholesale) Ltd. were shares of the class covered by the subsection.
Prima facie, therefore, the case would appear simple enough. The Irish company was a person who was entitled under an enactment, namely, section 349 of the Income Tax Act, 1952, to an exemption, which was qualified by section 4(2) of the Act of 1955. The subsection did not take the exemption away altogether, but it said, as regards dividends in respect of particular classes of shares, that the person specified would not get the full privilege, he would not be entitled to recover the whole amount of the tax but only a certain proportion of it.
The point, as Vaisey J. observed, is, when finally analysed, short, and on the face of it, as I venture to think, simple. But the argument Irish company has put forward is, first, to this effect : the Irish company says that one cannot in a case of this kind give to the language which I have read from sectioin 4 of the Act of 1955 its natural effect, because to do so would in some way strike at, would envolve a breach of, an agreement between this country and another sovereign state : and that is something which offends against the comity of nations. I do not propose, with all respect to Mr. Foster, to take much time upon that submission. It suffices, as I think, to say two things : first, that what Mr. Foster called 'treaties' were these agreements of which the agreement of 1926 is the relevant one, and on the face of that agreement, its effect and continued effect depended, and was expressed to depend, upon confirmation by the legislatures of the two countries, so that the agreement itself contemplated on its face that either side might at some time, if they thought fit, by the exercise of their sovereign legislative power put an end to it. Secondly, as I repeat once more, so far as the Irish companys rights in this case are concerned, they must depend upon some provision giving effect to them in an English statute which necessrily must be subject to review and modification by later legislative enactments.
At this stage I should, perhaps, refer to the way in which the matter was decided by the commissioners in the case stated, their decision being in favour of the Irish company. They said in paragraph 2 of their decision as set out above : 'In the first place it appears to be settled law that if possible a construction is not to be given to general words in a statute' - and the reference is, of course, to section 4(2) of the Act of 1955 - 'which would have the effect of imposing the will of Parliament, by entering into the treaty of April, 1926, with the Government of Eire, in effect relinquished jurisdiction in matters of income-tax over residents of Eire....'
I am quite unable to accept the proposition there stated, and Mr. Foster before us did not at all support it. I have already said with regard to English income-tax that there is no question of imposing the will of Parliament on persons not within its jurisdiction; still less can it be said, in my judgement, that the treaty of April, 1926, had the effect that the English Parliament relinquished jurisdiction in matters of income tax over residents of Eire.
The case, however, went on : 'In the second place, if the inroad contained in section 4(2) upon the exemption of tax is effective against residents of Eire, it would, in our opinion, be a breach of the treaty which afforded absolute exemption from British tax to such residents; and it appears to be a recognised principle of English law that words in an Act of Parliament are not to be construed in a sense which would create a breach of a treaty between this country and another unless such words are so explicit as to allow of no other interpretation.' Then a reference follows to Reg. v. Wilson.
It is upon that basis, though his expression of the point was not quite the same, that Mr. Foster has founded his argument. But there has seemed to me, I confess, one grave difficulty which the argument has to face, the difficulty which in the end must be, in my judgment, fatal to it. The opening words of section 4(2) of the Act of 1955 which I have already read are : 'Where a person entitled under any enactment.' The difficulty that I have indicated in this : on the face of it, 'any enactment' obviously means any Act of the United Kingdom Parliament. If the words are not to have that meaning, then, what is the qualified meaning which is to be given to them In some cases(and there was an illustration of what I am saying in Reg. v. Manchester Justices), it was possible in the light of the relevant context to limit the phrase 'Acts of Parliament' to mean special Acts of Parliament as distinct from general Acts of Parliament; but no such qualified definition appears here to be possible. It must in the end be said, as I think, by Mr. Foster, that 'any enactment' has to be construed as 'any enactmen except an enactment which affect Irish residents.' I am not saying that that is necessrily impossible. If the context and the relevant sections require it, that might be the answer. But it is obviously, as I think, a construction involving very grave difficulty. Put the other way round, as it seems to me, the phrase 'under any enactment' prima facie means, and is quite unambiguously referring to, any United Kingdom Act of Parliament, and section 349, part of the Act of 1952, is therefore, on the face of it and, as I think, unambiquously, comprehended in the phrase 'any enactment'.
But the case has been put, and I venture to think it is the only way it could be put, in this fashion : it is said that if one looks at subsection (2) of section 349 of the Act of 1952 there is there in clear and express terms confirmation of the agreement of 1926, and a statement by the legislature that it is to have effect so long, at any rate, as it has corresponding effect in the Republic of Ireland. The argument goes on to contend that the terms of section 4(2) of the Act of 1955 do not boldly and clearly say : 'The agreement shall no longer have effect', but they purport to qualify the rights given under the agreement by section 349 while leaving, as it were, the general confirmation contained in section 349(2) upon the statute book; and so it is said that there is created an inconsistency.
In my judgment, the answer to the point is this : subsection (2) states, no doubt quite clearly, that the agreement of 1926, the terms of which are incorporated in Schedule 18, shall have effect, and Parliament later said, as it was entitled to do, 'The effect shall be modified'. It is true that the modifiction might have been taken by those representing the Republic of Ireland to involve a breach and, therefore, a repudiation of the whole agreement, and that would mean an end of it. On the facts as we have seen them, that point was not taken, and it does not seems to me to follow at all that any modification of the statutory rights which section 349(2) conferred necessarily is inconsistent with the continued confirmation in general terms of the agreement of 1926. But Mr. Foster has also supported this part of his contention by referring to something which I earlier anticipated, namely, the agreement of 1947, and the place it took in the history of this matter between the two countries. It will be recalled that the purpose of the agreement of 1947 was to substitute in appropriate cases for the standard rate of British income tax which the Irish resident could recover, a less figure called 'the net United kingdom rate.' That net rate had been brought into the income-tax code, so to speak, in England by the Finance (No. 2) Act, 1945. Section 52 of the Act of 1945, so far as relevant, provided : 'Notwithstanding anything in the Income Tax Acts, no relief or repayment in respect of the tax deducted' - and so on -' shall be allowed at a rate exceeding,' the net United Kingdom rate.
Mr. Fosters point was to this effect : In so far as that provision applied to an Irish resident, it qualified the right which he had under section 23 of the Finance Act, 1926, to recover at the full standard British income-tax rate, and, therefore, just as section 4 of the Act of 1955 created an inconsistency, as he says, with section 349 of the Act of 1952, so the provisions of section 52 of the Act of 1945 which I have read were inconsistent with section 23 of the Act of 1926, 'and if they were given effect to,' says Mr. Foster, 'they would involve a breach of the agreement, if not its termination. And observe,' says Mr. Foster, 'in those circumstances what was done.' It was apparent on the findings in the case and from the later events, such as the agreement of 1947 and the later enactment in England in 1948, that the English Revenue authorities and, as Mr. Foster says, Parliament itself, proceeded on the basis that section 52 of the Act of 1945 did not, in truth, affect or qualify the statutory right given to Irish residents by the Finance Act, 1926.
Mr. Foster invokes that in support of the view that the Act of 1955 should similarly be construed now. Mr. Foster does not go so far as to say that the view taken by Parliament in 1945 and 1948 of the effect or construction of the section of the Act of 1945 is necessarily conclusive as to what the right view of that construction is, but he says it does, after all, lend support to the view that the construction for which he contends is one that has been and can reasonably be accepted.
I think one answer to that argument is this : that the apparent view taken by the English Revenue and, if you like, by the English Parliament when it enacted this Act of 1948 to implement the agreement of 1947, is equally consistent with the view that whatever the right construction of section 52 of the Act of 1945 might have been, the Revenue and Parliament, for reasons which they no doubt thought good, did not think it desirable to invoke against the Irish resident the qualifying effect of section 52 of the Act of 1945. They cannot, as I think, put it higher than that. If that is right, then it does not seem to me that the matter with which we are concerned is really further advanced. So, I come back to this, and agreeing once more with Vaisey J.s statement, the point is indeed short, the question is : having in mind the obvious competence, the acknowledged competence, of the English Parliament to qualify any statutory right to exemption or repayment of English income-tax which any person may have, be he a charity, a foreigner, or what you will, can one give, in all the circumstances of this case, to the phrase 'in any enactment', a meaning, can one impose upon it some qualification, which will have the result that the section will not apply to the Irish company as being a person otherwise entitled to the specific relief which section 349 of the Act of 1952 conferred upon him ?
I have come, like Vaisey J., I must confess, to a clear conclusion that one cannot, and in those circumstances and without, I hope, being disrespectful to the argument by abstaining, as I do, from citation of the other cases which were mentioned to us, I would conclude that this appeal fails and must be dismissed.
PEARCE L.J. I agree with what my Lord has said. The relevant words of section 4(2) are clear and simple. It is argued that they are so wide and general as to contain a possible ambiguity, or to invite some limitation, but they refer to what the judge described as a very limited and well defined class of the community. In spite of Mr. Fosters forcible argument, I see no warrant for reading into the words 'a person' or 'any enactment' the respective glosses that have been suggested.
In my view the judge was right in the conclusion at which he arrived and the appeal should be dismissed.
HARMAN L.J. I agree, and with all deference to the eloquent argument presented to us, I thought this a plain enough case. The Irish resident who wishes to obtain exemption from tax arising upon a dividend payable in this country must go to the English Parliament to obtain it. What Parliament has given Parliament may take away, and that it has done to the limited extent which the Act of 1955 proposes in a limited class of cases, and in order to stop an abuse. It would be astonishing if that abuse, no longer available to a person resident in England, could still be perpetrated by those resident in the Irish Republic. Of course, if Parliament had chosen to say that should be so, it could do so, but it is very unlikely that it did intend to do so, and, in my view, it has put a stop to it in the plainest terms which apply no less to the stranger than to the citizen of this country.
Appeals dismissed with costs.
Leave to appeal to the House of Lords granted in both cases.