LORD EVERSHED M. R. The point involved in this appeal falls indeed within the narrowest compass; but it is, or appears to be, novel in the sense that no strictly comparable case seems to have come before the court before.
Mr. Rogerson, the respondent, at the relevant date in 1955-56 was in the service of a company known as the Anglo-Oriental & General Investment Trust Limited. As the season of goodwill approached in the year, 1955, the company, of which he was the servant, wrote to him, and to some twenty or twenty-one fellow servants, a letter which, so far as material, was as follows : 'The Board have decided to make a Christmas present to all male members of the staff of clothes suitable for wear at the office up to the value of Pounds 15. Arrangements have been made with Messrs. Montague Burton Ltd., 112, Cheapside, E. C. 2, for you to be able to acquire from them a choice from or combination of the following : Suit, overcoat raincoat. The bill will be sent to the Trust, and it is stressed that no cash payment either way can be made between Pounds 15 and the actual cost of the goods.
Please take this letter with you when you visit Messrs. Montague Burton, which can be done on or after Thursday, November 10, 1955. Messrs. Montague Burton will provide a fitting if this is required and asked for. They will also make alterations if required. Both fittings and alterations will take additional time.'
On the same date the company wrote to Montague Burton Ltd. of 112, Cheapside, and the letter is as follows : 'We write with reference to the visit of Mr. W. Peter Spens on November 4, 1955. This company, a subsidiary of London Tin Corporation Ltd., has decided to give its male staff a Christmas present (purchased from Messrs. Montague Burton Ltd.) up to the value of Pounds 15 of clothes suitable for wear at the office drawn from a choice from or combination of a suit, overcoat or raincoat. We enclose a copy of a letter which we will write to each male member on the staff whose names are given below,' and then there follows the list of names. 'Please supply them with suits, overcoats or raincoats as above, and send us your account in due course. We stress that the bill will be paid by this company, and no cash payment either way can be made between Pounds 15 and the actual cost of the clothes. We have advised the staff to call on you on or after Thursday, November 10, 1955,' etc.
The only other document to which I need refer is a receipt in favour of the company in February of the following year for a total sum of Pounds 311 12s. 6d. which was the cost of the suits, overcoats or raincoats which had been supplied to the various members of the companys staff.
It has been necessary to read in full those documents because, in the end, much turns upon the exact nature of what was done. The taxpayer availed himself of the generosity of his employers, and acquired clothing from Montague Burton for which the bill was delivered to the company, the price in his case being not quite Pounds 15, but Pounds 14 15s.
The claim of the Crown has been that that figure, pounds. 14 15s., is to be treated as part of the taxable income of the taxpayer for the tax year in question. It is said that it falls within the terms of paragraph 1 of the Ninth Schedule to the Income Tax Act, 1952 : Tax under Schedule E shall be annually charged on every person having or exercising an office or employment of profit mentioned in Schedule E or to whom any annuity, pension or stipend chargeable under that Schedule is payable, in respect of all salaries, fees, wages, perquisites or profits whatsoever therefrom for the year of assessment...' It is the Crowns case that the Pounds 14 15s. must be treated as a perquisite or profit from the employment for the year of assessment 1955-56.
On behalf of the taxpayer it was said that any perquisite or profit was limited in this case to the value expressed in money of the thing which he got, namely, the clothing. For the purposes of this case, the value of the clothing, treated, of course, as second-hand the moment it had been delivered, has been agreed at Pounds 5. Let me say at once that this involves no reflection upon Messrs. Montague Burton Ltd., who are not before the court; and it should not, of be assumed that goods which they supply are worth one-third of the price which they charge. But it is, of course, notorious that, apart from purchase tax, the value of clothing is very much reduced the moment it can be called second-hand. In any case, the value is one which has been mutually accepted and agreed and nothing turns upon it. It may have been agreed at a low figure to discourage any cross-appeal by the taxpayer. If so, it has achieved its purpose, for it is now accepted on his behalf that he is rightly taxed, as the judge in the court below held, upon the money value of what he got.
I can now state again the point : What must be regarded for the purpose of the paragraph in the Ninth Schedule of the Act as the perquisite or profit from the taxpayers employment The case for the Crown, which Mr. Magnus presented with clarity and attraction, can I think be summarised in the way in which he put it at the end of the argument : 'I say' (and I read from my note of the argument) that where the employee accepts an offer from his employer to spend money on his behalf, then he is chargeable on the money spent, and not on the value of the thing bought for him.'
If that is a correct statement of the true nature of this transaction, it may be that the conclusion follows. Mr. Magnus referred to a few cases - gratefully, may I say, we were not given a great many to read - one of which is the case of Nicoll v. Austin before Finlay J. In that case a director of a company was told that, in order to do justice to his standing in the company, he should continue to live at a place called Debden Hall, but his employer, as part of the bargain of service, promised to pay the charges incurred for its use, such as rates and telephone charges, and also the cost of maintaining the gardens. In that case it was held that what Mr. Austin had got from the arrangement in moneys worth was the sum paid for the gardeners wages and the like as regards the gardens.
In the case of Hartland v. Diggines, an employing company had agreed to pay the income tax on its employees salary; and there the House of Lords likewise held that the tax so paid must be treated as with in the scope of the paragraph of the Schedule. Mr. Magnuss argument was that when this case is view according to his argument (as I have stated it), the same reasoning would compel a similar answer to that given in Nicoll v. Austin and Hartland v. Diggines.
I have said that the point is a very short one, and I think it does not lend itself to elaboration. I reject the premise involved in Mr. Magnuss formulation. It is no doubt true, in a sense, to say that the letter of November 7 was an offer, and one which the person to whom it was addressed was not bound to accept. Indeed, anyone who proposes to give a present to somebody else may find that the somebody else say : 'I will not have it.' But in the submission which Mr. Magnus has formulated, the word 'offer,' I think, is used in a sense in which it would be used in a legal context. The suggestion is that here was an offer which, on acceptance, created some right; and it is at that point that I venture to part company with Mr. Magnus.
It seems to me that the taxpayer never acquired any rights against anybody. He received this letter; armed with it, he went to Messrs. Montague Burtons establishment, and Montague Burton expressed themselves as willing to supply him with the clothes he ordered. When the clothes were delivered, then (and then only) the taxpayer got something which was his own. He acquired at that point of time a suit, albeit he had no right against anyone to get the suit. Nor had he, as I conceive, any right against the company, though as a matter of ordinary decency as between master and servant he could no doubt rely upon the company doing what they said they would do. But this was not a case in which he was entitled to call upon the company to pay some sum of money on his behalf, as that phrase is ordinarily understood.
If I have incurred a debt - for example, my debt due for income-tax comparable to Hartland v. Diggines - and my employer chooses to discharge that debt for me, then it is no doubt true that what I have received in money or moneys worth is the equivalent of the debt; and the sum of money is, therefore, properly brought within the scope of the charge. But as I think in this case, and in accordance with Mr. Heyworth Talbots argument, what the taxpayer got - what the company intended to give him, what the letter to him and Montague Burton said would be done, and was done - was a present of a suit. Until he got it, he got nothing; and when he got it, the thing which came in (which was his income expressed in moneys worth) was the value of the suit.
As I have said, I do not propose to elaborate it because I think it would be of no service either in this, or in other cases. I agree, therefore, with Danckwerts J. when he said that, on grounds which I have also tried to express, the case is distinguishable from Nicoll v. Austin. So far as the rates and telephone charges in that case were concerned, the result was on all fours with the decision in Hartland v. Diggines, where the employer discharged a liability or an obligation of the servant. Strictly, that might not true as regards the gardens. The facts in regard to that case are not known. We do not know who in fact employed the gardener. But, as the judge pointed out, there is no doubt that Mr. Austin got the benefit; and there may well be no other way of assessing the value than by reference to what was in truth paid for the upkeep of the garden. This case, I think, is different. We are here concerned with the present of a suit; that is the subject-matter; and the value of the suit in money seems to be the amount for which the taxpayer is properly taxable.
I would, therefore, dismiss the appeal.
HARMAN L. J. I agree. The taxpayer here does not dispute his liability. He agrees that he has received from his employer a perquisite, or something of that nature, which made him chargeable under Schedule E. The only controversy was whether he was to pay tax on the cost of that perquisite to his employer, or the value of it to him, and it appears to me that this perquisite is a taxable subject-matter because it is moneys worth. It is moneys worth, because it can be turned into money, and when turned into money the taxable subject-matter is the value received. I cannot myself see how it is connected directly with the cost to the employer. It is quite true that in Hartland v. Diggines, for instance, the employer made certain payments of money for the employees benefit. Well, the only way in which you can make a valuation of money is by money. It is not like a chattel, which is the case here, and therefore, there was no difference in standard of what was paid by the employer, and advantage received by the employee.
Here there is a difference. It is admitted that as a conventional matter the difference can be taken as that between Pounds 14 15s. and Pounds 5. Income-tax is a tax levied on income. The taxpayer has to pay on what he gets. Here he has got a suit. He can realise it only for Pounds 5. The advantage to him is, therefore, Pounds 5. The detriment to his employer has been considerably more, but that seems to me to be irrelevant, and I do not see that it makes any difference that no property in this suit ever passed to the employer.
I think, in Lord Watsons words in Tennant v. Smith that it is a benefit consisting in 'something acquired which the acquirer becomes possessed of and can dispose of to this advantage - in other words, money, or that which can be turned to pecuniary account.' This can be realised in cash, and it is that realisable quality which is the measure of the taxpayers liability.
I would therefore dismiss the appeal.
DONOVAN L. J. I agree, and I add a few words only because of the novelty of the point.
The case wears an aspect of triviality which is deceptive. Tax on Pounds 15 alone is involved, but the proposition on which the claim is based is of much wider significance, and it will look very different when applied to other cases which can easily be foreseen, and some of which were referred to during the argument.
The proposition was stated thus : Where an employer offers to spend money for an employee as a reward for service; and that offer is accepted, the employee is liable to be taxed on the money so spend, and not on the thing much which the money provides for him. A good many qualifications would need to be added to that proposition to make it true. It looks true in case like Hartland v. Diggines and Nicoll v. Austin, where money liabilities of the employed officers were discharged by the employer. But what the officers were really taxed upon was these moneys worth of the immunity they were thus given from their own liabilities. No valuation of the moneys worth was required, it was obviously of the same value as the liability which had been discharged.
In the present case the taxpayer never became liable to pay the pounds 14 15s. to Messrs. Montague Burton. Between him and them there was no privity of contract at all; and when the employers paid this sum, they discharged their own liability, and nobody elses.
On what principle is this payment nevertheless to be treated as the taxpayers income To that question, I think, no satisfactory answer is or can be given. At first the Crown suggested that it was principle underlying certain surtax cases where taxed income had been applied under a trust for the benefit of the beneficiaries; but the court in those cases explained that once the trustees so applied the income, that income itself became the beneficiaries; see, for example, the case of Sutton v. Inland Revenue Commissioners. In the end the Crown conceded (I think rightly) that no true analogy could be drawn between that class of case and the present.
The being so, I can discover no test which yields the result that the payment by the employer to Messrs. Montague Burton in the circumstances of this case is the income of the employee.
In that situation one must get back to what has always, so far as I known, been accepted as the basis of liability under Schedule E, namely, that liability extends to the profits or gains arising or accruing to the holder of the office or employment as such, whether those profits take the form of money, or moneys worth did, in the shape of the suit. The suit (and the suit alone) answer the description of profit accruing to the employee from his employment. On that basis is should be assessed to income-tax as its money value in the taxpayers hands, that is to say, what he could get for it if he sold it as soon as he received it. It is agreed between the parties that this is the sum of Pounds 5; and I therefore also think that the special commissioners and Danckwerts J. came to the right conclusion in this case, that the appeal should be dismissed.