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GoodwIn Vs. Brewster (H.M. Inspector of Taxes). - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Reported in[1952]22ITR31(Cal)
AppellantGoodwin
RespondentBrewster (H.M. Inspector of Taxes).
Cases ReferredMcMillan v. Guest
Excerpt:
- danckwerts, j., - this is an appeal by mr. j. a. goodwin from a decision of the special commissioners of income tax upholding assessments made upon him under schedule e of the income tax act, 1918, for each of the years 1941-42, 1942-43 and 1943-44, the total amount of the assessments in each year being pound 3,200, but the material sum for the present purpose being the sum of pound 3,000 in respect of each of those years.the provisions of the income tax act under which mr. goodwin was assessed under schedule e are these : 'tax under schedule e shall be charged in respect of every public office or employment of profit...' and so on '......for every public office or employment of profit..' and so on '.. for every twenty shilling of the annual amount thereof' then rule i of the rules.....
Judgment:

DANCKWERTS, J., - This is an appeal by Mr. J. A. Goodwin from a decision of the Special Commissioners of Income Tax upholding assessments made upon him under Schedule E of the Income Tax Act, 1918, for each of the years 1941-42, 1942-43 and 1943-44, the total amount of the assessments in each year being pound 3,200, but the material sum for the present purpose being the sum of pound 3,000 in respect of each of those years.

The provisions of the Income Tax Act under which Mr. Goodwin was assessed under Schedule E are these : 'Tax under Schedule E shall be charged in respect of every public office or employment of profit...' and so on '......for every public office or employment of profit..' and so on '.. for every twenty shilling of the annual amount thereof' Then Rule I of the Rules applicable to Schedule E says, 'Tax under this Schedule shall be annually charged on every person having or exercising an office or employment of profit mentioned in this Schedule..' Rule 6 says, 'the tax shall be paid in respect of all the public offices and employments of profit within the United Kingdom or by the officers hereinafter respectively described', and then (h) in the list which follows says, 'offices or employments of profit under any company or society, whether corporate or not corporate.'

In this case Mr. Goodwin was concerned with a company called Trinidad Consolidated Oilfields Ltd., which is a British company formed in the United Kingdom on February 13, 1936. It was a private company originally but it was turned into a public company of July 16, 1936.

On July 16, 1936, Mr. Goodwin was appointed to be a director of that company, and on the same day in pursuance of authority conferred by the company in general meeting and under the powers contained in the articles of the company the board of directors appointed him to be the managing director of the company and entered into an agreement on the same date for his employment for a period of seven years as managing director of director of the company at a salary of pound 3,000 per annum. As a director of the company he would be entitled under the articles to the sum of pound 200 a year and additional remuneration if any was voted by the company in general meeting.

The questions which have been raised are these : The Special Commissioners found that he only held one office, that the office was a public office under the company and that accordingly on the principles of a case in the House of Lords called McMillan v. Guest, Mr. Goodwin was assessable in respect of the salary which he received as managing director and in respect of the directors fees which he received as an ordinary director of the company, because under the decision in that case a director of a British company, even though he absented himself abroad, is the holder of a public office within the United Kingdom within the meaning of Schedule E and accordingly is taxable under that schedule.

The matters which give rise to the questions in the present case are that Mr. Goodwin went to Trinidad from time to time on business, Trinidad being the place where the companys oilfields were situate. Then in December, 1939, he went the Trinidad again with his wife and family and during the years in question he remained entirely in Trinidad for reasons which were not unconnected with the late war, and never came to England at all. Therefore he was not resident in England during any of that time. But of course, if he held only one office, he still held throughout that period a public office under an English company and therefore was assessable on the principle of McMillan v. Guest. The questions which are raised by the appeal are whether it is correct that he held only one office or whether he held two offices, that is to say, (a) a director and (b) the managing director, and if he held two offices whether that office of managing director was an offices, that is to say, (a) a director and (b) the managing director, and if he held two offices whether that office of managing director was an office within the United Kingdom for the purpose of the Schedule.

I have very properly been referred to a number of cases by Counsel in this case dealing with a great many different sets of circumstances, some showing that a managing director is merely a director with an adjective, with additional functions, but still merely a director, and sometimes of course with additional remuneration; but I have also been referred to cases which show that for some purposes at any rate a managing director has been treated as something different from a director and it has been said that they are not the same thing. The functions of a director are not identical with the functions of managing director and the same man may have two or more capacities. There are cases to which I have been referred which uphold that a managing director unlike for most purposes an ordinary director of a company, is employed by the company and not merely an officer of the company or anything of that sort. I do not propose to go through those cases because it seems to me that the case which I have to decide depends upon the facts in this case. I am far from saying there are not cases in which a company has a managing director who is merely one of its ordinary directors or other directors with special functions to perform and who is merely one of the board, and that there are cases in which remuneration is received by a director of a company for performing special services and so on, but in the present case I have come to the conclusion that Mr. Goodwin did hold two offices and therefore I purpose to mention the considerations which bring me to that conclusion.

Under the articles of this company the number of directors, by article 80 is to be not more than seven or less than and there is a provision (see article 86) under which directors may appoint alternative directors so that a director could avoid the necessity of having to attend board meetings - Which would be inconvenient if he had to go to Trinidad - by appointing a substitute to act on his behalf. Mr. Goodwin did in fact exercise that power in the present case while he was absent in Trinidad. Then we come to the provisions which deal with 'Managing Directors' and articles 88 provides as follows : 'The directors may from time to time appoint one or more of their body to be managing director or joint managing directors or technical director of the company either for a fixed term or without any limitation as to the period for which he or they is or are to hold such office, and may, from time to time, remove or dismiss him or them from office and appoint another or others in his or their place or places.' It is to be observed that the appointment is committed to the board of directors; it is an appointment which is to be held by one of themselves and therefore by someone who is also a director. They have power to dismiss him from the office of managing director and there is no such provision, at any rate in this article, giving any such power to the company. Then article 89 exempts the managing director from some of the requirements and vicissitudes which might apply to other directors or an ordinary director. 'A managing or technical director shall not be taken into account in determining the rotation of retirement of directors, but he shall be subject to the same provisions as to removal ...' - that is a reference to the removal of a director by the company under article 109 - '... and (subject to the provisions of any contract between him and the company) be subject to the same provisions as to resignation as the other directors of the company, and if he ceases to hold the office of director from any cause he shall ipso facto and immediately cease to be a managing or technical director from any cause he shall ipso facto and immediately cease to be a managing or technical director'. All those matters contained in article 89 are provisions dealing with the position of a director of an ordinary kind, not necessarily a managing director at all, and therefore it seems to me that they are quite distinct matters from the position of managing director as such, though of course the company by removing a managing director from the office of director could disqualify him from being any longer a managing director. Then article 90 provides that the salary or remuneration of the managing director, subject as provided in any agreement, shall be determined by the directors. I think those are all the provision of the articles of which I need refer.

Now, as I said, on July 16, 1936, Mr. Goodwin entered into a managing directors agreement for his service and that is another circumstance which to my mind indicates that the managing directorship was a separate and additional office to that of director which he also held. Therefore I come to the conclusion that the matter of whether he is a simple director or holds two offices is really determined by the circumstances of the case, that is to say the article and provision of this agreement.

Now I have come to the second point which is this : Assuming that he does hold two offices, is the office managing director one which he had within the the united Kingdom It is to be observed that by the agreement of July 16, 1936, under paragraph 1, 'The company hereby appoints the managing director and the managing director agrees to serve the company as managing director of company and as such shall perform the duties and exercise the powers which from time to time may be assigned to or vested in him by the directors of the company.' Paragraph 4 of the agreement provides, 'The managing director shall have the general management of the business of the company and shall have the power to decided on all acts and things which may be necessary for that purpose but subject nevertheless to the control of the board of directors of the company'. Therefore it seems to me that whether or not Mr. Talbot was right in saying that qua managing directors he still exercised all his functions as a director, this therefore not being something which was independent of the position of a director, directorship or whatever it may be, the duties which were cast upon the managing director by this agreement were the management of the business of the company as whole. The office and control of the company were at all material times situate in London. It is perfectly true, as Mr. Mustoe says, that from 1939 onwards during the material years Mr. Goodwin was in Trinidad and not really practically in a position to exercise the functions of management in London by reason of the difficulties of communication and so on, but I see no evidence in the case, or anything in the findings of the Commissioners to support the view that there was any agreement so that he should confine his management to Trinidad. It seems to me that legally, and therefore in principal, he was still the general manager of the business of the company at all material times and it seems tome that as the control of the company and the head office were still in London he must be taken to hold office in London, in the United Kingdom. Therefore it seems to me the decision of the Special Commissioners can be upheld on that ground, it not upon the conclusion which they reached that it was only one office, and for those reason it seems to me the appeal fails and must be dismissed.

The appellant appealed to the Court of Appeal.

N. E. Mustoe, for the appellant.

F. Heyworth Talbot, K. C., and Reginald P. Hills, for the Crown.

SIR RAYMOND EVERSHED, M.R. - I will ask Jenkins, L.J., to deliver the first judgment.

JENKINS, L.J. - This is an appeal from a judgment of Danckwerts, J., November 3, 1950, dismissing an appeal by the present appellant. Mr. J. A. Goodwin, from a decision of the Special Commissioners, the effect of which, so far as material to the present purpose, was to uphold assessments made on the appellant in the sum of Pounds 3,000 for each of the years 1941-42, 1942-43 and 1943-44, in respect of his salary as managing director of a company called Trinidad Consolidated Oilfields, Ltd., and the question which the Special Commissioners and the learned Judge had to determine was whether this managing directorship was a public office or employment within the United Kingdom under Rule 6 of Schedule E of the Income Tax Act, 1918. The material facts are fully set out in the stated case, and the relevant documents either appear in the form of extracts or annexures or are otherwise referred to therein.

The company, Trinidad Oilfields, Ltd., was incorporated as a private company on February 13, 1936. As its name implies, it was concerned with oil, and, as the inclusion in its name of the word Trinidad implies, the primary intention was to win oil in the is land of Trinidad. The memorandum and articles of association however contain no geographical restriction, and as is common in such cases, the objects are stated in the widest possible form, which would enable the company to prospect for oil and indeed to embark on many other activities in any part of the world.

On July 16, 1936, special resolutions of the company were passed whereby, amongst other things, the company was converted into a public company, certain modifications were made in the share capital, and a new articles of association, which are the articles material for the purposes of the present case, were adopted. Finally, there was this special resolution : 'That the directors of the company be and hereby are authorised to enter into' (so far as material) '(b) an agreement with James Alfred Goodwin' (that is the present appellant) 'appointing him managing director of the company upon the terms of the draft agreements submitted to this meeting and approved and for the purpose of identification initialed by the chairman.' Before going to the managing directors agreement mentioned in that resolution, it will be convenient to deal with such of the articles as have a bearing upon the question. The first to which I need refer is article 80, which says :

'The number of directors shall not be more than seven nor less than two' with the usual provisions about directors continuing, notwithstanding and vacancy, and so on. Article 81, which was an article apparently inserted to comply with the local law of Trinidad, provided amongst other things : (a) that the company should 'at all times be and remain a British company, registered in Great Britain or a British Colony, having its principal place of business within His Majestys Dominions, of which the chairman and managing director (if any) and the majority of the other directors shall at all times be British subjects'; and (e) that the managing directors should always be a British subject. Then in article 86 there is a provision of the usual character enabling alternate directors to be appointed by the actual substantive directors. Article 88 and the following articles deal with managing directors, and they are in these terms : 'The directors may from time to time appoint one or more of their body to be managing director or joint managing directors or technical director of the company either for a fixed term or without any limitation as to the period for which he or they is or are to hold such office, and may, from time to time, remove or dismiss him or them from office and appoint another or others in his or their place or places.' Article 89 : 'A managing or technical director shall not while he continues to hold that office be subject to retirement by rotation and he shall not be taken into account in determining the rotation of retirement of directors, but he shall be subject to the same provisions as to removal and (subject to the provisions of any contract between him and the company) be subject to the same provisions as to resignation as the other directors of the company, and if he ceases to hold the office of director from any cause he shall ipso facto and immediately cease to be a managing or technical director.' Article 90 provides for the salary or remuneration of any managing or technical director, which, subject as provided by any agreement, is to be determined by the directors. Article 91 : 'The directors may from time to time entrust to and confer upon a managing or technical director for the time being such of the powers exercisable under these presents by the directors as they may think fit, and may confer such powers for such time, and to be exercised for such objects and purposes, and upon such terms and conditions, and with such restrictions as they may think expedient; and they may confer such powers either collaterally with or to the exclusion of and in substitution for all or any of the powers of the directors in that behalf and may from time to time revoke, withdraw, alter or vary all or any of such powers.'

Then there is the usual fasciculus of articles dealing with the powers and duties of directors, beginning with Article 92, which opens by saying : 'The business of the company shall be managed by the directors', and then proceeds to elaborate that short statement over several pages. I should also refer to article 95, which includes the usual provisions enabling directors to hold other offices or places of profit under the company. Article 96(a) empowers the directors to establish local boards or agencies for managing the affairs of the company in a particular locality; and sub-paragraph (b) of the same article enables the directors to appoint any person or persons to be the attorney or attorneys of the company. Article 102 contains provisions of the usual character as to the disqualification of directors. Article 109 enables the company by extraordinary resolution to remove any director before the expiration of his period of office. In addition to special cases in which the office of director shall be vacated, there are provisions of the usual character in article 103 and following as to the retirement of directors by rotation. Those I think are all the relevant articles.

I should next refer to the managing directors agreement of July 16, 1936, which was entered into pursuant to the special resolution which I have mentioned. That agreement is annexed to the stated case, and I should read, I think, most of it. It is made on July 16, 1936, between the company and the appellant, and it is agreed as follows : 'The company hereby appoints the managing director' (that is the appellant) 'and the managing director agrees to serve the company as managing director of the company and as such shall perform the duties and exercise the powers which from time to time may be assigned to or vested in him by the directors of the company. 2. The managing director shall hold the said office as herein provided for the term of seven years from the date hereof. 3. The managing director shall not be entitled during the term of his office to resign his directorship or disqualify himself from holding his office as director. 4. The managing director shall have the general management of the business of the company and shall have the power to decided on all acts and things which may be necessary for that purpose but subject nevertheless to the control of the board of directors of the company. 5. The managing director shall unless prevented by ill-health during the said term devote to the promotion of the business of the company such time and attention as shall be requisite and proper', and so on and he 'shall well and faithfully serve the company and use his utmost endeavours to promote the interests thereof'. I refer to that clause, which is a very usual one in an agreement of this kind, because of an argument for the appellant which was founded upon the circumstance that this was not an agreement under which the employee undertook to spend his whole time in that particular employment. Then it goes on : '6. There shall be paid to the managing director as such managing director a remuneration of 3,000 Pounds per annum to commence from the date hereof and to be paid monthly on the last day of each month, the first of such monthly payments to be made on the 31st day of July next. Such remuneration to be in addition to all fees payable to the managing director as a director of the company.' Then, finally : '7. The company may by notice in writing at any time determine the employment of the managing director (a) if he be guilty of gross misconduct, (b) if he refuses or neglects to comply with any lawful orders given to him by the directors, (c) if he becomes permanently incapacitated by ill-health of mind or body from performing his duties' and that event is defined in the remainder of sub-clause (c), but I need not enter into the details of it. That is the agreement that was entered into, which is a perfectly ordinary managing directors agreement, conferring on the managing director, or delegating to him, the general management of the business of the company, subject to the supervision of the board.

It is next necessary to mention the vital finding of fact by the Special Commissioners that the control of the company was in England and that it was resident in England.

From his appointment in 1936 until December, 1939, the appellant made a visit of three months and another of one month yearly to Trinidad to superintend the companys business there. He went in December of 1939 with the approbation and approval of the board to see whether production could be improved and expenditure reduced. At that time there was a field manager in charge in Trinidad, and whilst the appellant was there he supervised the business. The company was during this period beset by wartime difficulties. In the result the appellant stayed in Trinidad, and being a technically qualified man he eased the situation by apparently taking over the duties of the field manager and also those of field engineer and geologist.

When the United States entered the war the production of oil in Trinidad came under American control, and the appellant made various visits to America on the resulting business. Actually, to sum up the position, from December, 1939, thereafter and throughout the whole of the period material to these assessments, the appellant was in fact in Trinidad managing and supervising on the spot the oil-producing activities of the company in Trinidad. He came home in April 1940 to attend the annual general meeting of the company, but apart from that I do not think he came back at all. At all events, the conclusion of fact drawn by the Special Commissioners is that he was not resident in England during the whole of the years relevant to the assessments under appeal. I should mention that in the autumn of 1936, prior to the appellants departure for Trinidad, he was provided by the company with a power of attorney to manage the companys affairs in Trinidad counched in very terms, and I understand that power of attorney to have remained unrevoked during the whole of the material period.

The appellants absence from England made it necessary or convenient that he should appoint an alternate director under the powers in the articles to which I have referred, and he appointed successively a Mr. Heisch and a Mr. Stewart, who acted as his alternates for the purpose of board meetings of the company; and for so acting these alternates during the whole of the relevant period successively received the appellants ordinary directors fees, which amounted to a sum of pound per annum. That circumstance accounts for the appearance in the case of assessments of pound in addition to those of pound 3,000, but that matter was, I understand cleared upon the footing that in fact the alternates and not the appellant had received those directors fees, and the question was thus brought down simply to the pound 3,000 per annum managing directors salary.

I think the final fact of any materiality which I need mention is this, that up to April 1, 1941, the appellants salary of pound 3,000 was paid to him in England by the company but from that date and thereafter during the whole of the period relevant to this appeal it was paid to him in Trinidad from a banking account of the company kept in Trinidad and fed from the proceeds of sales to a local oil refinery. I should also not omit to note that in addition to the registered office in England the company had, as required by local law, a registered office in Trinidad. There is no doubt that the company was in fact carrying on business in Trinidad and no doubt the local law required that a company incorporated outside Trinidad and carrying on business in Trinidad should have a registered office there.

The case refers to a considerable bundle of correspondence and minutes, to which our attention was directed by Mr. Mustoe, for the appellant. He used that correspondence and those minutes to show, if I understood him rightly, that the appellant proceeded to Trinidad with the approbation of the directors, that he consulted them if any question the arose as to his returning to this country from Trinidad, and that his activities were throughout the material period closely supervised by the board in England, so far as they were able to keep in touch with him. I do on not think it is necessary to refer in detail to these documents because I am quite prepared to accept those circumstances as made out.

Those I think are all the material facts, and to those facts the Special Commissioners had to apply the relevant provisions of Schedule E of the Income Tax Act, 1918. There are only a very few passages from the Schedule to which I should refer. The introduction is this : 'Tax under Schedule E shall be charged in respect of every public office or employment of profit, and in respect of every annuity, pension, or stipend payable by the Crown or out of the public revenue of the United Kingdom other than annuities charged under Schedule C, for every twenty shillings of the annual amount thereof.' Then comes Rule I : 'Tax under this Schedule shall be annually charged on every person having or exercising an office or employment of profit mentioned in this Schedule' : that I think is the material part of Rule I. Then I can go to Rule 6 : 'The tax shall be paid in respect of all the public offices and employments of profit within the United Kingdom or by the officers hereinafter respectively described, namely' - then there is a catalogue of offices, and in particular - '(h) offices or employments of profit under any company or society, whether corporate or not corporate'. The Special Commissioners were referred to a large number of authorities, and in particular to the case of McMillan v. Guest. Their decision was in these terms : 'The first question we have to determine is whether the appellant held in the years in question a public office or employment within the United Kingdom (Rule 6 of Schedule E). If he did so, he is assessable although he was not resident at the material times. He was managing director of Trinidad Consolidated Oilfields Ltd., a company registered in the United Kingdom and having its seat of government here. The number and nature of the offices held under a company must in our view depend on the provisions of its articles, and upon a review of the companys articles in this case it is clear to us, and we so find, that the company did create a separate office of managing director. This was a composite office, the duties of which were to carry out the duties common to all the individual directors and also to carry out such further duties as the directors might entrust and confer upon such managing director. In the present case such further duties were the general management of the business of the company subject to the control of the board. In our view, therefore, the appellant did not hold two offices, those of director, and managing director, but one office only, that of managing director. In view of the importance of the office and of the duties attached to it we hold that such office possessed sufficient substance and permanence to be a public office, and was within the United Kingdom for the reason given in the judgments of the House of Lords in McMillan v. Guest. The appellant is accordingly assessable under Schedule E upon the total emoluments paid to him, and we leave figures to be agreed'.

Mr. Mustoe challenges that decision in this Court, as he challenged it before the learned Judge, in effect, on these grounds. He says it proceeds upon a fallacy or false premise, namely, that the managing director of a company who is also, as is usually if not necessarily the case, one of its ordinary directors, holds not two offices, that is to say, the office of ordinary director, plus the managerial office or post of managing director, but not office only, that of a director on whom special managerial powers have been conferred. In Mr. Mustoes sub-mission,the true position is that there are two separate and distinct offices, or perhaps for the purposes of his argument I should say positions - the position of an ordinary director and the position of a managing director. The materiality of that contention appears from the case of McMillan v. Guest, upon which the Special Commissioners decision was based. If it is right to hold that the appellant, as managing director of the company was simply a director of the company like any other, but one to whom had been delegated in addition to his ordinary duties the special powers of management mentioned in the in McMillan v. Guest, that the office held by the appellant, being an office of director of a company incorporated in this country and resident and controlled here was an office within the United Kingdom. Mr. Mustoe accepts that result I think as inevitable once the premise is conceded : but as I have said, he contends that there are two positions here - the directorship and the managerial post - which are separate and distinct. Assuming he can make that good, he goes on to say that the case of McMillan v. Guest, therefore does not govern the present case at all because the case of McMillan v. Guest is confined in its application to the office of director as such. I should next refer as briefly as I can to that decision. The case was of this nature. There was a company incorporated and resident here, and it had a director who, in his capacity apparently as an ordinary director, was paid sub-stantial emoluments. That director went aboard, to America, to look after the interests of the company there, and he seem to have performed services of considerable value to the company, but not services of a kind which he was under any obligation to render as a director. He never attended any of the companys board meetings and never performed any of his directorial functions in this country. The question was whether, in those circumstances, notwithstanding that he was resident abroad, the director concerned was liable to tax under Schedule E on his emoluments as a director of the company, one the ground that this was an office held by him in the United Kingdom. That being the question, the Commissions who heard the case held that the appellant director was liable to assessment. Lawrence, J., reversed their decision, but the Court of Appeal restored the decision of the Commissioners and were upheld in so doing by the House of Lords. In the Court of Appeal the then Master of the Rolls, Sir Wilfrid Greene, as he then was, delivered an exhaustive and detailed judgment, which was approved in the House of Lords. In that judgment at page 195 he says this of the director in that case : 'The position, therefore, to sum it up, during the relevant period, was this : the respondent was a director of an English company which had its seat of government in England. During the period in question he had all the rights of a director. He was subject also to all the liabilities of a director. His duties as director (by which I mean the duties which fall upon him by the general law and the particular articles of this company) were, so to speak, in abeyance for the reason that his fellow directors had dispensed with his services in England, because, no doubt, they thought that he would do better work by remaining in the United States. Nevertheless, all his rights and all his duties as director, if they had been, exercised, would have been exercised in this country and nowhere else, a circumstance which, to my mind, is not affected by the fact that during this period he had been doing other work for the company voluntarily at the request of his fellow directors and without payment.' Then on page 197 he states what is really his ratio decidendi : 'In such a case, there may be an argument for saying that different consideration of the present problem, and I express no opinion one way or other; but, in the case of a company situated and governed as this company is, it is to be remembered (and this appears to me to be the crucial matter) that every right which a director has and every duty which the law, general or special, imposes on the director is to be exercised in this country and nowhere else. As a test of that in the matter of the directors rights, it must be remembered that a director is entitled to ask the assistance of the Courts of this country to enable him to exercise those rights.' Then the Master of the Rolls enlarged upon that and contrasted the case of a person merely employed by a company who if excluded from the job for which he was employed merely has a remedy in damages, with that of a director who has a definite right and is entitled to protection. That passage was strongly relied upon by Mr. Mustoe as severely limiting the effect of the decision to the particular case of an ordinary director, and to the office of an ordinary director, and nothing else.

In the House of Lords, Lord Atkin dealt with the three questions : whether the appellant held an office; and if so whether it was public office; and if so whether he held a public office within the United Kingdom. On that third question, having answered the first two in the affirmative, he says, at page 202 : 'Was, then, the office held by the appellant a public office within the United Kingdom As to this I am completely satisfied by the reasoning of the Master of the Rolls in his judgment delivered in the Court of Appeal. I will only add that we are here dealing with an office, not with an employment, the locality of which may be governed by different considerations. The office of director of an English company, the head seat and directing power of which is admitted to be in the United Kingdom, seems to me of necessity to be located where the company is. It is in fact part of the organic structure of the corporation. In such a case I do not think that it is true, as suggested by Rowlatt, J., in Proctor v. Ryall, that the place of exercise governs.' Then, later : 'Like the Master of the Rolls, I derive little assistance from previous cases. I consider it to be clear that the director of an English company which is resident in the United Kingdom, wherever he resides and whether or not be takes any part in directing the affairs of the company, holds an office in the United Kingdom.' Then, Lord Wright, on page 203 : 'The office of a possible, even more notional. In my opinion, the place where it is exercised, if it is exercised anywhere at all, is not necessarily the test.' Then at page 204 : 'Exercising no doubt does involve activity in the office or employment, but a man may have an office and draw the emolument without doing any work at all. For instance, a director may in certain cases be properly allowed to retain his emoluments when for good reasons he my be relieved from any active duties at all.' Then he refers to the Master of the Rolls test as to every right, and so forth, being exercisable in this country and nowhere else, and says : 'That is the best accepted in substance by the Commissioners. It is, I think, the true test in a case like this. The appellant had or held all through the years of charge the office of director in the United Kingdom. That, in my opinion, is sufficient to satisfy the schedule.' Lord Porter said, at page 205 : 'For the present purpose it is enough to say that a person in the position of the appellant holds an office in this Kingdom despite the fact that he has not in fact attended any meetings in this country since 1931. He is a director of a company resident and managed in this country, entitled to attend any board meetings which may be held here, giving advice as to matters concerning its management, and supplied at least with its formal literature. In such a use it is, I think, immaterial that most, if not all, of Mr. McMillans activities are carried out in America; he still holds an office in the United Kingdom'.

That case clearly shows that the office of a director -the ordinary office of a director - of a company incorporated here and resident here is an office in the United Kingdom within the meaning of Schedule E. It shows, further, that the place of exercise of the office is not a decisive consideration in such a case. The schedule applies to offices held or exercised in the United Kingdom. Where you find the office is locally situate in the United Kingdom, then it matters not that it may be exercised elsewhere, or indeed, that it is not exercised at all. Now, as I have said, Mr. Mustoe founded his argument on the proposition that there are two distinct positions here under consideration position that there are two distinct positions here under consideration : the position of managing director, that is, a managerial position, and the position of an ordinary director of the company - an ordinary directorial position; and he says these should be considered separaretely and that there is nothing in McMillan v. Guest which affects the managerial position. Mr. Mustoes argument commended itself to the learned Judge to the extent that the learned Judge agreed that in this case there office of a managerial director. But having so held the learned Judge nevertheless concluded the case adversely to the appellant because, looking at the character of the managing directorship -the office of managing director - he came to the conclusion that this office was situate here.

For my part I am content to accept the view that there are two offices here in question; that seems to me to follow from the from of the articles which seem to contemplate that a director who is appointed the managing director nevertheless continues to be an ordinary director, his position in the latter capacity being, however, fortified to the extent that he is exempted from retirement by rotation. The article which perhaps brings that out best is article 88 which, subject of course, to any special contract with the managing director, says : 'The directors my from time appoint one or more of their body to be managing director or joint managing directors or technical director... and may, from time to time, remove or dismiss him or them from office ...' Now clearly the directors would have no power to remove an ordinary director from office, so that that reference to removal from office in the case of the managing director must mean removal from the office of managing director considered as a distinct and separate office, the effect of which would be to leave on foot the ordinary directorship. The provision in article 89, to the effect that if a managing director ceases to hold the office of director from any cause he shall ipso facto and immediately cease to be a managing director, similarly points to a duality of offices.

Therefore, as I have said, I am prepared to hold that those are two distinct offices or positions, and that the Crowns argument, to the effect that this matter settles itself merely by the circumstance that the company is resident here and that the appellant is a director of the company, on the principle of the case of McMillan v. Guest, is an over - simplification of the question arising on the facts here involved, the appellant being treated simply as if he the position of the chairman of the board of directors in Barson v. Airey, who was given some additional remuneration for going to China on the companys business and was taxed, as I understand it, on such additional remuneration as part of the emoluments of his office as a director under Schedule E.

But, conceding that the office or position of managing director here is a separate office or position, Mr. Mustoe must still show that it is not a public office within the United Kingdom, and that he seeks to do, if I understand his argument, really in this way. He says the only office properly so called that is here in question is the office of an ordinary director. The office or position, to use a neutral expression, of managing director (as distinct from that of ordinary director) is no more really than a mere employment. He then says, the position in question being a mere employment, to which for practical purposes any person, whether a director or not, could have been appointed and called a manager or general manager or agent or something of that sort and not being an office, or what Loard Atkin called a part of the organic structure of the company, its locality must be determined by all the circumstances of the case. He further says, looking at the circumstances, looking at the de facto restriction of the appellants activities to Trinidad with the approbation of the board, looking at the supervention of America control, looking, in particular, to the fact that he was paid during the material period in Trinidad out of Trinidad funds, and looking also at the power of attorney giving him wide powers in Trinidad, that inference to be drawn is that his employment of managing director, so called, was in truth an employment localised and situate in Trinidad and nowhere else. That is Mr. Mustoes argument, and I hope I have done justice to it; but it is an argument which I, for my part, find myself constrained to reject.

In my view, the way this matter should be approached is this. One must look at the character of this position of managing director; on e must see whence and by what law it derives its efficacy; and one must see where the corporate organisation by which this appointment was made is resident. Having considered the post in question from that point of view, one must then, I think, before one comes to the question of place of exercised, ask oneself : 'Is this an office which is a public office and if so, where is it located ?' Applying myself to the matter from that point of view, I think that this is a question which really admits of only one answer. Here is a company incorporated under the English Companies Acts in this country, a company admittedly having its head seat and directing power here, a company resident here. That company includes in its constitution the usual provisions under which its business is to be managed by its directors. It also includes the usual provision empowering the directors to appoint one of their powers. The case of McMillan v. Guest makes it abundantly plain that the position which is held by each member of the board of directors in such a cases is essentially an office; and it seems to me that just as an ordinary directorship is clearly an office and also a public office e, within the meaning of the schedule - as Sir Wilfrid Greene (as he then was) said in the McMillan case : 'It is really one of this cases, I cannot help thinking, which must answer itself, and I am prepared to hold without hesitation that the director of a company incorporated under the Companies Acts is the holder of a public office' - so too, and a fortiori if anything, the position of a managing director provided for in the article, involving delegation of he powers of the board and the appointment by the board of the managing director as the chief executive officer of the company, clearly amounts to a public officer. It is a post which can properly be described I think, as existing as a vacancy when there is no one filling it, and I think when a person to filling it, and I think when a person is appointed to fill it he becomes the holder of a public office.

Now, where is the office situate Mr. Mustoe seeks to distinguish it entirely from the ordinary office of a director and says, in effect, that there is no ground for holding that it is situate here. I cannot agree. It seems to me, looking at the origin and character of the office, before one comes to the subsequent facts as to the exercise of powers or functions by particular managing director, that this is an office which, so far as an office can have any locality at all, can have only one location - it must be where the head seat and directing power of the company are. After all, conceding that it is a separate office, it is an office linked as closely as may be with the office of an ordinary director, it is an adjunct of that office in the sense that where the managing director r ceases to be an ordinary director he vacates his office of managing director. The duties of the office consist of the general management of the business of the company, subject to the supervision of the board, the consisting of the holders of offices which are essentially situate here. In those circumstance I find the conclusion irresistible that at the outset what one discovers when looking at the origin and character of this position of managing director is that beyond per-adventure, it is a public office situate in this country. That being so it is within he Schedule, which applies to offices or employments of profit held or exercised within the United Kingdom, and if it is in truth held here it matters not that it is exercised elsewhere. Therefore I cannot think that the subsequent history of the appellants connection with the activities in Trinidad can avail Mr. Mustoe unless he can show that something happened during the period relevant to these assessment to supersede the managing directors agreement entered into with appellant, so as to cause him to vacate the office which he held in this country and to undertake, in lieu of that office, some other employment which had a different locality and which was in fact located in Trinidad. I cannot find anything in the evidence which by any means suffices to support that conclusion. The managing directors agreement ran its full period; the office was never vacated; it remained throughout the original office in the United Kingdom held by the appellant, although the services he rendered to the company and the function he performed wherein fact limited locally to Trinidad. One might say that some of the function he performed belonged more properly to the technical staff than they would to a managing director. But be that as it may, so far as the activities carried in by the appellant in Trinidad were activities proper to a managing director, I cannot find that the fact of gives activities having been actually, in the events which happened, confined to Trinidad, had the effect of substituting for this United Kingdom office a new office or employment localised in Trinidad.

Accordingly, for the reason I have endeavoured to express, I am of opinion that the conclusion reached by the special Commissioners and the learned Judge was right and that this appeal fails and should be dismissed.

SIR RAYMOND EVERSHED, M. R. - I have arrived at the same conclusion.

I am certainly not insensible to the attractions of the argument so strenuously put forward by Mr. Mustoe for the appellant. Whatever, says he, the form of the relevant documents, whatever the title with which Mr. Goodwin was invested, in fact and in substance, while remaining a director of the company, he exercised in Trinidad the functions manager there, managing the business, the practical producing business, of the company. The companys business consisted only of that producing business and the necessary financial control of all the operation, and with the latter Mr. Goodwin had never at any relevant time anything whatever to on. He acted in Trinidad in truth and in subsistence (so runs the argument) as the servant and employee of the company, managing that aspect of their operations.

Now I have no doubt that matters might have been so contrived that Mr. Goodwin did hold the office of director in England and also was appointed to serve the company as manager or technical supervisor in Trinand, and had that been done I think there might have been great force in the contention that the remuneration he received, payable as it was Trinidad out of Trinidad resource, would not be liable to be brought into Mr. Goodwins assessment under Schedule E in England. But however attractive and calling for sympathy is the argument, I feel, like my brother, constrained to say that was not in fact what did occur.

By the agreement of July 16, 1936, Mr. Goodwin was, I think, appointed to the office of managing director of this company, as described in and contemplated by the companys articles of association - and I refer particularly to articles 88, 89 and 91. As my Lord has said, although it is true that neither the Act of Parliament nor the regulation of the company require that there should be managing directors or a managing director, they both contemplate that there may be. Having been appointed to that office in the way in which he was, I think for the reason which my Lords has already given, with which I wholly agree and upon which I could not hope to improve, that the remuneration was payable whatever managerial or other functions (if any) Mr. Goodwin might have been called upon to perform in any part of the earth.

For these reason, I think the appeal fails, and must be dismissed.

Hodson, L.J. - I agree, and have nothing to add.

Appeal dismissed with costs.


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