WYNN-PARRY, J. - The principal of law which govern this case are perfectly clear; and as the matter strikes me it is one which upon examination will be found to raise no more than a very short question -short, but not thereby easy to answer - namely whether or not the Commissioners had evidence before them upon which they could properly make the finding which they did. The Commissioners finding is expressed in these words : ' We the Commissioners who heard the appeal found that the company was a trading company with trading profits'. In my view that is a perfectly clear finding and is not open to the same sort of doubt to which the first finding of the Commissioners in the case of Leeming v. Jones was open. Thus, one is faced there was no evidence upon which the Commissioners could properly base that finding ?
The Commissioners refer in paragraph 1 of the case stated to the incorporation of the company in 1938 and to those of its objects as set out in clause 3 of its memorandum of association which they regard as being relevant. These extracts show, putting it shortly, that the company had power to acquire land and to hold land acquired as investments, and further that the company had power to carry on the business of a property company, that is dealing in land by purchasing and selling with a view to making a profit.
In paragraph 1(2) the Commissioners refer to the circumstance that in the year prior to the year ending April 5, 1947, the Inland Revenue had treated the company as an investment company, and that the company had been assessed to income-tax under Schedule A with relief for management expenses under Section 33 of the Income Tax Act, 1918. They then point out that in the year ended March 31, 1939, the following properties were purchased by the company, namely, eight houses in London Road, Kettering; four houses, half an acre of land and three garages in Netherfield Road, Kettering, and 13 acres of land at Barton Seagrave, near Kettering. They further point out that in the year ended March 31, 1944, a farm comprising 47 acres of land in Windmill Avenue, Kettering, was purchased. They then find that all these properties were let by the company to tenants, that the rents received were duly credited in the accounts, and that the company had no income from any other sources.
Down to that point those findings would appear to be in favour of the company. Speaking for myself, I on not set overmuch store upon the circumstances that prior to 1947 the Inland Revenue treated the company as an investment company. Over the early years of its existence the company. Over the early years of its existence the company was in fact not dealing in property in the sense of purchasing properties and turning them over, and therefore, as is the practice of the Inland Revenue in those cases, the company was treated as an investment company. But such action on the part of the Inland Revenue is not an irrevocable action, and if circumstances change, or if events show that the basis of treating the company as an investment company proves to be the wrong basis, the Inland Revenue are free to revise the position. But for what it is worth there is that circumstance that in the years prior to the year ending April 5, 1947, the company was treated as an investment company. There is then the circumstance, as appears from the remainder of sub-paragraph (2) to which I have referred that the company purchased a number of properties, all of them except one prior to March 31, 1939, and the last in the year ended March 31, 1944; that the company let these properties and received rent, and over the years to 1947 it had no other income.
Then comes sub-paragraph (3) of this paragraph in the case. This deals with the activities of the company as regards the disposition of properties : 'In July, 1945, the company sold one house in Netherfield Road and one acre of land and Barton Seagrave. In April, 1946, the 47 acres of farmland in Windmill Avenue were sold. In March, 1947, the remaining 12 acres of land at Barton Seagrave were sold. In August, 1947, one house in Netherfield Road was sold.' It will be found that as a result the company now holds ten houses; it is not clear whether it holds any of the three garages but that does not appear to be of decisive importance one way or the other.
The whole question then comes down to this : Is there enough disclosed in sub-paragraph (3) read in conjunction with sub-paragraph (2) to justify the finding that this company was a trading company with trading profits Mr. Clements, on behalf of the appellants, in a most attractive and forceful argument pressed upon me the point that there is to be discovered in the case no evidence upon which the Commissioners finding can be supported; and he sought to reduce the matter to this simple position, that it was a clear case of purchase, holding and realisation. On the other hand, it was emphasised by Mr. Hills, on behalf of the Crown, that sub-paragraph (3) discloses what can only properly be regarded as a course of dealing over a number of years.
A discussion took place as to where the onus of proof lay before the Commissioners, but I do not propose to go into that matter. It appears to me that I ought to confine myself to a consideration of these two sub-paragraphs. I have to bear in mind (for this has been laid down in many cases) that not merely is the question one of fact, but in deciding whether or not there is any evidence to support the Commissioners finding, it is not for the Court to consider how the Court itself would have viewed the matter had it been res integra. If left free I might well have come to a different conclusion from that to which the Commissioners have come; but unless I can be satisfied that there was no evidence to support their finding, then I am bound to give effect to it.
It has been emphasised by Mr. Clements, and indeed Mr. Hills accepted, that the fact stated in this case are most meagre in quantum. That is true, but in observing that I do not wish to be thought to be levelling any criticism against the Commissioners, who no doubt have included in the case all relevant facts that were brought to their notice; and I have to remember further the practice in these matters which enables both the taxpayer and the Crown to take part in the drafting of the case which finally becomes the case stated by the Commissioners.
Looking again at these two sub-paragraphs I observe that the company - which was incorporated in 1938 - acquired all except one of the properties which it has held over the material period before the outbreak of war. I observe that the first act - at any rate the first act recorded in the case - which the company performed after the war was to acquire a further property which it held for only two years. I then observe that over the years 1945, 1946 and 1947 - that is, in the period starting immediately after the termination of the war - the company has made five sales, leaving itself with the comparatively small proportion of the properties which it had previously acquired.
Now it is true, as Mr. Clements pointed out, that the form of the assessments here precludes the case being put forward that the company at some time changed the nature of its business from that of an investment company to a property dealing company, and that if the finding of the Commissioners is to be upheld, it must be upon the basis that this company is to be regarded as having been throughout its career a trading company.
I do find the material available for resolving this question to be very slight; but while I have very considerable sympathy with the taxpayer in this case, I cannot feel I should be justified in holding - applying the well-known rules which govern the Court in any case where it has to say, Aye or No, has an inferior Court no evidence upon which it could come to a particular conclusion of fact - that there was in this case before the Commissioners no evidence which could justify their finding that the company was a trading company with trading profits.
For those reason therefore, but as I say, not without some degree of reluctance, in my view this appeal to the Court of Appeal.
Attorney-General (Sir Frank Soskice, K.C.) and Reginald P. Hills, for the Crown.
COHEN, L.J. - We need not trouble you, Mr. Hills.
The appellant company incorporated in the year 1938. The objects clause of its memorandum of association, so far as material, is conveniently summarised by the learned Judge in this sentence : 'These extracts' (the extracts set out in the case) 'show, putting it shortly, that the company had power to acquired as investments, and to hold land acquired as investments, and further that the company had power to carry on chasing and selling with a view to making a profit'.
What followed was this. In the year ending March 31, 1939, the company acquired some 12 house 13 1/2 acres of land and three garages. It did nothing more, except presumably to let these properties, until the year ending March 31, 1944, during which year it purchased 47 acres of farming land. All these properties were let by the company to tenants at rents which were in fact its only income. For the Financial years down to the year 1946-47 the company was treated by the Inland Revenue as an investment company and assessed to income tax under Schedule A. It was granted relief for management expenses under Section 33 of the Income Tax Act, 1918 which allowed the granting of relief to a company whose business consists mainly in making investment and the principal part of whose income is derived therefrom. As we know, the war came to an end in Europe in the spring of 1945, and in July, 1945 the company effected its first sale of property, namely, the sale of one house and one are of land. In March 1947, it sold 12 acres of land out of the remaining 12 12 which it had acquired in 1939, and in August, 1947, it sold one further house, with the result that it retained at the end of the last fantail year in question ten houses, three garage and half an acre of land.
That being the position the Inland Revenue set up a claim that for the year ending April 5, 1947, and the two following years they were entitled to assess the company in various sums as a trader. From those assessments the company appealed to General Commissioner and they argued that the land and houses which they had acquired were only as an investment and that although the company had power to trade it had never exercised that power. Accordingly, it said that the sales which I have mentioned represented realisation of part of the companys investments and were not taxable. The Crown raised the contention that the purchases and sales amounted to carrying on a trade by the company. The Commissioners found that the company was a trading company and it was trading at a profit, and confirmed the assessments.
When the matter came before the learned judge, he said -and I thing Mr. Clements, who said all that could be said for the appellant company, agrees - that the only question for decision was : Could it be said that three was no evidence upon which the Commissioners could properly base there finding The learned Judge came to the conclusion, though he said not without some degree of reluctance, that it was impossible to say that there was no evidence on which the Commissioners could base their finding. I find myself in such complete agreement with the reasoning and conclusion of the learned Judge that it is only out of respect to the argument which was addressed to us by Mr. Clements that I find it necessary to add anything to what he has said.
Mr. Clements said that it was plain that the original acquisition of the land and houses was only as an investment and the claim in this case could not succeed unless the Crown showed that that which has been an investment had become stock-in-trade. Where I differ from him is that the Commissioners to hold that the original acquisition of these properties was an investment. Mr. Clements admitted that he could not rely in the fact that the Crown had treated the company as an investment company for a number years as an estoppel or as conclusive of the original acquisition amounting to an investment. He admitted that it was to the companys advantage to have been so treated, because otherwise they could not have the relief under Section 33 which they did get. But that consideration is irrelevant to the decision of the point before us. If the treatment of the company in this way could not be treated as an estoppel, it seems to me it necessarily follows that the Commissioners were entitled to look at the evidence as a whole in order to decide whether or not both the original acquisition and the sales on the dates I have mentioned and in the way I have indicated amounted to the carrying on of a trade. That being so, it seems to me necessarily to follow that the case is one where we cannot say that there was no evidence on which they could come to the conclusion that it did amount to carrying on a trade. They were a number of acquisitions of property and there were a number of sale. Though it is true that for six years there were no sale, it is not perhaps without significance that the period in which there were no sales was practically the duration of the war. Be that as it may, that is not a question in which we have to make up our own minds.
Mr. Clements relied in some observations of Rowlatt, J., in the case of Leeming v. Jones. Accordingly to the headnote in that case : 'The appellant was a member of a syndicate of four persons formed to acquire an option over a rubber estate with a view to re-sale at a profit. The option was secure but the estate was considered too small for re-small to a company for public flotation. An option over another adjoining estate was accordingly secured and it was decided to resell the two estates to a public company to be formed for the purpose. Another member of the syndicate undertook to arrange for the promotion of this company. The vendors of the second estate gave an abatement of 5 per cent. on the purchase price of that estate, this sum (pound 1,750) being stated in the form of a commission for introducing a purchaser but being claimed by the appellant to be in reality a deduction from the purchase price. The syndicates right were transferred to a company for pound 1,250.' The figures show that the total receipts amounted to pound 3,000, and the balance remaining after the deduction of certain expenses was divided between the members. 'The appellant was assessed to income tax Schedule D, in respect of his share. The General commissioners, on appeal, were of opinion that he acquired the property or interest in the property in question with the sole object of turning it over again at a investment. They confirmed the assessment. The case was remitted to the General Commissioners, after its first hearing in the Kings Bench Division, for a finding as to whether there was or was not a concern in the nature of trade. The Commissioner found that the transaction in question was not a concern in the nature of trade.'
What Mr. Clements relied upon were some observation of Rowlatt, J., at the stage in the case in which he was referring the matter back to the General Commissioner. I think it is not without importance to observe that he was referring it back in the express ground that he was not prepared to say there was no evidence. But he pointed out in the course of his judgment that it did not necessarily follow from the mare fact that an object was bought and then sold that there was a taxable profit. He says : 'I think it is quite clear that what the Commissioners have got to find is whether there is here a concern in the nature of trade. Now what they have found they say in these words (I am reading it short) : That the property was acquired with the sole object of turning it over again at a profit and without any intention holding the property as an investment. That describes what a man does of he buys a picture that he sees going cheap at Christies because he knows than in a month he will sell it again at Christies. That is not carrying on a trade.' That only means this, not that purchase and sale cannot amount to a transaction in the nature of trade, but that it does not necessarily do so. Thus the and sale of one picture would not of itself be conclusive evidence of the carrying on the trade of dealing in pictures.
I think the position is accurately stated by the observation of Lawrence, L.J., in the same case, which were referred to with approval by Lord Dunedin in the House of Lords on page 360 of the report : 'It seems to me in the case of an isolated transaction of purchase and resale of property there is really no middle course open. It is either an adventure in the nature of trade, or else it is simply a case of sale and resale of property.' That seems to me to show that even an isolated transaction can amount to an adventure in the nature of trade, But in the present case there is more than one acquisition and several sales.
It seems to me that it is essentially a case, as my brother Singleton put it in the course of argument, where if this case had been heard by a jury it would have been quit impossible for the judge to withdraw the case from the jury on the ground that there was no evidence. That seems to me be conclusive of the matter.
I have only stated at some greater length the same grounds as those which the learned Judges has expressed in judgment. For the reason I have given I think the appeal fails and must be dismissed with costs.
SINGLETON, L.J., - In my opinion the judgment of Wynn-Parry, J., was wholly right. The Commissioners found that this company was a trading company with trading profits. I am quite sure in my own mind that there was evidence on which they could so find. In those circumstances the learned Judge ought not to reverse their judgment nor ought this Court so to do. The matter which had to be decided by the Commissioner was a question of fact and so long as there was evidence on which they could find in the way in which they did find the court should not interfere.
I agree that the appeal should be dismissed.
JENKINS, L.J. - I agree, and I have nothing to add.