VISCOUNT CAVE L.C. (read by LORD ATKIN)
1. The appellant, Mr. L. N. Levene, has been assessed to income tax on his dividends from securities of British possessions and from War Loan for the tax year 1921-22 and the succeeding three tax years, and has claimed to be excused from such tax, that is to say, from tax on the dividends from the securities of British possessions on the ground that during the years in question he was not "resident." in the United Kingdom within the meaning of r. 2 (d) of the General Rules applicable to Sch. C of the Act, and from tax on the dividends on War Loan on the ground that during the same years he was not "ordinarily resident" in the United Kingdom within the meaning of s. 46, sub-s. 1, of the Income Tax Act, 1918. On appeal to the Special Commissioners under s. 27 of the Finance Act, 1924, those Commissioners disallowed the appellant's claim to exemption and confirmed the assessment, subject to a case which they stated for the opinion of the High Court; and on the argument of the case the decision of the Commissioners was affirmed by Rowlatt J. and afterwards by the Court of Appeal. Mr. Levene has now appealed to this House.
2. From the Case stated by the Special Commissioners it appears that the appellant is a British subject, and formerly lived in a house in Curzon Street, London, of which he held a lease, until the month of March, 1918, when he decided to break up his establishment and (to use his own expression) to "live abroad"; that he then sold his furniture and surrendered the lease of his house, and until December, 1919, continued to live in the United Kingdom, in hotels. In December, 1919, he went abroad and did not return until July 10, 1920, since when he has been in the United Kingdom for the following periods:-
[table not supplied]
3. During the remainder of these five years he was staying at Monacoand at various places in France.
4. From March, 1918, until January, 1925, the appellant had no fixed place of abode, but stayed in hotels, whether in this country or abroad. In the course of the years 1922, 1923 and 1924, he made endeavours to find a suitable flat in Monaco, but the negotiations came to nothing since none of the premises inspected were suitable, until in January, 1925, the appellant took a lease of a flat in Park Palace, Monte Carlo, for nine years, for which he paid a premium of 130,000 francs, and he lived there with his wife until he came to England for the purposes of the appeal to the Commissioners. Both he and his wife have indifferent health, and have been advised to live in the South of France and avoid the United Kingdomin the winter months. One of the reasons for their visits to England was to obtain medical advice. They also came to visit their relatives in England, and (on one occasion) to make arrangements for the care of a brother of the appellant who is mentally afflicted. Other reasons for his coming to England annually were to take part in certain Jewish religious observances, to visit the graves of his parents, who are buried at Southampton, and to deal with his income tax affairs.
5. After setting out the above facts and the contentions of the parties, the Commissioners gave their decision in the following terms:-
"The appellant is a British subject and until March, 1918, he was a householder in London. He then surrendered the lease of his house and sold his furniture, and from March, 1918, until January, 1925, he did not occupy any fixed place of residence, but lived in hotels, whether in this country or abroad.
"He was admittedly resident and ordinarily resident in the United Kingdom until December, 1919. He then went abroad, and in each subsequent year he has spent between 7 and 8 months abroad and between 4 and 5 months in the United Kingdom.
"We are satisfied upon the evidence that when he left the United Kingdom in December, 1919, he had formed the intention, which he has consistently carried out ever since, of living abroad for the greater part of the year, but of returning to this country each year and remaining here for considerable periods but not for a period equal in the whole to 6 months in any year.
"The questions for decision are whether he was entitled to exemption from income tax on War Loan interest under section 46 of the Income Tax Act, 1918, as a person not ordinarily resident in the United Kingdom, and on interest on securities of British Possessions under rule 2 (d) of the General Rules applicable to Schedule C as a person not resident in the United Kingdom, and the years under review are 1921-22, 1922-23, 1923-24 and 1924-25.
"These are in our opinion questions of degree, and taking into consideration all the facts put before us in regard to the appellant's past and present habits of life, the regularity and length of his visits here, his ties with this country, and his freedom from attachments abroad, we have come to the conclusion that at least until January, 1925, when the appellant took a lease of a flat in Monte Carlo, he continued to be resident in the United Kingdom. The claims for the years in question therefore fail."
6. It is obvious that the conclusions of the Commissioners above quoted are so worded as not to be mere inferences in law from the facts found in the earlier part of the Case, but to be themselves substantive findings of fact; and accordingly under the well established rule those findings cannot be disturbed by the Courts unless there was no evidence to support them. But before dealing with that question I think it desirable to say something about a matter which was much discussed during the argument - namely, the meaning of the word "reside" and the expression "ordinarily reside" as used in the Income Tax Act.
7. My Lords, the word "reside" is a familiar English word and is defined in the Oxford English Dictionary as meaning "to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place." No doubt this definition must for present purposes be taken subject to any modification which may result from the terms of the Income Tax Act and Schedules; but, subject to that observation, it may be accepted as an accurate indication of the meaning of the word "reside." In most cases there is no difficulty in determining where a man has his settled or usual abode, and if that is ascertained he is not the less resident there because from time to time he leaves it for the purpose of business or pleasure. Thus, a master mariner who had his home at Glasgow where his wife and family lived, and to which he returned during the intervals between his sea voyages, was held to reside there, although he actually spent the greater part of the year at sea: In re Young Rogers v. Inland Revenue. Similarly a person who has his home abroad and visits the United Kingdom from time to time for temporary purposes without setting up an establishment in this country is not considered to be resident here - although if he is the owner of foreign possessions or securities falling within Case IV. or V. of Sch. D, then if he has actually been in the United Kingdom for a period equal in the whole to six months in any year of assessment he may be charged with tax under r. 2 of the Miscellaneous Rules applicable to Sch. D. But a man may reside in more than one place. Just as a man may have two homes - one in London and the other in the country - so he may have a home abroad and a home in the United Kingdom, and in that case he is held to reside in both places and to be chargeable with tax in this country. Thus, in Cooper v. Cadwalader an American resident in New York who had taken a house in Scotland which was at any time available for his occupation, was held to be resident there, although in fact he had only occupied the house for two months during the year; and to the same effect is the case of Loewenstein v. de Salis. The above cases are comparatively simple, but more difficult questions arise when the person sought to be charged has no home or establishment in any country but lives his life in hotels or at the houses of his friends. If such a man spends the whole of the year in hotels in the United Kingdom, then he is held to reside in this country; for it is not necessary for that purpose that he should continue to live in one place in this country but only that he should reside in the United Kingdom. But probably the most difficult case is that of a wanderer who, having no home in any country, spends a part only of his time in hotels in the United Kingdom and the remaining and greater part of his time in hotels abroad. In such cases the question is one of fact and of degree, and must be determined on all the circumstances of the case: Reid v. Inland Revenue Commissioners. If, for instance, such a man is a foreigner who has never resided in this country, there may be great difficulty in holding that he is resident here. But if he is a British subject the Commissioners are entitled to take into account all the facts of the case, including facts such as those which are referred to in the final paragraph above quoted from the case stated in this instance. Further, the case may be different, and in such a case regard must be had to r. 3 of the General Rules applicable to all the Schedules of the Income Tax Act, which provides that every British subject whose ordinary residence has been in the United Kingdom shall be assessed and charged to tax notwithstanding that at the time the assessment or charge is made he may have left the United Kingdom, if he has so left the United Kingdom for the purpose only of occasional residence abroad.
8. Turning to the facts of this case, I think it clear that the appellant falls within the category last described. He is a British subject and formerly resided in England. Early in the year 1918 he formed the project of living abroad and thereupon broke up his establishment in this country; but in fact he continued to reside here in hotels until the end of the year 1919. He then went abroad from time to time, but continued to live in hotels either here or in France and he did not actually find a home abroad until the month of January, 1925, when he took a lease of a flat at Monte Carlo. The result is that during the period from the end of 1919 until January, 1925, he went much abroad, partly for the sake of his own and his wife's health, partly no doubt to search for a house or flat, and partly (as may be inferred from the finding of the Commissioners) in the hope of escaping liability to the English income tax; but none of these purposes was more than a temporary purpose, and he regularly returned to England for the greater part of the summer months though for less than one half of each year. On these facts I think that it was plainly open to the Commissioners to find that during the years in question he was resident in the United Kingdom, and I think it probable that r. 3 above quoted applied to him.
9. It remains to be considered whether during the period in question the appellant "ordinarily resided" in the United Kingdomfor the purposes of s. 46 of the Act, and I think that there was material upon which the Commissioners could answer this question in the affirmative. The suggestion that in order to determine whether a man ordinarily resides in this country you must count the days which he spends here and those which he spends elsewhere, and that it is only if in any year the former are more numerous than the latter that he can be held to be ordinarily resident here, appears to me to be without substance. The expression "ordinary residence" is found in the Income Tax Act of 1806 and occurs again and again in the later Income Tax Acts, where it is contrasted with usual or occasional or temporary residence; and I think that it connotes residence in a place with some degree of continuity and apart from accidental or temporary absences. So understood the expression differs little in meaning from the word "residence" as used in the Acts; and I find it difficult to imagine a case in which a man while not resident here is yet ordinarily resident here. Upon this point also, as upon the other, I think that the finding of the Commissioners cannot be disturbed.
10. For these reasons I am of opinion that this appeal fails.
11. Early in 1918 Mr. Levene, a British subject, formed the intention to "live abroad." He sold his house, in Mayfair, sold such furniture as was not in settlement, and then lived in hotels in Englandfor the best part of two years. I will assume that, but for passport difficulties and the condition of his wife's health, he would have gone abroad sooner. He left England in December, 1919.
12. Accordingly on April 6, 1920, at the beginning of the five years of charge now in question, he was, in the words of r. 3 of the General Rules, "a British subject, whose ordinary residence has been in the United Kingdom" and he remained chargeable to tax notwithstanding, if he had left the United Kingdom for the purpose only of occasional residence abroad. Was that the only purpose of his leaving so far as residence is concerned?
13. The Special Commissioners found that it was, and I think it is clear that they had evidence before them, on which they could so find. His only declaration was that he meant to live abroad, not saying whether it was to be an occasional or a constant, a part time or a whole time sojourn. He was advised by his doctor to seek a better climate, which is consistent with returning to Englandwhen English weather mends. He had gone out of business in England and had broken up his establishment, but he still had in England business interests connected with his income tax assessments, and ties of filial piety and religious observance, for his father was buried at Southampton and he was himself a member of the English community of Jews. What he actually did was to come back to England after an absence of about seven months, and he remained for nearly five. In the meantime he had not set up an establishment abroad but had lived in hotels. This however, was only what he had done in England from March, 1918, to December, 1919. I think there was ample evidence before the Commissioners to show that a man, who left England to live abroad as he had been living here, and when warm weather came returned to his native country and to his permanent associations, had in 1919 "left the United Kingdom for the purpose of occasional residence only." If so, he remained chargeable.
14. So much for the year of charge 1920-1921. In the following years he was a bird of passage of almost mechanical regularity. No material change occurred in his way of living, for his inquiries for a permanent flat came to nothing until so late as not to affect his life and residence for the period in question.
15. It is suggested that the Commissioners misdirected themselves in point of law, because they took into account, with regard to the earlier years, conduct, which only occurred subsequently. I agree that the taxpayer's chargeability in each year of charge constitutes a separate issue, even though several years are included in one appeal, but I do not think any error of law is committed if the facts applicable to the whole of the time are found in one continuous story. Light may be thrown on the purpose, with which the first departure from the United Kingdomtook place, by looking at his proceedings in a series of subsequent years. They go to show method and system and so remove doubt, which might be entertained if the years were examined in isolation from one another. The evidence as a whole disclosed that Mr. Levene continued to go to and fro during the years in question, leaving at the beginning of winter and coming back in summer. His home thus remained as before. He changed his sky but not his home. On this I see no error in law in saying of each year, that his purpose in leaving the United Kingdom was occasional residence abroad only. The occasion was the approach of an English winter and when with the promise of summer here that occasion passed away, back came Mr. Levene to attend to the calls of interest, of friendship and of piety. My Lords, for these reasons I think it unnecessary to express, in regard to Mr. Levene's case, any opinion on the question of the tests of residence which are material for income tax purposes or on the meaning of "temporary" in this connection, in cases where a person not within r. 3, comes from abroad to the United Kingdom and remains for a longer or shorter time but not permanently. Of the other conclusions of the Commissioners I say nothing except that, in my opinion, they in no way impair the soundness of their conclusion on r. 3.
16. I wish, however, to point out the position, in which Mr. Levene and others like him now find themselves. It is trite law that His Majesty's subjects are free, if they can, to make their own arrangements, so that their cases may fall outside the scope of the taxing Acts. They incur no legal penalties and, strictly speaking, no moral censure if, having considered the lines drawn by the Legislature for the imposition of taxes, they make it their business to walk outside them. It seems to follow from this and from other general considerations that the subject ought to be told in statutory and plain terms, when he is chargeable and when he is not. The words "resident in the United Kingdom," whether "ordinarily," or otherwise, and the words "leaving the United Kingdom for the purpose only of occasional residence abroad," simple as they look, guide the subject remarkably little as to the limits, within which he must pay and beyond which he is free. This is the more likely to be a subject of grievance and to provoke a sense of injustice when, as is now the case, the facility of communications, the fluid and restless character of social habits, and the pressure of taxation have made these intricate and doubtful questions of residence important and urgent in a manner undreamt of by Mr. Pitt, Mr. Addington or even Sir Robert Peel. The Legislature has, however, left the language of the Acts substantially as it was in their days nor can I confidently say that the decided cases have always illuminated matters. In substance persons are chargeable or exempt, as the case may be, according as they are deemed by this body of Commissioners or that to be resident or the reverse, whatever resident may mean in the particular circumstances of each case. The tribunal thus provided is neither bound by the findings of other similar tribunals in other cases nor is it open to review, so long as it commits no palpable error of law, and the Legislature practically transfers to it the function of imposing taxes on individuals, since it empowers them in terms so general, that no one can be certainly advised in advance, whether he must pay or can escape payment. The way of taxpayers is hard, and the Legislature does not go out of its way to make it any easier. If it had been possible in this case to apply the principle that a taxing statute must impose a charge in clear terms or fail, since it is to be construed contra proferentem, our duty would have been plain, but since the words are plain and it is only their application that is haphazard and beyond all forecast, Mr. Levene has no remedy in your Lordships' House.
17. So far as it is permissible to express an opinion on the facts, I think that for the purpose of taxing his Colonial and Indian securities Mr. Levene was at all material times resident in the United Kingdom and, for the purpose of taxing his holding in War Loan, it could not be said of him that he was not ordinarily resident here. Accordingly in my judgment his appeal fails.
18. I concur with the judgment of the Lord Chancellor which has just been read by my noble and learned friend Lord Atkin.
LORD WARRINGTON OF CLYFFE
19. The appellant in this case claims relief from income tax for the financial years ending respectively on April 5, 1921, April 5, 1922, April 5, 1923, April 5, 1924, and April 5, 1925.
20. His claim falls under two heads:
(1) In respect of income payable in the United Kingdom on securities of British possessions, and
(2) in respect of income of British War Loan.
21. The claim under the first head is based upon r. 2 (d) of the General Rules applicable to Sch. C.
"No tax shall be chargeable in respect of the interest or dividends on any securities of .... a British possession which are payable in the United Kingdom, where it is proved to the satisfaction of the Commissioners of Inland Revenue that the person owning the securities and entitled to the interest or dividends is not resident in the United Kingdom."
22. The claim under the second head is based upon s. 46, sub-s. 1, of the Income Tax Act, 1918:-
"Where the Treasury have before the commencement of this Act issued or may thereafter issue any securities which they have power to issue for the purpose of raising any money or any loan, with a condition that the interest thereon shall not be liable to tax or super tax, so long as it is shown, in manner directed by the Treasury, that the securities are in the beneficial ownership of persons who are not ordinarily resident in the United Kingdom, the interest of securities issued with such a condition shall be exempt accordingly."
23. War Loan Stock was issued under the condition mentioned in the section.
24. In order therefore to support his claims it was incumbent on the appellant to prove that in the one case he was not resident, and that in the other he was not ordinarily resident in the United Kingdom.
25. His claims having been rejected by the Commissioners of Inland Revenue he appealed to the Special Commissioners for Income Tax.
26. They expressed their decision in the following terms:-
"These (viz., the questions they had to decide) are in our opinion questions of degree, and taking into consideration all the facts put before us in regard to the appellant's past and present habits of life, the regularity and length of his visits here, his ties with this country, and his freedom from attachments abroad, we have come to the conclusion that at least until January, 1925, when the appellant took a lease of a flat in Monte Carlo, he continued to be resident in the United Kingdom."
27. It will be observed that they do not in express terms state that he continued to be ordinarily resident here, but, from the terms in which they state the questions they had to decide, it is clear that the decision was intended to cover both cases.
28. At the request of the appellant the Commissioners stated a case for the opinion of the High Court. The case came before Rowlatt J. on July 23, 1926, who affirmed the decision of the Commissioners and dismissed the appeal.
29. An appeal to the Court of Appeal was dismissed by an order dated March 16, 1927.
30. It is not quite clear whether the Commissioners intended their decision to be a finding of fact or a conclusion of law. If it were the former there is at least ground for saying that it was not open to appeal, but as the case was argued in both Courts below and in this House upon its merits, I think I ought to state shortly my reasons for thinking the decision was correct.
31. The appellant is a British subject. Down to March, 1918, he had a permanent home in London. In that month he sold his furniture and in April he surrendered the lease of his house. He continued, however, to live in England in various hotels until December, 1919. So far there is no question that he was both resident and ordinarily resident in the United Kingdom.
32. He is married but has no children. His family ties are in this country, his wife having five sisters and he himself six brothers and sisters residing here.
33. Apparently under medical advice to the effect that he and his wife should live in the South of France and avoid the United Kingdomin the winter months, he and his wife, in December, 1919, went abroad. They returned to this country on July 10, 1920. From that day until November 24, 1920, they remained in England. They then again went abroad until July 2, 1921, when they returned here and stayed until November 27. They then went abroad. On April 9, 1922, they returned to England, where they stayed until June 18. They were abroad until September 10. From that day until November 19 they stayed here. They then went abroad and remained there until April 12, 1923. On that day they returned and stayed in this country until June 27. They then went abroad, returning on September 10 and staying here until November 15. They were abroad from that day till April 10, 1924, when they returned here and stayed until July 1. From that day until September 10 they were abroad. They then returned and stayed until November 23, when they again went abroad. In no year of assessment did their stay here extend to six calendar months. While abroad they had no settled home, but lived in hotels at Monaco and at various places in France. In England also they lived in hotels. The appellant states that he intended throughout to live abroad, but his intention does not appear to have been of a very pressing character, for, though he made in the course of the years 1922 to 1924 endeavours to find a suitable flat he did not succeed until January, 1925. Since he gave up his house in 1918 he has had no intention of again taking a house or flat in the United Kingdom. He stated to the Commissioners various reasons for his visits to England - to obtain medical advice - to visit relatives - to take part in certain Jewish religious observances - to visit the graves of his parents - to deal with his income tax affairs.
34. These being the facts, the question is whether the Commissioners, the King's Bench Division and the Court of Appeal were wrong in the conclusion at which they respectively arrived.
35. I do not attempt to give any definition of the word "resident." In my opinion it has no technical or special meaning for the purposes of the Income Tax Act. "Ordinarily resident" also seems to me to have no such technical or special meaning. In particular it is in my opinion impossible to restrict its connotation to its duration. A member of this House may well be said to be ordinarily resident in Londonduring the Parliamentary session and in the country during the recess. If it has any definite meaning I should say it means according to the way in which a man's life is usually ordered.
36. In the present case, taking the several years of assessment in succession, in that ending April 5, 1921, there is no substantial difference between the nature of his residence abroad and that of his residence here except that the former was for a longer period. He did in fact, what many wealthy people do at the present time, he spent the winter and spring, and in this particular instance the early summer, abroad and the rest of the summer and the autumn here again going abroad for the winter. In the year ending April 5, 1922, there was no substantial change, but in those ending April 5, 1923, and April 5, 1924, we find a change to this extent, that he now returns to this country in April, goes abroad for the usual summer holiday, and returns to this country till the winter season comes round again. I will assume that, for the purpose of determining whether in any year he is ordinarily resident, the usual ordering of his life must be judged by what he does in that and preceding years only, still in the first year the circumstances show that the stay in England was as much in the ordinary course as his previous residence, and in subsequent years he developed habits of periodical changes of abode, each one of which may be said to be in accordance with the usual ordering of his life.
37. I have not thought it necessary to rest my opinion upon the third of the General Rules applicable to All Schedules, but it is difficult to see any answer to the case of the respondents under it. The appellant is a British subject, his ordinary residence was unquestionably in the United Kingdomuntil December, 1919, and I fail to see that his subsequent departure from the United Kingdom in any of the years in question was otherwise than for the purpose of occasional residence abroad.
38. Rule 2 of the Miscellaneous Rules applicable to Sch. D has no direct application to this case, which is under Sch. C, and I do not see that it throws any light on the two questions which here arise for decision.
39. In conclusion I desire, as far as I am concerned, to leave open the question whether the appellant's position has been altered by the acquisition in January, 1925, of a flat in Monte Carlo as his settled residence there.
40. On the whole I am of opinion that the appeal fails and ought to be dismissed with costs.
41. I am asked to say that my noble and learned friend, Lord Buckmaster, concurs with the motion I am about to propose.