Cooper (Inspector of Taxes) v. Stubbs

[1925] 2 K.B. 753
[1925] All ER 643

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(Judgment by: WARRINGTON L.J.)

Between: Cooper (Inspector of Taxes)
And: Stubbs

Court:

Judges: POLLOCK M.R.

WARRINGTON L.J.ATKIN L.J.

Subject References:
Revenue
Income Tax
Speculations in Cotton
Contracts for future Delivery
Practice of Cotton Brokers
Gambling Transactions
Trade or Vocation
Income Tax Act, 1918 (8 & 9 Geo. 5, c. 40), Sch. D, para. 1 (a) (ii.), (b); Cases I. and VI.

Legislative References:
Income Tax Assessment Act 1918 - 149; Schedule D

Case References:
Cape Brandy Syndicate v. Inland Revenue Commissioners - [1921] 2 K. B. 403
Partridge v. Mallandaine - [1886] 18 Q. B. D. 276
Graham v. Green - [1925] 2 K.B. 37
Erichsen v. Last - [1881] 8 Q. B. D. 414
Thacker v. Hardy - (1878) 4 Q. B. D. 685
Currie v. Inland Revenue Commissioners - [1921] 2 K. B. 332
Ryall v. Hoare - [1923] 2 K. B. 447
Coman v. Governors of Rotunda Hospital, Dublin - [1921] 1 A.C. 1
Attorney-General v. Black - (1871) L. R. 6 Ex. 78, 308
Inland Revenue Commissioners v. Greenwood - [1921] 2 A.C. 171

Judgment date: 30 June 1925

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Judgment by:
WARRINGTON L.J.

I am of the same opinion, though not for quite the same reasons.

The question submitted to the Court by the case stated by the Commissioners is thus expressed: "The question of law for the opinion of the Court is whether the profits arising to the respondent (the appellant in the present appeal) from his dealings in future delivery, contracts are profits assessable to income tax under Sch. D." The charging section in Sch. D is para. 1, which, so far as material, is in these terms: "Tax under this Schedule shall be charged in respect of - ( a ) The annual profits or gains arising or accruing .... (ii.) to any person residing in the United Kingdom from any trade, profession, employment or vocation, whether the same be respectively carried on in the United Kingdom or elsewhere." "Trade" is defined by s. 237 as including "every trade, manufacture, adventure or concern in the nature of trade." Clause ( b ) of para. 1 is: "All interest of money, annuities, and other annual profits or gains not charged under Schedule A, B, C or E, and not specially exempted from tax." The question is whether the profits mentioned in the case come under either of those two charging provisions.

The appellant is a member of a firm of cotton brokers or merchants carrying on an extensive business in Liverpool. In that business they have made considerable profits on which income tax has been assessed and paid, and as to which no question arises. But the appellant, in common with many other persons engaged in the business in which he was engaged, on his own account and independently of his firm, had dealings in future delivery contracts which, at all events so far as he was concerned, were simply speculations in future differences. The question is whether the profits arising from these dealings of the respondent are assessable to tax. The dealings in question, and the appellant's part in them, are thus described in paras. 6 and 7 of the case. [His Lordship read the paragraphs and continued:] Then in the next paragraph (para. 8) of the case, which I do not propose to read, the Commissioners state the amount and number of these particular dealings on the part of the appellant, and we have the details more or less complete of those transactions for six years. It is enough to say that the dealings were considerable in amount; that in some years the profits were large and in others there were losses; but the profits were of a considerable amount, and they were regular in every year of the six years to which the documents before us relate. It is to be borne in mind, also, that these dealings were dealings by a man who was skilled in the knowledge of the market - experienced in the particular trade, and using, no doubt, his skill and knowledge and experience with a view to determining whether a particular speculation was likely to turn out profitable, or the reverse. Moreover, there was nothing whatever in the facts found by the Commissioners to show that, as regards the other parties to them, the contracts were anything other than ordinary commercial contracts.

On these facts two questions arose for decision by the Commissioners. They are stated by them in their statement of the contentions raised on behalf of the appellant as follows: [His Lordship read the contentions set out in the case and the findings of the Commissioners and continued:] These two findings are, in my opinion, quite separate and independent findings. The first is on what is really a question of fact, that the dealings in question did not constitute the carrying on of a trade. The second is not so much a finding of fact as a decision of law turning upon their independent findings of fact that the dealings were gambling transactions, and therefore in their opinion not assessable.

Rowlatt J., by whom the case was heard, came to the conclusion that the Commissioners were not justified in finding that the dealings of the appellant did not constitute a trade, and on that ground, without dealing with the further question as to Case VI. of Sch. D, allowed the appeal from the Commissioners.

The Commissioners are the judges of fact, and this Court, and every Court on appeal from the Commissioners, which has jurisdiction in questions of law only, is very much tempted, when it feels that it cannot agree with the Commissioners in their finding of fact, to find some reason in law by which that finding may be reversed. In my opinion the Court of Appeal ought to be very careful not to yield to that temptation, or to interfere with the decision of the Commissioners on a question of fact except in a very clear case, where either the Commissioners have come to their conclusion without evidence which should support it, that is to say, have come to a conclusion which on the evidence no reasonable person could arrive at, or have misdirected themselves in point of law. I do not say for one moment that Rowlatt J. was wrong in the conclusion at which he arrived, if he had been a judge of facts. On the contrary, although it is purely irrelevant as to what my own opinion is, I should have been inclined to agree with him; but he is not the judge of facts; nor am I; and I am not prepared to go so far as to say that there was no evidence upon which a tribunal such as the Commissioners could have arrived at the conclusion they did. It must be borne in mind that the Commissioners are men of business, who are for that reason selected to deal with these questions relating to income tax, and, as a tribunal, particularly well qualified to decide such questions of fact, and we ought not, nor ought the King's Bench, lightly to set aside their findings on such subjects. In my opinion this is not a case in which it can be said that there was no evidence upon which the Commissioners could arrive at that conclusion. I think, therefore, if it be material, that the finding of the Commissioners with regard to Case I. is one which ought to be accepted.

But then arises the second question, and on that, I think, the conclusion ought to be that the profits arising from the dealings in question are annual profits or gains under para. 1 ( b ) of Sch. D, and would be classified under Case VI., which is this: "Tax in respect of any annual profits or gains not falling under any of the foregoing Cases, and not charged by virtue of any other Schedule." The Commissioners have come to the opposite conclusion, and I think they have done so on the ground, and on the ground alone, that these dealings were gambling transactions. In a sense they were gambling transactions, but in my view that circumstance, on the facts of the present case, at any rate, is irrelevant. They were gambling transactions so far as the appellant is concerned, because, as the Commissioners have said, he entered into them without any intention of taking up actual cotton, or using the contracts as hedges for actual transactions; but they were not wagering contracts, for the reason to which I have already alluded, that, so far as the other parties to the contracts were concerned, there was no evidence whatever that from their point of view they were not real contracts for the purchase or sale of cotton. The question therefore is simply this, were these dealings and transactions entered into with a view to producing, in the result, income or revenue for the person who entered into them? If they were, then in my opinion profits arising from them were annual gains or profits within the meaning of para. 1 ( b ) of Sch. D. On the findings of the Commissioners themselves they were contracts entered into with a view to making a profit on a rise or fall, as the case might be, in the market price of the contracts. They extended over a considerable number of years. There were large numbers of transactions in each of those years, from which in some years the appellant derived considerable revenue; and for myself I cannot see what there is to exclude that revenue from the tax which is charged under Sch. D. It seems to me, therefore, that, in this case, whatever may be the case under different facts, at all events the profits made by these transactions are annual profits or gains, and must be assessable to income tax.

I desire to reserve for consideration, when, if ever, it comes before this Court, the question whether betting transactions which produce a revenue to the person who engages in them may not result in profits which are assessable to tax. That question, when it arises, will have to be decided on the facts of the particular case. So far as this case is concerned, I think, for the reasons I have given, that the question stated by the case ought to be answered by saying that the profits arising to the appellant by his dealings in future delivery contracts are profits assessable to income tax under Sch. D, para. 1 ( b ), and that they should be classified under Case VI.

The result is that the appeal must be dismissed, and dismissed with costs.