HL Deb 03 April 1930 vol 76 cc1227-38

VISCOUNT DUNEDIN rose to call attention to the practice of appeals to the House of Lords in Income Tax cases. The noble and learned Viscount said: My Lords, it may possibly be within the knowledge of some of your Lordships that on a recent occasion I indicated, in the judicial business of the House, that I thought it necessary to call attention to what I considered a practice which was being abused, of the Crown coming to your Lordships' House on every occasion on which they had lost, irrespective of whether the case was really worth being brought to the Supreme Tribunal. I am not going into that matter again. I am

Amendment moved— Leave out ("adopted") and insert ("referred back to the Committee".)—(The Earl of Iveagh.)

On Question, Whether Paragraph 2 be referred back to the Committee?

Their Lordships divided; Contents, 11; Not-Contents, 55.

Iddesleigh, E. Esher, V. Marley, L. [Teller.]
Iveagh, E. [Teller.] Mersey, V. Melchett, L.
Onslow, E. Stewart of Garlies, L. (E. Galloway.)
Strafford, E. Jessel, L.
Kirkley, L.
Canterbury, L. Abp. FitzAlan of Derwent, V. Hampton, L.
Goschen, V. Hanworth, L.
Sankey, L. (L. Chancellor.) Hailsham, V. Hemphill, L.
Hutchinson, V. (E. Donoughmore.) [Teller.] Lamington, L.
Parmoor, L. (L. President.) Lawrence, L.
Lee of Fareham, V. Leigh, L.
Salisbury, M. Marks, L.
Addington, L. Monkswell, L.
Beauchamp, E. Annaly, L. Monson, L.
Clarendon, E. Arnold, L. Newton, L.
Denbigh, E. Askwith, L. Ponsonby of Shulbrede, L.
Grey, E. [Teller.] Atkin, L. Redesdale, L.
Lauderdale, E. Auckland, L. Ritchie of Dundee, L.
Lucan, E. Clwyd, L. Sinclair, L.
Stanhope, E. Darling, L. Stanley of Alderley, L. (L. Sheffield.)
Vane, E. (M. Londonderry.) Daryngton, L.
Desart, L. (E. Desart.) Stanmore, L.
Brentford, V. Dickinson, L. Trenchard, L.
Burnham, V. Fairhaven, L. Wharton, L.
Churchill, V. Greenway, L. Wigan, L. (E. Crawford.)
Dunedin, V. Greville, L. Wraxall, L.

On Question, Motion that Paragraph 2 of the Report be adopted, agreed to.

content to let bygones be bygones, and that all the more because I have been informed that in the last case in which I made these remarks the Crown authorities have, I think very properly, told the litigant, who had won the case before every Judge before whom it came, that they are prepared to pay his costs as between solicitor and client; but I should not have put down the Notice on the Paper merely to say what I have said. I put it down because I do not wish to appear as a mere critic when, as I believe, there is a perfectly easy remedy to meet what I think is an abuse, and what I think, from the notice taken of my remarks in the Press, is evidently considered an abuse by a widespread feeling throughout the country.

The proposition which I have to make is not original. It is not my own and I do not claim any credit for it, but it is much the best that I have seen put forward. There has been a certain amount of correspondence, and various people have proposed that in every case between taxpayer and Crown the costs should be met by the Crown. I do not think that that would ever do. I think that would simply lead to an abuse at the instance of the taxpayer—precisely the same abuse as the abuse at the instance of the Crown. But what I do propose is this. When the Crown wins in the Court of Appeal then let matters be just as they are. If the taxpayer chooses to go to the House of Lords, let him go at his own risk. But when the Crown loses in the Court of Appeal, then I would propose that the Crown should not be allowed to come to your Lordships' House except with the leave of the Court of Appeal, and that it should be possible, although not at all necessary, that the Court of Appeal should clog that permission to appeal with such conditions as to costs as it should think fit. I confess I think that that would meet the situation.

I think the Court of Appeal could perfectly be trusted to give leave in all proper cases. For instance, supposing the Crown had won before the Judge of First Instance, and then that judgment was reversed by two to one in the Court of Appeal. Of course, that would be a case in which certainly leave ought to be given. Then there are other cases where even the judgment might be unanimous and yet the question was of such far-reaching importance that it was right to have the decision of the highest Tribunal on the matter. I think the Court of Appeal can be trusted to give leave on those occasions. And I do believe that if that was done the two objects which are sought would both be obtained. The two objects are: first, that the Crown should have the chance of having really general questions decided by the highest Tribunal; and, secondly, that some unfortunate mortal should not be made the whipping boy to stand the expense of having that general question determined. I am not, of course, expecting for one moment that the Government should say "Yes" to what I am saying, but I ask them, if they will, to give an undertaking that they will consider this proposal, so that if it commends itself to them it may be put in the next Finance Bill.


My Lords, I need scarcely tell you that any suggestions or remarks of the noble and learned Viscount will receive full consideration by the Government. He has not expected anything in the nature of a definite reply on this occasion, and I am quite sure that he will not look for anything of the sort at such short notice; but I can assure him that his suggestion will be considered. I do not think it necessary to trouble your Lordships at any length on the general question, but, as the noble and learned Viscount spoke, I think, of the abuse which had taken place in regard to this matter of appeals, I think it is only right for me to say that the Board of Inland Revenue do not enter appeals from decisions given against them by the Court of Appeal or the Court of Session unless there is a very large sum of money at stake, or an important point of principle is in issue, which would involve large sums of money in other cases. But in all cases where the Board are themselves seeking to establish some new point of principle in Income Tax administration they pay the taxpayer's costs, whether they are successful or not.

There have been two cases recently in which the noble and learned Viscount has made adverse comments, and if those two cases are put to the test of the principles, if I may so call them, to which I have just referred, it will be found that they do fully comply with them both. In view of the attitude of the noble and learned Viscount, who said that he was not going to pursue these matters, I do not think it would be at all appropriate that I should do so in any detail. I think, though, I might without impropriety allude to the fact that in the first case about which the noble and learned Viscount made comments, the amount involved was about£200,000. A decision in favour of the Revenue had been made in the High Court by a Judge very experienced in Income Tax matters, and the basis of assessment for which the Revenue were contending was one which had hitherto been accepted in similar cases without question. And in the vast majority of cases that basis was more favourable to the taxpayer than the basis which the House of Lords has now declared in be the right one. I think it is clear, then, that a very important principle was at stake, and the result of the decision of the House of Lords will be that the Revenue will have to change its practice, and in future taxpayers in a similar position will be assessed on what will ordinarily be a more stringent basis than that which the Board previously adopted.

I think it is only right to say that much in view of the fact that the noble and learned Viscount used the word "abuse," but I will not pursue it further. Nor will I make any reference to the other case, nor will I discuss some of the very important considerations which will have to be taken into account in regard to the suggestions and proposals of the noble and learned Viscount. I will only assure him again that what he has said—and I say this quite sincerely—will receive full consideration by the Government.


My Lords, my noble and learned friend Lord Dunedin speaks with an authority on these matters which is entitled to the respect which the Government have promised to give to his suggestion. With studied moderation he has only asked that his suggestion should have consideration, and naturally that is a request which no Government could possibly refuse. But I think that I should be perhaps failing in my duty if I were to leave the debate here, and leave your Lordships perhaps under the impression that legal, and indeed judicial, opinion in this House was unanimously in favour of the proposal which the noble and learned Viscount has put before the Government. I cannot claim to speak with anything like my noble and learned friend's authority in judicial matters. It has been my lot to preside in some Revenue appeals, and I have had perhaps even more experience than my noble and learned friend in arguing those appeals both in the Court of Appeal and before your Lordships' House; and I am bound to say that, speaking from my experience, I do not think the suggestion which my noble and learned friend has put forward for consideration is one which commends itself to me, at any rate on such consideration as I have been able to give to it, and, as he knows very well, it is a suggestion which is not now made for the first time.

The suggestion is that the Crown in Revenue cases shall have imposed upon it a limitation to which no other litigant is submitted. The suggestion is made on the ground, which no doubt is a perfectly true ground, that the Crown has behind it resources which the ordinary litigant cannot command and that, therefore, there is a risk of those resources being abused to the oppression of the poorer litigant. That, of course, is true. It is true in every case in which one litigant has large resources behind him and the other is in a comparatively poor position. It is not limited to the cases in which the Crown is one of the parties. In every case in which the Crown is a party it cannot fail to happen that there must be a certain, I do not want to be misunderstood if I use the word bias, but a certain feeling of sympathy against the Crown. In every case in which there is a wealthy corporation on the one side and an individual on the other there is a natural feeling in favour of the individual and against the corporation. Anyone who has practised in jury cases must remember the difficulty which a railway company, or an omnibus company, or an insurance company feels in contesting a claim on the part of an individual for damages for injury, and the difficulty there is in persuading the jury to overcome their natural feeling that, after all, here is a poor man on the one side who has suffered damage and on the other side a wealthy corporation who can well afford to pay. Even Judges are not exempt from this human feeling. They cannot help feeling that same inclination, although, no doubt, they bravely struggle against it in the discharge of their judicial duties.

It seems to me that by limiting the right of appeal to those cases in which the Court of Appeal chooses to give leave, you are preventing the Crown from appealing and, therefore, preventing, your Lordships will remember, the general body of taxpayers (because those are the people whom the Crown represents) from appealing in precisely those cases in which it may be most necessary to give the Crown the right to appeal—namely, those cases in which, unhappily, the Judges in the Court of Appeal have allowed themselves to be a little misled by the sympathy to which I have already referred. From my own experience I am quite sure that some of the cases in which I have been most successful in obtaining in this House a reversal of decisions of the Court of Appeal have been precisely those cases in which the Court of Appeal were most certain that the Crown was wrong and would have been absolutely unanimous in refusing leave to appeal had I asked them. As my noble friend Lord Arnold, who has just spoken for the Government, has said, it very often happens that a decision which is in favour of an individual taxpayer in a given case works hardship to the great majority of taxpayers who have to abide thereafter by the principle laid down in his particular case.

The real remedy for the abuse, if there be an abuse, of the Crown's power, lies in the proper discharge of their duties by the Law Officers of the Crown. Again I speak of my own experience only because this is a matter in which I can speak with some little knowledge. When I was Attorney-General, I think, although I have not worked out the figures, that I must have been successful in something like 80 per cent. of the cases which came before your Lordships' House. Before ever an appeal was entered by the Board of Inland Revenue to your Lordships' House there first had to be an opinion by the counsel for the Commissioners of Inland Revenue, not an official at all, but a barrister of very great experience in Revenue cases. Secondly, as your Lordships know, the petition of appeal had to be signed by two counsel, one of whom in a Crown case would always be whichever of the Law Officers had argued that case before the Court of Appeal.

It was my practice, and the practice of my Solicitor-General, my learned friend Sir Thomas Inskip, and I doubt not it is the normal practice of a Law Officer (I expect my noble and learned friend Lord Hanworth would be able to confirm me) before signing notice of appeal in a Revenue case to give some consideration to the case, which, after all, he has argued, with the merits of which he is well acquainted and the importance of which he will be able to judge. Unless he thinks it is a proper case to bring before your Lordships' House it would be the duty of the Law Officer (a duty which I have discharged before now) to ask the solicitor for the Board of In- land Revenue to come to see him, and to explain either that there ought to be no appeal at all or, if there were an appeal, that an undertaking should be given to pay the costs, whichever way the appeal went. As the noble Lord, Lord Arnold, has pointed out, the Inland Revenue normally do that in cases in which they are seeking to decide some great point of principle on a matter in which the actual sum at stake in the individual case is unreasonably small. It is in that direction that a proper check ought to be imposed, and is imposed, upon any risk of abuse of the resources of the Crown in such litigation as the noble and learned Viscount has brought to your Lordships' attention.

I am not in the least suggesting that those proper considerations have not been gone into by whoever has been advising in the recent appeals before your Lordships' House. Your Lordships Twill, understand that it sometimes happens that points arise which are of much greater importance from the point of view of administration than is apparent in the actual argument before this House. The noble Lord, Lord Arnold, pointed out that in one case in which the noble and learned Viscount, Lord Dunedin, has said no question of importance was involved, there was in fact a system of assessment being upset which would cause a revolution in the practice of the Board of Inland Revenue. I speak without any prejudice of that particular case, because I am sorry to say I have not even read the judgment.


If the noble Viscount had read it he would not say what he is saying.


I am only saying that the noble Lord, Lord Arnold, has told your Lordships that that is the fact, and I should say that whether I had read the judgment or not. No doubt it is possible that a mistake might be made by a Law Officer. Your Lordships will forgive me for saying that it is equally possible that a mistake might be made by the Court of Appeal. No human machine is perfect. But I think that it is in the direction of tightening the administrative machinery and of insisting on a more rigid examination of eases by the Law Officers that a remedy is to be found, rather than in giving the Court of Appeal the right and the duty of deciding whether or no the Crown shall be at liberty to appeal from a decision which the Court of Appeal has just given, when I have no hesitation in saying, without disrespect to that Court, it is precisely in those cases in which the Crown most needs the right of appeal that it would be least likely to get leave granted.

I have felt it right to trouble your Lordships with those observations so that the Government shall not think there is only one opinion. I have no doubt that the noble and learned Lord on the Woolsack, speaking with the great authority of his position, can advise your Lordships and, if he thinks fit, the Government what their decision ought to be; but I thought I ought to explain to your Lordships' House why I should not feel myself in favour of the suggestion which my noble and learned friend has put forward.


My Lords, I hesitate to say much upon this subject because I remember that, in addition to my functions here, I have a judicial office, and I am very anxious not to say anything which would impart colour to my judicial view on any case which might arise. I am quite sure that this view is shared by my noble and learned friend Lord Dunedin. At the same time, anything which falls from the noble and learned Viscount, not only ought to receive, but must receive, the most careful attention of any Government, having regard to his very long experience, if I may say so, in both countries. I can assure him that this matter shall be most carefully considered by the competent authorities. Far be it from me to give a judgment before I hear all that can be said, but as at present advised I am not quite sure that my mind will go in the same way as that of the noble Viscount. I think every case should depend upon its own facts, and I rather agree with what has been said by the noble and learned Viscount, my predecessor, Lord Hailsham, that this is rather a matter for the exercise of their functions by the Law Officers of the Crown. At the same time, the noble and learned Viscount's remarks shall be most carefully considered.


My Lords, I have no right to speak again except with leave of the House. I do regret the remarks that have fallen from the noble and learned Viscount in front of me (Viscount Hailsham). I do not think he was very kind in referring to my judicial experience. I do not know that this question depends on judicial experience. The noble and learned Viscount was perhaps a little wrong, if I may say so, when he talked of much greater experience of arguing Crown cases. No doubt he was very young when it happened, but after all I was for eleven years a Law Officer of the Crown, and argued a good many of these cases. But really the result of his speech is that things ought to remain just as they are. I am perfectly certain that the general feeling in the country is that they ought not to remain just as they are.

I had said that I would not go back into matters, but it has really become necessary to say something. I will take an instance. There were various comments in the newspapers as to what I had said. I happened to go into a shop and they said: "Oh, we have seen what you have been saying. You know that was just our case. We had a case and we thought we were right, and our solicitor asked about it, and the answer he got was, Well, you may try the case if you like, but we will take you to the House of Lords.'" That is the general feeling in the country, and I believe if the solicitors of London were asked, they would all say that when a client comes to them upon an Income Tax case they say: "Well, remember, you won't win short of the House of Lords." There are statistics I would like to get and they are these. Within the last two years how many cases have been decided against the Crown in the Court of Appeal, and of those cases how many have been taken on appeal to this House? I should not be a bit surprised to hear it was every one. As regards the other matter, I quite accept the noble Viscount's correction that he was only saying what Lord Arnold had said, and I have no doubt that what Lord Arnold said was put into his mouth by the Department, because I do not suppose Lord Arnold has read the report in which I made the remark.


I read it next day in The Times.


Then I am sorry to say you thoroughly misunderstood it, when you said that the judgment would be, in the long run, against the taxpayer. I say it is impossible to say that, and I will show that in a moment by telling your Lordships what the case was. As you know, the ordinary computation of profits for a company is a three years' average, but of course a company may be set up within three years, and, therefore, there is another section which says that if that is the case then you are to take one year with certain adjustments. Now what had happened in this case was this. It was a company which was not subject to Income Tax at all, because it was a company entirely abroad, and what it did was this. It changed its direction to London, and the consequence was that it became for the first time liable to Income Tax, and the question was: Was this company—it was a very old company; there had not been a thing altered except the direction—was this company in the sense of the Statute set up within the three years or not? How can you say that the result of the decision will be for the Crown or against the Crown? You cannot foretell the future and say whether it is against the Crown or for the Crown. That depends entirely upon whether the particular year in which this thing happens is a fat year or a lean year. In the case in point it happened to be a fat year, and therefore it suited the Crown better to take the one year and not the three, but if it had been a lean year it would have suited the Crown better to take the three years.

My noble friend on the other side of the House is not a prophet, and he cannot tell when this point is raised again whether it will suit the Crown one way or the other. That is why I say it was a useless case, because the Crown did not know; it was in the dark as to whether the decision in one way or the other would be for its favour or not. So much for that. As far as the general question is concerned, I readily acknowledge the courtesy of the Government in the statement, that they will consider the matter, but I am afraid they will not consider it very favourably after what my noble friend has said. I must say that it seems to me that the idea that is dominant in the speech of my noble friend is a thorough distrust of the Court of Appeal. Why the Court of Appeal cannot be trusted to give leave in a proper case I cannot imagine. As to the conduct of Crown cases, while he held office as a Law Officer I do not doubt it was all right, but after all one may have many benefits but we cannot have him as a sempiternal Attorney-General.


My Lords, my learned colleague and my noble friend Lord Arnold cannot speak again, and it is only by permission of the House that the noble and learned Viscount spoke. I find no fault with that. It has been pointed out in the two speeches delivered from the opposite side of the House by the noble and learned Viscount, Lord Dunedin, and by the noble and learned Viscount, Lord Hailsham, that this is a matter which, as the noble and learned Lord Chancellor said, requires and will obtain most careful consideration. I am sure everyone is agreed that that is right. I must make one little protest, if it may be called 'a protest, on behalf of my noble friend Lord Arnold, who cannot make it himself. He certainly desires to reiterate what he said about the particular case. As he cannot speak again, I think it is right to say that on the information he has received, the source of which the noble and learned Viscount properly attributed to the Department as well as from his own reading of the case, I am afraid there is a difference of opinion between the noble and learned Viscount and himself that we cannot solve at the present time.

House adjourned at seven o'clock.