Bank Voor Handel en Scheepvaart NV v. Slatford and Anor
[1953] 1 QB 248(Judgment by: Romer LJ)
Between: Bank Voor Handel en Scheepvaart NV
And: Slatford and Anor
Judges:
Devlin J (27 June 1951 to 17 July 1951; 30 July 1951)
Evershed MR (6-8 October 1952; 3-4 November 1952)
Denning LJ (6-8 October 1952; 3-4 November 1952)
Romer LJ (6-8 October 1952; 3-4 November 1952)
Subject References:
INTERNATIONAL LAW
Foreign legislation transferring movable property in England
Whether enforceable in England
Decree of allied government in London
Public policy
TRADING WITH THE ENEMY
Peace Treaty
Hungary
Charge on property 'belonging to' or 'held or managed on behalf of' Hungarian national
One-man company
All shares held by Hungarian national
Whether charge imposed
CROWN PREROGATIVE
Custodian of enemy property
Income of investments of property made by the custodian not exempt from tax
Legislative References:
Treaty of Peace (Hungary) Order, 1948 - (S.I. 1948, No. 116), art. 1 (2), (3), (5) (g)
Trading with the Enemy Act, 1939 - (2 & 3 Geo. 6, c. 89), s. 7
Case References:
Lorentzen v. Lydden and Co. Ltd, not followed - [1942] 2 K.B. 202
O/Y Wasa S.S. Co. Ld. and Another v. Newspaper Pulp and Wood Export Ltd, not followed - (1949) 82 Ll.L.Rep. 936
Government of the Republic of Spain v. National Bank of Scotland Ld., followed. - [1939] S.C. 413; (63 Ll.L.Rep. 330, sub nom. The El Condado)
Judgment date: 4 November 1952
Judgment by:
Romer LJ
I agree that this appeal must be allowed. It cannot be and was not disputed by the bank that if the interest or profits which are in question in this appeal had been received by a private citizen for private purposes, they would have been chargeable to tax under section 1 and Sch. D of the Income Tax Act, 1918. Immunity, however, is sought to be claimed for them from this prima facie liability by an application of the general principle that the Sovereign is, by virtue of the prerogative, exempted from every Act which imposes a tax on the subjects. As the profits now in question never formed part of the personal revenue of the Sovereign, they cannot, as I see it, qualify for protection from taxation under the principle of Crown immunity, unless it can be shown that they were applicable by the custodian, who received them, exclusively for the purposes of the Crown - or, in other words, for public purposes. In my judgment, revenue which is so applicable is exempt from income tax whatever he the status of the recipient; and, on the other hand, income which is received by any servant of the Crown, but is not so applicable, is chargeable to tax notwithstanding the status of the person who receives it. I emphasize this aspect of the matter because it would appear that in the court below attention was mainly concentrated upon the question of the status of the custodian. In my opinion, that point (if relevant to the present problem at all) is material only in so far as it throws light on the one question which is of real significance, viz.: To what purposes could the income under discussion be applied? The importance of this question becomes apparent at once if one considers the position, for example, of a minister who is in charge of one of the spending departments of Her Majesty's Government. Such a minister is undoubtedly a servant of the Crown; but it is as obvious that his own private income is, notwithstanding his status, chargeable to income tax as it is that revenue placed at his disposal for the purposes of his department is not. From this it follows that immunity from taxation of income which is otherwise chargeable attaches (if at all) to the income and not to the recipient - except, of course, in the case of Her Majesty herself. The question, therefore, and the only relevant question for the purposes of the appeal, is whether the purpose to which the profits in the hands of the custodian were applicable were public purposes or not.
As a preliminary to this inquiry, it must, of course, be ascertained what is meant by the phrase "public purposes." As to this, the following criteria were laid down by Lord Westbury L.C. in the cases of Mersey Docks & Harbour Board Trustees v . Cameron (11 H.L.Cas. 443, 505.) and Greig v. University of Edinburgh (L.R. 1 Sc. & D. 348, 354.). In the former he said that public purposes "must be such as are required and created by the Government of the country, and are therefore deemed part of the use and service of the Crown." In the second case he somewhat amplified this definition by saying that such purposes are "the purposes of the administration of the government of the country."
Was, then, the income in the hands of the custodian applicable to public purposes as so defined? The destination of property which became vested in the custodian was prescribed by the Trading with the Enemy Act, 1939, s. 7, and by the various regulations to which reference has already been made in the judgments which my brethren have delivered. No distinction need be drawn in this regard between the property itself and the income which could be expected to derive from it by reason of the authority which the Board of Trade gave to the custodian to invest it. Under the relevant regulations, then, the assets in the custodian's hands (both capital and income) might, if the Board of Trade so directed, be paid over at any time to or for the benefit of the person who would have been entitled thereto but for the operation of the Act of 1939 or any order made thereunder; subject to this, the custodian was to retain such assets until the termination of the war and thereafter deal with them in such manner as the Board of Trade should direct. In addition, there vas the general power of direction exercisable by the Treasury (which was apparently never in fact exercised) established by paragraph 4 of the Defence (Trading with the Enemy) Regulations, 1940. Unless and until some direction was given to the custodian by the Board of Trade or the Treasury, the ultimate destination of the assets remained uncertain. Two things, however, at least were clear. The first was that the assets might at any time during the war be restored to their former owner. The second (which in fact occurred) was that they might be so restored after the war was over. In view of these manifest possibilities, it seems to me impossible to say - as, in my judgment, must be said if the bank are to succeed - that the only purposes to which the assets could properly be applied were "the purposes of the administration of the government of the country."
This view of the matter appears to me to be destructive of the bank's case. It was argued on their behalf that the custodian cannot be assessed to income tax under rule 1 of the Miscellaneous Rules applicable to Sch. D because he possesses Crown status. This contention, however, is essentially interlocked with the question whether or not the income which he receives is applicable to public or to private purposes. If the former, cadit quaestio - for the income itself is immune from taxation and consequently no question of assessment arises; if the latter, he is just as liable to assessment as is any servant of the Crown in respect of income which he receives for private purposes.
There are only two further points which I should like to mention. The first is that I agree that, for the reasons which the Master of the Rolls has indicated, the conclusion at which we have arrived is in no way inconsistent with the case of the Administrator of Austrian Property v. Russian Bank for Foreign Trade ( 48 T.L.R. 37 .). Secondly, I entirely concur with the Master of the Rolls' observations with regard to the "suspense" of beneficial rights in relation to enemy property during such time as the property remains vested in the custodian; and to those observations I have nothing to add. Accordingly, I agree that this appeal should be allowed.
Appeal allowed . Leave to appeal to the House of Lords .