Owen v Pook (Inspector of Taxes)
[1969] 2 All ER 1(Judgment by: Lord Pearce)
Owen
v Pook (Inspector of Taxes)
Judges:
Lord Guest
Lord PearceLord Donovan
Lord Wilberforce
Lord Pearson
Subject References:
Income Tax
Income
Emoluments
Perquisites or profits of office or employment
Travelling expenses
Medical practitioner practising at residence and also holding part-time appointments at hospital 15 miles away as obstetrician and anaesthetist
Emergency cases
Payment of allowance for travel by car to hospital
Payment irrespective of the method of travel
Whether emoluments of office
Deduction in computing profits
Expenses
Medical practitioner
General medical practitioner practising at his residence and also holding part-time appointments at hospital 15 miles away
Hospital work as obstetrician and anaesthetist
Emergency cases
Expenses of travel by car to and from hospital
Whether expenses deductible
Legislative References:
Finance Act 1956 (4 & 5 Eliz 2 c 54) - Sch 2, para 1(1)
Income Tax Act 1952 (15 & 16 Geo 6 & 1 Eliz 2 c 10) - s 156, Sch E, Case 1, as substituted by Finance Act 1956 (4 & 5 Eliz 2 c 54), s 10(1), and Sch 9, r 7 to the Act of 1952
Case References:
Fergusson (Surveyor of Taxes) v Noble - [1919] SC 534; 7 Tax Cas 176; 28 Digest (Repl) 237, *565
Hochstrasser (Inspector of Taxes) v Mayes - [1958] 1 All ER 369; [1959] Ch 22; [1958] 2 WLR 982, affd CA; [1958] 3 All ER 285; [1959] Ch 22; [1958] 3 WLR 215, affd HL; [1959] 3 All ER 817; [1960] AC 376; [1960] 2 WLR 63; 38 Tax Cas 673; Digest (Cont Vol A) 888, 987
Newsom v Robertson - [1952] 2 All ER 728; [1953] Ch 7; 33 Tax Cas 452; 28 Digest (Repl) 158, 618
Nolder v Walters - (1930), 15 Tax Cas 380; 28 Digest (Repl) 244, 1074
R v Postmaster General - (1878), 3 QBD 428; 47 LJQB 435; 38 LT 89; 38 Digest (Repl) 78, 539
Ricketts v Colquhoun (Inspector of Taxes) - [1924] 2 KB 347, affd CA; [1925] 1 KB 725, affd HL; [1926] AC 1; 95 LJKB 82; 134 LT 106; 90 JP 9; 10 Tax Cas 118; 28 Digest (Repl) 242, 1059
Judgment date: 26 March 1969
Judgment by:
Lord Pearce
My Lords, the taxpayer is a doctor carrying on a general practice at Fishguard, which is 15 miles from Haverfordwest. Since the medical needs of the hospital at Haverfordwest exceeded the supply of medical practitioners there, the hospital had to call on the part-time services of a Fishguard practitioner. Accordingly, the taxpayer was employed or appointed to act as a stand-by for emergencies, one weekend a month as an obstetrician, and one weekend a month (and also Monday and Friday nights) as an anaesthetist. He had to be available on the telephone at Fishguard. As soon as he received a telephone call his responsibility for the patient at Haverfordwest started. If he could deal with the case merely by instructions on the telephone he did so. But in the normal case he would give instructions to the hospital staff (eg, to prepare the patient for an operation) and set out immediately in his car for the Haverfordwest hospital. For the expense of these journeys he was re-imbursed, or partially re-imbursed, by the hospital management committee at whatever was the proper rate per mile under the terms and conditions of service of hospital medical and dental staffs. These conditions expressly state that:
"Travelling, subsistence, and other expenses shall be paid to meet actual disbursements of officers engaged in the service of Boards or Committees and shall not be regarded as a source of emolument or reckoned as such for the purposes of pension."
Nobody suggests that the re-imbursements were over-generous. The taxpayer was in fact re-imbursed only in respect of ten miles out of each 15-mile journey and had to bear the cost of five miles of the journey himself. The commissioners found, as I would expect, that "his travelling expenses ... to and from an emergency were wholly, exclusively and necessarily incurred or expended in the duties of that office".
Yet it has been held that he must pay tax on these re-imbursements as if they were income or profit received by him. The point can be underlined by the following example. Suppose that there were some constantly recurring emergency in the most distant part of Pembroke which he was constantly expected to deal with gratuitously and without any extra pay, but he was merely reimbursed for the railway ticket which he had taken to get there and back (or only for 2/3rds of his rail tickets so that each time he incurred an actual loss). In that case he would admittedly, if the argument of the Crown is correct, pay tax on all the re-imbursements or partial re-imbursements of his railway tickets.
Such a situation would be obviously unjust. If it be correct, it is clear that something has gone seriously wrong with the enactments or the case law or with both. It must be disturbing to the citizen if such a situation can arise. Such an injustice is not in the interests of anyone-certainly not of the Crown since injustice causes evasion. Each year there is an adjustment of the mechanism of taxation wherever that is necessary to ensure that ingenious schemes of avoidance shall not succeed. There is a corresponding duty to adjust the mechanism where it is found to be creating a clear injustice.
On the findings of the commissioners the expenses were incurred in the performance of his duties. In my opinion, that finding was correct and the expenses were allowable under r 7 of Sch 9 to the Income Tax Act 1952. It was as a doctor practising in Fishguard that the taxpayer was appointed to his stand-by duties. He was to stand-by in Fishguard. In Fishguard on the telephone he undertook his responsibilities to the patient and the hospital and no doubt he discussed the symptoms and made various arrangements as to what should be done by way of alleviation in the half-hour which must elapse before he could arrive. If he were held up on the road he would be under duty to ring through and make any resulting arrangements. If anyone asked him en route what he was doing he would probably say truthfully that he was on hospital duty. He would not, I think, be even pedantically accurate if he said: "I was on hospital duty on the telephone a quarter of an hour ago and shall be on hospital duty in a quarter of an hour's time, but at the moment I am driving on my own account". I do not find it helpful to consider whether, if he knocked down a pedestrian he would make the hospital liable or, indeed, whether he would do so if an accident happened when he had been to the hospital first and had been there directed on to an emergency case nearby. This has no decisive bearing on the point in issue. His duty to the hospital and the patient started on the telephone, and he was thereafter responsible to the hospital and the patient until he had dealt with the patient, whether he made his journey to the hospital in his own car or as passenger in a hired car. In my opinion, the finding of the commissioners was correct and should be upheld.
It is argued that the case of Ricketts v Colquhoun (Inspector of Taxes) compels us to hold otherwise. With all respect to their Lordships who decided that case, I find it, as some others have done, very unsatisfactory both in its result and in its reasoning. In order to carry out his duties as recorder, the taxpayer had to travel to Portsmouth, since he was a London practitioner (and it was, no doubt, by virtue of his London practice that he was appointed recorder). It was, therefore, unreasonable to tax him on the emoluments of his office without allowing the travelling expenses. For that would be to tax him on a sum larger than the true profit of the office. Rowlatt J described the position as unreasonable, but felt compelled by the rules to come to an unreasonable conclusion. Warrington LJ managed to give a more reasonable meaning to the rules, but his view did not prevail. In my opinion, that case should be considered afresh by your Lordships' House. It is contended that Parliament by re-enacting the section in 1952 gave countenance to the case. But the Act was a consolidation, and fresh consideration cannot, I think, have been given to the subject since the short re-enacted section refers only to one express expense and that is the "keeping and maintaining a horse to enable him to perform" the duties. This could not have resulted from a fresh consideration of a section which would be striving to do justice to modern transactions in a modern world. Obviously difficulties are caused by the archaic artificial division between Sch D and Sch E, especially if a man is taxed separately under each when both activities are really part of the same profession.
There is a further point raised by the taxpayer in the Court of Appeal. He contends that re-imbursements such as that which is here in question do not come within the "emoluments" of an appointment or employment under Sch E. They therefore never fall to be charged, and it is unnecessary to consider whether they are allowable under r 7. In my opinion, that contention is correct. "Emoluments" are charged. These are defined as including "all salaries, fees, wages, perquisites and profits whatsoever".
The re-imbursements of actual expenses are clearly not intended by "salaries", "fees", "wages" or "profits". It is contended that they are "perquisites". The normal meaning of the word denotes something that benefits a man by going "into his own pocket". It would be a wholly misleading description of an office to say that it had very large perquisites merely because the holder had to disburse very large sums out of his own pocket and subsequently received a re-imbursement or partial re-imbursement of these sums. If a school teacher takes children out for a school treat, paying for them out of his (or her) own pocket, and is later wholly or partially re-imbursed by the school, nobody would describe him (or her) as enjoying a perquisite. In my view, perquisite has a known normal meaning, namely, a personal advantage, which would not apply to a mere re-imbursement of necessary disbursements. There is nothing in the section to give it a different meaning. Indeed, the other words of the section confirm the view that some element of personal profit is intended.
I would therefore allow the appeal.