Edwards (Inspector of Taxes) v. Bairstow and Anor

[1956] A.C. 14

(Judgment by: Viscount Simonds)

Between: Edwards (Inspector of Taxes) - Appellant
And: Bairstow and Anor - Respondents

Court:
House of Lords

Judges:
Viscount Simonds
Lord Radcliffe
Lord Tucker
Lord Somervell of Harrow

Subject References:
REVENUE
INCOME TAX
Profits of trade
Isolated transaction
Adventure in the nature of trade
Purchase and sale of spinning plant
Finding of General Commissioners
Review
Principles

Legislative References:
Income Tax Act, 1918 (8 & 9 Geo. 5, c. 40) - Sch. D, Case I

Hearing date: 20-22 June 1955
Judgment date: 25 July 1955

Judgment by:
Viscount Simonds

In 1946 the respondents, neither of whom had previously had any transactions in machinery, embarked on a joint venture to purchase for £12,000 a complete spinning plant, agreeing between themselves not to hold it but to make a quick resale. Potential purchasers were approached and there were divers negotiations, but it was not until February, 1948, that the whole plant had been sold in several lots at a profit of £18,225 11s. 3d. There had been no advertising, but expenses had been incurred for commissions for help in effecting the sales, for insurance, renovation of the plant, office work in connexion with the transaction, travelling and entertaining and rent for the housing of the plant. The General Commissioners found that there was not an adventure in the nature of trade to justify an assessment to income tax under Case I of Schedule D to the Income Tax Act, 1918:-

Held, that the facts found led inevitably to the conclusion that the transaction was an adventure in the nature of trade and that the commissioners' inference to the contrary should be set aside.

Per Viscount Simonds: The finding that the transaction was not an adventure in the nature of trade is an inference of fact but can be set aside because it appears that the commissioners have acted without any evidence or on a view of the facts which could not reasonably be entertained. In making that inference they are to be assumed to have been rightly directed in law as to the characteristics which distinguish such an adventure, and, so far as the Scottish courts have diverged from this approach to such problems, the other approach, adopted by the English courts, is to be preferred.

Per Lord Radcliffe: Without any misconception of law appearing on the face of the case stated, the facts found may be such that no person acting judicially and properly instructed as to the relevant law could have come to the determination reached; the court may then intervene, having no option but to assume that some misconception of law is responsible for the decision. There is no divergence between the approach of the English and Scottish courts on the principle that such a determination can only be upset if it is erroneous in point of law, but there may have been some divergence in the application of that principle.

Cooper v. Stubbs [1925] 2 K.B. 753 ; 41 T.L.R. 614 ; Jones v. Leeming [1930] A.C. 415 ; 46 T.L.R. 296 and Inland Revenue Commissioners v. Fraser, 1942 S.C. 493; 24 T.C. 498 considered.

Decision of the Court of Appeal (1954) 33 A.T.C. 131 reversed.

APPEAL from the Court of Appeal (Evershed M.R., Jenkins and Hodson L.JJ.).

This was an appeal from an order of the Court of Appeal dated May 10, 1954, dismissing an appeal by the appellant, Harold Lewis Edwards (Inspector of Taxes), from an order of the High Court (Wynn-Parry J.) dated February 17, 1954, whereby an appeal from a determination of the Commissioners for the General Purposes of the Income Tax for the Division of West Morley in the County of York on a case stated by them was dismissed and their determination was affirmed. The question in the appeal arose on two assessments to income tax made on the respondents, Harold Bairstow and Fred Harrison, in respect of certain operations carried on by them as a joint venture in partnership in the years 1946-47 and 1947-48 whereby certain spinning plant was acquired by them and disposed of at a profit. The assessments for the years ending respectively April 5, 1947, and April 5, 1948, had originally been made on Bairstow only, but it became common ground that the operations out of which the profits arose were the joint venture of both respondents and the case was argued throughout on the footing of the assessments being made in their joint names. They were in the sum of £10,326 for the first year and £5,000 for the second year. The commissioners discharged the assessments and, the appellant having declared dissatisfaction, a case was stated.

Paragraph 3 of the case stated was as follows:

"The following facts were admitted or proved:

(1)
Mr. Harrison became aware in 1946 that a complete spinning plant was for sale at Messrs. Whitworths at Luddenden Foot and had reason to believe that the plant could be purchased for a reasonable figure. He communicated this information to Mr. Bairstow as he himself was not in a position to finance any purchase. Mr. Bairstow expressed himself to be interested but both he and Harrison agreed that they had no intention of holding the plant - what they desired was a quick purchase and re-sale. Mr. Bairstow therefore arranged for a valuation to be made by a professional valuer in order that he might be satisfied that the price asked by Whitworths was one on which he could make a quick profit. He also immediately and before purchasing the plant made inquiries as to whether he could arrange to sell the plant even before it had been purchased.
Mr. Harrison was in touch with an Indian by name Wattal who was very anxious to purchase some of the plant, namely, the botany spinning section; for this he was prepared to pay £17,000 but both Harrison and Bairstow were quite decided that they had no intention of selling the plant piece-meal; they wanted to sell it as a complete unit. Then Mr. Bairstow began negotiations with the International Export Co. They said they were prepared to buy the whole of the plant. On November 14 the International Export Co. wrote to Mr. Bairstow saying that they were prepared to buy the plant which was on the fourth floor which was the botany spinning plant for £15,000 this, of course, being £2,000 less than the price offered for the same section of the plant by the Indian Wattal.
The reason why the International Export Co. were prepared to pay £15,000 immediately for that particular section of the plant was because although they were willing to purchase the whole of the plant it was their intention to export it and whilst they were confident that an import licence into China would be forthcoming for the asking in respect of the botany spinning section they were not willing to complete the purchase of the remainder of the plant until the import licences for such remainder were in fact forthcoming. On November 20 Mr. Bairstow on behalf of himself and Harrison having negotiated the purchase of the spinning plant together with two small items of warping plant completed the purchase by the payment to Whitworths of £12,000.
On November 27, one week later, the International Export Co. paid Mr. Bairstow the sum of £15,000 for the botany spinning plant. Subsequently Messrs. Bairstow and Harrison were informed by the International Export Co. that unfortunately the import licences relating to the remainder of the plant could not be obtained and therefore it was regretted that they could not purchase the remainder of the plant. Thus Mr. Bairstow and Mr. Harrison found themselves with the remainder of the plant on their hands (which they had endeavoured to avoid) and this left them no alternative but to sell that remainder in whatever market they could.
(2)
The rest of the plant was sold in two other principal and two smaller lots by February, 1948, though owing to difficulties the last plant was not removed until March, 1949. The two smaller lots consisted of the two items of warping plant.
(3)
Mr. Bairstow was a director of a company manufacturing leather. Mr. Harrison was an employee of a spinning firm. Neither of them had had any transactions in machinery or any other commodity before.
(4)
The profits shown by the accounts (which form part of this case and are annexed hereto, marked 'A') was £18,225 11s. 3d.
(5)
The respondents' sole purpose in the transaction was to sell the plant at a profit.
(6)
With regard to the manner in which the sales were effected:

(A)
Some commissions were paid for assistance received in effecting sales.
(B)
There was no advertising. Customers principally learnt of the existence of the plant for sale when they came to inspect the premises which were being advertised by the original owners as becoming vacant.
(C)
About 400 spindles out of the 220,000 which the plant represented were replaced because they were missing or damaged.
(D)
Insurance risks were covered by the respondents while the plant was in their hands.
(E)
Some costs for renovation were incurred because of damage by floods during their ownership.
(F)
When it was seen that the transaction would not be over in a matter of weeks, wages were paid to Mr. Bairstow's secretary who kept books and did other office jobs in connexion with these transactions.
(G)
The respondents incurred expense in travelling and entertainment in meeting both the actual persons who would eventually buy the plant and others who did not in fact become customers.
A number of advertisements asking for plant, which appeared in trade papers, were answered by the respondents in an attempt to sell the plant remaining after the first main sale.
(H)
Owing to the delay in removing the plant, rent was paid to the landlords for the last six months during which the plant was housed, and it is thought that a further amount will have to be paid to put the premises in order."

EXHIBIT "A" Case Stated

MR. HAROLD BAIRSTOW AND MR. FRED HARRISON

JOINT VENTURE - A SPINNING PLANT EX WHITWORTH MILL, LUDDENDEN FOOT

PERIOD FROM NOVEMBER 20, 1946. TO MARCH 31, 1949

  £ s d £ s d
To   Purchase   of   Plant 12,000 0 0
Repairs and Replacements 110 18 10
Commissions
Cornelius Lane of Bradford 4,575 4 4
Mr. and Mrs. Horace Shaw, Highthorn, Belmont Rise, Baildon 751 2 0
W. Murgatroyd - address not known, but our clients believe he has gone abroad 250 0 0
Cash Commission to a workman 10 0 0
5,584* 6 4
Insurance 71 15 6
Christmas Boxes 32 0 0
Flood Damage Costs
Wages 300 5 11
Renovations 42 16 9
343 2 8
Wages 117 5 0
Stationery 3 0 0
Travelling and Entertainment 366 13 11
Rent 130 0 0
Reserve for cost of dilapidations, legal and accountancy charges 785 0 0
Profit on the transaction 18,225 11 3
£37,769 13 6
* Sic.
Profit divisible
Harold Bairstow £9,112 15 7
Fred Harrison £9,112 15 7
By Sale of Plant
1946 - Nov. 27 International Export Co. 15,439 13 6
Brought forward 15,439 13 6
1947 - Jan. 29 H. E. Crabtree & Co. 80 0 0
1947 - June 26 Bailey, Verity and Raynor 12,000 0 0
1947 - Oct. 22 Stalybridge Vigoyne Spinning Co. 250 0 0
1948 - Feb. 20 Joseph Cooper Jnr. 10,000 0 0
37,769 13 6
37,769 13 6

The respondents contended that this was a transaction the profits of which could not be liable to tax under Case I of Schedule D, [F1] because, as they said, in the case of Jones v. Leeming, [F2] "four conditions had been approved by the court, one of which must be present to establish liability; (A) the existence of an organization, or (B) activities which led to the maturing of the asset to be sold, or (C) the existence of special skill, opportunities, in connexion with the article dealt with, or (D) the fact that the nature of the asset itself should lend itself to commercial transactions." And they contended that none of these conditions was present in the transaction in question.

They distinguished certain cases upon which the appellant relied and urged that the profit was a capital one and that there was no concern in the nature of trade that could be taxed.

On behalf of the appellant it was contended "that the buying and selling of the plant constituted a trade or adventure in the nature of a trade and that the profits and gains arising therefrom were assessable" accordingly.

The commissioners expressed their original determination in these terms:

"We, the commissioners, having considered the facts and evidence submitted to us, are of opinion that this was an isolated case and not taxable and discharge the assessments."

When the matter came before Upjohn J. on the case stated, he remitted it to the commissioners with the intimation that they were to consider and answer the question whether the transaction, being an isolated transaction, was nevertheless "an adventure in the nature of trade" which was assessable to tax under Case I of Schedule D, and he further directed that they should be assisted in their finding by legal argument.

The commissioners accordingly met again and, having heard legal argument and further considered the matter, signed a supplemental case in which they stated their further decision as follows:

"We find that the transaction, the subject-matter of this case, was not an adventure in the nature of trade."

The case thus supplemented came once more before the High Court, this time before Wynn-Parry J., who took the view that he was bound by authority to hold that the question before the court was purely one of fact and that the finding of the commissioners could not be upset unless it was so perverse that as a matter of law it could not stand, and, holding that it was not possible for him to take that view of their decision, dismissed the appellant's appeal with costs.

From the decision of Wynn-Parry J. the appellant appealed to the Court of Appeal, which unanimously dismissed the appeal for the reasons given by Wynn-Parry J. In the course of his judgment the Master of the Rolls made this observation, which gave rise to much discussion before the House of Lords: [F3]

"Although the Scottish courts (as, I think, is clear from a citation from the judgment of the latest of them in the judgment of Upjohn J.) may have taken a road which diverges from that followed by the English courts, the two jurisdictions, as it seems to me, can only now be got together again by the House of Lords. ..."

Cyril King Q.C. and Sir Reginald Hills (Sir Reginald Manning-ham-Buller Q.C., A.-G. with them) for the appellant. The relevant provisions of the Income Tax Act, 1918, are Schedule D, paragraphs 1 (a) (ii) and 2, Case I, the rule applicable to Case I, rule 10 of the rules applicable to Cases I and II (dealing with a trade carried on by two or more persons jointly) and section 237 defining "trade." See section 149 as to cases stated. See also Income Tax Act, 1842, s. 100, Sch. D, Cases I and II, r. 3.

A joint adventure may be carried on by two or more persons on joint account as well as in partnership. This was a joint adventure.

One should approach the finding of the commissioners by distinguishing between the primary facts found and the conclusions drawn from those facts. In cases under the Income Tax Act all the facts are before the court, which is entitled to form its own opinion. Looking at the conclusion reached by the commissioners on the stated facts, the court may find that their conclusion is such that no reasonable person could have reached it. Then the conclusion can be reversed. But if on a consideration of the facts stated a reasonable man can choose one of two conclusions, that is a middle field in which the commissioners are masters: see Bracegirdle v. Oxley. [F4]

This was not a profit which should escape tax on the ground that it was an isolated case: see Californian Copper Syndicate Ld. v. Harris; [F5] Tebrau (Johore) Rubber Syndicate Ld. v. Farmer; [F6] Thew v. South West Africa Co. Ld.; [F7] Martin v. Lowry; [F8] Inland Revenue Commissioners v. Livingston; [F9] Pearn v. Miller; [F10] Rutledge v. Inland Revenue Commissioners; [F11] Cooper v. Stubbs. [F12] In the English cases matters of this sort have been treated as pure fact, whereas the question here is one of mixed law and fact and the approach to it should be rather that adopted by the Scottish courts. Cooper v. Stubbs [F12] does not present the same problem as the case under appeal, which is not a pure question of fact. Leeming v. Jones, [F13] affirmed in the House of Lords sub nom. Jones v. Leeming, [F14] does not lay down any general principle. It was really a battle on Case VI and it distinguished Cooper v. Stubbs. [F15] The Scottish courts have laid down the right principles in dealing with questions of mixed law and fact in cases stated: Inland Revenue Commissioners v. Fraser; [F16] Inland Revenue Commissioners v. Toll Property Co. Ld., [F17] and Inland Revenue Commissioners v. Reinhold. [F18]

In the present case the facts found show clearly a trading adventure entered into in the course of a scheme of profit making: see Californian Copper Syndicate Ld. v. Harris; [F19] Thew v. South West Africa Co. Ld., [F20] and Inland Revenue Commissioners v. Livingston. [F21] The machinery was acquired by the two men on joint account in their capacity as traders in this adventure. The mere fact that there were two men is not unimportant, since they joined together for an express purpose. The quality of their operations in holding the machinery after purchase and doing repairs brings the matter within the class of cases represented by Martin v. Lowry [F22] and Rutledge v. Inland Revenue Commissioners. [F23]

If the matter in such a case as this be held to be one entirely of fact the principle must include both the General and the Special Commissioners. That would be an unsatisfactory position. If the matter is not one of pure fact the court is the judge of the fact and the law and can give the cases a sense of direction. In Inland Revenue Commissioners v. Fraser [F24] the court looked at the meaning of the word "trade," on which so much depends in the present case, and held that there was in the case stated an error which it corrected. Jones v. Leeming [F25] does not prevent that course being adopted.

That was a different case in which the House of Lords was not laying down a ruling principle. On the Scottish view of the matter a question of law must arise on the meaning of "adventure ... in the nature of trade" in the Act. The commissioners have either wrongly construed the words of the Act on this point or they have taken a view of the facts which no reasonable man could take: see Bracegirdle v. Oxley. [F26] This view was accepted by Warrington and Atkin L.JJ. in Cooper v. Stubbs. [F27]

In Inland Revenue Commissioners v. Fraser [F28] the effect of Jones v. Leeming [F29] was correctly dealt with. Section 149 (1) (d) of the Income Tax Act, 1918, directs that in the case stated the facts and determination shall be set forth, and it is thus intended that the court shall be able to look at both the facts and the law in reaching a determination under section 149 (2) (a). The crux of the matter is the respondents' contention that it is not the function of the court to review the finding of the commissioners on a question of fact unless it is entitled to take the view that they have misunderstood the law or that their finding was perverse.

In summary, the respondents are chargeable to income tax under Case I of Schedule D in respect of the profits arising to them from the joint venture of acquiring and selling the plant. That venture was a "trade" within Case I as defined in section 237 and was an "adventure" within the meaning of that word in the definition. The joint venture, the operations of which extended over 17 months and consisted of numerous particular business activities, was an adventure within the charge of income tax in Case I. In deciding, after hearing legal argument, that the joint venture was not an "adventure" within the charge, the commissioners erred in law and misconstrued the meaning of the word in its statutory context. Alternatively, in so deciding they acted without any evidence or on a view of the facts which could not be reasonably entertained. On the admitted facts, no other view is possible than that the respondents, in carrying on their joint venture, carried on an "adventure" within Case I and were therefore chargeable to income tax in respect of the profits arising therefrom.

Sir Reginald Hills following. The only way in which an assessment can be challenged is by case stated. The case stated must set out the facts: see sections 137 and 149 of the Income Tax Act, 1918. Jones v. Leeming [F30] on its special facts cannot be treated as an authority governing other cases with different special facts. Lord Thankerton [F31] cites Inland Revenue Commissioners v. Livingston [F32] and treats it as a valid decision. The word "adventure" cannot be ignored. It has a legal meaning and there is strong ground for thinking that the legislature was familiar with it in its legal context in connexion with trading activities in a commercial and profit-making atmosphere: see Californian Copper Syndicate Ld. v. Harris. [F33]

According to the Oxford English Dictionary one meaning of "adventure" is "a pecuniary risk, a venture, a speculation, a commercial enterprise," and an "adventurer" is "one who undertakes, or shares in, commercial adventures or enterprises; a speculator." Under section 32 (b) of the Partnership Act, 1890, a partnership may be entered on "for a single adventure or undertaking." In the Income Tax Act, 1918, "adventure" may mean a short-term profit-making operation. A boat for a particular purpose might be specially built and sold at a large profit. That would be an adventure, even though it was an isolated transaction. In several cases it is very relevant to look at the commodity dealt with, as the question arises in what capacity it is that a man buys a particular thing. Martin v. Lowry [F34] was a clear case, and if the commissioners had held the other way the court would have held that they had come to an impossible conclusion. Cooper v. Stubbs [F35] was far away from this case. The word "adventure" never came into it. It was a case of the continuous carrying on of a trade.

The present is a case of buying and selling. In cases of industrial accidents the question whether due care has been taken may be considered by the court as one of degree, but the mere fact that it is a question of degree does not prevent the court from saying that the requisite degree has not been reached. The courts in income tax cases require the commissioners to set out the facts and they may say that those facts do not give rise to the commissioners' conclusions. Here the legislature mean something by using the word "adventure," which is different from a "concern." If the facts here set out do not disclose an "adventure," it is hard to say what can be one.

Senter Q.C. and Roderick Watson for the respondents. The Crown's proposition is not clear as to the difference alleged to exist between the practice in Scotland and in England. It was not asserted that the court was entitled to retry the case. The very strong judgments of Warrington and Atkin L.JJ. in Cooper v. Stubbs [F36] were against that view. The respondents adopt the suggestion of Evershed M.R. in the present case [F37] with regard to Inland Revenue Commissioners v. Fraser, [F38] which, properly understood, is not really inconsistent with the reasoning in the English decisions. The finding of the commissioners in that case was not a clean finding of fact. The same is true of Inland Revenue Commissioners v. Livingston [F39] and Inland Revenue Commissioners v. Toll Property Co. Ld. [F40] In Inland Revenue Commissioners v. Reinhold [F41] the finding of the commissioners was upheld as a finding of fact.

In the present case the views expressed by Evershed M.R. and Wynn-Parry J. show that it is impossible to say here that there has been perversity in the commissioners' finding in the sense of there being no evidence at all to support it. It is impossible to say that they misdirected themselves as to the meaning of the word "adventure" in the Act or on any other legal matter. The criteria adopted in the present case accord with those applied in Inland Revenue Commissioners v. Fraser. [F42] Apart from Jones v. Leeming [F43] it would be hard to find a case in which the attention of the commissioners had been so clearly directed to the proper matters for consideration. This appears on the face of the case stated. This is not a case of a commodity stamped with a trading character.

Counsel for the Crown are wrong in their construction of "adventure" in the Act. It is not to be distinguished from "concern." In section 237 "adventure or concern" amount to the same thing for the present purpose. The proper question is whether or not this was an adventure "in the nature of trade," and this is for the commissioners to decide as a question of fact.

The evidence set out in the case stated shows that this was not a trading adventure. The organization was on too trifling a scale. It was confined to Bairstow's secretary. The only work done on the plant was trifling. Nothing was done to mature the asset. There was no advertising. Neither of the respondents had any special skill which placed him in an advantageous position in carrying through the transactions. The purchase and sale of the plant lent itself to capital rather than commercial transactions. The commissioners weighed up all these matters and applied the proper tests and they were justified in arriving at their finding of fact. To upset them one would have to show that they misdirected themselves, misunderstanding the law, or else that there was no evidence at all to support their finding so that it was perverse. To allow this appeal would open the floodgates to innumerable appeals from the General Commissioners all over the country.

The basic submission for the respondents is that before such sums as this are taxable there must be a source of income. In Jones v. Leeming [F44] (Leeming v. Jones [F45] below) it was argued for the Crown that the transaction itself was the source of income. But that will not do here, where the Crown is alleging that the source of income is a "trade" chargeable under Case I of Schedule D.

The question, then, is whether there is here a "trade" in an extended meaning giving rise to taxable income. There is not such a trade, and if the Crown is not satisfied with the position its remedy lies in legislation. Although the case was argued for the Crown on a narrow front as though an adventure in the nature of trade was something special, it is really only one aspect of trade in the charging section.

The question may arise whether a person carries on a trade or more than one trade or has ceased to carry on a trade, or whether something is a trading sale. A company may be in a different position from an individual in this field. In Inland Revenue Commissioners v. Toll Property Co. Ld. [F46] importance was attached to the function of the company. In Balgownie Trust Ld. v. Inland Revenue Commissioners [F47] it was said that the company was doing what it was formed to do. See also Inland Revenue Commissioners v. Hyndland Investment Co. Ld. [F48] As to the distinction between sources of income in different cases, see Bennett v. Marshall. [F49] In the case of an individual trading the activity is the source of income. He will have performed a number of acts and it is for the commissioners to say what those acts add up to.

The Crown's basic proposition is that this was a profit-making scheme and as such gave rise to taxable profits, but the scheme must be considered fairly in its context. Californian Copper Syndicate Ld. v. Harris [F50] was a case of a company with a profit-making object. That is a special fact and what is true of a company may not be true of an individual. This was admittedly not a case of partnership. In the case of a company there is continuity and a profit-making motive, but in the case of an individual the intention to make a profit is not the relevant test: Jones v. Leeming [F51] and Graham v. Green. [F52] A mere association between individuals does not take the case much further; the commissioners must take account of all other factors.

On the question of the jurisdiction of the court in dealing with questions of fact in cases stated, Cooper v. Stubbs [F53] and Leeming v. Jones [F54] (Jones v. Leeming [F55] in the House of Lords) are the sheet anchor of the respondents. Calvert v. Wainwright [F56] is an example of the court saying that there had been a clear misunderstanding of the law. It is not wholly satisfactory to confine the authority of Jones v. Leeming [F57] to the narrow question of what is an adventure or concern in the nature of trade. The broad question is concerned with the painfully familiar distinction between fact and law. See also Levene v. Inland Revenue Commissioners; [F58] Inland Revenue Commissioners v. Lysaght; [F59] Rees Roturbo Development Syndicate Ld. v. Inland Revenue Commissioners; [F60] Ducker v. Rees Roturbo Development Syndicate Ld.; [F61] Currie v. Inland Revenue Commissioners; [F62] Inland Revenue Commissioners v. Dean Property Co., [F63] and Inland Revenue Commissioners v. Scottish Automobile and General Insurance Co. Ld. [F64]

King Q.C. in reply. In a case such as this, where facts and inferences play such a great part, one cannot confidently turn to other cases for guidance unless they lay down some principle. An adventure is part of a trade only in the sense that both connote trading activities. One has to find that the adventure itself is the source of the profit which it is sought to tax. It is plain on the authorities that the point can arise out of a single transaction: see Martin v. Lowry; [F65] Rutledge v. Inland Revenue Commissioners, [F66] and Californian Copper Syndicate Ld. v. Harris. [F67]

The question is whether on the facts found, which are not in dispute, there is a trading activity and a taxable profit arising from the purchase and sale of the machinery. It is important that the object of acquiring the machinery was to get a quick profit. In pursuance of this object the transaction was carried through on joint account. One of the respondents had knowledge of the machinery and the other had the capital; they combined the two. If one buys machinery it is unlikely that one does so otherwise than for the purposes of trading. Having regard to the general background, the machinery was bought as the subject-matter of a commercial transaction. As to the question what comes within trade, see Ducker v. Rees Roturbo Development Syndicate Ld. [F68]

There is no relevant distinction between an adventure entered on by two men in joint account or by one individual and an adventure by a limited company when on the facts the object of the men or the individual is not different from that of the company.

When the commissioners set down the facts proved and come to their decision, they must look at the Act and consider the statutory words. If they took the right view of the word "adventure" as construed in Californian Copper Syndicate Ld. v. Harris, [F69] the question arises whether on the evidence they have gone wrong. Either they formed an erroneous view of the Act or they reached a wrong conclusion on the evidence, which was all one way. This is just the sort of case which should be reviewed by the court. Inland Revenue Commissioners v. Fraser [F70] affords a signpost for the right approach. In Jones v. Leeming [F71] the House of Lords never intended to say that such a case as this was a pure question of fact. Further, the meaning of "adventure" was not analysed there as here and in Fraser's case. [F72]

Their Lordships took time for consideration.

Viscount Simonds, having stated the facts, continued: My Lords, it is clear that the revenue authorities were anxious to bring this case to your Lordships' House largely because it was apprehended that the courts of England and Scotland had to some degree diverged in their treatment of this subject. That there is some ground for this apprehension will be clear from a comparison of (for example) the observations of Atkin and Warrington L.JJ. in Cooper v. Stubbs, [F73] with those of Lord Russell in Inland Revenue Commissioners v. Reinhold: [F74]

"In the Scottish courts, however, it is clear that such a question"

(i.e., whether transaction is an "adventure in the nature of trade")

"is regarded as a question of law, or at least of mixed fact and law."

It is not to be doubted that, particularly in a matter of taxation any possible conflict, even if it be only an apparent conflict, should be resolved, and that is the task which now falls to your Lordships.

Before, however, examining the authorities in any detail, I would make it clear that in my opinion, whatever test is adopted, that is, whether the finding that the transaction was not an adventure in the nature of trade is to be regarded as a pure finding of fact or as the determination of a question of law or of mixed law and fact, the same result is reached in this case. The determination cannot stand: this appeal must be allowed and the assessments must be confirmed. For it is universally conceded that, though it is a pure finding of fact, it may be set aside on grounds which have been stated in various ways but are, I think, fairly summarized by saying that the court should take that course if it appears that the commissioners have acted without any evidence or upon a view of the facts which could not reasonably be entertained.

It is for this reason that I thought it right to set out the whole of the facts as they were found by the commissioners in this case. For, having set them out and having read and re-read them with every desire to support the determination if it can reasonably be supported, I find myself quite unable to do so. The primary facts, as they are sometimes called, do not, in my opinion, justify the inference or conclusion which the commissioners have drawn: not only do they not justify it but they lead irresistibly to the opposite inference or conclusion. It is therefore a case in which, whether it be said of the commissioners that their finding is perverse or that they have misdirected themselves in law by a misunderstanding of the statutory language or otherwise, their determination cannot stand. I venture to put the matter thus strongly because I do not find in the careful and, indeed, exhaustive statement of facts any item which points to the transaction not being an adventure in the nature of trade. Everything pointed the other way.

When I asked learned counsel upon what, in his submission, the commissioners could have reasonably founded their decision, he could do no more than refer to the contentions which I have already mentioned. But these upon examination seemed to help him not at all. For, if it is a characteristic of an adventure in the nature of trade that there should be an "organization," I find that characteristic present here in the association of the two respondents and their subsequent operations. I find "activities which led to the maturing of the asset to be sold" and the search for opportunities for its sale, and, conspicuously, I find that the nature of the asset lent itself to commercial transactions. And by that I mean, what I think Rowlatt J. meant in Leeming v. Jones, [F75] that a complete spinning plant is an asset which, unlike stocks or shares, by itself produces no income and, unlike a picture, does not serve to adorn the drawing room of its owner. It is a commercial asset and nothing else.

Your Lordships have examined a large number of cases in some of which the commissioners have found an adventure or concern in the nature of trade and in others have not. And in each category will be found cases in which the court has upheld and others in which the court has reversed the commissioners' decision. I do not think it necessary to review them. It is inevitable that the boundary line should not be precisely drawn, but I think that there has been no case cited to us in which the question, however framed, whether the determination of the commissioners was maintainable, could be answered more clearly and decisively than in the present case.

I must turn now to the question of the apparent divergence between the English and Scottish Courts and venture to approach it by a brief consideration of the nature of a problem which has many aspects, e.g., the finding of a jury, the award of an arbitrator, or the determination of a tribunal which is by statute made the judge of fact. And the present case affords an exact illustration of the considerations which I would place before your Lordships.

When the commissioners, having found the so-called primary facts which are stated in paragraph 3 of their case, proceed to their finding in the supplemental case that "the transaction, the subject-matter of this case, was not an adventure in the nature of trade," this is a finding which is in truth no more than an inference from the facts previously found. It could aptly be preceded by the word "therefore." Is it, then, an inference of fact? My Lords, it appears to me that the authority is overwhelming for saying that it is. Such cases as Cooper v. Stubbs, [F76] Jones v. Leeming [F77] and Inland Revenue Commissioners v. Lysaght [F78] (a case of residence) amongst many others are decisive. Yet it must be clear that to say that such an inference is one of fact postulates that the character of that which is inferred is a matter of fact. To say that a transaction is or is not an adventure in the nature of trade is to say that it has or has not the characteristics which distinguish such an adventure. But it is a question of law, not of fact, what are those characteristics, or, in other words, what the statutory language means. It follows that the inference can only be regarded as an inference of fact if it is assumed that the tribunal which makes it is rightly directed in law what the characteristics are and that, I think, is the assumption that is made. It is a question of law what is murder: a jury finding as a fact that murder has been committed has been directed on the law and acts under that direction. The commissioners making an inference of fact that a transaction is or is not an adventure in the nature of trade are assumed to be similarly directed, and their finding thus becomes an inference of fact.

If this is, as I hope it is, a just analysis of the position, the somewhat different approach to the question in some, but by no means all, of the Scottish cases is easily explicable. For as the Lord President (Lord Normand) put it in Inland Revenue Commissioners v. Fraser: [F79]

"... the commissioners here have either misunderstood the statutory language (which I think is the probable explanation of their error) or, having understood it, have made a perverse finding without evidence to support it."

He might equally well have said that the assumption that they were rightly directed in law was displaced by a finding which was upon that assumption inexplicable. The misdirection may appear upon the face of the determination. It did so here, I think, in the case as originally stated: for in effect that determination was that the transaction was not an adventure in the nature of trade because it was an isolated transaction, which was clearly wrong in law. But sometimes, as in the case as it now comes before the court, where all the admitted or found facts point one way and the inference is the other way, it can only be a matter of conjecture why that inference has been made. In such a case it is easy either to say that the commissioners have made a wrong inference of fact because they have misdirected themselves in law or to take a short cut and say that they have made a wrong inference of law, and I venture to doubt whether there is more than this in the divergence between the two jurisdictions which has so much agitated the revenue authorities.

But, my Lords, having said so much, I think it right to add that in my opinion, if and so far as there is any divergence between the English and Scottish approach, it is the former which is supported by the previous authority of this House to which reference has been made. It is true that the decision of the commissioners is only impeachable if it is erroneous in law, and it may appear paradoxical to say that it may be erroneous in law where no question of law appears on the face of the case stated. But it cannot be, and has not been, questioned, that an inference, though regarded as a mere inference of fact, yet can be challenged as a matter of law on the grounds that I have already mentioned, and this is I think the safest way to leave it. We were warned by learned counsel for the respondents that to allow this appeal would open the floodgates to appeals against the decisions of the General Commissioners up and down the country. That would cause me no alarm, if decisions such as that we have spent some time in reviewing were common up and down the country. But nothing, I think, will fall from your Lordships to suggest that there is not a large area in which the opinion of the commissioners is decisive. I would myself say nothing to detract from what was said by Lord Sterndale M.R. and Scrutton L.J. in Currie v. Inland Revenue Commissioners [F80] upon the kindred question whether the taxpayer was carrying on a profession, for I do not think that any more precise guidance can be given in the infinitely complex and ever-changing conditions of commercial adventures.

In the result the appeal will be allowed, but effect will be given to the special arrangement as to costs which was a condition of leave to appeal being given.