Federal Commissioner of Taxation v Clarke
(1927) 40 CLR 246(1927) 1 ALJ 287
(1927) R and McG 115
[1927] WL 22923
(Judgment by: Isaacs A.C.J.)
Federal Commissioner of Taxation
v Clarke
Judges:
Isaacs A.C.J.Higgins J.
Rich J.
Judgment date: 24 November 1927.
Sydney
Judgment by:
Isaacs A.C.J.
This is an appeal from a decision of the Supreme Court of Victoria under the Federal Income Tax Assessment Act 1915-1918, allowing an objection by the respondent by which he claimed that he was not taxable personally in respect of a sum of £39,915 included in his assessment as assessable income. The ground of the objection given effect to was that that sum was received by or on behalf of various members of his family. It was not actually decided whether the sum was assessable income at all, the learned primary Judge referring to certain considerations raising doubt in his mind on that point. At the same time he held clearly that the sum of £7,499-the residue of the profits distributed by the respondent after providing for moneys belonging to two outsiders-was taxable as income. In that there cannot be any doubt the learned Judge was right, and my only difficulty is to see, even on the assumption that the £ 39,915 belonged beneficially to the family, how it stands in any different position with regard to its character. The decision appealed from embraces a number of findings of fact and conclusions of law and the Commissioner appeals generally from all that are adverse to his assessment. I am greatly indebted to learned counsel on both sides for their able and thorough exposition of the voluminous and disconnected material and the complicated issues that have to be considered, for in the circumstances which, happily for the community, are of a most unusual character, there is no royal road to the determination of this appeal, short of a virtual abdication of our function as an appellate tribunal. Having had the advantage of that assistance, a careful examination of the evidence leaves me with but little hesitation as to the proper conclusions.
The issues in their larger aspects may be conveniently grouped as follows:-(1) Was the sum of £39,915 or some part of it income derived by anybody or was it all merely realized, that is, transformed into money? (2) Were the Badak shares, or some of them, which produced portion of that sum the property of the respondent at the time they were sold? (3) Were the Bux shares or some of them which produced other portion of that sum his property at the time they were sold? I take these in order.
(1) Capital or Income.
The Act provides by sec. 39 of the 1922-1925 Act (sec. 35 of the 1915-1918 Act) that in a proceeding of this nature the Commissioner's assessment is to be taken prima facie as correct. It follows, therefore, that the burden of proving to the satisfaction of the Court that the sum in question was not income, but capital transformed, and that it was not his income, rests on the respondent. The justice of that burden cannot be disputed. From the nature of the tax, the Commissioner has, as a rule, no means of ascertainment but what is learnt from the taxpayer, and the taxpayer is presumably and generally, in fact, acquainted with his own affairs. The onus may prove to be dischargeable easily or with difficulty according to circumstances. Where, as here, a taxpayer has failed to keep any records of considerable dealings while engaged in profit-making transactions relied on by him to avoid the taxation ordinarily incident to such profits, and where, as here, he has entangled those transactions, and has given discordant, and in some cases inconsistent, accounts and explanations of them, the onus is of the heaviest character. I make these observations with general reference to all three groups of issues.
On the first issue, the pertinent facts seem to me to stand out very clearly-I am tempted to say "luridly." To call these moneys the mere transformation of a capital investment by realization on a favourable opportunity, as we were invited to do on behalf of the respondent, is, in my opinion, quite unreasonable. To transform capital, you must at least have capital to begin with; but when one examines in their naked form the methods pursued in order to gather in the huge amounts constituting the fund from which the sum now in dispute was drawn, it is seen that the capital or property supposed to be realized or transformed was illusory. As to one portion in particular-the Bux shares-supposed to represent a concession or expected concession of tin-bearing land in Malay, there was no substratum firmer-as the parties concerned well knew-than some inexpensive paper and ink in Melbourne and the credulity of impressionable and trustful speculators on the Stock Exchange. The methods employed, restricting that term for the moment to the outward and visible means of disposing of the supposed property were those ordinarily adopted by a person engaged in trafficking in shares. Brokers on the Exchange were employed, shares were sold singly or in small numbers at a time and in repeated transactions from day to day and several times a day, and this was carried on over a period of a few months, and purchases were made as part of the scheme adopted to create what is called a market. No sane individual, having regard to the nature of the interests bought and sold and the way in which the affairs of the syndicates and companies involved were conducted, would believe for a moment that the parties in possession-if I may use that term-intended to hold their interests or to work them as a true mining proposition, or to regard them as an investment in the accepted sense, or their disposal as a simple realization. The Badak and Bux shares producing the amount in contest were part of a larger number disposed of by the respondent and, at all events, upon his instructions. He states in a document furnished to the Commissioner that his operations resulted as follows:-Badak profit, £44,308 18s. 8d.; Bux profit, £38,664 7s. 3d.; Badak Jungle, £8,734 6s. 11d.-a total of £91,707 12s. 10d. Of this, part, it appears, belonged to two of his associates, named Orton and Scarborough. Orton received £24,527 14s. 3d. and Scarborough £20,842 19s., leaving as the share of what the respondent calls "Clarke and Family," £46,336 19s. 7d. In another document furnished by him a few days later, he subdivides the sum of £ 46,336 19s. 7d. in the following manner:-To his wife and family (except two sons, Alfred Sylvester Clarke and Leslie Victor Clarke) a sum of £22,979 3s. 2d. net, consisting of gross £14,369 8s. 2d. for Badak shares and gross £9,009 15s. for Bux shares, and deducting £120 for Badak shares and £280 for Bux shares. As to the two sons mentioned, he stated they received net £ 16,753 10s., being £17,393 10s. for Badak and Bux after deducting £640. His statement concluded thus:-
"Total profit-Badak-Bux and Badak Jungle-Clarke and Family, £46,336 19s. 7d. Less profit paid to the members of family as above, £ 39,732 13s. 2d. Balance being Alfred Clarke's share of profit £6,604 6s."
Howsoever the interests are severable, the total profits on the whole series of transactions are represented as the final outcome of a common campaign in which the various parties mentioned participated. As already stated, Clarke's share, found to be £7,499, is definitely determined to be assessable income; and from this there has been no appeal. As to Scarborough, the learned Chief Justice in an appeal upon the very point held that his share of the same general collection of profits was subject to taxation and at least as income derived from personal exertion. Speaking for myself, I can have no doubt that Clarke's share is taxable as income, and, following the implication in the judgment of the Chief Justice in Scarborough's case, I would add that if not the proceeds of a business it is income derived from property, that is to say, either property in fact or property by irrebuttable imputation. Does the rest of the sum of £46,336 19s. 7d. stand in this respect on any footing different from Alfred Clarke's admitted share or from Scarborough's share of the total profits? That necessitates an inquiry as to the real nature of the two enterprises called Badak and Bux.
The Badak venture began when a company was formed in May 1918 and registered in June of the same year under the no-liability provisions of the Victorian Companies Act 1915. It was formed to acquire a concession of about 100 acres of supposed tin-bearing land in Malay which had been obtained by Orton. There was provided a nominal capital divided into 100 shares of £10 each, 50 of those shares being for the vendors and 50 for the public. Clarke took up 2 shares by purchase and got, as he says, 2 more as a gift from an original syndicator named Williamson. On 13th November 1918 an agreement under seal was entered into between Orton and the Badak Company No Liability whereby, in consideration of 50 shares paid up to £10 each, he agreed to transfer his concession to the company and that until transfer he would use and mine the lands for the company, and that while in the company's employ all concessions to be acquired by him should be held by him for the benefit of the company. In November 1918 the share capital was doubled. Apparently, however, the shares were dead stock on the market for another year, no sale being recorded until the following November. So little were they thought of that Orton himself, who was in Malay, would not pay for some 20 shares that had been allotted him and paid for by Clarke. About October 1919, however, some reports were sent in by the Badak Company, and soon after there appears to have begun the movement that culminated in the successful accumulation of profits referred to. Clarke says in his evidence:-
"Things were not looking too good with the Badak, there had been one or two poor reports: they were jumping up and down and I told my sons it would be wise to sell one each. They simply told me to sell them. I cannot remember it. I cannot remember whether I gave instructions to the broker or whether they did. I believe I did, but I would not like to swear to it."
There is no doubt he did. He got the accounts, the sale notes and the cheques. The shares realized £148 10s. each in November 1919. In that month the company increased its capital to 600 shares, being 200 more for the public; 200 being held in reserve. This notwithstanding the "poor reports." The movement indicated by the sale mentioned (22nd November) violently proceeded. The market became inflamed. On 9th December another Badak share was sold in the same way for £173 10s. On 15th January 1920 two more sold for £693 each, one for £795, and so on until the comparative decline of the market in April 1920. In that month the concern was floated into a limited liability company of 75,000 shares of £1 each, of which 5,000 realized in June £2,433 4s. 2d. In the meantime another enterprise was set on foot in circumstances that would be scarcely credible were they not authenticated beyond question. Tracing it in broad and essential outlines it is as follows:-In April or May 1919 Scarborough was deputed by Clarke to go to Malay to see some land about which Orton had written and which was situated adjoining the Badak land. Clarke had arranged to pay Scarborough's expenses, which it was thought would reach about £200. According to evidence which Mann J. accepted, the respondent's two sons, A. S. Clarke and L. V. Clarke, agreed to be associated with their father in this expedition. At that time Badak was not shown to be a success. Clarke was still a brewer on a comparatively small scale, his sons were brewery employees and one was £18 odd in his father's debt. But as on another issue this association with Scarborough is made the starting-point for the main legal argument to sustain the whole burden of attributing henceforth to these two sons the right-adverse to the respondent-to the huge sums they received in respect of Bux shares, the sequel, and particularly the immediate sequel, must be narrated. This immediate sequel is important, and no mention whatever is made of it in the oral evidence of the two sons or in the judgment under appeal. The two sons apparently overlooked it, or more probably were unaware of it. But it existed and is quite inconsistent with their case-and the respondent's case-regarding the Bux shares. It appears that the original idea-if it ever really existed-of the father and his two sons forming at joint expense a family syndicate of three to send off Scarborough was abandoned. Certainly a new syndicate was formed for that very purpose. It was not a 16 share syndicate, nor was it then intended to be a 16 share syndicate. The written evidence and the respondent's own oral testimony when applied to the written evidence make this clear beyond cavil. With the aid of Trembath, a broker, Clark by April 1919 formed a syndicate, called the Bux Tin Mining Syndicate consisting of 12 shares. Scarborough was a member. He had arranged with Clarke that he, for Orton and himself, should besides expenses and maintenance have a one-fourth interest in whatever syndicate and in whatever company was formed for the purpose. Accordingly 3 shares were allotted free to him. Nine other shares were held by various persons, Clarke taking 4. These shares were £30 shares of which £25 was to be paid up at once, leaving £5 at call. Apart from himself, not a single member of Clarke's family was a member. The two sons were adults. If they were to be original members or otherwise "subscribers" no reason has been suggested or can be suggested why they were not named. Clarke sold a half share to a man named Rees for £12 10s., that is, cost price; and apparently this was paid by Rees contributing that sum to the common fund. On 16th April the syndicate of 12 shares was complete and the full sum of £225 was paid up. This sum was placed to the credit of the syndicate in the Commercial Bank on 24th April. On that date began payments out to and for Scarborough, namely, on 24th April £67 10s. for his boat fare, on the 30th a cheque to his wife for £50 and another to himself for £50, and a third for £50 for travelling expenses, and some small sums for cables to Orton. The record of the receipts and disbursements of the Bux Syndicate is a valuable piece of testimony. Now, neither the respondent nor his sons assert they ever had any conversation about this syndicate of 12 shares. But it appears from the respondent's evidence on this occasion that though the original number of shares was fixed at 12, the syndicate was opened again to admit someone in Sydney. Looking at the written record of the syndicate in Trembath's book it is clear that it was on 8th May that the reopening took place. Two new partners were introduced, one of them for one share and the other for two shares. But this made 15 shares so far, and an automatic consequence ensued. Scarborough had to receive another share, and this appears on the record. It was in this way that the 16 share syndicate came into existence. Again no trace of the reopening and reconstitution of the syndicate can be found in the son's evidence or elsewhere than as I have mentioned. If they were on an even footing with their father from the first their silence is incomprehensible. When Scarborough left Australia is not distinctly stated, but it must have been about this time. It will later be seen how impossible it is to fit in with these actual occurrences the fundamental account in the evidence, which has been made the basis of the judgment as to the two sons' Bux interests. I have now to proceed with the narrative as it affects the first issue. Mr. Trembath's book, which seems to have been faithfully kept, contains two records of meetings of the syndicate of 16. On 25th November three days after the Badak share sale referred to-a meeting of the Bux Syndicate took place. The importance of this meeting can hardly be over-estimated. Clarke and Scarborough (inter alios) were present. Scarborough, as it there appears, had been to Malay, with the result recorded. He returned about the middle of October. As to Scarborough's mission the minutes deserve quotation. They run thus:-
"Correspondence was received from Mr. G. Shaw, the Inspector of Mines at Kedah on 23rd July 1919, stating that the application for lease had been received, also on 23rd September 1919, which was received 22nd November 1919, by Mr. Scarborough stating that at present they had decided to withhold alienation of mining land, until the progress of operations at Jeneri has made it clear that it is possible to work land in this locality without prejudice to agriculture. Should you care to submit your application at a later date it will be considered in the light of the result at Jeneri.-(Sgd.) C.A. Shaw, Superintendent of Mines, Kedah."
Scarborough, it is stated, made some explanation which was received as "highly satisfactory." He also stated he had left a signed application in the hands of an agent to be forwarded when he deemed it necessary, and also had deposited 25 dollars in the Penang Bank for that purpose. We hear nothing more of that application. Clarke's own evidence shows that he regarded Scarborough's application as refused and for a reason that could not easily or quickly be removed. At the same meeting the remaining £5 per share was called up and made payable on 19th December, a date important in another connection. These minutes were confirmed on 23rd January 1920, when the next meeting was held. Before reaching that meeting, it is well to recall that the position of affairs so far disclosed is that the Bux Syndicate has no property-none in esse, none in immediate prospect, none to be hoped for unless official policy should be altered or satisfied by proofs that in the nature of things could not be furnished for a considerable time. "Investment" in any real, that is, honest, sense was impossible. Thus Clarke in his evidence:-
"Q. No property was ever acquired for the Bux Syndicate? A. Only later on. Q. Was it in fact acquired later on? A. I understand they had the prospect of a licence, but that was very much later."
And then he refers to the refusal of Scarborough's application. The next meeting took place on 23rd January 1920, when the syndicate had no property or anything that could reasonably be called property, beyond £10 1s. 1d. to its credit in the Bank and 25 dollars at Penang. Clarke was present. He moved, and it was resolved, that "A syndicate be formed of £50,000 capital in 2,000 shares of £25. 1,000 shares fully paid up to the vendors and promoters, including any increase of capital. 1,000 shares issued at £5 per share, the sum of £5,000 to be placed to the credit of the Bux Tin Company, and Mr. I. Murchie, legal manager. The allotment of shares as follows:-350 fully paid up shares to vendors; 650 fully paid up shares to syndicate: 1,000. 1,000 shares to be offered to the syndicate of £5 per share and the remaining two paid shares to be given to Mr. Trembath for services rendered." Then comes this astonishing note: "The property consists of 500 acres immediately adjoining the 100 acres which" (sic) "the Badak Co. which is now being check bored by Mr. Wilson." One naturally asks "what property? and who were the vendors?" The "promoters" we know, and Clarke first. The 350 shares went to him, Orton and Scarborough. We know, also, rather by indirection, that, there being in the syndicate 12 contributing shares, the 650 paid up shares were applicable at the rate of 54 to each share. The same policy was pursued with regard to the 1,000 £5 shares. So that as a fact vendors and promoters as such got 700 paid up shares of which Clarke had one-third-he says by agreement; and the other shares had attached to them 54 paid up and 54 contributing in the new scheme. An indenture, bearing date 21st January 1920-apparently a slip for the 23rd-was executed between ten of the individual syndicators of the one part (as vendors) and Murchie, as trustee for the new no-liability company to be incorporated. The recital is: "Whereas one of the vendors" (Scarborough) "is the applicant for a tin-mining lease or concession in the valley of the Sungei Jeneri State of Kedah in the Malay Peninsula of approximately 500 acres adjoining the lease or concession held by Thomas West Orton of Badak Mining Syndicate No Liability on the western boundary at the Sungei Hai and such application has been lodged with the Malay Government and whereas the vendors have agreed to complete the said application and to sell and when obtained to grant transfer and assure the said lease or concession to the said trustee as hereinafter mentioned." Then follow the testatum and the other parts of the deed. So far as appears, the official attitude in Malay remained unchanged. No circumstances are suggested warranting the representations conveyed by the recital. No comment could do justice to the moral quality of the mind sanctioning the recital in such circumstances. The company was incorporated on 17th February 1920. The company adopted the agreement on 15th June 1920. But in the meantime all material events had happened and the adoption was practically the adoption of an empty shell. The project was placed on the market before registration of the no-liability company, indeed, numbers were sold from 28th January to 9th February. The market was already in a most excited state with Badak shares and apparently the anticipated registration of the Bux Company No Liability. Speaking of Badak and Bux shares, Clarke says that in January "you could sell thousands of them at £100 a piece at that particular time." The registration on 17th February of the new corporation with the mythical substratum was made under the provisions of the Companies Act 1915. The actual documents of registration are not before us in evidence, but the statute prescribes what is requisite. There must be a statutory declaration before a justice of the peace equivalent to an oath and describing the "property" of the company intended to be mined upon. Some "property" must have been described-what else than as recited? Now Clarke, the prime mover in the transaction, stated in answer to Mann J., that when the company was registered it was "well known that Scarborough was going over to endeavour to get the property that he had previously put in an application for." What does that vague statement mean? Does it mean that the public believed Scarborough had gone over to perfect an assured title or complete a pending application, or does it mean that the public were content to pay fabulous sums well knowing they had as yet no property at all and might never have any? To get the company recognized by the Stock Exchange, however, and so dispose more readily of the shares, Clarke arranged with Murchie to put on the register the names of his wife and four of his younger children for 25 shares each or 125 in all. This is said to be a "pro forma" registration. I do not quite understand that expression in the circumstances. It was either to complete an intended gift more generously than at first intended, or it was an act of deception and fraud. But the main fact is that on 17th February extensive sales of Bux shares began again, at first at £56 a share, rising on the same day to £138 10s. The sales went on and purchases took place, the market being skilfully manipulated with the wonderful pecuniary success that has been related.
Now, recalling the subject of the first issue-capital or income-and putting aside for the moment the legitimate relevance of these facts to the trustworthiness of the respondent as a witness, we have to ask for what purpose was all this procedure adopted? Was it by way of investment of capital? Was it to acquire property to hold? When all the circumstances are weighed in the common balance of human experience, I find it impossible to doubt that from its inception to its effectuation, the Bux enterprise was fashioned and carried out for the purpose of Stock Exchange business operations. And, without unnecessarily descending to details respecting the Badak enterprise, it ran closely connected at all material times with the Bux. The ventures were highly profitable, but of a character that cannot possibly, without doing a great injustice to the intelligence and moral standards of the community, be regarded as ordinary investments and their realization. Mann J. speaks of the "dubious" nature of the two companies with which the respondent was so closely associated, and regards the manner in which the shares were disposed of as "judicious realization." Even while making full allowance for the graciousness prompting these euphemisms I cannot help feeling that some important factors were missed from the calculation. I entertain no doubt that to regard the moneys in question as the mere realization of capital is unjustified. The results were certainly profitable, and in a way which should at least require them to share the responsibility to the Treasury which the more ordinary and humble trading profit has invariably to bear. I ought not to pass by the doubt expressed by the learned primary Judge as to the application of the word "derived" to the profits here in question. Learned counsel for the respondent stressed this view. It is that no one can "derive" profits that belong to another or are intended for another as owner. No doubt a manager does not "derive" his employer's profits. But it is dependent on circumstances whether anyone, other than the person beneficially entitled, "derives" income within the meaning of the Act. A person in fact carrying on and controlling a business and appearing to the outer world as the owner "derives" the income produced by the business for the purpose of the income tax. His accountability to another is beside the point. "Derived" only means "obtained" or "got" or "acquired." All income is derived from something and by someone. The mere fact, if it were a fact, that Clarke acquired these profits for his family, would not be decisive of whether he "derived" them or not. Par. (a) of sec. 52 of the Act 1915-1918 shows that income may be "derived" by an "agent" in his representative capacity. As to the facts that touch this phase it may be well once and for all, and subject only to the special considerations which the two other issues include, to state the general nature of Clarke's relation to the profits. There can be no doubt that in the active and operative designing and carrying out of the Badak and Bux schemes he was the chief and dominant personality. From the very nature of the plans laid down and followed, divided action and independent operation in the market would have meant failure. Unco-ordinated buying or selling would soon have defeated the arrangements. If other members of the family had been simply given shares to do as they liked with, even in opposition to their father, Clarke's plan of campaign would have been frustrated. From first to last his hand was on the helm, he regulated speed and direction, he controlled the receipt and discharge of cargo, and settled all accounts until the final port of destination was reached. That is why his family are personally and conspicuously absent from the Bux Syndicate-why they have no voice in selecting co-adventurers, and are kept apparently in ignorance of its stages of formation. He exercised all rights, whatever these were; he "sold for everybody," to use his own graphic phrase; he locked up in his office safe all scrip, including 1,024 Bux shares of which 700 were Orton's, Scarborough's and his own, besides 324 which he attributes to his family but which are indistinguishably mingled with the rest. One son, as employee, had access to the safe for other purposes; Clarke, however, took out whatever scrip he pleased, he claimed and exercised the right of distribution at pleasure, and he caused his wife and others to be registered for purposes foreign to them. He instructed the brokers to sell, he received or directed the application of the proceeds, he kept bonds said to belong to members of his family as long as he pleased, he cut off coupons and cashed them, and then gave the cash to his donees; then he cut off the coupons and handed the coupons direct instead, until he got "tired" of cutting off coupons. Apparently he was working all through in the general interests of his family as well as in his own. He was certainly unselfish towards them, but his plan demanded his control and dominance, practically despotic. So, judging by his actions he retained all power, or thought he did, until actual distribution of proceeds. As events turned out I think his power stopped in some cases earlier than he imagined; but unless by law, by the legal effect of what he did, his power of ownership determined earlier, it continued on to actual distribution of proceeds. This conclusion is emphasized by what has happened since 1920. When in consequence of the conspiracy proceedings the Commissioner's attention was attracted to the matter and he proceeded to investigate, it was always the respondent who took charge of the matter: he prepared the material for cases for counsel, he wrote the explanations, and the family simply sat back and allowed the respondent to persuade the Commissioner, if he could, and in any way he could, that they were not responsible for income tax. All these facts, though of course not decisive, very materially strengthen the statutory prima facie presumption that the assessment is correct, and that the respondent derived the income in his own right whatever he did with it afterwards.
I pass to the other issues. Before entering upon those issues an important question arises: How far am I at liberty to consider for myself the truth of the respondent's story as to his dealings with his family? The learned Judge who saw and heard him believed him on "prolonged observation"; and that despite what the learned Judge considered "dubious" share transactions. No doubt, as a general rule, credence so given is to be accepted by a Court of appeal not personally seeing the witnesses. But I am satisfied both on principle and authority that there is no rigid formula that stands in the way. Such a formula might baffle justice instead of assisting her. Whether a Court of appeal can, consistently with its duty, reverse a conclusion of fact by a primary Judge depends entirely on the circumstances, even where among those circumstances he has given or refused credence to oral testimony. The nearest approach to a formulation of a rule as to judicial conduct in appeals from a primary Judge is found in Mersey Docks and Harbour Board v. Procter, where Viscount Cave L.C. says: "In such a case it is the duty of a Court of appeal to make up its own mind, not disregarding the judgment appealed from and giving special weight to that judgment in cases where the credibility of witnesses comes into question, but with full liberty to draw its own inference from the facts proved or admitted, and to decide accordingly." "Special weight," of course, is not equivalent to blind adherence, and in order to throw light on this part of the question reference must be made to other decisions. In Riekmann v. Thierry the House of Lords found it necessary to recall the standard of duty which a Court of appeal is bound to observe in such circumstances, because of some expressions of Judges to the effect that the primary judgment is presumed to be right. Lord Halsbury L.C., with the express concurrence of Lord Macnaghten, stated in clear terms the function of a Court of appeal, including the weight to be attached to a primary finding of fact. I have in Dearman v. Dearman so fully quoted the Lord Chancellor's words that I do no more than say they amount to this: the Court of appeal, while giving all due weight to a finding based inter alia on demeanour, must still proceed so far as it justly can to form its own judgment. In Dearman's Case other cases are quoted, including The Glannibanta and Smith v. Chadwick, which support that view and also draw a distinction between the facts established and the inferences to be drawn from them. The latter are much more freely within the competence of the appellate Court (Dominion Trust Co. v. New York Life Insurance Co.). In Ruddy v. Toronto Eastern Railway Co. Lord Buckmaster L.C. (for himself and Lords Dunedin, Parker of Waddington, Parmoor and Wrenbury), speaking of the judgment of a trial Judge, said:-
"From such a judgment an appeal is always open, both upon fact and law. But upon questions of fact an appeal Court will not interfere with the decision of the Judge who has seen the witnesses and has been able, with the impression thus formed fresh in his mind, to decide between their contending evidence, unless there is some good and special reason to throw doubt upon the soundness of his conclusions."
Some illustrations are given. In Khoo Sit Hoh v. Lim Thean Tong Lord Robson for the Privy Council recognized the duty of the appellate Court, and also of the Judicial Committee, to consider even the credibility of witnesses. He points out that their Lordships must of necessity be "greatly influenced" by the opinion of the trial Judge. He states the familiar reasons. Then Lord Robson observes that a Court of appeal will "hesitate long" before it will disturb findings of a trial Judge "based on verbal testimony" unless the primary Judge has clearly failed to take account of (a) "particular circumstances or probabilities material to an estimate of the evidence," or (b) "has given credence to testimony, perhaps plausibly put forward, which turns out on more careful analysis to be substantially inconsistent with itself, or with indisputable fact." To that, which is obviously not exhaustive, might be added "or inconsistent with prior statements of the same witness." In 1915 Sir George Farwell (speaking for the Judicial Committee) in Bombay Cotton Manufacturing Co. v. Motilal Shivlal said :-
"It is doubtless true that on appeal the whole case, including the facts, is within the jurisdiction of the appeal Court. But generally speaking it is undesirable to interfere with the findings of fact of the trial Judge who sees and hears the witnesses and has an opportunity of noting their demeanour especially in cases where the issue is simple and depends on the credit which attached to one or other of conflicting witnesses. Nor should his pronouncement with respect to their credibility be put aside on a mere calculation of probabilities by the Court of appeal. In making these observations their Lordships have no desire to restrict the discretion of the appellate Courts in India in the consideration of evidence. They only wish to point out that where the issue is simple and straightforward and the only question is which set of witnesses is to be believed, the verdict of a Judge trying the case should not be lightly disregarded."
In 1919, in Clarke v. Edinburgh Tramways , the House of Lords had to consider the subject, and I select the views of two of their Lordships. Lord Buckmaster said: "When a case depends upon the simple determination of a plain question of fact it is not desirable that Courts should seek too anxiously to discover reasons adverse to the conclusion come to by the learned Judge who has seen and heard the witnesses and determined the case upon comparison of their evidence." Lord Wrenbury said: "It is no doubt my duty as this case comes not from a jury but from a Judge to accept the responsibility of saying what is the result of the evidence; but in so doing the finding of the Judge who saw the witnesses weighs strongly-not so strongly that I may confine myself to asking myself why he was wrong, but to the extent that I may, as an appellate Judge, properly recognize that the Judge of first instance stood in a position of advantage which I myself do not enjoy." Lord Atkinson and Lord Shaw also delivered judgments not quite in the same terms, but I do not think these are really inconsistent with what has been quoted, or lay down any rigid rule. In 1925 Lord Dunedin, delivering the judgment of the Privy Council in Wilson v. Kinnear, said:-
"It is quite evident that the Judge did not believe Mrs. Kinnear. Had the verdict been the verdict of a jury their Lordships think that it could not have been set aside. But the judgment of a Judge is in a different position. A Court of appeal is not to consider whether there is any evidence on which the verdict could be reasonably based; it has to consider whether it on the evidence would have come to the same conclusion, and that is what the appeal Court did."
Their Lordships ultimately did not agree with the Court of appeal, but formed their conclusions on the evidence and not on the doctrine of a closed door. There are cases, such as Admiralty cases, dependent on special skill, weather conditions, sudden positions of vessels, nautical tactics-matters outside the range of ordinary human experience-and in such cases in an especial degree much depends on the credibility and apparent character of the witness who testifies. The case of the S.S. Hontestroom v. S.S. Sagaporack and S.S. Durham Castle is an instance. Lord Sumner's judgment sets out the duty of an appellate Court very clearly as to such cases. But even in a case of that description two learned Lords, Phillimore and Blanesburgh, differed on the facts as they considered them for themselves. But, to use Lord Sumner's expression, the "estimate of the man," which is the all-important point as to one branch of this case, is not here dependent merely on the prolonged observation of the primary Judge. There are tests in this case, as will be seen, not dependent on psychology, but on unquestionable physical acts-representations, oaths and conduct generally, much of which has been already narrated. In a case of this character-not one of special knowledge, as Lord Sumner in the Hontestroom Case indicated, but one of common life and experience-I see nothing which absolves me from the duty of examining for myself some serious questions of fact. On the contrary, I find a good deal which on the broad ground of justice requires me to do so. More particularly is that so since I do not find that the learned primary Judge has given any opinion upon some of those important considerations. Besides the "dubious" transactions on the market, which he certainly did consider to some extent, though not, I think, sufficiently, since he considered them only dubious, there are even more cogent reasons for doubting the respondent as to which no mention is made in the reasons for judgment. Weighty grounds for questioning the veracity of the respondent, that certainly demand positive treatment, are apparently passed by unnoticed, and transactions that to my mind are most questionable are termed "judicious realizations." I may say at once it is not necessary to review the findings in many instances. For the most part, the words of the witnesses may be accepted, leaving, as is undoubtedly permissible, the inferences to be drawn as well by the appellate Court as by the primary Judge; and in other cases the matter becomes a mere question of law. In the instance where, as I think, the facts may and should be reversed, "the good and special reasons" will be indicated in the appropriate connections.
(2) Badak Shares.
The Badak shares have to be regarded separately as they concern Mrs. Clarke and the younger members of the family and the two sons, A. S. Clarke and L. V. Clarke.
(a) The Wife and Family.
The respondent's case rests on his alleged "gift" of the shares. And so Mann J. has found. There is no suggestion on this branch of a trust. Nor could there be, taking the words of the respondent which have been accepted. Asked as to a conversation with his wife or family with reference to these shares, he said:-
"In a casual way, Yes."
He goes on to say:-
"I promised two of these to the wife. ... I told her I took up a few cheap shares, and was going to give her two."
That is all strange language from a man who controlled the market, and not in the least like a present gift. His evidence which follows is most indecisive. He says:-
"I think I promised the wife two. I think I said she should have another two."
His wife is equally vague. She says:
"As far as I can remember my husband came home and told me he had bought me two Badak Syndicate shares."
The evidence of Elsie and Edgar and Leslie all speak of gift but in the future. Whatever was his intention it was, however, effected when he transferred to his wife Alice and his son Edgar shares by the ordinary method of registration by the company. That, assuming an intention to make a gift, completely divested him qua those shares. If any trusteeship henceforth existed as to these shares, Alice and Edgar were the trustees for the interests of the rest of the "family"-which term does not include A. S. Clarke or L. V. Clarke. Any power of control by the respondent thereafter existing must have been by virtue of some reservation from the gift, which, if valid, would make it imperfect as a gift-that is, there would be no gift. That, however, appears to be precisely the intended position according to the respondent's evidence. Cross-examined as to the shares in his wife's name, he spoke very distinctly as to the nature of the transaction of which the registration was part. The evidence stands thus:-
"Q. Can you tell me now from your recollection how many shares were put in the name of your wife, Alice Clarke, in the Badak Syndicate?
A. I think she had four altogether. ... I treated them more like a pool than anything else. ... I claimed the right that having given them I should distribute them as I thought fit.
Q. What you did in fact was this: that when you caused money to be paid into each account you would determine what would be paid to your children respectively and to your wife after the brokers had sold?
A. I suppose so-Yes. I had no hard and fast rule for it."
In fact there were some members of his family who had no shares registered in their names. And again, as the admitted figures show, the proceeds were distributed quite irregularly. The learned primary Judge, after drawing an inference as to the purpose of the registration of the shares of Alice and Edgar adds: "But he always regarded his wife and the younger members of his family as in a pool together and intended to reserve the right and did exercise the right to apportion the real benefits amongst them." The position then as to the "family" Badak shares was: (1) no trust; (2) either a complete gift of specific shares, the produce of which alone belonged to the "family," or (3) no gift of shares at all, that is, no gift at all except of proceeds which until given were his own (see Anning v. Anning and Richards v. Delbridge). The respondent should fail on this branch.
(b) The Sons' Badak Shares.
This is comparatively insignificant. But the evidence, as accepted, shows an intended gift-not a trust-completed by registration of specific shares. Assume, if you will, he arranged to sell his sons' shares. The fact remains that he did not do so. He sold his own on his own account, as between him and the broker, and voluntarily handed the proceeds thereof to his sons, after being paid into his own account. On this he fails also.
(3) Bux Shares.
The third issue relates to the Bux shares, and this also divides into two branches. The governing passage as to these shares in the judgment appealed from summarizes the general language of the respondent in his evidence. In substance it founds on the agreement between the respondent and his two sons to send Scarborough to Malay, the outcome being the 16 share syndicate, the purchase by Clarke of 4 shares-that is, 1 for each son, A. S. and L. V. Clarke, and 1 for the wife and family, the sale of his own share, and his self-denudation of all interest in the syndicate. Subsequent events are read and treated as consequential on that fundamental position. The conclusion arrived at is that an implied trust arose in each case as to the two sons and also as to the rest of the family. Without difficulty his Honor also finds that the sales of Bux shares of which the proceeds were received by the sons were effected by their express authority, and that, as the respondent told his wife and family he was selling for them, those sales also must be taken to be theirs. Mann J., however, found what is abundantly clear: "In no case can the sum received be connected with the sale of a share or shares of which the person receiving the money was at the time of sale the registered owner." He finds also that the registration of the 125 shares was merely pro forma and meant nothing as between the family. Again, and I suppose as a sort of confirmation, the learned Judge finds that A. S. Clarke and L. V. Clarke severally repaid to their father the £30 he expended for the original syndicate shares, thus retrospectively connecting the sons with that syndicate. The respondent relied on that position to show that his two sons ab initio held an interest adverse to him, commencing with Scarborough and ending with the distribution of money. As regards the wife and family he relied on a voluntary trust arising out of his benefaction immediately after the formation of the original enterprise. With respect to very much of the foundation on which the structure of the sons' adverse rights rests-I refer to their relation to Scarborough and the share syndicate-that has already been shown to be unsubstantial. But once that disappears, the respondent's case on this branch fails, for neither gift, purchase nor voluntary trust has been urged. If any one of these had been, it must have failed for the same reasons as apply to other parts of the case. But the matter goes further. The circumstances within our reach on this appeal are such as to make it one of those exceptional cases where credence ought to be reviewed. When we come to test what Lord Sumner calls the "estimate of the man" there is material which does not usually fall within the reach of an appellate Court. However reassuring the demeanour of the respondent may have appeared to the learned primary Judge, certain hard facts are undeniable. The respondent accordingly, as his interest for the moment seemed to point the way, has from time to time told different and inconsistent stories, even on oath, and his chief confirmatory witness, A. S. Clarke, has sworn statements practically irreconcilable with his present testimony. As to Leslie's evidence, so far from being supported by such documentary proofs as exist, it appears as a matter of inference to be directly opposed to those proofs. On the whole there seem to be in abundant measure "the good and special reasons" which Lord Buckmaster conceded as justifying the appellate revision of a primary finding of fact. I shall consider the two branches separately:-
(a) Wife and Family.
The evidence of the respondent points to an intended gift. "I would give her one and ... the others ... could have an interest with her." That is, if anyone were to be a trustee, it was the wife after the gift was made. Before Starke J., in 1926, the respondent swore: "I said I was going to give one of these to the wife and members of the family." It was all in the future. In February 1920, when the 125 shares were registered in the name of the wife and four children, it is said the registration was "pro forma." I am inclined to draw the same inference, if that means a sham. But why pro forma as far as they were concerned? Why not register them, if at all, for shares that belonged to them? The answer is: there was no trust, only a promised gift, and the fruit was not yet ripe. It is also a significant fact, as pointed out by Sir Edward Mitchell, that the wife received the whole of the Bux proceeds attributed to this branch. There was no pool as to this. These facts, added to the control exercised by the respondent over the bonds, show there was nothing in the nature of a trust and nothing in the nature of complete gift until the actual distribution of the profits. On this branch also the respondent fails.
(b) The Two Sons' Bux Shares.
As against the claim of original adverse rights of the sons against their father by reason of their being his co-adventurers ab initio, the fact is-and it is a serious fact-that in March 1926 the present respondent swore the direct opposite. The Crown was endeavouring before Starke J. to maintain the liability of A. S. Clarke to income tax for (inter alia) the amounts he received in respect of these shares. As a step, and to show trafficking, the Crown sought to prove that A. S. Clarke had purchased the original syndicate share from his father, and that the subsequent realization had been effected by the father on behalf of A. S. Clarke. The then respondent maintained: (1) that the proceeds were only realization of capital and (2), incidentally, that there was no purchase or speculation amounting to trafficking, but a gift, without any obligation to pay for it. The evidence of the present respondent on that occasion was as follows:-
"I purchased four shares";
and then:
"Q. Did you sell or agree to sell to your two sons?
A. When that conversation took place I really had four shares.
Q. When was that?
A. April or May 1919.
Q. Were they both there?
A. Yes.
Q. What was said?
A. I said I was going to give one of these shares to the wife and members of the family. I said to the boys: 'You can have one each.'
Q. At what cost?
A. I didn't say anything about the cost at that time. There was no payment at that time.
Q. What was said about their paying for it?
A. I never said anything. The suggestion came from them. They said: 'Oh no Dad, we will pay you for it.'"
On the same occasion, A. S. Clarke was examined. He said:-
"I knew a syndicate was being formed. ... My father applied for shares and he told me I could have one. Nothing was said about payment at that time. Afterwards payment was mentioned and father said:
"
- -'That is all right. Wait and see how it goes.'
As to eventual payment the present respondent was pressed and this was his then story:-
"Q. Did they pay you the £270 and the £30?
A. Not that I remember.
Q. Will you swear they didn't?
A. I wouldn't swear that. They didn't pay me in cash. I will swear that.
His Honor: You cannot remember?
A. No.
Q. There are no accounts to help you?
A. None whatever."
Later:
"In the Bux I had given them that share and they offered to pay for it, but I would not swear they paid for it."
As to the instructions to sell the shares-the respondent also testified:-
"Q. When the shares were sold were the account sales rendered to the members of your family?
A. No, they all went to me."
Again:
"Q. Do I understand you to say that your two sons did themselves receive from the brokers the proceeds of the sales of the Bux shares?
A. No, they received it from me. They were really sold on my account on their behalf. They were all included in my sales.
Q. Did you give your broker instructions in writing or verbally?
A."Phone and verbally.
Q. You did not say "Sell on behalf of so-and-so"?
A. Usually they asked me if I could let them have some.
Q. There was nothing to indicate on whose behalf they were sold?
A. No.
Q. The brokers would send down a cheque for the amount and you would send down certain scrip?
A. Yes.
Q. Did you consult with the members of your family which scrip went along?
A. At the time I did.
At that trial A. S. Clarke, said: "Father sold all the shares on our behalf." Now, the full force of that evidence is perceived only when it is known what statements had been made before the trial of March 1926. In a case for opinion prepared on the direct instructions of the respondent and with the authority of his sons, it had been stated that the father had subscribed for 4 shares in the Bux and had invested £120 in it, and that "one share was given to Mrs. Clarke and family, one each to Alfred S. and Leslie V. Clarke at cost" & c. Then in a later case for opinion prepared in connection with the assessment of A. S. Clarke it was stated:-
"Clarke Senior applied and paid for 4 of these. Later on he let A. S. and L. V." (? have) "one each at cost price."
Shortly before the trial in 1926, the then appellant, A. S. Clarke, gave to the Crown written notice to admit that in 1919, he had "purchased ... one share in a syndicate known as Bux for ... £30." On this, as the origin of a commercial venture the Commissioner built. But when it came to the trial both father and son, as has been seen, steered clear of any commercial character so far as the Bux were concerned and rested it from the son's standpoint purely on gifts of property. The strategy was successful. The Crown was in the hands of the Clarke family and could get no further. The learned Justice (Starke J.) said to counsel for the Crown:-
"I do not think you will get it any further, Sir Edward. It has made it more clear to my mind that these sons never purchased any shares at all. I am inclined to think they never got any. I think this family is a very attached family."
The judgment was reserved. In order that no judgment should create a res judicata should the Crown desire to assess the father, opportunity was given to the Crown to withdraw the then assessment. That was done and A. S. Clarke went free-and in view of the three years' bar must remain free-substantially, though not technically, on the opinion created by the respondent and his son that the proceeds were the personal receipts of the present respondent. It needs no seer to divine how different the position would now be if the same story had been told to Mann J. No demeanour can be more than plausible or chameleon-like that can sustain at different times two such diametrically opposed versions as were told within little over a year. And, be it observed, the memory of the respondent was a full year fresher than in 1927. Mann J. attaches importance to the time that had elapsed as accounting for imperfect explanations. But the water had been running under the bridge nearly all the time. The evidence shows that there was a constant and urgent need of stirring the memory of every member of the family. And it shows the pliability of the memory of the respondent and his two sons to meet the demands of the moment. Each varying stimulus brought forth its own special response, and these were discordant. This is strikingly exemplified with regard to the alleged payments of £30 each by A. S. Clarke and Leslie V. Clarke for these shares. At a comparatively early stage in the history of these assessments a case for opinion had been prepared in which it was stated that the two sons had subscribed £60 towards the Scarborough expedition, and that hence flowed the Bux Syndicate and proceeds. At the trial before Starke J., A. S. Clarke was faced with this. He said:-
"I do not remember paying £60 towards sending a man to report. I can find no trace of it. After sale of Bux shares my brother and I allowed our father to retain the cost of the contributing shares."
That last statement, obviously referable to a sum of £540 practically retained, is, on its face, entirely opposed to the present attitude in several respects. The £60-that is the two £30-we find quite repudiated and notwithstanding a prior allegation to that effect. Why this backing and filling? But at the trial before Mann J., though purchase was abandoned, so also were "gift" and "voluntary trust" ignored for obvious reasons. The whole case was pinned to original adverse rights rooted in the Scarborough expedition. The £60 allocation was revived on material and with incidents which, to my mind, are wholly inadequate to sustain the burden. The respondent himself was certainly cautious as to this and quite indistinct, though he might, as the principal business man of the concern and after having by conversation stimulated the recollection of his sons, have been expected to be precise. A. S. Clarke, however, recalls his payment in an extraordinary way. Though no record of these vast and varied transactions has been kept, and though in or about April 1920 all the other brewery accounts were destroyed, one book survived. It is a ledger in which the accounts between Clarke senior and the various members of his family were kept and balances shown. A. S. Clarke is shown to have been in credit £120 8s. on 30th June 1919 and to be so still. Leslie V. Clarke is shown to have been in debit on that date £18 7s. 10d. and to be so still. One can scarcely imagine that this book escaped attention during the many years this income tax agitation has proceeded. But no other existing line or word is suggested as having aroused the slumbering recollection of the two brothers. A. S. Clarke founds his newer belief on the fact that he used to write up the books of the brewery, at times including ledger accounts, and he believes he was debited in some book now destroyed. Apart from the curiosity of taking the trouble to make entries in books of a moribund concern, and that were about to be destroyed, it is certainly strange that the one place where the debit ought to be found, or where the balance should have been corrected-the surviving ledger-is silent. The explanation appears to me to stand so much opposed to prior statements, to accountancy, and other probabilities, and inherently so thin-not a distinct and definite statement-that I do not accept it. The explanation of Leslie is, if anything, more transparent, although Mann J. thinks it is supported by the probabilities. How can a ledger still showing a debit balance support a statement that the debit balance was extinguished? He says he was "credited" somewhere with a cheque for £148 10s.; where or how we are not told. It was said to be in November 1919. But if he were "credited" with £148 10s. he got the whole of it. Then he says he got the whole of it, less £30, by £100 cash, after deducting the £18 (about) he owed his father. There is no trace of the £ 100, no entry to support the story, and particularly the sum of £18 7s. 10d. still stands to his debit in the very place where it should have been shown to have been extinguished if matters proceeded on the strict business basis we are asked to accept. One very curious question presents itself, as suggested by Sir Edward Mitchell. If Leslie was credited with £148 10s. in November 1919, and especially if this fund was looked to for Bux recoupment, why did Clarke himself pay the final £5 calls in December 1919? With regard to the instructions to sell the shares, I have already referred to the evidence of the respondent and A. S. Clarke before Starke J., when the responsibility of A. S. Clarke was in issue. Before Mann J., without quoting the evidence in detail, certain points are clear. The respondent admits he was instructing Trembath the broker. Trembath does not corroborate his story as to the conversation leading to the sale. He says: "I have no recollection of orders from A. S. Clarke to sell." Trembath clearly looked to the father as the vendor and regarded the sons merely as the father's substitutes or messengers. Trembath's ledger shows every transaction to be for the father. Some subsequently written references to "Clarke Brothers" were obviously to indicate the destination directed by the respondent. One small ledger account in the name of Clarke Brothers was, as Trembath says, "opened probably on the father's instructions." His evidence is quite opposed to that of Leslie with respect to the person instructing him. After giving full weight to the impression evidently made upon Mann J. by the demeanour of those witnesses, and making, as I believe, full allowance for the advantage which that learned Judge possessed, I have no real hesitation in concluding that their own statements and acts at different times and under different aspects of liability are stronger than mere appearances and attitudes in the box, and must be given superior influence if Justice is to be properly served. The "estimate of the man" can in this case be made by more positive tests than the necessarily conjectural one of personal appraisement. Those positive tests are within our reach, and extend from the launching of the Bux upon the Exchange onwards through the exploitation of the share market and the conflicting stories told to the Commissioner and to the Courts. That does not necessarily lead to rejection of the last version. It has its chance with the others: they may all be false, but, as they cannot all be true, if one be true the latest may be that one. But having once reached the point where the estimate of the respondent's veracity by observation is not conclusive, then his story is to be considered by the light of all the circumstances conjointly, not omitting the weight to which he is entitled of a favourable impression in fact on the primary Judge. But also not omitting the important fact that by his former evidence on oath he assisted to secure a great benefit to one of his family-and incidentally to another-at the expense of the public Treasury.
On the whole I arrive at the conclusion that he did not divest himself of the property in the shares until sale. He was the one member of the family "familiar," as Mann J. says, "with mining affairs and in close touch with other speculators and brokers"; and he did not intend to present his family with unripe fruit. He intended to gather it first, when ripe, and give them the proceeds. It may be that the law impresses on some of his acts an effect he did not contemplate, but his intention was as I have stated.
Reason to believe Evasion.
An objection was raised by the respondent that the assessment was incompetent because it was an assessment of income more than three years after the income year, and without the Commissioner having any reason to believe evasion. The chief ground was that the three years ended in 1924. I agree with that. But it was said that the attempted evasion must have been not later than 1921. With that I do not agree. The attempted evasion might take place at any time during the three years, thus misleading the Commissioner during any part of the period open to him to assess unconditionally. But there is another answer. While the Commissioner is directed not to assess unless he has reason to believe attempted evasion or fraud, sec. 39 of the 1922-1925 Act (sec. 35 of the 1915-1918 Act) plainly makes the assessment unchallengeable. The Act so far trusts the Commissioner and does not contemplate, in my opinion a curial diving into the many official and confidential channels of information to which the Commissioner may have recourse to protect the Treasury. In any case, on the facts the Commissioner in this case had more than sufficient reason for his belief and I will not waste time in detailing it (see Moreau v. Federal Commissioner of Taxation).
Assessment as Representative.
I do not find it necessary to determine what might have been a very necessary point. Suppose the respondent had derived the whole £39,915 as representative of various interests and not for his own personal benefit, is it the only possible order for the Court to make on a proceeding of this nature to allow the appeal simpliciter and leave the Commissioner to make any new assessment he can? In view of the three years' limitation that might work great public wrong, and one due entirely to the circumstances being specially, if not solely, within the knowledge of the taxpayer. Although it is not necessary to determine it, yet as it was referred to in the course of the argument I shall very shortly state why it is open to consideration. Where an action is brought to recover tax the assessment is conclusive (sec. 39). That is a strictly legal enforcement of an ascertained right-regarded for the purpose as conclusively settled. Whatever relief is desired must be obtained on what is called "appeal." This appeal-so called-is really original jurisdiction to correct the assessment and bring it, as an essential factum of liability, into conformity with the requirements of the law, so that whatever liability exists it may be adjusted properly by a true factum. If the assessment were against A personally, and his objection were that it was in respect of representative income-trust income-I see no reason why the Court should not under the ample powers of sec. 51A, sub-sec. 5 make the necessary alteration. So if part of the sum were trust income, I see no difficulty in the Court doing what the Commissioner should have done. An assessment is only the ascertainment and fixation of liability (see R. v. Deputy Federal Commissioner of Taxation (S.A.); Ex parte Hooper) Suppose A were assessed as trustee of X and Y, and it became in complicated circumstances necessary to determine whether the income beneficially belonged to X alone or to X and Y jointly or severally. If the Court thought it was partly for X and partly for Y, would the whole assessment be void, and let both X and Y after three years escape; or could the Court declare separate assessments? These are considerations which it might have become necessary to determine had the view taken in the Supreme Court been upheld as to any of the branches dealt with.
In the view I take it is not necessary to decide that.
In my opinion this appeal should be allowed and the assessment confirmed.