Egyptian Delta Land and Investment Company Ltd v Todd

[1929] A.C. 1

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(Judgment by: Viscount Sumner)

Between: Egyptian Delta Land and Investment Company Limited
And: Todd

Court:

Judges:
Viscount SumnerLord Atkinson
Lord Buckmaster (read by Lord Atkinson)
Lord Warrington of Clyffe (read by Lord Atkin)

Subject References:
Revenue
Income Tax
Company incorporated in England
Registered Office in London
Business carried on Abroad
Residence
Liability of Company to Tax

Legislative References:
Income Tax Act 1918 - Sch. D, Cases IV. and V, All Schedules Rules, r.7

Case References:
American Thread Co. v. Joyce - 6 Tax Cas 163
Attorney-General v. Alexander - LR 10 Ex 20
Bradbury v. English Sewing Cotton Co - [1923] AC 744
Calcutta Jute Co. v. Nicholson; Cesena Sulphur Co. v. Nicholson - 1 ExD 428
Cooper v. Cadwalader - 5 Tax Cas 101
De Beers Consolidated Mines v. Howe - [1906] AC 455
Egyptian Hotels v. Mitchell - [1914] 3 KB 132
Goerz & Co. v. Bell - [1904] 2 KB 136
Imperial Continental Gas Association v. Nicholson (1877) - 37 LT 717
John Hood & Co. v. Magee (1918) - 7 Tax Cas 327
Keynsham Blue Lias Lime Co. v. Baker - [1863] 2 HC 729
London Bank of Mexico v. Apthorpe - [1891] 1 QB 383
IRC v Lysaght - [1928] AC 234
Mitchell v. Egyptian Hotels, Ld - [1915] AC 1022
New Zealand Shipping Co. v. Thew - 8 Tax Cas 208
Reid v. Inland Revenue Commissioners (1926) - 10 Tax Cas 673
San Paulo (Brazilian) Ry. Co. v. Carter - [1896] AC 31
Swedish Central Ry. Co. v. Thompson - [1925] AC 495
Taylor v. Crowland Gas Co. - [1855] 11 Ex 1
Wingate's case - [1897] 24 R 939

Judgment date: 23 July 1928

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Judgment by:
Viscount Sumner

My Lords, the Commissioners' finding, upon evidence which was sufficient to support it, was in favour of the subjects. It can only be challenged upon some ground of law sufficient to enable the Inland Revenue to succeed, but which they overlooked. Accordingly the respondent contends, and necessarily so, that incorporation under the Companies (Consolidation) Act, with the attendant statutory obligations, in itself and as matter of law makes a British company a "person resident in the United Kingdom" within the Income Tax Act, 1918. If this had been merely a factor to be considered along with others relating to the company's affairs, it would have been, like other questions of fact and of degree, a matter for the Commissioners, and their finding in favour of the appellants would be conclusive.

The word "resident," used for over a century in these taxing Acts, was introduced long before limited liability was freely recognized by the law, but in and before 1853 all incorporations were brought under charge. None existed with the precise forms of incorporation and obligation, enacted for companies with limited liability since 1862. The words "a person resident" were, of course, used of incorporated persons without any reference to the provisions subsequently enacted.

My Lords, I think it follows that the first question here is the interpretation of the Companies (Consolidation) Act, 1908, and not that of the Income Tax Acts. Only if its provisions make an English limited liability company resident in England does any further question arise. Now the Companies (Consolidation) Act says nothing about the "residence" of the companies incorporated under it and, as regards income tax, it was passed alio intuitu . The question is not "Where does such a company reside, if it must reside somewhere?" but "Has the Act of 1908 constituted for companies any residence at all?" - a thing not in any case analogous to the residence of an individual. Residence is not inherent in a company in the nature of things, and residence for the purpose of taxation is matter for express legislation.

Furthermore, down even to 1853, most taxpayers were natural persons. As to number it is so still, though whether they now pay more than companies do I know not. Throughout the Income Tax Acts "resident," with its various qualifications "actually," "ordinarily," "occasionally," "temporarily," and so forth, is used in a sense in every way appropriate to natural persons, but only artificially applicable to incorporated persons, and never really appropriate. Indeed, I think that "a person ordinarily resident in the United Kingdom," as used in the Income Tax Act, is so inappropriate a term for a person, albeit an artificial one, who is always and by law immovably resident in the United Kingdom, that it cannot be sustained; and so the Legislature itself seems to have thought, for I find in s. 39 of the Finance (No. 2) Act, 1915 (a cognate enactment to the Income Tax Act), the provision that "the .... businesses, to which this part of this Act applies, are all .... businesses .... carried on in the United Kingdom, or owned or carried on in any other place by persons ordinarily resident in the United Kingdom," which is the formula thought necessary to include the English businesses of English companies and to bring them under excess profits duty.

At first, perhaps, the Courts might have said that, as a corporation could not "reside" anywhere in any true sense, they must leave it to the Legislature to enact residence in an artificial sense, but they felt bound to make the Acts work as they found them and arrived at a compromise, under which certain propositions, I think, are now well settled. The word "resident," it is laid down, has to be applied to artificial persons by analogy from natural persons. With these, residence depends on personal facts. Place of birth, nationality and allegiance are not the tests, nor is domicil, except in a sense that makes it barely distinguishable from residence. Voluntary choice and habitual and repeated action are mainly material, such as making a home, keeping an establishment, pursuing a settled object in or at a particular place. A man can change his residence at will, except that a certain duration of time or fixity of decision is requisite, and, but for the peculiar cases of a convict in goal or a lunatic lawfully detained in a madhouse, I do not think that residence is ever determined for a natural person simply by the law. Accordingly, under the decisions, as well as in principle, "resident" is a term exceedingly unsuited to describe a statutory "person," which can never be non-resident, because, by the law of its being, it is a fixture. The analogy that is really possible between a natural person and a company is that of carrying on business at a place, great or small, and in my opinion, for the purpose of income tax, both on the words of the Acts and on the cases, the residence of a foreign company is preponderantly, if not exclusively, determined by this kind of fact.

Turn now to the Companies (Consolidation) Act. A form of incorporation is indeed prescribed, but how does that affect the matter, any more than the sealing of a royal charter or the royal assent to a private bill? This at most does no more than bring the embryo company to the birth, which in a natural person is not the test. The first effect of the incorporation is to make the new company amenable to English law and English law courts and to give it the status of an English company, but these things only place it in the same position as a British subject born or domiciled here, or as a natural person, who, "resident" or not, is within reach of English legal process. Then the company is to be wound up or to get leave to alter its memorandum or to reduce its capital, in an English Court of law. The domiciled Englishman is similarly under this personal law as to marriage and divorce, intestate administration and bankruptcy. An English company must, under English law, pay its debts and may be fined, but so may any one else who can be duly served with process for acts justiciable in this country. There is no analogy to "residence" here in the sense settled by the decisions for natural persons. These matters depend on the duty of obedience to English law.

What does the Companies (Consolidation) Act say more? A company must have a registered office in the United Kingdom, though it can move it about. Then it must keep certain lists and registers, and allow inquirers to inspect them and, although failure in any of these respects does not ipso facto work its dissolution nor is performance of these essential and important obligations a condition concurrent to its continuing to be incorporated, heavy fines may be inflicted for non-performance and, if not paid, may, I assume, lead to winding up. My Lords, between these requirements and the case of a natural person there is no analogy at all, for the natural person is not subject to them. How then do they constitute a residence such as is shared by a natural person and is analogous to his? It is said that the company is always really present at its registered office and, if you seek it, there you will find it. I can make little of this. The Income Tax Acts themselves distinguish between being "in" this country and being "resident" here (No. 2 of the Miscellaneous Rules applicable to Sch. D) and Mr. Cadwalader ( Cooper v. Cadwalader , 5 Tax Cas. 101) and Miss Reid ( Reid v. Inland Revenue Commissioners (1926) 10 Tax Cas. 673) are examples of persons, who had a "residence" here, though they were themselves nearly always elsewhere. At night and on Sundays and holidays you will not find the company at its head office, except in a mystical sense, but I would point out that a truer analogy and a more satisfying residence is to be found in "keeping house and doing business" there than in a continuous statutory presence, even during the hours of darkness and of Divine worship. I respectfully find this argument too transcendental for acceptance. Furthermore, all these requirements are enacted for other purposes than those of taxing profits and gains. As far as the Companies (Consolidation) Act goes, no business need be done at this office and no profits or losses made there. Nobody in authority need be present, perhaps nobody at all. The inspection of these registers and so on is the price paid for limitation of liability. It is directed for the assistance of creditors or intending creditors. It is not devised in order to attract tax. That is the business of a special taxing Act.

It is, I think, a legitimate test to see what is the minimum action by the company, which will satisfy the Act, for, if the argument for the Crown is right, even that minimum must inevitably result in "residence" here. The head office need not be in any frequented or convenient place. It may be shared with any number of other persons, natural or incorporated. Whatever has to be done may be left, as it was here, to an independent contractor. No officer of the company nor even any servant need attend. The provisions of the Income Tax Act, which regulate the place at which a taxpayer is to be assessed, ignore altogether the head office of a company which does not carry on its business there: see r. 4, sub-r. 1, of the Miscellaneous Rules applicable to Sch. D. Either the place of trade or the place of manufacture or the "ordinary residence" is to be the place. If the respondent company has no place of trade here and does nothing at its head office but the minimum and occasional formalities required by the Act, it is surely an impossible straining of plain words to call that its "ordinary residence." I cannot find anything to forbid the discharge of these obligations by purely mechanical means. A name on a door-post; a letter-box in a door, accessible to the public; a glass-fronted case under a lamp, containing the lists required, so placed that they may always be read from outside, with an occasional visit of a clerk to alter the lists and take away the letters, would seem to satisfy the Act - though of course I express no decided opinion about it. In so far as service may be by post or delivery at the office, the letter-box suffices. If it has to be personal, the Act merely authorizes some one, whom the company arranges to have there - an office-keeper or a typist - to accept service, a thing which the company might have done for itself. Notices and returns could be sent to the registrar from abroad. Though the Spirit of the company may be imagined to brood over these arrangements, I do not see how the company itself is there at all. The office is its English address but its business may be elsewhere. If this is "residence," I think it is "residence" not by analogy to that of a natural person but by an independent metaphor. At any rate, if it is to be called "residence," only the Legislature can do it. In doing so a Court of construction would not be interpreting the Act but amending it. Either the Companies (Consolidation) Act should say - "a company registered under this Act is always resident at its registered office for all purposes," though "residence" is a matter quite outside the scope of an Act, which deals only with a company's constitution, obligations and rights, or the Income Tax Act should say "a company registered under the Companies Act shall be deemed to be at all times a person resident in the United Kingdom for income tax purposes," which would raise a crop of difficulties for the Inland Revenue in other directions, to be dealt with when the time comes.

My Lords, I now turn to the authorities. This point, exactly in its present form, appears not to have been actually decided before this case. In my opinion the Swedish Central Ry. Co.'s case ([1925] A.C. 495; [1924] 2 K. B. 255) does not at all conclude it and on the other hand the whole current of authority since the Cesena Sulphur Co.'s case (1 Ex. D. 428) has been such as to make the point one which should be decided against the Revenue and should not be reopened.

All that was decided in the Swedish Central Ry. Co.'s case ([1925] A.C. 495; [1924] 2 K. B. 255) was that the company could have two residences, one in England as well as one in Sweden. Your Lordships were not asked to decide more. It is true that by admission the controlling power over the business was in Sweden, but other business was done in London the character and importance of which, though set out in the case, was not discussed at the Bar. It was a matter of degree on the facts and your Lordships cannot be deemed to have come to some unexpressed conclusion on that ground merely because you did not for yourselves declare either that there was no evidence of business carried on in England or that there was no need to discuss the carrying on of business, because the effect of registration was conclusive. Nor is it decisive of the point to say now that the business done in England was only administrative. It was in fact a good deal more and, in the static condition of the company's affairs, it was not much less important than the Swedish part. If new questions arose the Swedish directors could settle them but, as things were, little had to be done anywhere except "administration," as is often the case with companies, and that was fairly divided between the two countries. I would particularly draw attention to the powerful judgments of my noble and learned friend Lord Atkinson and of Atkin L.J. as showing how strong are the grounds for saying that since the De Beers case ([1906] A.C. 455) the test of taxable residence for any company has been settled to be the carrying on of business here and not the bare operation of the Companies (Consolidation) Act.

In the Court of Appeal the majority held not only that a company could have more residences than one but that the English registration together with the English statutory requirements would suffice to constitute such residence, even though the central control of the business carried on was abroad. This was the argument for the Crown, advanced then, so far as I know, for the first time in any case, by Sir Patrick Hastings. Before your Lordships Sir Douglas Hogg presented the case in a rather different form ([1925] A.C. 498, 499): "Unless it is established that central control is the sole and conclusive test of residence ..... the finding of the Commissioners disposes of the case .... If necessary, it is submitted a company has a residence where its registered office is, though it may also have a residence where its central control abides." It is I think plain that your Lordships' House affirmed the judgment of the Court of Appeal on the first of these two grounds only, for the Lord Chancellor says ([1925] A.C. 501): "An individual may clearly have more than one residence .... and on principle there appears to be no reason why a company should not be in the same position. The central management and control of a company may be divided, and it may 'keep house and do business' in more than one place; and if so, it may have more than one residence." This was said with reference to the fact that there was evidence, on which the Commissioners could act, of business done in England sufficient in importance and in amount to give a residence on that ground. The Lord Chancellor then ([1925] A.C. 505) expressly reserved the point now in debate. No other noble Lord went beyond his above quoted words, and Lord Buckmaster ([1925] A.C. 519), after referring to the New Zealand Shipping Co.'s case (8 Tax Cas. 208), says: "For purposes of our income tax the real and not a merely nominal residence was here, and if there were also residence elsewhere that did not displace it. The reference to the registered office is important; it is, to my mind, one of the critical facts in determination of residence in this country, but not necessarily the sole and exclusive fact." This was in accordance with the whole current of authority down to that time, and I would observe that the importance of the fact was for the Commissioners.

My Lords, as I venture to think that the law has been already decided against the respondent's proposition or, if not formally decided, has so long been taken at the Bar and on the bench to be settled, that I must I fear defend this position even at the cost of treading again the weary road of the Tax Cases. This question was a live question over fifty years ago. It was formally contended in Attorney-General v. Alexander (L. R. 10 Ex. 20) L.R. 10 Ex. (atp. 28) that a corporation's status is and can only be "in the country where it is constituted," a labour-saving proposition that must have commended itself strongly and would hardly have been rejected, if it could reasonably have been entertained. The case was decided on the ground that, apart from questions of residence in the country of incorporation, the claim for tax failed, because the bank did not carry on business here, as the Attorney-General claimed that it did. I will, however, quote his argument; (on p. 26) he says: "Such a body has no locality except by its acts and must be said to reside where its substantial business is carried on," and (on p. 30) Kelly C.B. says: "if .... this corporation can be said to be resident anywhere, .... it must be resident in Constantinople, where alone it has its 'seat,'" not, that is, its place of incorporation but its chief place of business, while Amphlett B. (at p. 34) makes his opinion plain that the locality of this seat alone and not the place of incorporation determines the question of residence. In the Cesena Sulphur and Calcutta Jute Companies' cases (1 Ex. D. 428), the Attorney-General 1 Ex. D (at p. 437) again contended, alternatively to the carrying on of business here, that "its seat and residence can only be in the country where it is created and constituted." For this sundry United States cases were referred to, which were not much in point, but the challenge was boldly taken up by counsel for the Calcutta Jute Co., who says (at p. 442), "the test of residence, at least for fiscal purposes, is not where is the company incorporated, but where is the real trading carried on."

How then do the learned Barons deal with the point thus clearly raised before them? On p. 445, Kelly C.B. answers the question, "what is the meaning of the word 'residing' as applied to a joint stock company?" thus:-

"whether there may or may not be more than one place at which the same joint stock company can reside, I express no opinion at present - a joint stock company resides where its place of incorporation is, where the meetings of the whole company .... are held and where its governing body meets in bodily presence .... and exercises the powers conferred upon it ....."

Huddleston B., at p. 452, says: "I adopt Mr. Matthews' suggestion that 16 & 17 Vict. c. 34, when it speaks of 'residing,' does not mean an artificial residence. It means an actual residence"; and then (on pp. 453-454) he shows how and in what sense actual residence is used, when, negativing the Crown's contention that "if a company was registered in England it must be held to reside in England," he says: "registration, like the birth of an individual, .... must be taken into consideration .... but it is only a circumstance" and he goes on to review as other circumstances all the direction and control and administration which take place in England, leading to the conclusion that when those circumstances show the main place of business to be here, then and thereby the company resides here.

Your Lordships will observe that so much of the respondent's present contention as rests on an English company's "residence" in the country of its incorporation was raised in the Cesena case (1 Ex. D. 428) by Sir John Holker A.-G. and was negatived by both the learned judges of the Court of Exchequer. So much was an express decision and is now in point. The Cesena case (1 Ex. D. 428) has not only never been overruled but it has far too long been cited with respect to be overruled now, nor were your Lordships asked to do so. How are we to decline to follow it? No doubt the Court's decision might have been arrived at without dealing with this point, but are we to say that the explicit rejection of it was therefore a mere obiter dictum , or that the point remains open, because the Attorney-General argued it without mentioning the statutory obligations, which the Companies Acts imposed? All that remains is an argument, which Sir John Holker (not ignorant of the Companies Acts, I am sure) elected to pass by - namely, the statutory obligations of such a company. Surely this does not reopen the decision.

Before passing from the Cesena case (1 Ex. D. 428) the case of Imperial Continental Gas Association v. Nicholson ((1877) 37 L. T. 717, 721, 722), also decided by Kelly C.B. and Huddleston B. shortly afterwards, ought to be mentioned. In it the same difference in language between the two judgments is to be noticed. Both agreed that, as regards the question of Sch. D, the two cases are on all fours. Kelly C.B. (p. 721) says: "this being a foreign undertaking .... belonging to a joint stock company, established, incorporated, and resident in England .... the whole of the profits .... are assessable to income tax in this country" while Huddleston B. says (p. 722): "here .... according to the decision of the court, in the Calcutta Jute Mills case (1 Ex. D. 428), the business is carried on at the place whence the orders emanate. That is the central point, where the business is carried on .... and where the whole transactions occur and .... it would be assessed here."

So matters stood for over thirty years. Importance chiefly attached to the place where control of the business was exercised (see San Paulo (Brazilian ) Ry. Co. v. Carter ([1896] A.C. 31)), the place of incorporation being a subordinate matter and the subsequent statutory requirements attracting no attention at all. Then in 1906 the De Beers case ([1906] A.C. 455), albeit that of a foreign company, was decided in terms which in my opinion render it conclusive of the present issue.

It was at one time thought that the authority of the Cesena Co.'s case (1 Ex. D. 428) had been shaken (see per Charles J. in the London Bank of Mexico v. Apthorpe ([1891] 1 Q. B. 383, 388)), and in 1904, in Goerz & Co. v. Bell ([1904] 2 K. B. 136), "residence" again came up for discussion before Channell J. Though registered abroad, the Goerz Company had its head office in London, where the directing and controlling power was exercised, and the case directly raised the question, whether a company, registered abroad and not in the United Kingdom, can reside here for income tax purposes. Wingate's case ((1897) 24 R. 939) was one in which a foreign company, though taxed because it carried on the whole of its business here, was yet held to have been "resident" abroad. The Attorney-General contended, and so Channell J. held, that registration was only one point to be considered and that the carrying on of the business of the company was the substantial test. After suggesting that a company may possibly have two residences, he asks whether the registration and incorporation abroad prevented residence in the United Kingdom, and replies that the English Companies Acts provide in the registered office of a company the place where any one who wants to find this company officially must go to find it. He adds that the company in question merely provided by its articles, that all summonses and notices should be served at its head office, in effect saying that "so far as the company has a local habitation it is at the head office," but, as the control and direction were exercised from London, which was the true head office, he finally held that, notwithstanding the South African registration and incorporation, the company was resident in London and was chargeable accordingly. "If it were necessary to decide between Johannesburg and London," he says ( [1904] 2 K. B. 150), "I think that the considerations, which go to make up the local habitation of such a body rather show that this company is to be found in London and not in Johannesburg." This sentence supports the finding of the Commissioners in the present case, but how the previous observations can assist the Inland Revenue I am at a loss to imagine, while the statement positively made in [1914] 3 K. B. 132, without discussion, that residence follows from incorporation here, must be read in its context - namely, a business carried on here by a person, who is charged as a "resident" here.

It was in this state of the authorities that the De Beers case ([1906] A.C. 455, 458) was decided in the House of Lords in 1906. The appellants argued that "a company resides where it is registered and nowhere else," a proposition which, even in a case relating to a foreign company, almost necessarily involved some consideration of the effect of the Companies Acts in this connection, whether it was discussed or not. This perfectly general proposition, which had been advanced by former Crown counsel almost in the same terms in the Cesena case (1 Ex. D. 428), was now met by a total denial. Sir Robert Finlay A.-G. was not heard in the House of Lords it is true, but in the Courts below he is reported as saying ([1905] 2 K. B. 612, 628): "the question where a company resides is mainly a question of fact. The place of its incorporation or registration is one circumstance, but only a circumstance, to be taken into account," accepting and citing the Cesena Sulphur Co.'s case (1 Ex. D. 428) as authority, equally in the case of a foreign as in that of an English company. In an often-quoted passage Lord Loreburn rejected the appellants' contention. The process of deciding the residence of a company he said was one of seeing, where it really keeps house and does business, not of considering the place or the form of its incorporation or the statutory obligations imposed by the lex loci. He then said that the Cesena case and the Calcutta Jute case (1 Ex. D. 428), in the former of which he had himself appeared as counsel, had been acted on for thirty years and involved the principle, that a company resides for purposes of income tax where its real business is carried on, and "the real business is carried on where the central management and control actually abides." "I regard that," he said, "as the true rule," and Lords Macnaghten and Robertson concurred without more, while Lord James of Hereford added a remark, which shows how prominently the question of the place of registration was before the mind of the House.

So far, my Lords, it does not seem to have occurred to any judge, that there might be two kinds of residence or two tests of its acquisition, one for the purpose of entangling foreign companies in British taxation and another for that of tying British companies down, so that they cannot wholly escape it. I submit that such a doctrine is illogical in form and in substance unjust. Residence may no doubt be constituted by various kinds of acts, but how it can be constituted in one place by doing something there and, at the same time, in another place by doing nothing I cannot understand.

In considering the true effect of the decision in the De Beers case ([1906] A.C. 455) the following matters have to be borne in mind. At that time and for twenty years afterwards it was assumed, that a limited liability company could not have two residences for income tax purposes; either it resided abroad or it did not. The Cesena Sulphur Co.'s case ( 1 Ex. D. 428) was open to review both in the Court of Appeal and in the House of Lords and, although it had stood for thirty years, it had been criticized in the meantime, and what appeared to be its principal ruling was expressly challenged. It was, therefore, natural and proper to consider not only the fact that the De Beers Company was registered abroad but the circumstances of that registration. To this I wish to direct attention. The De Beers Company was incorporated, as the report of the case before Phillimore J. states ([1905] 2 K. B. 612), under s. 3 of the Act 13 of 1888 of the Cape of Good Hope, which enabled a company, registered with limited liability under the Colonial Joint Stock Companies Limited Liability Act, 1861, to become a body corporate on satisfying certain formalities. The material provisions of the Act of 1861 were that it applied to partnerships of more than twenty-five members, and to partnerships whereof the capital was divided into shares transferable without the express consent of all the members. Such partnerships could obtain from the Colonial Registrar of Deeds a certificate of registration with limited liability. They had to lodge with him their deed of settlement, executed by not less than twenty-five shareholders holding not less than three-fourths of the nominal capital and endorsed with a certificate that not less than 10 per cent. had been paid up by them, and the registrar was to receive and to keep a copy of such deed with a list of the shareholders and of the number of their shares. Thereafter the joint stock company had to expose its name on the outside of every office where its business was carried on. No increase could be made in its capital until it had been registered with the registrar, with proof of payment of 10 per cent. on the increased capital, and, in case of the execution of new or supplementary deeds of settlement, copies had to be lodged with him. Twice a year the directors had to make a return to the registrar of every transfer made in the company's share register and of the changes in the names of the existing shareholders by marriage or otherwise. The returns, deeds and registers thus kept by the registrar were open to public inspection on payment of a fee, not exceeding one shilling, and copies might be taken and were to be receivable in evidence. The performance of these obligations was enforced by liability to fines, and the certificate of registration conferred on members the benefit of limited liability.

My Lords, I think it is evident that in choosing between registration and carrying on business as the proper test for the single residence of the De Beers Company it was proper to inquire into the circumstances of its registration and not merely to act upon the fact and the place, and, as it was proper and natural to do so, I presume that it was done. The report does not mention any argument of counsel or judicial observation upon the Act above cited, but, even if counsel can be supposed to have overlooked it, one must presume that the Lords Justices and the noble and learned Lords did not neglect to consider all relevant materials. This Act is, I think, sufficiently in pari materia, both in its scheme and in its details, with the Companies Consolidation Act, to have brought before the minds of both tribunals all the considerations, on which the counsel for the Crown have relied in the present case. Accordingly it seems to me that the decision against the South African registration as the determining factor of the company's residence was really in the circumstances a judicial negation of the Inland Revenue's argument and was more than a mere adoption of the previous decision, that registration alone, apart from consequent statutory obligation, will not establish residence. Having adopted that view, the further adoption of control and carrying on of business as the test alike for the De Beers Company and for the Cesena Sulphur Company followed in logical course. I submit that, even technically, the De Beers case is a binding authority to-day. Even if it be otherwise and there be no technical decision of the issue, whether a British company may not acquire a taxable residence here both by carrying on business here and by being incorporated here under the Limited Liability Acts, still, that a House so composed should, after consideration, have adopted a canon, so expressed as to lay down one rule supported by one train of reasoning without meaning that "the rule" applied equally to companies of both kinds exclusively of any other rule or reasoning, is I confess more than I can credit.

I will refer to two later cases in your Lordships' House (fully recognizing that in neither case was the issue of a British company's residence directly raised) for the purpose of citing language so used as to suggest that there is no vital distinction between the tests applicable to a foreign and those applicable to a British company, alleged to reside here. In the American Thread Co. v. Joyce (6 Tax Cas. 163, 165) Lord Halsbury, referring, I think, to the San Paulo (Brazilian ) Ry. Co.'s case ([1896] A.C. 31) says: "I myself have taken the same view of this, I think, some years before the De Beers case( [1906] A.C. 455), and that view has been since, I think, adopted in this House more than once, that the real test, which, after all, is only a question of analogy - you cannot talk about a company residing anywhere - and that which has been accepted as a test, is where what we should call the head office in popular language is, and where the business of the company is really directed and carried on in that sense."

This expression of opinion can only mean that for both British and foreign companies alike the test is where on the facts (including among all the others the fact of incorporation here or there) the company's business is really directed and carried on.

In Mitchell v. Egyptian Hotels, Ld . ([1915] A.C. 1022.), the argument of Sir John Simon A.-G. (pp. 1034, 1035) is: "In De Beers Consolidated Mines v. Howe ([1906] A.C. 455.) Lord Loreburn lays down the principle as the result of the cases as follows, 'The real business is carried on where the central management and control actually abides -' and the Commissioners find substantially in the terms of that judgment. Lord Loreburn also states his opinion, following Cesena Sulphur Co. v. Nicholson (1 Ex. D. 428), that a company resides for purposes of income tax where its real business is carried on ..... That statement involves that a trading company carries on some part at least of its business at the place where it resides, and this company admittedly resides in this country." The admission here mentioned of course was as to the transaction of a part of the business here and did not refer to the English incorporation, on which, as on the Companies (Consolidation) Act, no stress was laid. There is a further case, John Hood & Co. v. Magee ((1918) 7 Tax: Cas. 327), in which a United Kingdom company was again held to be chargeable under Case I. of Sch. D, because in fact an important, and indeed the chief part of its business was carried on at Belfast, and the De Beers case ([1906] A.C. 455.) was discussed without any suggestion that the test, mentioned in it, was not as universal as its language would imply. Finally I would call attention to Bradbury v. English Sewing Cotton Co . ([1923] A.C. 744), in which the references made to the rule laid down in the De Beers case ([1906] A.C. 455.), both in argument for the successful parties (p. 747) and in the opinions delivered (pp. 753, 755 and 765) by the Lord Chancellor, and Lords Shaw and Wrenbury, respectively, are all made in terms, that mention no second sense of residence and suggest no alternative to Lord Loreburn's rule, whether the company in question be foreign, as it was then, or British, as in the present case.

I wish however to refer specially to New Zealand Shipping Co. v. Thew (8 Tax Cas. 208), though again this is the case of a company incorporated abroad. Lord Sterndale and Warrington L.J. in the Court of Appeal and Lord Buckmaster in your Lordships' House (see especially 8 Tax Cas. at p. 229), in whose opinion all the other noble and learned Lords present concurred, all speak of the rule laid down in the De Beers case ([1906] A.C. 455) as if no other mode of determining any company's residence was known to them or could be put forward. Lord Sterndale quotes (p. 223) Lord Loreburn's rule and adds: "I think that that is just as accurate a statement of law now as it was at the time it was pronounced." Accurate it may have been but, if the present argument for the respondent is to be sustained, it was sadly lacking in precision, for it bears all the appearance of a universal test. Lord Sterndale proceeds to say that these principles cannot possibly be affected by the statutory obligation of a company registered abroad to file its articles at Somerset House on beginning business here, and Warrington L.J. says of this (p. 228), as I think may truly be said of the statutory requirements imposed on English companies: "It is merely one of the conditions, which must be fulfilled before they can lawfully do so. When that condition is fulfilled, then they can lawfully carry on the business; and if the circumstances are such as to bring them within the principle to which I have referred, they are just as much carrying on the business in this country as if they had not been compelled to file and had not filed their articles." I would also like to quote in this connection his observation in Lysaght's case ([1928] A.C. 234, 249) (which it is true is not a case of a company): "I have reluctantly come to the conclusion that it is now settled by authority that the question of residence or ordinary residence is one of degree, and that there is no technical or special meaning attached to either expression for the purposes of the Income Tax Act."

My Lords, in support of my view that this rule of income tax law has long been deemed to be settled by common consent I would refer to the opinion of the legal profession, as it may be gathered from books of admitted authority. Dowell's work first appeared in 1874 and contained no note on the residence of a British company. His second edition, 1885, after citing the Cesena case said (p. 208): "The residence of a joint stock company incorporated and registered in England is in the United Kingdom, and therefore the company is chargeable on profits from business carried on abroad as well as from business carried on in the United Kingdom," and this was repeated in the third edition in 1890 (p. 221). In 1895 the fourth edition (p. 244) modified this as follows: "In order to give effect to the Act as applied to joint stock companies we must suppose that a company has a residence..... In determining the question of residence, registration must be taken into consideration. It is a strong circumstance, but only a circumstance. It is a fact to be considered with all the others. But where a company" (does acts, as in the Cesena Co.'s case) "it is a company 'residing in the United Kingdom.'" For this the Cesena , the Calcutta Jute (1 Ex. D. 428) and the Imperial Continental Gas Companies' cases ((1877) 1 Tax Cas. 138) are cited. The sixth edition, 1908, adds that the principle of the decision in the Cesena case (1 Ex. D. 428) was approved in the Goerz Co . ([1904] 2 K. B. 136) and in the De Beers Co . ([1906] A.C. 455) cases, and the seventh edition, 1913, contents itself with a summary of all decided cases to date. Conversely I have endeavoured to find in the great authorities on the Companies Acts, Lindley and Buckley, using the editions for which those celebrated authors were personally responsible, any warrant for the view of those Acts in their relation to income tax, for which the respondent contends. They cite the case that has been so often referred to, but the proposition that an English limited liability company is by law always a resident in the United Kingdom is conspicuously absent. Thus I find in Lindley on Companies, 5th ed., 1889, p. 38, the last revision by the learned author himself, the statement that "a registered company does not necessarily dwell where its registered office is situate," citing the Cesena (1 Ex. D. 428) and the Keynsham Blue Lias Lime Co. v. Baker ((1863) 2 H. & C. 729) cases; and my noble and learned friend Lord Wrenbury, in his last revision, 9th ed., 1909, says, p. 154: "For the purpose of the Income Tax Acts, the place of registration of a company is not, any more than the birthplace of an individual, conclusive as to its 'residence.' A company registered here, with a registered office here, and governed by a board which meets here, is no doubt resident here ( Cesena ). But also a company registered abroad whose head office and directors' meetings are here is resident here ( Goerz ). The test of residence is not registration, but where the company does its real business, where the central management and control abides ( De Beers )." Similarly Professor Dicey, in the first and second editions of his Conflict of Laws, which were wholly his own, dwells in his r. 19 on the principal place of business as being the domicil of a trading company, and then describes the same test as determining its residence, and, in his Appendix on Income Tax law (2nd ed., p. 770), his note on the De Beers case is: "What should be noted is the close connection between residence in the United Kingdom and the carrying on business there. In the case of a trading corporation, or company, the two things can hardly be separated, for the simple reason that such company has not, in fact, any residence, but resides, from a legal point of view, in the country where the central management and control of its affairs is to be found," a proposition only slightly modified on p. 777. No one of these great authorities doubts, any more than Lord Loreburn doubted, that the test is the same for English companies as for foreign ones, or entertains any idea that for income tax purposes performance of the statutory obligations of a registered company has any different significance from that of mere registration. Similarly I have looked into the cases relating to the jurisdiction of county courts over companies. I do not say that they afford much assistance, but they show that the place, where the business is carried on, has long been an integral fact along with that of the registered head office in deciding where a company dwells within the County Courts Act (9 & 10 Vict. c. 95, s. 128): Taylor v. Crowland Gas Co . ((1855) 11 Ex. 1); and in Keynsham Blue Lias Lime Co. v. Baker (2 H. & C. 729), where the two were not the same, it was the place of manufacture, where the contract sued on was made, and not the London head office, where the directors met, that satisfied the word "dwells." In neither case were the statutory requirements of the Acts, under which the respective companies were incorporated, treated as having any importance.

I venture to submit that a long current of judicial expressions, whether technically obiter or not, the general agreement of the most valuable text-books and the course taken in argument by so many law officers of the Crown afford sufficient warrant for saying that the rule is settled and ought not to be disturbed. Sir Richard Baggallay and Sir John Holker advanced the present contention, though not on all the present grounds, but it was not accepted. Thenceforward one law officer after another until very recently has treated the rule as having been concluded, under circumstances that implied that the rule was an exhaustive one. Did they all miss the point or did they dismiss it as untenable?

In my opinion these eminent men did not miss the point but, apart from the unsuitability of the word "resident" to the technicalities of the Companies Acts, they saw that the interests of the revenue demanded a different construction. With Victorian rates of income tax it was long before it became worth while for English companies, which exploited foreign trades or properties, to incur the trouble and expense of removing the management from England. They were content to rely on the foreign locality of their enterprise. The crude attempt to rely on the place of incorporation, which was made in reply by the Crown, failed at once and was advisedly dropped, for, had it succeeded, the revenue could not have charged foreign companies trading here. It had not yet been foreseen that the doctrine of double residence could be applied to companies, still less that, if it could, double tests of residence could be tolerated - namely, incorporation for English companies and actual trading for foreign ones, a rightabout face attitude condemned in Bradbury's case ([1923] A.C. 744, 753, 754) by Lord Cave L.C. as intolerable.

My Lords, on reference to the Income Tax Act, 1918, I think it must appear that the Legislature itself has by that Act recognized the principle, which I submit was established by the previous current of authority, that for income tax purposes the residence of an English limited liability company depends not on its English registration and statutory obligations but on the facts as to the mode and place in which it controls and directs its affairs. The initial words of No. 7 of the General Rules applicable to All Schedules: "Where a non-resident person, not being a British subject or a British, Indian, Dominion, or Colonial firm or company, or branch thereof, carries on business with a resident person .... etc." appear to me in plain English to assume that a "person," being a British company, may be a "non-resident person," and this without any qualification dependent on the manner of its incorporation. If so, the fundamental proposition, on which the argument for the respondent has been rested, is conclusively negatived.

It is, however, contended that the rule, properly construed, refers only to such persons, including companies, as are nonresident, and therefore cannot relate or refer to any companies, which by law must be always resident. There are British companies, which can be non-resident, such for example as have been incorporated by some statute or Royal Charter, not containing provisions equivalent in effect to those pointed out in the Companies (Consolidation) Act, and to these, but to these only, the rule applies.

My Lords, I have not been able to adopt this view. It begs the whole question. It has been admitted that all the other "persons" mentioned after the words "not being" are used unrestrictedly and in this respect the drafting was said to have been "loose," but surely, unless express words to the contrary are to be found, words of exception like these are simply used in order to take the things enumerated out of the prior general words, because they would otherwise be included in them. In effect, I think this rule, had it been drafted in paragraphs, one dealing with British subjects, the next with British companies, the next with British firms, and so on, would have meant and rightly should have read "Any non-resident British company, which carries on business with a resident person ....." The matter is not to be brushed aside as the result of unskilful drafting or of hasty discussion in Committee. It was argued, that a rule framed alio intuitu should not be read as unsettling the settled law as to the residence of English limited liability companies, but the truth is that it was framed for the purpose of applying to a new case the income tax law as it then stood and was understood to have been interpreted by the Courts, and to use it now for the purpose of declaring by a tacit assumption a novel interpretation of the Companies Act in the teeth of the decisions of the Court, would be contrary to all the principles on which taxing legislation is framed. It is not thus that draftsmen perform their difficult task. Of course in later stages changes occur which, being the work of many minds and different processes of thought, may mar the symmetrical draft, which was the work of one. For this no apology is ever made, though we are often asked to show it suitable judicial indulgence, but I think this contention fails, as soon as the origin of r. 7 is historically considered.

It was first enacted as s. 31, sub-s. 3, of the Finance Act of 1915, a section which added to the previous rules on the subject of non-residence and extended them, till the Consolidation Act of 1918 converted them into a Code dealing with the whole topic. The section begins:

"(1.)

Section forty-one of the Income Tax Act, 1842 .... shall, so far as it relates to the taxation of non-residents, be extended" in two particular respects;

(2.)

a non-resident person shall be chargeable .... in the name of the branch, factor, agent, receiver, or manager" through whom the profits chargeable arose, and then follows

(3.)

the provision, which is now General Rule No. 7. Sect. 41 of the Act of 1842 provided a method of vicariously charging certain incapacitated natural persons and was not framed for the purpose of charging incorporated persons; nor had it anything to do with the system of incorporating companies with limited liability.

Where then there was added to that section a provision relating to a wholly different category of chargeable persons, namely companies, one would expect that the new provision would deal with companies generally, except in so far as express limiting words were employed, but one would not expect that a provision, dealing with the chargeability of non-resident companies, would leave the chargeability of the most important class of such companies to be inferred only from an assumed construction of a non-taxing Act, which had not till that time been laid down by any uniform current of decisions. I am clearly of opinion, that this General Rule adopts and, in effect, declares the view of the law as to the residence of companies generally, which had previously been assumed and acted on in the decisions for a generation or more, and gives statutory recognition to them, and, if so, the respondent's argument cannot be accepted.

The matter is one of very general importance. Many companies have, at the cost of some trouble and expense, transferred their control and management abroad on the faith of decisions, or if you will dicta , to the effect that by so doing they could legitimately reduce the burden of their taxation. Are they now to reconsider their position and, if so, in what direction? The present contention shuts out English companies from the advantages with regard to income from Colonial and other securities, which the Act secures to such natural persons, as change their residence in terms of the Rules, for companies cannot so change it. Such a discrimination must affect the question of the future incorporation of new concerns in England and the further question must arise whether British status and British protection are in business worth the price. It is a pity that among the above mentioned advantages were those offered by the Treasury on the issue of certain War Loans to investors generally, for English companies, though they may hold the stocks, cannot have the benefit of exemption from tax, since they cannot be persons "not ordinarily resident in the United Kingdom": s. 46, sub-s. 1. Most of all is it to be regretted, if this grave change is to be brought about, because the Crown adopts a line of argument, which appears to be the contrary of that long put forward on its behalf and thus obtains, as a matter of construction, something, as it seems to me, which the Legislature alone can make law.

In my opinion the appeal should be allowed with costs here and below; the judgments of the Court of Appeal and Rowlatt J. should be set aside and the decision of the Commissioners should be restored, and I move your Lordships accordingly.