Owen v Pook (Inspector of Taxes)

[1969] 2 All ER 1

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(Judgment by: Lord Wilberforce)

Owen
v Pook (Inspector of Taxes)

Court:

Judges: Lord Guest
Lord Pearce
Lord Donovan

Lord WilberforceLord Pearson

Subject References:
Income Tax
Income
Emoluments
Perquisites or profits of office or employment
Travelling expenses
Medical practitioner practising at residence and also holding part-time appointments at hospital 15 miles away as obstetrician and anaesthetist
Emergency cases
Payment of allowance for travel by car to hospital
Payment irrespective of the method of travel
Whether emoluments of office
Deduction in computing profits
Expenses
Medical practitioner
General medical practitioner practising at his residence and also holding part-time appointments at hospital 15 miles away
Hospital work as obstetrician and anaesthetist
Emergency cases
Expenses of travel by car to and from hospital
Whether expenses deductible

Legislative References:
Finance Act 1956 (4 & 5 Eliz 2 c 54) - Sch 2, para 1(1)
Income Tax Act 1952 (15 & 16 Geo 6 & 1 Eliz 2 c 10) - s 156, Sch E, Case 1, as substituted by Finance Act 1956 (4 & 5 Eliz 2 c 54), s 10(1), and Sch 9, r 7 to the Act of 1952

Case References:
Fergusson (Surveyor of Taxes) v Noble - [1919] SC 534; 7 Tax Cas 176; 28 Digest (Repl) 237, *565
Hochstrasser (Inspector of Taxes) v Mayes - [1958] 1 All ER 369; [1959] Ch 22; [1958] 2 WLR 982, affd CA; [1958] 3 All ER 285; [1959] Ch 22; [1958] 3 WLR 215, affd HL; [1959] 3 All ER 817; [1960] AC 376; [1960] 2 WLR 63; 38 Tax Cas 673; Digest (Cont Vol A) 888, 987
Newsom v Robertson - [1952] 2 All ER 728; [1953] Ch 7; 33 Tax Cas 452; 28 Digest (Repl) 158, 618
Nolder v Walters - (1930), 15 Tax Cas 380; 28 Digest (Repl) 244, 1074
R v Postmaster General - (1878), 3 QBD 428; 47 LJQB 435; 38 LT 89; 38 Digest (Repl) 78, 539
Ricketts v Colquhoun (Inspector of Taxes) - [1924] 2 KB 347, affd CA; [1925] 1 KB 725, affd HL; [1926] AC 1; 95 LJKB 82; 134 LT 106; 90 JP 9; 10 Tax Cas 118; 28 Digest (Repl) 242, 1059

Hearing date: 3, 4 February 1969
Judgment date: 26 March 1969

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Judgment by:
Lord Wilberforce

My Lords, the main point in this case, as the courts below have regarded it, is whether the taxpayer is entitled to a deduction from his emoluments as assessable to income tax, in respect of certain travelling expenses which he had admittedly incurred. In the alternative, he contends that certain sums which he has received by way of partial re-imbursement of these travelling expenses ought not to be brought into charge as part of his taxable emoluments.

The first point is of a familiar character. The emoluments arise under Sch E to the Income Tax Act 1952, and, therefore, the question is whether the deduction is authorised by the strict and narrow r 7 in Sch 9. In Ricketts v Colquhoun (Inspector of Taxes) this House decided that the travelling expenses incurred by a recorder in proceeding to Portsmouth where the duties of his office lay, could not be brought within the rule. On the basis of fact on which that case was presented, this decision may have been inevitable, but it does not follow that it governs each and every situation. The facts must be considered and the rule applied.

The taxpayer is a doctor whose main occupation is as general practitioner in Fishguard. As such he is taxable under Sch D. In November 1955, he was offered by the South West Wales Hospital Management Committee, and accepted, an appointment as clinical assistant to the Obstetric Department at a hospital at Haverfordwest, 15 miles from Fishguard. This appointment has been renewed from year to year, and in the Case Stated it was found that he was to act as obstetrician and anaesthetist, and that he was on stand-by duty at specified times in respect of each activity during which period he was required to be accessible by telephone. All his work in connection with these appointments was concerned with emergency cases at the hospital. On receipt of a call from the hospital he would give instructions to the hospital staff (eg, to prepare the patient for an operation). Usually he would then set out immediately to the hospital by car. Sometimes he advised treatment by telephone and then awaited a further report. Not every telephone call resulted in a visit to the hospital. His responsibility for a patient began as soon as he received a telephone call.

This description is sufficient to show that both the nature of the taxpayer's appointment, and the purpose for which he incurred travelling expenses, differ greatly from those found or assumed to exist in the case of Mr Ricketts. Are they sufficient to establish that he was necessarily obliged to incur and defray out of the emoluments the expenses of travelling in the performance of the duties of his office or employment?

I agree with the Crown's contention that the mere fact of being on stand-by duty is not enough: if this were all the taxpayer would be in the same position as the airline pilot who was held (rightly in my opinion) not to come within the rule in Nolder v Walters : this was just a case of a person having to travel to his place of work. Nor, in my opinion, is the mere fact sufficient that he might be called on, or might volunteer, to give some professional advice on the telephone before setting out. There are persons, who hold positions of importance, who carry their responsibility with them wherever they are: they, too, may be called to their offices after working hours and may give instructions or advice before departure. But this does not mean that they have more than one working place (cf, Newsom v Robertson). What is required is proof, to the satisfaction of the fact-finding commissioners, that the taxpayer, in a real sense, in respect of the office or employment in question, had two places of work, and that the expenses were incurred in travelling from one to the other in the performance of his duties.

In my opinion, the taxpayer satisfied this requirement. I have stated the basic facts; on them the commissioners found that his duties "commenced at the moment he was first contacted by the hospital authorities", and that "thereafter his travelling expenses to and from the hospital ... were wholly, exclusively and necessarily incurred or expended in the duties of that office". I consider that this finding was fully justified. Given that the appointment related to emergency cases, it was of the essence of his duties that he should give immediate, and correct, advice the moment he was contacted, and that he should form a decision whether to set off at once, to wait for further information, or to take no further action. In the event of his deciding to go at once to the hospital, I cannot appreciate why he was not thereafter travelling on the duty of his office: he was travelling not to his work but on his work. The taxpayer was not, it seems, in such continuous contact as the well-known Australian flying doctor, but the continuity of his responsibility and function is, I think, established by the commissioners' findings. I can find nothing fictitious or strained in their conclusions.

The main argument on which these were resisted was founded on observations in Ricketts v Colquhoun , and particularly on a passage in the speech of Lord Blanesburgh. His Lordship used these words ((1925), 10 Tax Cas at p 135; [1926] AC at pp 7, 8):

"'If the holder of an office'-the words, be it observed, are not 'if any holder of an office'-'is obliged to incur expenses in the performance of the duties of the office'-the duties again are not the duties of his office; in other words, the terms employed are strictly, and, I cannot doubt, purposely, not personal but objective. The deductible expenses do not extend to those which the holder has to incur mainly and, it may be, only because of circumstances in relation to his office which are personal to himself or are the result of his own volition."

Then it was said that the taxpayer chose to live 15 miles from the hospital, his case was indistinguishable from that of the recorder. Now, I would entirely agree that r 7 is drafted in an objective form so as to distinguish between expenses which arise from the nature of the office and those which arise from the personal choice of the taxpayer. But this does not mean that no expenses can ever be deductible unless precisely those expenses must necessarily be incurred by each and every office holder. The objective character of the deductions allowed relates to their nature, not to their amount: to take the often-quoted case of the Archdeacon, it would be absurd to suppose that each holder of that office or even each Archdeacon of Plumstead Episcopi travels the same distance or travels by the same means in a year, or that his choice of residence would affect his entitlement. In this case the hospital management committee required the services of doctors on a part-time basis for emergencies: it was found that there was difficulty in obtaining suitable men. Unless a suitable retired doctor could be appointed (and that case might be different) the committee would have to appoint a doctor with a practice of his own and also with suitable obstetric and anaesthetic experience: he might live and practice within 15 miles or one mile or 100 yards of the hospital: the choice in the matter, if any exists, does not lie with the doctor, who is there in his practice, but with the committee which decides, however near or far he works, to appoint him and to require him to discharge a part of his duty at his practice premises.

A finding that expenses necessarily arise from this duality appears to me legitimate and the undemonstrated possibility that a nearer practitioner might have been selected to be irrelevant.

I agree, therefore, with the judgment of Lord Denning MR ([1968] 1 All ER at p 263; [1968] 2 WLR at p 593), and would allow the appeal. I should add that, if I had not reached this conclusion, I should have difficulty in seeing how the taxpayer could succeed, on his alternative point, in establishing that re-imbursement of a non-deductible expense is something other than an emolument.