AN INCOME-TAX QUESTION.

Otago Witness, Issue 2813, 12 February 1908, Page 15

AN INCOME-TAX QUESTION.

NEW ZEALAND SHIPPING COMPANY.

IMPORTANT JUDGMENT.

■(From Oub Own Corbespootent.)

LONDON, December 13.

Last week I mentioned briefly that on 'the day of the departure of the mail judgment had been given in the case of the New Zealand Shipping Company versus the Surveyor of TPaxes. This raised a most important question affecting the position of the companies whose business is counted partly with New Zealand and partly with the Mother Country. Last week I was able to send merely the bar© gist of the judgment, the time available not permitting more to be done. As, however, the effect of the judgment is so serious and far-reachinar. I now send a full report. The ease was in the form of an appeal from a decision of Mr Justice Bray's on a 6peeial ease stated by the Income-tax Commissioners for the City of London. The case raised the question whether a company registered and having its registered offices abroad is resident in the United Kingdom .for the purpose of assessment of income tax. The shipping company originally appealed to the Commissioners against an estimated assessment of £68,944 under Schedule D of 16 and 17 Viet., c. 3*, and the material facts in the case were as follow: — The appellant company were registered in New Zealand with limited liability. „ By the memorandum of association it was provided that the registered office should be situate in Christchuroh, New Zealand. By Clause 2 of the company's regulations the company could borrow as the London board might think fit. By Clause 3 the business authorised by the legulations might be undertaken or stopped as t*he I/ondon board thought fit. Clause 4 authorised branch registers, and all branch registers elsewhere than in New Zealand were to be under the control of the London board. By Clause 5 the registered office at Christchurch was to be used for all business which could not be transacted otherwise than at the registered office, for the purpose of ordinary business in New Zealand, and for that of all business authorised to be transacted in New Zealand. The head or chief office for all other business of the company was in London. The London board had the right to the allotment of unissued shares, the disposition of new shares, the right of issuing preference shares, and the right of converting paid-up capital into stock. By Clause 17 the New Zealand txmrd of directors was appointed to exercise certain specified powers, having reference chiefly to the bus : nesß referred to in Clause 5 (supra), and also " for the exercise of such other powers of the directors as shall be delegated to them by the directors acting in the United Kingdom, but for such purposes only." The London board of directors was appointed (Clause 19) "for the purpose of issuing shares, making calls, exercising borrowing powers, and all other financial, commercial, or administrative business of the company not by these regulations expressly entrusted to the directors acting in New Zealand." By Clause 22 the two boards were to be deemed separate boards. Retiring directors in London were appointed by the shareholders on the London register, and retiring directors in New Zealand by shareholders on the register there. The directors of the company were to carry on the business subject to the powers -espectively of the London and New Zealand boaxde. The New Zealand board managed the business of the company in New Zealand, Australia, Tasmania, and the Pacific Islands, except that part of it to be done by the London board under the regulations, and the latter might appoint managers and representatives elsewhere than in the abovementioned places. Al]^ meetings other than the yearly ordinary meetings in London and New Zealand were to be deemed extraordinary meetings, and to be held in London. The investment of reserve fund, the declaration of dividends, declaration of net profits, determination of the amount to be 6et aside for reserve or depreciation fund, and the making of calls were, inter alia, dealt with by the London board. Since 1888 all the general meetings of the company were hela in London, and the balance-eheot and profit and loss accounts were prepared in the London offices and examined, audited and signed by London accountants. All the vessels of the company were registered in the United Kingdom, but almost all its investments and other proproperty were in New Zealand, and about two-thirds of the freight were earned in New Zealand. The most important contracts as to the carriage of good 6 entered into by the company were those made by the New Zealand board with the frozen meat companies. The officers of the fleet were appointed and dismissed by the London board. The commissioners were of opinion that all important contracts (other than the above) were entered into by the direction of the London board; that a.ll important questions of policy were decided by them and that, in effect, the New Zealand board were managers for their district, under the London board. The commissioners found as a fact that the trade and business of the company constituted one trade or business carried on by appellants in the United Kingdom at their London office, and not at their registered office in New Zealand ; that the chief office of the company was situate in London ; and that the whole of the operations of the company, both in the United Kingdom and elsewhere, were subject fo the control and direction of the head office in London and they decided that the appellants resided in the United Kingdom and confirmed the assessment, subject to this case. The shipping company appealed from this decision of the commissioners. Mr Justice^Bray was of oninion that on tli<* fact' n f *' 1 ° r^ flf> v'" " irntvneoiMn + o decide otherwise than that the comparv resided in the L'nireo J4.mj.uort!, and he accordingly dismissed its appeal. The shipping company appealed to the Court of Appeal. Mr Scrutton. X.C.. and Mr Edwardes Jones appeared for the appellants; and the Solicitor- general (Sir Willis en Hobson, K.C.) and Mr W. Finlay for the respondent. Mr Serutton and Mr Fdwarde* Jones, for the appellants contended that the commissioners' finding of fact was opposed to the evidence, and that rhe case ought to be sent back for amendment. The commissioners ought to stale the evidence on which they had found the facts as they had The fiete stated were contrary to the findings. The <juerti©aof control was one

of law and not of Tact. They cited Gramaphone am? Typewriter versus Stanley, and De Beers Consolidated Mines versus Howe.

The Solicitor-general was not called upon to argue. The court dismissed the appeal. The Maeter of the Rolls said that this was an appeal from a judgment of Mr Justice Bray. He would read two passages from that judgment. The learned judge said : "It seems to me that in rhis case it is impossible for the appellants to. maintain their contention in the face of the decision in the De Beers Consolidated Mines (Limited) v. Howe." With that his Lordship agreed, Theo a little lower down Mr Justice Bray said: "If I look at paragraph 13, of course there really is an end of the case, because certain facts are foundjhere which establish the proposition I have laid down at once in favour of the Crown." His Lordship d ; d not think that he should be justified in 6aying anything more on the case. The House of Lords had decided that it was really a question of fact, and when the Commissioners had found the facts as they had in the present case, that really was an end of the matter. It was said that tho case ought to be sent back because the commissioners had found facts which were not facts, and had not stated the evidence on which their findings of fact were based. But no such application had been made in the court below, and the Master of the Rolls did not think that, it should be listened to in the Court of Appeal. The judgment of Mr Justice Rvav \v--i« mute right and the appeaJ muet be dismissed. Lord Justice Fletcher Moult on agreed. He said that it might be a point of law whether or not there was any evidence on which certain findings of fact could be made, and he was far from sajuig that, if the true question of law was whether or not, on the facts before the commissioners, it was possible for them to come to certain conclusions of fact, the appellants might not request the court to send the matter back that the evidence might be eet out, in order to enable them to raise the question whether on the evidence it was possible for them to come to the conclusion that they had. But an objection of that kind must be taken in limine. If an appellant did rot take it in the first instance he could not afterward allege that the true point of law was not raised. The Court of Appeal might reouire additional facts to be 6tated to enable them to decide the questions of law before them, and might send a case back for that purpose, but that did not enable a person who brought such a case before the Court of Appeal to ask for it to be 6ent back. In the present case there was a _findinor,that this shiuoing company was resident— m the United Kingdom, and that the House of Lords had found was a question of fact. The learned iudge thought that they were bound by that unless they could find! that there was no evidence " to justify the findiner of the commissioners. In the present case they were not in such a -position, and, that being so, the learned iudge found that the shipping company was resident in the United Kingdom, and that the appeal must Lord Justice Farwell also delivered judgment to the same effect.