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«THE HAMLYN LECTURES Thirty-Third Series INTOLERABLE INQUISITION? REFLECTIONS ON THE LAW OF TAX H. H. Monroe STEVENS THE HAMLYN LECTURES THIRTY-THIRD ...»

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the Judges'Role 59 it appears, on the one hand, that a completely literal reading of the relevant words would so widely extend the reach of the section that no agreement of whatever character fell outside it, but that, on the other hand, a legislative purpose can be discerned, of a more limited character, which Parliament can reasonably be supposed to have intended, and that the words used fairly admit of such a meaning as to give effect to that purpose, it would be legitimate, indeed necessary, for the Courts to adopt such a meaning."

The majority found a legislative purpose: "bounty" was the key.

No bounty, no settlement. There was no bounty in the tax avoidance scheme. It was a bargain for hard cash. There was no "settlement."

It is instructive to observe how the minority, Lords Dilhorne and

Diplock, arrived at the opposite conclusion. Thus Lord Dilhorne:

"It cannot, in my opinion, be right for the Courts to amend the definition by adding words to it limiting its scope. That would be legislating. On the other hand, it is open to the Courts when considering particular transactions and whether they come within the definition, to conclude that Parliament cannot have intended that they should be treated as doing so; and to decide, if that conclusion is reached, that they do not. There must be a number of cases in which it cannot have been the intention of Parliament that income transferred to another pursuant to an agreement or arrangement should nevertheless continue to be treated as the income of the transferor." In the view of the noble Viscount the present case was not within that number. And Lord Diplock: "It is common ground between my noble and learned friends that upon a literal interpretation of what, according to [the definition section], is to be understood as included in the expression 'settlement,' the transaction would fall within it. It is likewise common ground that Parliament must have intended some narrower construction than this to be placed on the word 'settlement' in the context of [the charging section]: for, unless it is, it is difficult to think of any transaction in consequence of which income is paid by one person to another that would not fall within the section. The competing views are, on the one hand, that the context in which the word 'settlement' appears in [the relevant part] of the Act shows a parliamentary intention to exclude from its meaning bona fide business transactions only, and, on the other hand, that it shows an intention to include only transactions in which there is an element of bounty." His Lordship then considered whether there were indications in the relevant sections that one or other of these limitations of the statutory words

was appropriate. He concluded that there were not and continued:

60 The Judges'Role "So it seems to me that in order to reach a conclusion whether in addition to those transactions which are expressly excluded from [the charging section] any other kinds of transaction whereby income is paid by one person to another were intended to be excluded from its operation, it is necessary to apply to this Part of the Act a purposive construction and to ask oneself the question in relation to the particular kind of transaction which is under consideration 'Can Parliament really have intended to tax this particular kind of transaction by the wide words that the draftsman has used?' " If the only sensible answer to that question is "No" the words of the Act should be understood as inapplicable to that transaction. "That question when asked about a transaction which not only falls within the literal meaning of the words used in the section but has no other object than to enable the settlor to avoid a liability to surtax on his income which he would otherwise be obliged to pay, so far from inviting the answer 'No,' invites the answer: 'Whatever kind of transaction Parliament may have intended to exclude it cannot have been this one.' " In the Plummer case then the majority in the House of Lords legislated for the particular application of the section, or if that is an unfair use of words, construed the section by drawing the dividing line in one place, the minority by drawing the dividing line in another. Had the Royal Commission's suggestion about this part of the statutory code been followed up, some other body might have been called on to draw the line. It has to be drawn somewhere and by someone. Both majority and minority considered it appropriate to look for legislative intent and to look beyond the plain meaning of the words used. Does it come to this? If the words raise a doubt because what they say is ambiguous, or because what they say shocks the courts' sense of what is fair and proper, regard to the intendment of the statute is permissible.

The minority in the Plummer case considered that Parliament could not have intended not to include a tax avoidance device within the scope of a tax avoidance section. This echoes a proposition which has recently emerged to the effect that when antiavoidance provisions in taxing acts are in point, adherence to the plain words used may have to be abandoned as a guide to construction in favour of a broader approach. What policy was Parliament pursuing? What sort of transactions were intended to be netted? In short, let the mischief aimed at be identified and start from the hypothesis that Parliament's aim was more likely to be true than wide of the mark.





The Judges'Role 61 There is an echo, too, of this same proposition in what Lord Justice Buckley said in the Garvin and Rose cases already mentioned23 : "A statutory provision aimed at restricting tax avoidance is not to be construed in the way which is traditionally adopted in construing charging provisions in taxing statutes." In support he cited Lord Wilberforce in CIR v. Joiner24 who in turn commented on what Lord Reid had said in Greenberg v. CIR.25 "For whereas it is generally the rule that clear words are required to impose a tax, so that the taxpayer has the benefit of doubts or ambiguities, Lord Reid made it clear that the scheme of the sections [being the same sections which Lord Justice Buckley had to apply], introducing as they did a wide and general attack on tax avoidance, required that expressions which might otherwise have been cut down in the interest of precision were to be given the wide meaning evidently intended, even though they led to a conclusion short of which judges would normally desire to stop."

Lord Justice Buckley, as I understand what he said, concluded that this meant that in dealing with an anti-avoidance section he should adopt the approach which he subsequently adopted in Berry v. Wamett.26 (The latter case did not involve an anti-avoidance section. It did involve an avoidance device). What he said was: "This, as I understand it, does not mean that a court should officiously strive to construe a section in its widest possible significance in order to give it the widest possible operation, but that one must look for the meaning evidently intended by the language used bearing in mind the object of the section, and apply that section accordingly without giving either the taxpayer or the Revenue the benefit of any doubt or ambiguity."

Equal opportunities—at least—for goose and gander. Well, it represents an advance on the Blackstone tradition.

In 1932 the Committee on Ministers' Powers considered, amongst other things, the relationship between Parliament and judges in relation to what may be called social legislation. On the question of how the judges go about discovering the intentions of Parliament the Committee's Report27 cites Lord Blackburn's judgement in River Wear Commissioners v. Adamson,26 a decision which has been See above n. 15.

C.I.R. v. Joiner [1975] 1 W.L.R. 1701, 50 Tax Cas. 449.

[1972] A.C. 109, 47 Tax Cas. 240.

* See above n. 16.

Cmd. 4060 at p. 57.

[1877] 2 A.C. 743 at pp. 763-765.

62 The Judges'Role the subject of interesting and critical comment by Lord Devlin. 29 "In all cases" said Lord Blackburn "the object is to see what is the intention expressed by the words used. But, from the imperfection of language, it is impossible to know what the intention is without inquiring further, and seeing what the circumstances were with reference to which these words were used, and what was the object, appearing from those circumstances, which the person using them had in view; for the meaning of words varies according to the circumstances with respect to which they are used."

In another judgement, also cited in the Committee's Report ° Lord Blackburn made the point which has, perhaps, been illustrated by the cases which I have cited, that obscurity, and absurdity too, may sometimes rest in the eye of the beholder: "The great difficulty in all cases is in applying these rules to the particular case: for to one mind it may appear that an effect produced by construing the words literally is so inconsistent with the rest of the will—[The case concerned a will, but taxing act or testament, there may be a morbid similarity] —or produces an absurdity or inconvenience so great, as to justify the court in putting on them another signification, which to that mind seems a not improper signification of the words: whilst to another mind the effect produced may appear not so inconsistent absurd or inconvenient as to justify putting any other signification on the words than their proper one, and the proposed signification may appear a violent construction."

In the same Report of the Committee on Ministers' Powers there is an interesting dissenting note from Professor Harold Laski. 31 He was critical of the canons of the traditional method of construction as applied to acts designed to serve a social purpose. He identified four ways in which he reckoned the canons of construction to be

defective:

"(1) They exaggerate the degree to which the intention of Parliament may be discovered from the words of a statute.

(2) They underestimate the degree to which the personality of the Judge, what Mr. Justice Holmes has called his 'inarticulate major premiss', plays a part in determining the intention he attributes to Parliament;

(3) They exaggerate both the certainty and the universality of the Common Law as a body of principles applicable, in the absence of statute, to all possible cases;

" Lord Devlin, The Judge as Lawmaker, see n. 3 Chap. 1 above, at p. 15.

Allgood v. Blake L.R. 8 Ex. at p. 163.

Cmd. 4060 at p. 135.

The Judges'Role 63 (4) They minimise the possibility that the judge can, in his work of interpretation, fully operate the principle of Hay den's case32 and consider the evil the statute was intended to remedy so that their construction may suppress the mischief and advance the remedy."

It would seem to me that Harold Laski's comments are not without relevance to the principle of adhering to the plain words which governs, or may still govern, the interpretation of taxing acts.

The words used in the act are not, by themselves, much guide to Parliament's intention. It seems somehow stultifying to deny reference to the tax code as a whole when seeking to discover what the words used mean. There appears to be a refreshing judicial readiness, at least in the offing if not yet imminent, to find reasons for looking beyond the words to the context. Of course, the "inarticulate major premiss" of the judge has played its part. It was, no doubt, historically inevitable and politically desirable that it should. One aspect of the discussion of future fiscal policy and its declaration in manifesto form which seems to me sometimes to be overlooked is that the widow who hears or reads references to wealth, supposes her mite to be comprehended by the term since that is the only wealth she knows. She is naturally apprehensive. So earlier generations were naturally apprehensive about property. It was reassuring that the judges showed a sturdy bias towards property and a refined hostility towards taxation. But times change and so do judges. There is still cricket and the sanctity of the Club to protect. In an interesting and amusing article on "The First Hundred Years of Tax Cases"33 Basil Sabine tells us that one of the Law Lords who decided Seymour's case34 (the retiring Kent cricketer's case) had played for the Authentics and two were members of the M.C.C. In Brown v. Bullock35 (the case about the bank manager's club subscription) Lord Justice Harman confessed that he found some of the arguments extremely distasteful. (It is only fair to the memory of a great judge, who commanded both the respect and the affection of so many of those who appeared before him, to record that when invited by Counsel responsible for the arguments to give further and better particulars of their shortcomings, the Learned Lord Justice could not have been more gracious, more understanding or more forgiving). Judges are no less 32 1584) 3 Co. Rep. 8.

33 B.T.R. 239.

34 A.C. 554, 11 TaxCas. 625.

35 1 WT..R. 1095, 40 Tax Cas. 1.

64 Tlie Judges'Role human today than they always were, but in tax disputes they can no longer be relied upon invariably to vote for property.

As to the Common Law, judges, alas, get little assistance from that source when lacunae appear in the sophisticated web of Parliament's tax codes. But the robust common sense associated with many a common lawyer is not unwelcome in a tax context.

And so to the last point. An approach to tax statutes which recognised that Parliament normally intends to impose a tax universally rather than to leave yawning gaps, that an antiavoidance provision is usually intended to be effective rather than subtle and that the tax code as a whole can be shown—sometimes not without difficulty, it is true—to be reasonably coherent and rational would be welcome. As the cases which I have cited perhaps demonstrate, it is not entirely certain or uncertain whether such an approach has, or has not, already been adopted.

CHAPTER FOUR

THE LAW OF TAX AND THE COMMON PEOPLE

I recall a small girl, whose attendance had been subject to some uncertainty, arriving for a children's party half an hour or so before the time so painstakingly recorded on the invitation. "I was able to come after all" she trilled happily. "Surely, dear, you mean 'before all,' " replied her hostess's granny, always a stickler for precision. So, too, the common people: after all, in point of presentation, before all in importance. They tolerate tax. Most habitually pay, because they have to. It was ever thus.



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