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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Edwards (Inspector of Taxes) v Bairstow [1955] UKHL 3 (25 July 1955)
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Cite as: [1956] AC 14, [1955] UKHL 3, [1955] 3 All ER 48

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JISCBAILII_CASE_TAX

    Die Lunae, 25° Julii 1955

    Parliamentary Archives,
    HL/PO/JU/4/3/1029

    Viscount

    Simonds

    Lord
    Radcliffe

    Lord
    Tucker

    Lord

    Somervell
    of Harrow

    EDWARDS (INSPECTOR OF TAXES)

    v.
    BAIRSTOW AND ANOTHER

    25th July, 1955.

    Viscount Simonds

    MY LORDS,

    This appeal relates to certain assessments for income tax made upon the
    Respondents, Harold Bairstow and Fred Harrison, for the years of assess-
    ment ending respectively the 5th April, 1947, and the 5th April, 1948, in
    respect of the profits made by them from sales of machinery. The assess-
    ments had originally been made on the Respondent Harold Bairstow only,
    but it became common ground that the operations out of which the profits
    arose were the joint venture of both Respondents and the case has through-
    out been argued upon the footing of the assessments being made in their
    joint names.

    Against these assessments, which were in the sum of £10,326 for the first
    year and £5,000 for the second year, appeals were taken to the Commissioners
    for the General Purposes of the Income Tax for the Division of West Morley
    in the County of York. They discharged the assessments but, the Appellant
    having expressed his dissatisfaction with their decision as being erroneous
    in point of law, stated a Case for the opinion of the High Court.

    My Lords, it would not be right for me, in view of the conclusion which
    I have reached in this appeal, to try to abbreviate the statement of facts
    upon which the Commissioners made their determination and I therefore
    set out verbatim paragraph 3 of the Case which is in these terms.

    3. The following facts were admitted or proved: —

    (1) Mr. Harrison became aware in 1946 that a Complete Spinning
    plant was for sale at Messrs. Whitworths at Luddenden Foot and had
    reason to believe that the plant could be purchased for a reasonable
    figure. He communicated this information to Mr. Bairstow as he him-
    self was not in a position to finance any purchase. Mr. Bairstow
    expressed himself to be interested but both he and Harrison agreed
    that they had no intention of holding the plant—what they desired was
    a quick purchase and re-sale. Mr. Bairstow therefore arranged for a
    valuation to be made by a professional valuer in order that he might be
    satisfied that the price asked by Whitworths was one on which he could
    make a quick profit. He also immediately and before purchasing the
    plant made enquiries as to whether he could arrange to sell the plant
    even before it had been purchased. Mr. Harrison was in touch with
    an Indian by name Wattal who was very anxious to purchase some
    of the plant, namely, the Botany Spinning section ; for this he was
    prepared to pay £17,000 but both Harrison and Bairstow were quite
    decided that they had no intention of selling the plant piece-meal; they
    wanted to sell it as a complete unit. Then Mr. Bairstow began negotia-
    tions with the International Export Company. They said they were
    prepared to buy the whole of the plant. On the 14th November the
    International Export Company wrote to Mr. Bairstow saying that they
    were prepared to buy the plant which was on the fourth floor which
    was the Botany Spinning plant for £15,000 this, of course, being £2,000
    less than the price offered for the same section of the plant by the Indian
    Wattal. The reason why the International Export Company were pre-
    pared to pay £15,000 immediately for that particular section of the
    plant was because although they were willing to purchase the whole of
    the plant it was their intention to export it and whilst they were confi-
    dent that an Import Licence into China would be forthcoming for the
    asking in respect of the botany spinning section they were not willing
    to complete the purchase of the remainder of the plant until the Import

    2

    Licences for such remainder were in fact forthcoming. On the 20th
    November Mr. Bairstow on behalf of himself and Harrison having
    negotiated the purchase of the spinning plant together with two small
    items of warping plant completed the purchase by the payment to
    Whitworths of £12,000. On the 27th November, one week later, the
    International Export Company paid Mr. Bairstow the sum of £15,000
    for the botany spinning plant. Subsequently Messrs. Bairstow and
    Harrison were informed by the International Export Company that un-
    fortunately the Import Licences relating to the remainder of the plant
    could not be obtained and therefore it was regretted that they could
    not purchase the remainder of the plant. Thus Mr. Bairstow and Mr.
    Harrison found themselves with the remainder of the plant on their
    hands (which they had endeavoured to avoid) and this left them no
    alternative but to sell that remainder in whatever market they could.

    1. The rest of the plant was sold in two other principal and two
      smaller lots by February 1948 though owing to difficulties the last plant
      was not removed until March 1949. The two smaller lots consisted of
      the two items of warping plant.

    2. Mr. Bairstow was a Director of a company manufacturing leather.
      Mr. Harrison was an employee of a spinning firm. Neither of them
      had had any transactions in machinery or any other commodity before.

    3. The profits shown by the accounts (which form part of this Case
      and are annexed hereto, marked 'A') was £18,225 11s. 3d.

    4. The Respondents' sole purpose in the transaction was to sell the
      plant at a profit.

    5. With regard to the manner in which the sales were effected: —


    1. Some commissions were paid for assistance received in
      effecting sales.

    2. There was no advertising. Customers principally learnt of
      the existence of the plant for sale when they came to inspect the
      premises which were being advertised by the original owners as
      becoming vacant.

    (c) About 400 spindles out of the 220,000 which the plant
    represented were replaced because they were missing or damaged.

    (d) Insurance risks were covered by the Respondents while the
    plant was in their hands.

    (e) Some costs for renovation were incurred because of damage
    by floods during their ownership.

    (f) When it was seen that the transaction would not be over in
    a matter of weeks, wages were paid to Mr. Bairstow's Secretary
    who kept books and did other office jobs in connection with these
    transactions.

    (g) The Respondents incurred expense in travelling and enter-
    tainment in meeting both the actual persons who would eventually
    buy the plant and others who did not in fact become customers.
    A number of advertisements asking for plant, which appeared in
    trade papers, were answered by the Respondents in an attempt to
    sell the plant remaining after the first main sale.

    (h) Owing to the delay in removing the plant, rent was paid
    to the landlords for the last six months during which the plant
    was housed, and it is thought that a further amount will have to
    be paid to put the premises in order.

    EXHIBIT "A" Case Stated

    mr. HAROLD BAIRSTOW and mr. FRED HARRISON
    joint venture—A spinning plant ex whitworth mill

    LUDDENDEN FOOT

    .

    period from 20th november, 1946, to 31st march, 1949

    £ s. d. £ s. d. £ s. d. £ s. d.

    To Purchase of Plant 12,000 0 0 By Sale of Plant :—

    " Repairs and Replacements 110 18 10 1946—Nov. 27 International Export Co 15,439 13 6
    " Commissions: 1947—Jan. 29 H. E. Crabtree & Co. 80 0 0

    Cornelius Lane of Bradford 4,575 4 4 June. 26 Bailey, Verity and Raynor 12,000 0 0

    Mr. and Mrs. Horace Shaw, Highthorn, Belmont Oct. 22 Stalybridge Vigoyne Spinning Co. 250 0 0

    Rise, Baildon 751 2 0 1948—Feb. 20 Joseph Cooper Junr 10,000 0 0

    W. Murgatroyd-address not known, but our

    clients believe he has gone abroad 250 0 0 37,769 13 6

    Cash Commission to a workman 10 0 0

    5,584 6 4

    Insurance 71 15 6

    Christmas Boxes ... ... ... ... ... ... 32 0 0

    Flood Damage Costs:—

    Wages 300 5 11

    Renovations 42 16 9

    343 2 8

    Wages 117 5 0

    Stationery 3 0 0

    Travelling and Entertainment 366 13 11

    Rent 130 0 0

    Reserve for cost of dilapidations, legal and accountancy

    charges 785 0 0

    Profit on the transaction 18,225 11 3

    £37,769 13 6 £37,769 13 6


    Profit divisible:—

    Harold Bairstow £9,11215 7
    Fred Harrison £9,11215 7


    4

    Nor can I omit a reference to some at least of the contentions which
    were urged before the Commissioners on the one side or the other.

    The Respondents contended that this was a transaction the profits of
    which could not be liable to tax under Case I of Schedule D, because, as
    they said, in the case of Leeming v. Jones 15 Tax Cases 333 (to which I
    shall refer later) four conditions had been approved by the Court, one of
    which must be present to establish liability,

    1. the existence of an organisation, or

    2. activities which led to the maturing of the assets to be sold, or

    (c) the existence of special skill, opportunities, in connection with
    the article dealt with, or

    (d) the fact that the nature of the asset itself should lend itself to
    commercial transactions.

    And they contended that none of these conditions was present in the trans-
    action in question. They distinguished certain cases upon which the
    Appellant relied and urged that the profit was a capital one and that there
    was no concern in the nature of trade that could be taxed.

    On behalf of the Appellant it was contended that the buying and selling
    of the plant constituted a trade or adventure in the nature of a trade and
    that the profits and gains arising therefrom were assessable accordingly.

    The Commissioners expressed their original determination in these terms:
    " We, the Commissioners, having considered the facts and evidence
    " submitted to us, are of opinion that this was an isolated case and not
    " taxable and discharge the assessments ".

    This, my Lords, was clearly an unsatisfactory determination, for it appeared
    to suggest that the fact that the transaction was an isolated one (whatever
    that may mean) was by itself conclusive, and, when the matter came before
    Mr. Justice Upjohn upon the Case Stated, that learned Judge took a course
    which he was entitled to take and remitted the matter to the General Com-
    missioners with the intimation that they were to consider the question whether,
    the transaction being an isolated transaction, there was, nevertheless, " an
    " adventure in the nature of trade " which was assessable to tax under Case 1
    of Schedule D, and he further directed they should be assisted in their
    finding by legal argument.

    I pause in the narrative to remind your Lordships that tax under Schedule
    D is charged in respect of (inter alia) profits arising " from any trade, profes-
    " sion, employment or vocation " and that by definition " trade " includes
    " every trade, manufacture, adventure or concern in the nature of trade ".
    It is these words which are echoed in the order of Mr. Justice Upjohn.

    The Commissioners accordingly met again and, having heard legal argu-
    ment and further considered the matter, signed a Supplemental Case in which
    they stated their further decision as follows: -

    " We find that the transaction, the subject-matter of this Case was not an
    " adventure in the nature of trade ".

    The Case thus supplemented came once more before the High Court, this
    time before Mr. Justice Wynn-Parry. That learned Judge took the view
    that he was bound by authority to hold that the question before the Court
    was purely a question of fact and that the finding of the Commissioners
    could not be upset unless it was so perverse that as a matter of law it could
    not stand, and, holding that it was not possible for him to take that view
    of their decision, dismissed the Appellant's appeal with costs.

    From the decision of Mr. Justice Wynn-Parry the Appellant appealed to
    the Court of Appeal, which unanimously dismissed the appeal for the
    reasons given by the learned Judge. In the course of his judgment the
    Master of the Rolls made this observation which has given rise to much
    discussion before your Lordships. "Although the Scottish Courts (as, I
    " think, is clear from a citation from the judgment of the latest of them in the
    " judgment of Mr. Justice Upjohn) may have taken a road which diverges

    5

    " from that followed by the English Courts, the two jurisdictions as it seems
    " to me can only now be got together again by the House of Lords . . ."
    And it is clear that the Revenue Authorities were anxious to bring this case
    to your Lordships' House largely because it was apprehended that the
    Courts of England and Scotland had to some degree diverged in their treat-
    ment of this subject. That there is some ground for this apprehension will
    be clear from a comparison of (for example) the observations of Lord Justice
    Atkin and Lord Justice Warrington in Cooper v. Stubbs, 10 Tax Cases 29
    with those of Lord Russell in C.l.R. v. Reinhold, 34 Tax Cases 389 " In the
    " Scottish Courts, however, it is clear that such a question " [i.e. whether a
    transaction is an " adventure in the nature of trade "] " is regarded as a
    "question of law or at least of mixed fact and law". It is not to be
    doubted that particularly in a matter of taxation any possible conflict, even
    if it be only an apparent conflict, should be resolved and that is the task
    which now falls to your Lordships.

    Before, however, examining the authorities in any detail, I would make
    it clear that in my opinion, whatever test is adopted, that is whether the
    finding that the transaction was not an adventure in the nature of trade is
    to be regarded as a pure finding of fact or as the determination of a question
    of law or of mixed law and fact, the same result is reached in this case. The
    determination cannot stand: this appeal must be allowed and the assessments
    must be confirmed. For it is universally conceded that, though it is a pure
    finding of fact, it may be set aside on grounds which have been stated in
    various ways but are, I think, fairly summarised by saying that the Court
    should take that course if it appears that the Commissioners have acted with-
    out any evidence or upon a view of the facts which could not reasonably be
    entertained. It is for this reason that I thought it right to set out the whole
    of the facts as they were found by the Commissioners in this case. For,
    having set them out and having read and re-read them with every desire to
    support the determination if it can reasonably be supported, I find myself
    quite unable to do so. The primary facts, as they are sometimes called, do
    not in my opinion justify the inference or conclusion which the Commis-
    sioners have drawn: not only do they not justify it but they lead irresistibly
    to the opposite inference or conclusion. It is therefore a case in which,
    whether it be said of the Commissioners that their finding is perverse or that
    they have misdirected themselves in law by a misunderstanding of the statu-
    tory language or otherwise, their determination cannot stand. I venture to
    put the matter thus strongly because I do not find in the careful and indeed
    exhaustive statement of facts any item which points to the transaction not
    being an adventure in the nature of trade. Everything pointed the other
    way. When I asked learned counsel upon what, in his submission, the Com-
    missioners could have reasonably founded their decision, he could do no
    more than refer to the contentions which I have already mentioned. But
    these upon examination seemed to help him not at all. For, if it is a
    characteristic of an adventure in the nature of trade that there should be
    an " organisation ", I find that characteristic present here in the association
    of the two Respondents and their subsequent operations. I find " activities
    " which led to the maturing of the asset to be sold " and the search for
    opportunities for its sale, and, conspicuously, I find that the nature of the
    asset lent itself to commercial transactions. And by that I mean what I
    think Mr. Justice Rowlatt meant in Leeming v. Jones, that a complete
    spinning plant is an asset which, unlike stocks or shares, by itself produces
    no income and, unlike a picture, does not serve to adorn the drawing room
    of its owner. It is a commercial asset and nothing else.

    Your Lordships have examined a large number of cases in some of which
    the Commissioners have found an adventure or concern in the nature of
    trade and in others have not. And in each category will be found cases in
    which the Court has upheld and others in which the Court has reversed the
    Commissioners' decision. I do not think it necessary to review them. It
    is inevitable that the boundary line should not be precisely drawn, but I
    think that there has been no case cited to us in which the question, however
    framed, whether the determination of the Commissioners was maintainable,
    could be answered more clearly and decisively than in the present case

    6

    I must turn now to the question of the apparent divergence between the
    English and Scottish Courts and venture to approach it by a brief considera-
    tion of the nature of a problem which has many aspects, e.g. the finding of
    a jury, the award of an arbitrator or the determination of a tribunal which
    is by statute made the judge of fact. And the present case affords an
    exact illustration of the considerations which I would place before your
    Lordships.

    When the Commissioners, having found the so-called primary facts which
    are stated in paragraph 3 of their case, proceed to their finding in the Supple-
    mental Case that " the transaction, the subject-matter of this Case, was not an
    " adventure in the nature of trade ", this is a finding which is in truth no more
    than an inference from the facts previously found. It could aptly be preceded
    by the word " therefore ". Is it then an inference of fact? My Lords, it
    appears to me that the authority is overwhelming for saying that it is. Such
    cases as Cooper v. Stubbs 10 T.C. 29 Leeming v. Jones
    15 TC 333 and
    Lysaght v. C.I.R. 13 TC 511 (a case of residence) amongst many others are
    decisive. Yet it must be clear that to say that such an inference is one of fact
    postulates that the character of that which is inferred is a matter of fact. To say
    that a transaction is or is not an adventure in the nature of trade is to say that
    it has or has not the characteristics which distinguish such an adventure. But
    it is a question of law not of fact what are those characteristics, or, in other
    words, what the statutory language means. It follows that the inference can
    only be regarded as an inference of fact if it is assumed that the tribunal
    which makes it is rightly directed in law what the characteristics are and that,
    I think, is the assumption that is made. It is a question of law what is murder:
    a jury finding as a fact that murder has been committed has been directed on
    the law and acts under that direction. The Commissioners making an inference
    of fact that a transaction is or is not an adventure in the nature of trade are
    assumed to be similarly directed, and their finding thus becomes an inference
    of fact.

    If this is, as I hope it is, a just analysis of the position, the somewhat
    different approach to the question in some but by no means all of the Scottish
    cases is easily explicable. For as the Lord President (Lord Normand) put it
    in Fraser's case 24 Tax Cases 498 at p. 504, "... the Commissioners here
    " have either misunderstood the statutory language (which I think is the
    " probable explanation of their error) or, having understood it, have made a
    " perverse finding without evidence to support it". He might equally well
    have said that the assumption that they were rightly directed in law was
    displaced by a finding which was upon that assumption inexplicable. The
    misdirection may appear upon the face of the determination. It did so here.
    I think, in the Case as originally stated: for in effect that determination was
    that the transaction was not an adventure in the nature of trade because it
    was an isolated transaction, which was clearly wrong in law. But sometimes,
    as in the case as it now comes before the Court, where all the admitted or
    found facts point one way and the inference is the other way, it can only be a
    matter of conjecture why that inference has been made. In such a case it is
    easy either to say that the Commissioners have made a wrong inference of fact
    because they have misdirected themselves in law or to take a short cut and
    say that they have made a wrong inference of law, and I venture to doubt
    whether there is more than this in the divergence between the two jurisdictions
    which has so much agitated the Revenue authorities.

    But, my Lords, having said so much, I think it right to add that in my
    opinion, if and so far as there is any divergence between the English and
    Scottish approach, it is the former which is supported by the previous authority
    of this House to which reference has been made. It is true that the decision
    of the Commissioners is only impeachable if it is erroneous in law and it may
    appear paradoxical to say that it may be erroneous in law where no question
    of law appears on the face of the Case Stated. But it cannot be, and has not
    been, questioned, that an inference, though regarded as a mere inference of
    fact, yet can be challenged as a matter of law on the grounds that I have
    already mentioned, and this is I think the safest way to leave it. We were

    7

    warned by learned Counsel for the Respondents that to allow this appeal
    would open the floodgates to appeals against the decisions of the General
    Commissioners up and down the country. That would cause me no alarm, if
    decisions such as that we have spent some time in reviewing were common
    up and down the country. But nothing, I think, will fall from your Lordships
    to suggest that there is not a large area in which the opinion of the Com-
    missioners is decisive. I would myself say nothing to detract from what was
    said by Lord Sterndale and Lord Justice Scrutton in Currie's case [1921]
    2 K.B. 332 upon the kindred question whether the taxpayer was carrying on a
    profession, for I do not think that any more precise guidance can be given
    in the infinitely complex and ever changing conditions of commercial
    adventures.

    In the result the appeal will be allowed but effect will be given to the special
    arrangement as to costs which was a condition of leave to appeal being

    given.

    Lord Radcliffe

    MY LORDS,

    The Crown has sought to charge the Respondents with Income Tax upon
    the profit arising from the purchase and sales of certain spinning plant
    acquired and sold during the period 1946-48. This profit, it is said,
    came from a " trade, manufacture, adventure or concern in the nature of
    " trade " and so is taxable under Case I of Schedule D of the Income
    Tax Act, 1918.

    The Commissioners for the General Purposes of the Income Tax for the
    Division of West Morley in the County of York, to whom the Respondents
    appealed against the assessments, determined that the " transaction " which
    was their subject matter was not an adventure in the nature of trade and dis-
    charged the assessments. In the High Court the Crown's appeal was dismissed
    by the learned Judge (Wynn-Parry, J.), on the ground that the determination
    was " purely a question of fact " and that accordingly it was not open to
    the Court to interfere with it. The matter was treated in exactly the same
    way in the Court of Appeal.

    I should not myself have thought that the principles which govern a case
    of this sort offered much scope for controversy at this date, whether they
    are sought for in English or in Scottish legal decisions. The only difficulty
    that I see arises from the fact that in some cases judges have not been at
    pains to distinguish in their judgments what are the conditions which make
    the particular question before them no more than a question of fact.

    My Lords, I think that it is a question of law what meaning is to be given
    to the words of the Income Tax Act " trade, manufacture, adventure or
    " concern in the nature of trade " and for that matter what constitute " profits
    " or gains " arising from it. Here we have a statutory phrase involving a
    charge of tax, and it is for the Courts to interpret its meaning, having regard
    to the context in which it occurs and to the principles which they bring to
    bear upon the meaning of income. But, that being said, the law does not
    supply a precise definition of the word " trade ": much less does it prescribe
    a detailed or exhaustive set of rules for application to any particular set of
    circumstances. In effect it lays down the limits within which it would be
    permissible to say that a " trade " as interpreted by section 237 of the Act
    does or does not exist.

    But the field so marked out is a wide one and there are many combinations
    of circumstances in which it could not be said to be wrong to arrive at a
    conclusion one way or the other. If the facts of any particular case are
    fairly capable of being so described, it seems to me that it necessarily follows
    that the determination of the Commissioners, Special or General, to the effect
    that a trade does or does not exist is not " erroneous in point of law ";
    and, if a determination cannot be shown to be erroneous in point of law,

    8

    the statute does not admit of its being upset by the Court on appeal. I except
    the occasions when the Commissioners, although dealing with a set of facts
    which would warrant a decision either way, show by some reason they
    give or statement they make in the body of the Case that they have mis-
    understood the law in some relevant particular.

    All these cases in which the facts warrant a determination either way can
    be described as questions of degree and therefore as questions of fact. In
    this, I am only saying what was said by Lord Sterndale in Currie v. C.I.R.
    [1921] 2 K.B. 332 and repeated by Atkin, L.J. in Cooper v. Stubbs 10 T.C. 29
    at p. 55. And, in Scotland, Lord Sands says the same thing in C.I.R. v.
    Livingston
    11 T.C. 538 at pp. 545-6. I agree with them. But, of course,
    in proper circumstances a case can be described as one of fact, or as purely
    one of fact (if the testimonial adds anything), without going through the
    procedure of explaining that is so because it is one of degree and, the facts
    fairly admitting of the determination come to, there is no error which justifies
    the Court's intervention. I see nothing more than this in anything that was
    said in this House in Leeming v. Jones
    15 TC 333. The only thing that
    I would deprecate is too much abbreviation in stating the question, as by
    asserting that it is simply a question of fact whether or not a trade exists.
    It is not simply a question of fact. The true clue to the understanding of
    the position lies, I think, in recalling that the Court can allow an appeal
    from the Commissioners' determination only if it is shown to be erroneous
    in point of law.

    Nor do I think that there can be any real divergence of opinion as to
    what constitutes error of law for this purpose. Naturally, judges have not
    always expressed it in exactly the same terms. I will take one or two
    instances. As I have said, where there is an actual statement in the Case
    which shows a misconception of the law, no one feels any difficulty. But,
    equally, no one supposes that the Court's right, or, as I would say, duty,
    to intervene stops at this. For example, in Cooper v. Stubbs supra, Mr.
    Justice Rowlatt was prepared to overrule the Commissioners' determination
    that no trade existed because, as he said, " If one were trying a question of
    " this sort with a jury, one would have to say upon these facts, ' Well now
    " ' a trade is proved ', and I think that what the Commissioners have done is
    " merely to give the wrong name to a state of facts which in law amount to
    " something else ". In the Court of Appeal the majority did not agree with
    him, holding, in effect, that it would not have been right to give such a
    direction to the jury on the facts as found. We are not rehearing the case
    of Cooper v. Stubbs, though one can say, at any rate, " sed victa Catoni ".
    But I see no reason to think that the majority were following any different
    principle. Warrington. L.J., said that intervention was proper only " in
    " very clear cases where either the Commissioners have come to their con-
    " elusion without evidence which would support it, that is to say, have come
    " to a conclusion which ... no reasonable person could arrive at. or have mis-
    " directed themselves in point of law ". And Atkin, L.J., recognised that
    " there may be a state of facts which can only lead to one conclusion of
    " law ". Now if I turn to the Scottish decisions I find that the Judges are
    stating, though sometimes in somewhat different words, the same principle.
    Lord Normand's judgment in the Court of Session (First Division) in C.I.R.
    v. Fraser 24 T.C. 498 has said almost everything that needs to be said on
    this branch of the subject. "In cases", he says (p. 501), "where it is
    " competent for a tribunal to make findings in fact which are excluded from
    " review, the Appeal Court has always jurisdiction to intervene if it appears
    " either that the tribunal has misunderstood the statutory language—because
    " a proper construction of the statutory language is a matter of law—or
    " that the tribunal has made a finding for which there is no evidence or
    " which is inconsistent with the evidence and contradictory of it ". And that,
    in its turn, appears to me to propound the same principle as that adopted
    by Lord Cooper in C.I.R. v. Toll Property Co., Ltd. 34 T.C. 13, where he
    says (pp. 18-19): "Keeping in view the nature of the transaction, the pur-
    " pose with which the Company was floated and the objects which were
    " prescribed in the memorandum of association, and the whole of the other
    " circumstances which I have briefly summarised, it seems to me that the

    9

    " majority of the Commissioners were not entitled to reach the conclusion
    " which they did, that they must have misdirected themselves in law, and
    " that the true and only reasonable conclusion on the facts found is the
    " conclusion reached by the dissenting Commissioner ".

    My Lords, I must apologise for taking so much time to repeat what I
    believe to be settled law. But it seemed to be desirable to say this much,
    having regard to what appears in the judgments in the Courts below as
    to a possible divergence of principle between the English and Scottish Courts.
    I think that the true position of the Court in all these cases can be shortly
    stated. If a party to a hearing before Commissioners expresses dissatisfaction
    with their determination as being erroneous in point of law, it is for them to
    state a Case and in the body of it to set out the facts that they
    have found as well as their determination. I do not think that
    inferences drawn from other facts are incapable of being themselves
    findings of fact, although there is value in the distinction between
    primary facts and inferences drawn from them. When the Case comes
    before the Court, it is its duty to examine the determination having regard
    to its knowledge of the relevant law. If the Case contains anything ex facie
    which is bad law and which bears upon the determination, it is, obviously,
    erroneous in point of law. But, without any such misconception appearing
    ex facie, it may be that the facts found are such that no person acting
    judicially and properly instructed as to the relevant law could have come to
    the determination under appeal. In those circumstances, too, the Court
    must intervene. It has no option but to assume that there has been some
    misconception of the law and that this has been responsible for the deter-
    mination. So there, too, there has been error in point of law. I do not
    think that it much matters whether this state of affairs is described as one
    in which there is no evidence to support the determination or as one in
    which the evidence is inconsistent with and contradictory of the determination
    or as one in which the true and only reasonable conclusion contradicts the
    determination. Rightly understood, each phrase propounds the same test.
    For my part, I prefer the last of the three, since I think that it is rather
    misleading to speak of there being no evidence to support a conclusion when
    in cases such as these many of the facts are likely to be neutral in themselves
    and only to take their colour from the combination of circumstances in
    which they are found to occur.

    If I apply what I regard as the accepted test to the facts found in the
    present Case I am bound to say, with all respect to the judgments under
    appeal, that I can see only one true and reasonable conclusion. The profit
    from the set of operations that comprised the purchase and sales of the
    spinning plant was the profit of an adventure in the nature of trade.

    What other word is apt to describe the operations? Here are two gentlemen
    who put their money, or the money of one of them, into buying a lot of
    machinery, They have no intention of using it as machinery, so they do
    not buy it to hold as an income-producing asset. They do not buy it to
    consume or for the pleasure of enjoyment. On the contrary, they have no
    intention of holding their purchase at all. They are planning to sell the
    machinery even before they have bought it. And in due course they do
    sell it, in five separate lots, as events turned out. And, as they hoped and
    expected, they make a net profit on the deal, after charging all expenses
    such as repairs and replacements, commissions, wages, travelling and enter-
    ment and incidentals, which do in fact represent the cost of organising the
    venture and carrying it through.

    This seems to me to be, inescapably, a commercial deal in secondhand
    plant. What detail does it lack that prevents it from being an adventure
    in the nature of trade, or what element is present in it that makes it capable
    of being aptly described as anything else? Well, to judge by the Respondents'
    contentions as recited in the Case, there were some circumstances lacking
    in this deal of which the presence has been regarded as of importance in
    other cases. I do not think that this line of argument is ever very conclusive ;
    but, in any event, it breaks down completely on the facts that are found. It
    is said that there was no organisation for the purposes of the transaction.

    10

    But in fact there was organisation, as much of it as the transaction required.
    It is true that the plant was not advertised for sale, though advertisements
    asking for plant were answered by the Respondents. But why should they
    incur the cost of advertising if they judged that they could achieve the sale
    of the plant without it? It is said that no work had been done on the
    maturing of the asset to be sold. But such replacement and renovation as
    were needed were in fact carried out, and I can see no reason why a dealer
    should do more work in making his plant saleable than the purposes of sale
    require. It is said that neither of the Respondents had any special skill
    from his normal activities which placed him in an advantageous position
    for the purposes of this transaction. It may be so, though one of them was
    the employee of a spinning firm. In any case the members of a commercial
    community do not need much instruction in the principles and possibility
    of dealing, and I think that, given the opportunity, the existence or non-
    existence of special skill is of no significance whatever. It is said, finally, that
    the purchase and sale of plant lent itself to capital, rather than commercial,
    transactions. I am not sure that I understand what this is intended to mean.
    If it means that at the relevant period there was no market for second-hand
    plant in which deals could take place., there is no finding to that effect and
    all the facts that are recited seem to be against the contention. If it means
    anything else, it is merely an attempt to describe the conclusion which the
    Respondents would wish to see arrived at on the whole Case.

    There remains the fact which was avowedly the original ground of the
    Commissioners' decision—" this was an isolated case ". But, as we know,
    that circumstance does not prevent a transaction which bears the badges
    of trade from being in truth an adventure in the nature of trade. The true
    question in such cases is whether the operations constitute an adventure
    of that kind, not whether they by themselves or they in conjunction with
    other operations constitute the operator a person who carries on a trade.
    Dealing is, I think, essentially a trading adventure, and the Respondents'
    operations were nothing but a deal or deals in plant and machinery.

    There is only one thing more that I wish to add. The appeal was
    presented to us as involving a question of great importance, since it offered
    an opportunity of reconciling what were thought to be divergences between
    the views of the English and Scottish Courts as to their jurisdiction in dealing
    with Cases Stated which involve the existence or non-existence of a " trade "
    under Case 1 of Schedule D. As I have tried to show, I do not think that
    there has been any such divergence of principle. But I do not feel equally
    confident that there has not been some divergence in the understanding and
    application of the governing principles. I find it difficult to think that,
    had there not been, the Crown would have been Appellant in the present
    case.

    I think it possible that the English Courts have been led to be rather over-
    ready to treat these questions as " pure questions of fact" by some observa-
    tions of Warrington and Atkin LJJ., in Cooper v. Stubbs supra. If so, I
    would say, with very great respect, that I think it a pity that such a tendency
    should persist. As I see it, the reason why the Courts do not interfere
    with Commissioners' findings or determinations when they really do involve
    nothing but questions of fact is not any supposed advantage in the Com-
    missioners of greater experience in matters of business or any other matters.
    The reason is simply that by the system that has been set up the Com-
    missioners are the first tribunal to try an appeal and in the interests of the
    efficient administration of justice their decisions can only be upset on appeal
    if they have been positively wrong in law. The Court is not a second opinion,
    where there is reasonable ground for the first. But there is no reason to
    make a mystery about the subjects that Commissioners deal with or to invite
    the Courts to impose any exceptional restraints upon themselves because
    they are dealing with cases that arise out of facts found by Commissioners.
    Their duty is no more than to examine those facts with a decent respect for
    the tribunal appealed from and, if they think that the only reasonable con-
    clusion on the facts found is inconsistent with the determination come to,
    to say so without more ado.

    I agree that the appeal should be allowed.

    11

    Lord Tucker

    MY LORDS,

    I agree, for the reasons which have been stated, that this appeal should
    be allowed.

    Lord Somervell of Harrow

    MY LORDS,

    I have had the advantage of reading the Opinion of my noble and learned
    friend, Lord Radcliffe, in which I concur.

    (31276) Wt. 8100-102 35 8/55 D.L./PA/19


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