Edwards (Inspector of Taxes) v Bairstow [1955] UKHL 3

House of Lords

Between

Edwards (Inspector of Taxes)Appellant

BairstowRespondent

Before

Lord Radcliffe

Lord Tucker

Lord Somervell of Harrow

[1]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. 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. 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. The profits shown by the accounts (which form part of this Case and are annexed hereto, marked 'A') was £18,225 11s. 3d. The Respondents' sole purpose in the transaction was to sell the plant at a profit. With regard to the manner in which the sales were effected: — Some commissions were paid for assistance received in effecting sales. 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, the existence of an organisation, or 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 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.

[2]My Lords,

[2]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

[3]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.

[4]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.

[5]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.

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

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

[8]With regard to the manner in which the sales were effected: —

[9]Some commissions were paid for assistance received in effecting sales.

[10]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

[11]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.

[12]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, (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.

[13]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.

[14]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.

[15]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 ".

[16]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.

[17]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 ".

[18]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.

[19]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.

[20]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.

[21]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

[22]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.

[23]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.

[25]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.

[26]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,

[27]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.

[28]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.

[29]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.

[30]My Lords,

[30]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.

[31]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.

[32]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.

[34]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 "

[35]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.

[36]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.

[37]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

[38]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.

[39]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.

[40]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.

[41]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.

[42]I agree that the appeal should be allowed. 11 Lord Tucker MY LORDS,

[43]I agree, for the reasons which have been stated, that this appeal should be allowed. Lord Somervell of Harrow MY LORDS,

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

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