O'Coindealbhain v Gannon

• Jurisdiction: Ireland
• Judge: Mr. Justice Barrington
• Judgment Date: 11 March 1986
• Neutral Citation: 1986 WJSC-HC 1287
• Court: High Court
• Docket Number: No. 840R/1984,[1984 No. 840R]
• Date: 11 March 1986

1986 WJSC-HC 1287

THE HIGH COURT

No. 840R/1984

O COINDEALBHAIN v. GANNON

EOIN PACELLI O COINDEALBHÁIN INSPECTOR OF TAXES

APPELLANT

AND

THE HONOURABLE MR. JUSTICE SEAN GANNON

RESPONDENT

Citations:

DEWAR V CMRS OF INLAND REVENUE 19 TC 561

DOLAN V K 1944 IR 470

FINANCE ACT 1970 S20

FINANCE ACT 1970 S21

FINANCE ACT 1982 S76

GRESHAM LIFE ASSURANCE SOCIETY LTD V BISHOP 4 TC 464

HALSBURY'S LAWS 3ED V20 P27 PARA 32

LEIGH V CMRS OF INLAND REVENUE 11 TC 590

PILCHER V LOGAN 1914 15 SR NSW 24

ROBERTSON V MACDONOGH 6 LRI 433

RONDEL V WORSLEY 1969 1 AC 191

SCOTTISH WIDOWS FUND LIFE ASSURANCE SOCIETY V FARMER 5 TC 502

WORDS & PHRASES V4

Synopsis:

REVENUE

Income tax

Income - Receipt - Whether established - Discontinuance of profession - Barrister ceasing to practise - Professional fees earned but not paid before discontinuance - Barrister informing solicitors that he did not wish to be paid outstanding fees - Barrister intimating that equivalent sums might be paid to company specified by barrister - Outstanding fees paid to designated company - Whether barrister chargeable to tax in respect of sums so paid - Whether sums so paid were "received" by barrister within meaning of s.20 of Income Tax Act, 1970 - Held in affirmative - (1984/840 R - Barrington J. - 11/3/86) - [1986] IR 154

|O Coindealbhain v. Gannon|

WORDS AND PHRASES

"Received"

Income tax - Taxpayer - Income - Money earned before discontinuance of profession - Money not paid to taxpayer before discontinuance - Barrister informing solicitors that he did not wish to be paid outstanding fees - Barrister intimating that equivalent sums might be paid to a designated company - Sums so paid - Whether those sums had been received by barrister within meaning of s.20 of Income Tax Act, 1970 - Held in affirmative - (1984/840 R - Barrington J. - 11/3/86) - [1986] IR 154

|O Coindealbhain v. Gannon|

1 Judgment of Mr. Justice Barrington delivered the 11th day of March 1986.

2 This is an appeal by way of case stated from a decision of his honour Judge Neylon, the former President of the Circuit Court. It raises an interesting point on the interpretation of section 20 of the Finance Act 1970.

3 The former President's decision was given on the 25th July 1978. Why it should have taken the Appellant more than seven years to get his appeal before this Court is a source of some puzzlement to me. What is at issue in the present case is a not point of law and it was clearly both possible and desirable to have the matter disposed of more expeditiously.

4 The point of law arises in the following context -

5 The Respondent carried on practice as a Barrister until he was appointed to the High Court Bench on the 4th of January 1973.

6 In February 1973 a company called Essgee Limited was incorporated. Three £1 ordinary shares in the capital of the company were issued. These shares were held, as to one each, by two sons and a son-in-law of the Respondent. No other shares in the capital of the company have been issued. No shares in the company were at any time held by or on behalf of the Respondent and he was never at any time a director of the company.

7 Following his appointment to the High Court Bench and the incorporation of the company, the Respondent -

8 1 Wrote to solicitors for whom he had done work stating that he did not desire to receive any fees but, if they wished, they could pay same to the company. Similar letters were sent to solicitors to whom he returned work unfinished.

9 2 Returned some cheques which were made payable to him with an intimation on the lines of the intimation referred to in the previous paragraph.

10 3 Received and retained some fees which represented fees due for work done by him for the State and some other small fees.

11 All sums in respect of fees actually received and retained by the Hespondent subsequent to his appointment were duly returned by the Respondent for the purpose of ascertaining his liability to Income Tax and were duly assessed pursuant to the provisions of section 20 of the Finance Act 1970. The Respondent had at all times been assessed to Income Tax on the fees received basis.

12 All cheques representing fees due to the Respondent which were drawn in favour of the company and sent to the Respondent by the solicitors concerned were delivered by the Respondent to the company and received by the company and all cheques and sums representing fees due to the Respondent which were sent to the company directly were retained by it. All such sums were treated in the books of the company as part of its capital reserve.

13 No consideration was paid by the company or any other person to the Respondent or to any person on his behalf in connection with the receipt by the company of the sums so received by it.

14 The Respondent did not make or intend to make any claim against the company for an account of any sums received by the company in the foregoing circumstances. It was his intention that the company should receive the sums for its own absolute use and benefit and should not hold them on any resulting or other trust for the Respondent.

15 The dispute in the present case is whether the sums representing fees due to the Respondent but which were in fact received by the company can properly be regarded for the purposes of section 20 of the Finance Act 1970as having been received by the Respondent.

16 Full disclosure in relation to all relevant matters has been made to the Inspector of Taxes and the disputed taxes have long since been paid. The issue is whether the Respondent, in the circumstances described, is liable to pay them. The learned President has held that he is not liable to pay them because he did not "receive" the fees in question within the meaning of section 20 of the Finance Act 1970. The question which I have to decide is whether the learned President, was entitled in law, on the admitted facts, to reach that conclusion.

The Law

17 The principles of legal interpretation to be applied to the construction of Revenue statutes are well established. It is a general principle that to be liable to tax the citizen must come clearly within the words of the charge to tax. On the other hand, once within the scope and terms of the charge to tax, he cannot escape unless clearly within the terms of an exemption. There is no rule of law against the citizen making genuine and lawful arrangements of his affairs by which the incidence of tax on his property is lessened. In the construction of a Taxing Act the Court has primary regard to the statutory words themselves and to their proper judicial construction. Particular words must be construed in their context. Taxing Acts are to be construed strictly, in the sense that one has to look merely at what was clearly said, there being no room for any intendment, but a fair and reasonable construction must be given to the language without leaning to one side or the other. Whether applying the terms of the charge or the terms of the exemption, no considerations of equity or hardship affect the construction of the Act. (See Halsbury 3rd Edition Volume 20 Page 27, paragraph 32).

18 Before turning to section 20 of the Finance Act 1970it is necessary to say something about the legal background in which it was passed. Prior to the Finance Act 1970a self employed person who retired was relieved of tax on his profits from his profession received after his retirement. This concession was, presumably, designed to compensate him for the fact that he would not be entitled to any pension on his retirement. But the exemption also applied even though the formerly self employed person, on his retirement, took up some other form of paid employment.

19 Section 20 was designed to remove the exemption. Subsection (1) accordingly provides that-

"Where any trade or profession the profits or gains of which are chargeable to tax under Case I or Case II of Schedule D has been permanently discontinued, tax shall be charged under Case IV of the Schedule in respect of any sums to which this section applies which are received after the discontinuance ......"

20 The net point in the present case accordingly is whether the sums admittedly paid to Essgee Limited after the Respondent had discontinued his profession as a Barrister were "received" by the Respondent and caught by section 20.

21 Another legal issue of importance to the Respondent's case is that a Barrister has no legal right to be paid his professional fees by his client. He may not accordingly sue the client for his fees. It is not necessary here to go into the reasons for this. The law is well established by the Courts in both Ireland and the United Kingdom (See Rondel .v. Worsley) 1969 1 Appeal Cases, page 191 and Robertson .v. MacDonogh 1880 6 Law Reports Ireland page 433). In the former case Lord Morris of Borth-y-Gest refers to the fact that the Courts regarded the payment of a Barrister's fees as being "only a matter of honour". Mr. Geoghegan has submitted, on behalf of the Respondent, that as a Barrister has no right to sue for his fees he has no enforceable legal right to receive them.

22 Section 21 of the Finance Act 1970deals with the case where a self employed person, on his retirement, transfers the right to receive his fees and provides that, in such a case, tax is to be payable on the value of the consideration or, in the case of a transaction otherwise than at arms length, in respect of the value of the right transferred as between parties at arms length. In the Court below the Inspector rested his case partly on section 21 of the Act. But in this Court Mr. O'Keeffe, on behalf of the Inspector, abandoned section 21 because he accepted that there had been no transfer of the right to receive the fees for valuable consideration. Mr. Geoghegan, however, submits that the matter goes further than that. He submits that because there was no...