Hayes v Duggan

• Jurisdiction: Ireland
• Judgment Date: 01 January 1929
• Date: 01 January 1929
• Court: Supreme Court (Irish Free State)

High Court.

Supreme Court.

Hayes v. Duggan

C. HAYES, Inspector of Taxes

Appellant

and

R. J. DUGGAN, Respondent (1)

Revenue - Income tax - Sweepstake - Profits - Liability to income tax - Unlawful and criminal enterprise - Public policy - Income Tax Act, 1918 (8 & 9 Geo. 5, c. 40), Sch. D, Case II and Case VI.

Case Stated under the Income Tax Act, 1918, sect. 149, by the Commissioners for the Special Purposes of the Income Tax Acts for the opinion of the High Court of Justice. The case stated was as follows:—

"1. At meetings of the Commissioners for the Special Purposes of the Income Tax Acts, held on the 28th January, 1925, and on the 24th March, 1925, at Dublin, for the purpose of hearing appeals, Mr. R. J. Duggan (hereinafter referred to as 'the respondent') appealed against an assessment to income tax on the sum of £40,000 for the year of assessment 1922-23, made upon him under Schedule D of the Income Tax Act, 1918, in respect of profits derived from sweepstakes carried on by him.

2. The following facts were admitted or proved:—The respondent is a bookmaker, or turf commission agent, by profession or vocation, and is assessed to income tax each year under Case II of Schedule D of the Income Tax Act, 1918, in respect of the profits of such profession or vocation. The assessment under appeal is distinct from the assessment which was made upon him for the year 1922-23 in respect of his profits as bookmaker or turf commission agent.

3. In the beginning of 1922 the Executive Committee of the Governing Body of the Mater Misericordiae Hospital, Dublin (hereinafter referred to as 'the Executive Committee'), contemplated raising funds for the purposes of the hospital by means of a sweepstake. The Executive Committee approached the respondent with the view of obtaining his help and influence, as their efforts on previous occasions to raise money by means of sweepstakes for small prizes had not met with marked success. The respondent suggested that the Executive Committee should promote a sweepstake on a larger scale than heretofore, and offer prizes to the amount of £10,000. The Executive Committee could not see their way to embark upon a venture

of this magnitude, and the respondent thereupon declared his willingness to accept full responsibility for the promotion and carrying through of a sweepstake on the lines he had suggested.

4. The Executive Committee agreed to accept respondent's offer, upon the understanding that the sweepstake should be run in aid of the Mater Misericordiae Hospital; that, whatever the result of the sweepstake, the Executive Committee should receive £10,000, but no more, for the purposes of the hospital; that any surplus in excess of £10,000 should belong to the respondent; and that, for the purposes of the sweepstake, Dublin should be fixed as headquarters, the staff employed should be of Irish birth, so far as was convenient, and the respondent should be solely responsible for the cost of the staff employed, the printing, posting, and all other expenses or liabilities incurred.

5. The respondent, having signed an agreement in the terms set out in the preceding paragraph, proceeded, about August, 1922, to take steps to promote the sweepstake upon the result of a horse race, known as the Manchester November Handicap (hereinafter referred to as 'the race').

6. By means of an extensive advertising campaign, the respondent brought to the notice of the public in this and other countries the fact that he was selling tickets entitling each holder of a ticket to a chance of winning one of several prizes in money. He also purchased from people in other countries lists of names and addresses of persons who might be willing to buy tickets, and upon receipt of these lists he forwarded tickets to the persons named therein. Each ticket was sold at the price of 10s., and the amount of money offered in prizes was £10,000, divided as follows:—

To the holder of the ticket, the number of which was drawn against the name of the horse declared as having won the race, i.e., as having first reached the winning post	£5,000
To the holder of the ticket, the number of which was drawn against the name of the second horse to reach the winning post	£2,500
To the holder of the ticket, the number of which was drawn against the name of the third horse to reach the winning post	£1,250

The balance of £1,250 was to be divided equally amongst the holders of tickets, the numbers of which were drawn against the names of horses which took part in the race, other than the horses which were placed first, second, and third as the result of the race.

7. The tickets printed for the purpose of the sweepstake had each a consecutive number and a counterfoil, with a number thereon corresponding to the number on the ticket. The purchaser of a ticket was required to enter his name and address on the counterfoil, and when he did so, and returned the counterfoil with the price of the ticket to the respondent, he was entitled to participate in the sweepstake. Purchasers were at liberty to return counterfoils up to a fixed date, which was some two or three days prior to the date upon which the sweepstake was to be drawn. Counterfoils and money received after the fixed date were returned to the senders.

8. The draw for the sweepstake was held in the Mansion House, Dublin, on the eve of the race, under the supervision of the Acting Lord Mayor of Dublin, the High Sheriff of the City of Dublin, representatives of the Mater Misericordiae Hospital, and of the English and Irish press, and a large number of the public —mostly ticket-holders. The manner in which the draw was conducted was as follows:—

Each counterfoil received, representing a ticket sold and paid for, was placed in a large revolving glass drum, and the name of each horse entered in the race at the time of the draw was enclosed in a sealed envelope and placed in a smaller revolving drum. After the drums had been revolved rapidly, in order to mix the counterfoils in the one and the envelopes in the other, a blind girl was conducted by the Acting Lord Mayor to the smaller drum, from which she extracted one of the sealed envelopes containing the name of one of the horses in the race. Another blind girl was conducted by the High Sheriff to the large drum, from which she drew a counterfoil, the number of which was immediately read to the press and to all who were present, together with the name of the horse drawn from the smaller drum. The person whose name appeared on the counterfoil drawn had then a chance of winning a prize, the value of which would be determined by the result of the race to be run on the following day, and would depend upon whether the horse, the name of which was drawn at the same time as the counterfoil, finished first, second, or third, or competed in the race. The same process was repeated until a counterfoil had been drawn against each envelope in the smaller drum. No prizes were awarded to persons the counterfoils of whose tickets were drawn against the names of horses which did not actually run in the race. The results were announced in the press immediately after the conclusion of the draw; each person against the counterfoil of whose ticket the name of a horse had been drawn was notified by telegram or cable, and the prize money was paid to the winners within fourteen days after the draw.

9. The respondent paid £10,000 to the Executive Committee, in accordance with the agreement with them.

10. Early in 1923 the respondent promoted on similar lines a sweepstake depending upon the result of a horse race, known as the Grand National. This sweepstake was carried out at the instance of a parish priest of a parish in the city of Dublin, in order to raise funds for the erection of a parochial house, and of the Governing Body of the Cancer Hospital, in order to raise funds for the purposes of the hospital, to each of whom the respondent paid £5,000, accepting full responsibility, as in the case of the previous sweepstake, and being entitled to any surplus after meeting all liabilities in connection with the sweepstake.

11. The respondent admitted that he derived profits in the year of assessment 1922-23 from the promotion and carrying on of each of these two sweepstakes, but declined to give us any data from which the amount of his profits could be ascertained —acting upon the advice of his counsel, that he was not obliged to furnish information which might incriminate himself or others who were connected with him in carrying on the sweepstakes.

12. It was contended by counsel on behalf of the respondent—

• i. that profits from a sweepstake are not profits or gains within the meaning of the Income Tax Acts;

• ii. that the profits in this case were not annual profits;

• iii. that the carrying on of sweepstakes was not a trade, profession, or vocation under Schedule D of the Income Tax Acts;

• iv. that it was an unlawful and criminal enterprise, in the proceeds of which the State could not participate;

• v. that if, contrary to the contention at iii, the carrying on of sweepstakes was a trade, profession, or vocation, then the profits from such should be assessed...