Re Reade

• Jurisdiction: Ireland
• Judgment Date: 30 October 1927
• Date: 30 October 1927
• Court: Supreme Court (Irish Free State)

Supreme Court.

In re Reade.

In re W. J. READE, A Bankrupt

Revenue - Excess profits duty - Accounting periods prior to the establishment of the Provisional Government - Right of Government of Irish Free State to claim duty - Judgment against trader for amounts of duty - Execution - Judgment unsatisfied - Trader adjudged bankrupt - Validity of adjudication - Right to duty disputed - Power of Court to go behind judgment - Act of bankruptcy - Execution issued and levied by petitioning creditor - Debt due to the Crown - Provisional Government - Establishment of Irish Free State - Rights transferred - Bankruptcy (Ir.) Amendment Act, 1872 (35 & 36 Vict. c. 58), sect. 21,sub-sect. 5; sect. 54 - Finance (No. 2) Act, 1915 (5 & 6 Geo. 5, c. 89),sects. 38 and 45, sub-sects. (1), (3), and (7) - Irish Free State (Agreement) Act, 1921 (12 Geo. 5, c. 4), Sch. Art. 17 - Finance Act, 1921 (11 & 12 Geo. 5, c. 32), sects. 35 and 39. - Irish Free State Constitution Act, 1922 (Session 2) (13 Geo. 5, c. 1), Sch. Arts. 73, 74, 80 - Constitution of the Irish Free State (Saorstát Éireann éireann) Act, 1922 (No. 1of 1922), Sch. I, Arts. 73, 74, 80; Sch. II, Art. 17 - Provisional Government (Transfer of Functions) Order, 1922 (Stat. R. & O. 1922,No. 315).

Motion.

William Joseph Reade, 115 and 116 Cork Street, Dublin, carrying on the business of poplin manufacturer under the name of Fry & Co., showed cause against an adjudication in bankruptcy which took place on the 21st day of April, 1925, on the petition of the Attorney-General of the Irish Free State. On the 14th day of August, 1924, the Attorney-General had recovered judgment in default of defence against the applicant for the sum of £7,758 12s. in respect of excess profits duty for four assessments, namely, the assessments for the four accounting periods ending December 31st, 1917, December 31st, 1918, December 31st, 1919, and December 31st, 1920. Writs oflevari facias for the recovery of the judgment debt were placed in the hands of the Sheriffs of the City of Dublin and County of Dublin, and the applicant 's goods were seized and sold, leaving a sum of £7,610 18s. 1d. owing on foot of the judgment at the date of the petition in bankruptcy.

The applicant appealed to the Supreme Court (4).

Judgment, in default of defence, was recovered by the Attorney-General of the Irish Free State against R., a trader, for excess profits duty in respect of the four accounting periods ending 31st December, 1917, 1918, 1919, 1920. The assessments for these duties were made by the Revenue officials of the Irish Free State subsequent to 31st March, 1923. Execution against R. was levied by seizure and sale of his goods, but after the sale there still remained due on foot of the judgment a sum of over £7,000. On the petition of the Attorney-General, R. was adjudged bankrupt. R. applied to have the adjudication annulled, contending that the Government of the Irish Free State was not entitled to claim these duties, and therefore that the judgment was wrongly recovered against him, and the Attorney-General had no right to present the petition. R. did not dispute the correctness of the amounts of the assessments.

Held, affirming Johnston J., that the position behind the judgment could be examined to determine the question whether the Attorney-General was a competent petitioning creditor in respect of the amount of the duties.

In re Calvert; Ex parte Calvert[1899] 2 Q.B. 145, distinguished.

Held also that the adjudication could not be annulled, as the Attorney-General was a competent petitioning creditor because the Government of the Irish Free State was entitled to the duties in question, the assessments having been made after 31st March, 1923, by regularly authorised officials in accordance with the powers conferred by sect. 39 of the Finance Act, 1921, the provisions of which were in force in the Irish Free State by virtue of Art. 73 of the Constitution at the time when the assessments were made, and those powers were not abrogated by Art. 74 or any other provision of the Constitution.

Cur. adv. vult.

Johnston J. :—

This is an application by William Joseph Reade to annul the adjudication in bankruptcy, which took place on April 21st, 1925, on the petition of the Attorney-General of Saorstát Éireann éireann. The ground of the application is that neither the debt nor the act of bankruptcy relied upon is sufficient to support the adjudication.

The case involves a question of very considerable importance in regard to the revenue of the Irish Free State.

On August 14th, 1924, the Attorney-General recovered judgment, in default of defence, against the present applicant for £7,758 12s. in respect of excess profits duty. A writ of levari facias for the recovery of the judgment debt was placed in the hands of the sheriff, and an execution and sale of the applicant's goods took place, leaving a sum of £7,610 18s. 1d. owing on foot of the judgment at the date of the petition in bankruptcy. The petitioner states that he was willing to forego, for the benefit of the creditors generally, any security for the debt that he holds in respect of the debtor's estate in the event of there being an adjudication in bankruptcy.

It is contended on behalf of Mr. Reade that, whether or not these arrears of excess profits duty on which the judgment is grounded are still alive as a debt for which he is liable, in consequence of the constitutional changes that have taken place in this country, the Government of Saorstát Éireann éireann, at any rate, has no right or title to recover the amount from him, and, therefore, that the judgment, so far as the Bankruptcy Court is concerned, is a nullity. I think I am entitled to say at this stage that it would have been more convenient, and certainly more eloquent, if this far-reaching case had been made as a defence in the original action rather than in a summary proceeding such as the present in the Bankruptcy Court.

It is argued on behalf of the Attorney-General, on the authority of the decision in In re Calvert(1), that the ordinary rule, that the Court can go behind a judgment and ascertain whether or not there is a provable debt, does not apply to a proof for assessed taxes, and that it is not competent for this Court, at the invitation of the debtor, to go behind the assessment of this tax and the judgment based thereon. That decision, however, has no application to a case like the present. The legality of the assessment, and the debtor's original liability therefor, are in no way involved in the present controversy. The contention now is that, by reason of certain supervening facts to which I shall refer, the Government of Saorstát Éireann éireannhas no title whatever to these arrears of taxes, and cannot now recover them from Mr. Reade as the person originally assessed.

Excess profits duty was a war tax, imposed for the first time by the Finance (No. 2) Act, 1915, in respect of profits from any trade or business in any "accounting period" which ended after August 4th, 1914. Sect. 45 (3) provided that "the amount of duty payable shall be recoverable as a debt due to His Majesty from the person or persons on whom it is assessed."The tax was continued, with numerous amendments of the law, by the Finance Acts of 1916, 1917, 1918, 1919, and 1920, and finally it was terminated by the Finance Act, 1921, sect. 35 of which enacted a precise definition of the "final accounting period." The Legislature, however, was careful to keep in existence the right of the fiscal authorities to investigate the past. Sect. 39 provided that, "notwithstanding anything to the contrary in the principal Act [that of 1915], . . . assessments and additional assessments to excess profits duty in respect of any accounting period may be made at any time, as the case may require, unless and until Parliament otherwise determines."Certain relief in respect of the payment of excess profit duty was given by sect. 34 of the Finance Act, 1922, which section was deemed to have effect as from January 1st, 1922, though the Act itself was not passed until July 20th, 1922.

That was the state of the law on December 6th, 1921, when the historic document, which is generally known as "the Treaty," was executed by representatives of Great Britain and Ireland, and also on March 31st, 1922, when the Irish Free State (Agreement) Act, 1922, was passed. It is unnecessary for me to refer in detail to the process by which the Provisional Government was set up, and by which executive power was transferred from the old to the new authority. Those are matters that are

entirely outside the scope of the present case. The main factor in the course of that process was the Provisional Government (Transfer of Functions) Order, 1922, which was promulgated by virtue of the powers conferred by Article 17 of the Treaty and sect. 1 of the Act of 1922; and the Order is to be regarded as having the same effect as if enacted in that Act. It was the subject of a minute analysis by the House of Lords in the case of Attorney-General v. Great Southern & Western Railway Company(1), and no question was raised there, either in the arguments or the judgments, as to its validity. Art. 1 provided for the general transfer of all functions "in connection with the administration of public services in Southern Ireland"to the appropriate departments and officers of the Provisional Government; but, not content with that general transfer, the Legislature provided specifically that "all functions heretofore performed by existing Government departments and officers in connection with the assessment, levying, and collection of taxes, so far as leviable in Southern Ireland, shall, as from the day of transfer, be transferred to and become exercisable by the departments and officers of the Provisional Government, to whom such functions are so assigned"; and those powers were to "extend to the assessment, levying, and collection of...