Seymour v Reed

[1927] A.C. 554

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(Judgment by: Lord Atkinson)

Between: Seymour - Appellant
And: Reed - Respondnent

Court:

Judges: Viscount Cave LC
Viscount Dunedin

Lord AtkinsonLord Phillimore
Lord Carson

Subject References:
REVENUE
INCOME TAX
Profit from Employment
Proceeds of professional Cricketer's Benefit Match

Legislative References:
Income Tax Act, 1918 (8 & 9 Geo. 5, c. 40) - Sch. E, r. 1

Case References:
Herbert v. McQuade distinguished - [1902] 2 K. B. 631
Blakiston v. Cooper distinguished - [1909] A.C. 104

Judgment date: 24 May 1927

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Judgment by:
Lord Atkinson

My Lords, I regret that I am unable to concur with the judgment which has just been delivered by my noble friend on the Woolsack, the Lord Chancellor, and I further regret that I am unable to concur with the judgments given and about to be given by my other noble friends. In those circumstances I must, of course, assume that the conclusions at which I have arrived are erroneous, though I cannot feel convinced of it. I have this consolation, however, that if I err, I err in good company - namely, in that of the Master of the Rolls and of Warrington L.J., as he was when he delivered judgment in this case in the Court of Appeal.

In my view, this latter judgment, especially, appears to be sound, logical, sustained by the facts proved and consistent with the authorities cited in support of it. What has given me most trouble in the case is this - the bald, meagre and sketchy way in which the facts of the case have been stated.

It is rightly stated in the case that the sole question for decision is whether the large sum of 939l. 16s. 11d. derived by Seymour, the professional cricketer, from the benefit match played on the cricketing field of the Kent County Cricket Club, accrued to him, or came to him from his employment as the professional cricketer of this club, or was a gift not earned by him by the discharge, with special efficiency, of his duties as professional cricketer to the club, but independently of the discharge of those duties, unconnected with them, not in any way springing from them. Accordingly, one would, I think, suppose that in order to determine this question, the first thing to be fully ascertained would be what were the terms upon which Seymour was hired; what were his duties, what were the functions which he discharged upon the occasion of a benefit match being held; did he himself play in it? Did he in any way select the competing teams, or aid in the management of the fete, as it may well be styled?

The only statement contained in the case at all touching upon these matters is the following:

"(C) A professional cricketer in the service of the Kent County Cricket Club is granted a benefit on the express understanding that he shall allow the proceeds of the benefit to be invested in the names of the trustees of the club during the pleasure of the committee. The income derived from the proceeds invested is paid to the beneficiary. The invested sum has, however, always eventually been handed over to the professional cricketer when his career as a cricketer is over, or when he finds an investment (such as a share in a business or farm) of which the trustees approve."

The following is an extract from the regulations for the staff of the Kent County Cricket Club bearing on the point, actually in force when the above-mentioned match was played. The regulation is headed

"Benefits and Tours,"

and runs thus:

"The committee reserve to themselves an absolute and unfettered discretion as regards benefit matches, the collection of subscriptions in connection with such matches, and dealing with the net proceeds of such matches in any way they may think desirable in the interest of the beneficiaire. The committee also reserve the like discretion in regard to granting permission to any player to go on winter tour and in regard to dealing with remuneration receivable by him on account of such tour."

This regulation may be fully adequate to protect the committee from any legal obligation towards their professional cricketer being imposed upon the club or the committee in respect of the matters named, but it is quite inadequate to prevent that cricketer from having a hope or an expectation, or a formed belief that he will have a chance, if he discharged his duties well and to the satisfaction of his employers, of being given the prize of a benefit match. For all that appears, he owed no duties to the Kent club or to its committee save those which sprang from his position of professional cricketer. If he got the reward of a benefit match by reason of the efficient discharge of those duties, it must, I think, in the absence of all evidence of the committee being influenced by any other motive, object, or aim, be held that this reward accrued to him by reason of the office or employment he held within the meaning of Sch. E of the Act of 1842, or came to him from that employment within the meaning of Sch. E, r. 1, of the Income Tax Act of 1918.

I cannot find anything in the case suggesting that the club, or its committee, had any motive, object or aim in giving the benefit of this match to Seymour, their officer, other than to reward him for the efficient discharge of the duties of his post.

It is here that the bald, incomplete and unsatisfactory provisions of para. 2 (c) of the case stated cause embarrassment. Surely it would have been easy to have ascertained from Seymour or the committee what, if any, was the agreement made with, or assurance given to him as to the result of holding a benefit match, or whether it was the usual practice of the club to permit any professional cricketer they had in their service to obtain this benefit if he discharged the duties of his post well, though admittedly it was a matter entirely in their discretion, and they were not bound to do so. Suppose, for instance, that when Seymour was originally appointed, the committee or secretary of the club said to him:

"The committee have absolute powers to let you have the advantage of a benefit match or not just as they please. Their discretion is absolute and unfettered, but if you discharge the duties of your post to their entire satisfaction, they may possibly be inclined to let you have the benefit of such a match. They make no promise whatever to do so."

It certainly would appear to me that if that remark or any equivalent remark had been made at the time suggested, it ought to be held that Seymour might naturally and reasonably anticipate that he would have a fair chance of obtaining the benefit of a test match conferred upon him by his employers, if he discharged the duties of his post to their entire satisfaction. A grave injustice might be done to an employee or to his employer by the omission to elicit what took place when the employee was first engaged.

What were the precise conditions of his employment? Warrington L.J. deals with these points of view in a lengthy passage of his judgment. ^[F14] I quote it in full by reason of its importance, and because I thoroughly concur with it.

"Now did this money come to the respondent by virtue of his office? Looking at the regulations, I am satisfied that from that alone one must come to the conclusion that it did come to him by virtue of his office. It is something which obviously was contemplated as a possibility amongst the terms under which he was serving the Kent County Cricket Club, but more than that, it seems to me that this came to him not merely by virtue of his office, because it was something which he might expect to get from his office, but it came to him from his employers, when one comes to think of what really happened.

If this match had been held without the exercise by the club of their discretion in this man's favour by making it a benefit match, the gate money would have been the property of the club and would have gone into their coffers. It is quite true that the gate money which would have been taken at the match if it had not been a benefit match may have been less in amount, but that seems to be quite immaterial. They were under no obligation to give the benefit. They were under no obligation to give him any portion of the gate money that day, and it seems to me that by making the match a benefit match, it was their act which gave him the right to receive this gate money. That seems to me to be one extremely important and perhaps the most important factor of all, and it is that fact which distinguishes the gate money from the subscriptions which were gathered outside.

As regards those subscriptions, the club never had any interest in them at all. They were, as it seems to me, quite properly treated by the Crown as falling on the other side of the line, and as donations purely personal given by outsiders to the man for whose benefit they were given. That seems to me to be the crucial point in this case, that this was money given to him by the will of his employers and in a manner contemplated by the actual terms of the employment as shown by the regulations."

The fact that the giving of permission by the committee of the club to the holding of benefit matches is purely voluntary and discretionary is entirely immaterial. In Herbert v. McQuade, ^[F15] Collins M.R. (as he then was) quoted a passage from the judgment of Lord Curriehill in a Scotch case, to the following effect:

"It is,"

said the learned judge,

"with some reluctance that I have formed the opinion that the Commissioners are wrong, and that the appellant is liable for income tax on the 100l. mentioned in the case. It is true that it is a voluntary contribution by the parishioners, one which they are under no obligation to make and which they may withdraw at any time, but still it is a payment made to the appellant as their clergyman and is received by the appellant in respect of the discharge of his duties of that office, which is one of public employment in the sense of the statutes."

The Master of the Rolls, in commenting on this judgment, laid down a test in these words:

"The test is whether, from the standpoint of the person who receives it"

(i.e., the payment),

"it accrues to him in virtue of his office; if it does, it does not matter whether it was voluntary or whether it was compulsory on the part of the persons who paid it. That seems to me to be the test; and if we once get to this - that the money has come to, or accrued to, a person by virtue of his office - it seems to me that the liability to income tax is not negatived merely by reason of the fact that there was no legal obligation on the part of the persons who contributed the money to pay it."

This case of Herbert v. McQuade ^[F15] has been often approved of and followed. It may well be that there is nothing to prevent the Kent County Cricket Club from giving a handsome gift to their professional cricketer, though they knew he was the worst cricketer that ever held a bat or bowled a ball, but these regulations do not appear to me to contemplate such a case. A benefit match permitted in such a man's interest would naturally secure very little money either in the shape of subscriptions or gate money. A professional cricketer such as Seymour must have had some special merit to secure such a splendid prize as he obtained in this case. The money of both subscribers and persons who passed the gate was rather lavishly given. It is difficult to imagine what special merit he could have had other than skill and efficiency in the game he was employed by his employer to play, and to teach. It is much to be regretted that Seymour was not examined, not only as to the terms of his employment, but also as to how he regarded this sum of 939l. odd, and upon what ground he demanded a return of the income tax paid yearly by his trustees. According to the decision in Herbert v. McQuade ^[F16] it establishes that the test is whether from the standpoint of the person who receives the money it accrues to him in virtue of his office or employment.

The Master of the Rolls deals with this point in the following passage of his judgment. ^[F17] He said:

"But after recounting the facts as I have done and giving consideration to the substance of the matter and bearing in mind the regulations which I have read, it appears to me that this sum of 939l. cannot be considered to be an extraneous addition to Seymour's wages or a fortuitous donation, but that it was an addition arranged by and through his employers at a time when they considered that a benefit match should be allowed to him, and was an addition contemplated as a possibility in the course of his employment in the very terms which regulated the employment of their staff, including the respondent. For these reasons it appears to me that this sum of 939l. falls within the principle which has been laid down in Herbert v. McQuade ^[F16] and the other cases, and is taxable just as any other sums are taxable which are received in the course of employment and are profits arising therefrom."

It is not disputed that the effect of these regulations is, according to a well known principle of law, to create in Seymour an absolute ownership in the fund vested in the appointed trustees.

The mode in which the trustees discharged their trust affords an indication of how they and their beneficiary must have regarded the fund resulting from the benefit match.

At p. 3 of the stated case it is set forth that the net proceeds of the match, with certain other sums, amounting on the whole to 1492l. 8s. 7d., were by the Kent County Cricket Club invested in the purchase of the stocks named, that dividends from these investments were received by the county club, less the income tax which was deducted, and were paid to Seymour by cheques drawn by the county club in his favour on October 21, 1921, October 21, 1922, and October 21, 1923, for the respective amounts of 55l. 8s. 6d., 64l. 5s. 8d. and 67l. 12s. 2d. At p. 4 of the case stated it is set forth that certificates of the deduction of income tax from these sums were furnished to Seymour by the Kent County Cricket Club, and that he, Seymour, claimed for repayment of the income tax deducted on the sums above mentioned. The case of Herbert v. McQuade ^[F18] and the cases which followed it decided that it was the standpoint of the receiver of the money that determines the liability to income tax. It was essential then that it should be ascertained in what light Seymour regarded these dividends. He is not apparently asked a single question upon the subject.

The judgment of Lord Loreburn in Blakiston v. Cooper ^[F19] has been frequently referred to. The headnote fairly states what was the pith of the decision. It is there set forth that voluntary Easter offerings given as free gifts to the incumbent of a benefice as such for his personal use are, if given for the purpose of increasing his stipend, assessable to income tax as profits accruing to him by reason of his office under Sch. E, Income Tax Act, 1842. There was, I think, a disposition during the argument to treat Lord Loreburn's judgment as having laid down a test as to when Easter offerings of this kind would be properly assessable to income tax and when not. I doubt very much if Lord Loreburn intended to lay down any test of the kind. I doubt very much if the alleged test would have been workable, for he said:

"Had it been a gift of an exceptional kind, such as a testimonial, or a contribution for a specific purpose, as to provide for a holiday, or a subscription peculiarly due to personal qualities of the particular clergyman, it might not have been a voluntary payment for services, but a mere present."

In the present case no evidence was given to show that Seymour was possessed of anything beyond his skill in cricketing or in the discharge of his professional duties to give him a claim to the benefit of a benefit match, but that skill he was hired to exercise and display in the performance of the duties of his post, and the money he thus secured accrued to him by reason of that, not as far as appears by reason of anything else.

The judgment of Lord Robertson in Blakiston v. Cooper ^[F20] is well worth a careful perusal on this point. He said:

"When the broader facts of the case are remembered, I confess that it savours of paradox to say that this money did not accrue to the appellant by reason of his office of vicar of East Grinstead. The cause of collecting the money was to supplement the legal income of the vicar, and, while this is the ordinary history of Easter offerings, in the present instance the thing is set out in black and white in the bishop's letter and the subsequent notices."

I think that when no reason is shown for the gift to an official such as Seymour of the large and substantial prize given to him through the medium of a benefit match, it must in reason be assumed that it was given to him for the efficient and satisfactory discharge of the duties he was employed to discharge, and, if so, that the reward which accrued to him came to him from his employment. I am therefore of opinion that the judgment of the Court of Appeal was right and should be affirmed and that this appeal should be dismissed with costs.