Royal Bank of Canada v Inland Revenue Commissioners

[1972] 1 All ER 225
[1972] Ch 665

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(Judgment by: Megarry J)

Royal Bank of Canada
v. Inland Revenue Commissioners

Court:

Judge:
Megarry J

Judgment date: 15 November 1971

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Judgment by:
Megarry J

read the following judgment. Under this originating summons, various questions arise on the construction and operation of the Income Tax Act 1952, s 414. These questions do not appear to be the subject of previous authority, although they are plainly of importance to banks and the Commissioners of Inland Revenue, and, through them, to others. It is common ground that the plaintiff, the Royal Bank of Canada, carries on the business of a bank; and I shall refer to it as 'the bank'. The defendants are the Commissioners of Inland Revenue, and I shall refer to them as 'the commissioners'. The basic question is how far, if at all, the bank is bound to comply with a notice dated 11 September 1969, which I shall call 'the 1969 notice'. This was served on the bank by the commissioners, and it required the bank to give the commissioners certain information about certain transactions and persons. The bank is perfectly willing to give the information sought by the 1969 notice insofar as that notice is valid and effective, but not otherwise. The bank has, of course, especial regard to its obligations of secrecy in respect of its customers, and in these proceedings the argument that the bank is not bound to comply with any of the requirements of the notice has accordingly been put forward by the bank.

The 1969 notice reads as follows:

'With reference to the sales of gilt-edged stocks listed in the Schedule to this Notice, being sales carried out by the Royal Bank of Canada (hereinafter referred to as "the Bank") on behalf of Poinsettia Investments Ltd., a company incorporated in the Bahama Islands, the Commissioners of Inland Revenue hereby require the Bank to furnish to them, on or before the 16th day of October, 1969, at the address shown above:--

'1.

Full particulars of the manner in which the instructions for each sale were received by or on behalf of the Bank (that is, whether orally or in writing or by cable or by a combination of two or more of those methods), and the names and addresses of all persons who (a) gave such instructions, or (b) in any way represented or held themselves out to the Bank or any officer, employee or agent of the Bank as representing Poinsettia Investments Ltd. in connection with the said sales or any of them or the disposal of any of the proceeds of the sales, or (c) acted as guarantors or sureties of Poinsettia Investments Ltd. in connection with the said sales or any of them.

'2.

Full particulars of any agreement, arrangement or understanding pursuant to which in whole or in part the sales or any of them were effected and to which the Bank or any officer, employee or agent of the Bank was a party, including the names and addresses of the individuals concerned in such agreement, arrangement or understanding on behalf of each party.

'3.

The names and addresses of the persons who are known or believed by the Bank or any officer, employee or agent of the Bank to have had at the time of or since the sales or any of them control of or a beneficial interest in Poinsettia Investments Ltd.; and, if any such person is a company, similar information in respect of that company.

'4.

The name and address of the representative of Poinsettia Investments Ltd. with whom, at the interview thought to have taken place on the 28th January 1966, a representative of the Bank discussed a matter referred to in a letter dated the 25th January 1966 from the Governor of the Bank of England to the Chairman of the Bank bearing on the sales or any of them.'

It will be observed that, put broadly, questions 1 and 2 require particulars of certain transactions, with the names and addresses of those concerned, while questions 3 and 4 merely require certain names and addresses. The schedule to the notice specifies 14 sales of gilt-edged stock at prices between 91 and 105, or thereabouts, carried out at dates between 1 June 1964, and 22 June 1965, in nominal amounts ranging from £150,000 to £525,000. The heading of the schedule is:

'Sales of gilt-edged stock carried out on behalf of Poinsettia Investments Ltd. since the 5th April 1961 on a cum dividend basis during the 21 day period preceding the ex dividend date of the stock.'

The summons asks two questions, the second having been added by consent during the hearing. The first is whether under s 414 the bank is bound to furnish 'all or any and, if only some, which of the particulars' required by the 1969 notice. The second question asks that if the answer to question 1 is that the bank is not bound to furnish any of the particulars, it may be determined whether any and if so which of the particulars were particulars which the commissioners were empowered to require the bank to furnish under s 414.

Although the six days of argument before me opened up many prospects, the core of the bank's attack on the 1969 notice remained within the three heads that counsel for the bank helpfully postulated at the outset. First, he contended that the bank was relieved from the obligation of answering the first two questions by the terms of s 414(5). Second, he said that the last two questions in the 1969 notice were bad in limine as they did not relate to 'transactions', and all that s 414 required was the giving of particulars of transactions in which the addressee of the 1969 notice had been engaged. Third, he argued that if any of the questions asked by the 1969 notice were questions which the bank could not lawfully be required to answer, the whole notice was bad. If the last two questions were bad, they accordingly invalidated the first two as well. Counsel for the bank did not contend that the commissioners lacked sufficient grounds on which they could in the circumstances of this case address a valid notice under s 414 to the bank; indeed, he accepted that there were adequate grounds on which some such notice could be given to the bank. But, he said, the notice that was in fact sent was bad.

In those circumstances, I do not need to explore the complexities of s 412. Sections 412 to 414 inclusive constitute Chapter IV of Part XVIII of the Income Tax Act 1952; and the title of the chapter is 'Transactions Resulting in Transfer of Income to Persons Abroad'. The marginal note to s 412 is 'Provisions for preventing avoidance of income tax by transactions resulting in the transfer of income to persons abroad'; and s 413 contains supplementary provisions. The power of the commissioners to serve notices under s 414 is a power to require such particulars as the commissioners 'think necessary for the purposes of this Chapter'; but as there is, quite properly, no suggestion that the commissioners did not think the notice necessary for those purposes I need say no more about s 412.

Before I turn to the terms of s 414, I must say something more about the transactions in question. It is common ground that they were all of the type known by the name of 'bond-washing', a somewhat convoluted cousin of dividend-stripping. Bond-washing is a device which makes a relatively slender profit at the expense of the Revenue by means of purchasing gilt-edged stock ex dividend and promptly selling it cum dividend within one of the 21 day periods during which transactions in these stocks may be either ex dividend or cum dividend. The modus operandi, which is of a considerable degree of complexity and sophistication, was patiently described to me by counsel for the commissioners, but I do not think it necessary to burden this judgment with it. It suffices to say that at all relevant dates bond washing was a type of transaction which, although not illegal, was frowned on by reputable persons and institutions (including the bank) as involving a misuse of arrangements which, properly employed, were of utility to those who dealt in the gilt-edged market. It is clear that at the relevant time the bank did not know that the transactions with which it was concerned formed part of bond-washing transactions.

The only evidence before me consists of three affidavits filed on behalf of the bank, with their exhibits, coupled with the cross-examination of two of the three deponents. During the period of the transactions, Mr C F Stuart, the deponent who was not cross-examined, was assistant manager of the City office of the bank. The other two deponents were Mr J J Matheson, who was manager of the securities department of that branch of the bank, and Mr J F Smith who, during the time in question, was manager of the branch. The hierarchy, so far as relevant, was that Mr Matheson was under Mr Stuart, who was under Mr Smith. It was Mr Stuart who was mainly concerned with the 14 sales in question; and his affidavit resorts to the convenient device of referring by fictitious names to those concerned whose identities may or may not have to be revealed, depending on the efficacy of the 1969 notice. I shall preface such fictitious names with the word 'Fictitious'.

One important name, however, has for long been known to the commissioners, namely, Poinsettia Investments Ltd, which I shall refer to as 'Poinsettia'; indeed Poinsettia is referred to in the 1969 notice. As that notice states, Poinsettia was a company incorporated in the Bahama Islands, and the transactions in question were carried out on behalf of that company. When in October 1967 the commissioners began to make enquiries about certain 1965 transactions which ultimately were included in the 1969 notice, the officers of the bank who were concerned with those enquiries did not know that on 22 December 1966 Poinsettia had been struck off the register of companies in the Bahamas. The bank had previously been instructed by a representative of Poinsettia not to make disclosures, and so the bank at first refused to divulge that Poinsettia was concerned. However, after the officers concerned had discovered that Poinsettia was no more, the bank wrote to the commissioners in October 1968, disclosing both Poinsettia's name and the 14 transactions which later became the subject of the 1969 notice. The bank had in fact received notice in 1966 of the resolution to wind up Poinsettia, but apparently this had been placed in another file. I should make it clear that throughout the hearing before me no attack whatever has been made on the integrity or good faith of the bank or its officers.

The activities of the bank in relation to the 14 transactions were limited. The first contact between Poinsettia and the bank was in May 1964, when Mr Fictitious Coke telephoned Mr Stuart to say that Poinsettia was going to be advised on investments by Mr Fictitious Stock. At about the same time, the bank received a letter from Fictitious Doe Co, setting out the nature of the operations proposed. The letter, dated 22 May 1964, and marked for the attention of Mr Stuart, reads as follows:

'Our clients, Poinsettia Investments Limited of P.O. Box 288, Nassau, Bahamas are desirous of making purchases on the Gilt Edged market from time to time, and would like you to act on their behalf in this connection.

'The stock will be purchased by Montreal Trust Company of your City, registered in your Nominee name and delivered to you against payment and for subsequent sale upon our instructions.

'In order to facilitate these operations, our clients propose to cable their instructions to you indicating the particular stock to be accepted from Montreal Trust Company against payment and to be sold in accordance with the code words enclosed with this letter and by figures representing units of £1,000 stock.

'Perhaps you would be good enough to confirm that these arrangements are satisfactory from your point of view.'

Poinsettia also applied to the bank for £500,000 credit for short term loans, and the bank referred this by cable to its head office in Montreal, recommending acceptance on the basis of the security offered and the standing of the principals. A substantial company guaranteed a margin of £25,000, and in carrying out the transactions the bank would, of course, have in the name of its nominee the gilt-edged securities purchased with the money lent. The proposed transactions were described as 'staggering new issues' and 'taking short term positions in gilt-edged market in London'. The head office of the bank agreed, and operations began soon afterwards. All that the bank had to do was to take delivery of stock already purchased and standing in the name of its nominee, pay for it, and then promptly sell it 'at best', that is, cum dividend, thus recouping itself the money advanced. This process in fact produced a modest profit for Poinsettia on each occasion. I shall not go further into the details of the transactions as I hope that I have said enough to make intelligible the questions I have to resolve.

I must now turn to s 414. The Income Tax Act 1952 is, of course, a consolidating Act, and so is presumed not to have changed the effect of the provisions that it consolidates. I shall therefore make some reference to the sources of the various subsections. I take the section in the amended form in which it stood when the 1969 notice was served. By sub-s (1):

'The Commissioners of Inland Revenue or, for the purpose of charging tax at the standard rate, an inspector may by notice in writing require any person to furnish them within such time as they may direct (not being less than twenty-eight days) with such particulars as they think necessary for the purposes of this Chapter.'

This subsection has been in the forefront of the argument. It is all that remains of what was originally para 6 of Sch 2 to the Finance Act 1936, a schedule which was appended to s 18 of that Act, the precursor of s 412 of the Income Tax Act 1952. Para 6 had within it a defence of reasonable excuse, and provisions for a penalty not exceeding £50; and these later became, in a generalised form, the Finance Act 1960, ss 63(2) and 46(1) respectively. The original s 414(2) of the Income Tax Act 1952, drawn from the Finance Act 1936, Sch 2, para 7, authorised estimated assessments, and was later replaced by the general provisions of the Income Tax Management Act 1964, s 5(1), (2): I do not think I need mention it further.

Section 414(3) of the Income Tax Act 1952, on the other hand, is an important provision. It runs as follows:

'The particulars which a person must furnish under this section, if he is required by a notice from the Commissioners of Inland Revenue or, for the purpose of charging tax at the standard rate, an inspector so to do, include particulars--(a) as to transactions with respect to which he is or was acting on behalf of others; and (b) as to transactions which in the opinion of the Commissioners of Inland Revenue or, for the purpose of charging tax at the standard rate, an inspector it is proper that they should investigate for the purposes of this Chapter notwithstanding that, in the opinion of the person to whom the notice is given, no liability to tax arises under this Chapter; and (c) as to whether the person to whom the notice is given has taken or is taking any, and if so what, part in any, and if so what, transactions of a description specified in the notice.'

This subsection had no counterpart in the Finance Act 1936, but was brought in by the Finance Act 1939, s 17(1).

There is then s 414(4) of the Income Tax Act 1952. This has not been directly in issue, though it has been relied upon as throwing light on other provisions. It is as follows:

'Notwithstanding anything in subsection (3) of this section, a solicitor shall not be deemed for the purposes of paragraph (c) thereof to have taken part in a transaction by reason only that he has given professional advice to a client in connection with that transaction, and shall not, in relation to anything done by him on behalf of a client, be compellable under this section, except with the consent of his client, to do more than state that he is or was acting on behalf of a client, and give the name and address of his client and also--(a) in the case of anything done by the solicitor in connection with the transfer of any asset by or to an individual ordinarily resident in the United Kingdom to or by any such body corporate as is hereinafter mentioned, or in connection with any associated operation in relation to any such transfer, the names and addresses of the transferor and the transferee or of the persons concerned in the associated operations, as the case may be; (b) in the case of anything done by the solicitor in connection with the formation or management of any such body corporate as is hereinafter mentioned, the name and address of the body corporate; (c) in the case of anything done by the solicitor in connection with the creation, or with the execution of the trusts, of any settlement by virtue or in consequence whereof income becomes payable to a person resident or domiciled out of the United Kingdom, the names and addresses of the settlor and of that person. [The subsection concludes with the words:] The bodies corporate mentioned in the preceding provisions of this section are bodies corporate resident or incorporated outside the United Kingdom which are, or, if resident in the United Kingdom would be, close companies, but not trading companies, within the meaning of Part IV of the Finance Act, 1965.'

This subsection had its origin in the Finance Act 1939, s 17(2).

Finally, there is s 414(5) of the Income Tax Act 1952; and on this the bank has placed much reliance. It provides as follows:

'Nothing in this section shall impose on any bank the obligation to furnish any particulars of any ordinary banking transactions between the bank and a customer carried out in the ordinary course of banking business, unless the bank has acted or is acting on behalf of the customer in connection with the formation or management of any such body corporate as is mentioned in paragraph (b) of subsection (4) of this section or in connection with the creation, or with the execution of the trusts, of any such settlement as is mentioned in paragraph (c) thereof.'

This too had its origin in the Finance Act 1939, as s 17(3) of that Act.

I begin with the phrase 'such particulars as they think necessary for the purposes of' the tax avoidance provisions of s 18 of the Finance Act 1936, or Chapter IV of Part XVIII of the Income Tax Act 1952. This seems to me an expression that is wide in its meaning, both in itself and in its context. Counsel for the bank contended on a number of grounds that its scope was somewhat restricted. He urged that the word 'particulars' posed the question, 'Particulars of what?', and that this question must then receive the answer of the matters dealt with in the relevant tax avoidance provisions. These provisions are drafted in terms of 'transfers of assets' and 'associated operations', and so the particulars that could be required were particulars of those transfers and operations but of nothing else, even though it formed part of some prelude or sequel. The particulars were limited to particulars of such transactions as the addressee of the notice had been engaged in, and did not extend to other transactions, nor to any other information, such as the ownership of shares apart from any transaction: the power was a power to require particulars of dynamics, and did not extend to particulars of statics. Counsel for the bank also relied on s 414(3). This provides that the particulars which must be furnished under sub-s (1) 'include particulars' as to the two types of 'transactions' set out in paras (a) and (b), and as to whether the person to whom the notice was addressed took or was taking part in 'transactions' of a description specified in the notice: see para (c). Counsel for the bank accepted, of course, that the word used is 'include' and not 'means', and that 'include' is very generally used to enlarge the meaning of a phrase or avoid doubts, or both; but he contended that the word 'include' was used here in the sense of 'mean and include', and he relied for support on the well-known passage in Lord Watson's judgment in Dilworth v Stamps Comr ([1899] AC 99 at 105).

I do not think that these contentions are sound. First, the statutory phrase is 'such particulars as they think necessary' for the purposes specified. Parliament did not think it requisite to confine the word 'particulars' in terms by stating of what the particulars must be. The word 'particulars' is quite capable of standing on its own in the sense of items or details or points, and the scope of the particulars is in terms limited by the words 'as they think necessary' for the specified purpose. This express delimitation seems to me at least in some degree inconsistent with the existence of some further implied limitation. If the commissioners think it necessary to obtain certain particulars for the specified purposes, then I think Parliament intended them to be able to obtain that information without being met with the answer 'The only particulars you can have are particulars of transfers of assets, associated operations and other transactions, and not particulars of anything else, even though you think them necessary for the specified purposes'. I find it difficult to see why Parliament, in conferring powers to obtain information to prevent certain forms of avoidance of income tax, and in terms limiting those powers only by reference to what the commissioners think necessary for the purpose, should nevertheless intend, by some covert and implied limitation, to prevent the commissioners from obtaining part of the information that they think necessary. Furthermore (although this was not relied on in argument), it may be observed that where Parliament wishes to confine its use of the word 'particulars' to particulars of some specified matter, Parliament seems quite capable of stating this in terms: see s 414(5), where the phrase is 'particulars of any ordinary banking transactions', and so on.

As for sub-s (3), both its language and its history seem to me to point against the word 'include' meaning 'include and mean'. Initially, in the Act of 1936, there was no ancestor of sub-s (3): para 6 of Sch 2 used the word 'particulars' without any explanation. The precursor of sub-s (3) was s 17(1) of the Finance Act 1939, and this was drafted in the form of 'It is hereby declared that the particulars which a person must furnish ... include particulars--... '. In the process of consolidation, the words 'It is hereby declared' have disappeared, though this change will be presumed not to have affected the construction. Furthermore, the first category of particulars which under sub-s (3) a person must furnish is particulars '(a) as to transactions with respect to which he is or was acting on behalf of others'. If sub-s (3) were truly defining, and not extending or merely removing doubt, it is remarkable that the primary category does not consist of transactions in which the person concerned is acting on his own behalf and not on behalf of others. Indeed, it is not clear to me under which head at least some cases of a person acting on his own behalf could be brought. Counsel for the bank relied on sub-s (3)(c), but this seems to me to be an oblique and imperfect instrument for his purpose. Furthermore, sub-s (3)(b), requiring particulars to be given 'notwithstanding that, in the opinion of the person to whom the notice is given, no liability to tax arises under this Chapter', seems to me to be essentially the type of provision which is inserted for the removal of doubt and the stopping up of possible loopholes, rather than for the purpose of primary definition.

From what I have said it follows that in my judgment s 414(1) of the Income Tax Act 1952 is on its true construction wide enough in its terms to authorise all four heads of the 1969 notice. Once it is accepted (as it has been) that the commissioners could and did think the particulars specified in the notice 'necessary' for the specified purposes, then all the information sought by the 1969 notice seems to me to be within the authority given by the subsection. In particular, I can see nothing in the language of the subsection, construed in its context, to draw any distinction between the particulars of the transactions sought under questions 1 and 2 of the notice and the names and addresses sought under questions 3 and 4, as well as under questions 1 and 2. Furthermore, I observe that sub-s (4) provides that a solicitor is not, in relation to anything done by him on behalf of a client, to be 'compellable under this section' (except with the client's consent) to do 'more than state that he is or was acting on behalf of a client, and give the name and address of his client'; and para (a), (b) and (c) make further provision for names and addresses. This, it will be seen, is cast in the form not of imposing a positive obligation to give the names and addresses but of an exemption from the obligations of the section to give the particulars which the commissioners think necessary, which exemption is not to extend to the names and addresses mentioned. In other words, the assumption of sub-s (4) is that names and addresses are or may be included in the particulars which under the main provisions of the section the commissioners may require to be given, and sub-s (4) is doing no more than preventing the exemption which it confers from interfering with that obligation to give names and addresses.

Accordingly, in my judgment questions 3 and 4 are authorised by s 414. At the same time I cannot refrain from observing on the width of question 3. This requires the names and addresses of persons known or believed 'by the Bank or any officer, employee or agent of the Bank' to have had at the time of the sales or subsequently 'control of or a beneficial interest in' Poinsettia. The question is framed in terms which relate to the bank generally, and not merely the branch in question, and I do not know what is the total number of the officers, employees and agents of the bank. But it is plain that a wholehearted attempt to comply with the requirements of this question might well involve the bank in a very considerable burden of enquiry among its staff. I need not pursue this point since counsel for the bank founded no argument on it; it was counsel for the commissioners who had the burden of meeting somewhat pointed comment on the matter from the bench. I shall say no more than that it seems to me that the wider the powers that Parliament confides to the commissioners, the more important it is that the commissioners should not exercise those powers in an unduly burdensome or oppressive way. A question asked in September 1969, which requires the bank to ascertain whether any of its officers, employees or agents, wherever they may be in the world, knows or believes that any person had on 1 June 1964 or subsequently any beneficial interest in Poinsettia is of an amplitude which, if repeated, may hereafter attract to itself robust judicial criticism.

Counsel for the commissioners contended that the words 'officer, employee or agent' in the 1969 notice meant merely any officer, employee or agent who properly appeared to the bank to be potentially able to give the information sought; but no such limiting words appear in the 1969 notice, and counsel for the commissioners had no real explanation why they were not, if that was what the question really meant. The recipient of such a notice ought not to be driven to his lawyer to find out (if, indeed, his lawyer can tell him) precisely what words of restriction are to be implied, when the commissioners could so easily have inserted those words if they had in truth been intended. I shall only add that for my part I should be slow to read s 414(1) of the Income Tax Act 1952, or any similar section supported by penal sanctions, as if the phrase 'such particulars as they think necessary for the purpose of this Chapter' were followed by words such as 'however burdensome or oppressive this may be'. Nor do I think that it suffices to point to the provisions as to 'reasonable excuse' in the Finance Act 1960, s 63(2), as a cure for any excessive demands made by a notice such as that before me. At the same time, let me say that I am not suggesting that in this case there was any deliberate unreasonableness or oppression; I am sounding a warning for the future.

I turn, then, to the contention that s 414(5) of the Income Tax Act 1952 relieves the bank from any obligation of answering questions 1 and 2. No point of any substance has arisen on the concluding words of the subsection. The issue has been that of the ambit of the words which prevent the section from imposing on the bank the obligation 'to furnish any particulars of any ordinary banking transactions between the bank and a customer carried out in the ordinary course of banking business'. Before I turn to the contentions put before me, let me say at the outset that this seems to me to be a strictly limited provision. The limitations may be ranged under four heads. First, the protection is given not to particulars at large but only to particulars of certain transactions: if the particulars sought are particulars not of any transaction but of the name and address of some person, unrelated to anything that could fairly be called a transaction, then they are outside the protection. Second, there is a limit as to the type of transaction: no transaction will suffice unless it falls within the expression 'ordinary banking transactions'. Third, there is a limit by reference to the parties: only transactions 'between the bank and a customer' qualify. Fourth, there is a limitation as to the circumstances in which the transaction is carried out, namely, that it was 'carried out in the ordinary course of banking business'. This language seems to me to be carefully guarded, having regard to the use of the words 'ordinary' and 'banking' twice over, and the cumulative limiting effect of all the phrases used. For the purposes of analysis, I may add, it is usually convenient to look separately at the constituent parts of a compound expression; but, of course, what must be construed is the expression read as a whole.

As I have mentioned, the subsection first came into the legislation as s 17(3) of the Finance Act 1939. As it stood then, it provided that 'Nothing in this section' was to impose the obligation of disclosure on the bank; and this is perhaps a little odd because at that time th general obligation of disclosure was imposed not by s 17 of that Act but by para 6 of Sch 2 to the Finance Act 1936. What s 17 did, inter alia, was to declare, by sub-s (1), that the particulars that must be furnished under para 6 of Sch 2 to the Finance Act 1936 included particulars as to transactions with respect to which the person on whom the notice was served was acting on behalf of others. In other words, reading the section literally, all that the bank was protected against was such extensions of the obligation under the Finance Act 1936, as were made by s 17 of the Finance Act 1939. However, when the statutes came to be consolidated in the Income Tax Act 1952, the opening words of the bank provision remained 'Nothing in this section', but there was included in the section not only what had been in s 17 of the Finance Act 1939, but also the basic obligation that para 6 of Sch 2 to the Finance Act 1936 had created. As a matter of language, the words of protection remained unchanged, but the ambit of the obligation to which those words related was enlarged. The point is curious, but I doubt whether it has any real significance; and certainly it does not dispense me from considering the meaning of the words of exemption in question.

Counsel for the commissioners laboured for some while to persuade me that it was a matter of law and of judicial notice whether any particular transaction fell within the words of exemption; but I remained unconvinced. No doubt the meaning of the statutory language is a question of law. No doubt the bounds of judicial notice are at times surprisingly wide. But the word 'ordinary', if nothing else, seems to me to stand in the path of counsel for the commissioners. I cannot see how questions as to what transactions are 'ordinary banking transactions' and which of them are 'carried out in the ordinary course of banking business' can possibly be matters of such notoriety that the courts will take judicial notice of them. If banking transactions and banking business, why not the manifold processes of manufacture or science, for example? Is the court to be treated as taking judicial notice of all the processes of science or manufacture, and also of which of these are 'ordinary'? Counsel for the commissioners relied on the camel case,McQuaker v Goddard, and especially on some language of Clauson LJ ([1940] 1 All ER at 478, [1940] 1 KB at 700); but I do not think that this supported him. It is one thing to say that the courts will take judicial notice of the ordinary course of nature, though evidence is admissible to aid the judge in the matter despite the complete knowledge of it that he is supposed to have; it is quite another to say that the court will take judicial notice of the ordinary course of all the artifices of man (many of which are extremely complex and obscure), whether they be banking, manufacture, scientific endeavour or otherwise. I may perhaps be permitted to observe that when I asked counsel for the commissioners for an explanation of the process of bond washing, his answer took little less than an hour. I think counsel for the bank was right when he said that it was a question of mixed law and fact whether or not the matters in question before me fall within the statutory phrase. The question before Salmon J in Woods v Martins Bank Ltd ([1958] 3 All ER 166 at 172, [1959] 1 QB 55 at 70) was quite different, but I respectfully agree with his statement that 'the limits of a banker's business cannot be laid down as a matter of law'.

I was naturally referred toUnited Dominions Trust Ltd v Kirkwood. In that case the main question was whether the plaintiffs, the well-known finance house that I shall call 'UDT', were excluded from the statutory definition of moneylenders by virtue of an exception for 'any person bona fide carrying on the business of banking'. The Court of Appeal was unanimous that it had not been shown that UDT's business had the usual characteristics of banking; but by a majority it was held that is reputation for carrying on the business of banking sufficed. The court described the usual characteristics of banking at the time, and it is plain that the transactions before me in this case do not fall within this description. However, the question in that case was entirely different from the question in the present case. Here, it is common ground that the plaintiff is a bank; the issue is not the status of the plaintiff but the nature of particular transactions. There, the whole issue was the status of the plaintiff and not the nature of individual transaction. To define the usual characteristics of banking today helps, of course, where the questioned transactions fall within those limits; but I do not think that there is any suggestion in this case that transactions outside those limits cannot be usual banking transactions. A statement of the essentials of a business does not seem to me, without more, to be exhaustive of all that is ordinary in that business. Accordingly, while of course I pay due attention to what was said in the UDT case, I do not think it solves the problem before me.

Questions as to the ambit of the term 'ordinary banking transactions' are not made easier by the circumstance that at least on some views there are many different types of bank. According to one classification [See J M Holden, Banker and Customer, 1970, Vol 1, pp 3-8], the two main groups are savings banks, such as the various trustee savings banks and the Post Office Savings Bank (now the National Savings Bank), and commercial banks. The latter may be classified as deposit banks (which include those commercial banks which are best known to the public as 'banks'), merchant banks, and industrial bankers. A transaction that to one type of bank may be ordinary may to another type be exceptional. Whether all these types of bank fall within what the law recognises as being a bank may indeed be a difficult question to resolve; the traditional view has been, and may well still be, that the payment of cheques drawn on the bank is of the essence of being a bank: see, for example the UDT case. However, as I have mentioned, it is accepted that the plaintiff in the present case is a bank, and so falls within the words 'any bank' in sub-s (5). I therefore do not think that I need attempt to consider these difficulties except insofar as they throw any light on the particular transactions here in question in relation to the statute. I further bear in mind that this bank is a foreign bank with its headquarters in Canada, and also that the branch in question is in the heart of the City of London.

There is one other matter that I should mention in relation to sub-s (5). Many types of confidential relationship are, of course, generally recognised today. The powers given to the commissioners by s 414 appear to enable them to invade all such relationships save insofar as the section provides some protection. The only forms of protection so provided are in respect of solicitors, by sub-s (4), and in respect of banks, by sub-s (5). When one reads those subsections it becomes plain that Parliament has not only refrained from protecting every confidential relationship but also has not made the statutory protection coterminous with the cloak of confidentiality. A bank's duty of secrecy to its customers is not, as I understand it, confined to ordinary banking transactions, but would extend to any banking transaction which it effected for a customer, ordinary or extraordinary. Accordingly, in determining the ambit of sub-s (5) one cannot obtain much, if any, assistance from a consideration of the ambit of the banker's duty of secrecy, for the bounds of the duty and of the statutory protection are plainly not coincident.

It will be seen that there are thus a number of considerations which provide me with little direct assistance, though in differing degrees they make their contributions to the background of what I have to decide. I must now turn to consider the evidence that has been put before me. As I have already indicated, the only evidence consisted of the affidavits of three employees of the bank, Mr Smith, Mr Matheson and Mr Stuart, all filed on behalf of the bank, together with the cross-examination of the first two of these deponents, which occupied about a day in all. The commissioners adduced no evidence, and there was no independent evidence before me to assist me on the scope of banking, or on what was ordinary or extraordinary. I have to do the best I can on the evidence in fact before me. Counsel for the commissioners asserted and counsel for the bank accepted that the bank bore the burden of establishing that the case fell within sub-s (5), and so I must examine the evidence, particularly (though by no means exclusively) in relation to the statutory phrase 'ordinary banking transactions'.

Mr Smith's affidavit is mainly concerned with explaining the questions that have arisen, and describing various factual occurrences. But para 8 of his affidavit reads as follows:

'The receipt from customers of the Bank of instructions to take delivery of stock and to sell it is an event of very frequent occurrence. The Bank has maintained a Securities Department for very many years and one of the services which the Bank in common with practically every other bank known to me in the City of London offers to its customers is that of taking delivery of securities against payment and of giving instructions to brokers. In my considered opinion the transactions intended to be described in Mr. Stuart's said Affidavit disregarding for the moment questions of bond-washing are common form transactions which the vast majority of bankers would carry out in the ordinary course of the day's work without question. I should perhaps add that it is not uncommon for gilt edged securities to be dealt in in such substantial amounts as are mentioned in the [1969 notice] even though the person or company buying has not the resources to make such purchases without financial assistance. The gilt edged market would lose a great deal of its efficiency if it were not so.'

Naturally much attention was given to the third sentence of this paragraph which, Mr Smith said in his oral evidence, was still his view today. He made, however, one qualification, namely, that in expressing that view he was, in addition to disregarding bond-washing, also disregarding an instruction given by Poinsettia that all sales had to be effected through a specified jobber. Under cross-examination he could not recollect any cases in which instructions such as these had been given. (I may here interpose that the jobber appears to play an important part in bond-washing, though it has not been suggested that this ought to have made the bank suspect bond-washing.) The fact that the customer was resident outside the United Kingdom also made the transaction in some degree less usual; but what made the real difference was the specification of a particular jobber. It may also be observed that the words in Mr Smith's affidavit are 'common form transactions which the vast majority of bankers would carry out in the ordinary course of the day's work without question', whereas the question before me is whether they are 'ordinary banking transactions'. Not every common form transaction by a bank is an ordinary banking transaction. Thus it is said in 2 Halsbury's Laws (3rd Edn) p 151, note (g):

'... Numerous other functions are undertaken at the present day by banks, such as the payment of domiciled bills, custody of valuables, discounting bills, executor and trustee business or acting in relation to stock exchange transactions, and banks have functions under certain financial legislation, e.g. by delegation under the exchange Control Act, 1947 ... , or as authorised dealers under that Act and subordinate legislation; see title MONEY. These functions are not strictly banking business ... '

Counsel for the commissioners strenuously sought to demonstrate that Mr Smith, a Canadian banker, had had too little experience of English banking to be a reliable guide in English banking matters; but I do not think he succeeded.

Mr Matheson's affidavit was short. The most material part of it was para 5. This states:

'The sale transactions in themselves were not exceptional for my Department to handle. It is one of the prime functions of this Department to deal on the Stock Exchange through brokers on behalf of the Bank's customers. Instructions for dealing are received in a wide variety of ways by post telephone or personal call and sometimes are received direct from customers and sometimes from their agents or other branches of the Bank. Purely by way of illustration my Department received instructions to sell securities on behalf of customers on 35 occasions during the last eighteen working days before this Affidavit was sworn. Equally it is a common experience for my Department to receive instructions on behalf of a customer to accept securities from a named person or institution against payment. Such instructions were received on 68 occasions during the last eighteen working days.'

Cross-examined on this paragraph, however, Mr Matheson agreed that the transaction here in question, whereby the bank was to receive the stock, pay for it and sell it, all at a blow (as distinct from instructions merely to sell, or instructions merely to accept securities and pay for them), were rather unusual and not an everyday occurrence. This, it seems to me, does much to negate the idea of 'ordinary banking transactions'.

On the standards appropriate to civil cases, the result of applying the sum total of the evidence, the judicial notice that I may properly ascribe to myself, and the law as I understand it, is to leave me far from satisfied that these transactions were 'ordinary banking transactions'. They were transactions, and they were carried out by a bank; but I certainly do not accept that every transaction lawfully carried out by a bank is a 'banking transaction'. Furthermore, even if they were 'banking transactions',

I cannot regard them as being 'ordinary' banking transactions. I do not think it is for counsel for the commissioners to establish that they were 'unusual' or 'extraordinary' or whatever is the appropriate antithesis to 'ordinary': it is for counsel for the bank to show that they were 'ordinary'. If there is any no-man's-land between 'ordinary' on the one hand and 'extraordinary' or 'unusual' on the other hand, a transaction in that no-man's-land would thus not avail counsel for the bank: nothing will suffice him save a sufficient demonstration of ordinariness. In my judgment, there has been no such demonstration.

In the result, the answer to question 1 of the summons is that the plaintiff bank is bound to furnish all of the particulars required by the 1969 notice. Question 2 accordingly does not arise. Nor does there arise the question whether, if some of the particulars required by the notice are unauthorised by the statute and others are authorised, the presence of the unauthorised particulars invalidates the entire notice. However, the point has been fully argued, and it may be helpful if I say something about it. If one adopts the classification that I ventured in Brunner v Greeslade ([1970] 3 All ER 833 at 839, [1971] Ch 993 at 1003), what I say now will be neither of the ratio nor merely obiter dicta, but what for want of a better term may be called judicial dicta. Counsel for the bank's contention that the answer to the question was Yes was founded on Dyson v A-G, where the Court of Appeal held that the invalidity of a single question in a notice requiring certain returns to be made under the Finance (1909-10) Act 1910 invalidated the entire notice. In that case, six forms were served on the plaintiff, relating to six properties. The unauthorised question was worded so that it had to be answered only 'if the person making the return is also the occupier'; and for five of the properties this was not the case. In those five cases the presence of the unauthorised question did not invalidate the notice. It was only in the sixth case, where the owner was also the occupier, that the unauthorised question was held to invalidate the entire notice. The contention before me was that this sixth case applied in its essentials to the present case.

It seems to me that the respective statutory provisions are somewhat different. What is before me is a statute authorising the commissioners, 'by notice in writing', to require a person to furnish them, within a stated time, 'with such particulars as they think necessary', and so on; and the notice before me follows this language. The response to the statutory requirement is thus to be the furnishing of the particulars within the time. There is no form to be filled up, no requirement that all the particulars are to be supplied simultaneously, and no other formal requirement. The only question is whether the person concerned has or has not furnished the particulars within the time stated. The penalty is imposed by the Finance Act 1960, s 46(1), if the person 'fails to comply with the notice'.

That may be contrasted with the Finance (1909-10) Act 1910, s 26(2). The power was for the commissioners to require a person, 'by notice from the Commissioners', to 'furnish to the Commissioners a return containing such particulars as the Commissioners may require' as to the matters stated; and there was a penalty for failure 'to make such a return' within the time specified. The notice sent by the commissioners required a return to be made on the form accompanying the notice; and copies of what was called 'Form 4' were enclosed. This form contained a declaration that the particulars were 'in every respect fully and truly stated to the best of my judgment and belief', and referred to the penalty for 'failure to make a due return'. In those circumstances it is not surprising that in the Dyson case ([1912] 1 Ch at 166) Sir Herbert Cozens-Hardy MR said:

'The requirement is for a return containing an answer to all the particulars, including (i), and that is not authorized. The penalty is imposed for failure to make "such a return" as the Commissioners require. The return is one and indivisible. No penalty could be exacted for omitting to make an unauthorized return. I decline to read the notice as requiring a return of the particulars so far and so far only as they can lawfully be required by the Commissioners.'

Fletcher Moulton LJ said ([1912] 1 Ch at 170):

'But seeing that the demand is for the whole of the information and that the declaration which the plaintiff has to sign relates to the whole, and moreover contains words which are intended to refer expressly to this part of the notice, the presence of this unauthorized inquiry renders the whole demand bad. It certainly renders untrue the statement that there is a penalty for not making the return demanded.'

Farwell LJ said ([1912] 1 Ch at 171, 172):

'The duty imposed by the Act on owners is to make such a return as is required by the Commissioners under a penalty of50l. The duty and the penalty for disobedience are both one and indivisible and are co-extensive, and if the Commissioners frame their requisition with so little care as to exceed their powers, the whole demand and not merely the ultra vires portion becomes unenforceable. [He added:] It is impossible to split the requisition into good and bad, and hold that the demand may be good so far as the requisitions are good; the Act speaks of a return, not of part of a return, and gives a penalty for not making "such return" ... '

The Dyson case is thus authority for the proposition that the inclusion of an unauthorised demand in a return that is one and indivisible and has been demanded under statutory powers invalidates the entire requirement for making the return. The indivisible nature of the return is at the heart of all three judgments on this point. In the present case, there is no demand for the making of an indivisible return; instead, there is a requirement for the furnishing of 'particulars', and this seems to me to be distributive rather than unitary in its import. If the commissioners seek particulars of more than they are entitled to, I do not in principle see why their requirement should not be bad merely as to the excess. It may well be that if the excess is so entwined with the valid as to be separable from it only with difficulty, then the whole of the requirement will be bad: the subject ought not to be required to perform delicate feats of surgery on what is in substance a single requirement. But where, as here, the requirements are contained in a notice divided into numbered paragraphs dealing with different matters, and the attack is made on one or more of such paragraphs, I do not see why the invalidity of those paragraphs, if established, should infect the other paragraphs, or why the notice should not be good as to the good paragraphs and bad as to the bad. Accordingly, had it been necessary to decide the point, I should have held that even if questions 3 and 4 in the notice were invalid, this would not invalidate questions 1 and 2. But as it is, the only answer that I make to the originating summons is, as I have already indicated, to say "All" to question 1.

Ruling accordingly.