972

THE COLLIERY GUARDIAN.

May 9, 1913.

LAW INTELLIGENCE.

SUPREME COURT OF JUDICATURE.
COURT OF APPEAL—May 7.

Before the Master of the Rolls, Lord Justice Buckley
and Lord Justice Kennedy.

Mineral Rights Duty.

Duke of Beaufort y. Commissioners of Inland Revenue,
and Marquess of Anglesey v. the Same.—These were
appeals from decisions of Lord Justice Hamilton, when
sitting as a judge of first instance, and Mr. Justice Horridge
respectively.

In the Duke of Beaufort’s case Mr. Justice Hamilton held
(1) that in assessing the Duke of Beaufort to mineral rights
duty for the year 1909-10 in respect of mineral rights
included in a lease dated May 25, 1908, and made between
the duke and the Copper Pit Collieries Limited, a sum
received from the colliery company on October 2, 1908, was
rent in respect of the right to work minerals, notwith-
standing that represented arrears of rent from the previous
year; (2) that the duty was payable not on the gross amount
of the rent reserved, but only on that amount less income-
tax deducted by the colliery company; but (3) that no
deductions could be claimed in respect of super-tax. The
Commissioners appealed, and there was a cross-appeal by
the Duke of Beaufort. When the matter came before the
Court of Appeal some months ago, it was found that the
facts of the Duke of Beaufort’s case did not successfully
raise the point whether the mineral rights duty ought to
be assessed in respect of the whole rent reserved by the
landlord, or only in respect of that amount less landlord’s
property tax, because in that case the landlord’s property
tax had not been deducted during the working year in
respect of which the tax was payable. The whole appeal
was therefore allowed to stand over until the Marquis of
Anglesey’s case could be begun, in which the facts properly
raised the point. The two appeals now came on together.
The Commissioners abandoned their appeal on the second
point in the Duke of Beaufort’s case, but the questions
raised by the cross-appeal still remained.

Their lordships delivered judgment dismissing the
Crown’s appeal in Lord Anglesey’s case and dismissing the
Duke of Beaufort’s cross appeal on both points.

Lord Justice Buckley, who delivered the judgment of the
Court, said that he took first the question raised by the
appeal of the Commissioners of Inland Revenue in Lord
Anglesey’s case—viz., the question as to the meaning of
“rent paid” in section 20 (2) (a) of the Finance Act, 1910.
If there were to be found in the Income Tax Acts any
provision rendering the lessor debtor to the Crown, he
would be of opinion that the Crown was right. It was
because there was no such provision that he thought the
Crown was wrong. Under section 20 (1) of the Finance
Act, 1910, mineral rights duty was charged on the rental
value, and by section 20 (2) (a) the rental value was to be
taken to be the amount of rent paid. If there be a lease
at .£150 a year and the tenant pay property tax, and
deducted the amount from his rent, was the rent paid £150
or was it the differential sum P Quite shortly stated, the
result of the Act, in his lordship’s opinion, was that there
was a contractual obligation to pay £150 a year, but there
intervened a statute which created in the tenant a Crown
debt, and provided that he should be entitled to pay
not £150 a year, but the difference between the
£150 and the amount of that Crown debt. That
differential sum was the amount of rent paid.
In the case of mines of coal, included as they were within
Schedule A, No. III., Rule 2 of the Income Tax Act, 1842,
the duty was chargeable on the persons carrying on the
concern, and such persons were entitled to make deduction
of the duty so charged before making payment to the
persons entitled to the profits. The person so paying the
property tax who omitted to deduct it from his next
payment of rent had no right to deduct it subsequently.
Thus plainly it was not a sum which he could say he paid
for and on behalf of his lessor. He had paid his own Crown
debt, and by virtue of the statute he was entitled to deduct
the amount of that debt from the contractual rent which
otherwise he would have had to pay. It resulted that the
rent paid was the difference. Section 163 of the Act of 1842
spoke of such a person as the lessor as a person charged or
chargeable to duty by way of deduction, and expressed that
he should in certain cases be entitled to be “ repaid the
amount of all deductions.” The person spoken of as charge-
able by way of deduction was a person who was not
chargeable to the Revenue by way of obligation. He was
a person who, by way of deduction, was made to bear the
debt; but he never had to pay the debt, and the word
“repaid” meant no more than reimbursed. It resulted
that, in his lordship’s judgment, the rent paid in this case
was not the contractual rent, but the difference between
the contractual rent or so much of it as the tenant affected
to pay and the property tax which the tenant had deducted.
It followed that the appeal of the Crown in Lord Anglesey’s
case must be dismissed.

As to the question whether the snper-tax was to be
deducted in order to arrive at the sum chargeable under
section 20, super-tax was an additional income-tax charge-
able under section 68 of the Finance Act, 1910. It was

payable, not by the tenant, but by the recipient of the income.
The amount upon which super-tax was to be charged was to
be determined by ascertaining what was the income of the
lessor from all sources. His income from this source—
namely, the mineral rights—was (upon the footing of that
which had preceded) not the total amount of the rent, but
the difference between the contractual rent and the property
tax in respect of the rent. In the case with which they had
to do that amount was £356 5s, That sum, with other
income of the lessor, would be aggregated, and upon the
excess of the aggregate over £3,000 the additional duty of
super-tax was charged. There was no ground in this case
for making any deduction from the £356 5s. of the amount
of the super-tax.

Lastly, there was the question of the arrears. Before
dealing with this case, his lordship said he would assume a
case in which the lease was granted after the Act came into
force, and in which the tenant in the first working year
paid only half his rent. The rental value for the relevant
financial year would then be the amount (being one-half) of
the rent paid in that first working year. Suppose that
then the tenant in the second working year paid the half-
year’s arrear for the previous year and the whole of the
amount for the current year. Upon the words of section 20
(2) (a) it seemed to be beyond dispute that the rental value
chargeable in the second financial year would be the rent-
and-a-half paid by the lessee in the second working year.
In other words, all rent paid would from time to time become
assessable to duty, whether it were for current rent or
for arrears of rent, but duty did not become payable before
the rent was in fact paid. If this were true as regards
arrears after the commencement of the Act, there was in
the statute no variation of language addressed to the case
of arrears in respect of working years before the commence-
ment of the Act. So that upon the literal construction of
the statute it seemed to follow that arrears before the
commencement of the Act became chargeable to duty.
The fact was that at the commencement of the Act the
lessor enjoyed a book-debt or right to payment of a sum of
money, and also enjoyed certain minerals which were in the
soil and which would thereafter produce rent. There was no
reason why the statute should not, if its language be apt for
the purpose, charge as well the former as the latter of these.
These arrears of rent were, in fact, paid at a date when,
under section 20 (2) (a), they were to be taken into account
in ascertaining the rental value. Upon these grounds,
therefore, he had arrived at the conclusion that the con-
tention of the Crown as to the arrears is right. It was
further argued that the result of this view was that the
working owner dealt with by section 20 (2) (b) was in a
better position than the demising owner under section 20
(2) (a) for that the former could never have any arrears of
rent due from himself and that he was simply chargeable
upon the rental value as from the commencement of the
Act. This was true, but furnished no ground for construing
section 20 (2) (a) otherwise than according to the plain
meaning of the words. Subsection (b) uses the word
“ received,” and this lent some additional force to the
argument as to the words “ rent paid ” in (a) as showing
that which measured the rental value was the sum which in
the working year was received by the owner of the mining
rights. The language of the statute was, his lordship
thought, such as to bring in for the purpose of calculating
rental value the rent paid by the lessee, whether due for a
period before or after the commencement of the Act. The
result was that the cross-appeal in the Duke of Beaufort’s
case failed and must be dismissed.

HIGH COURT OF JUSTICE.

CHANCERY DIVISION.—April 23.

Before Mr. Justice Joyce.

Compulsory Working.

Hunloke y. Spooner.—This was an action brought by
Capt. Philip Hunloke, of Bucknell Manor, Bicester, against
Mr. William Spooner, as lessee of the Walton Colliery,
Chesterfield, for alleged arrears of minimum rent and
breaches of covenants contained in a lease to him of part of
the Piper seam of coal in the parish of Walton.

In giving judgment, his lordship said the Piper coal was
undoubtedly an inferior seam, which consisted of several
strata, with one or two strata of dirt interspersed, and the
royalty payable by the lessee under the lease was only £25.
In July 1911, the defendant having arranged or being
about to arrange for the termination of adjoining royalties
held by him, ceased to work under his lease with
the plaintiff, and he said he did so irrespective of what the
consequences might be. He abandoned the working.
Prima facie, on the terms of the lease, there was a certain
amount still due to the plaintiff for minimum or dead rent
until the whole of the coal demised had been worked out or
paid for. The defence raised several objections to this.
One was that the coal, or a great part of it, had been
worked out before the lease. But the coal demised had not
been worked out. Another objection was that for a long
time it had been impossible to work the coal demised
owing to flooding from other workings. It was true that
in 1904 the water did rise in the shaft, and working had
been stopped for some time owing to obstructions to the
ventilation shaft, but that was some years ago. Again the
defendant said that whatever coal was left in the mine was

worthless, and could not be worked at a profit. But the
defendant had not seen fit to terminate his lease at the end
of seven or 14 years, when he could have done so. His
lordship said he could see no reason why the water could
not be kept down, and he saw no reason to suppose that the
working of the coal in the south-east portion of the royalty
would, as was contended by the defendant, be extraordinarily
dangerous. As to whether what remained of the coal was
commercially workable at a profit, the evidence for the
defence was confined to general statements. But, in any
case, under the terms of the lease the defendant was not
excused from working any part of the ground when such
working might involve him in pecuniary loss.

Defendant submitted to judgment in respect of a claim
for £11 odd for a way leave, and there would be a declara-
tion that he was not entitled to discontinue working, and
that he was not free from the performance of the covenants
to work, and of the other covenants in the lease. Further,
there would be judgment for the minimum rent up to
December 31 last, and the plaintiff might, if he desired it,
have an enquiry as to what loss he had suffered owing to
the discontinuance of the working, &c. Judgment was
accordingly entered for the plaintiff for £73 16s. 6d. and
costs, and an order made for an enquiry.

KING’S BENCH DIVISION.—April 16.

Before Mr. Justice £crutton.

A Turkish Government Contract.

Pintas and Sommerfield Limited y. 8. Higginbottom
Limited.—This action was brought by Messrs. Michael
Pmtus and Sommerfield Limited, of Mark-lane, against
Messrs. S. Higginbottom Limited, of Old Hall-street,
Liverpool, claiming damages for alleged breach of contract.

His lord ship said the plaintiffs allege that they had
contracted to supply the Turkish Government with coal
containing a quantity of gas and coke of the illuminating
candle power contained in an analysis of Arley gas coal
received from the defendants, the whole large order
depending on the first sample cargo being satisfactory,
and that to carry out this contract the defendants under-
took to supply them with Arley gas coal or other equal
coal, equal to the said analysis. They further alleged that
the defendants shipped a cargo which was not in accordance
with the analysis or the contract, and was unmerchantable,
whereby the Government rejected the cargo, and the
plaintiffs, after incurring considerable expenses, were forced
to make a large allowance to the Government. The
defendants replied that they did not sell on any analysis,
that they did sell a quantity of Lostock Arley and (or)
Nor ley gas coal and (or) equal coal, one-half screened, one-
half small; that the cargo complied with this description;
that they had nothing to do with the Turkish Govern-
ment; and that, in any event, most of the damages
claimed were too remote. The defendant company
were interested in two collieries, the Lostock - lane
and Norley, near Wigan, in Lancashire. They heard
that the plaintiffs wanted gas coal, and offered them
Lostock Arley coal at Ils. 3d. f.o.r. Garston, sending
an analysis on March 11, 1911. This was an analysis of
Arley gas cobbles, a selected coal of a certain size. Plaintiffs
replied on May 22 : “ Your Arley coal is too dear in the way
you offer it. What we want is an unscreened gas, 50 to 60
per cent, of small, at about 8s. 6d.” His lordship remarked
that in an unscreened Lancashire coal there would be about
35 per cent, of small; unscreened gas coal with 50 to 60 per
cent, of small would be a very poor coal. The trouble had
arisen from the plaintiffs’ attempt to apply to the cheap
coal, half smalls which they wanted to buy, the analysis of
a large and expensive coal sent them on May 20 by the
defendants. In Lancashire the ash or dirt must at least be
doubled, perhaps trebled, by the addition of smalls, and the
gas production would be diminished by at least 7 or 10 per
cent. It was unusual in Lancashire to buy or sell with a
guarantee of analysis, though it might be produced as a
guide. The defendants accordingly quoted 8s. 6d. for a
sample cargo of one-half Lostock-lane screened gas coal and
one-half Arley gas smalls 8s. 6d. f.o.r. high level. The Norley
Five-foot seam was almost equal to the Lostock Arley seam.
Having ascertained figures for freights the plaintiffs on
June 27 tendered to the Turkish Government for gas coal
according to the analysis, which was the analysis for Arley
cobbles received from the defendants on May 22, at
14s. 10|d. This price was 8s. 6d. for coal and 6s. 4|d. for
freight, and it only left a small profit of about Is. per ton,
depending on pickings and commissions on chartering.
They had at this time neither contracted for coal nor for
freight. They received an order by wire on July 8 for a
cargo “ according to their conditions.” The defendants
knew that their Arley analysis had been sent to Constanti-
nople, but did not know the terms of the contract with the
Government, or that the analysis had been guaranteed. They
offered to supply 30,000 to 40,000 tons of Lostock Arley coal
and (or) Norley Four-foot coal, and enclosed the analysis of
Norley Four-foot coal. His lordship here said he regretted
that he was unable to place any reliance on the oral
evidence of either side as to the interviews that took place.
He found, however, the contract to be as alleged by the
defendants. It might be asked how the plaintiffs could be
so foolish as to contract with the Turkish Government on
analysis without binding their supply in the same way