Lawson v. Johnson Matthey plc, (1992) 145 N.R. 241 (HL)

• Case Date: May 14, 1992
• Jurisdiction: Canada (Federal)
• Citations: (1992), 145 N.R. 241 (HL)

Lawson v. Johnson Matthey plc (1992), 145 N.R. 241 (HL)

MLB headnote and full text

Lawson (Her Majesty's Inspector of Taxes) (respondent) v. Johnson Matthey plc

(appellants)

Indexed As: Lawson v. Johnson Matthey plc

House of Lords

London, England

Lord Keith of Kinkel, Lord Emslie,

Lord Templeman, Lord Goff of Chieveley, Lord Jauncey of Tullichettle

May 14, 1992.

Summary:

A taxpayer owned a bank that was about to collapse and in turn threaten the taxpay­er's business. The taxpayer paid £50 million to the bank and transferred ownership of the bank to the Bank of England. The taxpayer claimed a deduction from income of £50 million that was disallowed. The taxpayer appealed.

The General Commissioners allowed the appeal. The Crown appealed.

The trial judge allowed the appeal whose decision was affirmed by the Court of Appeal. The taxpayer appealed.

The House of Lords allowed the appeal and held that the payment was a revenue expenditure and not a capital expenditure.

Income Tax - Topic 1140.5

Income from a business - Deductions - Payment to preserve business - The taxpayer, a platinum trader, owned a bank that was about to collapse and in turn threaten the taxpayer's solvency - The taxpayer paid £50 million to the bank and transferred ownership of the bank to the Bank of England - The taxpayer's business was saved and it claimed a deduction of £50 million - The Crown argued that the payment was a capital expenditure - The House of Lords held that the payment was deductible because it was a revenue ex­penditure made to remove a threat to the taxpayer's business.

Cases Noticed:

Mitchell v. B.W. Noble Ltd., [1927] 1 K.B. 719, refd to. [paras. 4, 14].

Anglo-Persian Oil Co. Ltd. v. Dale, [1932] 1 K.B. 124, refd to. [paras. 4, 15].

Commissioners of Inland Revenue v. Carron Co. (1968), 45 T.C. 18, refd to. [paras. 4, 21, 37].

Cooper v. Stubs, [1925] 2 K.B. 753, refd to. [para. 9].

British Insulated and Helsby Cables Ltd. v. Atherton, [1926] A.C. 205, refd to. [paras. 9, 13, 40].

Van den Berghs Ltd. v. Clark, [1935] A.C. 431, refd to. [para. 9].

Southern v. Borax Consolidated Ltd., [1941] 1 K.B. 111, refd to. [para. 17].

Associated Portland Cement Manufacturers Ltd. v. Inland Revenue Commissioners, [1946] 1 All E.R. 68, refd to. [para. 19].

Tucker v. Granada Motorway Services Ltd., [1979] 1 W.L.R. 683, refd to. [paras. 22, 37].

Morgan v. Tate & Lyle (1954), 35 T.C. 367, refd to. [para. 37].

Mallett v. Staveley Coal and Iron Co. Ltd., [1928] 2 K.B. 405, refd to. [para. 37].

Counsel:

Andrew Park, Q.C., and T.P.C. Ivory, for the appellants;

Alan Moses, Q.C., and L. Henderson, for the Crown.

This appeal was heard by Lord Keith of Kinkel, Lord Emslie, Lord Templeman, Lord Goff of Chieveley and Lord Jauncey of Tullichettle of the House of Lords on February 5 and 6, 1992. The decision of the court was delivered on May 14, 1992 and the following opinions were filed:

Lord Keith of Kinkel - see paragraphs 1 to 5;

Lord Emslie - see paragraphs 6 and 7;

Lord Templeman - see paragraphs 8 to 24;

Lord Goff of Chieveley - see paragraphs 25 to 36;

Lord Jauncey of Tullichettle - see para­graphs 37 to 42.