The Gazette 1961 - 64

Defence costs paid by company—whether taxable emolument The Court of Appeal in England has recently reversed a decision by the High Court allowing an appeal by a company director against the decision of the special commissioners who had held that the amount of £641 spent by the company for his defence at his trial for causing the death of a pedestrian by reckless or dangerous driving was spent for his benefit and was chargeable to income tax under Schedule E. This case was reported in the GAZETTE for April, 1963, at page 94. The tax payer was the company director and the accident in question occurred while he was driving a motor car, the property of the company. The company undertook the cost of his defence and he was acquitted. The High Court judge had referred the case back to the commissioners for them to find out what was a reasonable sum for the purpose of the defence and he held that the director was only assessable to tax in such a sum. The Court of Appeal disagreed with this view and held that the company had clearly incurred an expense in the sum of £641 with the provision of a benefit to the tax payer. Since he was a director of the company the condition precedent to liability specified in Section 161 (i) of the Income Tax Act, 1952, had been satisfied. The expense was to be treated as perquisite of his office as director and must be included in the Schedule E assessment. It had been argued that the company incurred the expense primarily in its own interest and only secondarily in the interests of the director and that accordingly no benefit was provided within the meaning of the Section. The Court of Appeal did not accept this interpretation. It has also been argued that the tax payer would not have spent £641 in his own defence and that he would have spent only £60 or £70. The affect of the Statute, however, was to lay the charge not upon the benefit but upon the sum actually paid by the company as an expense. There was nothing in the language of the Act to justify the Court enquiring how much of the expense would have been incurred by the director if left to provide for himself. (Rendell v. Went (Inspector of Taxes) 1963 Tax reports, page in.) Misappropriation by solicitor of fees received for counsel and shorthand writers In a case before the Court of Criminal Appeal the appellant, a former solicitor, received from a client a cheque for £1,663 95. yd. in payment of his bill. The bill included £639 175., as disbursements for counsels' fees. These fees were not paid to counsel. The appellant paid the cheque into his own bank account and he was charged under Section 20 (i) (iv)

(b) of the Larceny Act, 1916, with fraudulent con version. The particulars alleged were that the appellant, having received a cheque on account of the client fraudulently converted part of the proceeds thereof to his own use and benefit. The relevant part of the sub-section reads as follows : " every person who . . . (iv) (a) being entrusted either solely or jointly with any other person with any property in order that he may retain in safe custody or apply, pay, or deliver, for any purpose or to any per son, the property or any part thereof or any proceeds thereof; or (V) having either solely or jointly with any other person received any property for or on account of any other person ; fraudulently converts to his own use or benefit, or the use or benefit of any other person, the property or any part thereof or any proceeds thereof; shall be guilty of a misde meanour." Admissions by the appellant in evidence at the trial showed that the sum in question was fraudu lently converted by the appellant to his own use. In his appeal the appellant contended that in effect the Solicitors Accounts Regulations required that he should pay the cheque into his own bank account and that thereupon the money became his own and, secondly, that the charge was wrongly laid under Section 20 (i) (iv) (b) as distinct from Section 20 (i) (iv) (a) because the particulars alleged receipt of the cheque on behalf of the client while as in fact the client had drawn the cheque. It was held (i) that the fact that a particular sum was paid into a particular banking account by a solicitor, albeit pursuant to statutory obligation, did not affect the rights of persons interested in the sum or any duty of the solicitor either towards his client or towards third persons in regard to the disposal thereof; the relevant provisions of the Solicitors Act and of the accounts regulations were domestic matters and it remained a question of fact in each case where the money was so received as to bring the case within section 20 (i) (iv) (b) of the 1916 Act. In the present case the £639 iys. was shown to have been fraudulently converted by the appellant to his own use, (ii) although the proceeds of the cheque were received by the appellant as to part for or on account of another person within the wording of section 21 (iv) (&) so that a charge under that enactment lay, yet the cheque was not received on account of the client as alleged in the particulars. Therefore, although the Statement of Offence was unobjectionable the particulars were defective and should have been amended at the trial. As the appellant had not been embarrassed in his defence by the particulars the court would, under Section 4 of the Criminal Appeal Act, 1907, dismiss the appeal. (R. v. Yule 1963 2. All England Reports, page 781.) 28