[1953] 1 QB 248




(Judgment by: Denning LJ)

Between: Bank Voor Handel en Scheepvaart NV
And: Slatford and Anor


United Kingdom Court of Appeals (Queens Bench Division)

Judges: Devlin J (27 June 1951 to 17 July 1951; 30 July 1951)
Evershed MR (6-8 October 1952; 3-4 November 1952)
Denning LJ (6-8 October 1952; 3-4 November 1952)
Romer LJ (6-8 October 1952; 3-4 November 1952)

Subject References:
Foreign legislation transferring movable property in England
Whether enforceable in England
Decree of allied government in London
Public policy
Peace Treaty
Charge on property ‘belonging to’ or ‘held or managed on behalf of’ Hungarian national
One-man company
All shares held by Hungarian national
Whether charge imposed
Custodian of enemy property
Income of investments of property made by the custodian not exempt from tax

Legislative References:
Treaty of Peace (Hungary) Order, 1948 – (S.I. 1948, No. 116), art. 1 (2), (3), (5) (g)
Trading with the Enemy Act, 1939 – (2 & 3 Geo. 6, c. 89), s. 7

Case References:
Lorentzen v. Lydden and Co. Ltd, not followed – [1942] 2 K.B. 202
O/Y Wasa S.S. Co. Ld. and Another v. Newspaper Pulp and Wood Export Ltd, not followed – (1949) 82 Ll.L.Rep. 936
Government of the Republic of Spain v. National Bank of Scotland Ld., followed. – [1939] S.C. 413; (63 Ll.L.Rep. 330, sub nom. The El Condado)

Hearing date: 27 June 1951 to 17 July 1951; 30 July 1951; 6-8 October 1952; 3-4 November 1952
Judgment date: 4 November 1952

Judgment by LORD DENNING

As a result of concessions made in the course of the trial, we are left to determine this one question: When the Custodian of Enemy Property invests money in his hands, is he liable to pay income tax on it? The judge has held that he receives “the income as a person having Crown status, or at the least that he receives it for a Crown purpose” – and is therefore exempt from tax.

This ruling of the judge is based on the maxim that the Crown is not bound by a statute unless expressly named therein. This maxim is, as Mr. Stamp said, too widely expressed. It would be more accurate to say that the Crown is not to be prejudiced by a statute unless it is clear that Parliament intended it should be. The reason for this rule lies in history. The King is historically a constituent part of the legislature and, by assenting to an Act, he cannot be intended to prejudice himself. That is how it was put in the year 1561 in Willion. v . Berkley ([1561] 1 Plowden 223, 239.): “And because it is not an Act without the King’s assent, it is to be intended that when the King gives his assent, he does not mean to prejudice himself or to bar himself of his liberty and privilege, but he assents that it shall be a law among his subjects.” It was similarly expressed in 1616 by Lord Coke in his Reports in the case of Magdalen College ([1615] 11 Co.Rep. 66b.).

Such being the rule which we have to apply, I ask myself: Will the Crown be prejudiced if the custodian is made liable to pay income tax? The answer is plain. The Crown will not be prejudiced at all. The truth is the other way about. The Crown will be seriously prejudiced if the custodian does not pay tax. There is no room, therefore, in this case for applying the maxim. Neither Parliament nor the Crown can ever have intended to exempt the custodian from tax and thus prejudice the public revenue.

A contrary view is only reached by starting with the inaccurate maxim “The Income Tax Acts do not bind the Crown” and then asking: Has the custodian Crown status? as if that settled the matter, whereas it does nothing of the sort. The Attorney-General pointed out the fallacy when he observed that the judge had placed too much emphasis on the status of the custodian and not enough on his activities. If the custodian is to be exempt from paying tax, it is not only because he has Crown status, but also because the income he receives is public revenue, that is, the revenue of the central government. If his income is public revenue, it will bo exempt. The reason why public revenue is exempt from tax is because there is no point in the Crown taking money from one of its pockets and putting it into another. But if the revenue of the custodian is not public revenue, there is no reason why it should not be taxed. A study of the Trading with the Enemy Acts shows that his income does not go in aid of the public revenue at all. It is held in suspense pending later arrangements. As such it is not exempt from tax.

I would have liked to finish this judgment at this point; but the approach suggested by the Attorney-General is so important that it should be verified from the authorities. These do, I think, support the view that Crown immunity depends, not only on whether the person has Crown status, but also on whether the activity in question is a Crown activity. Thus, in all the rating and taxing cases since 1863, it has been held that exemption from rates depends, not only on whether the occupier has Crown status, but also on whether his occupation is exclusively for Crown purposes: see Mersey Docks and Harbour Board Trustees v. Cameron ( 11 H.L.C. 443 .), Greig v. University of Edinburgh ((1868) L.R. 1 Sc. & Div. 348.), Coomber v. Justices of Berkshire (9 App.Cas. 61.) and Worcestershire County Council v. Worcester Union ([1897] 1 Q.B. 480.). A neat illustration is also to be found in a traffic case. Where an army driver exceeded the speed limit for locomotives, it was held that his immunity depended, not only on the fact that he was a servant of the Crown, but also on the fact that he was exceeding the speed limit exclusively for Crown purposes. If he had exceeded it simply because he liked driving fast, he would not have been immune: Cooper v. Hawkins ([1904] 2 K.B. 164.).

Not only must the activity be a Crown activity, but also, in accordance with the original rule which I have mentioned, the activity must be such that the Crown purposes would be prejudiced unless immunity were afforded to it. This appears from all the cases. It was the basis of the decision in the Magdalen College case (11 Co.Rep. 66b.), where there was no prejudice to the Crown, and is well illustrated by three modern cases where there was prejudice. The collection of debts to implement a Treaty of Peace – which is a Crown purpose – would be prejudiced if the Administrator of Enemy Property were to be barred by the lapse of time. He is accordingly immune from the Statute of Limitations. That is the Austrian Administrator case ( 48 T.L.R. 37 .). The development of Crown property for Crown purposes would be prejudiced if the local authorities could insist on their local Acts being observed unconditionally by the Crown. The Crown is therefore exempt from them: see the Bombay Province v. Bombay Municipal Corporation ( [1947] A.C. 58 .). The Defence of the Realm would be prejudiced if the Territorial Association could not recover possession of houses needed for their instructors; and so the Association is immune from the restrictions imposed by the Rent Restriction Acts; see Territorial and Auxiliary Forces Association of the County of London v. Nichols ([1949] 1 K.B. 35.).

Te immunity can, I think, only be claimed by a person having Crown status. He must be either a servant of the Crown or, at any rate, be in consimili casu: see what Blackburn J. said in the Mersey Docks case ( 11 H.L.C. 443 .). But I confess that there are two decisions of a Divisional Court which suggest the contrary. They seem to show that the Crown immunity can be claimed, even by a private person, if it can be shown that Crown purposes would be prejudiced unless immunity were granted to him. One of the cases is Clark v. Downes ((1931) 145 L.T. 20.), where it was held that a purchaser of Crown property was immune from the Rent Acts as regards a tenancy created by the Crown; for to hold otherwise would prevent the Crown from obtaining a higher price. Talbot J. considered that to be an extreme application of the doctrine of immunity: see Wirral Estates Ld. v. Shaw ([1932] 2 K.B. 247.). The other case was Rudler v. Franks ([1947] K.B. 530.), in 1947, where it was held that a tenant who held from the Crown could eject his sub-tenant in spite of the Rent Acts. It does not seem to have been argued in either of those cases that Crown immunity can only be claimed by a person having Crown status. It was, however, raised before this court in Tamlin v. Hannaford ([1950] 1 K.B. 18.), in 1950, but it was unnecessary to give any decision upon it. The Divisional Courts do not seem to have been referred to some observations of Lord Watson and Lord Bramwell in Coomber v. Berkshire Justices (9 App.Cas. 61.), which go to show that immunity of Crown property only extends to the Crown interest therein and not to any other interests, and this is, I think, the correct view. The Divisional Court cases have now been overruled in effect by the Crown Lessees (Protection of Sub-tenants) Act, 1952, and need not be further considered.

The question remains, however: What is meant by the “Crown” in these cases? What is meant when we speak of “Crown status,” “Crown activities,” “Crown purposes,” “Crown interest” and so on?

So far as Crown status is concerned, the Privy Council found no guidance in the phrase “emanation of the Crown.” Devlin J. finds none in the phrase “servant or agent of the Crown,” although it is the phrase used in the Crown Proceedings Act, 1947. I find no guidance in the phrase “Crown status” by itself. All that can be said is that Crown status attaches to the Ministers of the Crown, to the government departments of which they are the heads, and to the servants of those departments. In this connexion I would observe that the test of being a servant does not rest nowadays on submission to orders. It depends on whether the person is part and parcel of the organization: see Cassidy v. Ministry of Health ([1951] 2 K.B. 343.) in 1951 and Stevenson Jordan & Harrison Ld. v. MacDonald & Evans ([1952] W.N. 7.) in 1951. Outside the Government departments, Crown status also attaches to a number of persons in consimili casu, as Lord Blackburn described them in the Mersey Docks case ( 11 H.L.C. 443 , 464.). These are persons who acquire Crown status by acting exclusively for Crown purposes, such as occupiers of assize courts and police stations, the Territorial Associations, and the Administrator of Enemy Property under a Peace Treaty. This category of persons is extremely vague because of the difficulty of deciding what are “Crown purposes.” If by “Crown purposes” is meant the purposes of the executive government, these have been vastly enlarged in the last century. In former days they were almost confined to justice, defence and foreign affairs. Nowadays they include transport, fuel, hospitals, forestry, new towns and indeed almost every purpose beneficial to the public at large. I am quite sure that the great judges who spoke of “the province of government” in the nineteenth century did not mean to include in it the wide range of activities in which governments now embark; and we have recently in this court refused to extend immunity to these activities. The point was distinctly raised in Tamlin v. Hannaford ([1950] 1 K.B. 18, 21.) when Mr. Redmond Barry K.C. (as he then was) said that the real question was “What at this date is the true province and sphere of central government?” and we answered it by declining to give Crown immunity to the commercial activities of government.

We have now to decide whether Crown status attaches to the Custodian of Enemy Property. He is appointed by the Board of Trade, he is subject to a large measure of control by the Board of Trade, the fees he receives go into the Exchequer, and he is paid out of the Consolidated Fund. The present holder of the office, Mr. Slatford, is himself an official of the Board of Trade, he has his office in the Board of Trade, and he may, for aught I know, do work for the Board of Trade when he is not engaged in his work as custodian. All this makes it look at first sight as if he had Crown status. But it does not touch the crucial question, which is: What are his activities? Are they crown activities? Although the Board of Trade have a large measure of control over him, his activities as custodian are his own activities. They are not Board of Trade activities. Whilst doing them, he is not acting as a servant of the Board of Trade, but as custodian. And, as custodian, he is not implementing any of the Crown’s prerogatives, as the administrator was in the case cited. He is collecting debts due, not only to alien enemies, but also to alien friends resident in territory occupied by the enemy. The Crown has no prerogative to seize the property of British subjects or alien friends who are resident, against their will, in territory occupied by the enemy. When the custodian has collected the money, he does not hold it on behalf of the Crown. He holds it pending arrangements to be made later. It is inconceivable that, under those arrangements, the property of alien friends would be confiscated. Even the property of alien enemies would probably be used to pay English creditors. At any rate, all the property is held in suspense. It is not Crown property, and his activities are not Crown activities. He is a public officer carrying out public purposes: but they are not Crown purposes.

The Attorney-General submitted that the burden was on a person asserting Crown immunity to show he was entitled to it. I agree with this submission. In recent years Parliament has set up many corporations, boards, persons and bodies, entrusted them with public duties, paid them out of the public purse, and put them under the direction or control of a Minister. It would be a strong thing for the courts to give these persons Crown immunity when Parliament has not done it. If Parliament has said nothing in the matter, the presumption should be that they are as much subject to the statutes at large as anyone else. They have no special privileges or immunity.

They are under the law. This principle was applied in striking fashion recently when in Rex v. Yorkshire Electricity Board (The Times, Nov. 17, 1951.) the electricity authority was heavily fined for doing building work without a licence; and it is most important that it should be maintained. Applying this principle, the Trading with the Enemy Act, 1939, does not say that the custodian is to have Crown immunity. He should not, therefore, be given it by the courts.

For all these reasons, I am of opinion that the custodian has not Crown status. His income is no part of the public revenue and he was liable to pay income tax as he did. The appeal should be allowed.