GOFF, J. - (1.) THIS is a case in which the taxpayer company J. G. Ingram and Son Ltd., carried on for a good many years a successful business in the manufacture and sale of surgical and pharmaceutical products having glass and rubber parts. Owing to the facts that plastics and comparable products became not only a possible substitute for the rubber, but something which was both cheaper and more durable, and therefore clearly better, the taxpayers fell into difficulties and suffered serious losses, so much so, that a receiver was appointed and he sold the taxpayers factory, completion taking place in September, 1960. In the meantime, the taxpayers shares had been acquired in May, 1960, by Redland Holdings Ltd., a public company with many subsidiaries and diverse interests. The Commissioner found that Redland intended to extend its interests into the field of plastics and had for that reason recently acquired a company, Tuck and Co. Ltd. There was a space in Tucks factory premises a Hainault, and Redland caused three -quarters of the taxpayers machinery to be moved to Hainault, the remainder being sold, and thereafter the company continued its business at Hainault. [His Lordship read paragraph 7 of the case stated, and continued :] It does not appear that Martindill or anyone else ever acquired any plant other than the pilot plant so far as the facts found are concerned, but it may be that that one pilot plant was and is sufficient. Notwithstanding these efforts, considerable losses continued to be incurred and in March, 1961, Redland decided to close the Hainault factory. [His Lordship read paragraphs 8 and 9 of the case stated and continued :] By paragraph 10 : 'The products produced by Martindill were not entirely satisfactory, and in April or May, 1962, Redland decided to dispose of the company;' and on June 4, 1962, they made an offer to another company called Plastage (Sussex) Ltd. which was accepted, and under which they agreed to sell the Losca Moulding Machine (which must, I think, be the pilot machine) complete with all ancillary equipment and moulds, all raw materials in stock, and to transfer the whole of the issued share capital of the company for the sum of Pounds 3,500. It was said to be an integral part of the agreement that all orders of the company outstanding as at May 31, 1962, would be undertaken by the purchasers and satisfied. It is indeed expressly stated that the machinery referred to was Martindills shares was Pounds 375. The company had no physical assets. It had its order book which was valuable to Plastage and the name Ingram was well known and was a valuable acquisition for Plastage. [His Lordship read paragraph 11 of the case stated and continued :]
(2.) IN view of the finding in paragraph 9 (b) that Martindills products, which were made with plastic components, were accepted as identical with the rubber products previously supplied, the exception in paragraph 11 [to the finding that the business carried on by taxpayers after the sale to Plastage was exactly the same as before September, 1961] is of no significance. On these facts it is material both as to the made of assessment, and more importantly, on the question of carrying forward losses, to determine whether the taxpayers business continued throughout, or whether there was a break and a change -over to a new trade when Martindill took over and the taxpayers were reduced in the manner I have described, and then again when Plastage having acquired the taxpayers, the same business as had been in operation prior to September, 1961, was again carried on, and if there were such breaks, whether the first change amounted to a permanent discontinuance of the trade, or whether there was merely a suspension. The commissioners findings, starting at paragraph 15(2), are as follows : 'It is common ground that the taxpayers arrived on a trade of manufacturers and suppliers of surgical and pharmaceutical products up to September, 1961, and incurred losses therein.' Pausing there, it is a little surprising that that was common ground because it is clear from the findings that the taxpayers ceased production in May, 1961, and one would have thought that that was the relevant date rather than September, but there it is. The sub -paragraph continues : 'We find that from June, 1962, onwards the taxpayers have been carrying on a trade which so nearly resembles the trade they were carrying on prior to September, 1961, that we would have had no doubt it was the same trade if we have not got the events of the intervening nine months to consider.' (3) 'Looking at the taxpayers activities between September, 1961, and June, 1962, we find they were not during that period carrying on the trade they had carried on theretofore. It was not disputed that the activities amounted to trading, but in our view it was a new and different trade, set up and commenced in September, 1961, and discontinued in June, 1962.' It is difficult to see what was set up and commenced in September, 1961. It is true that the factory at Hainault was not closed until then, but the Martindill arrangements were clearly operating before September, 1961, and, as I have before observed, it is found that the company ceased production in May. Continuing the quotation : 'The question, as we see it, is whether the former trade was suspended (to be continued again after June, 1962), or whether it was permanently discontinued in September, 1961, and a new trade was set up in June, 1962. 'We have not found this easy to decide, but looking at all the evidence we have come to the conclusion that in September, 1961, the trade previously carried on was permanently discontinued, and that its activities since June, 1962, although very similar to its activities before September, 1961, constitute a new trade and not a continuation of the old trade.' Those conclusions were not acceptable to the taxpayers who have appealed to this court.
(3.) MR . Monroe for the taxpayers put his case in two ways : first, he says, in order to see whether a trade has ceased when there has been a change in the mode of carrying it on, or in proprietorship, it is necessary to see what the essence of the trade was and to see whether in that essence it has been preserved, in support of which he relies on two cases, Laycock v. Freeman, Hardy and Willis Ltd. and Briton ferry Steel Co. Ltd. v. Barry. He submits that the essence here was selling the product, not manufacture and sale. On that basis he contends that the first trade did not cease at all. Alternatively he says that if the trade did cease, it was only a temporary cessation and the commissioners should have found that the trade was suspended, not permanently discontinued. Different considerations, in my view, apply to these two separate submissions. On the first it seems to me that the question involved is clearly one of fact as has been reiterated in numerous cases. In the Freeman, Hardy and Willis case itself at page 8, Sir Wilfrid Green M. R. said : 'Now that, of course, does not mean that the business, regarded after the secession, must be in every respect and in every detail identical with the business which was carried on before the succession. The successor may succeed to a business, let me say, with 50 ships; he may choose to shut up some of those shops; he may make alterations in the goods that he sells; all sorts of alterations of that kind may take place; he may change his supplier; he may cut out a particular class of customer or a particular area. All questions of that kind appear to me to be really matters of fact for the determination of the commissioners, who have to set themselves the question, where matters of that kind arise, whether or not its is true and fair to say that the business in respect of which the successor is said to be making profits is the business to which he succeeded. Changes of that kind may or may not be so substantial as to make it right to say, as a matter of fact (that would be a question for the commissioners) that the business is not the same as the one to which he succeeded. The differences may be so substantial as to justify a finding to that effect.' Again, at page 615 his Lordship said, 'the question which arises appears to me to be : Can it truly be said that the business of a wholesale manufacturing concern is being carried on by respondents ? The answer to that question seems to me to be quite clearly in the negative. Manufacture in these factors is being barrier on, but the mere manufacturing is not the thing which produces the profit of the business. That part of the business of the subsidiaries which was essential for the realisation of taxable profit, namely, the selling of their goods wholesale, has disappeared, and the goods are now sold and the profits realised by the respondents in their ordinary organisation and in their ordinary retails ships. It seems to me, therefore, that the special commissioners were amply entitled to find, and I think on the facts they were bound to find, that the business of two subsidiary companies ceased..........';