DONALDSON, J. - (1.) GAVE judgment on July 24, 1968, in the course of which he said that the plaintiffs had asked for and had been supplied with particulars of the facts and matters and of the statutory provisions on which the defendants relied as authorising the deduction of income tax; the defendants had replied that the interest payments satisfied the description of 'interest of money' and were therefore charged to income tax under Case III of Schedule D by section 123(1) of the Income Tax Act, 1952; that under section 169 (1) (c) of the Act they were empowered to make such deduction and that paragraph (d) of the subsection required the plaintiffs to accept; and that under section 170 the defendants were obliged to make such a deduction.
(2.) HIS Lordship added that the defendants had not committed themselves on whether the section applicable was section 169 or section 170, though that matter might be of importance as between them and the Inland Revenue but not as between them and the plaintiffs. It had been contended for the defendants, he said, that if the payments were not 'interest of money' they were an 'other annual payments' within the meaning of Case III with the like consequence as if they were 'interest of money.' Both parties agreed that if the payments fell within Case III the deduction was rightly made. The judge continued : 'It was common ground that if the obligation evidenced by the coupons had been discharged by the mortgage bank' [the original principal debtors] 'the receipt by the plaintiffs would not have fallen under Case III but under Case IV as income arising from securities out of the United Kingdom since the mortgage bank had no branch in the United Kingdom and the payments were secured on real property in Greece. The defendants, however, submit that the position is quite different in the case of a payment by them, since such a payment is not secured and constitutes income arising in the United Kingdom. In my judgment, both those contentions are correct. The defendants obligation to pay is evidenced by the bond, but there is not right to resort to any specific fund or property to secure the discharge of that obligation. Any income arising from a payment by the defendants is not, therefore, income arising from securities within the meaning of Case IV.... The defendants obligation obligation under the guarantee is a collateral security to the charge on Greek property and both secure the mortgage banks obligations. The obligation under the guarantee itself is, however, unsecured. As to the second point, income arising from payments by the mortgage bank which, if recoverable at all, can only be recovered in Greece, quite clearly arises out of the out of United Kingdom. On the other hand, income arising from payments made voluntarily or compulsorily by the United Kingdom branch of the defendant equally clearly arises within the United Kingdom.'
(3.) THE judge further held that a payment by the defendants and a receipt by the plaintiffs in discharge of the defendants obligation under the guarantee did not involve the payment of receipt of 'interest of money' within the meaning of section 122(1) (b) or 123(1) Case III of the Act of 1952, and that though any payment by the defendants to the plaintiffs pursuant to the guarantee in respect of the interest coupons would be a pure income profit in the hands of the plaintiffs, the coupons were bearer documents and the necessary element of recurrence which would make them 'annual payments' within Case III was lacking. Accordingly, he held that deduction of the income tax should be made; and he gave judgment for the plaintiffs with costs. During the hearing the issue was raised that if the defendants failed to deduct income tax they might have to pay income tax in the United Kingdom twice and for that reason the Solicitor to the Inland Revenue instructed counsel [Mr. J. P. Warner] as amicus curiae. The plaintiffs opposed his being heard. The judge in the course of his judgment said : 'This is by no means the first occasion on which the position of the Inland Revenue as a very interest official (but not officious) bystander in a dispute between subjects has created difficulty'; and having reviewed the authorities on the matter he expressed the hope that those who had the power and duty to modernise the law would look into the matter of allowing the revenue to be heard, since in cases where the law required the subject to act as taxgatherer or as part of the machinery for tax collection, the subject ought in justice to be able to obtain a binding decision in one set of proceedings not only between himself and another subject but also between himself and the Crown. He continued : 'If the court requires assistance and asks the commissioners to instruct counsel of attend as amicus curiae in the strict meaning of those words, no doubt the commissioners would comply, as would any other responsible body. The position in wholly different if they seek to use a procedure designed for the assistance of the court for a quite different purpose, namely, the furtherance of their own very proper interests by supporting one party against the other. The result is unfair to the commissioners who would consider themselves bound by a decision against which they could not appeal and who could not recover the costs of their appearance. It is unfair to one of the parties who is faced with an additional antagonist who enjoys a privileged position with regard to costs if the intervention is unsuccessful. 'In the present case I had no doubt that with the appearance of counsel so eminent in the filed of tax law as Mr. Heyworth Talbot and Mr. Desmond Miller, I could have no need of further assistance on the law. I was also unable to detect any special interest of the commissioners which would not be safeguarded by the defendants in their own interests.' He accordingly declined to hear Mr. Warner. ;