Scottish Court of Session Decisions

On 9th January 1903 the Lord Advocate on behalf of the Commissioners of Inland Revenue brought an action against the Lord Provost, Magistrates, and Council of the city of Edinburgh for declarator that the defenders should be ordained “to render to the Commissioners of Inland Revenue a full account of the sums retainable by the defenders in respect of income-tax during the period from 22nd September 1901 to 5th April 1902 upon their payment of interest of moneys borrowed by them on temporary loan by means of bill or promissory-note or simple acknowledgment.” The action also concluded that the defenders, whether such account were rendered or not, should be decerned “to pay to the pursuer the sum of £1200, or such other sum, more or less, as may be found to be due and payable in respect of income-tax retainable as aforesaid, with interest on the said sum of £1200.…”

On 7th July 1903 the pursuer obtained a decree under the first conclusion of the summons, the case quoad ultra being continued, and to this interlocutor of the Lord Ordinary the First Division adhered on October 15, 1903. Income-tax had not been deducted by the city authorities when the interest in question was paid; they therefore furnished the Commissioners of Inland Revenue with particulars of their payments of interest under this head. Inquiry into these payments brought out the fact that certain of the payees had paid income-tax and others were exempt therefrom, and that, as a final result, a sum of £12, 19s. which had been retainable by the defenders but which had not been deducted, alone was unaccounted for.

By interlocutor pronounced on 18th May 1905 the Lord Ordinary ( Stormonth Darling) gave decree in favour of the pursuer for this sum of £12, 19s.

Opinion.—“The only remaining point in this case arises on the rendering of an account by the defenders for the period mentioned in the interlocutor of 7th July 1903, which was affirmed by the First Division. On adjustment of that account the matter came before my colleague, who was acting temporarily as Lord Ordinary in Exchequer, and I find in the report of' what took place that the effective motion that was made by the defenders was that they should be allowed a proof of something or other, I do not exactly know what; but that did not meet with the approval of Lord Kyllachy, and accordingly parties were asked by his Lordship to endeavour to settle the matter and arrange figures for themselves. An attempt has now been made to do so by the Inland Revenue authorities, and I have before me a statement founded on particulars given by the defenders, and adopting these particulars, but bringing out the actual balance of income-tax which is said to be due as the result. It is a very small matter—it amounts only to £12, 19s.—and for that Crown counsel move me to grant decree. The only answer is, not that the sum is incorrect, but that there is no liability on the part of the defenders to account for any tax not deducted.

“Now, plainly that is a matter that ought to have been stated as a defence in limine The action is one for an account, it is true, but it is also a petitory action for a large sum of income-tax due by the defenders, and due by them because the Crown regards them as having incurred liability through their failure to deduct income-tax from the persons to whom they were paying interest on these receipt notes. I do not intend to decide the point whether the statutes make a person so acting liable to pay the income-tax at all. If that point is stateable, it ought to have been stated long ago, because it would have rendered unnecessary all the elaborate inquiries which apparently have taken place and which have resulted in bringing out this balance of £12, 19s. Accordingly, I give decree for £12, 19s., and there ends the case so far as the Outer House is concerned.”

The defenders reclaimed, and argued—The Court had held that there was a duty on the defenders to retain income-tax upon payment by them of interest and to account for income-tax so retained, but the statute which their Lordships so interpreted fixed no penalty for a failure in this duty. The question was therefore one of common law, and by common law a failure in such a duty could only give ground for a claim against the party in fault for such damages as reasonably flowed from his failure. Damages, however, must be relevantly averred, and in the present case there was nothing in the pleadings to show that the Inland Revenue had suffered loss, nor had they, inasmuch as it was open to them to recover the sums in question from the lenders to whom the interest was paid. It might have been averred that the defenders' failure to give an accounting timeously had prevented the recovery of the sums sued for, or that trouble had been caused by such failure which was estimated at the sum sued for. Such pleadings would have been relevant, but did not exist on record. The action was therefore irrelevant and should be dismissed.

Counsel for the pursuer and respondent was not called upon.