Scottish Court of Session Decisions

In an action by John Ralston Henderson, wine and spirit merchant, Elderslie Bar, Yoker, pursuer, against Andrew M'Gown and Dugald Cameron, both wine and spirit merchants, Clydebank, defenders, concluding for £5000 damages for slander, the defenders lodged a specification of documents including, inter alia, certain income tax returns, and moved for a commission and diligence for the recovery thereof.

The seventh article of the specification was in the following terms—“7. All income tax returns made by the pursuer so far as bearing upon the Elderslie Bar during the … period [from 15th May 1905 to 24th September 1613], and all income tax assessment notices and receipts for income tax received by the pursuer during the said … period.”

The relevant facts and averments appear from the opinion of the Lord Ordinary ( Hunter), who on 10th June 1916 granted diligence, inter alia, for the recovery of the documents in the seventh article, and granted leave to reclaim.

Opinion.—“This is an action of slander brought by a gentleman who was formerly in partnership with the two defenders. The slander is to the effect that the pursuer when he was a partner made deliberately false statements with reference to the returns that he had received from the business during the subsistence of the copartnery. There was a reference, under which an award was given, and the award was set aside, but that has not any material bearing upon the present matter.

The defenders plead veritas—that is to say, they allege that the pursuer deliberately falsified statements with reference to the business. In the record they make averments to this effect—‘The pursuer has made a return to the surveyor of taxes showing, for income tax purposes, the trading account and profit and loss account of the business carried on at the Elderslie Bar for the year from April 1913 to April 1914. In the said trading account he sets forth that for the said period the gross profit was £2477, 14s. 5d., and the shop drawings were £6942, 18s. 11d. The said gross profit represents 35·6 per cent. of the said shop drawings. These defenders believe and aver that the pursuer has made returns to the surveyor of taxes showing, for income tax purposes, the trading account and profit and loss account of the said business for the year 1914/1915; and they further believe and aver that the gross profits declared in the said returns represent over 36 per cent. of the shop drawings, as therein declared.’

It is now sought to recover by way of diligence the returns which were made by the pursuer to the surveyor of taxes. So far as I know a diligence on those lines has never been granted by the Court. The Court have allowed receipts for income tax to be recovered. The defenders have been in communication with the income tax authorities, who, although they are not represented here, have intimated that they object to the production of the documents. In their original communication they had adopted the ordinary departmental position, namely, that it was against the public interest that the documents should be produced. On further communication with them they have modified that position to this extent that it appears that they are influenced largely by the circumstance that they regard these returns as confidential.

The question as to whether a Court of law ought to ordain the production of

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income tax returns came before Lord Pearson for consideration in the case of Shaw v. Kay, 1914, 12 S.L.T. 495. There the income tax authorities appeared, and after hearing them Lord Pearson refused an order for the recovery of the documents. In that case Lord Pearson said—‘Private convenience must give way to public interest; and the Courts have been accustomed to give almost conclusive effect to a representation by a Department of State on such a matter. They have, it is true, usually qualified their decisions by intimating that a case might occur in which they might exercise their discretionary power to compel recovery. It is difficult to figure so exceptional a case beforehand; but at all events I do not think we have it here.’

The opinion I have formed as regards this case is that we have such an exceptional case here, and I am prepared therefore to grant a diligence for the recovery of the returns. The pursuer and the defenders were partners in the same business, and the returns were not private returns in the sense in which the returns of a third party would have been private. I am told now that the pursuer exercised an option which he had and which gave him the business at a date prior at all events to some of these returns; but at the time that this record was closed, and at the time the statements that are said to be slanderous were made, there was at all events an interest in the defenders in connection with the returns which were made. That I think puts the case in an exceptional position, and I do not think, so far as the public interest is concerned, that there is any greater reason for not allowing these returns to be recovered than there is for not allowing income tax receipts to be recovered.

I shall therefore grant the diligence. As this is the first time so far as I know that the Court has taken the step I am now taking, I shall grant leave to reclaim.”

The pursuer reclaimed.

At the hearing in the Inner House the Commissioners of Inland Revenue appeared, and argued—They had certified that it was contrary to the public interest that the income tax returns should be produced. When such a statement was made by a responsible department of the Government, the Court was bound by it, and had no alternative but to refuse to grant a diligence— Earl and Others v. Vass, 1822, 1 Shaw's Appeals 229, per Lord Chancellor Eldon at p. 230; Dunlop v. Scottish North-Eastern Railway Company, 1866, 1 S.L.R. 102; Tierney v. Ballingal & Son, (1896), 23 R. 512, 33 S.L.R. 379; Brown's Trustees v. Inland Revenue, 1897, 35 S.L.R. 340; Forrest v. Macgregor, 1913, 1 S.L.T. 372; Shaw v. Kay, 1904, 12 S.L.T. 495; Admiralty v. Aberdeen Steam Trawling and Fishing Company, Limited, 1909 S.C. 335, per Lord President (Dunedin) at p. 340, Lord M'Laren at p. 342, and Lord Kinnear at p. 343, 46 S.L.R. 254. The same rule applied to documents in the Lord Advocate's department— Arthur v. Lindsay, 1895, 22 R. 417, 32 S.L.R. 334; Sheridan v. Peel, 1907 S.C. 577, 44 S.L.R. 406. The English rule was to the same effect— Beatson v. Skene, 1860, 29 L. J. Ex. 430, 5 H. & N. 838, per Pollock, C.B., at p. 853; Hughes v. Vargas, 1893, 9 The Reports 661; in re Joseph Hargreaves, Limited, [1900] 1 Ch 347, per Lindsay, M.R., at p. 352; Asiatic Petrol Company, Limited v. Anglo-Persian Oil Company, Limited, 1916, 114 L.T. 645. This would apply to one seeking to recover his own income tax return, and a fortiori to a partner seeking to recover the returns of a copartner in connection with the partnership. The receipts were in a different position, for they were not in the hands of a public department. Further, the income tax officials were bound by an oath of secrecy. Diligence should be refused.

Argued for the pursuer (reclaimer)—The seventh article of the specification, so far as relating to income tax returns. was unnecessary, and diligence should not be granted, for the question in issue was did the pursuer honestly account for the profits? The defenders had had allowed to them recovery of all the documents necessary to check the pursuer's returns. They had all the books, vouchers, and income tax returns. If the Court had a discretion to order production of income tax returns in exceptional cases, this was not such an exceptional case as to warrant exercise of that discretion, for the defenders would suffer no prejudice if the returns were not produced.

Argued for the defenders (respondents)—Production of the documents called for was relevant to the issue, for the defenders stated that the profits of the business markedly decreased after the pursuer entered it, and markedly increased after he left it. The cases cited were distinguished, because in none of them was a party who was entitled to see the documents called for, calling for their production. The Court had a discretion to order production— Hargreaves ( cit.), per Lindsay, M.R., at p. 352, and Vaughan Williams, L.J., at p. 352; Hughes v. Vargas ( cit.); Dowgray v. Gilmour, 1907 S.C. 715, per Lord President (Dunedin) at p. 720, 44 S.L.R. 559. Here the objection was frivolous, for the call was in substance a call by an individual to see his own returns. Further, it was the duty of the Commissioners of Inland Revenue to apply their minds to the question of whether the production of the particular document would prejudice the public interest, and they had not done so here, but contended that in all cases production of such documents was contrary to the public interest. The Lord Ordinary was right.

At advising (after consultation with the Judges of the Second Division)—