[HOUSE OF LORDS]

AND

[On appeal from In re VANDERVELL'S TRUSTS]

Practice - Parties - Joinder - Revenue - Dispute between executors and trustees - Result entailing tax consequences - Revenue willing to be party to decision having tax consequences - Application for joinder opposed by defendant trustees - Whether commissioners' presence "necessary to ensure ... all matters in dispute ... effectually and completely determined and adjudicated upon" - R.S.C., Ord. 15, r. 6 (2) (b)

Crown - Joinder - Proceedings between subjects - Whether jurisdiction to join "as necessary party" - Crown consenting and one party objecting - Fiscal issue - R.S.C., Ord. 15, r. 6 (2) (b)

By R.S.C., Ord. 15, r. 6 (2):

"At any stage of the proceedings in any cause or matter the court may on such terms as it thinks just and either of its own motion or on application ... (b) order any person who ought to have been joined as a party or whose presence before the court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon be added as a party; but no person shall be added as a plaintiff without his consent signified in writing or in such other manner as may be authorised."

In 1961 the trustees of a family settlement made by V. in 1949 exercised an option to purchase from the Royal College of Surgeons shares in a company with which V. was concerned which shares V. had transferred to the college in 1958. Between 1961 and 1965 the trustees received dividends exceeding £750,000 net on those shares. In 1965, during the course of proceedings in which the revenue claimed surtax from V. on dividends paid while the charity held the shares, on the ground that V. had not divested himself of his beneficial interest in the option, the shares, or the dividends thereon, V. executed a deed intended to transfer to the trustees any such interest as he might be held to have retained. In Vandervell v. Inland Revenue Commissioners [1967] 2 A.C. 291, the House of Lords affirmed the assessment on V. to surtax on the dividends paid up to 1961 while the charity held the shares. V. died in 1967, and the commissioners, relying on the House of Lords decision made an assessment on his estate for surtax in respect of the dividends received by the trustees between 1961 and 1965. The executors gave notice of appeal against that assessment but the appeal was, by agreement with the revenue, stood over pending the determination of proceedings begun by the executors by originating summons in May, 1968, in which they claimed as against the trustees of the family settlement that the estate was entitled to the dividends received by the trustees between 1961 and 1965.

In October, 1968, the executors obtained leave from the master under R.S.C., Ord. 15, r. 6 (2) (b) to join the Inland Revenue Commissioners as second defendants to the originating summons against the trustees. The commissioners consented to be joined, but the trustees objected. Buckley J. (whose decision was reversed by the Court of Appeal) granted an application by the trustees to have the commissioners struck out. On appeal:-

Held, that the court had no jurisdiction under R.S.C., Ord. 15, r. 6 (2), to order that the commissioners be added as a party to the proceedings in order that the issue whether the dividends belonged to the executors (thereby involving a fiscal liability in which the revenue was interested) might be determined by a decision binding on the commissioners.

Per Lord Reid. It is competent to make a rule of court bringing in the revenue in proceedings baffle the High Court and so preventing the same issue being raised again before the special commissioners (post, pp. 929H - 930A).

Per Viscount Dilhorne. The High Court has no jurisdiction to determine tax liability or make declarations with regard thereto and the parties cannot confer such jurisdiction by waiver or consent (post, p. 934A-C). Nevertheless the High Court has jurisdiction to add the Inland Revenue Commissioners as a party to a properly instituted action and if they are so added they will be bound by the findings of fact, though the special and general commissioners will not (post, pp. 934H - 935A).

Per Lord Wilberforce (Lord Morris of Borth-y-Gest agreeing). The High Court has jurisdiction to decide a question between a subject and the Crown as to the ownership of property, notwithstanding that an assessment to tax has been made, the validity of which may depend on that ownership. Either the Crown or the subject may insist that the statutory procedure for dealing with disputed assessments to income tax and surtax be followed. The question whether, where both Crown and subject consent, the Crown can be brought into litigation between subjects depends either on the consent of all parties being given or, failing this on the Rules of the Supreme Court (post, pp. 939H - 940A).

Per Lord Diplock. The court has no jurisdiction after an assessment to tax to adjudicate between the taxpayer and the Inland Revenue on the correctness of the assessment or on any underlying issue of fact on which the correctness of the issue depends, where the Inland Revenue has no other interest in that issue except its effect on the taxpayer's liability to tax (post, pp. 943H - 944A).

Barraclough v. Brown [1897] A.C. 615, H.L.(E.). and Amon v. Raphael Tuck & Sons Ltd. [1956] 1 Q.B. 357; [1956] 2 W.L.R. 372; [1956] 1 All E.R. 273 considered.

Decision of the Court of Appeal [1970] Ch. 44; [1969] 3 W.L.R. 458; [1969] 3 All E.R. 496 reversed.

The following cases are referred to in Theodore Lordships' opinions:

Amon v. Raphael Tuck & Sons Ltd. [1956] 1 Q.B. 357; [1956] 2 W.L.R. 372; [1956] 1 All E.R. 273.

Argosam Finance Co. Ltd. v. Oxby [1965] Ch. 390; [1964] 3 W.L.R. 774; [1964] 3 All E.R. 561, C.A.

Asher v. London Film Productions Ltd. [1944] K.B. 133; [1944] 1 All E.R. 77, C.A.

Barraclough v. Brown [1897] A.C. 615, H.L.(E.).

Leek, decd., In re [1969] 1 Ch. 563; [1968] 2 W.L.R. 1385; [1968] 1 All E.R. 793, C.A.

Norwich Corporation v. Norwich Electric Tramways Co. Ltd. [1906] 2 K.B. 119.

Pilkington's Will Trusts, In re [1961] Ch. 466; [1961] 2 W.L.R. 776; [1961] 2 All E.R. 330, C.A.; [1964] A.C. 612; [1962] 3 W.L.R. 1051; [1962] 3 All E.R. 622, H.L.(E.).

Riches v. Westminster Bank Ltd. [1947] A.C. 390; [1947] 1 All E.R. 469, H.L.(E.).

Soul v. Inland Revenue Commissioners [1963] 1 W.L.R. 112; [1963] 1 All E.R. 68, C.A.

Turner's Will Trusts, In re [1937] Ch. 15; [1936] 2 All E.R. 1435, C.A.

Vandervell v. Inland Revenue Commissioners [1967] 2 A.C. 291; [1967] 2 W.L.R. 87; [1967] 1 All E.R. 1, H.L.(E.).

The following additional cases were cited in argument:

Abrahams' Will Trusts, In re [1969] 1 Ch. 463; [1967] 3 W.L.R. 1198; [1967] 2 All E.R. 1175.

Al Fin Corporation's Patent, In re [1970] Ch. 160; [1969] 2 W.L.R. 1405; [1969] 3 All E.R. 396.

Attorney-General v. Avelino Aramayo & Co. [1925] 1 K.B. 86, C.A.

Barnato, In re [1949] Ch. 258; [1949] 1 All E.R. 515, C.A.

Barras v. Aberdeen Steam Trawling & Fishing Co. Ltd. [1933] A.C. 402, H.L.(Sc.).

Bentley Motors (1931) Ltd. v. Lagonda Ltd. (1945) 114 L.J.Ch. 208; [1945] 2 All E.R. 211.

British Transport Commission v. Gourlay [1956] A.C. 185; [1956] 2 W.L.R. 41; [1955] 3 All E.R. 796, H.L.(E.).

Buxton v. Public Trustee (1962) 41 T.C. 235.

Byrne v. Brown (1889) 22 Q.B.D. 657, C.A.

Caffoor v. Income Tax Commissioner, Colombo [1961] A.C. 584; [1961] 2 W.L.R. 794; [1961] 2 All E.R. 436, P.C.

Cornwell v. Barry (1955) 36 T.C. 268.

Dyson v. Attorney-General [1911] 1 K.B. 410, C.A.

Esquimalt and Nanaimo Railway Co. v. Wilson [1920] A.C. 358, P.C.

Fire, Auto & Marine Insurance Co. Ltd. v. Greene [1964] 2 Q.B. 687; [1964] 3 W.L.R. 319; [1964] 2 All E.R. 761.

Gestetner Settlement, In re [1953] Ch. 672; [1953] 2 W.L.R. 1033; [1953] 1 All E.R. 1150.

Gurtner v. Circuit [1968] 2 Q.B. 587; [1968] 2 W.L.R. 668; [1968] 1 All E.R. 328, C.A.

Hooper's 1949 Settlement, In re [1955] 34 A.T.C. 3.

Income Tax Special Commissioners v. Linsleys (Established 1894) Ltd. [1958] A.C. 569; [1958] 2 W.L.R. 292; [1958] 1 All E.R. 343, H.L.(E.).

Inland Revenue Commissioners v. Raphael [1935] A.C. 96, H.L.(E.). on appeal from In re Sassoon [1933] Ch. 858, C.A.

Inland Revenue Commissioners v. Sneath [1932] 2 K.B. 362, C.A.

McCheane v. Gyles (No. 2) [1902] 1 Ch. 911.

Marsh v. Marsh [1945] A.C. 271, P.C.

Midwood's Settlement, In re [1968] Ch. 238; [1967] 3 W.L.R. 1014; [1967] 3 All E.R. 291.

Montgomery v. Foy, Morgan & Co. [1895] 2 Q.B. 321, C.A.

Moore v. Gamgee (1890) 25 Q.B.D. 244, D.C.

Moser v. Marsden [1892] 1 Ch. 487, C.A.

Park, decd., In re [1970] 1 W.L.R. 626; [1970] 1 All E.R. 611; [1970] 2 All E.R. 248, Goff J. and C.A.

Result, The [1958] P. 174; [1958] 2 W.L.R. 725; [1958] 1 All E.R. 839.

Soul v. Marchant and Inland Rhino Commissioners (1962) 40 T.C. 508.

Westminster Bank Ltd. v. Edwards [1942] A.C. 529; [1942] 1 All E.R. 470, H.L.(E.).

Westminster Bank Executor and Trustee Co. (Channel Islands) Ltd. v. National Bank of Greece S.A. [1970] 1 Q.B. 256; [1969] 3 W.L.R. 468; [1969] 3 All E.R. 504, C.A.

APPEAL from the Court of Appeal (Lord Denning M.R., Sachs and Karminski L.JJ.).

This was an appeal by leave of the House of Lords given on July 10, 1969, from a decision of the Court of Appeal given on May 22, 1969, reversing a decision of Buckley J. given on January 30, 1969, whereby it was ordered (inter alia) that the Commissioners of Inland Revenue, the second defendants and the fourth named respondents, should cease to be defendants in the action. They had been joined by an order of Master Heward dated October 23, 1968. By summons dated November 8, 1968, the first defendants and appellants, Vandervell Trustees Ltd., applied to have them struck out.

The issue in this appeal was whether there was jurisdiction under R.S.C., Ord. 15, r. 6 (2) (b), to order the joinder of the commissioners as defendants in this action.

The plaintiffs, the first three named respondents, Gerrard Wilfred White, Rudolf Edgar Francis de Trafford and Joseph Leonard Reed, were the executors of the late Guy Anthony Vandervell. As such they claimed from the first defendants, the appellants, Vandervell Trustees Ltd., the dividends received by the appellants on certain shares in Vandervell Products Ltd. in respect of the period from October 11, 1961, to January 19, 1925, on the ground that during that period the appellants held those shares in trust for the deceased absolutely. The appellants had refused to pay the respondent executors these dividends amounting to £1,256,458 (gross) or £769,580 (net after deduction of income tax).

The commissioners had claimed surtax from the respondent executors in respect of these dividends on the primary ground that the deceased was the beneficial owner of the shares during that period. The respondent executors had appealed against assessments made on them for that surtax, and payment of the surtax claimed had been deferred pending clarification of the issues between the respondent executors and the trustees.

The facts are stated by Viscount Dilhorne.

Viscount Bledisloe Q.C. and Michael Miller for the appellants. No relief is sought against the revenue, who say they are neutral. If the first defendants, the trustees, were struck out there would be no question to decide. The revenue's interests can and will be safeguarded by counsel for the plaintiffs, the executors. The situation is illustrated by Riches v. Westminster Bank Ltd. [1947] A.C. 390, 394, 395.

Two questions arise: (1) Is there jurisdiction to add the revenue at all? (2) Can R.S.C, Ord. 15, r. 6 (2) (b) be invoked to add the revenue?

Once the legislature has laid down a special procedure for the determination of a particular question, it can only be decided in the way so laid down and by the tribunal designated, e.g., the Companies Court sitting under the statutory jurisdiction laid down by the Companies Act. Similarly the Revenue Court has a certain jurisdiction and the Income Tax Act provides special procedures for deciding revenue questions: see Barraclough v. Brown [1897] A.C. 615; Asher v. London Film Productions Ltd. [1944] K.B. 133, 137 and Argosam Finance Co. Ltd. v. Oxby [1965] Ch. 390, 396, 397, 400, 409-410, 422.

In almost every dispute as to property the revenue has an interest because of the fiscal repercussions. When there is a dispute as to property between a rich man and a pauper the revenue is not brought in. If it were brought in there would be no limit to the possibility of doing so.

The only object of bringing the revenue in here is to get the question of surtax decided. It is said that unless the revenue were brought in, the Crown would not be bound by the result.

The decision of the Court of Appeal would seem to have reversed the decisions in Asher's case [1944] K.B. 133 and Moser v. Marsden [1892] 1 Ch. 487 and the views expressed in Argosam's case [1965] Ch. 390, and to be inconsistent with the principles laid down by the House of Lords in Barraclough v. Brown [1897] A.C. 615.

If the plaintiffs (the executors) win, the liability for surtax will follow but the surtax problem is not a matter in dispute in the present action between the parties to it. In order to decide whether the investments belong to the executors or the trustees, the only question in the case, it is not necessary for the revenue to be before the court. In such a dispute as this creditors might be interested in the result but it is not proper to join them. No more is it proper to join the revenue.

As to the meaning of "cause or matter" in R.S.C., Ord. 15, r. 6 (2), see the definitions of "cause" and "matter" in section 225 of the Supreme Court of Judicature (Consolidation) Act 1925. The expression cannot cover this present action plus surtax litigation.

A complete code for the determination of surtax matters is laid down by the surtax legislation, whereas the revenue is only here to get a surtax problem decided, instead of adopting the only procedure laid down by statute.

As to the revenue's right to be heard, see Westminster Bank Executor and Trustee Co. (Channel Islands) Ltd. v. National Bank of Greece S.A. [1970] 1 Q.B. 256. In In re Al Fin Corporation's Patent [1970] Ch. 160, 174-175 it was held that where a special procedure for deciding a point is laid down by statute it is not permissible for it to be decided in any other way: see also Simon's Income Tax (1965), Vol. I, pp. 328-329, and Amon v. Raphael Tuck & Sons Ltd. [1956] 1 Q.B. 357, 360, 362, 365-366, 369, 371-372, 381, 382, 386; Montgomery v. Foy, Morgan & Co. [1895] 2 Q.B. 321, 324, 326; Bentley Motors (1931) Ltd. v. Lagonda Ltd. (1945) 114 L.J.Ch. 208, 209, 210; McCheane v. Gyles (No. 2) [1902] 1 Ch. 911; The Result [1958] P. 174, 181, 182 and Fire, Auto & Marine Insurance Co. Ltd. v. Greene [1964] 2 Q.B. 687.

In the face of these authorities Lord Denning M.R. in the Court of Appeal in the present case based his decision on Attorney-General v.

Avelino Aramayo & Co. [1925] 1 K.B. 86, 98-101, 106. That case is distinguishable because it was not one in which the special commissioners had in no circumstances whatever any jurisdiction to entertain the dispute; there the appellants simply waived a technical objection to the jurisdiction of the commissioners to assess them to tax and it was held that they could not go back on that waiver. What was said in Byrne v. Brown (1889) 22 Q.B.D. 657, 666 does not apply to the present case. Gurtner v. Circuit [1968] 2 Q.B. 587, 594, 596, 601 et seq. was a very special and unusual case.

The cases where it is necessary to "ensure" that all the matters in dispute are determined within the meaning of R.S.C., Ord. 15, r. 6 (2) are those in which it is necessary for the person joined to be a party in order to determine the action.

The circumstances in which the revenue has been joined are: (1) when there was no party before the court to argue the point in issue: (2) when the revenue was joined with the consent or by the invitation of all the parties; (3) when no question of fact arose; (4) when no one took the point that there was no jurisdiction to add the revenue. These are not the circumstances of the present case. The consent procedure by which the revenue agrees to be bound by the decision in proceedings in which they are joined is illustrated in In re Pilkington's Will Trusts [1961] Ch. 466; [1964] A.C. 612.

In summary: (1) Where statute prescribes a special procedure for the determination of any question that procedure is the only method by which it can be determined: Barraclough v. Brown [1897] A.C. 615; Asher's case [1944] K.B. 133; Argosam's case [1965] Ch. 390; Al Fin's case [1970] Ch. 160 and the Westminster Bank case [1970] 1 Q.B. 256.

(2) The liability or other vise of the executors for surtax on the dividends is under appeal and the appeal has been properly made under the special procedure prescribed by the Income Tax Act 1952. Their liability cannot be determined in any other manner.

(3) The Court of Appeal is bound by its own decisions and in this case its decision is in direct conflict with Asher's case [1944] K.B. 133.

(4) If (contrary to the appellants' contentions) the executors can invoke R.S.C., Ord. 15, r. 6, then, on its true interpretation, there is no jurisdiction to join the revenue, or, alternatively, the revenue should not be joined because the presence of the revenue is not necessary to ensure that the matter is determined within the terms of the rule.

(5) If (contrary to the appellants' contentions) the rule could apply to this case, it must give the court power to join the revenue, whether or not the revenue consents.

(6) The issue raised in this action relates to the beneficial entitlement to certain dividends and that can perfectly well be determined in the absence of the revenue; consequently they do not fall within the rule.

(7) The determination of the issues in this action leaves the rights of the revenue unimpaired. Although the revenue has an indirect commercial or economic interest in the determination, it has no legal interest in the subject-matter of the action. Accordingly there is no jurisdiction under the rule: see Moser v. Marsden [1892] 1 Ch. 487 and Amon's case [1956] 1 Q.B. 357.

(8) The Court of Appeal wrongly relied on Gurtner v. Circuit [1968] 2 Q.B. 587 to justify an interpretation of the rule which would justify the joinder.

(9) The ratio of that authority was that where a prospective party to an action would, by the judgment, be affected in his legal rights or in his pocket, e.g., where he was bound to satisfy the judgment in the last resort, the court has discretion to join him as a party.

(10) Further, that authority is distinguishable because (a) no question of joining the revenue arose, and (b) there was no one to challenge the plaintiffs case unless the Motor Insurance Bureau were allowed to do so and the bureau was the party who was to meet any judgment obtained by the plaintiff. In the present case the executors challenge the contentions of the trustees and are in the same interest as the revenue.

(11) Byrne v. Brown (1889) 22 Q.B.D. 657 is also distinguishable, since there the only person challenging the proposed joinder had no locus standi to object. The dicta of Lord Esher M.R. were far wider than was justified by the predecessor of the present rule, Ord. 16, r. 11.

(12) The revenue has never been joined as a party in proddings between subjects where any objection was taken to the joinder.

(13) The decision below, if correct, would have far-reaching implications, since it involves the proposition that the revenue can and should be joined as a party to most proceedings where any right to income on property is in dispute, because the revenue has a financial interest in the outcome of most of such proceedings.

(14) Aramayo's case [1925] 1 K.B. 86 is distinguishable.

(15) In the cases decided since Asher's case [1944] K.B. 133, viz. Pilkington's case [1961] Ch. 466; [1964] A.C. 612 and In re Leek, decd. [1969] 1 Ch. 563, there were present relevant considerations which are absent from the present case.

(16) It would be unjust to the appellants if the revenue were joined since (a) It would increase the costs of the action and expose the appellants, who are trustees of a settlement under which infants may be interested, to the risk of liability for the costs of two adverse parties; (b) it would expose them to the risk of an appeal by the revenue, even if the executors were content to accept a decision adverse to their interests at first instance; (c) it would enable counsel for the revenue to cross-examine the executors' witnesses extracting evidence which could not have been given in answer to examination-in-chief by the executors' own counsel; (d) it enables the executors to enlist the resources of the Crown in their purely private dispute.

(17) Even if the court has jurisdiction to join the revenue, it should exercise its discretion by declining to do so.

Michael Miller following. On the facts there was no waiver or acquiescence on the part of the appellants in this joinder. The point, which was only raised in the Court of Appeal [1970] Ch. 44, 49, is not open to the respondents, who did not raise it before the judge. Even if there were waiver, it would not confer on the court a jurisdiction to join which it did not have under the rules: see Norwich Corporation v. Norwich Electric Tramways Co. Ltd. [1906] 2 K.B. 119. The point under

Ord. 15, r. 6 goes to the jurisdiction of the master to make the order, and therefore waiver would not be conclusive. The revenue was not a "necessary" party within the rule.

We accept that the Rules of the Supreme Court are not exhaustive of the practice of the court. Compare Ord. 18, r. 19 and the power to strike out pleadings, which is concurrent with the inherent jurisdiction in the court to stay hopeless proceedings. But the erroneous joinder of a party is a contravention of the rules. If the revenue were an unnecessary party, there is jurisdiction under Ord. 16, r. 2 (a) to strike it out. If the court has no power at all to determine a dispute between X and Y, Ord. 15, r. 6 cannot be construed so as to confer jurisdiction, and the issues between the executors and the revenue are matters in which exclusive jurisdiction is given to the Revenue Court.

The question arises whether when a decision is made in litigation between subjects the revenue must take the result as it finds it. There is no practical probability that it would refuse to do so and accordingly it is not necessary for it to be a party. The decision would be arrived at in hostile litigation, with no holds barred.

A. J. Balcombe Q.C. and J. M. Chadwick for the first three respondents. In this case there is no question of the revenue making the running. The executors asked the revenue to come in so that the questions to be decided in this action and also in the surtax proceedings should be decided together.

Barraclough v. Brown [1897] A.C. 615 is distinguishable on its facts. If the point depending on that case goes, the master had jurisdiction to make the order. If it is a question of the rules, there was a mere irregularity, not going to the jurisdiction. Before Buckley J. both points were argued. In the Court of Appeal reliance was placed on Marsh v. Marsh [1945] A.C. 271.

It is obviously convenient that the revenue should be a party and the court should not strike it out without a compelling reason. In cases in which the judges have taken such a course they have done so with regret: see The Result [1958] P. 174, 185. In the present case all the members of the Court of Appeal thought the presence of the revenue convenient; the House of Lords should be disposed to retain that presence.

The appellants have submitted that: (1) there is a special procedure for deciding revenue matters; (2) there was no power under the rules to join the revenue; (3) the joinder prejudiced the appellants.

In revenue matters there is an established procedure the whole purpose of which is to protect the interests both of the Crown and of the subject. In Argosam [1965] Ch. 390 the Crown required this to be followed, and accordingly in that case it could not be required that the revenue be joined as a party. The question of consent goes to the jurisdiction. There is a statutory code and it is open to both parties to waive their right to insist on that procedure being adopted, just as a foreigner can submit to the jurisdiction of the English courts. What is at issue in the present case is not a direct ability to tax but the construction of a document which will heavy tax implications, since, if it is held that the executors are not entitled to the dividends, the revenue would be bound by that decision if it was a party and the point would be res judicata against it.

In Barraclough v. Brown [1897] A.C. 615, 620 it was a question of the recovery of money, not a case in which the revenue was suing to recover surtax or to obtain a declaration of liability. But in the present case it is desired that the revenue be bound by the findings of fact. Where the revenue's right to recover tax may depend on certain proceedings between subjects and on certain findings of fact therein, it is right that the revenue should be a party since it will be bound. There is no lis between the executors and the revenue or between the revenue and the trustees. Had Parliament laid it down that, because of the existence of the revenue procedure, the revenue could in no case be a party to other proceedings between subjects even though the result would affect the tax liability, that would be conclusive. But it has not done so. The House of Lords should not extend the principle in Barraclough v. Brown.

If it were held in these proceedings, as between the executors and the trustees, that the dividends did not belong to the executors, there might then be a dispute between the executors and the revenue. To avoid multiplicity of litigation the executors want that to be decided in the present proceedings: see Dyson v. Attorney-General [1911] 1 K.B. 410 and Esquimalt and Nanaimo Railway Co. v. Wilson [1920] A.C. 358. The old Court of Chancery had jurisdiction to make an order binding on the Crown and that jurisdiction was transferred to the High Court by section 18 of the Supreme Court of Judicature (Consolidation) Act 1925. The position here is that the trustees do not accept the findings in the previous case in the House of Lords: Vandervell v. Inland Revenue Commissioners [1967] 2 A.C. 291. The executors do not want a similar position to arise now. They want a decision which will bind all parties and are seeking declarations against both the Crown and the trustees.

There is nothing in law or in the procedural rules which prevents this course. There is nothing in the Income Tax Acts which precludes the parties from agreeing that the facts on which the liability to tax may depend should be determined in some way other than that provided by those Acts: see section 229 of the Income Tax Act 1952, section 12 (5) of the Income Tax Management Act 1964 and section 64 of the Act of 1952. A finding in the present proceedings or an agreed statement of facts should ink as "lawful evidence" within section 52 (1) (b) of the Act of 1952 which should be accepted by the commissioners. The law and practice in determining revenue disputes was discussed in In re Park [1970] 1 W.L.R. 626. If the revenue in the present case had initiated proceedings under the Crown Proceedings Act 1947, as in that case, it would have been necessary to decide whether the dividends formed part of the estate of the deceased, whereas if there had been a decision on that point it would not be necessary to relitigate the matter for surtax purposes.

What was said in Barraclough v. Brown [1897] A.C. 615, 622 cannot be applied to the present case because the legislature has expressly given to other courts the jurisdiction to determine the ownership of the dividends. If the question arises in the context of a claim for estate duty or stamp duty the legislature has expressly provided other methods of determining these questions. But in other circumstances the legislature has not forbidden other courts to determine the question of ownership.

In Pilkington's case [1961] Ch. 466; [1964] A.C. 612 the matter was determined in the High Court without the revenue being a party. But the revenue was made an additional party in the Court of Appeal and the House of Lords with the consent of the other parties. If there had been no jurisdiction to add the revenue, the consent would have made no difference and the revenue would not have been properly present, either in that case or in In re Leek, decd. [1969] 1 Ch. 563. See also Cornwell v. Barry (1955) 36 T.C. 268, 272; In re Midwood's Settlement [1968] Ch. 238, 245 et seq.; In re Barnato [1949] Ch. 258; Buxton v. Public Trustee (1962) 4 T.C. 235 and In re Abrahams' Will Trusts [1969] 1 Ch. 463 and what Buckley J. said at first instance in the present case [1969] 1 W.L.R. 437, 443.

As to causes of action and joinder of parties, see R.S.C., Ord. 15, rr. 1, 2, 3, 4 and 6. Under r. 4 (1) (a) the revenue could be brought in because "some common question of law or fact would arise." "Actions" are referred to and "action" is defined in section 225 of the Supreme Court of Judicature (Consolidation) Act 1925. Further r. 6 (2) (b) provides the only method under the rules allowing the bringing in a person who ought to have been joined as a party. It must be construed in its context and in conjunction with r. 4 (1) (a). The test whether a person is properly joined should be the same whether he is joined at the start of the proceedings or in the course of them.

The authorities cited for the appellants are cases concerned with persons who wish to join a party against the wishes of the other parties. Whether or not the power conferred by the rule should be exercised is a matter of discretion. The exercise of the power in r. 6 (2) (b) cannot be confined to the dispute between the plaintiffs and the defendants: see Amon's case [1956] 1 Q.B. 357, 363, 368-369, 386. A party can be brought in against whom the plaintiff has no cause of action. Here the ownership of the dividends is the matter in dispute. The reason the revenue is a necessary party within the explanation in Amon's case at p. 380 is that it is necessary that it should be bound by the decision.

The authorities differ as to the interest a party must have before he can be brought in. Moser v. Marsden [1892] 1 Ch. 487, 488-489, 489-490, which was decided on the narrow construction of the relevant rule, goes furthest against joining. But the whole rule is concerned with adding additional parties and it should not be given a narrow construction. One must ask whether there is somebody else besides the parties who is interested in the subject-matter of the dispute so that he should be bound by the decision. Here, without the presence of the revenue, the dispute would not be completely determined because it would have to be litigated again. The object of the rule is to prevent multiplicity of proceedings: Montgomery's case [1895] 2 Q.B. 321, 324. It has to meet all cases and must accordingly be given a wide construction. It has been suggested that the test is to ask: What is the interest of the third party that it can be said that his presence is necessary to ensure that all the matters in dispute are effectively determined and adjudicated on? But it is no part of the respondents' case to say that one need look at the interest of the parties. That need not be the test and nothing in the rule lays it down. The wider meaning stated in Byrne v. Brown (1889) 22 Q.B.D. 657, 666, 668 should be adopted. In

choosing between the two conflicting lines of authority the House of Lords should prefer this case.

If under the Act there was jurisdiction in the master to join the revenue, it is not now open to the trustees to complain that it was not properly exercised, because (1) they allowed the master's order to be made without raising that objection; and (2) if they had not acquiesced their immediate remedy would have been to appeal to the judge.

On the facts the jurisdiction was properly exercised. It is convenient to have the revenue present and the trustees will suffer little inconvenience. If this increases their costs the trial judge has a complete discretion to allow them the extra costs. It is said that it would increase the risk of an appeal, since the revenue might appeal even if the executors did not. There is no substance in that. If the finding of the court were such that the respondents were held not entitled to the dividends, but the revenue were still making a claim against them, then, for all practical purposes, they would be bound to appeal. It was further said that joinder would enable the respondents to enlist the resources of the revenue. But, if the revenue wanted to finance them, they could do so without being joined as a party.

J. M. Chadwick following. The respondents wish to submit the point set out in paragraph 10 of their printed case and to apply for leave

"to introduce the following point not taken before Buckley J. An application for leave to introduce this point was made to the Court of Appeal but was not pursued. Even if the commissioners were not persons who could properly be joined under Ord. 15, r. 6 (2) (b), the order of October 23, 1968, was not void ab initio; it was voidable at the discretion of the court. The court will not set aside an order if it was obtained by an irregularity acquiesced in by the party seeking to have the order set aside. Any irregularity in the assumption of jurisdiction by Master Heward was acquiesced in by the appellants."

Since the order was voidable and not void, it was for the appellants to apply, either by way of adjournment to the judge or by way of motion, to have it set aside and this they have not done. If they ask now, it is too late.

[LORD REID intimated that their Lordships could not allow the respondents to take this point.]

J. P. Warner for the fourth named respondents. The revenue is not asking to be joined. On that point it is neutral. Its concern is (1) to satisfy the House of Lords that the consent procedure is lawful; (2) to repel the suggestion that, if it is lawful to join the revenue, it could have been done without its consent; and (3) to correct misconceptions as to what the position has been.

As to (3): In Riches v. Westminster Bank Ltd. [1947] A.C. 390, 395 counsel for the Crown correctly stated the amicus curiae procedure, where the initiative is always left to the court. The revenue never seek or apply to be heard. In Westminster Bank Executor and Trustee Co. (Channel Islands) Ltd. v. National Bank of Greece S.A. [1970] 1 Q.B. 256, 262, 269 there was a misunderstanding. The revenue did not ask to be heard; counsel for the defendant bank asked that it should be heard. In the House of Lords the revenue will be available but do not ask to be heard.

The usual role of an amicus curiae is to be invited by the court to argue a point which would otherwise not be argued. Here admittedly the role of counsel for the revenue is not the ordinary one of an amicus curiae.

It is not the case that the revenue necessarily in all cases accepts a decision given in its absence: In re Sassoon [1933] Ch. 858, 869, 880-881, 893-894; Inland Revenue Commissioners v. Raphael [1935] A.C. 96, 109 on appeal to the House of Lords.

The consent procedure, whereby the revenue is joined by consent as a defendant to an originating summons in the Chancery Division was commended by Harman J. in Cornwell v. Barry (1955) 36 T.C. 268. In re Turner's Will Trusts [1937] Ch. 15, 17-18, 20, 29 was an early example of that procedure. In most of the cases when it has been used it has been because no one else would have argued the same way as the revenue. In In re Gestetner Settlement [1933] Ch. 672, 675 the decision was against the interest of the revenue which did not, however, appeal. In In re Hooper's 1949 Settlement (1955) 34 T.C. 3 the revenue was joined as a party and lost. In the last four years there have been two or three cases a year in which the revenue has been joined with its own consent. There are six cases pending now, some dealing with questions of construction and others with a person's domicile.

As to In re Park [1970] 1 W.L.R. 626 the decision should be ignored. It was founded on a misapprehension by Goff J. of the practice since the Crown Proceedings Act 1947. The matter was corrected in the Court of Appeal to everyone's satisfaction. That case dealt with estate duty, and estate duty legislation can only be approached historically. Sometimes the proceedings are brought by the Crown and sometimes by the taxpayer. In 1894, when estate duty was introduced, proceedings brought by the Crown were either by English information or by summons under the Crown Suits Act 1865. As to the procedure in the case of an aggrieved taxpayer, see section 10 of the Finance Act 1894. Since 1910 there has been a special procedure for appeals about the valuation of land. See section 60 (3) of the Finance (1909-10) Act 1910 and the Lands Tribunal Act 1949. The next relevant legislative provisions are section 3 of the Administration of Justice (Miscellaneous Provisions) Act 1933 and sections 13 and 14 of the Crown Proceedings Act 1947. By paragraph 1 (1) of Schedule 1 of the latter Act, Latin and English in formations were abolished and, by paragraph 1 (5), writs of summons under Part V of the Crown Suits Act 1865. An ordinary writ may now be issued for the recovery of estate duty. In practice this is only done where there is no defence and the summary procedure under R.S.C., Ord. 14 is to be invoked. In other cases the Crown proceeds under section 14 of the Act of 1947 and R.S.C., Ord. 77, r. 8. The older legislation cannot be construed by reference to the express provisions of the capital gains tax legislation. Sachs L.J. was mistaken in what he said in the Court of Appeal in the present case as to the determination of estate duty questions: [1970] Ch. 44, 58. The legislation has conferred on the revenue procedural rights as to the manner in which it may be impleaded, and it cannot be compelled to adopt this procedure.

On the question whether the consent procedure is unlawful Asker's case [1944] K.B. 133 was not a decision that the revenue could not be joined as a party. There was no argument on the question and the observations

of Lord Greene M.R. and MacKinnon L.J. were obiter. Neither in Argosam [1965] Ch. 390 nor in Al Fin [1970] Ch. 100 was any question raised as to what could be done by consent. In the statement in Simon's Income Tax (1965) Vol. I, p. 328 the use of the word "generally" in the statement that the code of procedure "provides generally the only method by which an assessment may be challenged" should be noted.

One must differentiate between questions which are submitted to the exclusive jurisdiction of the commissioners and those which are not: see Inland Revenue Commissioners v. Sneath [1932] 2 K.B. 362, 390-391. What was said there is still good law. See also section 52 (5) of the Income Tax Act 1952. The commissioners have not exclusive jurisdiction over incidental questions which may fall to be determined by the court in other proceedings. There is an echo of Sneath's case in Caffoor v. Income Tax Commissioner, Colombo [1961] A.C. 584, 597-598, 599-600. See also Income Tax Special Commissioners v. Linsleys (Established 1894) Ltd. [1958] A.C. 569, 579, 580-581, 583-584, 595-596.

It is submitted: (1) In the case of an appeal against an assessment to the special commissioners one must distinguish between their exclusive jurisdiction created by statute and the incidental issues of fact or law which they may have to decide before determining the issues committed to them.

(2) The issue committed exclusively to their jurisdiction is the amount of the assessment for the year or years under appeal. The High Court cannot, even with consent, assume jurisdiction over that issue.

(3) Incidental issues of fact and law which may have to be determined by the special commissioners are not themselves necessarily within the exclusive jurisdiction of the special commissioners. Such an issue may fall to be determined by the court in proceedings brought for some other purpose or because it is submitted to the court to determine by consent.

(4) The reason it is permissible for the parties to agree to submit such issues to the High Court is that the right is procedural and is not a matter of jurisdiction. One may pray in aid as an example the right of the parties to submit a technical issue under a patent to a technical arbitrator. The distinction is well established: see Moore v. Gamgee (1890) 25 Q.B.D. 244, 245-246, where the distinction is made between jurisdiction and procedure, and Attorney-General v. Avelino Aramayo & Co. [1925] 1 K.B. 86, 101.

It is not true to say that if it was lawful to join the revenue here it could have been done without the revenue's consent. That does not follow from the wording of Ord. 15, r. 6. To say that it did would be to attribute to the Rules of the Supreme Court a scope and importance which they do not possess. Their function is to regulate practice and procedure. They cannot override the rights which people otherwise have to refuse to submit to the jurisdiction of the High Court. In the case of the parties to an appeal under the Income Tax Acts, each of them has a right to have the appeal heard and determined by the appellate commissioners - a very valuable right. There is a multiplicity of cases of all descriptions in which the question whether tax is deductible could arise. In such cases it would not be right for one of the parties to bring in the revenue to fight the case for him. The staff of the Solicitor of Inland Revenue would have to be doubled. Further, the preservation of confidentiality is a practice with the revenue. The revenue might have information about the affairs of one party to

litigation which might not be known to the other party. If the revenue could be forced to join in litigation between them it might be compelled to disclose that confidential information, if it was not to be obliged to fight the case with one arm tied behind its back, not using the information it possessed, which might show that the case made against it was wrong. In the present case the revenue had to obtain from the respondents a release from the obligation of confidentiality.

On an appeal under the Income Tax Acts the onus is on the appellant, who knows all the facts. To proceed elsewhere might reverse the onus and involve the revenue in insuperable difficulties. A particular question of fact might be raised in High Court proceedings in which the revenue did not have the right to say to the taxpayer that the onus of proof was on him. If the revenue could be dragged in willy nilly, a lot of evidence might be put in on affidavit on which the revenue was in the dark. An affidavit may be couched in tendencies language. It is very hard to meet affidavit evidence which may or may not be true. For example, the next-of-kin of a testator might sue his executors for a declaration that he died domiciled in England, while the executors contended that he died domiciled in Italy. Suppose the revenue had in its files evidence that he died domiciled in England but was not released from confidentiality. If the revenue were joined as a party to the action it could not disclose or use that information. A similar situation might arise out of the interplay of sections 169 and 170 of the Income Tax Act 1952.

The preservation of the right to insist on adherence to the procedure for appeals against assessments prescribed by the Income Tax Acts is of importance to the person assessed too. In particular (1) the procedure ensures that, unless there is an appeal to the High Court on a point of law (which occurs only in a minority of cases) the confidentiality of any relevant facts about that person's affairs is preserved; (2) the procedure is comparatively inexpensive. There are, in most cases, no interlocutory proceedings and such interlocutory proceedings as there may be are comparatively simple. The appellant may be represented before the general or special commissioners by a solicitor or accountant and no costs of proceedings before those commissioners can be awarded against him in any event. Reliance is placed on section 52 (5) of the Income Tax Act 1952 and sections 5 (6) and 12 (4) of the Income Tea Management Act 1964. One cannot imply a right to suspend the procedure of the special commissioners while another court deals with the matter. The power of postponement in section 52 (3) of the Act of 1952 is confined to cases where a person is prevented from attending. The Rules of the Supreme Court cannot override the rights given to the parties to a tax appeal. They only regulate the practice of the High Court. As to the power to make rules, see section 99 of the Supreme Court of Judicature (Consolidation) Act 1925 (Supreme Court Practice 1970, Vol. II, p. 905, para. 3419).

As to the possibility of joining the revenue as a party in a case like British Transport Commission v. Gourlay [1956] A.C. 185, see the Seventh Report of the Law Reform Committee 1958 (Cmnd. 501), p. 6, para. 12.

Viscount Bledisloe Q.C. in reply. The questions are whether there is jurisdiction to add the revenue and whether there is power to do so.

The Income Tax Act 1952 has provided not only a special procedure to determine tax matters but also a special tribunal. The jurisdiction of the High Court only arises on a case stated by the Special Commissioners. Asher's case [1944] K.B. 133 covers the present case. There Lord Greene M.R. suggested that a new rule might be framed to enable the revenue to be added in such a case. But no such rule was framed. It is incredible that Lord Greene and Somervell L.J. did not consider whether the jurisdiction existed under the rules then in force: see Lord Denning M.R. in the Court of Appeal in the present case [1970] Ch. 44, 55. See also Soul v. Marchant and Inland Revenue Commissioners (1962) 40 T.C. 508, 509-510. The Norwich case [1906] 2 K.B. 125, 127 is another instance of the ousting of the jurisdiction of the High Court by the provision of a particular procedure and tribunal. As to want of jurisdiction, see Westminster Bank Ltd. v. Edwards [1942] A.C. 529, 533-534, 536-537.

The only interest of the revenue here is in the claim for surtax. So far as the revenue is concerned the only object of a declaratory judgment would be that the matter should be decided, but that can only be done by the special procedure prescribed. The special commissioners must decide the surtax problems, fact and law. Here the facts are in dispute. Even if the revenue and the taxpayer can agree the tax, they cannot agree the dispute between the executors and the trustees. On the pleadings there is no lis between the executors and the revenue. The executors are claiming a declaration in favour of both themselves and the revenue.

No question as to estate duty was argued in the courts below and it is not mentioned in the printed case of the respondents. The facts relating to it are not known.

If the revenue is joined the corollary is that the surtax question must necessarily be determined. But this is not so. The House of Lords might decide in favour of the trustees without deciding the revenue question. The question which is between the executors and the trustees is: To whom do the dividends belong? The court cannot be required to decide a question which is not in dispute just because the revenue is joined as a party.

R.S.C., Ord. 15, r. 6 should be given the narrower construction given to it by Devlin J. in Amon's case [1956] 1 Q.B. 357. The difficulty of adopting the wider construction was illustrated by him. If the wider construction were adopted, it would be hard to know where to stop. What Lord Denning M.R. said in the Court of Appeal in the present case [1970] Ch. 44, 56-57 amounts to rewriting the rule.

The deed of January 19, 1965 was executed before the case between the deceased, Guy Anthony Vandervell, and the Inland Revenue Commissioners [1967] 2 A.C. 291 was finally determined. The question is whether it was effective to transfer the dividends on the shares for 1961 ex post facto. It may be that from 1961 to 1965 he could have instructed the trustees to pay him those dividends but after 1965 he could not, being prevented by his own deed. A decision on that point in the present case would not necessarily solve the surtax problem.

As to estoppel by judgment inter partes, see Halsbury's Laws of England,3rd ed., Vol. 15 (1956), p. 196, para. 372. As to estoppel by deed, see p. 214, para. 402, and p. 217, para. 408. If there is power under the rule to add the revenue as a party so that all matters in dispute may be

effectively determined, the adding of the revenue here will not necessarily have that effect. The deed of 1965 may operate ex post facto to transfer the dividends of 1961 but the revenue would still be entitled to a that till the deed was executed the deceased was entitled to claim the dividends. Fundamentally the problem in the action between the executors and the trustees is to show to whom the dividends belong now. The problem between the executors and the revenue is a different one. The court might say that the deed operated ex post facto and refuse to decide the question whether or not the trustees were entitled on the exercise of the option to purchase the shares conferred in 1958.

R.S.C., Ord. 15, r. 6 was slightly altered in 1962: see Supreme Court Practice 1970, Vol. 1, p. 166. If the rule is reproduced in substantially the same form the judicial construction which it has been previously given stands: see Barras v. Aberdeen Steam Trawling & Fishing Co. Ltd. [1933] A.C. 402, 410-412, 433, 438, 441, 446, 447. The ambit of this rule was laid down in Moser v. Marsden [1892] Ch. 487. It was not till Gurtner v. Circuit [1968] 2 Q.B. 587 that Lord Denning M.R. propounded another interpretation. When the rule was reworded in 1962 the decision in Moser v. Marsden was standing.

There is no lis against the revenue on the pleadings, and nothing to be decided between them and the executors because, if the executors win, there is no doubt that surtax will be payable, and, if the trustees win, on the ex post facto operation of the deed it would in practice be impossible that the revenue should not accept the decision. The revenue might want to be satisfied that all essential points had been raised. The practice in such matters is expressed in Riches' case [1947] A.C. 390, 394, 395 by Viscount Simon and counsel for the Crown. If every litigant in a dispute as to property were to be faced with the possibility of tax repercussions, the revenue would be liable to intervene in almost all cases. What was said in Byrne v. Brown (1889) 22 Q.B.D. 657, 666, 668 was directed to the Judicature Acts and not to the rules. The revenue could not be joined as a party under R.S.C., Ord. 15, r. 4 (1) (a).

Counsel for the Inland Revenue Commissioners submitted no compelling reason for adding them as defendants. He supported the consent procedure, which is very valuable in some cases and he helped the House by explaining the revenue's procedure in this connection. His role should have been that of amicus curiae.

Their Lordships took time for consideration.

July 15. LORD REID. My Lords, this case raises a general question of procedure which is of considerable importance. I can state the question in general terms. The revenue claim surtax on certain income from A on the ground that it was his income. A third party B asserts that this income was his income. So the single issue to be decided is whose income it was when it accrued. It appears to me to be obvious that both justice and convenience require that this issue should be decided in proceedings to which all three, the revenue, A and B, are parties so that all shall be bound by the decision.

But the appellants maintain that all three parties cannot be joined in the same proceedings: the question between the revenue and A must be decided by the special commissioners and the question between A and B must be decided by the court. This would not only require unnecessary duplication of litigation and expense, but it might cause serious injustice. There is no appeal from the special commissioners on questions of fact, so if the ownership of the income depends on questions of fact there may be conflicting decisions both of which are final. A may be left in the position that by reason of the decision of the commissioners he has to pay the tax, but by reason of the decision of the court he cannot get the money in respect of which the tax is due.

The revenue do not support the appellants' argument. Quite properly they are not willing to accept as final in all cases the decision in an action between A and B to which they are not parties because that action may be of a "friendly" character and the case for A may not have been properly developed. But they are willing at least in most cases to be joined as parties in such an action so that they can see that A's case is properly presented. They agree that they will then be bound by the decision. This has in fact been done in a number of cases, but if the appellants' main argument is correct I think this practice must now cease.

The appellants' first argument was based on jurisdiction. It is trite law that the consent of parties cannot give jurisdiction where there is none and that, even where the parties consent, it is pars judicis to intervene and refuse to act where there is no jurisdiction. It is quite true that only the commissioners have any right or jurisdiction to alter an assessment to tax. But here there is no question of altering an assessment. What is sought is the determination by the court of a question which, if not already decided, the commissioners would have to decide before they could decide whether or not the assessment should stand.

Cases may easily arise in which a court clearly has to decide such a question as between the revenue and the taxpayer. If after a man's death the revenue claim from his executors both surtax and estate duty on the ground that certain property belonged to him and that income from it which had accrued before his death was his income, then as regards estate duty that issue must be decided by the court. Then the question would arise whether the commissioners in dealing with the surtax assessment are bound to accept the court's decision as res judicata.

So the real question is not one of jurisdiction. It is whether the commissioners are subject to the ordinary rule of law of res judicata. I know of no other instance where a tribunal exercising functions of a judicial character is not so bound, and I find it incredible that Parliament can have intended to make an exception in this case. Of course, if the relevant statutory words are incapable of any other construction, then we must give them that construction. But if there is any other possible construction I would adopt it.

The relevant provision is section 52 (5) of the Income Tax Act 1952, as amended by section 12 of the Income Tax Management Act 1964. Section 52 (5) provides that, if it appears to the majority of the commissioners "by examination of the appellant on oath or affirmation, or by other lawful evidence" that the appellant is overcharged by any assessment,

the commissioners shall abate or reduce the assessment accordingly. This provision in substantially the same form goes back to the early days of income tax. I can see nothing in it which requires or permits the commissioners to disregard a decision of the court.

The question is what is the proper construction of "other lawful evidence." If that phrase is given a narrow meaning, then the commissioners are bound not only to disregard decisions of the court but they are also bound to disregard agreements between the revenue and the taxpayer: they must be satisfied by evidence that the assessment is wrong. But I see no difficulty in interpreting "lawful evidence" as including both a decision of the court which creates res judicata and an agreement between the revenue and the taxpayer as to some matter which the commissioners would have had to decide if there had been no agreement. If the taxpayer produces to the commissioners either such a decision or such an agreement - I can see no difference between the two - then the commissioners must accept that. I find it quite impossible to suppose that Parliament could have intended otherwise. This enactment originally applied to the general commissioners who were busy men acting under a sense of public duty and it would have been absurd to require them to undertake such an unnecessary task and to prevent the taxpayer and the revenue from acting in a reasonable manner, and I find it equally impossible to suppose that the commissioners were given a discretion to accept or reject a decision of the court or an agreement as they might see fit. I have therefore no hesitation in holding that the commissioners are bound to treat as res judicata any decision of a competent court to which the revenue were parties on any issue which may come before them.

I am fortified in my view by what was said in Asher v. London Film Productions Ltd. [1944] K.B. 133, 137-138 and the sequel to that case. Lord Greene M.R. said:

"I have often thought that in cases of this kind it is extremely inconvenient that the Crown (which is vitally interested) cannot, under the existing procedure, be made a party, or otherwise appear. The result is that the Crown is technically not bound by any decision which may be pronounced in its absence. ... I venture to suggest that the Inland Revenue authorities might usefully consider approaching the Rule Committee with a view to obtaining the enactment of a rule under which they could receive notice of litigation of this kind and be given a right to attend and put forward any argument or facts they thought right. The corollary would be that they would be bound by the decision, and the whole matter would be cleared up between everybody concerned."

Discussions took place and since then in one way or another the revenue have appeared in a number of cases. No one at any stage seems to have had any idea that there was any technical objection owing to the nature of the duties or powers of the special commissioners, or the phraseology of the Income Tax Management Act. I find this so strange as to be inexplicable if it is not competent to make a rule of court bringing

in the revenue and so preventing the same issue from being raised again before the special commissioners.

So I turn to the second question in this appeal - whether the existing Rules of Court are wide enough in their terms to warrant the course that has been taken in this case. Here I am under the disadvantage that I am not familiar with the practical operation of the English Rules of Court. Treating the matter as an ordinary question of construction I would have been inclined to agree with the decision of the Court of Appeal. But if your Lordships think otherwise I am not prepared to dissent on this matter, and this would be a sufficient ground for allowing this appeal.

LORD MORRIS OF BORTH-Y-GEST. My Lords, although the submissions in this case have ranged extensively the decision can rest upon a consideration of the rule which is applicable. In agreement with Buckley J. I do not think that this is a case which falls within Ord. 15, r. 6 (2) (b). It is not suggested that the commissioners "ought to have been joined as a party." The only question is whether their presence before the court is "necessary" - that is necessary "to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon." I do not think that any process of giving a wide or liberal interpretation to the rule can be employed to alter it or to give it an enlarged meaning which, on a fair and reasonable interpretation, it does not bear.

As the executors have for the three years in question been served with notices of assessment to surtax (in respect of which they have pending appeals) they are naturally concerned to ensure that if they have to pay surtax they will have the income to which it relates. So in their action against the trustees the effective claim is for payment of the net sums which the trustees received. The trustees say that the late Mr. Vandervell was never beneficially entitled to those sums and apart from this they rely on the terms and effect of the deed of January 19, 1965. The "matters in dispute in the cause or matter" are the matters in dispute between the executors and the trustees. Their resolution calls for the application of legal principles to certain transactions and documents - the details of which do not appear to be in issue. It does not seem to me that the commissioners if present before the court could make any contribution to the determination or adjudication of the matters in dispute. If they wished to present argument that favoured the executors and which was adverse to the trustees they could add nothing to what could be said by those representing the executors. No question of revenue law is raised in the action. The commissioners do not assert any claim to the sums in question. They do not ask for any relief against either party. They did not seek to be joined. They could do nothing to ensure that the matters in dispute in the action brought by the executors against the trustees are "effectually and completely" determined. The matters in dispute between the executors and the trustees can be effectively and completely determined and adjudicated upon in the absence of the commissioners. It follows, in my view, that their presence was not shown to be "necessary."

As, in my view, the wording of the rule is clear I have not derived help

from a consideration of cases decided in reference to situations and circumstances which much differ from those of the present case.

If the presence of the commissioners were necessary to ensure effectual and complete determination and adjudication of the matters in dispute between the executors and the trustees it would be open to the court of its own motion and on such terms as it thought just to order the commissioners to be added as defendants. In the situation of the present case I can see no reason at all why the court would contemplate such action. In circumstances where the court might act there is no provision making consent necessary before a party is added as a defendant. The commissioners, however, take their stand that it is only with their consent that they could be joined in the proceedings.

If the matter is tested by considering the provisions of Ord. 15, r. 4, and its supposition of separate actions being brought against two defendants giving rise to some common questions of law or fact I cannot contemplate an action being brought by the executors against the commissioners claiming a declaration that the trustees held the shares during the relevant period in trust for Mr. Vandervell.

As, in my view, the rule, rationally applied, cannot support the joinder of the commissioners I would allow the appeal. If some new and enlarged procedure on lines adumbrated by Lord Greene M.R. in Asher v. London Film Productions Ltd. [1944] K.B. 133 were thought to be desirable it would be for Parliament to devise and adopt it. On the wider issues as to jurisdiction I am in agreement with the conclusions of my noble and learned friend, Lord Wilberforce, whose speech I have had the advantage of reading in advance.

VISCOUNT DILHORNE. My Lords, the executors of the late Mr. Vandervell, the first, second and third respondents, claim from the appellants, Vandervell Trustees Ltd., dividends received by the appellants on shares in Vandervell Products Ltd. between October 11, 1961, and January 19, 1965. The dividends amounted to £1,256,458 gross and £765,016 after deduction of income tax.

In 1958 Mr. Vandervell transferred to the Royal College of Surgeons 100,000 "A" shares in Vandervell Products Ltd. On December 1, 1958, the college gave the appellants an option to purchase the shares for £5,000. That option was exercised on October 11, 1961. On January 19, 1965, Mr. Vandervell executed a deed which recited that doubts had arisen as to whether he had divested himself absolutely of all interests in the shares, and by which he, inter alia, assigned and released to the appellants such rights as he might have to or in the dividends from those shares.

He had been assessed to surtax on the dividends received by the college on the ground that he had not absolutely divested himself of them. Those assessments were upheld in this House (Vandervell v. Inland Revenue Commissioners [1967] 2 A.C. 291).

Assessments were made on his estate for surtax in respect of the dividends received by the trustees after the exercise of the option and prior to the deed of January 19, 1965, and notices of appeal against those assessments have been given.

In this action the executors contend that during that period the appellants held the shares on trust for Mr. Vandervell and that they are consequently entitled to the dividends which the appellants refuse to pay to them.

If the shares were held on trust for Mr. Vandervell, then there would be liability to surtax on the dividends but it does not follow that there is no surtax liability if they were not so held. If property or any income therefrom is or will or may become payable to him or applicable for his benefit in any circumstances, a settler such as Mr. Vandervell is not to be deemed to have divested himself absolutely of that property (Income Tax Act 1952, s. 415 (2)).

If it is held in the action that Mr. Vandervell was entitled to the beneficial interest in the shares prior to January 19, 1965, presumably the executors will not dispute liability to surtax and the appeals will be abandoned, for it would be very odd if the executors sought to contend before the special commissioners the contrary to their contention in the action. If it is held in the action that he was not so entitled, it does not follow that there is no surtax liability. If the Inland Revenue are a party to the action, they would be bound by the decisions reached in the action and not able to contend on the hearing of the appeals that Mr. Vandervell had a beneficial interest in the shares if it was held in the action that he had not; but it would still be open to the revenue to contend that, even though he had no beneficial interest, he still had not divested himself absolutely of all interest in the shares and dividends.

It is not, therefore, in my opinion, accurate to say that the issues to be determined in the appeals are bound to be the same as those in the action.

If the Inland Revenue were made a party, then it would be in the interest of the revenue to support the executors' claim. If that failed at first instance, they might appeal though the executors might be prepared to accept the decision. They might pursue the appeal to this House. The appellants would be faced with a very different opponent. Instead of having to fight the executors alone, they would find aligned against them a government department with all its resources. And if the appellants ultimately succeeded in the action, that would not necessarily dispose of the surtax liability for they might succeed on the ground that the deed of January 19, 1965, entitled them to the dividends they had received and if it were held that Mr. Vandervell did not have the beneficial interest in the shares, the Inland Revenue, though bound by that decision if a party to the action, could still contend that he had not absolutely divested himself of all interest in the shares and the dividends.

Further, by section 52 (5) of the Income Tax Act 1952, to which I refer later, the duty is cast on the commissioners to satisfy themselves that the assessment is wrong before they alter it. It would be open to them to hold that the assessments were correct even though the revenue did not so contend.

With a view to securing that the Inland Revenue are bound by the judgment in the action, the executors applied for an order under R.S.C., Ord. 15, r. 6 (2) (b) that the Inland Revenue should be added as defendants. The revenue consented to being joined and on October 23, 1968, an order joining them was made. The appellants then took out a summons to

strike them out as defendants. That was adjourned into court and Buckley J. ordered that they should be struck out. The Court of Appeal (Lord Denning M.R., Sachs and Karminski L.JJ.) reversed his decision, and the question now to be decided is whether they were right to do so.

The appellants contend that R.S.C, Ord. 15, r. 6 (2) (b), precludes the joinder of the Inland Revenue in this action and also that, apart from this rule, the High Court has no jurisdiction to do so as Parliament has entrusted exclusive jurisdiction with regard to appeals against assessments to the special and general commissioners.

Section 5 (6) of the Income Tax Management Act 1964 reads as follows:

"After the notice of assessment has been served on the person assessed the assessment shall not be altered except in accordance with the express provisions of the Income Tax Acts."

The following sections of the Income Tax Act 1952 as amended by the Income Tax Management Act are relevant.

Section 51 gives a person aggrieved by an assessment a right of appeal to the general commissioners and, where the assessment has been made by the Commissioners of Inland Revenue, to the special commissioners. Section 229 (4) provides that assessments in respect of surtax shall be subject to appeal to the special commissioners and section 12 (1) of the Income Tax Management Act provides that section 52 of the Income Tax Act 1952 is to apply in relation to appeals to the special and general commissioners under the Income Tax Acts.

Section 52 (5) and (6) read as follows:

"(5) If, on an appeal, it appears to the majority of the commissioners present at the hearing, by examination of the appellant on oath or affirmation, or by other lawful evidence, that the appellant is overcharged by any assessment or surcharge, the commissioners shall abate or reduce the assessment or surcharge accordingly, but otherwise every such assessment or surcharge shall stand good. (6) If, on an appeal, it appears to the commissioners that the person assessed or surcharged ought to be charged in an amount exceeding the amount contained in the assessment or surcharge, they shall charge him with the excess."

These provisions confer jurisdiction on the special and general com missioners to determine the correctness or otherwise of an assessment. Save upon cases stated by them under section 64 of the Income Tax Act 1964, the High Court is not given any jurisdiction with regard thereto.

Tax questions may arise between subjects, as, for instance, with regard to the right to deduct income tax on making certain payments: Asher v. London Film Productions Ltd. [1944] K.B. 133; Riches v. Westminster Bank Ltd. [1947] A.C. 390. In such cases the jurisdiction of the High Court cannot be doubted, but where the correctness of an assessment, and so the liability to pay income tax or surtax, is challenged, that can only, in my opinion, be decided by the special or general commissioners.

I am, therefore, unable to agree with Lord Denning when he said in this case that where the commissioners (the Inland Revenue Commissioners)

consent, the High Court has jurisdiction to decide questions as to liability to tax without going through the procedure of the Income Tax Acts, and with Sachs L.J. when he said that the subject and the Crown can waive their rights to the benefit of the income tax code.

In my opinion, they cannot confer jurisdiction on the High Court by waiver or by consent to adjudicate as to liability of a taxpayer to income tax or surtax, for Parliament has prescribed the method and the only method by which an assessment and the taxpayer's liability thereunder can be challenged.

If, as I think is clearly the case, the High Court has not jurisdiction to determine liability to income tax and surtax, it follows that it has not jurisdiction to make declarations with regard thereto. To do so would be to impinge upon the exclusive jurisdiction vested in the special and general commissioners.

In Argosam Finance Co. Ltd. v. Oxby [1965] Ch. 390 the plaintiff took out an originating summons with an inspector of taxes as defendant, asking whether dividends received from certain shares should be included at their net amount, that is after deduction of income tax, for the purpose of calculating their profit or loss. Section 15 (4) of the Finance Act 1953 provided that an objection to a claim by a taxpayer in respect of alleged trading losses was to be "heard and determined by the commissioners ... in like manner as ... an appeal against an assessment under Schedule D. ..." In the light of this provision Plowman J. held that he had no jurisdiction to hear the summons. On appeal, Lord Denning M.R. while not wholly agreeing with him, said at p. 423:

"If the summons had been limited to question (a) - that is, to determine whether the company was entitled to relief under section 341 - I would agree that the courts would have no jurisdiction to determine it. The question is one which is entrusted by the legislature to the exclusive province of the commissioners, and the courts cannot entertain it."

Diplock L.J., as he then was, agreed at p. 425 that the court had no jurisdiction with regard to that question "for that was a matter which Parliament has exclusively confided to the jurisdiction of the commissioners."

Under section 341 of the Income Tax Act 1952 a person who has sustained a loss in any trade, etc., can apply to the general or special commissioners for an adjustment of his liability by reference to the loss and to the aggregate amount of his income for that year. If the commissioners have exclusive jurisdiction as to this, it would, indeed, be odd if they did not also have exclusive jurisdiction with regard to alteration of an assessment and liability thereunder.

In my opinion, the appellants' contention that the special and general commissioners have exclusive jurisdiction with regard to assessments and liability thereunder is well founded, but I do not think that this conclusion establishes that the High Court has not got jurisdiction to add the Inland Revenue Commissioners as a party to a properly instituted action. Whether or not they are added, they, and, of course, also the special and general commissioners, will, like everyone else, be bound by

any decision reached on a question of law. If added, they will be bound by findings of fact, but the special and general commissioners will not be.

Whether in this case the Inland Revenue should be added, in my opinion depends upon Ord., 15, r. 6 (2) (b) of the Rules of the Supreme Court. So far as material that rule reads as follows:

"(2) At any stage of the proceedings in any cause or matter the court may on such terms as it thinks just and either of its own motion or on application ... (b) order any person who ought to have been joined as a party or whose presence before the court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon be added as a party; but no person shall be added as a plaintiff without his consent signified in writing or in such other manner as may be authorised."

If, under this rule, the Inland Revenue can be added as a party, their consent to that is not a condition precedent to that being done unless it is proposed to add them as a plaintiff. Their refusal of consent would be no bar to the exercise by the High Court of its jurisdiction to add them as a defendant.

The many reported cases in which this rule has been considered were comprehensively reviewed by Devlin J. (as he then was), in Amon v. Raphael Tuck & Sons Ltd. [1956] 1 K.B. 357. He said, at p. 361:

"There are two views about its scope; and authority can be cited for both. One is that it gives a wide power to the court to join any party who has a claim which relates to the subject-matter of the action ... if it is right, it really kills any submission about jurisdiction. The court is hardly likely in the exercise of its discretion to join as a party somebody who has no claim relating to the subject-matter of the action; and if its powers extend to joining anyone who has, the question whether a particular intervener should be joined becomes virtually one of discretion."

In this case the Court of Appeal held that there should be a wide interpretation of the rule. Lord Denning said [1970] Ch. 44, 56-57:

"We will in this court give the rule a wide interpretation so as to enable any party to be joined whenever it is just and convenient to do so. It would be a disgrace to the law that there should be two parallel proceedings in which the self same issue was raised, leading to different and inconsistent results. It would be a disgrace in this very case if the special commissioners should come to one result and a judge in the Chancery Division should come to another result as to who was entitled to these dividends."

Whether this interpretation is wider than that stated by Devlin J. in the passage cited above, it is not necessary to consider. My difficulty about accepting Lord Denning's wide interpretation is that it appears to me wholly unrelated to the wording of the rule. I cannot construe the language of the rule as meaning that a party can be added whenever it is just or convenient to do so. That could have been simply stated if the rule was intended to mean that. However wide an interpretation is given, it must

be an interpretation of the language used. The rule does not give power to add a party whenever it is just or convenient to do so. It gives power to do so only if he ought to have been joined as a party or if his presence is necessary for the effectual and complete determination and adjudication upon all matters in dispute in the cause or matter. It is not suggested that the revenue ought to have been joined.

All matters in dispute in the action will, it seems to me, be effectually and completely disposed of without the Inland Revenue being added as a party. Their presence is not necessary to ensure that the court can effectually and completely determine whether Mr. Vandervell was entitled to the beneficial interest in the shares and whether, if he was, the deed operated retrospectively so as to deprive his executors of a right to the dividends paid before its execution.

The rule does not provide that a party may be added on account of matters in dispute in another cause or matter. And even if it did, for the reasons I have given, it could not be said that the determination of the matters in dispute in this action would effectually and completely determine the liability to surtax. I do not regard the proceedings on the appeals against the assessments and this action as parallel proceedings, nor do I feel that it is accurate to say that the self same issue arises in both proceedings. On the appeals the question will be: did Mr. Vandervell wholly divest himself of all interest in the shares and the dividends? In the action the issue is, who is entitled to the dividends and, as I have said, if the appellants are held entitled, it does not follow that there is no liability to surtax.

While there may be cases where, under the rule, the revenue can properly be joined as a party, this, in my opinion, is not one of them for, in my view, their presence is not necessary to ensure that the matters in dispute in the action are completely and effectually determined.

For these reasons, in my opinion, the appeal should be allowed.

LORD WILBERFORCE. My Lords, this appeal arises out of certain dispositions made by the late Mr. G. A. Vandervell which have already, in one aspect, been considered by this House. Considerable sums of money are involved and the disputes with regard to them are of importance to the parties. But the appeal also raises a question, or questions, of general application: whether, in a suit between subjects concerning the ownership of property, the Crown, represented by the Commissioners of Inland Revenue, can be brought in as an additional defendant against the wish of one of the original parties. At the present time there are few transactions of a commercial, or dispositive, character which do not have tax implications for one or more of the parties to them: so to admit that, when disputes as to these matters arise, the Crown can be brought in, either generally, or in specified cases, or at the discretion of the court, is to introduce a new dimension into litigation, which for one of the parties may have unwelcome consequences. To be faced, in addition to the selected private opponent, by the Crown, with all its resources, as an additional opponent, with rights of argument and appeal, may be a serious matter. It is said that this particular case is an exceptional one; so, in

many respects, it is, but unless some limiting criterion can be found the decision establishes a new principle, to which, in turn, extensions are likely to be made. So we should be sure that we are on firm ground before permitting it.

It is not necessary to say much about the facts. Mr. Vandervell was the controlling shareholder in a successful company, Vandervell Products Ltd. As part of a scheme for founding a Chair in surgery (details can be found in Vandervell v. Inland Revenue Commissioners [1967] 2 A.C. 291) the appellant company, which is a trustee company and the trustee of a settlement for Mr. Vandervell's children, acquired an option to purchase 100,000 "A" shares in Vandervell Products Ltd. This option it exercised in 1961. Between October 11, 1961, and January 19, 1965, dividends on the shares, amounting to over £1,250,000 (gross), were paid to the trustee company. On January 19, 1965, Mr. Vandervell executed a deed assigning to the trustee company all his interest (if any) in the shares and in the dividends, to hold on the trusts of the children's settlement. He died in 1967: the first three respondents are his executors.

These executors now claim against the trustee company to be entitled to the dividends or to a sum equal in amount, contending that they belonged to Mr. Vandervell. The trustee company resist this claim on two main grounds: (a) That the dividends never belonged to Mr. Vandervell. (b) That, in any event, the deed of 1965 had the effect of transferring Mr. Vandervell's interest in them to the trustee company.

The resolution of this dispute will inevitably have fiscal consequences. It may involve claims for estate duty: these we are not concerned with in this appeal. We are concerned with the possible liability of the executors for surtax. The commissioners have already assessed the executors to surtax as regards the dividends, on the ground, presumably, that Mr. Vandervell was the beneficial owner or had not divested himself of the shares during the years in question: the assessment is formally under appeal pending the present suit. If the executors succeed in showing that they are entitled to the dividends, their assessment to surtax will inevitably stand. But this is the difficulty of their situation: if they lose against the trustees and if the commissioners are not bound by the decision to that effect, the executors still have to defend themselves against the assessment, and are at risk of being held liable to a large sum of surtax without having the dividends. It is to prevent this happening that they wish the commissioners to be joined in this action, so as to be bound by the decision. The situation is even more difficult than this. For if they lose against the trustees only on ground (b) above, that is, that Mr. Vandervell was the owner of, or interested in, the dividends up to 1965 but then disposed of them, they might still be liable for the surtax without the dividends. Joinder of the commissioners cannot help them over this difficulty; it arises out of the facts of the situation.

So the position is that joining the commissioners may, but will not necessarily, save the executors from being assessed to surtax without having the dividends. In one event it will; in another not. But it would benefit the executors to have even this partial protection.

I must now refer to the position of the Commissioners of Inland Revenue. Their policy is not to seek to intervene in suits between subjects

merely because tax consequences may arise: it was so stated to this House in Riches v. Westminster Bank Ltd. [1947] A.C. 390. It is not their policy to agree in advance to be bound by a decision in private litigation, nor, invariably, to agree to accept the consequences of a decision in private litigation, though in fact they frequently do so. They agree, and this practice goes back anyhow to 1937 (In re Turner's Will Trusts [1937] Ch. 15) in certain cases, mainly where questions of construction or law are involved, to be joined as defendants if all the parties consent to their joinder. This "consent procedure" has proved useful: it is exemplified in In re Pilkington's Will Trusts [1961] Ch. 466 ([1964] A.C. 612) when the Crown was joined and given a right of appeal and In re Leek, decd. [1969] 1 Ch. 563 and we were told of a number of pending cases where it is being used. But even in this procedure they do not agree to determination by the court directly whether a particular liability to tax arises. They assert the right to refuse to be joined in private litigation, at any rate (and this is the field under discussion) where a question affecting a party's liability to income tax (including surtax) is concerned. The reason for this is, they submit, that a statutory code has been laid down for determining liability to this tax, by assessment, appeal to the special commissioners and, in certain circumstances, to the courts, of the benefit of which they (and they concede the same right for the taxpayer) cannot be deprived without their consent. As regards this particular matter, the commissioners adopt a neutral attitude although they have, by leave, lodged a printed case, to define their position.

I now come to the arguments on the appeal. The appellants put their contention - that joinder ought not to be allowed - on two main grounds: first that there is no jurisdiction in the High Court to join the commissioners as defendants; second, that if there is jurisdiction, their joinder is not permitted by the Rules of the Supreme Court. There is also formally a submission based on discretion, but this could not be pursued in this House. On the respondents' side there is a contention based on acquiescence but, even if they are at liberty to take the point, it has no substance in it.

The argument for lack of jurisdiction rests upon the proposition that, where the legislature has by statute laid down a special procedure for the determination of any question, that special procedure is the only method by which such a question can be determined: and the ordinary jurisdiction of the courts is excluded. As regards income tax a special procedure is prescribed by the Income Tax Act 1952.

This argument was supported by authority: Barraclough v. Brown [1897] A.C. 615, Norwich Corporation v. Norwich Electric Tramways Co. Ltd. [1906] 2 K.B. 119, Soul v. Inland Revenue Commissioners [1963] 1 W.L.R. 112, Argosam Finance Co. Ltd. v. Oxby [1965] Ch. 390. The last two cases were examples where it was sought to bring directly before the High Court a tax question without the consent of the Crown. They do not govern the present case, where the question is incidental, and the Crown consents. The first two depend on essentially the same principle, and it is sufficient to consider Barraclough v. Brown [1897] A.C. 615, for this illustrates sufficiently the scope and limit of the proposition. The question related to the right of undertakers to recover

expenses of removing a sunken vessel in the River Ouse from the owner of the vessel. The owner was under no liability at common law. The undertakers' right to recover the expenses rested, and rested exclusively, on the provisions of a statute which provided that the expenses might be recovered in a court of summary jurisdiction. The undertakers sought to obtain a declaration of liability in the High Court, but it was held that this they could not do. Lord Herschell said, at p. 620:

"I do not think the appellant can claim to recover by virtue of the statute, and at the same time insist upon doing so by means other than those prescribed by the statute which alone confers the right."

The limits of this decision are obvious from these words. In order to compare (in fact to contrast) the situation under the Income Tax Acts, it is necessary to see precisely what it is that under that legislation has been made the subject of the statutory procedure. This is the validity and quantum of the assessment to tax which has been made upon the subject. It is this which, when made, is the subject of appeal to the special commissioners under section 52 (5) of the Income Tax Act 1952 and section 12 (5) of the Income Tax Management Act 1964; it is the assessment which cannot be altered except in accordance with the Income Tax Acts (Income Tax Management Act 1964, section 5) and which ultimately becomes final and conclusive. All this is undoubted and, if necessary, the authority of Barraclough v. Brown could be invoked to show that the High Court cannot interfere with assessments. But this is not sufficient to make good the appellants' argument. In any but the simplest cases of assessment to tax there may arise questions of fact or of law which have to be decided. The special commissioners can decide them. They may do so after examination of the appellant, or by other lawful evidence (Income Tax Act 1952, section 52 (5)). But I see no reason why, if there is consent between the taxpayer and the revenue, these questions should not be settled by agreement, by arbitration or even by decision of the court, whether before or after an assessment has been made, provided, of course, that it has not become final after appeal, or after the time for appeal has expired. There may be questions, in form suitable for decision by the court, which are in fact so close to the question of the assessment itself that the court ought not to entertain them but leave them to the statutory procedure. And nothing that I have said must be taken to imply that either the Crown, or the taxpayer, may not be entitled to insist that a particular question, as between them, be so decided. But I find nothing in the income tax legislation to justify the comprehensive proposition for which the appellants must contend, namely, that the High Court is absolutely excluded from a vast range of issues of a kind normally justiciable by it, just because those questions arise between taxpayer and Crown and form a basis, even a necessary basis, for an income tax assessment.

I consider, therefore, that the High Court has jurisdiction to decide a question between a subject and the Crown as to the ownership of property, notwithstanding that an assessment to tax has been made, the validity of which may depend upon that ownership. From this three things follow: (1) the consent procedure as heretofore adopted is perfectly valid

in appropriate cases; (2) either the Crown, or the subject, has the right to insist that the statutory procedure for dealing with disputed assessments to income tax (and surtax) be followed; (3) the question whether, where both Crown and subject consent, the Crown can be brought into litigation between subjects depends either upon the consent of all parties being given, or, failing this, upon the Rules of the Supreme Court.

The particular rule which has to be considered is Ord. 15, r. 6.

As to this provision, though I am willing to give it a generous interpretation, I am in agreement with my noble and learned friend, Lord Morris of Borth-y-Gest, and with Buckley J., that it does not enable the Crown to be brought into the present litigation. That it has not this effect was perceived in 1944 by Lord Greene M.R. in Asher v. London Film Productions Ltd. [1944] 1 K.B. 133, and the view expressed in his judgment must have been confirmed by subsequent consultation with the Attorney-General which failed to provide an agreed formula. I cannot agree with the Court of Appeal that this situation, which the same court clearly thought to exist in 1944, has in some way altered since that time: the rule is in all essentials the same as it was then, and the only factor adduced as evidence for a change consists of the development of the consent procedure. (In re Pilkington's Will Trusts [1964] A.C. 612 was such a case where the commissioners were brought in with their consent and that of all parties: Riches's case [1947] A.C. 390 where the Crown appeared as amicus curiae.) But I do not see how any of this can affect the scope of the rule where no consent exists.

From one point of view, it would be convenient if procedure existed for enabling the Crown to be bound by inter-subject litigation, but so long as the Crown desires to retain freedom of choice this may be difficult to achieve, and whatever change were to be made would have to ensure that the other party is not prejudiced by the joinder.

In my opinion, the trustee company's objection is justified, and I would allow the appeal.

LORD DIPLOCK. My Lords, between July and October 1967 the executors of the late Mr. Vandervell were served with notices of assessment to surtax for the years 1962-63, 1963-64 and 1964-65 upon dividends which had been paid to the Vandervell Trustees, Ltd. as trustees of a settlement made by Mr. Vandervell in 1949. The assessments were made on the basis that the shares on which the dividends were paid were held by the trustees on a resulting trust in favour of Mr. Vandervell. The executors have given notice of appeal against the assessments.

Section 5 (6) of the Income Tax Mangement Act 1964 provides that after notice of assessment has been served "the assessment shall not be altered except in accordance with the express provisions of the Income Tax Acts." The only way in which an assessment can be altered under the provisions of the Income Tax Acts is by the special commissioners on an appeal to them by the party assessed. The powers of alteration are conferred by section 52 (5) and (6) of the Income Tax Act 1952, as amended by the Income Tax Management Act 1964, and made applicable to surtax assessments by section 229 (4) of the Income Tax Act 1952. Section 52 (5) and (6) are as follows:

"(5) If, on an appeal, it appears to the majority of the commissioners present at the hearing, by examination of the appellant on oath or affirmation, or by other lawful evidence, that the appellant is overcharged by any assessment or surcharge, the commissioners shall abate or reduce the assessment or surcharge accordingly, but otherwise every such assessment or surcharge shall stand good. (6) If, on any appeal, it appears to the commissioners that the person assessed or surcharged ought to be charged in an amount exceeding the amount contained in the assessment or surcharge, they shall charge him with the excess."

The executors have not been paid the dividends. In 1968 they brought proceedings against the trustees to recover them. These were started by originating summons but are now being continued as a witness action with pleadings. Issues of fact as well as issues of law are involved. The trustees resist the claim upon the ground that at the time the dividends were received the late Mr. Vandervell had already parted with his beneficial interest in the shares or, if not in the shares, at any rate in the dividends declared on them. Alternatively, they say that Mr. Vandervell disposed of his interest in the dividends in 1965 after they had been received by the trustees.

If the executors recover the dividends from the trustees or if they fail to recover because Mr. Vandervell did not dispose of his interest in them until 1965, the estate of the late Mr. Vandervell will be liable to surtax in the amounts assessed on the executors. It is only if Mr. Vandervell was not entitled to the beneficial interest in the dividends at the time when they were received by the trustees that the executors would be entitled to have the assessments to surtax reduced by the special commissioners. But the onus of proving this to the satisfaction of the special commissioners would lie upon the executors; and the special commissioners would not be bound by any findings of fact made by the court in the action between the executors and the trustees. As respects any ruling by the court upon questions of law involved, the special commissioners would have to follow it, but it would be open to the commissioners of Inland Revenue (whom I will call "the board") to appeal by way of case stated and to carry that appeal to an appellate court which might not be bound by the ruling of the court in which the proceedings between the executors and the trustees terminated.

Theoretically, therefore, there is a risk that the executors might be faced by conflicting findings of fact or law in the action between them and the trustees, on the one hand, and in the proceedings in their surtax appeal to the special commissioners, on the other, which might have the result of their failing to recover the dividends from the trustees on the ground that Mr. Vandervell was not beneficially entitled to them at the time they were received by the trustees, and yet also failing to have their assessment to surtax on the self-same dividends set aside, because they had not succeeded in establishing this ground to the satisfaction of the special commissioners or of an appellate court on appeal by case stated.

It is in an endeavour to eliminate this theoretical risk, which I confess I regard as minimal in the actual circumstances of the instant case, that

the executors have sought, against the opposition of the trustees, to join the board as additional defendants in their action against the trustees. The sole reason for joining the board, who do not themselves oppose this course, is in order that the board may be bound by any decision in the action as to who was entitled to the beneficial interest in the dividends at the time they were received by the trustees.

My Lords, it has been assumed, without any close analysis, that if the board are made parties to the action, the special commissioners who hear the executors' appeals against their surtax assessments will be bound to give effect to any decision of the court as to who was entitled to the beneficial interest in the dividends at the time they were received by the trustees.

But a judgment in the action can only operate as an estoppel per rem judicatam between parties to the action; and in an action in which no express declaration of the executors' liability to surtax is sought, the only estoppel against the board which could be relied upon would be an issue estoppel. The only effect of an issue estoppel per rem judicatam is to prevent the party estopped from asserting, in any subsequent civil litigation between the same parties in which the same issue arises, any claim or defence which would involve his contending that the previous decision on that issue was erroneous or his adducing evidence in support of any such contention. It is, therefore, necessary to consider what are the legal characteristics of the proceedings on appeal to the special commissioners against surtax assessment and what are the respective roles of the board and the special commissioners in such appeals.

The board, though entitled to be represented during the hearing and at the determination, are not necessary parties to an appeal. If they do not attend, the special commissioners must still be satisfied "by examination of the appellant on oath or affirmation, or by other lawful evidence" that the appellant is overcharged by the assessment; and the special commissioners may increase the assessment proprio motu if they are satisfied that the appellant has been under-assessed. If the board do exercise their right to appear, their role is restricted to that allotted to them by section 52 (2) (b) and (c) of the Income Tax Act 1952, namely "to produce any lawful evidence in support of the assessment," and "to give reasons in support of the assessment." They have no right to adduce evidence or to give reasons for any increase in the assessment although the special commissioners have express power to make one.

It is thus evident that the function of the special commissioners on an appeal against an assessment to surtax differs from that of a court of law on the hearing of a civil action, whether at first instance or on appeal. A court of law adjudicates upon issues in dispute between the parties to the civil action which they have chosen to submit to the court's adjudication. It is not entitled to adjudicate upon any other issues or to make an order which none of the parties to the action has sought. In contrast to this, the special commissioners on an appeal against an assessment have to satisfy themselves by lawful evidence that the appellant has been overcharged, even though the board themselves do not dispute this on the appeal and they can make an order increasing the assessment although

the appellant has not sought and the board are not entitled to seek or even to support the making of such an order.

Thus, even if the court in a civil action to which a taxpayer and the board were parties had jurisdiction to determine an issue of mixed fact and law which would also arise upon the taxpayer's appeal to the special commissioners against an assessment on him to surtax, the issue estoppel per rem judicatam resulting from the court's determination of that issue would prevent the board from producing any evidence before the special commissioners which conflicted with the court's determination of fact or advancing any reasons to the special commissioners which conflicted with what the court had decided on that issue as a matter of fact or law. But it would do no more. The taxpayer would still have to satisfy the special commissioners that the assessment was wrong and, so far as it depended upon facts, to do so by lawful evidence of them. The judgment of the court in the action would not be lawful evidence of the facts found therein. Those facts would have to be proved afresh by the taxpayer if the grounds on which he sought reduction of the assessment depended on the truth of those facts.

My Lords, I do not desire to say anything to discourage the sensible practice on appeals before the special commissioners of dispensing with proof by lawful evidence of facts which are agreed between the taxpayer and the Commissioners of Inland Revenue or which the latter do not wish to contest. The functions of the special commissioners have been substantially altered by the Income Tax Management Act 1964. They have become more judicial and less administrative, although the procedure on appeals to them laid down in section 52 of the Income Tax Act 1952 has not been amended to take account of this. Nevertheless, if with the consent of both the parties entitled to be heard on the appeal they determine it upon facts which are agreed but not proved by evidence, this is irregularity in procedure which can be waived. The resulting assessment as altered or confirmed by the special commissioners would be valid and neither of the consenting parties would be able to object to it thereafter on the ground of irregularity.

No doubt the taxpayer and the board might also agree to accept as correct, for the purposes of the appeal, facts already found in any judgment of a court, whether or not the taxpayer or the board were themselves parties to that judgment. They might also, without any irregularity, agree not to appeal by way of case stated from any determination of the special commissioners which followed any ruling of law contained in the judgment. That is the purpose for which the executors and the board intend to make use of the judgment in the instant action. But the board are unwilling to do so unless they themselves are made parties to the action.

My Lords, however sensible this latter course may be, it would involve an irregularity in the procedure laid down by Parliament for the determination of surtax appeals. What the court is being asked to do, against the opposition of one of the parties to the action, is to give its aid to this proposed irregularity. I do not think that it can. The decisive question, as I see it, is whether the court has any jurisdiction, after an assessment to surtax has once been made, to adjudicate between the

taxpayer and the Commissioners of Inland Revenue upon the correctness of the assessment or upon any underlying issue of fact on which the correctness of the assessment depends, where the board have no other interest in that issue except its effect upon the taxpayer's liability to surtax.

I think the court has no such jurisdiction. The provisions of section 5 (6) of the Income Tax Management Act 1964, which I cited at the outset of my speech, are clear and unequivocal. The power to alter an assessment once it has been made and served is conferred upon the special commissioners to the exclusion of any court of law, except in so far as an appeal from a determination of the special commissioners upon a point of law lies to the High Court under section 64 of the Income Tax Act 1952. It is not suggested that me court has any jurisdiction to entertain an action between the taxpayer and the board for a declaration that the taxpayer's liability to surtax is different from that with which he is charged by the assessment. That would be to trespass upon the jurisdiction to alter an assessment which Parliament has confided exclusively to the special commissioners. And I do not think that this statutory exclusion of the jurisdiction of the High Court can be circumvented by seeking a declaration upon an issue whether of fact or of mixed fact and law upon which the liability of the taxpayer to the amount of surtax with which he has been charged by the assessment depends. If the only interest of the board in that issue is the taxpayer's liability to surtax, any relief granted by the court by way of declaration would either not be a declaration of any rights to which the taxpayer was entitled against the board or vice versa, or would be a declaration of his liability to surtax, and this lies within the excluded jurisdictional field.

If the court has no jurisdiction to grant relief by way of a declaratory judgment of this kind against the board at the suit of the taxpayer or against the taxpayer at the suit of the board, it cannot, in my view, acquire jurisdiction to do so merely because a declaratory judgment in similar terms is sought by one or other party in an existing action instituted for some other purpose between the taxpayer and some other person. It follows that if the commissioners were made parties to the instant action neither the executors nor the board would be entitled to claim any relief by way of declaration or otherwise against one another in that action. A party to an action must be a person who claims in that action some relief against another party to the action or against whom some relief is claimed by another party to the action. There is, in my view, no jurisdiction to add as a party to an existing action a person by and against whom no relief which the court has jurisdiction to grant can be claimed.

My Lords, I have deliberately confined my observations to cases such as the instant case where an assessment to surtax has already been made and is under appeal to the special commissioners. Much wider topics have been canvassed in argument, and your Lordships have been invited to express some general views as to the validity of what has been termed "the consent procedure" in adding the Revenue as parties to civil actions between subjects. Despite the helpful argument, I do not feel qualified to do so. It seems to me that the problem would be more appropriately

dealt with by Parliament itself rather than by attempting, by judicial decision, to reconcile a procedure of this kind with a whole variety of statutory procedures in fiscal matters which never contemplated it. But, for the reasons I have given, I would allow the instant appeal.

Solicitors: Culross; Allen & Overy; Solicitor of Inland Revenue.

F. C.