Today in Court 2: Mr Dunlop opened proceedings by going back …

Comment on HMRC vs MGH by John Clark.

Today in Court 2:
Mr Dunlop opened proceedings by going back to the point he tried to make yesterday, namely that ‘Income Tax’ equals ‘tax on income’, and ‘income’ means ‘money or money’s worth’.Neither Income Tax nor PAYE obligations attach unless there are earnings in the sense of money or money’s worth.What about the McCann letter, some ask? That letter was not a ‘contract of employment’. There are difficulties in precise .??.. That was the job of the First Tier Tribunal, whose decision, upheld by the Upper Tier, was that there was no tacit agreement to pay earnings.
The Tribunal below ruled that there were no ‘earnings’ over and above salary.
There were payments, Mr Dunlop continued, but they were not payments which the employees were entitled to, and not payments in respect of which they had any proprietary interest. That’s why they were not earnings. And if one looks at the Forde& McHugh case one can see that is correct.
The facts in the that case were that there was a payment of Treasury stock into Trust, and the question was whether they were earnings.Were they to be deemed as such? It was clear that they were not. And because this Statutory innovation did not apply for NIC purposes the Court had to consider the notion of earnings.
Mr Dunlop then referred to the judgement of Lord Reimer (?), who had looked at the Streatham case in which it was decided that there was a need to look at the true nature of the arrangement that had been made.[And here Mr Dunlop pointed out that the First Tier Tribunal did consider the true arrangements and had agreed that they did not amount to an agreement to pay earnings].
Then Reimer had looked at the Edwars and Roberts case in which Edwards in addition to salary, was to receive a sum from a fund set up by the employer.It was ruled that it could not be said that the employee had accrued a vested interest..
Mr Dunlop said that there was no proper distinction between those funds in that case and the funds presently in issue.And in the Forde & McHugh case ( my note: it took me a while to understand that the abbreviation ‘FML’ was used in referring to this case, because the employer in the case was Forde and McHugh Limited!]it was decided that ‘such payments form no part of the emoluments….because they cannot be converted into money.Mr Dunlop said that Lord Justice Reimer’s conclusion was that the ordinary meaning of ’emoluments’ was defined, and that the payments involved here do not fall within the definition.
Therefore, according to Mr dunlop,any monies paid into the Main Trust , OR sub-trusts in the present case were not emoluments because they could not be turned into money. And in the Words of the Edward’s judgement the employees have no ‘vested interest’ in the monies in the trust.
Mr Dunlop further remarked that since then, Parliament had filled such gap as there was:Part 7 of the new regulations of 2011, which specifically mentions arrangements between parties and ..awards, loans..”
[At this point, Lord Drummond-Young complained about the illegibility of the copy he had been given.
Mr Ghosh volunteered that was prepared to accept what was on the copy, Mr Dunlop assured Lord D-Y that better copies would be obtained]
Continuing,Mr Dunlop went on to say that the new regulations will deem such arrangements,loans etc to be earnings..
My learned friend, said Mr Dunlop, says we should not be looking at this new legislation.But I think Parliament thought it necessary to fill the gap.Why was there a gap? because payments like this cannot be turned into money by the employee.
Mr Dunlop made another reference to the Supreme Court ‘ FML accept….but did FML pay earnings when McHugh had only a cntingent interest. The revenue argued that what was paid was earnings because
McHugh benefited from the hope of…’
In the present case the only thing my learned friend refers to is the ‘package’……..[????]
He referred to Lord Hodge’s pronouncement on ‘double taxation’
where he cites another case in which the double-taxation is considered, the Dextra case.
” Mr Thornhill points out the double taxation when money is paid into the fund and then when payments are made out of the fund.’
We prefer the Thornhill view, and so did Lord Hodge.What my learned friend asserts would make no sense of what Lord Hodge said.
Mr Dunlop said then that he would turn back to the Forde case..
At this point Lord Carloway interrupted to express his disquiet at the faulty ‘bundle’ [ i.e. the whole collection of material being used in the appeal.There was a whole sentence missing from the report of one of the cited cases]
Mr Ghosh expressed his readiness to accept that he was happy if the court accepted what Mr Dunlop said was the missing sentence.
Lord Carloway said he was anxious to ensure that what they had on paper was indeed the official transcript of the report of the case.
Mr Dunlop gave him the proper reassurances, and continued:
There are three reasons why muy learned friend’s submission is wrong
1. the man on the underground … payment into the fund was NOT earnings and NOT taxable, payment out of the fund are.In Forde, the money was placed FOR Mr McHu.That is not the case here.
2.”…only by looking at what the earner received”
3. The Revenue by treating the payments into Trust as earnings failed to see the contingency of funds and failed to deal with what the employee received at the time.
Mr Dunlop then returned to the ‘accrued interest’ cas, and stressed the approbation of what the Master of the Rolls said about ‘vested interest’.

lord Drummond-Young asked ” What does ‘vested interest’ mean? It can be a very ambiguous word.
Mr Dunlop vaguely acknowledged but related it to ‘money’s worth’ you can sell it, profit from it.
In this case, he asked, was there vested interest? NO
is it money? NO
He said it was interesting that the ‘Smith and(?)case ,which did not make the cut to be included in the cited references, was used by his learned smelled of afterthought.
Dunlop then went back to the Edwards case and the agreement between the company and Edwards: “the company shall pay salary and an additional fund…under the provisions the following payments will be made to the account of Mr Roberts in the form of shares..”
and that is the case.If my learned friend is right, edwards should have gone the other way.
Likewise, going back to Dextra case, which was only a Special Commissioners’ decision, but there was no appeal against it, no demurral
we have “..the chronology of events of the setting up of EBT……on 21.12.98 various contributions to EBT..” then [ and this is where I began to lose the thread]
my learned friend cas his basis for distinguishing was based on the fact that the Trust was set up in 1998, but not paid till 1999.
The question before the Special commissioners was ‘ were these payments earnings?’
Lord Drummond-Young interjected ” ‘earmarking’ is ambiguous
Mr Dunlop: my learned friend used ‘earmarking’, look, defined amounts paid into trust for nominated people…
with great respect 1998/99 is a specious distinction
And Dunlop read again from the Special commissioners’ judgement.He then said ‘I submit that this is directly applicable to this case.My learned friend does not argue that Dextra is wong, and his basis of distinction does not work.In my submission, this approach is consistent with that of the Aberdeen Asset case. In Aberdeen, the taxable payment was the transfer of shares in the money box companies to the employee.If my learned friend is right,that conclusion is wrong.if he is right, the true taxability arose on the anterior funding of the trust.
I will cite one last authority,the UTTT judgement in the UBS case. In that case, there are certain parallels:
‘none of the employees was entitled to..’
none of the relevant employees became entitled to immediate payment..
that never happened because sums were put into shares..”
The same idea, identified bonus, part as shares..

On the quesion of ‘the year they were earned/year they were paid’ it is difficult to reconcile the Revenue’s position with that of the argument in …..(?)
In my submission, it’s impossible to square the circle.
The fact is, in this case there are no earnings and that’s what lord Doherty found, and that’s what my learned friend has to show is wrong.
My learned friend’s assertion about it being ‘catastrophic for the public purse’is overstated. If any payment is made out of the Trust, it is taxable.If paid to family, that’s section 201.
The challenge on re-direction of earnings fails.
Lord Drummond-Young: You haven’t mentioned the Hatton (?) case?
My Lord, that was straightforward.
What has to be attcked is the notion that under the law of England the Protector could take absolute entitlement. I note the Revenue’s introductory remark ” the employee could wind up the trust fund”
On ‘unreserved disposal’, Garforth is the authority
Here, the Trusts are genuine, there is genuine discretion, and we are a long, long way from ‘unreserved disposal’.
It’s odd that the Revenue would take 27 days of argument to discover ‘unreserved disposal’. This court is entitled to query the correcftness of an argument only ?….?
The decision in Dextra…. and similar in Sempra(Special commissioners decision, but not appealed or subsequently challenged)
” discharge of employer”s obligations” trustee not a cypher’
If there is a genuine discretion in play…
On the role of the Protector, the First Tierfound that the Protectors were in a position resembling trusteeship ( para 103). That denotes a fiduciary position, so could not do what my learned friend said they could do.The Main Trust protector is not the point. it is the power of the protectors of the sub-trusts. in Mr Bain’s case, my learned friend says the power was absolute.That is simply not true.
[Mr Ghosh interjects [but i couldn’t here what he said]
lord Drummond-Young : fiduciary duties cover a vast tract of law.Protector is there to ensure that the wishes of the benficiaries are carried out
Mr Dunlop: yes, my lord. You can’t act in your own interest.
Lord D-Y: even that is not an absolute rule..
Mr Dunlop: On the question of whom the Protector is there to protect, we can look at the Jersey case “… protector will be to protect the beneficiary’, and in my submission the Protector is there for the beneficiaries.
lord menzies: What’s the purpose of the protector if the Trustees are….
Mr Dunlop: The protector is much more limited’
Lord D-Y: well, it means so many things…
Mr Dunlop: There is a text book..
Lord D-Y: aimed at different jurisdictions- West Indies, Caynman Islands..
Mr Dunlop read from a passage’
Lord D-Y : I wrote that…
Mr Dunlop continued, saying that under Scots law, protectors role is fiduciary in part, and in part to protect the trust.He referred to copies of Logan Henderson encyclopedia ”( fiduciary is bound to…) and to Stair Memorial , all to the effect that protectors can not do what they like even when the protector is not fiduciary.
Lord D-Y: who is the donor of the power?
Mr Dunlop: The Trustee of the main trust.
the only argument is tht the protector was given the power to amend..
But the ‘settlor’……
more references ‘..if the holder of the power is also an object or the power’
The beneficial class does not include the trustee, there is a prohibition on emoluments. therefore it is not right to say that the trustee could turn the whole thing into an emolument.
trustees are to give written consent to amendments when their interests are involved. the trustee cannot stand by and let the protector do what he likes.
And a final point, says Mr Dunlop,, applying only to the Bain trust, ” the protector cannot (then follows clause 2)
therfeore there is no ‘unreserved disposal’ on the Garforth test.
The protector cannot do what my learned friend suggests.Unreserved disposal is not made out,therefore the Tribunal followed the right test: correctly held there were earnings, and correctly held there was no unreserved disposal.
Therefore, the Court should refuse the appeal, and Lord Doherty’s decisions should stand.
End of Mr Dunlop’s submission.

Once again, Mr Ghosh was a bit of a problem. He speaks fast and low, so it’s difficult to get either the opening words of what he says ( to get an idea of what he might be about to say, or the end of his sentences so that you can fit what he has said into context.
My scribbles of what he said are hard for even me to decipher, let alone understand, but I’ll try to get some of what he said at least paraphrased tomorrow.
The submissions finished at about 3.15 this afternoon, with Lord Carloway saying it will take them a wee while to reach a decision.

John Clark Also Commented

While it’s still reasonably fresh in mind, I have spent the last hour or so trying to make some sense of my notes.
Mr Ghosh in exercising his right of reply was of course briefly defending his earlier submissions against what Mr Dunlop was saying today in his submissions.
my problem is that because I couldnae hear him yesterday, I gave up trying to record what he was saying. the result of that is that what I have recorded of what he said today ( and he was punchy, one-line dismissive of the respondent’s case) can only be properly understood in the context of the arguments he put forward fully yesterday!
Mr Ghosh: First,The question of whether payments into the Main trust or, alternatively, into sub-trusts were ‘earnings’ is a matter of LAW, not of fact.[It was]the observations or findings of fact [in the lower tribunals] that found no payment of earnings.
Second, I have not conceded that there was no entitlement to anything. I accept there was no entitlement for cash to be paid them, the employees. There was a present, contractual obligation on the employer to pay the Main trust on terms…. being informed by ‘letters of wishes’and loan applications. This was accepted as a contractual entitlement in the lower tribunal (para 139).
The only question is whether given the entitlement the identity of the payee makes any difference.
If Rangers had not paid into the Main Trust, actions could have been raised.
‘An application of my wages in a particular way’:- the respondent [Mr Dunlop] did not answer the point.
‘if you are going to pay me a bonus, don’t pay me- pay someone else’
clearly re-directed earnings.
Lord Carloway: the finding that payment to sub-trusts was in lieu of bonus to executives, no finding of payment of contractual bonuses.
Mr Ghosh: but ‘instead’ .
‘remuneration’ not once dealt with by Respondent, not a single case from the respondent..
mis-description by Mr Dunlop of what I said.
I don’t want to raise the temperature. i am annoyed.
Procter and Gamble [case]?.. ach!
The Dextra case. Mr Dunlop said ‘earnings’ had not been argued by First tier. It had! I don’t blame him ( Dunlop) [ my note: I think he was having a swipe at the rubbishy rubbishy way the First Tier had recorded their findings] [ directed payments]
power of protectors ( First tier decision , paras 116, 117, 138), an express observation. the pointv was raised.
UTTT directed payments argument -para 22, para 24 (last sentence) para 40, para 69, 70.
Powers of protector, paras 36, 47, 79, 80
Is my argument unprecedented? NO. it was argued in 1904.’Benefit in kind’ provisions
the notion that ‘don’t pay me, pay him’….

The new Regulations brought in in 2011?So what? We shouldn’t construe legislation by reference to future legislation.The new legislationhas nothing to say about the present case.
‘Causal connection’ informs payment into the main trust, on terms to give the beneficiaries what they want..
causal chain… letters of wishes, loan application..
and my learned friend stayed away from talking about side-letters
Dextra? double tax? I have said there would not be double tax.
It’s quite simple.
Lord Carloway:( smiling) it’s only him that made it complex [ no idea who he was referring to, and I might have misheard].
Mr Ghosh: ” my learned friend took his eye off ‘entitlement’ on to the trust, that’s why he was so careful to stay away from the Hatton (?) case, in which it was decided that ‘income is the product of their personal exertion’..
THAT’S the principle. If my salary is applied in a particular way that I am happy with, it is still my salary.
As for the Aberdeen Asset case, in relation to MGML trust only, employees were excluded from Main trust.The Main trust had to be an entity acting on behalf of the employer.
on the protector, whose wishes was he to protect-it has to be the ‘settlor’-the employer who puts the money in.
And a reference to the 2nd May Trust (MGL only) affecting or involving SDM, with references to paras 71 in the First tier’s decision.
then Dextra? Sempra? simply not relevant to any of this, paras 78, 79..
Lord D-Y: loans were repayable on demand after 10 years?

Yes, para 103.
End of Mr Ghosh’s right of reply.
Mr Dunlop told the Court he would hand in the proper print of the page that had the missing sentence. And then asked the court to note that in the Kirkness case in 1956 it was held that ‘subsequent legislation may be looked at if there is ambiguity in earlier legislation”

And that was that. Lord Carloway thanked Counsel for their submissions, and observed that it would them a wee while to arrive at their judgement.

I can add that Mr Ghosh was really seriously annoyed at what he saw as Dunlop’s misrepresentation of something he said.

And it was clear that he thought the First Tier had made an arse of how they went about their recording of findings of fact and findings in law.
The Bench didn’t show in any obvious way that they thought the same, but I think we all felt that they agreed.

I suspect that the President of the Tribunals might get a wee note suggesting that the ‘majority’ of that FTTT tribunal should be told that they will not be called upon again.

Because we don’t need to be lawyers to see how badly and disjointedly the two had tried to put together their findings of fact and how they related those findings to the legislation and to case law.
And we don’t need to be trained lawyers to appreciate how much more professionally and skilfully presented was Dr Poon’s dissenting judgement.It is easy to see her line of reasoning and how she understood the facts as they were established and how the law,in her opinion, applied to the facts.
She made the other two look like rank amateurs.
Only very,very wicked people would suggest that their amateurism was contrived.

Homunculus says:
Member: (108 comments)
July 8, 2015 at 8:32 pm
‘..If so he is clearly a clever and talented man, however going by the webpage this isn’t really his field. I’m not saying he isn’t more than capable, it just seems his expertise may be in other areas.’
I would say that he seemed to me to be not fast enough on his feet to ‘feel’ the import of the questions and interjections from the bench, or to foresee what the bench might ask.
And, it seemed, he had not quite realised that his side ( whether he was involved or not) had agreed to the note of what was to be raised by Mr Ghosh, the note that allowed Mr Ghosh to refer to, and invite the Court to look at, the transcript of the First Tier’s decision..
So he got off to a bad start as obviously not having fully briefed himself.
Looked at realistically,and in the round,I would say that Mr Dunlop has still to acquire , in this field, the street-fighter edge that Mr Ghosh so clearly has.

Auldheid says:
Blog Writer: (477 comments)
July 8, 2015 at 11:27 pm
‘..I mean should whoever is responsible, if still in the game in any position of authority, lose their place in Scottish football? ‘
Hitler has gone. The gauleiters will plead the Eichmann defence ‘obeying orders’.
The rottenness in the Executives of the SFA/SFL ( at the time)will be punished in that the individuals serving on those executives will feel a growing chill, as they are progressively removed from elected or appointed office as having presided over the most disgraceful episode in Scottish Football history.
What is of fundamental importance though, is that, if the actions of SDM’s Rangers in the field of social taxes ARE declared by the Courts to have been illegal,the sporting triumphs ‘won’ by the illegality as well as by the football cheating implicit in the breaking of the rules requiring declaration of all payments made to players, must be unceremoniously stripped from the record of the liquidated club..
Other sports know how to deal with cheating.
Scottish football should not be allowed to be different.

Recent Comments by John Clark

It Is Better To Offer No Excuse Than A Bad One
My brother and I, auld men now that we are, meet occasionally for a pint or three.
We tend to pay homage to our late dad by visiting one of the pubs he used as a young man afore the war ( he lived in digs near Partick Cross) , or one of the pubs he used when we were kids during his working life at what  used to be Glasgow Corporation Tramways Parkhead depot,  or the pub he used in Tollcross in his retirement days.
So I feel for the patrons of what had been Annie Miller’s pub in Ropework lane.
If and when the new owners of the premises tart it up gaily as a feeder bar for their adjoining sauna, I expect that it will no longer be a ‘Rangers’ pub,a place of shared enjoyment of football memories and celebration of former days of glory.

Like the historic Rangers Football Club, Annie Miller’s is dead. Ceased trading in 2016. No longer exists as a ‘Rangers’ pub, any more than the Rangers Football Club of 1872 exists as a professional football club entitled to a place in Scottish Football.
That’s the reality.
There isn’t even a ‘Scottish Football Pubs Association’ prepared to create and propagate a lie  that ‘Annie Miller’s’ lives on, there have been no white or green knights/knaves rushing in to found ‘continuity Annie Miller’s’, no running-dog SMSM types betraying their avocation by propagating untruths…… convicted criminals begging, borrowing and making false promises about good times to come if only other folk will produce the readies…
Annie Miller’s is dead and gone.
Only a lie sustains TRFC Ltd.
And those who drank in Annie Miller’s know that.
And the evil men of the SMSM and the SFA know it, too.
May 2018 see them confounded, and their untruths exposed.

It Is Better To Offer No Excuse Than A Bad One
FinlochDecember 30, 2017 at 20:42
‘…Craig took a Corinthian and undisciplined club going nowhere fast, rooted it into a previously ignored community and has achieved some incredible health and social goals deep into that community using football as glue.’
Beautifully expressed, Finloch.

Football as a glue of ‘community’

Of community trust,

of basic honesty,

of the  Corinthian spirit,

of sporting integrity….

and of all the virtues that the SFA has so spectacularly abandoned, in its determination to insist that Charles Green’s Sevcoscotland is entitled to call itself the Rangers of 1872

That such an incredibly monstrous perversion of truth of any kind, never mind sporting truth, is being, and has been for 5 years, propagated by our Football Governance body and supported by the SMSM is stark evidence of a deep, deep corruption at the heart of our sport, and, worse, at the very essence of our ‘free’ Press.

in this little country of ours.

It Is Better To Offer No Excuse Than A Bad One
And since I’m talking to myself while all you guys and gals are snoring your heads off, can I just mention that in the local newspaper this morning there was a piece about school sports.

It seemed to be about the ‘pick’ of the best players.

I didn’t have time today to read the whole thing ( and it’s too late to disturb the household to go looking for the paper!) but it seemed to be related to the use by ‘soccer’ teams of the American  Football  concept of who gets to pick the best player in the ‘draft’.

I have only the haziest understanding of that concept.

But in so far as it might relate to attempts to create genuine ‘sporting’ , on-field, equality of talent, it must have something to recommend it.

Even the Americans realise that in order to make money out of sport,there has to be some concept of genuine ‘sporting competition’

Auldheid reminded us, quite movingly, of the joyous nature of our game as we all experienced it.
We all knew instinctively what was fair, and what wasn’t.
Remember how our street game teams were picked?

The two ‘captains’ tossed for first choice.Whichever won the toss would pick the ‘best’ player. The other guy would pick ‘the second best’ and so on.

And, if it appeared that there was an imbalance ,or if there was an odd number of players, then it would be agreed that a ‘John Clark’ would play the first half for one side to give them the extra man, and the second half for the other side, to try to be fair in the use of that useless lump!

( who, I may say, was actually quite good at lifting the wee ba’ from the street up onto the pavement, one hand on the lamp-post outside the Thomson’s house on Cuthelton Street, and bringing it to the goal at the lorry entrance to the Domestos depot ( formerly Donald Clarke’s steel kind of place, which in 1947 sirened One o’Clock,with the siren they used ‘during the war!’)

And it is these kinds of memories that fuel my contempt
contempt for the cheating bast.rd of a knight of the realm who killed the RFC of my day

contempt for the SFA who, like some referees,not only did not ‘see’ that cheating but went further and assisted in that cheating

And who continue to propagate the lie that the football club that cheated its way to death by Liquidation is somehow the same club as a five year old creation that they themselves have lied into existence.

And as for the the whole lot of the successive boards of either Sevco 5088, Sevcoscotland, The rangers football Club Ltd, RIFC plc  how can they be described otherwise than as  scavengers of carrion? Feeding as they do on the dead flesh of a once proud football club?

It gars me greet…
Quietly and solemnly, into my glass of “Goose IPA, 5.9%, made from hops from Idaho” ( And actually quite surprisingly pleasant, reminiscent of McEwan’s pale ale.

It Is Better To Offer No Excuse Than A Bad One
It’s 11.43 pm in Scranton,PA,  and we have just come back from being wined and dined  in tremendously good company in a friends-of-the-son’s home.

I am therefore in a cheerful frame of mind. (Mind you, sitting in the back seat of the car I had one of those A9 moments of absolute fear, when the driver overtook another car on a blind bend, before I realised we were still on a dual carriageway!)….

For one reason or another, it suddenly strikes  me that I don’t actually know ( or remember) when it was that the concept of ‘transfer windows’ was introduced, or why it was introduced.

On the face of it, it’s as much of a restriction of ‘trade’ on ’employers’, as the pre-Bosman situation was on freedom of employment was on ‘workers'(players).

Is there a decently worked out rationale for the concept?

It Is Better To Offer No Excuse Than A Bad One
easyJamboDecember 27, 2017 at 17:49
‘..I think that the document will only be a restatement of the resolutions that were approved at the AGM (Resolutions 10 & 11).’
You’re perfectly right, of course, eJ: it was only the official recording  of the AGM resolutions.

I think I for one (in my general ignorance) tend to think that any plc of which a director has been taken to the Courts( in an unprecedented action by the Takeover Panel) would have every form or document that it submitted to Companies House rigorously examined, cross-checked, double-checked, treble checked ,even, in a way that ,for example, the SFA does not do with documents submitted to it by its trustworthy gentlemen members.

The Takeover Panel has a lot riding on how the Law stands in its approach to the Panel’s need for support in their regulation of rogues in the market-place.

So I tend to look at anything touching on RIFC plc that seems even a wee bit different as something worth exploring.

Largely tongue-in-cheek, of course: -we’re not likely ever to be told anything confidential by CH! But if they say something will appear, and then it doesn’t appear when promised, then it allows one to ask why. Keeps them on their toes!

And we know that when even the gentlemen of our free Press are not above behaving with less than complete honesty when it comes to TRFC Ltd/RIFC plc  there may (God forbid!) exist a ‘protective of companies’ mindset in CH, rather than a ‘get the baddies’ approach.

Who knows?

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