1985 PLP 102 (PTD)

15. The original appeal by the tax‑payer company had extended to money spent on installing electric wiring, but the Commissioners decided this point against the tax‑payer company, who did not challenge that part of the determination and now accept it as correct. The amount of capital expenditure finally in issue was 105,770 of which L 44,122 represented expenditure on various types of decors and murals, namely, wall decors plaques tapestries, murals, pictures and metal sculptures, and the balance consisted of expenditure on electric light fittings. The question of law for the opinion of the Court, and now for consideration by your Lordships House, is baldly stated in the case to be 'whether our decision except in so far as it relates to electrical wiring, was correct

16. Appeals are of many different kinds, and it is important to understand and apply the ground rules relevant to each type. For present purposes, my Lords, I might be permitted to repeat in slightly condensed form what I said on an earlier occasion in Schofield (Inspector of Taxes) v. R & H Hall Ltd. (1975) S T C 353 at 360, a case which was also concerned with plant: (1) it is a question of law what meaning is to be given to the word 'plant', and it is for the Courts to interpret its meaning, having regard to the context in which it occurs: (2) the law does not supply a definition of plant or prescribe a detailed or exhaustive set of rules for application to any particular set of circum stances, and there are cases which on the facts found, are capable of decision either way; (3) a decision in such a case is a decision on a question of fact and degree and cannot be upset as being erroneous in point of law unless the Commissioners show by some reason they give or statement they make in the case stated that they have misunderstood or misapplied the law in some relevant particular; (4) the Commissioners err in point of law when they make a finding which there is no evidence to support; (5) the Commissioners may also err by reaching a conclusion which is inconsistent with the facts which they have found. I would also refer to the classic statement of Lord Redcliffe in Edwards (Inspector of Taxes) v. Bairstow (1955) 3 All E R 48 at 58, 1956 A C 14 at 36.

17. An agreed statement of facts at para. VIII (3) of the case stated included a detailed description of the decor (see 1981 S T C 50 at 52‑53). 1 mention three items: "Wall Decor consists of general decorative items, such as, pictures, plaques, tapestries, plates, horse harnesses, stage heads, pewterware, brassware, copperware, swords, axes, bagpipes, pistols and deer skins. The aforementioned items can be either screwed to the wall and easily removed or hung on the wall and movable Murals are fibre glass leather or metal sculptured panels which are screwed to the wall: They are removable and often are removed for redecoration purposes or change of theme. All murals are specially designed to suit specific themes... Two Metal Sculptures. One hangs from the ceiling to which it is bolted and is supported by steel rods. The other is a standing feature, which is permanently fixed to the forecourt. The sculptures represent "Seagull in Flight". The metal sculptures cost L 5,

450. They were‑ the only items 'fixed but not easily removable'. The balance of the L 44,122 spent on 'decor and murals' was accounted for by "items fixed but easily removed" costing L 35,820 and 'items not fixed but movable' costing L 2,852.

18. Paragraph VIII (5) sets out additional facts which were found proved and which I now summarise briefly: the premises are purpose built or leased s a shell: in either case the tax‑payer company choose the fittings and decor likely to create an appropriate atmosphere to suit different types of clientele; changes, of decor and lighting are made for commercial reasons and the success of the change can be demonstrated, as at the King James and Royal Scot hotels, the aim being to product; atmosphere to attract custom of the kind sought.

19. In working towards an answer to their problem, the Commissioners started in time‑honoured fashion by quoting the definition of plant given by Lindley, L J in Yarmouth v. ,r France (1887) 19 Q B D 647 at

658. The fact that the learned Lord Justice was classifying vice in a horse as a defect in the condition of plant within the meaning of the Employers' Liability Act, 1880 did not rob this judicial definition of its felicity and general usefulness or its authority, now of nearly a hundred years' standing. The Commissioners then marched along a well‑signposted road via J. Lyons & Co. Ltd. v. A.‑G (1944) 1 All E R 477, (1944) Ch. 281, Jarrold (Inspector of Taxes) v. John Good Sons Ltd. (1963) 1 All E R 141, (1963) 1 W L R 214, l R C v. Barclay Curle & Co Ltd. (1969) 1 All E 1't 132, (1969) 1 W L If 675 and Dixon (Inspector of Taxes) v. Fitch's Garage Ltd. (1975) 3 All E R 455, (1976) 1 WLR 215, to apply the principles extracted from those authorities to the facts of the case. The Commissioners appreciated that the atmosphere point was the general touchstone, but they also considered all the items of alleged plant individually. In the result they found in the tax‑payer company's favour on every item except the electrical wiring which they said (1981) S T C 50 at 55: 'We regard this as integral with the fabric of the building‑‑as to which no question arises in the proceedings. We find that the electrical wiring is not plant and to this extent the Company's appeal fails.' They considered that the other items were 'apparatus which (in the same way as the light fittings) serves a functional purpose in the Company's trade. Therefore, they found them to be plant, and continued (at 55): 'We found more difficulty with the 2 metal sculptures of seagulls at the Atlantic Towers Hotel, Liverpool... They are clearly part of the setting and we think it fair to describe them as structures but, as we interpret the authorities, neither of these factors taken alone disqualifies the sculptures from being plant. They are fixed but not easily removed and on balance (but not without doubt) we are of the view that they should not be regarded as part of the permanent structure of. the hotel but they can be properly described as apparatus which in view of the nature of the Company's trade, functions as 'plant' ."

20. My Lords, I have mentioned the detailed findings in order to set in clear perspective the reasoning of the Commissioners and next ' wish to look at the opinion of the learned Judges of the First Division, which are worthy of study for the clarity and cogency of their expression and in which the determination of the Commissioners was upheld. These judgments, when read in their entirety, strongly support the Commissioners' determination but, because the point at issue before your Lordships is whether that determination was correct in point of law, I shall be content to cite a few passages, starting with the opinion of the Lord President (1981) S T C 50 at 58‑59: "In the present case it is not suggested that the articles held by the Special Commissioners to be plant fall to be regarded as part of the structure of the various premises. They are undoubtedly "apparatus" used by the company "for carrying on their business" and articles which they keep "for permanent employment" in their business. The words in quotation marks constitute a reference back to Yarmouth v. France... one must bear in mind that "setting" and "plant" are not mutually exclusive... As I read the findings of the Special Commissioners they have recognised that the special feature of the trade in which the company is engaged is the marketing of the setting‑ including atmosphere‑‑itself. All the articles of furniture in their premises‑‑those conceded to be plant and the articles in dispute‑ play their intended part in creating the planned character and atmosphere of the various settings, and all were selected carefully to play this part." Turning next to Lord Cameron's opinion, I have found the following observations particularly helpful (at 60‑62): 'in my opinion the Commissioners have not been shown to have misdirected themselves nor is the conclusion at which they arrived in any sense unreasonable. The problem which the Commissioners were called on to solve was one concerned with a "service industry"; I think this factor is important, because the question of what is properly to be regarded as "point" can only be answered in the context of the particular industry concerned and, possibly, in light also of the particular circumstances of the individual tax‑prayer's own trade ...I think that much difficulty is caused by seeking to place limitative interpretations on the simple word "plant". I do not think that the classic definition propounded in Yarmouth v. France suggests that it is a word which is other than of comprehensive meaning‑‑"whatever apparatus is used by a businessman for carrying on his business"‑‑whatever the business may be ...It is difficult to see that the provision of conditions of comfort or even luxury lies outside the legitimate operations of an hotel‑keeper or by consequence that he should not be entitled in his business to make use of articles designed to subserve that purpose ...To do this may, in one sense of the word, no doubt be regarded as After providing or enhancing the "setting" in which the services are themselves provided‑‑but at the same time the "setting" (as opposed to the structure or place within which the businessman conducts his business) ...is something the use of which is itself one of the services which the hotel‑owner makes available to his customer ...I do not think that the fact that certain objects of furnishing or even of decorative quality alone can be characterized as serving only an "amenity" purpose is in any way to be regarded as prima facie ground for rejecting a claim to have expenditure on them held to be expenditure on "plant'." Lord Scott, who concurred in the opinions of his brethren, said inter alia (at 63‑64): 'In the present case the fallacy in the Crown's contention, as it seems to me, comes from a failure to recognise the true character of a hotelier's trade... This chair and table which provide for the bodily comfort of the guests, and the lighting and decor which provide for his visual or mental enjoyment, are alike material by the use of which the hotelier may provide the service which it is part of his function to provide, and accordingly in my opinion may alike be held to fall within the definition of "plant" as the word has been construed in the relevant authorities. ' Counsel for the Crown contended in the course of a well‑presented argument that the Commissioners, and by necessary implication the Judges of the First Division, had misunderstood and misapplied the relevant legal principles. As the foundation for this proposition he advanced the view that the setting of a trade was synonymous with the premises or place in which the trade is carried on, in contrast to the apparatus, or plant, with which it is carried on, (2) that articles which were used merely to enhance or adorn the setting and thereby to create atmosphere could not in law be plant because they were not used, or meant to be used, in the activity carried on in the setting, and therefore (3) that the only articles which could qualify as plant were those used in the processes of the trade, such as chairs to sit on, plates to eat off and glasses to drink out of (which might in themselves be chosen partly for their aesthetic qualities).

21. Counsel further contended that the Commissioners had misunder stood and misapplied the functional test by wrongly assuming that anything which serves a functional purpose in a trade must be plant used for carrying on that trade; this could not be so, because for example, the premises here (and also the electrical wiring) performed a function, but this did not mean that they were plant. He also pressed your Lordships with the argument in terrorem that to accede to the tax‑payer company's wide interpretation would open the gate into a large field with no definable limits.

22. Counsel for the tax‑payer company had the easier task, but discharged it with no less skill. Generally, he supported the reasoning of Commissioners and the First Division, but he also relied on what Pearson, L J said in Jarrold (Inspector of Taxes) v. John Good & Sons Ltd. (1963) 1 All E R 141 at 149, (1963) 1 W L R 214 at 225 (which my noble and learned friend Lord Wilberforce described as the high water mark for respondents in this type of case) to the effect that, where either of two views might have been taken, the one which the Commissioners preferred must stand if there was evidence to support it and no error of principle. He also submitted that an artifact is prima facie more likely to be plant.

23. My Lords, the Crown's primary fallacy, in my opinion, was to identify setting inevitably with 'premises' or 'place' by misapplying to this case the observations of the judges in Jarrold when facing the question whether the articles are part of the premises or setting in which the business is carried on or part of the plant with which it is carried on. This was in a case where the word 'setting' had no theatrical or artistic significance, as it would have in the phrase 'appropriate setting' meaning the right atmosphere. And, even if one assumes that 'the setting' is the same thing as 'the premises' it is fallacious to say that articles used to adorn the setting thereby ceased to be apparatus used by the tax‑payer company for carrying on their business.

24. It is, in my view, equally fallacious to deny that the creation of atmosphere is, for the purposes of his trade, an important function of the successful hotelier; in fact, this was admitted on behalf of the Crown before your Lordships. Now the creation of the right atmosphere is a means to an end in the carrying on of such a trade; it is not a trade in itself or a separate part by the trade. This objective can be achieved by a combination of things, a beautiful or unusual or historic building, attractive views, gardens, shrubberies and waterfalls, ornaments, the equipment used by the staff and the glasses, china, cutlery, table linen, and the tables and chairs used by the customers. Everything in this list, from the ornaments onwards, is apparatus used in the hotel business and the ornaments are used purely to create atmosphere. The mere fact that some of the ornaments are free standing on the floor or on shelves or tables and that others are suspended from or affixed to walls or ceilings is quite beside the point. They are all part of the hotelier's plant as defined in Yarmouth v. France. And, as my noble and learned friend Lord Salmon put it in the course of argument, one of the trade functions of a hotelier is to make the interior attractive to customers; why then should one deny that the items used for this purpose are plant? 25 Counsel for the Crown sought to persuade your Lordships that because 'murals' affixed to the wall performed the same function (of enhancing the setting) as attractive wallpaper or mural paintings they were not plant. By this fallacy he presented in reverse the argument, which he attributed to the Commissioners; the walls and the electric wiring and the electric light fittings all perform an indispensable function, but only the fittings are plant. In the same way, the mural paintings and the wallpaper, when executed or applied, are part of the walls and not plant, whereas the 'murals' being apparatus, are plant. The fact that two different things perform the same function or role is not the point. One thing functions as part of the premises, the other as part of the plant.

26. One speaks of the setting of a play. The producer creates this by the use of chattels or movables in the shape of theatrical properties or 'props', which affect the audience by conveying atmosphere across the footlights, as the 'props' (or plant) of the hotelier affect the customer. Your Lordship will also recall the apt illustration of counsel for the Crown of the furnishings and atmosphere to be found in a private nursing home or clinic..

27. In support of the argument that the functional test had been misapplied the Crown referred to a passage in the case stated (1981) STC 50 at 55): "In our view, and we so find, all the light fitting ...are of such a design and are so laid out as to be properly regarded as apparatus serving functional purpose in the Company's trade." But here one must stress not only the words I have emphasised but the word 'apparatus'. The Crown also tried to take advantage of the words attributed to counsel for the Crown ay Lord Cameron in his opinion, when h,: said (1981) S T C 50 at 61): "Counsel for the Crown in his elegantly propounded submissions urged the necessity of giving proper meaning to words which could be of 'slippery" interpretation: it was necessary to dis tinguish those objects which enhanced or embellished what he called "setting" from those which had a functional use for the purposes of the tax‑payer's trade." In this passage 'functional' is used as the equivalent of something like 'directly practical; hairs and china for use are being distinguished from ornaments, and Lord Cameron is surely not falling into the error of saying that the electrical wiring (which is not plant) has no functional use. It is correct, as the Crown contends, that the setting, for example a beautiful house or garden, may attract customers and create atmosphere without being plant. That does not mean that a chattel or movable used (as part of the setting) to create atmosphere is not plant.

28. Having regard' `to the legal history of the word 'plant', there is no warrant for arbitrarily confining its meaning as suggested by the Crown. One might as well say that the tools and jigs of a wartime factory were part of the plant but that the apparatus used to convey 'music while you work' to those employed was not.

29. My Lords, the length to which the Crown's argument must go illustrates its frailty. It is also an illusion to think that a more general interpretation of plant leads to unjustified exemption. We do not lack examples of claims, which are rejected by the Special Commissioners or favorable decisions, which are later reversed by the Courts. Moreover, the test accepted in this case by the Commissioners and affirmed by the Inner House draws a line, which can be held without trouble: something which becomes part of the premises instead of merely embellishing there, is not plant, except in the rare case where the premises are themselves plant; like the dry dock in I R C v. Barclay Curle & Co. Ltd. or the grain silo in Schefield. (Inspector of Taxes) v. R & H Hall Ltd. And, in the last resort, if after enduring nearly a century of Yarmouth v. France, Parliament decides that 'plant' must receive a statutory definition, something can no doubt be done to curb the 'excesses' of the Special Commissioners and the judiciary. My Lords, both sides recognised that most of the cases are illustrations rather than authorities, but I must mention some of those relied on by the Crown.

30. In Brown (Inspector of Taxes) v. Burnley Football and Athletic Co. Ltd. (1980) 3 All. E R 244, a new concrete stand was held not to be 'plant', since it was not part of the apparatus with which the club carried on its trade (although the seating affixed to the stand was agreed to be plant). Vinelott J adopted the conclusion of the Special Commissioners that the stand is not "plant" functioning, whether passively or actively, in the actual processes, which constitute the trade. But the Crown can get help from that case only by falsely assuming that the actual processes which constitute the notelier's trade are strictly confined to the serving of food and drink and providing accommodation in a limited sense.

31. In Hampton (Inspector of Taxes) v. Fortes Autogrill Ltd. (1980) S T C 80, the tax‑payers, who carried on the trade of public caterers, installed permanent false ceilings which both supported and concealed water pipes, ventilation trucking, electrical conduits and lighting apparatus. The General Commissioners allowed the claim that the ceilings were plant being 'part and parcel of the services which they supported and covered', but the Court reversed this determinations, holding that the ceiling, were not necessary for the functioning of any apparatus used for the purposes of the company's trade and were not part of the means by which the trade was carried on. The Crown has relied on observation of Fox, J who said (at p . 84) "The covering provided by the false ceiling‑ is not, it seems to me part of the means by which the tax‑payer company provides food and drink to its customers ...It is merely a covering (for plant) in the form of a plaster ceiling. The fact that it covers the pipes and services does not, it seems to me make it plant, any more than the fact that the pipes and services were placed behind a true ceiling or wall would make that ceiling or wall into plant ...if a trader has an unsightly piece of plant and wishes to mask it by some covering, the fact that what is being masked is itself plant does not turn the masking (which itself performs no function in carrying on the operations of the trade) into plant. It is plant alone, which attracts the allowances doubt it is, in a restaurant, desirable visually that pipes and services, should be covered by a false ceiling if they are not inside the ordinary walls or ceiling. But that merely means that the place in which the trade is carried on is made more attractive; it does not establish that the false ceilings are means by which the trade is carried on. (Fox J's emphasis)". The Crown relied on the reference to the means by which the tax‑payer company provides food and drink to its customers' but there was (quite apart from other considerations) no issue about the creation of atmosphere. They also pointed to the statements that the masking 'performs no function in carrying on the operations of the trade and that the place in which the trade is carried on is made more attractive'.

32. My Lords, what the Crown's argument, based on Forte, disregards is what Fox, J. said (at pp.84‑85): "A permanent ceiling, true or false, is part of the premises in which the trade is carried on. The fact that plant is attached to it does not, in my view, make the ceiling plant. It is just a ceiling, and, as such, does not perform a function in carrying out the trade any more than the remainder of the premises do Similarly, a wall of a building may provide support for plant but it seems to me, is not thereby plant itself "

33. In other words, the ceiling in Forte was part of the reality and therefore part of the premises in which the trade was carried sea. The articles now in dispute were apparatus, some of which was suspended from or attached to the wall, the apparatus was, as the Commissioners found, plant used by the tax‑payer company in their business.

34. Cooke (Inspector of Taxes) v. Beach Station Caravans Ltd. (1974) 3 All E R 159, (1974) 1 W L R 1898 was concerned with a swimming pool on a caravan site and, so far as it is relevant, causes much more difficulty for the Crown than for the tax‑payer company. In Dixon (Inspector of Taxes) v. Fitch's Garages Ltd. (1975) 3 All E R 455, 1976 W L R 215 a canopy at a self‑service petrol station was held not be plant but merely part of the setting. This case seems to me to have been capable of decision either way but involves no principle destructive of the Commissioners' findings in the present case, because the word 'setting' was used synonymously with 'the place in which'.

35. Passing over Cole Bros. Ltd. Philips (Inspector of Taxes) (1980) S T C 518; (1981) S T S' 67 J C A, which illustrates new principle, I come to Benson (Inspector of Taxes) v. Yard Arm Club Ltd. (1979) 2 All. E R 336, (1979) 1 W L R 347, in which a ship, or floating hulk, used as a restaurant was held not to be plant. The Crown relied on the case because of the fact that the ship was used to create a ship‑board feeling, in other words, a certain kind of atmosphere, among the patrons. But the distinction is that the ship, although a chattel, was the place in which the trade was carried on and was therefore the equivalent of the various premises in which the present tax‑payer company carry on their trade and not of the apparatus used as an adjunct of the trade carried on in those premises. Thus the ship, with all its novelty and atmosphere, could no more be called plant than a restaurant consisting of an Elizabethan manor house, a thatched cottage, a barn or a converted windmill, although like all those buildings it could be embellished and adorned with 'plant' suitable to the surroundings and to the purposes of the trade. This is another way of saying that the site is not an adjunct to the carrying on of a business, although the setting can be; the good ship Hispaniola cannot bring the Crown safe to port.

36. The dry dock in I R C v. Barclay Curie & Co. Ltd. (1969) 1 All. E R 732, (1969), 1 W L R 675, was a structure as well as plant. Therefore the case does not directly help the tax‑payer company because their premises are not plant. But the Crown also relies in vain on Barclay Curie. It appeared to say that the dry dock, although it was the setting, was also plant, whereas the hotel premises are the setting but are not plant; therefore articles used to adorn the hotel setting are not plant either, although they are 'goods and chattels, fixed or movable ...Which (the tax‑payer company) keeps for permanent employment in (their) business' (see Yarmouth v. France [(1887) 19 Q B D 647 at 658 per Lindley L J)

1. Barclay Curie, however, shows that a structure in which a trade is carried 'on can be plant with which it is carried on; it would therefore be strange indeed if articles used in a building 'for the purposes of the trade' could not also be plant within the meaning of section 41.

37. My Lords, for the reasons set out in this opinion, I would dismiss the appeal. LORD BRIDGE OF HARWICH.‑‑My Lords, I have had the advantage of reading in advance the speeches of my noble and learned friends Lord Wilberforce and Lord Lowry For the reasons they give would also dismiss the appeal. M.A.K. Appeal dismissed