Clark v Perks (No 2) (Guild v Newrick, MacLeod v Perks)

Whether an ordinary statutory word applies to established facts is generally a question of fact and degree for the fact-finding tribunal. An appellate court may intervene only for an error of law, including an unreasonable conclusion or a conclusion inconsistent with the facts found.

For paragraph 3(2A) of Schedule 12 to the Income and Corporation Taxes Act 1988, a jack-up oil rig may be a ship where it is designed and used for navigation in the sense of movement across water. Navigation need not be its principal commercial function. The absence of self-propulsion, a rudder, or carriage of persons or cargo does not prevent that conclusion.

Three taxpayers worked on jack-up oil-drilling rigs in the North Sea. The General Commissioners held that the rigs were ships and that the taxpayers' earnings were therefore from employment as seafarers for the foreign-earnings provisions in paragraph 3(2A) of Schedule 12 to the Income and Corporation Taxes Act 1988.

Ferris J allowed the Revenue's appeals on a point of law and held that the rigs were not ships: their drilling function was static and their movement was merely incidental. The taxpayers appealed. The central issues were whether the classification of the rigs was one of law or fact, and whether use in navigation was sufficiently established.

1. The appeals were allowed unanimously. Carnwath J held, with whom Longmore LJ and Robert Walker LJ agreed, that the General Commissioners' determinations were restored.

2. The statutory word ship was an ordinary English word. Even if informed by the Merchant Shipping legislation and related authorities, its application to the facts found was a question of fact and degree. Ferris J therefore erred by substituting his own assessment for that of the Commissioners. Their conclusion could be disturbed only if it disclosed an error of law within the limits identified in Edwards v Bairstow.

3. The Commissioners had made no such error. The relevant inquiry was whether the rigs were used in navigation. Navigation in this context meant significant movement across water. It did not require self-propulsion, steering equipment, or a primary function of conveying cargo or people. A specialised structure could remain a ship although drilling or another commercial activity was its principal purpose.

4. The rigs were capable of being, and were, towed across the sea between drilling locations. Their navigation was directed from the rigs. It was therefore open to the Commissioners to find that they were ships. The proposed “real work” test was too restrictive: the authorities did not exclude a vessel merely because its navigation was ancillary to a specialised function.

5. The Revenue could not fairly advance, after the fact-finding stage, a new case that the Merchant Shipping definition and authorities were irrelevant. The necessary factual findings had not been made on that new basis. In any event, the statutory definition and the Revenue's own guidance made the Merchant Shipping approach a proper and useful framework.

6. The court restored the three determinations of the General Commissioners and ordered the Revenue to pay the taxpayers' costs in the Court of Appeal and below.

• Court of Appeal: Allowed the taxpayers' appeals, set aside Ferris J's decision, and restored the General Commissioners' determinations.
• High Court, Chancery Division (Ferris J): Allowed the Revenue's appeals on a point of law and held that the jack-up rigs were not ships for paragraph 3(2A) of Schedule 12 to the Income and Corporation Taxes Act 1988: [2000] STC 483.
• General Commissioners: Held that the rigs were ships and that the taxpayers were employed as seafarers for the relevant statutory relief.