Rowland v Boyle (HM Inspector of Taxes)

On an appeal from the Special Commissioners on a point of law, the High Court may interfere with findings of fact only where they could not reasonably be justified by the evidence. The same applies to inferences drawn from primary facts where the inferences are unsustainable. A finding of fraudulent conduct, although proved on the balance of probabilities, may require stronger evidence because of the inherent improbability of dishonesty by a person of good character. Where the tribunal has assessed the witnesses, rejected the taxpayer’s evidence, accepted reliable contemporaneous evidence, and reached a conclusion open to it, the appellate court should not substitute its own assessment.

Mr Reginald Stanley Rowland appealed against the dismissal by the Special Commissioners of his appeal against income-tax assessments. The assessments reversed interest relief allowed for the years 1988/9 to 1992/3. They were made outside the ordinary six-year period and therefore depended on establishing a loss of tax attributable to fraudulent or negligent conduct under sections 34(1) and 36(1) of the Taxes Management Act 1970.

Mr Rowland claimed relief for interest on loans made to Internoms Limited, a company owned by him and his wife. His case was that Internoms had borrowed as his nominee. The Special Commissioners found that Internoms had acted as principal, that Mr Rowland knew this, and that his later claims for personal interest relief were fraudulent. The central issue was whether those findings and the resulting inferences were legally open to the Commissioners.

1. The appeal was dismissed. The Special Commissioners’ findings were findings of fact and could be challenged only on a point of law.

2. Applying Edwards v Bairstow [1956] AC 14, the relevant question was whether the findings of fact could have been justified by the evidence and whether the inferences drawn could be justified by the primary facts.

3. The Commissioners were entitled to assess the witnesses. They accepted the evidence of Mr Parkinson and Mr Clare, supported by contemporaneous documents, and rejected Mr Rowland’s evidence on the critical issues. There was material on which they could find that Mr Rowland had told Mr Parkinson that Internoms was in no sense a nominee and had told Mr Clare that he was using Internoms rather than borrowing directly for tax reasons.

4. Those findings were fatal to the appeal. Mr Rowland had not advanced any case based on mistake or subsequent misunderstanding. Once the Commissioners found that his evidence was unreliable and accepted the contrary evidence, it followed that he knew Internoms was acting as principal when he claimed personal interest relief.

5. The finding of fraud concerned serious conduct by a professional man, and therefore required appropriately cogent evidence in the circumstances. That requirement did not prevent the Commissioners from reaching their conclusion on the evidence before them. Their decision contained sufficient analysis and reasoning.

• High Court (Chancery Division): The appeal from the Special Commissioners was dismissed.