Raja's Commercial College v Gian Singh & Co Ltd

• Jurisdiction: Singapore
• Judge: Lord Diplock
• Judgment Date: 27 April 1976
• Neutral Citation: [1976] SGPC 4
• Docket Number: Privy Council Appeal No 14 of 1975
• Date: 27 April 1976
• Year: 1976
• Published date: 19 September 2003
• Plaintiff Counsel: Andrew Park (Parker Garrett & Co)
• Citation: [1976] SGPC 4
• Defendant Counsel: JE Holroyd Pearce (Coward Chance)
• Court: Privy Council
• Subject Matter: Section 10(1)(f) Income Tax Act (Cap 141, 1970 Rev Ed),Whether damages taxable,Whether damages for lost rental profits taxable,Damages,Income taxation,Appeals,Whether damages should have been reduced to reflect tax savings,Damages awarded for lost rental profits,Revenue Law

Cur Adv Vult

This is an appeal from the Court of Appeal in Singapore. It raises a question as to the basis on which damages should be assessed. The respondents were the owners of a large building at 30-31 Raffles Place, Singapore. The appellants were the tenants of premises in the building from 1957 for several years. The respondents gave the appellants a notice to quit dated 30 November 1967 determining the appellants` tenancy at 31 December 1967. The appellants disputed the effectiveness of the notice to quit and claimed to be entitled to remain in occupation under the Control of Rent Ordinance. The respondents maintained that the Ordinance did not apply and raised an action against the appellants claiming possession of the premises and damages. That action was tried by Choor Singh J, the main issue at the trial being whether the Control of Rent Ordinance applied. The learned judge held that it did not and he therefore made an order dated 22 November 1973 in favour of the respondents for possession and for damages. The appellants gave notice of appeal against the whole decision, but they soon abandoned the appeal against the order for possession and vacated the premises on 30 November 1973. They went on with their appeal against the award of damages but the Court of Appeal dismissed their appeal.

It will be apparent from the foregoing summary of the facts that the appellants were in occupation of the premises as trespassers from 1 January 1968 until 30 November 1973, that is for five years eleven months. There is no doubt that the respondents are entitled to damages for the trespass. The appellants accept that, and they accept also that the measure of damages must be based on the difference between the actual rent which the respondents have (apparently) been paid by the appellants at $0.75 per sq ft per month and the higher rent which they admittedly could have obtained if the appellants had moved out at 31 December 1976 so that the respondents could have re-let the premises to another tenant.

In the appeal to the Board the appellants sought to raise two objections to the amount of damages awarded which they said had been assessed at too high a figure. One of the objections (in para 10 of the printed case of the appellants) related to the amount of rent which the learned judge held could have been obtained by the respondents if they had re-let the premises. Evidence on this matter was led on behalf of the respondents but there was no counter evidence for the appellants. The respondents` evidence was accepted by the learned judge who drew from it certain inferences. In the appellants` petition of appeal to the Court of Appeal at paras 4(4) and (5) they submitted that the learned judge had failed to appreciate the true significance of the respondents` evidence on this matter and that he had erred in law in holding that he had no alternative but to accept what he thought the evidence meant. But the point is not mentioned in the judgment of the Court of Appeal and their Lordships infer that it cannot have bulked significantly in the argument before them, if indeed it was raised at all. In any event their Lordships consider that the appellants` contention on this point lacks the basis in fact without which it depends on mere speculation. It was not raised at the trial either in evidence on behalf of the appellants or by cross-examination of the respondents` witnesses, nor apparently in the submissions to the judge, and their Lordships declined to allow the appellants to raise the point before the Board.

The appellants` main ground of objection to the damages awarded was that they should not have been the full amount of the rent lost by the respondents (whatever that amount may have been) but rather that amount, less the income tax which the respondents would have had to pay on the rent. The reason is that according to the appellants, the respondents will not be liable to pay income tax on the damages when they are received. The appellants, relied on the basic principle laid down in the case of British Transport Commission v Gourley [1956] AC 185 which, as applied to this case, was that, if the rent would have been taxable but the damages are not, then the damages should be reduced to reflect the tax saving to the respondents; if, however, the damages are themselves taxable they do not fall to be reduced on this account. The issue between the parties accordingly is whether the damages are taxable. The appellants contend that they are not and that therefore they should be reduced in amount; the respondents contend that they are. This issue was not raised before the learned judge but it was argued before the Court of Appeal who rejected the appellants` contention. The Court of Appeal held that the damages would be taxable.

Liability to tax depends upon the effect of the (Singapore) Income Tax Act, s 10, the material part of which is as follows:

10(1) Income tax shall, subject to the provisions of this Act, be payable at the rate or rates specified hereinafter for each year of assessment upon the income of any person accruing in or derived from Singapore or received in Singapore from outside Singapore in respect of -

...

(f) rents, royalties, premiums and any other profits arising from property;

The Court of Appeal disposed of this point very briefly in one sentence thus:

In our opinion, it is clear that the damages awarded in the present case undoubtedly fall within the expression `and any other profits arising from property` in s 10(1)(f).

Their Lordships agree with the expression of opinion, so far as it goes, and they did not understand that it was disputed on behalf of the appellants. But it does not touch the prior, and more difficult, question of whether the damages are income at all. That question does not appear to have been considered by the Court of Appeal. The first part of s 10(1) cited above provides that income tax shall be payable `upon the income of any person` and the profits arising from property are liable to income tax only if they are income. Clearly profits arising from property might be, and often are, of a capital nature and profits of that sort will not be liable to income tax.

Questions of whether sums awarded by courts are income, liable to income tax, or not, have arisen in a number of reported cases. The names given to the sums awarded have varied: `damages` `interest` `compensation`...