COURT OF APPEAL
DE BEERS CONSOLIDATED MINES, LIMITED, APPELLANTS; HOWE (SURVEYOR OF TAXES), RESPONDENT.
 2 K.B. 612
COUNSEL: Cohen, K.C. (Danckwerts, K.C., and Felix Cassel with him), for the appellant company.
Sir R. B. Finlay, A.-G. (S. A. T. Rowlatt with him), for the Crown.
SOLICITORS: For appellants: Hollams, Son, Coward & Hawksley.
For the Crown: Solicitor of Inland Revenue.
JUDGES: Phillimore J., Collins M.R., Mathew, and Cozens-Hardy L.JJ.
DATES: 1905 April 17; June 2, 6.
Revenue Income Tax Residence Person residing in the United Kingdom Company registered Abroad Head Office Abroad General Meetings Abroad Directors Meetings in England and Abroad Majority of Directors in England Companys Business in England and Abroad Income Tax Act, 1853 (16 & 17 Vict. c. 34), s. 2, Sched. D.
A foreign corporation may be resident in this country for the purposes of income tax.
A company was incorporated and registered in South Africa. The office denominated its head office was in Kimberley in the Cape Colony, and it had an office in London. It owned extensive diamond mines in South Africa. The essential part of its business was the sale of the diamonds from its mines to a syndicate of diamond merchants of London under such conditions as to control the diamond trade of the world. The contracts of sale, which were annual contracts dealing with a years output, were executed in London; they provided for the sale of diamonds to the syndicate, with delivery at Kimberley, in specified amounts at specified prices, and contained terms regulating the output of diamonds, the effect of which was to control the diamond trade. The general meetings of the company were held in Kimberley. Members of the company might name an address in South Africa to be registered as their address for the service of notices, and any member not naming such an address was to be deemed to have waived service of the notice upon him. The control of the company was vested in three life governors and sixteen ordinary directors, of whom four had to reside in England. Two of the three life governors and nine of the sixteen ordinary directors resided in the United Kingdom. The chairman and six ordinary directors resided in the Cape Colony. Meetings of the directors were held weekly in Kimberley and London with an interchange of minutes between the two places. The proceedings of the boards of directors sitting in Kimberley and London were regulated by by-laws which provided as follows: (1.) That the course of business respecting technical management of the companys work and operations at its mines, expenditure for wages, and such like, should be determined upon by the directors in Kimberley, who should however consult the directors in London on matters of exceptional importance: (2.) All other expenditure exceeding 25,000l. was to be determined upon by the majority of all the directors; but the directors in Kimberley with the sanction of the chairman might under special circumstances incur expenditure not exceeding at one time 50,000l. in addition. No further expenditure could be incurred unless the authority of the Kimberley directors was confirmed by the [*613] majority of all the directors: (3.) The policy of the board respecting the disposal of diamonds and other assets, the working or development of the mines and the output of diamonds, application of profits, and appointment of directors was to be determined by the majority of all the directors: (5.) Matters to be determined by the majority of all the directors were to be determined by resolution to be submitted to meetings of directors in Kimberley and London, and the decision was to be in accordance with the vote of the majority thus ascertained: (6.) Except as before provided the directors in Kimberley and the directors in London were to have equal and concurrent authority. The majority of the directors was always in London. Matters referred to in by-law 3 were always dealt with in London, and in all important matters under by-law 5 the majority voting had always been in London. No case had ever occurred where the directors in Kimberley had overruled the decision of the directors in London. Under powers conferred upon the directors generally, the directors in London had appointed four committees to control various departments of the companys business and report to them. The general accounts of the company were kept at Kimberley, but the majority of the directors had a controlling influence upon the accounts:
Held, that the conclusion to be drawn from the facts was that the company was residing in the United Kingdom within the meaning of s. 2, Sched. D, of the Income Tax Act, 1853, and also that the company exercised their trade in this country within the meaning of the same schedule.
CASE stated under s. 59 of the Taxes Management Act, 1880 (43 & 44 Vict. c. 19), by the Commissioners for the general purposes of the Income Tax Acts for the City of London on appeal against an income tax assessment.
1. At a meeting of the Commissioners for the general purposes of the Income Tax Acts for the City of London, held at the Guildhall in the said City on Thursday, July 31, 1902, the De Beers Consolidated Mines, Limited (hereinafter called the appellant company), of 62, Lombard Street, in the City of London, appealed against a supplementary assessment made upon them for the year ending April 5, 1901, in the sum of 1,557,693l., and against an additional assessment for the year ending April 5, 1902, in a similar sum of 1,557,693l. in respect of the profits of the company in the United Kingdom and elsewhere.
2. The appellant company was registered with limited liability in the Deeds Office of Griqualand West, in the Colony of the Cape of Good Hope (hereinafter for brevity termed the [*614] Cape Colony) on March 13, 1888. It was also registered on September 3, 1888, as an incorporated company in the said Colony in terms of s. 3 of Act 13 of 1888 of the said Colony according to the laws then subsisting in the said Colony. The appellant company is not registered in the United Kingdom as a joint stock company.
3. The present authorized capital of the appellant company is 4,500,000l. in 800,000 preference shares and 1,000,000 deferred shares of 2l. 10s. each, having been increased to that amount from 3,950,000l. in December, 1901. The company has also 3,500,000l. 5 per cent. first mortgage debentures authorized and issued in 1894 under a scheme for consolidation and conversion of the companys debenture debt of which there are outstanding 2,638,320l., also 301,780l. De Beers 41Ú2 per cent. Bultfontein Obligations authorized and issued in May, 1900, of which there are outstanding 205,480l., and also 1,750,000l. De Beers South African Exploration 41Ú2 per cent. debentures authorized and issued in June, 1900, all of which are outstanding.
4. By art. 3 of the articles of association it is provided that the head office of the company shall be in Kimberley in the Cape Colony, or at such other place either in the said Colony or in such other country as the directors shall from time to time consider advisable, with such branch or branches elsewhere as the directors shall deem fit, or with such agent or agents in other places or countries as the directors may deem fit. The company has offices at London and at Kimberley.
5. The appellant company owns or is interested in extensive diamond mines and mining property in South Africa, together with various farms and landed property there, and investments in English Government securities and shares in an English joint stock company.
6. The profits of the appellant company during the years of assessment and for many years previously have been chiefly made by the raising and sale of diamonds, the produce of their said mines, to a syndicate composed of six or seven firms of diamond merchants, with whom the company have had a series of contracts in that behalf since the year 1895, including [*615] an agreement dated December 2, 1901. (1) The said contracts were negotiated and executed in London, and the firms
(1) This was an agreement made between the appellant company, whose London office was stated to be at No. 62, Lombard Street, in the City of London, of the first part, and seven firms, all carrying on business as merchants and diamond merchants in the City of London and therein called the syndicate, of the other parts. By this agreement it was (inter alia) provided that the company should sell and the syndicate should purchase the output of rough diamonds as it was produced, including débris, tailings, and small diamonds produced and got from the De Beers, Kimberley, and Wesselton Mines of the company during the months of October, November, and December, 1901, and the months of January and February, 1902, up to but not exceeding on an average a monthly total of 105,000 carats from the De Beers and Kimberley Mines, and on an average a monthly total of 35,000 carats from the Wesselton Mine. The agreement then provided for the prices to be paid by the syndicate to the company. Delivery of diamonds was to take place at Kimberley, and payment was to be made in cash or its equivalent against each delivery. The company was to retain until February 28, 1902, in hand its entire output of rough diamonds produced from any of its mines during the months of August and September, 1901. The syndicate were to keep accounts of all transactions relating to diamonds purchased from the company. By clause 10 of this agreement, in addition to the payments to be made by the syndicate to the company, the syndicate were to account for and pay to the company one-half of all net profits made by the syndicate on realization or dealing with the diamonds under this agreement as appearing from the accounts, and all risks in the realization or dealing with the diamonds were to be on joint account, and borne by the company and the syndicate in equal shares, and if the syndicate covered any risks it was to cover them on joint account, subject, however, to the terms of clause 11, by which the syndicate, in making up the accounts, were entitled to charge as part of the expenses of realization and dealing with the diamonds purchased from the company, all charges incidental to the importation and sale of the same and all insurances, and in addition 30,000l. per annum to cover office rent, secretarial and accountancy charges and expenses, and also a sum equal to 5 per cent. on the net amount of goods sold or brought into account. The 5 per cent. was only to be charged if the account shewed an equivalent amount of profit made; but if the profit made did not reach 5 per cent., then whatever profit was made was to go to the syndicate, and if a loss was made the loss was to be borne in equal parts by the company and the syndicate. The syndicate was also entitled to charge, and was to be debited with, interest at the rate of 5 per cent. per annum in account current in respect of all moneys advanced or received by them in connection with the realization and dealing with the said diamonds. By clause 12 the syndicate was entitled to purchase from the company the output of rough diamonds (including débris and small diamonds) produced and got from the De Beers, Kimberley, [*616] composing the syndicate are all therein described as of London. These contracts, which vary greatly in detail, provide for the purchase by the syndicate (with delivery at Kimberley) of the produce of the mines up to the amounts specified at specified prices with various and often complicated options in respect of the remainder, and with provisions for the company sharing in certain profits to be made by the syndicate on resale, and other provisions designed to control or affect the output and sale of diamonds from the companys mines.
The object and effect of these arrangements by the company (who practically control the diamond trade of the world) is to
Wesselton, Bultfontein, and Dutoitspan Mines, and any other mines under the control of the company during the months of March, April, May, and June, 1902, provided the syndicate on or before February 20, 1902, gave notice to the company that it elected so to do. The price to be paid for the diamonds purchased under this clause was to be ascertained as follows: The syndicate was to inform the company of the net price realized for the diamonds then already sold and the net estimated price to be realized on the diamonds then in hand, and the syndicate was to pay for the diamonds to be purchased a sum per carat equal to the total average prices so realized and estimated respectively, less 12 per cent. thereof. If the syndicate should not elect to purchase under clause 12, the company were to be at liberty to sell the diamonds elsewhere, giving the syndicate the first offer to purchase them at the price and on the terms at and on which the company were willing and able to sell them. By clause 15, if the syndicate elected to purchase, it was to have a similar right as to the output for the months from July to December, 1902, the election to be made on or before June 20, 1902, at the same price as already provided. And it was to have the like option during each succeeding six months until June 30, 1906. By clause 17, on June 30 in each year the syndicate was to prepare a balance-sheet shewing the result of the dealings in diamonds to be audited by the auditors of the company in London, and all sums thereby shewn to be due to the company from the syndicate, or vice vers‰, were forthwith to be paid by the syndicate to the company or by the company to the syndicate, as the case might be. By clause 19 the company were not during the continuance of the agreement to sell or otherwise dispose of any rough diamonds, large or small, or débris, or fine sand diamonds, small stuff, or rubbish to any firm, syndicate, or corporation except the syndicate, but the syndicate was to have the option at any time of purchasing from the company the excess of diamonds, large and small, débris, and fine sand diamonds, small stuff, and rubbish produced from any mines under the control of the company over and above the quantity purchased by the syndicate from the company under the agreement. [*617] regulate and support the market for diamonds, and the negotiation and maintenance of these arrangements is an essential part of the business of the company.
7. The articles of association of the appellant company were put in evidence, and were to be taken as forming part of the case. (1)
8. The management of the business and the control of the appellant company during the years of assessment were, under the articles of association, vested in three life governors and sixteen ordinary directors. There were three trustees for the 5 per cent. debenture-holders and two trustees for the South African Exploration debentures.
By the articles of association it was provided that four at least of the directors should reside in England.
9. Meetings of directors have been held at the companys office in London weekly from November 21, 1888. Weekly meetings of directors have also been held at Kimberley during the same period and minutes have been kept. At the first meeting in London on November 21, 1888, twelve directors were present including two life governors. Minutes of the proceedings at all meetings in London and Kimberley have been duly kept. There is an exchange of minutes between the two places London and Kimberley. The proceedings of the board of directors sitting in Kimberley and London are regulated by by-laws framed pursuant to Nos. 107 and 119, sub-s. 21, of the companys articles of association.
10. These by-laws, having been drawn up in London and communicated to Kimberley, were discussed and finally approved at meetings of directors held in London on February 10, 12, and 17, 1891. Fifteen directors including the chairman (the Right Honourable Cecil J. Rhodes) were present at the meeting on February 10, 1891; ten directors were present on February 12, 1891; and fourteen directors including the chairman (the Right Honourable Cecil J. Rhodes) were present at the meeting on February 17, 1891.
The by-laws are as follows:–
(1.) The course of business as respects the technical
(1) The articles of association which appear to be material are set out in a note at the end of this case, p. 644, post. [*618] management of the companys work and operations at its mines and the expenditure there for wages, materials, and such like shall be determined upon by the directors for the time being in Kimberley, who will however, where practicable, consult the directors for the time being in London on matters of exceptional importance.
(2.) All other expenditure exceeding 25,000l. shall be determined upon by the majority of all the directors for the time being; but the directors for the time being in Kimberley, with the previous sanction of the present chairman of the board, the Honourable Cecil J. Rhodes, may, should special circumstances arise, expend or incur liabilities not exceeding altogether at any one time 50,000l. in addition to the above 25,000l. No further expenditure or liability under this proviso shall be incurred until the previous exercise of the authority hereby given has been confirmed by the majority of all the directors for the time being.
(3.) The policy of the board (a) as respects the disposal of its diamonds or other assets, (b) in connection with the working or development of the companys mines and the output of the diamonds, (c) as respects the application of the companys profits, and (d) as respects the appointment of elected directors and the filling up of casual elective vacancies in the board of directors, shall be determined by the majority of all the directors for the time being.
(4.) In the case of an equality of votes upon any question submitted for the decision of the directors the chairman of the board shall have a casting vote.
(5.) All matters to be determined by the majority of all the directors for the time being shall be determined by resolution to be submitted to meetings of the directors in Kimberley and London to be convened in the usual way, at which the votes of those present and voting shall be recorded, and the decision arrived at shall be in accordance with the vote of the majority thus ascertained, notwithstanding that any director whether in Kimberley or London may be absent or abstain from voting. On any vote taken under this by-law no person appointed by any life governor his alternative director (see art. 85) shall vote if the life governor appointing him votes, [*619] and if in fact both a life governor and his alternative should vote the vote of the alternative shall not be counted.
(6.) Except as before provided, a quorum of the directors (see art. 107) sitting in Kimberley and a quorum of the directors sitting in London shall have in all respects equal and concurrent authority, including authority to incur expenditure not exceeding 25,000l.
(7.) These by-laws shall continue in force until repealed or varied by a majority of all the directors for the time being.
11. The chairman of the appellant company attended meetings of the directors in London when important business was to be transacted or the policy of the board determined, as appears from minutes of the board meetings dated April 17, May 1, 15, and 17, June 17 and 19, 1889; February 10 and 17, 1891; April 13 and 20, October 26 and 28, November 2, and December 7 and 14, 1892; November 28, 1894; January 23, 1895; February 24 and March 3, 1897; May 4 and 11, 1898; January 25 and 27, May 3 and 10, June 14 and 28, 1899; April 9, 18, and 20, 1900; July 26 and October 9, 1901; and January 8 and 15, 1902.
The meetings of directors in London which have been attended by the general manager, who during the last few years has been resident in South Africa for six months of the year and for six months in England, are as follows namely, seven meetings in 1898, five in 1900, ten in 1901, and twelve in 1902.
In each of the years 1900 and 1901 there was, including three life governors, a total of nineteen directors. In each of these years sixteen of the said directors at one time or another attended meetings of directors in London.
Two of the three life governors and nine of the sixteen ordinary directors were resident in the United Kingdom. Two of the remaining directors travel to and fro between England and Africa. The Right Honourable Cecil J. Rhodes, chairman, and six ordinary directors were resident in the Cape Colony. One director had a residence in each country.
The highest attendance at any board meeting in London was fifteen. The highest attendance at any board meeting in [*620] Kimberley was eight, but included three persons acting as alternatives, appointed under the articles of association, as representing life governors, when those life governors were absent from Kimberley. The average attendance of ordinary directors at the London meetings was largely in excess of the average attendance at the Kimberley meetings.
12. The evidence shewed that matters falling within the terms of clause 3 of the by-laws were always dealt with at meetings of the directors in London, where the majority of all the directors always was. Matters of policy within the said clause were discussed and approved and then communicated to Kimberley. There is no instance of the vote of the Kimberley directors turning a minority in London into a majority or negativing the decision of the London board. It was admitted that the majority of the directors had always given their votes in connection with any important matter to be determined under by-law 5 at the meetings of directors in London.
The directors meeting in London have appointed four committees, namely, (a) the finance committee, (b) the diamond committee, (c) the machinery committee, and (d) the dynamite committee, to act in London and to deal with matters falling respectively under such headings; and these committees have been continued to the present time. To the finance committee, first appointed on November 21, 1888, was entrusted (inter alia) the final carrying out of the scheme for consolidation and conversion of the companys debentures, under which 3,500,000l. of 5 per cent. first mortgage debentures was issued in London in 1894; and the minutes shew that the committee is required to make weekly reports to the directors in London as to the finances of the company, including the payment and discounting of bills. Accounts were submitted shewing the total receipts and payments through the London office for each of the years ended June 30, 1900, and June 30, 1901, as follows: Year ended June 30, 1900 receipts, 5,700,674l. 2s. 10d.; payments, 5,663,758l. 13s. 4d. Year ended June 30, 1901 receipts, 3,700,858l. 7s.; payments, 3,738,487l. 10s. 6d.
The diamond committee was first appointed in June, 1889, and under its direction and control the companys diamonds [*621] received in London were arranged to be disposed of. From 1890 the committee were required to report at the weekly meetings of directors in London the sales of all diamonds, and from 1894 they submitted for the approval of the directors in London the terms under which the companys production of diamonds was disposed of to the diamond syndicate in London, which took over in Kimberley the whole produce of the mines and paid for it by bills on members of the syndicate in London under the contracts already mentioned in paragraph 6.
The machinery committee, first appointed on December 5, 1888, executes in London all orders from Kimberley for the purchase of machinery and plant for the companys use, the directors meeting in London having by minute of November 28, 1888, called upon the directors at Kimberley to pass all such orders through the London office. The machinery committee acts only on requisitions from Kimberley, and never initiates any policy relating to machinery. Their function is control. The accounts of the London office for the years ended June 30, 1900, and June 30, 1901, shew goods and sundry payments to the amount of 178,372l. 10s. and 151,967l. 1s. 3d. for each of the years mentioned respectively, and these sums are almost entirely in payment of orders received from Kimberley. The materials are passed by the London machinery committee, who engage the services of an expert to advise them in relation thereto.
The dynamite committee accepted tenders and made contracts for the purchase of dynamite. On September 14, 1898, this committee accepted a tender from Nobels Explosives Company for two years from April 1, 1899. The payments made under the direction and by order of this committee through the London office in connection with explosives during the year ended June 30, 1900, amounted to 33,046l., and for the year ended June 30, 1901, to 30,703l. All orders are in pursuance of requisitions from Kimberley. The dynamite committee never initiates any policy relating to dynamite. Their function is control.
In addition to the above transactions, various other transactions of considerable magnitude were considered, arranged, [*622] and carried out by the directors in London and the said committees.
13. Evidence was given from the minutes shewing that the directors meeting in London carried through (inter alia) the following important financial and other transactions: The final approval and sealing with the common seal of the company in October, 1889, of an agreement for purchasing the property and undertaking of the Bultfontein Consolidated Mining Company; also of the Pullinger Company in June, 1889; the arrangement and approval in May and June, 1899, of the purchase of the London and South African Exploration Company and the Kimberley Diamond Mining Company, and the approval and sealing with the common seal of the company of the agreement for that purpose; the appointment of a committee to settle the purchase of the New Bultfontein Company; the approval and sealing of various agreements with other companies; the consolidation and conversion of the companys debentures of 3,500,000l. in May and June, 1894. From July to November, 1901 (the then life governors being in London), the directors in London considered and finally arranged for the commutation of the life governors profits, and for the distribution of a bonus of 400,000l. to shareholders on account of accumulated profits. In connection with these transactions it was arranged that the then existing capital should be increased from 3,950,000l. to 4,000,000l., each of the 5l. shares being divided into two shares of 2l. 10s., one of which was designated a preference and the other a deferred share. The directors in London also arranged for an increase of the capital of 4,000,000l. to 4,500,000l. by the creation and issue of 200,000 deferred shares of 2l. 10s. each. It was shewn that the directors were empowered under the articles of association to increase the capital of the company by the creation of new shares up to one-sixth of the nominal capital of the company for the time being; but the directors in London, acting under legal advice, required the agreement with the life governors and the respective increases of capital before referred to to be submitted to the shareholders at an extraordinary general meeting at Kimberley on December 23, 1901. [*623]
In all these cases it was stated in evidence that the transactions were always subject to confirmation at Kimberley; but this is only true in the sense that the majority of the directors did not use their power as such majority without formal communication with their colleagues in Kimberley. It was admitted that an absolute majority of all directors, if present in London, could not have been overruled by the directors at Kimberley, and, further, that as a matter of fact no conflict ever arose, everything decided at meetings in London at which the Right Honourable Cecil J. Rhodes was present being accepted without demur. No case was shewn in which the directors in Kimberley ever overruled the decision of the directors in London.
On May 14, 1902, the directors in London (eleven directors being present) unanimously appointed one L. L. Michell chairman of the companys directors from July 1, 1902, and resolved to send the following telegram to Kimberley: Board unanimously appoint Michell chairman from July 1 next for five years, subject to his annual re-election as director. Terms not finally settled yet. Please pass special resolution and cable confirmation. We will make special announcement here. On hearing this telegram read the directors in Kimberley on May 14 resolved that L. L. Michell should be appointed chairman of the company from July 1 next for a period of five years, subject to his annual re-election.
14. The following minutes shew the relation between the directors in London and the directors in Kimberley: June 3, 1890. Kimberley board called upon to rescind resolutions and purge the minutes of meeting of April 30, when two directors only were present, the other two gentlemen being alternatives of directors scil. life governors acting in London. June 24 and July 22, 1891. Independent auditor appointed by London directors. January 21, 1892. Unanimously resolved that this board do not approve of the advances made to the Chartered Company, and urge their Kimberley colleagues to use their best endeavours to obtain the earliest repayment of these advances, and not to sanction any more. May 31, 1892. It was proposed by Mr. Atkinson, seconded by Mr. C. [*624] Meyer, and carried unanimously, that the board select a firstclass accountant to proceed to Kimberley to take charge of the companys accounts as chief accountant, to be directly responsible to the directors. November 28, 1894. It was resolved that having heard the explanation of Mr. Rhodes . the directors in London agree to leaving the distribution of this sum (a profit of about 9000l.) in the hands of Mr. Rhodes . on the understanding that Mr. Rhodes will render an account to the board at the end of the financial year, as previously proposed by the directors in Kimberley. June 2, 1896. The secretary was directed to write to Mr. Oats expressing the opinion of the board as to the necessity of strengthening the board in Kimberley, and inquiring if it would be convenient to him to proceed to Kimberley at an early date. September 30, 1896. Resolved to send the following cable to Kimberley: We have received your cables of September 24 and 26. This board is of opinion that you exceeded your authority. They most decidedly object to purchase for many reasons, and A. Beit will telegraph to C. J. Rhodes to-day, advising withdrawal purchase till C. J. Rhodes arrives home. Thirteen directors present. July 7, 1897. It was resolved that the London board see no reason for acquiring an interest in the Dundee coal properties, and unanimously decline to confirm. This resolution to be telegraphed to Kimberley to-day.
[On further representation, however, the London board of directors subsequently did confirm the proposal.]
May 3, 1899. Resolved that the authority given by the by-laws to the Kimberley board (with the approval of Mr. Rhodes) should be increased to 100,000l. instead of 75,000l. as it is now; such amount not to be expended more than once in every year without the confirmation of the London board. July 3, 1901. The secretary was directed to ask for information about the farm referred to in the Kimberley minutes of May 30, and why an offer was made for it.
15. With regard to the general meetings of the company, evidence was given that they had always been held in Kimberley. [*625] The general accounts of the company are kept at Kimberley, and balance-sheets, including the audited returns of the London office, are first drawn up there and then submitted to all the directors for approval. Evidence taken from the minutes shews that the directors in London, who have always been a majority of the board, exercise a controlling influence over these accounts.
It is shewn by the minutes that the dividends, which must under the Acts be declared by the directors but which are always announced in Kimberley and London simultaneously, were arrived at as the result of communications between the directors in London and Kimberley, the dividends being suggested from either side.
16. The appellant company contended that it was not resident within the United Kingdom, and that it did not exercise any trade within the United Kingdom, and was not subject to assessment to income tax under the Income Tax Acts.
17. On behalf of the Revenue it was contended that the operations of the company were controlled from London by the directors here; that London was the real seat of its business regarded as a whole; and that the company was resident here, and liable to assessment under s. 2 of the Income Tax Act, 1853, on the whole profits wherever made.
It was further contended as an alternative that, as the whole produce of the mines of the appellant company had been habitually disposed of under contracts made in England with the diamond syndicate in the manner and to the effect hereinbefore mentioned, the appellant company exercised a trade or business within the United Kingdom, and was chargeable to income tax on the whole of the profits made by them from the sale of the produce of the said mines under the said contracts.
18. The Commissioners having heard counsel on behalf of the appellant company and the inspector of taxes for the Inland Revenue, and having taken into consideration the facts set forth and certain other evidence adduced before them, came to the conclusion (1.) That the trade or business of the appellant company constituted one trade or business, and was carried [*626] on and exercised by the appellant company within the United Kingdom at their London office. (2.) That the head and seat and directing power of the affairs of the appellant company were at the office in London, from whence the chief operations of the company both in the United Kingdom and elsewhere were in fact controlled, managed, and directed.
19. The Commissioners determined that the appellant company was a person residing in the United Kingdom, and was liable as such to be assessed under s. 2 of the Income Tax Act, 1853, Sched. D, paragraph 1 (1), on the whole of the annual profits or gains arising or accruing from its trade whether the same was carried on in the United Kingdom or elsewhere, and accordingly confirmed the said assessments.
The appellant company thereupon expressed their dissatisfaction with the determination of the Commissioners as being erroneous in point of law, and duly required them to state and sign a case for the opinion of the High Court of Justice, which they accordingly stated as above.
April 12. Cohen, K.C. (Danckwerts, K.C., and Felix Cassel with him), for the appellant company. The first question is whether this company resides in the United Kingdom. There is another and a different question namely, whether it exercises a trade within the United Kingdom. A company may reside in one country and exercise a trade in another; it may reside abroad and exercise a trade in the United Kingdom: Attorney-General
(1) By s. 2, Sched. D, of the Income Tax Act, 1853, the duties are made payable For and in respect of the annual profits or gains arising or accruing to any person residing in the United Kingdom from any kind of property whatever, whether situate in the United Kingdom or elsewhere, and for and in respect of the annual profits or gains arising or accruing to any person residing in the United Kingdom from any profession, trade, employment, or vocation, whether the same shall be respectively carried on in the United Kingdom or elsewhere, and to be charged for every twenty shillings of the annual amount of such profits and gains:
And for and in respect of the annual profits or gains arising or accruing to any person whatever, whether a subject of Her Majesty or not, although not resident within the United Kingdom, from any property whatever in the United Kingdom, or any profession, trade, employment, or vocation exercised within the United Kingdom, and to be charged for every twenty shillings of the annual amount of such profits and gains: . [*627]
v. Alexander (1); or reside in the United Kingdom and exercise a trade abroad: Cesena Sulphur Co. v. Nicholson (2); San Paulo (Brazilian) Ry. Co. v. Carter. (3)
The appellant company is incorporated abroad; its head office is abroad; its mines are abroad; and the whole of its work is done abroad. A company incorporated abroad does not reside in the United Kingdom Attorney-General v. Alexander (1) unless either it exercises a trade in the United Kingdom in its own person and without the services of agents: Erichsen v. Last (4); Wingate v. Inland Revenue (5); or its head office is in the United Kingdom: Goerz & Co. v. Bell. (6) Further, the general meetings of shareholders of this company are all held abroad. To make such a company liable to pay income tax in the United Kingdom on all its profits would work an injustice like that indicated by Lord Herschell in Colquhoun v. Brooks. (7)
A company incorporated by the laws of a foreign country has no legal existence in this country. It owes its existence to the laws of the foreign country, and it is only by international comity that its existence is recognised outside the country of its incorporation: Blackstone Manufacturing Co. v. Inhabitants of Blackstone (8); Bank of Augusta v. Earle (9); Ohio and Mississippi Railroad Co. v. Wheeler. (10)
Secondly, this company does not exercise any trade within the United Kingdom. Its only source of profit in this kingdom is derived from entering into a contract once a year with a syndicate of diamond merchants in London. That contract is to be performed by the company in South Africa entirely, and not in the United Kingdom. A company must habitually enter into contracts during the year of assessment before it can be said to be exercising its trade: Erichsen v. Last (4), per Brett L.J.
A company incorporated in a foreign country, where alone
(1) (1874) L. R. 10 Ex. 20.
(2) (1876) 1 Ex. D. 428.
(3)  A. C. 31.
(4) (1881) 8 Q. B. D. 414.
(5) (1897) 24 R. 939.
(6)  2 K. B. 136.
(7) (1889) 14 App. Cas. 493.
(8) (1859) 13 Gray (Mass.) 488.
(9) (1839) 13 Peters (U.S.) 519.
(10) (1861) 1 Black (U.S.) 286, 295, 297. [*628]
the general meetings of its shareholders are held, at which alone its directors are annually elected and at which alone they can be removed, whose head office and seat are abroad, and whose powers can only be exercised by the joint operation of directors in London and abroad, cannot be said to be resident in the United Kingdom.
Sir R. B. Finlay, A.-G. (S. A. T. Rowlatt with him), for the Crown. The findings of the Commissioners in this case are conclusive in favour of the Crown, and there is ample evidence to support them. The fallacy in the argument for the appellant company is in supposing that this company is merely a mining company. It is much more. It is just as much a financial company as was the appellant company in Goerz & Co. v. Bell. (1) By contracts such as that of December 2, 1901, it controls the sale of diamonds all over the world, and that control, which is an essential and inseparable part of its trade, is exercised in London. Moreover, the majority of its directors has always been in London, and therefore it cannot be said that this company does not exercise a trade in the United Kingdom. But if it exercises a trade here by its own officers, and not merely by agents, it must reside here. In Goerz & Co. v. Bell (1) Channell J. held that a financial company, such as the appellant company, resides where its head office is situate; but such a company may have more than one residence. Cases relating to the service of writs, though not directly in point, furnish close analogies to this case. Such cases are Haggin v. Comptoir dEscompte de Paris (2) and Compagnie Générale Transatlantique v. Law; La Bourgogne. (3) The question where a company resides is mainly a question of fact. The place of its incorporation or registration is one circumstance, but only a circumstance, to be taken into account: Cesena Sulphur Co. v. Nicholson. (4)
Cohen, K.C., in reply. The place where a company resides cannot depend upon the question where the majority of its directors may happen to be at any particular time. The
(1)  2 K. B. 136.
(2) (1889) 23 Q. B. D. 519.
(3)  A. C. 431.
(4) 1 Ex. D. 428. [*629]
judgment of Channell J. in Goerz & Co. v. Bell (1) is in favour of the appellant company.
Cur. adv. vult.
April 17. PHILLIMORE J. read the following judgment:- This is an appeal against two assessments made by the Commissioners for the general purposes of the Income Tax Acts for the City of London, one for the year ending April 5, 1901, and the other for the year ending April 5, 1902, each in the sum of 1,557,693l., in respect of the profits of the appellant company in the United Kingdom and elsewhere.
The appellant company was not incorporated in the United Kingdom; it derives its existence from a deed of settlement registered at Kimberley under the Cape Colony Act No. 4 of 1861, to which the further benefit of incorporation became attached by the Cape Colony Act No. 13 of 1888. It has nevertheless been found by the Commissioners to be resident within the United Kingdom and liable as such to assessment for profit or gains accruing from its trade whether carried on in the United Kingdom or elsewhere under the first paragraph of Sched. D of the Income Tax Act, 1853. The material facts upon which the Commissioners decided are set out fully in great detail, and with reference to many documents, in the case, which then concludes with the following paragraphs: The Commissioners, having . taken into consideration the facts above set forth and certain other evidence adduced before them, came to the conclusion (1.) that the trade or business of the appellant company constituted one trade or business and was carried on and exercised by the appellant company within the United Kingdom at their London office; (2.) that the head and seat and directing power of the affairs of the appellant company were at the office in London, from whence the chief operations of the company both in the United Kingdom and elsewhere were in fact controlled, managed, and directed. 19. The Commissioners determined that the appellant company was a person residing in the United Kingdom, and liable as such to be assessed under s. 2 of the Income
(1)  2 K. B. 136. [*630]
Tax Act, 1853 (Sched. D), paragraph 1, on the whole of the annual profits or gains arising or accruing from its trade, whether the same was carried on in the United Kingdom or elsewhere, and accordingly confirmed the said assessments. The way in which the Commissioners have stated their conclusions of fact is more absolute than that in which they stated their conclusions in the somewhat similar case of Kodak, Ld. v. Clark (1); but it was contended by counsel for the appellant company, and not disputed by counsel for the Crown, that the intention of the case was that I should look at all the facts with a view to seeing whether the findings of the Commissioners were warranted, and without being fettered by their conclusions, although I must of necessity attach great weight to them. This course was taken by my brother Channell in Goerz & Co. v. Bell (2), and the counsel for the Crown agreed that I might rightly take it in the present case.
There is, as I have said, no doubt that this company owes its existence to its colonial incorporation, and that the corporate existence of foreign corporate bodies is only recognised in other countries by international comity. I doubt whether the same principle applies to colonial as to foreign corporations. Probably every corporation which has legal existence by virtue of an Act of the Sovereign Power exercised in any part of His Majestys dominions should be recognised as a corporation in every Court of His Majestys dominions. But, be this as it may, a foreign company, and certainly none the less a colonial company, may be treated by English Courts as existing, and as existing in this country, for the purposes of taxation. The language of Huddleston B., giving judgment in the two cases of Calcutta Jute Mills Co. v. Nicholson (3) and Cesena Sulphur Co. v. Nicholson (3), the inquiry entered upon by the Court of Session in Wingate v. Inland Revenue (4), and the decision of my brother Channell in Goerz & Co. v. Bell (2), shew that this is the case. It was the taxpayer who in Calcutta Jute Mills Co. v. Nicholson (3) and Cesena Sulphur Co. v. Nicholson (3)
(1)  2 K. B. 450;  1 K. B. 505.
(2)  2 K. B. 136.
(3) 1 Ex. D. 428.
(4) 24 R. 939. [*631]
contended that his company, though incorporated in England and having an office here, was not residing within the United Kingdom a contention which in the particular facts of those cases failed. As then a company, though incorporated abroad, may be deemed to be residing within the United Kingdom for the purposes of the Income Tax Acts and vice vers‰, it remains to consider whether this company is, notwithstanding its colonial incorporation, so resident.
Now the case is one of much detail. I have attended to all the considerations urged upon me, but in this judgment I only profess to give the main ones. The company relies upon its incorporation, upon its head office being at Kimberley, upon general meetings of shareholders being always held at Kimberley, upon some of the directors meeting weekly in quasi-board meetings at Kimberley, upon the by-laws Nos. 2 and 5 requiring matters of grave importance to be submitted to meetings of directors to be held at Kimberley and in London, and upon the fact that the main industry of the company (which is the mining of diamonds) is entirely carried on in the Cape Colony.
The Crown relies on the facts that four at least of the directors must reside in England, that weekly quasi-board meetings have been held in London, that far the larger proportion of the directors have attended the London quasi-board meetings, so much larger a proportion that, whenever it has been necessary to add up the votes of the directors, the scale has never been turned by the Kimberley vote, that four committees sit and act in London, of which the finance committee and the diamond committee deal with the most important operations of the company, and, lastly, that a large portion of the companys profit is earned by the judicious mode in which they regulate the sale of their diamonds and control the diamond market throughout the world by contracts made and carried into effect in the United Kingdom.
Upon a review of these various considerations I should come to the conclusion, if it was necessary to find that the company had one residence, and one residence only, that its residence was within the United Kingdom, where its business of control is carried on, even though its principal physical labours are [*632] abroad, as was the case in San Paulo (Brazilian) Ry. Co. v. Carter. (1)
But I do not think it necessary to determine that the only residence of the company is in the United Kingdom. As was pointed out in Goerz & Co. v. Bell (2), a person and a company may have for the purposes of taxation two residences. So a company may have two residences for the purpose of answering to justice: see Compagnie Générale Transatlantique v. Law; La Bourgogne. (3) I am satisfied that this company has existence and residence within the United Kingdom. It is from London that the policy and the important operations of the company are directed. It is in London that the governing work of the company is done, and where the principal officers of the company meet in greatest numbers and consult and determine its business.
I have one further observation. It is clear that, even if this company be not resident within the United Kingdom, it exercises a trade within the United Kingdom in respect of the profits of which it would be liable to assessment; to a certain extent namely, in respect of profits derived under the agreement of December 2, 1901, this was admitted by counsel for the company, but this admission by no means reaches to the extent of the companys liability. At one time I thought that this of itself was conclusive against the appellant company upon the principles stated towards the close of the judgment in Goerz & Co. v. Bell. (4) The company has to pay on the profits of its trade within the United Kingdom; if it is nonresident, it is assessed and pays by its agent in this country, but it has no such agent. It is its own agent, and must itself be assessed and pay. This argument, as I have said, I at one time thought conclusive. But I am not sure upon reflection that it is conclusive as to the whole assessment, because the assessment is upon profits earned, not only in the United Kingdom, but elsewhere. To support the full assessment the company must be determined to be resident within the United Kingdom, and I so determine. I have considered the case of
(1)  A. C. 31.
(2)  2 K. B. 136, at p. 146.
(3)  A. C. 431.
(4)  2 K. B. 136, at p. 151. [*633]
the Attorney-General v. Alexander. (1) I do not think that my decision conflicts with it. Throughout the case I have been assisted by the judgment in Goerz & Co. v. Bell (2); but I admit that the facts were stronger in that case than in the one before me, and that my judgment may be considered as going somewhat further.
The appeal must be dismissed.
A. P. P. K.
The company appealed.
June 2, 7. Cohen, K.C., and Danckwerts, K.C. (Felix Casselwith them), for the appellants.
Sir R. B. Finlay, A.-G., and Rowlatt (Sir E. H. Carson, S.-G.,with them), for the Crown.
The arguments were substantially to the same effect as in the Court below.
[The following authorities were cited in addition to those cited in the Court below: Grainger & Son v. Gough (3); Sulley v. Attorney-General (4); Alivon v. Furnival (5); Gilbertson v. Fergusson (6); Ex parte Breull. (7)]
COLLINS M.R. This is an appeal from a judgment of Phillimore J. holding that the appellants were liable to income tax under the terms of Sched. D. Those terms are as follows: For and in respect of the annual profits or gains arising or accruing to any person residing in the United Kingdom from any kind of property whatever, whether situate in the United Kingdom or elsewhere, and for and in respect of the annual profits or gains arising or accruing to any person residing in the United Kingdom from any profession, trade, employment, or vocation, whether the same shall be respectively carried on in the United Kingdom or elsewhere, and to be charged for every twenty shillings of the annual amount of such profits and
(1) L. R. 10 Ex. 20.
(2)  2 K. B. 136.
(3)  A. C. 325.
(4) (1860) 5 H. & N. 711.
(5) (1834) 1 C. M. & R. 277; 40 R. R. 461.
(6) (1881) 7 Q. B. D. 562.
(7) (1880) 16 Ch. D. 484. [*634]
gains; and for and in respect of the annual profits or gains arising or accruing to any person whatever, whether a subject of Her Majesty or not, although not resident within the United Kingdom, from any property whatever in the United Kingdom, or any profession, trade, employment, or vocation exercised within the United Kingdom, and to be charged for every twenty shillings of the annual amount of such profits and gains. The learned judge has held that the appellant company is resident in the United Kingdom, and also that it exercises a business in the United Kingdom; and that, on either of these grounds, the company is liable to be assessed to income tax under Sched. D on the profits of that business. The really important question, according to the appellants counsel, is whether the company can be said to be resident in the United Kingdom. The Attorney-General does not admit that this question is of the supreme importance ascribed to it by the appellants. He says that, from the standpoint of the Crown, if the company exercises its business in the United Kingdom, the result is that, under the special circumstances of the case, the position is the same with regard to income tax as if the company were resident in the United Kingdom; because, he contends, the business of the company is one entire business which is exercised in this country: so that, in either view of the case, whether the company is resident in England or not, the Crown is entitled to the income tax claimed, as there is only one business which is carried on by them in the United Kingdom. I propose to deal shortly with both points. The question, as regards both points, appears to me to depend on the inferences of fact to be drawn in this case, and, subject to one point, there does not appear to me to be really any dispute as to the law applicable.
As regards the first point, namely, whether the company is resident in England or not, the appellants counsel meets that in limine with a proposition of law, and, relying on certain American authorities, affirms that a corporation can have no residence outside the sovereignty of the country wherein, and under the laws of which, it is incorporated. He bases that proposition on dicta to be found in the American cases which [*635] he cited namely, Blackstone Manufacturing Co. v. Inhabitants of Blackstone (1); Bank of Augusta v. Earle (2); Ohio and Mississippi Railroad Co. v. Wheeler. (3) When those dicta come to be considered with reference to the points raised in these cases, and certain qualifications appended to them, I do not know that for the present purpose they amount to very much, or that they contain anything very inconsistent with the possibility of a corporation residing in a country other than the country in which it is incorporated, to the extent at any rate of bringing it within the jurisdiction, and making it amenable to all the laws of that country. For, though the learned judges who uttered those dicta seem to consider that a corporation can, in point of law, have only one domicil and residence, namely, within the sovereignty of the country from which it derives its existence, they go on apparently to qualify that view by saying that it is possible for it to carry on business in another country, which possibility they derive from the comity of nations. Whether it rests on comity or on the view that, a corporation being an entity, that entity is legally capable of existing within a jurisdiction other than that of the country which gave it birth, the result is that it can carry on business in a country other than that in which it was incorporated. However this may be in American law, it seems to me clear that by the law of this country a foreign corporation is capable of residing in this country. In Carron Iron Co. v. Maclaren (4) Lord St. Leonards laid it down that a corporation can have more than one domicil. He said: I think that this company may properly be deemed both Scotch and English. It may, for the purposes of jurisdiction, be deemed to have two domicils. Its business is necessarily carried on by agents, and I do not know why its domicil should be considered to be confined to the place where the goods are manufactured. The business transacted in England is very extensive. The places of business may, for the purposes of jurisdiction, properly be deemed the domicil. The corporation cannot have the benefit of its place of business
(1) 13 Gray (Mass.) 488.
(2) 13 Peters (U.S.) 519.
(3) 1 Black (U.S.) 286.
(4) (1855) 5 H. L. C. 416, at pp. 449, 458. [*636]
here without yielding to the persons with whom it deals a corresponding advantage. The claim of the company is in respect of dealings here. Service on one member of a corporation is good service. Upon general reasoning, I think that the company may, for the purposes of the suit in Chancery, be treated as within our jurisdiction. And further on he said: I have been unable to discover which is the particular residence of this company. The money of the appellants is made by returns coming from England. They manufacture in Scotland. The members of this corporation do not make the iron; they do not reside in the house. They are nobody; in fact, they are represented by their seller, but they are not, in other respects, persons dealing as individuals. Their business is carried on in London just as much as it is carried on in Scotland. It is not, therefore, a question of attacking the agent as agent. If the service upon the agent is right, it is because, in respect of their house of business in England, they have a domicil in England. And in respect of their manufactory in Scotland, they have a domicil there. There may be two domicils and two jurisdictions; and in this case there are, as I conceive, two domicils and a double sort of jurisdiction, one in Scotland and one in England; and for the purpose of carrying on their business one is as much the domicil of the corporation as the other.
It seems to me that what was there said points to the conclusion that it is possible according to our law for a foreign company to acquire a residence in this country; and, although it may be said that the passages which I have cited were only dicta of Lord St. Leonards, and not an actual decision of the House of Lords, they appear to have been followed in other cases with regard to the service of writs on foreign corporations. It is necessary to consider what lies at the bottom of these cases as to service, in order to see how far they are consistent with the high and dry position taken up by the appellants counsel with regard to the impossibility of a foreign corporation acquiring a residence in this country. In those cases the question was whether, under the particular circumstances of the case, a foreign corporation could be made amenable to the [*637] jurisdiction by service of a writ upon it, not out of, but within the jurisdiction. It was necessary, in order to establish the right to treat the foreign corporation as within the jurisdiction, to bring it within the law applicable to residents in this country. Those cases arose under Order IX., r. 8, which provides that, in the absence of any statutory provision regulating service of process, every writ of summons issued against a corporation aggregate may be served on the mayor or other head officer, or on the town clerk, clerk, treasurer, or secretary of such corporation. The first step which had to be taken was to decide that the rule covered a foreign as well as an English corporation. Then, in dealing with the question whether such a corporation was properly served, it became necessary to consider whether it was resident in this country. Hence those cases were certainly decided on the view that the particular corporation in question was resident in this country when the writ was served. It may be, no doubt, that a residence which would be sufficient for the purposes of service would not be such as to bring a foreign corporation within the operation of a taxing Act; but the cases do appear to strike at the root of the proposition that it is legally impossible for a foreign corporation to be resident in this country. They are certainly, I think, authorities against the existence of a hard and fast line confining the residence of a foreign corporation to the country in which it is incorporated.
Assuming that it is possible for a foreign corporation to acquire a residence in this country, it becomes, in my opinion, really a question of fact whether under all the circumstances it can be deemed to have acquired such a residence. The question is as to the inference to be drawn from many facts. I do not propose to go through all the details of this case. Phillimore J. has given his opinion upon a general examination of the facts, and I agree in the conclusion at which he arrived. I will state, however, a few of the considerations which lead me to the conclusion that the appellant company must be deemed to be resident in this country. Turning to the articles of association, art. 3 provides that the head office of the company shall be [*638] in Kimberley, in the Cape Colony, or at such other place either in the said Colony or in such other country as the directors shall from time to time consider advisable. That is a very remarkable provision, if it is to be presumed that the company is incapable of residing in any country other than the Cape Colony. It certainly shews that it was not the intention that the residence of the company should be limited to the sovereignty of the country from which its existence was derived, but that there should be power to shift the residence of the company to another country. I do not say that the locality of the head office would be conclusive to shew where the company resided; but, assuming it to be so, inasmuch as the article shews that the intention was that it might be shifted from the Cape Colony to another country, we are justified in looking to see what has been done in fact, before drawing any inference from the mere fact that the head office was by the article stated in the first instance to be at Kimberley. We find that an office was established in London, and that, throughout the period in question, a majority of the directors resided in the United Kingdom; and, although certain directors had to reside in South Africa, a quorum must always reside in England. There are a series of findings of fact all tending to shew that the real business of the company was conducted in England, though in concert with the directors in Kimberley. As I have said, the majority of the directors resided in the United Kingdom, and they appear to have been the persons who really exercised the effective control of the undertaking. In paragraph 13 of the case it is stated as follows: In all these cases it was stated in evidence that the transactions were always subject to confirmation at Kimberley; but this is only true in the sense that the majority of the directors did not use their power as such majority without formal communication with their colleagues in Kimberley. It was admitted that an absolute majority of all directors, if present in London, could not have been overruled by the directors at Kimberley. It seems to me that the more one looks into the facts, the more clear it becomes that the provisions of the articles were so [*639] framed, and so acted on, as really to enable the directors in London to manage the company. Now, when we come to look at what was really done under the management of the directors, it appears clear that the real business of this company was that of diamond merchants carrying on business in London. The material which they dealt in, no doubt, was drawn from South Africa, and certain members of the governing body had to be in Kimberley to superintend operations there; but, though that was so, the real business of the company, the business operations to which skill, and intelligence, and experience were most essential, were carried on in London. Provisions are made, by means of an annual contract, by which the whole produce of the appellants mines is taken by a syndicate formed of different firms of diamond merchants in London, who by arrangement with the directors deal with the diamonds in London, the market on which the operations in the companys diamonds are conducted; and it is the skill and intelligence with which these provisions are made, and these operations are conducted, which enable the market to be controlled so as to allow the company to earn profits on a large scale. The head and brains of the company are, as it appears to me, to be found in London, and the real conduct of the adventure takes place there. It does not matter in my opinion whence the subject-matter with which the business deals is drawn; the inference which I draw from the facts is that the real business of the company is carried on in London.
It is not necessary to go through the cases to which we have been referred. With the exception of the dicta in the American cases to which I have alluded, I can find nothing in those cases at all inconsistent with the inference which I draw from the facts in the present case. The counsel for the appellants has pressed upon us an expression used by Lord Esher, then Brett L.J., in the case of Erichsen v. Last (1), as to the conditions in which a foreign company may be said to carry on a trade in England, and perhaps I ought to say a few words on that subject. In that case Lord Esher said: I should say
(1) 8 Q. B. D. 414. [*640]
that, wherever profitable contracts are habitually made in England, by or for foreigners, with persons in England, because they are in England, to do something for, or supply something to those persons, such foreigners are exercising a profitable trade in England, even though everything to be done by them in order to fulfil the contracts is done abroad. The appellants counsel said that, assuming that passage to represent the law applicable to such cases, the conditions there mentioned were not fulfilled in the present case. He fastened on the word habitually, and argued that there was nothing in the present case in the nature of an habitual making of contracts by the appellant company in this country, inasmuch as they only made one contract annually for the whole of the produce of their mines. I do not think that there is any substantial difference between making one contract annually to govern all the transactions throughout the year, and making a series of similar contracts in the year dealing with each transaction in succession separately.
Dealing with the questions of residence and where the business was carried on together, I think that the business of the company was really one business, and that the essential parts of that business were conducted in London; and, having regard to the fact that the company had a local habitation in London, which, though not named the head office, really was in effect the head office, I think it resided in London. For these reasons I think the decision of Phillimore J. was right and this appeal must be dismissed.
MATHEW L.J. I am of the same opinion. It is important for the purposes of this case to consider what was the real character of the appellants business. It was one business namely, first to dig for diamonds in Africa, and then to secure the sale of them on the London market under such conditions as to enable the company to obtain the control of the market for diamonds. The mining operations in Africa were superintended by a small number of the directors, and the majority of the directors resided and held their meetings in the United [*641] Kingdom. No profits were made in Kimberley or diamonds sold there; the object of the directors was to secure the sale of the diamonds in England, and all the provisions made by the company were directed to that end. The question is, having regard to all the circumstances, where the company can be said to reside. The appellants counsel contended that a company can only reside in the country where it was incorporated, that its powers cease, and its existence ends, when once the boundaries of that country are passed; and they relied on certain American cases to establish that proposition. When these cases are looked at, they only appear to indicate the existence of an opinion on the part of some American lawyers of a somewhat technical nature namely, that in legal theory corporations cannot have any existence outside the boundaries of the country in which they are incorporated; but that theory appears practically to have but little substance in it. It cannot be disputed that a foreign corporation can sue and be sued in this country, and can enforce contracts here; and it is every days experience that foreign companies carry on business here quite as effectively as if they were incorporated in this country. It seems impossible to contend under these circumstances that they do not reside where they so carry on business, or that their existence must be treated as confined to the country of their incorporation. The practice of business and of the law appears quite inconsistent with such a view. It is clear from the cases that under the rules a foreign corporation may be served with a writ in this country. The question in such cases is whether the corporation resides within the jurisdiction; and, whenever it is found to be occupying by means of its officers premises in this country, its residence here would seem to be established for purposes of service. It appears to me that the contention of the appellants counsel on this point wholly fails, and that a foreign corporation may reside in this country for the purposes of income tax. I do not enter on the question whether this colonial corporation is for the present purpose a foreign corporation in the strict sense of the term or not. I will assume that [*642] it is; but, even so, the law seems to me clearly to be that it may exist outside the country in which it was incorporated, and may reside here.
That being so, the question is, Does the appellant company reside or carry on business in this country? I think there can be only one answer to that question. As I have said, the part of the business carried on in Africa was mining only, and no profits were made there. Arrangements were made for dealing with all the diamonds produced by the appellants mines through a syndicate in London, and the diamonds sold to the syndicate appear to have been paid for by bills drawn on members of the syndicate in London. A most important department of the business was that of finance, and the company derived all the funds necessary for the operations in Africa from London. A great deal was made of the fact that dividends were declared in Kimberley; but it appears that, before their declaration there, the amount of the dividend is arranged in the London office, and then the dividend is declared simultaneously in London and Kimberley. It seems to me impossible on the facts to treat the company otherwise than as carrying on business in this country; and the inference which I draw is that the seat of authority over the affairs of the company was in England, there being a preponderance of directors here, who could and did in fact control the operations of the company abroad.
COZENS-HARDY L.J. I agree, and have very little to add. It cannot be doubted, I think, that the appellant company might be served with a writ in an action in this country. If so, that must be because in the view of the Court they would be resident in this country, having an office here which they occupy by their directors. In the case of Dunlop Pneumatic Tyre Co. v. Actien-Gesellschaft für Motor und Motorfahrzeugbau vorm. Cudell & Co. (1), that point was very clearly put by the Master of the Rolls. He said that according to the cases the true test in such cases is whether the foreign
(1)  1 K. B. 342. [*643]
corporation is conducting its own business at some fixed place within the jurisdiction, that being the only way in which a corporation can reside in this country. It can only so reside through its agent, not being a concrete entity itself, but if it so resides by its agent, it must be considered for this purpose as itself residing within the jurisdiction; and in that case it was held that such a residence even for the period of nine days was sufficient for the purposes of service. I think it is not open to us to assent to the proposition urged by Mr. Cohen, namely, that it is impossible for a corporation ever to be resident anywhere except in the country in which it was incorporated. No doubt its residence in this country might be so temporary that, though sufficient for the purposes of service, it might not be sufficient to render the corporation liable to the operation of the laws relating to taxation. But I agree with the view expressed by the Master of the Rolls to the effect that the principle laid down in the cases as to service is really conclusive against the proposition put forward by Mr. Cohen. In answering the question whether a company resides in this country, which is a mixed question of law and fact, the place where it is incorporated forms no doubt one element for consideration; but all the circumstances must be considered. The question cannot depend on what the company chooses to call its head office. One must look at facts and not mere terms. I find in the present case that a clear majority of the directors reside in the United Kingdom, and all questions of policy appear to be dealt with by them in London. All important contracts by the company would appear to be sealed in London. So far as our information goes, the seal of the company would appear to be kept in London and to be there affixed to documents requiring to be sealed by the order of the directors. In considering where the brain, heart, and motive power of the company are situated, all the important elements in the case appear to me to shew that they are to be found in London, and not in Kimberley. For these reasons I think that the decision of Phillimore J. was correct. Furthermore, I think that it may also be supported on the ground that, wherever the company may be resident, it exercises a trade in this country. The [*644] business of the company appears to me to be really one business, the essential part of which is carried on in London.
NOTE. EXTRACTS FROM ARTICLES OF ASSOCIATION.
By art. 1, Life governors mean the permanent directors of the company during the term of their natural lives and of their proper qualification for office, as hereinafter set forth. Directors mean the directors for the time being of the company, or such number of them assembled at a board as have authority to act for the company, and, save where the terms are used in opposition or distinction to each other, directors shall include permanent directors or life governors. Board means a meeting of directors duly constituted. Office means the registered office of the company. Seal means the common seal of the company.
Office of the Company.
Art. 3 (set out in paragraph 4, supra).
Objects of the Company.
By art. 4 the objects of the company were declared to be (inter alia), (a) To acquire any houses, lands, mines, mining rights, water rights, and other rights and hereditaments, diamonds and other precious stones, gold and other minerals, and any other movable or immovable property in Africa or elsewhere. (b) To carry on the business of miners in all its branches, to search for, win, get, mine, quarry, crush, smelt, wash, roast, dress, calcine, refine, cut, polish, prepare for market, buy, sell, and deal in diamonds, gold ores, coal, and all other precious stones, metals, and minerals. (c) To acquire, construct, and manage any works or conveniences which the company may think conducive to its objects. (d) To be interested in and to promote such companies as may be considered conducive to the interest of the company, and to carry on any other business calculated to render the companys property or rights profitable. (e) To acquire the business of any company or person carrying on any business which the company is authorized to carry on, and to deal in the property, shares, or stock of any such person or company. (f) To enter into partnership or amalgamation with any person or company carrying on any business which the company is authorized to carry on, or any business capable of being carried on for the benefit of the company. (j) To acquire by concession, grant, purchase, or otherwise any tract or tracts of country in Africa or elsewhere, together with such rights as may be agreed upon and granted by the rulers and owners thereof, and to expend such sums of money as may be deemed requisite and advisable in the development and maintenance of order and good government thereof; also to obtain rights over, construct, and regulate roads, railways, telegraphs, submarine telegraphs, waterways, docks, and [*645] harbours . (l) To take all necessary and proper steps in the Parliaments, Legislative Assemblies, National Assemblies, or with the authorities, whether supreme, local, municipal, or otherwise of any place or country in which the company may have interests, or carry on operations for the purpose of directly or indirectly furthering the interests of the company. (m) To make, accept, indorse and execute promissory notes, bills of exchange, and other negotiable instruments connected with the business of the company. (n) To borrow money, or receive money on deposit at interest, or otherwise as the company may think fit, and in particular by the issue of debentures, debenture stock, or perpetual annuities, and in security of any money so borrowed to mortgage, pledge, or charge the whole or any part of the property, assets, or revenue of the company, present or future, including its uncalled capital, by special assignment or otherwise. (o) To lend, invest, or otherwise employ moneys belonging to or entrusted to the company upon securities and shares, and from time to time to vary such transactions. (p) With the unanimous consent of the life governors to sell or dispose of the undertaking or property of the company or any part thereof for such consideration as the company may think fit, and in particular for shares, debentures, and other securities of any other company having objects altogether or in part similar to those of this company. (s) To procure the company to be registered as a limited liability company in any country where it may be deemed advisable so to do. (t) To open and keep a register in any country where it may be deemed advisable to do so, and to allocate any number of shares in the company to such register or registers. (u) To do all things that are incidental or conducive to the attainment of the objects of the company in any part of the world, either as principals, agents, contractors, or otherwise, and either in its own name or through trustees, agents, or otherwise, and either alone or in conjunction with others .
Transfer and Transmission of Shares.
Art. 20: All transfers of shares shall be made by indorsement upon the certificate, and shall specify the person or persons to whom the same are transferred, or shall be by deed signed by both transferor and transferee, duly attested by two witnesses, and in such form as the board of directors may from time to time approve, and shall be deposited with the secretary, provided nevertheless that no such transfer by indorsement or deed shall be valid to transfer any interest in or right or title to any share or shares or any dividend, profit, or advantage therein or thereupon, until such transfer shall have been duly registered in the office of the company; provided also that in any case where a transfer of any share is intended to be effected out of this Colony, any person or persons duly empowered in that behalf by the board of directors shall transfer on the usual common form of transfer used by the members of the London Stock Exchange such share or shares into the name of the transferee, and any such transfers so given shall be as valid and effectual as if the same had been given by the secretary of the company; and provided also that the secretary or other person or persons so empowered as above shall not register any transfer of shares during a period of fourteen days immediately preceding any of the ordinary annual meetings of the company. [*646]
Increase and Reduction of Capital.
Art. 39: The company in general meeting may from time to time increase the capital by the creation of new shares of such amount as may be deemed expedient; provided, however, that the directors may without the intervention of any meeting increase the capital by creating new shares to such amount and under such circumstances as hereinafter set forth (see art. 119, post); and provided further, that save for the acquisition of new property there shall be no increase of capital without the consent of the life governors.
Art. 40: . If the creation of new shares be resolved upon by a general meeting they shall be issued upon such terms and conditions as the said meeting shall direct, and if no direction be given then as the directors shall determine.
Art. 48: All meetings of the company shall, until otherwise determined by the board, be held in Kimberley.
Art. 49: The first general meeting shall be held at such time, not being more than fifteen months after the registration of these presents, as the directors shall determine.
Art. 50: Subsequent general meetings shall be held once during the year following that in which the first meeting is held, and in each subsequent year at such time as the directors may determine.
Art. 51: The above-mentioned general meetings shall be called ordinary general meetings; all other meetings of the company shall be called extra-ordinary general meetings.
Art. 52: The directors may whenever they think fit, and they shall upon a requisition made in writing by not less than ten members holding not less than one-fifth of the nominal amount of the issued capital, convene an extraordinary general meeting.
Proceedings at General Meetings.
Art. 57: The business of an ordinary meeting shall be to receive and consider the statement of income and expenditure, and the balance-sheet, the reports of the directors and auditors, to elect directors and other officers in the place of those retiring by rotation or otherwise, and to transact any other business which under these presents ought to be transacted at an ordinary general meeting.
Art. 58: Ten members personally present or represented by proxy shall be a quorum for any general meeting. No business shall be transacted at any general meeting unless the requisite quorum be present at the commencement of the business.
Life Governors and Directors.
Art. 80: There may be five life governors or permanent directors . Each of the said life governors shall be and remain a director until his death, resignation, or disqualification, and no resolution at any meeting or anything whatsoever, save death, resignation, or disqualification, shall be capable of vacating the office or effecting the removal from the board of directors of the said life governors or any of them.
Four persons were named as the first life governors, and they had power to appoint a fifth. By Art. 82 the same four persons were appointed the first directors of the company, and they were given power to appoint such duly qualified persons as they should think necessary to act in conjunction with them as directors until the first ordinary general meeting of [*647] the company, at which the directors so appointed were to retire.
Art. 83: At the first ordinary general meeting the members shall determine how many directors besides the life governors there shall be, and they shall at such meeting proceed to elect such number as they determine to be necessary.
Art. 84: Four at least of the directors shall reside in England.
Art. 85: Any life governor, with the consent and approval of the majority of the other life governors, shall have the right and power at any time, if he thinks fit so to do, to appoint any person who shall be a shareholder to act as alternative director in his place and stead at all or any meetings of the directors at which he shall not be present.
Art. 89: It shall be lawful for the shareholders at any ordinary general meeting to vote such sum out of the profits of the company to the directors other than the life governors, as remuneration for their services, as they may think fit.
Art. 98: At each ordinary general meeting all elected directors shall retire from office.
Art. 99: The company at any general meeting at which the directors retire shall fill up the vacated offices by electing a like number of persons to be directors, unless at such meeting it be determined to reduce or increase the number, in which case the company shall fill up the number so determined upon.
Art. 103: . The company in general meeting may by special resolution reduce the remuneration to be paid to elective directors.
Art. 104: The company may by extraordinary resolution remove any director, not being a life governor, before the expiration of his period of office, and, if thought fit, may by like resolution appoint another person in his stead.
Art. 106: The directors may from time to time entrust to and confer upon one or more directors such of the powers exercisable by the directors as they think fit.
Art. 107: The directors may meet together for the despatch of business, adjourn, and otherwise regulate their meetings as they think fit, and may determine the quorum necessary for the transaction of business, and, until otherwise determined, four directors shall be a quorum.
Art. 109: Questions arising at any meeting of directors shall be decided by a majority of votes, and in case of an equality of votes the chairman shall have a second or casting vote.
Art. 110: The directors may elect a chairman and deputy chairman. In the absence of the chairman the deputy chairman shall preside. If such officers have not been appointed, or if neither be present at the time appointed for a meeting, the directors present shall choose some one of their number to be chairman of such meeting.
Art. 112: The directors may delegate any of their powers to committees consisting of such members of their body as they may think fit.
Powers of Directors.
Art. 118: The management of the business and the control of the company shall be vested in the directors who, in addition to the powers and authorities by these presents expressly conferred upon them, may exercise all such power and do all such acts and things as may be exercised or done by the company, and are not hereby expressly directed or required to be done by the company in general meeting. [*648]
By art. 119 the directors were expressly entrusted with power to acquire property for the company, to increase the capital up to one-sixth of the nominal capital, to declare dividends, to expend up to 10,000l. per annum on secret service, to found companies and acquire interests in them; to mortgage and charge the property of the company; to appoint and at their discretion remove such managers, secretaries, officers, clerks, agents, and servants as they might think fit; to open an agency or branch office for the company in London or elsewhere, and to appoint agents to represent the company for the issue and transmission of shares; to appoint persons to hold property in trust for the company; to institute, defend, or abandon any legal proceedings; to set aside out of the profits of the company any sum as a reserve fund; and from time to time to make, vary, and repeal by-laws for the regulation of the business of the company, its officers and servants, or the members of the company.
Art. 120: The directors may provide for the management of the affairs of the company at such places and in such manner as they think fit.
Art. 121: The directors may establish any local committee or agency for managing any of the affairs of the company abroad, or may appoint persons to be members of local committees and delegate to such persons any of their powers, other than the power to make calls.
Art. 132: The directors shall cause true accounts to be kept of the sums of money received and expended by the company, and the matters in respect of which such receipts and expenditure take place and of the assets, credits, and liabilities of the company.
Art. 135: At every ordinary general meeting the directors shall lay before the company a statement of the income and expenditure and a balance-sheet containing a summary of the property and liabilities of the company, made up to date, not more than three months before the meeting, from the time when the last preceding statement and balance were made.
Art. 136: Every such statement shall be accompanied by a report of the directors as to the state and condition of the company, and as to the amount they recommend to be paid out of the profits by way of dividend or bonus to the members, and the amount, if any, which they propose to carry to the reserve fund, according to the provisions in that behalf hereinbefore contained.
Art. 138: Once at least in every year the accounts of the company shall be examined, and the correctness of the statement and balance-sheet ascertained by two auditors.
Art. 139: The first auditors shall be appointed by the directors, and subsequent auditors shall be appointed by the company at each ordinary general meeting. The remuneration of the auditors shall be fixed by the company in general meeting.
Art. 142: The auditors shall be supplied with copies of the statement of accounts and balance-sheet intended to be laid before the company in general meeting four days at least before the meeting to which the same are to be submitted, and it shall be their duty to examine the same, with the accounts and vouchers relating thereto, and to report to the company in general meeting thereon. [*649]
Art. 144: The trustees of the company shall always be two of the members of the company, and shall be appointed and removed from office by the directors.
Two persons were named as the first trustees.
Art. 145: All the property to which the company may be or become entitled shall be, and be deemed to be, the property at law of the trustees and be treated and considered as such in all legal proceedings whatever.
Art. 147: The several shareholders shall, and they do, by these presents assign and set over in trust all right and title in and to their respective shares and interests in the capital, stock, property, estate, chattels, effects, actions, credits, and other things of the company unto the said trustees and to the trustees of the company for the time being, and the said trustees do hereby accept such trusts for the benefit of the shareholders for the time being of the company, and the said trustees, and all others who shall be appointed as such, are, and shall, at all times, upon being authorized and directed to that effect by the directors, be competent and also bound to make and conclude and to take and accept all purchases, sales, demises, leases, securities, and contracts relating to the concerns of the company, or to discontinue the same, also to compromise or submit to arbitration any matter or question in dispute, to sue and defend actions at law, or otherwise act as the directors shall deem most advisable for the interests of the company, and the receipt or receipts, or other acts and deeds of the trustees relative to all and every the matters aforesaid shall be good, sufficient, and absolute discharges, exonerations, and indemnities to and for any vendor, purchaser, or any other person whomsoever by, or to, or with whom any sale, purchase, contract, agreement, rent, moneys, or securities for money shall be made or given, provided, however, that the authority hereby given to and trust vested in the trustees shall not extend to interfere with the powers and privileges of the shareholders or the directors as provided by any clause or clauses of these presents relative to the management of the affairs of the said company.
Art. 148: In case . the directors by a resolution of the board . or in case the shareholders at any extraordinary general meeting shall require all or any one or more of the said trustees to relinquish his or their said office, or in case all or any one or more of them shall be absent from South Africa for more than one month at a time (provided that leave of absence may be granted for a period exceeding one month by the directors) then and in such case the office of such trustee or trustees shall be deemed to have become vacant. .
Art. 151: A notice may be served by the company upon any member either personally or by sending it through the post in a letter addressed to such member at his registered address. Any member may name an address in South Africa to be registered as his address for service, and if he does not name such an address, he shall be deemed to have waived the service of the notice upon him.