With the looming introduction of a Statutory Residence Test in the UK, a number of the oldest and best known cases on UK tax residence may fall into disuse. As set down in the Volumes of Tax Cases, some of these cases are obscure even for the tax practitioner. I set out to find out whether there was a human interest element to make the cases more interesting.
In Cooper (Surveyor of Taxes) v Cadwalader, the bare facts are a dispute between an American barrister and the Surveyor of Taxes over whether he was resident at a Scottish shooting lodge and therefore liable to UK income tax. In fact, the background to the participants and the case is rather more interesting.
The tax case
An American ordinarily resident in New York, with no place of business in the United Kingdom, rents a house and shooting rights in Scotland, where he spends about two months continuously in each year. The owner of the house keeps it wind and water tight, besides bearing the expense of keeping the ground in order, and paying the wages of the gamekeeper, watcher, housekeeper, and housemaid. The shootings are under the entire management of the keeper.
Held, that the Appellant was a person "residing in the United Kingdom" within the meaning of Schedule D of the Act of 1853, Section 2, and liable to assessment to Income Tax accordingly.
At a meeting of the General Commissioners of Income Tax for the District of Brechin. in the County of Forfar, held at Brechin the 15th day of December 1903, John Lambert Cadwalader appealed against an assessment of £3000 made upon him under Schedule D of the Income Tax Acts for the year ending the 5th day of April 1904. The assessment was made under authority of the Finance Act of 1903 (3 Edward VII., cap. 8, sec. 5), 16 and 17 Vict., cap. 34, sec. 2, and 5 and 6 Vict., cap. 35, sec. 100, cases fourth and fifth.
The following facts were found or admitted:-
1. The appellant is an American citizen, and has his ordinary residence at No. 13 Thirty-fifth Street, New York, where he practises his profession as a barrister.
2. By minute of lease entered into between the factors and commissioners for the Right Honourable The Earl of Dalhousie of the first part, and the appellant of the second part, dated 16th March and 2nd and 3rd April 1900, there was let to the appellant for the period of three years from 1st February 1900, at the yearly rental of £1500, payable in advance on 1st February yearly, All and Whole the sole and exclusive right of shooting and sporting over the grouse shootings of Millden, together with Millden Lodge and the furniture therein, and also with a right of fishing in the rivers and streams within the bounds of the territory let, upon inter alia the conditions following:- (a) The furniture and other effects in the lodge and out-buildings were to be delivered over per inventory to the second party, who bound himself to keep and maintain them in good order during the currency of the said lease, and on the expiry thereof to deliver the same in an equally good state, ordinary wear and tear excepted. (b) The first parties undertook to maintain the whole buildings wind and water tight, and to bear the expense of keeping in order the grounds attached to the lodge, to pay all rates and taxes imposed in respect of said tenancy, and also to pay the wages of a housekeeper and housemaid and one gamekeeper and a watcher, all of whose service should be at the disposal of the second party. (c) The shootings were to be under the entire management of the present keeper, or any other keeper to be appointed by the first parties, but the services of said keeper and under-keeper to be at the service of and under the control of the second party during the shooting season. Upon grounds reasonable and satisfactory to the first parties, the second party might require the removal of any of the servants mentioned in fact 2 (b) and the substitution of others.
3. The said lease,* a copy of which was put in and forms part of this Case, was continued by agreement for one year, to 1st February 1904, and by subsequent agreement, dated 3rd and 6th October 1903, the lease was renewed for a period of two years from 1st February 1904. These agreements also form part of the Case.
4. The appellant is a bachelor. He and his valet, whom he brings with him from America, reside at Millden continuously for a period of two months each year during the grouse shooting season. He employs a caterer from London, who supplies all food and servants. The guests at his house are mostly from America. When the appellant takes possession of Millden, the housekeeper and housemaid remove from the lodge and do not return until he goes away. The female servants are paid board wages by the first parties.
5. In the valuation roll of the County of Forfar the appellant is entered as tenant and occupier of the Millden shooting lodge and shootings, and he is charged to all the local and imperial rates and taxes applicable to such occupancy, though the proprietor relieves him of these taxes under the provisions of the lease. The appellant is an alien, and is not entitled to vote, though his name appears in the register of persons entitled to vote in the election of a member to serve in Parliament for the County of Forfar.
6. When the appellant or his friends are not living at Millden, the lodge is under the care of the female servants referred to in fact 2 (b), and is available for the appellant's return at any time. 7. The appellant has no place of business in the United Kingdom.
8. During the appellant's stay in the United Kingdom he maintains and keeps open for his return his residence in New York, to which he could have returned at any time. He also pays all taxes due by him in New York in respect of his dwelling- house or his profession.
The appellant, who was represented by his agent, Mr. David G. Shiell, solicitor, Brechin, contended that he was not a person residing in the United Kingdom" within the meaning of the income Tax Acts, and quoted in support of his contention sec. 39 of 5 and 6 Vict., cap. 35, Lloyd v Sulley, Court of Exchequer, Scotland, 12th March 1884, 11 R., p. 687; and Colquhoun v Brooks, House of Lords, 9th August 1889.
The Surveyor of Taxes, on the other hand, contended that Lloyd v Sulley proved the appellant's liability, and in support of his contention that section 39 of 5 and 6 Vict., cap. 35, did not exempt the appellant, he quoted The Attorney-General v Coote (1817), 4 Price 183, a decision given on section 51, 46 Geo. III., cap. 65, which was a provision: similar to that contained in section 39 of 5 and 6 Vict., cap. 35.
The Commissioners being of opinion that the appellant was not liable, sustained the appeal and discharged the assessment, and the Surveyor of Taxes having immediately expressed his dissatisfaction with the determination of the Commissioners as being erroneous in point of law, and having duly required in writing & Case to be stated for the opinion of the Court of Exchequer in accordance with 43 and 44 Vict., cap. 19, see. 59, his Case has been stated and signed accordingly.
The Judgement of the Lord President
It was maintained on behalf of the Appellant that his case fell within section 39 of the Income Tax Act, 1842, by which it is provided no person who shall on and after the passing of the Act actually be in Great Britain for some temporary purpose only, and not with any view or intent of establishing his residence therein, and who shall not actually have resided in Great Britain (now the United Kingdom see the Act of 1853, sec. 5) at one time, or several times, for a period equal in the whole to six months in any one year, shall be charged with the duties mentioned in Schedule D. as a person residing in Great Britain, in respect of the profits or gains received from or out of any possessions in (Ireland or) any other of Her Majesty's dominions, or any foreign possessions, or from securities in (Ireland or) any other of Her Majesty's dominions, or foreign securities, but nevertheless every such person shall, after such residence in Great Britain for such space of time as aforesaid, be chargeable to the said duties for the year commencing on the sixth day of April preceding. This provision appears to be directed to prevent temporary residents for less than six months in one year from being charged in respect of profits received from abroad, but it does not appear to me to apply to a case like the present. I do not think that the Appellant can reasonably maintain that he is in the United Kingdom "for some temporary purpose only, and not with any view or intent of establishing his residence therein", in the sense of the section, as he took Millden with the view of establishing his residence there during a material part of each year and maintaining his connection with it as tenant during the rest of the years, and he has a residence always ready for him if he should choose to come to it. It is not necessary in order to a person being chargeable that he shall have his sole residence in the United Kingdom. A man can have residences in more countries than one, although he can only have one domicile.
For these reasons I am of opinion that the decision of the Commissioners was erroneous, and that the Appellant is liable to the assessment in question, the amount of the assessment being, as is conceded, open to adjustment.
HMSO Tax Cases 5 TC 101
John Lambert Cadwalader
This bland description of John Cadwalader as a barrister is a rather considerable under estimate of his talents. He was in fact a very eminent man. Born in Trenton New Jersey on 17th November 1837, John Lambert Cadwalader traced his origins back to antecedents who had gone to America soon after the founding of William Penn's colony, and became a member of the provincial assembly. His grandfather, Col. Lambert Cadwalader, represented New Jersey in the Continental Congress from 1784 to 1787; was a member of the Constitutional Convention, and a member of Congress from New Jersey from 1789 to 1795. His father, Thomas Cadwalader, was a Major-General in the U. S. army, and his mother, Maria C. Gouverneur, was the daughter of Nicholas Gouverneur, of New York.
Cadwalader was educated at Princeton University and in 1860 he entered the Harvard Law School, and, after completing the course there, was admitted to the bar, and began practice in New York City. He became a member of the law firm of Bliss and Cadwalader, which, later, became Eaton and Cadwalader, then Strong and Cadwalader, and finally, in 1914, shortly before his death, Cadwalader, Wickersham and Taft.
“Mr. Cadwalader not only discharged his regular duties in the State Department so as to deserve and receive the commendation of his superior officer, but he distinguished himself in a manner not very common among officials of the government by the preparation of a valuable digest of decisions upon international law, treaties, and kindred subjects.
When he left the State Department, Mr. Cadwalader, after a journey round the world, including a visit to some remote parts of China (much less accessible thirty-seven years ago than now), returned to New York and formed a partnership with the late Charles E. Strong the surviving member of a highly respected firm of lawyers whose business had been established in this City for generations.”
The history of Cadwalader, Wickersham & Taft says of him:
“That he bought to the firm experience in litigation on behalf of major railroads and manufacturing companies. He had also been involved in large bankruptcy proceedings and had defended insurance companies and trade associations against suits by public authorities. Cadwalader was known as Henry W Taft later recalled for his ‘ability to summarise and state to the court in a terse and incisive phrase the substance of a controversy’”
Cadwalader was at one time president of the Bar Association of the City of New York; he was also president of the New York Public Library. For many years before his election to this office he had been a member of the board of trustees and of the executive committee of the library. He probably did more, in the form of personal activities, for the library service of New York City than any other man. He worked out the plans for combining the Astor, Lenox, and Tilden foundations into one great, central library, and was instrumental in the material carrying out of this conception. He also devoted a great deal of thought to the planning out of the present magnificent building which still stands at Fifth Avenue and Forty-Second Street. He was also a trustee of Princeton University, to which institution he made several large gifts; one, made the year before his death, amounting to $30,000; a trustee of the Metropolitan Museum of Art, to which he devoted almost as much of his time and energy as to the Public Library, and was on the boards of the New York Zoological Society and the Carnegie Institution of Washington. He was a member of the Society of the Cincinnati, the Sons of the Revolution, the American Fine Arts Society, and the American Museum of Natural History. His clubs included the Union League, Lawyers', Union, Metropolitan, Knickerbocker, University, Princeton, and New York Yacht, all of New York City.
His swift and comprehensive mind, impatient of forms and details, was at its best in dealing with the larger aspects of a complicated situation, and especially in dealing with what may be called the human side of a legal problem
“for many years he maintained a house in this City where he received an exceptionally large circle of agreeable and distinguished people. With his discriminating taste for art, he had collected mezzotints, old porcelain, and old furniture, which lent the house a special charm; and his collection of old and warm friends was no less remarkable.”
In his obituary published in the New York Times in 1914, it mentions that:“Mr Cadwalader was also fond of outdoor sports, and he was in his day a noted shot. He was also an enthusiastic sportsman and fisherman.”
So already the case becomes more interesting. JL Cadwalader was not just a barrister, but one of the most noted New York barristers ,a former member of the US Government and philanthropist. His keen interest in outdoor sports must have led him to take the lease on Millden Lodge.
Millden Lodge
Again, the rather bland descriptions do not do justice to either Millden Estate or Millden Lodge. According to the 1882 edition of the Highland Sportsman
“The Lodge is situated amid very fine scenery and commands extremely lovely views. It contains entrance-hall, drawing-room, dining-room , business room, butler’s pantry, with hot and cold water, housekeeper’s room , store-room, kitchen and scullery with hot and cold water, larder, and 14 bed-rooms ( counting servants) dressing-rooms with baths etc.
There are also a five-stall stable , coach-house , dairy , laundry, wash-house , 3 stall pony stable, kennels fit for 25 to 30 dogs, 4 outside rooms for men-servants and kitchen garden.
The shootings extend to about 18,000 acres and should yield 1000 brace of game, 10 to 30 brace of game, 10 to 20 brace of black-game and 50 brace partridges, besides snipe, woodcocks, roe deer, hares and rabbits and 2 or 3 stags.
There is very fair tout fishing in the River Esk which when in ply occasionally yields some sport with Salmon”
In September 2011, it was reported that Millden Estate had been put up for sale for £17 million. It was apparently withdrawn from the market. A modern brochure on the Estate speaks to the attractions it must have offered to a keen sportsman such as Cadwalader.It is simply one of the best , if not the best shooting estate in Scotland. The marketing material describes the estate as follows:
“Millden Estate is a classic Scottish sporting estate offering driven grouse, pheasant and partridge shooting as well as salmon and sea-trout fishing on the River North Esk and the River Dee” It goes on to say The estate is recognised historically as one of the great Scottish Grouse Moors , where a record brace of 8,159 brace was achieved in 1931…. Millden was once described as the ‘the Holy Grail of grouse moors, capable of shooting over ten consecutive days.”
Millden Lodge itself is a 19th Century Granite building in Scottish Baronial style, it would be nice to reproduce the photos of the inside, but I am unsure of the copyright, so I direct the interested observer the following Link:
The gardens of the lodge extended down to the North River Esk. “This offers some wonderful salmon, sea trout and brown trout fishing. The Millden beat is eight miles long and with over 40 named pools, you will be spoiled for choice that will challenge all level of fishermen.”
I imagine the estate has not changed hugely in the last century and looking at the photographs of lowland and upland grouse shoots, interspersed with idyllic looking river settings, it is quite easy to see why John Lambert Cadwalader , a noted sportsmen was a keen to take a lease on Millden Lodge and cross the Atlantic to spend a couple of months there. I doubt that he would have estimated that his love of field sports would have left him with a very large British tax bill and a place in history in one of the UK’s leading tax residence cases.
Cadwalader continued to entertain a select band of his New York circle at Millden lodge, including Henry James, the author, and his cousin Beatrice Farrand the noted American Landscape gardener. In 1909 it was reported that Mrs John Jacob Astor had consulted Cadwalader at his Scottish shooting lodge about commencing divorce proceedings against her husband.
References
Background material on JL Cadwalader
IN MEMORIAM JOHN L CADWALADER MARCH THE ELEVENTH
MCMXIV
http://archive.org/stream/inmemoriamjohnl00unkngoog/inmemoriamjohnl00unkngoog_djvu.txt
http://www.cadwalader.com/assets/HistoryBrochure.pdf
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