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DEATH AND TAXES: BLESSED BEYOND ALL BLISS

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O fortunatos nimium, sua si bona norint, agricolas

Oh, blessed beyond all bliss, the farmers – did they but know their happiness.

 

This was Virgil, apparently expressing a romantic view of bucolic life. To be fair, the farmers he had in mind were not perceived as blessed because of the nature of their work or their surroundings but because they were far removed from the dangers experienced by warriors. Virgil lived in Italy from 70BC to 19BC when he died. In the division of land among the soldiers after the battle of Phillippi in 42BC he was deprived of his land, not unlike certain farmers to the north of us.

For many years farmers in South Africa were often fiscal favourites. They received many tax benefits that were not allowed to other taxpayers. Some argue that they still do because they are subject to the vagaries of climate change and sometimes erratic Government interventions.

The earliest recorded example of farmers being fiscal favourites was in 1377 during the reign of King Richard the Second in England. A poll tax was imposed “on the goods of each person in the Kingdom, man and woman, over the age of fourteen, except only that real beggars, mendicant friars and farmers” were exempt.

One thing is certain. Farmers make frequent, and often unwilling, appearances in courts of law. Not the least of their subsequent problems, is the tax deductibility of legal expenses incurred in their defence.

A farmer in England had an erratic problem of a different kind when one of his cows escaped and knocked down a man who was on a pedestrian crossing in Guildford in Surrey. The man sued the farmer in the High Court and the matter was, appropriately, heard before Mr Justice Stable. It seems that the judge was the butt of many jokes about closing the stable door after the cow had bolted.

Counsel for the farmer argued eloquently that since the owner of a tame animal is not liable for any damage done by it, as long as it is in keeping with its species, and since a cow is unquestionably tame, he would seek to prove that the cow attacked the plaintiff and, if so, no liability could attach to the defendant farmer. This address elicited the following response:

His Lordship – Is one to abandon every vestige of common sense in approaching this matter?

Counsel – Yes, my Lord.

The judge closed the stable door and adjourned the hearing to consider the matter. In his judgment in Thorp v King Bros (1957) Mr Justice Stable said that  “… after running from the market the cow turned into a cul-de-sac where, if people had only acted with half as much intelligence as the average cow in circumstances of this kind it could have been safely retrieved. But a number of people stood on a wall shouting and waving their arms with the object of creating as much disturbance in the cow’s mind as they could. The cow, accustomed to the tranquility of the farm, became more and more frightened. It turned into the High Street, where it trotted along in a staid manner. The cow, however, unacquainted with the regulations relating to zebra crossings, did seem to recognise a policeman when it saw one. He held out his hand and gave it the appropriate signal whereupon it turned into a car park. Hearing a motor horn, the cow broke through a cordon and out of the car park where it went over the zebra crossing and knocked down the plaintiff. His Lordship was satisfied that the cow had never shown any vice. By the time it knocked down the plaintiff it had been driven frantic by the misguided efforts of human beings and had become dangerous. Its collision with the plaintiff was not a vicious attack: he happened to be in its way…”

Acquitted of any negligence, the farmer succeeded.

Wild animals are another matter. The rule is that he who keeps such an animal does so at his peril, as if it escapes and causes damage he will be liable. The rule is not whether the animal caused the damage by malevolence or innocent panic, but whether the animal is of a species recognised as wild. The distinction is between animals ferae naturae (wild and uncivilized) and those mansuetae naturae (mild mannered or tame). In the course of another trial, which hinged on the nature of the animal, the judge, digressing, observed that most parents probably consider their own children mansuetae naturae and those of their neighbours ferae naturae.

In the Orange Free State Provincial Division in Richter v du Plooy, the judge had to decide whether certain wildebeeste that lived in a large enclosure were ferae naturae. Mr Justice McGregor observed that “the exact place occupied by the wildebeest in the social economy is a matter of some interest – if not to the wildebeest himself, at least to his owner or captor”. He referred to the fact that the wildebeest grazed with the plaintiff’s cattle, that they lived in an enclosed camp without exhibiting any marked signs of insubordination or even disaffection, and that they only sought opportunities to escape when pressed by the forcible arguments supplied by beater, dog and gun. Yet in this large enclosure the wildebeeste “did not call up the same sylvan picture as the placid and unhurried fallow deer leading a sleek and comfortable existence in the ancestral park”. In the end he decided that the wildebeeste were wild.

Now dear reader, lest you wonder what on earth this has to do with tax, you are invited to consider as an academic exercise, the tax deductibility of the enormous legal costs incurred by the various defendant farmers in these cases. For many years the benchmark case was the Port Elizabeth Tramways judgment but the addition of Section 11(c) to the Income Tax Act has complicated matters. The question to be asked is: was the risk a necessary concomitant of the business?

Penelope Webb is a former tax partner of a large international accounting firm.

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