Case: In re Dagnall Ex parte Soan &amp; Morley [1896] 2 QB 407 
Outcome: distinguished
The applicant relies upon a line of cases in bankruptcy commencing with In re Dagnall Ex parte Soan &amp; Morley [1896] 2 QB 407. Pursuant to the Married Women's Property Act 1982 , 'Every married woman carrying on a trade separately from her husband shall, in respect of her separate property, be subject to the bankruptcy laws in the same way as if she were a feme sole.' Mrs Dagnall had been carrying on a trade separately from her husband. Having sold her business, she gave notice to creditors that she was about to suspend payment of their debts. As a result a bankruptcy petition was presented. The question was whether or not the bankruptcy laws continued to apply to her after she had ceased trading but whilst she still owed trading debts. The Divisional Court (Vaughan Williams J and Wright J) found that the bankruptcy legislation continued to apply. Vaughan Williams J said (at 410-11): 'But whether a person is carrying on a trade or not is a question of fact; and if it were not for the decision in Ex parte McGeorge... , I would have said without any hesitation that as long as a woman trading separately from her husband had not paid the trade debts which she had incurred, so long she was continuing to trade. It seems to me that trading is not completed until you have performed all the obligations that the fact of trading imposed upon you. And that was the view that was taken in the older cases. Then we have to consider whether there is anything in the decision in Ex parte McGeorge... which prevents us from holding that the non-payment of debts incurred by a married woman while trading separately is evidence that she is still continuing to trade.' 24 His Lordship then referred to numerous "older" cases, noting that the decision in Ex parte McGeorge had departed from them on the basis of differences in the wording of the relevant bankruptcy legislation. Two alternative lines of reasoning emerge from his Lordship's brief judgment. The first is that a trader continues to trade until he or she has performed all obligations incurred as a result of such trading. The second is that non-payment of trading debts is evidence of continued trading, presumably to be considered in the light of other evidence. Wright J disposed of the matter on a different basis, holding (at 411) that: '... this appeal must be allowed, upon the short ground that in my view the natural meaning of the section is that a married woman who trades separately is to be subject to the bankruptcy laws in respect of all debts incurred by her in the period during which she was carrying on the trade.' 26 Those "older cases" are of some assistance in understanding the decision in Dagnall . In Meggot v Mills , 1 Ld Raym 286; 91 ER 1088, it was said that: '... though a man quits his trade, yet he may be a bankrupt for the debts that he owed before.' 29 In bankruptcy matters, Dagnall has been followed in Theophile v The Solicitor-General [1950] AC 186 at 201-203; In re Bird v Inland Revenue Commissioner [1962] 1 WLR 686 at 695-697 and In re a Debtor [1992] Ch 554. However, in Avondale Motors (Parts) Pty Ltd v Commissioner of Taxation [1971] HCA 17 ; (1971) 124 CLR 97 at 102-103, Gibbs J (as his Honour then was) doubted the applicability of the decision in Dagnall 'beyond the field of bankruptcy and into that of taxation law' , referring to the decision of Tryka Ltd v Newall (1963) 41 TC 146 where Wilberforce J (as his Lordship then was) said: 'I do not think I can accept the application of the bankruptcy cases here. It seems to me that the two fields are quite different. When one is considering the question whether for purposes of bankruptcy laws a person is carrying on business, it may be necessary to hold that he does not cease to carry on business when trading activity has ceased, and for that reason, the Courts have been ready to extend the Section so as to cover a case where he has left debts unpaid. But to apply the same line of thought to Income Tax cases would lead to very great difficulties and, indeed, would mean that almost every case which one finds in the books on such questions as cessation of business would have been complicated by the introduction of this question and might, indeed, have been otherwise decided.' 38 One might well say that the railway company was in a position similar to that of the applicant prior to 25 June 2001. It had an interest in an asset, which was being managed by another party, and derived income from such interest. However the change in the undertaking of the railway company effected by the 1906 agreement was quite different from that made to the applicant's position by the agreement of 25 June 2001. The railway company's capital continued to be tied up in the railway, and it continued to derive income from that source. In the present case the applicant terminated its investment in the joint venture and ceased to derive income from it. Although Lord Sumner's reference to Dagnall may suggest some support for the applicant's case, the reference hardly amounted to an endorsement of the decision, and his Lordship clearly decided the case on its own facts. The other Law Lords made no reference to Dagnall . The applicant also refers to decisions applying the Dagnall-Theophile line of authorities in the Australian Taxation Board of Review and in Canada where Bowman CJ said: 'It is, I believe, settled law that a business continues to be carried on so long as the obligations arising out of the business remain unfulfilled ... .' 39 The cases cited in Dagnall and the reasons of Wright J do not support that proposition, even in the bankruptcy context. The rule is rather that, under bankruptcy legislation then in force, trading debts were recoverable in bankruptcy after trading had ceased. In Australia two eminent judges have doubted the wisdom of applying that proposition in the tax context, and a third (Brennan J) appears to have had a similar view. In England another eminent judge has expressed similar reservations. The decision in South Behar Railway cannot be interpreted as an endorsement of the wider application of the decision in Dagnall . Only one member of the House of Lords referred to it, and in a qualified way. Decisions in the Australian Taxation Board of Review can hardly be set against the views of the judges to whom I have referred. The observation in the Canadian case is not persuasive. In the circumstances I decline to follow Dagnall for present purposes.