BIM24155 - Mutual trading: non-mutual insurance trading activities: corporation water works
Corporation water works
One of the earliest judgements that people cannot make a profit
by trading with themselves was made by the Lord President in Harris
v Corporation of Burgh of Irvine [1900] 4TC221.
The Corporation owned a water works that supplied its own
town and also two neighbouring towns, Stevenston and Saltcoats. All
recipients were charged a water rate and the Revenue sought to tax
the surplus.
The Court of Session held that the surplus from Stevenston
and Saltcoats was assessable but not that from the people of
Irvine. The people were the Corporation and it was their water
works. So they were supplying water to themselves. The Lord
President compared the situation to that of a person laying on a
water supply for their own house and allowing for it in their
household accounts, 4TC at page 233:
The provider of the supply and the consumer of the water are one and the same individual, and I have never yet heard that a man can make a profit by taking money out of one pocket and putting it into another.
The concept that there must be two parties to a trading transaction was heard again in the Styles v New York Life Insurance Company [1889] 2TC460 (see BIM24035) and CIR v The Cornish Mutual Assurance Co Ltd [1926] 12TC841 (see BIM24040) cases.
