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Heather Hill Management Company CLG and Gabriel McGoldrick v An Bord Pleanála, Burkeway Homes Limited and the Attorney General  IESC 43BL
On 10 November 2022, Mr Justice Murray in the Supreme Court delivered judgment in Heather Hill Management Company CLG & McGoldrick v An Bord Pleanála, Burkeway Homes Limited and the Attorney General  IESC 43, overturning an earlier decision of the Court of Appeal and reinstating the decision of Mr Justice Simons in the High Court. The decision addresses the task of statutory interpretation against the backdrop of the Supreme Court decisions in Dunnes Stores v Revenue Commissioners  IESC 50 and Bookfinders Ltd v The Revenue Commissioners  IESC 60. The Decision This case concerned the correct interpretation of Section 50B of the Planning and Development Act 2000 (“s.50B”), which provides for a protective costs order in certain environmental and planning claims. The Supreme Court held that s.50B applies to any challenge to a decision made pursuant to a statutory provision which gives effect to the Directives listed in the provision, and that there is no basis under s.50B or the Aarhus Convention for the splitting of costs where some grounds and issues raised in the proceedings engage those Directives, and others do not. The court held that certain provisions of the Aarhus Convention require contracting states to take the necessary legislative measures to ensure that environmental law proceedings are “not prohibitively expensive”. Mr. Justice Murray stated that the respondents had not advanced “any persuasive alternative analysis of the text” of s.50B that could displace its “literal construction”(3). Recent Jurisprudence This decision was delivered against the backdrop of a number of recent Supreme Court decisions issued in the sphere of taxation, each of which gave consideration to the task of statutory interpretation. Murray J considered Dunnes Stores, where Mr Justice McKechnie concluded that a “provision should be construed in context having regard to the purpose and scheme of the Act as a whole, and in a manner which gives effect to what is intended” (70). The court held that even where a literal approach is available, if that approach is absurd or fails to give effect to the purpose of the Act, the Court will decline to apply it (71). The court subsequently considered the literal interpretation in the significant Bookfinders. The appellant, a franchise of the fast-food chain ‘Subway’, sought to import an interpretation of the statute’s words which were then pieced together in a manner which read the term ‘food and drink’ to mean only items of food and drink purchased together, and not food or drink purchased separately, which would have allowed it to avail of the zero-rate of VAT. In rejecting the appeal, O’Donnell J (as he then was) addressed the meaning of the literal approach and criticised the appellant’s attempts to divorce the meaning of words from the overall surroundings of the statute itself: “It is not, and never has been, correct to approach a statute as if the words were written on glass, without any context or background, and on the basis that, if on a superficial reading more than one meaning could be wrenched from those words, it must be determined to be ambiguous, and the more beneficial interpretation afforded to the taxpayer, however unlikely and implausible”. Murray J gave detailed consideration to the meaning of interpretive elements such as “words used in context” and “ascertaining the purpose of an Act”. The Court acknowledged the above-mentioned jurisprudence in noting that the meaning of ‘context’ has broadened in recent times: “To that extent I think that the Attorney General is correct when he submits that the effect of these decisions – and in particular of Dunnes Stores and Bookfinders – is that the literal and purposive approaches to statutory interpretation are not hermetically sealed” (108). The Supreme Court confirmed in Bookfinders that the provisions of the Interpretation Act 2005 do not apply to taxing statutes, and Murray J noted in Heather Hill that absent these provisions: “in no case can the process of ascertaining the legislative intent or the will of the Oireachtas be reduced to the reflexive rehearsal of the literal meaning of words or the determination of the plain meaning of an individual section viewed in isolation from either the text of the statute as a whole or the context for which and the purpose for which it was enacted” (109). Consideration was also given to the decision in The People (DPP) v AC  IESC 74 in which O’Donnell CJ gave an alternative description of the literal approach: “I prefer to describe this as ‘the plain meaning approach’ rather than a ‘literal approach’, because it may be that the literal meaning may, at its margin, have a connotation of strict or even artificial interpretation, and the two terms are used relatively interchangeably. It is important, however, that this approach does not invite a court to isolate the critical words…and consider if they have a plain or literal meaning in the abstract” (3). Permissible Admission of Context vs. Impermissible Imposition on Legislation In Heather Hill, Murray J provided a four-point critical analysis of “the line between the permissible admission of context and identification of ‘purpose’ and the impermissible imposition on legislation of an outcome that appears reasonable or sensible to an individual judge or which aligns with his or her instinct as to what the legislators would have said had they considered the problem at hand, becomes blurred”: The court notes that ‘legislative intent’ is a misnomer where it is used to describe the objective of the interpretive exercise, as the court “cannot peer into the minds of parliamentarians” to ascertain what their subjective intention may have been. It states that interpretation is identifying the legal effect attributed to legislation by a series of rules and presumptions that have been developed by common law and statute for that purpose: “That is the price of an approach which prefers the application of transparent, coherent and objectively ascertainable principles to the interpretation of legislation, to a situation in which judges construe an Act of the Oireachtas by reference to their individual assessments of what they think parliament ought sensibly to have wished to achieve by the legislation” (114). It is confirmed that the words of the statute are given primacy: “[the words] are the best guide to the result the Oireachtas wanted to bring about. The importance of this proposition and the reason for it, cannot be overstated. Those words are the sole identifiable and legally admissible outward expression of its members’ objectives: the text of the legislation is the only source of information a court can be confident all members of parliament have access to and have in their minds when a statute is passed. In deciding what legal effect is to be given to those words their plain meaning is a good point of departure, as it is to be assumed that it reflects what the legislators themselves understood when they decided to approve it” (115). The court notes that the Oireachtas usually enacts a composite statute, and not a collection of disassociated provisions. It does so in a pre-existing context and for a purpose. For this reason, Murray J that the best guide to this purpose is the language of the statute revised as a whole; however, that often must be informed by reliable and identifiable background information of the kind identified by McKechnie J in The People (DPP) v Brown  IESC 67. However, Murray J observes that the ‘context’ that is deployed to that end and ‘purpose’ so identified must be: “clear and specific and, where wielded to displace the apparently clear language of a provision, must be decisively probative of an alternative construction that is itself capable of being accommodated within the statutory language” (116). Conclusion The court’s initial concern appeared to be that context may be used to wrench the meaning of a statute from the plain meaning of the words used. It notes in the first instance that the most preferable context is “the immediate context of the sentence within which the words are used”(106). However, it later states that the overriding concern is that the context must be clear, specific and, where wielded to displace the ostensibly clear language of a provision, it must be “decisively probative of an alternative construction that is itself capable of being accommodated within the statutory language” (116). Murray J concluded that the words of the statute are the “first port of call”: “The words of the section are the first port of call in its interpretation, and while the court must construe those words having regard to the context of the section, of the Act in which the section appears, the pre-existing relevant legal framework and the object of the legislation insofar as discernible, the onus is on those contending that a statutory provision does not have the effect suggested by the plain meaning of the words chosen by the legislature to establish this” (214). The takeaway for tax practitioners from this judgement is that care should be taken in regard to the context of a statute, because the words themselves have primacy. However, context should not be separated entirely from the words as the two are not “hermetically sealed”. This is significant in the sphere of taxation where the approach to separate the two still lingers.
Case Summary – Michael Quigley v Revenue Commissioners and The Tax Appeal Commission -  IEHC 244 - Judicial Review
Judgment of Ms Justice Siobhan Phelan, delivered on 10th May 2023 Subject Areas: Tax Appeal Commission - Fair Procedures – Applicants entitlement to disclosure from the Revenue – Role of EU Jurisprudence The Applicant sought relief by way of Judicial Review as against the Revenue for refusing to disclose information relating to persons interviewed for the purpose of a Revenue assessment against the Applicant. Relief was also sought as against the Tax Appeal Commission on the basis that an application seeking such disclosure was refused by the Commissioner. The Facts The Applicant appealed a Revenue assessment of VAT and Excise liabilities to the Tax Appeals Commission (TAC). These assessments were in the sum of €636,842.00 and €1,012,337.85 respectively for a period between 2009-2016 and arose on foot of the Applicants sale of Marked Gas Oil (MGO), commonly known as Green Diesel for which he was a licensed fuel trader. In carrying out the assessments, the Revenue investigated a list of 700 customers of the applicant only 400 of which could be identified. A proportion of these customers (44) were interviewed for the purposes of the investigation. Some of these customers (33) allegedly denied buying MGO from the applicant. In the course of the appeal to the TAC the applicant requested the names of the 44 identified customers who were interviewed by the Revenue. Revenue refused to provide him with the names. The Appeals commissioner conducted a case management hearing on 17th September 2021 wherein the applicant sought inter alia: the details of the customers and the transactions which comprised the sales at the core of the assessments; In a decision delivered on 1st December 2021 the Commissioner refused the request to furnish the names, details and particulars of the 44 customers interviewed by the Revenue together with the documentation in relation to the interviews. The Commissioner further directed the Applicant to furnish Revenue with the names of the 300 customers it could not identify within 28 days. On the 3rd of December 2021 the Applicant submitted an application to amend and withdraw the Commissioner's direction. In a decision on the 25th of January 2022, the Commissioner largely reaffirmed her directions. As such, the Applicant instituted Judicial Review proceedings in March 2022 seeking the following reliefs: An Order of certiorari by way of judicial review quashing the decisions of first respondent (Revenue) on the 13th of September 2021; An Order of certiorari by way of judicial review quashing the decisions of the second respondent (TAC) on the 1st of December 2021 and the 25th of January 2022; Declarations that the first respondent (Revenue) breached the principles of fair procedures and natural and constitutional justice in failing and refusing to provide the Applicant with the information sought in its letters of the 12th of April 2021 and the 20th of July 2022; Declarations that the second respondent (TAC) breached the principles of fair procedures and natural and constitutional justice in failing and refusing to direct the first respondent to provide the information sought in the letters of the 12th of April 2021 and the 20th of July 2021 to the Applicant; Declarations that the second respondents breached the Applicant's Article 6 rights of the European Convention of Human Rights In failing to direct the first respondent to provide the information sought in the letters dated 12th of April 2021 and the 20th of July 2021 Declarations that the first respondent and second respondent erred in law in making their respective decisions. The Issues The parameters of the legal grounds identified in the Statement of Grounds and the applicability of EU Procedural Rights to the proceedings. The Court was satisfied that the protection of the Applicant’s rights to fair procedures before the TAC may properly be informed by the jurisprudence of the CJEU and the requirements of EU Law. In relation to the issues arising in this case, the case law establishes that there is a right of access to documents which is not absolute just as there is no such right in domestic law. Insofar as that right is conceived as part of a defence, it arises where there is an imputation against the tax-payer of a nature that gives rise to an entitlement to such access in order to respond to and defend against same. However, in the absence of any argument before the TAC in reliance on the jurisprudence of the CJEU, the Court was not satisfied that the applicant could advance such arguments for the first time in the Judicial Review proceedings.  The Applicant continued to have that opportunity where the appeals remain pending before the TAC, even during the hearing as demonstrated by Determination 31TACD2023.  Whether the information sought by the Applicant in relation to the interviews, and specifically with customers who deny buying MGO from the Applicant is required to vindicate his right to fair procedures in the appeal process before the Tax Appeals Commissioner? The Court stated it is well established that the taxpayer undertakes the burden of appeal and must establish an entitlement to the Tax relief sought.  In doing so, the applicant is entitled to fair procedures during the Revenue process but issues of law and fact arising in that process are matters for the Tax Appeals Commission in the first instance.  There are no defined set of principles as to what is required to ensure observance of those requirements for fair procedures and constitutional justice. The requirements will vary from case to case and will be determined by the legal and factual matrix.  “ if for example records ostensibly establish an entitlement to relief but the Revenue challenge the bona fides of the records by means other than material already in the tax-payers possession or available to him or her in a manner which imputes dishonesty, then such a challenge signals a red-flag for the decision maker to be alert to ensure fair procedures in the process which may lead to any adverse determination”  The Appeal Commissioners are the most appropriate body before which to pursue the fairness issue, if it remains live, given they have expert knowledge in dealing with Taxation appeals. . Further it is clear from the case law that the structure of the self-assessment system along with the aforementioned onus of proof requires a particular approach in tax proceedings.  As such, a range of rulings may be required at the hearing of the Tax Appeal in this case, depending on the circumstances that arise for consideration during the Tax Appeal. It is therefore open to the Applicant to make such submissions as may be necessary at the hearing of the Tax Appeal including submissions in reliance on the line of authority from the CJEU  Conclusion The documentation requested relating the identity of the 44 individuals was not necessary for the applicant to prepare and make his case.  A direction that the applicant provide information about the 300 unidentified customers was not tainted by unlawfulness nor did it amount to any pre-determination of the issue in the tax appeal. That direction does no more than afford the applicant the opportunity to demonstrate that he is able to identify those customers from his records (something he is required to do for the Tax Appeal in any event)  The question of the provision of further information by either Respondent remains live before the TAC and will be required to be determined by the Commissioner depending on how the Appeal is conducted. The Court refused the relief sought and dismissed the proceedings.
Case Summary – Decision of Tax Appeal Commission – 31TACD2023
Subject areas: VAT – VAT fraud – application of Kittel principles “knew or ought to have known” – preliminary issue – “rights of the Defence” – evidence – admissibility. This was an appeal against VAT assessments raised on the Appellant in the sum of €6,542,195 for the period 1 January 2013 to 30 June 2018. The assessments were raised on the basis that the Appellant knew or ought to have known that it was participating in transactions connected with the fraudulent evasion of VAT. The Facts Revenue raised assessments for the relevant periods on the basis that the Appellant had purchased products from twelve missing traders (“Missing Traders”) and had sold products to four further traders in the EU (“EU Customers”), in circumstances where its counterparties had not properly accounted for VAT on the transactions, and that the Appellant knew or ought to have known this. The Appeal Commissioner ruled that Revenue should go into evidence first following submissions on the burden of proof in appeals against assessments to VAT, based on the Kittel principles. Evidence was adduced on behalf of Revenue as to the basis on which it was alleged that the Appellant knew or ought to have known that transactions with the Missing Traders and EU Customers were connected with VAT Fraud. A number of other Revenue witnesses also gave evidence. A director of the Appellant, who was also its general manager, gave evidence as to the Appellant’s dealings with the Missing Traders and EU Customers and the steps taken to ensure compliance with the VAT Acts. The Appeal Commissioner considered two mains issues. 1. Were the Appellant’s rights of defence breached? 2. Did the Appellant know, or ought it to have known that it was involved in transactions connected to VAT fraud? The Issues 1. Were the Appellant’s rights of defence breached? The Commissioner held that the Appellant’s rights to the defence arose as a matter of EU law and that he was thus obliged to determine (a) whether a breach of those rights had occurred and (b) what the consequence of such breach was, for the purposes of appeal. He held that the Appellant was entitled, as a matter of EU law, to receive the file of evidence held by Revenue relating to the case, and to be given an opportunity to respond to the basis on which assessments were to be raised, before they were raised. Revenue had failed to provide the file of evidence, and had not given the Appellant an opportunity to make representations prior to the raising of an assessment. The Appellant was entitled to submit its observations on the allegations and the Respondent was obliged to consider these observations before deciding whether or not to raise an assessment, . Consequently, the Appellant’s rights of the defence were breached. Consequently, the Appeal Commissioner found that: “it follows that he is obliged to disregard all of the evidence proffered by the Respondent in this case.” (49) As the Respondent bore the burden of proving that the Appellant knew or ought to have known that its transactions with the Missing Traders and EU Customers were connected with VAT fraud, and as a consequence of the Appeal Commissioner that he was obliged to disregard the evidence proffered by the Respondent as a result of its breaching the Appellants rights to the defence, it followed that there was no valid evidence before the Commissioner and so the assessment was reduced to zero, (52). 2. Did the Appellant know, or ought it to have known that it was involved in transactions connected to VAT fraud. Despite the Appeal Commissioners findings in relation to the Appellant’s rights of defence being breached, the Appeal Commissioner proceeded to decide on the ‘knew or ought to have known’ test. There was no allegation of actual knowledge of VAT fraud but simply that the Appellant ‘ought to have known’. The Appeal Commissioner noted that Revenue’s principal witness “appeared to interpret the available evidence through the prism of what the Respondent knew rather than what the Appellant knew or should have known.” (225) The Appeal Commissioner was, on the other hand, satisfied that any reasonable businessman would understand that there was a greater risk in dealing with certain businesses compared to entities with established trading histories, physical infrastructure and staff networks, and would consequently take additional care to attempt to ensure that the risk of fraud was minimised. The Appeal Commissioner was not satisfied that the Appellant had demonstrated the expected care in its due diligence, (236). The Commissioner stated that he would have expected that, given the lack of trading history the Appellant would have taken additional steps to ensure that the missing traders were acting bona fide, (237). The Appeal Commissioner, however, decided that the circumstances that gave rise to the Appellant dealing with missing traders were very different to many of the indicia that have typically been seen in missing traders cases. The Appeal Commissioner accepted the Appellant’s contention that it was not aware of VAT fraud in the industry and found that there was no clear evidence before him to demonstrate that the Appellant was aware of VAT fraud, (242). The Appeal Commissioner further held that there was no clear evidence from the Respondent that the Appellant was paying below market prices from the missing traders. It was not a case of the prices being offered being “too good to be true.” (244) In weighing up the evidence, the Appeal Commissioner was satisfied that the Respondent had not met the high hurdle showing that the Appellant ought to have known that the only reasonable explanation for the transactions was that they were connected to VAT fraud. In coming to this view, the Appeal Commissioner had particular regard to the events of 2011 which provided reasonable grounds to conclude that the appearance of a trader trading in excess was bona fide, (246). The Appeal Commissioner found that there was no relevant evidence put forward by Revenue to suggest that the Appellant should have known that the transactions with the EU Customers were connected to fraud, (250). Conclusion The Appeal Commissioner held that the Respondent had breached the Appellant’s rights of the defence under EU law. He consequently disregarded the evidence proffered by the Respondent in the appeal. Thus, there was no valid evidence before the Appeal Commissioner on which the Respondent could discharge the burden of proving that the Appellant knew or ought to have known that the transactions with Missing Traders and EU Customers were connected with VAT fraud. He further held that the Respondent had failed to demonstrate that the Appellant knew or ought to have known that its transactions with the twelve missing traders and four EU customers were connected with VAT fraud. The assessments under appeal were therefore reduced to zero. The Appeal Commissioner has been asked to state a case.
Inaugural Annual Conference of the Tax Bar Association
The newly formed Tax Bar Association held its inaugural annual conference on Saturday morning, 8th October 2022 during the first week of the Michaelmas term. The theme of the conference was Recent Developments in Tax Litigation and the Association was delighted to welcome the Chief Justice, Mr Justice Donal O’Donnell, Ms Justice Stack, Judge of the High Court, Ms Marie-Claire Maney, Chairperson of the Tax Appeals Commission, Ms Grainne Clohessy SC and Mr Michael Ashe SC KC to discuss recent developments in the area. The Gaffney Room in Distillery Building at the Law Library was at capacity and there were in excess of eighty in attendance. Ciaran Ramsay SC, Chair of the Association, opened the Conference and on behalf of the Committee of the Association extended a very warm welcome to colleagues at the bar and tax professionals in attendance. The Association was privileged to open the conference with Mr Justice Donal O’Donnell as keynote speaker. Mr Justice O’Donnell gave a very entertaining dissertation covering some of the recent Supreme Court judgments dealing with the statutory interpretation of tax legislation. He was very warm in his enthusiastic comments about the formation of a specialist tax bar association and noted the value brought by barristers from their general litigation experience to the specialist area of tax litigation. Ms Grainne Clohessy SC received a very warm welcome as an esteemed member of the tax bar. She echoed the Chief Justice describing how the bar has developed over the years and that now there is a specialist tax bar that sits within the bar generally. Ms Clohessy SC brought the audience on a whistle-stop tour of the tax appeals system before focusing on the jurisdiction of the Tax Appeals Commission and the role of judicial review within the tax context. Coffee and pastries provided an opportunity for attendees to meet and chat in person; many for the first time since before the pandemic. This return to in-person events was very welcome for those attending. Following the coffee break, the Association was privileged to be addressed by Ms Marie Claire Maney, the Chairperson of the Tax Appeals Commission. She gave a very informative talk on the transformation of the Tax Appeals Commission following her appointment in a newly formed role as Chairperson of the Tax Appeals Commission during the pandemic in 2020. She shared some of the impressive statistics from the Commission. The Association was also delighted to welcome Michael Ashe, KC SC, another esteemed member of the tax bar. Mr Ashe gave a very practical overview of the importance of focusing on evidence and the question of proofs. He also gave some practice insights into evidence and the importance of proving the case drawing on some amusing anecdotes from practice. The Association was honoured to welcome Ms Justice Stack as a speaker. Her contribution was eagerly anticipated as she brought her insight into the case stated procedure, the chancery list and appeals to the High Court. Her comments on the Association also mirrored those of the other speakers in terms of the importance of the barrister as a generalist as well as a specialist tax barrister. The conference closed at 1pm and the Association was very appreciative of all those who took time out on a Saturday morning to attend what was a rare opportunity to hear such esteemed speakers discuss recent developments in tax litigation. The Association is committed to informing and educating in the area of tax litigation. To this end, its early months were marked by two seminars and there are plans to hold seminars on a regular basis.