Commissioners of Customs and Excise v DFS Furniture Company Ltd (No 2)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lord Justice Keene,Lord Justice Laws,Lord Justice Jonathan Parker |
| Judgment Date | 16 March 2004 |
| Neutral Citation | [2004] EWCA Civ 243,[2002] EWCA Civ 1708 |
| Docket Number | Case No: C3 2003 1080 CHRVF,Case No: C/2002/0823 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 March 2004 |
[2002] EWCA Civ 1708
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MR JUSTICE MOSES
QUEEN'S BENCH DIVISION ADMINISTRATIVE COURT
Lord Justice Mummery
Lord Justice Laws and
Lord Justice Keene
Case No: C/2002/0823
MR PETER MANTLE (instructed by the Legal Department of Customs and Excise) for the Commissioners
MR RODERICK CORDARA QC and MR DAVID SCOREY (instructed by Messrs Landwell, London EC4A 3TL for the DFS Furniture Company PLC
This is an appeal by HM Commissioners of Customs and Excise (the Commissioners) against the order of Moses J dated 22 March 2002. On an application for judicial review by DFS Furniture Company PLC (DFS) he ordered that the claim be allowed, that the decision of the Commissioners in a letter dated 19 February 2001 not to repay to DFS the sum of £6.2m be quashed and that the Commissioners repay that sum, plus interest accrued since 23 June 1997, within 28 days. The judge refused permission to appeal. On 11 June 2002 Laws LJ granted the Commissioners permission to appeal.
The Issue
At this stage of the proceedings there is only one ground of challenge to the lawfulness of the Commissioners' decision letter of 19 February 2001. DFS contends that the Commissioners are precluded from refusing repayment, as they came to an agreement with DFS in November 1996 to settle an appeal by DFS to the VAT Tribunal against the Commissioners' refusal to refund to DFS sums claimed to be due under section 80 of the Value Added Tax Act 1994 (the 1994 Act). It has been agreed by the parties that the resolution of the remaining issues (arising from Community law, the Human Rights Act 1998 and Articles 6 and 14 and Article 1 of Protocol No 1 of the Convention) raised by DFS in a Respondent's Notice should be adjourned pending the decision of this court in Marks & Spencer PLC v Commissioners of Customs and Excise [2000] STC 16 in the light of the ruling of the Court of Justice on a reference under Article 234 of the Treaty.
Under section 83 of the 1994 Act an appeal lies to a VAT Tribunal in respect of a claim for the repayment of an amount under section 80 of the 1994 Act. Section 80 is concerned with recovery of overpaid VAT. It provides the means by which a taxpayer can recover an amount paid to the Commissioners by way of VAT, which was not VAT due to them. Section 80, as amended, also contains the following provisions, which came into force on 4 December 1996.
"(4) The Commissioners shall not be liable, on a claim made under this section, to repay any amount paid to them more than three years before the making of the claim.
(4A) Where—
(a) any amount has been paid, at any time on or after 18 th July 1996, to any person by way of repayment under this section, and
(b) the amount paid exceeded the Commissioners' repayment liability to that person at that time,
the Commissioners may, to the best of their judgement, assess the excess paid to that person and notify it to him.
(4B) For the purposes of subsection (4A) above the Commissioners' repayment liability to a person at any time is—
(a) in a case where any provision affecting the amount which they were liable to repay to that person at that time is subsequently deemed to have been in force at that time, the amount which the Commissioners are to be treated, in accordance with that provision, as having been liable at that time to repay to that person; and
(b) in any other case, the amount which they were liable to repay to that person."
Section 85 contains provisions for settling VAT appeals by agreement.
"(1) Subject to the provisions of this section, where a person gives notice of appeal under section 83 and, before the appeal is determined by a tribunal, the Commissioners and the appellant come to an agreement (whether in writing or otherwise) under the terms of which the decision under appeal is to be treated –
(a) as upheld without variation, or
(b) as varied in a particular manner, or
(c) as discharged or cancelled,
the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was come to, the tribunal had determined the appeal in accordance with the terms of the agreement (including any terms as to costs).
(3) Where an agreement is not in writing –
(a) the preceding provisions of this section shall not apply unless the fact that an agreement was come to, and the terms agreed, are confirmed by notice in writing given by the Commissioners to the appellant or by the appellant to the Commissioners, and
(b) references in those provisions to the time when the agreement was come to shall be construed as references to the time of the giving of that notice of confirmation."
Judgment of Moses J
After a detailed examination of the communications between DFS and the Commissioners in the Autumn of 1996 in their legal and factual setting, Moses J concluded that an agreement was reached between DFS and the Commissioners to settle an appeal by DFS to the VAT Tribunal; that that settlement had the effect of a judicial determination; and that the Commissioners were not therefore entitled to "claw back", under the statutory powers in section 80(4A) of the 1994 Act, the refund to DFS.
The judge's analysis of the correspondence was that an offer to settle the appeal was contained in a letter from DFS dated 11 November 1996, that that offer was orally accepted on behalf of the Commissioners on 25 November 1996 and that under the terms of the agreement so reached the decision of the Commissioners appealed by DFS was to be treated as discharged or cancelled. As the agreement was not in writing, the judge then had to consider whether there was compliance with section 85(3). He held that a letter from DFS's solicitors dated 28 January 1997 was, in the context of the earlier documents, a written confirmation of the terms of the agreement in compliance with the requirements of section 85(3).
Grounds of Appeal
The Commissioners appeal on the ground that the judge erred in fact and in law in concluding that the Commissioners entered into an agreement with DFS within the meaning of section 85. They accept that, after the appeal had been commenced by DFS, they authorised payment of the claim made by DFS under section 80. They contend, however, that the authorisation of the payment and the actual making of it was not under an agreement to settle the appeal by DFS. The refund was made administratively pursuant to a unilateral publicly announced change of policy regarding the deferral of repayments, following a judicial decision declaring the policy of deferment to be unlawful.
Mr Peter Mantle, on behalf of the Commissioners, has demonstrated to my satisfaction that the Commissioners and DFS did not in fact come to an agreement settling its appeal to the VAT Tribunal. DFS cannot rely on the provisions of section 85 to challenge the lawfulness of the Commissioners' decision in their letter of 19 February 2001 refusing a refund of £6.2m.
It will be necessary to focus, as did the judge in his careful and clear judgment, on the correspondence and other communications between the Commissioners and DFS in the Autumn of 1996. The communications between the parties in 1996 and 1997 involve a confusing succession of claims and cross claims: (a) a claim by DFS for overpayment of VAT; (b) a refund by the Commissioners in respect of the overpayment claim; (c) the Commissioners' recovery of the refund from DFS; and (d) the claim by DFS in these proceedings for the return of the recovered refund.
Overpayment of VAT by DFS.
In 1996 DFS claimed to have made an over declaration of VAT in the sum of £6.2m. In connection with its business of selling furniture DFS arranged for interest free credit to be made available to its customers for purchases of furniture. It would invoice the customer for the full purchase price, but receive from the finance house the purchase price, less an agreed commission for arranging the credit. DFS accounted for VAT on the gross purchase price invoiced to the client. In Primback Limited v Commissioners of Customs and Excise [1996] STC 757 the Court of Appeal held that DFS was only obliged to account for VAT calculated on the net purchase price it received from the finance house. (A different conclusion was ultimately reached by the Court of Justice in [2001] STC 803, but that is not immediately relevant to the present appeal).
Shortly before DFS sought a refund of the overpaid VAT, the Paymaster General announced on 18 July 1996 the proposed introduction, with immediate effect, of a 3 year limitation period to apply retrospectively to refund claims in relation to VAT and other indirect taxes and to associated statutory interest.
Deferral of Repayment
On 17 September 1996, DFS formally applied by letter for a refund of all overpaid VAT for the prescribed accounting periods from the period commencing 1 December 1985 to the period ended March 1993. It also enclosed a completed voluntary disclosure (form VAT 652) relating to the prescribed accounting periods from the period ended June 1993 to the period ended March 1996. The Commissioners replied on 7 October 1996 that they had decided to defer accepting DFS's Voluntary Disclosure submitted on 17 September and thus to defer the refund in the light of the announcement on 18 July 1996 of the proposed introduction, with immediate effect, of a three year limitation period applying retrospectively to refund claims and...
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