HM Revenue and Customs v Weight Watchers (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE MORGAN,Mr Justice Morgan |
| Judgment Date | 21 January 2008 |
| Neutral Citation | [2008] EWHC 53 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH/2007/APP/0259 |
| Date | 21 January 2008 |
[2008] EWHC 53 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE VAT & DUTIES TRIBUNAL
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Morgan
Case No: CH/2007/APP/0259
Peter Mantle (instructed by the Solicitor for the Commissioners for Her Majesty's Revenue & Customs) for the Appellants
David Milne QC (instructed by Lovells) & Greg Sinfield (of Lovells) for the Respondent
Approved Judgment
Hearing dates: 14 th & 15 th November 2007
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The issue
This is an appeal from a decision of the VAT & Duties Tribunal released on the 8 th March 2007.
The question before the Tribunal, which is the same question raised by the appeal to the High Court, was expressed by the Tribunal in paragraph 1 of its decision in these terms:
“This appeal concerns whether customers of [Weight Watchers (UK) Limited], who attend weekly meetings at which they are weighed and can then remain to attend a talk and discussion period but in any event also receive a handbook and other printed material at the meetings, receive single standard-rated supplies of a weight loss programme or separate supplies of zero rated printed material and standard-rated support services.”
The primary facts
The Tribunal's findings of primary fact were set out in paragraphs 5 to 28 of the Tribunal decision. I will repeat those findings verbatim. I will also include paragraphs 2 to 4 of the Tribunal decision by way of introduction to those findings.
The appeal was against a decision letter dated 11 March 2005 that “with effect from 1 April 2005, the ruling given to you on 23 January 2004 is withdrawn” and Weight Watchers Classes “shall be treated as a single supply of a weight-loss programme which is liable to VAT at the standard rate.” The ruling of 23 January 2004 was that the supplies were mixed supplies. In the letter of 11 March 2005 Customs accepted apportionment for the years 2003 and 2004 with 80 per cent zero-rated and 20 per cent standard-rated. Apart from the fact that the handbook in use from 2005 is very much larger than that used previously, there was no material change in the nature of the supplies. The ruling arose from a change in Customs' view of the law as to single and separate supplies.
The only witness was Mrs Melanie Stubbing, Senior Vice-President of Operations of the Appellant. She confirmed a witness statement, most of which was not challenged, and was cross-examined for a day and a half. She was an excellent witness who took considerable care in answering the questions put to her. In the nature of the dispute many of the questions were complex and sometimes lengthy, as were her answers. Given the nature of the cross-examination, it is unfortunate that there was no transcript.
Statements by five customers were accepted without challenge. There was a common bundle of documents with some specific exhibits, in particular the Switch handbook of 170 pages (“the Handbook”).
The facts
The Appellant, which is a wholly owned subsidiary of Weight Watchers International Inc, offers services and products built upon its approach to weight management and weight loss. Most customers are women. The approach is based on three key principles : healthy eating, moderate exercise and modifying behaviour. The approach is designed to help customers learn how to lose weight and keep it off by means of re-education rather than a quick fix. It is designed to result in a safe and healthy weight loss of 1–2 lbs per week.
The current diet plan is branded “Switch” which was introduced in January 2005. This consists of alternative two (sic) food plans—Full Choice and No Count. Full Choice is based on the Points system which has been operated since 1996. Based on a unique formula, Points assigns values to appropriate portion sizes of foods based on their calorie and saturated fat content. Customers are given an individual daily allowance of Points based on their gender, starting weight and certain lifestyle factors. The daily allowance can be increased by exercise at various intensity levels. The method of calculating the daily Points allowance and the Points value of specified portions of food are set out in the Handbook which contains some 600 individual values.
The No Count plan allows customers to eat freely from a comprehensive list of healthy foods listed in the Handbook. It is used by 23 per cent of customers. With No Count there is an optional weekly fixed Points allowance for foods not in the No Count list; this Easy Points list is separate from the Points list described in the previous paragraph and only contains 41 items. Customers can change from one plan to the other.
The Switch programme also contains 10 Winning Habits, starting with “Make Wise Food Choices”. Customers are encouraged to do a “habit audit” and to pick habits focused on different types of behaviour on which to work.
Some 6,000 to 6,500 meetings are held each week in leisure centres, church halls, village halls, school halls and similar venues up and down the country. Some meetings are attended by as many as 70 or 80 people. The number of customers attending meetings varies from some 150,000 weekly to a peak of 350,000 for 5 or 6 weeks after Christmas, there are lower peaks after Easter and the summer holidays. There were around a million meetings enrolments in 2005, around half being new and half being customers who rejoined after having lapsed. Customers are treated as lapsed after missing five meetings.
In 2003 up to 7 November there were 894,640 registrations, of which 453,425 were new Members and the rest were lapsed Members rejoining. By far the largest source of customers was friends' recommendations, accounting for almost half of new members; the next largest sources were television, press and magazine advertising, together accounting for 112,992 new Members; the source of a considerable proportion of customers was unknown. There is extensive press advertising, with 20 inserts per week in the national press in January 2007. Meeting places are advertised in the local press. National advertisements give a telephone number to find the nearest meeting. Advertisements give the website details; the website has 15,000 pages. The publicity is primarily directed to meetings, however the website and Weight Watchers magazine do also cover At Home membership for customers who do not attend meetings.
Apart from Meetings members, the Appellant had some 12,500 At Home customers in 2006 and 100,000 Online customers, who again did not attend meetings. These customers received the printed material by post monthly and by e-mail respectively. Supplies to At Home customers are zero-rated; those to Online customers are standard-rated.
On arrival at a meeting a new customer is greeted by the organiser of the meeting, known as the Leader, fills in a registration form and pays a registration fee of £9 and a fee of £4.95 for that meeting. Sometimes registration is free under a promotion. The current national press advertisement has a free registration voucher valid up to 31 March. Some customers pay concessionary fees.
There is no written contract as such, the terms being part written and part oral. The written terms are set out at page 170 of the Handbook in a page headed “The Small Print”. This starts with certain conditions of joining and exclusions. Members must be at least 5lbs overweight for their height, must not be pregnant and must be at least 10 years old and if under 16 must have GPs and parent's written approval.
Under “Joining” the following appears:-
. “When you join, you pay a Registration Fee and Weekly Meeting Fee at the first Meeting you attend. After that, you pay a Weekly Meeting Fee as you attend each week. You may discontinue your Membership at any time. Previous Members can rejoin upon Payment of a Registration Fee. Your stamped Membership Card is proof of current Membership.
. We charge for missed weeks, but you are allowed up to 2 holiday weeks every six months—just tell your Leader …
. You will be given one copy of the current Programme materials. Extra copies cannot be given …”
Under “additional benefits” it is stated that after attending one paid meeting a week, the Member can attend as many other meetings as she wishes free of charge but can only be weighed-in once a week. It is also stated that only Members and potential Members can attend; guests are only allowed on special occasions announced in advance.
The Registration Form contains a statement that the Member agrees to abide by the Rules of Membership set out in the Handbook. The Membership Card also refers to those Rules. These rules are “The Small Print” referred to above; the Card also states “We do charge for any weeks you miss (up to a maximum of 3).” It is clear on the evidence that payment for missed meetings only arises when the Member attends a further meeting. Those attending after a missed meeting pay for the missed meeting and receive the materials which had been given out at that meeting. There is no question of paying if they simply lapse. After two or three missed meetings it is of course be (sic) more economic to rejoin paying the registration fee again.
Apart from the reference to being weighed-in there is no specification in the written terms as to what will be provided at meetings. This must be communicated orally by the Leader when the Member joins although what a Member is told is unclear and presumably will vary somewhat from Leader to Leader. The new Member receives a Handbook together with a Points Calculator and Bonus...
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