Jersey Choice Ltd v HM Treasury
| Jurisdiction | England & Wales |
| Judge | Lord Justice Green,Lord Justice Snowden,Lord Justice Arnold |
| Judgment Date | 17 December 2021 |
| Neutral Citation | [2021] EWCA Civ 1941 |
| Docket Number | Case No: A3/2021/0246 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 1941
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
BUSINESS & PROPERTY COURTS OF ENGLAND & WALES
His Honour Judge Johns QC (sitting as a High Court Judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Green
Lord Justice Arnold
and
Lord Justice Snowden
Case No: A3/2021/0246
Aidan O'Neill QC & Nicholas Gibson (instructed by CJ Jones Solicitors LLP) for the Appellant
Jessica Simor QC & Amy Mannion (instructed by Solicitor's Office & Legal Services, HMRC) for the Respondent
Hearing date: Tuesday 16th November 2021
Approved Judgment
A. Introduction and Context
The issue
This is an appeal from the judgment of the High Court dated 27 th November 2020 ( [2020] EWHC 3258 (Ch)) which struck out the claimant's claim form and particulars of claim upon the basis that they disclosed no reasonable grounds for the claim and were, otherwise, an abuse of process. The claim was for damages against the Government for breach of EU law by virtue of the alleged unlawful enactment of Section 199(3) Finance Act 2012 which had the effect of removing VAT relief, known as “Low Value Consignment Relief” (“ LVCR”), from low value goods sold to customers in the United Kingdom using mail order despatched from the Channel Islands.
The Jersey judicial review / “roundtripping”
The withdrawal of this relief was subject to a claim for judicial review, initiated upon an expedited basis, during the Bill stage of the Act. This was brought by the Minister for Economic Development of the States of Jersey, and the States of Guernsey, who contended that the relevant Article of the Directive (Article 23) did not permit selective disapplication of LVCR, either by reference to categories of goods or territories and that selective disapplication of the proviso offended against the principles of fiscal neutrality, non-discrimination and proportionality. In a judgment given on 15 th March 2012 ( [2012] EWHC 718 (Admin) – “ the Jersey judicial review”) Mitting J rejected the claim. He concluded that the law arising was not acte clair and had time permitted he would have referred the issue to the CJEU. However, that was not an option given that judgment was required on a highly expedited basis before the next Budget Day which was imminent. In paragraphs [18] – [20] the judge explained that the motivation behind withdrawal of the relief was the growth of the practice of “ roundtripping” which was considered to be an abuse of the tax system:
“18. The total value of goods imported with LVCR has risen from about £454 million in 2006, but has held steady for the last four years. This may be the combined result of the recession in the United Kingdom and steps taken by the States of Jersey and Guernsey to reduce or eliminate the practice of “round tripping” by which large UK retailers took orders for goods from UK customers in the United Kingdom which they then delivered from the United Kingdom to the Channel Islands and which were then dispatched from the Channel Islands to the UK customers. This commercially pointless exercise was worthwhile because of the tax consequences. The UK retailer paid VAT on the goods when delivered to its warehouse in the United Kingdom and then exported them to the Channel Islands free of VAT. The same goods were then reexported to the United Kingdom customer, also free of VAT, due to LVCR. The UK retailer recovered the VAT which it had paid as input tax; the UK customer paid a price which was free of VAT.
19. There is evidence from members of RAVAS that this practice has not stopped. It is unnecessary for me to determine the extent to which it continues, if at all. It was, and if it continues is, clearly an abusive practice. I accept, as RAVAS members and HMRC witnesses assert, that it has had a significant adverse impact on the turnover and profitability of some UK retailers in the affected sectors.
20. What can properly be categorised as legitimate export activity has also been conducted by Channel Island-based companies, of which Play.com and Indigo Lighthouse are exemplars. Both have established a warehousing and distribution centre in Jersey, from which orders placed by the internet from the United Kingdom are supplied. The business of Play.com is the supply of digital media, principally CDs and DVDs. That of Indigo Lighthouse is more diversified. Both have invested significantly in establishing and developing their facilities and operations in Jersey, and both are substantial employers of local labour.”
The appellant, and claimant below, Jersey Choice Limited (“ JCL”), a company incorporated and registered in Jersey in 2003, was not a party to the Jersey judicial review. Witness statement evidence dated 20 th January 2012 was however given by Mr Tim Dunningham. He has also produced a witness statement for the present proceedings dated 1 st October 2020. He was the founder of JCL. He is now a consultant with JCL. He is a British citizen resident in Jersey who has been involved in horticultural mail order in Jersey since January 1984. The company grows and sells, by mail order from Jersey, bedding plants and other live gardening products mainly to customers throughout the UK. The nature of the products is such that they are low value and generally sell for under £18. The business thrived and was profitable, and VAT exempt, until the Government removed the LVCR with effect from 1 st April 2012. It is not alleged that JCL has at any time been engaged in “ roundtripping”.
The Particulars of Claim
On 19 th July 2018 JCL served Particulars of Claim seeking damages against HMT upon the basis that the removal of LVCR amounted to a breach of ( inter alia) the directly effective Articles 28, 30 TFEU (prohibiting customs charges and charges of equivalent effect), and the general principles of EU law of equal treatment, fiscal neutrality and proportionality.
It is common ground between the parties that, prior to Brexit, the EU customs rules applied to the Channel Islands, including Jersey, under the same conditions as they applied to the UK. Jersey was part of the customs territory of the EU. It is also common ground that the Channel Islands, including Jersey, were not, a “ Member State” of the EU. Nor were they a part of the territory of the UK (or any other Member State of the EU) for the purpose of the EU common system of VAT. These distinctions are relevant to legal issues which I address below.
It is central to the claimant's case that the withdrawal of the LVCR applied only to the Channel Islands and not to the other overseas territories of EU Member States which have the same, somewhat sui generis, status as the Channel Islands under EU law, namely that they form part of the customs union of the EU but not a part of the EU common system of VAT. The Particulars of Claim aver that the provisions of EU law relied upon confer private law rights enforceable in the domestic courts. Further, by reason of the breach of those rights, the claimant suffered substantial loss. Damages are quantified at in excess of £15 million, comprising: (i) repayment of monies charged by way of importation of VAT on the claimant's goods in breach of EU law which charges were not passed on to customers but which were absorbed into the claimant's costs with a consequential decrease in profit margins; (ii) monies paid through the claimant's membership of the Import VAT Accounting Scheme; (iii) monies paid via the Low Value Bulking Import Scheme; (iv) lost profits resulting from reduced sales calculated by reference to those which would have been achieved but for the unlawful imposition of the charge; and (v) additional costs, including the costs of additional borrowing, as a result of paying for the charge which was not properly due.
By an application dated 9 th March 2020, the respondent — HMT — applied to strike out the Particulars of Claim upon the basis that it disclosed no reasonable grounds for bringing the claim and/or that it was otherwise an abuse of the court's process or was otherwise likely to obstruct the just disposal of the proceedings. Alternatively, HMT sought summary judgment against the claimant upon the basis that there was no real prospect of success and there was no other compelling reason for trial. The gist of the application was that the matter had already been decided, correctly, by Mitting J in 2012 in the Jersey judicial review and that reasoning should be followed. Nothing in the Particulars of Claim was new. Further, it was an abuse of process to permit JCL to, in effect, re-litigate the same issues as had been determined in the judicial review, in particular because Mr Dunningham had given evidence on behalf of the claimants in those proceedings.
In the judgment under appeal dated 27 th November 2020, the judge struck out the claim upon the basis that it had no prospect of success and that it was, in addition, an abuse of process. The judge endorsed the conclusions arrived at by Mitting J in the earlier Jersey judicial review. Permission to appeal was given by Nugee LJ on 27 th April 2021. He considered that there was a real question as to whether this was a case of abuse of process. He also considered that it was sufficiently arguable that it was unlawful under EU law for HMT to discriminate between the Channel Islands and other comparable territories who were also within the customs territory of the EU, albeit outside of the VAT territory of the EU.
Summary of parties' arguments
The appellant argues as follows: (i) it was not an abuse of process for JCL to have brought this claim; (ii) although described as a tax the imposition of VAT was in truth a charge having equivalent effect to a customs duty because it was applied...
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