John Dee Ltd v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judgment Date | 12 July 1995 |
| Date | 12 July 1995 |
| Court | Court of Appeal (Civil Division) |
Neill, Roch and Hutchison LJJ.
Court of Appeal (Civil Division).
Value added tax - Tribunal - Jurisdiction - Discretionary decision by Customs to require security - Whether jurisdiction of tribunal on appeal supervisory or appellate - Value Added Tax Act 1983, s. 40(1)(n), Sch. 7, para. 5(2) (Value Added Tax Act 1994 section 83 schedule 11 subsec-or-para 4Value Added Tax Act 1994, s. 83(l), Sch. 11, para. 4(2)).
This was an appeal by Customs against a judgment of Turner J ([1995] BVC 125) that the jurisdiction of the VAT tribunal, when considering the exercise of a discretion by Customs pursuant to the Value Added Tax Act 1983, s. 40(1)(n), was appellate rather than supervisory.
In January 1991 John Dee Ltd ("the company") took over some 20 per cent of the haulage undertaking of the John Dee Group of companies in respect of which joint administrative receivers had been appointed. Two of the company's initial directors, who did not control the company, had also been directors of companies in the John Dee Group.
In view of the two directors' involvement with the John Dee Group and without considering representations made by the company to show that the company's financial position was secure, Customs required the company, pursuant to the Value Added Tax Act 1983, Sch. 7, para. 5(2), to provide security as a condition of registration for VAT.
An appeal to the VAT tribunal pursuant to the Value Added Tax Act 1983, s. 40(1)(n) against Customs' decision to require security proceeded on the basis that the tribunal's jurisdiction was supervisory and that its decision should be based on the principle that a decision should only be quashed if no reasonable tribunal properly instructed as to the law could have come to such a decision.
The tribunal decided that Customs should have had regard to the additional financial material and went on to consider what decision as regards security Customs might reasonably have reached had they taken the material into account. The tribunal concluded that the decision would "most likely" have been the same and dismissed the appeal.
The first issue before the court was as to the true nature of the jurisdiction of the VAT tribunal on an appeal from a discretionary decision of Customs.
The second issue was, if Customs had wrongly exercised their initial discretion, whether the VAT tribunal should: allow the appeal against the initial decision and leave it to Customs to make a fresh decision on the basis of such facts as they ought properly to consider at the time of the fresh decision; or itself come to a decision in the light of the current evidence; or put itself in the position of Customs, in the light of the evidence as it existed at the time of the decision which they had taken and substitute its own decision.
The company contended that an appeal to the tribunal was not supervisory, but was in the nature of an appeal by way of rehearing, so that the tribunal could exercise its own discretion.
Customs contended that the tribunal's jurisdiction was merely supervisory: that the decision to require a trader to provide security was discretionary and administrative and therefore the rules for the review of administrative decision were particularly appropriate.
The court held that, while the tribunal's jurisdiction was appellate and not supervisory, the tribunal should have allowed the appeal leaving Customs to make a fresh decision.
Before the Court of Appeal Customs accepted that the tribunal's jurisdiction was appellate. They contended, however, that the function and powers of the tribunal were to be determined by the nature of the decision against which the appeal was brought. The words in the Value Added Tax Act 1983, Sch. 7, para. 5(2), "where it appears to the Commissioners requisite to do so for the protection of the revenue" imposed a statutory condition which had to be satisfied before security could be required. The tribunal on appeal could only examine whether the condition had been satisfied, a task similar, if not identical, to the task of a court on judicial review of administrative action: it could not substitute its own decision.
Customs accepted that the original decision should not have been taken without regard to the company's financial position, but contended that the tribunal was entitled to consider whether the same decision would have been reached if Customs had taken it into account. Thus, they said, the tribunal had been entitled to dismiss the appeal.
Held, dismissing Customs' appeal:
1. The VAT tribunal's jurisdiction under the Value Added Tax Act 1983, s. 40(1)(n) was an appellate jurisdiction, but the tribunal could not substitute its own discretion for that of Customs. The statutory condition which the tribunal had to examine in an appeal under s. 40(1)(n) was whether it appeared to the commissioners requisite to require security. In examining whether that statutory condition was satisfied the tribunal should consider whether Customs had acted in a way in which no reasonable panel of commissioners could have acted or whether they had taken into account some irrelevant matter or had disregarded something to which they should have given weight.
2. If the tribunal had found that the decision would inevitably have been the same if the additional material had been taken into account, the tribunal would have been entitled to dismiss the appeal. But in the present case the tribunal said only that it was "most likely" that the decision would have been the same if they had considered the material. "Most likely" could not be equated with "inevitably" and the matter should have been sent back for Customs to reconsider their discretion in the light of the evidence.
The following cases were referred to in the judgment:
Associated Provincial Picture Houses Ltd v Wednesbury CorporationELR[1948] 1 KB 223
C & E Commrs v JH Corbitt (Numismatists) LtdELRVAT[1981] AC 22; (1980) 1 BVC 330
C & E Commrs v Peachtree Enterprises Ltd VAT[1994] BVC 209
Hadmor Productions Ltd & Ors v Hamilton & AnorELR[1983] 1 AC 191
Lothbury Investment Corporation Ltd v IR CommrsELR[1981] Ch 47
R v Secretary of State for Social Services, ex parte Wellcome Foundation Ltd WLR[1987] 1 WLR 1166
R v West Sussex Quarter Sessions, ex parte Albert and Maud Johnson Trust Ltd & Ors ELR[1974] QB 24
Sagnata Investments Ltd v Norwich Corporation ELR[1971] 2 QB 614
Wishmore (Mr) Ltd v C & E Commrs VAT(1988) 3 BVC 311
Stephen Richards and Peter Mantle (instructed by the Solicitor for Customs and Excise) for the Crown.
Robert Englehart QC and Adam Lewis (instructed by Gregory Rowcliffe, agents for Dickinson Dees, Newcastle upon Tyne) for the the company.
Customs appealed against the judgment of Turner J given on 3 February 1995. The grounds of the appeal were, inter alia, that the judge was wrong in law in holding that the jurisdiction of the VAT tribunal under the Value Added Tax Act 1983, s. 40(1)(n) was not supervisory, and wrong in concluding that Customs would have reached the same decision if they had taken into account relevant matters.
Neill LJ: This case raises important questions as to the nature and scope of an appeal brought pursuant to s. 40 of the Value Added Tax Act 1983 (as amended) ("the 1983 Act") to a VAT tribunal constituted in accordance with Sch. 8 to the 1983 Act. It is to be noted that the 1983 Act was repealed by the Value Added Tax Act 1994 and that the provisions as to appeals to a tribunal are now contained in Value Added Tax Act 1994 section 83 section 84ss. 83 and 84 of the Value Added Tax Act1994.
For many years prior to 1991 a number of companies carried on road haulage businesses as a group under the name of the John Dee Group. By the beginning of 1990, however, it became apparent that the group was experiencing financial and management problems. On 3 January 1991 joint administrative receivers were appointed. According to the directors' statement of affairs the estimated total deficiencies of the group at 3 January 1991 exceeded £24,000,000. The debts owing by the group included over £l,000,000 due to Customs in respect of VAT.
On 23 January 1991 a company named Index Agent Ltd was incorporated. On 19 March 1991 this company changed its name to John Dee Ltd. John Dee Ltd ("the company") took over 20 per cent of the undertaking of the former John Dee Group. Two of the initial directors of the company had been directors of companies in the John Dee Group. Mr Davison had been a director of five of the six companies in the group. Mr Newton had been a director of one of the six companies in the group.
Customs became concerned about what they considered to be the apparent links between the company and the former John Dee Group of companies and decided to exercise their powers to require the company to give security for the payment of any VAT which either was or might become payable. At the material time this power, which had formerly been contained in s. 32(2) of the Finance Act 1972, was contained in para. 5(2) of Sch. 7 to the 1983 Act. The relevant provision was in these terms:
Where it appears to the Commissioners requisite to do so for the protection of the revenue they may require a taxable person, as a condition of his supplying goods or services under a taxable supply, to give security, or further security of such amount and in such manner as they may determine, for the payment of any tax which is or may become due from him.
On 10 January 1992 a letter was written on behalf of Customs to the company requiring the company to provide security in accordance with para. 5(2). So far as is material the letter was in these terms:
The Commissioners … have noted the VAT record of the above business and other businesses in which your directors Mr John Davison and Mr Peter Newton were involved and for the protection of the revenue and in pursuance of their powers...
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