Midlands Co-operative Society Ltd v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice Wall,Lord Justice Wilson |
| Judgment Date | 09 April 2008 |
| Neutral Citation | [2008] EWCA Civ 305 |
| Docket Number | Case No: A3/2007/1496 |
| Court | Court of Appeal (Civil Division) |
| Date | 09 April 2008 |
[2008] EWCA Civ 305
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BLACKBURNE J
Lady Justice Arden
Lord Justice Wall
Lord Justice Wilson
Case No: A3/2007/1496
(Transcript of the Handed Down Judgment of WordWave International Limited A Merrill Communications Company 190 Fleet Street, London EC4A 2AG Tel No: 020 7404 1400, Fax No: 020 7831 8838 Official Shorthand Writers to the Court)
Hearing date : Wednesday 5 March 2008
This is an appeal by HM Revenue and Customs (whom I will call “HMRC”) from the order dated 19 June 2007 of Blackburne J. By his order, Blackburne J allowed an appeal by Midlands Co-operative Society Limited (“Midlands”) against a decision released on 20 July 2005 of the VAT and Duties Tribunal (Mr Colin Bishopp). The sole question arising on this appeal is whether Midlands as transferee of the business of another industrial and provident society, Leicestershire Co-operative Society Limited (“Leicester”), has standing to make a claim for the repayment of VAT under section 80 of the Value Added Tax Act 1994 (“ VATA”).
In my judgment, the judge was correct for the reasons he gave. As he held, the appellants have to show that there is some provision in the relevant statutory scheme which expressly or by implication precludes an assignment by operation of law of a claim for repayment under section 80 of VATA. Both he and this court have been referred to certain provisions of VATA and the Value Added Tax Regulations 1995 (“the regulations”) made thereunder. There is no express legislative prohibition on assignment in the provisions to which we have been referred, and in my judgment none of them gives rise to the implication that the transfer of claims under section 80 was not permitted in the circumstances of this case.
Background
Like the judge, I can take the facts from the agreed statement of facts, making only an alteration which the judge made to correct an obviously erroneous statutory reference in paragraph (9).
“(1) Midlands is an industrial and provident society registered in accordance with the Industrial and Provident Societies Act 1965 (the Act).”
(2) Midlands carries on business as a general retailer, selling food and non-food products through retail premises, providing funerals, acting as travel agents, and carrying on the business of a motor dealer.
(3) Midlands has been registered for the purposes of VAT since 6 September 1997 although returns have been rendered with effect from the prescribed accounting period 02/92.
(4) Leicestershire Co-operative Society Limited (Leicester) was an industrial and provident society registered in accordance with the Act carrying on a similar business to Midlands, including the business of a motor dealer. Leicester was registered for VAT.
(5) At general meetings of Leicester held on 7 March and 23 March 1995 the following special resolution was passed in accordance with section 51 of the Act:
'That this meeting of the members of [Leicester] hereby resolves to transfer the whole of the stock, property and other assets and all engagements of the Society to [Midlands] in consideration of [Midlands] issuing to each member of this Society paid up shares equal to the amount standing to the credit of each member in the share ledgers of this Society on the date when the transfer of engagements becomes effective. The transfer shall become effective immediately on the expiration of the Saturday following the date of the registration of this resolution'.
(6) At a meeting of the Board of Midlands on 26 January 1995 it was resolved that a special members' meeting be called to change the name of the society and:
'That this meeting of the Central Board of Directors of [Midlands] hereby agrees in consideration of this Society receiving the whole stock, property and other assets of [Leicester] to issue paid up shares equal to the amount standing to the credit of each such member in the share ledgers of [Leicester] on the date when the transfer of engagements becomes effective.'
(7) On 30 March 1995 the Registrar of Friendly Societies acknowledged … the registration that day of the Special Resolution of Leicester and the registration of the change of name of Midlands.
(8) In consequence of the registration of the Special Resolution 'immediately upon the expiration of' Saturday 1 April 1995 the engagements of Leicester were transferred to Midlands pursuant to section 51(1) of the Act. At that moment Leicester had no spare members and no assets or liabilities whatsoever.
(9) On 30 April 1997, pursuant to section 16(l)(a)(iii) of the Act, the Registrar of Friendly Societies stated in respect of Leicester that:
'The registration of the above mentioned society is hereby cancelled on the ground that the society has ceased to exist following its Transfer of Engagements to [Midlands]'.
(10) On 30 June 2003 Midlands' representatives submitted two voluntary disclosure claims in respect of VAT claimed to have been over declared. The first voluntary disclosure for £63,054 relates to the period 1 April 1973 to 30 November 1999 in respect of output tax over declared under the margin scheme on the sale of demonstrator cars. The second voluntary disclosure for £38,493 relates to the period 1 April 1973 to October 1996 in respect of payments by car manufacturers of demonstrator discounts and bonuses. The two claims were made as a consequence of the decisions: in the cases of Commission v Italian Republic ( Case C-46/95) [1997] STC 1062 and Elida Gibbs v Customs and Excise Commissioners ( Case C-317/94) [1996] STC 1387 respectively.
(11) Customs, by letter dated 18 May 2004, have refused to pay any part of the voluntary disclosure in so far as it relates to VAT paid originally by Leicester prior to its transfer of engagements to Midlands on 1 April 1995.”
Section 80 of VATA
Section 80 of VATA was at the material time and so far as material as follows:
“(1) Where a person has (whether before or after the commencement of this Act) paid an amount to the Commissioners by way of VAT which was not VAT due to them, they shall be liable to repay the amount to him.
(2) The Commissioners shall only be liable to repay an amount under this section on a claim being made for the purpose.
(3) It shall be a defence, in relation to a claim under this section, that repayment of an amount would unjustly enrich the claimant.
….
(6) A claim under this section shall be made in such form and manner and shall be supported by such documentary evidence as the Commissioners prescribe by regulations; and regulations under this subsection may make different provision for different cases.
(7) Except as provided by this section, the Commissioners shall not be liable to repay an amount paid to them by way of VAT by virtue of the fact that it was not VAT due to them.”
Section 51 of the Industrial and Provident Societies Act 1965
Section 51(1) of the Industrial and Provident Societies Act 1965 provides as follows:
“(1) Any registered society may by special resolution transfer its engagements to any other society which may undertake to fulfil those engagements; and if that resolution approves the transfer of the whole or any part of the society's property to that other society, the whole or, as the case may be, that part of the society's property shall vest in that other society without any conveyance or assignment.”
The reference in section 51(1) to a “registered” society is to any industrial and provident society (such as Leicester or Midlands) registered in accordance with the 1965 Act.
Section 51(1) of the 1965 Act was considered by this court in Co-operative group (CWS) Limited v Stansell Limited [2006] 1 WLR 1704 In that case, the industrial and provident society had entered into a contract for the construction of a distribution centre. It then passed a resolution under section 51(1) transferring its whole property and assets to another society and that resolution took effect under the 1965 Act. However, an issue arose as to whether section 51(1) was effective to transfer to the transferee the right to claim damages for breach of the construction contract notwithstanding the fact that it provided that neither the employer nor the contractor could assign the contract without the written consent of the other. This court held that section 51(1) vested the benefit of the contract in the transferee notwithstanding the prohibition on assignment.
Discussion
Mr Craig Sephton QC, for HMRC, submits that section 51(1) cannot apply to non-assignable property. However this is precisely what Stansell decides. Indeed HMRC accept that the answer to the sole issue identified above is to be found in VATA. They do not rely on any particular quality of a claim to repayment under section 80 under the general law. It is not therefore a claim which is too personal to be the subject even of a statutory assignment.
The first question is what VATA must contain in order to exclude the transfer of a right to repayment. The judge approached the matter in essence by asking whether there was anything in VATA, express or implied, which prevented the assignment of such a claim (judgment paragraphs 35 and 36). Mr Sephton submits that the judge had simply to consider whether VATA allows the benefit of a claim under section 80 to be assigned. In my judgment, that is not the correct question. VATA and the regulations thereunder take effect subject to the...
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