Mr Richard Allen v HM Treasury
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 17 April 2019 |
| Neutral Citation | [2019] EWHC 1010 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2012-000207 |
| Date | 17 April 2019 |
[2019] EWHC 1010 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Mann
Case No: HC-2012-000207
Mr Leslie Allen (instructed by Mishcon de Reya LLP) for the Claimant
Ms Jessica Simor QC and Ms Amy Mannion (instructed by GLD) for the Defendant
Hearing dates: 12 th & 13 th March 2019
Approved Judgment
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.
Introduction
This is trial of an action brought by the claimant, Mr Richard Allen, claiming damages from the defendants (representing the United Kingdom as a Member State of the European Union) for failing to implement measures to remove a VAT exemption from Channel Island suppliers which, it is said, enabled those suppliers to compete with his business on unfairly advantageous terms (they could sell more cheaply) which eventually drove his company out of business. Although the business was conducted by a company in which Mr Allen was a shareholder, he has sued in his own name. The defendants expressly said to me, through counsel, that they took no point on that, so I have ignored the corporate veil and approached the matters before me as though Mr Allen would be able to make such claims as the company could have made. Since Mr Allen shares the same surname as his counsel, I shall hereafter refer to the claimant Mr Allen as the claimant.
This trial, as it arrived before me, was inadequately set up. The parties had agreed broadly that the trial would take certain issues of liability and put off questions of causation and quantum until a later date when liability (if any) had been determined. They proposed determining the liability points via some formulated questions, but unfortunately had not completely agreed the formulation. I had two different versions of what were said to be the relevant questions in my papers, with no agreement as to their final form. Nor was I asked to determine which form was appropriate. Although the formulations were sufficiently similar to enable the parties to address points in their skeleton arguments, that is still an unsatisfactory state of affairs and should not have been allowed to happen.
It may or may not have contributed to the other omission from what was necessary. Neither party proposed to adduce oral evidence, and there was no documentary evidence before me either. The prima facie gratifyingly thin single trial bundle turned out to consist of procedural documents and a long witness statement from the claimant which was put into the bundle by the defendant, apparently in order to evidence the fact that the claimant had previously intended judicial review proceedings on two separate occasions and sent pre-action protocol letters. The claimant did not adduce the evidence in that witness statement himself. Nor was there an agreed statement of facts. So there was no evidential framework for the determination of the issues which the parties invited me to decide (whatever they were). It did not take much probing to reveal that some of the apparent issues which I was to decide were to a degree fact sensitive, and the parties accepted that I could not deal with those. However, there seemed to be two points which I could decide on the basis of a broad agreement as to some incontestable legislative history and some basic facts about the claimant's business, and rather than waste the whole trial opportunity the parties agreed that we could tackle those (subject to its becoming apparent that one or other of them became dependent on disputed facts after all, which it did not). This again is not a state of affairs which should have been allowed to arise, particularly since this action was started as long ago as 2012.
It was in those circumstances that this turned out to be a rather limited trial.
The background
This case concerns exemptions from VAT known as low value consignment relief – “LVCR”. As appears from the legislation which I have to set out below, under that relief some importation of low value goods is exempt from the VAT that might otherwise be chargeable. It applied, inter alia, to goods imported from the Channel Islands. Retailers started to take advantage of that, and one of the main activities in which they did that was the sale of CDs and DVDs, which was the mainland business of the claimant. Because VAT was not payable on those imports, the goods were cheaper than those sourced from mainland suppliers. That was a benefit to Channel Islands based suppliers, but some mainland suppliers also started to exploit the exemption as well. They would take an order on the mainland, send the goods from the mainland to the Channel Islands (claiming repayment of the VAT that they had already paid here), and would then supply free of VAT from the Channel Islands. This process was known as “round-tripping”.
In the early 2000s some UK retailers complained about this. They included the claimant. The claimant even went so far as to threaten two sets of judicial review proceedings, which were ultimately abandoned for want of funds (or so it is said). The essence of the complaint (as I understand it) was that the UK government should have tackled what was said to be an abuse and had failed to do so – the complaint that is now made in these proceedings. It is the claimant's case that his business was adversely affected to such an extent that it was no longer viable by 2007 and had to be closed down, with losses having accrued. He sues for those losses.
That VAT state of affairs continued until 2012 when the UK introduced a statutory instrument which removed the exemption on imports from the Channel Islands where there was a commercial mail order or “distance selling” sale. That removed the scope for the round-tripping abuse, but of course by then it was too late for the claimant's business. When the proposal to remove the relief was announced the governments of Jersey and Guernsey launched judicial review proceedings challenging the proposed statute on the basis that the UK was not entitled to introduce a selective removal of the exemption under the applicable European Directives. The matter was heard speedily by Mitting J who rejected that claim – R (on the application of the Minister for Economic Development of the States of Jersey and another v The Commissioners for Her Majesty's Revenue and Customs [2012] STC 1113; [2012] EWHC 718 (Admin). I shall call this the “ Jersey” case. Mitting J declared the proposal to be lawful. The case was relied on by the parties before me as providing factual background against which I could decide the issues I was to decide, and (by the defendant) as deciding certain matters which are relevant to my issues. I shall return to it as necessary.
The two questions that I am invited to decide, arising out of that background, are as follows:
(a) Should this claim have been brought by judicial review? If so, it is brought way beyond the 3 month time limit applicable to such claims.
(b) Can the claimant identify a right under the Directives pursuant to which he is entitled to claim as an individual?
The relevant EU legislation and the nature of the claim
Those issues have to be determined against the legislative background and the nature of the claim. That background is as follows.
So far as the legislation is concerned, it is probably easier to understand its effect by a short narrative description before embarking on the actual text. The names that I give to the Directives are not necessarily names which they bear on their face; they are names that I have given them to aid understanding.
The Sixth Directive of 1977 (77/88) sets up a broad framework for a harmonised VAT regime. It anticipated exemptions from VAT and contained recitals which suggested that exemptions were not to be allowed to have any serious effect on competition or to be abused. These recitals and their successors form an important part of the claimant's case. However, it did not confer the exemptions. It anticipated (in Article 2) that they would be provided in a later Directive, and they were. That later Directive (83/181/EEC – the “ 1983 Directive”) had more recitals about abuse and provided for various exemptions. They included a discretion to allow LVCR on goods not exceeding €22. That was the original amount of LVCR. In a 1988 (Directive 88/331/EEC – the “ 1988 Directive”) the amounts and nature were amended. A mandatory exemption for goods not exceeding €10 was substituted for the €22; and a discretionary further exemption could be allowed by Member States for goods with a value between €10 and €20; but there was also a discretion to allow no exemption at all for mail order goods.
With effect from 1 st January 2007 the Sixth Directive was replaced by the Principal VAT Directive (2006/112/EC) which was a largely consolidating measure with more recitals said to be relevant. It confirmed, by incorporating by reference, the exemption in the 1983 Directive as amended. It, too, contained recitals said by the claimant to be relevant.
Last, Directive 2009/132/EC (the “ 2009 Directive”) sought to bring about a further consolidation. It was not said to be directly relevant to the cause of action in this case because it is too late in time, but was shown to me because it was the legislative context of the Jersey case.
I therefore revert to the relevant text. Any emphasis in what follows is provided by me to flag up words which are said to be particularly significant to this case.
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