Petition Of Paulden Activities Limited And Others For Judicial Review
| Jurisdiction | Scotland |
| Judge | Lord Kinclaven |
| Neutral Citation | [2009] CSOH 55 |
| Court | Court of Session |
| Published date | 15 April 2009 |
| Date | 15 April 2009 |
| Year | 2009 |
| OUTER HOUSE, COURT OF SESSION [2009] CSOH 55 | |
| OPINION OF LORD KINCLAVEN in the Petitions of PAULDEN ACTIVITIES LIMITED AND OTHERS Petitioners; for Judicial Review of the issue of Notices under Section 20(1) of the Taxes Management Act 1970 ________________ |
Petitioners: Tyre, Q.C.; Morton Fraser, LLP
Respondents: Moynihan, Q.C., Paterson; Acting Solicitor (Scotland), HM Revenue & Customs
15 April 2009
Introduction
[1] This opinion relates to a continued first hearing in fourteen petitions for Judicial Review of the issue of notices addressed to each of the petitioners under Section 20(1) of the Taxes Management Act 1970. In essence, the notices require the production of certain documents and the furnishing of certain information considered to be relevant to their respective tax liabilities.
[2] The petitioners are Paulden Activities Limited, Eastbay Enterprises Limited, Eastpark Enterprises Limited, Northbay Enterprises Limited, Paulden Associates Limited, Paulden Enterprises Limited, Paulden Interests Limited, Southbay Enterprises Limited, Alcester Enterprises Limited, Cotteridge Enterprises Limited, Marlbrook Enterprises Limited, Northpark Enterprises Limited, Southpark Enterprises Limited and Eindhoven Enterprises Limited. They are all companies incorporated under the Companies Acts having their registered offices at 7 West Park Road, Dundee.
[3] Mr Tyre, Q.C., appeared for those companies. In overview, each of the petitioners contended that there was no basis upon which the General Commissioner who gave consent to the issue of the notice addressed to it could reasonably have been satisfied that in all the circumstances the respondent's officer was justified in seeking consent to the issue of the notice. Reduction of all fourteen notices was therefore sought. In relation to the six petitioners which are trustee and nominee companies, it was submitted by the petitioners that there was sufficient information before the court to entitle it to grant the applications without further procedure. Decree of reduction was therefore sought in those applications. In relation to the eight petitioners which have issued bonds, it was submitted that proof before answer at a second hearing is required in order to determine whether or not the Commissioner could reasonably have been so satisfied.
[4] Mr Moynihan, Q.C. appeared for the Advocate General for Scotland, for and on behalf of H.M. Revenue and Customs ("the Respondents"). In overview, the Respondents contended that the court should dismiss all fourteen petitions. Which failing, the court was invited to dismiss those petitions which it was satisfied are irrelevant.
[5] In the whole circumstances, and for the reasons outlined below, I have decided that the respondents' arguments prevail. Having heard counsel, I propose (i) to sustain the first plea-in-law for the respondents to the relevancy of each of the petitions, (ii) to repel the pleas-in-law for each of the petitioners and (iii) to dismiss all fourteen petitions. As requested at the hearing, I shall put the case out By Order so that counsel can address me on the interlocutors to be pronounced. I would explain my decision as follows.
The Background
[6] Mr Moynihan opened the debate and outlined the background for the respondents along the following lines.
[7] As at 25 August 2005 the respondents were aware of 14 companies with close associations, sharing the same registered office, with the same directors, company secretary and auditors and all limited by guarantee. These companies fell into two broad categories, namely, (i) bond issuing companies and (ii) trustee companies.
[8] Eight (the bond issuing companies) bore by their financial accounts to have issued one capital redemption policy each in 2000, with no other transactions recorded. These companies bore to have generated no income and all expenses were said to have been paid by unidentified third parties. The bond issuing companies are:
- Paulden Activities Limited ("Paulden");
- Eastbay Enterprises Limited ("Eastbay");
- Eastpark Enterprises Limited;
- Northbay Enterprises Limited;
- Paulden Associates Limited;
- Paulden Enterprises Limited;
- Paulden Interests Limited; and
- Southbay Enterprises Limited.
[9] Six (the trustee companies) bore to be nominee or trustee companies. They are:
- Eindhoven Enterprises Limited ("Eindhoven");
- Alcester Enterprises Limited ("Alcester");
- Cotteridge Enterprises Limited;
- Marlbrook Enterprises Limited;
- Northpark Enterprises Limited; and
- Southpark Enterprises Limited.
The accounts of Eindhoven record that no transactions took place in any year other than in the capacity as a trustee or nominee. Notwithstanding the occurrence of transactions, that company was stated to have earned no income and all expenses were borne by a third party. In relation to the remaining five, they bore to have carried out no transactions, generated no income, and again their expenses were borne by a third party.
[10] Within each of the categories there is one exception with specialities differentiating it from the rest, otherwise the remainder in each category are sufficiently similar to be debated by reference to one example.
[11] In the case of the bond issuing companies the exception is Paulden Activities Limited ("Paulden"). Eastbay Enterprises Limited ("Eastbay") is taken as typical of the rest. Paulden is special because the identity of the individual taxpayer engaged in the transaction with the petitioners (Mr Collins) was known to the officer of HMRC (Dr Branigan) who served the Notice. The identity of the persons with whom the remaining companies transacted (referred to as the bondholders) are not known to him.
[12] In the case of the trustee companies it is Eindhoven Enterprises Limited ("Eindhoven") that is the exception and Alcester Enterprises Limited ("Alcester") the typical example. Again Eindhoven is special because the person for whom that company says that it acts is named in the petition: Monarch Associates. For the remaining companies the ultimate "beneficiary" (if there be one) is not disclosed.
[13] By agreement Answers have been lodged in only those four cases.
[14] While recognising the differences between the two categories, and within each category the speciality that makes one company exceptional, the respondents' primary position was that all 14 cases can be viewed together (for reasons that were explained when addressing the Paulden case - see further below). If, however, the court were to reject that primary position the respondents invited the court to differentiate as appropriate.
The Respondents' Motion
[15] The respondents' primary motion was that the court should sustain their plea to the relevancy (plea 1) and dismiss all fourteen petitions. Which failing, if I differentiate among them, I was invited to dismiss those petitions that I was satisfied are irrelevant.
[16] While the petitioners' primary position had been to offer a Proof Before Answer, the respondents were aware that as the debate developed the petitioners might seek decree de plano in some of the cases, for example in the petitions concerning the trustee companies.
The Statutory Background
[17] Each of the fourteen petitions seeks reduction of a Notice dated 25 August 2005 issued by an "inspector" (now an officer of Revenue and Customs) under section 20(1) of the Taxes Management Act 1970, there being a separate notice in respect of each petitioner. Each Notice was accompanied by a statement of reasons.
Section 20 of the Taxes Management Act 1970
[18] Section 20 of the Taxes Management Act 1970 as amended ("TMA") provides, inter alia, as follows:
"20(1) Subject to this section, an inspector may by notice in writing require a person -
(a) to deliver to him such documents as are in the person's possession or power and as (in the inspector's reasonable opinion) contain, or may contain, information relevant to -
(i) any tax liability to which the person is or may be subject, or
(ii) the amount of any such liability, or
(b) to furnish to him such particulars as the inspector may reasonably require as being relevant to, or to the amount of, any such liability. ...
(3) Subject to this section, an inspector may, for the purposes of enquiring into the tax liability of any person ('the taxpayer'), by notice in writing require any other person to deliver to the inspector or, if the person to whom the notice is given so elects, to make available for inspection by a named officer of the Board, such documents as are in his possession or power and as (in the inspector's reasonable opinion) contain, or may contain, information relevant to any tax liability to which the taxpayer is or may be, or may have been, subject, or to the amount of any such liability ...
(6) The persons who may be treated as 'the taxpayer' for the purposes of this section include a company which has ceased to exist and an individual who has died.
(7) Notices under subsection (1) or (3) above are not to be given by an inspector unless he is authorised by the Board for its purposes; and -
(a) a notice is not to be given by him except with the consent of a General or Special Commissioner; and
(b) the Commissioner is to give his consent only on being satisfied that in all the circumstances the inspector is justified in proceeding under this section. ...
(7AB) A Commissioner who has given his consent under subsection (7) above shall neither take part in, nor be present at, any proceedings on, or related to, any appeal brought -
(a) in the case of a notice under subsection (1) above, by the person to whom the notice applies, or
(b) in the case of a notice under subsection (3) above, by the taxpayer concerned,
if the Commissioner has reason to believe that any of the required information is likely to be adduced in evidence in those proceedings.
(7AC) In subsection (7AB) above 'required information' means any document or particular which were the subject of the...
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