Potter and Another. (trading as P. & R Potter Wholesale) v Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judgment Date | 26 October 1984 |
| Date | 26 October 1984 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal.
Mr. D. Braham Q.C. and Mr. I. McCullough (instructed by Messrs. David Rimmer & Co., agents for Messrs. Sheltons) for the taxpayers.
Mr. J. Laws (instructed by the Solicitor of Customs and Excise) for the Crown.
Before: Sir John Donaldson M.R.; Oliver, Goff L.JJ.
Value added tax - Supply of goods - Goods sold to retail customers by dealers at parties held for that purpose - Goods obtained by dealers from wholesale distributors - Nature of relationship between distributors and dealers - Whether dealers were agents for distributors - Whether VAT payable on full price of goods sold to retail customers or on price paid by dealers to distributors.
This was an appeal by the taxpayers from a decision of Woolf J. in the Queen's Bench Divisional Court (reported at [1984] BTC 5003), dismissing the taxpayers' appeals against a decision of a Value Added Tax Tribunal that dealers who sold Tupperware to the public acted as agents of the taxpayers, so that VAT was payable on sales at the full recommended retail price of the goods.
The taxpayers were wholesalers, known as distributors, of Tupperware household goods. The distributors appointed dealers who arranged for friends to act as hostesses and to organise parties at which Tupperware was displayed for sale. The dealer ordered goods required for sale from the taxpayers and paid to the taxpayers 70% of the recommended retail price for the goods, retaining the balance of 30%. The dealer then ensured that the customers received their goods, and collected payment from them.
In the standard form of application to become a Tupperware dealer, the dealer was described as an "independent agent", and the dealer's gross earnings were referred to as "commission". The dealer had, however, freedom to decide upon the retail selling price, and was not required to reveal the price, or the identity of the retail customers, to the taxpayers. The contract between the taxpayers and the dealer contained a clause providing that the goods remained the property of the taxpayers until paid for or returned. Dealers were responsible for bad debts. There was no express agreement as to who bore certain marketing expenses. The figure upon which the dealer's discount was calculated was not necessarily the price which the dealer charged a retail customer.
The taxpayers were assessed to VAT on the full recommended retail price of the goods, on the basis that the dealers acted as their agents. The assessment was upheld both by the VAT Tribunal and by the Queen's Bench Division.
The taxpayers appealed to the Court of Appeal, contending that the tribunal's determination was inconsistent with the only reasonable conclusion on the facts found: namely, that the relationship between the taxpayers and the dealers was one of principal to principal, and not that of principal to agent.
Held, allowing the taxpayers' appeal:
1. The relationship between the taxpayers and the dealers was that of principal to principal. Use of the word "agent" was not conclusive as to the nature of the relationship, which left the use of the word "commission" as the only pointer towards agency. This was outweighed by the other factors pointing towards the opposite conclusion. The only true and reasonable conclusion was therefore inconsistent with the tribunal's determination.
2. The taxpayers were liable to pay VAT on 70% of the recommended retail price only.
The taxpayers, Mr. & Mrs. R. Potter, appealed against a decision ofWoolf J. whereby he had dismissed their appeal from the Value Added Tax Tribunal and upheld two assessments made upon them for value added tax.
By Notice of Appeal dated 9 February 1984 the taxpayers appealed on the grounds that:
1. The judge misdirected himself in law in holding that he was inhibited in deciding the appeal by the decision of the court in Martin v. Glynwed Distributions ICR[1983] I.C.R. 511.
2. The judge in the circumstances and on the true construction of the documents before him erred in law in holding that dealers in Tupperware were agents of the taxpayers who were distributors thereof.
3. The document entitled "Tupperware Opportunity Information" when executed by an intending dealer in Tupperware and delivered to the taxpayers as distributors did not create a relationship of principal and agent between the taxpayers as distributor and the dealer.
4. In the events which have happened and upon the true construction of the above-mentioned document and the document entitled "Dealers Weekly Order Form" the true and only reasonable conclusion for the Tribunal and/or the judge to draw was that dealers in Tupperware are not the agents of distributors thereof.
Sir John Donaldson M.R.: This appeal is about the VAT chargeable on Tupperware. Tupperware needs no introduction. It is the brand name of a range of domestic utensils made in plastic, which gained fame in part because of the system by which it was, and is, marketed. It is this marketing system which has created the problem which falls to be resolved by this appeal.
There are five parties involved in the Tupperware distribution system. The manufacturer is Dart Industries Ltd. Dart sells to an associated company "The Tupperware Company", which in turn sells to distributors or authorised wholesalers. The appellants, trading as P. & R. Potter Wholesale, are such Tupperware distributors. Thus far there is no problem. It is the next two links in the chain which create the problem.
Tupperware distributors appoint "dealers". The dealers arrange for friends and acquaintances to act as "hostesses" and to organise parties, such as coffee mornings, at which Tupperware is displayed and the guests are encouraged to buy. The essence of the problem is that the dealer pays the distributor 70% of the recommended selling price, but receives a higher price, usually the full recommended selling price, from the individual purchasers. The issue is whether VAT is payable by the distributors on the sums received by them or on the higher price paid by the retail customers. This, in turn, depends upon whether the dealers purchase from the wholesalers and then re-sell to the retail customers or are agents of the distributors in the sense that they create contractual relations between the distributors and the retail customers. If the purchaser from the distributors is the dealer, VAT is payable only on the 70% of the recommended selling price received by the distributors. Whether in that event VAT would also be payable on the price paid by the retail customer to the dealer would depend upon other considerations, such as the turnover of the dealer. If, however, the dealer is not a purchaser from the distributor, but is the distributor's agent to effect a sale by the distributor to the retail customer, the distributor is undoubtedly liable to pay VAT on the price paid by that customer.
The appellants contend that the dealers are principals buying Tupperware from them and re-selling it to the retail customers. The respondents, the Commissioners of Customs & Excise, contend that the dealers are agents for the distributors who, through that agency, sell to the retail customers. The Manchester Value Added Tax Tribunal (LordGrantchester Q.C.) held that the distributors sold to the retail customers, thereby affirming the contention of the Commissioners that VAT was payable by the distributors on the price paid by the retail customers. The VAT Tribunal has been added to those from which there is an appeal to the High Court under section 13sec. 13of the Tribunals and Inquiries Act 1971 where one of the parties is dissatisfied with the decision "in point of law". The distributors exercised this right and their appeal was heard and dismissed by Woolf J. They now appeal to this court.
There can be no doubt that the appellants are dissatisfied in point of law, that point being a decision that their legal relationship with their dealers was one of principal and agent rather than that of seller and buyer. However we were urged by Mr. Laws, for the Commissioners, to approach the appeal, as did Woolf J., on the basis that whilst the final answer is indeed a question of law, it depends upon an appreciation of matters of fact and degree which are solely for the tribunal. Similar problems arose inEdwards v. Bairstow ELR[1956] A.C. 14; Young & Woods Ltd. v. West UNK[1980] I.R.L.R. 201; Martin v. Glynwed Distribution Ltd. ICR[1983]...
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