R (Federation of Tour Operators and Others) v HM Treasury and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Waller,Lord Justice Buxton,Lady Justice Smith |
| Judgment Date | 02 July 2008 |
| Neutral Citation | [2008] EWCA Civ 752 |
| Docket Number | Case No: C1/2007/2186 |
| Court | Court of Appeal (Civil Division) |
| Date | 02 July 2008 |
[2008] EWCA Civ 752
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
-ON APPEAL FROM THE QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Mr Justice Stanley Burnton
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Waller
Vice-president Of The Court Of Appeal, Civil Division
Lord Justice Buxton and
Lady Justice Smith
Case No: C1/2007/2186
Charles Haddon-Cave QC and Tim Ward (instructed by Herbert Smith LLP) for the Appellant
David Anderson QC and Sarah Lee (instructed by Treasury Solicitor) for the Respondent
Hearing date : 15 th May 2008
This is an appeal from one aspect of a decision of Stanley Burnton J (as he then was) handed down on 4 th September 2007. On 6 th December 2006, the Chancellor of the Exchequer announced in his Pre-Budget Report (PBR), the doubling of Air Passenger Duty (APD) with effect from 1 February 2007 (i.e. only 7 weeks later). The tax was to be paid by operators of aircraft on passengers flying. Airlines were likely to pass the tax on to passengers with whom they had direct contracts and to Tour Operators where they had not, even in relation to pre-booked flights. Unlike the airlines, Package Tour Operators would be largely precluded from passing on the increase to passengers who had already booked their holidays, by virtue of the Package Travel, Package Holidays and Package Tour Regulations 1992 (the Package Travel Regulations). If implemented on such short notice the effect would be to impose the burden of the tax on the Tour Operators without any ability for them to pass the same on to passengers.
The Tour Operators immediately drew this fact to the attention of the Government. The Government, however, refused to postpone the introduction of the increase. On 11 th December they announced that the decision was fixed. In the result a Parliamentary Resolution passed under Section 1 of the Provisional Collection of Taxes Act 1968 on 27 March 2007 applied the increase to flights departing on or after 1st February 2007. The Finance Bill, making provision for doubling APD rates with effect from 1 st February 2007, received its second reading on 23 rd April 2007. It was debated in Committee of the Whole House on 1 st May 2007. It received its third reading on 25 th and 26 th June 2007 and was given Royal Assent on 19 th July 2007.
The Federation of Tour Operators and two representative Tour Operators commenced proceedings. They attacked the lawfulness of the tax itself and thus the lawfulness of the increase, alleging a breach of Article 15 of the 1944 Chicago Convention and a breach of Article 49 of the European Treaty. It was also alleged that the increase in duty, imposed in the manner it was, infringed the Tour Operators' rights under Article 1 of the First Protocol (“A1P1”) to the European Convention on Human Rights. Stanley Burnton J rejected all lines of attack.
On appeal the Tour Operators wished to pursue only one argument. They confined their appeal to a single ground; they said the timing of the implementation of the increase in APD gave rise to unjustified interference with Tour Operators' property rights, contrary to A1P1. The relief they seek on the appeal is “a declaration of incompatibility” pursuant to section 4 of the Human Rights Act 1998 ( HRA) in respect of section 12 of the Finance Act 2007.
They submit that there was an easy solution which would have avoided imposing a burden on the Tour Operators. Before Stanley Burnton J they produced Section 12 with an amendment to subsection (4) which made that subsection read as follows:—
“(4) The amendments made by this section have effect in relation to any carriage of a passenger on an aircraft which begins on or after 1 st February 2007, save passengers whose carriage forms a component part of a package holiday booked prior to 6 December 2006.”
The submission is that, without the amendment, Section 12 is incompatible with the Tour Operators' rights under A1P1.
APD and the Package Travel Regulations
The judge sets out the full history of the introduction of APD and the increases thereto over the years. He details the fact that previously concessions were made by reason of the special position of Tour Operators. He spells out what occurred up to and following the PBR on 6 th December 2006. All the above he does from paragraphs 8 to 33 of his judgment and there is no challenge to that account. In short it comes, I believe, to this. APD was introduced by the Finance Act 1994. The duty was to be paid by the operator of the aircraft on each passenger and was due when the aircraft took off. Where flight tickets have been purchased other than through Tour Operators, operators of the aircraft can recover the duty from the passengers. Normally so far as bookings made through Tour Operators are concerned, the operator of the aircraft can recover through the contracts maintained with Tour Operators the same from the Tour Operator. Where a Tour Operator is also the operator of the aircraft the duty necessarily falls on it.
Regulation 11 of the Package Travel Regulations constrains the ability of Tour Operators to recover the duty from passengers who have booked through them. Furthermore many Tour Operators include “no surcharge guarantees” in their conditions of contract.
When APD was introduced in 1994 its implementation was postponed in recognition of the position of the Tour Operators. The News Release of 31 st January 1994 contained this paragraph:—
“We accept it would be unreasonable to expect Tour Operators to take the theoretical possibility of this new duty into account when they made their guarantees, and so the Government has agreed to a special concession in 1994 to accommodate Tour Operators. The delay will also give airlines one further month to prepare for the new duty.”
The reference to one month was to a postponement from 1 st October 1994 to 1 st November 1994, i.e. to a date 11 months after the announcement of the duty.
It is of relevance that although it is the position of Tour Operators which was being recognised, the delay in implementation was not limited to Tour Operators, but applied to airlines as well.
On 26 th November 1996 an increase in the rate of APD was announced to be implemented 11 months later, again the Chancellor in Parliament recognising the position of Tour Operators but, once again, the date for implementation applying to all.
There were further changes announced in March 2000 but only taking effect on 1 st April 2001.
The increase with which these proceedings are concerned was announced on 6 th December 2006. The judge spells out the details of how the same would impact on Tour Operators if the date for implementation of 1 st February 2007 were adhered to in paragraphs 19 and 20. Suffice it to say the impact is accepted as being serious, estimated in the region of £50 million.
Between paragraphs 21 and 33 the judge spells out the detail of the negotiations and makes findings of fact from paragraphs 139 to 153. Since there is no challenge to his findings I can summarise the position as follows. Prior to making the announcement on 6 th December 2006 those responsible had overlooked the effect of the Package Travel Regulations and, as the judge said, “that this should have occurred does not speak well of the process of decision-making by the Treasury.” But the Regulations and their effect was most emphatically brought to the attention of the Government by the claimants. The Government then decided that, despite the effect on Tour Operators, they were not prepared to postpone implementation.
When the increase in APD had been announced, its objectives were said to be “to protect the environment, broaden the tax base and raise revenue”. Insofar as the tax burden was to fall on Tour Operators rather than passengers in relation to holidays already booked, there could be no environmental justification, save in a speculative sense arising from the possibility that Tour Operators might increase their prices in following seasons to recoup losses.
The judge accepted however that the possible loss of revenue, if there was a postponement of the implementation, was “a, if not the, major consideration of the Ministers in refusing any concession to the Tour Operators”. The judge found that a general postponement would have involved loss of revenue to the extent of some £100 million; a postponement for Tour Operators alone would have involved £50 million. The figures given by the Government in their skeleton argument on the appeal suggest a postponement from 1 st February to 1 st November 2007 would actually have involved foregoing some £800 million [see paragraph 27].
The judge, it is right to say, rejected the Government's argument that there would have been “legal and administrative difficulties involved in an exemption for Tour Operators' existing bookings” [see paragraph 146]. He also accepted that the increase in APD was “practically a retrospective measure, since it was payable on flights that had already been contracted when it was announced” [paragraph 148]. But he was far from sure that “exempting package holiday passengers, while retaining liability for other passengers, would have been seen as, or would have been, fair and non-discriminatory and in that context the judge thought “there were substantial reasons not to defer or to exempt existing package holiday bookings.” [paragraph147]
The judge considered...
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