R v HM Inspector of Taxes, ex parte Northern Bank Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 21 August 1996 |
| Date | 21 August 1996 |
| Court | Queen's Bench Division |
Queen's Bench Division (Crown Office List).
Ferris J.
David Goldberg QC and John Walters (instructed by Cameron Markby Hewitt) for the bank.
Genevra Caws QC and Rabinder Singh (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Arab Monetary Fund v Hashim (No. 5) UNK[1992] 2 All ER 911
Asbestos Insurance Coverage Cases, Re WLR[1985] 1 WLR 331
Bankers Trust Co v Shapira WLR[1980] 1 WLR 1274
Berkeley Administration Inc v McClelland UNK[1990] FSR 381
Harkness v Bell's Asbestos & Engineering Ltd ELR[1967] 2 QB 729
Herbert Berry Associates Ltd v IR Commrs WLR[1977] 1 WLR 1437
IR Commrs v Adams TAX(1971) 48 TC 67
Lee v Angas ELR(1866) LR 2 Eq 59
Lorenzo Halcoussi, The UNK[1988] 1 Ll Rep 180
Mediterranea Reffineria Siciliana Petroli SpA v Mabanaft GmbH(1978) (unreported)
Pearlberg v Varty (HMIT) WLR[1971] 1 WLR 728
R v City of London Magistrates, ex parte Asif TAX[1996] BTC 5213
R v IR Commrs, ex parte Matrix Securities Ltd TAX[1994] BTC 85
R v IR Commrs, ex parte Taylor (No. 2) TAX[1991] BTC 281
R v IR Commrs, ex parte TC Coombs & Co TAX[1991] BTC 89
R v IR Commrs, ex parte Unilever plc TAX[1996] BTC 183
Rees v Crane ELR[1994] 2 AC 173
Rio Tinto Zinc Corp v Westinghouse Electronic Corp ELR[1978] AC 547
Royal Bank of Canada v IR Commrs ELR[1972] Ch 665
Taxpayer v Inspector of Taxes SCD(1996) Sp C 79 (unreported)
Wiseman v Borneman (HMIT) ELR[1971] AC 297
Judicial Review - Power to call for documents - Notices served on bank by inspectors - Whether notices too wide and general - Whether notices adequately "described and specified" documents - Whether inspector should have considered whether notice of application for consent should have been given - Whether commissioners had jurisdiction to give consent for service of notices - Whether notices were irrational -Taxes Management Act 1970 section 20 subsec-or-para (3)Taxes Management Act 1970, s. 20(3).
This was an application for judicial review seeking to quash notices served on the applicant ("the bank") under the Taxes Management Act 1970 section 20 subsec-or-para (3)Taxes Management Act 1970, s. 20(3).
The Revenue wished to investigate the affairs of various individuals and corporations which they believed to be, or to have been, customers of the bank. Over a period a large number of notices were issued to the bank by inspectors with the consent of general commissioners in Manchester obtained ex parte.
The bank contended that the material sought consisted of general information and was not within the scope of Taxes Management Act 1970 section 20 subsec-or-para (3)TMA 1970, s. 20(3). The power under Taxes Management Act 1970 section 20 subsec-or-para (3)TMA 1970, s. 20(3) was limited by Taxes Management Act 1970 section 20 subsec-or-para (8D)TMA 1970, s. 20(8D) to the production of documents "specified or described" in the notices. In this case, classes of documents were demanded which required a judgment to be made by the bank as to what documents were within the class. The bank would not necessarily know which documents were within a class and, although an innocent third party, would be exposed to penalties if the notices were not complied with. The trouble and expense of complying with the notices, which might involve searching through the records of 107 branches was onerous and unacceptable. Moreover, the bank had a legitimate expectation that Taxes Management Act 1970 section 20 subsec-or-para (3)TMA 1970, s. 20(3) notices would be served only after consideration at the highest level of the Revenue as indicated in correspondence between the Revenue and the British Bankers Association in the 1970's.
The bank further contended that the notices were vitiated by procedural errors in that the consent of the general commissioners should not have been obtained without giving the bank an opportunity to resist the application and the Manchester commissioners had no jurisdiction to give consent in relation to a taxpayer in Northern Ireland.
Held, granting the application for judicial review and quashing the notices:
1. The Revenue's power under Taxes Management Act 1970 section 20 subsec-or-para (3)TMA 1970, s. 20(3) extended only to the production of documents. Although documents described by reference to class might be within the scope of the section because of the word "described" in addition to "specified" in Taxes Management Act 1970 section 20 subsec-or-para (8D)TMA 1970, s. 20(8D), these notices, requiring general evidence rather than identifiable documents were outside the scope of the section. The bank was in this context a third party or "mere witness", and the principle that a mere witness was not to be required to give discovery applied unless it was over-ridden by clear words in the statute, and there was nothing in Taxes Management Act 1970 section 20 subsec-or-para (3)TMA 1970, s. 20(3) to displace the principle: Rio Tinto Zinc Corp v Westinghouse Corp [1978] AC 547 and Re Asbestos Insurance Coverage Cases [1985] 1 WLR 331 applied.
2. No legitimate expectation had been raised by any representation by the Revenue, but the difficulty of complying with the notices and the expense which would be incurred rendered them grossly oppressive and thus "irrational"; Royal Bank of Canada v IR Commrs [1972] Ch 665 per Megarry J at p. 677 applied.
3. The Revenue were entitled to apply ex parte for consent to the issue of notices under Taxes Management Act 1970 section 20 subsec-or-para (3)TMA 1970, s. 20(3). A third party intended to be served with a notice under Taxes Management Act 1970 section 20 subsec-or-para (3)TMA 1970, s. 20(3) had no part to play in the inspector's decision to serve it: R v City of London Magistrates,TAX ex parte Asif [1996] BTC 5213 distinguished.
4. The general commissioners for a division other than that in which the applicant belonged had jurisdiction to consent to the issue of notices under Taxes Management Act 1970TMA 1970, s. 20(3) since such consent did not lead to a determination of a liability to tax and did not constitute "proceedings" for the purpose ofTaxes Management Act 1970TMA 1970, s. 44(1) of the Taxes Management Act.
Ferris J: Before the court are two applications for judicial review made by Northern Bank Ltd ("the bank"). These applications seek orders quashing some 13 notices served on the bank by inspectors of taxes in exercise, or purported exercise, of the powers conferred by theTaxes Management Act 1970 section 20 subsec-or-para (3)Taxes Management Act 1970, s. 20(3).
In order to understand the scope of s. Taxes Management Act 1970 section 20 subsec-or-para (3)20(3) it is necessary to look at it in its statutory context. This involves setting out substantial parts of Taxes Management Act 1970 section 20s. 20, a section which has been much amended, and certain ancillary provisions. The material provisions are as follows:
Power to call for documents of taxpayers and others
20(1) Subject to this section, an inspector may by notice in writing require a person-
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(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
(iii) to furnish to him such particulars as the inspector may reasonably require as being relevant to, or to the amount of, any such liability.
(2) Subject to this section, the Board may by notice in writing require a person-
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(a) to deliver to a named officer of the Board such documents as are in the person's possession or power and as (in the Board'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 a named officer of the Board such particulars as the Board 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 purpose 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; …
(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.
…
(8) Subject to subsection (8A) below, a notice under subsection (3) above shall name the taxpayer with whose liability the inspector … is concerned.
(8A) If, on an application made by an inspector and authorised by order of the Board, a Special Commissioner gives his consent, the inspector may give such notice as is mentioned in subsection (3) above without naming the taxpayer to whom the notice relates: but such a consent shall not be given unless the Special Commissioner is satisfied … [of certain prescribed matters].
(8B) A person to whom there is given a notice under subsection (8A) above may by notice in writing given to the inspector within thirty days after the date of the notice under that subsection, object to that notice on the ground that it would be onerous for him to comply with it; and if the matter is not resolved by agreement, it shall be referred to the...
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