The Commissioners of Customs and Excise v Ronald James Hodges and Another
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE MOSES |
| Judgment Date | 25 February 2000 |
| Judgment citation (vLex) | [2000] EWHC J0225-9 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | NO: CO/1289/99 |
| Date | 25 February 2000 |
[2000] EWHC J0225-9
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
CROWN OFFICE LIST
Royal Courts of Justice
Strand
London WC2
Mr Justice Moses
NO: CO/1289/99
MR J HYAM (instructed by CUSTOMS & EXCISE, LONDON, SE1 9PJ) appeared on behalf of the Appellant
MR D BARTLETT (instructed by J WOOD & CO, DORSET, SP8 4QX) appeared on behalf of the Respondent
Friday 25th February 2000
The issue in this appeal from a decision of the Bristol VAT and Duties Tribunal is whether horse race trainers are liable for VAT on the supply of riding services performed by apprentice and conditional jockeys employed as stable lads.
The respondents, Mr and Mrs Hodges carry on business as racehorse trainers in Summerton. They are registered for VAT. The appeal from the decision of the tribunal concerns the question whether they owed output tax in respect of rides undertaken by apprentice and conditional jockeys employed by them in their stables between 1997 and 1998.
Horse racing in this country is governed by instructions and rules by the British Horse Racing Board and the Stewards of the Jockey Club. Apprentice jockeys are young men and women who wish to become flat racing jockeys. Conditional jockeys are young men and women who aspire to ride in steeple chases, hurdle races and National Hunt flat races.
The tribunal found that when apprentice jockeys ride for owners in flat races and when conditional jockeys ride in, for example, steeple chase races, those jockeys were supplying services independently of the Hodges. Thus, the Hodges, the trainers, were not liable to VAT on consideration for such supplies. Nor was VAT payable by the apprentice or conditional jockeys since their earnings were insufficient to take them over the threshold above which VAT becomes payable.
In this appeal the Commissioners appeal on the grounds that it was the trainers who supplied the services. This is a test case.
The Commissioners contend that the agreement or arrangements between the trainer and apprentice or conditional jockeys are contracts of employment or contracts of apprenticeship, with the result that the riding services were provided by the apprentice or conditional jockeys as employees on behalf of the trainer. In that event the trainer is liable for VAT on the whole consideration for such supply.
The Commissioners further contend that even if the jockeys were self-employed, the riding services were supplied by the self-employed jockeys to their trainers who made an onward supply of such services to owners of horses. In that event, the trainers would also be liable for VAT.
The real question, however, in my judgment, is whether the services were supplied independently by those apprentice or conditional jockeys.
By Article 4(1) of the Sixth Directive 77/388/ EEC,
"…taxable person shall mean any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purposes or the results of that activity."
By 4(4):
"The use of the word independently in paragraph 4(1) shall exclude employed and other persons from the tax in so far as they are bound to an employer by a contract of employment or by any other legal ties creating the relationship of employer and employee as regards working conditions remuneration and employer's liability."
Law or Fact
The first question I must determine is whether the issue in this case is one of law or of fact. The Commissioners contend that the apprentice or conditional jockeys are employed by the trainers. They submit that their legal relationship depends upon the proper construction of an agreement in writing between the trainer and apprentice or conditional jockey. In those circumstances, it is contended that the question is purely one of law. This is of importance since if the issue is one of law, and I disagree with the conclusion of the tribunal, then I should reverse their decision. If however the decision is one of fact or of mixed law and fact, then unless I can detect an error of law which taints the decision, I can only reverse the decision if it contradicts the true and only reasonable conclusion (see Edwards v Bairstow [1956] AC 14, at page 36).
In Davies v Presbyterian Church of Wales [1986] 1 WLR 323, the relationship between the pastor and the Presbyterian church was governed solely by a book of rules. Consequently, Lord Templeman concluded at page 328G:
"The question to be determined is a question of law, namely, whether upon the true construction of the book of rules a pastor of the church is employed and is under a contract of service. If the industrial tribunal erred in deciding that question, the decision must be reversed and it matters not that other industrial tribunals might have reached a similar erroneous conclusion in the absence of an authoritative decision by a higher court."
The usual difficulty of determining whether the question of whether someone is employed is a question of law or a question of fact cannot be determined in accordance with the apothegm of one judge, experienced in the Employment Appeal Tribunal, who has observed that an appellate court finds an issue to be a question of law when it knows the answer but a question of fact when it is uncertain how it should make up its mind.
Some guidance has recently been given by the House of Lords in its decision in Carmichael and another v the National Power plc [1999] 1 All ER 897. Whether parties intend that their relationship should be governed solely by reference to a written agreement in the case is a question of fact. But unless that was the intention of the parties the nature of their relationship is a question of fact. The Lord Chancellor, Lord Irvine said:
"In my judgment it would only be appropriate to determine the issue in these cases solely by reference to the documents in March 1989, if it appeared from their own terms and/or from what the parties said or did then, or subsequently, that they intended them to constitute an exclusive memorial of their relationship."(901f)
In Lord Hoffmann's speech he said, in agreeing with Lord Irvine, Lord Chancellor, of the rule as to construction of documents:
"It applies in cases in which the parties intend all the terms of their contract (apart from any implied by law) to be contained in a document or documents. On the other hand, it does not apply when the intention of the parties, objectively ascertained, has to be gathered partly from documents but also from oral exchanges and conduct. In the latter case, the terms of the contract are a question of fact. And of course the question of whether the parties intended a document or documents to be the exclusive record of the terms of their agreement is also a question of fact."(903f-g)
The tribunal relied upon a number of documents. They relied upon agreements between the jockeys and the trainers headed in the case of apprentice jockeys
"Apprentice Riding Agreement between apprentice jockey and trainer"and in the case of conditional jockeys
"Conditional Jockeys'Agreement". Both of those agreements were governed by and incorporated, so far as necessary, orders and rules of racing. The tribunal also referred to various instructions issued by the British Horse Racing Board and the Jockey Club. All those documents were construed in reaching their decision.
There was no finding of fact by the tribunal that the parties intended their relationship to be solely governed by documents to which the tribunal referred. But, contends Mr Hyam, on behalf of the Commissioners, the tribunal's conclusions were based solely on documents and it can thus be inferred that it was the intention of the parties that the documents should be an exclusive record of the terms of the agreement between jockeys and trainers, so far as riding in races is concerned.
The tribunal also heard evidence from Mr and Mrs Hodges. They said, at page 2 of their decision:
"Our findings of fact are based on the oral evidence and the documents provided to us."
They also went on:
"Traditionally young men and women who aspire to become jockeys start work soon after leaving school in the stables of a trainer. They start work doing general stable duties. The Appellants have 15 employees but few of those will eventually become jockeys. They have only two riding at present. As long as these young men and women are employed in the stables their wages are subject to deductions for income tax under the PAYE system and national insurance contributions, as is normal."
The tribunal also referred later in their decision to the way in which a jockey arranges rides with owners of their various horses. At page 8 they said:
"At the earlier stages of a jockey's career rides are arranged on his behalf by the Trainer in whose stables he is working. It needs to be borne in mind that the Trainer may own horses himself or have a share in a horse which he is training on behalf of one or more other owners. Later, a conditional jockey might have an agent. In that case the trainer would arrange rides through the agent."
At page 9 they refer to further oral evidence, saying:
"Where Mr Hodges is receiving one half of the riding fees he regards that as compensation for the loss of working time of the rider concerned which would otherwise have been spent in his stables. Once jockeys are fully fledged, they are no longer employed by the Trainer and would themselves pay for schooling for each horse they rode."
Finally, in setting out their conclusion,...
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