JUDGMENT
Die Jovis 25° Aprilis 1985
Upon Report from the Appellate Committee to whom was
referred the Cause In re Preston, That the Committee had
heard Counsel on Monday the 18th, Tuesday the 19th, Wednesday
the 20th and Thursday the 21st days of February last upon the
Petition and Appeal of Michael David Preston of 91 Redington
Road, London NW3 praying that the matter of the Order set
forth in the Schedule thereto, namely an Order of Her
Majesty’s Court of Appeal of the 31st day of July 1984, might
be reviewed before Her Majesty the Queen in Her Court of
Parliament and that the said Order might be reversed, varied
or altered or that the Petitioner might have such other
relief in the premises as to Her Majesty the Queen in Her
Court of Parliament might seem meet; as also upon the Case of
the Commissioners of Inland Revenue lodged in answer to the
said Appeal, and due consideration had this day of what was
offered on either side in this Cause:
It is Ordered and Adjudged, by the Lords Spiritual and
Temporal in the Court of Parliament of Her Majesty the Queen
assembled, That the said Order of Her Majesty’s Court of
Appeal of the 31st day of July 1984 complained of in the said
Appeal be, and the same is hereby, Affirmed and that the said
Petition and Appeal be, and the same is hereby, dismissed
this House: And it is further Ordered, That the Appellant do
pay or cause to be paid to the said Respondents the Costs
incurred by them in respect of the said Appeal, the amount
thereof to be certified by the Clerk of the Parliaments if
not agreed between the parties.
Cler: Parliamentor:
HOUSE OF LORDS
IN RE PRESTON (ENGLAND)
Lord Scarman
Lord Edmund-Davies
Lord Keith of Kinkel
Lord Brightman
Lord Templeman
LORD TEMPLEMAN
My Lords,
This is an appeal in judicial review proceedings whereby the
appellant Mr. Preston seeks a declaration that the respondent
Inland Revenue Commissioners are not entitled to exercise and
perform their statutory powers and duties under Part XVII of the
Income and Corporation Taxes Act 1970 by counteracting a tax
advantage alleged to have been obtained by the appellant by his
dealings in the shares of Gymboon Ltd.
Part XVII of the Act of 1970 begins with section 460. By
section 460(6), if the commissioners have reason to believe that a
taxpayer has obtained a tax advantage in consequence of a
transaction in securities in the circumstances prescribed by section
461, the commissioners may notify the taxpayer in writing. The
taxpayer may then make a statutory declaration that section 460
does not apply to him either because he has not been involved
with any transactions in securities in the circumstances prescribed
by section 461 or because he can show, in the words of section
460(1):
“that the transaction or transactions were carried out either
for bona fide commercial reasons or in the ordinary course
of making or managing investments, and that none of them
had as their main object, or one of their main objects, to
enable tax advantages to be obtained . . .”
If, notwithstanding the taxpayer’s statutory declaration, the
commissioners see reason to take further action, they shall by
section 460(7)(a) submit to a tribunal established for the purpose
by section 463, a certificate to that effect together with the
statutory declaration of the taxpayer and, if the commissioners
wish, a counter-statement by the commissioners with reference to
the matter. The tribunal after taking into consideration the
statutory declaration by the taxpayer and the certificate and
counter-statement by the commissioners shall by section 460(7)(b)
determine “whether there is or is not a prima facie case for
proceeding in the matter . . .” If the tribunal determine that a
prima facie case has been established, the commissioners by
section 460 (3) shall counteract the tax advantage obtained by the
taxpayer by a number of alternative adjustments, including an
additional assessment to tax on such basis as the commissioners
may specify by notice in writing served on the taxpayer as being
requisite for counteracting the tax advantage so obtained. By
section 462(1) the taxpayer to whom notice has been given may
appeal to the special commissioners on the grounds that section
460 does not apply to him or that the adjustments directed to be
made are inappropriate. An appeal lies from the special
– 1 –
commissioners to the tribunal under section 462(2). The tribunal
shall rehear and determine the appeal and by section 462(3) the
determination of the tribunal shall be final.
In the present case, there has been a notification by the
commissioners and a statutory declaration by the appellant both
under section 460(6), followed by the presentation to the tribunal
of a certificate, the statutory declaration and a counter-statement.
The tribunal has determined under section 460(7) that there is a
prima facie case for proceeding. The commissioners have
proceeded by serving notice under section 460(3) designed to
counteract, by means of an additional assessment, the tax
advantage which they say the appellant has obtained. No appeal
has yet been heard by the special commissioners under section 462
(1) because the appellant seeks by this appeal to obtain a
declaration that all the steps taken against him by the
commissioners pursuant to Part XVII of the Act of 1970 are
unlawful.
The dispute between the appellant and the commissioners
has its origin in the activities of the appellant between 1974 and
1977. The appellant gave an account of his activities between
those years in a letter dated 24 May 1978 written by the appellant
to Mr. Thomas, an officer of the Special Investigations Section
maintained by the commissioners. In November 1974 the appellant
took employment with the Rossminster Group Ltd. “with a view to
developing a commercial and corporate financial activity for the
group, and with the ultimate aim of making such activity the
principal, if not sole, activity of the group.” He “built up a team
of 6 or 7 competent corporate finance executives. Our activities
were principally confined to commercial and corporate finance
matters and, in particular, my own involvement with the other
activities of Rossminster was minimal.” By the latter part of
1976, “on the one hand the substance of Rossminster “s current
financial well-being clearly now depended very little on my
department and in commercial terms we were no longer an
essential ingredient of the group’s future well-being. At the same
time, from a personal viewpoint, I had become progressively less
sympathetic towards the nature and aims of Rossminster’s main
field of activity.” It is common knowledge that Rossminster’s
main field of activity to which the appellant referred consisted of
the invention, marketing and carrying into effect of large numbers
of sophisticated tax avoidance schemes which were lawful and
which were thought by Rossminster but not guaranteed to be
effective. The appellant ceased to be employed by Rossminster in
March 1977 and received an ex gratia payment.
From information supplied to your Lordships by the appellant
through his counsel, it appears that the tax returns for the
appellant for the years 1974-75 and 1975-76 represented that after
allowing for claims for loan interest, the appellant was not liable
to pay any income tax. In the year 1974-75 a deduction of
£11,592 loan interest was claimed for income tax purposes and a
capital loss of £10,000 was shown for capital gains tax purposes.
In the year 1975-76 a deduction of £26,074 loan interest was
claimed for income tax purposes. In May 1978 the appellant’s
taxation returns were referred to the Special Investigations Section
of the commissioners. After some preliminary correspondence, Mr.
Thomas, the officer of the Special Investigations Section dealing
– 2 –
with the matter, invited the appellant to call on Tuesday, 6 June
and said in a letter dated 18 May that the particular matters that
he would like to discuss were:
“(a) Your claims to relief for interest paid to Rossminster
Acceptances Ltd.,
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-
the loss which you have claimed in respect of the
purchase and sale of shares in Jurby Raven Ltd., and
allied operations, -
your transactions in the shares of Gymboon Ltd.,
Jacksons Bourne End Ltd., the Telbex Group Ltd.,
Powerstem Ltd., Alanvale Securities Ltd. and First
London Securities Ltd., -
the leaving payment which you received from
Rossminster Management Services Ltd.
-
-
It would be very helpful if you would bring to the
meeting the documents, correspondence and other
papers in your possession which are relevant to these
matters.”
It subsequently transpired in July 1982 that among the
documents in the appellant’s possession which were relevant was an
incomplete draft of the agreement whereby the appellant had sold
his shares in Gymboon Ltd.
The appellant replied by letter dated 24 May 1978. He
pointed out “that although a chartered accountant, I am by no
means well versed in highly-complex taxation matters, and feel
that I am not competent to converse with you on equal terms.
Subject to my comments below, therefore, if the interview is still
considered necessary I feel that I must now seek professional
advice. In the meantime, however, in order to facilitate the
finalisation of my affairs I set out below certain information and
observations on the matters specified in your letter of the 18 May.
In this regard it seems to me that your questions fall into two
main categories. Dealing first with the claims for relief for
interest paid to Rossminster Acceptances Ltd. (in connection solely
with which the holding of shares in First London Securities Ltd.
arose) and for loss on disposal of shares in Jurby Raven Ltd., the
following background information may be relevant.” He then set
out the history of his employment with Rossminster from which I
have largely quoted and continued:
“As you will appreciate, as the head of the corporate
financial and commercial activity at Rossminster I would
have displayed a considerable lack of confidence in my
employers if I had failed to enter into the transactions in
question and into which all other senior employees of
Rossminster had evidenced their intention to enter. The
foregoing deals adequately, I hope, with the first category.
Turning to the second category of matters raised by your
enquiries, these involve commercial investments of business
substance, and need not, in my view, be considered other
than as capital transactions. As things stand today it is not
a matter of great concern to me to see whether or not I
– 3 –
proceed with my claims for relief for interest or capital
loss. What is most certainly of greater importance is that
my taxation affairs are maintained on a current basis.
Accordingly, without prejudice to any claim which may have
to be made for interest relief or capital loss, I am prepared
to forgo such claims for the years in question on the basis
that by doing so I shall facilitate the agreement of my tax
affairs. In the light of the above you may feel that a
discussion is no longer necessary. However, if you still wish
to proceed with such a meeting, perhaps you will provide
me with a list of specific questions on which I can obtain
professional advice.”
There was a telephone conversation between Mr. Thomas and
the appellant on the 25 May 1978 and the substance of that
conversation was confirmed the following day by a letter from Mr.
Thomas in these terms:
“If I understand the penultimate paragraph of your letter
correctly, you are withdrawing your claims to relief for
interest paid to Rossminster Acceptances Ltd. during the
two years ended 5 April 1976, and you are not pursuing the
inclusion in the computation of your gains chargeable to
capital gains tax a loss on the disposal of shares in Jurby
Raven Ltd. For the avoidance of doubt would you please
let me have a note confirming these amendments to your
income tax returns. I have considered your comments
regarding the subjects mentioned in sub paragraphs (c) and
(d) of my letter of 18 May 1978. As stated on the
telephone, I should like the following information regarding
the shares in Gymboon Ltd:
a. full details of the acquisition and disposal of these
shares, including the names and addresses of the
person from whom they were acquired and to whom
they were sold, the relevant dates and numbers of
shares involved.
b. a note of the circumstances in which the value of the
shares increased so quickly between September 1976
and the date of disposal. What was the precise
nature of Gymboon Ltd.’s business activities?
I look forward to hearing from you on these points. I
confirm that I should not wish to trouble you with an
interview if you withdraw your claim to relief for interest
paid to Rossminster Acceptances Ltd. and for the loss on
the disposal of the shares in Jurby Raven Ltd.”
After a reminder dated 21 June 1978 the appellant
responded by a letter dated 23 June 1978 and provided the
following information concerning the shares in Gymboon Ltd:
“(a) (i) On 10 April 1974, I acquired 50 per cent. of
the issued share capital in the company at par
from Gardencare Group Ltd. (formerly
Danecross Ltd.) of 44, Grange Walk, London,
S.E.1.
– 4 –
(ii) On 1 February, 1975, I sold 15.4 per cent. of
the shares in the company to Mrs. S. L. M.
Aaronberg of 6, Westchester Drive, London,
N.W.4 thus reducing my holding in the company
to 34.6 per cent. This sale was made at par.
(iii) On 11 January, 1977, and pursuant to an
unsolicited offer, I sold my remaining holding in
the company which, at that time, was 346
shares at 10p each, to Broadforth Ltd. (an
unconnected party) of 1, Hanover Square,
London, W.1 for £24,375.
(b) Gymboon Ltd.’s activity was that of a dealer in
shares and commodities, the latter being traded upon
the London Metal Exchange, and it was as a result of
the substantial profits generated by its dealing that
the value of its snares increased as they did.
I trust that the above is sufficient for your
requirements and upon hearing from you that you have no
further questions on my tax affairs, I shall be happy to
write formally to you withdrawing my claims of relief for
interest paid to Rossminster Acceptances Ltd. and for a loss
on disposal of shares in Jurby Raven Ltd.”
There followed a letter from Mr. Thomas, dated 21 July 1978,
which noted the information supplied regarding the shares in
Gymboon Ltd. and said:
“On receipt of your note formally withdrawing your claims
to relief for interest paid to Rossminster Acceptances Ltd.
during the two years ended 5 April 1976 and confirming that
you are not pursuing the inclusion in the computation of
your gains chargeable to capital gains tax of a loss on the
disposal of shares in Jurby Raven Ltd. I propose to return
your tax papers to H.M. Inspector of Taxes, North East 5
(London) as I do not intend to raise any further enquiries on
your tax affairs.”
The correspondence ended with a letter dated 28 July 1978
from the appellant in which, after acknowledging the letter from
Mr. Thomas dated 21 July, he continued:
“Accordingly, I am pleased to give you formal notice that I
hereby withdraw my claims to relief for interest paid to
Rossminster Acceptances Ltd. during the two years ended 5
April, 1976 and confirm that I am not pursuing the inclusion
in the computation of my gains chargeable to capital gains
tax of a loss on the disposal of shares in Jurby Raven Ltd.”
In October 1978 tax assessments were made on the appellant
taking into account the withdrawal of his claims for tax relief.
On 16 October 1978 the appellant was assessed to capital gains
tax in the sum of £7,302 in respect of the sale of the appellant’s
shares in Gymboon Ltd. This liability was set off against tax
repayments in respect of certain annuity benefits received by the
appellant when he left the employment of Rossminster.
– 5 –
Subsequently, the Special Investigations Section received
from Gymboon Ltd. the accounts of the company for the year
ended 13 September 1977. Mr. Owston, an inspector of taxes,
senior principal grade, employed in the Inland Revenue Technical
Division, Special Investigations Section in an affidavit sworn on 22
December 1982 deposed that on 8 October 1979 he was one of the
inspectors of taxes engaged in the Special Investigations Section
considering the tax avoidance scheme known as the Rossminster
Company Purchase Scheme.
“On that day there were referred to me the accounts of
Gymboon Ltd. for the year ended 13 September 1977 … It
was apparent to me from those accounts that the shares of
the company had been sold during the year ended 13
September 1977 by its former shareholders, of whom Mr. M.
D. Preston was one, in the course of the Rossminster
Company Purchase Scheme.”
In April 1981, the claims for capital loss and loan interest
for the year 1974-75 which the appellant had withdrawn in 1978
ceased by statute to be renewable and they cannot now be
revived. The appellant’s claim for loan interest for the year 1975-
76 ceased to be renewable in April 1982.
By section 465 of the Act of 1970:
“Where it appears to the Board that by reason of any
transaction or transactions a person may be a person to
whom section 460 above applies, the Board may by notice in
writing served on him require him, within such time not less
than 28 days as may be specified in the notice, to furnish
information in his possession with respect to the transaction
or any of the transactions, being information as to matters,
specified in the notice, which are relevant to the question
whether a notice under subsection (3) of that section should
be given in respect of him.”
In exercise of the powers conferred by section 465, the
commissioners by a notice dated 26 July 1982 required information
from the appellant concerning the following transactions:
“1. On 13 September 1976 the subdivision of the 100
ordinary £1 shares of Gymboon Ltd. (Gymboon) into
1000 ordinary 10p shares.
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-
On 10 January 1977 the creation by Gymboon of 300
13 per cent. redeemable preference shares of £1
each. -
On or about 10 January 1977 the grant to Broadforth
Ltd. (Broadforth) of an option to subscribe for 300 13
per cent. redeemable preference £1 shares in
Gymboon. -
On 11 January 1977 the following alterations in the
share capital of Gymboon:
-
-
(a) the increase in the authorised capital to £410
by the creation of 1000 ordinary 1p shares;
– 6 –
-
-
-
the conversion of the existing issued 1000
ordinary 10p shares into 1000 deferred 10p
shares; -
the rights issue of a 1000 ordinary 1p shares
-
-
5. On 11 January 1977 the sale by you to Broadforth of
your 346 deferred 10p shares and 346 ordinary 1p
shares (held on renouncable letters of allotment) in
Gymboon for a consideration of £24,375.
-
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-
On 11 January 1977 the acquisition by St. George’s
Elizabethan Theatre Ltd. (St. George’s) of all the
shares in Gymboon. -
The transactions described as ‘Annuity payment
£75,000’ in the note to the accounts of Gymboon for
the year ended 13 September 1977. -
The transaction described as ‘Donation to the then
ultimate holding company being a UK registered
charity £66,852’ in the notes to the accounts of
Gymboon for the year ended 13 September 1977. -
(a) On 3 February 1977 the transfer of all the
-
-
shares in Gymboon to the Elizabethan Theatre
Trust.
(b) The write-down in respect of the fall in the
value of the shares in Gymboon in the accounts
of St. George’s for the period 29 October 1975
to 4 February 1977.”
The information which was sought included the sale
agreement whereby the appellant sold his Gymboon shares to
Broadforth.
By a letter dated 29 July 1982 the appellant supplied such
information as was available to him including the only copy in his
possession of the sale agreement, which was only an incomplete
draft, whereby he sold his Gymboon shares to Broadforth. The
appellant, however, prefaced the information which he furnished
with a protest in the following terms:
“In your letter dated 21 July 1978 and sent to me by
Special Investigations Section you stated ‘I do not intend to
raise any further enquiries on your tax affairs.’ If you
refer to this letter and to the correspondence which led up
to it, you will see that this latter statement was a
consequence of and in consideration for the withdrawal by
me of certain claims for tax relief. I would contend
accordingly that this correspondence constituted a binding
legal agreement which estops you from now raising enquiries
on Gymboon Ltd. or any other matters covered by the
correspondence.”
.
On 14 September 1982 the commissioners served on the appellant
notification under section 460(6) that the Board had reason to
believe that section 460 applied to the appellant in respect of the
– 7 –
transactions which had been set out in the section 465 notice
dated 26 July 1982.
On 11 October 1982 the appellant made a statutory
declaration pursuant to section 460(6). He contended that the sale
of his shares in Gymboon and “the incidental alterations on the
company’s share capital preceding that sale” were outside the
scope of section 460(1) as being transactions carried out for bona
fide commercial reasons or in the ordinary course of making or
managing investments and not having as their main objects or one
of their main objects to enable tax advantages to be obtained. He
also contended that the transactions did not fall within the scope
of section 461 which rigidly defines the prescribed circumstances
such as dividend stripping to which section 460 applies. Section
461 includes within its ambit tax advantages achieved by a scheme
whereby a shareholder receives in connection with the distribution
of profits of a company a consideration which represents assets of
the company available for distribution by way of dividend but in
such manner that the shareholder does not pay or bear tax on the
consideration as income. In his statutory declaration the appellant
gave detailed reasons why in his view sections 460 and 461 did not
apply to the sale of his shares in Gymboon. The appellant also
drew attention to the fact that he had been assessed to capital
gains tax in the sum of £7,302 in respect of the purchase and sale
of his shares in Gymboon Ltd. Finally, he drew attention to the
1978 correspondence and concluded:
“By reason of the agreement thus made the Inland Revenue
is now contractually precluded from seeking to apply the
provisions of the said section 460 to me in respect of the
sale of the shares.”
On 20 December 1982 the commissioners served a counter-
statement under section 460(7). On the same day the
commissioners certified to the tribunal, pursuant to section 460(7)
that the commissioners saw reason to take further action and on
the 28 January 1983 the tribunal constituted under section 463
determined that there was a prima facie case for proceeding
against the appellant under section 460.
The legality of the commissioners’ actions was challenged in
these proceedings on 18 November 1982 when the appellant applied
for leave to apply for an order prohibiting the commissioners from
taking any further steps under Part XVII of the Act of 1970 for
the purpose of investigating or assessing the appellant to further
tax liabilities in connection with the affairs of Gymboon Ltd. In
his application the appellant asserted that the conduct of the
commissioners in “invoking section 460 was a breach of contract or
breach of representations made in the 1978 correspondence with
Mr. Thomas and that “In the premises the said conduct of the
commissioners constitutes an improper exercise alternatively an
abuse of the statutory powers of collection and management of
Inland Revenue.” In his affidavit in support sworn on 17 November
1982 the appellant made the same submissions and said:
“if I had realised that the commissioners would subsequently
attempt to go back on their word and their agreement with
me made in 1978, I should not have agreed to withdraw my
claims for tax relief.”
– 8 –
On behalf of the commissioners Mr. Thomas swore an
affidavit in reply on 22 December 1982. He said that in 1978 the
appellant:
“did not tell me that the sale price of the shares was based
on an asset value which excluded provision for corporation
tax on those profits … I now understand that the
£24,733 paid to the applicant for his Gymboon shares was in
excess of their true market value and could only have been
paid because no provision had been made for corporation tax
…. I am advised that since the applicant was able to
obtain cash from the sale of his shares in Gymboon which
represented the accumulated profits of the company
available for distribution by way of dividend without
payment of tax thereon as income, the transaction is caught
by the anti-avoidance provisions of Part XVII of the Income
and Corporation Taxes Act 1970. At no time did I say or
imply that the Board of Inland Revenue would not
contemplate proceedings under these provisions.”
In argument before your Lordships, the commissioners without
implying bad faith on the part of the appellant, indicated by their
counsel that in their view the value of the appellant’s shares in
Gymboon Ltd. increased from £34.60 to £24,735 partly “as a result
of the substantial profits generated by its dealings” as the
appellant informed Mr. Thomas in the appellant’s letter dated 23
June 1978 but also partly because the effect of the Rossminster
company purchase scheme was to relieve Gymboon from its
liability to corporation tax by artificial transactions.
On 25 January 1983 Woolf J. granted the appellant leave to
apply for judicial review and on 23 February 1983 the application
came before the same judge. On the following day Woolf J.
“ordered and declared that the Commissioners of Inland Revenue
were and are not entitled in the circumstances of the case to
exercise their powers pursuant to Part XVII of the Income and
Corporation Taxes Act 1970 in respect of the acquisition in 1974
and subsequent disposal by the applicant of shares in Gymboon Ltd.
and that the commissioners purported exercise of the said powers
in respect thereof was and is unlawful.” The reasons of the judge
are to be found in the report of the case in [1983] 2 All.E.R. 300.
On 31 July 1984 the Court of Appeal (Lawton, Griffiths and Dillon
L.JJ.) allowed an appeal by the commissioners from the decision of
Woolf J. and discharged the order which he had made: see [1984]
3 W.L.R. 945. Your Lordships were informed that the
commissioners have made on the appellant under section 460 an
additional assessment to income tax to counteract the tax
advantage which they assert he obtained from the shares of
Gymboon Ltd. An appeal by the appellant to the special
commissioners pursuant to section 462(1) of the Act of 1970
against the additional assessment made under section 460(3) awaits
the result of this present appeal whereby the appellant with leave
of your Lordships’ House, appeals against the decision of the Court
of Appeal. It will be for the special commissioners and the
tribunal to determine, if this appeal fails, whether section 460
applies and if so whether in computing the tax advantage obtained
by the appellant and the appropriate amount of any counteracting
assessment, the capital gains tax of £7,302 paid by the appellant
in respect of the Gymboon shares should be taken into account. If
– 9 –
on this appeal it appears that the actions taken by the
commissioners under section 460 have been unlawful, the
commissioners cannot proceed to enforce the additional assessment
made upon the appellant under section 460, whether or not the
appellant in 1977 fell foul of section 460. If your Lordships
determine that the actions taken by the commissioners under
section 460 have been lawful, then subject to the appeal procedure
provided by section 462 to the special commissioners and the
tribunal, the commissioners will proceed to enforce the additional
assessment.
Woolf J. rightly decided that the appellant had no remedy
against the commissioners for breach of contract or breach of
representations made by Mr. Thomas in 1978 because the
commissioners could not in 1978 bind themselves not to perform in
1982 the statutory duty of counteracting a tax advantage imposed
on the commissioners by section 460 of the Act of 1970. The
only remedy which might be available to the appellant was the
remedy of judicial review. Judicial review is available where a
decision-making authority exceeds its powers, commits an error of
law, commits a breach of natural justice, reaches a decision which
no reasonable tribunal could have reached, or abuses its powers.
Judicial review should not be granted where an alternative remedy
is available. In most cases in which the commissioners are said to
have fallen into error, the remedy of the taxpayer lies in the
appeal procedures provided by the tax statutes to the General
Commissioners or Special Commissioners. This appeal structure
provides an independent and informed tribunal which meets in
private so that the taxpayer is not embarrassed in disclosing his
affairs and the commissioners are not inhibited by their duty of
confidentiality. The commissioners and the tribunals established to
hear appeals from the commissioners have wide knowledge and
experience of fiscal law and practice. Appeals from the General
Commissioners or the Special Commissioners lie, but only on
questions of law, to the High Court by means of a case stated and
the High Court can then correct all kinds of errors of law
including errors which might otherwise be the subject of judicial
review proceedings: see Edwards v. Bairstow [1956] AC 14.
Judicial review process should not be allowed to supplant the
normal statutory appeal procedure. The present circumstances are
exceptional in that the appeal procedure provided by section 462
cannot begin to operate if the conduct of the commissioners in
initiating proceedings under section 460 was unlawful.
My Lords, it is clear that the commissioners are amenable
to the remedy of judicial review in a proper case. In Reg. v.
Inland Revenue Commissioners, Ex parte National Federation of
Self-Employed and Small Businesses Ltd. [1982] AC 617 a group
of self-employed taxpayers applied for an order of mandamus
directing the commissioners to collect tax from casual employees
with whom the commissioners had made an arrangement not to
investigate tax evasion prior to 1977. In the instant case the
appellant seeks an order to restrain the commissioners from
proceeding to collect the tax which they have assessed on the
appellant under section 460. In the Self-Employed case Lord
Wilberforce said, at p. 631:
“The Inland Revenue Commissioners are a statutory body.
Their duties are, relevantly, defined in the Inland Revenue
– 10 –
Regulation Act 1890 and the Taxes Management Act 1970.
Section 1 of the Act of 1890 authorises the appointment of
commissioners ‘for the collection and management of inland
revenue’ and confers on the commissioners ‘all necessary
powers for carrying into execution every act of Parliament
relating to inland revenue.’ By section 13 the
commissioners must ‘collect and cause to be collected every
part of inland revenue and all money under their care and
management and keep distinctive accounts thereof.’ Section
1 of the Act of 1970 provides that ‘Income tax . . . shall
be under the care and management of the commissioners.’
This Act contains the very wide powers of the board and of
inspectors of taxes to make assessments on persons
designated by Parliament as liable to pay income tax . . .
From this summary analysis it is clear that the Inland
Revenue Commissioners are not immune from the process of
judicial review.”
Lord Wilberforce said, at p. 632, that from the authorities and
from principle:
“a taxpayer would not be excluded from seeking judicial
review if he could show that the revenue had either failed
in its statutory duty toward him or had been guilty of some
action which was an abuse of their powers or outside their
powers altogether. Such a collateral attack – as contrasted
with the direct appeal on law to the courts – would no
doubt be rare, but the possibility certainly exists.”
Lord Diplock, at p. 637, stated:
“Judicial review is available only as a remedy for conduct
of a public officer or authority which is ultra vires or
unlawful, but not for acts done lawfully in the exercise of
an administrative discretion which are complained of only as
being unfair or unwise, . . .”
Then at p. 644, he added that the commissioners:
“are accountable to Parliament for what they do so far as
regards efficiency and policy, and of that Parliament is the
only judge; they are responsible to a court of justice for
the lawfulness of what they do, and of that the court is the
only judge.”
Lord Roskill said, at p. 660, that the commissioners:
“are, and must as a public body charged with the
performance of a public duty of crucial importance be,
amenable to the general law and liable to possible
correction if their statutory powers are exceeded, or their
statutory duties are not lawfully discharged.”
The speech of my noble and learned friend Lord Scarman
was to the same effect and he made observations as to the
principle of fairness. At p. 650, Lord Scarman referred to the
remedy of mandamus as one which has:
– 11 –
“been recognised by the judges as a remedy for certain
forms of abuse of discretion, upon the principle that the
improper or capricious exercise of discretion is a failure to
exercise the discretion which the law has required to be
exercised.”
In considering the statutory provisions applicable to the
commissioners, Lord Scarman said, at p. 651:
“They establish a complex of duties and discretionary powers
imposed and conferred in the interest of good management
upon those whose duty it is to collect the income tax. But
I do not accept that the principle of fairness in dealing with
the affairs of taxpayers is a mere matter of desirable policy
or moral obligation. Nor do I accept that the duty to
collect ‘every part of inland revenue’ is a duty owed
exclusively to the Crown … I am persuaded that the
modern case law recognises a legal duty owed by the
revenue to the general body of the taxpayers to treat
taxpayers fairly; to use their discretionary powers so that,
subject to the requirements of good management,
discrimination between one group of taxpayers and another
does not arise; to ensure that their are no favourites and no
sacrificial victims.”
He concluded, at p. 652, “I am, therefore, of the opinion that a
legal duty of fairness is owed by the revenue to the general body
of taxpayers.”
Mr. Brodie, on behalf of the appellant, submitted that if, as
Lord Scarman announced in the Self-Employed case [1982] A.C.
617, the commissioners owe a duty of fairness to the general body
of taxpayers, the commissioners must equally owe a duty of
fairness to each individual taxpayer. I agree, but a taxpayer
cannot complain of unfairness, merely because the commissioners
decide to perform their statutory duties including their duties
under section 460 to make an assessment and to enforce a liability
to tax. The commissioners may decide to abstain from exercising
their powers and performing their duties on grounds of unfairness,
but the commissioners themselves must bear in mind that their
primary duty is to collect, not to forgive, taxes. And if the
commissioners decide to proceed, the court cannot in the absence
of exceptional circumstances decide to be unfair that which the
commissioners by taking action against the taxpayer have
determined to be fair. The commissioners possess unique
knowledge of fiscal practices and policy. The commissioners are
inhibited from presenting full reasons to the court for their
decisions because of the duty of confidentiality owed by the
commissioners to each and every taxpayer.
The court can only intervene by judicial review to direct
the commissioners to abstain from performing their statutory
duties or from exercising their statutory powers if the court is
satisfied that “the unfairness” of which the applicant complains
renders the insistence by the commissioners on performing their
duties or exercising their powers an abuse of power by the
commissioners.
– 12 –
In most cases in which the court has granted judicial review
on grounds of “unfairness” amounting to abuse of power there has
been some proven element of improper motive. In the leading
case of Padfield v. Minister of Agriculture [1968] AC 997 the
Minister abstained from exercising his statutory discretion to order
an investigation because he feared the consequences of the
investigation might be politically embarrassing. In Congreve v.
Home Office [1976] Q.B. 629 the Minister exercised his power to
revoke television licences because he disapproved of the conduct of
the licence holders, albeit they had acted lawfully. In Laker
Airways Ltd, v. Department of Trade [1977] QB 643 the Minister
exercised his statutory discretion to give directions with regard to
Civil Airways with the ulterior motive of making it impossible for
one of the airlines to pursue a course of which the Minister
disapproved. In these cases judicial review was granted because
the Ministers acted “unfairly” when they abused their powers by
exercising or declining to exercise those powers in order to
achieve objectives which were not the objectives for which the
powers had been conferred. The question of “fairness” was
considered in H.T.V. Ltd, v. Price Commission [1976] I.C.R. 170.
In that case the Price Commission misconstrued the counter
inflation price code and changed its mind as to the treatment of
exchequer levy as an item in the costs of television companies
allowable for the purpose of increasing their advertising charges
within the limits prescribed by the code. The effect of the
change of mind of the Price Commission was to deprive the
companies of an increase of advertising charges which they were
plainly intended to enjoy and which they badly needed in order to
remain financially viable. Lord Denning M.R., at p. 185, said “It
is often been said, I know, that a public body, which is entrusted
by Parliament with the exercise of powers for the public good,
cannot fetter itself in the exercise of them. It cannot be
estopped from doing its public duty. But that is subject to the
qualification that it must not misuse its powers: and it is a misuse
of power for it to act unfairly or unjustly towards a private
citizen where there is no overriding public interest to warrant it.
So when an army officer was told that his disability was accepted
as attributable to war service, and he acted on it by not getting
his own medical opinion, the Minister was not allowed to go back
on it; see Robertson v. Minister of Pensions [1949] 1 Q.B. 227.
And where an owner, who was about to build on his land, was told
that no planning permission was required and he acted on it by
erecting the building the Minister was not allowed to go back on
it: see Wells v. Minister of Housing and Local Government [1976]
1 W.L.R”1000 and Lever Finance Ltd, v. Westminster (City)
London Borough Council [1971] 1 QB 222. Very recently when a
man was issued with a television licence then although the
Minister had power to revoke it, it was held that it would be a
misuse of that power if he revoked it without giving reasons or
for no good reasons: see Congreve v. Home Office [1977] 2
W.L.R. 291.” In the first three cases cited by Lord Denning the
authorities acted in a manner for which, if the authorities had not
been emanations of the Crown, the applicants would have enjoyed
a remedy by way of damages or an injunction for breach of
contract or breach of representations. In the third case of
Congreve, as I have indicated, the decision was “unfair” because
the Minister was actuated by an irrelevant motive.
– 13 –
In the H.T.V. case [1976] I.C.R. 170 my noble and learned
friend, then Scarman L.J., said, at p. 189:
“Agencies, such as the Price Commission, must act fairly.
If they do not, the High Court may intervene either by
prerogative order to prohibit, quash or direct a
determination as may be appropriate, or, as is sought in this
case, by declaring the meaning of the statute and the duty
of the agency … It is a common place of modern law
that such bodies must act fairly. . . It is not really
surprising that a code must be implemented fairly, and that
the courts have power to redress unfairness.”
Scarman L.J., after considering the Price Commission’s change of
mind, said, at p. 192, that “the commission’s inconsistency has
already resulted in unfairness, and unless corrected, could cause
further injustice. First, it gives rise to a real possibility of an
erosion of profit margin . . .” Next, if, as the Price Commission
contended, the Exchequer levy was excluded in 1976 but included
in 1973 then the television companies would be unable to obtain a
fair increase in advertising charges corresponding to increases in
costs between 1973 and 1976:
“The commission, to avoid being unfair, must either include
or exclude Exchequer levy as a cost upon both sides of the
comparison. Since it has made clear that, in the absence of
a ruling to the contrary, it intends to exclude it when
calculating current profit margins, the commission must also
exclude it when calculating the profit margin at April 30,
1973. I am not completely sure that it intends so to do if
it succeeds in this litigation. . . The commission has acted
inconsistently and unfairly; and on this ground were it
necessary, I would think H.T.V. are also entitled to
declaratory relief.”
In the H.T.V. case [1976] I.C.R. 170, the “unfairness” of the
decision was due not to improper motive on the part of the Price
Commission but to an error of law whereby the Price Commission
misconstrued the code they were intending to enforce. If the
Price Commission had not misconstrued the code, they would not
have acted “inconsistently and unfairly.” Of course the
inconsistent and unfair results to which Scarman L.J. drew
attention were themselves powerful support for the contention that
the Price Commission must have misconstrued the code.
In the present case, the appellant does not allege that the
commissioners invoked section 460 for improper purposes or
motives or that the commissioners misconstrued their powers and
duties. However, the H.T.V. case and the authorities there cited
suggest that the commissioners are guilty of “unfairness” amounting
to an abuse of power if by taking action under section 460 their
conduct would, in the case of an authority other than Crown
authority, entitle the appellant to an injunction or damages based
on breach of contract or estoppel by representation. In principle I
see no reason why the appellant should not be entitled to judicial
review of a decision taken by the commissioners if that decision is
unfair to the appellant because the conduct of the commissioners
is equivalent to a breach of contract or a breach of
representation. Such a decision falls within the ambit of an abuse
of power for which in the present case judicial review is the sole
remedy and an appropriate remedy. There may be cases in which
conduct which savours of breach of conduct or breach of
representation does not constitute an abuse of power; there may
be circumstances in which the court in its discretion might not
grant relief by judicial review notwithstanding conduct which
savours of breach of contract or breach of representation. In the
present case, however, I consider that the appellant is entitled to
relief by way of judicial review for “unfairness” amounting to
abuse of power if the commissioners have been guilty of conduct
equivalent to a breach of contract or breach of representations on
their part.
The sole question which now falls to be determined is
whether upon the true construction of the correspondence which
passed between the appellant and Mr. Thomas in 1978, the
commissioners, acting by Mr. Thomas, purported to contract or
purported to represent that they would not thereafter re-open the
tax assessments of the appellant for the years 1974-75 and 1975-76
if he withdrew his claims for interest relief and capital loss for
those years. Woolf J. concluded [1983] 3 A11.E.R. 300, 310:
“on my reading of the material, the taxpayer was led to
believe that the 1978 (sic) share transaction was closed
when he paid the capital gains tax on those shares. For
him to now be faced with a new claim in respect of that
transaction would be wrong and improper unless there were
circumstances of which I have no evidence and to which I
know not, which would alter the normal implication to be
drawn from such a situation.”
In my opinion the judge overlooked the evidence that in
1978 Mr. Thomas did not receive from the appellant and was not
in possession from other sources of information which was
significant for the purposes of section 460.
By no stretch of imagination could the answer given by the
appellant in his letter of 23 June 1978, “On 11 January 1977 . . .
I sold my remaining holding in the company, which at that time
was 346 shares of 10p each to Broadforth Ltd. . . for £24,375” be
regarded as providing “full details of the . . . disposal of these
shares” requested by the inspector, in the light of the series of
steps, seven in all, which were carried out for the purpose of
effecting the sale. The inhibitory effect which the inspector’s
letter of 21 July 1978 would, or might, have had on future
Revenue action was lost to the appellant by the fact that it did
not contain the full disclosure which the inspector had the right to
expect and on which he plainly relied.
The 1978 correspondence discloses an initial request on the
part of Mr. Thomas to discuss with the appellant all the matters
set forth in the letter from Mr. Thomas dated 18 May 1978.
When the appellant offered to withdraw his capital loss and
interest claims there was no further need to discuss those claims.
The appellant gave certain information on the other matters, which
information Mr. Thomas was prepared to accept as satisfactory.
Mr. Thomas concluded his enquiries on the basis of the information
supplied to him by the appellant. The correspondence does not
support the view that Mr. Thomas agreed that no further enquiries
– 15 –
would be made or action taken by the commissioners if they
received further information from which the commissioners could
reasonably suspect that the assessments made in the light of the
information supplied by the appellant did not represent his full
liability to tax.
By section 29(3) of the Taxes Management Act 1970:
“If an Inspector or the Board discovers –
-
-
-
that, any profits which ought to have been
assessed to tax have not been assessed, or:- -
that an assessment of tax is or has become
insufficient, or:-
-
-
(c) that any relief which has been given is or has
become excessive,
the Inspector or, as the case may be, the Board may make
an assessment in the amount, or the further amount, which
ought in his or their opinion to be charged,”
By section 460(3) of the Income and Corporation Taxes Act
1970 the commissioners are charged with the duty of counteracting
any tax advantage by means of an assessment. The only limitation
on that duty is imposed by section 460(9) whereby no assessment
may be made later than six years after the chargeable period to
which the tax advantage relates, in this case not later than 5
April 1983.
In my opinion, the 1978 correspondence does not disclose
any agreement or representation that the commissioners would
abandon their right and neglect their duty of raising further
assessments on the appellant before April 1983 in respect of any
of the matters canvassed in the correspondence if further
information showed that, notwithstanding the explanations furnished
by the appellant in 1978, further tax was chargeable.
Save in exceptional circumstances such as those which
obtained in the Self-Employed case [1982] AC 617, I do not think
it would be proper for the commissioners to absolve a taxpayer
from a tax liability of which the commissioners were unaware.
The 1978 correspondence does not indicate any intention on the
part of Mr. Thomas to absolve the appellant from undisclosed
liability. This does not mean that the appellant did not derive any
benefit from the agreement made in 1978 whereby he abandoned
the claims to interest relief and capital loss which he never sought
to justify and in which he expressed a singular lack of confidence.
The appellant obtained from the 1978 agreement that which he
sought, namely, avoidance of the inconvenience of an interview,
release from the time and trouble involved in studying and
answering further questions and the expense of professional advice.
He obtained these advantages and a speedy assessment of his tax
liability on the basis of the information which he supplied in the
course of the correspondence.
When the commissioners received further information from
the accounts of Gymboon Ltd. and from their investigations of the
– 16 –
Rossminster group and ultimately from the appellant and his fellow
shareholder, there was nothing in the 1978 agreement which made
it unfair for the commissioners to enforce any liability to tax
which Mr. Thomas did not know to exist in 1978. Some significant
information might have come to light in 1978 if Mr. Thomas had
interviewed the appellant but Mr. Thomas desisted from making
further enquiries from the appellant at the request of the
appellant and on the basis of the information supplied by the
appellant. That information was woefully inadequate. Full details
of the disposal were requested. Bare details alone were given.
When the application for judicial review came before Woolf J. it
was plain from the facts and the evidence that the commissioners
were invoking section 460 notwithstanding the 1978 agreement,
because the commissioners were not in possession of the full facts
in 1978. Nevertheless the judge pressed the commissioners to give
further evidence about the commissioners’ reasons for invoking
section 460 and about their process of reasoning. He then
dismissed their further evidence as inadequate: [1984] 3 W.L.R.
945, 950, 951. My Lords it was not open to Woolf 3. to usurp the
functions of the commissioners or to investigate further their
reasons and reasoning for invoking section 460. The sole question
for the judge on judicial review was whether in the light of the
1978 agreement it was an abuse of power for the commissioners to
invoke section 460. In my opinion it was not.
Faced with these difficulties Mr. Brodie on behalf of the
appellant concentrated on two matters which he said made the
decision of the commissioners to proceed under section 460 an
abuse of power.
As to the first matter, Mr. Brodie made great play with
what he described as a “concession” volunteered by counsel for the
commissioners in the course of argument in the Court of Appeal,
namely that in the 1978 disclosures and correspondence the
appellant acted “innocently.” But the state of mind of the
appellant in 1978 is not in issue or in evidence in these
proceedings. I decline to be influenced by a casual, courteous and
irrelevant observation made in argument by one counsel and
forensically elevated by another into a “concession.” The state of
mind of the appellant in 1978 may be explored in section 460
proceedings in order to shed light on the intentions of the
appellant in 1977. This appeal is confined to a consideration of
the propriety of the conduct of the commissioners in invoking
section 460 notwithstanding the terms of the 1978 correspondence.
As to the second matter, Mr. Brodie relied on a submission
which was first considered by Lawton L.J. in the Court of Appeal;
[1984] 3 W.L.R. 945. Lawton L.J. referred, at p. 952, to the
submission of Mr. Brodie that:
“The Inland Revenue had said that they knew by 8 October
1979 that Mr. Preston’s shares had been sold in the course
of a Rossminster tax avoidance scheme. Despite their
knowledge the Inland Revenue did not take any action under
section 460 until September 1982, by which date, as they
must have known, it was too late for Mr. Preston to seek
relief pursuant to section 33 of the Taxes Management Act
1970.”
– 17 –
Lawton L.J. dismissed this submission summarily in the last
sentence of his judgment on p.953 when he said “The delay in
initiating the procedure was not enough to make the decision an
abuse of power.”
I have already observed that the appellant never sought to
justify his claims which he said were of no great concern to him
and were less important than the establishment of his tax affairs
on a current basis. That object he achieved. In his statutory
declaration of 11 October 1982, his affidavit sworn on 17
November 1982, and his notice of application for leave to apply
for judicial review dated 18 November 1982, the appellant did not
complain of any ‘delay but complained of breach of contract,
breach of representation, or conduct analogous to breach of
contract or breach of representation constituting an abuse of
power. On 22 December 1982 the affidavit of Mr. Owston on
behalf of the commissioners stated that the commissioners
appreciated by 8 October 1979 that the appellant had sold his
shares “in the course of the Rossminster Company Purchase
Scheme.” No evidence was filed on behalf of the appellant
thereafter complaining of delay between 1979 and 1982. The
commissioners were invited to give further evidence during the
hearing before Woolf J. but not on the reasons for delay between
1979 and 1982 and there is no reference to or reliance upon that
delay in the judgment of Woolf J.
A decision in 1979, when the commissioners received the
Gymboon accounts, to invoke section 460 but not to take action
under that section until after April 1982 when the appellant’s
claims had expired, would have been inspired by an improper
motive and would have constituted an abuse of power. If the
commissioners had deliberately waited from 1979 until 1982 in
order that the claims of the appellant might be time barred,
different considerations would have applied. But there is no
suggestion that the commissioners waited deliberately. The
appellant chose to withdraw his claims. He ran the risk, of course
unwittingly, that his claims would cease to be renewable before
the expiry of the time limit which governed the actions of the
commissioners and before the commissioners in fact took action.
It is not surprising that the significance of the passing of time
with regard to the appellant’s claims was not present to the minds
of the commissioners. The commissioners were not asked to
explain the delay. There are several possible reasons which come
to mind. The difficulties and complications of enforcing section
460 are well known: see for example, Inland Revenue
Commissioners v. Garvin [1981] 1 WLR 793. We do not know
how many relevant tax avoidance schemes and how many cases
which might have involved such schemes were under consideration
between October 1979 and April 1982. We know that after the
decision of this House in Ramsay Ltd, v. Inland Revenue
Commissioners [1982] AC 300 the Chancellor of the Exchequer
estimated that the tax avoidance industry could have cost the
Revenue £300 m. annually. We can suspect that priority was
accorded by the commissioners to the investigation of each case
which required action at some time between October 1979 and
April 1982 in order that an additional assessment might not
become barred by lapse of time under section 460(3) or otherwise.
We can suspect that the numbers of the staff of the Inland
Revenue equipped and available to investigate and unravel possible
– 18 –
liability under section 460 and other tax avoidance provisions of
fiscal legislation were limited. We know that the commissioners
did not obtain copies of the contract for the sale of the
appellant’s shares until July 1982 and we were informed that the
commissioners consider that contract to be relevant to the
question of whether the appellant sought to obtain a tax advantage
by the sale of his shares. In these circumstances the appellant
has not shown that delay between 1979 and 1982 converted the
commissioners otherwise lawful actions into an abuse of power. I
would dismiss the appeal.
LORD SCARMAN
My Lords,
I would dismiss the appeal for the reasons to be developed
by my noble and learned friend, Lord Templeman, with whose
speech I agree. Since, however, the appellant relies on the
principle of fairness as the ground for judicial review in this case
and cites in support of his submission my speech in Reg. v. Inland
Revenue Commissioners, Ex parte National Federation of Self-
Employed and Small Businesses Ltd. [1982] AC 617, I think it
necessary to explain why I have reached the conclusion that his
case fails.
I shall do so by stating a few propositions relevant to the
appeal which I believe to be correct in law, by making a few
comments upon the facts of this particular case, and by indicating
what I consider to be the true reason for dismissing the appeal.
But first, and by way of preface, I must make clear my view that
the principle of fairness has an important place in the law of
judicial review: and that in an appropriate case it is a ground upon
which the court can intervene to quash a decision made by a
public officer or authority in purported exercise of a power
conferred by law.
First, “the Inland Revenue Commissioners are not immune
from the process of judicial review:” per Lord Wilberforce in the
National Federation of Self-Employed case, at p. 631. This
proposition, if it were ever doubted, is now, as I understand it, put
beyond doubt by the speeches of your Lordships in the present
appeal.
The second proposition relates to the grounds upon which a
taxpayer may seek judicial review of a decision taken by the
Commissioners of Inland Revenue. The commissioners have their
statutory powers and duties, the exercise of which can be
challenged by the process of judicial review only if certain
principles of general application are met. The taxpayer must show
either a failure to discharge their statutory duty to him or that
they have abused their powers or acted outside them: Reg. v.
Inland Revenue Commissioners, Ex parte National Federation of
Self-Employed and Small Businesses Ltd. [1982] AC 617, per Lord”
Wilberforce, p. 632, and per Lord Roskill, p. 660.
– 19 –
My third proposition is that unfairness in the purported
exercise of a power can be such that it is an abuse or excess of
power. This was the view of the law which I expressed in the
National Federation of Self-Employed case (notably at p. 650): and
it remains my view. I do not consider it to be inconsistent with
the words of Lord Diplock in that case, p. 637, which my noble
and learned friend Lord Templeman quotes in his speech, namely
that:
“judicial review is available only as a remedy for conduct of
a public officer or authority which is ultra vires or
unlawful, but not for acts done lawfully in the exercise of
an administrative discretion which are complained of only as
being unfair or unwise.”
I do not understand my Lord to have been saying that the
unfairness of what has been done can in no circumstances become
relevant in determining whether what was done was ultra vires or
unlawful. If, however, the words are to be understood in that
sense, then with very great respect I cannot accept them as a
totally accurate statement of the law. I stand where I stood in
the Court of Appeal decision, H.T.V. Ltd, v. Price Commission
[1976] I.C.R. 170. The present case, as is clear from the speech
of my noble and learned friend, Lord Templeman, illustrates how
and in what circumstances the principle of fairness falls to be
considered in determining whether a statutory power has been
abused or exceeded. I return later to this, the critical point in
the appeal.
My fourth proposition is that a remedy by way of judicial
review is not to be made available where an alternative remedy
exists. This is a proposition of great importance. Judicial review
is a collateral challenge: it is not an appeal. Where Parliament
has provided by statute appeal procedures, as in the taxing
statutes, it will only be very rarely that the courts will allow the
collateral process of judicial review to be used to attack an
appealable decision. In the first part of his speech my noble and
learned friend, Lord Templeman, has set out in detail the ample
appeal procedures available to a taxpayer aggrieved by a decision
of the commissioners to exercise their powers and duties under
Part XVII of the Act of 1970 to counteract a tax advantage
alleged to have been obtained by him.
But cases for judicial review can arise even where appeal
procedures are provided by Parliament. The present case
illustrates the circumstances in which it would be appropriate to
subject a decision of the commissioners to judicial review. I
accept that the court cannot in the absence of special
circumstances decide by way of judicial review to be unfair that
which the commissioners by taking action against the taxpayer
have determined to be fair. But circumstances can arise when it
would be unjust, because it would be unfair to the taxpayer, even
to initiate action under Part XVII of the Act of 1970. For
instance, as my noble and learned friend points out, judicial review
should in principle be available where the conduct of the
commissioners in initiating such action would have been equivalent,
had they not been a public authority, to a breach of contract or a
breach of a representation giving rise to an estoppel. Such a
decision could be an abuse of power: whether it was or not and
– 20 –
whether in the circumstances the court would in its discretion
intervene would, of course, be questions for the court to decide.
It was the appellant’s case that upon the true construction
of the correspondence in 1978 between him and Mr. Thomas, an
officer of the Special Investigations Section, the commissioners
purported to contract or to represent that they would not
thereafter re-open the tax assessments of the appellant for the
years 1974-75 and 1975-76 if he withdrew his claims for interest
relief and capital loss. Had he made good this case, I do not
doubt that he would have been entitled to relief by way of judicial
review for unfairness amounting to abuse of the power to initiate
action under Part XVII of the Act of 1970. But he failed upon the
construction of the correspondence as my noble and learned friend
demonstrates in his speech.
Secondly, had the appellant made good his case based on
delay, the process of judicial review would have been available to
him. The appellant’s case on delay was that the commissioners
had delayed initiating action to counteract the tax advantage
which the appellant realised from his dealings in the shares of
Gymboon Ltd. until his own claims for interest relief and capital
loss had become statute barred by lapse of time. I, like others of
your Lordships, was impressed by this case when it was first
advanced by Mr. Brodie, Q.C. for the appellant. But the factual
analysis of the circumstances of the delay undertaken by my noble
and learned friend in his speech has convinced me that it would be
unreasonable and unjust to treat the delay as an abuse of power,
which in other circumstances it might well have been.
For the reasons, therefore, given by my noble and learned
friend, Lord Templeman, I am of the opinion that the appellant
has failed to make out his case for intervention of the court by
way of judicial review. I would dismiss the appeal.
LORD EDMUND-DAVIES
My Lords,
For the reasons developed in the speech of my noble and
learned friend, Lord Templeman, which I have had the advantage
of reading, I would concur in dismissing the appeal.
LORD KEITH OF KINKEL
My Lords,
I have had the benefit of reading in advance the speech to
be delivered by my noble and learned friend, Lord Templeman. I
agree with it, and for the reasons given by him I too would
dismiss the appeal.
– 21 –
LORD BRIGHTMAN
My Lords,
I also agree that this appeal should be dismissed for the
reasons given by my noble and learned friend, Lord Templeman.
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