Bank of Ireland Trust Services Ltd v Revenue Commissioners (No. 2)

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 15 July 2003
• Neutral Citation: [2003] IEHC 59
• Court: High Court
• Docket Number: [2000 No. 7923P],No 7923p/2000
• Date: 15 July 2003

[2003] IEHC 59

THE HIGH COURT

No 7923p/2000

BANK OF IRELAND TRUST SERVICES LTD (ORSE ERIN EXECUTOR & TRUSTEE CO LTD) v. REVENUE COMMISSIONERS

BETWEEN

BANK OF IRELAND TRUST SERVICES LIMITED (FORMERLY ERIN EXECUTOR AND TRUSTEE COMPANY LIMITED) (AS TRUSTEE OF IRISH PENSION FUND PROPERTY UNIT TRUST)

Plaintiff

and

THE REVENUE COMMISSIONERS

Defendant

Citations:

TAXES CONSOLIDATION ACT 1997 S941(9)(A)

TEXACO IRL LTD V MURPHY 1992 4 ITR 91

INCOME TAX ACT 1967 S428(9)

MCGRATH V MCDERMOTT 1988 IR 258

REVENUE CMRS V DOORLEY 1933 IR 750

INSPECTOR OF TAXES V KIERNAN 1981 IR 117

O'ROURKE V REVEUE CMRS 1996 ITR 321

TEXACO (IRL) LTD V MURPHY (NO 3) 1992 2 IR 300

COURTS ACT 1981

TAXES CONSOLIDATION ACT 1997 S941(9)

Synopsis:

REVENUE

Value added tax

VAT refunds unlawfully withheld - Interest thereon - Repayment of interest - Rate - Method of calculation - Appropriate rate of interest to be applied - Period to be considered for calculation of interest repayments - Taxes Consolidation Act, 1997 section 941 (2000/7923p - Kelly - 15/7/2003)

Bank of Ireland Trust Services Ltd v Revenue Commissioners - [2003] 3 IR 398

in 1991 the plaintiffs gave the defendants notice of a claim for repayment of value added tax for the period 1986 to 1989. When the defendants refused repayment, court proceedings were ultimately instituted and £1,750,000 was repaid by the defendants in 1999. The High Court held that the plaintiff was entitled to interest upon that repayment of value added tax but left over to another day the determination of the rate of such interest and the quantification of the amount payable. The plaintiff contended that it was entitled to interest on two separate bases, firstly pursuant to Taxes Consolidation Act 1997 and by reference to the doctrine of unjust enrichment. Five different rates of interest were identified by the plaintiff: rates prescribed under the Taxes Acts; the rate prescribed under the Courts Act; bank interest rate; performance rate, and; gilt rate. The plaintiffs claimed they were entitled to performance rate interest from the time of the first overpayment to the defendants in 1982 to time of the repayments. The defendants contended that interest should be payable only from the time of the notification of a claim for repayment in 1991.

Held by Kelly J in awarding interest under the Courts Act rate from 1991 to 1999 that section 941(9) of the Act of 1997 left to the court to decide if any interest was to be paid in a particular case and if so how much which was in contrast to other statutory provisions found in taxes legislation and that a just result would be achieved if the plaintiff was permitted interest from the time it first gave notice of a claim for repayment. The Courts Act rate applied to all litigants and had the merit of certainty and equality of treatment for all litigants. Performance rate interest was inappropriate as awarding it would be tantamount to assessing damages as it would not be granting interest on a sum certain but would be treating the principal as constantly changing over the years in question. If the legislature intended the court to apply the Taxes Act rate it could have said so but did not. Moreover, none of the statutory provisions provided for other than the awarding of simple interest.

1 JUDGMENT of Mr. Justice Kelly delivered on the 15th day of July, 2003.

Introduction

2 On the 29 ^th November, 2002 I decided that the plaintiff was entitled to interest upon repayments of Value Added Tax (VAT) made to it by the defendants. The VAT repaid amounted to IR£1,750,000. Prior to the hearing in October, 2002 which led to that judgment the parties agreed that if interest was payable to the plaintiff the determination of the rate of such interest and the qualification of the amount payable should be left over for another day. That day came on the 27 ^th June, 2003 and this is my judgment on the matter.

Background

3 The background to the case is set forth in detail in my judgment of the 29 ^th November, 2002. A short summary of the salient facts will suffice for the purposes of this ruling.

4 The plaintiff has for many years been involved in the acquisition, development and management of a portfolio of properties. It was registered for VAT. It made the usual bi-monthly returns in respect of its VAT liability. VAT was paid by or refunded to the plaintiff on foot of those returns between 1981 and 1997.

5 On the 22 ^nd March, 1991 the plaintiff gave written notice of a claim for repayment of such tax for the period 1 ^stNovember, 1986 to 30 ^th April, 1989. The defendants refused repayment.

6 An appeal was taken to the Appeal Commissioners. The appeal was brought in respect of a single two month period but it was a test case the result of which was to govern liability for all of the relevant periods in respect of which a claim was made. The claim for refund was ultimately made retrospective to 1981 being the maximum period permissible having regard to the limitation period for such claims.

7 The plaintiff lost before the Appeal Commissioners. A case was stated to the High Court where it lost again. An appeal was taken to the Supreme Court. On the 16 ^th December, 1997 it reversed the decision of the High Court. On foot of the Supreme Court determination IR£1.75 million VAT was repaid. That occurred in January, 1999.

8 It was agreed that all VAT periods from the 1 ^st March, 1981 should be treated as having been under appeal. Repayment of VAT was made on that basis.

9 The plaintiff contended that it was entitled to interest on the VAT overpaid on two separate bases. First, it alleged that it was entitled to interest pursuant to the relevant legislation. I found in its favour in this regard. Having considered the relevant legislation I said:

"I am of opinion that the correct construction to be given to these statutory provisions is that all of the provisions of the Income Tax Acts relating to the payment of tax in accordance with the determination of the Appeal Commissioners where that decision is under appeal by way of case stated are necessarily imported into the VAT legislation. If that be correct then if a claim for repayment of VAT is determined by the High Court or on appeal by the Supreme Court in favour of the tax payer, the position in relation to a VAT appeal is the same as that which applies to an income tax appeal. It follows that the amount of VAT overpaid falls to be treated as if it were income tax overpaid and to be refunded with such interest, if any, as the court may allow."

10 Later in the judgment I held that

"The plaintiff is entitled to interest in accordance with the provisions of s. 941(9) of the Taxes Consolidation Act, 1997".

11 I held that a specific provision had been made by statute for the payment of interest.

12 I went on to consider the second basis upon which the plaintiff claimed interest. It did so by reference to the doctrine of unjust enrichment. I held that the doctrine applied in the context of taxes paid where they ought not to have been and refunds not made when they should have been. I held that the plaintiff would be entitled to recover under the general law of restitution and unjust enrichment if the payment of interest was not specifically provided for pursuant to the statutory provisions. Strictly speaking it was not necessary for me to consider this second limb of the plaintiff's case. I did so for the sake of completeness lest my decision on the first part of the claim might have been considered erroneous in the event of an appeal to the Supreme Court.

13 My judgment of the 29 ^th November, 2002 was not appealed. Such being so, the plaintiff re-entered the case for the purposes of having the amount of interest assessed by the court.

The Claim

14 It is common case that the task which I have been asked to undertake is that contemplated in s.941(9)(a) of the Taxes Consolidation Act, 1997. The plaintiff does not seek to have me determine a claim under the general law of restitution or unjust enrichment. Indeed it would be difficult to see how it could do so having regard to my finding that the payment of interest is specifically provided for by statute.

15 The plaintiff does contend however, that in exercising the statutory discretion I ought to bear in mind the legal principles which inform the doctrine of restitution and unjust enrichment. This, it contends, is so because of the nature of the statutory jurisdiction. I now turn to a consideration of the statutory provision.

The Statutory Provision

16 S.941(9) (insofar as it is relevant) provides as follows:

"(9) Notwithstanding that a case has been required to be stated or is pending, income tax or, as the case may be, corporation tax shall be paid in accordance with the determination of the Appeal Commissioners; but if the amount of the assessment is altered by the order or judgment of the Supreme Court or the High Court, then—"

(a) if too much tax has been paid, the amount overpaid shall be refunded with such interest, if any, as the Court may allow,..."

17 It is clear that the statute leaves it to the court to decide if any interest is to be paid in a particular case and if so how much.

18 This is in marked contrast to other statutory provisions which are to be found in the taxes legislation. There specific rates of interest are prescribed. The legislature chose not to do so in the present case.

Is Interest Payable?

19 The defendants contend that this is the first question...