O'Brien -v- Quigley,  IEHC 398 (2013)
|Docket Number:||2011 1120 R|
|Party Name:||O'Brien, Quigley|
THE HIGH COURT
REVENUE[2011 No. 1120 R]
DENIS O’BRIEN APPELLANTAND
INSPECTOR OF TAXES RESPONDENT
Judgment of Ms. Justice Laffoy delivered on 6th day of September, 2013.
The proceedings and procedural background
The background to this Case Stated was that during the tax year 1999/2000 the appellant disposed of 5,734,000 shares in Esat Telecom in exchange for loan notes in BT Hawthorn Limited valued at €285,927,994. In December 2000 the loan notes were disposed of by the appellant to Chase Bank Plc for a net consideration of €284,830,824. The disposal gave rise to a potential capital gains tax liability of €56.86m for the tax year 2000/2001 (6th April, 2000 to 5th April, 2001), in addition to liability on certain other capital gains arising on the disposal of other assets. On 8th October, 2002 the respondent raised an assessment to capital gains tax on the appellant in the sum of €57,848,753 for the tax year 2000/2001.
The appellant appealed the assessment. The appeal was heard by Ronan Kelly (the Appeal Commissioner) on 7th, 8th and 30th July, 2003. In an oral decision communicated to the parties on 26th September, 2003, the Appeal Commissioner effectively allowed the appeal by agreeing with the arguments advanced on behalf of the appellant.
The respondent being dissatisfied with the determination of the Appeal Commissioner, the Appeal Commissioner was requested by letter dated 1st October, 2003 to state a case for the opinion of the High Court pursuant to s. 941 of the Taxes Consolidation Act 1997. The question of law for the determination of the Court set out in the Case Stated, which is dated 16th December, 2011, is:
“Whether, having regard to the evidence given and the facts found by me as aforesaid, I was correct in holding that 6 Raglan Road, Ballsbridge, Dublin 4 was not a permanent home available to the appellant for the tax year 2000/2001 for the purposes of Article 4.2 of the Ireland/Portugal Double Taxation Convention”.
Article 4.2 of Ireland/Portugal Double Taxation Convention
By virtue of the Double Taxation Relief (Taxes on Income) (Portuguese Republic) Order 1994 (S. I. No. 102/1994), the Convention entitled “Convention between Ireland and the Portuguese Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income” (the Convention), the text of which is set out in the schedule to the Order, was given force of law in this jurisdiction.
To put Article 4 thereof in context, Article 1 of the Convention provides that the Convention “shall apply to persons who are residents of one or both of the Contracting States”. Article 1, which is headed “Personal Scope”, is contained in Chapter 1, which is headed “Scope of the Convention”, as is Article 2, which is headed “Taxes Covered”. Article 4 is contained in Chapter 2, which deals with definitions. Article 3 contains general definitions. Article 4 is headed “Resident” and provides as follows:
“1. For the purpose of this Convention, the term ‘resident of a Contracting State’ means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that State in respect only of income from sources in that State.
Where, by reason of the provisions of paragraph 1, an individual is a resident of both Contracting States, then his status shall be determined as follows:
(a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him; if he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests);
(b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;
(d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
Where, by reason of the provisions of paragraph 1, a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated.”
The appellant, being an individual who was a resident at the material time of both Contracting States, paragraph 2 of Article 4 applied to him. The case made by the appellant before the Appeal Commissioner and in this Court was that, by virtue of the application of paragraph 2(a), in the tax year 2000/2001 he was not deemed to be a resident of Ireland, because Ireland was not a Contracting State in which he had “a permanent home available to him”. The term “permanent home available” is not defined in the Convention, nor is any of its three components.
Principles of interpretation of Convention
The relevant principles of interpretation applicable to the construction and application of a Double Taxation Convention, such as the Convention, were considered by the High Court (Kelly J.) in Kinsella v. Revenue Commissioners  2 I.R. 417, where, in the context of the application of a Double Taxation Convention with Italy dating from 1971 and incorporated into Irish law in 1973, it was stated (at para. 41):
“This State acceded to the Vienna Convention on the Law of Treaties with effect from the 6th September, 2006. Even before that event it is clear from the decision of Barrington J. in McGimpsey v. Ireland  I.R. 567 that in interpreting an international treaty the court ought to have regard to the general principles of international law and in particular the rules of interpretation of such treaties as set out in articles 31 and 32 of the Vienna Convention.”
The decision in McGimpsey v Ireland concerned a constitutional challenge to the Anglo-Irish Agreement of 15th November, 1985. In that case, it was held by the High Court that an international treaty must be interpreted having regard to international law and such interpretation should not be coloured by reference to the Constitution. In his judgment, Barrington J. stated (at p. 582):
“An international treaty has only one meaning and that is its meaning in international law. Its interpretation cannot be coloured by reference to the Constitution. The approach to the interpretation of post constitutional statutes laid down in East Donegal Co-Operative Society v. The Attorney General  I.R. 317 can have no application to the interpretation of a treaty. For guidance on this subject one must look to the general principles of international law and in particular to the rules of interpretation set out in article 31 of the Vienna Convention on the Law of Treaties. Ireland, admittedly, is not a party to that convention, but article 31 is acknowledged to have codified the relevant principles of interpretation.”
Article 31 of the Vienna Convention is headed “General rule of interpretation”. Paragraph 1 of Article 31 provides:
“A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.”
Paragraph 2 elaborates on what the context for the purpose of the interpretation of a treaty shall comprise and paragraph 3 sets out what shall be taken into account together with context, neither of which paragraphs is of any particular relevance for present purposes. Paragraph 4 provides that a special meaning shall be given to a term if it is established that the parties so intended.
Article 32 of the Vienna Convention, which is headed “Supplementary means of interpretation” provides:
“Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:
(a) leaves the meaning ambiguous or obscure; or
(b) leads to a result which is manifestly absurd or unreasonable.”
In Kinsella v. Revenue Commissioners, having outlined the provisions of Articles 31and 32 of the Vienna Convention, Kelly J. stated (at para. 44):
“In accordance with what is prescribed by the Vienna Convention, I must therefore interpret the Convention in good faith in accordance with the ordinary meaning to be given to its terms in their context and in the light of the Convention's object and purpose. Where such an interpretation leaves the meaning of the Convention ambiguous or obscure or leads to a manifestly absurd or unreasonable result then recourse can be had to supplementary means of interpretation. These means of interpretation could, in an appropriate case, include the OECD Model Convention with respect to Taxes on Income and Capital (the Model Convention) as well as the commentaries thereon.”
That passage, in my view, clearly sets out the proper approach to be adopted in interpreting and applying a Double Taxation Convention. It was the approach adopted by the Appeal Commissioner on the appellant’s appeal.
In the Case Stated (at para. 13), the Appeal Commissioner stated:
“In reaching my determination, I was satisfied that Barrington J. in McGimpsey v. Ireland . . . sets out the manner in which general principles of interpretation of international law, and in particular the rules of interpretation set out in Article 31 of the Vienna Convention on the Law of Treaties should be approached...
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