Cussens v T.G. Brosnan (Inspector of Taxes)

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke, Chief Justice
• Judgment Date: 01 November 2019
• Neutral Citation: [2019] IESC 77
• Docket Number: [Appeal No: 2008/229]
• Court: Supreme Court
• Date: 01 November 2019

BETWEEN/

EDWARD CUSSENS, JOHN JENNINGS

AND

VINCENT KINGSTON

APPELLANTS

AND

T. G. BROSNAN (INSPECTOR OF TAXES)

RESPONDENT

[2019] IESC 77

[Appeal No: 2008/229]

THE SUPREME COURT

Preliminary reference – Questions of EU law – Abusive practices – Appellants seeking a further reference to the CJEU – Whether the answers given by the CJEU were insufficiently clear

Facts: When this appeal first came before the Supreme Court, it was considered necessary to refer certain questions of EU law to the Court of Justice of the European Union (the CJEU) under the preliminary reference procedure set out in Article 267 of the Treaty on the Functioning of the European Union (TFEU). At the core of the issues in these proceedings and in the questions referred by the Supreme Court to the CJEU were matters concerning the potential applicability of the principle that abusive practices are prohibited (that is, the abuse doctrine) in EU law to the circumstances of this case. The basic problem which emerged in these proceedings was that the transactions, whose tax treatment was the subject of dispute between the parties, were carried out prior to the decision of the CJEU in Halifax and Others v Commissioners of Customs and Excise (Case C-255/02) [2006] E.C.R. I-01609, ECLI:EU:C:2006:121. In those circumstances, a question arose as to the extent to which the abuse doctrine which was applied by the CJEU to tax matters in Halifax could be said to be applicable. The CJEU delivered its judgment on the preliminary reference made by the Supreme Court on 22nd November 2017, Cussens and Others v Brosnan (Case C-251/16), ECLI:EU:C:2017:881. The matter was subsequently listed before the Supreme Court to obtain the views of the parties as to the consequences for this appeal of the response given by the CJEU. At that stage, it became clear that there were significant differences between the parties which fell into two categories. First, it was said on behalf of the appellants, Mr Cussens, Mr Jennings and Mr Kingston (the taxpayers), that at least some of the answers given by the CJEU were insufficiently clear and also that a subsequent decision of the CJEU cast doubt about the correctness of the judgment given in this case so that, it was argued, in accordance with the jurisprudence of the CJEU itself, it was appropriate to treat this as one of those exceptional cases where it would be permissible and appropriate to resend questions to the CJEU. Second, it was said that it was still not possible to finally determine this appeal given that, for the reasons set out in its judgment, the CJEU did not consider it necessary or appropriate to answer some of the questions which were referred by the Supreme Court. Thereafter, further written submissions were filed and an oral hearing ensued.

Held by Clarke CJ that he was not satisfied that it was appropriate for the Supreme Court to make a further reference to the Court of Justice in these proceedings. He did not consider that the answers given by the CJEU to the questions already referred were in any way unclear or were open to any legitimate suggestion to the effect that the CJEU did not deal fully with each of the questions to which it did provide answers. Further, he was also satisfied that the fact that the CJEU did not find it appropriate to answer some of the issues presented to it by the Court did not give rise to a situation where it was impossible finally to determine this appeal. He was satisfied that it was clear from the findings of the Circuit Court Judge as set out in the case stated and from the judgment of the CJEU in the reference in these proceedings, that it was appropriate to treat the transactions concerned in the matter contended for by the Revenue Commissioners.

Clarke CJ proposed one minor change to the answer to question (iv). However, with that minor exception, he held that he would dismiss the appeal and uphold the decision of the High Court. In respect of the answer to question (iv), he held that he would vary the order of the High Court by answering that question as follows: “The question of whether interest is properly due on any VAT which the taxpayers are liable to pay on foot of the substantive decision of the courts on these appeals is a matter of law and not a matter within the discretion of the Circuit Court. The question of whether, as a matter of law, interest is so payable in all the circumstances of this case, was not, on the basis of the materials before this Court, properly before the Circuit Court and, in those circumstances, the Circuit Court was not correct to hold that no interest was payable. That answer is, however, without prejudice to the entitlement of the taxpayers to seek to argue, in any appropriate proceedings, that interest is not payable.”

Appeal dismissed.

Judgment of Mr. Justice Clarke, Chief Justice , delivered the 1st November, 2019.

1. Introduction

1.1 Value Added Tax is, to a very significant extent, governed by the law of the European Union. The various Value Added Tax directives required member states to introduce that tax and make significant provision for the parameters within which the tax is to operate. It follows that many cases involving issues surrounding Value Added Tax have a significant EU law dimension to them. This case is no exception.

1.2 These proceedings have a very lengthy history which it will be necessary to outline in a little greater detail in due course. However, when this appeal first came before the Court, it was considered necessary to refer certain questions of EU law to the Court of Justice of the European Union (“the CJEU”) under the preliminary reference procedure set out in Article 267 of the Treaty on the Functioning of the European Union (“TFEU”). At the core of the issues in these proceedings and in the questions referred by this Court to the CJEU were matters concerning the potential applicability of the principle that abusive practices are prohibited (that is, the abuse doctrine) in EU law to the circumstances of this case.

1.3 While it will be again necessary to consider that doctrine in greater detail in due course, it has a lengthy history and it has been clear that the abuse doctrine has application in the field of tax (where that tax is governed by EU law) since the judgment of the CJEU of 21 February 2006 in Halifax and Others v. Commissioners of Customs and Excise ( Case C-255/02) [2006] E.C.R. I-01609, ECLI:EU:C:2006:121. However, the basic problem which emerged in these proceedings was that the transactions, whose tax treatment was the subject of dispute between the parties, were carried out prior to the decision of the CJEU in Halifax. In those circumstances, a question arose as to the extent to which the abuse doctrine which was applied by the CJEU to tax matters in Halifax could be said to be applicable.

1.4 The CJEU delivered its judgment on the preliminary reference made by this Court on 22nd November 2017, Cussens and Others v. Brosnan ( Case C-251/16), ECLI:EU:C:2017:881, in terms which it will be necessary to analyse in due course. The matter was subsequently listed before the Court to obtain the views of the parties as to the consequences for this appeal of the response given by the CJEU. At that stage, it became clear that there were significant differences between the parties which, I think it can be said, fell into two categories.

1.5 First, it was said on behalf of the appellants (“the taxpayers”) that at least some of the answers given by the CJEU were insufficiently clear and also that a subsequent decision of the CJEU cast doubt about the correctness of the judgment given in this case so that, it was argued, in accordance with the jurisprudence of the CJEU itself, it was appropriate to treat this as one of those exceptional cases where it would be permissible and appropriate to resend questions to the CJEU.

1.6 Second, it was said that it was still not possible to finally determine this appeal given that, for the reasons set out in its judgment, the CJEU did not consider it necessary or appropriate to answer some of the questions which were referred by this Court.

1.7 Thereafter, further written submissions were filed and an oral hearing ensued. This judgment is directed towards the issues which thus arose.

1.8 The facts and the underlying issues which arise on this appeal are set out in the earlier judgment of this Court delivered by Laffoy J. on 21 April 2016 ( Cussens v. Brosnan [2016] IESC 79) and it is unnecessary, therefore, to repeat either those facts or the issues. The starting point for a consideration of the remaining questions which this Court must address is, in those circumstances, the questions referred by this Court to the CJEU and the answers given.

2. The Reference

2.1 The first and second questions referred by this Court, which the CJEU found appropriate to consider together, were as follows:-

“(1) Is the principle of abuse of rights, as recognised in the judgment of the Court in Halifax as being applicable in the sphere of VAT, directly effective against an individual in the absence of a national measure, whether legislative or judicial, giving effect to that principle, in circumstances where, as here, the redefining of the pre-sale transactions and the purchaser sales transactions (collectively referred to as the appellants’ transactions) as advocated by the Commissioners, would give rise to a liability on the part of the appellants to VAT where such liability, on the proper application of the provisions of national legislation in force at the relevant time to the appellants’ transactions did not arise?

(2) If the answer to question (1) is that the principle of abuse of rights is directly effective against an individual, even in the absence of a national measure whether legislative or judicial giving effect to that principle was the principle sufficiently clear and precise to be applied...