Desmond O'Sullivan v Revenue Commissioners
Jurisdiction | Ireland |
Judge | Mr. Justice Mark Sanfey |
Judgment Date | 22 February 2021 |
Neutral Citation | [2021] IEHC 118 |
Docket Number | [Record No. 2019/299 R] |
Court | High Court |
Date | 22 February 2021 |
In the Matter of a Case Stated Pursuant to Section 949AQ of the Taxes Consolidation Act 1997 (As Amended)
[2021] IEHC 118
[Record No. 2019/299 R]
THE HIGH COURT
Case stated – Questions of law – Errors in law – Tax Commissioner seeking the opinion of the High Court – Whether the Tax Commissioner erred in law in his determination
Facts: There was a case stated for the opinion of the High Court pursuant to s. 949AQ of the Taxes Consolidation Act 1997 (TCA) in relation to a determination by a Tax Commissioner of 11th October, 2019 in an appeal by the appellant, Mr O’Sullivan. The respondent was the Revenue Commissioners (Revenue). The case stated recited that a notice requesting Mr Kennedy (the Commissioner) to state and sign a case was received by the Tax Appeals Commission (TAC) on 31st October, 2019 in accordance with s. 949AQ of the TCA. The Commissioner accordingly drafted and signed a comprehensive case stated for the opinion of the Court pursuant to s. 949AQ of the TCA on 17th December, 2019. The case stated states that the issue in the appeal “was to determine whether the Appellant could satisfy the burden of proof to support his assertion that he invested €700,000 in the Santa Maria Property Partnership (SMP) and as a consequence seek to avail of loss relief pursuant to Taxes Consolidation Act 1997 (TCA) section 381.” (para. 3). At para. 30 of the case stated, the Commissioner set out of the questions of law for the opinion of the High Court as follows: “whether I erred in law: (a) in relying on transactions relating to Moongate and the Laurels during the hearing of the appeal when such transactions were not dealt with at the initial hearing [i.e. the case management conference held in preparation for the hearing before the Commissioner] and the Appellant was not prepared to deal with those queries having had no notice that such queries would be raised; (b) in relying on inconsistences of fact and a failure to adduce relevant evidence when the transactions to which the hearing related occurred in 2007 and the requirements to maintain records had expired by 12th of December 2014, and (c) in relying on evidence produced in preparation of the hearing as constituting primary evidence for the purposes of determining credibility.”
Held by Sanfey J that the appropriate questions of law arising from the matters set out in the case stated were as follows: (a) whether the Appeal Commissioner erred in law in relying on transactions relating to Moongate and The Laurels during the hearing of the appeal when such transactions were not dealt with at the initial hearing and the appellant was not prepared to deal with those queries having had no notice that such queries would be raised; (b) whether the Appeal Commissioner erred in law in relying on the appellant’s inconsistencies of fact and his failure to adduce relevant documentary evidence in relation to transactions which occurred in 2007; and (c) whether the Appeal Commissioner erred in law in relying on an inconsistency between the appellant’s written submissions and his evidence, and on his failure to explain the inconsistency. Sanfey J held that there would be an order pursuant to s. 949AR(1)(c) amending questions (b) and (c) set out at para. 30 of the case stated in accordance with the reformulated questions above. Sanfey J did not consider that the Commissioner erred in law in his determination in relation to the issues as set out in those questions.
Sanfey J held that there would be an order of the Court affirming the determination of the Commissioner pursuant to s. 949AR(1)(a).
Case stated.
JUDGMENT of Mr. Justice Mark Sanfey delivered on the 22nd day of February 2021.
This matter concerns a case stated for the opinion of this Court pursuant to s.949AQ of the Taxes Consolidation Act 1997 (‘ TCA’) in relation to a determination by a Tax Commissioner of 11th October, 2019 in an appeal by Mr. Desmond O'Sullivan (‘the appellant’). The Revenue Commissioners (‘Revenue’) are the respondent. The case stated recites that a notice requesting Mr. Conor Kennedy (‘the Commissioner’) to state and sign a case was received by the Tax Appeals Commission (‘TAC’) on 31st October, 2019 in accordance with s.949AQ of the TCA. The Commissioner accordingly drafted and signed a comprehensive case stated for the opinion of this Court pursuant to s.949AQ of the TCA on 17th December, 2019.
The parties proffered detailed written submissions in advance of the hearing, and the written submissions made on behalf of the appellant at the hearing before the Commissioner were also made available to the court. The appellant also sought, at the commencement of the hearing before the court, to have certain further documentation admitted which had not been made available at the hearing before the Commissioner. This application was opposed by Revenue, and I will refer to the application in this regard in more detail below.
The case stated states that the issue in the appeal “ was to determine whether the Appellant could satisfy the burden of proof to support his assertion that he invested €700,000 in the Santa Maria Property Partnership (SMP) and as a consequence seek to avail of loss relief pursuant to Taxes Consolidation Act 1997 ( TCA) section 381.” [Paragraph 3].
The factual background to the matter is set out comprehensively in both the determination and the case stated. In the following paragraphs, I will summarise the ‘material findings of fact’ as set out in the latter document.
The appellant acquired a 9.86% interest in the Santa Maria Property Partnership (‘SMP’), which was in operation as a trading partnership in or around 2007. In or around October 2007, SMP acquired a 1.45-acre site at Cunningham Road, Dalkey, Co. Dublin. This site cost €20 million, and the partners of SMP contributed €5 million, with the remaining €15 million of the development cost to be financed by Zurich Bank. The intention was to develop the site for the construction of residential units in accordance with its planning permission. The development commenced in 2008, but due to the collapse in the property market in that year, Zurich withdrew funding and the development was abandoned, causing significant losses to all the investors.
In his tax returns for 2009 and 2010, the appellant claimed an offset of losses incurred against the appellant's PAYE income in accordance with s.381 of the TCA. The Commissioner records that “ this loss offset triggered a tax refund which was immediately taken by the Bank”.
On or about 12th December, 2014, Revenue wrote to the appellant querying his claimed entitlement to offset trading losses for 2009 and 2010. Ultimately, the respondent issued amended notices of assessments for those years disallowing the entitlement to loss relief, which gave rise to tax liabilities of €31,557 and €31,923 for the periods ending 31st December, 2009 and 31st December, 2010 respectively. The assessments accordingly gave rise to a tax liability of €63,480.
In the case stated, the Commissioner summarised the evidence given by the appellant and two witnesses on his behalf. The appellant gave evidence that he began investing in properties in 1990 and had built up a substantial property portfolio of approximately thirty-seven properties while working as a commercial pilot. In 2004 he retired from flying to concentrate on his property business. In 2005 he was introduced to a chartered accountant, Mr. Alan Hynes, who prevailed on the appellant to use his substantial property portfolio as equity for investment into ‘big-ticket’ investments. This was to be done through an investment vehicle of Mr. Hynes called Tuskar Property Holdings (‘Tuskar’).
The first such investment was for €300,000 in a project called Moongate, a property in Wexford. Due to planning difficulties, this development never took place, and the €300,000 which was to have been invested in the project was transferred to the firm of solicitors acting on behalf of Mr. Hynes, Seamus Maguire & Co. The evidence of the appellant was that €100,000 of that transfer was subsequently paid to Mr. Hynes as property-based commissions, and that the remaining €200,000 from the abortive Moongate investment, together with the sum of €500,000 borrowed from AIB, were invested into SMP. The case stated records that an AIB bank statement of the appellant was produced in evidence, and shows the transfer of €500,000 to Tuskar on 16th July, 2007. It is recorded that “ the Respondent accepted such evidence”. The case stated goes on to say however that “… the Appellant was unable to clarify the source of the lodgement of €300,000 on 8th July 2008 that appeared on the same statement. Furthermore, he was unable to confirm whether that lodgement represented a return of capital from a project managed by Mr. Hynes…” [para. 13(e)].
The case stated records the appellant as having given evidence that SMP acquired a property on Cunningham Road, Dalkey for €20 million, but goes on to say that “ SMP contributed €7 million and the balance was funded by Zurich…”, notwithstanding the statement in the “ material findings of fact” that €5 million was the sum contributed by the SMP partners. Mr. Hynes produced a schedule that purported to highlight the amount of funds invested in SMP. The case stated states that the schedule “…noted that the appellant invested €700,000 which when added to the other partners' contributions came to €6,100,000. However, he was unable to reconcile a conflicting entry on that document which showed the total partners' contribution of €7,100,000…” [para. 13(g)].
The case stated goes on to note that, in cross-examination, “…the Appellant was unable to clarify how one investor had a 7.04% interest while not making any equity...
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