Dublin Waterworld Ltd v National Sports Campus Development Authority

• Jurisdiction: Ireland
• Judge: Ms. Justice Irvine
• Judgment Date: 24 July 2019
• Neutral Citation: [2019] IECA 214
• Date: 24 July 2019
• Court: Court of Appeal (Ireland)
• Docket Number: Neutral Citation Number: [2019] IECA 214

BETWEEN/

DUBLIN WATERWORLD LIMITED

APPELLANT/PLAINTIFF

- AND -

NATIONAL SPORTS CAMPUS DEVELOPMENT AUTHORITY

RESPONDENT/DEFENDANT

[2019] IECA 214

Irvine J.

Birmingham P.

Irvine J.

Costello J.

Neutral Citation Number: [2019] IECA 214

Record Number: 2017/336

THE COURT OF APPEAL

Damages – Malicious abuse of the civil process – Illegal Immigrants (Trafficking) Act 2000 s. 5 – Appellant seeking damages for the tort of malicious abuse of the civil process – Whether the High Court judge reached his decision based on an incomplete and erroneous assessment of the evidence

Facts: The appellant, Dublin Waterworld Ltd (DWW), appealed to the Court of Appeal against the judgment and order of the High Court (Twomey J) dated the 10th and 24th May, 2017 respectively whereby it dismissed the appellant’s claim against the respondent, National Sports Campus Development Authority (NSCDA), for, inter alia, damages for the tort of malicious abuse of the civil process in pursuing an action to recover VAT in respect of a lease dated the 30th April, 2003 to DWW of the National Aquatic Centre, Abbotstown, County Meath.

Held by Irvine J that, whilst she was satisfied that the High Court judge erred in law when he concluded that DWW’s claim must fail because of the decision of the Arbitrator and the High Court (Gilligan J) in the primary litigation, she was nonetheless satisfied that his alternative basis for rejecting DWW’s claim, namely that it had not established that Campus and Stadium Ireland Development Ltd (CSID) did not have reasonable and probable cause to issue the proceedings, could not be faulted in any material respect. Irvine J held that, in concluding, as he did, that DWW had not discharged the requisite burden of proof, the High Court judge did not, as alleged, reach his decision based on an incomplete and erroneous assessment of the evidence. Irvine J was satisfied that the failure of the High Court judge to address with particularity DWW’s submission that the deliberate withholding of the Valuation Office Report from DWW until after the commencement of the proceedings did not cast in doubt the judgment of the High Court judge. Irvine J rejected the claim of DWW that the conclusions of the High Court judge were fatally undermined by his failure to consider in detail the emails of the 20th and 23rd December, 2002 or by his failure to formally rule upon its submission that adverse inferences be drawn from the failure on the part of CSID to call a number of identified witnesses. Irvine J held that there was no merit in the claim that the High Court judge fell into some fatal error when, for the purpose of determining if CSID had reasonable and probable cause to issue the VAT proceedings, he attached weight to the fact that the claim had been supported by CSID’s solicitors. Irvine J also saw no merit in DWW’s submission that there was a fatal inconsistency in the trial judge’s determination that CSID had reasonable and probable cause to issue the proceedings in light of his finding that both at Executive Services Team (EST) level and board level, CSID was aware of the dichotomy between the Revenue practice and the strict wording of Regulation 19 of the VAT Regulations of 1979 (S.I. No. 63/79). Finally, Irvine J was fully satisfied that objectively assessed, as is the test to be applied when considering the issue of reasonable and probable cause, the evidence overwhelmingly favoured a conclusion that the reasonable actor in the shoes of CSID would have considered it had reasonable and probable cause to issue the VAT proceedings.

Irvine J held that the appeal would be dismissed.

Appeal dismissed.

JUDGMENT of Ms. Justice Irvine delivered on the 24th day of July 2019

Index

Procedural History 12

High Court judgment 17

DWW's submissions 33

CSID's submissions 42

Legal principles 50

Decision

A. On basis of Arbitrator's decision 56

Conclusion 107

1 This is an appeal against the judgment and order of the High Court (Twomey J.) dated the 10th and 24th May, 2017 respectively whereby he dismissed the claim of Dublin Waterworld Limited (‘DWW’) against National Sports Campus Development Authority (‘NSCDA’) for, inter alia, damages for the tort of malicious abuse of the civil process in pursuing an action to recover VAT in respect of a lease dated the 30th April, 2003 to DWW of the National Aquatic Centre, Abbotstown, County Meath (‘the Aquatic Centre’).

The parties

2 NSCDA, the defendant to the within proceedings, is a statutory authority established pursuant to the National Sports Campus Development Authority Act 2006. It is the legal successor and transferee of all assets and liabilities of Campus and Stadium Ireland Development Limited (‘CSID’) which was, as a result of that legislation, dissolved and replaced by NSCDA. CSID had been a private limited company established by the Government in 2000 to develop a sports campus at Abbotstown, County Meath. At that time CSID was 50% owned by the Minister for Sports, Arts and Tourism, 25% owned by the Minister for Finance and 25% owned by the Taoiseach. All references in this judgment to CSID should be taken to include NSCDA, unless otherwise stated.

3 In 2001, DWW commenced negotiations with CSID with a view to entering into a lease in respect of the Aquatic Centre. On the 30th April, 2003 CSID granted a lease (‘the lease’) of the Aquatic Centre to DWW for a term of thirty years commencing the 30th April, 2003. Pursuant to Clause 4.30 of the said lease DWW covenanted to pay to CSID all VAT payable on the grant of the lease.

4 Following advices received as to whether or not VAT was chargeable in respect of the lease, on the 15th May 2003, CSID issued an invoice to DWW claiming a sum of €10,254,600 in respect of VAT, stating that the sum so claimed had been calculated in accordance with Regulation 19 of the VAT Regulations of 1979 (S.I. No. 63/79, as amended by S.I. 219/02). The invoice detailed the relevant calculation.

5 In circumstances where DWW considered that CSID was not entitled to claim VAT on the lease, it refused to discharge CSID's invoice with the result that in December 2003, CSID's solicitors, McCann Fitzgerald, issued a formal letter demanding payment of the said sum of €10,254,600 in respect of VAT.

6 Notwithstanding the said demand DWW continued to dispute the sum so claimed with the result that on the 26th April, 2005 CSID issued proceedings (‘the primary litigation’) in the High Court ( [2006] IEHC 200) which included a claim for payment of the aforementioned sum in respect of VAT on the lease. Relevant in this regard is the fact that the claim for VAT was pursued in the context of proceedings brought by CSID to forfeit the lease due, inter alia, to the alleged failure on the part of DWW to comply with certain covenants in the lease including the assignment of the lessee's interest in the lease without the prior consent of CSID.

7 In its High Court proceedings CSID maintained that there were three methods of establishing whether VAT might be charged on the lease. It maintained that Regulation 19(1)(i), which sets out what is commonly referred to as the ‘rent formula method’ of calculating the open market price of the lease, entitled it to pursue its claim in respect of VAT.

8 Following the issue of the proceedings, DWW brought a motion to have the VAT element of the dispute between the parties referred to arbitration in accordance with the arbitration clause in the lease. That application was successful and Kelly J. referred the dispute concerning CSID's claimed entitlement to VAT to arbitration ( [2005] IEHC 201). Mr. Dermot O'Brien, chartered accountant, was appointed arbitrator. I will return shortly to provide somewhat greater detail concerning the outcome of the arbitration and CSID's further efforts to recover the VAT claimed on the lease. Suffice to say at this juncture that the arbitrator decided that CSID was entitled to charge VAT on the Lease and that decision was later upheld by the High Court on CSID's application to enforce the award of the arbitrator notwithstanding the challenge made by DWW to the lawfulness of that award. Ultimately that decision of the High Court was reversed by the Supreme Court which determined that the arbitrator had made a fundamental error in interpreting Regulation 19 of the VAT Regulations of 1979 (as amended) so as to find that CSID was entitled to claim VAT on the lease.

Relevant regulations

9 In order to understand the progress of CSID's claim to VAT on the lease it is necessary to consider the Regulations which, at the relevant time, determined a lessor's entitlement to impose such a charge. Furthermore, familiarity with these provisions is essential in order to fully understand and contextualise the evidence given over the course of the 20 days that the within proceedings, being the secondary litigation, were at hearing in the High Court. Indeed, absent an understanding of the relevant provisions, it would be impossible to determine whether or not the High Court judge acted lawfully and in accordance with the evidence in concluding, as he did, that CSID's primary litigation did not amount to a malicious abuse of the process of the Court.

10 In circumstances where the High Court judge considered the purpose and effect of Regulation 19 of the VAT Regulations of 1979 (as amended) and neither party takes issue with his analysis, I will gratefully adopt his summary of the said Regulation which appears at paras. 6-12 inclusive of his judgment:-

‘6. The Value-Added Tax Act, 1972 (the “VAT Act”) provides that the granting of a lease is a taxable supply of immoveable goods for VAT purposes if the lease is a long lease, i.e. for a period of 10 years or more. In this case, the lease of the NAC was signed by DWW as lessee and by CSID as lessor on the 30th April, 2003, for a period of 30 years (“the Lease”). Thus, the Lease was one which was...