Falkenthal v Revenue Commissioners

• Jurisdiction: Ireland
• Judge: Mr Justice Rory Mulcahy
• Judgment Date: 07 March 2025
• Neutral Citation: [2025] IEHC 122
• Docket Number: Record No.: 2024/36 R
• Court: High Court

Between:

Gunther Falkenthal

Appellant

and

The Revenue Commissioners

Respondent

[2025] IEHC 122

Record No.: 2024/36 R

THE HIGH COURT

JUDGMENT of Mr Justice Rory Mulcahy delivered on 7 March 2025

Introduction

1 On 12 November 1998, the respondent (“ Revenue”) sent the appellant (“ Mr Falkenthal” or “ the appellant”) a notice pursuant to s. 811(6) of the Taxes Consolidation Act 1997 (“ the Notice of Opinion”). The Notice of Opinion stated that an investment by Mr Falkenthal in Albany Partners under the terms of a partnership agreement dated 25 March 1997 concerned with the acquisition, distribution and licensing of films was a tax avoidance transaction within the meaning of s. 811 of the Taxes Consolidation Act 1997 (“ the TCA 1997”). It stated that the tax advantage to Mr Falkenthal of the transaction, calculated at IR£31,252.80, would be withdrawn if the Notice of Opinion became final and conclusive. The Notice referred to Mr Falkenthal's right of appeal under s. 811(7) of the TCA 1997.

2 This case stated concerns the extent of Mr Falkenthal's rights of appeal.

3 Mr Falkenthal, as he was entitled to, appealed the Notice of Opinion to the Appeal Commissioners. This appeal was unsuccessful. He appealed from there to the Circuit Court. This appeal was also unsuccessful. In a comprehensive written judgment dated 27 October 2004, the court (Judge Matthews) concluded that Revenue was entitled to take the view that the transaction was a tax avoidance transaction. He dismissed the appeal and concluded that the opinion should stand.

4 Mr Falkenthal then sought to appeal by way of case stated from the Circuit Court to the High Court. There seems to have been considerable delay before that case stated was listed for hearing. However, on the morning it was due to be heard, 16 October 2012, the case stated was compromised on written terms (“ the Settlement”) pursuant to which Mr Falkenthal agreed to withdraw his appeal by way of case stated. The Settlement includes an express agreement by Mr Falkenthal “ to be bound by the decision of the Circuit Court”.

5 As a consequence of that agreement, Revenue wrote to Mr Falkenthal on 10 April 2013 stating that the Notice of Opinion had become final and conclusive in light of the Settlement (“ the Demand Letter”). The Demand Letter stated that, therefore, Revenue was withdrawing the loss relief claimed and requested that Mr Falkenthal remit the additional income tax due within 30 days. For reasons which weren't addressed at the hearing of the case stated, the amount demanded, €34,670.00, was less than the sum set out in the Notice of Opinion, but unsurprisingly, this is not the focus of Mr Falkenthal's complaint in these proceedings.

6 Notwithstanding the Settlement, rather than pay the amount demanded as (apparently) agreed by him, Mr Falkenthal wrote to Revenue by email dated 8 May 2013. He stated that Revenue had no entitlement to withdraw relief, and its demand was invalid. In addition, he claimed, inter alia, that the demand was made “ subject to appeal under Section 955 of the Act, on the grounds that Section 955(2) precludes payment of tax after the time specified in the section.” He also argued that the demand was precluded by the time limits in section 956(2) of the Act.

7 Revenue replied, noting that as the Notice of Opinion had said that if the opinion became final and conclusive, relief would be withdrawn, and the Settlement had rendered the opinion final and conclusive, it did have the power to withdraw relief. In addition, its letter stated that any right of appeal under s. 955(3) was excluded by the provisions of s. 811(5A) of the TCA 1997. It noted that s. 956 was of no application. That provision relates to the making of further enquiries by Revenue and imposes a time limit thereon. However, as Revenue was not seeking to make any further enquiries, that provision simply didn't arise. The letter stated that Revenue would issue an amended assessment shortly. It did so on 29 May 2013. The sum claimed in the amended assessment was €34,583.70, again, for reasons unaddressed at the hearing, for an amount lower than in the Notice of Opinion and, indeed, marginally lower than in the Demand Letter.

8 Mr Falkenthal sought to appeal the notice of amended assessment by letter dated 21 June 2013, referring again to s. 955(2) and 956(2).

9 By decision dated 26 June 2013, Revenue advised that an appeal did not arise, i.e., there was no entitlement to appeal, in light of the provisions of s. 811(5)(d) of the TCA 1997, which disapplied the rights of appeal contained in ss. 955(3) and 956(2), and s. 811(5A) of the TCA 1997, which disapplied the time limits contained in ss. 955(2) and 956(1).

10 Mr Falkenthal then appealed that refusal to the Appeal Commissioners. Appeal Commissioner O'Callaghan upheld the refusal in an ex tempore decision dated 1 May 2015. As appears therefrom, Commissioner O'Callaghan concluded that the right of appeal had been excluded by each of s. 811(5A), s. 957(1)(c) and s. 811(5)(d) of the TCA 1997.

11 Mr Falkenthal then requested that Commissioner O'Callaghan state a case regarding this refusal, although it appears that he never identified a point of law for the opinion of the High Court.

12 Revenue contested the jurisdiction to state a case following a refusal to entertain an appeal. However, Commissioner O'Callaghan formed the view that there was such a jurisdiction and by letter dated 13 October 2015, he expressed his agreement to state a case. However, before the case stated was completed, he vacated his office.

13 There was, it seems, considerable correspondence about how to proceed thereafter. It should be noted that following the decision of Commissioner O'Callaghan to state a case, the Tax Appeals Commission was established on 21 March 2016 in accordance with the provisions of the Finance (Tax Appeals) Act 2015 (“ the 2015 Act”). The functions of the Appeal Commissioners were transferred to this new body. No issue arises in this case stated by reason of the transfer of functions.

14 On 10 January 2019, the Tax Appeals Commission (“ TAC”) wrote to the parties, in accordance with s. 29(4) of the 2015 Act, asking whether they wished to have the appeal re-heard or required the completion of the case stated. Mr Falkenthal requested that the appeal be re-heard, but Revenue did not agree. Absent agreement to re-hearing, s. 29(6) of the 2015 Act required the TAC to complete the case stated and sign it. Ultimately, the TAC signed a case stated on 25 January 2024.

15 The case stated was signed by Appeal Commissioner Millrine. Having regard to the fact that the case stated was signed by a commissioner who had not heard the application and that there was no formal Determination by the Commissioner who did hear the application, it is in somewhat unusual form. The required contents of a case stated are set out in s. 949AQ of the TCA 1997. The case stated contains headings mirroring the requirements of that section, but, by way of example, under the heading ‘ Material Findings of Fact’, the case stated provides:

Section 949AQ(1)(a)(i) TCA 1997 sets out that the Case Stated shall contain the Appeal Commissioner's material findings of fact. Given the unusual nature of this Case Stated, there are no material findings of fact found herein, as there is no Determination in this Case Stated, only a transcript of the decision to refuse to admit an appeal.

16 The transcript is attached as an exhibit to the case stated.

17 The case stated was heard before me on 30 January 2025, more than 26 years after Revenue first issued the Notice of Opinion withdrawing Mr Falkenthal's tax relief.

18 The only issue in the case stated is as follows:

Did Appeal Commissioner O'Callaghan err in upholding the decision of the Respondent to refuse the Appellant's appeal?

19 In order to help understand how this question arises, I propose to set out the relevant statutory provisions and then explain the parties' arguments in relation thereto by reference to the case law on which they rely. First, however, I should address a preliminary application by Mr Falkenthal, that the case should be remitted to the TAC for re-hearing.

Preliminary application

20 At the outset of the hearing, the appellant's counsel applied to have the case stated remitted to the TAC, on the basis of an objection to the form of the case stated, arguing that it did not comply with the provisions of s. 94AQ(1)(a) of the TCA 1997. He relied on the jurisdiction to remit a case stated to the TAC for rehearing, pursuant to s. 949AX, where the court formed the view that proceeding to deal with the case stated “ would not, by reason of the relevant circumstances, be consistent with the due administration of justice”. This was not an objection which had been addressed in the appellant's written submissions or flagged to Revenue in advance of the hearing.

21 Counsel for the appellant initially argued that:

“ [T]his should be a de novo appeal relating to all matters under original dispute. This is not just an appeal to be confined to the issues of whether Mr. Falkenthal has a right of appeal to the High Court in respect of Mr. O'Callaghan's decision in the substantive issue.”

22 However, he subsequently appeared to moderate his position, suggesting that the matter go back to the stage it was at when Commissioner O'Callaghan retired. It will be recalled that at that stage, Commissioner O'Callaghan had rejected the appellant's application to appeal but had agreed to state a case.

23 Revenue opposed the application and asked the court to deal with the case stated.

24 I could and can see no purpose which remittal to the TAC would serve and accordingly refused the application.

25 The first basis upon which remittal was sought, for the purpose of a ‘full’ appeal was, in effect, an application that the case stated be...