Fortune v Revenue Commissioners

• Jurisdiction: Ireland
• Judge: O'Neill J.
• Judgment Date: 23 January 2009
• Neutral Citation: [2009] IEHC 28
• Court: High Court
• Date: 23 January 2009

[2009] IEHC 28

THE HIGH COURT

[No. 1148 J.R./2005]

Fortune v Revenue Commissioners

Between

Brian Fortune

Applicant

And

The Revenue Commissioners

Respondents

FINANCE ACT 1987 S35

TAXES CONSOLIDATION ACT 1997 S481

EUROPEAN CONVENTION ON HUMAN RIGHTS & FUNDAMENTAL FREEDOMS ART 6

EUROPEAN CONVENTION ON HUMAN RIGHTS & FUNDAMENTAL FREEDOMS PROTOCOL 1 ART 1

FINANCE ACT 2004 S28

FINANCE ACT 1987 S35(4)

FINANCE ACT 1987 S35(6)

TAXES CONSOLIDATION ACT 1997 S481(22)

CRONIN (INSPECTOR OF TAXES) v CORK & COUNTY PROPERTY CO LTD 1986 IR 559 1984/6/1876

AG OF HONG KONG v NG YUEN SHIU 1983 2 AC 629 1983 2 WLR 735 1983 2 AER 346

COUNCIL OF CIVIL SERVICE UNIONS & ORS v MIN FOR THE CIVIL SERVICE 1984 3 AER 935 1985 AC 374 1984 3 WLR 1174 1985 ICR 14

GLENCAR EXPLORATION PLC & ANDAMAN RESOURCES PLC v MAYO CO COUNCIL (NO 2) 2002 1 IR 84 1998/20/7466

WILEY v REVENUE CMRS 1994 2 IR 160 1993 ILRM 482 1992/4/1204

STEPHENS v PAUL FLYNN LTD UNREP CLARKE 28.4.2005 2005/56/11682 2005 IEHC 148

GILROY v FLYNN 2005 1 ILRM 290 2004/19/4269 2004 IESC 98

KNOCKLOFTY HOUSE HOTEL LTD & ECCLESHALL LTD, IN RE 2005 4 IR 497 2005/35/7353 2005 IEHC 105

KEOGH v WYETH LABORATORIES INC & JOHN WYETH & BROTHER LTD 2006 1 IR 345 2005 2 ILRM 508 2005/34/7132 2005 IESC 46

NOONAN (AKA HOBAN) v DPP UNREP SUPREME 27.7.2007 2007/45/9380 2007 IESC 34

FARRELLY v BOARD OF BEAUMONT HOSPITAL & MCLEAN UNREP GILLIGAN 1.2.2006 2006/23/4788 2006 IEHC 58

DEIGHAN v HEARNE & ORS 1986 IR 603 3 ITR 253 1986/5/268

DEIGHAN v HEARNE 1990 1 IR 499 1990 ITR 120 1990/2/335

TAXES CONSOLIDATION ACT 1997 S955

FINANCE ACT 2003 (COMMENCEMENT OF SECTION 17) ORDER 2003 SI 508/2003

PRIMOR PLC (PMPA) v FREANEY & STOKES KENNEDY CROWLEY 1996 2 IR 459 1995/20/5287

TOAL v DUIGNAN (NO 2) 1991 ILRM 140 1990/8/2334

EUROPEAN CONVENTION ON HUMAN RIGHTS & FUNDAMENTAL FREEDOMS ART 6.1

FERRAZZINI v ITALY 2002 34 EHRR 45

REVENUE

Income tax

Assessment - Application to quash tax assessment - Withdrawal of statutory tax relief eight years after grant thereof - Vires of respondent to ensure compliance with Ministerial certification of tax relief scheme - Statutory interpretation - Whether amending legislation can be used as interpretative tool for prior legislation - Whether respondent in breach of statutory jurisdiction - Legitimate expectation - Whether delay in withdrawing relief creating legitimate expectation - Whether representation made such as to create legitimate expectation - Natural and constitutional justice - Fair procedures - Delay - Whether inordinate and inexcusable - Whether applicant prejudiced by delay such that relief should issue - Cronin v Cork and County Property Co [1986] 1 IR 559, Glencar Exploration plc v Mayo County Council (No 2) [2002] 1 IR 84 and Ferrazzini v Italy (2002) 34 EHRR 45 applied; Wiley v Revenue Commissioners [1994] 2 IR 160 and Deighan v Hearne [1990] 1 IR 499 considered - Finance Act 1987 (No 10), s 35 - European Convention on Human Rights, art 6 - Relief refused (2005/1148JR - Ó Néill J - 23/1/2009) [2009] IEHC 28

Fortune v Revenue Commissioners

Facts: The applicant sought by way of judicial review, an order of certiorari quashing the assessment of 20 September 2005, issued by the respondents seeking to withdraw tax relief previously granted to the applicant pursuant to s.35 of the Finance Act, 1987. The applicant also sought an order of prohibition and various declarations. The applicant had invested money in five film production companies for the purposes of producing films in Ireland. The applicant was granted tax relief by the respondents in the assessment to tax issued on 25/07/1996, in respect of the tax year 1994/1995 after submitting the relevant certificates from the production companies confirming that the conditions for relief were satisfied. The statutory scheme for relief required that a film production company demonstrated compliance with the conditions for relief as set out in the certificate issued by the Minister for Arts, Heritage, Gaeltacht and the Islands and s. 35 of the Act of 1987. On 26/04/2007, the applicant received correspondent from the respondent informing him that consideration was being given to the withdrawal of the tax relief on the basis that the criteria set out in the legislation and in the certificate issued by the Minister had not been satisfied. S. 35 of the Act of 1987 provided a claw-back of relief in the event that the statutory conditions for relief had not been satisfied. Subsequently, the applicant received confirmation that the tax relief was to be withdrawn. It was submitted on behalf of the applicant that the respondents did not have the power to supervise and decide if there had been compliance with the conditions outlined in the Minister’s certificate. The applicant also submitted that the respondents acted ultra vires in seeking information in relation to the expenditure of the film production companies. The applicant further submitted that he had a legitimate expectation that the relief accorded to him would not be withdrawn in circumstances where there was no communication from the respondents for eight years after the relief was granted to him and he also argued that the delay of over eight years on the part of the respondents in attempting to withdraw the tax relief was inordinate, inexcusable and prejudicial to the applicant.

Held by O’Neill J. in refusing the application: That based on the contents of the certificate itself and the wording of s. 35(4) of the 1987 Act, the respondents did have the power to monitor and ensure compliance with the Minister’s certificate. Furthermore, the respondents were entitled to make enquiries into the final destination of the expenditure by the film production companies. A legitimate expectation to the non-withdrawal of relief could not arise in circumstances where the relevant legislation expressly provided that tax relief could be withdrawn. The applicant’s investment was always subject to the risk that the production companies would not satisfy the relevant conditions for relief sometime after the applicant was granted tax relief. The respondents did not make a representation to the applicant such as to ground a claim for breach of a legitimate expectation. The applicant failed to demonstrate that any delay as occurred was inexcusable and in any event there was no evidence of prejudice to the applicant.

Reporter: L.O’S.

1 O'Neill J. delivered the 23rd day of January 2009

2 In these proceedings the applicant was granted leave to apply for judicial review by this Court (Peart J.) on the 24 ^th October, 2005, for the following reliefs:-

3 1. An order of certiorari quashing the assessment of the 20 ^th September, 2005, issued by the respondents against the applicant seeking to withdraw tax relief previously granted to the applicant pursuant to s.35 of the Finance Act 1987.

4 2. An order of prohibition prohibiting the respondents, their servants or agents from taking any further steps in seeking to withdraw the tax relief granted to the applicant pursuant to s.35 of the Finance Act 1987 in relation to the companies known as Stylefile Limited, Kavside Limited, Routeway Limited, Harlonian Limited and Newforge Limited.

5 3. A declaration that the applicant is entitled to the said tax relief pursuant to the provisions of s.35 of the Finance Act 1987 and s.481 of the Taxes Consolidation Act 1997.

6 4. A declaration that the action of the respondents, their servants or agents in seeking to withdraw the said tax relief from the applicant herein is unreasonable and/or irrational and/or contrary to the principles of natural and constitutional justice and amounts to a breach of the applicant's constitutional right to fair procedures.

7 5. A declaration that the methodology employed by the respondents, their servants or agents in seeking to review the circumstances in which the applicant was granted said tax relief was ultra vires and/or unreasonable and/or contrary to the principles of natural and constitutional justice.

8 6. A declaration that the action of the respondents, their servants or agents in purporting to withdraw the said tax relief from the applicant is ultra vires, void and of no force or effect.

9 7. A declaration that the respondents, their servants or agents in purporting to withdraw the said tax relief is acting in breach of the legitimate expectations of the applicant.

10 8. A declaration that the respondents, their servants or agents in seeking to withdraw the said tax relief is acting in breach of the applicant's rights pursuant to Articles 6 and Article 1 Protocol 1 of the European Convention on Human Rights, 1950.

11 9. A declaration that the applicant has furnished the respondents, their servants or agents with all information as the respondents may reasonably require in order to grant relief to the applicant pursuant to s.35 of the Finance Act 1987.

1. Facts

12 In April 1995, the applicant invested the sum of IR£25,000 in five film production companies, namely, Stylefile Limited, Kavside Limited, Routeway Limited, Harlonian Limited and Newforge Limited by way of share investment. These five companies were established by the Merlin Film Group for the purpose of producing films in Ireland. Merlin Film Group promoted the investment in these companies to the applicant.

13 Section 35 of the Finance Act 1987 (the Act of 1987), which is now s.481 of the Taxes Consolidation Act 1997, introduced a special tax incentive scheme to encourage investment in "qualifying" film production companies by persons unconnected with such companies. The relief set out in s.35 of the Act of 1987 permitted a deduction, equal to 80% of the amount invested from the investor's total profits or income in respect of a "qualifying" investment made in a film production company, in...