Harrahill v Kane

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 03 July 2009
• Neutral Citation: [2009] IEHC 322
• Court: High Court
• Date: 03 July 2009

[2009] IEHC 322

THE HIGH COURT

[No. 324 R/2009]

[No. 325 R/2009]

Harrahill v Kane

REVENUE

COMMERCIAL

BETWEEN

GERARD HARRAHILL

PLAINTIFF

AND

PAURAIG KANE

DEFENDANT

BETWEEN

GERARD HARRAHILL

PLAINTIFF

AND

JOHN KANE

DEFENDANT

TAXES CONSOLIDATION ACT 1997 S935

TAXES CONSOLIDATION ACT 1997 S933(6)(C)(ii)(II)(C)

TAXES CONSOLIDATION ACT 1997 S933(3)(D)

AER RIANTA CPT v RYANAIR LTD 2001 4 IR 607

FIRST NATIONAL COMMERCIAL BANK PLC v ANGLIN 1996 1 IR 75

TAXES CONSOLIDATION ACT 1997 S933(1)(A)

TAXES CONSOLIDATION ACT 1997 S933(6)(A)

TAXES CONSOLIDATION ACT 1997 S933(C )(E)(C)

TAXES CONSOLIDATION ACT 1997 S933(3)(B)

TAXES CONSOLIDATION ACT 1997 S933(3)(D)

R v INSPECTOR OF TAXES EX-PARTE BASS HOLDINGS LTD 1993 STC 122

SCHUDDENFREI v HILTON (INSPECTOR OF TAXES) 1998 STC 404

WAUGH v HB CLIFFORD & SONS LTD 1982 1 AER 1095

PRACTICE AND PROCEDURE

Summary judgment

Value added tax - Assessment - Appeals Commissioner - Precepts issued - Appeals withdrawn - No formal order made dismissing appeals - Whether failure to comply with precepts rendered assessments binding - Allegation appeals withdrawn by solicitor without instructions - Whether arguable defence - Aer Rianta CPT v Ryanair Ltd [2001] 4 IR 607 and First National Commercial Bank Plc v Anglin [1996] 1 IR 95 applied; R v Inspector of Taxes ex p Bass Holdings Ltd [1993] STC 122 and Schuddenfrei v Hilton (Inspector of Taxes) [1998] STC 404 distinguished; Waugh v HB Clifford & Sons Ltd [1982] 1 All ER 1095 considered - Taxes Consolidation Act 1997 (No 39), ss 933 & 935 - Liberty to enter final judgment granted (2009/324 & 325 - Kelly J - 3/7/2009) [2009] IEHC 322

Harrahill v Kane (P) & Harrahill v Kane (J)

Facts The plaintiff (as Collector General of Revenue) instituted proceedings in respect of sums owed by the defendants with regard to VAT sales. The plaintiff had transferred proceedings to the Commercial Court. The defendants were the owners and operators of a motor sales business specialising in the selling of 4 x 4's. It was the contention of the plaintiff that there had been a significant understatement in the amount of sales that had occurred. When the initial assessments were raised the defendants sought to appeal them before an Appeal Commissioner. Ultimately the solicitor for the defendants withdrew their appeal before the Commissioner. It was now the defendants' contention that their previous solicitor did not have the authority to withdraw their appeals before the Appeal Commissioner. As such the defendants contended that they had raised an arguable defence which would necessitate adjourning the case to plenary hearing.

Held by Kelly J in granting the judgments sought. Although no formal order had been made by the Appeal Commissioner in dismissing the appeals, there was no other jurisdiction left to the Commissioner but to follow the statute and dismiss the appeals. There was no doubt but that the solicitor who withdrew the defendants' appeals was a person acting on behalf of the defendants. The defendants had failed to demonstrate an arguable defence to the claim for summary judgment.

Reporter: R.F.

1 JUDGMENT of Mr. Justice Kelly delivered on the 3rd day of July, 2009

Introduction

2 The plaintiff in each of these cases is the Collector General of Revenue and is duly authorised to collect tax for and on behalf of the Minister for Finance for the benefit of the Central Fund.

3 On 3 ^rd April, 2009, these proceedings were commenced against each of the defendants. In the case of the defendant, Pauraig Kane, a sum of €5,271,004.07 is alleged to be due in respect of arrears of Value Added Tax and interest. In the case of the defendant, John Kane, a sum of €4,941,997.52 is alleged to be due also in respect of Value Added Tax and interest.

4 The proceedings were transferred to the Commercial List on 25 ^th May, 2009 and the plaintiff's application for summary judgment as against the defendants was fixed for hearing on 11 ^th June, 2009. In the event, that application was adjourned and came on for hearing on Friday last the 26 ^th June, 2009.

5 This is my judgment on the plaintiff's application for summary judgment.

Background

6 As far as the Revenue Commissioners are concerned there is a considerable history of unsatisfactory behaviour on the part of the defendants concerning their tax affairs.

7 The defendants' motor sales business commenced in 2000. They claim to be one of Irelands 4 X 4 specialists with what is described as "very significant numbers of used and unused vehicles in stock".

8 In 2004, the Revenue Commissioners commenced an investigation into separate sole trade businesses operated by the defendants at premises in Barrack Street, Granard, Co. Longford. The separate business of Pauraig Kane was operated under the style of Granard Motors. The separate business of John Kane was operated under the styles of John Kane and Kanes of Granard.

9 The Revenue investigation was undertaken because of concerns that there were serious VAT and other tax irregularities in the operation of the businesses of Granard Motors and Kanes of Granard. The main concern was that the business had substantial sales of commercial jeeps (which they had converted from passenger vehicles) to persons who are registered for VAT in this jurisdiction and which were being incorrectly recorded as intra community acquisitions. As part of the investigation, search warrants were obtained and the premises were searched in December 2004. Extensive documentation was seized and as a result of the examination of it, assessments on the defendant Pauraig Kane for Value Added Tax were raised. The Revenue Commissioners took the view that the defendant Pauraig Kane had liabilities in excess of €3,300,000 for VAT in respect of the years 2000 - 2004, which included a large sum which they believed had been understated on the statutory VAT returns. In the case of John Kane, the Revenue Commissioners formed the view that sales of certain goods were not recorded nor was VAT accounted for on those sales. They estimated that the VAT element of undisclosed sales of tractors and machinery was in excess of €127,000 for 2003 and in excess of €144,000 for 2004.

10 The Revenue Commissioners were satisfied that there were undisclosed sales invoices in the case of both defendants.

11 There were many other elements of the defendants' fiscal arrangements with which the Revenue Commissioners were deeply dissatisfied but it is not necessary to recite them in any detail for the purposes of this ruling.

12 It is sufficient to record that the assessments which led to these proceedings were raised under the relevant statutory provisions and this judgment is largely concerned with what happened subsequent to the raising of those assessments.

Steps since Assessment

13 The assessments in question were raised on the basis of the information obtained following the investigations which I have already alluded to. In the case of each defendant, the assessments were subject to an appeal. The defendants at all material times were represented by Mr. Paul Madden Solicitor.

14 The appeals first came before an Appeal Commissioner on 12 ^th June, 2008. At that hearing, a number of complaints were made by the Revenue Commissioners. The principal complaint was that numerous letters issued by the Revenue Commissioners between April 2005 and early 2007 seeking information from the defendants arising from an examination of the records obtained on foot of the warrants in December 2004 had not been replied to. On that hearing, the Appeal Commissioner indicated that he would issue precepts pursuant to the powers invested in him by s. 935 of the Taxes Consolidation Act 1997. On 15 ^th July, 2008, the Appeal Commissioner duly issued the precepts requiring the defendants to provide information as specified in them. He fixed 21 ^st September, 2008 as the date by which the information would have to be furnished.

15 It is common case that the precepts issued by the Appeal Commissioner were not obeyed by either defendant.

16 The matter came before the Appeal Commissioner again on 6 ^th November, 2008.

17 Mr. Paul Madden on behalf of the defendants sought an adjournment of the hearing and that was granted on his undertaking that he would make written legal submissions to the Commissioner no later than 8 ^th December, 2008. Those legal submissions were to deal with the provisions of s. 933(6)(c)(ii)(II)(C), of the Taxes Consolidation Act 1997, which deals with dismissal of appeals in the event of non-compliance with a precept issued by an Appeal Commissioner. In the event, no submissions were made by Mr. Madden by 8 ^th December, 2008 or at all.

18 The Appeal Commissioner then notified the defendants and the Revenue Commissioners that the appeal hearing would resume on 25 ^th February, 2009.

19 On 13 ^th January, 2009, Mr. Madden wrote to the Revenue Solicitor requesting a meeting which took place on 5 ^th February, 2009. In a letter of 18 ^th February, 2009, the Revenue Commissioners indicated that having considered all matters, they were not prepared to make any reduction in the assessments. A further discussion took place between Mr. Madden and officials in the Office of the Revenue Solicitor who again confirmed the position of the Revenue Commissioners concerning the quantum of the assessments.

20 On 24 ^th February, 2009, Mr. Madden wrote the following letter to the Revenue Commissioners:-

"Re: Appeals Against Valued Added Tax Assessments"

(a) John Kane PPS No. 6791330P

(b) Pauraig Kane PPS No. 5157523F

21 Dear Sirs

22 We refer to the above which as you are aware is due to commence rehearing before Appeal Commissioner O'Callaghan on Wednesday 25 ^th February, 2009 at the Ballymascallion (sic) Hotel, Dundalk.

23 ...