Kenny Lee v The Revenue Commissioners

• Jurisdiction: Ireland
• Court: Court of Appeal (Ireland)
• Judge: Mr. Justice Murray
• Judgment Date: 28 January 2021
• Neutral Citation: [2021] IECA 18
• Docket Number: Court of Appeal Record No. 2018/223
• Date: 28 January 2021

Between:

Kenny Lee

Plaintiff/Respondent

and

The Revenue Commissioners

Defendant/Appellant

[2021] IECA 18

Whelan J.

Ní Raifeartaigh J.

Murray J.

Court of Appeal Record No. 2018/223

High Court Record No. 2015/269R

THE COURT OF APPEAL

CIVIL

JUDGMENT of Mr. Justice Murray delivered on 28 ^th day of January 2021

Issue and facts

1 . This appeal presents a net issue as to the scope of the jurisdiction of the Appeal Commissioners and of the Circuit Court when hearing appeals against assessments to income tax pursuant to, respectively, ss. 933 and 942(1) of the Taxes Consolidation Act 1997 (‘the TCA’). The plaintiff contended before the Circuit Court and High Court that the Appeal Commissioners and the Circuit Court were thereby invested with jurisdiction to determine whether (a) the alleged liability reflected in the assessments has been compromised by agreement and/or (b) the Revenue Commissioners (‘Revenue’) were estopped from asserting such a liability. Revenue contended that the jurisdiction of the Appeal Commissioners and Circuit Court was limited to dealing with and considering ‘ an assessment to tax’ and that this did not extend to addressing whether any underlying liabilities had been settled by agreement or otherwise rendered unenforceable by prior representation. The Appeal Commissioner and the Circuit Court having reached different views on these questions, the High Court determined that while neither enjoyed jurisdiction to determine claims of legitimate expectation or estoppel, both had the power to determine if Revenue had compromised a tax liability. In my view, the trial Judge was correct in the first of these conclusions but erred in the second.

2 . The factual context in which this issue presented itself was simple, if unusual. In May 2008 Revenue announced a voluntary disclosure initiative for persons holding untaxed funds in domestic deposit accounts. In order to avail of the ‘ qualifying disclosure’ provisions applicable to that process (s. 1077(E) TCA), an eligible person had to submit a notice of intention to make such a disclosure on or before 15 September 2008. They were required to follow that notice with full payment and disclosure on or before 15 January 2009. On 12 September 2008 a firm of accountants submitted on the plaintiff's behalf a notice of intention to make such a disclosure in relation to untaxed funds deposited by him in a named financial institution. The plaintiff thereby expressly undertook to submit computations and pay the tax, interest and penalties due by 15 January 2009.

3 . On 9 January 2009, the plaintiff's solicitor wrote directly to Revenue enclosing a cheque drawn on the solicitor's client account in the amount of €12,500. That letter stated, inter alia, as follows:

‘You might please note that the enclosed cheque from this office is the maximum amount our client can raise at this junction and leaves him in a very vulnerable financial position. It may be that our client does not owe this much tax or it may transpire that he owes somewhat more. The cheque is sent on the basis that if it is not accepted in [sic] that means you might return the cheque to us. Our client recognises that this is not entirely satisfactory from a Revenue point of view but it is the best he can do in the circumstances.’

4 . Revenue wrote to the plaintiff's solicitors on 13 January acknowledging receipt of the ‘ submission’ and stating inter alia that the letter ‘ should be regarded as a receipt for the payment of €12,500’. The cheque for €12,500 enclosed with the plaintiff's solicitor's letter was encashed by Revenue. Then, between July 2009 and December of the following year, Revenue and the plaintiff's solicitors exchanged correspondence with, essentially, the former requesting information, documentation and computations in relation to the offer of €12,500, and the latter protesting that the payment of €12,500 was offered on the terms set forth in the letter of 9 January and was accepted as such. It was, the plaintiff's solicitors said ‘ not open to the Revenue to seek to re-open any matter’ covered by that letter. Revenue refused to accept this and offered the return of the monies advanced by the plaintiff, while the plaintiff's solicitor insisted that the liabilities were settled.

5 . That was the background against which, on 13 December 2010, Revenue issued to the plaintiff notices of assessment for the years 2000 to 2006 and notice of amended assessment for 2007 to 2009 inclusive. The aggregate tax liability to income tax of the plaintiff was assessed at €536,322. The plaintiff appealed against those assessments, asserting in his notice of appeal that the figures relied upon by Revenue as miscellaneous income were estimated and excessive, and claiming that for the tax years up to 31 December 2008 a settlement had been made with Revenue, the amount tendered by him having been accepted in full and final satisfaction.

6 . The proceedings came before a single Appeal Commissioner and were at hearing on 23 October 2012, 21 February, 21 March and 24 May 2013. No oral evidence was heard, the plaintiff relying instead on the correspondence exchanged between the parties. By decisions dated 4 January and 24 May 2013 the Appeal Commissioner rejected Revenue's argument that he had no jurisdiction to determine whether or not a settlement had been reached but found on the evidence that no such settlement had in fact been agreed. He proceeded to confirm the assessments under appeal.

7 . The plaintiff appealed this decision to the Circuit Court, as he was entitled to do under the legislation then in force. That right of appeal has since been abolished by the Finance (Tax Appeals) Act 2015, which came into effect in March 2016. The appeal was heard and determined by His Honour Judge David Riordan on 24 January and 6 May 2014. The Circuit Court heard oral evidence. The plaintiff's solicitor testified that he intended the offer contained in the letter of January 9 to be in full and final settlement of any alleged liabilities in respect of the years 2000 to 2007 inclusive. A Revenue official gave evidence that the relevant cheque was encashed as part of normal administrative procedure and was treated as a payment on account of the plaintiff's final liabilities to tax, interest and penalties. Based on the foregoing, the plaintiff contended that the cashing of the cheque represented an unqualified acceptance of the offer contained in the letter of January 9 while Revenue (although disputing that the Court had jurisdiction to deal with the issue of whether there had been any settlement) asserted that the purported accord and satisfaction was attended by ambiguity and misunderstanding to the extent that there was no consensus ad idem between the parties.

8 . On the first day of sitting what was described as the ‘ preliminary jurisdictional point’ was argued and determined, the Judge deciding that he did not have power to adjudicate upon either whether or not a settlement had been agreed between the parties or whether Revenue was estopped from denying the existence of such a settlement. As recorded in the Case Stated giving rise to this appeal (at para. 28 and 29), the Judge decided:

‘ my role was confined to determining the amount, if any, of tax which was due and owing …

… the Appeal Commissioners … erred in law in finding that he did have jurisdiction to decide whether a settlement had been reached, and that I would compound that error if I came to the same conclusion …

I therefore held that I did not have the jurisdiction to determine whether or not a settlement had been agreed between the parties or whether the respondent was estopped from denying the existence of such a settlement’.

9 . Having refused to state a case at that point (but doing so at the conclusion of the proceedings) the Circuit Court resumed hearing the matter in May whereupon the taxpayer did not give any further evidence, resting on his submission that the only evidence before the Court was that the quantum of the liability to tax on the relevant income had been reduced to zero. In his decision of the 6 May, the Judge determined that the letter from the taxpayer's solicitor of 9 January 2009 did not cause his liability to be reduced to zero and proceeded to confirm the assessments under appeal.

10 . Based on the foregoing, the case stated identified three questions of law for the opinion of the High Court. They were:

• (a) Does a Judge of the Circuit Court, hearing an appeal from the Appeal Commissioner, have jurisdiction under s. 942(3) of the Taxes Consolidation Act, 1997 (as amended), or pursuant to his inherent jurisdiction, to determine whether the parties to an appeal have entered into a settlement in respect of the liability at issue in the said appeal?

• (b) Was I correct in my refusal on 6 May 2014 to state a case for the opinion of the High Court on my preliminary ruling of 24 January 2014 and my refusal to adjourn the further hearing of the appeal pending the determination of such a case stated?

• (c) Was I correct in my determination that, on the evidence before me, I should confirm the assessments?

11 . The third of these questions is, obviously, ancillary to the first two. The parties accept that the second question has now been conclusively resolved by the decision of the Supreme Court in O'Rourke v. Appeal Commissioners [2016] IESC 28, [2016] 2 IR 615. There, the Court decided that an appeal from the Appeal Commissioners to the Circuit Court was not open at the point at which an intermediate finding was made, but only when the appeal was determined. An appeal, it held, was only determined where there was a final decision as to liability to pay and as to the amount of tax for which the tax payer was liable. Accordingly, it followed, it was only once that determination was made that an appeal could be brought by the...