Kenny Lee v The Revenue Commissioners

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

Assessments to income tax – Jurisdiction – Taxes Consolidation Act 1997 – Applicant appealing to the Court of Appeal from a determination of the High Court – Whether the Appeal Commissioner and the Circuit Court had the power to determine if the applicant had compromised a tax liability

Facts: The plaintiff/respondent, Mr Lee, contended before the Circuit Court and High Court that the Appeal Commissioners and the Circuit Court were invested with jurisdiction to determine whether (a) the alleged liability reflected in assessments to income tax had been compromised by agreement and/or (b) the applicant, 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. Revenue’s appeal to the Court of Appeal presented 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). Revenue’s appeal depended on the proposition that the function of the Appeal Commissioners was defined by the assessment to tax. Those Commissioners, Revenue said, were empowered only to deal with and consider such an assessment; on this argument a settlement of the kind alleged by the plaintiff could not vary the charge to tax, and could not, therefore, be an incidental question to be considered by the Appeal Commissioners in assessing the tax liability that was before them.

Held by Murray J that the jurisdiction of the Appeal Commissioners and of the Circuit Court under those provisions of the TCA in force at the time of the events giving rise to these proceedings and relevant to this appeal (ss. 933, 934 and 942) was limited to determining whether an assessment correctly charges the relevant taxpayer in accordance with the relevant provisions of the TCA; that means that the Commissioners were restricted to inquiring into, and making findings as to, those issues of fact and law that were relevant to the statutory charge to tax. Murray J held that their essential function was to look at the facts and statutes and see if the assessment had been properly prepared in accordance with those statutes; they may make findings of fact and law that are incidental to that inquiry. Noting the possibility that other provisions of the TCA may confer a broader jurisdiction and the requirements that may arise under European Law in a particular case, Murray J held that they do not in an appeal of the kind in issue in this case enjoy the jurisdiction to make findings in relation to matters that are not directly relevant to that remit, and do not accordingly have the power to adjudicate upon whether a liability the subject of an assessment has been compromised, or whether Revenue are precluded by legitimate expectation or estoppel from enforcing such a liability by assessment, or whether Revenue have acted in connection with the issuing or formulation of the assessment in a manner that would, if adjudicated upon by the High Court in proceedings seeking judicial review of that assessment, render it invalid.

Murray J proposed that the appeal should be allowed. As Revenue had been entirely successful in this appeal, it was Murray J’s provisional view that it was entitled to the costs thereof and, having won the ‘event’ in the High Court proceedings in accordance with the then applicable costs regime, was entitled to its costs of those proceedings also.

Appeal allowed.

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...