Kenny Lee v The Revenue Commissioners

• Jurisdiction: Ireland
• Judge: Mr. Justice Murray
• Judgment Date: 16 April 2021
• Neutral Citation: [2021] IECA 114
• Docket Number: Court of Appeal Record No. 2018/223
• Date: 16 April 2021
• Court: Court of Appeal (Ireland)

Between:

Kenny Lee

Respondent

and

The Revenue Commissioners

Appellant

[2021] IECA 114

Whelan J.

Ní Raifeartaigh J.

Murray J.

Court of Appeal Record No. 2018/223

High Court Record No. 2015/269 R

THE COURT OF APPEAL

CIVIL

Costs – Public interest – Jurisdiction – Respondent urging the Court of Appeal to exercise its discretion to make a limited order for costs in his favour or, alternatively, to make no order as to costs – Whether the appeal presented issues of public and systemic importance

Facts: The Court of Appeal, at the conclusion of the judgment delivered by Murray J ([2021] IECA 18), expressed the provisional view that the appellant, the Revenue Commissioners, had been entirely successful in its appeal and costs should follow that outcome. The respondent, Mr Lee, urged that the Court exercise its discretion to make a limited order for costs in his favour or, alternatively, to make no order as to costs. Revenue urged that the Court make an order for costs in its favour in line with the proposal suggested by the Court. The issue presented by the appeal depended upon whether the Appeal Commissioners enjoyed the jurisdiction to decide whether liabilities the subject of assessments to tax issued by the Revenue Commissioners had been compromised. The gravamen of Mr Lee’s argument was that the appeal presented issues of what he described as ‘public and systemic importance’. He submitted that the language of s. 169 of the Legal Services Regulation Act 2015 is sufficiently broad to allow the court to consider the making of a modified costs order in relation to such cases and contended that these proceedings fell within the category of litigation to which the general rule as provided for in s. 169 should not be applied. Revenue noted that tax cases frequently clarify the law so as to be relevant to taxpayers, their professional advisors and to Revenue. Revenue observed that jurisdictional issues can frequently arise in relation to the Circuit Court and other inferior tribunals suggesting that a general rule exempting the unsuccessful party from the obligation to pay costs in proceedings raising such issues, would require legislative intervention. It stressed that Mr Lee did not bring these proceedings as a public interest challenge: his concern was a very real financial one arising from his attempt to have the assessment to tax raised by Revenue ‘reduced to zero’.

Held by Murray J that: (i) the proceedings presented an issue of law which was not straightforward and on which there were two legitimate views; (ii) the issue in the appeal went to the core of the powers and functions of an important quasi-judicial tribunal exercising an extensive jurisdiction of potential relevance to many citizens; (iii) the question was one of statutory construction arising in a context in which the relevant statute could have, but did not, present a clear definition of the jurisdiction of the Appeal Commissioners; (iv) having regard to the relationship between Revenue, the Minister for Finance and the process of collection of tax it was not unreasonable that Revenue bear its own costs of proceedings that could have been avoided (or could have been rendered simpler and easier to predict) through a clear statutory definition of the Appeal Commissioner’s jurisdiction; (v) Revenue would ultimately benefit from the consideration in the Court’s judgment of the nature and extent of the Appeal Commissioner’s jurisdiction; (vi) the underlying issue was not simply a question of a dispute as to the meaning or effect of a charging provision, the scope of the Commissioner’s jurisdiction could and ought to have been clearly identified and defined in a single and accessible statutory provision, and litigants such as the appellant who have to adopt a position as to the extent of that jurisdiction in the circumstances should not be penalised when they do so and when the choice they make is a reasonable one.

Murray J held that no order should be made as to the costs of the proceedings.

No order as to costs.

UNAPPROVED

NO REDACTION NEEDED

JUDGMENT of Mr. Justice Murray delivered on the 16 ^th of April 2021

1 . At the conclusion of the judgment I delivered in this matter (and with which Whelan J. and Ní Raifeartaigh J agreed) ( [2021] IECA 18) I expressed the provisional view that (a) the appellant (‘Revenue’) had been entirely successful in its appeal and (b) costs should follow that outcome. Both parties have delivered written submissions following that proposal. Mr. Lee, while not disputing that Revenue has been entirely successful, has urged that the Court exercise its discretion to make a limited order for costs in his favour or, alternatively, to make no order as to costs. Revenue disagrees, urging that the Court make an order for costs in its favour in line with the proposal suggested by the Court.

2 . The issue presented by the appeal was, as I described it in the judgment, net. It depended upon whether the Appeal Commissioners enjoyed the jurisdiction to decide whether liabilities the subject of assessments to tax issued by the Revenue Commissioners had been compromised. To resolve that issue, it was necessary for the Court to address in some detail the precise definition of the Appeal Commissioner's function and powers when hearing appeals against assessment to income tax. In doing so, the Court was guided by authority in which the relationship between the jurisdiction of the Appeal Commissioners and established public law principles was explored. There was, however, no case in which the specific issue presented by the taxpayer here had been previously addressed.

3 . The gravamen of Mr. Lee's argument is that the appeal presented issues of what he describes as ‘public and systemic importance’. He submits that the language of s. 169 of the Legal Services Regulation Act 2015 is sufficiently broad to allow the court to consider the making of a modified costs order in relation to such cases and contends that these proceedings fall within the category of litigation to which the general rule as provided for in s. 169 should not be applied.

4 . Revenue, on the other hand, notes that tax cases frequently clarify the law so as to be relevant to taxpayers, their professional advisors and to Revenue. Revenue observes that jurisdictional issues can frequently arise in relation to the Circuit Court and other inferior tribunals suggesting that a general rule exempting the unsuccessful party from the obligation to pay costs in proceedings raising such issues, would require legislative intervention. It stresses that Mr. Lee did not bring these proceedings as a public interest challenge: his concern was a very real financial one arising from his attempt to have the assessment to tax raised by Revenue ‘ reduced to zero’.

5 . The application falls to be viewed by reference to four features of the factual and legal context. First, the issue arising in this case was of systemic importance to the definition of the jurisdiction of the Appeal Commissioners. Second, it was not a straightforward issue – as evidenced by the fact that while both the Appeal Commissioner and the High Court judge adopted the view that the Commissioners did have jurisdiction to rule on whether there had been a settlement of the taxpayer's liability, both the Circuit Court Judge and this Court reached a different conclusion. There were, on any version of the case, good arguments either way. Third, while it follows that the taxpayer may have acted entirely reasonably in adopting the position that he did and litigating the issue of whether the Appeal Commissioners enjoyed that jurisdiction, it is clear that this is not enough of itself to displace the principle that a party that has failed in proceedings will normally bear the costs incurred by its opponent in defeating its claim (see most recently The Lady Magda [2021] IECA 51 at para. 6).

6 . Fourth it is clear that the Court retains an exceptional jurisdiction to exempt a litigant from the consequence of this principle where proceedings were of general public importance. That jurisdiction continues following the enactment of the Legal Services Regulation Act 2015. The essential factors guiding it were, I think, well summarised recently by Simons J. in Corcoran and anor. v. Commissioner of An Garda Siochana and anor. [2021] IEHC 11 at para. 20. Having referred to the balancing exercise involved in reconciling the objective of ensuring that litigants are not deterred from pursuing litigation which serves a public interest with the aim of not encouraging unmeritorious litigation, Simons J. continued:

In carrying out this balancing exercise, it will be necessary for the court to consider factors such as (i) the general importance of the legal issues raised in the proceedings; (ii) whether the legal principles are novel, or, alternatively, are well established; (iii) the strength of the applicant's case: proceedings might touch upon issues of general importance but the grounds of challenge pursued might be weak; (iv) whether the subject-matter of the litigation is such that costs are likely to have a significant deterrent effect on the category of persons affected by the legal issues; and (v) whether the issues touch on sensitive personal rights.'

7 . As this description suggests, the ‘ public...