Perrigo Pharma International DAC v McNamara

• Jurisdiction: Ireland
• Judge: Denis McDonald
• Judgment Date: 2020
• Neutral Citation: [2020] IEHC 552
• Docket Number: [2019 No. 104 J.R.]
• Court: High Court

BETWEEN

PERRIGO PHARMA INTERNATIONAL DESIGNATED ACTIVITY COMPANY

APPLICANT

AND

JOHN McNAMARA, THE REVENUE COMMISSIONERS, THE MINISTER FOR FINANCE, IRELAND

AND

THE ATTORNEY GENERAL

RESPONDENTS

[2020] IEHC 552

Denis McDonald

[2019 No. 104 J.R.]

[2019 No. 46 COM.]

THE HIGH COURT

JUDICIAL REVIEW

COMMERCIAL

Judicial review – Notice of amended assessment – Legitimate expectations – Applicant challenging the legality of a notice of amended assessment – Whether the assessment was in breach of the applicant’s legitimate expectations

Facts: The applicant, Perrigo Pharma International DAC (Perrigo), in judicial review proceedings, challenged the legality of a notice of amended assessment dated 29th November, 2018 issued by the first respondent, Mr McNamara, an inspector of taxes, in respect of the accounting period 1st January, 2013 to 31st December, 2013 in the sum of €1,636,047,645.00. The basis for the amended assessment was described in a letter issued by the second respondents, the Revenue Commissioners (the Revenue), on 30th October, 2018 setting out the Revenue’s findings arising from the audit of the corporation tax returns of Perrigo for the periods ended 31st December, 2012 and 31st December, 2013 (the audit findings letter). The contention of the Revenue in the audit findings letter was that a transaction (involving the disposal of intellectual property rights) which had been treated as part of the trade of Perrigo in its corporation tax returns should properly have been treated as a capital transaction. When treated in this way, the transaction, in accordance with s. 78 of the Taxes Consolidation Act 1997, attracted tax at an effective rate of 33% rather than the 12.5% rate applicable to trading transactions under s. 21 (1) of the 1997 Act. The transaction which gave rise to controversy between the parties involved the sale to Biogen, in 2013, of Perrigo’s remaining 50% interest in the intellectual property relating to a pharmaceutical product sold under the brand name Tysabri which was used to treat multiple sclerosis and Crohn’s disease. Perrigo contended that the Revenue was incorrect in characterising the sale of the intellectual property (the Tysabri IP) as a capital transaction and appealed the notice of amended assessment to the Tax Appeal Commission (the TAC). In the proceedings before the High Court, Perrigo claimed that the appeal should never have to proceed before the TAC. Perrigo claimed that, irrespective of the nature of the transaction, there was no legal entitlement on the part of the inspector to issue the assessment. Perrigo instituted the judicial review proceedings challenging the legality of the notice of amended assessment on the grounds that the assessment: (a) was in breach of Perrigo’s legitimate expectations; (b) was so unfair as to amount to an abuse of power; and (c) amounted to an unjust attack on its constitutionally protected property rights.

Held by McDonald J that Perrigo had failed to establish any basis to interfere with the assessment issued in respect of the disposal of the Tysabri IP and, accordingly, its claim must be dismissed.

McDonald J held that the respondents were presumptively entitled to their costs of the proceedings subject to any case which Perrigo wished to make to the contrary.

Claim dismissed.

JUDGMENT of Mr. Justice Denis McDonald delivered on 4 ^th November, 2020

Contents

Introduction 4

The nature of the proceedings before the court 5

The four categories of representation in issue 8

Legitimate expectation – the applicable principles 9

The claim based on the Shannon Certificate. 16

The terms of the certificate 19

The evidence of Mr. Hurley in relation to the certificate 21

Mr. Sunberg's affidavit 24

The proviso to the certificate 28

Section 445 of the 1997 Act .30

The application for the grant of the Certificate 45

Conclusion in relation to Perrigo's case based on the Shannon Certificate 63

The second category of representation based on TB 57 66

Conclusion in relation to Perrigo's case based on TB 57 73

The representation alleged to arise as a consequence of the course of dealing between the parties 74

The statutory context on which Perrigo relies 74

The establishment of the Large Cases Division within the Revenue 78

The article in the Irish Tax Review 2004 79

The email of 26 ^th July, 2005 from Mr. MacSuibhne 81

The email of 18 ^th June, 2009 from Mr. Neenan 81

The case made in relation to the manner in which IP was treated in the materials supplied by EPIL to the Revenue 84

The disposal of the Tysabri IP 87

The additional complaints made in relation to the audit findings letter 88

The response of the respondents to this aspect of Perrigo's case 89

The material submitted by EPIL to the Revenue 92

The 1997 return 93

The 1998 return 94

The 1999 return 95

The 2000 return 96

The 2001 return 97

The 2002 return 99

The 2003 return 100

The compliance report 102

The submission of counsel for Perrigo in relation to the compliance report 103

The objection of the respondent to the approach taken by Perrigo in relation to the compliance report and the affidavit evidence sworn on behalf of the Revenue 104

In the absence of cross-examination, Perrigo is not entitled to call into question the evidence given on behalf of the respondents 104

The 2004, 2009 and 2011 tax returns 108

The R & D claims 109

The conclusion urged by Perrigo 110

The evidence given by officers of the Revenue in response 110

Has Perrigo established a representation by the Revenue to it arising from the conduct of the Revenue in the course of the dealings between the parties? 119

The email from Mr. MacSuibhne in context 122

The email from Mr. Neenan in context 123

Further observations in relation to the Irish Tax Review article 124

The statutory context 126

The non-objection of the Revenue does not give rise to the representation alleged 130

Conclusion in relation to Perrigo's case based on its course of dealings with the Revenue 134

The case based on a combination of the Shannon Certificate, TB 57 and the course of dealings 134

Consideration of the complaint made by Perrigo in relation to the audit findings letter 136

The case made by Perrigo that the assessment is so unfair as to amount to an abuse of power 143

The alternative case based on Perrigo's constitutional rights 151

Conclusion 151

Introduction

1 In these judicial review proceedings, the applicant ( “Perrigo “) challenges the legality of a notice of amended assessment dated 29 ^th November, 2018 issued by the first named respondent, an inspector of taxes, in respect of the accounting period 1 ^st January, 2013 to 31 ^st December, 2013 in the sum of €1,636,047,645.00. The basis for the amended assessment is described in some detail in a letter issued by the second named respondents, the Revenue Commissioners ( “the Revenue “) on 30 ^th October, 2018 setting out the Revenue's findings arising from the audit of the corporation tax returns of Perrigo for the periods ended 31 ^st December, 2012 and 31 ^st December, 2013 ( “the audit findings letter”). In short, the contention of the Revenue in the audit findings letter was that a transaction (involving the disposal of intellectual property rights) which had been treated as part of the trade of Perrigo in its corporation tax returns should properly have been treated as a capital transaction. When treated in this way, the transaction, in accordance with s. 78 of the Taxes Consolidation Act. 1997 ( “the 1997 Act”), attracted tax at an effective rate of 33% rather than the 12.5% rate applicable to trading transactions under s. 21 (1) of the 1997 Act.

2 The transaction which has given rise to controversy between the parties involved the sale to Biogen, in 2013, of Perrigo's remaining 50% interest in the intellectual property relating to a pharmaceutical product sold under the brand name Tysabri which is used to treat multiple sclerosis and Crohn's disease.

3 Perrigo contends that the Revenue is incorrect in characterising the sale of the intellectual property ( “the Tysabri IP”) as a capital transaction and has appealed the notice of amended assessment to the Tax Appeal Commission ( “the TAC”). In the event that the present application for judicial review fails, it will be for the TAC to determine whether the disposal of the Tysabri IP was or was not a trading transaction. In the proceedings before the court, Perrigo claims that the appeal should never have to proceed before the TAC. As described in more detail below, Perrigo claims that, irrespective of the nature of the transaction, there was no legal entitlement on the part of the inspector to issue the assessment.

4 Perrigo has instituted these judicial review proceedings challenging the legality of the notice of amended assessment on the grounds that the assessment is (a) in breach of Perrigo's legitimate expectations; (b) so unfair as to amount to an abuse of power; and (c) that it amounts to an unjust attack on its constitutionally protected property rights. The case based on legitimate expectation has a number of aspects to it. It is based on four separate categories of representation alleged to have been made by the respondents over a period of more than 10 years. This requires consideration of a significant volume of material and this is examined, in detail, in paras. 24 to 254 below. In order to put that consideration in focus, some of the relevant legal principles applicable to legitimate expectation claims are first outlined in paras. 11 to 23 below. In turn, the claim based on an alleged abuse of power is considered in paras. 255 to 266 below. Finally, the claim based on constitutionally protected property rights is addressed briefly in paras. 267 to 268 below.

The nature...