Revenue Commissioners v Canada Life Ltd

JurisdictionIreland
JudgeMr. Justice Tony O'Connor
Judgment Date06 July 2016
Neutral Citation[2016] IEHC 499
Docket Number[2015\307 R]
CourtHigh Court
Date06 July 2016

[2016] IEHC 499

THE HIGH COURT

O'Connor Tony J.

[2015\307 R]

BETWEEN
THE REVENUE COMMISSIONERS
APPELLANT
AND
CANADA LIFE LIMITED
RESPONDENT

Revenue – Transfer of shares – Exemption from stamp duty – S. 108(b) of the Stamp Duty Consolidation Act 1999 – S. 6 of the Credit Institutions (Financial Support) Act (CIFSA) 2008 – Recovery of financial support – Delegation – Discretion of minister – National Treasury Management Agency (NTMA) – Direction of minister.

Facts: The question that arose in the present case by way of case stated from Appeal Commissioner was whether the Appeal Commissioner was correct in law in determining that the transfer of shares held by the Minister for Finance (Minister) in Irish Life Group Limited was exempt from stamp duty by virtue of s. 108(b) of the Stamp Duty Consolidation Act 1999. The appellant submitted that the sale of shares in Irish Life to the respondent did not constitute recovery of financial support provided to Irish Life and Permanent PLC (ILP) within the meaning of s. 6(4) of CIFSA 2008. The respondent submitted that the Minister would not have bought Irish Life if its holding company did not require capital as the Regulator insisted upon.

Mr. Justice Tony O'Connor held that the Appeal Commissioner was correct in law in determining that the share transfer form was exempted from stamp duty by reason of s. 108(b) of the 1999 Act because s. 6(4) of the 2008 Act would have allowed NTMA, if necessary, to dispose of the shares. The Court held that the purchase of the shares in Irish Life was a form of financial support to ILP and its subsidiaries as per s. 6(1) of the 2008 Act, which could have been delegated to NTMA on the Minister's discretion. The Court held that even in case NTMA had been directed to purchase the shares and had the ownership or control, but still the Minister's directions would have bound NTMA.

JUDGMENT of Mr. Justice Tony O'Connor delivered on the 6th day of July, 2016
Introduction
1

The question for this Court by way of case stated dated 10th December, 2015 from the Appeal Commissioner was whether he was correct in law in determining that the transfer of shares held by the Minister for Finance (‘ The Minister’) in Irish Life Group Limited (‘ Irish Life’) is exempt from stamp duty by virtue of s. 108(b) of the Stamp Duty Consolidation Act 1999 (‘ SDCA’) 1. The transfer was effected by stock transfer form dated 18th July, 2013 for a consideration of €1.3 billion.

2

Section 108 of the SDCA provided that ‘stamp duty shall not be chargeable on any instrument executed by or on behalf of…the Minister in relation to a function exercised by the Minister which is capable of being delegated to’ the National Treasury Management Agency (‘ NTMA’) ‘under s. 5 of the National Treasury Management Agency Act 1990 (‘ NTMAA 1990’) [The phrase underlined was the subject of most debate at the hearing on 16th and 17th June 2016 giving rise to this judgment].

Background
3

The Court extrapolates the following from the 24 page case stated and the extensive submissions made as facts which are particularly relevant to its consideration:-

1. Irish Life was owned by Irish Life and Permanent PLC (‘ ILP’).

2. ILP but not Irish Life became a ‘covered institution’ pursuant to regulations made by the Minister under the Credit Institutions (Financial Support) Act 2008 (‘ CIFSA 2008’). The CIFSA 2008 was enacted to allow the State to guarantee the liabilities of credit institutions including banks and insurance companies.

3. Under the terms of CIFSA 2008 the Minister was enabled to provide financial support including a loan, a guarantee, an exchange of assets and any other kind of financial accommodation to credit institutions. The power to provide financial support in s. 6(1) of CIFSA 2008 is extremely broad having regard to the definition of ‘financial support’.

4. Section 6(1) to (11) of CIFSA 2008 were added by s. 8(1)(b) of CIFSA 2008 to the first schedule of the NTMAA 1990 as functions of the Minister that may be delegated to the NTMA pursuant to s.5 of the NTMAA 1990.

5. Irish Life and Permanent Group Holdings PLC (‘ ILPGH’) came into existence on foot of a scheme of arrangement approved by this Court in January 2010. ILPGH was the holding company and entire owner of ILP.

6. In March 2011, stress tests carried out on ILP detected a requirement for recapitalisation in the sum of €4 billion. This was firstly achieved by the Minister applying for and obtaining a direction order under the Credit Institutions (Stabilisation) Act 2010 (‘ CISA 2010’) from this Court on 26 July 2011, pursuant to which he subscribed €2.7 billion by way of capital and other instruments and became the holder of 99.2% of the share capital of ILPGH. A further direction order was made under CISA 2010 on 28 March 2012 requiring ILPGH to sell its shares in Irish Life to the Minister for a consideration of €1.3 billion.

Incidental history
4

The context of the acquisition of Irish Life by the Minister was summarised by Peart J. in Dowling and Ors. v. The Minister for Finance and Irish Life and Permanent PLC [2012] IEHC 436. Those proceedings concerned an unsuccessful challenge to the sale of Irish Life to the Minister for €1.3 billion. This arose as part of the measures taken to secure the €85 billion finance facility which was deemed necessary for the State in view of the State's inability to access its own funding on the international markets. In effect, the Minister was obliged to buy Irish Life as part of an overall exercise.

5

O'Malley J. in Dowling and Ors. v. Minister for Finance and Ors. [2014] IEHC 418 elaborately set out the history of the various decisions, applications and judgments of this Court and of the Supreme Court in the context of the scheme of arrangement for the holding company of the bank which now trades as Permanent TSB. That judgment does not have any particular impact on the facts to be considered.

Interpretation of s. 108 SDCA
6

The SDCA as a taxation statute must be read in accordance with the decision of the Supreme Court in O'Flynn Construction Limited v. The Revenue Commissioners [2011] IESC 47 which requires a court to interpret a tax statute in accordance with ordinary canons and standards of statutory construction, to apply the ordinary and natural meaning of the words used in legislation and ‘in cases of doubt or ambiguity’ to resort to a consideration of the purpose and intention of the legislature, or to adopt ‘a purposive approach’ in the same way as is required by s. 5 of the Interpretation Act 2005.

Burden on taxpayer where relief is claimed
7

Where a claim for relief or exemption is made, the burden of proving entitlement to relief or exemption rests on the taxpayer. In Revenue Commissioners v. Doorley [1933] IR 750 at page 766 Kennedy C.J. put it as follows:-

‘…If it is clear that a tax is imposed by the Act under consideration, then exemption from that tax must be given expressly and in clear and unambiguous terms, within the letter of the statute as interpreted with the assistance of the ordinary canons for the interpretation of statutes. This arises from the nature of the subject-matter under consideration and is complementary to what I have already said in its regard. The Court is not, by greater indulgence in delimiting the area of exemptions, to enlarge their operation beyond what the statute, clearly and without doubt and in express terms, excepts for some good reason from the burden of a tax thereby imposed generally on that description of subject matter.’

8

The Court must be careful therefore not to enlarge the operation of any exemption ‘beyond what the statute, clearly and without doubt and in express terms excepts…’.

Delegable functions
9

Section 5(1) of the NTMAA 1990 provides:-

‘The Government may by order delegate to the Agency [NTMA] the functions of the Minister specified in the First Schedule and any other functions of the Minister in relation to the management of the national debt or the borrowing of moneys for the Exchequer that the Minister considers appropriate and...

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