O'Rourke v Revenue Commissioners

• Jurisdiction: Ireland
• Judge: Keane J.
• Judgment Date: 18 December 1996
• Neutral Citation: 1997 WJSC-HC 1975
• Docket Number: [1994 No. 7 CA],7 CA/1994
• Court: High Court
• Date: 18 December 1996

1997 WJSC-HC 1975

THE HIGH COURT

7 CA/1994

O' ROURKE V. REVENUE COMMISSIONERS

BETWEEN

LAURENCE O'ROURKE

Plaintiff

AND

THE REVENUE COMMISSIONERS

Defendants

Citations:

INCOME TAX ACT 1967 SCHED E

INCOME TAX ACT 1967 SCHED D

FINANCE ACT 1976 S30

FINANCE ACT 1976 S30(3)

FINANCE ACT 1976 S30(4)

COURTS ACT 1981 S22(1)

WOOLWICH BUILDING SOCIETY V INLAND REVENUE COMMISSIONERS 1993 AC 70

TEXACO (IRL) LTD V MURPHY (NO 3) 1992 2 IR 300

INCOME TAX ACT 1967 S428(9)

MURPHY V AG 1982 IR 241

DOLAN V NELIGAN 1967 IR 247

CAMPBELL V HALL 1774 1 COWP 204

INCOME TAX ACT 1967 S192

FINANCE ACT 1978

EAST CORK FOODS V O'DWYER STEEL 1978 IR 103

PMPA GARAGES LTD, IN RE 1992 1 IR 332

DUBLIN CORPORATION V BUILDING & ALLIED TRADE UNION 1996 1 ILRM 547

DEBTORS (IRL) ACT 1840 S26

COURTS ACT 1981 S22(2)

COURTS ACT 1981 S22(2)(a)

Synopsis:

Revenue

Interest - Revenue assessment - plaintiff had paid tax on incorrect basis over nine year period - repayment made by Revenue Commissioners - assessing measure of plaintiffs loss - whether interest payable on such sum and rate of interest applicable - case stated to Supreme Court as to whether plaintiff entitled to interest pursuant to s.30 Finance Act, 1976 - held s.30 not applicable - trial judge considered basis upon which repayment made - doctrine of unjust enrichment considered - whether interest on interest payable. - Held: Rate of interest applicable is rate ruling under s.22 Courts Act, 1981 or s.26 Debtors (Ireland) Act, 1840. - (High Court: Keane J. - 18/12/1996) - [1996] 2 IR 1

|O'Rourke v. Revenue Commissioners|

1 JUDGMENT delivered the 18th day of December, 1996 by Keane J.

2 This is an appeal from a decision of Judge Dominick Lynch in the Dublin Circuit Court awarding the Plaintiff the sum of £13,624.24 together with the costs of the proceedings.

3 The facts are as follows. The Plaintiff, at all material times, was the Branch Manager of the Employment Office of the Department of Social Welfare in Portlaoise. He held that position as a result of a contract between himself and the Minister for Social Welfare. For the successive tax years from 1979/80 to 1987/88, he was treated as coming within Schedule E of the Income Tax Act 1967and the Department deducted tax on a PAYE basis from the payments made to him in accordance with the relevant provisions of the income tax code. However, on April 21st, 1988, the High Court (Blayney J.) found that a similar contract entered into between the Minister for Social Welfare and one Thomas B. Mooney, a branch manager in another office, was a contract for services as distinguished from a contract of service. It was held, accordingly, that Mr. Mooney should have been assessed under Schedule D and not Schedule E.

4 Because the Defendants believed that the Plaintiff was liable to tax under Schedule E, in the years referred to, no assessments were raised on the Plaintiff. Annual balancing statements were issued periodically to the Plaintiff in accordance with the relevant regulations and repayments made on foot of those balancing statements. Subsequent to the decision of Blayney J, the accountant acting for the Plaintiff, Mr. Baithean Mooney, had a meeting with Mr. William Leahy, an Inspector of Taxes, at which they discussed the question of the repayments of tax overpaid by other branch managers for whom Mr. Mooney acted, including the Plaintiff. Mr. Leahy at that time took the view that such branch managers would not be entitled to a repayment and indicated that the Defendants" view was that the High Court decision would affect other branch managers only as from the date on which it was pronounced. However, at a second meeting which took place in or about August 1988, Mr. Leahy indicated that he was prepared to accept that other branch managers were entitled to be treated as coming within Schedule D in accordance with the High court decision and were entitled to claim repayment on that basis. The difficulties of raising assessments in respect of each of the years in relation to 80/90 branch managers(up to 900 assessments in all) over the years in question was discussed and it was agreed to dispose of the formalities of raising assessments. It was agreed instead that Mr. Mooney, on behalf of the branch managers, would submit abridged accounts, in effect, income and expenditure accounts. These accounts were then submitted in respect of the Plaintiff for the tax years from 1979/80 to 1987/88 and, on the basis of these accounts the Inspector of Taxes certified a repayment to the Plaintiff in the sum of £23,139 which was paid to the Plaintiff on the 23rd June 1989. No interest, however, was paid on the sum.

5 On the 12th March, 1992, the High Court (Barr J) found that Mr. Thomas Mooney was entitled to be paid interest in accordance with s.30 of the Finance Act 1976on the tax found to have been overpaid as a result of the decision of Blayney J. The Plaintiff then issued the present proceedings by way of Ordinary Civil Bill in the Circuit Court and, as already indicated, the learned Circuit Court judge found in his favour.

6 When the appeal first came on for hearing before me, Mr. Baithean Mooney and Mr. Leahy gave evidence on behalf of the Plaintiff and the Defendants respectively, as to the matters already referred to in this judgment. Counsel on behalf of the Plaintiff submitted that he was entitled to interest on the sum overpaid by him pursuant to the provisions of subsections (3) and (4) of s.30 of the Finance Act 1976which are as follows:-

7 2 "(3) In any case where Notice of Appeal has been given against an assessment of tax:-

8 (a) the specified amount of tax shall, notwithstanding the appeal, be collected, paid and carry interest in all respects as if it were tax charged by an assessment in respect of which no appeal was pending and s.550 (other than subsection (2)(a)) of the Income Tax Act 1957 shall apply accordingly and

9 (b) any balance of tax chargeable in accordance with the determination shall be payable, or any tax overpaid shall be repaid.

10 (4) Where an overpayment of tax is to be repaid under subsection 3, the overpayment shall carry interest at the rate or rates in force by virtue of s.550(1) of the Income Tax 1967 for the period from the date or dates of the payment or amount or amounts giving rise to the overpayment as the case may require to the date on which the repayment is made:-

11 provided that:-

12 (a) interest shall not be payable under this section if it amounts to less than £1 and

13 (b) income tax shall not be deductible on payment of interest under this subsection and such interest shall not be reckoned in computing income for the purposes of the Tax Acts."

14 Counsel for the Plaintiff accepted that there was no express agreement between his client and the Defendants that interest would be paid at the rate provided for in these provisions on the amount of tax overpaid. He urged, however, that it was implicit in the agreement for dispensing with the formalities of raising assessments in order to avoid over-burdening the revenue system that the Plaintiff would be treated in all relevant respects (including the right to interest pursuant to s.30 of the Finance Act 1976) as if these formalities had taken place.

15 Counsel for the Defendants submitted that the provisions of s.30 only took effect when there had been an assessment and an appeal from that assessment. If, as a result of the appeal, it transpired that an overpayment had been made, the taxpayer was entitled to interest calculated in accordance with s.30. He submitted that these necessary preconditions to such a payment of interest were not met in the present case.

16 Having heard the submissions of counsel, I agreed, at the request of Counsel for the Defendants, to state a case for the opinion of the Supreme Court, the question posed by the Case Stated being as follows:-

"Whether having regard to the facts found or admitted before me the Plaintiff is entitled to a payment of interest on foot of the overpayment of tax for the periods in question pursuant to s.30 of the Finance Act 1976."

17 On the 15th May, 1996, the Supreme Court answered the question posed in the Case Stated in the negative and ordered the matter to be referred back, with the judgments delivered by the court annexed thereto, to the High Court to proceed thereon as to justice should appertain.

18 In the course of his judgment, Murphy J (with whom Hamilton C.J. and O'Flaherty J agreed) said that there was no doubt as to be correctness of the argument made on behalf of the Defendants, since none of the conditions for the bringing into operation of s.30 had been met. He added

"...the court has been presented with the problem that the Plaintiff relies on a somewhat ambiguous agreement between the parties or some conduct on the part of the inspector of taxes which, it is contended, may operate as an estoppel preventing the revenue relying upon the statutory conditions contained in s.30 aforesaid."

"Without a comprehensive analysis of the contents of that agreement and an examination of the conduct of the official or officials involved and in either case their authority to bind the Revenue Commissioners, it is impossible to evaluate the case which the Plaintiff seeks to make."

19 Murphy J also commented that he would foresee considerable difficulty in asserting a claim to payment of interest under s.30 in respect of tax collected (as here) under the PAYE system, i.e. collected otherwise than by assessment on the taxpayer.

20 In the course of his judgment, O'Flaherty J said:-

"In this case, the Revenue Commissioners came to be in possession of the taxpayer's money by mistakenly assigning him to an incorrect category and of course they were obliged to refund the overpayment of tax that occurred as a result and have done so."

"In my opinion - but...