The Revenue Commissioners v Maloney

• Jurisdiction: Ireland
• Court: Court of Appeal (Ireland)
• Judge: Ms. Justice Faherty
• Judgment Date: 11 April 2025
• Neutral Citation: [2025] IECA 85
• Docket Number: Record Number: 2023/328

Between/

Michael Maloney

Appellant

and

The Revenue Commissioners

Respondent

[2025] IECA 85

Whelan J.

Faherty J.

Meenan J.

Record Number: 2023/328

THE COURT OF APPEAL

Stamp duty – Put option notice – Case stated – Appellant appealing from the judgment and order in a case stated – Whether stamp duty was chargeable on the consideration paid by the appellant for the purchase of a hotel following the service of a put option notice

Facts: The appellant, Mr Maloney, appealed to the Court of Appeal from the judgment of the High Court (Butler J) delivered on 12 October 2023 ([2023] IEHC 555) and the order made on 24 November 2023 in a case stated by the Tax Appeals Commissioner for the opinion of the High Court on a point of law pursuant to s. 949AQ of the Taxes Consolidation Act 1997. The opinion sought arose from a determination which issued on 11 January 2021 pertaining to an assessment by the respondent, the Revenue Commissioners, raised, inter alia, in respect of the appellant under s. 31A and/or s. 31 of the Stamp Duties Consolidation Act 1999. The key issue in dispute was whether stamp duty was chargeable on the consideration paid by the appellant for the purchase of a hotel following the service of a put option notice in January 2014. The Appeal Commissioner duly determined that stamp duty was payable under the provisions of s. 31A of the 1999 Act. Butler J upheld the Appeal Commissioner’s decision that stamp duty was chargeable, although on different grounds to the Appeal Commissioner.

Held by Faherty J that the appellant’s contention that that Butler J adopted an overly expansive approach to the requisite interpretation exercise and that the Court should have regard only to Clause 3.2 of the deed of mortgage charge and assignment (the Deed) was not consistent with the well-established principles of contractual interpretation as evidenced by Analog Devices BV v Zurich Insurance Company [2005] 1 IR 274; as that case and the relevant jurisprudence that followed it directs, in construing the contract the function of the court is to put itself in the shoes of the person who has all the background knowledge. Faherty J held that a number of third parties (the Investors), who executed the Deed in favour of Barclays Bank Plc, were aware or must be assumed to have been aware of the contents of the Facility Agreement executed on the same day as the Deed; Clause 1.2.1 of the Deed bears witness to this. That being the case, Faherty J held that Butler J was correct to find that the Deed ought to be read in conjunction with the Facility Agreement as part of the matrix of fact to which Lord Hoffman at principle 2 in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 adverted. In Faherty J’s view, Butler J was correct to find that there were sufficient features in the text of the Deed, the “Notice of Assignment of Material Contracts” and the Facility Agreement to allow the court to say that the Investors had retained their right to exercise the “Put Option” under the “Third Put and Call Option Agreement”. Faherty J held that the analysis conducted by Butler J was thorough and she correctly identified the applicable principles of interpretation and then applied them to the case in hand; having regard to the applicable principles, she correctly looked at Clause 3.2 of the Deed, and to the Deed read as a whole, the Notice of Assignment and the Facility Agreement.

Faherty J dismissed the appeal and affirmed the order of the High Court.

Appeal dismissed.

UNAPPROVED

JUDGMENT of Ms. Justice Faherty delivered on the 11 ^th day of April 2025

1 . This is an appeal from the judgment of the High Court (Butler J.) (hereafter “the Judge”) delivered on 12 October 2023 ( [2023] IEHC 555) and the Order made on 24 November 2023 (as perfected on 4 December 2023) in a Case Stated by the Tax Appeals Commissioner for the opinion of the High Court on a point of law pursuant to s. 949AQ of the Taxes Consolidation Act 1997, as amended (“the 1997 Act). The opinion sought arose from a determination which issued on 11 January 2021 pertaining to an assessment by the respondent (hereafter “Revenue”) raised, inter alia, in respect of Mr. Maloney (hereafter “the appellant”) under s. 31A and/or s.31 of the Stamp Duties Consolidation Act 1999 (“the 1999 Act”). (Book of Evidence pgs. 203–205) The key issue in dispute was whether stamp duty was chargeable on the consideration paid by the appellant for the purchase of a hotel following the service of a put option notice in January 2014. The Appeal Commissioner duly determined that stamp duty was payable under the provisions of s.31A of the 1999 Act. The Judge upheld the Appeal Commissioner's decision that stamp duty was chargeable, although, as we shall see, on different grounds to the Appeal Commissioner.

Background

2 . In 2005 the appellant was a member of the Mount Falcon Partnership (hereafter “MFP” or “the Promoters”). MFP was the freehold owner of a property know as Mount Falcon Castle in County Mayo (“the Hotel”).

3 . On 5 December 2005 the Promoters entered into a contract with a number of third parties (hereafter “the Investors”) to sell, for the purchase price of €1000, a 999-year leasehold interest in the Hotel to the Investors subject to an initial annual rent of €1500 per annum and the covenants and conditions contained in the lease (hereafter “the Hotel scheme”). The Investors did not intend to become involved in the development or operation of the Hotel, rather they were using the Hotel scheme to avail of certain tax reliefs which were available to them under statute by reason of their investment, in other words, they were availing of a “tax shelter”, as described by the Judge. The lease was in fact never executed, nor intended to be, and the arrangement between the Promoters and the Investors was left to “rest in contract” for the duration of the tax life of the Hotel scheme. As such, the Investors acquired a beneficial interest in the Hotel but not the legal interest.

4 . Under the terms of a “Third Put and Call Option Agreement” dated 3 November 2006, the Promoters granted the Investors a “Put Option” which if exercised, would require the Promoters to purchase all the right, title and interest of the Investors in the Hotel on the terms specified in the Option Agreement. Conversely, pursuant to the same agreement, the Investors granted the Promoters a “Call Option” under which the Promoters could require the Investors to sell (and by extension the Promoters would purchase) the Investors' right and title to the lease. In effect, on the exercise of the Option Agreement by either party, the Promoters would be required to buy back the Investors' rights in the Hotel which were resting in contract pursuant to the memorandum of sale. This was referred to in the High Court judgment as the Investors' “exit mechanism”.

5 . For the purposes of this judgment, save where otherwise stated, the Third Put and Call Option Agreement will be referred to as “the Option Agreement”. There were in fact two other iterations of the Option Agreement, but the Court is only concerned with the Third Put and Call Option Agreement.

6 . The terms of the Option Agreement required the Put Option to be exercised by means of a notice in writing to be given to the Promoters between 25 October 2013 and midnight on 25 January 2014.

7 . For the purposes of financing the acquisition of their interest in the Hotel, the Investors had initially obtained finance from Anglo Irish Bank. Due to the collapse of that institution, the loan was transferred to IBRC. As the tax life of the Hotel scheme began to run down, the Investors sought to extract the loan from IBRC and secure alternative commercial financing. Ultimately, Barclays Bank Plc (“Barclays” or “the Bank”) agreed to provide alternative finance in February 2013. This led to the execution of a suite of documents between Barclays and the Investors under which Barclays provided funding in return for the provision of security by the Investors.

The Facility Agreement

8 . On 28 February 2013, a Facility Agreement was executed between the Investors (as borrowers), the Promoters (who provided a guarantee for the Investors' indebtedness) and Barclays. Pursuant to Clause 2 of the Facility Agreement, the Bank granted the Investors a term loan of €6m to refinance the amounts previously advanced by IBRC. The Investors were not required to make repayments on the loan during its lifetime, instead, pursuant to Clause 8, the loan, together with all interest due, was to be repaid in full at the end of the period of the tax shelter (seven years and three months after payment was made by the Investors and the Hotel opened, or “…the date on which the Borrowers [the Investors] received the full sale proceeds following the exercise of [the Option Agreement]”).

9 . Clause 10 of the Facility Agreement headed “Recourse” sets out as follows:

“10.1.1. Notwithstanding any other provision of any Transaction Document but save as provided for in this Clause 10.1 and in Clauses 10.2, 10.3 and 10.4, the Lender's recourse to each investor in respect of such investor's obligations under the Transaction Documents shall be limited to amounts realised in connection with the enforcement, disposal or other action taken by the Lender in respect of the Recourse Assets, any sale of any of the Recourse Assets or any payments made by any third party to an investor in respect of any contractual or other obligation owed to such Investor pursuant to the contracts which are comprised in the Recourse Assets.

10.1.2. The Lender shall not take or pursue any judicial or other steps or proceedings or exercise any other right or remedy that it may have against an Investor or against an Investor's Other Assets for the discharge of any outstanding indebtedness under the Transaction Documents and no action, proceedings, claim,...