The State (at the prosecution of Melbarien Enterprises Ltd) v The Revenue Commissioners

• Jurisdiction: Ireland
• Judge: Mr. Justice Hamilton
• Judgment Date: 01 January 1986
• Neutral Citation: 1985 WJSC-HC 2520
• Court: High Court
• Docket Number: [1985 No. 168 SS],No. 168 SS/1985
• Date: 01 January 1986

1985 WJSC-HC 2520

THE HIGH COURT

No. 168 SS/1985

MELBARIEN LTD v. REVENUE COMMISSIONERS

BETWEEN

THE STATE AT THE PROSECUTION OF MELBARIEN ENTERPRISES LTD.

Prosecutor

and

THE REVENUE COMMISSIONERS

Respondents

Synopsis:

COMPANY

Persona

Distinctiveness - Corporate veil - Tax clearance certificate - Refusal by respondents - Prosecutor seeking to supply goods to the Department of Defence - Department requiring production of certificate - Prosecutor's taxes paid - Refusal on ground that directors and shareholders of prosecutor company same as another company - Other company in liquidation owing substantial sums to respondents - Duty of respondents to decide prosecutor's application on circumstances affecting prosecutor only - Order absolute granted - (1985 No.168 SS - Hamilton P. 19/4/85).

|The State (Melbarien Enterprises) v. Revenue Commissioners|

REVENUE

Certificate

Mandamus - Tax clearance certificate - Refusal - Prosecutor seeking to supply goods to Department of Defence - Department requiring production of certificate - Prosecutor's taxes paid - Refusal on ground that directors and shareholders of prosecutor company same as another company - Other company in liquidation owing substantial sums to respondents - Duty of respondents to decide prosecutor's application on circumstances affecting prosecutor only - Order absolute granted - (1985 No.168 SS - Hamilton P. - 19/4/85).

|The State (Melbarien Enterprises) v. Revenue Commissioners|

STATE SIDE

Mandamus

Revenue commissioners - Tax clearance certificate - Refusal - Prosecutor seeking to supply goods to Department of Defence - Department requiring production of certificate - Prosecutor's taxes paid - Refusal on ground that directors and shareholders of prosecutor company same as another company - Other company in liquidation owing substantial sums to respondents - Duty of respondents to decide prosecutor's application on circumstances affecting prosecutor only - Order absolute granted - (1985 No. 168 SS - Hamilton P. - 19/4/85).

|The State (Melbarien Enterprises) v. Revenue Commissioners|

1 Judgment of Mr. Justice Hamilton delivered the 19th day of April 1985

2 This is an application brought by the Prosecutor to have made absolute the Conditional Order made herein by Mr. Justice Barr on the 29th day of March 1985 notwithstanding cause shown by the Revenue Commissioners, the Respondents herein.

3 The facts in this case appear in the affidavits of Brian Lowe, a Director of Melbarien Enterprises Ltd. (hereinafter called "the Company") sworn herein on the 20th day of March 1985 and the 29th day of March 1985, the affidavit of William O'Grady sworn on the 29th day of March 1985 and the affidavit of Marie Hurley, an Assistant Principal in the Office of the Collector General of Revenue sworn herein on the 22nd day of March 1985 and the documents and correspondence exhibited therein.

4 The relevant facts may be summarised briefly as follows:-

5 1. The Company was incorporated on the 3rd day of August 1983.

6 2. The Company carries on business as manufactures of rainwear and is alleged to carry on such business successively.

7 3. The Company has discharged all its liabilities for PAYE, PRSI and VAT and this fact is not challenged by the Respondents.

8 4. On the 20th day of February 1985 the Company tendered for a contract issued by the Department of Defence, which is the purchasing agent for Government Departments generally and the said tender was for contract worth in excess of 180 thousand pounds.

9 5. By letter dated the 7th day of March 1985 the Assistant Contracts Officer of the Department of Defence wrote to the Company stating that it was a condition for the award of a contract by the said Department that a firm must be able to produce promptly a tax clearance certificate from the Respondents.

10 6. With this letter was enclosed a form TC1 for completion and submission by the Company to the Collector General of Taxes, this form required inter alia the insertion of the name and address of the contractor, the Income Tax serial number and district, Corporation Tax serial number and district (in the case of the Company), Construction Industry Tax serial number and district, Capital Gains Tax serial number and district, VAT registration number and PAYE/PRSI Registration number.

11 7. The Tax Clearance Certificate is evidently necessary because of a statement made by the Minister for Finance to the Dail on the 25th day of January 1984 where he stated as follows:-

"I mentioned in the 1983 Budget Statement that I was reviewing the reporting arrangements for payments to individuals and companies by the Government Departments and Public Authorities to ensure that relevant details have been made available to the Revenue Commissioners. One result of this review was that details of Public Sector contracts are now being provided to the Commissioners and I am examining the feasibility of requiring the production by firms of a Tax Clearance Certificate as a condition of obtaining such contracts."

12 8. As appears from the affidavit of Marie Hurley,

"In 1984 the Government decided to introduce a procedure whereby any party tendering for the Grant of Contracts from a Public Department would be required to produce a Clearance Certificate from the Revenue Commissioners to the effect that the Collector General would have no objection to the award of the Contract to the applicant. The rationale behind the introduction of this procedure was directed to bring to an end the situation where entities which were in default with the payment of tax to the Revenue Commissioners would be in receipt of the Grant of Contracts paid for out of public funds. Accordingly, since the introduction of this procedure, I say and believe that all Government Departments which invite tenders for the carrying out of work on the supplying of material by third parties require sight of such a Certificate before they will proceed to grant the Contract to the tenderer, the only exception to this procedure is that persons in the Construction Industry do not require the existence of such Certificates in certain circumstances."

13 She further states that:-

"The issue of such Certificates is not governed by any statutory requirement, nor does it have any statutory basis. It is merely an administrative arrangement made between Government Departments so as to insure that tenderers will not be granted Contracts from Government Departments in circumstances where the Collector General of Revenue has an objection to the award of the Contract in question."

14 10. The Company had applied on two previous occasions for tax Clearance Certificates from the Respondent and had been refused by letters dates respectively the 14th day of November 1984 and the 10th day of December 1984 on the grounds that the Collector General stated that he "must have regard to tax default in any connected case."

15 11. It appears that a company entitled J.J. Meek & Co. Ltd. of which Mr. Lowe and Mr. O'Grady were Directors, had gone into liquidation in July 1983 owing arrears of £126,414 plus interest in respect of PAYE/PRSI.

16 12. On the 7th day of March 1985 the Company applied to the Collector General for the necessary Clearance Certificate in regard to Contract No. R4G/0173 Department of Defence, enclosing therewith the application form, in the said letter Mr. Lowe stated, inter alia, that:-

"In addition you will note that the PAYE/PRSI/VAT liabilities of the Company are up-to-date and the Company has since incorporation always discharged its liabilities to the Commissioners in a prompt fashion".

17 13. By letter dated the 13th day of March 1985 addressed to Mr. Lowe, the Collector General stated that:-

"I have your letter of March 7th, 1985 in connection with your Company's application for a Tax Clearance Certificate

I have noted the points mentioned in your letter but I must nevertheless confirm my decision as advised to you in my letters of November 16th and December 10th 1984."

18 In this letter he does not controvert the statement made by Mr. Lowe that the PAYE/PRSI/VAT liabilities of the Company are up-to-date and have always been discharged in a prompt fashion.

19 It is quite clear from the correspondence that the Tax Clearance Certificate sought by the Company was not refused by the Collector General because of the default of the Company with regard to any of its liabilities for tax, be it PAYE, PRSI, VAT or Corporation Profit Tax but was because two of the Directors of "the Company" had...