Used Cars Importers Ireland Ltd v Minister for Finance

• Jurisdiction: Ireland
• Judge: Mr. Justice Murray
• Judgment Date: 06 November 2020
• Neutral Citation: [2020] IECA 298
• Date: 06 November 2020
• Court: Court of Appeal (Ireland)
• Docket Number: Court of Appeal Record No. 2014/1170

Between:

USED CAR IMPORTERS OF IRELAND LIMITED

APPELLANT

-AND-

THE MINISTER FOR FINANCE, THE REVENUE COMMISSIONERS, IRELAND

AND

THE ATTORNEY GENERAL

RESPONDENTS

[2020] IECA 298

Donnelly J.

Faherty J.

Murray J.

Court of Appeal Record No. 2014/1170

High Court Record No. 1995/1988P

THE COURT OF APPEAL

CIVIL

Vehicle Registration Tax – Declaratory relief – Damages – Appellant seeking declaratory relief – Whether the provisions pursuant to which Vehicle Registration Tax was calculated and levied were invalid having regard to the Constitution

Facts: The appellant, Used Car Importers of Ireland Ltd (UCII), complained that the manner in which Vehicle Registration Tax (VRT) was operated and administered by the second respondent, the Revenue Commissioners (Revenue), over the period from 1993 to 2010 was contrary to the governing legislation, to principles of legitimate expectation, proportionality, legality, equality and legal certainty and that it was unreasonable. It further contended that Revenue had breached EU law by discriminating against imports. All of this, UCII said, resulted in VRT being imposed on used car imports at a rate that was too high, thereby increasing the price of those cars and damaging its business. It sought various declaratory reliefs arising from those claims, including declarations that the provisions pursuant to which VRT was calculated and levied were invalid having regard to the Constitution. It also claimed for the return of taxes paid by it and/or damages in a total amount of €131M. Following a thirty-three-day trial Murphy J ([2013] IEHC 128) refused UCII all of the relief claimed by it. USII appealed from that dismissal.

Held by Murray J that: (1) insofar as the trial Judge placed reliance on the availability of a statutory appeal against individual decisions of Revenue determining the ‘open market selling price’ (OMSP) of imported used vehicles as a basis for precluding the declaratory relief claimed in the action, he erred; (2) UCII was wrong in contending that Revenue is obliged to have regard to the price obtained on the sale of a vehicle in determining the OMSP of that vehicle; (3) UCII was also mistaken in its contention that there was a fundamental conflict in the evidence given by Revenue’s expert witness Dr Bacon on the one hand and Revenue’s witnesses of fact on the other as to the role of the depreciation tables in Revenue’s methodology; (4) UCII had not established that the trial Judge erred in concluding that vehicles were valued by reference to the information in the Car Sales Guide and other trade information, that the Car Sales Guide was a reasonable reference point for this purpose, and that UCII had failed to establish that its application systematically overvalued the vehicles, and so its irrationality challenge had to fail; (5) insofar as UCII based part of its claim on breaches of ‘the principle of proportionality’ or of breach of its constitutional rights, these did not add to the claim based on unreasonableness and properly failed for the same reason as did that contention; (6) where a public body is conferred with a statutory discretion or power and formulates fixed and detailed internal criteria on the basis of which that discretion or power will be exercised, those affected by the exercise of the discretion are entitled to be informed of those criteria when they request them and until depreciation tables were made available to UCII in 2010, Revenue failed to comply with that obligation in respect of the criteria it applied in determining the OMSP of used vehicles pursuant to s. 133 of the Finance Act 1992; (7) insofar as imports from outside the EU are concerned, principles of EU law are not applicable, however, UCII was correct when it said that the trial Judge erred when he decided that this meant that it was precluded by jus tertii from asserting that the system operated by Revenue was in breach of EU law; (8) for the same reasons as Revenue breached the cognate obligation in domestic law, it breached the similar requirements imposed by EU law; (9) UCII’s claim that the State was required to tax imports on their landed price was misconceived; (10) EU law dictated that the onus in this case fell on the respondents to establish that the system put in place by Revenue did in fact result in a valuation for used imported vehicles which would, as a general rule, be very close to their actual value, and that issue was not determined by the trial Judge, who decided only the distinct and different question of whether UCII had failed to discharge the burden imposed on it to establish that the methodology was irrational; (11) UCII’s claim insofar as based upon the VAT Directives failed; (12) UCII had made out no claim in tort in domestic law, nor did it enjoy any credible basis for a claim in Francovich damages; (13) nor had it any basis for claiming recovery of taxes paid; (14) the findings of fact of the trial Judge in respect of loss could not be disturbed in this appeal.

Murray J held that the Court would receive submissions from the parties as to the orders that it should make consequent on those findings.

Appeal allowed in part.

JUDGMENT of Mr. Justice Murray delivered on the 6 ^th of November 2020

I THE CONTEXT

Introduction - 1 -

II THE DETERMINATION OF THE OMSP FOR USED IMPORTS

The development of the process for the valuation of used imports - 17 -

III THE PROCEEDINGS AND THE EVOLUTION OF THE SYSTEM FOR DETERMINING THE OMSP

The proceedings - 61 -

IV REVENUE'S METHODOLOGY FOR THE DETERMINATION OF THE OMSP OF USED VEHICLES

UCII's claim and Revenue's methodology - 97 -

V THE CASE - 117 -

VI THE STATUTORY APPEAL

The Appeal and its operation - 127 -

VII THE OBLIGATION TO TAKE ACCOUNT OF THE ACTUAL SELLING PRICE

The argument - 155 -

VIII THE TEST FOR DETERMINING THE LEGALITY OF REVENUE'S METHODOLOGY -171 -

IX ALLEGED INCONSISTENCIES IN REVENUE'S EXPLANATION OF ITS SYSTEM

The argument - 183 -

X REASONABLENESS

The High Court judgment - 204 -

XI PROPORTIONALITY - 258 -

XII THE CLAIM BASED ON BREACH OF CONSTITUTIONAL RIGHTS

Findings of the trial Judge - 262 -

XIII TRANSPARENCY, LEGAL CERTAINTY, STATUTORY DISCRETIONS AND FIXED POLICIES

The Argument -270 -

XIV WAS UCII ENTITLED TO MAINTAIN A CLAIM UNDER EU LAW ?

The High Court judgment - 306 -

XV THE CLAIM IN EU LAW

The principles - 315 -

XVI DAMAGES AND RECOVERY OF TAX

The causes of action for damages and the High Court judgment - 386 -

XVII LOSSES AND REMEDIES

The findings of the High Court as to loss - 401 -

XVIII CONCLUSIONS AND ORDERS - 415 -

I THE CONTEXT

Introduction

1 The plaintiff (‘UCII’) was incorporated in 1989 and began trading that year. As of its establishment Niall O'Dowling and Fintan Riordan were equal shareholders in and the only directors of the company. Both had been involved in different aspects of the motor trade for many years. Their intention was that UCII would develop a business of sourcing used cars abroad (including in other European Union member states) and selling the vehicles thus imported to other dealers and to the public. In particular. Mr. O'Dowling and Mr. Riordan had come to the view that there was a market for, and shortage of, good quality second hand Japanese cars in Ireland. Mr. O'Dowling identified contacts in Japan and eventually put in place a system for purchasing vehicles at auction there. He secured shipping lines and necessary credit facilities.

2 A disused factory premises was acquired near the port in Cork city. From that premises UCII sold the cars it imported to a network of dealers it had established, as well as to the general public. In the early years UCII's business grew rapidly so that by 1992 it was selling in the region of 670 units per annum. Mr. Riordan and Mr. O'Dowling believed that with the introduction of the single European market in 1993 the opportunities for their car importation business would further expand.

3 On 1 January 1993 (and coincident with the opening of the single market) the legal provisions governing Vehicle Registration Tax (‘VRT’) took effect. VRT was payable on the registration of all motor vehicles including those imported into the State. It replaced a tax known as motor vehicle excise duty (‘MVED’) previously levied on the importation or delivery of such vehicles. VRT was initially introduced and regulated by the provisions of ss. 132 and 133 of the Finance Act 1992. These have since been amended from time to time. The effect of the statutory provisions governing VRT throughout the period with which this action was concerned was that the tax was to be imposed by reference to the ‘chargeable value’ of the motor vehicle in question, defined in turn as its ‘open market selling price’ (‘OMSP’). For second hand vehicles, the OMSP was dependent upon the opinion of the Revenue Commissioners (‘Revenue’) as to the price the vehicle might reasonably be expected to fetch on a sale in the open market.

4 UCII said that from the introduction of VRT it encountered difficulties in ascertaining the methodology by which Revenue determined the OMSP of used cars it imported. That methodology, UCII claimed, had resulted in it paying more VRT than was properly due in respect of vehicles it sold. In this action it complained that the manner in which VRT was operated and administered by Revenue over the period from 1993 to 2010 was contrary to the governing legislation, to principles of legitimate expectation, proportionality, legality, equality and legal certainty and that it was unreasonable. It further contended that Revenue had breached EU law by discriminating against imports. All of this, UCII said, resulted in VRT being imposed on used car imports at a rate that was too high, thereby increasing the price of those cars and damaging its business. It sought various...