Warnock v Revenue Commissioners

• Jurisdiction: Ireland
• Judge: Mr. Justice Costello
• Judgment Date: 01 January 1986
• Neutral Citation: 1985 WJSC-HC 1636
• Court: High Court
• Docket Number: [1976 No. 4348P],1976 No.4348P
• Date: 01 January 1986

1985 WJSC-HC 1636

The High Court

1976 No.4348P

WARNOCK & ORS v. REVENUE COMMISSIONERS

Between/

Warnock and Others, Practising as Stokes Kennedy Crowley and Co.

Plaintiffs

and

The Revenue Commissioners

Defendants

Citations:

CLINCH V INLAND REVENUE COMMISSIONERS 1974 1 QB 76

CRAIE STATUTE LAW P294

DUNNE V HAMILTON 1982 ILRM 290

FINANCE ACT 1974 PART I

FINANCE ACT 1974 PART I CH IV

FINANCE ACT 1974 S57

FINANCE ACT 1974 S57(9)

FINANCE ACT 1974 S58

FINANCE ACT 1974 S59

FINANCE ACT 1974 S59(1)

FINANCE ACT 1974 S59(2)

FINANCE ACT 1974 S59(6)

FINANCE ACT 1974 S88

FINANCE ACT 1974 S88(5)

INCOME TAX ACTS

PRESTON, IN RE 1985 2 WLR 836

ROYAL BANK OF CANADA V IRC 1972 1 CH 665

Synopsis:

REVENUE

Information

Disclosure - Statutory notice served on firm of accountants - Validity of notice - Obligation to supply information sought - Whether expense of compliance with notice a relevant factor - Transactions occurring before enactment of statute authorising service of notice - Notice issued intra vires - Finance Act, 1974, ss. 57–59 - (1976 No. 4348P - Costello J. - 21/5/85).

Warnock v. Revenue Commissioners

STATUTE

Compliance

Expense - Burden - Whether obligation unreasonable - Revenue - Information - Disclosure - Statutory notice served on firm of accountants - Validity of notice - Obligation to supply information sought - Whether expense of compliance with notice a relevant factor - Transactions occurring before enactment of statute authorising service of notice - Notice issued intra vires - Finance Act, 1974, ss. 57–59 - (1976 No. 4348P - Costello J. - 21/5/85).

Warnock v. Revenue Commissioners

1 Judgment of Mr. Justice Costello delivered on the 21st day of May 1985.

2 Administrative Law - Notice served on Plaintiffs by Revenue Commissioners requiring information - Section 59, Finance Act, 1974 - Whether notice ultra vires - Whether notice unduly burdensome and oppressive.

3 The Revenue Commissioners caused to be served on the plaintiffs (partners in a well known firm of accountants) a notice dated the 24th August, 1976 under section 59 of the Finance Act, 1974, a section which was part of new tax-avoidance measures contained in Part I of the Act. On the 1st October, 1976 the Plaintiffs issued a plenary summons challenging its validity and five months later delivered a Statement of Claim. On the 13th May 1977 the defendants served a notice for particulars and thereafter a form of paralysis appears to have settled on the action. For six years nothing happened and it was not until 1983 after the defendants had brought a motion to strike out the claim that the plaintiffs gave the particulars sought. The defendants immediately filed a defence, the pleadings were then closed and now, nearly nine years after the date of the notice to which these proceedings relate, the action has come for hearing. The plaintiffs" case is two-fold; (a) that the notice was invalid because it was ultra vires the section; and (b) that it was invalid because it would cost the plaintiffs"£50,000 to comply with it and that this cost and the disruptive effect of compliance make it unduly burdensome and oppressive.

4 The parties are only too familiar with those provisions of the 1974 Act which are relevant to these proceedings and I need not overburden this judgment by citing them in any great detail. They relate to anti-avoidance measures containd in Part I Chapter IV of the Act. Those with which I am concerned are measures to avoid tax liability by the transfer of assets to tax havens abroad. Section 57 is a charging section and provides, inter alia that where in consequence of any transfer of assets an individual has power to enjoy the income of a person resident or domiciled outside the state that income is deemed to be the income of the individual for the purposes of the Income Tax Acts. Further detailed provisions followed and subsection (9) provides as follows:

"The provisions of this section shall apply for the purposes of the assessment to tax for the year 1974-75 and subsequent years, and shall apply in relation to transfers of assets and associated operations whether carried out before or after the commencement of the Act."

5 The effect of that subsection is perfectly clear; the tax liability resulting from the new charging provisions measure would arise in respect of the tax year 1974/75, and they would arise even though the transfer of the asset or the "associated operations" (phrase defined in the section) had been carried out before the commencement of the Act.

6 Section 58 provided that tax chargeable by virtue of section 57 would be charged under Case IV of Schedule D, and made provision for deductions and reliefs in relation to the income chargeable. Section 59 empowered the Revenue Commissioners to obtain information for the purposes of these sections and as this is the section with which this action is primarily concerned I must examine it in some detail. To do so I will quote its first two sub-paragraphs:

7 59 (1) The Revenue Commissioners or such officer as the Revenue Commissioners may appoint may by notice in writing require any person to furnish to them within such time as they may direct (not being less than twenty-eight days) with such particulars as they think necessary for the purposes of sections 57, 58, and 60.

8 (2) The particulars which a person must furnish under this section, if required by notice so to do, include particulars -

9 (a) as to transactions with respect to which he is or was acting on behalf of others, and

10 (b) as to transactions which in the opinion of the Revenue Commissioners, or of such officer as the Revenue Commissioner may appoint, it is proper that they should be investigated for the purposes of section 57, 58 and 60 notwithstanding that, in the opinion of the person to whom the notice is given, no liability to tax arises under the said sections,

11 (c) as to whether the person to whom the notice is given has taken or is taking any, and if so what, part in any, and if so what, transactions of a description specified in the notice.

12 It is also of relevance to note that non-compliance with a section 59 notice could involve its recipient in a criminal prosectution (section 59(6)).

13 The power which the Oireachtas gave to Mr. O'Sé (who was the duly appointed officer in this case) to obtain information was a very extensive one - indeed it would be hard to imagine how it could be drafted in wider terms. He is entitled to serve a notice in writing requiring any person (and that would include of course a taxpayer's professional advisers) to furnish him with such particulars as he thinks necessary for the purposes of section 57, and in particular to furnish information as to transactions in which the person to whom the notice is addressed had in the past been acting on behalf of others. Mr. O'Sé whose evidence I heard stated that he was of the opinion that the particulars which were sought in the notice of the 24th August, 1974 were necessary for the purpose of section 57 and that it was proper that he should investigate for the purposes of the section the transactions referred to in the notice. His veracity was not challenged, I unreservedly accept his evidence and accordingly hold that he bona fide formed the opinions referred to in the subsection to which I have quoted.

14 How then can it be said that the notice is ultra vires the section? It is, in fact, a long document drafted with very careful precision but for the purposes of examining this part of the plaintiffs" case it will suffice if I draw attention to the feature which it is said vitiates it. It provided that in any case where the plaintiff firm had since the 6th April 1970 acted for a "Republic of Ireland client" in or in connection with any transaction or operation of a kind mentioned in the first column of the notice...