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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Vietjet Aviation Joint Stock Company v FW Aviation (Holdings) 1 Ltd [2025] EWCA Civ 783 (24 June 2025) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2025/783.html Cite as: [2025] EWCA Civ 783 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LONDON
COMMERCIAL COURT
MR JUSTICE PICKEN
Strand, London, WC2A 2LL |
||
B e f o r e :
LORD JUSTICE POPPLEWELL
and
LORD JUSTICE ZACAROLI
____________________
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Appellant/ Defendant |
|
- and - |
||
FW AVIATION (HOLDINGS) 1 LIMITED |
Respondent/ Claimant |
____________________
Mr Tom Smith KC, Mr Jonathan Peacock KC, Mr Richard Lissack KC, Mr Robin Lööf, Ms Sarah Black, Mr Orestis Sherman & Ms Susanna Breslin (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Respondent
Hearing dates: 20th, 21st & 22nd May 2025
____________________
VERSION
OF JUDGMENT
Crown Copyright ©
LORD JUSTICE POPPLEWELL:
Introduction
The financing arrangements and relevant events in outline
(1) a mortgage over the aircraft granted by the Owners/Borrowers as a first priority security interest, governed by New York law;
(2) security assignments, which assigned most of the rights of the lessor under the Head Lease/Sub-Lease in certain eventualities; this was achieved by back to back security assignments comprising:
(a) a 'Security Assignment (Lessee)' by which theVietJet
subsidiaries assigned their rights under the Sub-Lease to the Head Lessors (i.e. the Owners/Borrowers); and
(b) a 'Security Assignment (Lessor)' by which the Owners/Borrowers assigned their rights under the Head Lease, and the assigned rights of the Sub-Lessor under the Sub-Lease, to a security trustee representing the interests of the Lenders.
VietJet
acknowledged each of these by Assignment Acknowledgments.
(3) an Irrevocable Deregistration and Export Request Authorisation (IDERA) in favour of BNP and Natixis respectively, filed with the Civil Aviation Authority ofVietnam
('The CAAV').
Early stages of the litigation
Ground 1: The validity
of the Termination Notices
"The Lessor hereby, with full title guarantee, assigns and agrees to assign the Assigned Property, free from any Security Interest (other than Permitted Liens), absolutely and unconditionally by way of security to and in favour of the Security Trustee, in order to secure the payment, performance and discharge in full of all the Secured Obligations."
7. DEFAULT AND REMEDIES7.1 Powers of Security Trustee
Without prejudice to any of its other rights whether conferred under any of the Operative Documents or by law generally, at any time upon or following the occurrence of an Enforcement Event provided the same is continuing the Security Trustee shall be entitled (subject to Clauses 3.4 (Excluded Property), 3.5 (Co-extensive Rights) and 3.6 (Restrictions on dealing with the Excluded Property and Co-extensive Rights)):
7.1.1 to apply to any court of competent authority for an order for foreclosure absolute so as to
vest
all the Lessor's right, title and interest in all or any of the Assigned Property in the Security Trustee;
7.1.2 to sell, call in, collect and convert into money all or any of the Assigned Property by public or private contract at any place in the world with or without advertisement or notice to the Lessor or any other person, with all such powers in that respect as are conferred by law; and by way of extension thereof such sale, calling in, collection and conversion may be made for such consideration as the Security Trustee may in its sole and absolute discretion deem reasonable (whether the same shall consist of cash or shares or debentures in some other company or companies or other property of whatsoever nature or partly of one and partly of some other species of consideration, and whether such consideration shall be presently payable or by instalments or at some future date, and whether such deferred or future payments shall be secured or not) and in all other respects in such manner as the Security Trustee may in its sole and absolute discretion think fit (in the absence of fraud, gross negligence or wilful misconduct or as otherwise may be the case under applicable law), and without being liable to account for any loss of or deficiency in such consideration (in the absence of fraud, gross negligence or wilful misconduct or as otherwise may be the case under applicable law); and section 103 of the Law of Property Act 1925 shall not apply to this Assignment or to the power of sale, calling in, collection or conversion hereinbefore contained; and for the purposes of this paragraph the Security Trustee may (in its sole and absolute discretion) by notice appoint the Lessor (with the Lessor's consent which shall not be unreasonably withheld) or any other person its non-exclusive agent to sell all or any of the Assigned Property on terms satisfactory to the Security Trustee;
7.1.3 to settle, arrange, compromise or submit to arbitration any accounts, claims, questions or disputes whatsoever which may arise in connection with the Assigned Property or in any way relating to this Assignment and execute releases or other discharges in relation thereto;
7.1.4 to bring, take, defend, compromise, submit to arbitration or discontinue any actions, suits or proceedings whatsoever, civil or criminal, in relation to the Assigned Property;
7.1.5 to execute and do all such acts, deeds and things in relation to the Assigned Property as the Security Trustee may consider necessary or proper for or in relation to any of the purposes aforesaid; and
7.1.6 to appoint a Receiver of all or any part of the Assigned Property upon such terms as to remuneration and otherwise as the Security Trustee shall deem fit; and the Security Trustee may from time to time remove any Receiver so appointed and appoint another in its stead; and to fix (at or after the time of its appointment) the remuneration of any such Receiver. A Receiver so appointed shall be the agent of the Lessor, and the Lessor shall be liable for such Receiver's actions and defaults to the exclusion of liability on the part of the Security Trustee. Nothing herein contained shall render the Security Trustee liable to any such Receiver for its remuneration, costs, charges or expenses or otherwise.
7.2 Law of Property Act
Sections 109(6) and 109(8) of the Law of Property Act 1925 shall not apply in relation to any Receiver appointed under Clause 7.1 (Powers of Security Trustee).
"Co-extensive Rights" means all of the rights, title, benefits, claims and interest, present and future, actual and contingent, of the Lessor in, to, under or in respect of the following clauses and schedules of the Lease (other than to the extent any provision thereof or payment thereunder is Excluded Property or a Relevant Payment):
(a) clause 2.1 (Lessee Representations);(b) clause 3.1 (Lessor Conditions Precedent);(c) clause 3.4 (Conditions Subsequent);(d) clause 5.5 (Authorisations for Payments);(e) clause 7 (Lease Period);(f) clause 11.1 (Lessee's Undertakings);(g) clause 12 (Operation, Use and Possession);(h) clause 13 (Maintenance and Repair);(i) clause 14 (Interchange and Replacement of Engines and Parts);(j) clause 15 (Title and Registration);(k) clause 16 (Insurance);(l) clause 17 (Loss and Requisition);(m) clause 18 (Events of Default);(n) clause 22.1 (Transfer);(o) clause 24 (Benefit of Agreement);(p) clause 25 (Further Provisions);(q) clause 27 (Law and Jurisdiction);(r) clause 8 (Change in Circumstances) and clause 19 (Remedies) but in each case other than any right thereunder to repossess, require redelivery of and/or to sell the Aircraft (except in respect of any remarketing or offering for sale, or any sale of the Aircraft to the Lessee (or its nominee), in accordance with the provisions of clause 8 (Change in Circumstances) or clause 19 (Remedies) of the Lease),and also the rights of the Lessor to the equivalent provisions in the Sub-Lease as assigned pursuant to the Security Assignment (Lessee)."
"Enforcement of Security
On and at any time after the occurrence of an Enforcement Event which is continuing the Security Trustee may, and shall if instructed by the Instructing Group:
(a) take such steps as it considers necessary or desirable to preserve, protect and enforce the rights of the Financing Parties under the Operative Documents;
and/or(b) take such steps as it considers necessary or desirable for the enforcement, protection and preservation of the Security Interests constituted by the Security Documents."
Ground 2: Was FWC a "financial institution"?
17.1 Assignments and transfers by the LendersSubject to this Clause 17, a Lender (the "Existing Lender") may:
(a) assign any of its rights; or(b) transfer by novation any of its rights and obligations,
under the Operative Documents, to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the "New Lender").
17.2 Conditions of assignment or transfer(a) The consent of the Borrower is not required for any assignment or transfer by a Lender of its rights and/or obligations under the Operative Documents to which it is a party provided that:(i) such assignment or transfer is to another Lender who is at the time of such assignment or transfer a Qualifying Lender; or(ii) such assignment or transfer is to a Lender or a New Lender who, upon becoming a Lender, would be a Qualifying Lender; or …
" "Qualifying Lender" means a Lender which is beneficially entitled to interest payable to that Lender in respect of an advance under an Operative Document and is a Lender:
(i) [a Japanese bank, financial institution or company licensed to carry on banking or lending business in Japan]
(ii) [a non-Japanese bank or financial institution participating in the loan through a Japanese Facility Office]
(iii) "which (x) is a bank or other financial institution organized under the laws of any jurisdiction other than Japan (y) participates in the Facility through a Facility Office outside Japan and (z) benefits from a double tax treaty with Japan so that no withholding tax will be levied in relation to payments of interest (the "Relevant DTT") being qualified as an entity that can receive such interest free of withholding tax under the Relevant DTT and the relevant regulations and not acting through its branch in Japan."
21.23 Retirement of Security Trustee
(b) "The Security Trustee may …retire from its appointment as Security Trustee … provided that no such retirement shall take effect unless there has been appointed as a successor security trustee …the successor (i) who shall be a trust corporation, bank or financial institution nominated by the Instructing Group (after consultation with the Borrower provided that no Event of Default has occurred and is continuing) or, failing such a nomination; (ii) any trust corporation, bank or financial institution nominated by the Security Trustee (after consultation with the Borrower)"
"I, therefore, end up with a broader interpretation than did the judge of the term 'other financial institution' in the expression, 'a bank or other financial institution', in the agreement. In myview,
the judge, in identifying the nature of the restriction imposed by the agreement on the meaning of a transferee for the purpose of considering whether a putative transferee was entitled to claim repayment of debts of Essar passed to it, adopted too restrictive a meaning. He should have held that it was satisfied by proof that the putative transferee met the broad fifth criterion he identified (at [38]), namely having 'a legally recognised form or being, which carries on its business in accordance with the laws of its place of creation and whose business concerns commercial finance', and whether or not its business included the lending of money on the primary or secondary lending market."
"…where the relevant expression has been given a settled meaning by the courts, the court should so construe it in the same context in the future."
He went on at [28] to say:
"To my mind, that principle is essentially a principle of construction. Thus the court is trying to ascertain the intention of the parties in using the expression deployed in the contract. Where a contract has been professionally drawn, as in the case of the Institute Clauses, the draftsman is certain to have in mind decisions of the courts on earlier editions of the clause. Such decisions are part of the context or background circumstances against which the particular contract falls to be construed. If the draftsman chooses to adopt the same words as previously construed by the courts, it seems to me to be likely that, other things being equal, he intends that the words should continue to have the same meaning."
Grounds 3 and 4: the double tax treaty
Ground 3: was FWC an exempt resident under Article 22.5?
"5. (a) Notwithstanding that a resident of a Contracting State may not be a qualified person, that resident shall be entitled to the benefits granted by the provisions of paragraph 3 of Article 10 or paragraph 1 of Article 11; or of Articles 12, 13 or 21 of this Convention with respect to an item of income, profit or gain described in those paragraphs or Articles derived from the other Contracting State if the resident is carrying on business in the first-mentioned Contracting State (other than the business of making or managing investments for the resident's own account, unless the business is banking, insurance or securities business carried on by a bank, insurance company or securities dealer), the income, profits or gains derived from the other Contracting State is derived in connection with, or is incidental to, that business and that resident satisfies any other specified conditions in those paragraphs or Articles for the obtaining of such benefits" (my emphasis).
(1) What is the proper interpretation of "the business of making or managing investments" within Article 22(5(a)? and
(2) Did the business which FWC was carrying on at the date of the assignments fall within that phrase on its proper interpretation?
Issue 1: interpretation
"[36] There was no dispute as to the general approach to the interpretation of double tax conventions so, for convenience, I will repeat the summary I gave in Royal Bank of Canadav
HMRC [2023] EWCA Civ 695, [2023] STC 1205:00
'[23] … Article 31(1) of theVienna
Convention on the Law of Treaties (1969) (the "
Vienna
Convention") requires a treaty to be:
"… interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."
[24] Article 31 also provides that the context extends beyond the treaty itself to certain other sources, including subsequent agreements between the parties in respect of the interpretation of the treaty, subsequent practice that establishes such an agreement and any relevant rules of international law.
[25] Article 32 permits recourse to further supplementary means of interpretation in order to confirm the meaning resulting from the application of Article 31, or to determine that meaning when it would otherwise be ambiguous or obscure or leads to a result which is manifestly absurd or unreasonable.
[26] As Lord Reed explained in Ansonv
HMRC [2015] UKSC 44, [2015] STC 1777:
"[56] Put shortly, the aim of interpretation of a treaty is therefore to establish, by objective and rational means, the common intention which can be ascribed to the parties. That intention is ascertained by considering the ordinary meaning of the terms of the treaty in their context and in the light of the treaty's object and purpose. Subsequent agreement as to the interpretation of the treaty, and subsequent practice which establishes agreement between the parties, are also to be taken into account, together with any relevant rules of international law which apply in the relations between the parties. Recourse may also be had to a broader range of references in order to confirm the meaning arrived at on that approach, or if that approach leaves the meaning ambiguous or obscure, or leads to a result which is manifestly absurd or unreasonable."
[27] Later in his judgment Lord Reed commented on the fact that the process of interpretation must take account of the fact that what is being interpreted is an international convention, not a UK statute. He said this:
"[110] Article 31(1) of theVienna
Convention requires a treaty to be interpreted 'in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose'. It is accordingly the ordinary (contextual) meaning which is relevant. As Robert Walker J observed at first instance in Memec [1996] STC 1336 at 1349, 71 TC 77 at 93, a treaty should be construed in a manner which is 'international, not exclusively English'.
[111] That approach reflects the fact that a treaty is a text agreed upon by negotiation between the contracting governments …"
He went on to emphasise in the same paragraph the courts' predisposition, when faced with "narrow and technical constructions", to favour an interpretation which reflects the "ordinary meaning of the words used and the object" of the treaty.
[28] This echoes the well known passage of Lord Diplock's speech in Fothergillv
Monarch Airlines
Ltd
[1981] AC 251, at pp.281–282:
"The language of an international convention has not been chosen by an English parliamentary draftsman. It is neither couched in the conventional English legislative idiom nor designed to be construed exclusively by English judges. It is addressed to a much wider and morevaried
judicial audience than is an Act of Parliament that deals with purely domestic law. It should be interpreted, as Lord Wilberforce put it in James Buchanan & Co.
Ltd.
![]()
v.
Babco Forwarding & Shipping (U.K.)
Ltd.
[1978] AC 141, 152, 'unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation'."
[29] The Treaty we are concerned with here, like most bilateral double tax treaties, is based on the OECD Model Tax Convention ("MTC"). As explained by Lord Briggs in Fowlerv
HMRC [2020] UKSC 22, [2021] 1 All ER 97, guidance as to how such a treaty is to be interpreted can also be found in OECD Commentaries on the MTC, which (even where they postdate the treaty in question) should be "given such persuasive force as aids to interpretation as the cogency of their reasoning deserves" (see at [16] and[18], citing Patten LJ's judgment in Smallwood
v
HMRC [2010] EWCA Civ 778, [2010] STC 2045 at [26(5)]; see also Irish Bank, where the 2008
version
of the Commentary was considered in interpreting a treaty entered into in 1976).
[37] I would add four points at this stage.
[38] First, the unilateral opinion or practice of a tax authority is not a relevant aid to interpretation: see Irish Bank Resolution CorporationLtd
![]()
v
HMRC [2020] EWCA Civ 1128, [2020] STC 1946 ('Irish Bank') at [18]–[23].
…
[43] Fourthly, there was some discussion at the hearing about how reference to OECD Commentaries (and indeed to the MTC itself) fits in with the terms of arts 31 and 32 of theVienna
Convention. Given Lord Briggs' guidance in Fowler and the fact that there is no controversy that reference is permitted, it is not necessary to determine the extent to which the power to refer to such material is derived from art 31 or 32, or (at least for
versions
of the OECD Commentary that post-date the relevant treaty) is akin to academic commentaries. However, I note that in relation to later
versions
of the OECD Commentary Lord Briggs referred in Fowler at [18] to the cogency of their reasoning in a similar way to Lord Diplock's reference to the use of academic commentaries in Fothergill
v
Monarch Airlines, and that the authority that Lord Briggs cited was Smallwood at [26], where Lord Diplock's comment is referred to in a citation from Commerzbank, p 298 at para (5). In other words, those later
versions
were treated in a similar way to academic commentaries."
"154. Accordingly Article 1(1)(c) of the BIT must be interpreted (1) in good faith (2) in accordance with its ordinary meaning (3) in its context, which includes the terms of the BIT as a whole and (4) in the light of the object and purpose of the BIT. However, although we have for ease of exposition broken down thevarious
elements of the interpretation exercise, reflecting some of the submissions made to us, it is important to say that interpretation is "a single combined operation", as the Supreme Court explained in JTI Polska Sp Z.o.o.
v
Jakubowski [2023] UKSC 19, [2024] AC 621:
"26. Article 31 focuses on seeking to ascertain the ordinary meaning of the relevant terms of the treaty having regard to their context and the object and purpose of the treaty. This is to be done by reference to the text of the treaty and to the material set out in article 31.2 to 31.4, such as its preamble, as a 'single combined operation'.
27. As Lord Kerr of Tonaghmore explained in Moohanv
Lord Advocate [2014] UKSC 67; [2015] AC 901, para 64:
"It would be wrong to read article 31 as reflecting something like the so-called 'golden rule' of statutory interpretation where one starts with the ordinary meaning of the words and then moves to other considerations only if the ordinary meaning would give rise to absurdity. That is not international law. The International Law Commission made clear in its commentary to the draft treaty, at p 219, that, in accordance with the established international law which these provisions of [theVienna
Convention] codified, such a sequential mode of interpretation was not contemplated: 'The commission, by heading the article 'General rule of interpretation' in the singular and by underlining the connection between paras 1 and 2 and again between para 3 and the two previous paragraphs, intended to indicate that the application of the means of interpretation in the article would be a single combined operation'."
"In this area as in the area of contractual construction, "the notion of words having a natural meaning" is not alwaysvery
helpful (Charter Reinsurance Co
Ltd
![]()
v
Fagan [1997] AC 313, 391C, per Lord Hoffmann), and certainly not as a starting point, before identifying the legislative purpose and scheme."
"20. Whilst the preceding paragraphs identify different approaches to deal with conduit situations, each of them deals with a particular aspect of the problem commonly referred to as "treaty shopping". States wishing to address the issue in a comprehensive way may want to consider the following example of detailed limitation-of-benefits provisions aimed at preventing persons who are not resident of either Contracting States from accessing the benefits of a Convention through the use of an entity that would otherwise qualify as a resident of one of these States, keeping in mind that adaptations may be necessary and that many States prefer other approaches to deal with treaty shopping:
"1. Except as otherwise provided in this Article, a resident of a Contracting State who derives income from the other Contracting State shall be entitled to all the benefits of this Convention otherwise accorded to residents of a Contracting State only if such resident is a "qualified person" as defined in paragraph 2 and meets the other conditions of this Convention for the obtaining of such benefits.
2. A resident of a Contracting State is a qualified person for a fiscal year only if such resident is either:
a) an individual;
b) a qualified governmental entity;
c) a company, if
(i) the principal class of its shares is listed on a recognised stock exchange specified in subparagraph a) or b) of paragraph 6 and is regularly traded on one or more recognized stock exchanges, or
(ii) at least 50 per cent of the aggregatevote
and
value
of the shares in the company is owned directly or indirectly by five or fewer companies entitled to benefits under subdivision i) of this subparagraph, provided that, in the case of indirect ownership, each intermediate owner is a resident of either Contracting State;
d) a charity or other tax-exempt entity, provided that, in the case of a pension trust or any other organization that is established exclusively to provide pension or other similar benefits, more than 50 per cent of the person's beneficiaries, members or participants are individuals resident in either Contracting State; or
e) a person other than an individual, if:
(i) on at least half the days of the fiscal year persons that are qualified persons by reason of subparagraph a), b) or d) or subdivision c) i) of this paragraph own, directly or indirectly, at least 50 per cent of the aggregatevote
and
value
of the shares or other beneficial interests in the person, and
(ii) less than 50 per cent of the person's gross income for the taxable year is paid or accrued, directly or indirectly, to persons who are not residents of either Contracting State in the form of payments that are deductible for purposes of the taxes covered by this Convention in the person's State of residence (but not including arm's length payments in the ordinary course of business for services or tangible property and payments in respect of financial obligations to a bank, provided that where such a bank is not a resident of a Contracting State such payment is attributable to a permanent establishment of that bank located in one of the Contracting States).
3. a) A resident of a Contracting State will be entitled to benefits of the Convention with respect to an item of income, derived from the other State, regardless of whether the resident is a qualified person, if the resident is actively carrying on business in the first-mentioned State (other than the business of making or managing investments for the resident's own account, unless these activities are banking, insurance or securities activities carried on by a bank, insurance company or registered securities dealer), the income derived from the other Contracting State is derived in connection with, or is incidental to, that business and that resident satisfies the other conditions of this Convention for the obtaining of such benefits.
b) If the resident or any of its associated enterprises carries on a business activity in the other Contracting State which gives rise to an item of income, subparagraph a) shall apply to such item only if the business activity in the first-mentioned State is substantial in relation to business carried on in the other State. Whether a business activity is substantial for purposes of this paragraph will be determined based on all the facts and circumstances.
c) In determining whether a person is actively carrying on business in a Contracting State under subparagraph a), activities conducted by a partnership in which that person is a partner and activities conducted by persons connected to such person shall be deemed to be conducted by such person. A person shall be connected to another if one possesses at least 50 per cent of the beneficial interest in the other (or, in the case of a company, at least 50 per cent of the aggregatevote
and
value
of the company's shares) or another person possesses, directly or indirectly, at least 50 per cent of the beneficial interest (or, in the case of a company, at least 50 per cent of the aggregate
vote
and
value
of the company's shares) in each person. In any case, a person shall be considered to be connected to another if, based on all the facts and circumstances, one has control of the other or both are under the control of the same person or persons.
4. Notwithstanding the preceding provisions of this Article, if a company that is a resident of a Contracting State, or a company that controls such a company, has outstanding a class of shares
a) which is subject to terms or other arrangements which entitle its holders to a portion of the income of the company derived from the other Contracting State that is larger than the portion such holders would receive absent such terms or arrangements ("the disproportionate part of the income"); and
b) 50 per cent or more of thevoting
power and
value
of which is owned by persons who are not qualified persons the benefits of this Convention shall not apply to the disproportionate part of the income.
5. A resident of a Contracting State that is neither a qualified person pursuant to the provisions of paragraph 2 or entitled to benefits under paragraph 3 or 4 shall, nevertheless, be granted benefits of the Convention if the competent authority of that other Contracting State determines that the establishment, acquisition or maintenance of such person and the conduct of its operations did not have as one of its principal purposes the obtaining of benefits under the Convention.
… "
(1) The concept of carrying on a business is avery
wide one, considered by Falk LJ in GE Financial Investments at [127]-[136]. It is wider than carrying on a trade.
(2) However, a business which is carrying on a trade is a trading business and is taxed as a trading business. The 'badges of trade' are those discussed in Marsonv
Morton [1986] 1 WLR 134 which are regularly applied by the courts.
(3) UK tax law also recognises that a person may carry on investment business: Cook (Inspector of Taxes)v
Medway Housing Society
Ltd
[1997] STC 90.
(4) Article 22.5 draws the same distinction between non-investment business (exempt status) and investment business (excluded from exempt status save for banks, insurers and securities dealers). Trading business is, ex hypothesi, non-investment business. It follows that for the purposes of Article 22.5 an entity which is carrying on a trading business cannot be making or managing investments with respect to the same activity.
(5) Since FWC was carrying out a trading business and its relevant activity was trading activity, its business could not fall within the exclusion in the parenthesis of investment business.
(6) The special singling out of banks and insurance companies in Article 22 is explicable by what was said in the House of Lords decision in Nuclear Electric Plcv
Bradley [1996] 1 WLR 529. The issue was whether the investment income from a sinking fund which a nuclear fuel powered electricity generating company had invested in order to meet future decommissioning costs was a trading receipt. In holding that it was not, Lord Jauncey, giving the leading speech, treated banks and insurance companies whose business required them to make and hold investments to meet current liabilities as those whose investment income would be part of their trading activity (at p. 535B-C).
"The income from investments held by a trader is prima facie investment income; but it may in certain circumstances be brought into account as a trading receipt. Whether it may or may not be so treated depends on the nature of the trade. What the authorities show is that the nature of the trade must be such that it can fairly be said that the making and holding of the investments at interest is an integral part of the trade."
Issue 2: Was FWC carrying on business making or managing investments?
(1) that Mr Peacock was making the concession alleged; or
(2) that the fund was being conducted by an entity which was FWC's 100% parent at the time of the assignment, given that Mr Thompson was simply relying on a chart from 2023; or
(3) that Article 22.5(c) is relevant to FWC's business activity or qualification for DTT exemption, when it seems to be addressed:
a) to whether a taxpayer who has received an interest payment can be treated as carrying on business in the UK by reference to the business activity of a connected person doing so, whereas the question here is not whether FWC is carrying on business in the UK, which is common ground, but the nature of that business; and
b) to the place of business of subsidiaries being attributable to their parent in certain circumstances, notvice-versa,
which is how it is contended to apply here; or
(4) that this argument is within the ground of appeal.
Ground 4
"7. No relief shall be available under this Article if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment."
(1) Article 11 is concerned with interest, and by the time of the assignment the loans had been accelerated so that there was no prospect of interest being paid under the Loans; and
(2) the fact that FitzWalter sought to structure its affairs in a tax efficient manner did not establish that the "main purpose" requirement was made out, and the Judge was not prepared to draw any adverse inference that evidence from Mr Gray or any other uncalled witness would have established that it was.
"9.4 … it is agreed that States do not have to grant the benefits of a double taxation convention where arrangements that constitute an abuse of the provisions of the convention have been entered into.
9.5 It is important to note, however, that it should not be lightly assumed that a taxpayer is entering into the type of abusive transactions referred to above. A guiding principle is that the benefits of a double taxation convention should not be available where a main purpose for entering into certain transactions or arrangements was to secure a more favourable tax position and obtaining that more favourable treatment in these circumstances would be contrary to the object and purpose of the relevant provisions."
"Anti-abuse rules dealing with source taxation of specific types of income
21.4 The following provision has the effect of denying the benefits of specific Articles of the convention that restrict source taxation where transactions have been entered into for the main purpose of obtaining these benefits. The Articles concerned are 10, 11, 12 and 21; the provision should be slightly modified as indicated below to deal with the specific type of income covered by each of these Articles:
"The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the [Article 10: "shares or other rights"; Article 11: "debt-claim"; Articles 12 and 21: "rights"] in respect of which the [Article 10: "dividend"; Article 11: "interest"; Articles 12 "royalties" and Article 21: "income"] is paid to take advantage of this Article by means of that creation or assignment."
Ground 5
"… the Judge erred in law in concluding that the actions ofVietJet's
founder and its CEO (as the Judge found them to be) in causing the
Vietnamese
Shareholder Proceedings to be brought was attributable to
VietJet.
He ought to have concluded that any such actions were undertaken on behalf of Silva Star and the other shareholders in
VietJet
who were parties to the Shareholder Proceedings, and that there was no basis in English or
Vietnamese
law for attributing the actions of
VietJet's
shareholders to
VietJet
itself."
Jurisdiction
"16.— Appeals from High Court
(1) Subject as otherwise provided by this or any other Act … or as provided by any order made by the Lord Chancellor under section 56(1) of the Access to Justice Act 1999, the Court of Appeal shall have jurisdiction to hear and determine appeals from any judgment or order of the High Court."
"… Lakev
Lake properly understood means that if the decision when properly analysed and if it were to be recorded in a formal order would be one that the would be appellant would not be seeking to challenge or
vary,
then there is no jurisdiction to entertain an appeal. That is in my
view
consistent with In re B. That this is so is not simply by
virtue
of interpretation of the words "judgment" or "order", but as much to do with the fact that the court only has jurisdiction to entertain "an appeal". A loser in relation to a "judgment" or "order" or "determination" has to be appealing if the court is to have any jurisdiction at all. Thus if the decision of the court on the issue it has to try (or the judgment or order of the court in relation to the issue it has to try) is one which a party does not wish to challenge in the result, it is not open to that party to challenge a finding of fact simply because it is [not] one he or she does not like."
[I have put [not] in square brackets because the sense suggests it is a typographical error]
Hale LJ said at [53]:
"It is clear that the statutory jurisdiction of the Court of Appeal is to hear appeals from a 'judgment or order' of the High Court or a 'determination' of a county court. It has long been axiomatic that these words refer to the result of the hearing rather than to the reasons given by the judge for reaching that result. Hence I agree with Waller L.J. (para 27, above) that 'Lakev
Lake properly understood means that if the decision when properly analysed and if it were to be recorded in a formal order would be one that the would-be appellant would not be seeking to challenge or
vary,
then there is no jurisdiction to entertain an appeal.' This ties in neatly with the distinction drawn in the CPR between a cross appeal, in which the respondent is seeking a different or
varied
result, for which he needs permission, and upholding the decision on other grounds, for which he does not."
"It is in that context that it might be appropriate for the court at first instance to consider whether some declaration should be granted to provide a "judgment" or "order" or "determination" which could be the subject of an appeal. If for example the findings of fact might be relevant to some other proceedings (and Mr Pollock accepted this), it might be appropriate to make a declaration so as to enable a party to challenge those findings and not find him or herself prejudiced by them. The findings would still be pregnant with legal consequences. It is to go beyond the scope of this judgment to consider precisely what circumstances might allow for the granting of a declaration where findings of fact might affect other proceedings."
"It is therefore unnecessary to hold that the Cie Noga approach can be engaged in this case because it may be said that the judge's findings are "pregnant with legal consequences" or some such phrase. That factor is relevant, but it is relevant to determining whether or not the individual's article 8 private life rights are engaged and in reviewing the overall proportionality of establishing whether or not there has been a breach of those rights. It is also not necessary to use the rather contrivedvehicle
of the judge's refusal to grant a declaration in the terms of the adverse findings in order, in some way, to generate an "order" or "judgment" that can be the subject of any appeal."
Conclusion
LORD JUSTICE ZACAROLI
LADY JUSTICE ASPLIN