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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Customs & Excise v DFS Furniture Company Plc [2002] EWCA Civ 1708 (06 December 2002) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2002/1708.html Cite as: [2002] EWCA Civ 1708, [2003] STC 1 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MR JUSTICE MOSES
QUEEN'S BENCH DIVISION ADMINISTRATIVE COURT
Strand, London, WC2A 2LL | ||
B e f o r e :
LORD JUSTICE LAWS
and
LORD JUSTICE KEENE
____________________
HER MAJESTY'S COMMISSIONERS OF CUSTOMS & EXCISE | Appellants | |
- and - | ||
DFS FURNITURE COMPANY PLC | Respondent |
____________________
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
MR RODERICK CORDARA QC and MR DAVID SCOREY (instructed by Messrs Landwell, London EC4A 3TL for the DFS Furniture Company PLC
____________________
AS APPROVED BY THE COURT
Crown Copyright ©
Lord Justice Mummery :
The Issue
The 1994 Act
"(4) The Commissioners shall not be liable, on a claim made under this section, to repay any amount paid to them more than three years before the making of the claim.
(4A) Where-
(a) any amount has been paid, at any time on or after 18th July 1996, to any person by way of repayment under this section, and
(b) the amount paid exceeded the Commissioners' repayment liability to that person at that time,
the Commissioners may, to the best of their judgement, assess the excess paid to that person and notify it to him.
(4B) For the purposes of subsection (4A) above the Commissioners' repayment liability to a person at any time is-
(a) in a case where any provision affecting the amount which they were liable to repay to that person at that time is subsequently deemed to have been in force at that time, the amount which the Commissioners are to be treated, in accordance with that provision, as having been liable at that time to repay to that person; and
(b) in any other case, the amount which they were liable to repay to that person."
"(1) Subject to the provisions of this section, where a person gives notice of appeal under section 83 and, before the appeal is determined by a tribunal, the Commissioners and the appellant come to an agreement (whether in writing or otherwise) under the terms of which the decision under appeal is to be treated –
(a) as upheld without variation, or
(b) as varied in a particular manner, or
(c) as discharged or cancelled,
the like consequences shall ensue for all purposes as would have ensued if, at the time when the agreement was come to, the tribunal had determined the appeal in accordance with the terms of the agreement (including any terms as to costs).
(3) Where an agreement is not in writing –
(a) the preceding provisions of this section shall not apply unless the fact that an agreement was come to, and the terms agreed, are confirmed by notice in writing given by the Commissioners to the appellant or by the appellant to the Commissioners, and
(b) references in those provisions to the time when the agreement was come to shall be construed as references to the time of the giving of that notice of confirmation."
Judgment of Moses J
Grounds of Appeal
Overpayment of VAT by DFS.
Deferral of Repayment
Appeal to VAT Tribunal
"As you may know, the VAT Tribunal has since our last letter confirmed our view that it is not within the Commissioners' powers to delay or defer repayment under section 80. The Tribunal took the view that even if the Commissioners did possess such a power, its exercise in circumstances such as the present would be wholly improper and their decision not to pay would be totally unreasonable.
As regards the Commissioners' view that theirs was not a decision against which an appeal could be made, the Tribunal held that such a decision shall be construed as a plain refusal to make a repayment rather than a decision to defer and such refusal is clearly capable of being appealed.
Consequently, we believe that there is no basis in law for any further delay in respect of our claim for repayment. The Tribunal expressed the hope that the Commissioners would act in good faith and proceed on the basis that the Tribunal had directed the Commissioners to make repayment immediately and we trust that the Commissioners will indeed so act.
In light of this, we intend applying to the Tribunal for an extension of time in which to serve our list of documents as it would benefit neither Customs nor ourselves to incur further costs in pursuing the appeal if Customs were to act in accordance with the Tribunal's decision. We would be grateful if you could confirm your agreement to such an extension as soon as possible. We will, of course, only withdraw the appeal once we have received repayment in full.
Finally, we would emphasise that we are making two claims. First, that as a matter of current law (as upheld by the Tribunal) we are entitled to repayment immediately. Second, we are also requesting that you give our claim special treatment, so that even if Parliament approves the proposed changes, we would be allowed to keep the repayments in excess of the three-year cap. We should be grateful if you would confirm whether Customs & Excise are prepared to accept our claim for special treatment.
We look forward to your speedy response."
"As you know, the High Court ruled yesterday that Customs & Excise have no discretion to defer repayments under section 80 of the Value Added Tax Act 1994. This means that it has been unlawful for the Commissioners to withhold payment of the amounts set out in the forms VAT 652 enclosed with our letters of 17 September 1996 and 30 October 1996 and we would request that they rectify that position and make immediate payment."
"Following the High Court decision Customs will be authorising and paying the agreed claims which have been deferred. However, if Parliamentary approval is given for the legislation introducing the three year cap on repayments, then Customs will have the power to assess to recover any refunds more than three years old which have been paid out since 18 July 1996. Full use will be made of that power in order to protect the revenue.
This means that in some cases refunds will be made, and then very shortly afterwards an assessment will be issued to recover the refunds. Businesses who are entitled to a refund will therefore be asked, where time permits, if they want to receive the money, or whether they want to wait to see if Parliament approves the legislative proposals."
"We would like to confirm, for the purposes of the paragraph headed "Payment of deferred claims", that we would want to receive payment of the claims set out in the forms VAT 652 previously sent to you. In this connection, we would again like to draw your attention to the request made in our last letter of 17 September 1996 for special treatment.
Further, referring to the paragraph headed "Order in which business claims will be dealt with", we understand that you confirmed to our solicitors during a telephone conversation earlier today that our said claims have already been authorised on Friday 22 November 1996 and are in the process of being paid to us. We would be grateful if you could confirm this in writing."
"On 25 November 1996, I spoke with Mrs Crosby on the telephone at 4.25pm. I told her that the claimant wanted full payment of the sum claimed in its appeal and she confirmed to me on the telephone that the Claimant's claim had been authorised for payment on Friday 22 November 1996 and was in the process of being paid to the Claimant. The Claimant noted this telephone call in writing to Mrs Crosby of the Defendant by a letter drafted by me dated 25 November 1996."
"On 19 November 1996 the High Court decided this policy of deferment in advance of Parliamentary approval was not correct and accordingly your outstanding claim has now been processed and authorised for payment. However, please read the next paragraph very carefully.
VERY IMPORTANT
If Parliament agrees in the forthcoming Budget that a 3-year limit is appropriate from 18 July 1996 for refunds of overpayments of indirect tax then Customs will require the repayment of the amount paid to you as a result of this letter. In your own interest you are therefore strongly advised to keep the monies paid to you readily available so that you are able to repay when required to do so by Customs."
"We write to inform you on behalf of the Appellant [DFS] that the Commissioners have settled the Appellant's claim in full and that the Appellant wishes to withdraw his appeal to the VAT & Duties Tribunal.
Please treat this letter as an application of behalf of the Appellant to the Tribunal for an award of costs….."
The Judicial Review Proceedings
"As you know the Commissioners made payment to you of £6.207,224 on 03. 12. 96. £6,207,224 was paid in respect of an amount overpaid by way of VAT more than 3 years prior to the date of your claim. At the time you indicated that you would like repayment of the capped sum pending Parliamentary approval of the 3 year time limit. Parliament has now approved this time limit and has given the Commissioners of Customs and Excise powers to recover refunds of sums overpaid in VAT which are subject to the cap.
In pursuance of their powers under Section 80(4A) VAT Act 1994, which allows the Commissioners to assess any amount they paid after 18 July 1996 which they were not liable to pay, an assessment is issued for the sum of £6,207,224. The assessment is made up of £6,207,224 which relates to the VAT refund."
Submissions of DFS
Conclusion
"58…The warning given by the Commissioners on 26th November does not alter the analysis. True it is that that letter does no more than record what has happened. It does not constitute a written acceptance of the claim. But the warning cannot, as Mr Mantle contended, be regarded as a counter-offer. In that warning the Commissioners were not inviting DFS to agree anything whatever. In my view, DFS, as an appellant before the VAT tribunal and the Commissioners, did come to an agreement under the terms of which the decision, which was a decision to defer payment made in October 1996, was to be treated as discharged or cancelled. Thus the like consequences ensued as would have ensued if the tribunal had determined that the Commissioners were liable to repay the amount of the overpayment (as in BSOC) and were not entitled to defer. The like consequences of course only followed if the provisions of section 83 were complied with.
59. I do not agree that the claim for repayment by DFS can be distinguished from its appeal in which it sought repayment. The two were identical and indivisible. In both DFS sought repayment of the sums which the Commissioners had hitherto refused to pay. In making payment in full the Commissioners evidenced their agreement to meet the claim and settle the appeal. There was an agreement to pay, as evidenced by the authorisation. The agreement to pay was an agreement under which the decision to defer the decision under appeal was to be treated as discharged or cancelled. It matters not that the Commissioners' motive was to comply as soon as possible with Mr Justice Keene's ruling, nor that the payment was made because the Commissioners were under a legal obligation to make it. That seems to me to be irrelevant. Any agreement reached by the Commissioners to make a payment must inevitably either be because they regarded themselves under a legal obligation to make that agreement or, alternatively, in the exercise of their powers of fair management
60. Nor do I consider that such a finding deprives section 84A of all effect, as Mr Mantle suggested.
61. Section 84A operates whenever there has been a voluntary payment in response to a claim under section 80(2), but subsection (4A) does not operate where a payment has been made in settlement of a dispute which has given rise to an appeal settled within the meaning of section 85. The distinction finds support at paragraph 106 in BSOC. True that there was no intervention of a judicial determination as in BSOC, but section 85 has the same effect as the intervention of a judicial determination.
62. The appeal had to be ended somehow. In my view it ended as a result of DFS's withdrawal, but that withdrawal was only made on terms that it received payment. The appeal ended because DFS agreed to withdraw it on the payment by the Commissioners of the sum claimed in the appeal."
The letter of 11 November 1996, read in context and according to its ordinary and natural meaning, did not make any offer to the Commissioners, which was capable of acceptance by them, so as to lead to a concluded agreement to settle the pending appeal. The letter was not worded as an offer nor, even on Mr Cordara's preferred characterisation, as an invitation to agree that the decision under appeal was invalid and to treat it as discharged or cancelled. In my view, the letter would not be construed by the reasonable recipient as making any offer or invitation to come to such an agreement. The letter asserted, relying on a recent tribunal decision, that the Commissioners were not legally entitled to defer refunds under section 80. It trusted that the Commissioners would make the refund immediately. It asked for confirmation of the Commissioners' agreement to an extension of time for the service of a list of documents in the appeal to the tribunal. It stated an intention to withdraw the appeal once repayment in full was received. It emphasised the two basis of DFS's claims: legal entitlement to immediate repayment and special treatment. But no offer or invitation to come to an agreement was made by DFS. In the absence of such an offer or invitation, no oral acceptance was possible on 25 November 1996 or at any other time. In the absence of an offer and an acceptance, there was no meeting of minds and no agreement, either within the meaning of section 85 or at common law. That is fatal to DFS's case. I agree with the observations of Jonathan Parker J in Schuldenfrei v. Hilton [1999] STC 821 at 831 (a decision on similarly worded provisions in section 54 of the Taxes Management Act 1970) that
" ….the notion of parties having "come to" an agreement plainly implies not merely that they are of the same mind in relation to a particular matter, but also that their minds have met so as to form a mutual consensus, and that that meeting of minds, that mutual consensus, has resulted from a process in which each party has to some extent participated. On that footing it is, in my judgment, both legitimate and helpful (as both sides have accepted) to approach the question whether the Revenue and the taxpayer have made a section 54 agreement in the instant case by applying common law principles of offer and acceptance." (paragraph 44).
It is true that it may be possible to infer an agreement to settle a claim or an appeal from the conduct of the parties and from the surrounding circumstances, by relying, for example, on the refund followed by the withdrawal of the appeal. But the making of the refund and the withdrawal of the appeal need not, in all circumstances, be referable to a prior agreement reached by the parties. It all depends on the context in which the refund was made. There may be a non-contractual explanation for the refund and for the withdrawal of the appeal. In my view, that was the case here. If, contrary to my view, there was an initial offer, or an invitation to agree, to settle the appeal in the letter of 11 November 1996, it was overtaken by subsequent events. The true explanation for the refund, which is borne out by the documents and by the sequence of events described earlier, is that it was made in consequence of a unilateral reversal by the Commissioners of a policy (i.e. deferral of repayment under section 80), which had been declared unlawful by Keene J in the case of ex parte Kay on 19 November 1996. They refunded £6.2m to DFS because it was unlawful for them to defer the refund any longer. They decided to act in accordance with their legal obligations, as determined by the court. This is clear from the Business Brief of 22 November 1996 issued three days before the alleged formation of an agreement by acceptance of an offer to settle. By the time that the alleged agreement was made the Commissioners had already decided to make the refund and had made a public announcement of the change in the policy of deferring refunds. The refund was made by the Commissioners without the need to come to an agreement with DFS to settle the appeal. The VAT appeal was neither determined judicially nor was it settled by a negotiated agreement. It was subsequently withdrawn by DFS, because it had ceased to have any practical point once DFS had received the refund .
Result
Lord Justice Keene
Lord Justice Laws