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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> R v Inland Revenue Commissioners, ex p. Preston [1984] UKHL 5 (25 April 1984)
URL: http://www.bailii.org/uk/cases/UKHL/1984/5.html
Cite as: [1985] AC 835, [1984] UKHL 5, [1985] 1 AC 835

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JISCBAILII_CASE_CONSTITUTIONAL

    Parliamentary Archives,
    HL/PO/JU/18/245

    In re Preston

    JUDGMENT

    Die Jovis 25° Aprilis 1985

    Upon Report from the Appellate Committee to whom was
    referred the Cause In re Preston, That the Committee had
    heard Counsel on Monday the 18th, Tuesday the 19th, Wednesday
    the 20th and Thursday the 21st days of February last upon the
    Petition and Appeal of Michael David Preston of 91 Redington
    Road, London NW3 praying that the matter of the Order set
    forth in the Schedule thereto, namely an Order of Her
    Majesty's Court of Appeal of the 31st day of July 1984, might
    be reviewed before Her Majesty the Queen in Her Court of
    Parliament and that the said Order might be reversed, varied
    or altered or that the Petitioner might have such other
    relief in the premises as to Her Majesty the Queen in Her
    Court of Parliament might seem meet; as also upon the Case of
    the Commissioners of Inland Revenue lodged in answer to the
    said Appeal, and due consideration had this day of what was
    offered on either side in this Cause:

    It is Ordered and Adjudged, by the Lords Spiritual and
    Temporal in the Court of Parliament of Her Majesty the Queen
    assembled, That the said Order of Her Majesty's Court of
    Appeal of the 31st day of July 1984 complained of in the said
    Appeal be, and the same is hereby, Affirmed and that the said
    Petition and Appeal be, and the same is hereby, dismissed
    this House: And it is further Ordered, That the Appellant do
    pay or cause to be paid to the said Respondents the Costs
    incurred by them in respect of the said Appeal, the amount
    thereof to be certified by the Clerk of the Parliaments if
    not agreed between the parties.

    Cler: Parliamentor:

    HOUSE OF LORDS


    IN RE PRESTON (ENGLAND)

    Lord Scarman
    Lord Edmund-Davies
    Lord Keith of Kinkel
    Lord Brightman
    Lord Templeman


    LORD TEMPLEMAN

    My Lords,

    This is an appeal in judicial review proceedings whereby the
    appellant Mr. Preston seeks a declaration that the respondent
    Inland Revenue Commissioners are not entitled to exercise and
    perform their statutory powers and duties under Part XVII of the
    Income and Corporation Taxes Act 1970 by counteracting a tax
    advantage alleged to have been obtained by the appellant by his
    dealings in the shares of Gymboon Ltd.

    Part XVII of the Act of 1970 begins with section 460. By
    section 460(6), if the commissioners have reason to believe that a
    taxpayer has obtained a tax advantage in consequence of a
    transaction in securities in the circumstances prescribed by section
    461, the commissioners may notify the taxpayer in writing. The
    taxpayer may then make a statutory declaration that section 460
    does not apply to him either because he has not been involved
    with any transactions in securities in the circumstances prescribed
    by section 461 or because he can show, in the words of section
    460(1):

    "that the transaction or transactions were carried out either
    for bona fide commercial reasons or in the ordinary course
    of making or managing investments, and that none of them
    had as their main object, or one of their main objects, to
    enable tax advantages to be obtained . . ."

    If, notwithstanding the taxpayer's statutory declaration, the
    commissioners see reason to take further action, they shall by
    section 460(7)(a) submit to a tribunal established for the purpose
    by section 463, a certificate to that effect together with the
    statutory declaration of the taxpayer and, if the commissioners
    wish, a counter-statement by the commissioners with reference to
    the matter. The tribunal after taking into consideration the
    statutory declaration by the taxpayer and the certificate and
    counter-statement by the commissioners shall by section 460(7)(b)
    determine "whether there is or is not a prima facie case for
    proceeding in the matter . . ." If the tribunal determine that a
    prima facie case has been established, the commissioners by
    section 460 (3) shall counteract the tax advantage obtained by the
    taxpayer by a number of alternative adjustments, including an
    additional assessment to tax on such basis as the commissioners
    may specify by notice in writing served on the taxpayer as being
    requisite for counteracting the tax advantage so obtained. By
    section 462(1) the taxpayer to whom notice has been given may
    appeal to the special commissioners on the grounds that section
    460 does not apply to him or that the adjustments directed to be
    made are inappropriate. An appeal lies from the special

    - 1 -

    commissioners to the tribunal under section 462(2). The tribunal
    shall rehear and determine the appeal and by section 462(3) the
    determination of the tribunal shall be final.

    In the present case, there has been a notification by the
    commissioners and a statutory declaration by the appellant both
    under section 460(6), followed by the presentation to the tribunal
    of a certificate, the statutory declaration and a counter-statement.
    The tribunal has determined under section 460(7) that there is a
    prima facie case for proceeding. The commissioners have
    proceeded by serving notice under section 460(3) designed to
    counteract, by means of an additional assessment, the tax
    advantage which they say the appellant has obtained. No appeal
    has yet been heard by the special commissioners under section 462
    (1) because the appellant seeks by this appeal to obtain a
    declaration that all the steps taken against him by the
    commissioners pursuant to Part XVII of the Act of 1970 are
    unlawful.

    The dispute between the appellant and the commissioners
    has its origin in the activities of the appellant between 1974 and
    1977. The appellant gave an account of his activities between
    those years in a letter dated 24 May 1978 written by the appellant
    to Mr. Thomas, an officer of the Special Investigations Section
    maintained by the commissioners. In November 1974 the appellant
    took employment with the Rossminster Group Ltd. "with a view to
    developing a commercial and corporate financial activity for the
    group, and with the ultimate aim of making such activity the
    principal, if not sole, activity of the group." He "built up a team
    of 6 or 7 competent corporate finance executives. Our activities
    were principally confined to commercial and corporate finance
    matters and, in particular, my own involvement with the other
    activities of Rossminster was minimal." By the latter part of
    1976, "on the one hand the substance of Rossminster "s current
    financial well-being clearly now depended very little on my
    department and in commercial terms we were no longer an
    essential ingredient of the group's future well-being. At the same
    time, from a personal viewpoint, I had become progressively less
    sympathetic towards the nature and aims of Rossminster's main
    field of activity." It is common knowledge that Rossminster's
    main field of activity to which the appellant referred consisted of
    the invention, marketing and carrying into effect of large numbers
    of sophisticated tax avoidance schemes which were lawful and
    which were thought by Rossminster but not guaranteed to be
    effective. The appellant ceased to be employed by Rossminster in
    March 1977 and received an ex gratia payment.

    From information supplied to your Lordships by the appellant
    through his counsel, it appears that the tax returns for the
    appellant for the years 1974-75 and 1975-76 represented that after
    allowing for claims for loan interest, the appellant was not liable
    to pay any income tax. In the year 1974-75 a deduction of
    £11,592 loan interest was claimed for income tax purposes and a
    capital loss of £10,000 was shown for capital gains tax purposes.
    In the year 1975-76 a deduction of £26,074 loan interest was
    claimed for income tax purposes. In May 1978 the appellant's
    taxation returns were referred to the Special Investigations Section
    of the commissioners. After some preliminary correspondence, Mr.
    Thomas, the officer of the Special Investigations Section dealing

    - 2 -

    with the matter, invited the appellant to call on Tuesday, 6 June
    and said in a letter dated 18 May that the particular matters that
    he would like to discuss were:

    "(a) Your claims to relief for interest paid to Rossminster
    Acceptances Ltd.,

    1. the loss which you have claimed in respect of the
      purchase and sale of shares in Jurby Raven Ltd., and
      allied operations,

    2. your transactions in the shares of Gymboon Ltd.,
      Jacksons Bourne End Ltd., the Telbex Group Ltd.,
      Powerstem Ltd., Alanvale Securities Ltd. and First
      London Securities Ltd.,

    3. the leaving payment which you received from
      Rossminster Management Services Ltd.

    It would be very helpful if you would bring to the
    meeting the documents, correspondence and other
    papers in your possession which are relevant to these
    matters."

    It subsequently transpired in July 1982 that among the
    documents in the appellant's possession which were relevant was an
    incomplete draft of the agreement whereby the appellant had sold
    his shares in Gymboon Ltd.

    The appellant replied by letter dated 24 May 1978. He
    pointed out "that although a chartered accountant, I am by no
    means well versed in highly-complex taxation matters, and feel
    that I am not competent to converse with you on equal terms.
    Subject to my comments below, therefore, if the interview is still
    considered necessary I feel that I must now seek professional
    advice. In the meantime, however, in order to facilitate the
    finalisation of my affairs I set out below certain information and
    observations on the matters specified in your letter of the 18 May.
    In this regard it seems to me that your questions fall into two
    main categories. Dealing first with the claims for relief for
    interest paid to Rossminster Acceptances Ltd. (in connection solely
    with which the holding of shares in First London Securities Ltd.
    arose) and for loss on disposal of shares in Jurby Raven Ltd., the
    following background information may be relevant." He then set
    out the history of his employment with Rossminster from which I
    have largely quoted and continued:

    "As you will appreciate, as the head of the corporate
    financial and commercial activity at Rossminster I would
    have displayed a considerable lack of confidence in my
    employers if I had failed to enter into the transactions in
    question and into which all other senior employees of
    Rossminster had evidenced their intention to enter. The
    foregoing deals adequately, I hope, with the first category.
    Turning to the second category of matters raised by your
    enquiries, these involve commercial investments of business
    substance, and need not, in my view, be considered other
    than as capital transactions. As things stand today it is not
    a matter of great concern to me to see whether or not I

    - 3 -

    proceed with my claims for relief for interest or capital
    loss. What is most certainly of greater importance is that
    my taxation affairs are maintained on a current basis.
    Accordingly, without prejudice to any claim which may have
    to be made for interest relief or capital loss, I am prepared
    to forgo such claims for the years in question on the basis
    that by doing so I shall facilitate the agreement of my tax
    affairs. In the light of the above you may feel that a
    discussion is no longer necessary. However, if you still wish
    to proceed with such a meeting, perhaps you will provide
    me with a list of specific questions on which I can obtain
    professional advice."

    There was a telephone conversation between Mr. Thomas and
    the appellant on the 25 May 1978 and the substance of that
    conversation was confirmed the following day by a letter from Mr.
    Thomas in these terms:

    "If I understand the penultimate paragraph of your letter
    correctly, you are withdrawing your claims to relief for
    interest paid to Rossminster Acceptances Ltd. during the
    two years ended 5 April 1976, and you are not pursuing the
    inclusion in the computation of your gains chargeable to
    capital gains tax a loss on the disposal of shares in Jurby
    Raven Ltd. For the avoidance of doubt would you please
    let me have a note confirming these amendments to your
    income tax returns. I have considered your comments
    regarding the subjects mentioned in sub paragraphs (c) and
    (d) of my letter of 18 May 1978. As stated on the
    telephone, I should like the following information regarding
    the shares in Gymboon Ltd:

    a. full details of the acquisition and disposal of these
    shares, including the names and addresses of the
    person from whom they were acquired and to whom
    they were sold, the relevant dates and numbers of
    shares involved.

    b. a note of the circumstances in which the value of the
    shares increased so quickly between September 1976
    and the date of disposal. What was the precise
    nature of Gymboon Ltd.'s business activities?

    I look forward to hearing from you on these points. I
    confirm that I should not wish to trouble you with an
    interview if you withdraw your claim to relief for interest
    paid to Rossminster Acceptances Ltd. and for the loss on
    the disposal of the shares in Jurby Raven Ltd."

    After a reminder dated 21 June 1978 the appellant
    responded by a letter dated 23 June 1978 and provided the
    following information concerning the shares in Gymboon Ltd:

    "(a) (i) On 10 April 1974, I acquired 50 per cent. of

    the issued share capital in the company at par
    from Gardencare Group Ltd. (formerly
    Danecross Ltd.) of 44, Grange Walk, London,
    S.E.1.

    - 4 -

    (ii) On 1 February, 1975, I sold 15.4 per cent. of
    the shares in the company to Mrs. S. L. M.
    Aaronberg of 6, Westchester Drive, London,
    N.W.4 thus reducing my holding in the company
    to 34.6 per cent. This sale was made at par.

    (iii) On 11 January, 1977, and pursuant to an
    unsolicited offer, I sold my remaining holding in
    the company which, at that time, was 346
    shares at 10p each, to Broadforth Ltd. (an
    unconnected party) of 1, Hanover Square,
    London, W.1 for £24,375.

    (b) Gymboon Ltd.'s activity was that of a dealer in
    shares and commodities, the latter being traded upon
    the London Metal Exchange, and it was as a result of
    the substantial profits generated by its dealing that
    the value of its snares increased as they did.

    I trust that the above is sufficient for your
    requirements and upon hearing from you that you have no
    further questions on my tax affairs, I shall be happy to
    write formally to you withdrawing my claims of relief for
    interest paid to Rossminster Acceptances Ltd. and for a loss
    on disposal of shares in Jurby Raven Ltd."

    There followed a letter from Mr. Thomas, dated 21 July 1978,
    which noted the information supplied regarding the shares in
    Gymboon Ltd. and said:

    "On receipt of your note formally withdrawing your claims
    to relief for interest paid to Rossminster Acceptances Ltd.
    during the two years ended 5 April 1976 and confirming that
    you are not pursuing the inclusion in the computation of
    your gains chargeable to capital gains tax of a loss on the
    disposal of shares in Jurby Raven Ltd. I propose to return
    your tax papers to H.M. Inspector of Taxes, North East 5
    (London) as I do not intend to raise any further enquiries on
    your tax affairs."

    The correspondence ended with a letter dated 28 July 1978
    from the appellant in which, after acknowledging the letter from
    Mr. Thomas dated 21 July, he continued:

    "Accordingly, I am pleased to give you formal notice that I
    hereby withdraw my claims to relief for interest paid to
    Rossminster Acceptances Ltd. during the two years ended 5
    April, 1976 and confirm that I am not pursuing the inclusion
    in the computation of my gains chargeable to capital gains
    tax of a loss on the disposal of shares in Jurby Raven Ltd."

    In October 1978 tax assessments were made on the appellant
    taking into account the withdrawal of his claims for tax relief.
    On 16 October 1978 the appellant was assessed to capital gains
    tax in the sum of £7,302 in respect of the sale of the appellant's
    shares in Gymboon Ltd. This liability was set off against tax
    repayments in respect of certain annuity benefits received by the
    appellant when he left the employment of Rossminster.

    - 5 -

    Subsequently, the Special Investigations Section received
    from Gymboon Ltd. the accounts of the company for the year
    ended 13 September 1977. Mr. Owston, an inspector of taxes,
    senior principal grade, employed in the Inland Revenue Technical
    Division, Special Investigations Section in an affidavit sworn on 22
    December 1982 deposed that on 8 October 1979 he was one of the
    inspectors of taxes engaged in the Special Investigations Section
    considering the tax avoidance scheme known as the Rossminster
    Company Purchase Scheme.

    "On that day there were referred to me the accounts of
    Gymboon Ltd. for the year ended 13 September 1977 ... It
    was apparent to me from those accounts that the shares of
    the company had been sold during the year ended 13
    September 1977 by its former shareholders, of whom Mr. M.
    D. Preston was one, in the course of the Rossminster
    Company Purchase Scheme."

    In April 1981, the claims for capital loss and loan interest
    for the year 1974-75 which the appellant had withdrawn in 1978
    ceased by statute to be renewable and they cannot now be
    revived. The appellant's claim for loan interest for the year 1975-
    76 ceased to be renewable in April 1982.

    By section 465 of the Act of 1970:

    "Where it appears to the Board that by reason of any
    transaction or transactions a person may be a person to
    whom section 460 above applies, the Board may by notice in
    writing served on him require him, within such time not less
    than 28 days as may be specified in the notice, to furnish
    information in his possession with respect to the transaction
    or any of the transactions, being information as to matters,
    specified in the notice, which are relevant to the question
    whether a notice under subsection (3) of that section should
    be given in respect of him."

    In exercise of the powers conferred by section 465, the
    commissioners by a notice dated 26 July 1982 required information
    from the appellant concerning the following transactions:

    "1. On 13 September 1976 the subdivision of the 100
    ordinary £1 shares of Gymboon Ltd. (Gymboon) into
    1000 ordinary 10p shares.

    1. On 10 January 1977 the creation by Gymboon of 300
      13 per cent. redeemable preference shares of £1
      each.

    2. On or about 10 January 1977 the grant to Broadforth
      Ltd. (Broadforth) of an option to subscribe for 300 13
      per cent. redeemable preference £1 shares in
      Gymboon.

    3. On 11 January 1977 the following alterations in the
      share capital of Gymboon:

    (a) the increase in the authorised capital to £410
    by the creation of 1000 ordinary 1p shares;

    - 6 -

    1. the conversion of the existing issued 1000
      ordinary 10p shares into 1000 deferred 10p
      shares;

    2. the rights issue of a 1000 ordinary 1p shares

    5. On 11 January 1977 the sale by you to Broadforth of
    your 346 deferred 10p shares and 346 ordinary 1p
    shares (held on renouncable letters of allotment) in
    Gymboon for a consideration of £24,375.


    1. On 11 January 1977 the acquisition by St. George's
      Elizabethan Theatre Ltd. (St. George's) of all the
      shares in Gymboon.

    2. The transactions described as 'Annuity payment
      £75,000' in the note to the accounts of Gymboon for
      the year ended 13 September 1977.

    3. The transaction described as 'Donation to the then
      ultimate holding company being a UK registered
      charity £66,852' in the notes to the accounts of
      Gymboon for the year ended 13 September 1977.

    4. (a) On 3 February 1977 the transfer of all the

    shares in Gymboon to the Elizabethan Theatre
    Trust.

    (b) The write-down in respect of the fall in the
    value of the shares in Gymboon in the accounts
    of St. George's for the period 29 October 1975
    to 4 February 1977."

    The information which was sought included the sale
    agreement whereby the appellant sold his Gymboon shares to
    Broadforth.

    By a letter dated 29 July 1982 the appellant supplied such
    information as was available to him including the only copy in his
    possession of the sale agreement, which was only an incomplete
    draft, whereby he sold his Gymboon shares to Broadforth. The
    appellant, however, prefaced the information which he furnished
    with a protest in the following terms:

    "In your letter dated 21 July 1978 and sent to me by
    Special Investigations Section you stated 'I do not intend to
    raise any further enquiries on your tax affairs.' If you
    refer to this letter and to the correspondence which led up
    to it, you will see that this latter statement was a
    consequence of and in consideration for the withdrawal by
    me of certain claims for tax relief. I would contend
    accordingly that this correspondence constituted a binding
    legal agreement which estops you from now raising enquiries
    on Gymboon Ltd. or any other matters covered by the
    correspondence."

    .

    On 14 September 1982 the commissioners served on the appellant
    notification under section 460(6) that the Board had reason to
    believe that section 460 applied to the appellant in respect of the

    - 7 -

    transactions which had been set out in the section 465 notice
    dated 26 July 1982.

    On 11 October 1982 the appellant made a statutory
    declaration pursuant to section 460(6). He contended that the sale
    of his shares in Gymboon and "the incidental alterations on the
    company's share capital preceding that sale" were outside the
    scope of section 460(1) as being transactions carried out for bona
    fide commercial reasons or in the ordinary course of making or
    managing investments and not having as their main objects or one
    of their main objects to enable tax advantages to be obtained. He
    also contended that the transactions did not fall within the scope
    of section 461 which rigidly defines the prescribed circumstances
    such as dividend stripping to which section 460 applies. Section
    461 includes within its ambit tax advantages achieved by a scheme
    whereby a shareholder receives in connection with the distribution
    of profits of a company a consideration which represents assets of
    the company available for distribution by way of dividend but in
    such manner that the shareholder does not pay or bear tax on the
    consideration as income. In his statutory declaration the appellant
    gave detailed reasons why in his view sections 460 and 461 did not
    apply to the sale of his shares in Gymboon. The appellant also
    drew attention to the fact that he had been assessed to capital
    gains tax in the sum of £7,302 in respect of the purchase and sale
    of his shares in Gymboon Ltd. Finally, he drew attention to the
    1978 correspondence and concluded:

    "By reason of the agreement thus made the Inland Revenue
    is now contractually precluded from seeking to apply the
    provisions of the said section 460 to me in respect of the
    sale of the shares."

    On 20 December 1982 the commissioners served a counter-
    statement under section 460(7). On the same day the
    commissioners certified to the tribunal, pursuant to section 460(7)
    that the commissioners saw reason to take further action and on
    the 28 January 1983 the tribunal constituted under section 463
    determined that there was a prima facie case for proceeding
    against the appellant under section 460.

    The legality of the commissioners' actions was challenged in
    these proceedings on 18 November 1982 when the appellant applied
    for leave to apply for an order prohibiting the commissioners from
    taking any further steps under Part XVII of the Act of 1970 for
    the purpose of investigating or assessing the appellant to further
    tax liabilities in connection with the affairs of Gymboon Ltd. In
    his application the appellant asserted that the conduct of the
    commissioners in "invoking section 460 was a breach of contract or
    breach of representations made in the 1978 correspondence with
    Mr. Thomas and that "In the premises the said conduct of the
    commissioners constitutes an improper exercise alternatively an
    abuse of the statutory powers of collection and management of
    Inland Revenue." In his affidavit in support sworn on 17 November
    1982 the appellant made the same submissions and said:

    "if I had realised that the commissioners would subsequently
    attempt to go back on their word and their agreement with
    me made in 1978, I should not have agreed to withdraw my
    claims for tax relief."

    - 8 -

    On behalf of the commissioners Mr. Thomas swore an
    affidavit in reply on 22 December 1982. He said that in 1978 the
    appellant:

    "did not tell me that the sale price of the shares was based
    on an asset value which excluded provision for corporation
    tax on those profits ... I now understand that the
    £24,733 paid to the applicant for his Gymboon shares was in
    excess of their true market value and could only have been
    paid because no provision had been made for corporation tax
    .... I am advised that since the applicant was able to
    obtain cash from the sale of his shares in Gymboon which
    represented the accumulated profits of the company
    available for distribution by way of dividend without
    payment of tax thereon as income, the transaction is caught
    by the anti-avoidance provisions of Part XVII of the Income
    and Corporation Taxes Act 1970. At no time did I say or
    imply that the Board of Inland Revenue would not
    contemplate proceedings under these provisions."

    In argument before your Lordships, the commissioners without
    implying bad faith on the part of the appellant, indicated by their
    counsel that in their view the value of the appellant's shares in
    Gymboon Ltd. increased from £34.60 to £24,735 partly "as a result
    of the substantial profits generated by its dealings" as the
    appellant informed Mr. Thomas in the appellant's letter dated 23
    June 1978 but also partly because the effect of the Rossminster
    company purchase scheme was to relieve Gymboon from its
    liability to corporation tax by artificial transactions.

    On 25 January 1983 Woolf J. granted the appellant leave to
    apply for judicial review and on 23 February 1983 the application
    came before the same judge. On the following day Woolf J.
    "ordered and declared that the Commissioners of Inland Revenue
    were and are not entitled in the circumstances of the case to
    exercise their powers pursuant to Part XVII of the Income and
    Corporation Taxes Act 1970 in respect of the acquisition in 1974
    and subsequent disposal by the applicant of shares in Gymboon Ltd.
    and that the commissioners purported exercise of the said powers
    in respect thereof was and is unlawful." The reasons of the judge
    are to be found in the report of the case in [1983] 2 All.E.R. 300.
    On 31 July 1984 the Court of Appeal (Lawton, Griffiths and Dillon
    L.JJ.) allowed an appeal by the commissioners from the decision of
    Woolf J. and discharged the order which he had made: see [1984]
    3 W.L.R. 945. Your Lordships were informed that the
    commissioners have made on the appellant under section 460 an
    additional assessment to income tax to counteract the tax
    advantage which they assert he obtained from the shares of
    Gymboon Ltd. An appeal by the appellant to the special
    commissioners pursuant to section 462(1) of the Act of 1970
    against the additional assessment made under section 460(3) awaits
    the result of this present appeal whereby the appellant with leave
    of your Lordships' House, appeals against the decision of the Court
    of Appeal. It will be for the special commissioners and the
    tribunal to determine, if this appeal fails, whether section 460
    applies and if so whether in computing the tax advantage obtained
    by the appellant and the appropriate amount of any counteracting
    assessment, the capital gains tax of £7,302 paid by the appellant
    in respect of the Gymboon shares should be taken into account. If

    - 9 -

    on this appeal it appears that the actions taken by the
    commissioners under section 460 have been unlawful, the
    commissioners cannot proceed to enforce the additional assessment
    made upon the appellant under section 460, whether or not the
    appellant in 1977 fell foul of section 460. If your Lordships
    determine that the actions taken by the commissioners under
    section 460 have been lawful, then subject to the appeal procedure
    provided by section 462 to the special commissioners and the
    tribunal, the commissioners will proceed to enforce the additional
    assessment.

    Woolf J. rightly decided that the appellant had no remedy
    against the commissioners for breach of contract or breach of
    representations made by Mr. Thomas in 1978 because the
    commissioners could not in 1978 bind themselves not to perform in
    1982 the statutory duty of counteracting a tax advantage imposed
    on the commissioners by section 460 of the Act of 1970. The
    only remedy which might be available to the appellant was the
    remedy of judicial review. Judicial review is available where a
    decision-making authority exceeds its powers, commits an error of
    law, commits a breach of natural justice, reaches a decision which
    no reasonable tribunal could have reached, or abuses its powers.
    Judicial review should not be granted where an alternative remedy
    is available. In most cases in which the commissioners are said to
    have fallen into error, the remedy of the taxpayer lies in the
    appeal procedures provided by the tax statutes to the General
    Commissioners or Special Commissioners. This appeal structure
    provides an independent and informed tribunal which meets in
    private so that the taxpayer is not embarrassed in disclosing his
    affairs and the commissioners are not inhibited by their duty of
    confidentiality. The commissioners and the tribunals established to
    hear appeals from the commissioners have wide knowledge and
    experience of fiscal law and practice. Appeals from the General
    Commissioners or the Special Commissioners lie, but only on
    questions of law, to the High Court by means of a case stated and
    the High Court can then correct all kinds of errors of law
    including errors which might otherwise be the subject of judicial
    review proceedings: see Edwards v. Bairstow [1956] AC 14.
    Judicial review process should not be allowed to supplant the
    normal statutory appeal procedure. The present circumstances are
    exceptional in that the appeal procedure provided by section 462
    cannot begin to operate if the conduct of the commissioners in
    initiating proceedings under section 460 was unlawful.

    My Lords, it is clear that the commissioners are amenable
    to the remedy of judicial review in a proper case. In Reg. v.
    Inland Revenue Commissioners, Ex parte National Federation of
    Self-Employed and Small Businesses Ltd.
    [1982] AC 617 a group
    of self-employed taxpayers applied for an order of mandamus
    directing the commissioners to collect tax from casual employees
    with whom the commissioners had made an arrangement not to
    investigate tax evasion prior to 1977. In the instant case the
    appellant seeks an order to restrain the commissioners from
    proceeding to collect the tax which they have assessed on the
    appellant under section 460. In the Self-Employed case Lord
    Wilberforce said, at p. 631:

    "The Inland Revenue Commissioners are a statutory body.
    Their duties are, relevantly, defined in the Inland Revenue

    - 10 -

    Regulation Act 1890 and the Taxes Management Act 1970.
    Section 1 of the Act of 1890 authorises the appointment of
    commissioners 'for the collection and management of inland
    revenue and confers on the commissioners 'all necessary
    powers for carrying into execution every act of Parliament
    relating to inland revenue.' By section 13 the

    commissioners must 'collect and cause to be collected every
    part of inland revenue and all money under their care and
    management and keep distinctive accounts thereof.' Section
    1 of the Act of 1970 provides that 'Income tax . . . shall
    be under the care and management of the commissioners.'
    This Act contains the very wide powers of the board and of
    inspectors of taxes to make assessments on persons
    designated by Parliament as liable to pay income tax . . .
    From this summary analysis it is clear that the Inland
    Revenue Commissioners are not immune from the process of
    judicial review."

    Lord Wilberforce said, at p. 632, that from the authorities and
    from principle:

    "a taxpayer would not be excluded from seeking judicial
    review if he could show that the revenue had either failed
    in its statutory duty toward him or had been guilty of some
    action which was an abuse of their powers or outside their
    powers altogether. Such a collateral attack - as contrasted
    with the direct appeal on law to the courts - would no
    doubt be rare, but the possibility certainly exists."

    Lord Diplock, at p. 637, stated:

    "Judicial review is available only as a remedy for conduct
    of a public officer or authority which is ultra vires or
    unlawful, but not for acts done lawfully in the exercise of
    an administrative discretion which are complained of only as
    being unfair or unwise, . . ."

    Then at p. 644, he added that the commissioners:

    "are accountable to Parliament for what they do so far as
    regards efficiency and policy, and of that Parliament is the
    only judge; they are responsible to a court of justice for
    the lawfulness of what they do, and of that the court is the
    only judge."

    Lord Roskill said, at p. 660, that the commissioners:

    "are, and must as a public body charged with the
    performance of a public duty of crucial importance be,
    amenable to the general law and liable to possible
    correction if their statutory powers are exceeded, or their
    statutory duties are not lawfully discharged."

    The speech of my noble and learned friend Lord Scarman
    was to the same effect and he made observations as to the
    principle of fairness. At p. 650, Lord Scarman referred to the
    remedy of mandamus as one which has:

    - 11 -

    "been recognised by the judges as a remedy for certain
    forms of abuse of discretion, upon the principle that the
    improper or capricious exercise of discretion is a failure to
    exercise the discretion which the law has required to be
    exercised."

    In considering the statutory provisions applicable to the
    commissioners, Lord Scarman said, at p. 651:

    "They establish a complex of duties and discretionary powers
    imposed and conferred in the interest of good management
    upon those whose duty it is to collect the income tax. But
    I do not accept that the principle of fairness in dealing with
    the affairs of taxpayers is a mere matter of desirable policy
    or moral obligation. Nor do I accept that the duty to
    collect 'every part of inland revenue' is a duty owed
    exclusively to the Crown ... I am persuaded that the
    modern case law recognises a legal duty owed by the
    revenue to the general body of the taxpayers to treat
    taxpayers fairly; to use their discretionary powers so that,
    subject to the requirements of good management,
    discrimination between one group of taxpayers and another
    does not arise; to ensure that their are no favourites and no
    sacrificial victims."

    He concluded, at p. 652, "I am, therefore, of the opinion that a
    legal duty of fairness is owed by the revenue to the general body
    of taxpayers."

    Mr. Brodie, on behalf of the appellant, submitted that if, as
    Lord Scarman announced in the Self-Employed case [1982] A.C.
    617, the commissioners owe a duty of fairness to the general body
    of taxpayers, the commissioners must equally owe a duty of
    fairness to each individual taxpayer. I agree, but a taxpayer
    cannot complain of unfairness, merely because the commissioners
    decide to perform their statutory duties including their duties
    under section 460 to make an assessment and to enforce a liability
    to tax. The commissioners may decide to abstain from exercising
    their powers and performing their duties on grounds of unfairness,
    but the commissioners themselves must bear in mind that their
    primary duty is to collect, not to forgive, taxes. And if the
    commissioners decide to proceed, the court cannot in the absence
    of exceptional circumstances decide to be unfair that which the
    commissioners by taking action against the taxpayer have
    determined to be fair. The commissioners possess unique
    knowledge of fiscal practices and policy. The commissioners are
    inhibited from presenting full reasons to the court for their
    decisions because of the duty of confidentiality owed by the
    commissioners to each and every taxpayer.

    The court can only intervene by judicial review to direct
    the commissioners to abstain from performing their statutory
    duties or from exercising their statutory powers if the court is
    satisfied that "the unfairness" of which the applicant complains
    renders the insistence by the commissioners on performing their
    duties or exercising their powers an abuse of power by the
    commissioners.

    - 12 -

    In most cases in which the court has granted judicial review
    on grounds of "unfairness" amounting to abuse of power there has
    been some proven element of improper motive. In the leading
    case of Padfield v. Minister of Agriculture [1968] AC 997 the
    Minister abstained from exercising his statutory discretion to order
    an investigation because he feared the consequences of the
    investigation might be politically embarrassing. In Congreve v.
    Home Office
    [1976] Q.B. 629 the Minister exercised his power to
    revoke television licences because he disapproved of the conduct of
    the licence holders, albeit they had acted lawfully. In Laker
    Airways Ltd, v. Department of Trade
    [1977] QB 643 the Minister
    exercised his statutory discretion to give directions with regard to
    Civil Airways with the ulterior motive of making it impossible for
    one of the airlines to pursue a course of which the Minister
    disapproved. In these cases judicial review was granted because
    the Ministers acted "unfairly" when they abused their powers by
    exercising or declining to exercise those powers in order to
    achieve objectives which were not the objectives for which the
    powers had been conferred. The question of "fairness" was
    considered in H.T.V. Ltd, v. Price Commission [1976] I.C.R. 170.

    In that case the Price Commission misconstrued the counter
    inflation price code and changed its mind as to the treatment of
    exchequer levy as an item in the costs of television companies
    allowable for the purpose of increasing their advertising charges
    within the limits prescribed by the code. The effect of the
    change of mind of the Price Commission was to deprive the
    companies of an increase of advertising charges which they were
    plainly intended to enjoy and which they badly needed in order to
    remain financially viable. Lord Denning M.R., at p. 185, said "It
    is often been said, I know, that a public body, which is entrusted
    by Parliament with the exercise of powers for the public good,
    cannot fetter itself in the exercise of them. It cannot be
    estopped from doing its public duty. But that is subject to the
    qualification that it must not misuse its powers: and it is a misuse
    of power for it to act unfairly or unjustly towards a private
    citizen where there is no overriding public interest to warrant it.
    So when an army officer was told that his disability was accepted
    as attributable to war service, and he acted on it by not getting
    his own medical opinion, the Minister was not allowed to go back
    on it; see Robertson v. Minister of Pensions [1949] 1 Q.B. 227.
    And where an owner, who was about to build on his land, was told
    that no planning permission was required and he acted on it by
    erecting the building the Minister was not allowed to go back on
    it: see Wells v. Minister of Housing and Local Government [1976]
    1 W.L.R"1000 and Lever Finance Ltd, v. Westminster (City)
    London Borough Council
    [1971] 1 QB 222. Very recently when a
    man was issued with a television licence then although the
    Minister had power to revoke it, it was held that it would be a
    misuse of that power if he revoked it without giving reasons or
    for no good reasons: see Congreve v. Home Office [1977] 2
    W.L.R. 291." In the first three cases cited by Lord Denning the
    authorities acted in a manner for which, if the authorities had not
    been emanations of the Crown, the applicants would have enjoyed
    a remedy by way of damages or an injunction for breach of
    contract or breach of representations. In the third case of
    Congreve, as I have indicated, the decision was "unfair" because
    the Minister was actuated by an irrelevant motive.

    - 13 -

    In the H.T.V. case [1976] I.C.R. 170 my noble and learned
    friend, then Scarman L.J., said, at p. 189:

    "Agencies, such as the Price Commission, must act fairly.
    If they do not, the High Court may intervene either by
    prerogative order to prohibit, quash or direct a
    determination as may be appropriate, or, as is sought in this
    case, by declaring the meaning of the statute and the duty
    of the agency ... It is a common place of modern law
    that such bodies must act fairly. . . It is not really
    surprising that a code must be implemented fairly, and that
    the courts have power to redress unfairness."

    Scarman L.J., after considering the Price Commission's change of
    mind, said, at p. 192, that "the commission's inconsistency has
    already resulted in unfairness, and unless corrected, could cause
    further injustice. First, it gives rise to a real possibility of an
    erosion of profit margin . . ." Next, if, as the Price Commission
    contended, the Exchequer levy was excluded in 1976 but included
    in 1973 then the television companies would be unable to obtain a
    fair increase in advertising charges corresponding to increases in
    costs between 1973 and 1976:

    "The commission, to avoid being unfair, must either include
    or exclude Exchequer levy as a cost upon both sides of the
    comparison. Since it has made clear that, in the absence of
    a ruling to the contrary, it intends to exclude it when
    calculating current profit margins, the commission must also
    exclude it when calculating the profit margin at April 30,
    1973. I am not completely sure that it intends so to do if
    it succeeds in this litigation. . . The commission has acted
    inconsistently and unfairly; and on this ground were it
    necessary, I would think H.T.V. are also entitled to
    declaratory relief."

    In the H.T.V. case [1976] I.C.R. 170, the "unfairness" of the
    decision was due not to improper motive on the part of the Price
    Commission but to an error of law whereby the Price Commission
    misconstrued the code they were intending to enforce. If the
    Price Commission had not misconstrued the code, they would not
    have acted "inconsistently and unfairly." Of course the
    inconsistent and unfair results to which Scarman L.J. drew
    attention were themselves powerful support for the contention that
    the Price Commission must have misconstrued the code.

    In the present case, the appellant does not allege that the
    commissioners invoked section 460 for improper purposes or
    motives or that the commissioners misconstrued their powers and
    duties. However, the H.T.V. case and the authorities there cited
    suggest that the commissioners are guilty of "unfairness" amounting
    to an abuse of power if by taking action under section 460 their
    conduct would, in the case of an authority other than Crown
    authority, entitle the appellant to an injunction or damages based
    on breach of contract or estoppel by representation. In principle I
    see no reason why the appellant should not be entitled to judicial
    review of a decision taken by the commissioners if that decision is
    unfair to the appellant because the conduct of the commissioners
    is equivalent to a breach of contract or a breach of
    representation. Such a decision falls within the ambit of an abuse

    of power for which in the present case judicial review is the sole
    remedy and an appropriate remedy. There may be cases in which
    conduct which savours of breach of conduct or breach of
    representation does not constitute an abuse of power; there may
    be circumstances in which the court in its discretion might not
    grant relief by judicial review notwithstanding conduct which
    savours of breach of contract or breach of representation. In the
    present case, however, I consider that the appellant is entitled to
    relief by way of judicial review for "unfairness" amounting to
    abuse of power if the commissioners have been guilty of conduct
    equivalent to a breach of contract or breach of representations on
    their part.

    The sole question which now falls to be determined is
    whether upon the true construction of the correspondence which
    passed between the appellant and Mr. Thomas in 1978, the
    commissioners, acting by Mr. Thomas, purported to contract or
    purported to represent that they would not thereafter re-open the
    tax assessments of the appellant for the years 1974-75 and 1975-76
    if he withdrew his claims for interest relief and capital loss for
    those years. Woolf J. concluded [1983] 3 A11.E.R. 300, 310:

    "on my reading of the material, the taxpayer was led to
    believe that the 1978 (sic) share transaction was closed
    when he paid the capital gains tax on those shares. For
    him to now be faced with a new claim in respect of that
    transaction would be wrong and improper unless there were
    circumstances of which I have no evidence and to which I
    know not, which would alter the normal implication to be
    drawn from such a situation."

    In my opinion the judge overlooked the evidence that in
    1978 Mr. Thomas did not receive from the appellant and was not
    in possession from other sources of information which was
    significant for the purposes of section 460.

    By no stretch of imagination could the answer given by the
    appellant in his letter of 23 June 1978, "On 11 January 1977 . . .
    I sold my remaining holding in the company, which at that time
    was 346 shares of 10p each to Broadforth Ltd. . . for £24,375" be
    regarded as providing "full details of the . . . disposal of these
    shares" requested by the inspector, in the light of the series of
    steps, seven in all, which were carried out for the purpose of
    effecting the sale. The inhibitory effect which the inspector's
    letter of 21 July 1978 would, or might, have had on future
    Revenue action was lost to the appellant by the fact that it did
    not contain the full disclosure which the inspector had the right to
    expect and on which he plainly relied.

    The 1978 correspondence discloses an initial request on the
    part of Mr. Thomas to discuss with the appellant all the matters
    set forth in the letter from Mr. Thomas dated 18 May 1978.
    When the appellant offered to withdraw his capital loss and
    interest claims there was no further need to discuss those claims.
    The appellant gave certain information on the other matters, which
    information Mr. Thomas was prepared to accept as satisfactory.
    Mr. Thomas concluded his enquiries on the basis of the information
    supplied to him by the appellant. The correspondence does not
    support the view that Mr. Thomas agreed that no further enquiries

    - 15 -

    would be made or action taken by the commissioners if they
    received further information from which the commissioners could
    reasonably suspect that the assessments made in the light of the
    information supplied by the appellant did not represent his full
    liability to tax.

    By section 29(3) of the Taxes Management Act 1970:
    "If an Inspector or the Board discovers -

    1. that, any profits which ought to have been
      assessed to tax have not been assessed, or:-

    2. that an assessment of tax is or has become
      insufficient, or:-

    (c) that any relief which has been given is or has
    become excessive,

    the Inspector or, as the case may be, the Board may make
    an assessment in the amount, or the further amount, which
    ought in his or their opinion to be charged,"

    By section 460(3) of the Income and Corporation Taxes Act
    1970 the commissioners are charged with the duty of counteracting
    any tax advantage by means of an assessment. The only limitation
    on that duty is imposed by section 460(9) whereby no assessment
    may be made later than six years after the chargeable period to
    which the tax advantage relates, in this case not later than 5
    April 1983.

    In my opinion, the 1978 correspondence does not disclose
    any agreement or representation that the commissioners would
    abandon their right and neglect their duty of raising further
    assessments on the appellant before April 1983 in respect of any
    of the matters canvassed in the correspondence if further
    information showed that, notwithstanding the explanations furnished
    by the appellant in 1978, further tax was chargeable.

    Save in exceptional circumstances such as those which
    obtained in the Self-Employed case [1982] AC 617, I do not think
    it would be proper for the commissioners to absolve a taxpayer
    from a tax liability of which the commissioners were unaware.
    The 1978 correspondence does not indicate any intention on the
    part of Mr. Thomas to absolve the appellant from undisclosed
    liability. This does not mean that the appellant did not derive any
    benefit from the agreement made in 1978 whereby he abandoned
    the claims to interest relief and capital loss which he never sought
    to justify and in which he expressed a singular lack of confidence.
    The appellant obtained from the 1978 agreement that which he
    sought, namely, avoidance of the inconvenience of an interview,
    release from the time and trouble involved in studying and
    answering further questions and the expense of professional advice.
    He obtained these advantages and a speedy assessment of his tax
    liability on the basis of the information which he supplied in the
    course of the correspondence.

    When the commissioners received further information from
    the accounts of Gymboon Ltd. and from their investigations of the

    - 16 -

    Rossminster group and ultimately from the appellant and his fellow
    shareholder, there was nothing in the 1978 agreement which made
    it unfair for the commissioners to enforce any liability to tax
    which Mr. Thomas did not know to exist in 1978. Some significant
    information might have come to light in 1978 if Mr. Thomas had
    interviewed the appellant but Mr. Thomas desisted from making
    further enquiries from the appellant at the request of the
    appellant and on the basis of the information supplied by the
    appellant. That information was woefully inadequate. Full details
    of the disposal were requested. Bare details alone were given.
    When the application for judicial review came before Woolf J. it
    was plain from the facts and the evidence that the commissioners
    were invoking section 460 notwithstanding the 1978 agreement,
    because the commissioners were not in possession of the full facts
    in 1978. Nevertheless the judge pressed the commissioners to give
    further evidence about the commissioners' reasons for invoking
    section 460 and about their process of reasoning. He then
    dismissed their further evidence as inadequate: [1984] 3 W.L.R.
    945, 950, 951. My Lords it was not open to Woolf 3. to usurp the
    functions of the commissioners or to investigate further their
    reasons and reasoning for invoking section 460. The sole question
    for the judge on judicial review was whether in the light of the
    1978 agreement it was an abuse of power for the commissioners to
    invoke section 460. In my opinion it was not.

    Faced with these difficulties Mr. Brodie on behalf of the
    appellant concentrated on two matters which he said made the
    decision of the commissioners to proceed under section 460 an
    abuse of power.

    As to the first matter, Mr. Brodie made great play with
    what he described as a "concession" volunteered by counsel for the
    commissioners in the course of argument in the Court of Appeal,
    namely that in the 1978 disclosures and correspondence the
    appellant acted "innocently." But the state of mind of the
    appellant in 1978 is not in issue or in evidence in these
    proceedings. I decline to be influenced by a casual, courteous and
    irrelevant observation made in argument by one counsel and
    forensically elevated by another into a "concession." The state of
    mind of the appellant in 1978 may be explored in section 460
    proceedings in order to shed light on the intentions of the
    appellant in 1977. This appeal is confined to a consideration of
    the propriety of the conduct of the commissioners in invoking
    section 460 notwithstanding the terms of the 1978 correspondence.

    As to the second matter, Mr. Brodie relied on a submission
    which was first considered by Lawton L.J. in the Court of Appeal;
    [1984] 3 W.L.R. 945. Lawton L.J. referred, at p. 952, to the
    submission of Mr. Brodie that:

    "The Inland Revenue had said that they knew by 8 October
    1979 that Mr. Preston's shares had been sold in the course
    of a Rossminster tax avoidance scheme. Despite their
    knowledge the Inland Revenue did not take any action under
    section 460 until September 1982, by which date, as they
    must have known, it was too late for Mr. Preston to seek
    relief pursuant to section 33 of the Taxes Management Act
    1970."

    - 17 -

    Lawton L.J. dismissed this submission summarily in the last
    sentence of his judgment on p.953 when he said "The delay in
    initiating the procedure was not enough to make the decision an
    abuse of power."

    I have already observed that the appellant never sought to
    justify his claims which he said were of no great concern to him
    and were less important than the establishment of his tax affairs
    on a current basis. That object he achieved. In his statutory
    declaration of 11 October 1982, his affidavit sworn on 17
    November 1982, and his notice of application for leave to apply
    for judicial review dated 18 November 1982, the appellant did not
    complain of any 'delay but complained of breach of contract,
    breach of representation, or conduct analogous to breach of
    contract or breach of representation constituting an abuse of
    power. On 22 December 1982 the affidavit of Mr. Owston on
    behalf of the commissioners stated that the commissioners

    appreciated by 8 October 1979 that the appellant had sold his

    shares "in the course of the Rossminster Company Purchase
    Scheme." No evidence was filed on behalf of the appellant
    thereafter complaining of delay between 1979 and 1982. The
    commissioners were invited to give further evidence during the
    hearing before Woolf J. but not on the reasons for delay between
    1979 and 1982 and there is no reference to or reliance upon that
    delay in the judgment of Woolf J.

    A decision in 1979, when the commissioners received the
    Gymboon accounts, to invoke section 460 but not to take action
    under that section until after April 1982 when the appellant's
    claims had expired, would have been inspired by an improper
    motive and would have constituted an abuse of power. If the
    commissioners had deliberately waited from 1979 until 1982 in
    order that the claims of the appellant might be time barred,
    different considerations would have applied. But there is no
    suggestion that the commissioners waited deliberately. The
    appellant chose to withdraw his claims. He ran the risk, of course
    unwittingly, that his claims would cease to be renewable before
    the expiry of the time limit which governed the actions of the
    commissioners and before the commissioners in fact took action.
    It is not surprising that the significance of the passing of time
    with regard to the appellant's claims was not present to the minds
    of the commissioners. The commissioners were not asked to
    explain the delay. There are several possible reasons which come
    to mind. The difficulties and complications of enforcing section
    460 are well known: see for example, Inland Revenue
    Commissioners v. Garvin
    [1981] 1 WLR 793. We do not know
    how many relevant tax avoidance schemes and how many cases
    which might have involved such schemes were under consideration
    between October 1979 and April 1982. We know that after the
    decision of this House in Ramsay Ltd, v. Inland Revenue
    Commissioners
    [1982] AC 300 the Chancellor of the Exchequer
    estimated that the tax avoidance industry could have cost the
    Revenue £300 m. annually. We can suspect that priority was
    accorded by the commissioners to the investigation of each case
    which required action at some time between October 1979 and
    April 1982 in order that an additional assessment might not
    become barred by lapse of time under section 460(3) or otherwise.
    We can suspect that the numbers of the staff of the Inland
    Revenue equipped and available to investigate and unravel possible

    - 18 -

    liability under section 460 and other tax avoidance provisions of
    fiscal legislation were limited. We know that the commissioners
    did not obtain copies of the contract for the sale of the
    appellant's shares until July 1982 and we were informed that the
    commissioners consider that contract to be relevant to the
    question of whether the appellant sought to obtain a tax advantage
    by the sale of his shares. In these circumstances the appellant
    has not shown that delay between 1979 and 1982 converted the
    commissioners otherwise lawful actions into an abuse of power. I
    would dismiss the appeal.

    LORD SCARMAN

    My Lords,

    I would dismiss the appeal for the reasons to be developed
    by my noble and learned friend, Lord Templeman, with whose
    speech I agree. Since, however, the appellant relies on the
    principle of fairness as the ground for judicial review in this case
    and cites in support of his submission my speech in Reg. v. Inland
    Revenue Commissioners, Ex parte National Federation of Self-
    Employed and Small Businesses Ltd.
    [1982] AC 617, I think it
    necessary to explain why I have reached the conclusion that his
    case fails.

    I shall do so by stating a few propositions relevant to the
    appeal which I believe to be correct in law, by making a few
    comments upon the facts of this particular case, and by indicating
    what I consider to be the true reason for dismissing the appeal.
    But first, and by way of preface, I must make clear my view that
    the principle of fairness has an important place in the law of
    judicial review: and that in an appropriate case it is a ground upon
    which the court can intervene to quash a decision made by a
    public officer or authority in purported exercise of a power
    conferred by law.

    First, "the Inland Revenue Commissioners are not immune
    from the process of judicial review:" per Lord Wilberforce in the
    National Federation of Self-Employed case, at p. 631. This
    proposition, if it were ever doubted, is now, as I understand it, put
    beyond doubt by the speeches of your Lordships in the present
    appeal.

    The second proposition relates to the grounds upon which a
    taxpayer may seek judicial review of a decision taken by the
    Commissioners of Inland Revenue. The commissioners have their
    statutory powers and duties, the exercise of which can be
    challenged by the process of judicial review only if certain
    principles of general application are met. The taxpayer must show
    either a failure to discharge their statutory duty to him or that
    they have abused their powers or acted outside them: Reg. v.
    Inland Revenue Commissioners, Ex parte National Federation of
    Self-Employed and Small Businesses Ltd.
    [1982] AC 617, per Lord"
    Wilberforce, p. 632, and per Lord Roskill, p. 660.

    - 19 -

    My third proposition is that unfairness in the purported
    exercise of a power can be such that it is an abuse or excess of
    power. This was the view of the law which I expressed in the
    National Federation of Self-Employed case (notably at p. 650): and
    it remains my view. I do not consider it to be inconsistent with
    the words of Lord Diplock in that case, p. 637, which my noble
    and learned friend Lord Templeman quotes in his speech, namely
    that:

    "judicial review is available only as a remedy for conduct of

    a public officer or authority which is ultra vires or

    unlawful, but not for acts done lawfully in the exercise of

    an administrative discretion which are complained of only as
    being unfair or unwise."

    I do not understand my Lord to have been saying that the
    unfairness of what has been done can in no circumstances become
    relevant in determining whether what was done was ultra vires or
    unlawful. If, however, the words are to be understood in that
    sense, then with very great respect I cannot accept them as a
    totally accurate statement of the law. I stand where I stood in
    the Court of Appeal decision, H.T.V. Ltd, v. Price Commission
    [1976] I.C.R. 170. The present case, as is clear from the speech
    of my noble and learned friend, Lord Templeman, illustrates how
    and in what circumstances the principle of fairness falls to be
    considered in determining whether a statutory power has been
    abused or exceeded. I return later to this, the critical point in
    the appeal.

    My fourth proposition is that a remedy by way of judicial
    review is not to be made available where an alternative remedy
    exists. This is a proposition of great importance. Judicial review
    is a collateral challenge: it is not an appeal. Where Parliament
    has provided by statute appeal procedures, as in the taxing
    statutes, it will only be very rarely that the courts will allow the
    collateral process of judicial review to be used to attack an
    appealable decision. In the first part of his speech my noble and
    learned friend, Lord Templeman, has set out in detail the ample
    appeal procedures available to a taxpayer aggrieved by a decision
    of the commissioners to exercise their powers and duties under
    Part XVII of the Act of 1970 to counteract a tax advantage
    alleged to have been obtained by him.

    But cases for judicial review can arise even where appeal
    procedures are provided by Parliament. The present case
    illustrates the circumstances in which it would be appropriate to
    subject a decision of the commissioners to judicial review. I
    accept that the court cannot in the absence of special
    circumstances
    decide by way of judicial review to be unfair that
    which the commissioners by taking action against the taxpayer
    have determined to be fair. But circumstances can arise when it
    would be unjust, because it would be unfair to the taxpayer, even
    to initiate action under Part XVII of the Act of 1970. For
    instance, as my noble and learned friend points out, judicial review
    should in principle be available where the conduct of the
    commissioners in initiating such action would have been equivalent,
    had they not been a public authority, to a breach of contract or a
    breach of a representation giving rise to an estoppel. Such a
    decision could be an abuse of power: whether it was or not and

    - 20 -

    whether in the circumstances the court would in its discretion
    intervene would, of course, be questions for the court to decide.

    It was the appellant's case that upon the true construction
    of the correspondence in 1978 between him and Mr. Thomas, an
    officer of the Special Investigations Section, the commissioners
    purported to contract or to represent that they would not
    thereafter re-open the tax assessments of the appellant for the
    years 1974-75 and 1975-76 if he withdrew his claims for interest
    relief and capital loss. Had he made good this case, I do not
    doubt that he would have been entitled to relief by way of judicial
    review for unfairness amounting to abuse of the power to initiate
    action under Part XVII of the Act of 1970. But he failed upon the
    construction of the correspondence as my noble and learned friend
    demonstrates in his speech.

    Secondly, had the appellant made good his case based on
    delay, the process of judicial review would have been available to
    him. The appellant's case on delay was that the commissioners
    had delayed initiating action to counteract the tax advantage
    which the appellant realised from his dealings in the shares of
    Gymboon Ltd. until his own claims for interest relief and capital
    loss had become statute barred by lapse of time. I, like others of
    your Lordships, was impressed by this case when it was first
    advanced by Mr. Brodie, Q.C. for the appellant. But the factual
    analysis of the circumstances of the delay undertaken by my noble
    and learned friend in his speech has convinced me that it would be
    unreasonable and unjust to treat the delay as an abuse of power,
    which in other circumstances it might well have been.

    For the reasons, therefore, given by my noble and learned
    friend, Lord Templeman, I am of the opinion that the appellant
    has failed to make out his case for intervention of the court by
    way of judicial review. I would dismiss the appeal.

    LORD EDMUND-DAVIES
    My Lords,

    For the reasons developed in the speech of my noble and
    learned friend, Lord Templeman, which I have had the advantage
    of reading, I would concur in dismissing the appeal.

    LORD KEITH OF KINKEL
    My Lords,

    I have had the benefit of reading in advance the speech to
    be delivered by my noble and learned friend, Lord Templeman. I
    agree with it, and for the reasons given by him I too would
    dismiss the appeal.

    - 21 -

    LORD BRIGHTMAN

    My Lords,

    I also agree that this appeal should be dismissed for the
    reasons given by my noble and learned friend, Lord Templeman.

    - 22 -


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