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Cite as: [1999] EWHC Admin 825
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The Commissioners Of Customs & Excise And Gil Insurance Limited Respondants; UK Consumer Electronics Limited; Consumer Electronics Insurance Co Limited; Direct Vision Rentals Limited; Homecare Insurance Limited and Pinnacle Insurance PLC [1999] EWHC Admin 825 (26th October, 1999)
In The Court Of Justice Case No: Co/4749/99
Queens Bench Division CC/92/2000
Crown Office List
Royal Courts of Justice Strand, London
Wednesday, 16th February 2000
Mr Justice Richards
Between
The Commissioners Of Customs & Excise Appellants
And
1. Gil Insurance Limited Respondants
2.
3.
4.
5.
6.
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
Dr KPE Lasok QC, Mr A Robertson and Mr T Ward instructed by the solicitor the Commissioners of Customs and Excise.
Mr DAJ Vaughan QC and Mr C McDonnell instructed by Rowe & Maw (Sols)
As Approved by the Court
Crown Copyright ©
MR JUSTICE RICHARDS:
1. The commissioners appeal against two interlocutory decisions of the VAT and Duties Tribunal (Chairman: Dr A.N. Brice), released respectively on 26 October 1999 and 22 December 1999, made in the context of appeals to the tribunal by a number of undertakings ("the taxpayers") concerning payments of insurance premium tax ("IPT").
Background
2. The taxpayers all provide insurance for domestic appliances. The Finance Act 1994 introduced IPT on supplies of such insurance. Section 21 of the Finance Act 1997 amended the relevant provisions by substituting new sections in the 1994 Act, which provided that tax was to be charged at a higher rate (17.5%) on premiums of some descriptions and at a standard rate (4%) on others. The taxpayers were subject to tax at the higher rate.
3. Another sector affected by the introduction of the higher rate was travel insurance. Certain undertakings in that sector challenged the legality of the arrangements under EC law, in particular on the ground that they distorted competition between competing providers of travel insurance, some of whom accounted for tax at the standard rate and some at the higher rate, and thereby gave rise to an unlawful state aid. The Court of Appeal upheld a decision of the Divisional Court that the differential rate did give rise to an unlawful state aid in that sector: see R v. Commissioners of Customs and Excise, ex parte Lunn Poly [1999] STC 350.
4. At about the same time as the dispute about the higher rate of IPT was raised in relation to the travel insurance sector, the taxpayers raised a similar claim that the higher rate was unlawful in relation to domestic appliance insurance. They too alleged, amongst other things, that the differential rate was an unlawful state aid.
5. The taxpayers brought proceedings in the High Court claiming declaratory relief, damages and the restitution of sums paid to the commissioners by way of IPT. Those proceedings are to be stayed by agreement between the parties pending the outcome of the tribunal proceedings that are the subject of the present appeals.
6. Those proceedings before the tribunal arose in this way. In 1998 the taxpayers claimed from the commissioners repayment, with interest, of amounts paid by way of higher rate IPT. The claim was made under paragraph 8(1) of Schedule 7 to the Finance Act 1994, whereby the commissioners are liable to repay amounts paid to them "by way of tax which was not tax due to them". The commissioners rejected the claim. That decision was maintained on a review under s.59 of the 1994 Act, on the basis that (1) all the grounds of illegality invoked by the taxpayers save one (the state aid issue) had been dismissed by the Divisional Court in the Lunn Poly case, and (2) in relation to the state aid issue, if the differential rates of IPT resulted in an unlawful state aid, it would not follow that amounts paid by way of higher rate IPT would have been paid by way of tax that was not due to the commissioners.
7. Pursuant to s.60 of the 1994 Act, an appeal lies to the tribunal against such a decision. The taxpayers duly appealed. In their appeal they claim that the higher rate IPT in relation to domestic appliance insurance is contrary to EC law on three broad grounds: (1) the differential tax represented a state aid and the United Kingdom was in breach of its obligations under the relevant provisions of the EC Treaty by introducing, without notification to the Commission, the measures creating that differential; (2) higher rate IPT at 17.5% represents a form of VAT on insurance, contrary to Articles 13 and 33 of the Sixth Directive on VAT; alternatively, it is a VAT anti-avoidance measure introduced without the appropriate authorisation under Article 27 of the Sixth Directive; (3) higher rate IPT infringes rights of freedom of movement and freedom to provide cross-border services, a point relevant to two of the taxpayers which are subsidiaries of an Irish and a French insurance group respectively.
8. The taxpayers claim sums totalling approximately £80 million plus interest, increasing at the rate of approximately £700,000 per week.
9. There have been a number of interlocutory hearings before the tribunal. In a decision given on 25 June 1999 the tribunal directed the commissioners to serve a statement of case and made other directions, but left open the possibility of subsequent applications for issues to be tried separately. The commissioners then applied for a direction that the state aid issue be struck out or be heard as a preliminary issue of law. The tribunal decision of 26 October 1999, the first of those now under appeal, dismissed that application with costs. Thereafter the commissioners applied for a direction that the Sixth Directive and free movement issues be heard as preliminary issues of law. The tribunal decision of 22 December 1999, the second of those now under appeal, dismissed that application with costs. At the same time the tribunal allowed a cross-application by the taxpayers to set a timetable for the tribunal proceedings, including disclosure of documents, witness statements and expert reports. Work on those matters is continuing.
10. By the present appeals the commissioners seek to have the two decisions to which I have referred set aside. The cases before the tribunal are not to be listed for hearing until the decision of this court on the present interlocutory appeals is known.
General approach
11. It is common ground that an appeal lies on a point of law from an interlocutory decision of the tribunal (though neither party pointed to a reported case concerning such an appeal). The court should, however, in my view be slow to interfere with such a decision. The tribunal has a wide discretion in relation to the conduct of proceedings before it. Each of the present decisions was taken in the exercise of such a discretion. Each decision is full and carefully reasoned. It is not the function of this court to entertain a re-run of the arguments before the tribunal and to reach its own decision on whether to order a strike-out or the hearing of a preliminary issue. The court can intervene only where the tribunal has erred in law, either by way of an error in its reasoning or by reaching a decision that is Wednesbury unreasonable. Not every error of law in the tribunal's reasoning would vitiate the decision and justify intervention. It seems to me that in this context the court should not intervene unless the error has resulted in a decision that is plainly wrong. Interlocutory appeals should be kept to a minimum. The tribunal should be allowed to get on with the conduct of proceedings before it. The appropriate time for appeal to the High Court is generally at the end of the tribunal proceedings, when the tribunal has decided the substance of the case before it or when, exceptionally, the tribunal has brought the proceedings to an end by a strike-out or other summary disposal.
12. Of the relevant authorities to which I have been referred, the closest in terms of subject matter is Customs and Excise Commissioners v. Young [1993] STC 394, a decision of the Inner House of the Court of Session sitting as the Court of Exchequer in Scotland. That was an appeal from a final, though discretionary, decision of the tribunal dismissing an appeal to the tribunal for non-compliance with directions. The judgment serves to illustrate the importance of the Wednesbury principle in the context of a discretionary decision by the tribunal. At page 397h Lord Hope stated:
"It is clear that it is not open to us to interfere with a decision which was taken by the tribunal in this case simply because, if we had been presented with the same facts, we would have reached a different result. The test which we must apply is whether the tribunal exercised its discretion reasonably and in a judicial way...."
13. Both parties before me have relied on observations in Ashmore v. Corporation of Lloyds [1992] 1 WLR 446. For present purposes I focus on a passage in Lord Templeman's speech relied on by the taxpayers:
"So too, where a judge, for reasons which are not plainly wrong, makes an interlocutory decision or makes a decision in the course of a trial the decision should be respected by the parties and if not respected should be upheld by an appellate court unless the judge was plainly wrong"
14. In my view that principle is equally apposite in relation to an interlocutory decision of the tribunal. It may be said that it is simply the equivalent, in the context of a full appellate jurisdiction, of the Wednesbury principle which is directly applicable in the present statutory context. I think, however, that the principle can be applied somewhat more widely, to include a case where errors of law are identified in the tribunal's reasoning. It supports the view that the court should not interfere with the decision unless the errors were such as to make the decision plainly wrong.
The tribunal's rules
15. The procedure before the tribunal is governed by the Value Added Tax Tribunal Rules 1986 as amended. The relevant parts of the rules are these:
"18(1) A tribunal shall -
(a) strike out an appeal where no appeal against the disputed decision lies to a tribunal; and
(b) dismiss an appeal where the appeal cannot be entertained by a tribunal ....
19(3) Without prejudice to the preceding provisions of this rule a tribunal may of its own motion or on the application of a party to an appeal or application ... give or make any direction as to the conduct of or as to any matter or thing in connection with the appeal or application which it may think necessary or expedient to ensure the speedy and just determination of the appeal ...."
The first decision
16. I shall consider first the decision of 26 October 1999 and the challenge to it. A short summary of the decision will suffice for present purposes, since the submissions advanced on this appeal cover much the same ground. After setting out the factual and legislative background, the tribunal held first that it had jurisdiction to hear the state aid issue. It considered secondly whether it had power to strike out or dismiss one issue in the appeal, namely the state aid issue, as distinct from striking out or dismissing the appeal as a whole. It held that rule 18(1) did not confer power to strike out or dismiss part of an appeal, but that rule 19(3) was "most probably wide enough" to give the tribunal power to direct that a ground of appeal which discloses no reasonable grounds for bringing the appeal be struck out.
17. The tribunal then turned to examine the state aid issue, evidently on the basis that a power to strike out did exist. In terms of principles to be applied, it held that it should direct the issue to be struck out only if satisfied that there were no reasonable grounds for the taxpayers to raise that issue. Relevant factors were the chances of the taxpayers succeeding on the issue and whether a strike-out would obviate the necessity for a hearing or would substantially cut down or simplify the hearing of the appeal. After considering the substantive arguments advanced, it concluded:
"48. Having heard the arguments of the parties it seems to me that it is at least arguable that it is the higher rate, or the differential, which is illegal rather than the lower rate ....
49. At the hearing of the application there was reasonably prolonged and very serious argument on the question of the nature of the illegality and on the consequences of it. Having heard those arguments I am unable to reach the conclusion that the Appellants had no reasonable grounds for raising the state aid issue. There is at least a possibility that they will succeed. Further, this is an area of law which is uncertain and developing. I also bear in mind that this is a lead case and that substantial amounts of tax are at stake. In my view the Appellants should have the opportunity of presenting their arguments fully in the substantive appeal rather than having them dealt with summarily on an application to strike out. For those reasons alone I would not direct that the state aid issue be struck out. In addition, however, such a direction would not obviate the need for the hearing of an appeal, as there are other issues to be determined."
The tribunal therefore held against a strike-out of the state aid issue.
18. Finally the tribunal considered whether the state aid issue should be heard as a preliminary issue of law. From an examination of various authorities it derived the principle that the hearing of a preliminary issue of law should only be directed in an exceptional case. After giving examples of cases where it might be directed, the tribunal went on:
"62. Applying those principles to the facts of the present application this is not a case where any decision on the law relating to the state aid issue will be decisive of the litigation. If Customs and Excise succeed on the preliminary issue of law then the Appellants still have further issues to argue and if the Appellants succeed on the preliminary issue of law Customs and Excise have not agreed the facts. Neither is this a case where the legal issue is short and easily decided, as appears from the arguments of the parties summarised earlier. Again, the facts relating to the state aid issue have not been agreed and Mr Lasok does not propose that they be determined as part of the preliminary issue of law. Further, this is a case where the facts and the law are mixed and also where the facts relating to the state aid issue may be relevant to other issues in the appeal. Finally, this is an uncertain and developing area of the law and so it is desirable for future developments to be made on the basis of actual facts found at the hearing of the appeal."
19. Accordingly the tribunal declined to direct that the state aid issue be heard as a preliminary issue of law.
The challenge to the first decision: (1) strike-out
The commissioners' submissions
20. At the heart of the commissioners' case is the contention that, if the differential rates of IPT did result in an unlawful state aid, that would not affect the validity of the statutory provisions for payment of higher rate IPT by these taxpayers. The amounts paid by the taxpayers to the commissioners by way of higher rate IPT were therefore duly payable in any event and the commissioners were not liable to repay those amounts under paragraph 8 of Schedule 7 to the 1994 Act as amounts paid "by way of tax which was not tax due to them". If that is right, then the commissioners contend that the tribunal has no jurisdiction to entertain an appeal against the decision not to repay, to the extent that the appeal is based on the state aid issue, and/or that the tribunal should have exercised its powers under the rules to strike out or dismiss the appeal on the state aid issue.
21. Dr Lasok's submissions for the commissioners may be summarised as follows. First, it is only an advantage granted through state resources that can constitute a state aid: see e.g. Cases C-52/97 to C-54/97, Viscido v. Ente Poste Italiane [1998] ECR I-2629 at 2641 paragraph 13. Thus in Lunn Poly the Court of Appeal held that the unlawful state aid was the benefit provided to the group of taxpayers who paid the lower rate of 4%. Lord Woolf stated, at [1999] STC 362h-j:
"You can have a state aid in relation to a group of taxpayers, where you have the position, as here, of one body of taxpayers receiving a benefit which another body of taxpayers does not receive. This discrimination is capable of constituting a state aid. Those providing travel insurance, who are not subject to the higher rate of tax, are a clearly defined part of the group providing travel insurance and they received a benefit in the form of a lower tax rate which another defined part of those providing travel insurance, namely the travel operators and travel agents, did not receive. The aid was both specific and selective."
At page 365b-d, Clarke LJ stated:
"One of the express purposes of Art 92 is to prohibit aid which threatens to distort competition. Assuming that the differential rate of IPT threatens to distort competition, the reason that it does so is that it gives a benefit to those who pay at 4% at the expense of those who pay at 17.5%. That is so whether the standard rate is expressed to be 4% with a higher rate of 17.5% to be paid by some taxpayers or 17.5% with a lower rate of 4% to be paid by some taxpayers. In either such case the taxpayer who pays at the lower rate has received a benefit from the state as compared with the taxpayer who pays at the higher rate. As I see it, it is really no more than a matter of form whether the tax is expressed in one way and not the other. The effect is the same in either case and the purpose of the differential (whatever it may be) is the same in either case."
22. In Case C-354/90 FNCE v. France [1991] ECR I-5505 the ECJ held that the grant of unlawful state aid affects the "validity" of the measures giving effect to the aid. It stated at page I-5528 paragraph 12:
"In view of the foregoing considerations it must be held that the validity of measures giving effect to aid is affected if national authorities act in breach of the last sentence of Article 93(3) of the Treaty. National courts must offer to individuals in a position to rely on such breach the certain prospect that all the necessary inferences will be drawn, in accordance with their national law, as regards the validity of measures giving effect to the aid, the recovery of financial support granted in disregard of that provision and possible interim measures."
23. But what this means, submits Dr Lasok, is that an advantage constituting an unlawful state aid must be clawed back from the recipient of the advantage. In support of that proposition he cites Case C-39/94 SFEI v. La Poste [1996] ECR I-3547, a case which concerned the provision of logistical and commercial advantages by the Post Office to certain undertakings in breach of the state aid provisions. In its judgment the ECJ first considered the general question of the national court's jurisdiction in relation to a state aid which was unlawful by reason of the Member State's failure to notify it to the Commission under Article 93(3) of the Treaty. It stated (at pages 3590-3591, paragraphs 39-43):
"The involvement of national courts is the result of the direct effect which the prohibition on implementation of planned aid laid down in the last sentence of Article 93(3) has been held to have ....
National courts must offer to individuals the certain prospect that all the appropriate conclusions will be drawn from an infringement of the last sentence of Article 93(3) of the Treaty, in accordance with their national law, as regards the validity of measures giving effect to the aid, the recovery of financial support granted in disregard of that provision and possible interim measures (Case C-354/90 FNCE ... paragraph 12)."
24. Having held that the provision of the relevant advantages was capable of constituting state aid, the ECJ went on to consider the question whether a national court requested to order the repayment of unlawful state aid must grant that application. It held (at page 3597 paragraphs 67-70):
"First, the role of a national court seised of an application based on the last sentence of Article 93(3) goes beyond that of a judge ruling on an application for interim relief. The national court is under a duty to provide protection in the final judgment it gives in such a case against the consequences of unlawful implementation of aid ....
It follows from paragraph 12 of the FNCE judgment that a finding that aid has been granted in breach of the last sentence of Article 93(3) must in principle lead to its repayment in accordance with the procedural rules of domestic law.
Any other interpretation would encourage the Member States to disregard the prohibition laid down in Article 93(3). Thus, if national courts could only order suspension of any new payment, aid already granted would subsist until the Commission's final decision finding the aid incompatible with the common market and ordering its repayment.
Having regard to the importance for the proper functioning of the common market of compliance with the procedure for prior review of planned State aid, national courts must in principle allow an application for repayment paid in breach of Article 93(3) of the Treaty. However, as the Advocate General has pointed out in paragraphs 73-77 of his Opinion, there may be exceptional circumstances in which it would be inappropriate to order repayment of the aid."
25. The passage in the Advocate General's Opinion to which the court referred ended with these observations (at page I-3573 paragraph 77):
"Finally, it may be noted that in some cases repayment of aid already granted may not be a wholly adequate response to a breach of the prohibition in the last sentence of Article 93(3), in particular where the aid has resulted in a loss of profits and market share for competitors. However, recovery of aid is not ... the only means of guaranteeing the effectiveness of that prohibition. As the Commission suggests, the State may also - and independently of any obligation to recover the aid - be subject to claims for damages brought in the national courts on the basis of Community law by competitors who incur loss or damage as a result of measures unlawfully implementing aid."
26. So, it is submitted, two possible remedies have been identified by the ECJ. One relates to repayment of the advantage, which in this case would mean requiring the government to obtain repayment of the benefit given to those competitors of the taxpayers who paid the lower rate of IPT (subject to any defences that those competitors might have). The other is a claim for damages. Neither can avail the taxpayers in the tribunal. They do not seek (and the tribunal would not be the place to seek) an order requiring the government to secure repayment of the advantage. Their claim for damages has been brought in the High Court, which is the correct forum for it.
27. What the taxpayers need to establish for the purposes of their appeal to the tribunal is that the statutory provisions governing the payment of higher rate IPT were void or ineffective. That, however, cannot possibly be the case. Given that the aid, if any, is the advantage or benefit received by those paying the standard rate, it is only the measures conveying that advantage which can be affected. The measures in question in this case are the provisions of the Finance Act 1994 relating to the standard rate of IPT. And not even those measures are affected in the sense of being rendered void. They simply fall to be disapplied in particular cases where they are found to be inconsistent with individual rights under EC law. Thus in Cases C-10/97 to C-22/97 Ministero delle Finanze v. IN.CO.GE.'90 Srl [1998] ECR I-6307, the ECJ stated at paragraph 21 of its judgment:
"It cannot ... be inferred ... that the incompatibility with Community law of a subsequently adopted rule of national law has the effect of rendering that rule of national law non-existent. Faced with such a situation, the national court is, however, obliged to disapply that rule, provided always that this obligation does not restrict the power of the competent national courts to apply, from among the various procedures available under national law, those which are appropriate for protecting the individual rights conferred by Community law ...."
28. Dr Lasok adds that the taxpayers' position is also illogical. Repayment of the higher rate IPT paid by these taxpayers, in the assertion of their individual rights under EC law, would not remedy the unlawful aid but would exacerbate it. It would mean that an even larger number of competitors would end up having paid tax at the standard rate and thereby having received an unlawful advantage, at the expense of those other undertakings in the market which paid the higher rate tax but were unable to assert rights under EC law to obtain repayment of the amounts so paid.
29. Accordingly, it is submitted, the taxpayers' contention that the statutory provisions governing the higher rate of IPT are unlawful and that tax paid under them is recoverable cannot be sustained. They fail to address the true nature of a state aid and the means of remedying an aid unlawfully granted. The taxpayers simply have no right under EC law to have the higher rate set aside or to claw back payments they have made. The contrary is unarguable. The tribunal was wrong to hold otherwise and to proceed on the basis that, if the taxpayers succeeded in showing that there was an unlawful state aid, they might be entitled to repayment of the higher rate tax already paid and might therefore succeed in their appeal. The commissioners' decisions are unimpeachable by reference to the state aid provisions of the Treaty.
30. That leads in turn to the contention that this was a case where the tribunal had no jurisdiction to entertain the appeal. Its jurisdiction is limited to considering the legality of the particular decision under challenge. Since that decision was unimpeachable and, if there was an unlawful state aid, the taxpayers' only remedy lies in the High Court proceedings, the tribunal should have exercised its powers under the rules to strike out the appeal on the state aid issue. It should have done so under rule 18(1), as an appeal over which the tribunal has no jurisdiction: the tribunal was wrong to construe that rule as applying only where the appeal as a whole is one over which the tribunal has no jurisdiction. In any event the tribunal had power to strike out this ground under rule 19(3) and should have exercised that power. The tribunal's reasons in support of its decision not to exercise the power were not only individually erroneous but displayed a misunderstanding of the tribunal's role. Instead of considering whether factual matters were relevant to this issue, the tribunal took the doctrinaire view that it must decide the facts since it is a tribunal of fact. Litigants do not, however, have a right to require a court or tribunal to investigate all the factual assertions raised. As Lord Roskill stated in Ashmore v. Corporation of Lloyds [1992] 1 WLR 446 at 448g-h:
""Litigants are not entitled to the uncontrolled use of a trial judge's time. Other litigants await their turn. Litigants are only entitled to so much of the trial judge's time as is necessary for the proper determination of the relevant issues."
The taxpayers' submissions
31. The response of Mr Vaughan for the taxpayers is that the question for this court is not whether the commissioners are ultimately right or wrong in their case as to the effect of an unlawful state aid, but whether the tribunal approached the exercise of its discretion in the right way and reached a rational conclusion. The tribunal proceeded on the basis that it had a power to strike out in an appropriate case. The commissioners do not dispute that the tribunal applied the right principles in relation to the application to strike out. The tribunal examined the parties' respective cases on the substance of the state aid issue and was correct to conclude that the taxpayers had an arguable case.
32. Since I have already referred to the principal relevant authorities, I think it sufficient for present purposes to quote from the summary of Mr Vaughan's submissions on the state aid issue as recorded in the tribunal's own decision:
"46. For the Appellants Mr Vaughan argued that it was the higher rate of tax which was illegal. If there were only one rate of tax of 4% then there would be no state aid and no illegality. It was the differential between the 4% and the 17.5% which established the state aid and so it was the introduction of the higher rate of tax which caused the state aid. Thus it was the higher rate of tax which should be disapplied. He distinguished the decision in Viscido which, he argued, dealt with an entirely different situation, as had been noted by the Court of Appeal in Lunn Poly at 370f. He relied upon the decision of the Court of Appeal in Lunn Poly as authority for the view that it was the differential taxation which was unlawful and he contended that so long as there were a difference in rates then the whole system of differential taxation was unlawful. The amended Order of the Divisional Court declared that the differential rates constituted an unlawful state aid contrary to Article 92 of the EC Treaty and that Order had been upheld by the Court of Appeal; Clarke LJ at page 365d had said that it was the differential which created the state aid.
47. .... He cited the Opinion of the Advocate General in SFEI at paragraphs 22 and 23, and also paragraph 12 of the judgment of the Court of Justice in FNCE, as authority for the view that national courts had to have regard to the validity of the measures giving effect to the aid. He contended that the measures which gave effect to the aid in this appeal were the amendments to the 1994 Act which were introduced by the 1997 Act and which created the differential between the two rates ...."
33. Before this court Mr Vaughan submitted that the tribunal was justified in treating those submissions as arguable and in holding that there was therefore at least a possibility that the taxpayers would succeed. It was also right in regarding this as an uncertain and developing area. In those circumstances, and given the importance of the case, the tribunal was entitled to take the view that the taxpayers should have the opportunity of presenting arguments fully in the substantive appeal rather than having them dealt with summarily on an application to strike out. There was no basis for interfering with the tribunal's decision.
Conclusion
34. I am of the clear view that the tribunal's decision not to strike out the ground of appeal on the state aid issue was a decision properly open to it.
35. I shall deal first with the more technical points. I have no doubt that the tribunal had jurisdiction to entertain the appeal. The taxpayers' claim was for repayment under paragraph 8 of Schedule 7 to the 1994 Act. The decision to reject that claim was maintained on a review under s.59. An appeal lies to the tribunal under s.60 against a decision on any such review. There are several grounds on which the taxpayers contend that the commissioners' decision not to make repayment was wrong. The jurisdictional position is not affected by whether those grounds are well-founded or not. Even if Dr Lasok were entirely correct in his submissions that the state aid ground cannot succeed as a matter of law, the tribunal's jurisdiction would be wholly unaffected. It would still fall within the jurisdiction of the tribunal to determine that issue. Nor is there any question of the taxpayers seeking from the tribunal a remedy that the tribunal is not empowered to give. Accordingly the tribunal was correct to conclude that it had jurisdiction to hear the state aid issue irrespective of the strength of Dr Lasok's arguments on that issue. To the extent that Dr Lasok continues to dress up his submissions in jurisdictional terms, they are misconceived.
36. For similar reasons the tribunal was in my view correct to conclude that rule 18(1) does not apply to this situation. The question under rule 18(1)(a) is whether the disputed decision is one in respect of which statute confers a right of appeal to the tribunal: an appeal lies to the tribunal only if statute so provides. In this case s.60 of the 1994 Act undoubtedly confers such a right of appeal. The language of rule 18(1)(b) reflects specific statutory provisions which provide that an appeal "shall not be entertained" in certain circumstances. Section 60(4) itself provides that an appeal against a decision with respect to certain matters in s.59 "shall not be entertained unless.....". It is not suggested that the present appeal is barred by that provision. I find no support in the language or evident legislative intent of rule 18 for the commissioners' submission that one of the grounds on which an appeal is advanced, in this case the state aid issue, can be struck out under that rule if the ground is unarguable.
37. Rule 19(3) does not have the same limitations. It confers a broad discretionary power as to the conduct of proceedings before the tribunal. True, it does not provide on its face for disposal of a matter by way of strike out. I therefore understand the tribunal's caution in expressing its conclusion in terms that the rule is "most probably" wide enough to confer a power to direct that a ground of appeal which discloses no reasonable grounds for bringing the appeal should be struck out. Nevertheless I agree with the tribunal that such a power is probably conferred. Since that is the basis on which the tribunal proceeded to examine the commissioners' submissions on the strike-out, there can be no complaint about the tribunal's approach on this point. Nor can there be any complaint about the tribunal, in considering whether to exercise the power, asking itself whether there were reasonable grounds for the raising of the state aid issue.
38. I turn to consider the state aid issue itself. For that purpose I shall assume, as I must, that the IPT arrangements do involve the grant of an unlawful state aid. I accept that such aid lies technically in the advantage or benefit conferred on those paying the standard rate rather than in the disadvantage imposed on those paying the higher rate. That is inherent in the concept of a state aid as elucidated in the case law of the ECJ. I also accept that where an undertaking has received a financial advantage constituting an unlawful state aid, the remedy will normally lie in securing repayment of that advantage. But the circumstances of the present case are unusual. The existence of the state aid arises out of the application of a differential tax rate. It arises only because one group of undertakings pays a higher rate of tax than another group of undertakings. It seems to me that one cannot sensibly treat the higher rate tax as an irrelevance: without it, there would be no aid. Further, it is a situation where the favoured group cannot realistically be required to repay anything. In theory they might be required to pay an additional tax so as to bring them up to the level of the higher rate and thereby remove the element of aid. But in practice there can be no levelling up in respect of the past, since that would involve the impermissible retrospective imposition of tax on the favoured group. As to the future, the aid can be brought to an end by equalisation of the tax rates in any way the Government may choose, whether by levelling up or by levelling down or by adopting some half-way house. But that does not advance matters, since the concern in this case is with the past, or at least with the continuing state of affairs, rather than with the future.
39. How, then, might the national court approach the matter? The authorities cited by Dr Lasok stress the duty of the national court to provide protection against the consequences of unlawful implementation of aid and to draw "all the appropriate conclusions" as regards the validity of measures giving effect to the aid. For that purpose the court needs to look at the total picture, rather than focusing exclusively on the technical (though important) point that the aid itself lies in the advantage conferred on the favoured group. In the circumstances I think it arguable that the unlawfulness might properly be held to lie not simply in the adoption of measures providing for standard rate IPT but in the introduction of the package of measures that created the differential in rates, and that the appropriate remedy might properly be held to lie in disapplying the higher rate so as to remove the unlawful aid or its consequences. Those whose directly effective rights have been infringed by the grant of unlawful aid might otherwise be denied effective protection. The infringement of Article 93(3) might go without any effective remedy. The alternative of a claim against the state for damages in accordance with the principles laid down in Cases C-46/93 and C-48/93 Brasserie du Pecheur SA v. Germany and R v. Secretary of State for Transport, Ex parte Factortame Limited [1996] ECR I-1029 is far less satisfactory for a number of reasons, including the need to overcome the threshold conditions of liability and the problems of proof of causation of loss.
40. I do not read the judgment of the ECJ in SFEI as laying down any principle to the effect that the only possible alternative to requiring repayment of the aid is an action in damages. Such an action may be appropriate in certain situations, as the Advocate General and Court envisaged in that case. Whether another remedy might also be appropriate in certain situations was simply not under consideration in that case.
41. The situation that the court faces in the present case is one that neither the ECJ nor the national court has yet had to address. The issue of restitution was not considered in Lunn Poly and I do not think that any real weight can be placed on the terms of the order of the Divisional Court (as upheld by the Court of Appeal) in that case. But the absence of a decided case directly supporting the existence of a restitutionary claim in these circumstances is not a fatal obstacle to the taxpayers. The law cannot in my view be regarded as sufficiently settled and clear as to make the taxpayers' contentions unarguable. Although there is a substantial body of case law on state aids, the tribunal was in my view right to refer to this particular area as uncertain and developing. The present case might prove to be on the leading edge. Developments over the last decade or so show that there is still room for innovation in the search for effective protection of rights under EC law.
42. I have not forgotten Dr Lasok's contention that it would be illogical for the court to order repayment of the higher rate tax at the behest of this group of taxpayers, since that would be to exacerbate rather than remove the aid. I can see that this is something to be considered in deciding whether the remedy sought would be appropriate. I am doubtful about its potential force, since it is difficult to see why others in this sector who have paid the higher rate tax should not enjoy the same directly effective rights as are asserted by the taxpayers in the present proceedings. It seems to me, however, that the point can sensibly be examined only in the context of findings of fact about the relevant market and about the effect of the aid on competition within it. Again, that tells in favour of the course adopted by the tribunal in this case.
43. I stress that I am concerned only with arguability or the existence of reasonable grounds for raising the state aid issue. I have therefore not considered the issue in the same detail as I would have done if deciding the substantive issue itself. I do not deny that Dr Lasok's arguments have considerable force to them. At the end of the day they may well prevail. But that is not sufficient to justify a strike-out.
44. For the reasons given the tribunal was in my judgment entitled to take the view that there were reasonable grounds for the taxpayers to raise the state aid issue and that this ground of appeal should not therefore be struck out. There is at least a possibility that the taxpayers will succeed on this issue. The tribunal was right to regard this as an uncertain and developing area. That it is a lead case and substantial amounts of tax are at stake are relevant considerations in determining whether the matter should be dealt with at a full hearing or summarily. So is the fact that to strike out this ground of appeal would not obviate the need for a hearing on other grounds. In concluding that the taxpayers should have the opportunity to present their arguments fully at a substantive hearing, the tribunal did not misunderstand its role but took a reasonable view as to the course that the proceedings should follow. Even if a few detailed points in the tribunal's reasoning might be criticised (I have not set out every passage to which Dr Lasok drew attention in the course of his argument), they are not such as to vitiate the overall reasoning or conclusion. This is very far from a case where the tribunal's decision was irrational or plainly wrong. I see no grounds for intervention by this court in relation to the refusal to strike out the state aid issue.
The challenge to the first decision: (2) preliminary issue.
45. That brings me to the second part of the challenge to the first decision, namely the argument that the tribunal erred in refusing to direct that the state aid issue be heard as a preliminary issue.
46. I have already set out the tribunal's conclusions on this issue. Dr Lasok submits that the tribunal should have taken into account that the preliminary point would be decisive of the state aid issue, was wrong to say that the issue is not short or easily decided, was wrong to treat the facts relating to the state aid issue as being in some way relevant to the preliminary point, was wrong to treat the state aid issue as one of mixed fact and law, and was wrong to treat it as an uncertain and developing area of the law where it is desirable for future developments to be made on the basis of actual facts found at the hearing of the appeal. The tribunal should in his submission have been prepared to dispose of it as a preliminary point, saving the parties and the tribunal the considerable expense and time involved in carrying out a factual inquiry that will ultimately be of no assistance to the taxpayers. His submissions as to the tribunal's misunderstanding of its role apply here too.
47. Whether the preliminary point would be decisive of the state aid issue as a whole would depend on whether Dr Lasok's arguments ultimately prevailed. For reasons I have given, they might not. In any event the tribunal was plainly right that resolution of that point in the commissioners' favour would not be decisive of the litigation: if the taxpayers lost on the state aid issue, they would still have their other grounds of appeal. Nor, for reasons already touched on, do I consider the tribunal to have been in error in regarding the facts as of potential relevance to the assessment of the legal arguments raised by Dr Lasok. Indeed, I see merit in deciding the facts first and in taking the state aid issue with the other issues in the case, so that all relevant points of law can be resolved within the context of those findings of fact and any appeal to higher courts (and any reference to the ECJ) can take place at one go rather than in several stages. In any event the tribunal was fully entitled to take the view, in the exercise of its discretion, that such was an appropriate course. Again I see no basis for intervention by this court.
The second relevant decision
48. The decision of 22 December 1999 dealt first with the commissioners' application (made three days before the hearing) that the Sixth Directive issue and the free movement issue be heard as preliminary issues of law. After setting out the arguments of the parties, the tribunal referred back to the principles formulated in the decision of 26 October 1999. It went on:
"28. Applying those principles to the facts of the present application this is not a case where any decision on the law relating to either the Sixth Directive issues or the free movement issues will be decisive of the litigation. If Customs and Excise succeed on the preliminary issues of law then the Appellants may wish to request a reference to the European Court of Justice for which the facts will have to be found; if the Appellants succeed on the preliminary issues of law Customs and Excise have not agreed the facts. Neither is this a case where the legal issues are short and easily decided, as appears from the arguments of the parties. Again, the facts relating to these issues have not been agreed and Dr Lasok does not propose that they be determined as part of the preliminary issues of law. Further, this is a case where the facts and the law are mixed. Finally, this is an uncertain and developing area of the law and so it is desirable for future developments to be made on the basis of actual facts found at the hearing of the appeal. For those reasons alone I would dismiss the application."
49. But the tribunal went on to identify other factors that were also of relevance. Rule 19(3) provides that any direction should be "necessary or expedient to ensure the speedy and just determination of the appeal", and in the view of the tribunal the speedy and just determination of these appeals would best be ensured by an early hearing of all the facts and the legal arguments. Concern was expressed about the fragmentation of the appeal by interlocutory applications and separation of issues. A further consideration was that, on the course proposed by the commissioners, substantially the whole appeal would have been heard as preliminary issues of law without any facts being found; and "[b]earing in mind that the tribunal is primarily a fact-finding tribunal that would be an odd result". Account was also taken of the fact that this is a lead case and that substantial amounts of tax are at stake. The tribunal's view was that the taxpayers should have the opportunity of presenting their arguments fully in the substantive appeal.
50. Finally, various arguments advanced by the commissioners in support of the hearing of preliminary issues were examined. The first concerned the possible outcome of the present appeal to the High Court against the decision of 26 October 1999. It is unnecessary to consider that any further. The second was the concern expressed by the commissioners about the voluminous evidence which might be adduced if the facts had to be found. The tribunal pointed out that the burden of proof was on the taxpayers. That tied in with the fourth point raised, namely the time and expense to which the taxpayers would be put if the facts had to be found. That, the tribunal observed, was a decision for the taxpayers (and in so far as the commissioners were concerned about their own time and resources, that had to be balanced by the considerations that the taxpayers had paid substantial amounts of tax, were themselves devoting substantial time and resources to the appeal, and were entitled to a fair trial). The third point was an expressed concern about the effect of the hearing of the appeal on the rights of other appellants. As to that, the tribunal did not think it likely that the hearing of these appeals would delay the appeals of others.
51. On the basis of that detailed exposition of reasons the tribunal dismissed the commissioners' application and ordered the commissioners to pay the costs.
The challenge to the second decision
52. The commissioners start from the premise that the Sixth Directive issues and the free movement issues could be dealt with quickly with little factual investigation. As to the Sixth Directive, the Divisional Court in Lunn Poly decided the Article 33 question (i.e. whether higher rate IPT represents a form of VAT) in favour of the commissioners; the Court of Appeal did not find it necessary to consider the question; but the tribunal is bound by the finding of the Divisional Court. The Article 27 question (whether the higher rate IPT is an unauthorised VAT anti-avoidance measure) was not decided by the Divisional Court in Lunn Poly; but the taxpayers in the present appeals sought to intervene in Lunn Poly in the Court of Appeal, put in written submissions that included the Article 27 question, and proposed to take up a maximum of 45 minutes in addressing the court on the Sixth Directive issues. The only area of factual investigation concerns the factual purpose behind the introduction of higher rate IPT, which is undisputed or, if disputed, could form part of the preliminary issue.
53. As to the free movement issues, it is submitted that the factual inquiry that such issues might normally engage can be avoided in this case because it is plain from the taxpayers' pleaded case that they cannot as a matter of law succeed on the issues. The equivalent claim failed before the Divisional Court in Lunn Poly. More importantly, the situation is one to which the Treaty rules on free movement can be seen not to apply. The grounds of appeal to the tribunal, and further and better particulars of those grounds, do not assert that the taxpayers themselves enjoy rights under the relevant provisions of the Treaty. What is said to be restricted is the freedom of establishment of "nationals of other Member States". Although two of the taxpayers are subsidiaries of companies established in other Member States, even in their case there is no basis for application of the rules on free movement. They are not operating in this country in reliance on the Treaty rules. They have their seat here and pursue all their relevant activities here. The rules on free movement simply have no application to that situation: see Case C-134/94 Esso Espanola v. Comunidad Autonoma de Canarias [1996] ECR I-4233 at 4246 paragraphs 13-16, and Case C-108/98 RI.SAN.Srl v. Comune di Ischia (9 September 1999) at paragraphs 21-22.
54. Those considerations ought, in Dr Lasok's submission, to have prompted the tribunal to order the hearing of preliminary issues of law. He also advanced a more detailed critique of the tribunal's reasoning. The tribunal should have held that the preliminary issues would be decisive of those issues. It erred in law in holding that the taxpayers might want a reference to the ECJ if the commissioners succeeded on the preliminary issues: if the commissioners succeeded, a reference would not then be possible. The tribunal should have viewed the issues as short and easily decided. It should have held that, if any fact-finding exercise was required at all on the Sixth Directive issues, it would be very short. Subject to that, it should have held that the legal aspects of the issues could be determined appropriately without consideration of the facts. It was wrong to view this as an uncertain and developing area of the law. It should have held that preliminary issues would have led to a more speedy and just determination of the appeals, and would have enabled the taxpayers to present their relevant arguments fully. Finally it is submitted that the tribunal should have ordered costs in the cause rather than ordering the commissioners to pay the costs.
55. Mr Vaughan, in addition to making certain forensic points about what he described as the commissioners' misuse of the tribunal's procedures by a "cascade" of sequential applications, submitted that the tribunal's decision was an unimpeachable exercise of discretion. The issues of law could not be isolated from questions of fact or from other issues in the way contended for by Dr Lasok. The Sixth Directive issues required a detailed consideration of the history of the introduction of higher rate IPT and of the manner in which it operates and interacts with the VAT system. Even if the tribunal were to feel bound by the decision of the Divisional Court in Lunn Poly on the Article 33 question, there was still the separate Article 27 question which had not been decided in Lunn Poly. The taxpayers had undertaken to limit themselves to a short oral intervention in the Lunn Poly appeal for the simple reason that they could not expect the Court of Appeal to allow them longer. That the issues were not short was evidenced by the fact that they had put in a lengthy written submission. Moreover the arguments in the present case would have to be based on the facts of the case, which would in turn need to be established.
56. Mr Vaughan indicated that serious thought was being given to whether to pursue the free movement issues. But the tribunal decision had to be taken, and must now be examined, on the basis that the issues were still live issues. The case advanced was that the two subsidiaries of companies based in other Member States were indeed exercising rights of establishment in the United Kingdom. This, and the impact of the higher rate IPT on such rights of establishment, would require detailed factual investigation. The case could not be dealt with as a bare legal issue. Furthermore there would be a considerable factual overlap between the free movement issue and the state aid issue.
57. There was, submitted Mr Vaughan, nothing wrong with the tribunal's reasoning. The point on fragmentation merited particular emphasis. All the issues raised went ultimately to the question whether the legislative provisions imposing higher rate IPT were unlawful. They were different ways in which the taxpayers contended that the tax had been levied unlawfully and that they were entitled to repayment. There was no basis for allowing the commissioners to try to pick off the points one by one. They should be considered together. If the taxpayers succeeded on any one of them, then they would win their case before the tribunal.
58. I accept Mr Vaughan's submissions. In my view the tribunal's general approach to the exercise of its discretion was commendable. One can quibble about some points of detail in its reasons. For example, what is said about the circumstances in which a reference might be made to the ECJ is not strictly accurate as expressed; and the relevant law on free movement can fairly be said to be clear, rather than uncertain and developing. But there was no substantial error of law and such points do not undermine the reasonableness of the ultimate conclusion. The tribunal was fully entitled to take the view that neither the Sixth Directive issue nor the free movement issue would necessarily be decisive of the case before it, that neither issue could be determined as a pure question of law in isolation from any findings of fact, that neither issue was short and easily decided, and that it was preferable in all the circumstances for the facts and law to be decided together at a substantive hearing. There was no misunderstanding of the tribunal's role, no burdening of the parties with factual inquiry for the sake of it, no sacrificing of the interests of other appellants. There was a balanced and rational judgment that the proceedings were best dealt with by having everything determined at one substantive hearing rather than by fragmenting them. Again there is no basis for intervention by this court.
Conclusion
59. For the above reasons both of the commissioners' appeals are dismissed.
MR JUSTICE RICHARDS: I am handing down judgment in this case. The judgment handed down takes account of the topographical and similar corrections that were identified to me by counsel who were in receipt of the draft; I am grateful for those points. For the reasons given in the judgment handed down, both appeals by the Commissioners against directions of the VAT and Duties Tribunal are dismissed.
MR VAUGHAN: May it please your Lordship, I ask for costs on both appeals. We prepared a schedule, it being a day case.
MR JUSTICE RICHARDS: Yes, I had a schedule before.
MR VAUGHAN: No, there was a corrected one.
MR JUSTICE RICHARDS: I have not got that.
MR VAUGHAN: It merely brings it up-to-date for today's costs, on page -- for attending court today.
MR JUSTICE RICHARDS: Yes, I see.
MR VAUGHAN: And also the work since judgment.
MR JUSTICE RICHARDS: Work since judgment?
MR VAUGHAN: Well, consideration of the judgment.
MR JUSTICE RICHARDS: How has the matter crept up by £4,000 since the previous occasion?
MR VAUGHAN: That is the attendance at the hearing, that was the hearing before your Lordship previously.
MR JUSTICE RICHARDS: Well, the schedule that was handed in previously appeared to cover that.
MR VAUGHAN: We assumed it was a half-day hearing, I am told, the previous one, the previous hearing.
MR JUSTICE RICHARDS: So where do I find the differences? Do I need to run through it?
MR VAUGHAN: I am sorry I only have the previous one but if one looks in (5) the increase should be there, the attendance at the hearing. Our estimate was it was a half-day hearing and item (5) took that into account, I think.
MR JUSTICE RICHARDS: So it is gone up from 150 minutes to 480 minutes?
MR VAUGHAN: The 150 presumably was the morning.
MR JUSTICE RICHARDS: Yes, it was a very long afternoon.
MR VAUGHAN: No, no, it was also the work afterwards.
MR JUSTICE RICHARDS: What work afterwards?
MR VAUGHAN: Well, reading the judgment and seeing if there were any corrections to be made.
MR JUSTICE RICHARDS: I thought junior counsel did that.
MR VAUGHAN: Well, solicitors do too.
MR JUSTICE RICHARDS: I see. All right, let me hear from whoever I am going to hear from -- Mr Robertson, yes?
MR ROBERTSON: My Lord, my submissions are on the schedule of costs: first of all, I do not resist costs but I certainly do resist this schedule of costs.
MR JUSTICE RICHARDS: Yes.
MR ROBERTSON: The costs are divided into counsel's fees and then solicitor's costs. They are summarised on the last page before the back coversheet.
MR JUSTICE RICHARDS: Yes.
MR ROBERTSON: Subtotal (6) and (7) are counsel's fees and they are claimed for a total of £18,703, and talking in VAT inclusive figures--
MR JUSTICE RICHARDS: Yes.
MR ROBERTSON: --that is nearly £13,000 for leading counsel, £5,750 for junior counsel, who is 1994 call, the year before I was called. To put those figures in perspective: had the Commissioners won, the Commissioners counsel's fees for three counsel, that is leading counsel and two junior, would have totalled, including vat, £5,117.
MR JUSTICE RICHARDS: Was a schedule put in by the Commissioners for the last hearing?
MR ROBERTSON: No schedule was put in, no draft schedule. We did not waste costs at that point by compiling a draft schedule, but those are the figures that were being quoted to me this morning by the clerks to Mr Ward and Mr Lasok and by my own clerk. The counsel's fees being claimed by the respondents are three and a half times larger than counsel's fees for the Commissioner. Now, your Lordship's task on an application for summary assessment for costs is to ascertain whether the costs being claimed by the winning party are reasonably and necessarily incurred.
MR JUSTICE RICHARDS: Well, beyond that, I have to look at the overriding objective and the questions of proportionality.
MR ROBERTSON: Yes, and proportionately incurred as well, my Lord, yes. My Lord, my submission is that there are two courses open on counsel's fees to your Lordship: one is to stick a finger in the air and say well whatever reasonable and proportionate fees are they could not be three and half times larger than the fees for the Commissioners. The other, and I suspect more appropriate, course would be to send the application for costs off for detailed assessment, to a costs officer, under your Lordship's powers under Rule 447 (B) because it is difficult to work out how a claim for counsel's fees three and a half times larger than those of the other party, when the other party are represented by three counsel and not two counsel, can be justified. It is plainly a matter which calls out for some explanation.
It is not as if this hearing raised particularly new issues; they were issues rehearsed before the Tribunal. The Commissioners had lost before the Tribunal and, as leading counsel for the respondents submitted, as these really were issues that had been properly dealt with by the Tribunal, there was nothing new being raised before your Lordship. Your Lordship was being asked to take a view on the law, but those legal submissions had been before the Tribunal so there was nothing that we were raising that was going to catch the other side unawares and required working into the wee small hours, or something else like that which might justify higher counsel's fees. In any event, even if there was, it is hard to see how they could justify counsel's fees three and a half times larger.
MR JUSTICE RICHARDS: Yes.
MR ROBERTSON: Those are my submissions on counsel's fees, my Lord. I do have a more detailed breakdown on leading and junior fees if your Lordship so wishes.
MR JUSTICE RICHARDS: Yes, but you are inviting me, rather than, as you put it, pluck a figure out of the air, to send this off for detailed assessment because prima facie these fees are far too high.
MR ROBERTSON: That is right, my Lord, and that submission I would support by also drawing your Lordship's attention to some aspects of the solicitor's claims for fees. Their claim for fees totals just over £7,500. Your Lordship has already pointed out that the solicitors appear to be claiming a figure, it is under subtotal (4), of £540 for "Review of judgment", unfortunately this is not paginated but it is under (4), "Work done on documents". It comes under subtotal (3), and then goes on to (4).
MR JUSTICE RICHARDS: Yes, 610 minutes, that cannot be right.
MR ROBERTSON: That I believe is wrong, it is £270, it is slightly less than 60 minutes, my Lord, because the hourly rate is claimed at £170 and he has claimed £160.
MR JUSTICE RICHARDS: Yes, I see.
MR ROBERTSON: But we have got there two figures: £260 reviewing the judgment, that is £540 - and these are VAT exclusive figures - and then there are also some other figures in here for preparation for hearing which total eight hours, at £1,610. It is not at all clear what that relates to and it is not consideration and preparation of bundles because that has been done by Mr Rega and he spent three and a half hours on that and that is claimed at £560 at item (1). Preparation for the hearing appears to be something else but it is not explained what it is. In those circumstances your Lordship could disallow this figure entirely or send it off for detailed assessment.
MR JUSTICE RICHARDS: Thank you.
MR VAUGHAN: No objection at all for it going off for detailed assessment. If I can tell your Lordship about counsel's fees? The agreement is not, as it were, on an brief fee basis, it is done on an hourly basis and worked out on an hourly basis for the work that had to be done. We have no objection at all to it going off for assessment. We think we can justify those fees on a detailed assessment. I think it more difficult to do justice by saying I worked very hard on the case.
MR JUSTICE RICHARDS: Since you are not opposed to that course I will adopt that course.
MR VAUGHAN: I would not oppose it at all.
MR JUSTICE RICHARDS: The Commissioners will pay the respondent's costs to be subject to detailed assessment. I make clear, and this will be on the transcript for the benefit of whoever is responsible for assessment, that I adopt that course because I have concerns about the level of fees claimed by the taxpayers in this case. The substantial arguments before me were largely a rerun of those before the Tribunal. The fees put forward are, for the taxpayers, wholly out of line with those of the Commissioners. They strike me, on the face of it, as being wholly disproportionate to the nature of the hearing that took place before me. I am not in a position to investigate the details that underlie it. I accept, of course, what Mr Vaughan says about the matter having been dealt with by reference to actual work done, but I think that it is something that needs to be scrutinised carefully. Similarly, I have concerns about aspects of the solicitors' fees, though they are not so significant in terms of the overall issue.
I hope that by adopting this course I am not ducking out of my responsibilities, that is a presumption in favour of summary assessment in a case of this sort, but I think it would be unfair to both parties if, in the circumstances, I were to engage in a summary assessment rather than leave it to detailed assessment.
MR VAUGHAN: Yes. Yes, I am grateful, my Lord.
MR JUSTICE RICHARDS: Thank you all very much indeed. Who was it who asked for a copy of the judgment on a disk?
MR MCDONNELL: I did.
MR JUSTICE RICHARDS: I have got a copy for the shorthand writer which will save a lot; I have also got a copy for you. You better sort out with the shorthand writer whether there are any copyright problems about you having a copy for publication elsewhere. I am not going to get myself involved in that issue. If I could have the disks back I would be grateful. It is on Word 97, I hope that is all right.
MR MCDONNELL: I am grateful.
MR JUSTICE RICHARDS: Thank you.
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