England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		30/06/2006

Mr Justice Lightman:

1. This is an interim application in relation to an appeal by the appellant Able UK Holdings Limited ("Able") to the High Court by way of case stated by the Commissioners for the General Purposes of the Income Tax for the Division of Hartlepool with Stockton on Tees ("the Commissioners").
2. Able is the owner of land at Seaton Meadows near Hartlepool ("the Land"). In 1992 Northumbrian Water Limited ("NWL") obtained a compulsory purchase order in respect of part of the Land ("the Site"). On the 18^th August 1992 NWL served notice of entry. On the 9^th November 1994 NWL purported to withdraw the order and subsequently vacated the Site. Over this period Able was kept out of possession of the Site. At all material times Able intended to use the Site for clay extraction and landfill, but between 1992 and 1995 the local landfill market had changed. In 1992 Able would have been able to bid for contracts for general waste (an activity providing a high turnover but relatively low margins) but by 1995 it could only bid for contracts for special waste (an activity providing a lower turnover but higher margins). Able claimed compensation from NWL for the service and withdrawal of the order under section 31(3) of the Land Compensation Act 1961 and (leaving aside the sum representing expenses, costs and interest) it received £2,185,000. Able treated this sum as capital. The Revenue disagreed taking the view that it was income and (following an enquiry) issued a Notice of Amendment against which Able appealed to the Commissioners.
3. The Commissioners heard the appeal on the 13^th and 14^th April 2005. Able called three witnesses namely Mr Stephenson, Mr Ruff and Mr Crawford whose witness statements were read and who were cross-examined. At the conclusion of the hearing the Commissioners gave an oral decision ("the Decision") dismissing the appeal. On the 11^th May 2005 Able requested the Commissioners to state a case.
4. The Commissioners sent a draft case stated to Able on the 19^th July 2005. Able then and thereafter requested amendments reflecting the additional findings which Able seeks to be made on this application for interim relief. The Commissioners provided the final version of the case stated on the 28^th March 2006. From this version it was apparent that the Commissioners declined to make the amendments requested.
5. By the Appellant's Notice dated the 25^th April 2006 Able challenged the Decision on the grounds that: (1) the findings of fact on which the Commissioners relied in reaching their conclusions and in particular those at paragraphs 9.2, 9.3 and 9.4 of the Statement of Case were not justified on the evidence before the Commissioners; and (2) the conclusion that the sum of £2,185,000 should be treated as income was wrong in law. The appeal is listed for a two day hearing during the window of the 17^th to 20^th October 2006.
6. Paragraph 3 of the Statement of Case states that Able had called as witnesses Mr Stephenson, Mr Ruff and Mr Crawford, that they had each provided witness statements or proofs of evidence available for inspection by the court that they had given further oral evidence in chief and were cross-examined, and that no witnesses were called by the Revenue. Paragraph 4 specified the documents produced to the Commissioners which are available for inspection by the court. Paragraph 5 referred to an agreed statement of facts submitted to the Commissioners and proceeded to set out findings of fact on the documentary and oral evidence. Paragraph 6 set out the contentions of Able and paragraph 7 the contentions of the Revenue. Paragraph 8 sets out the authorities cited.
7. Paragraph 9 of the Statement of Case reads as follows:

"9. We the Commissioners having heard the various representations and contentions considered that:

9.1 That there was no permanent loss of the use of the CPO Land, but rather there was an interruption in its availability for trading purposes for a finite period. The period in question was not significantly large given the total period of time that the whole site would ultimately be in operation.

9.2 Whilst it was demonstrated that the established practice for the capital valuation of a landfill site was to look to the profitability of the operation carried out on the land, rather than by way of comparative values, it is also the way to value a revenue loss caused by an interruption to use.

9.3 The interruption to the Taxpayer's business caused by Northumbrian Water Ltd's actions in respect of the CPO Land had a consequential effect on the Taxpayer's business as a whole, in that it was unable to fully exploit the landfill market as it had intended. This was a loss for which compensation was paid.

9.4 The contemporaneous documentation, in particular the detailed claim submitted to the Lands Tribunal, indicated that the Taxpayer and its professional advisers regarded the compensation claim to the Lands Tribunal to be for loss of profits.

9.5 Applying the five indicia as to whether receipts are of a capital or income nature we did not accept the Taxpayer's contentions that four were applicable. The only one that was clearly applicable was that the compensation was a lump sum payment rather than recurrent and we would not expect compensation by way of a Lands Tribunal award to be any other way.

9.6 For the reasons above the payment received by the Appellant was a revenue receipt."

8. By the Appellant's Notice sought interim relief. Part A of section 10 of the Appellant's Notice read as follows:

"PART A

I apply (the appellant applies) for an order (a draft of which is attached) that:-

1) the case stated be remitted to the General Commissioners under the Taxes Management Act 1970 s 56(6) or 56(7) with a direction that it be amended to include:

a) the evidence on which the General Commissioners relied in making their findings of fact that (1) 'look[ing] at the profitability of the operation carried out on the land … is also the way to value a revenue loss caused by interruption to use' (paragraph 9.2) and (2) the compensation was paid for the Appellant's being 'unable to exploit the landfill market as it had intended' (paragraph 9.3); and

b) in relation to the statement that 'the contemporaneous documentation, in particular the detailed claim submitted to the Lands Tribunal, indicated that the Taxpayer and its professional advisers regarded the compensation claim to the Lands Tribunal to be for loss of profits' (paragraph 9.4) an indication of the documents other than the claim form (if any) and professional advisers to which they refer … (see continuation sheet).

Because:-

1. One aspect of the question of law on which the opinion of the High Court is sought by the case stated is whether the General Commissioners' decision is one that they could properly reach in light of the evidence before them. This clearly involved consideration of that evidence.

2. In paragraph 5 of the Case Stated, the General Commissioners claim to rely on the 'documentary and oral evidence' before them to make the findings of fact listed in that paragraph, although they do not refer to any particular evidence in support of any of the findings and the case does not contain any indication of the oral evidence given.

3. The appellant accepts the findings of fact in paragraph 5. However, there are further conclusions in paragraph 9 which appear to form the basis for the final decision and which are clearly findings of fact. Although the point is not expressly stated, these findings of fact must also be based on the oral and documentary evidence given. However, since there is no note of the evidence or indication of what oral evidence is said to support what conclusion in paragraph 9, it is impossible for the High Court to judge whether that evidence supports the conclusions. The General Commissioners should be directed to include a note of the oral evidence, an indication of what evidence was accepted and on what evidence they relied."

9. Mr Richard Vallat in the course of his clear and helpful submissions explained to me that the application was directed at shortening and rendering more economic and directed the trial of the first issue, namely whether the findings of fact relied on by the Commissioners in reaching their conclusions, and in particular those at paragraphs 9.2, 9.3 and 9.4 of the Statement of Case, were justified on the evidence before them.
10. The relevant principles governing the exercise of the power to remit to the Commissioners are set out in the judgments of Scott J in Consolidated Goldfields plc v. IRC [1990] STC 357 at 361 and Sir John Vinelott in Carvill v. IRC [1996] STC 126 at 129 (both in relation to cases stated by Special Commissioners). In summary: (1) it is for the Commissioners to find the facts and it is for them to determine the manner in which they express their findings; (2) they cannot be required to identify which of the facts proved or admitted they considered to be relevant or irrelevant to their conclusion; and (3) a case cannot be remitted for the consideration or making of additional findings unless those findings are: (a) material to some tenable argument; (b) reasonably open on the evidence adduced; and (c) not inconsistent with the finding or findings already made; and (4) the Commissioners should be protected from nit-picking and if the findings in the case stated broadly cover the territory desired to be dealt with by the additional findings, the court should be slow to send the case back, particularly if the Commissioners have had the proposed findings in mind when settling the final form of the case stated. (It is common ground that the Commissioners had the proposed findings in mind in this case when they settled the case stated.) I should add: (a) the Commissioners are not obliged to set out the evidence in detail, particularly when the evidence is documentary (Johnson v. Scott [1978] STC 48 at 55-6) or to set out the evidence which they do not accept (Tersons v. Stevenage [1965] 1 QB 37 at 51f to 52b); and (b) that when the case has been stated by general commissioners (who are not a legally qualified body) as opposed to special commissioners (who are) it is appropriate to have in mind in determining what (if any) order is appropriate that it is a lay body and that there may not have been formality in the proceedings (e.g. note taking of the evidence) and that even if there was such note taking as the general commissioners do not have to give reasons for their decision (see Haven Healthcare (Southern) Ltd v. York (Inspector of Taxes) [2005] EWHC 2212 [2005] STC 1662), there may have been no single view on the part of the members on any of the issues before them: it is sufficient that there is a view on the outcome. Accordingly greater latitude has to be allowed to them and greater restraint has to be shown in granting relief of the character sought.
11. I should first look at each of paragraphs 9.2, 9.3 and 9.4. It is common ground that all that Paragraph 9.2 states is that the profitability of an operation carried out on land may be relevant for capital valuations of land and may also be a way of valuing revenue losses caused by an interruption to use. Further it is common ground that this is common sense. I cannot see how or why the statement in paragraph 9.2 calls for any elaboration or any identification of evidence on which it is based. Paragraph 9.3 states that compensation was paid for Able being "unable to exploit the landfill market as it had intended." Evidential support for this proposition is proffered by the Revenue in specified paragraphs in the evidence and statement of Mr Crawford. Whether this (and any other evidence) sufficiently supports the proposition is a matter for the hearing of the appeal: all the available evidence will be before the court. I can see no sufficient need or justification for the relief now sought. The same applies in respect of the proposition in paragraph 9.4 that the contemporaneous documentation indicated that Able and its advisers regarded the compensation as compensation for loss of profits. In his skeleton argument Mr David Rees, counsel for the Revenue, has identified some of the contemporaneous documentation relied on. There is an issue between the parties as to the meaning of the words "contemporaneous documentation" and whether the documents relied upon fall within this description. Mr Rees submits that "contemporaneous" in this context means contemporaneous with any consideration by Able of the character of the compensation received or to be received whether before or after the date of the detailed claim submitted to the Lands Tribunal; Mr Vallat for Able submits that it means contemporaneous with the date of the detailed claim. If I had to decide this question (which I do not), in the context of paragraph 9.4 I would incline to the view that Mr Rees is correct. If there is an issue of construction raised at the hearing of the appeal, the judge can decide it and, whatever construction is adopted, the judge can and will have to decide whether the contents of the "contemporaneous documents" (as the term is construed) can have the effect attributed to them by the Commissioners. I do not think that there is any advantage or need to refer back to the Commissioners and in my discretion I will not do so. The problem is very different from that which arose in Whittles v. Uniholdings Ltd [1993] STC 671 where the court was unable to decide the appeal without clarification by the Commissioners of their finding as a fact of the existence of a "composite transaction", a term pregnant with possibilities.
12. I am reinforced in the view that no remission should be ordered to "clarify" the paragraphs in question by the facts that the Commissioners had the request for such clarification in mind and its rejection when finalising the case stated, that the Commissioners are general (and not special) commissioners and that the hearing date of the appeal is shortly to take place in October 2006.
13. Mr Vallat applied for orders that the Commissioners specify the evidence on which they relied for their findings. I do not think that it was necessary for the Commissioners to say more than they did in the Case Stated nor do I think that they should be required to identify the evidence relied on to support their findings. Subject only to preparation of an agreed note of the oral evidence all the evidence will be before the court. Mr Vallat complains that there is no record of the oral evidence and in particular the cross-examination. It was open to Mr Vallat and his accountant at the hearing before the Commissioners to take a detailed note of the oral evidence, to seek to agree it with the Revenue and refer any dispute to the Commissioners. I do not think that Commissioners should in any ordinary circumstances be ordered to produce their notes of the evidence (if they exist), whether or not the Civil Procedure Rules contemplate that they may be required to do so. At most they ought to be requested, if they can, to adjudicate on disputes as to the contents of the notes made by the parties.
14. The parties should first seek to agree a note before any request is made of the Commissioners. I certainly do not think that it would be right in this case at this date with the trial imminent to make any order that the Commissioners produce their notes. At the hearing the parties sensibly agreed that they should seek to agree a note. I should say that I am far from satisfied that the agreement of a note will advance the case: it is sufficient for the Revenue that there is some evidence to support the Commissioners' holding.
15. I accordingly dismiss this application. I would only add that this is a case where it would be sensible for the parties to exchange skeleton arguments at an early date, in particular so that (in case he is in any doubt) Mr Vallat can see the full facts and documents relied on by the Revenue.