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United Kingdom VAT & Duties Tribunals Decisions

You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Dorfman v Customs and Excise [2004] UKVAT V18816 (21 October 2004)
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Cite as: [2004] UKVAT V18816
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Dorfman v Customs and Excise [2004] UKVAT V18816 (21 October 2004)
    18816

    VAT REGISTRATION — liability to be registered — appellant a musician and proprietor of the ensemble performing as "The Gershwin Group" — whether appellant acting as principal or agent for fellow musicians in obtaining bookings for performances of the ensemble — turnover of the ensemble held to belong to the appellant — appeal against confirmation of registration dismissed

    MANCHESTER TRIBUNAL CENTRE

    SELWYN DORFMAN Appellant

    -and-

    THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

    Tribunal: Mr M S Johnson (Chairman)
    Mr C Gill (Member)
    Mrs M Crompton (Member)

    Sitting in public in Manchester on the 7th September 2004

    The Appellant appeared in person

    Miss S Williams, counsel instructed by the Solicitor for the Customs and Excise, for the Respondents

    © CROWN COPYRIGHT 2004
     
    DECISION
    Nature of the appeal
  1. This is an appeal pursuant to section 83(a) of the Value Added Tax Act 1994 against the decision of the Commissioners of Customs and Excise ("Customs") dated 18 June 2003 to confirm the registration of the appellant for VAT as the principal of the group of musicians performing under the title "The Gershwin Gang".

    2. Representation of the parties and evidence
  2. At the hearing of the appeal, the appellant represented himself. Miss Williams of counsel represented Customs. The only evidence before the tribunal consisted of what the appellant told the tribunal, in chief and under cross-examination by Miss Williams, and the contents of a folder of relevant documents, helpfully put together and presented by Customs. Miss Williams also provided us with a written Skeleton Argument supported by authorities.

    3. The issue
  3. The issue between the parties is whether, in assembling "The Gershwin Gang" to perform at venues up and down the country, and in providing the group's services, the appellant was acting as principal or as agent. Put shortly, the position of the appellant is that he obtained the services of his fellow members of the group in the capacity of agent, on each occasion that the group met to perform, and received a fee from the customer for each of them as agent. On that basis, each musician apart from the appellant was his own business entity making a supply to the customer, so that the appellant would not be responsible for accounting for any value added tax that should in law be payable for the supply of their services. Customs' position, by contrast, is that the appellant is and was sole proprietor of the business of "The Gershwin Gang", which has provided musicians for functions of various kinds, and that he is required to be registered personally for VAT in respect of the whole turnover of the group, subject to the total taxable supplies exceeding the registration threshold.

    4. The facts
  4. The facts as we find them to be are as follows.

  5. "The Gershwin Gang" is a bespoke ensemble of a fluctuating small number of musicians, comprising both instrumentalists and singers, who meet together in various combinations ad hoc to perform on specific occasions, as required by customers who book their services through the appellant. The point of contact between the group and its customers is always the appellant. For the purposes of this decision we find that he is the sole proprietor of the goodwill in the name "The Gershwin Gang", which he personally markets on the basis that hiring "The Gershwin Gang" means that he himself will normally perform for the customer (on keyboard and vocals) and will typically be joined by a small number of other musicians – one or two others, perhaps more – to provide a small band.

  6. We find that the other members of the group besides the appellant have commonly been individuals who have performed with the appellant many times, but that the membership of the group is far from static. Some customers want one combination of band members and some another. We find that the number of musicians who will perform for a particular customer is specifically agreed with the customer on each occasion, as is the instruments they will play, whether there will be a vocalist in addition to the appellant, and how much the group as a whole will cost. We find that the cost of the group that is put together for a particular occasion varies, not only according to the size and composition of the band, but according to what the market will bear, and that such factors as location, time of year, nature of the event, and the existence or lack of alternative work available elsewhere for the various musicians providing their services, have all been factors affecting the charges made. This is as one might expect.

  7. We find it important that the negotiating with customers has all been done by the appellant himself, and that it is he who decides upon the identity of particular musicians to perform on particular occasions. Say that the customer requires a saxophonist and drummer as part of the ensemble being ordered: the appellant will undertake to provide them, and the customer will leave it entirely to the appellant to decide which saxophonist and drummer will perform at the particular event. In other words, the customer trusts the appellant, who holds out the group as "The Gershwin Gang", to provide musicians of the right calibre, but the customer does not concern himself with their identity. There is one exception to this: occasionally the singer Brigitte Escobar has been mentioned as a performer who might attend a particular event as a guest vocalist. If she were booked, clearly the customer would expect her to attend.

  8. We understand that there have not been complaints from customers about the quality of the music produced at performances by "The Gershwin Gang", but we were told about a particular wedding function at Billesley Manor, near Stratford upon Avon, where a customer had booked "The Gershwin Gang" as a trio, and in the event only two musicians appeared and played throughout the afternoon. When reminded by the bridegroom that he had booked a trio, not a duo, the appellant reduced the fee for the event to the price for a duo, on the basis that the booking fee is in part a function of the number of musicians ordered.

  9. The folder of documents before the tribunal contains letters from various musicians, saying that these musicians have worked with the appellant on different occasions on a freelance basis. These letters confirm what we were told by the appellant in tribunal, namely that the appellant collects the fees for events at which they respectively perform, and that he pays the musicians, typically on the day of the function itself. The thrust of all these letters, without exception, is that, having been contacted by the appellant, who asks them to perform on a particular date at a particular place, the musicians look to him to accept responsibility for paying them, which we find that he has been content to do.

  10. It is clear to us that there exists a pool of freelance musicians available for work, up and down the country, who are prepared to offer their services as such to persons, such as the appellant, wishing to put together a band to perform on demand. We find that the appellant is skilled in finding work for himself and other musicians, by the way in which he markets "The Gershwin Gang".

  11. The way in which he does this is that he publicizes "The Gershwin Gang" as such. "The Gershwin Gang" has its own internet website and e-mail address. It has its own publicity material, which we think it is fair to say gives the impression that the group is less fluctuating in its membership than is in reality the case. But in his dealings with customers, the appellant never disguises the fact that he will decide which individuals will make up the particular band that the customer is ordering. Booking "The Gershwin Gang" means that the appellant himself will usually come along to the event. If he has already booked "The Gershwin Gang" for a different event on the new customer's required date, he will instead offer a differently described and publicized band, such as "The Jazz Functionnaires".

  12. In that case, if the new customer books "The Jazz Functionnaires", or some other band alternative to "The Gershwin Gang", the appellant stands at arm's length to the booking, so far as the musicians are concerned. In the tribunal folder there is a specimen "Entertainer's Contract" whereby the appellant is expressed to engage another musician to perform at a particular event as "The Jazz Functionnaires". That form of contract describes the appellant as "the agent" and the other contracting party as "the artiste". The contract sets out the name and address of the customer, the details of the event, and the fee negotiated with the customer for it. This form of contract has the appearance of an agency agreement, in that the appellant is described as agent, the artiste undertakes with the appellant to perform the engagement, the artiste takes full responsibility for the fulfilment of the separate contract with the customer, but the artiste agrees to treat the customer connexion as the intellectual property of the appellant and not to solicit or to accept further work from the customer during specified periods, on pain of having to pay the appellant damages.

  13. By contrast, we find that there has never been a written form of contract governing the relations between the appellant, on the one hand, and on the other hand, any of the musicians retained to perform as part of "The Gershwin Gang".

  14. The mechanism for booking "The Gershwin Gang" is that the potential customer will make an overture to the appellant for a booking, the appellant will then write to the potential customer detailing the options available, often enclosing a demonstration compact disc, and asking the potential customer to write back expressing his preferences and to send a cheque for a deposit; only when the potential customer has done this will the appellant write confirming the booking. The appellant regards the contract between him and the customer as arising when the appellant writes to provide that confirmation.

  15. We find that, in his initial letter in response to a potential customer's enquiry, the appellant typically sets out a range of alternative prices for "The Gershwin Gang" to perform, depending upon the personnel provided. The appellant invited us to deduce from these letters that a particular instrumentalist was being offered at a discernible price. Thus if a trio including the appellant costs £750, and a duo minus drums costs £575, then it follows that the drummer must cost (£750 - £575 = ) £175. But the arithmetic is unclear. Thus, to take the same example, as appearing from a letter dated 1 July 2002 to a potential customer in Brackley, Northamptonshire [1], if a trio plus a fourth instrument – i.e. a saxophone, trumpet or second vocalist – costs £900, the additional musician must cost (£900 - £750 = ) £150. And solo piano/ vocals (i.e. the appellant on his own) is said to cost £350, so the second instrument if a duo plays must cost (£575 - £350 = ) £225. In this example, is the price for an extra musician, in isolation, £225, £175 or £150?

  16. Contrary to what the appellant suggested to us, we cannot see, and we do not find, that a potential customer would possess the information from which he could readily see what his financial liability towards a particular member of "The Gershwin Gang" would be for that musician attending and playing at his event.

  17. Rather what happens, as the appellant informed us, is that the customer expects to pay, and does pay, only one fee for the event. He pays this to the appellant. The appellant then sees that his colleagues who have performed with him are paid for their work – in the particular amounts, as we find, that he has agreed with each of them respectively. The customer does not know what the appellant has agreed to pay them, and does not care, because the customer has fulfilled his side of the bargain by paying the appellant the fee the appellant stipulated.

  18. At the time when the appellant confirms the customer's booking, giving rise to the obligation upon the appellant to perform at the stipulated event, the appellant commits himself to provide musicians for the agreed band, but the identity of those musicians is yet to be established. The appellant quotes an overall price for the event based upon his knowledge of the going rate for booking musicians for such an event. Not only is it not then known which individual musicians will attend the event, it is not known which musicians may agree to attend the event and at what price – each musician's individual charge for attending is a matter for the appellant to agree with the musician after he has taken the booking from the customer at the overall price agreed with the customer.

    19. The submissions of the parties
  19. For Customs, Miss Williams submitted that an agency relationship between the appellant and the other musicians could not exist. She said that there was firstly no evidence of an agency agreement between the parties, nor ought such an agreement to be implied. She referred us in that regard to the decision of Woolf J (as he then was) in C & E Comrs v Johnson [1980] STC 624. Secondly, Miss Williams submitted that the contract arising by virtue of any agency agreement had to arise with the consent and knowledge of the principal on whose behalf the agent enters into the contract. That was not, she said, the case here, because at the time the appellant contracted with the customer, no particular musician(s) had agreed with the appellant that he should act as their agent.

  20. For the position where an individual describes himself as agent and is in fact the principal, Miss Williams referred us to the decision of Pickford J in Harper & Co v Vigers Brothers [1909] 2 KB 549, submitting that in such a situation the so-called agent must in truth be regarded as the principal. She further drew our attention to the famous company law case of Regal (Hastings) Ltd v Gulliver [1942] 1 All ER 378, to the effect that an agent, if that is what he is, cannot properly make a profit from his agency to the detriment of his principal which he has not agreed with the principal as the price of his agency. She said that there was no evidence in this case of what fees the appellant may have agreed with the other musicians to obtain from the customer on their behalf.

  21. Miss Williams invited us to find that the fees negotiated by and paid to the appellant for the performances of "The Gershwin Gang" were received by him as principal. She invited us to dismiss the appeal.

  22. The appellant invited us to allow the appeal. He submitted that in receiving bookings for "The Gershwin Gang" he acted on his own behalf as keyboard instrumentalist/ vocalist, and on behalf of his fellow musicians in relation to the services provided by them. They knew that he was acting for them in obtaining bookings for them from customers who would require their services. The musicians relied upon him to get them the work as their agent. As regards payment, he received a global fee from the customer for the sake of convenience. It was easiest and simplest, after an event, for the appellant to receive a single payment from the customer and divide it amongst the musicians once he had done so.

  23. Whilst the appellant took responsibility for receiving the fees, the amounts due to individual musicians were, he submitted, a matter between them and the customer. This was shown by the case of the wedding in Stratford where the customer was due a refund in the amount of the difference between the fees for a trio and those for a duo. The appellant drew an analogy with the building trade – each contractor performing, and being paid for, his particular part of the work in relation to a building project. He submitted that the relationship between the customer and each musician performing in "The Gershwin Gang" was like that.

    24. Decision of the tribunal with reasons
  24. We do not agree with the analogy suggested by the appellant. In the case of building projects, it is common for a hierarchy of contracts and sub-contracts to exist, under the terms of which sub-contractors may be payable directly by employers in certain agreed circumstances, but under which head contractors take responsibility for the performance of their sub-contractors, just as the appellant took responsibility for his fellow musicians here.

  25. We think that an analogy that would better fit the facts of this case, although somewhat crude, would be the case of the plantation owner who, in the harvest season, requires labour to bring in the harvest. He approaches a gangmaster, who agrees to provide the owner with a gang of labourers who will do the work. The owner is unconcerned who is in the gang – he just wants the job done. He agrees a price with the gangmaster for the job, leaving it to the gangmaster how much he pays each member of the gang. The owner does not know or care how much each gang member receives; his only concern is that the job is done at the single price agreed with the leader of the gang.

  26. Of course we are here considering skilled musicians who are performing using their artistic talent. However, as we see it, the principle is the same. What the customer has in mind to obtain, and the appellant has a view to providing, is musical entertainment for the purpose of the customer's event. The customer is not concerned to make a bargain with any musician in particular, other than, of course, with the appellant himself.

  27. We are unable on the facts of this case to identify any contractual nexus between any other musician and the customer. The appellant has not served to introduce the customer to the musician, so that the musician can supply his services to the customer at a price agreed between them via the appellant; rather the appellant has agreed with the customer to supply him with a band consisting of a non-specific set of individuals playing particular instruments, whom vis-à-vis the customer, the appellant takes responsibility for recruiting.

  28. We accept Miss Williams' submission that the evidence does not show that any musicians commissioned the appellant to be their agent for the purpose of finding them work. Indeed the converse was the case: the appellant offered his fellow musicians work which he had already obtained, to be done either by them, or by alternative musicians. This does not however mean that the appellant was the customer's agent for placing work with the musicians. According to our findings, customers in each case intended to make the appellant wholly responsible for choosing and providing the band, and they never contemplated any separate bargain between themselves and the individual musicians.

  29. It follows that the appellant lacked express or implied authority to act as an agent on behalf of either customers or musicians. The question of ratification does not arise because a contract made by a person intending to contract on behalf of a third party, but without his authority, cannot be ratified by the third party so as to render him able to sue or liable to be sued on the contract, where the person who made the contract did not profess at the time of making it to be acting on behalf of a principal. Whilst such a profession was made in the case of "The Jazz Functionnaires", it was not made in the case of "The Gershwin Gang".

  30. We therefore decide that the appellant's business was liable for value added tax due in respect of the entirety of the fees received for performances by "The Gershwin Gang", as being supplies made by the appellant. We are not aware that any of the musicians approached by him to play on an ad hoc basis was registered for VAT, but if such were the case, and the point arose, we would hold that such musician(s) made taxable supplies to the appellant to facilitate the supplies made by him to customers of "The Gershwin Gang", who were customers of the appellant alone.

  31. This appeal is therefore dismissed. At the conclusion of the hearing, we requested Miss Williams to indicate if she would be applying for costs if successful, and she indicated that she would not be. Accordingly we make no order as to costs.

    32. MR M S JOHNSON
    CHAIRMAN
    Release Date: 21 October 2004

    MAN/2003/0578

Note 1    In opening his case, the appellant described this particular letter as his “standard letter”.    [Back]

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