Terence Keogh (applicant) v Criminal Assets Bureau, Revenue Commissioners and the Collector General
Judicial review - Certiorari - Time limit for appealing assessments of income tax - Whether assessment becomes final and conclusive in default of notice of appeal - Time limit for appealing refusal to accept notice of appeal - Tax Payers' Charter of Rights - Revenue's undertaking to provide taxpayer with full, accurate and timely information - Whether applicant has a legitimate expectation to receipt of information - whether failure to provide information breached the procedures Revenue had undertaken to apply - Taxes Consolidation Act 1997, sections 922, 933 and 957
The Supreme Court (Chief Justice Keane, Mrs Justice Denham, Mr Justice Murray, Mrs Justice McGuinness, Mr Justice Hardiman); judgment delivered on May 17, 2004
A person aggrieved by any assessment to income tax is entitled to appeal within 30 days after the date of the notice of assessment. The person concerned is precluded from exercising his right of appeal until he has delivered the return and paid the appropriate tax. An assessment becomes final and conclusive in default of a notice of appeal. An assessment is not prevented from becoming final and conclusive by giving a notice of appeal which the person concerned was not entitled to give.
The Taxpayers' Charter of Rights contains an undertaking by the Revenue to give the taxpayer full, accurate and timely information about his entitlements and obligations under revenue law. Where the respondents fail to meet this undertaking by omitting to inform the applicant of his statutory right of appeal, the applicant is entitled to be placed in the same position as if this undertaking had been met.
The Supreme Court so held in allowing the applicant's appeal from a judgment of the High Court.
Michael Forde SC, Simon Boyle SC and Ross Maguire, BL for the applicant; Richard Law Nesbitt SC, Brian R Murray SC and Cian Ferriter BL, for the respondents.
The Chief Justice, Mr Justice Keane said that the matter before the court was an appeal from a judgment of the High Court in which Mr Justice McKechnie refused to grant the applicant orders of certiorari quashing certain assessments to income tax, and declarations that the assessments served on the applicant had not become final and conclusive and that the time for bringing an appeal against them had not commenced. The Chief Justice set out the factual background to the case. On March 13, 1996, in the course of a search of the applicant's residence, the Gardaí seized sums of £21,510 and £490. The applicant made an application under the Police Property Act, 1897 for the return of the sums of money and Chief Superintendent Michael F Murphy made an application under the Proceeds of Crime Act, 1996, in respect of them. Those proceedings were struck out by consent, one of the terms being that the sums should be paid over to the first named respondents as a partial discharge of the applicant's preliminary tax for the years ending April 5, 1994, 1995, 1996 and 1997.
On February 23, 1998 the first named respondents wrote to the applicant informing him that, under Part 41 of the Taxes Consolidation Act, 1997 (hereafter "the 1997 Act"), they would henceforth act as his inspector of taxes. On the same day, notices of assessment of income tax were issued. Each of the notices of assessment contained that following notice:
"You have certain rights of appeal under the Tax Acts against the assessment or any item in it. In most circumstances, unless you enter a valid notice of appeal and pay the appropriate tax within 30 days of the date of this notice, the assessment become final and conclusive. If you do not wish to appeal you are strongly advised to seek professional guidance."
On March 20, 1998 the applicant wrote to the first named respondents indicating that he wished to appeal the assessments and that he would furnish the relevant returns within 21 days. The first named respondent replied on March 26. They acknowledged that they had received the applicant's letter on March 23. They stated that pursuant to section 933 of the 1997 Act they considered that the applicant was not entitled to make an appeal as he had not complied with the requirements as set out in section 957(2)(a)(ii) of the 1997 Act. They also stated that it was a prerequisite of any appeal that the applicant deliver a return for the relevant year and pay the amount of tax defined in section 957(2)(a)(ii).
The first named respondent wrote again to the applicant on April 2 acknowledging tax returns dated March 19 which they said that they had received on April 1. The applicant was informed that these had been received too late to enable the appeal to be accepted and that, in addition, there had been no payment of the tax and interest due. On April 28 the first named respondent sent the applicant demands for the immediate payment of tax and interest stated to become due and payable in the sum of £84,007.53 for the year 1993/4, £75,555.55 for the year 1994/5, £67,337.18 for the year 1995/6 and £59,130.30 for the year 1996/7.
Ultimately, on November 27, 2000, the applicant applied to the High Court for leave to institute these proceedings by way of judicial review, which was granted. As already noted, Mr Justice McKechnie dismissed the applicant's claim.
The Chief Justice referred to the High Court proceedings in which the applicant had relied on two grounds in support of his claim. The first ground related to the statutory provisions relevant to appeals from assessments to income tax. The applicant argued that where the return had not been delivered and the tax paid in accordance with section 957(2)(a), the time for bringing an appeal did not commence and that, accordingly, there was no default in the service of a notice of appeal so as to result in the assessment being final and conclusive.
The second ground related to a document issued by the second named respondents and described as a "Taxpayers' Charter of Rights". The Charter stated that "In your dealings with the Revenue Commissioners you are entitled To expect that every reasonable effort will be made to give you access to full, accurate and timely information about revenue law and your entitlements and obligations under it." It was submitted that the failure by the first named respondents to inform the applicant of the time limit for bringing an appeal from their refusal to treat his notice of appeal as valid constituted a breach of the practice adopted under the Charter.
In relation to the first ground, the learned trial judge rejected the submission that time would only begin to run against the applicant when he delivered his return accompanied by payment of the appropriate tax. In his view, while the latter part of section 957(2)(a) lacked clarity, the provisions of that sub-section could be read "in full harmony" with section 933.
The trial judge said he was of the view that to construe them as enabling the person on whom liability to pay tax clearly rested to create a situation in which no time limit existed for the bringing of an appeal would result in an absurdity which the legislature could not have intended. As to the second ground, the trial judge said that the Revenue's failure to give the information could not have the result contended for when the procedures under consideration were required by statute.
The Chief Justice said that, in construing the provisions of the 1997 Act, the duty of the court is as stated by Lord Russell of Killowen CJ in Attorney General v Carlton Bank 2 QB 158 , "to give effect to the intention of the legislature as that intention is to be gathered from the language employed, having regard to the context in connection with which it is employed." The Chief Justice noted that the relevant provisions of the 1997 Act do not impose any tax but set out the machinery for tax assessment and recovery and thus the normal principles of construction referred to above must be applied. The Chief Justice stated that he had no doubt that it was the intention of the legislature that the provisions in section 933(6)(a) that assessments become final and conclusive in default of a notice of appeal by the person concerned is applicable where a purported notice of appeal is of no legal effect. The Chief Justice saw no reason for imputing to the legislature an intention that an assessment should be prevented from becoming final and conclusive by the giving of a notice of appeal which the person concerned was not entitled to give.
As to the alternative argument based on s 957(2)(a) that a person in the position of the applicant could prevent the assessments from becoming final and conclusive by simply refraining from delivering returns and paying the appropriate tax, the Chief Justice said that the right of the applicant to serve a notice of appeal did not derive from s957(2)(a). It derived solely from section 933(1)(a) which expressly refers to any person "aggrieved by any assessment to income tax". The intention of section 957(2)(a) is to preclude a taxpayer in the position of the applicant from exercising his right of appeal under section 933(1)(a) until he has delivered the return and paid the appropriate tax.
Although clumsily worded, the concluding words of the subsection were clearly intended to qualify the provisions set out in section 933(1) by precluding the taxpayer from serving notice of appeal within the 30 day period, until such time as he has delivered the returns and paid the appropriate tax. Thus, in a case where the taxpayer did not deliver the returns and pay the tax until 15 days after the service of the notice of assessment, he would only have 15 days left within which to serve a notice of appeal, since the period within which he could serve a notice of appeal did not commence until the date on which he had delivered the returns and paid the tax.
The Chief Justice disagreed with Kearns J's view of section 957(2)(a) as stated in Criminal Assets Bureau v McSweeney un reported judgment of Kearns J; November 16, 2001 , and was satisfied that the appeal referred to in section 957(2)(a) was the appeal provided for in section 933. The Chief Justice thus upheld the conclusion of the trial judge as to the first ground.
The Chief Justice said that if this case was solely concerned with the compliance of the Notices of Assessment with the relevant provision of the Taxpayers' Charter or Rights, he would have no difficulty in upholding the conclusion of the trial judge. It seemed to him that the notice, pointing out in clear language that the taxpayer has a right of appeal, that it must be brought within 30 days and that it may involve the payment of tax, gave the essential information that a lay person would need, accompanied as it was by a reminder of the desirability of seeking professional advice.
That, however, could not be said of the letter from the first named respondent of March 26. This letter replied to the applicant's letter indicating his wish to appeal which was received on March 23, ie, when the period of 30 days from the 23 February within which an appeal law had still to expire. Yet 3 days were allowed to elapse before the first named respondent replied and that letter did not refer in any way to the right of the applicant to appeal within 15 days from the refusal of the first named respondent to accept the notice of appeal. The Chief Justice agreed with the view of the trial judge that the failure of the letter of March 26 to make any reference to his statutory right of appeal could not be regarded as complying with the Revenue's undertaking in the Charter of Rights to give the taxpayer "full, accurate and timely information about revenue law and entitlements and obligations under it".
A question arose, accordingly, as to what here the consequences of that failure to comply with the Charter. The Chief Justice disagreed with the view of the trial judge that the doctrine of legitimate expectation can have no application in a case such as this. According to the Chief Justice, the fact that the operation of the doctrine would result in a finding that a legitimate expectation of the applicant to the receipt of certain information had not been met and that, he was entitled to specific relief would be entirely reconcilable with the proper operation of the statutory scheme established by the 1997 Act. It is beyond argument that the second named respondent and their agents, as public authorities, are bound to observe fair procedures in the exercise of the powers conferred on them by the tax code and, where an actionable breach of those requirements has been established, that does not mean that the statute has been amended as a result of a decision to that effect by a court.
The Chief Justice stated that it is generally accepted that the doctrine of legitimate expectation made its first appearance in our law in the decision of Webb v Ireland IR 353 . However, it was pointed out by Mr Justice O'Hanlon in Fakih v Minister for Justice 2 IR 406 that "as the law developed it has come to be applied in situations where the conventional plea of estoppel by conduct might not be available since the party seeking to rely on the plea of legitimate expectation may not be able to establish that he has been induced by the conduct of the other party to act to his own detriment".
That was a case where the applicant's for refugee status claimed that they were entitled to have their applications dealt with under the procedures set out in a letter by the Minister for Justice to a representative of the UN Commissioner for Refugees (referred to as the "von Arnin" letter). As in this case, the applicants could not make the case that they had altered their position in reliance on the Minister's letter, but it was held that they had a legitimate expectation that their applications would be considered in accordance with the procedures accepted as proper by the Minister.
In the subsequent decision of Gutrani 2 IR 427 , Mr Justice McCarthy, while noting that the obligation was accepted to exist in that case to consider the applications for refugee status in accordance with the von Arnin letter, was of the view that" it does not appearto depend upon any principle of legitimate or reasonable expectation; it is, simply, the procedure which the Minister has undertaken to enforce." The Chief Justice remarked that the judgments cited indicate some divergence of view as to whether the approach is properly regarded as an application of the doctrine of legitimate expectation or simply the recognition of a duty on the Minster to observe the procedures he had undertaken to apply.
That may reflect the fact, noted by Mr Justice Fennelly in his judgment in Glencar Exploration Plc & Anor v Mayo County Council 1IR 112 that the doctrine of legitimate expectation is a developing one and that its legal parameters cannot be regarded as having been definitively established as yet. For the purposes of this judgment, it is sufficient to say that, the respondents, having acknowledged that fair procedures required the furnishing to all the taxpayers with whom they had dealings of full, accurate and timely information, failed to observe those requirements in the case of the applicant.
The Chief Justice said the documents such as the Charter frequently contain what are no more than praiseworthy statements of an aspirational nature which would not normally give rise to causes of action based on legitimate expectations doctrine. However, in this case, we are concerned with a specific undertaking to give taxpayers full, timely and accurate information as to the provisions of a notoriously opaque and difficult code. The Chief Justice was of the view that while it is manifestly not the function of the second named respondents or their inspectors to give gratuitous advice in all circumstances to members of the public as to their legal position, it was not asking too much of them in the present case not to respond to a letter such as that from the applicant in a manner which they must have known could have left him in the dark as to his rights.
That would seem to be to be at variance with both the letter and the spirit of the undertaking in the Charter. The Chief Justice was satisfied that fair procedures were not applied in this case and that, in the light of the authorities, the applicant was entitled to be placed in the same position as if they had been met. Accordingly, the Chief Justice allowed the appeal and indicated that he would hear counsel as to the form of relief to which the applicant was entitled.
Mrs Justice Denham, Mr. Justice Murray, Mrs. Justice McGuinness and Mr. Justice Hardiman concurred with the judgment of the Chief Justice.
Solicitors: MacGeehin & Toale (Dublin) for the applicant; Chief State Solicitors for the respondents.
Ann Marie Courell, barrister