Judgments - Regina v. Central Valuation Officer and another (Respondent) ex parte Edison First Power Limited (Appellants)

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    137. My Lords, as an aid to construction of statutes, presumptions are from time to time invoked. This is particularly so where rights of citizens regarded as of fundamental importance appear to be encroached upon by a particular application of a statute. In such a case it is presumed that Parliament, if it intended the statute to encroach upon the important fundamental right, would have expressly said so. If Parliament has not expressly said so, and if the statute is capable of being given sensible effect without encroaching upon the fundamental right, a construction of the statutory language may be adopted that would leave unimpeded the right in question. As Lord Hoffmann put it in R v Home Secretary ex parte Simms [2000] 2 AC 115:

    "Fundamental rights cannot be overridden by general or ambiguous words. This is because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process. In the absence of express language or necessary implication to the contrary, the courts therefore presume that even the most general words were intended to be subject to the basic rights of the individual." (p 131)

    138. A very good recent example of this is the decision of the House in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] 2 WLR 1299. The case concerned legal professional privilege. It raised the question whether the statutory power of the Revenue to require production of documents extended to documents covered by legal professional privilege. The statutory provision relied on by the Revenue was in general terms and apt to cover all and any relevant documents. But the right of citizens, or companies, to seek and receive legal advice in the knowledge that the communications between them and their lawyers cannot be the subject of compulsory disclosure is of such fundamental importance in a society governed by the rule of law as to require express statutory language or an unavoidance implication if it is to be overruled by statute. General words in a statute will not suffice. So the House held.

    139. There are no doubt other rights whose fundamental importance may justify similar reverence but I need not try and identify them for it is surely clear that the so-called presumption against double taxation or double recovery does not derive from a fundamental right of that character. There is no fundamental right not to be taxed, or not to be taxed in a particular way or at a particular time. The so-called presumption against double taxation is in reality no more, and no less, than the formulation in a taxation context of the broader interpretative presumption that Parliament does not intend that legislation should bring about results that are unreasonable or unfair or arbitrary.

    140. As Lord Reid said in IRC v Hinchy [1960] AC 748:

    "One is entitled and indeed bound to assume that Parliament intends to act reasonably, and therefore to prefer a reasonable interpretation of a statutory provision if there is any choice." (p 768)

In IRC v Clifforia [1963] 1 WLR 396, where the Inland Revenue were proposing an interpretation of a taxing Act that would result in double taxation, Ungoed-Thomas J referred to the double taxation result as "patently unjust" (p 402).

    141. In IRC v Vestey [1980] AC 1148 Lord Wilberforce declined to accept a construction of a taxing Act that led to a result that was "arbitrary, unjust, and in [his] opinion unconstitutional" and explained that:

    "…. it is a well accepted principle that if one interpretation of an Act of Parliament produces such a result, but another avoids it, the latter is to be preferred." (p 1174).

It was the unfairness of a tax regime that subjected a number of discretionary beneficiaries to the burden of paying tax on income that they might never receive that prompted those remarks. The statutory provision in question had been enacted in order to combat a particular type of tax avoidance scheme, but it was not the beneficiaries who were the tax avoiders. They had not participated in setting up the scheme. They were simply named as beneficiaries. The House did not accept that Parliament could have intended to impose on each of the discretionary beneficiaries a liability to pay tax on the income generated by the funds in the scheme. Such a result would have been, in Ungoed-Thomas J's words, "patently unjust" and the House construed the taxing provision in question so as to avoid that result.

    142. By way of contrast, in R v Dimsey [2002] 1 AC 509 it was the tax avoider himself who was liable to tax on income that he might never receive. The actual recipient of the income was the corporate tax avoidance vehicle that the tax avoider had used. For reasons that it is unnecessary to explain the tax avoider contended that his own liability to tax ought to lead to a construction of the relevant taxing statute that relieved the tax avoidance vehicle from liability to tax on the same income. The presumption that Parliament did not intend the same income to be taxed twice was invoked. The House declined to accept these submissions. For the tax avoider to be liable to tax did not seem in the least unjust and there was no practical likelihood of the Revenue, even if they had wanted to do so, being able to recover tax from the tax avoidance vehicle, an overseas company incorporated in a tax haven.

    143. These cases, my Lords, are some distance removed from the rating issue that is before the House on this appeal. But they are relevant to the approach that the House should adopt. It is said that the House should presume that Parliament did not intend the 1988 Act to bring about a result under which more than one ratepayer was liable to pay rates in respect of the same hereditament and for the same period. My Lords, I do not doubt that in general such a presumption would arise. If it were contended, for example, in relation to a house in joint ownership that each owner/occupier of the house was liable to pay the full amount of rates on the house whether or not some other joint owner had already paid, the courts would rightly look for express statutory words mandating such an unjust result before acceding to the contention. It would be the unfairness and the unreasonableness of the result contended for that would justify the assumption that Parliament did not intend that result and would justify the insistence on express words or unavoidable implication. It would not be the compressing of the facts of the case into a box labelled "no double taxation" or "no double recovery" that would do so.

    144. The present case is not a case of double taxation at all. It might, arguably, be described as a case of double recovery. It might, therefore, be said to justify an initial assumption that the general statutory words in paragraph 3 of the 6th Schedule to the 1988 Act were not intended by Parliament to allow the Secretary of State to produce that result. But, as Lord Oliver observed in R v IRC, Ex p Woolwich [1990] 1 WLR 1400, such a presumption is no more than a presumption. He said:

    "…These are only presumptions. They are clearly rebuttable if sufficiently clear express words are used. But they can also be rebutted, as it seems to me, by circumstances surrounding the enactment of the particular legislation which led to an inevitable inference that Parliament intended, in using the words that it did, that these presumptions or principles should not apply."

    145. The circumstances surrounding the enactment of the 1988 Act include the history of the rating of non-domestic hereditaments, and the history of 'formula rating' in particular, set out in the opinion of Lord Hoffmann and Lord Millett. This history rebuts, in my opinion, any inference that Parliament could not have intended the Secretary of State to be able to prescribe an en bloc rating system with yearly changes based on changes in electricity generating capacity for designated electricity generators such as PowerGen. And I can see no room for any compelling inference that would debar the Secretary of State from prescribing a system under which for a period within a particular rating year he might, on the one hand, receive rates under the en bloc system in respect of a hereditament which for the same period was attracting for its occupier a rating liability under the local occupation-based system or, on the other hand, receive no rates under the en bloc system in respect of a hereditament which had become rateable under the central list and which, therefore, for the same period did not attract rates under the local system.

    146. The result produced by the system prescribed by the Secretary of State cannot, in my opinion, be described as unfair, unreasonable or arbitrary. Edison was liable under the Act for rates in respect of the two power stations for the period 19 July 1999 to 31 March 2000. Its liability was based on its occupation of the power stations for that period. PowerGen's rating liability for the year 1999/2000 derived in part from its ownership of the two power stations on 1 April 1999 and on their contribution to its DNC on that date.

    147. My Lords, this is not double taxation or double recovery in the sense in which those expressions are normally used. It is true that it was because the two power stations were owned and occupied by PowerGen at the commencement of the 1999/2000 rating year that PowerGen's rating liability for that year was in part attributable to the two stations. And it is true that the Secretary of State may, in consequence of their sale during that year and consequent entry on the local non-domestic rating list, be regarded as having made in a sense double recovery for the period 19 July 1999 to 31 March 2000. But this analysis does not take into account the distinctly different bases on which the respective liabilities of PowerGen and Edison arose.

    148. In any event, however, I do not regard the wielding of a double taxation or double recovery banner as apt to provide a sound answer to the appellant's contentions on this appeal. The critical issue is whether the statutory power given to the Secretary of State by paragraph 3 of Schedule 6 to the 1988 Act, correctly construed, authorised him to prescribe the rating system for PowerGen and other electricity generating companies that has produced the result now challenged by Edison. The language of the paragraph is in my opinion, plainly wide enough to frank the system and unless the result can be shown to be unfair, unreasonable or arbitrary the challenge, based on the presumed intention of Parliament, must fail.

    149. Neither PowerGen nor, so far as your Lordships have been told, any other electricity generating company has complained of the unfairness of the central rating scheme. PowerGen, indeed, has intervened in these proceedings and expressly disavowed any such complaint. The burden on Edison has been caused not by the imposition on Edison of an unfair statutory rating liability but by Edison's agreement in a freely negotiated contract of sale to pay PowerGen an additional sum calculated by reference to PowerGen's rating liability derived from the two power stations. The liability of PowerGen that Edison agreed to pay did not arise from PowerGen's occupation of the power stations for the period, 19 July 1999 to 31 March 2000, during which Edison were in rateable occupation. It derived from a quite different base. I can find nothing unreasonable or unfair or arbitrary in the central list formula rating system prescribed by the Secretary of State.

    150. For these reasons and for those expressed by Lord Hoffmann and Lord Millett with which I am in full agreement, I would dismiss this appeal.

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