Ben Nevis (Holdings) Ltd & Anor v HM Revenue & Customs [2013] EWCA Civ 578

Case No A3/2012/2201[2013] EWCA Civ 578
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT, CHANCERY DIVISION
HIS HONOUR JUDGE PELLING QC
Venue (Sitting as a Judge of the High Court in Manchester)Case No HC 12 C 00707Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 23/05/2013
Before
LORD JUSTICE JACKSONLORD JUSTICE LLOYD JONESLORD JUSTICE FLOYD
Between
(2) Metlika Trading LimitedAppellantsCommissioners for HM Revenue & CustomsRespondent
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company165 Fleet Street, London EC4A 2DYTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Timothy Howe QC, Philip Baker QC and Rupert Allen (instructed by Stephenson Harwood Llp) for AppellantsJames Ayliffe QC and Mark Fell (instructed by HMRC Solicitors Office) for RespondentHearing Hearing dates : 30th April & 1st May, 2013
JudgmentLord Justice Lloyd Jones :
[1]The first Appellant (“Ben Nevis”) is a company incorporated in the British Virgin Islands. It is owned and controlled by a South African based businessman, Mr. David King, and/or his trustees. Ben Nevis is liable to the Commissioner for the South African Revenue Service (“SARS”) for taxes for the 1998, 1999 and 2000 years of assessment in the total sum (including various penalties and interest) of Rand 2.6 billion (approximately £222 million), following the final determination of a tax appeal in October 2010. On the 4 March 2011 judgment was entered against Ben Nevis in proceedings in the Republic of South Africa for these sums.[2]SARS maintains that when Mr. King learned that SARS was investigating Ben Nevis’s tax affairs he procured the transfer of Ben Nevis’ assets to the second Appellant (“MTL”), a company incorporated in the British Virgin Islands. SARS became aware that as a result of these activities a fund of approximately £7.8 million had been credited to a bank account in London in the name of MTL.[3]Following the coming into force on 13 October 2011 of a Protocol amending an existing double taxation treaty between the United Kingdom and the Republic of South Africa which made provision for mutual assistance in the collection of taxes, SARS made a request to the Respondent (“HMRC”) that it assist in the collection of the tax debt.[4]The present proceedings were issued in the Chancery Division of the High Court pursuant to that request and comprised claims by HMRC for(1) judgment against Ben Nevis in respect of the tax debt and(2) relief against Ben Nevis and MTL under Sections 423-425 Insolvency Act 1986 (transactions defrauding creditors), with a view to making the deposit available for satisfying the tax debt. At the outset of the proceedings HMRC sought and obtained, on an application made without notice to Ben Nevis or MTL, an order granting permission to serve the proceedings out of the jurisdiction and freezing the deposit pending trial of the claims. Ben Nevis and MTL subsequently applied to set aside that order and to strike out the proceedings on a wide range of grounds. On 20 July 2012, HHJ Pelling QC (sitting as a Judge of the High Court in Manchester), handed down his judgment dismissing the application.[5]The Appellants now appeal against that dismissal. However, their appeal is limited to two of the grounds relied upon below, both of which relate to the temporal scope of the relevant mutual assistance provisions between the United Kingdom and the Republic of South Africa.[6]For centuries, courts in this jurisdiction have refused to entertain claims for the enforcement of revenue or other public laws of a foreign State (See, for example,Government of India v Taylor [1955] AC 491). The editors of Dicey, Morris & Collins, The Conflict of Laws (15th Ed.) state that this reflects a well-established and almost universal principle that the courts of one country will not enforce the penal and revenue laws of another country. The principle is, however, subject to contrary agreement by treaty and in recent years very substantial inroads have been made into the principle by international agreements. In 1988 the Council of Europe and OECD adopted a Joint Convention on Mutual Administrative Assistance in Tax Matters which included provision for assistance in recovery of taxes. Furthermore, since 2003 the OECD Model Conventions on Double Taxation have included provisions for mutual assistance in the collection of taxes.[7]There have been Double Taxation Agreements in force between the United Kingdom and South Africa since 1939. At the hearing of this appeal we have examined the text of Double Taxation Agreements between those States concluded in 1939, 1946, 1962, 1968 and 2002. The 2002 Convention was signed on 4 July 2002 and entered into force on 17 December 2002. In its original form it did not include any provisions for mutual assistance in the collection of taxes. Article 2 defines the categories of tax to which it applies. Articles 6-23 set out provisions which have the effect of modifying tax liabilities in one State in the light of tax liability in the other. Article 25 makes provision for the exchange of information and provides in relevant part:
“(1) The competent authorities of the contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to this Convention, in particular, to prevent fraud and to facilitate the administration of statutory provisions against legal avoidance. The exchange of information is not restricted by Article 1 of this Convention. Any information received by a Contracting State shall be treated as secret and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by this Convention. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decision.”
Article 27 is headed “Entry into Force” and provides:
“(1) Each of the Contracting States shall notify to the other, through the diplomatic channel, the completion of the procedures required by its law for the bringing into force of this Convention. This Convention shall enter into force on the date of receipt of the later of these notifications and shall thereupon have effect: (a) in South Africa: (i) with regards to taxes withheld at source, in respect of amounts paid or credited on or after 1st January next following the date upon which this Convention enters into force; and (ii) with regard to other taxes, in respect of taxable years beginning on or after 1st January next following the date upon which this Convention enters into force; (b) in the United Kingdom: (i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after 6th April in the calendar year next following that in which this Convention enters into force; (ii) in respect of corporation tax, for any financial year beginning on or after 1st April in the calendar year next following that in which this Convention enters into force. (2) The Convention between the Government of the Republic of South Africa and the Government of the United Kingdom of Great Britain and Northern Ireland signed at London on 21st November, 1968, shall be terminated and shall cease to have effect in respect of the taxes to which this Convention applies in accordance with the provisions of paragraph (1) of this Article.”
[8]On 8 November 2010, the United Kingdom and the Republic of South Africa signed a protocol (“the 2010 Protocol”) which amended the 2002 Convention. The 2010 Protocol came into force on 13 October 2011. It introduces for the first time into a treaty between the United Kingdom and the Republic of South Africa a provision for assistance in collection of taxes. Article IV provides in relevant part:
“Article IV The following new Article shall be inserted immediately after Article 25 of the Convention: “Article 25A Assistance in the Collection Taxes 1. The Contracting States shall lend assistance to each other in the collection of revenue claims. This assistance is not restricted by Articles 1 and 2 of this Convention. The competent authorities of the Contracting States may by mutual agreement settle the mode of application of this Article. 2. The term “revenue claim” as used in this Article means an amount owed in respect of taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Convention or any other instrument to which the Contracting States are parties, as well as interest, administrative penalties and costs of collection or conservancy related to such amount. 3. When a revenue claim of a Contracting State is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of collection by the competent authority of the Contracting State. That revenue claim shall be collected by that other State in accordance with the provisions of its laws applicable to the enforcement and collection of its own taxes as if the revenue claim were a revenue claim of that other State. … 6. Proceedings with respect to the existence, validity or the amount of a revenue claim of a Contracting State shall not be brought before the courts or administrative bodies of the other Contracting State. 7. Where, at any time after a request has been made by a Contracting State under paragraph 3 or 4 of this Article and before the other Contracting State has collected and remitted the relevant revenue claim to the first-mentioned State, the relevant revenue claim ceases to be: (a) in the case of a request under paragraph 3, a revenue claim of the first-mentioned State that is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, or (b) in the case of a request under paragraph 4, a revenue claim of the first-mentioned State in respect of which that State may, under its laws, take measures of conservancy with a view to ensure its collection the competent authority of the first-mentioned State shall promptly notify the competent authority of the other State of that fact and, at the option of the other State, the first-mentioned State shall either suspend or withdraw its request.””
The following new Article shall be inserted immediately after Article 25 of the Convention:

Assistance in the Collection Taxes

[9]Article III of the 2010 Protocol amends Article 25 of the 2002 Convention. Article 25 as amended reads as follows:
“Article III Article 25 of the Convention shall be deleted and replaced by the following: “Article 25 Exchange of information. 1. The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Convention or to the administration or enforcement of the domestic laws of the Contracting States concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions, insofar as the taxation thereunder is not contrary to the convention. The exchange of information is not restricted by Articles 1 and 2 of the Convention. 2. …””
[10]Article VI of the 2010 Protocol provides:
“Article VI Each of the Contracting States shall notify to the other, through the diplomatic channel, the completion of the procedures required by its law for the bringing into force of this Protocol. This Protocol shall enter into force on the date of the later of these notifications and shall thereupon have effect in both Contracting States: (a) in relation to Article II of this Protocol, in respect of amounts paid or credited on or after the date of the introduction in South Africa of the system of taxation at shareholder level of dividends declared; (b) in relation to the information referred to in Article III of this Protocol, in respect of such information that is requested or exchanged on or after the date of entry into force of this Protocol; (c) in relation to revenue claims referred to in Article IV of this Protocol, in respect of requests for assistance made on or after the date of entry into force of this Protocol.”
[11]Section 173, Finance Act 2006, makes provision for implementation into domestic law of international tax enforcement agreements. It provides in relevant part:
“173 International tax enforcement arrangements (1) If Her Majesty by Order in Council declares that– (a) arrangements relating to international tax enforcement which are specified in the Order have been made in relation to any territory or territories outside the United Kingdom, and (b) it is expedient that those arrangements have effect, those arrangements have effect (and do so in spite of anything in any enactment or instrument). (2) For the purposes of subsection (1) arrangements relate to international tax enforcement if they relate to any or all of the following– (a) the exchange of information foreseeably relevant to the administration, enforcement or recovery of any UK tax or foreign tax; (b) the recovery of debts relating to any UK tax or foreign tax; (c) the service of documents relating to any UK tax or foreign tax. (3) In this section– “UK tax” means any tax or duty imposed under the domestic law of the United Kingdom, and “foreign tax” means any tax or duty imposed under the law of the territory, or any of the territories, in relation to which the arrangements have been made.”
[12]The Double Taxation Relief and International Tax Enforcement (South Africa) Order 2011 (2011 No. 2441) made on the 12 October 2011 provides that the arrangements contained in the 2010 Protocol, which is set out in the Schedule, shall have effect.[13]The Appellants’ grounds of appeal may be summarised as follows:(1) The judge erred in holding that Article 25A and Article 27 of the 2002 Convention together permitted cross-border collection of the tax debts notwithstanding that the tax debts are due in respect of years of assessment commencing prior to coming into force of the 2002 Conventions.(2) The judge erred in holding that the powers conferred by section 173, Finance Act 2006 to give effect to “arrangements relating to international tax enforcement” extended to such “arrangements” insofar as they purported to apply retrospectively prior to 19 July 2006 (being the date on which section 173, Finance Act 2006 itself came into force) and that the 2011 Order was effective insofar as it purported to give effect to Article 25A in respect of foreign taxes arising prior to that date. Ground 1: The judge erred in holding that Article 25A and Article 27 of the 2002 Convention together permitted cross-border collection of the tax debts notwithstanding that the tax debts are due in respect of years of assessment commencing prior to coming into force of the 2002 Conventions.[14]The Appellants’ case, as originally formulated, was that Article 25A did not apply to tax debts arising prior to the coming into force of the 2010 Protocol, alternatively that the effect of Article 27 was to limit the temporal scope of Article 25A to tax debts arising on or after 1 January 2003. However, shortly before the hearing below, the Appellants abandoned the former argument, leaving their case as now reflected in the grounds of appeal. Within this first ground the Appellants submit that Article 25A does not permit collection of the tax debt because, on the proper construction of the 2010 Protocol and the 2002 Convention, Article 27 applies to Article 25A and has the effect (by virtue of Article 27(1)(a)(ii)) of precluding mutual assistance in the collection of tax debts which relate to periods prior to 1 January 2003.[15]The judge’s reason for rejecting the Appellants’ submissions on this ground may be summarised as follows:(1) The purpose of the 2010 Protocol was to assist international tax enforcement. This did not suggest any logical or policy reason for imposing a temporal limitation on the scope of Article 25A which gave it retrospective effect but excluded tax years arising earlier than the coming into effect of the 2002 Convention. This suggested a probable intention that the only relevant qualification to the applicability of Article 25A should be that concerning bars to collectability imposed by the law of the assessing State.(2) If Article 27 had effect in relation to Article 25A then Article 25A would be of no effect since the only force given to the 2002 Convention in relation to the United Kingdom would be in respect of the identified UK taxes referred to in Article 27(1)(b).(3) Even if that difficulty could be avoided, the effect of Article 27 on Article 25A would be that it would take effect in the United Kingdom by reference to the date on which United Kingdom not South African tax years commenced. This was illogical because if recovery for the years in question was objectionable it could only be by reference to the position of Ben Nevis as a tax payer in South Africa.(4) By contrast, these difficulties would be avoided if Article 27 was confined in its effect to the provisions of the 2002 Convention as originally drafted (including the information sharing provisions).(5) The difficulties which he had identified suggested that to construe Article 25A as subject to Article 27 gave rise to obvious absurdity or was manifestly unreasonable.(6) The true intention of the parties is apparent from Article VI which is an entry into force provision.(7) Article VI provided that the Protocol was to have effect “in relation to revenue claims referred to in Article IV of this Protocol”. That meant that it had effect in relation to any revenue claim as defined in Article 25A(2) that is enforceable under the laws of the State requesting assistance and is owed by a person who cannot prevent collection according to the laws of the requesting State at the date when the request for assistance was made, subject to the proviso that Article IV is of no effect other than in respect of “requests for assistance made on or after the date of entry into force of this Protocol”. That proviso was satisfied in the present case.(8) Therefore, the true effect of Article 25A, when construed in context and in light of its purpose, was that once the 2010 Protocol entered into force, Article 25A thereupon applied to all revenue claims as defined, subject only to the qualifications referred to within Article 25A itself and to the proviso that the request for assistance was made on or after the date when the 2010 Protocol entered into force.

The interpretation of treaties – applicable principles

[16]The judge relied on the summary of principles applicable to the interpretation of treaties contained in the judgment of Mummery J. in IRC v Commerzbank AG[1990] STC 285, a case concerned with double taxation treaties. That particularly helpful summary is derived in part from the earlier decision of the House of Lords in Fothergill v Monarch Airlines Limited [1981] AC 251 and the formulation by Mummery J. was subsequently approved by this court in Memec v IRC [1998] STC 754. “(1) It is necessary to look first for a clear meaning of the words used in the relevant article of the convention, bearing in mind that consideration of the purpose of an enactment is always a legitimate part of the process of interpretation’: per Lord Wilberforce (at 272) and Lord Scarman (at 294). A strictly literal approach to interpretation is not appropriate in construing legislation which gives effect to or incorporates an international treaty: per Lord Fraser (at 285) and Lord Scarman (at 290). A literal interpretation may be obviously inconsistent with the purposes of the particular article or of the treaty as a whole. If the provisions of a particular article are ambiguous, it may be possible to resolve that ambiguity by giving a purposive construction to the convention looking at it as a whole by reference to its language as set out in the relevant United Kingdom legislative instrument: per Lord Diplock (at 279). (2) The process of interpretation should take account of the fact that— ‘The language of an international convention has not been chosen by an English parliamentary draftsman. It is neither couched in the conventional English legislative idiom nor designed to be construed exclusively by English judges. It is addressed to a much wider and more varied judicial audience than is an Act of Parliament which deals with purely domestic law. It should be interpreted, as Lord Wilberforce put it in James Buchanan & Co. Ltd v. Babco Forwarding & Shipping (UK) Limited, [1987] AC 141 at 152, “unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation’: per Lord Diplock (at 281–282) and Lord Scarman (at 293).’ (3) Among those principles is the general principle of international law, now embodied in article 31(1) of the Vienna Convention on the Law of Treaties , that ‘a treaty should be interpreted in good faith and in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose’. A similar principle is expressed in slightly different terms in McNair's The Law of Treaties (1961) p 365 , where it is stated that the task of applying or construing or interpreting a treaty is ‘the duty of giving effect to the expressed intention of the parties, that is, their intention as expressed in the words used by them in the light of the surrounding circumstances’. It is also stated in that work (p 366) that references to the primary necessity of giving effect to ‘the plain terms’ of a treaty or construing words according to their ‘general and ordinary meaning’ or their ‘natural signification’ are to be a starting point or prima facie guide and ‘cannot be allowed to obstruct the essential quest in the application of treaties, namely the search for the real intention of the contracting parties in using the language employed by them’. (4) If the adoption of this approach to the article leaves the meaning of the relevant provision unclear or ambiguous or leads to a result which is manifestly absurd or unreasonable recourse may be had to ‘supplementary means of interpretation’ including travaux préparatoires: per Lord Diplock (at 282) referring to article 32 of the Vienna Convention, which came into force after the conclusion of this double taxation convention, but codified an already existing principle of public international law. See also Lord Fraser (at 287) and Lord Scarman (at 294). (5) Subsequent commentaries on a convention or treaty have persuasive value only, depending on the cogency of their reasoning. Similarly, decisions of foreign courts on the interpretation of a convention or treaty text depend for their authority on the reputation and status of the court in question: per Lord Diplock (at 283–284) and per Lord Scarman (at 295). (6) Aids to the interpretation of a treaty such as travaux préparatoires, international case law and the writings of jurists are not a substitute for study of the terms of the convention. Their use is discretionary, not mandatory, depending, for example, on the relevance of such material and the weight to be attached to it: per Lord Scarman (at 294).”[17]Before this court, both parties agreed that this was an accurate statement of principle. However, they both took issue with the conclusion of Judge Pelling that the rules of interpretation of treaties set out in the Vienna Convention on the Law of Treaties have no application to the present case because the Republic of South Africa is not a party to that Convention. The rules of interpretation set out in Articles 31 and 32 of the Vienna Convention are rules of customary international law and therefore binding on all States regardless of whether or not they are parties to that Convention. (See Fothergill [1981] AC 251 per Lord Diplock at p. 82.) Furthermore, the principles stated by Mummery J. are largely derived from the Vienna Convention to which he refers in the passage cited above. Accordingly, it is appropriate to have regard to Articles 31 and 32 of the Vienna Convention in this appeal. There is no conflict between these principles and the formulation by Mummery J. However, that formulation was in the nature of a summary and the corresponding Articles of the Convention deal with certain matters which are not included in the Commerzbank formulation.[18]It is convenient to set out at this point Articles 31 and 32 of the Vienna Convention on Treaties. “Section 3. Interpretation of Treaties Article 31 General rule of interpretation 1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:(a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty;(b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty. Article 31 General rule of interpretation 3. There shall be taken into account, together with the context: (a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions; (b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;(c) any relevant rules of international law applicable in the relations between the parties. 4. A special meaning shall be given to a term if it is established that the parties so intended. Article 32 Supplementary means of interpretation Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: (a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable” The interpretation of the 2010 Protocol.

Article 31 General rule of interpretation

[19]The 2010 Protocol effects certain important amendments to the 2002 Convention. In particular it inserts a new Article 25A and substitutes a new version of Article 25. I consider that in interpreting the Protocol and the provisions it inserts into the Convention it is necessary to consider them within the context of the Convention as amended of which they form part. However, it is also necessary to bear in mind that the clear purpose of the Protocol is to amend the effect of the Convention as originally concluded.[20]A crucial issue is whether the new Article 25A must be read subject to Article 27 of the Convention. Article 27 is entitled “Entry into Force” and it prescribes the time at which the Convention is to enter into force. It provides that each Contracting State is to notify the other of the completion of the procedures required by its law for the bringing into force of the Convention and that the Convention shall enter into force on the date of receipt of the later of these notifications. The 2002 Convention entered into force on 17 December 2002 in accordance with this provision. However, Article 27 goes further and makes detailed provision as to the temporal effect of the treaty once it comes into force. It defines, by reference to various dates, the tax liabilities in South Africa and the United Kingdom in relation to which it is to have effect. As a result it became effective in the United Kingdom from 1 April 2003 for corporation tax and from 6 April 2003 for income tax and capital gains tax and it became effective in South Africa from 1 January 2003. Furthermore, Article 27(2) provides that the previous Double Taxation Convention between the United Kingdom and South Africa (the 1968 Convention) shall be terminated and shall cease to have effect in respect of the taxes to which the 2002 Convention applies in accordance with Article 27(1).[21]The Protocol includes its own provision in Article VI for the entry into force of the Protocol. It entered into force on 13 October 2011. Moreover, following the pattern of Article 27, Article VI of the Protocol goes on to make provision as to the effect of the Protocol. The wording introducing this element in each case is identical:
“…and shall thereupon have effect…”
. In particular Article VI(b) provides that the substituted Article 25 shall have effect in respect of such information that is requested or exchanged on or after the date of entry into force of the Protocol. Article VI(c) provides that the new Article 25A shall have effect in respect of requests for assistance made on or after the date of entry into force of the Protocol. On the face of it the Protocol contains its own provisions as to its entry into force and makes specific provision for its effect when it comes into force. It is difficult to see therefore why it is necessary to read Article 25A as subject to Article 27.[22]The Appellants accept that the part of Article 27 concerned with entry into force of the Convention cannot apply to the Protocol. However, they submit that the remainder of Article 27, which is concerned with the temporal effect of the Convention, does apply to the provisions introduced by the Protocol. They submit that although some provision is made by Article VI for the temporal scope of Article 25A i.e. it applies only to requests made after entry into force of the Protocol, this is an incomplete provision and that it is necessary to limit its application further by reference to the dates of accrual of tax liabilities as set out in the remainder of Article 27. It is on this basis that it is said that the Protocol has no application to the tax debts which accrued in the 1998, 1999 and 2000 years of assessment which it is sought to recover in these proceedings. Furthermore, they draw attention to the fact that Article 25A(1) expressly provides that assistance in the collection of taxes for which it provides is not restricted by Articles 1 and 2 of the Conventions. On this basis, they submit that if it had been intended that Article VI should make comprehensive provision for the temporal effect of the provision on assistance in the collection of taxes and that Article 25A should not be subject to Article 27, there would have been an express provision in the Protocol to this effect.[23]To my mind, the Protocol in Article IV (introducing the new Article 25A) and Article VI makes entirely sensible and workable provision for assistance in the collection of taxes and it is not necessary to resort to Article 27 to supplement it. Its provisions apply only to requests for assistance made after the entry into force of the Protocol. The Convention in its original form was principally concerned in Articles 6-23 inclusive with substantive issues of double taxation. These provisions, when brought into effect and implemented, modified liability to taxation in both the United Kingdom and South Africa. There was therefore a compelling reason why it was necessary to define with precision the scope of their effect by reference to both the categories of taxes and the time of accrual of liability to which they applied. This need was intensified by the fact that the 2002 Convention was merely the latest in a line of treaties between the United Kingdom and South Africa on double taxation and it was necessary to define the precise temporal limitations of the successive regimes which they introduced. Article 27 has a vital role to perform in this context. However, while the parties may choose to limit the temporal application of provisions relating to mutual assistance in this way, I can see no corresponding necessity for defining the years of accrual of liability to which such provisions for mutual assistance may apply. “Taxes” in Article 25A(2) does not need to be limited by reference to the date of their accrual. Article 25A has no bearing on liability to tax and is merely concerned with proceedings for enforcement. Whereas provisions which modify tax changes need to be linked to the relevant tax period so as to ensure a smooth transition from the existing rules to the new rules, there is no need to make similar provision for administrative provisions such as Article 25A which may, without difficulty, be brought into effect as soon as the Protocol comes into effect.[24]This reading of the provisions is also consistent with the objective of the Protocol which, as the judge correctly identified, is to assist international tax enforcement. (See the 2011 Order in Council at para. 2). This purpose would be obstructed by limiting Article 25A in the manner proposed by the Appellants. By contrast, it is difficult to see what purpose might be served by reading Article 25A subject to Article 27. The Appellants no longer contend that Article 25A does not permit enforcement of liabilities arising before the coming into force of the Protocol, so this reasoning does not prevent what the Appellants describe as “retroactivity”. Rather, the effect of reading Article 25A subject to Article 27 would be to introduce a backstop; it would prevent enforcement of liabilities arising before the entry into effect of the 2002 Convention. However this would lead to an entirely arbitrary result, there being no sound reason in principle or in practice why the new enforcement machinery should be limited by reference to the date of commencement of the 2002 Convention.[25]A further difficulty in the path of the Appellants’ submission is that to subject Article 25A to Article 27 would create a major anomaly in the application of Article 25A to different taxes. Article 25A is not limited in its application to the specific taxes listed in Article 2; Article 25A(1) provides that the assistance is not restricted by Article 1 and 2 and Article 25(2) provides that a “revenue claim” extends to “taxes of every kind and description”. Article 27, by contrast, limits the application of the provisions to which it applies to the taxes identified in Article 27. As a result, on a literal interpretation of the provisions, the temporal limitation for which the Appellants contend would apply, for example, to the collection of income tax but not to inheritance tax or VAT. The Appellants seek to circumvent this difficulty in two ways.(1) First they submit that Article 27 is not limited to the taxes listed in Article 2 but extends to all types of taxes. They point to Article 27(1)(a), which relates to South African taxes and which refers in Article 27(1)(a)(ii) to “other taxes”, and submit that this broadens the scope of Article 27 to include all South African taxes, not merely those listed in Article 2. This submission is, in my view, untenable. The reference in Article 27(1)(a)(ii) to “other taxes” is clearly a reference to taxes within Article 2 other than those referred to in Article 27(1)(a)(i). The Appellants have not proposed any reason why, at the date of the original making of the 2002 Convention, it should have applied to any taxes other than those identified in Article 2. Moreover, the submission ignores Article 27(1)(b) which deals with United Kingdom taxes and which includes no provision corresponding to the reference in Article 27(1)(a)(ii) to “other taxes”. The parties cannot have intended that a different regime should apply to each State.(2) Secondly, the Appellants submit that Article 27 should be given a purposive interpretation so as to extend its application to taxes not expressly referred to in it. Here they seek to derive support from an article by M. Jacques Sasseville, Head of the Tax Treaty Unit, OECD Centre for Tax Policy and Administration. The article is entitled “Temporal Aspects of Tax Treaties” and it was published in 2010 in a Festschrift to Dr. Avery Jones entitled “Tax Polymath”. Referring to the OECD Model Convention, M. Sasseville states:
“One minor difficulty, however, may arise with respect to some Articles (such as Article 24) [concerning non-discrimination] which also covers taxes that are not referred to in Article 2 since the effective date of these Articles in relation to these other taxes may be unclear. Article 24(6) provides that the provisions of the Article, “notwithstanding the provisions of Article 2, apply to taxes of every kind and description”
. Assume, for instance that a State introduces a change to its value added tax legislation that discriminates on the basis of nationality of the taxpayer. When trying to determine the date from which the Article on non-discrimination has had effect, one may find that the entry into force Article of the relevant Convention includes a provision drafted by reference to taxes levied from a certain date. Since, however, it can be argued that the “taxes” to which that provision refers are those covered by Article 2 (which do not include value added taxes), a technical argument could be made that the coming-into-effect provision does not apply in relation to the value added tax. Surely, in that case, the reasonable conclusion is to consider that an implicit coming-into-effect provision applies to the value added tax from the same date as the taxes covered by Article 2 or, failing that, from the date of entry into force of the treaty”. (at pp.58-8) I note that a reading over of the kind for which the Appellants contend is only one of two possible solutions proposed by Mr. Sasseville. Furthermore, it seems to me that there is great force in the submission of Mr. Ayliffe QC on behalf of the Respondent that there would be huge practical difficulties in reading over a provision such as Article 27(1) to apply to different types of taxes. The Appellants’ submission that if Article 27 were extended by interpretation in this way to UK stamp duty, VAT and inheritance tax “in reality there would be no difficulty in such cases of determining whether the particular sale, supply or death which give rise to the relevant tax liability took place in time before or after the 2002 Tax Convention came into force” is, to my mind, unrealistic. Moreover, it is inconsistent with their case that the effect of Article 27 is to impose a backstop by reference to the entry into effect of the Convention and not its entry into force. In any event, I do not understand Mr. Sasseville to be addressing a situation, such as the present case, where the mutual assistance provision is introduced by amendment in a Protocol which includes express provision for entry into effect and temporal scope and which makes entirely appropriate provision in that regard. In these circumstances there is no purpose to be served by such a bold extension of treaty provisions under the colour of interpretation.[26]The Appellants submit that it is necessary to read Article 25A subject to Article 27 in order to avoid the absurdity that ancient tax liabilities will be recoverable under the procedure introduced by Article 25. They contend that, on the judge’s interpretation of the provisions, the only temporal limitation on cross-border collection would be the limitation periods, if any, applicable in the United Kingdom and South Africa, which would apply by virtue of the requirement in Article 25A(3) that the claim is owed by a person who at the relevant time cannot under the laws of the States to which the liability is owed prevent its collection. The Appellants submit that there is no limitation period for collection of taxes in the United Kingdom and that the limitation period in South Africa is thirty years to bring a claim followed by another thirty years to enforce a judgment. As a result, they say, the judge’s interpretation would expose taxpayers to potential claims for cross-border collection up to sixty years after liability arose in the case of enforcement in the United Kingdom and indefinitely in the case of enforcement in South Africa. They submit that such a result cannot have been intended. However, the reading for which the Appellants contend would not avoid such a result because the enforcement of old and stale claims would not be ruled out by the backstop of 1 January 2003 for which they contend. Even on the Appellants’ reading, the Convention could be used in future in relation to very old tax debts which arose after 1 January 2003 but long before enforcement. In any event, separate provision has been made to avoid the possible consequences identified by the Appellants. A Memorandum of Understanding between the competent authorities of the United Kingdom and South Africa provides that the requested State is not obliged to comply with the request for assistance if the revenue claim is more than five years old.[27]At the hearing before us a great deal of time was devoted to the question whether Article 27 governs the provisions of the 2002 Convention relating to the exchange of information. It will be recalled that exchange of information was dealt with in Article 25 of the 2002 Convention in its original form but that a new Article 25 was substituted by Article III of the Protocol. The Appellants point to the judge’s conclusion (at paragraph 33 of his judgment) that the original Article 25 must be read subject to Article 27. The judge dealt with this point very briefly, merely stating that he came to this conclusion “both because of the nature of that provision and because the earlier Conventions contained information sharing provisions”. The Appellants then construct the following argument on this foundation. They submit that provisions for exchange of information and assistance in cross-border collection are closely analogous in that both involve one State requesting the assistance of the other State in relation to the enforcement of its revenue laws. Further, they submit that, although the judge did not address the point, he would have reached the same conclusion in relation to the amended Article 25 substituted by the Protocol. (Here they submit that otherwise Article 25 as amended would overlap with Article 25 of the 1968 Convention which remains in force in relation to South African taxes due in respect of taxable years prior to 1 January 2003 and the effect of the amendment of Article 25 would have been, without making any express provision to that effect, to make the provision for exchange of information retrospective rather than merely prospective for the first time.). They submit that that conclusion would be inconsistent with the judge’s determination as to the effect of Article VI of the Protocol in relation to Article 25A since the relevant part of Article VI which provides for requests for exchange of information under the new Article 25 is in materially identical terms.[28]To my mind, this argument of the Appellants is constructed on a shaky foundation. First, so far as the original Article 25 is concerned, I do not agree with the judge’s conclusion that it has to be read subject to Article 27. The original Article 25 provides for the exchange of “such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by this Convention”. As Mr Ayliffe accepts, Article 27 may have some temporal significance for the operation of the first limb of this provision. If information is sought for the purpose of carrying out the provisions of the Convention relating to the modification of tax liabilities (to which Article 27 undoubtedly applies) the indirect effect may well be that the information exchanged will relate to these tax liabilities. To this extent there may be a temporal limitation on Article 25. However that is a very different matter from subjecting the original Article 25 to Article 27. Moreover, when one considers the other limb of the original Article 25 “such information as is necessary for carrying out … the domestic laws of the Contracting States concerning taxes covered by this Convention” there is, to my mind no justification for reading it as subject to Article 27. The Appellants submit that these words refer not only to the categories of tax described in Article 2 but also to the temporal limitations provided for in Article 27. I am unable to accept this submission. The words “concerning taxes covered by this Convention” are apt to describe the categories of taxes to which the Convention applies. In this regard I note that Article 2, which sets out the relevant categories of tax, is headed “Taxes Covered”. To my mind, Article 27 is not concerned with what taxes are “covered” by the Convention.[29]Moreover, I consider that that part of Article 27(1) which is concerned with temporal effect (i.e. sub-paragraphs (a) and (b)) is clearly intended to apply to the provisions of the Convention which are concerned with the modification of liability to tax. The substantive provisions of the Convention which address issues of double taxation and which modify liabilities clearly need to be related to the relevant tax periods for the system to be workable. By contrast, there is no particular reason why exchange of information provisions such as Article 25, which are not concerned with the modification of tax charges, require to be limited temporally in their application to particular years of assessment. Information can be effectively exchanged without the process being related to defined periods of liability to taxation.[30]The judge, in coming to his conclusion that Article 25 was subject to Article 27 in respect of its temporal application was clearly influenced by his view that earlier Double Taxation Agreements between the United Kingdom and South Africa included similar provisions. This, it may be suggested, makes it necessary to define the temporal scope of corresponding provisions in later treaties between the same parties. However, an examination of the 1946, 1962 and 1968 Conventions (Articles XIV, XVI and XVII, Articles XXI, XXV and Articles 25 and 27 respectively) shows that they include exchange of information and commencement and effect provisions similar to those in the 2002 Convention and so, by the same token, I consider that the force and effect clauses did not limit temporally the operation of the exchange of information clauses. Moreover, in my view the provision in each of those treaties which provided that it superseded its predecessor was sufficient to define under which treaty the co-operation was taking place.[31]Secondly, in any event, when we come to the amended Article 25 there are further reasons why it cannot have been intended to be read subject to Article 27. These reasons closely reflect those in relation to Article 25A set out earlier in this judgment. Whereas the original Article 25 was limited to the taxes listed in Article 2, the amended Article 25 extends the operation of the exchange of information provision to “taxes of every kind and description”. The Appellants maintain that the amended Article 25 is subject to Article 27 notwithstanding the fact that Article 27 deals expressly only with certain specified taxes. The Appellants submit that, as in their submissions on the effect of Article 25A, it is necessary to extend by purposive interpretation the effect of Article 27 so that it applies to all taxes. For reasons given earlier in this judgment, I consider that such an extension by interpretation is too big a step. Here, once again, there is no clear purpose to be achieved. There is no good reason why the amended Article 25 requires to be limited in its application by reference to specific tax years. On the contrary, Article VI is all that is needed by way of provision for commencement and effect. It gives effect to what I consider to be the clear intention of the parties and avoids all of the difficulties which arise from the mismatch of the amended Article 25 and Article 27 in relation to their subject matter. Consequently, even if, contrary to my view, the original Article 25 was subject to Article 27, the amended Article 25 cannot be.[32]The Appellants draw attention to the fact that the 1968 Convention continues to have some relevance to double tax relief for years of assessment prior to those to which the 2002 Convention applies by operation of Article 27. They submit that the fact that the 2010 Protocol amended the 2002 Convention but did not amend the 1968 Convention supports the view that the parties to the Protocol did not intend Article 25A to have any application other than in relation to tax assessed in the years of assessment to which the 2002 Convention applies. However, I agree with the judge that this point does not assist the Appellants. The submission is circular in that it assumes as correct the conclusion for which the Appellants contend. As the judge observed, the fact that there was no amendment to the 1968 Convention is at least equally explicable by an intention that Article 25A should apply irrespective of the years of assessment applicable to the tax in respect of which reciprocal collection was sought. (Judgment para. 27).[33]Article 25A is based on a provision relating to assistance in the collection of taxes in the OECD Model Convention with respect to Taxes on Income and on Capital (Article 27 of the Model Convention). During the course of submissions we were referred to the official commentary on that draft Article. It includes the following passage:
“14. Nothing in the Convention prevents the application of the provisions of the Article to revenue claims that arise before the Convention enters into force, as long as assistance with respect to these claims is provided after the treaty has entered into force and the provisions of the Article have become effective. Contracting States may find it useful, however, to clarify the extent to which the provisions of the Article are applicable to such revenue claims, in particular when the provisions concerning the entry into force of their Convention provide that the provisions of that Convention will have effect with respect to taxes arising or levied from a certain time. States wishing to restrict the application of the Article to claims arising after the Convention enters into force are also free to do so in the course of bilateral negotiations.”
Both parties before us claimed that this passage supported their interpretation of the 2002 Convention as amended, not surprisingly placing emphasis on different parts of the passage. To my mind, the passage does not advance the case of either party. It makes clear that it is open to the parties to apply the provision on assistance in the collection of taxes to revenue claims arising before the Convention enters into force. The question is whether the parties intended that the Protocol should have that effect. Similarly, an express provision addressing this issue would have been helpful but is certainly not essential.[34]The Appellants sought to rely on the expert evidence of Professor Dr. Maria Grau Ruiz and Dr. Avery Jones in relation to the interpretation of the provisions of the Convention and Protocol. The judge rejected this evidence as inadmissible. I consider that he was clearly correct to do so. Questions of interpretation are for the court. At the hearing before us we refused an application on behalf of the Appellants to consider this material. However we did allow the Appellants to refer us to published writings on the subject of Double Taxation Agreements.[35]As a result we were referred by the Appellants to Professor Dr. Grau Ruiz’s book “Mutual Assistance for the Recovery of Tax Claims”. Paragraph 2.1-2.3 includes the bold statement that:
“Mutual Assistance is only applicable to tax claims arising at a later date than the agreement or directive concerned”
However, this statement is contradicted in the following passages where the author states that it is not usual for the regulation establishing assistance to be applied to tax claims originating at an earlier date but that there are exceptions to this general rule. She states that this is an issue that needs to be addressed and that she does not favour such a measure. Moreover, any suggestion that assistance in recovery may apply only to tax claims arising after the entry into force of the relevant treaty is contradicted by the commentary to the OECD Model Convention considered above. As a result I am unable to derive any assistance from Professor Doctor Grau Ruiz.[36]The Appellants also referred us to M. Jacques Sasseville’s article “Temporal Aspects of Tax Treaties” published in “Tax Polymath” (2010). Having considered exchange of information provisions, M. Sasseville continues: “The application of typical coming-into-effect provision of tax treaties to Article 27 (Assistance in the collection of taxes) is clearer as that Article deals directly with tax claims. Thus, as regards most bilateral conventions, the provisions of Article 27 only have effect as regards taxes in respect of amounts paid after a certain date or for taxes levied for periods beginning after a certain date (that date corresponding or being subsequent to the entry into force of the convention). That conclusion does not result from the article itself but from the drafting of the coming-into-effect provision which limits the application of the provisions of the convention to such subsequent taxes.” (At p. 61) M. Sasseville then states that this is recognised by paragraph 14 of the Commentary on Article 27 of the OECD Model Convention, a paragraph which is set out earlier in this judgment. I understand M. Sasseville to be saying that the temporal scope of a provision governing assistance in the recovery of taxes is a matter for agreement between the parties as expressed in the coming into effect provision. The intention of the parties as reflected in Article VI of the Protocol and Article 27 of the Convention is the very question to be decided in these proceedings.[37]The Appellants draw attention to the Joint Council of Europe/OECD Convention on Mutual Administrative Assistance in Tax Matters, 1988 which deals, inter alia, with cross-border collection of tax. Article 28(6) provides that the provisions of the Convention, as amended by a Protocol in 2010, shall have effect for administrative assistance with prospective effect i.e. in relation to taxable periods or tax liabilities after its entry into force. I note that the Joint Convention as originally promulgated in 1988 did not include any such provision. Moreover Article 30, which provides that a State may by reservation reserve the right not to provide assistance in respect of tax claims in existence at the date of entry into force of the Convention, indicates that the Convention in its original form did apply to pre-existing tax liabilities unless there was an applicable reservation. Article 28(6) was introduced by a Protocol in 2010. However it also includes an express provision that any two or more parties may mutually agree that the Convention as amended by the Protocol shall have effect for administrating the assistance relating to earlier taxable periods or charges to tax. Accordingly, I do not consider that this provision assists the Appellants.[38]Both parties relied on a US decision, Stuart v United States 813 F.2d 243 (9th Cir. 1987), as supporting their case. Stuart concerned successive Double Taxation Agreements between the United States of America and Canada. The 1980 Convention included a provision (Article XXX) resembling Article 27 of the 2002 Convention with which we are concerned. The taxpayers argued on the basis of that provision that the 1980 Convention and not the 1942 Convention applied to a request for information. The US Government offered two arguments for the application of the 1942 Convention. The first was that Article XXX controlled the exchange of information provision. That argument resembled that of the Appellants in the present case. Alternatively, it argued that all of the relevant acts of request preceded the coming into force of the 1980 Convention. The court did not need to rule on the first argument because it accepted the second. Accordingly, I consider that the decision does not assist the parties to the present proceedings.[39]The Respondent sought to rely, in support of the judge’s interpretation of the Protocol, upon a Memorandum of Understanding between the United Kingdom and South Africa concerning assistance in the collection of taxes under Article 25A of the 2002 Convention. This Memorandum of Understanding was concluded between the representatives of the competent authorities of the United Kingdom and South Africa on 24 February 2011, although Miss Louise Kollmer explains in her evidence that it was negotiated and agreed during the course of negotiating the 2010 Protocol. Indeed, the Protocol itself expressly provides in Article 25A(1) that the competent authorities in the United Kingdom and South Africa may enter into one or more Memoranda of Understanding to settle the mode of application of the Convention. The Appellants contended that the Memorandum of Understanding is inadmissible as an aid to the interpretation of the Protocol or the 2002 Convention, in particular because it is not an agreement between the States party to those instruments but between their respective competent authorities (i.e. their tax authorities). In this regard they also drew attention to the refusal of Mummery J. in IRC v Commerzbank at pp. 301-2 to have regard to a joint statement of the UK and US tax authorities. Notwithstanding the fact that the Memorandum of Understanding in the present case was concluded between the tax authorities of the Contracting States, I consider that it is admissible on the construction of the 2010 Protocol and the 2002 Convention pursuant to Article 31(2) and/or 31(3), Vienna Convention on the Law of Treaties, as an agreement relating to the treaty, which was made between all the parties in connection with the conclusion of the treaty (Article 31(2)(a)) or a subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions (Article 31(3)(a)) or subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation (Article 31(3)(b)). The Memorandum of Understanding was concluded between the appropriate organs of the Contracting States for this particular purpose. Moreover, I note that in Commerzbank Mummery J. was not addressing the status of the joint statement in the context of the Vienna Convention on the Law of Treaties.[40]The Memorandum of Understanding provides that requests for assistance are not restricted to claims that were finally determined after the entry into force of Article 25A. The Respondent submits that this provision is consistent only with an understanding that there was no backstop. This provision makes clear, as the Appellants now accept, that the enforcement procedure can apply to tax liabilities which accrued before the Protocol came into force. However, I agree with the judge that this does not cast any light on the issue whether Article 25A applies beyond the period identified in Article 27.[41]Before leaving this topic I should record that we were told by Mr. Ayliffe on behalf of the Respondent that Memoranda of Understanding of this kind relating to Double Taxation Agreements to which the United Kingdom is a party are not published by the Respondent and that the only way in which taxpayers can obtain a copy of the text is by making a Freedom of Information Act request. This is a surprising state of affairs. It seems that Memoranda of Understanding are now frequently used in this context. The OECD Model Tax Convention on Income and Capital produced in 2010 clearly contemplates that Contracting States may enter into Memoranda of Understanding to settle the mode by which agreements for mutual assistance may be applied and the OECD has also published a model form of Memorandum of Understanding. Such Memoranda of Understanding may have an important bearing on the position of taxpayers. I consider that in the interests of fairness to taxpayers such Memoranda of Understanding should be readily available to the public.[42]For these reasons, I agree with the judge’s conclusion that Article 27 does not limit the temporal application of the Protocol and Article 25A.[43]For the reasons set out below, I consider that Article 25A, when read free of the fetters of Article 27 with which the Applicants have sought to confine it, applies to requests for assistance in the enforcement of tax liabilities arising before the coming into force of the Protocol. (1) Article 28, Vienna Convention on the Law of Treaties provides:
“Non-retroactivity of treaties Unless a different intention appears from the treaty or as otherwise established, its provisions do not bind a party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry-into-force of the treaty with respect to that party.”
Although the Vienna Convention is not in force between the United Kingdom and South Africa, the basic rule on non-retroactivity reflected in Article 28 may be taken to be declaratory of existing rules of customary international law binding on all States (Ambatielos case (Preliminary Objections) ICJ Rep. (1952) 40; Sinclair, The Vienna Convention on the Law of Treaties, 2nd Ed. (1984) p. 85). However, the principle of non-retroactivity is not a peremptory norm of international law and, as Article 28 makes clear, it is open to the parties to agree to the contrary. Therefore everything depends on the intention of the parties. (Mavrommatis Palestine Concessions (1924) PCIJ Ser. A, No. 2, 34; Sinclair, p.85). (2) For reasons developed later in this judgment in relation to the Appellants’ second ground of appeal, I do not consider that the application of Article 25A to requests for assistance in the enforcement of tax liabilities arising before the coming into force of the Protocol is a true case of retrospective application. Nor do I consider that there is any unfairness in the application of the Protocol to such liabilities. (3) The parties have made clear in Article VI of the Protocol their intention that Article 25A should apply to all requests for assistance in the enforcement of tax claims which comply with Article 25A provided that the request is made on or after the date of entry into force of the Protocol. I can see no good reason or any legal basis for seeking to introduce any further temporal limitation on the scope of Article 25A when the parties have chosen not to do so. (4) The Appellants themselves have, in fact, accepted that Article 25A is capable of applying to requests for assistance in the enforcement of tax liabilities arising before the coming into force of Protocol. Both below and before this court their position has not been to deny any application of Article 25A to pre-existing tax liabilities, but to limit it by reference to a backstop derived from Article 27.[44]For these reasons, I consider that the tax claims which the Respondents seek to enforce in these proceedings fall within Article 25A of the 2002 Convention. Ground 2: The judge erred in holding that the powers conferred by section 173, Finance Act 2006 to give effect to “arrangements relating to international tax enforcement” extended to such “arrangements” insofar as they purported to apply retrospectively prior to 19 July 2006 (being the date on which section 173, Finance Act 2006 itself came into force) and that the 2011 Order was effective insofar as it purported to give effect to Article 25A in respect of foreign taxes arising prior to that date.[45]Section 173, Finance Act 2006, came into force on 19 July 2006. The Appellants submit that it provides no express statutory authority for the making of arrangements relating to international tax collection that have retrospective effect i.e. which purport to apply to tax debts arising prior to 19 July 2006, and accordingly they contend that any Order in Council purporting to give effect to such arrangements as a matter of domestic law would be ineffective in relation to the period prior to 19 July 2006. Accordingly, this would mean that even if the judge were correct in rejecting their primary case that Article 25A of the 2002 Convention does not apply to tax debts in respect of taxable years commencing prior to 1 January 2003, the 2011 Order does not validly give effect to Article 25A as a matter of domestic law insofar as it purports to apply to tax debts arising before 19 July 2006. In this regard the Appellants rely on the statement of Willes J. in Phillips v Eyre(1870) LR 6 QB 1 at p. 23 that retrospective legislation is “Contrary to the general principle that legislation by which the conduct of mankind is regulated ought, when introduced for the first time, to deal with future acts, and ought not to change the character of past transactions carried on upon the faith of the then existing law.”[46]The judge dealt with this part of the case in a very clear and succinct manner, stating his conclusions as follow: “Against that background, I turn to the Defendants’ secondary case which I reject for the following reasons. As I have explained already the Revenue Rule precludes the enforcement in England of taxes assessed by a foreign Tax Authority. Thus as long as that rule applies, persons in the position of Ben Nevis are entitled to resist any attempt by a foreign Tax Authority such as SARS to collect tax from it in England. However, an entitlement to resist collection as long as that rule applies does not give rise to an expectation that in relation to such liabilities the law that presently precludes collection in England will never be changed. If the rule is changed then … it bites only as to the future enforcement of the existing debt. The fact that the debt was incurred prior to the change in the law is immaterial so long as the taxpayer cannot under the laws of the assessing State prevent its collection. The presumption against retrospectivity would preclude the rearrangements of tax liabilities for prior years of assessment (which is no doubt the, or a, reason why Article 27 is formulated in the terms it was and included in the original rule 2002 Convention) but I see no reason for concluding that it precludes the collection in the future of debts that happen to have fallen due prior to the coming into effect of [the Finance Act 2006]. Such a conclusion does not in any relevant sense involve changing “…the character of past transactions carried on upon the faith of the then existing law…” or the retrospective alteration of the legal effect of an act or omission by a later change in the law.” (Judgment at para 45.)[47]The Appellants criticise this passage as a mischaracterisation of the nature and effect of provisions like Article 25A which, they submit, purports to reverse the effect of a widely known and long established rule of private international law. At the time the liability to tax arose in South Africa there was, as a result of the Revenue Rule, no basis on which it could be pursued in this jurisdiction. The Appellants submit that the effect of the implementation of Article 25A is the creation of a new cause of action vested in the Respondent in respect of tax debts where previously no such cause of action existed and/or the abolition of an absolute defence that Ben Nevis would otherwise have had to any such claim. This, they submit, cannot plausibly be described as merely a procedural change that does not alter the legal incidents of prior transactions. They submit that the alleged effect of the 2011 Order engages the presumption against retrospectivity and other linked presumptions.[48]It was common ground before us and below that, as the judge expressed it in paragraph 44 of his judgment, absent express wording to the contrary it is to be presumed that a statute was not intended by the legislator to “have retrospective effect or, where it would appear that some retrospective effect was intended, that such effect was intended to be limited to the minimum necessary to achieve the relative legislative purpose”. However, it is necessary to examine with care the precise sense in which an enactment is said to have retrospective effect. In particular, it is important to have in mind the distinction drawn by Lord Rodger in Wilson v First County Trust (No. 2)[2004] 1 AC 816 at paras. 186 et seq., between retroactive operation of legislation and statutes making prospective changes to existing rights. In the present case the judge found that an enactment is not retrospective in any objectionable sense where the enactment is simply applied at a time after its commencement to a state of affairs existing at that time, even though that state of affairs came in to existence before the commencement. In this regard he relied on the following statement by Mr. Francis Bennion in Bennion on Statutory Interpretation (5th Ed.) at p. 317 which was approved by Ward J. as he then was, in Hager v Osborne [1992] Fam. 94 at p. 99. “It is important to grasp the true nature of objectionable retrospectivity, which is that the legal effect of an act or omission is retroactively altered by a later change in the law. However, the mere fact that a change is operated with regard to past events does not mean that it is objectively retrospective. Changes relating to the past are objectionable only if they alter the legal nature of a past act or omission in itself. A change in the law is not objectionable merely because it takes note that a past event has happened and bases new legal consequences upon it.”[49]There is an abundance of authority to support the approach taken by the judge. In West v Gwynne [1911] 2 Ch 1 the Appellant argued that section 3, Conveyancing and Law of Property Act 1892 should not be applied “retrospectively” to leases executed before the Act commenced. The Court of Appeal rejected the submission, Cozens-Hardy MR observing:
“Almost every statute affects rights which would have been in existence but for the statute”
(at p.11) Buckley LJ stated: “During the argument the words “retrospective” and “retroactive” have been repeatedly used, and the question has been stated to be whether s.3 of the Conveyancing Act 1892, is retrospective. To my mind the word “retrospective” is inappropriate, and the question is not whether the section is retrospective. Retrospective operation is one matter. Interference with the existing rights is another. If an Act provides that as at a past date the law shall be taken to have been that which it was not, that Act I understand to be retrospective. That is not this case. The question here is whether a certain provision as to the contents of leases is addressed to the case of all leases or only of some, namely, leases executed after the passing of the Act. The question is as to the ambit and scope of the Act, and not as to the date as from which the new law, as enacted by the Act, is to be taken to have been the law.” (pp.11-12)[50]Similarly in the Canadian decision Gustavson Drilling (1964) Limited v Minister of National Revenue [1977] 1 RCS 271, which was cited with approval by Lord Rodger in Wilson at paras 191, 193, the issue was whether the taxpayer could deduct against its liability to income tax certain expenses incurred prior to 1960 when legislation passed in 1962 had repealed the availability of such deductions for tax years following 1962. A majority of the Supreme Court of Canada rejected the taxpayer’s argument that the repealing legislation was retrospective. Dickson J. observed:
“It is perfectly obvious that most statutes in some way or other interfere with or encroach upon antecedent rights, and taxing statutes are no exception… No one has a vested right to the continuance of the law as it stood in the past; in tax law it is imperative that legislation conform to changing social needs and governmental policy. A taxpayer may plan his financial affairs in reliance on the tax laws remaining the same; he takes the risk that the legislation may be changed.”
(at p.282)[51]I agree with the judge that the presumption against retrospective effect has no application in the present case because the application of Article 25A to taxes arising prior to 19 July 2006 or 1 January 2003 does not involve any objectionable retrospective effect.(1) It was common ground that Article 25A does not change the relevant law with effect from a time earlier than the commencement of the 2011 Order in Council, the 2010 Protocol or the 2002 Tax Convention.(2) Article 25A does not confer on any person a power to act with retrospective effect. On the contrary, Article VI of the Protocol stipulates that a request for assistance must be received and acted on after Article 25A has come into force.(3) Article 25A does not alter the legal incidents of a transaction or other conduct effected before its commencement. The first Appellant became subject to a liability in the law of South Africa to pay taxes. That liability has not been changed by Article 25A. In particular, I consider the Appellants’ submission that Article 25A created a new cause of action untenable. The true position is made abundantly clear by Article 25A(3) which provides that where a revenue claim arises in one Contracting State “that revenue claim shall be collected” by the other State “as if the revenue claim were a revenue claim of that other State”. The provision does not create a new right or liability to tax in the law of the collecting State. On the contrary, the words “as if” import a legal fiction which permits the South African claim to be enforced as if it were a UK claim. In this regard I would also draw attention to Article 25A(6) which provides that proceedings with regard to the existence, validity or amount of a revenue claim of the requesting State shall not be brought before the courts of the other Contracting State. Furthermore, I note that Article 25A(7) provides that where the relevant revenue claim ceases to be enforceable in the laws of the requesting State, the competent authority of the requesting State has a duty to notify the collecting State promptly of that fact and, at the option of the collecting State, the requesting State shall either suspend or withdraw its request. Furthermore, the abrogation of the Revenue Rule does not deprive Ben Nevis of an absolute defence to liability. The Revenue Rule merely prevents the enforcement of the debt in another jurisdiction; the abrogation of the rule by Article 25A merely allows the debt to be collected in the United Kingdom.[52]That is not the end of the matter, however. As Lord Rodger explained in Wilson at para. 193, “Often a sudden change in existing rights would be so unfair to certain individuals or businesses in their particular predicament that it is to be presumed that Parliament did not intend the new legislation to affect them in that respect”. Lord Rodger then went on to cite with approval a further passage from the judgment of Dickson J. in Gustavson Drilling. “The rule is that a statute should not be given a construction that would impair existing rights as regards person or property unless the language in which it is couched requires such a construction … The presumption that vested rights are not affected unless the intention of the legislature is clear applies whether the legislation is retrospective or prospective in operation. A prospective enactment may be bad if it affects vested rights and does not do so in unambiguous terms. This presumption, however, only applies where the legislation is in some way ambiguous and reasonably susceptible of two constructions.” (at p.282) Lord Rodger then observed that the presumption more often falls to be considered in relation to legislation which alters rights only for the future and that since it is more likely that Parliament intended to alter vested rights in this way than that it intended to make a retroactive change, in practice the presumption against legislation altering vested rights is regarded as weaker than the presumption against legislation having retroactive effect (at para. 195). It is far from clear on the authorities what constitutes a “vested right” for this purpose, Lord Rodger in Wilsonobserving that “the courts have tended to attach the somewhat woolly label “vested” to those rights which they conclude should be protected from the effect of the new legislation.” (para 196). What is clear, however, is that the basis of any presumption in this area is that of simple fairness. Thus in Wilson Lord Nicholls (at para. 19) approved the following statement by Staughton LJ in Secretary of State for Social Security v Tunnicliffe [1991] 2 All ER 712, 724, as stating the underlying rationale of the principle: “The true principle is that Parliament is presumed not to have intended to alter the law applicable to past events and transactions in a manner which is unfair to those concerned in them, unless a contrary intention appears. It is not simply a question of classifying an enactment as retrospective or not retrospective. Rather it may well be a matter of degree – the greater the unfairness, the more it is to be expected that Parliament will make it clear if that is intended.” (See also L’Office Cherifien des Phosphates v Yamashita–Shinnihon Steamship Co. Ltd. [1994] 1 AC 486 per Lord Mustill at p.525A; Wilson per Lord Rodger at para. 196.)[53]To my mind there is no unfairness in Article 25A permitting the enforcement of pre-existing tax liabilities. Prior to the amendment of the 2002 Convention and its implementation in this jurisdiction the Revenue Rule prohibited the enforcement of South African tax liabilities in the United Kingdom. However, that Rule was always liable to be abrogated by treaty and the taxpayer could have no legitimate expectation that the Rule would not be abrogated in the future. Moreover, the Revenue Rule did not exist for the benefit or protection of taxpayers. Its precise basis has long been debated (see F.A. Mann, Studies in International Law, (1973), pp. 495-9.) The editors of Dicey, Morris and Collins, The Conflict of Laws, (15th Ed.), para. 5-020) suggest that the best explanation is that provided by Lord Keith of Avonholm in Government of India v Taylor [1955] AC 491 at p. 511, that enforcement of such claims is an extension of the sovereign power which imposed the taxes, and an “assertion of sovereign authority by one State within the territory of another, as distinct from a patrimonial claim by a foreign sovereign, is (treaty or convention apart) contrary to all concepts of independent sovereignties.” (See also Re State of Norway’s Application (Nos. 1 and 2)[1990] 1 AC 723 per Lord Goff of Chieveley at p. 808.) However, whatever its precise basis, it seems clear that it lies in relationships between sovereign States and that its abrogation, therefore, cannot be regarded as an injustice to a party seeking to resist enforcement of a tax liability. From a taxpayer’s point of view, the Revenue Rule is a collateral benefit and he cannot complain of injustice if he is deprived of it.[54]Accordingly, I conclude that section 173, Finance Act 2006 does authorise the making of international tax enforcement arrangements in relation to tax liabilities which arose before that section came into force on 19 July 2006. Conclusion.[55]For these reasons, I would dismiss this appeal. I should add that I agree with the observations of Jackson LJ in relation to the publication by the Respondent of Memoranda of Understanding and in relation to skeleton arguments.

Lord Justice Jackson :

[56]I agree that this appeal should be dismissed for the reasons stated by Lloyd Jones LJ. I only wish to add comments on two matters namely, Memoranda of Understanding and skeleton arguments.[1]Memoranda of Understanding[57]The OECD Model Tax Convention in Income and Capital (22nd July 2010) specifically envisages that contracting states may enter into Memoranda of Understanding (“MOUs”) to settle the mode by which agreements for mutual assistance may be applied. The OECD has published a model form of MOU. This deals with matters such as how far back in time the provisions for collecting unpaid tax may extend.[58]Under Article 31 of the Vienna Convention such an MOU may be taken into account as an aid to interpreting the primary instrument which the MOU supplements.[59]Paragraph 1 of Article 25A of the 2002 Convention (as amended) specifically envisages that the competent authorities in the UK and South Africa may enter into one or more MOUs to settle the mode of application of the Convention.[60]It follows from the foregoing that any taxpayer who does or did business in both South Africa and the UK has a legitimate interest in those MOUs. I was concerned to learn during argument that such MOUs are not made publicly available. The only means by which the taxpayers can ascertain what they say is by making Freedom of Information Act requests.[61]In my view such MOUs should be placed in the public domain. This may either be done by putting them on the HMRC website or by some other means.[2]Skeleton Arguments[62]The appellants have furnished two replacement skeleton arguments. Together they run to 40 pages and contain 113 footnotes. They are discursive in style and contain much material which was not pursued in oral submissions. When the appellants’ leading counsel got to their feet, they proceeded to argue the case as if the skeleton arguments did not exist – at least until the court objected. Thereafter counsel did their best to direct us to disparate sections of the skeletons which were relevant to what they were saying at any particular time. Quite often there were no relevant sections of the skeletons. Counsel simply read out at dictation speed various sets of legal propositions for the court to write down and ponder. At one point counsel dictated a list of relevant dates, since they had not troubled to provide a chronology. All this is a far cry from what the rules require.[63]The practice directions which now supplement CPR Part 52 reflect what was good practice under the former practice direction PD52. Section 5 of Practice Direction 52A provides: “5.1 (1)The purpose of a skeleton argument is to assist the court by setting out as concisely as practicable the arguments upon which a party intends to rely. (2) A skeleton argument must –• be concise;• both define and confine the areas of controversy;• be set out in numbered paragraphs;• be cross-referenced to any relevant document in the bundle;• be self-contained and not incorporate by reference material from previous skeleton arguments;• not include extensive quotations from documents or authorities. (3) Documents to be relied on must be identified. (4) Where it is necessary to refer to an authority, a skeleton argument must –(a) state the proposition of law the authority demonstrates; and(b) identify the parts of the authority that support the proposition. If more than one authority is cited in support of a given proposition, the skeleton argument must briefly state why. (5) The cost of preparing a skeleton argument which – (a) does not comply with the requirements set out in this paragraph; or (b) was not filed within the time limits provided by this Practice Direction (or any further time granted by the court), will not be allowed on assessment except as directed by the court. 5.2 The appellant should consider what other information the appeal court will need. This may include a list of persons who feature in the case or glossaries of technical terms. A chronology of relevant events will be necessary in most appeals. 5.3 Any statement of costs must show the amount claimed for the skeleton argument separately.”• be concise;• both define and confine the areas of controversy;• be set out in numbered paragraphs;• be cross-referenced to any relevant document in the bundle;• be self-contained and not incorporate by reference material from previous skeleton arguments;• not include extensive quotations from documents or authorities. (a) state the proposition of law the authority demonstrates; and (b) identify the parts of the authority that support the proposition. (a) does not comply with the requirements set out in this paragraph; or (b) was not filed within the time limits provided by this Practice Direction (or any further time granted by the court),[64]In relation to appeals to the Court of Appeal, paragraph 31(1) of Practice Direction 52C provides: “31 (1)Any skeleton argument must comply with the provisions of Section 5 of Practice Direction 52A and must– (a) not normally exceed 25 pages (excluding front sheets and back sheets); (b) be printed on A4 paper in not less than 12 point font and 1.5 line spacing.(2) Where an appellant has filed a skeleton argument in support of an application for permission to appeal, the same skeleton argument may be relied upon in the appeal or the appellant may file an appeal skeleton argument (Timetable Section 5, Part 1).(3) At the hearing the court may refuse to hear argument on a point not included in a skeleton argument filed within the prescribed time.(4) The court may disallow the cost of preparing an appeal skeleton argument which does not comply with these requirements or was not filed within the prescribed time.” (a) not normally exceed 25 pages (excluding front sheets and back sheets); (b) be printed on A4 paper in not less than 12 point font and 1.5 line spacing.[65]These provisions mean what they say and they serve a serious purpose. The civil division of the Court of Appeal works under considerable pressure of time and does its utmost not only to decide cases justly and in accordance with the law, but also to deliver an efficient service to court users. To this end what the court needs from each party is a concise skeleton argument, setting out clearly the points which will be argued and providing relevant references.[66]The sum at issue in this appeal is approximately £7.8 million and a galaxy of experienced and expensive lawyers have been instructed. One might therefore have expected the rules to be complied with. If the appellants had succeeded in this appeal, the court would have disallowed at least some and possibly all of the costs of the appellants’ skeleton arguments.[67]Out of fairness, I should add that the respondents’ skeleton argument was longer than necessary and longer than permitted by the current practice direction. On the other hand, it was well structured and the respondents had a great deal of material to respond to. Also, and more importantly, the respondents’ skeleton argument identified the arguments which counsel was planning to deploy orally. It thus avoided the need for a dictation exercise. In oral submissions the respondents’ counsel used his skeleton argument as the note from which he spoke, amplifying points where necessary and debating with the court the written propositions of law which were in front of us all.[68]The consequences of the parties’ differing approaches to skeleton arguments were graphically illustrated during the course of the hearing. The respondents’ oral submissions were completed in half a day. The appellants’ oral submissions occupied almost one and a half days.[69]The purpose of this judgment is not to pick on particular counsel as egregious offenders. The present malaise is too widespread for that. I simply take this case as an exemplifying a practice which must now stop.[70]Any advocates who have cases pending in the Court of Appeal may care to review their skeleton arguments in the light of this judgment, bearing in mind the costs sanctions which are available to the court.[71]The Master of the Rolls has read paragraphs 62 to 70 of this judgment in draft and asks me to say that he agrees with the general observations about the use of skeleton arguments in the Court of Appeal.

Lord Justice Floyd :

[72]I agree with both judgments.

Cited in 8 later judgments