Upper Tribunal Tax and Chancery Chamber

[2024] UKUT 00319 (TCC)

Fecha: 23-May-2024

In RCC v IDT Card Services [2006] EWCA Civ 29 at [81], the Court of Appeal reached essentially the same conclusion

In RCC v IDT Card Services [2006] EWCA Civ 29 at [81], the Court of Appeal reached essentially the same conclusion.

58.

The Court of Appeal summarised the approach to be taken by English courts when applying a conforming interpretation in its decision in Vodafone 2 v RCC [2010] Ch 77. In his judgment Sir Andrew Morritt C quoted at [37] and [38] with approval a summary prepared by counsel for HMRC of the principles established in case law (and from which counsel for Vodafone did not dissent). These principles are:

(1)

The obligation on the English courts to construe domestic legislation consistently with Community law obligations is both broad and far-reaching. In particular:

(a)

it is not constrained by conventional rules of construction;

(b)

it does not require ambiguity in the legislative language;

(c)

it is not an exercise in semantics or linguistics;

(d)

it permits departure from the strict and literal application of the words which the legislature has elected to use;

(e)

it permits the implication of words necessary to comply with Community law obligations; and

(f)

the precise form of the words to be implied does not matter.

(2)

The only constraints on the broad and far-reaching nature of the interpretative obligation are that:

(a)

the meaning should go with the grain of the legislation and be compatible with the underlying thrust of the legislation being construed: an interpretation should not be adopted which is inconsistent with a fundamental or cardinal feature of the legislation since this would cross the boundary between interpretation and amendment; and

(b)

the exercise of the interpretative obligation cannot require the courts to make decisions for which they are not equipped or give rise to important practical repercussions which the court is not equipped to evaluate.

59.

In FII Group Test Claimants v RCC [2012] UKSC 19 at [176] (“FII SC1”), Lord Sumption described the adoption of a conforming interpretation as a:

[…] highly muscular approach to the construction of national legislation so as to bring it into conformity with the directly effective Treaty obligations of the United Kingdom. It is no doubt correct that, however strained a conforming construction may be, and however unlikely it is to have occurred to a reasonable person reading the statute at the time, a later judicial decision to adopt a conforming construction will be deemed to declare the law retrospectively in the same way as any other judicial decision. But it does not follow that there was not, at the time, an unlawful requirement to pay the tax. It simply means that the unlawfulness consists in the exaction of the tax by the Inland Revenue, in accordance with a non-conforming interpretation of what must (on this hypothesis) be deemed to be a conforming statute.

60.

It is agreed that the authorities make it clear that the case law on the application of s3 Human Rights Act 1998 (“HRA”) and the case law on conforming interpretations are interchangeable - see for example the speech of Lord Steyn in Ghaidan v Godin-Mendoza [2004] 2 AC 557 at [45]:

44 It is necessary to state what section 3(1), and in particular the word “possible” does not mean. First, section 3(1) applies even if there is no ambiguity in the language in the sense of it being capable of bearing two possible meanings. The word “possible” in section 3(1) is used in a different and much stronger sense. Secondly, section 3(1) imposes a stronger and more radical obligation than to adopt a purposive interpretation in the light of the ECHR. Thirdly, the draftsman of the Act had before him the model of the New Zealand Bill of Rights Act which imposes a requirement that the interpretation to be adopted must be reasonable. Parliament specifically rejected the legislative model of requiring a reasonable interpretation.

45.

Instead the draftsman had resort to the analogy of the obligation under the EEC Treaty on national courts, as far as possible, to interpret national legislation in the light of the wording and purpose of Directives. In Marleasing SA v La Comercial Internacional de AlimentaciónSA (Case C-106/89) [1990] ECR I-4135, 4159 the European Court of Justice defined this obligation as follows:

It follows that, in applying national law, whether the provisions in questions were adopted before or after the Directive, the national court called upon to interpret it is required to do so, as far as possible, in light of the wording and the purpose of the Directive in order to achieve the result pursued by the latter and thereby comply with the third paragraph of article 189 of the Treaty.

Given the undoubted strength of this interpretative obligation under EEC law, this is a significant signpost to the meaning of section 3(1) in the 1998 Act.