Neutral Citation Number: [2007] EWHC 971 (Admin)
Case No: CO/2220/2005
IN THE HIGH COURT OF JUSTICE
ADMINISTRATIVE  COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 2 May 2007 

Before:

Kenneth Parker QC, sitting as a Deputy High Court Judge
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Between:

	THE QUEEN (on application of SOFTWARE SOLUTIONS PARTNERS LIMITED) 	Claimant	
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	HER MAJESTY’S COMMISSIONERS FOR CUSTOMS AND EXCISE	Defendants	

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David Milne QC (instructed by Deloitte & Touche LLP) for the Claimant
Rebecca Haynes (instructed by Solicitor of HM Revenue and Customs) for the Defendants

Hearing dates: 26 March 2007
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JUDGMENT
Kenneth Parker QC: 
Proceedings
1.	This is a “rolled up” application for permission, with the substantive hearing to follow if permission is granted, brought by Software Solutions Partners Limited (“SSP”) against Her Majesty’s Commissioners for Customs and Excise (now merged into HM Revenue and Customs) (“Customs”). Following an oral hearing Mr Justice Stanley Burnton on 1 November 2005 adjourned the application for permission and stayed the claim pending the disposition of two appeals (consolidated under LON/0062) brought respectively on 21 May 2004 and 7 February 2005 by SSP against Customs in the VAT and Duties Tribunal. Those appeals were withdrawn on 1 March 2006 in circumstances that I shall later explain, and SSP has renewed its application for permission before me in this Court.
The nature of the claim
2.	SSP designs, supplies, installs and maintains certain computer software, and provides ancillary computer hardware, for the insurance industry. The SSP software enables those insurance brokers who have access to it to carry out certain insurance transactions with those insurers with whom SSP has made previous arrangements and whose electronic communication systems are linked through SSP to the brokers. I shall explain the nature of these services more fully later in this judgment.
3.	In these proceedings SSP claims that on 25 November 2003 Customs ruled (“the disputed ruling”) that the relevant supplies made by SSP were exempt from VAT. SSP contends that it relied to its detriment on the ruling and that under public law principles Customs may not, as it has purported to do by a notice of assessment dated 12 January 2005, assess SSP to VAT on relevant supplies made during the period beginning with the date of the ruling and ending on 22 April 2004 (“the relevant period”). It was on 22 April 2004 that Customs effectively withdrew the ruling and told SSP that the relevant supplies were subject to VAT.
4.	There is no issue before the Court as to reliance upon the disputed ruling or detriment. Nor is there any longer any dispute that, on a correct interpretation and application of the relevant law, the supplies made by SSP were at all times subject to VAT and that SSP had to account for VAT on supplies made after the withdrawal of the disputed ruling. The claim turns upon the meaning and effect of the disputed ruling and upon whether Customs may assess SSP to VAT for supplies made during the relevant period. The amount due on the challenged assessment now exceeds £1 million.
The applicable law
5.	In order to provide a sound basis for understanding and resolving the issues in this claim, it is perhaps best to set out first the applicable law.                      
6.	Article 13 B (a) of EC Council Directive 77/388 (“the Sixth Directive”) exempts from VAT:
“insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents”
7.	The apparent simplicity of Article 13 B (a) of the Sixth Directive has been no impediment to a rather lengthy implementation of the exemption by the United Kingdom. I shall seek to extract from the Value Added Tax Act 1994, Schedule 9, Exemptions, Group 2 – Insurance,  only such part as I believe is relevant to the present application:
“Item No.
1 Insurance transactions and reinsurance transactions
4 The provision by an insurance broker or insurance agent of any of the services of an insurance intermediary in a case in which those services – 
(a)	are related (whether or not a contract of insurance or reinsurance is finally concluded) to an insurance transaction or a reinsurance transaction; and
(b)	are provided by that broker or agent in the course of his acting in an intermediary capacity.

Notes:
(1)	For the purposes of item 4 services are services of an insurance intermediary if they fall within any of the following paragraphs – 
(a)	the bringing together, with a view to the insurance or reinsurance of risks, of – 
(i)	persons who are or may be seeking insurance or reinsurance, and
(ii)	persons who provide insurance or reinsurance;
(b)	the carrying out of work preparatory to the conclusion of contracts of insurance or reinsurance;
(c)	the provision of assistance in the administration and performance of such contracts, including the handling of claims; 
(d)	the collection of premiums.
(2)	For the purposes of item 4 the insurance broker or insurance agent is acting “in an intermediary capacity” wherever he is acting as an intermediary, or one of the intermediaries, between – 
(a)	a person who provides insurance or reinsurance, and
(b)	a person who is or may be seeking insurance or reinsurance or is an insured person.”
8.	Customs from time to time issue public notices which seek to explain, in language intelligible to traders and their advisers, Customs’ own understanding of the effect of EU and UK VAT law. At the time of the disputed ruling the relevant notice was 701/36 Insurance, which was issued in May 2002. This notice was not included in the original trial bundles and neither party referred to it in the written skeleton arguments, but it seemed to me that the notice formed part of the essential background to, and context in which, the disputed ruling was made. The notice was, therefore, produced at my request at the hearing. The material part of the notice began at section 8, under the heading “What are insurance related activities?” Paragraph 8.2.1 noted that the Sixth Directive did not define “insurance related activities”, but stated that “ a useful indication of what services constitute the services of insurance brokers and agents is stated in Article 2 of the Intermediaries Directive” [EC Council Directive 77/92: OJ L26 31.1 77 p 14].
9.	Section 9 of the notice addressed the question of the nature of insurance brokers and agents. Paragraph 9.1 said that Customs did not restrict the exemption to those who were insurance brokers and agents by profession, but allowed exemption “for other intermediaries supplying services akin to those of traditional brokers and agents”. For the purposes of these proceedings paragraph 9.2, under the heading “Acting in an intermediary capacity” is the most important and I quote it in full:   
“The term “agent” or “intermediary” by definition means someone acting on behalf of someone else in effecting something with a third party. Whilst we accept that the insurance exemption is not restricted to traditional brokers and agents, to qualify as an “insurance agent”, UK law requires a person to be acting as an intermediary between an insurer and an insured party (or a potential insured party). This means that, for the purposes of the VAT exemption, insurance brokers, professional insurance agents and other intermediaries must all be acting “in an intermediary capacity” when supplying a “related service”.
To be acting in an intermediary capacity a business will be acting somewhere in the chain of supply of a contract of insurance. This does not necessarily mean they will have direct contact with the insurer or the insured party because there can be more than one intermediary in the chain. It does mean, however, that at one end of the chain there will be a business which has direct contact with the insured party (or potential insured party) and at the other end there will be a business which has direct contact with the insurer” (my emphasis).
10.	At the time of this Notice there was no judgment of the Court of Justice in Luxembourg (“the ECJ”) on the meaning of “related services”, but on 20 December 2000 the ECJ received from Denmark a reference for preliminary ruling in Case C-8/01 Assurandor-Societet/Taksatorringen v Skatteministeriet [2006] STC 1842 (“Taksatorringen”). Taksatorringen did squarely raise for the first time before the ECJ the meaning of “related services” in the relevant insurance exemption. The United Kingdom intervened in this reference, made written Observations and appeared at the oral hearing on 27 June 2002.
11.	Advocate General Mischo delivered his Opinion on 3 October 2002 (that is, about one year before the disputed ruling). At paragraphs 86 and 91 of his Opinion he made observations which could reasonably have been interpreted to mean that the exemption for related services applied if, and arguably in certain cases only if, the agent had authority to act on behalf of at least one of the principal parties to an insurance contract and had power to enter into a binding contract on behalf of the principal or principals.
12.	On 21 March 2003 the VAT and Duties Tribunal sitting in Scotland held that a “call centre” which sold health insurance on behalf of an insurer fell within the exemption: the fact that the insurer was put on risk and the customer on cover “at the hand” of the call centre appeared to the Tribunal to be “decisive” (Teletech UK Ltd VTD 18080). No appeal was brought against this decision and on I July 2003 (that is, about four months before the disputed ruling) Customs sent out a “Business Brief” (7C/03) in which Customs said that it accepted that an intermediary’s power to bind an insurer to enter a contract of insurance was sufficient to bring their services into the VAT exemption. That communication had not been withdrawn or modified before the disputed ruling was made. 
13.	The ECJ gave judgment in Taksatorringen on 20 November 2003, that is, five days before the disputed ruling. At paragraph 45 of its judgment the ECJ confirmed the Opinion of the Advocate General referred to above.
The services supplied by SSP
14.	In these proceedings there is no agreed statement of primary facts of the nature now usual in cases of this kind before the VAT and Duties Tribunal. There is also no core bundle of primary documents relating to SSP’s business activities, including, for example, any relevant service protocols or operating manuals. Letters from, or on behalf of, SSP to Customs that are found in the trial bundles and the witness statements filed on behalf of SSP contain various descriptions of the services supplied. They refer, however, to only one primary document, an Electra M3 Rental Agreement between SSP and a broker client, that gives little guidance as to the particulars of the service actually provided. Paragraph 3 of the witness statement filed by David Potter on behalf of Customs refers to SSP’s services but does not purport to set out a full description. For example, it appears that Mr Potter may have had recourse to SSP’s web site at the time of the disputed ruling in order better to understand the nature of the services supplied by SSP and to make the disputed ruling, but he does not refer in his witness statement to any such material.
15.	However, I shall try to set out the nature of the services drawing on the material before me. It appears that SSP designs, supplies, installs and maintains various packages of computer software, and provides ancillary computer hardware, to insurance brokers and insurers. The principal supplies appear to be to insurance brokers, divided into large corporate brokers for whom customised computer programmes are designed and provided, and smaller brokers who are supplied with standard, but specialised, software packages, marketed at the relevant time under various brand names (such as Electra, M3, etc.). Once the broker has access to the SSP software, whether customised or “off the peg”, he is in a position electronically to transact insurance business on behalf of members of the public with those insurers with whom SSP has made the necessary arrangements, whose communication systems are linked through SSP to the broker and who have agreed to accept business from the broker in question. It appears that SSP maintains “panels” of insurers who are prepared in principle electronically to transact business with brokers having access to the SSP software.
16.	The actual process of electronic contract formation is described by Mr Nick Bate, the finance director of SSP, at paragraphs 15 and 16 of his witness statement, in the following terms:
“Where a broker wishes to effect an insurance contract for a customer, they will input the policyholder and risk details for the required product (e.g. car insurance, home insurance, etc.) into the SSP software which will validate the details and calculate the quotes available from all the various insurers with whom SSP has agreements. The quotes are based on pre-determined qualification criteria that SSP has agreed with its insurance company clients. The criteria and quotes are constantly updated by SSP following consultation with the insurer.
Once the customer has decided on an insurance product and his or her criteria are entered into the software, SSP electronically makes the decision as to whether the risk is acceptable to the insurer and offers the premium of the insurance product for which the risk is acceptable without a need to refer back to the insurer. The premium calculated by SSP is a guaranteed price binding on the insurer. Once the customer accepts the price and terms of cover, the policy is incepted and the insurer is bound by this decision (even in cases where SSP makes an error). The software then produces the necessary paperwork (e.g. terms &conditions, cover note etc.) and the certificate of insurance. Accordingly, SSP is authorised by its insurance company clients to accept insurable risk on their behalf”.
17.	Mr Bate’s statement as regards errors was qualified by Mr David Rasche, the chief executive of SSP, at paragraph 8 of his witness statement, where he says that “as long as the rate is within 25 per cent of the nearest quote the insurer will stand by the rate”. This statement does suggest that there were indeed agreements between SSP and brokers and insurers dealing with operational matters that were not, however, put in evidence.
18.	Mr Bate’s evidence to the effect that insurers were bound by the transactions electronically carried out through the use of the SSP software was corroborated by witness statements, in materially identical terms, from two insurers, Mr Steve Tidd, chief underwriting officer of Link Insurance Limited, and Ms Rosemary Smith, company secretary of Fortis Insurance Limited. At paragraphs 4 and 5 of her statement Ms Smith states:
“In respect of the services provided to Fortis, SSP electronically provides quotations and other associated services to brokers who hold agency arrangements with us. We are able to confirm that SSP’s direct involvement in these transactions enables insurance to be incepted and documentation (such as cover notes, insurance schedules and certificates) generated without the need for prior reference to ourselves, provided certain pre-determined qualification conditions are satisfied in respect of each product/scheme. The details of risks written are subsequently confirmed to us via SSP.
In the circumstances described above, the acceptance of the insurable risk is fulfilled by SSP without prior reference to us”. 
19.	I do not believe that anything in this application turns upon a precise analysis of the electronic contract formation as such, although it would appear from Mr Bate’s description that in legal terms it is the insurer which makes the binding offer of insurance (rather than a mere invitation to treat) and that it is the broker, on behalf of his principal, which gives acceptance, such acceptance being presumably effective when received on SSP’s information system, or on the information system of such other party as might be stipulated in any operating protocol to which SSP, broker and insurer may be party. I mention this simply because, by contrast to the position here under consideration, in most business to consumer transactions by e-mail or over the internet it is the customer that makes the offer and the business supplier that reserves the right to accept or reject (see Chissick and Kelman, Electronic Commerce, Law and Practice, 3rd edition, paras 3.29-3.33; and Article 11(I) of EC Council Directive 2000/31/EC on Electronic Commerce, as implemented by Regulation 11 of the Electronic Commerce (EC Directive) Regulations 2002, which seem predicated on this sequence of offer and acceptance).
20.	Mr Bate’s evidence gives the impression that SSP takes “decisions” when the offer of insurance is made to the broker. However, as appears from the evidence as a whole, all the information necessary for electronic contract formation has been pre- programmed, according to strict parameters laid down by the insurer, in the SSP computer software, updated when necessary to take account of any change in those parameters as regards terms and conditions and premiums payable. The relevant data is, therefore, processed automatically by electronic means through the computer software, and the transactions are self-executing within the specified parameters pre-determined in the programme. Once the broker, using his computer and accessing the SSP software, has input the appropriate data, the “offer” is automatically generated by the programme itself without further human intervention; and once the broker has taken the steps required by the computer programme necessary for an “acceptance” of the offer, the acceptance is automatically processed by the programme itself, again without further human intervention.  
21.	Similarly, it seems to me that care needs to be taken about statements to the effect that SSP may “make errors” in the execution of the insurance contract. On my understanding the errors in question are failures by SSP to ensure that the computer software functions efficiently according to the parameters set by the insurers. The “bug” is in the computer software or in the computer system more generally, and hence a transaction is generated which fails exactly to fit the stipulations of the insurer. 
22.	The self-executing nature of the transactions electronically processed by the SSP software is naturally stressed by Customs, both in the evidence of Mr Potter at paragraphs 4 and 7 of his witness statement and by Miss Haynes in her submissions. SSP filed no further evidence in response to these paragraphs of Mr Potter’s witness statement, and Mr David Milne QC, who appeared for SSP, did not contest the description of SSP’s operations as they are set out in those paragraphs.
23.	Moving forward in the transaction, I see no reason in principle why the data generated in the transactions could not be communicated directly by electronic data interchange (“EDI”) between broker and insurer. However, as explained by Mr Bate, the data is transmitted electronically between the information system of the broker and the system of SSP. It appears that SSP’s system “stacks” into a “batch” the data relating to contracts that are electronically concluded on a particular day and then at the end of the business day transmits the information by EDI to insurers.
24.	It appears that SSP earns its revenue from brokers, through initial charges and then ongoing monthly or annual charges. The Electra M3 Rental Agreement in the trial bundles is for the rental to a broker of hardware and software and related services at a stipulated monthly rental for the first 36 months and thereafter for a lower monthly rental and a fixed monthly charge for hardware maintenance. It appears that SSP provided separate services to insurers, namely, a service by which existing policies were electronically updated and then appropriately amended through EDI in the broker’s computerised information system. At least for the financial year ending on 31 March 2003 the fees for this service to insurers were very substantially less than the fees earned from brokers through the supply of the principal services.
Summary of events leading to the disputed ruling
25.	On 16 June 2003 Mr Bate wrote to Mr Dobson at the Halifax office of Customs, in effect seeking agreement that SSP’s supplies of computer software and hardware to brokers and insurers were exempt supplies. Following a reply on 10 July 2003 from Mr Marijt, a Customs officer in Newcastle with Regional Business Services North, Mr Rob Burton, a manager of Deloitte & Touche LLP (Deloitte) in Leeds, wrote on 8 August 2003 a fairly lengthy letter seeking to explain the nature of SSP’s supplies and renewing the request that Customs agree that these supplies were exempt. Following further correspondence to which I need not refer, Mr Dobson, on behalf of Customs, wrote on 22 October that SSP’s services were “eligible to be treated as exempt for VAT purposes”. However, on 19 November 2003 that ruling was effectively withdrawn by Mr Marijt who wrote to Mr Burton at Deloitte stating that SSP’s supplies were not “those of an intermediary, rather they are the design and supply of software”, and that such supplies were, therefore, “totally taxable”.
26.	The next development was the crucial one. It appears that on 24 November 2003 there was a telephone conversation between Mr Dave Potter, a senior officer then working in the Customs “Insurance Unit of Expertise”, who had earlier received enquiries from the officers in Newcastle, Mr Burton and Mr Kevin Ahern of Deloitte. Mr Potter refers to this conversation in paragraph 5 of his witness statement, but does not there mention any note, whether made contemporaneously or otherwise, of this conversation. However, it appears that Mr Potter at some time did make a note, for such a note was first referred to in a letter from Customs of 9 November 2004 (about a year later), and a copy was attached to the summary grounds for contesting the claim. It remains unclear when this note was made, but the material part (in its original form) was as follows:
“Telephoned accountants above and explained that exemption would apply for the services of their client where software solutions held delegated authority to bind the risk i.e. that the acceptance of the risk was software solutions decision.
  If Software solution are authorised to underwrite on behalf of the insurance company then there services fall within the VAT exemption under Group 2 of schedule 9 VATA 1994.
Kevin Ahearne confirmed that Software Solutions do in fact hold such authority and they would confirm this in writing”.
27.	At paragraph 5 of his witness statement Mr Potter says this in respect of the telephone conversation of 24 November 2003:
“During my discussion with Mr Burton however he was insistent that Software Solutions was able to accept risk without reference to the insurance company. I was unsure and confused as to how this could be the case on the basis of what I had been told. It is for that reason that I indicated to him that Software Solutions’ services could only be regarded as exempt if they themselves effectively acted as the insurance company and were able to bind as to risk. I used the term “delegated authority” in that sense and, I believe, made clear to Mr Burton what I meant by that. I remember explaining in colloquial terms that delegated authority effectively meant that the underwriter “gave away the pen” to a third party. In the course of our discussion I asked Mr Burton to provide me with written evidence that Software Solutions had authority to bind the insurers. No such written evidence was or has since been provided”.
28.	 Following the telephone conversation on 24 November 2003, Kevin Ahern, on behalf of Mr Burton, sent late on 25 November 2003 an e-mail to Mr Potter in the following terms:
“As a result of the content of this letter [from Mr Marijt dated 19 November 2003 referred to above], we feel it is necessary to provide further clarification of the information detailed in our previous correspondence. We can confirm that as a result of the insurance intermediary activities performed by SSP, provided the Insured meets the qualifying conditions of the scheme/product, insurance is written, documentation such as a cover note and/or insurance schedule is generated and issued to the Insured, as appropriate, at point of sale without prior reference to the Insurer. Details of risks written are subsequently confirmed to the appropriate Insurer.
We hope that the above clarifies the concern that you had that SSP only provides a means of electronic communication rather than being actively involved in the chain of supply between the insurer and the insured. To reiterate the points made in earlier correspondence, SSP has direct contact with insurers and brokers, provides specific insurance input (e.g. extent of cover, providing quotations and verifying application, etc) and is involved directly with bringing about and administering contracts of insurance. In practice, without SSP’s direct involvement, the insurers and/or the brokers would not be able to effect insurance.
We will call you tomorrow morning to obtain your views, but please do not hesitate to contact myself……..or Kevin Ahern….should you wish to clarify any aspect of SSP’s intermediary activities”.
29.	In the above e-mail Mr Ahern did not say in terms that SSP had authority to bind insurers, and did not refer to any primary document by which such authority might have been conferred. However, the thrust of the message was that SSP was directly in the chain of communications leading to the contract of insurance, that SSP did things that resulted in a contract binding on the insurer, and that, therefore, by necessary inference SSP had authority to enter into contracts on behalf of insurers.  To that extent Mr Ahern’s e-mail did confirm in writing that SSP had the authority alleged and did meet Mr Potter’s request, recorded in his note of the telephone conversation of 24 November 2003, that such written confirmation be given. Whether Mr Ahern was correct to draw the inference that he did is another question which will need examination later.
30.	In any event Mr Potter, by e-mail sent the next day on 25 November 2003 to Mr Ahern, with a copy to Mr Burton, made the disputed ruling in the following terms:
“I can confirm that based on the information provided below [referring to Mr Ahern’s e-mail of 24 November quoted above] that Software solutions services fall within the VAT exemption under group 2 of schedule 9 to the VAT Act 1994, in those circumstances were [meaning where] the insurance company has authorised software solutions to accept insurable risk on their behalf, i.e. those transactions within the terms and condition of any delegated authority.”
31.	Following Mr Potter’s ruling on 25 November 2003 it seems that there was later on that day a further telephone conversation between Mr Potter, Mr Burton and Mr Ahern. Mr Burton made a file note of this conversation which was put before the Court. I have to be somewhat cautious in regard to this file note. It was plainly prepared by the advisers of SSP who might, without any deliberate attempt at “spin”, seek to put on Mr Potter’s alleged remarks an interpretation most favourable to their client. As far as I am aware, the file note was not agreed with Customs, although Mr Burton did at the time, by e-mail sent on 25 November 2003 to Mr Marijt, offer the note to Customs. Mr Potter in his witness statement does not refer at all to any telephone conversation on 25 November 2003 and makes no comment on the Deloitte file note. The evidence at this point is, therefore, hardly in a tidy state, but the note says, so far as is material:
“KJA [Ahern] thanked DP [Potter] for the speedy response to his e-mail issued 24/11/2003 which provided additional clarification in respect of the nature of the supplies made by SSP. DP re-iterated that he was comfortable that the supplies made by SSP as described in earlier correspondence and subsequently clarified in the e-mail dated 24/11/2003, were indeed exempt for VAT purposes.
 KJA asked DP to define the term “Delegated Authority” given that neither HMCE guidance or any of the public notices referred to the term in any context other than claims handling [This is apparently a reference to VATA 1994 Schedule 9, Group 2 – Insurance, note (7) to item 4]. DP explained that his definition was a reference to the “Insurance company giving away the pen” and that it would place the recipient in a position to bind the insurance without prior reference to the Insurer and place them on risk. He explained that this was typical in the industry where there were likely to be a large volume of transactions.
DP confirmed that based on the correspondence he had received together with the email dated 24/11/2003 clarifying the nature of SSP’s activities, that he was comfortable that the supplies made were exempt for VAT purposes. DP also confirmed that he had taken the opportunity of visiting the SSP website to establish the nature of the activity in which they were involved and that it was “clear they were making exempt supplies and were acting for a number of insurers”……..
KJA agreed to contact the local office at Halifax to discuss a suitable partial exemption method which would now be necessary following confirmation of the exemption……”
32.	Mr Ahern, following the telephone conversation with Mr Potter, then sent an e-mail later the same day of 25 November 2003 to Mr Marijt informing him of the disputed ruling and saying:
“I trust this ruling from the Insurance UOE [Unit of Expertise] now clarifies and concludes the position concerning the VAT liability of SSP’s supplies. Please contact us urgently if you consider the supplies made by our client are not exempt for VAT purposes given that SSP would now like to implement the exemption with immediate effect”.
33.	It appears that Mr Marijt replied on 27 November 2003 (see letter from Deloitte to Customs dated 1 December 2004 at page 3, third paragraph), but this communication is not in evidence and is not relied on.
Summary of events leading to the challenged assessment
34.	On 22 April 2004 Mr Martin Butterworth wrote to Deloitte giving Custom’s decision that SSP’s supplies did not fall, and had at no material time fallen, within the exemption for insurance related activities. As to the date from which the decision was to take effect he said:
“My understanding is that all parties agree that the nature of SSP’s supplies have not materially changed since SSP acquired the business in 2002. Furthermore, it is also my understanding that all parties agree that SSP’s supplies have never met the terms stated in Dave Potter’s e-mail of 25 November 2003, insofar as SSP has never had delegated authority from the insurance companies to accept risk. In the absence of material change to the nature of the supplies and, as the supplies are not and have never been what we consider to be insurance related intermediary services, they can only ever have been taxable. The current decision therefore applies to all supplies made prior to this decision where the exemption has been applied retrospectively and to all supplies from a current date”. 
35.	On 21 May 2004 SSP issued a Notice of Appeal in the VAT and Duties Tribunal against Customs’ decision of 22 April 2004.
36.	Notwithstanding the issue of the Notice of Appeal, the parties continued to discuss through correspondence and at a meeting in April 2005, first, the question of the correct treatment of SSP’s supplies and, secondly, the question of the retrospective liability to account for VAT in respect of supplies made during the relevant period.
37.	On 10 September 2004, that is, almost five months after the decision letter, Mr Butterworth, on behalf of Customs, wrote to SSP in the following terms regarding the retrospective imposition of liability to account for VAT:
“Rob Burton has also brought to my attention some correspondence from one of my colleagues which he feels provides sufficient evidence to challenge date from which the liability decision is to apply. I have therefore asked my colleagues in the Appeals Team to consider this, and initially, while they are carrying out a reconsideration, I will not be taking any immediate action to recover any tax due which has not been declared in the VAT periods up to 30 June this year. However, I will be reviewing the situation in four weeks and if any further action is necessary at that time I will get in touch with Rob Burton”.
38.	Further correspondence ensued with letters from Customs dated 9 November and 22 December 2004, re-affirming the decision of 22 April 2004, and from Deloitte of 1 December 2004 dealing with liability generally and the retrospective effect of the decision in particular. Finally, on 12 January 2005 Customs issued the Notice of Assessment which is challenged in these proceedings in so far as it assessed SSP to output VAT on supplies made during the relevant period.
39.	On 3 March 2005 the ECJ gave its judgment in Case C-472/03 Staatssecrataris van Financien v Arthur Andersen & Co. Accountants c.s. [2005] STC 508. In particular, the ECJ held at paragraph 32 of its judgment:
“However, as the Advocate General points out in point 31 of his Opinion, it cannot be inferred from that case-law that the existence of a power to render the insurer liable is the determining criterion for recognition of an insurance agent within the meaning of Article 13 B(a) of the Sixth Directive. Recognition of a person as an insurance agent presupposes an examination of what the activities in question comprise.”
40.	In other words, contrary to what might reasonably have been inferred from Taksatorringen, the power to render the insurer liable was neither sufficient nor necessary to render the exemption for insurance related activities applicable.
41.	Then in paragraph 36 of its judgment the ECJ concluded:
“Furthermore, as the Commission of the European Communities stated in its written observations and as the Advocate General pointed out in point 32 of his Opinion, essential aspects of the work of an insurance agent, such as the finding of prospects and their introduction to the insurer, are clearly lacking in the present case. It is apparent from the order for reference – and the defendant has not disputed – that the activity of ACMC starts only when it handles the applications for insurance sent to it by the insurance agents through whom UL [an insurer] seeks prospects in the Netherlands life assurance market.”
42.	 In the light of that judgment of the ECJ it appeared indisputable that SSP’s services at no time were exempt, and SSP’s appeal to the VAT and Duties Tribunal was in due course withdrawn on 1 March 2006. That, however, has left outstanding the issue of SSP’s liability under the challenged assessment in respect of the relevant period.
The law relating to legitimate expectation and abuse of power
43.	The classic statement of the law in the present context is that of Bingham LJ (as he then was) in R v Inland Revenue Commissioners, ex parte MFK Underwriting Agencies Ltd [1990] 1 WLR 1545; [1990] STC 873:
“No doubt a statement formally published by the Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them. But where the approach to the Revenue is of a less formal nature a more detailed inquiry is, in my view, necessary. If it is to be successfully said that as a result of such an approach the Revenue has agreed to forego, or has represented that it will forego, tax which might arguably be payable on a proper construction of the relevant legislation it would, in my judgment, be ordinarily necessary for the taxpayer to show that certain conditions had been fulfilled……First, it is necessary that the taxpayer should have put all his cards face upwards on the table. This means that he must give full details of the specific transaction on which he seeks the Revenue’s ruling, unless it is the same as an earlier transaction on which a ruling has already been given. It means that he must indicate to the Revenue the ruling sought……….Secondly, it is necessary that the ruling or statement relied on should be clear, unambiguous and devoid of relevant qualification.”
44.	The overarching test in this part of public law is whether the public authority has acted so unfairly that its conduct amounts to an abuse of power. As Lord Hoffmann stated in R (Zeqiri) v Secretary of State for the Home Department [2002] UKHL 8, at [44]:
“In principle I agree that an alleged representation must be construed in the context in which it is made. The question is not whether it would have founded an estoppel in private law but the broader question of whether, as Simon Brown LJ said in R v Inland Revenue Commissioners, ex parte Unilever plc [1996] STC 681, 695B, a public authority acting contrary to the representation would be acting “with conspicuous unfairness” and in that sense abusing its power.” (See also Rowland v Environment Agency [2003] EWCA Civ 1885; [2005] Ch 1, at [68], by Peter Gibson LJ).
45.	MFK, of course, concerned purely UK taxation. The present application concerns the administration and collection of a tax, VAT, which is ultimately imposed by Community Law under the Sixth Directive. It might be argued that the question whether, and on what conditions, Customs officers, acting on behalf of the competent national authority, may make rulings that would have the effect of relieving traders of the obligation to account for output tax that was payable on the proper application of the Sixth Directive was governed by principles of Community law (see the general test for the application of Community Law formulated by Laws J (as he then was) in R v Ministry of Agriculture, Fisheries and Food, ex parte First City Trading Limited  [1997] 1 CMLR, at 271). It might perhaps also be argued that the answer might not be the same under Community Law, given that the ECJ has consistently held that Community institutions cannot be compelled by virtue of the general principle of legitimate expectations to apply Community rules contra legem (see, for example, Case C-313/90 CIRFS v Commission [1993] ECR 1-1125, at para 45; Case T-2/93 Air France v Commission [1994] ECR 11-323, at paras 101-102; and, generally, Craig, EU Administrative Law, 652-654).
46.	Fortunately, I do not have to consider these questions because there is clear authority binding on me that the principle in MFK does apply to the administration and collection of VAT and that, if the requisite conditions are fulfilled, Customs officers have the same managerial discretion to give rulings about the application of VAT: see F&I Services Ltd v Commissioners of Customs and Excise [2001] EWCA Civ 762; [2001] STC 939 at [65]-[68], by Robert Walker LJ (as he then was) and at [69]-[73], by Sedley LJ.
47.	For the sake of completion I also note that Customs has published an “extra-statutory” concession, which broadly reflects the principle in MFK, in the following terms:
“If a Customs and Excise officer, with the full facts before him has given a clear and unequivocal ruling on VAT in writing or, knowing the full facts, has misled a registered person to his detriment, any assessment of VAT due will be based on the correct ruling from the date the error was brought to the registered person’s attention.”
48.	This extra-statutory concession received endorsement through ministerial statements in Parliament, first on 21 July 1978 (Official Reports Column 426), and more recently on 18 December 2002. Customs has also published a public notice 700/6 of August 2003 on “VAT Rulings”
The Submissions of the Parties
49.	 Mr David Milne QC, appearing for SSP, put his case with his usual clarity and directness: the disputed ruling complied squarely with the conditions set out in MFK (and also with the terms of the extra-statutory concession referred to above), and the services supplied by SSP met the condition in the ruling. He contended that the position was no different from that which would have prevailed had insurers, before the advent of electronic contract formation, delegated the administrative function of entering into contracts to an outside agency. The insurers, in transferring this function to an outside agency, could well have drawn up strict parameters within which the agent had to operate, just as in the present case the relevant SSP software was programmed strictly to incorporate the parameters set by insurers.
50.	For Customs, Ms Haynes submitted, first, that the disputed ruling did not satisfy the requirements of MFK (or of the extra-statutory concession) because (a) the ruling was ambiguous and (b) SSP had not made full and frank disclosure about the nature of the services supplied by it. As to ambiguity, it appears that in the industry the expression “delegated authority” was and is conventionally reserved to describe authority held by agents who have a relatively wide discretion to enter into insurance contracts (see the witness statement of Mr Rasche, Chief Executive of SSP, at paragraphs 7 and 11; and, generally, Colinvaux’s Law of Insurance, 8th edition, at 15.20-15.25). Ms Haynes, therefore, contended that the “delegated authority” prescribed by the disputed ruling could be taken to mean that SSP should have a fairly wide discretion as to what insurance business to accept and on what terms. It was common ground that on any view SSP had no such authority.
51.	Secondly, Ms Haynes submitted that SSP’s supplies did not in any event come within the terms of the disputed ruling. Finally, she contended that SSP’s application was out of time.

Decision
52.	The disputed ruling could not be described as a paradigm of its kind. Although Mr Potter referred to the relevant exemption, he did not specify which legal aspect of the exemption he considered to be key to its application. Anyone seeking to interpret and apply the ruling, particularly after a substantial passage of time and in changed conditions, is left somewhat in the dark as to the precise question to which Mr Potter was directing his mind. His witness statement shed no light on the ruling in that respect.
53.	Furthermore, Mr Potter did not set out in the ruling his own understanding of the nature of the services supplied by SSP. That does not facilitate the task of discerning the precise basis upon which he thought those services could qualify for exemption. He also took the unusual and, in some ways, unhelpful course of making the ruling open-ended, with the crucial element still to be worked out. The open-ended character of the ruling was exemplified by the telephone conversation on 25 November 2003 (see paragraph 31 above), where the discussion was not about a peripheral element of the ruling, but went to the fundamental basis upon which it was made.
54.	However, that said, it seems to me that in all probability Mr Potter’s starting-point was paragraph 9.2 of Notice 701/36 of May 2002 (see paragraph 9 above). He was asking himself whether SSP “acted in an intermediary capacity”, that is, according to paragraph 9.2, whether SSP was “acting somewhere in the chain of supply of a contract of insurance.” Furthermore, as I have explained at paragraph 12 above, Customs in its Business Brief 7C/03 of 1 July 2003 had accepted that an intermediary’s power to bind an insurer to enter into a contract of insurance was sufficient to bring their services within the exemption for related services. That conclusion would not have appeared inconsistent with the Opinion of the Advocate General or with the recently delivered judgment of the ECJ in Taksatorringen. This background would explain why the ruling was conditioned upon SSP having the authority to bind insurers.
55.	Recognising that the disputed ruling is not without shortcomings, I nonetheless find that it does meet the criteria of MFK.
56.	 I reject first of all Ms Haynes’s submission that the ruling was ambiguous. There is no contemporary evidence that Mr Potter was aware of the special use of the term “delegated authority” and that he could have intended to apply the expression in that sense. If the matter is looked at objectively, the expression “delegated authority” in the ruling could bear only the ordinary meaning of the term, namely, the agent’s authority to bind the principal. It could not bear the special sense mentioned at paragraph 50 above.
57.	 There was nothing in the legislation, or in Customs published notices or in the case law, to suggest that an agent could act as an intermediary only if the agent had “delegated authority” in the special sense. On the contrary, traditional insurance agents (who tend to be tied to a particular insurer) had no such delegated authority (and indeed little contractual authority at all: see Colinvaux’s Law of Insurance, cited above, at 15.13-15.19), but their intermediary services had always been treated as exempt. Further, where the VATA 1994 referred uniquely in Schedule 9, Group 2, Insurance, note (7) to item 4, to the authority of an agent to bind its principal, it did not require “delegated authority” in the special sense. Finally, there was nothing in the current Business Brief 7C/03 of 1 July 2003 or in Taksatorringen which suggested that an intermediary needed “delegated authority” in that sense.
58.	 I also reject Ms Haynes’s submission that SSP did not make full and frank disclosure of the nature of its services. The evidence, which I have summarised at paragraphs 25-33 above, demonstrates that SSP, through Deloitte, did everything reasonably within its power to explain to Customs the nature of those services. Deloitte told Customs that it was ready to answer any further queries if Customs thought that there were gaps in its understanding, and Customs was invited to attend SSP’s business premises to see precisely how the system operated. If Mr Potter was “confused” and did not fully understand the nature of SSP’s operations, I am not persuaded by the evidence that at the time of the ruling he disclosed any such confusion or lack of understanding to either SSP or Deloitte, or that SSP or Deloitte could reasonably have inferred that Mr Potter, who was a senior Customs officer with the requisite expertise, was confused or had an imperfect understanding of any relevant matter.
59.	 That leaves the last question: did SSP’s activities during the relevant period fall within the terms of the ruling? In my judgment, they did not, for the following reasons.
60.	First, no primary document has been produced which would support the claim that insurers appointed SSP as an agent either to make binding offers on their behalf or, on the alternative view of the process of contract formation (see paragraph 19 above), to give an acceptance on their behalf of offers made by brokers. The only relevant primary document before the Court is the rental agreement referred to at paragraph 14 above between SSP and a broker client. That agreement does not refer to SSP as having authority to enter into contracts on behalf of any insurer, or indeed as having any authority to act on behalf of any insurer. No primary document at all has been produced that would shed light on the relationship between SSP and insurers.
61.	Secondly, in my judgment, the necessary agency between insurers and SSP cannot be inferred from the evidence that I have set out at paragraphs 14-24 above. SSP did not take any “decision” to make offers of insurance on behalf of insurers. The information necessary for electronic contract formation had been pre-programmed, according to parameters laid down by the insurer, in the SSP computer software. The relevant data was processed automatically by electronic means through that software and the transactions were self-executing within the specified parameters pre-determined in the programme. SSP had to take no “decisions” to generate the offers; the software performed the necessary tasks.
62.	The result is no different on the alternative view of contract formation, because any “acceptance” of the broker’s putative offer would have been pre-programmed in the software and would have required no decision by SSP.
63.	Furthermore, if any error was made in the execution of the contract, that was because the system malfunctioned (see paragraph 21 above), not because SSP had made an error of judgment in “deciding” to offer insurance on terms that did not accord with its “authority” as an alleged “agent” of the insurer.
64.	In my view, it is not surprising that there was no primary document emanating from SSP, broker or insurer, to support the claim that SSP acted as the agent of insurers to enter into binding contracts of insurance. Once it is appreciated that the electronic process of contracting was automated, there was no legal or commercial need for insurers to appoint SSP as their agents to make contracts on their behalf. Indeed, any such appointment would have been confusing and risky, for it would have created the impression that SSP could take real decisions on behalf of insurers to offer insurance.
65.	In my judgment, the correct legal analysis is that the relevant insurers, expressly or impliedly, invited brokers who had access to the appropriate SSP software to use the computer programme for the purpose of contract formation, and that the insurers undertook that, if the brokers followed the pre-programmed procedures, they would be bound by the automatically generated result, even if they (the insurers) were temporarily unaware of that result. Insurers further undertook that if for any reason the computer programme failed to execute the contract in accordance with the parameters that had been established, or ought to have been established, in the computer programme, insurers would, within specified limits, be bound by the result produced by the programme. 
66.	Conceptually, the analysis is similar to that set out by Lord Denning MR in the well known case of Thornton v Shoe Lane Parking Ltd  [1971] 2 QB 163, where the customer, driving up to the barrier of an automatic car park, put money into the machine and was issued with a ticket. Lord Denning said (at p 169): 
“The customer pays his money and gets a ticket……It can be translated into offer and acceptance in this way: the offer is made when the proprietor of the machine holds it out as being ready to receive the money. The acceptance takes place when the customer puts his money into the slot.”
67.	Similarly, in the present case, insurers hold out the SSP software as the automatic medium for contract formation. Once the broker, like the plaintiff in Thornton putting his money into the machine, has input the necessary data into the electronic process, no further human intervention is necessary for the formation of a binding contract between broker and insurer. The ruling is clear that it is SSP as a business entity that must have the authority to enter into contracts on behalf of insurers: it is not sufficient that insurers enter into contracts through computer programmes designed by, and running on the information system of, SSP. (Given the clear terms of the ruling I leave aside the irrelevant question whether an automated system could itself be regarded as an “agent”, although on current authority the answer would appear in the negative, because only a person with a “mind” can be an agent in law). 
68.	In this case the relevant data was transmitted by EDI from SSP’s information system to the insurer’s information system (see paragraph 23 above). That makes no difference to the above analysis. SSP was no more than an electronic conduit for the transmission of the relevant information. Similarly, it would have made no difference in Thornton if the operator of the car park had engaged the third party who had designed and made the ticket machine to furnish at the end of each day particulars of the contracts made with the car parking customers during that day. The contracts would have been made through the mechanical operation of the machine, not as a result of any “delegated authority” conferred by the operator on the person who passed information about concluded contracts to the operator. The only difference is that here the contract was made electronically, rather than mechanically, and the information about the contracts was also transmitted electronically. That does not alter the application of the basic legal principles that I have explained to the transactions in question.
Delay
69.	I deal finally with the issue of delay, although it is strictly unnecessary in the light of my ruling above.
70.	The challenged assessment was notified to SSP on 12 January 2005. The claim for judicial review was brought on 8 April 2005, that is, within the period of three months from the notification of the assessment. However, Ms Haynes submits:
“The real focus of the Claimant’s challenge is the Commissioners’ refusal to apply the extra-statutory concession so as to override the liability determination of 22 April 2004 (appealed in the VAT Tribunal on 21 May 2004): that is when the grounds of review first arose (at her very latest) and that refusal was first communicated to the Claimant on 9 November 2004 and confirmed on 22 December 2004. The Claimant did not respond to that confirmatory letter and no further communication was made until their letter before action dated 24 March 2005. This claim was therefore out of time and there is no reasonable excuse for the Claimant’s delay, particularly in view of the appeal launched before the Tribunal in May 2004” (Written Outline Submissions). 
71.	I reject that submission.
72.	It seems to me that a taxpayer placed in the position of SSP is entitled to wait until the notification of an assessment before taking steps to bring proceedings for judicial review. Under section 75(9) of the VATA 1994 it is the notification of the assessment which crystallises the legal liability of the taxpayer and, subject to any appeal to the VAT and Duties Tribunal, the amount so assessed is recoverable as a debt due to the Crown (VATA 1994, Schedule 11, paragraph 5(1)). Until the notification of the assessment it remains uncertain (to varying degrees of probability, depending on the facts of each case) whether Customs will decide to impose liability on the taxpayer. In this case discussions on the critical issue of the retrospective effect of the disputed ruling for the relevant period had been continuing for a considerable time, and, though the letter of 22 December 2004 from Customs seemed definitive, some doubt might still have been reasonably entertained as to whether Customs would inevitably proceed to assess the full amount of output VAT for the whole of the relevant period.   
73.	In my judgment, R (Burkett) v Hammersmith and Fulham London Borough Council [2002] UKHL 23; [2002] 1 WLR 1593 provides a strong analogy to the present case. In Burkett, the House of Lords, reversing the Court of Appeal and the learned judge at first instance, held that for the purposes of RSC Ord 53, r 4(1) and CPR r 54.5 (1), the grounds for the application or claim, in relation to an application for judicial review of a grant of planning permission, first arose on the date when permission was actually granted. Lord Steyn, giving the principal speech in their Lordships’ House, held that this result was supported by compelling reasons of policy. First, the provisional decision to grant permission had no legal effect; it was the grant of permission itself which gave rise to legal rights and duties (at paragraph 39). Similarly, in the present context it is the notification of the assessment that imposes legal liability on the taxpayer. Further, in Burkett the result promoted certainty and simplicity, and obviated dispute as to when the “real” final decision had been taken (at paragraphs 45 and 46). Similarly in the present context, there could well be uncertainty as to when a decision had achieved a sufficient degree of finality to be treated as the appropriate starting point for the running of time. Lord Steyn also referred to the cost burden on a litigant if proceedings are begun prematurely and, in the event, unnecessarily; and to the general policy of the law that procedural rules should not discourage the resolution of disputes by negotiation and should not propel the parties into litigation (at paragraphs 50 and 53). Again, these considerations apply with equal force in the present context.
74.	Even if the application had been technically out of time, I would have extended time to allow this application to be brought. In the circumstances of this case it was inevitable that any application for judicial review would be stayed pending the resolution of the appeals before the VAT and Duties Tribunal. Even in November 2005 both parties continued to believe that the VAT and Duties Tribunal would determine the issue of liability and, in the course of doing so, would make findings of fact that would be likely to be determinative of this judicial review. The application for permission was in the event stayed. There was, therefore, no compelling urgency to bring the application before the date upon which it was actually brought and Customs have suffered no prejudice at all from any delay in bringing these proceedings. Finally, the application raised a serious issue and the amount at stake for the taxpayer is substantial.
Conclusion
75.	However, although I reject the argument that the application is out of time, I nonetheless dismiss the application for judicial review on the ground that the relevant supplies made by SSP for the relevant period do not fall within the express terms of the disputed ruling, and that Customs were therefore at liberty, according to principles of public law governing abuse of power, as given expression in MFK, to make the challenged assessment.