Judgment delivered on the 29th day of July, 2011 by Denham C.J.
1. This is an appeal by G.H., the applicant/appellant, an authorised inspector acting on the authority and on behalf of the Revenue Commissioners, who is referred to as "the appellant". The appeal lies against the judgment of the High Court (O'Sullivan J.) delivered on the 19th December, 2006, and the order of the High Court dated the 20th December, 2006. The respondents, I. and G., are referred to as "the respondents". This appeal was heard in camera pursuant to s.908 Taxation Consolidation Act, 1997.
Costs
2. This is an appeal from an order for costs made by the High Court. The appellant is appealing the decision of the High Court to award the respondents the costs arising from an order under s. 908 of the Taxes Consolidation Act, 1997, as substituted by s. 207(i) of the Finance Act, 1999, which will be referred to as "s. 908".
3. The appellant is appealing the order of the High Court that the appellant pay to the respondents: (a) the costs of application brought by the appellant pursuant to s. 908 against the respondents; (b) the costs incurred by the respondents in complying with these orders; (c) interest on the costs of compliance from the 1st August, 2005; and (d) the costs of the motion brought by the respondents seeking the above.
4. The application under s. 908 was issued on the 27th February, 2002. It was brought at a time when there were many false DIRT-exempt non-resident accounts. The appellant sought orders directing the respondents to provide information in relation to DIRT-exempt non-resident accounts, including the address in the State of the holders of the accounts. The order was made on the 24th June, 2002, and then amended four times.
High Court Order
5. In the High Court order of the 24th June, 2002, Finnegan J. ordered that the court being satisfied that there are reasonable grounds for suspecting that the taxpayer, or where the taxpayer is a group or class of persons, all or any of these persons may have failed or may fail to comply with any provision of the Acts, that any such failure is likely to lead to serious prejudice to the proper assessment or collection of tax, which is likely to arise from the information, explanations and particulars to which the application relates, and is relevant to the proper assessment or collection of tax. Pursuant to s. 908 the respondents were ordered to furnish to the appellant:-
"i. on or before the 31st day of August 2002 the specified information as respects each specified taxpayer who at the 31st day of December 1989 or the 31st day of December 1995 had a credit balance of £100,000.00 (€126,973.81) or more in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with I.
ii. on or before the 31st day of August 2002 the specified information as respects each specified taxpayer who at the 20th day of November 1989 or the 6th day of April 1995 had a credit balance of £100,000.00 (€126,973.81) or more in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with T. Bank.
iii. on or before the 31st day of August 2002 the specified information as respects each specified taxpayer who at the 31st day of December 1991 or the 31st day of December 1995 had a credit balance of £100,000.00 (€126,973.81) or more in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with G.
iv. on or before the 30th day of November 2002 the specified information as respects each specified taxpayer who at the 31st day of December 1989 or the 31st day of December 1995 had a credit balance of £50,000.00 (€63,486.90) or more but less than £100,000.00 (€126,973.81) in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with I.
v. on or before the 30th day of November 2002 the specified information as respects each specified taxpayer who at the 20th day of November 1989 or the 6th day of April 1995 had a credit balance £50,000.00 (€63,486.90) or more but less than £100,000.00 (€126,973.81) in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with T. Bank.
vi. on or before the 30th day of November 2002 the specified information as respects each specified taxpayer who at the 31st day of December 1991 or the 31st day of December 1995 had a credit balance of £50,000.00 (€63,486.90) or more but less than £100,000.00 (€126,973.81) in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with G.
vii. on or before the 31st day of January 2003 the specified information as respects each specified taxpayer who at the 31st day of December 1989 or the 31st day of December 1995 had a credit balance of £25,000.00 (€31,743.45) or more but less than £50,000.00 (€63,486.90) in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with I.
viii. on or before the 31st day of January 2003 the specified information as respects each specified taxpayer who at the 20th day of November 1989 or the 6th day of April 1995 had a credit balance of £25,000.00 (€31,743.45) or more but less than £50,000.00 (€63,486.90) in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with T. Bank.
ix. on or before the 31st day of January 2003 the specified information as respects each specified taxpayer who at the 31st day of December 1991 or the 31st day of December 1995 had a credit balance of £25,000.00 (€31,743.45) or more but less than £50,000.00 (€63,486.90) in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with G.
x. on or before the 31st day of March 2003 the specified information as respects each specified taxpayer who at the 31st day of December 1989 or the 31st day of December 1995 had a credit balance of £5,000.00 (€6,348.69) or more but less than £25,000.00 (€31,743.45) in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with I.
xi. on or before the 31st day of March 2003 the specified information as respects each specified taxpayer who at the 20th day of November 1989 or the 6th day of April 1995 had a credit balance of £5,000.00 (€6,348.69) or more but less than £25,000.00 (€31,743.45) in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with T. Bank.
xii. on or before the 31st day of March 2003 the specified information as respects each specified taxpayer who at the 31st day of December 1991 or the 31st day of December 1995 had a credit balance of £5,000.00 (€6,348.69) or more but less than £25,000.00 (€31,743.45) in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with G.
xiii. on or before the 31st day of May 2003 the specified information as respects each specified taxpayer who at the 31st day of December 1989 or the 31st day of December 1995 had a credit balance of £1,000.00 (€1,269.74) or more but less than £5,000.00 (€6,348.69) in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with I.
xiv. on or before the 31st day of May 2003 the specified information as respects each specified taxpayer who at the 20th day of November 1989 or the 6th day of April 1995 had a credit balance of £1,000.00 (€1,269.74) or more but less than £5,000.00 (€6,348.69) in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with T. Bank.
xv. on or before the 31st day of May 2003 the specified information as respects each specified taxpayer who at the 31st day of December 1991 or the 31st day of December 1995 had a credit balance of £1,000.00 (€1,269.74) or more but less than £5,000.00 (€6,348.69) in a DIRT-exempt non-resident account or a DIRT-liable non-resident account with G."
The order also defined certain words and phrases.
On the 20th January, 2003, by consent, it was ordered that paragraphs vii, viii and ix of the above order be varied to read the 31st March, 2003, in lieu of the 31st January, 2003. On the 31st March, 2003, without objection from the appellant, the above order was varied so as to grant an extension of time in relation paragraphs x, xi, xii, which was given to the 31st May, 2003. Also, there was an extension of time regarding paragraphs xiii, xiv and xv to the 30th November, 2003. There were further amendments consented to on the 26th May, 2003 and the 5th June, 2003.
6. The information was provided by the respondents.
Notice of Motion
7. The respondents brought a notice of motion dated the 9th February, 2006, seeking an order that the appellant pay to the respondents the costs of the applications to the court on the 24th June, 2002, the 20th January, 2003, the 31st March, 2003, the 26th May, 2003 and the 5th June, 2003, as well as the costs of complying with the orders made on those dates.
High Court Judgment
8. The matter was determined by the High Court (O'Sullivan J.) on the 19th December, 2006. The learned High Court judge's conclusions included the following:-
"I accept that it is an established principle that where a party carries out work at the behest and for the benefit of another the first should be paid the costs and expenses of carrying out that work. This principle applies regardless of whether the work is carried out pursuant to a court order, as here, or otherwise.
Secondly it appears that the work required to be carried out pursuant to the court orders in this case is more than the respondents would be required to do under the tax code, albeit that a significant dispute exists as to how much of the extra work would have had to have been done had the respondents fully complied with their obligations under the tax code in the first place.
Thirdly I accept that in light of the principle referred to above, it would require some clear, if not unambiguous, counter-principle (whether by way of statutory provision or otherwise) to displace its application. Accordingly I turn to consider a number of issues in this context which arose in the course of the submissions.
In the first place is there anything in s. 908, itself which assists?
The section is silent as to the costs unless subsection (5) (which refers to the attaching of proper conditions to the order) is intended to deal with them. Even if this is the case, however, in my opinion there is nothing in s. 908 itself which is sufficiently clear cut (not to say unambiguous) to displace the application of the principle already referred to.
…
It seems to me that having regard to the specific purpose of s. 908, and also having regard to the statutory context in which it finds itself which includes many other powers available to the applicant and specifically and relevantly a power which in effect makes the respondent liable for the direct interest retention tax obligations of its clients in the present circumstances – a liability which was paid by way of full and final settlement - the true construction of s. 908, is that it is not intended to enlarge those other powers and accordingly that the discretion of the court in relation to awarding these costs is a discretion referable only to the four corners of s. 908, and not to other collateral issues outside it. In practise the discretion would enable the court to consider such matters as whether there was or was not compliance with the order. I reach this conclusion in addition to the other reasons stated herein because I think it is important that the power available under s. 908 should not be itself fettered or clogged by issues which might interfere with its effectiveness in any given case.
…
My view, therefore, is that the issues now relied upon by the [appellant] which are extraneous, so to speak, to the operation of s. 908 itself, are not appropriate for determination in that context but rather in the context of other procedures available to the [appellant]."
The learned trial judge then went on to consider the alternative approach, stating:-
"It is of course quite possible that I am incorrect in my foregoing conclusion, and that Mr. Aston is correct, contrary to my own view, in saying that the court is indeed at large with a full and wide discretion to take into account all the collateral matters upon which the applicant now seeks to rely in order to defeat the respondents’ right to be paid for complying with the orders. I intend, accordingly, briefly to consider the position on the assumption that I am incorrect in my primary conclusion."
The learned High Court judge referred to the affidavits filed in the case, the fundamental conflict of fact, the absence of cross examination and oral evidence. He doubted whether the respondents should have the burden of paying the costs even if there was a prima facie case that the respondents have been negligent or even complicit with their customers in defeating the proper operation of the tax law. He stated that there were other remedies open to the appellant. He noted that a significant portion of the information furnished related to compliant taxpayers. He pointed out that the evidence furnished pursuant to these orders was of significant value to the appellant who collected in excess of €16 million from the clients of the respondents on foot of their tax liabilities which were independent of any DIRT liability. The learned High Court judge concluded:-
"Having regard to the foregoing conclusions, therefore, my view is that even if I am incorrect in my initial opinion and I should now exercise a wide and full discretion, I should nonetheless award the respondents their costs because to decline to do so would be to accept an allegation of fraud and, in effect, conspiracy to defraud the Revenue which is hotly contested and made out only on a prima facie basis, without the benefit of cross-examination, and which relies on evidence which is only partial. The courts have repeatedly insisted that allegations of serious wrongdoing such as fraud or worse must be established with great particularity and specificity so that the court can be firmly convinced that the allegations are true. No matter how convincing a prima facie case may appear to be my view is that the comprehensive proofs repeatedly insisted upon by the courts are those which the courts would require in the present case if it were to displace the clear principle that the respondents are entitled to be paid their costs of compliance with the orders of the court. Accordingly, even upon the basis that my discretion is as contended for by Mr. Aston, I would have to conclude that the respondents are entitled to the costs they seek."
Notice of Appeal
9. The appellant filed a notice of appeal dated the 16th February, 2007. The grounds of the appeal stated:-
"(i) That the learned trial judge erred in law and in fact in not finding or, in the alternative not considering, whether the respondents, as a matter of public policy, should be disentitled to relief by reason of their conduct.
(ii) That the learned trial judge erred in law and in fact in finding that the discretion of the Court in awarding cost-s on an application made pursuant to Section 908 of the Taxes Consolidation Act, 1997, as amended, is referable only to the four corners of Section 908 and not to other issues which may otherwise be relevant to the exercise of that discretion.
(iii) That the learned trial judge erred in law and in fact in finding that there is an established principle that where a party carries out work at the behest and for the benefit of another pursuant to a court order, that the party carrying out that work should be paid the costs and expenses thereof.
(iv) In the alternative, that the learned trial judge erred in law and in fact in finding that it would require some clear, if not unambiguous, counter-principle to displace the application of the principle referred to in the preceding ground hereof.
(v) That the learned trial judge erred in law and in fact in not finding that the onus lay on the respondents to satisfy the Court that in all the circumstances of the application, they should be awarded the costs sought.
(vi) That the learned trial judge erred in law and in fact in ruling that he could not take into account evidence on affidavit which grounded the application made pursuant to Section 908, of which application the respondents' application for costs is ancillary thereto.
(vii) That the learned trial judge erred in law and in fact in concluding that if he were to exercise a wide discretion and refuse the application for costs he would have to accept an allegation of fraud and in effect a conspiracy to defraud the Revenue.
(viii) That the learned trial judge erred in law and in fact in failing to reach appropriate findings and inferences of fact based on incontrovertible evidence before the Court.
(ix) Without prejudice to the generality of the foregoing, the learned trial judge erred in law and in fact in not reaching any or some of the following or similar findings or inferences:-
(a) that the respondents failed to maintain records in accordance with its legal obligations;
(b) that there was a significant failure on the part of the respondents to maintain in their respective head offices records that truly reflected information known to and held at branch level, in direct breach of their legal obligations;
(c) that the respondents, through their agents and employees, failed to correct their records when they knew or ought to have known that their customers had furnished false declarations of non-resident status;
(d) that the respondents, through their agents and employees, knowingly disregarded information pointing to significant abuse of non-resident accounts by their customers; and
(e) that having regard to all the information in the possession of the respondents, whether at their head offices or at branch level, that they ought to have known that their customers were using non-resident accounts for the purposes of tax evasion.
(x) That the learned trial judge erred in fact in finding that the application made pursuant to section 908 of the Taxes Consolidation Act, 1997, as amended was an urgent application to which the respondents agreed to have the issue of costs deferred.
(xi) That the learned trial judge erred in law and in fact in having regard to whether the application was urgent or whether the respondents agreed to have the issue of costs deferred.
(xii) That the learned trial judge erred in law and in fact in taking into account the value to the Revenue of the information obtained on foot of the orders.
(xiii) That the learned trial judge erred in law and in fact in taking into account the fact that a significant amount of information obtained related to compliant taxpayers having regard to the purpose and the wording of Section 908 of the Taxes Consolidation Act, 1997, as amended.
(xiv) That the learned trial judge erred in fact in finding that there were other remedies available to the appellant which are more suited to the resolution of factual disputes than the current application.
(xv) In the alternative that the learned trial judge erred in .law in taking into account the finding referred to in the previous ground herein in determining whether to award the respondents the costs sought.
(xvi) That the learned trial judge erred in law and in fact in failing to have any or any adequate regard to the fact that the substantial portion of the costs of complying with the order arose from the breach by the respondents of their legal obligations or, in the alternative, of its failure to maintain adequate and accurate records of their customers identities.
(xvii) In the alternative that the learned trial judge erred in law and .in fact in awarding the respondent all the costs of compliance having regard to the matters referred to in the preceding ground and, if necessary, not directing an appropriate enquiry.
Submissions
10. Written submissions were received from the appellant and the respondents, and oral submissions were made to the Court on behalf of both parties.
11. In concluding the written submissions on behalf of the appellant it was accepted that the work was done at the behest of the appellant and that it resulted in the collection of a substantial amount of unpaid taxes. It was also accepted that these are factors to be taken into account by the Court in the exercise of its discretion. But it was submitted that these factors must be measured against factors that weigh against granting orders for costs (of compliance and of the application). In this case, not only do such factors exist, as outlined in the submissions, but they are closely connected to one of the factors on which the respondents most relies, namely the extent of the work that had to be carried out. In fact, the amount of work done, and as a result the costs of compliance, are directly a result of the respondents' failure to maintain proper records and to comply fully with their obligations under s. 257(2) of the Taxes Consolidation Act, 1997. As a matter of public policy, it was submitted that the respondents should bear the cost of their own wrongdoing. It was stated that it was possible that a small fraction of the cost may have been incurred even had the respondents been compliant but it is unlikely because in that event people who seek to evade tax would not have been attracted to non-resident accounts and hence there would have been no reasonable purpose in the making of the application. No other financial institution has been awarded their costs (whilst none have applied, a number did not seek or obtain an order permitting liberty to apply) and it was submitted that it is wrong in principle that the very financial institution that held out the longest in its persistent denials of wrongdoing (and seems to be still doing so), should be the only one to be awarded its costs.
12. On behalf of the respondents, in written submissions, it was submitted that it was a well-established principle of law that where an individual expends money or money's worth for the benefit of another individual at the latter's express or implied request, then the first named individual was entitled to the costs and expenses of complying with that request. It was submitted that this principle included circumstances where the work carried out is pursuant to an order of a court. Reference was made to O'C (J.B.) v. D. (P.C.) H.C.S.C. [1985] 1 I.R. 265. It was further submitted that having regard to the clear principle, and the clear benefit accruing, to the respondents from the full compliance with that order, the respondents are plainly entitled to be paid the costs of complying with the order.
13. In oral submissions, counsel for the appellant, inter alia, informed the Court that there was no case where a court has ultimately refused costs; however, there were seventeen cases where the High Court made orders without awarding costs to the bank in issue. In several cases, by consent, no order as to costs was made. Of the fourteen remaining orders, seven recite a general liberty to apply and seven recite a liberty to apply in relation to costs. However, the Court was informed, that no other bank has applied for costs in these circumstances. Thus, it was submitted that there was an error at the commencement of the judgment of the High Court when reference was made to a significant number of similar orders having been made and that in such cases the financial institution had been awarded the costs.
Counsel submitted that there might be a general principle that when a person is obliged to do work he should get paid. Further, counsel said that, other than the cases referred to previously, it was the ordinary practice of the Revenue Commissioners to anticipate the exercise of the Court's discretion and to offer to pay the costs of an order and of compliance. But, counsel argued, the type of case before the Court is different because the need to make the order arises out of the failure of the financial institution to comply with the law.
14. Counsel for the respondents addressed the matters in issue in oral submissions also. He stressed that the Court has the jurisdiction to order costs, and the costs of compliance, to be paid under section 908. He noted that this is the first occasion where a party has sought costs and where costs have been resisted. He submitted that the respondents had incurred the costs in complying with the orders and should receive a costs order.
Statute
15. Section 908 provides:-
…
(7) Every hearing of an application for an order under this section and of any appeal in connection with that application shall be held in camera.
…
(9) (a) Where—
(i) a copy of any affidavit and exhibits grounding an application under subsection (2) or (8) and any order made under subsection (5) or (8) are to be made available to the taxpayer, or the taxpayer’s solicitor or to the financial institution or the financial institution’s solicitor, as the case may be, and
(ii) the judge is satisfied on the hearing of the application that there are reasonable grounds in the public interest that such copy of an affidavit, exhibits or order, as the case may be, should not include the name or address of the authorised officer, such copy, or copies or order shall not include the name or address of the authorised officer.
Thus this is an extensive section making provision for an application such as occurred in this case. However, there is no express provision relating to costs.
Case Law
16. No case directly on the point was opened to the Court. However, it was submitted on behalf of the respondents that an analogy may be drawn to the words in O'C (J.B.) v. C. (P.C.) H.C.S.C. [1985] 1 I.R. 265 at p. 274 to 275 by Murphy J., which will be referred to later in the judgment.
Decision
17. The order under appeal is an order for costs made by the learned High Court judge in the exercise of his discretion. Such an order is rarely appealed. Further, this Court rarely interferes with the exercise of discretion by a High Court judge on the issue of costs alone, when it is not an aspect of a substantive appeal.
18. The general law on costs is grounded on Order 99 of the Rules of the Superior Courts. Order 99 rule (1) provides that the costs of and incidental to every proceeding shall be in the discretion of the court. Order 99 rule (3) states:-
"The costs of every action, question, or issue tried by a jury shall follow the event unless the Court, for special cause, to be mentioned in the order, shall otherwise direct."
19. Thus the general rule is that costs follow the event, in other words that the winner is entitled to the costs from the loser. This reflects the adversarial nature of litigation.
20. However, this case is not a situation where there is litigation between two parties. In this case there has been an application to the Court under section 908.
21. The procedure under s. 908 is investigative. An authorised officer, such as the appellant, applies to the High Court seeking an order requiring a financial institution, such as the respondents, to make available certain documents and/or information. This is invasive of the respondents, and is only permitted if the authorised officer has the consent in writing of a Revenue Commissioner, and on certain other conditions. Further, the High Court judge to whom the application is made has to be satisfied that there are reasonable grounds for the application being made. When making the order, the learned High Court judge may attach such conditions as he or she may consider proper, which may include an order for costs.
22. Thus s. 908 enables the Revenue Commissioners to obtain documents and information from institutions, such as the respondents. This is to assist the Revenue Commissioners. Section 908 is a statutory scheme, the clear underlying policy of which is to enable information to be obtained for the Revenue Commissioners. The carrying out of such an order will be costly to any person ordered to so comply.
23. There is no specific reference to costs in section 908. It may be inferred that one of the conditions put in place by the High Court when making an order under s.908 may be in relation to costs. However, there is no guidance given as to how such costs should be applied. It is left to the discretion of the learned High Court judge.
24. I agree with the principle behind the statement of Murphy J. in O'C. (J.B.) v. D. (P.B.) H.C.S.C. [1985] I.R. 265 at p.274 to 275:-
"As the affidavit sworn on behalf of the Bank in the present case clearly establishes, an order directing the provision of information in broad terms could involve the bank concerned in time consuming research and the revenue authorities in very substantial expenditure as it is clear - and indeed accepted by the applicant in the present case - that the proper costs of the financial institution in complying with an order must be borne by the revenue authorities.
Even if the statement was obiter dictum that does not detract from the integrity of the underlying principle.
25. The order in this case involved the respondents in time-consuming research and very substantial expenditure in complying with the order. Thus it follows on the above principle that they should receive the costs of such work.
26. This approach may be affirmed by the fact that as a matter of policy the Revenue Commissioners should receive full information under such an application, without bars, or side issues, interfering with the obtaining of the information sought. Such information is to the benefit of the Revenue Commissioners.
27. If there has been recalcitrant, negligent, careless or other reprehensible behaviour by any such institutions, then the penalties may be ordered in other proceedings. The order for costs should not be treated as a penalty in such an application.
28. Any application for costs should be made in time, i.e. at the making of the application, or in accordance with a specific order of the High Court.
29. Consequently, as a matter of statutory construction, and acknowledging the clear public policy of the benefit of having such material collected and made available to the Revenue Commissioners, I am satisfied that the respondents are entitled to their costs. Thus it is not necessary to consider the issue of the exercise of a wide and full discretion.
30. For the reasons given, I would dismiss the appeal.
