R v Inland Revenue Commissioners, ex parte Caglar QUEEN'S BENCH DIVISION (CROWN OFFICE LIST)  [1995] STC 741, 67 Tax Cas 335 HEARING-DATES: 15 May 1995 15 May 1995  CATCHWORDS:   Judicial review - Emoluments from office or employment - Consul and other officials - Exemption from income tax - Officials of mission of republic not recognised in United Kingdom - Assessments raised on officials - Whether question of exemption justiciable by judicial review where appeal available by case stated procedure  HEADNOTE:   The applicant was the head of the London Mission of the Turkish Republic of Northern Cyprus, a republic not recognised by the United Kingdom. He sought judicial review of a decision by the inspector of taxes to assess the salaries of officials of the mission to income tax for the years 1986-87 and 1987-88.       The applicant contended that s 321 of the Income and Corporation Taxes Act 1988 precluded the assessment of income tax on income arising from any office or employment of an official agent in the United Kingdom for any foreign state.     Held - The correctness or otherwise of an assessment could be challenged by way of judicial review, however it required exceptional circumstances to justify the court to proceed by way of judicial review where there was a normal statutory appeal procedure.  There was nothing in the instant case to indicatethat it was an exceptional case.  Accordingly, the application would be dismissed.  NOTES:   For judicial review, see Simon's Direct Tax Service A3.901-902.  CASES-REF-TO: Argosam Finance Co Ltd v Oxby (Inspector of Taxes) [1965] Ch 390, [1964] 3 All ER 561, 42 TC 86, CA.Barraclough v Brown [1897] AC 615, HL.IRC v National Federation of Self-Employed and Small Businesses Ltd [1981] STC 260, [1982] AC 617, [1981] 2 All ER 93, 55 TC 133, HL.Preston v IRC [1985] STC 282, [1985] AC 835, [1985] 2 All ER 327, 59 TC 1, HL. R v Birmingham City Council, ex p Ferrero [1993] 1 All ER 530, CA.R v Brentford General Comrs, ex p Chan [1986] STC 65, 57 TC 651.R v Chief Constable of the Merseyside Police, ex p Calveley [1986] QB 424, [1986] 1 All ER 257, CA.R v Secretary of State for Employment, ex p Equal Opportunities Commission [1992] 1 All ER 545, DC; rvsd [1993] 1 WLR 872, [1993] 1 All ER 1022, CA; rvsd [1995] 1 AC 1, [1994] 1 All ER 910, HL.R v Secretary of State for the Home Dept, ex p Swati [1986] 1 WLR 477, [1986] 1 All ER 717, CA.Vandervell Trustees Ltd v White [1971] AC 912, [1970] 3 All ER 16, 46 TC 341, HL.  CASES-CITED: Aspin v Estill (Inspector of Taxes) [1987] STC 723, 60 TC 549, CA.IRC v Commerzbank AG [1990] STC 285, 63 TC 218.  INTRODUCTION:   Application Resat Caglar, head of the London Mission of the Turkish Republic of Northern Cyprus (the applicant), applied with leave granted by Popplewell J on 28 February 1994, for judicial review of the decisions of an inspector of taxes to raise assessment to income tax on Halil Acarturk, an official of the Turkish Republic of  North Cyprus  dated 5 and 10 August.  The applicant sought the following relief: (i) certiorari to quash the decisions; (ii) a declaration that the inspect or had acted ultra vires in making the decisions; and (iii) a stay of the appeals of Tansel Fikri, Halil Acarturk, Fikri Direkoglu and Tahsim Erutugruloglu (all officials of the Turkish Republic of Northern Cyprus) against assessments to income tax for 1986-87 and 1987-88 which were before the General Commissioners pending the outcome of the application.  The facts are set out in the judgment.  COUNSEL:   Michael Beloff QC and Helen Mountfield for the applicant; Launcelot HendersonQC and Christopher Greenwood for the Crown. PANEL: POPPLEWELL J JUDGMENTBY-1: POPPLEWELL J  JUDGMENT-1:   POPPLEWELL J.  Nothing I say is intended to have or has any political significance.  This is an application for judicial review pursuant to leave granted by me on 28 February 1994. The applicant, Mr Caglar, is head of the London Mission of the Turkish Republic of Northern Cyprus  (TRNC).  Cyprus is divided into two; there is a government, recognised, of Cyprus and there is the TRNC, which is not recognised as a state by the United Kingdom.    Mr Caglar seeks to challenge the decisions of 5 and 10 August 1993 of the inspector of taxes to assess, for income tax, the salary of an official, Mr Acarturk, who is said to have been employed in the London Mission of TRNC for the years 1989 to 1993 and 1993 to 1994.  The issue also affects a number ofother official agents.    The issue which arises on the judicial review is that the applicant has claimed exemption from tax pursuant to s 321 of the Income and Corporation TaxesAct 1988, which reads:    '(1) Income arising from any office or employment to which this section applies shall be exempt from income tax . . .    (2) The offices and employments to which this section applies are the following, that is to say -- . . . (b) the employment of an official agent in the United Kingdom for any foreign state, not being an employment exercised by a Commonwealth citizen or a citizen of the Republic of Ireland or exercised in connection with any trade, business or other undertaking carried on for the purposes of profit.    (3) In the section -- . . . "official agent" means a person, not being a consul, who is employed on the staff of any consulate, official department or agency of a foreign state, not being a department or agency which carries on any trade, business or other undertaking for the purposes of profit.'    It is quite clear from the skeleton arguments which have been helpfully put before the court that the central issue in the determination of this hearing is whether the TRNC is 'any foreign state', that is to say whether it meets the criteria of 'state', that is irrespective of whether it is recognised.    There are ancillary questions, namely whether the gentlemen are official agents engaged in undertakings for profit, and whether they are members or otherwise of the Commonwealth.    When Mr Beloff QC started to open the case on the merits it became clear that I ought to decide the question of whether judicial review was an appropriate forum for the hearing, given that there are rights of appeal elsewhere.  The Crown has taken the point not merely on discretion but also on jurisdiction.  It seems to me that before spending three very interesting days deciding matters of private and public international and so on, I should first resolve the question whether I have jurisdiction to hear the matter and if I do have jurisdiction, whether I should allow the matter to proceed by way of judicial review or by way of appeal under the provisions of the Taxes Acts.     The history can be quite shortly stated.  I have already indicated that the assessments were made.  They were made pursuant to s 29(1) of the Taxes Management Act 1970.  By s 29(1)(b):    'Except as otherwise provided, assessments to tax shall be made by an inspector and -- . . . (b) if it appears to the inspector that there are any profits in respect of which tax is chargeable and which have not been included in a return under Part II of this Act, or if the inspector is dissatisfied with any return under Part II of this Act, he may make an assessment to tax to the best of his judgment.'    Section 29(6) provides:    'After the notice of assessment has been served on the person assessed, the assessment shall not be altered except in accordance with the express provisions of the Taxes Acts.' A right of appeal is conferred by s 31 of the same Act to the Commissioners:   'An appeal may be brought against an assessment to tax by a notice of appeal in writing given within thirty days after the date of the notice of assessment.'   Section 46(2) provides:    'Save as otherwise provided in the Taxes Acts, the determination of the General Commissioners or the Special Commissioners in any proceedings under the Taxes Acts shall be final and conclusive.'    Section 56 provides that there may be an appeal by way of case stated for the opinion of the High Court on questions of law.    It is submitted on behalf of the Crown that the correctness or otherwise of an assessment may only be challenged by the appeal machinery which I have just set out.    It is accepted that if the Revenue have misdirected themselves as a matter of law, then there is an error of law by an administrative body which is subject to judicial review.  It is clear from the authorities that judicial review can be applied to decisions of the Revenue and in the instant case, therefore, there could be jurisdiction in the court to hear the application for judicial review.   The Crown, however, relies on the decision in Vandervell Trustees Ltd v White reported in the House of Lords [1971] AC 912, 46 TC 341.  It was essentially a private law litigation between the executives and trustees as to how dividends received by the trustees between 1961 and 1965 should be dealt with.    However, their Lordships, in the course of various speeches, expressed views about the effect of the Income Tax Management Act 1964.  Viscount Dilhorne said this ([1971] AC 912 at 933, 46 TC 341 at 365):    'These provisions confer jurisdiction on the special and general commissioners to determine the correctness or otherwise of an assessment.  Save upon cases stated by them under section 64 of the Income Tax Act 1964, the High Court is not given any jurisdiction with regard thereto.  Tax questions may arise between subjects, as, for instance, with regard to the right to deduct income tax on making certain payments . . . In such cases the jurisdiction of the High Court cannot be doubted, but where the correctness of an assessment, and so the liability to pay income tax or surtax, is challenged, that can only, in my opinion, be decided by the special or general commissioners.' He goes on ([1971] AC 912 at 934, 46 TC 341 at 365):            'In my opinion, they [i e the subject and the Crown] cannot confer jurisdiction on the High Court by waiver or by consent to adjudicate as to liability of a taxpayer to income tax or surtax, for Parliament has prescribed the method and the only method by which an assessment and the taxpayer's liability thereunder can be challenged.  If, as I think is clearly the case, the High Court has not jurisdiction to determine liability to income tax and surtax, it follows that it has not jurisdiction to make declarations with regard thereto.'    Viscount Dilhorne cited what Diplock LJ had said in Argosam Finance Co Ltd v Oxby (Inspector of Taxes) [1965] Ch 390 at 425, 42 TC 86 at 105.  Viscount Dilhorne said this:    'Diplock LJ, as he then was, agreed that the court had no jurisdiction with regard to that question "for that was a matter which Parliament has exclusively confided to the jurisdiction of the commissioners."'    Lord Wilberforce said this ([1971] AC 912 at 938, 939, 46 TC 341 at 369, 370):  'The argument for lack of jurisdiction rests upon the proposition that, where the legislature has by statute laid down a special procedure for the determination of any question, that special procedure is the only method by which such a question can be determined: and the ordinary jurisdiction of the courts is excluded . . . The limits of this decision [Barraclough v Brown [1897]AC 615] are obvious from these words [per Lord Herschell (at 620)].  In order to compare (in fact to contrast) the situation under the Income Tax Acts, it is necessary to see precisely what it is that under that legislation has been made the subject of the statutory procedure.  This is the validity [emphasis added] and quantum of the assessment to tax which has been made upon the subject.'    Lord Diplock said ([1971] AC 912 at 943, 46 TC 341 at 374):    'The decisive question, as I see it, is whether the court has any jurisdiction, after an assessment to surtax has once been made, to adjudicate between the taxpayer and the Commissioners of Inland Revenue upon the correctness of the assessment or upon any underlying issue of fact on which the correctness of the assessment depends . . . I think the court has no such jurisdiction.  The provisions of section 5(6) of the Income Tax Management Act 1964, which I cited at the outset of my speech, are clear and unequivocal.  The power to alter an assessment once it has been made and served is conferred upon the special commissioners to the exclusion of any court of law, except in so far as an appeal from a determination of the special commissioners upon a point of law lies to the High Court under section 64 of the Income Tax Act 1952.'    He finished that paragraph by saying -- '. . . this lies within the excluded jurisdiction field'.    It is accepted by the Crown that although it is contended that the Special Commissioners have exclusive jurisdiction, if there is alleged to be an abuse of power it is open to the court to review the Revenue's decision by way of judicial review.  The proposition is to be found in the decision of Preston v IRC [1985] STC 282, [1985] AC 835.    It is not necessary to set out the facts.  In that case Lord Scarman said this ([1985] STC 282 at 299, [1985] AC 835 at 852):    'My fourth proposition is that a remedy by way of judicial review is not to be made available where an alternative remedy exists.  This is a proposition of great importance.  Judicial review is a collateral challenge: it is not an appeal.  Where Parliament has provided by statute appeal procedures, as in the taxing statutes, it will only be very rarely that the courts will allow the collateral process of judicial review to be used to attack an appealable decision.' That is an indication that the contention of the Crown that this is exclusive jurisdiction may be subject to some exception.    Lord Scarman went on:    'But cases for judicial review can arise even where appeal procedures are provided by Parliament.  The present case illustrates the circumstances in which it would be appropriate to subject a decision of the commissioners to judicial review.  I accept that the court cannot in the absence of special circumstances decide by way of judicial review to be unfair that which the commissioners by taking action against the taxpayer have determined to be fair.'    Lord Templeman, giving the substantive judgment of the court, said this ([1985] STC 282 at 291, [1985] AC 835 at 862):    'Woolf J rightly decided that the taxpayer had no remedy against the commissioners for breach of contract or breach of representations made by Mr Thomas in 1978 because the commissioners could not in 1978 bind themselves not to perform in 1982 the statutory duty of counteracting a tax advantage imposed on the commissioners by s 460 of the 1970 Act.  The only remedy which might be available to the taxpayer was the remedy of judicial review.  Judicial review is available where a decision-making authority exceeds its powers, commits an error of law [emphasis added] commits a breach of natural justice, reaches a decision which no reasonable tribunal could have reached, or abuses its powers. Judicial review should not be granted where an alternative remedy is available. In most cases in which the commissioners are said to have fallen  into error, the remedy of the taxpayer lies in the appeal procedures provided by the tax statutes to the General Commissioners or Special Commissioners.'    He then sets out what are the advantages of going to the commissioners and says this: 'My Lords, it is clear that the commissioners are amenable to the remedy of judicial review in a proper case.' He quotes IRC v National Federation of Self-Employed and Small Businesses Ltd, the 'Mickey Mouse' case [1981] STC 260, [1982] AC 617, and cites from Lord Wilberforce who said ([1981] STC 260 at 266, [1982] AC 617 at 632) --    '. . . a taxpayer would not be excluded from seeking judicial review if he could show that the revenue had either failed in its statutory duty toward him or had been guilty of some action which was an abuse of their powers or outside their powers altogether.  Such a collateral attack, as contrasted with the direct appeal on law to the courts, would no doubt be rare, but the possibility certainly exists.' Lord Diplock stated ([1981] STC 260 at 269, [1982] AC 617 at 637):    'Judicial review is available only as a remedy for conduct of a public officer or authority which is ultra vires or unlawful [emphasis added], but not for acts done lawfully in the exercise of an administrative discretion which are complained of only as being unfair or unwise . . .'    On the facts of the particular case Lord Templeman went on to say, ([1985] STC 282 at 293, [1985] AC 835 at 864):    'The court can only intervene by judicial review to direct the commissioners to abstain from performing their statutory duties or from exercising their statutory powers if the court is satisfied that "the unfairness" of which the taxpayer complains renders the insistence by the commissioners on performing their duties or exercising their powers an abuse of power by the commissioners.'    He then went on to deal with whether it was a matter of fact that there had been an abuse of power.    I am satisfied from that authority that the exclusive jurisdiction contended for by the Crown is subject to the exception that where an administrative body has committed an error which otherwise would make it subject to judicial review the Revenue are thereby amenable to the remedy of judicial review.    One of the matters which makes them liable to judicial review is whether they have committed an error of law. In this case it is submitted and contended that they have committed an error of law in their conclusion, namely that the applicants are not entitled to the exemption under s 321.    It is submitted by the Crown that that would apply in almost every case.  The answer to that, is that it does not go to jurisdiction; it goes to the exercise of discretion as to whether judicial review be granted where clearly there is an alternative remedy.    I am satisfied that the error of law alleged in the instant case does not mean 'want of jurisdiction' in the true sense, that is to say they acted ultra vires, which would make their decision a nullity.  The allegation as Lord Templeman and Lord Diplock said, they have acted unlawfully and misdirected themselves in reaching their decision as to the law.    There are other authorities to which my attention was drawn, but they all, in my judgment, merely restate the matter in a different way, which is to say that the normal process is to go by the statutory way of appeal and not otherwise. If authorities are needed for the proposition that there is exception to the exclusivity of the statutory appeal it is to be found in Preston.  I do not therefore propose to refer to any other authorities.    Accordingly, I take the view that there is jurisdiction in this court to determine the matter by way of judicial review.  However, it is quite clear, and it is accepted by both the applicant and the Crown, that even if judicial review does apply in principle it requires exceptional circumstances to  justify a court proceeding by way of judicial review when there is a normal statutory, alternative, i e the statutory appeal procedure.  It is not necessary to repeat the very many authorities which there are on this subject both in revenue law, immigration law and elsewhere.  Preston is one of them, R v Chief Constable of the Merseyside Police, ex p Calveley [1986] QB 424 and R v Birmingham City Council, ex p Ferrero [1993] 1 All ER 530 were others.  The law reports are full of them.  In R v Secretary of State for the Home Dept, ex p Swati [1986] 1 WLR 477 Sir John Donaldson MR said he was not going to seek to try to interpret what was meant by 'exceptional'.    The court has to look at all the facts of the particular case in front of it, because the facts and the appeal procedure vary from case to case and the word is 'exceptional'.The facts in the instant case, which have been relied on by the applicant, in support of the submission that this is 'exceptional', are these.  The question whether the TRNC is a foreign state within the meaning of the Act is a matter of very difficult construction both as to private and public international law which requires the judgment of the High Court.  It is not one of the normal matters of fiscal law customarily dealt with by a Special Commissioner, however distinguished he is, it will effectively dispose of the issue in the case. Although, because there are a number of applicants, there may be one or two small matters of fact subsequently to go to the commissioner, as it were, to tidy up the assessment, essentially, the question is a very difficult question of law to which a Special Commissioner is not ideally suited, however experienced he may be in fiscal law.    Secondly, this is a matter of some sensitivity arising from the political situation which arises in Cyprus, and that the High Court is a more suitable forum than the Special Commissioner.    Next, that the matter is now before the High Court, which goes to the question of convenience and cost.  It is more convenient to proceed either this afternoon or certainly tomorrow morning than for the matter now to go back to the Special Commissioner for the matter to be argued thereafter.  Because quite clearly if anything that has happened previously is anything to go by the case will go not merely to this court, by way of case stated, or to the Chancery Division, but to the Court of Appeal perhaps, thereafter.  Therefore that is one thing to be taken into account.    There is the authority of R v Brentford General Comrs, ex p Chan [1986] STC 65 where Taylor J said that the fact that the parties are here ready to deal with a case is not a factor, effectively, to be taken into account.  I am afraid I do not wholly subscribe to that view.  It seems to me it is a factor to be taken into account, if the parties are ready and able to proceed.  Because it might mean that the hearing by way of judicial review would be speedier.  It is in my view a proper factor to be taken into account.    It is clear from all the chronology that if there had not been an application for judicial review the matter would have been heard probably a year ago. Accordingly, one result of this granting of leave has been the delay in the matter which is, of itself, very old.  It goes back certainly to 1987 when some assessments were made, and the first time that s 321 was raised was in 1989. The matter was before the General Commissioners and on a number of occasions the applicants requested a postponement.  The Crown made some point that delay has been the fault of the applicants, that they could have taken this route much earlier and the matter could have been resolved much earlier, but they waited and waited.  I do not find correspondence and timing of any significance one way or the other.    Mr Beloff relied, to some extent, on the decision of R v Secretary of State for Employment, ex p Equal Opportunities Commission [1993] 1 WLR 872 and, in particular, to what Nolan LJ, as he then was, said in the Divisional Court [1992] 1 All ER 545.  A number of ladies who worked part-time did not qualifyfor a redundancy payment because they worked part-time and it was said that they were, therefore, being discriminated against.    Nolan LJ and Judge J decided that judicial review was the most appropriate way of dealing with it, and said this (at 557-558):    'The question at issue is whether [the Employment Protection (Consolidation) Act 1978] is lawful in requiring  her to complete five years of continuous employment rather than two before qualifying for a redundancy payment.  We accept these submissions, which seem to us to reflect the reality of the matter. This is the principal consideration which has led us to conclude that Mrs Day should be allowed to pursue the remedy of judicial review in preference to that of an appeal to an industrial tribunal.  We fully subscribe to the principle that as a general rule disputes arising out of contracts of employment should be dealt with by industrial tribunals . . . but in the present case the features which generally make the industrial tribunal the appropriate forum for resolving such disputes are almost wholly lacking.  The natural respondent to Mrs Day's complaints is not her employer; it is the Secretary of State, as the designated minister for the purpose of section 2(2) of [the European Communities Act 1972] in relation to measures to prevent discrimination between men and women as regards terms and conditions of employment.  The issues of fact which arise in this case are widely different from those which an industrial tribunal normally has to consider.  They affect not only Mrs Day, but also every other part-time worker working between eight and 16 hours a week who becomes redundant after less than five years' continuous employment.  If these issues fell to be resolved by the industrial tribunal to which she has appealed a number of grave disadvantages would follow.  One is that there is no appeal from the decision of an industrial tribunal upon matters of fact: appeal (to the Employment Appeal Tribunal) only arises on a point of law.  Another is that the view taken of the facts by this industrial tribunal might differ from the view taken by another industrial tribunal to whom a redundant part-time employee in the same situation as Mrs Day might appeal (or, for all we know, has appealed).  Thirdly, the industrial tribunal could not, of course, give a declaratory judgment or make a declaration.  Finally, there is the purely practical point that appellants to an industrial tribunal do not qualify for legal aid.  The costs of the hearing would inevitably be very substantial.  One of the functions of the EOC is to provide financial assistance for those who seek to complain to industrial tribunals on grounds of discrimination, but the resources of the EOC are limited.  Even if one has regard solely to the question of entitlement to redundancy pay which Mrs Day's case raises, it would . . . be more cost-effective, as well as more expeditious, for the proceedings to begin in the High Court.'     That matter, of course, is a factor which I take into account in the instant case.    The Crown points out that His Honour Stephen Oliver QC or any of the Special Commissioners are not only conversant, particularly, with fiscal law, but that matters of international law are not beyond their ken, unlike the chairman of the industrial tribunal having, for instance, to deal with a very difficult point under the Sex Discrimination Act 1975.    I have stood back and looked at all the arguments in favour of allowing the matter to go by way of judicial review, but I have to remind myself that it is only to happen in exceptional cases.  I think it would be otherwise to suggest that the Special Commissioners do not have the ability to determine this veryinteresting and no doubt difficult point.  I suspect their judgments will be no less compelling than those of a number of High Court judges like myself, whose only experience of international law goes back to student days. I find nothing in the instant case which persuades me that it is an exceptional case for me to try.  I have to say it is not from lack of enthusiasm to do so or from idleness, but having heard all the arguments I am not persuaded that this is an exceptional case and, therefore, in the exercise of my discretion I shall not hear it by way of judicial review.  DISPOSITION:   Application dismissed with costs.  SOLICITORS:   Theodore Goddard; Solicitor of Inland Revenue 11