CEDH · CASELAW;DECISIONS;DECCOMMISSION;ENG — 13 janvier 1995

.sDD6737AE { font-size:11pt } .s211D6B00 { margin-top:0pt; margin-bottom:0pt; line-height:normal; widows:0; orphans:0; font-size:8.5pt } .sBB9EE52A { font-family:Arial }                          AS TO THE ADMISSIBILITY OF   Applications Nos. 21319/93, 21449/93 & 21675/93, the NATIONAL & PROVINCIAL BUILDING SOCIETY, the LEEDS PERMANENT BUILDING SOCIETY and the YORKSHIRE BUILDING               SOCIETY            against the United Kingdom        The European Commission of Human Rights sitting in private on 13 January 1995, the following members being present:              MM.    C.L. ROZAKIS, Acting President                  F. ERMACORA                  E. BUSUTTIL                  G. JÖRUNDSSON                  S. TRECHSEL                  A.S. GÖZÜBÜYÜK            Mrs.   G.H. THUNE                  J. LIDDY            MM.    L. LOUCAIDES                  J.-C. GEUS                  M.P. PELLONPÄÄ                  B. MARXER                  I. CABRAL BARRETO                  B. CONFORTI                  N. BRATZA                  D. SVÁBY                  E. KONSTANTINOV                  G. RESS              Mr.    H.C. KRÜGER, Secretary to the Commission        Having regard to Article 25 of the Convention for the Protection of Human Rights and Fundamental Freedoms;        Having regard to the application introduced on 15 January 1993 by the National and Provincial Building Society and registered on 3 February 1993 under file no. 21319/93, to the application introduced on 21 December 1992 by the Leeds Permanent Building Society and registered on 1 March 1993 under file no. 21449/93, and to the application introduced on 11 January 1993 by the Yorkshire Building Society and registered on 16 April 1993 under file no. 21675/93;        Having regard to:   -     the reports provided for in Rule 47 of the Rules of Procedure of      the Commission;   -     the observations submitted by the respondent Government on      4 November 1993 and the observations in reply submitted by the      applicant societies on 21 February 1994;   -     the parties' oral submissions at the hearing on 13 January 1995;        Having deliberated;        Decides as follows:   THE FACTS        The applicants are building societies under the Building Societies Act 1986.   The first applicant society ("the National & Provincial") is represented before the Commission by Mr. C. Evans, solicitor, of Messrs. Slaughter and May, London.   The second applicant society ("the Leeds") is represented before the Commission by Mr. N.R.V. Jordan, Solicitor, of Messrs. Clifford Chance, London. The third applicant society ("the Yorkshire") is represented by Ms. S. Garrett, solicitor, of Messrs. Booth & Co., Leeds.   The facts of the cases, as submitted by the parties, may be summarised as follows.   The particular circumstances of the cases        On 15 March 1991 the Leeds began proceedings against the Inland Revenue for the restitution of £57,973,690 which had been paid pursuant to the transitional provisions in Regulations 3 and 11 of the Income Tax (Building Societies) Regulations 1986 ("the 1986 Regulations"), which had been found to be void by the House of Lords in a case brought by the Woolwich Building Society ("the Woolwich").   On 25 July 1991 Section 53 of the Finance Act 1991 retroactively validated those regulations.   The Leeds' proceedings for restitution of the sums paid were thereby thwarted.        On 10 July 1991 the Leeds applied for leave to commence judicial review proceedings for a declaration that the Treasury Orders establishing the composite rates of tax for 1986-87 to 1989-90 were unlawful because of the retroactive validation of the 1986 Regulations. Mr. Justice McPherson ordered that the application should be joined with applications made by the Bradford and Bingley Building Society and the National & Provincial.        On 1 June 1992 the Leeds issued further proceedings in the High Court for recovery of the monies it had paid under the allegedly invalid Treasury Orders.        On 16 July 1992 Section 64 of the Finance (No. 2) Act 1992 entered into force.   The provisions retroactively validated the Treasury Orders which were being challenged in the judicial review proceedings.   The judicial review proceedings and the writ proceedings begun on 1 June 1992 were thereby thwarted.                                    * * *        On 15 March 1991 the National & Provincial began proceedings against the Inland Revenue for the restitution of £15,873,945.27 which had been paid pursuant to the transitional provisions in the 1986 Regulations.   With the entry into force of Section 53 of the Finance Act 1991, the National & Provincial's proceedings for restitution of the sums paid were thwarted.        On 6 November 1991 the National & Provincial was granted leave to commence judicial review proceedings for a declaration that the Treasury Orders establishing the composite rates of tax for 1986-87 to 1989-90 were unlawful because of the retroactive validation of the 1986Regulations.   Mr. Justice McPherson ordered that the application by the National & Provincial should be joined with applications made by the Bradford and Bingley Building Society and the Leeds.        On 12 June 1992 the National & Provincial issued further proceedings in the High Court for recovery of the monies it had paid under the allegedly invalid Treasury Orders.        On 16 July 1992, with the entry into force of Section 64 of the Finance (No. 2) Act 1992, the judicial review proceedings and the writ proceedings begun on 12 June 1992 were thwarted.                                     ***        On 3 March 1992 the Yorkshire applied for leave to commence judicial review proceedings for a declaration that the Treasury Orders establishing the composite rates of tax for 1986-87 to 1989-90 were unlawful because of the retroactive validation of the 1986 Regulations. The Yorkshire limited its claim to the sum of £8,902,620.71 alleged to have been paid under the transitional provisions of the 1986 Regulations.        On 11 May 1992 the Yorkshire issued proceedings in the High Court for recovery of the monies it had paid under the allegedly invalid Treasury Orders.        On 16 July 1992, with the entry into force of Section 64 of the Finance (No. 2) Act 1992, the judicial review proceedings and the writ proceedings begun on 11 May 1992 were thwarted.   Relevant domestic law and practice        Income tax is an annual tax authorised by Parliament and calculated by reference to income accruing in a given period.        From 1894 until 1985-86 there existed a series of agreements between building societies and the Inland Revenue that building societies would account for income tax on interest accruing to members by way of direct payment from the society concerned to the Revenue. The Revenue and the individual members were thereby relieved of the administrative task of collecting and declaring the usually small amounts of interest involved.   The tax was paid at a "composite rate", that is, an approximate average of the rate at which investors would have paid their individual amounts of tax.   It was calculated by reference to the principle of "revenue neutrality" which means that, overall, the same amount would be paid as if the individuals had declared the amounts themselves.   The rate, originally decided by the Revenue after consultation with the societies, and later by the Treasury, was slightly less than the rate of "basic rate" tax (25.5% for the tax year 1985-86, compared with a basic rate of 30%).   The tax year runs from 6 April to 5 April of the following year.        For the period immediately preceding the tax year 1986-87, the sum due in any tax year was calculated by reference to the interest paid by the society concerned to its members during a period of, generally, 12 months (the society's "accounting period") ending in the year of assessment.   The tax was paid on 1 January of the year of assessment and discharged the liability of investors to pay income tax upon the interest received by them from the building society in the year being taxed.        Section 40 of the Finance Act 1985 amended Section 343 of the Income and Corporation Taxes Act 1979 to enable the Revenue to make regulations introducing a new regime to come into force on 6 April 1986 in place of the old voluntary arrangements.   Under the regulations, the Income Tax (Building Society) Regulations 1986, SI 1986/482 ("the 1986 Regulations"), tax was calculated on a quarterly basis on actual interest in the quarter concerned.   Transitional provisions of the 1986 Regulations for the tax years 1986-87 and 1987-88 purported to require building societies to account, in addition to the tax on actual interest, for tax in respect of interest paid to depositors after the end of the last accounting period but before the new system became effective (that is, during the so-called "gap period").        The Woolwich, which had paid some £70 m. more as a result of the transitional provisions than it would have paid had the new provisions simply had effect from 6 April 1986, applied for judicial review seeking a declaration that the relevant parts of the 1986 Regulations were unlawful.   At first instance, Mr. Justice Nolan on 31 July 1987 found nothing in the enabling legislation to indicate that Parliament had intended to authorise a departure from the principle that income tax should only be levied on the income of one year.   The main regulation at issue (Regulation 11) was therefore void, and the remaining regulations were void so far as they purported to apply to payments and receipts prior to 6 April 1986 (R. v. Inland Revenue Commissioners, ex parte Woolwich Building Society, [1987] STC 654).        The Court of Appeal, allowing the Revenue's appeal, found inter alia that an intention to legislate retroactively could be discerned in the enabling legislation, in particular the amendment to Section 343 of the Income and Corporation Taxes Act made by Section 47 of the Finance Act 1986.   It considered that in any event there was no element of double taxation in the case because the interest paid to investors in the gap period had not otherwise been subject to tax.   It also found that ordinary principles of tax law did not necessarily apply to the special case of the lump sums paid by building societies.   It had been conceded that paragraph (4) of Regulation 11 was invalid, but the Court of Appeal found the remainder of the Regulations to be valid ([1989] STC 463].        On 25 October 1990 the House of Lords allowed the appeal, agreeing with the Court of Appeal that Parliament had manifested an intention to require taxation in 1986-87 and subsequent years of both interest during the year in question and interest paid in the gap period.   It disagreed, however, over the effect of that finding on the regulations.   The Revenue conceded that paragraph (4) was ultra vires and had to be deleted.   The House of Lords considered that the deletion of that paragraph alone, leaving the remainder of Regulation 11 and the related Regulation 3 in force, would produce an effect not intended by the draftsman.   Accordingly both regulations, which contained the transitional provisions, were invalid.   Lord Lowry, who agreed with the conclusion of the majority, considered that the wording of Section 343of the Income and Corporation Taxes Act did not authorise the taking of additional tax from the Woolwich either in its initial form or as amended by Section 47 of the Finance Act 1986.        In the meantime, the Woolwich had issued a second set of proceedings for recovery of the monies paid in respect of the gap period.   The Revenue refunded the principal sum but refused to pay interest on the sum between the date of payment and the finding of the House of Lords that the relevant regulations were invalid.   Mr. Justice Nolan found for the Revenue in this respect on 12 July 1988.   The Woolwich's appeal to the Court of Appeal was allowed, by a majority, on 22 May 1991, and the Revenue's appeal to the House of Lords was dismissed on 20 July 1992, the House of Lords finding, also by a majority, that as the society's claim fell outside the statutory framework for claiming overpaid tax, the common law required repayment of the money with interest from the day the money had been paid.        On 25 July 1991 Section 53 of the Finance Act 1991 entered into force.   It provided that the transitional regulations which had been found to be invalid were retrospectively validated, save that it did not apply to any building society which had brought proceedings to challenge the validity of the regulations before 18 July 1986.   Only the Woolwich fulfilled this condition.        On 16 July 1992 Section 64 of the Finance (No. 2) Act 1992 entered into force.   It provided that the Treasury Orders setting out the composite rate tax for the tax years 1986-87 to 1989-90 should be taken to be and always to have been effective.   COMPLAINTS        The applicant societies allege violations of Article 1 of Protocol No. 1, and of Articles 6 and 14 of the Convention.   Complaints initially made by the National & Provincial and the Leeds under Article 13 of the Convention were subsequently withdrawn.   Under Article 14 of the Convention the applicant societies consider that there was no justification for the difference in treatment between them and the Woolwich, which was exempted from the effects of Section 53 of the Finance Act 1991.   PROCEEDINGS BEFORE THE COMMISSION        The National & Provincial's application was introduced on 15 January 1993, the Leeds' application on 21 December 1992 and the Yorkshire's application on 11 January 1993.   The applications were registered on 3 February 1993, 1 March 1993 and 16 April 1993 respectively.        On 28 June 1993 the Commission decided to communicate the applications to the respondent Government and to request them to submit written observations on their admissibility and merits.        The Government's observations were submitted on 2 November 1993, and the applicant societies' observations in reply were submitted on 21 February 1994.        On 30 August 1994 the Commission decided to join Applications Nos. 21319/93 and 21675/93 (the National & Provincial and the Yorkshire).   On the same date, it also decided to hold a hearing on the admissibility and merits of the applications.        On 10 January 1995 the Commission decided to join Applications Nos. 21319/93 and 21675/93 with Application No. 21449/93 (the Leeds).        At the hearing, which was held on 13 January 1995, the parties were represented as follows:   For the Government :   Mr. M. Eaton, Agent Mr. A. Moses, QC, Counsel Mr. D. Anderson, Counsel Ms. Shepherd, Trainee barrister Mr. W. Durrans, Inland Revenue, Adviser Mr. W. Streeter, Inland Revenue, Adviser   For the applicant societies:   Mr. J. Gardiner, QC, Counsel Mr. P. Duffy, Counsel Mr. J. Peacock, Counsel Mr. T. Eicke, Trainee barrister   The National & Provincial   Mr. J. Thurwell and Ms. D. Reed, both from the applicant society Ms. F. Ferguson, solicitor Mr. C. Evans, solicitor Ms. E. Hunt, solicitor   The Leeds   Mrs. D. Gaskin, from the applicant society Mr. N. Jordan, solicitor Mr. H. Ross, solicitor Mr. M. Marks, solicitor   The Yorkshire   Ms. S. Wyresdale, solicitor, from the applicant society Ms. S. Garrett, solicitor.   THE LAW        The applicant societies allege violations of Article 6 (Art. 6) of the Convention and Article 1 of Protocol No. 1 (P1-1) to the Convention, taken alone and in conjunction with Article 14 (Art. 6+P1-1+14) of the Convention.   Article 6 (Art. 6) of the Convention provides, so far as relevant, as follows:        "1.    In the determination of his civil rights and obligations      ..., everyone is entitled to a fair and public hearing ... by an      independent and impartial tribunal established by law."        Article 1 of Protocol No. 1 (P1-1) to the Convention provides as follows:        "Every natural or legal person is entitled to the peaceful      enjoyment of his possessions.   No one shall be deprived of his      possessions except in the public interest and subject to the      conditions provided for by law and by the general principles of      international law.        The preceding provisions shall not, however, in any way impair      the right of a State to enforce such laws as it deems necessary      to control the use of property in accordance with the general      interest or to secure the payment of taxes or other contributions      or penalties."        Article 14 (Art. 14) of the Convention provides as follows:        "The enjoyment of the rights and freedoms set forth in this      Convention shall be secured without discrimination on any ground      such as sex, race, colour, language, religion, political or other      opinion, national or social origin, association with a national      minority, property, birth or other status."        The applicant societies consider that the legislative interventions in the proceedings which they had brought were in conflict with Article 6 (Art. 6) in that the proceedings were brought for the determination of their civil rights and obligations within the meaning of the Convention and that, by virtue of Section 53 of the Finance Act 1991 and Section 64 of the Finance (No. 2) Act 1992, the applicant societies were deprived of a judicial determination of the disputes at issue.        The Government consider in this connection that the proceedings were tax proceedings and therefore did not attract the guarantees of Article 6 (Art. 6) of the Convention, but that in any event the enactment of the measures at issue amounted to a legitimate intervention in the pending proceedings as its aim was to rectify a technical defect in the introduction of the new system, thereby giving effect to the original intention of Parliament, and to prevent any further collateral challenge to the legislative provisions.        Under Article 1 of Protocol No. 1 (P1-1) to the Convention, the applicant societies consider that the cumulative effect of Section 53 of the Finance Act 1991 and Section 64 of the Finance (No. 2) Act was to deprive them of monies to which they were entitled, namely the sums which had been paid pursuant to the transitional regulations which had initially been found to be void and were then validated by Section 53 of the Finance Act 1991.        The Government submit that the legislation at issue in the present case was "to secure the payment of taxes or other contributions" within the meaning of the second paragraph of Article 1 (Art. 1), but that in any event any deprivation of possessions was in the public interest as its purpose was to remedy the technical defects in the 1986 Regulations.        Under Article 14 (Art. 14) of the Convention the applicant societies submit that they were subjected to discrimination in connection with both Article 6 (Art. 6) of the Convention and Article 1 of Protocol No. 1 (P1-1).   In particular, they consider that there was no justification for the fact that in Section 53 of the 1991 Act they were treated differently from the Woolwich.   The Government submit that the justification for the difference in treatment between the applicant societies and the Woolwich lies in the fact that the Woolwich alone brought proceedings to challenge the validity of the transitional regulations, and that it was therefore proper to let the Woolwich recover the money paid by it under the regulations.        The Commission finds that the application raises complex issues of fact and law which must be examined on the merits.   The application cannot, therefore, be declared manifestly ill-founded within the meaning of Article 27 para. 2 (Art. 27-2) of the Convention.   No other ground for declaring it inadmissible has been established.        For these reasons, the Commission, by a majority        DECLARES THE APPLICATION ADMISSIBLE,      without prejudging the merits of the case.   Secretary to the Commission        Acting President of the Commission        (H.C. KRÜGER)                          (C.L. ROZAKIS)