LORD JUSTICE WARD
this an appeal by the defendant Total Network SL (a company incorporated in Spain) against an order made by Mr Justice Hodge on 10 January 2005 following the trial of a preliminary issue. By his order the judge held that the claimants, the Commissioners of Customs and Excise,did have a cause of action against the defendant "in conspiracy where the unlawful means alleged is a common law offence of cheating the public revenue". The judge reached his decision on the basis of an agreement that he should treat the facts as set out in the Consolidated and Amended Particulars of Claim. At the same time he granted the claimants permission to amend the Consolidated and Amended Particulars of Claim. In accordance with the latter order the claimants amended their Particulars of Claim with permission. Subsequently a Re-Amended Consolidated Particulars of Claim was made without permission and placed in the bundle for this court. During the course of the hearing with the consent of the defendants the claimants further amended their pleadings and we are asked to decide the appeal on the basis of this further Amended Consolidated Particulars of Claim.
The claim concerns a series of alleged carousel frauds. Such frauds are best described in a passage from a decision of the VAT Tribunal in Bond House Systems Limited and adopted by the Advocate General in the Court of Justice of the European Communities in Optigen Ltd and Others Conjoined Cases C – 354/03, C – 35/03 and C – 484/03. It reads:
This type of fraud is not confined to the United Kingdom. Material before us shows that it is common in other countries within the European Community. It is best known in this country as carousel fraud but generally known throughout the European Community as missing trader intra-community (MTIC) fraud. It is described as a sophisticated criminal attack on the VAT system which in the year 2004/05 is estimated to have cost between £1.12 and £1.9 bn. It is usually committed by using goods such as mobile telephones and computer chips but includes other electronic goods. It involves the goods being imported VAT-free from other European Union Member States being sold through contrived business-transaction chains and subsequently exported. As is apparent from the above description the tax loss occurs when the VATcharge on the initial sale of the goods in United Kingdom is not paid to the Commissioners because the seller disappears. The purchaser can still reclaim VAT, so the loss crystallises when the trader who exports the goods from the United Kingdom makes a repayment claim.
The Consolidated Particulars of Claim allege thirteen separate conspiracies all following a broadly similar pattern. It will suffice to refer to the details of the first alleged conspiracy. The facts alleged in this conspiracy are as follows. On 15 October 2002 Total sold 3,780 Nokia mobile telephones to Redlaw Ltd, a company incorporated in England and Wales, for the sum of £1,672,224.75. On the same day Redlaw sold the telephones on to Lockparts Ltd for £1,423,170 plus VAT in the sum of £249,050.75. The total price was therefore, £1,672,224.75. Lockparts again on the same day sold the telephones on for slightly greater sums including VAT to GAK Ltd. GAK sold the telephones on for slightly greater sums to The Accessory People Plcwho in turn sold them for a further slightly increased sum to Alldech Ltd. Alldech paid £1,447,740 plus £253,345 VAT for the telephones. Alldech then sold the telephones back to Total for £1,508,020. That sale was zero-rated because it was a sale out of the United Kingdom. All these transactions took place on the same day, namely 15 October 2002.
Redlaw and Lockparts have both ceased to trade and have not accounted for the VAT on the transactions in which each was involved. Alldech by virtue of having acquired the telephones with a VAT value of £253,345.50 and having sold them out of the United Kingdom zero-rated, claimed and was paid a VAT refund from the Commissioners which included the sum of £253,345.50. The Commissioners allege that the loss suffered by reason of this conspiracy is a sum in damages equivalent to £250,047.
There are common features in respect of all thirteen conspiracies. In each conspiracy all the transactions were carried out on the same day. Total was the first and last link in all of the conspiracies. Redlaw features in two of the conspiracies. The Accessory People feature in six of the conspiracies. In nine of the thirteen conspiracies, Alldech is the final company in the United Kingdom which sold to Total outside the United Kingdom and claimed repayment of VAT from the Commissioners.
Before the judge Total put forward three grounds in its application to strike out the Consolidated Particulars of Claim which were tried as a preliminary issue. Those grounds were that the alleged conspiracies circumvented the statutory scheme; there was no unlawful means conspiracy on the facts; and that the Commissioners could not demonstrate harm to a business. The judge rejected all three grounds. Before this court only the first two grounds are pursued.
As we have indicated, the judge dealt with the preliminary issue on the basis of an assumption that the facts alleged were true. In its final form, produced on the morning of the second day of the hearing of the appeal, the Commissioner's case was put in the following way:
The Commissioners have not been given permission to amend the pleadings in this way but, sensibly, Mr Charles Flint QC, on behalf of Total, took no objection to the claim being made in this form. During the course of argument, as we shall see, the Commissioners were invited to consider a further amendment but the invitation was declined.
Section 1 of the Value Added Tax Act 1994 ("VATA1994") is in these terms, so far as material:
Section 1(1) VATA 1994 has effect "in accordance with the provisions of this Act". Notwithstanding the general words in paragraphs (a) and (b) of section 1(1), VAT is not chargeable on every supply of goods in the United Kingdom nor on every acquisition in the United Kingdom of goods from another member State. The section must be read with sections 4(1) and 10(1) VATA 1994:
A person is a taxable person for the purposes of VATA1994 while he is, or is required to be, registered under the Act: section 3(1) VATA 1994. A taxable supply, for the purposes of section 4(1), is a supply of goods or services made in the United Kingdom other than an exempt supply: section 4(2) VATA 1994. A supply of goods or services is an exempt supply if it is of a description for the time being specified in schedule 9: section 31(1) VATA1994. In the present context the relevant supplies do not fall within schedule 9.
VAT is charged on a taxable supply made by a taxable person in the course or furtherance of a business carried on by him: section 4(1) VATA 1994. An acquisition of goods from another member State is a taxable acquisition if (a) the goods are acquired in the course or furtherance of a business carried on by any person, (b) the person who carries on that business is the person who acquires the goods, and (c) the supplier is taxable in another member State at the time of the transaction in pursuance of which the goods are acquired and, in participating in that transaction, acts in the course or furtherance of a business carried on by him: section 10(3) VATA 1994. A supply of goods in the United Kingdom, or an acquisition in the United Kingdom of goods from another member State, which is not made in the context, and in the course or furtherance, of a business carried on by the person making the supply and (in the case of an acquisition) the person making the acquisition, gives rise to no VATcharge.
Section 7 VATA 1994 applies for determining, for the purposes of the Act, whether goods or services are supplied in the United Kingdom. In the present context it is sufficient to note subsections (2) and (7):
Section 13 VATA 1994 applies for determining, for the purposes of the Act, whether goods acquired from another member State are acquired in the United Kingdom. It is sufficient to note subsections (2) and (3):
Section 25(1) VATA 1994 requires that a taxable person shall account for and pay VAT (a) in respect of supplies made by him and (b) in respect of the acquisition by him of goods from other member States by reference to "prescribed accounting periods". Sections 25(2) and (3) are in these terms:
The circumstances in which input tax is allowable for the purposes of section 25(2) VATA 1994 are prescribed by section 26:
Article 28c(A)(a) of the EC Sixth Council Directive on the harmonisation of the laws of the member States relating to turnover taxes (77/388/EEC) requires that member States shall exempt supplies of goods dispatched or transported by or on behalf of the vendor or person acquiring the goods out of the territory of that member State but within the Community. Effect is given to that requirement under the domestic law of the United Kingdom: not by treating supplies to other member States as exempt supplies within section 31 and schedule 9 VATA 1994, but by providing (by regulations made under section 30(8)) that such supplies be zero-rated by for the purposes of section 30 VATA 1994. Regulation 134 of the Value Added Tax Regulations 1995 (SI 1995/2518) ("the 1995 Regulations") is in these terms:
In what the VAT and Duties Tribunal described in the Bond House case (in the passage adopted by the Advocate General in Optigen and set out earlier in this judgment) as a carousel fraud "in its simplest form" – and where (i) the original vendor and ultimate purchaser (A and D) is or are VAT-registered in a member State other than the United Kingdom and (ii) the first purchaser (B) and the second purchaser (C) are VAT-registered traders in the United Kingdom - the apparent effect of those provisions in VATA 1994 and the 1995 Regulations may be summarised as follows:
The summary in the previous paragraph assumes that, in the three relevant transactions – (i) the acquisition of the goods by B from A, (ii) the supply of the goods by B to C and (iii) the supply of the goods by C to D – A, B and C are each making supplies (and B is making an acquisition) in the course or furtherance of their respective businesses. It is for that reason that we have used the expression "the apparent effect". If, on a true analysis, the relevant acquisition and supplies are not made in the course or furtherance of business, then the position is different. In summary:
Part V of the 1995 Regulations contains provisions as to accounting, payment and records. Regulation 25 requires every person who is registered to make a return in respect of each prescribed accounting period, showing the amount of VAT payable by or to him. The return is to be made on a form (Form 4), set out in schedule 1 to the 1995 Regulations. Form 4 includes boxes (boxes 3, 4 and 5) which the taxable person is to complete with (i) the totalamount of VAT due from him (box 3 – being the sum of the amounts of VAT due on sales (box 1) and on acquisitions from other member States (box 2)), (ii) the amount of "VAT reclaimed in this period on purchases and other inputs (including acquisitions from the EC)" (box 4) and (iii) the amount of "Net VAT to be paid to customs or reclaimed by you (Difference between boxes 3 and 4)" (box 5). Regulation 29(1) requires that a person claiming deduction of input tax under section 25(2) 1994 shall do so on a return made under regulation 25. Regulation 29(2) requires that:VATA
In order to comply with those requirements, it is necessary (in pursuance of a simple carousel fraud) for B to provide C with a VAT invoice; and for C to complete a return on Form 4 showing a nil amount in box 3 (on the basis that C's supply of the goods to D is zero-rated), an amount equal to the amount of the VAT shown on the VAT invoice provided by B in box 4 (on the basis that that C is entitled to reclaim that amount as input tax on the supply of the goods to him by B) and the same amount (being the difference between the amounts in boxes 3 and 4) in box 5. For the reasons which we have explained, if the supplies of the goods by B to C and by C to D are not made in the course or furtherance of business, the VATinvoice and the entries made by C in boxes 3, 4 and 5 of Form 4 will be false; in the sense that they will present to the Commissioners a claim for a VAT credit in respect of input tax to which C (if he knows the facts) must be taken to know he is not entitled.
Section 73(2) VATA 1994 provides the means for the recovery of monies wrongly paid by way of a VAT credit. Recovery is effected in such a case following an assessment. VAT due from any person under an assessment can be recovered as a debt due to the Crown: paragraph 5(1), schedule 11, VATA 1994. Section 73(2) is in these terms, so far as material:
It is pertinent to have in mind that the provision made by VATA 1994 for the recovery of monies wrongly paid by way of a VAT credit – that is to say, recovery of those monies following an assessment as if they were VAT due – is subject to the statutory safeguards provided by the Act. Section 77(1) VATA 1994 provides that (subject to other provisions in the section) an assessment under section 73 shall not be made more than 3 years after the end of the relevant prescribed accounting period. Section 77(4) extends that period to 20 years "if VAT has been lost" as a result of conduct falling within section 60(1) VATA 1994 or for which a person has been convicted of fraud. When section 60(1) is read with section 60(2)(b) it is, we think, reasonably clear (although we do not need to decide the point) that the expression "if VAT has been lost" in section 77(4) includes the obtaining of a VATcredit by conduct involving dishonesty. An assessment made under section 73(2)(b) VATA 1994 can be challenged on an appeal to the VAT and Duties Tribunal: section 83(p)(i) VATA 1994. There is a further appeal, but only on a point of law, to the High Court under section 11 of the Tribunals and Inquiries Act 1992.
As will have been seen from our analysis of the statutory scheme, the missing trader Redlaw should, pursuant to s. 25, have accounted for and paid VAT in respect of the acquisition of the goods by it from the appellant, a supplier in another member state. In the alternative the Commissioners can proceed under s. 73(2) to assess the amount of VAT which ought not to have been paid or credited to Alldech. Furthermore, although this remedy was not available to the Commissioners at the time, the Commissioners have since 10th April 2003 had the power to impose joint and several liability by serving on a taxable person a notice specifying the amount of VATpayable but unpaid in respect of a supply to some other taxable person where that person knew or had reasonable grounds to suspect that VAT in respect of that supply or on any previous or subsequent supply would go unpaid: see s.77A.
Accordingly Mr Flint submits that with such a range of weaponry in the Commissioners' arsenal, there is a comprehensive scheme for the collection of VAT; that Parliament therefore intended that the scheme and only the scheme must be deployed as the means to fill the Commissioners' coffers and that if none of the available remedies can be directed at the appellant, who is outside the scheme because it is not a UK taxpayer and is not a taxable person, then the appellant cannot be held to account. We have already dealt and will deal further with the extent to which there is an all-embracing scheme. For present purposes, Mr Flint's argument then runs that the recovery of money from the appellant by fashioning a common law cause of action for damages for conspiracy is in effect the levying of taxation without the authority of Parliament. Such a levy is impermissible by virtue of Article 4 of the Bill of Rights Act 1688 which declares:
Mr Flint has referred us to a number of authorities. The first is Gosling (1850) 12 Q.B. 328, 407 where Wilde C.J. held:
That was applied in Attorney-General (1921) 37 T.L.R. 884. There the Food Controller had power under the Defence of the Realm Acts to make orders regulating the sale and purchase of milk. In granting the dairy a licence to buy milk in Cornwall, Devon, Dorset and Somerset, the Food Controller required the Dairy to pay 2d. per imperial gallon of milk purchased from those counties. The Attorney-General sued for the recovery of the monies which were not paid. The Dairy's objection was that the method adopted by the Food Controller was in its nature a tax which could only be levied or imposed by Parliament. Scrutton L.J. said this:
In Congreve [1976] Q.B. 629, the appellant purchased his television licence at a time when the charge was £12 although the minister had announced that it would later be increased to £18. The Home Office wrote to those who had purchased their licence before the new charge came into effect demanding the payment of the extra £6 failing which their licence would be revoked. Lord Denning M.R. held at p. 652:
Mr Martin QC for the Commissioners submits that the appellant's arguments demonstrate a fundamental misapprehension that the Commissioner's claim in conspiracy is equivalent to a demand for tax. It is not an alternative method of tax collection. The respondents are not seeking to impose a liability to tax on anyone; they do not base their loss on the failure of Redlaw to account for VAT (though that failure is an integral part of the plot). The Commissioners are merely seeking to recover, by means of an award of damages, money which they have been tricked into paying out in circumstances where there is no other remedy. Mr Martin submits firmly that it is "nonsense" to describe the respondent's claim as in effect an attempt to raise monies without the authority of Parliament. It would be extraordinary, he says, if Parliament were to be taken to have intended that the public purse could be depleted as a result of a fraud without there being any means of recovering the money from the fraudsters.
Mr Flint's argument is an interesting one but we prefer the arguments advanced on behalf of the Commissioners. In our judgment the crucial issue is to determine the nature of this claim in conspiracy. Assuming for the purpose of this argument that a claim in conspiracy does lie, then this is a claim for damages for a perfectly proper, well-recognised tort, the tort of conspiring together to defraud the claimant. That the measure of damages suffered by such a claimant may be measured by reference to the amount by which the Exchequer's income is depleted does not in our viewalter the essential character of the claim as one for damages, not as a levy of money for the use of the Crown without grant of Parliament. In the Wiltshire Dairies case the claim was expressly based upon the improper levy of 2d. per gallon. It was a claim to enforce that charge. Mr Congreve objected to paying the extra £6 levied upon him when he took advantage of the fact that the television licence fee would be increased. Again what was directly in issue was the lawfulness of that levy. Properly characterised this claim by the Commissioners is not a direct claim for VAT. It is a claim brought on a wholly different basis. It is a claim against conspirators to recover loss occasioned by fraud. It would make a mockery of the law to suggest that a fraudster can escape with impunity by piously claiming the benefit of the Bill of Rights designed for the innocent down-trodden citizen, not the scheming international fraudster.
In our judgment this ground of appeal is wholly devoid of merit.
It is not in dispute that there are two types of actionable conspiracy: conspiracy to injure by unlawful means and conspiracy to injure by lawful means. The latter requires a predominant intention to injure. The former requires an intention to injure but that intention need not be a predominant intention (see Clerk and Lindsell 19th Edition para 25 – 117).
During the course of the hearing of the appeal we invited Mr Martin to consider whether to amend the Consolidated Particulars of Claim to include an allegation of lawful means conspiracy. It seemed to us that it was strongly arguable that on the assumed facts the predominant purpose of the alleged conspiracy was to injure the Commissioners. After taking instructions Mr Martin informed the court that he was instructed not to seek an amendment to make that allegation for reasons which he explained. It is, of course, not our function to challenge or comment on these reasons. We merely record the Commissioners' clear decision not to make this allegation.
The judge held that it was sufficient for the Commissioners to show that Total was a party to a conspiracy, the intention of which was to cheat the Commissioners by a series of transactions that had no other purpose than to cheat and defraud the Commissioners. In doing so he held that the fraud automatically amounted to unlawful means for the purpose of the tort. He did so on the basis of what was decided in Sorrell [1925] AC 700 @ 714 and Crofter Hand Woven Harris Tweed Co Ltd [1942] AC 435 @ 462. He went on to hold that in any event there was a cause of action independent of the conspiracy against one of the conspirators. In doing so he was influenced by the VAT Tribunal's decision in Bond House Systems Ltd a decision which was subsequently overruled by the European Court of Justice in Optigen. Recognising this change in the law, after the judge's decision, the Commissioners amended their claim in the form set out above.
The issues in this appeal in respect of unlawful means conspiracy are as follows. First, is it a necessary ingredient of an unlawful means conspiracy for the unlawful means to be actionable at the suit of the Commissioners against at least one of the conspirators? Secondly, is this court bound by the decision in Powell [1998] Lloyds Rep Med 116 which held that an unlawful act actionable at the suit of the claimant was a necessary ingredient of unlawful means conspiracy? Thirdly, if it is necessary for the Commissioners to prove an actionable unlawful act against one of the conspirators, can they do so against Alldech?
The claimants primary case is that the allegation of the offence of common law cheat (preserved by s. 32(1) (a) of the Theft Act 1968 in revenue cases) is sufficient on its own to found an unlawful means conspiracy. It is contended by the Commissioners that this offence can be committed without any positive act of deceit and can include any form of fraudulent conduct (see R (1987) 84 Cr. App. R. 34). It is further accepted for the purpose of this issue that the offence of cheat is not actionable as an independent claim against Alldech.
Mr Martin submits that an unlawful means conspiracy does not require the claimant to show that it has an actionable claim against any conspirator. He submits that the essence of the tort is an agreement carried out by the conspirators by unlawful means, in this case the offence of cheat. Mr Flint submits that an unlawful means conspiracy can only arise if the unlawful means are actionable at the suit of the claimant against at least one of the alleged conspirators.
This issue has been the subject of controversy for some years. In the 17th Edition of Clerk and Lindsell two apparently conflicting views are expressed. At para 23-80 the following passage appears:
In the 19th Edition the editors of Clerk and Lindsell appear to come down more firmly on the side of the requirement of an independent actionable claim against at least one of the conspirators (see 19th Edition para 25-121); whilst still sounding a note of caution in paragraph (see para 25-94).
We have been referred in the skeleton arguments and oral submissions to a number of authorities touching on this issue. They include Sorrell and Smith; Crofter Hand Woven Harris Tweed ; Williams (1959) 103 CLR 30; McKinnon (1968) 70 DLR 2d; Gouriet . [1978] AC 435; Lonrho Ltd (No 2) [1982] AC 173; Lonhro [1992] 1 AC 448; Williams 1 [AC] 448; Kuwait Oil Tanker Co. SAK [2000] 2 All ER (Comm) 271; Michaels [2001] Ch 493; Mbasogo President of Equatorial Guinea and others [2006] EWCA Civ 1370. Of these authorities counsel concentrated their submissions to a great extent on the two Lonhro cases. Much of the argument centred on what had been decided by the House of Lords in each of these two cases.
As Davis J in Mbasogo pointed out, there are a number of decisions at first instance which have had held that overt acts of the crime must be actionable. Laddie J in Michaelsheld this to be so and his reasoning was adopted by Cooke J in Mahonia Limited [2004] EWHC 1938 (Comm). Davis J made it clear in his judgment that if he was free to do so he would have held to the contrary. However, he decided that he was bound by the Court of Appeal's decision in Powell . We shall discuss Powell when dealing with the second issue.
Davis J also pointed out that the authorities do not speak with the same voice. There are obiter dicta pointing in the other direction (see for instance Waller LJ in Surzur Overseas Ltd [1999] 2 Ll. Rep. 611; Mance LJ in Gruppo Torras SA [1999] CLC 1469 at first instance).
It is in our judgment unnecessary to refer to all the above authorities. We start with Sorrell . The facts are not material. However, at page 712 Viscount Cave LC, discussing what is now better known as conspiracy to injure by lawful means, said:
Next, in Crofter there are a number of passages in the speeches in the House of Lords which are relied on by Mr Martin. The case involved a dispute between officials of the Transport and General Workers Union at Stornaway on the island of Lewis and producers of tweed cloth. At issue was the right of the Union to bring pressure on the producers of the tweed cloth to prevent the latter from obtaining yarn from the mainland to the detriment of local mills. The holding in the headnote reads:
The issue for decision involved the necessity or otherwise for the appellants to show that the predominant purpose of the persons combining was the legitimate promotion of their interests. Viscount Simon L C said:
Before turning to Lonhro No 2 and Lonhro it is convenient to refer to Michaels. Mr Flint relies on Michaels for the reason that, in that case, Laddie J accepted all the arguments which Mr Flint has placed before us. Laddie J in Michaels carefully analysed the speeches of Lord Diplock in Lonhro No 2 and Lord Bridge in Lonhro He concluded that there were passages in both speeches which supported the proposition that an actionable overt act was central to an unlawful means conspiracy. He said:
Davis J in Mbasogo made it clear that he disagreed with Laddie J. He said:
We come now to the two Lonhro cases starting with Lonhro Ltd Petroleum Co Ltd (No 2) . Both counsel emphasise that it is important to understand what the issues were and what the House of Lords decided. The case arose out of the sanctions Order made pursuant to the Southern Rhodesia Act 1965. The Act and the Order followed the declaration of U.D.I. by the Government of Southern Rhodesia in November 1965. Lonhro sought to recover compensation from Shell and BP for supplying oil to Southern Rhodesia during the period of U.D.I. in breach of the sanctions Order.
Having determined that there was no breach of contracts made between Lonhro and Shell the House went on to consider whether, notwithstanding the absence of a breach of contract, delivery to Southern Rhodesia by Shell and BP of petroleum products contrary to the sanctions Order gave Lonhro the right to a cause of action against them in tort. Lord Diplock described the case against Shell and BP put against them as an innominate tort, committed by Shell and by BP severally, of causing foreseeable loss by an unlawful act. The questions were:
Lord Diplock, with whom the other members of the House, including Lord Bridge, agreed, decided question (a) in the negative. He held that the breach of the Act and the sanctions Order did not give rise to a private right actionable by Lonhro.
Mr Flint seeks to gain assistance from this holding by submitting that in the appeal before us the Commissioners are in reality seeking to enforce statutory rights under the VAT Act 1994 which give rise to no private rights. He makes the same point by reference to Gouriet Following our decision on the first ground of appeal this argument falls away.
Lord Diplock then went on to consider question 5(b). He said:
Mr Flint relies on this passage as an indication that Lord Diplock was considering both types of conspiracy.
Lord Diplock continued in a long passage which it is necessary to set out in full:
Mr Flint particularly emphasises the importance of the passage on page 189 in which Lord Diplock, he argues significantly, included actions contrary to some penal law in the same sentence as his expression of acts which are not actionable at the suit of the claimant. He further relies heavily on Lord Diplock's firm rejection of any extension of the tort of conspiracy.
In our judgment it is difficult to glean from these passages the proposition that Lord Diplock was dealing with both conspiracies to cause injury by unlawful means as well as lawful means. There are references in his speech to contraventions of penal law and in the question itself to breaches of the sanctions Order. But in our judgment the real point decided by this decision is that to establish the tort of conspiracy the predominant purpose of the agreement for execution of the damage-causing acts must be injury to the plaintiff (claimant). With respect, we do not agree with Laddie J that this decision "points strongly against the existence of the tort advanced by Mr Mowbray" (see para 34 in Michaels).
In Lonrho , the House of Lords revisited the question of the predominant purpose of the tort of conspiracy. The background was what Lord Bridge, giving the only speech with which all other members of the House agreed, described as "... another instalment of the long-running dispute about the take-over in 1985 of House of Fraser Plc..." The proceedings, which ended in the appeal to the House of Lords, arose out of a summons to strike out Lonrho's Statement of Claim. Part of the headnote reads:
Lord Bridge in his speech introduced the two types of tortious conspiracy in the following terms:
It is unnecessary to recite again the passage of Lord Diplock's speech cited by Lord Bridge and taken from pp 188G – 189 of Lonrho What is of significance, in our judgment, is what follows in Lord Bridge's speech. It reads:
Mr Flint submits that this is a fair indication that Lord Bridge was endorsing the proposition that the unlawful means must be actionable. We do not accept that this so. It seems to us clear from Lord Bridge's citation of the examples namely Ware and DeFreville Ltd [1921] 3 KB 40, Sorrell and Crofterthat he was not only excluding the predominant purpose test for unlawful means conspiracies, but can properly be taken to be lending some support for the principle that unlawful means conspiracies are actionable by virtue of the crime itself which constitutes the means, whether or not it is actionable independently against one of the conspirators.
Lord Bridge continued at p. 465:
Once again it is relevant to note that there is no mention in that passage of a requirement for an overt act to be independently actionable against one of the conspirators. And, in our judgment, Lonrho does provide some support for the proposition that an actionable act is not a requirement of an unlawful means conspiracy. It certainly provides no support for the reverse of that proposition.
It is necessary briefly to refer to three other authorities. Two are Commonwealth decisions: Williams (1959) 103 CLR and McKinnon (1968) 70 DLR 2d. Both lend some support to Mr Martin's submissions. We need say little about Williams . The support in that case comes from a minority judgment of Menzies J for which no support is found in the other judgments. McKinnon is a decision of the Alberta Supreme Court and is, of course, not binding on us.
Finally, Mr Martin submits that some support is to be found in the decision of this court in Douglas and others Hello! (No. 3) [2006] QB 125. One of the causes of action in that case was an allegation of the economic tort of unlawful interference with business. The judgment of the court includes the following passage:
In our judgment this passage does lend some support to the Commissioners' submissions on this issue. In this case it could hardly be contended other than that the act of defrauding the Commissioners by the offence of cheat was a sufficient nexus between Total and the harm suffered by the Commissioners.
Save for arguments raised on the Powell issue, we can see no reason why on the assumed facts of this case the Commissioners ought not to be able to rely on the tort of conspiracy by unlawful means. If it were open to us we would hold that the allegation of conspiracy to cheat the Commissioners provided there is an intention to injure them, albeit not a predominant intention, is sufficient. In our judgment such a holding is supported by the dicta of Viscount Cave in Sorrell Crofter . In our opinion, there is nothing in the two Lonrho cases which prevents us from arriving at this conclusion and there are passages, particularly in Lonrho which in our view support this conclusion.
We do not believe that such a holding would extend the scope of the tort of conspiracy in any unjustifiable way. To hold that a conspiracy to cheat with the intention to injure is actionable without more by a person against whom it is aimed, seems to us appropriate and justified. As the assumed facts of this case demonstrate, to hold otherwise would mean that the Commissioners would have no remedy against an entity which had benefited from the fraud and in respect of which the VAT legislation is unavailable.
Finally, we add that we find passages in Davis J's judgment in Mbasogo in support of our conclusion persuasive.
In Powell , a clinical negligence case, the first issue which we have just discussed arose in unusual circumstances. It is unnecessary to recite the facts. Giving the leading judgment with which the two other members of the court, Morritt LJ and Shiemann LJ agreed, Stuart-Smith LJ said:
The issue in this appeal is whether we are bound by Powell whatever conclusions we reach on the first issue above. Mr Flint submits that we are. Mr Martin submits that we are not. Mr Martin accepts that the above passage from the judgment of Stuart-Smith LJ's judgment forms part of the ratio of the decision in that case.
Mr Flint accepts that Marinan and Hargreaves , cited by Stuart-Smith LJ in support of his conclusion, do not support the proposition for which they were cited as support. He, of course, relies on Lonrho to support his submissions on first issue above. He further submits that in any event this court cannot hold that the decision in Powell was per incuriam.
Mr Martin, submitting that this court was entitled to find it was not bound by Powell , refers us to the relevant authorities on stare decisis. First, he referred to Re Holmden's Settlement Trusts [1966] Ch 151. In that case in the Court of Appeal Lord Denning M.R. said:
Mr Martin relies on this passage from Lord Denning's judgment. He submits that in Powell Stuart-Smith LJ gave three reasons for the court's decision. The other two reasons were correct. So if this court concludes that the proposition cited in the second reason was wrong it may reject it.
The other two members of the Court of Appeal in Re Holmden's Settlement Trusts did not agree with Lord Denning on the main issue in the appeal. Accordingly, nothing in their judgments supports this observation by Lord Denning. The case went to the House of Lords and the decision of the majority of the Court of Appeal was held to be correct. In the circumstances, in our judgment, Lord Denning's observations are of limited weight and we do not think they are sufficient to found a decision by this court that Powell can be ignored.
The next authority is Williams [1986] QB 604. Lord Donaldson M.R. giving the leading judgment, with which the other members of the court agreed, dealt with stare decisis principles saying:
In that case the court found itself able to decide that an apparently binding authority displayed a manifest slip or error. Mr Martin submits that we should find that the relevant part of the decision in Powell was a manifest error.
We regret that we are unable to accede to Mr Martin's submissions. It is true that two of the decisions referred to by Stuart-Smith LJ do not support the proposition for which they were cited. But Lonrho (No 2 ) arguably did. If free to do so, we would have held that it did not, but we recognise that our conclusion on the first issue is a conclusion on an issue which has been controversial for some years. The passages from Clerk and Lindsell to which we have referred, and to which Stuart-Smith LJ referred, demonstrate this to be so. We find ourselves unable to say that the decision in Powell displayed a manifest slip or error. It was a considered decision and reflects a conclusion reached by Stuart-Smith LJ in Generale Bank Nederland NV (formerly Credit Lyonnais Bank Nederland NV) [1997] EWCA Civ 2165 following a concession made by the appellant's counsel.
We recognise the importance of the principle stated by Lord Donaldson in Williams . In our judgment if we are correct in our conclusion on the first issue, this state of affairs can only properly be corrected by the House of Lords.
Mr Martin submits that even if the Commissioners are unable to rely on the crime of cheat to establish an unlawful means conspiracy, they are able to show that they can do so because they have an independent actionable claim against Alldech. For this submission the Commissioners rely on an alleged fraudulent misrepresentation which they allege Alldech made by seeking a VAT credit in respect of the VAT element of the sum paid to The Accessory People.
Mr Flint submitted that there was no misrepresentation made by Alldech to the Commissioners in respect of its claim for credit. He relied on the following factors;
For the reasons given earlier in this judgment, we are of the opinion that on the assumed facts the statement that the goods were supplied in the course of Alldech's business was not true. In our judgment the fraudulent misrepresentation arises from the very fact that Alldech made a claim for credit for input tax under s.26 of the VATA. Following that claim for credit an assessment was raised.
However, in our view, there is a major obstacle in the way of the Commissioners decision that they have an actionable claim against Alldech for damages equivalent to the overpayment of credit to it.
S.73(2) and s.77 of the VATA provide a statutory method for the Commissioners to claw back tax wrongly paid or credited to a trader. In our judgment a common law claim would be met by the defence that the only remedy is one provided by the statute. In this respect the statutory provisions can properly be said to provide a comprehensive regime for collecting tax which has been wrongly paid or credited to a trader.
Support for this proposition is to be found in the recent decision of the House of Lords in Deutsche Morgan Grenfell Group Majesty's [2006] UKHL 49. At issue in that appeal was the remedy for over payment of tax. The appellants submitted that s.33 of the Taxes Management Act 1973 provided the second of only two remedies for recovery of tax paid under a mistake of law. The first remedy was said to be a common law right to recover tax unlawfully demanded. The latter remedy has no application in this case. As to the first remedy, Lord Walker of Gestingthorpe in his speech said of s.33:
In our judgment, the same can be said about s.73 (2) and s.77 of the VATA. Together they provide a comprehensive remedy in respect of over-payment of credits and displace any common law remedy.
It follows that, in our judgment, the Commissioners do not have an independent actionable remedy against Alldech.
It follows from the above that, for the reasons given, the second ground of appeal succeeds. The appeal will be allowed and the Commissioners' claim struck out.