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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Total Network SL v Customs & Excise [2007] EWCA Civ 39 (31 January 2007) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2007/39.html Cite as: [2007] BTC 5150, [2007] STC 1005, [2007] STI 291, [2007] 2 WLR 1156, [2007] BVC 119, [2007] EWCA Civ 39

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION
MR JUSTICE HODGE
[2005] EWHC 1 (QB)

		Royal Courts of Justice Strand, London, WC2A 2LL
		31st January 2007

Lord Justice Ward:

This is the judgment of the Court to which all members have contributed

1. This is 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 & 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-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.
2. 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 v Customs and Excise Commissioners Conjoined Cases C – 354/03, C – 35/03 and C – 484/03. It reads:

"In its simplest form a carousel fraud works in this way. A VAT-registered trader, A, in one European Union member state sells taxable goods to a VAT-registered trader, B, in another member state. A's sale to B is zero-rated in A's member state".

"According to article 28c (A) (a) of the Sixth Directive, the supply of goods to an operator in another member state is exempted from VAT. In the wording of the United Kingdom Value Added Tax Act 1994, the supply is "zero-rated". B should declare the purchase and pay acquisition tax in its own member state and on the premise that it is intending to use those goods in order to make onward taxable supply, then claim credit for the same amount as input tax. Usually, if it is a participant in a carousel fraud, it does neither. B then sells the goods to another VAT-registered trader C, in its own member state, charging and receiving VAT on the consideration. However, it fails to account to the tax authorities for that VAT and effectively disappears; it becomes what the commissioners refer to as a "missing trader". Nevertheless, at the time of making its sale to C, while it is still registered for VAT and before the commissioners are aware that it is or might become a missing trader and had been able to intervene … it provides a VAT invoice to C, which claims the VAT it has paid to B as input tax. C (to whom the commissioners refer as a "broker") then sells the goods to registered trader in another member state: the hallmark of the simplest fraud is that this purchaser is A, and it is this circularity which gives rise to the "carousel fraud". C has an input tax to claim but, because its sale to A is zero-rated in C's own member state is not required to account for any output tax. As noted above, the supply of goods to an operator in another member state is exempted from VAT. The vendor is entitled to recover input tax pursuant to article 17(2) (d) of the Sixth Directive as inserted by article 28f(1) thereof. The result, if the fraud is successful is that B has received, but not accounted for the VAT which the tax authorities must pay to C…. The goods are no more than a token, necessary to lend verisimilitude to the transactions…A (at least, if it is participant in the fraud) likewise has no genuine business motive in buying back that which it has sold."

3. 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 VAT charge 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.
4. 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 Plc who 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.
5. 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.
6. 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.
7. 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.
8. 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 First Conspiracy

4. In or about October 2002, the Defendant, together with:

(i) Redlaw Ltd, a company incorporated in England and Wales with the company number 04455520, having VAT registration number 795944559 and having its registered office at Office No.5, Leonard House,21-14 Silver Street, Tamworth B79 7NH;

(ii) Lockparts Ltd, a company incorporated in England and Wales with the company number 04092001, the VAT Registration no 801 6831 51, and having its registered office at Allen House, the Maltings, Station Road, Sawbridgeworth, Hertfordshire, CM21 9JX;

(iii) Alldech Ltd, a company incorporated in England and Wales with the company number 03659760, having a VAT registration number 697 7746 51, and having its registered office at 2^nd floor, 1 King's Yard, 20 High Street, Uxbridge, UB8 1JN,

Or any one or more of the three, with intent to cheat the Claimants of revenue and/or defraud the revenue, conspired and combined together to cheat and/or defraud the Claimants by the following unlawful means (which the Defendant intended and knew would be used), namely by either or both of;

(a) the commission by Redlaw Ltd and/or Alldech Ltd of the common law offence of cheating the revenue;

(b) the making by Alldech Ltd of a fraudulent misrepresentation by submitting to the Claimant a return (in the form required by regulation 25 of The Value Added Tax Regulations 1995), which return, by stating the amount of VAT reclaimed by Alldech Ltd, involved a representation

(A) that its sale of the 15/10/92 Mobile Phones (q.v.) was a section 26(2) VATA supply made in the course of or in furtherance of the business of Alldech Ltd;

(B) that it was entitled to credit for the input tax on its purchase of the 15/10/92 Mobile Phones (q.v.) and then to deduct that amount from any output tax (if any) that was due from Alldech Limited at the end of that prescribed accounting period; and/or

(C) that it was entitled to a VAT credit (or to a greater VAT credit) within the meaning of section 25(3) VATA,

when to the knowledge of Alldech Ltd (and, so far as necessary, the Defendant),

(i) all or some of the transactions particularised hereunder had no other purpose than to facilitate the cheating of the Claimants;

(ii) the submission by Alldech Ltd of such a claim enabled that purpose to be effected; and

(iii) had the Claimants known of that purpose they would have been entitled to withhold the refund or credit.

In the circumstances, one or more of the above representations was false.

9. 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.

The statutory scheme

10. Section 1 of the Value Added Tax Act 1994 ("VATA 1994") is in these terms, so far as material:

"1(1) Value added tax shall be charged, in accordance with the provisions of this Act -

(a) on the supply of goods or services in the United Kingdom ( . . . ),

(b) on the acquisition in the United Kingdom from other member States of any goods, and

(c) . . .

and references in this Act to VAT are references to value added tax.

(2) VAT on any supply of goods or services is a liability of the person making the supply and (subject to provisions about accounting and payment) becomes due at the time of the supply.

(3) VAT on any acquisition from another member State is a liability of the person who acquires the goods and (subject to provisions about accounting and payment) becomes due at the time of acquisition.

(4) . . ."

11. 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:

"4(1) VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him."

"10(1) VAT shall be charged on any acquisition from another member State of any goods where

(a) the acquisition is a taxable acquisition and takes place in the United Kingdom;

(b) . . . ; and

(c) the person who makes the acquisition is a taxable person.. . ."

12. A person is a taxable person for the purposes of VATA 1994 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) VATA 1994. In the present context the relevant supplies do not fall within schedule 9.
13. 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 VAT charge.
14. 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):

"7(2) Subject to the following provisions of this section, if the supply of any goods does not involve their removal from or to the United Kingdom they shall be treated as supplied in the United Kingdom if they are in the United Kingdom and otherwise shall be treated as supplied outside the United Kingdom.

. . .

(7) Goods whose place of supply is not determined under any of the preceding provisions of this section but whose supply involves their removal to or from the United Kingdom shall be treated

(a) as supplied in the United Kingdom where their supply involves their removal from the United Kingdom without also involving their previous removal to the United Kingdom; and

(b) as supplied outside the United Kingdom in any other case."

15. 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):

"13(2) The goods shall be treated as acquired in the United Kingdom if they are acquired in pursuance of a transaction which involves their removal to the United Kingdom and does not involve their removal from the United Kingdom, and (subject to the following provisions of this section) shall otherwise be treated as acquired outside the United Kingdom.

(3) Subject to subsection (4) below, the goods shall be treated as acquired in the United Kingdom if they are acquired by a person who, for the purposes of their acquisition, makes use of a number assigned to him for the purposes of VAT in the United Kingdom."

16. 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:

"25(2) Subject to the provisions of this section, he is entitled at the end of each prescribed accounting period to credit for so much of his input tax as is allowable under section 26, and then to deduct that amount from any output tax that is due from him.

(3) If either no output tax is due at the end of the period, or the amount of the credit exceeds that of the output tax then . . . the amount of the credit or, as the case may be, the amount of the excess shall be paid to the taxable person by the Commissioners; and an amount which is due under this subsection is referred to in this Act as a 'VAT credit'."

In that context "input tax" and "output tax" have the meanings assigned by sections 24(1) and (2) VATA 1994:

"24(1) Subject to the following provisions of this section, 'input tax', in relation to a taxable person, means the following tax, that is to say –

(a) VAT on the supply to him of any goods or services; and

(b) VAT on the acquisition by him from another member State of any goods; and

(c) . . .

being (in each case) goods or services used or to be used for the purpose of any business carried on or to be carried on by him.

(2) Subject to the following provisions of this section 'output tax', in relation to a taxable person, means VAT on supplies which he makes or on the acquisition by him from another member State of goods (including VAT which is also to be counted as input tax by virtue of subsection (1)(b) above)."

17. The circumstances in which input tax is allowable for the purposes of section 25(2) VATA 1994 are prescribed by section 26:

"26(1) The amount of input tax for which a person is entitled to credit at the end of any period shall be so much of the input tax for the period (that is input tax on supplies [and] acquisitions . . . in the period) as is allowable by or under regulations as being attributable to supplies within subsection (2) below.

(2) The supplies within this subsection are the following supplies made or to be made by the taxable person in the course or furtherance of his business;

(a) taxable supplies;

(b) supplies outside the United Kingdom which would be taxable supplies if made in the United Kingdom; . . .

(c) . . .

. . . "

It is important to note that the input tax which is allowable under section 26 VATA 1994 – and so capable of giving rise to an entitlement to a VAT credit under section 25(2) – is limited to tax on supplies to the taxable person which are attributable to supplies used or to be used – or made or to be made - by the taxable person in the course or furtherance of his business: sections 24(1) and 26(2) VATA 1994. So a taxable person can claim credit for the input tax which he pays to his supplier on supplies made to him if, but only if, those supplies are attributable to supplies which he makes (or is to make) to his customer in the course or furtherance of his business.

18. 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:

"134 Where the Commissioners are satisfied that –

(a) a supply of goods by a taxable person involves their removal from the United Kingdom,

(b) the supply is to a person taxable in another member State,

(c) the goods have been removed to another member State, and

(d) the goods are not goods in relation to whose supply the taxable person has opted . . . for VAT to be charged by reference to the profit margin on the supply,

the supply, subject to such conditions as they may impose, shall be zero-rated."

19. 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:

(1) B is required to account, at the end of the prescribed accounting period, for output tax on (i) the acquisition by him of the goods from A (sections 24(2) and 25(1)(b) VATA 1994) and (ii) the supply by him of the goods to C (sections 24(2) and 25(1)(a) VATA 1994); but is entitled to credit for input tax on the acquisition of the goods from A (sections 24(1)(b) and 25(2) VATA 1994). In relation to the acquisition of the goods from A, he can set off the credit for input tax against the liability for output tax. The net position is that B should pay to the Commissioners an amount equal to the output tax on his supply to C.

(2) C is required to account, at the end of the prescribed accounting period, for output tax on the supply by him of the goods to D (sections 24(2) and 25(1)(a) VATA 1994); but is entitled to credit for input tax on the supply of the goods to him by B (sections 24(1)(a) and 25(2) VATA 1994). The supply by him of the goods to D is zero rated (regulation 134 of the 1995 Regulations) so the amount of output tax for which C is liable is nil (section 30(1) VATA 1994). The net position is that the Commissioners pay to C an amount equal to the input tax on the supply of the goods to him by B.

It can be seen, therefore, that if, B does pay the Commissioners an amount equal to the output tax on his supply to C and the Commissioners pay to C an amount equal to the input tax on the supply of the goods to him by B, the combined transaction is tax neutral: in the sense that the amount of the output tax received by the Commissioners from B is equal to the amount of the VAT credit which they pay to C. The underlying vice in a carousel fraud lies in the fact that, although C claims (and receives) a VAT credit, B does not account to the Commissioners.

20. 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:

(1) The acquisition of the goods by B from A gives rise to no charge to VAT under section 10(1) VATA 1994 because it is not a taxable acquisition: the goods are not acquired by B in the course or furtherance of his business (section 10(3)(a) and (b)) and the supplier (A) is not participating in that transaction in the course or furtherance of a business carried on by A (section 10(3)(c)). Accordingly, B is not required to account for output tax and is not entitled to a VAT credit in respect of input tax in relation to that acquisition.

(2) The supply of the goods by B to C gives rise to no charge to VAT under section 4(1) VATA 1994 because it is not a taxable supply made by B in the course or furtherance of his business. Accordingly B is not required to account for output tax in relation to that supply.

(3) The supply of the goods by C to D gives rise to no charge to VAT under section 4(1) VATA 1994 (albeit that, if it did, the tax would be nil because the supply would be zero-rated) because it is not a taxable supply made by C in the course or furtherance of his business. More pertinently in the present context, C is not entitled to a VAT credit in respect of the supply of the goods to him. There are two reasons for that: (i) the supply of the goods by B to C is not a taxable supply made by B in the course of his business, so the supply gives rise to no charge to VAT and there is no input tax in relation to that supply and (ii) the supply of the goods by C to D is not a taxable supply made by C in the course or furtherance of his business, so (if there were input tax on the supply of the goods by B to C) that input tax would not be attributable to a supply within section 26(2) VATA 1994 and would not be allowable for the purposes of section 25(2).

In the result, therefore, if the relevant acquisition and supplies are not made in the course or furtherance of business, B is not required to account for output tax; and C is not entitled to a VAT credit in respect of input tax. But, although the analysis differs if the relevant acquisition and supplies are not made in the course or furtherance of business, the vice in a carousel fraud remains the same. C receives a VAT credit in respect of input tax in circumstances in which B has not accounted for output tax in respect of the supply.

21. 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 total amount 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) VATA 1994 shall do so on a return made under regulation 25. Regulation 29(2) requires that:

"29(2) At the time of claiming deduction of input tax in accordance with paragraph (1) above, a person shall, if the claim is in respect of – (a) a supply from another taxable person, hold the document which is required to be provided under regulation 13 . . ."

Regulation 13 requires that, where a registered person makes a taxable supply in the United Kingdom to a taxable person, he shall provide that person with a VAT invoice.

22. 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 VAT invoice 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.
23. 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:

"73(2) In any case where, for any prescribed accounting period, there has been paid or credited to any person –

(a) . . .; or

(b) as being due to him as a VAT credit,

an amount which ought not to have been so paid or credited had the facts been known or been as they later turn out to be, the Commissioners may assess that amount as being VAT due from him for that period and notify it to him accordingly."

24. 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 VAT credit by conduct involving dishonesty. An assessment made under section 73(2)(b) VATA 1994 can be challenged on an appeal to the VAT & 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.

The first ground: the Bill of Rights issue

25. 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 VAT payable 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.
26. 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:

"That levying money for or to the use of the Crown, by pretence of Prerogative without Grant of Parliament for longer Time, or in any other Manner then the same is or shall be granted, is illegal."

27. Mr Flint has referred us to a number of authorities. The first is Gosling v Veley (1850) 12 Q.B. 328, 407 where Wilde C.J. held:

"The rule of law that no pecuniary burden can be imposed upon the subjects of this country, by whatever name it may be called, whether tax, due, rate, or toll, except under clear and distinct legal authority, established by those who seek to impose the burden, has been so often the subject of legal decision that it may be deemed a legal axiom, and requires no authority to be cited in support of it."

28. That was applied in Attorney-General v Wilts United Dairies Ltd (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:

"It is conceivable that Parliament, which may pass legislation requiring the subject to pay money to the Crown, may also delegate its powers of imposing such payments to the Executive. But in my view the clearest words should be required before the courts hold such an unusual delegation has taken place."

He then cited Chief Justice Wilde's observation in Gosling v Veley and continued:

"A great deal of time was occupied in arguing whether the requirement of this payment was a "tax". I prefer to use the words of the Bill of Rights which forbids "levying money for the use of the Crown without grant of Parliament," and the requirement of this 2d. appears to me clearly to come within these words. It is true that the fear in 1689 was that the King by his prerogative would claim money; but excessive claims by the Executive Government without grant of Parliament are, at the present time, quite as dangerous, and require as careful considerations and restriction from the Court of Justice."

That decision was affirmed by the House of Lords, see (1922) 38 T.L.R. 781, Lord Buckmaster saying:

"Neither of those two enactments enabled the Food Controller to levy any sum of money on any of his Majesty's subjects. Drastic powers were given to him in regard to the regulation and control of the food supply, but they did not include the power to levy money, which he must receive as part of the national fund. However the character of the transaction might be defined, in the end it remained that people were called upon to pay money to the Controller for the exercise of certain privileges. That imposition could only be properly described as a tax, which could not be levied except by direct statutory means."

29. In Congreve v Home Office [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:

"There is another reason for holding that the demands for £6 to be unlawful. They were made contrary to the Bill of Rights. They were an attempt to levy money for use of the Crown without the authority of Parliament: and that is quite enough to damn them."

30. 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.
31. 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 view alter 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.
32. In our judgment this ground of appeal is wholly devoid of merit.

The second ground: unlawful means conspiracy

33. 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 & Lindsell 19^th Edition para 25 – 117).
34. 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.
35. 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 v Smith [1925] AC 700 @ 714 and Crofter Hand Woven Harris Tweed Co Ltd v Veitch [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 v Commissioners of Customs & Excise, 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.
36. 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 v Boldaz [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 first issue

37. 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 v Mavji (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.
38. 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.
39. This issue has been the subject of controversy for some years. In the 17^th Edition of Clerk & Lindsell two apparently conflicting views are expressed. At para 23-80 the following passage appears:

"If, however, the overt acts alleged are not actionable in a civil action, the plaintiff will fail to establish this cause of action…"

In the same paragraph on the following page some doubt appears to be introduced in relation to this proposition:

"It has even been commonly suggested that if the act aimed at by the combination is criminal, then it is a tortuous conspiracy and that a combination to commit a crime is actionable (even if the injured party would have had no action in tort merely on the basis of the crime itself), provided of course damage is caused."

40. In the 19^th Edition the editors of Clerk & 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 19^th Edition para 25-121); whilst still sounding a note of caution in paragraph (see para 25-94).
41. We have been referred in the skeleton arguments and oral submissions to a number of authorities touching on this issue. They include Sorrell & Smith; Crofter Hand Woven Harris Tweed v Veitch; Williams v Hursey (1959) 103 CLR 30; McKinnon v F.W. Woolworth (1968) 70 DLR 2d; Gouriet v U.P.O.W. [1978] AC 435; Lonrho Ltd v Shell Petroleum Co. Ltd (No 2) [1982] AC 173; Lonhro Plc v Fayed [1992] 1 AC 448; Williams v Department of Trade 1 [AC] 448; Kuwait Oil Tanker Co. SAK v Al Bader [2000] 2 All ER (Comm) 271; Michaels v Taylor Woodrow Developments Plc [2001] Ch 493; Mbasogo President of Equatorial Guinea & others v Logo Ltd & 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.
42. 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 Michaels held this to be so and his reasoning was adopted by Cooke J in Mahonia Limited v J.P. Morgan Chase Bank [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 v Boldaz. We shall discuss Powell v Boldaz when dealing with the second issue.
43. 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 v Koros [1999] 2 Ll. Rep. 611; Mance LJ in Gruppo Torras SA v Al Sabah [1999] CLC 1469 at first instance).
44. It is in our judgment unnecessary to refer to all the above authorities. We start with Sorrell v Smith. 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:

"I deduce as material for the decision of the present case two propositions of law, which may be stated as follows:-

(1.) A combination of two or more persons wilfully to injure a man in his trade is unlawful and, if it results in damage to him, is actionable.

(2.) If the real purpose of the combination is, not to injure another, but forward or defend the trade of those who enter into it, then no wrong is committed and no action will lie, although damage to another ensues."

Later in his speech he returned to the second of those two propositions saying:

"(c) The second proposition, of course, assumes the absence of means which are in themselves unlawful, such as violence or the threat of violence or fraud."

Although this observation is obiter it provides some support for the proposition that it is sufficient to establish a tort of conspiracy by unlawful means if the means are themselves unlawful. It is noteworthy that Viscount Cave specifically instances fraud.

45. 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:

"Held, that the predominant purpose of the combination was the legitimate promotion of the interests of the persons combining, and since the means employed were neither criminal nor tortious in themselves, the combination was not unlawful."

46. 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:

"In the present case, the conclusion, in my opinion, is that the predominant object of the respondents in getting the embargo imposed was to benefit their trade-union members by preventing under-cutting and unregulated competition, and so helping to secure the economic stability of the island industry. The result they aimed at achieving was to create a better basis for collective bargaining, and thus directly to improve wage prospects. A combination with such an object is not unlawful, because the object is the legitimate promotion of the interests of the combiners, and because the damage necessarily inflicted on the appellants is not inflicted by criminal or tortious means and is not "the real purpose" of the combination." (see p.714- emphasis added).

Lord Wright in his speech said:

"It is a different matter if the conspiracy is to do acts in themselves wrongful, such as to deceive or defraud, to commit violence, or to conduct a strike or lock-out by means of conduct prohibited by the Conspiracy and Protection of Property Act, 1874, or which contravenes the Trade Disputes and Trade Unions Act, 1927"(see p.462).

The latter, as we shall see, is cited by Lord Bridge in Lonhro v Fayed.

47. Before turning to Lonhro v Shell No 2 and Lonhro v Fayed 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 v Shell No 2 and Lord Bridge in Lonhro v Fayed. 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:

"49 I have come to the conclusion that none of the cases unequivocally support the wide proposition advanced by Mr Mowbray and many of them including particularly the Lonhro cases, are inconsistent with it. Subject to the impact of the law of unlawful interference with business to be considered below, it appears to me that the correct principle is that for a conspiracy by unlawful means to exist, it must be shown that the unlawful activity was actionable against at least one of the conspirators absent the co-operation between them. If that is right, then Mrs Michael's claim must fail because it is conceded that no separate actionable wrong has been committed by any one of the alleged conspirators."

The wide proposition was the one in issue in this appeal namely whether an actionable act is a requirement of the unlawful means conspiracy.

48. Davis J in Mbasogo made it clear that he disagreed with Laddie J. He said:

"There was, at all events, as I see it, no authority actually binding Laddie J to reach the conclusion that he reached: and, on the whole, I would not myself have read the various passages of Lord Diplock's and Lord Bridge's speeches as compelling a conclusion that the unlawful means must be actionable at the suit of the claimant. For myself and absent binding authority to the contrary, I would have differed from this conclusion. I would have done so by reference to what I conceive to be the underlying rationale distinguishing the two kinds of tort. In the predominant intention kind of conspiracy it is actionable – even though no unlawful means are used – just because injury to the claimant is the predominant intention. In the unlawful means kind of conspiracy, there is no requirement for such predominant intention (although, and importantly, there is a requirement of some intention). But the simple – I suspect Mr McLaren and Mr Shepherd would say simplistic – view I would take is that it is actionable at the suit of a targeted claimant just because unlawful means are used"(see para 70).

49. We come now to the two Lonhro cases starting with Lonhro Ltd v Shell 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.
50. 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:

"Even if there were breaches by the respondents of the 1965 and 1968 Orders" [sc. The sanctions Orders] "(a) whether breaches of those Orders would give rise to a right of action in the claimants for damage alleged to have been caused by those breaches and (b) whether the claimants have a cause of action for damage alleged to have been caused by such breaches by virtue only of the allegation that there was an agreement to effect them"(see p.183F).

51. 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.
52. 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 v UPOW. Following our decision on the first ground of appeal this argument falls away.
53. Lord Diplock then went on to consider question 5(b). He said:

"Question 5 (b), to which I now turn, concerns conspiracy as a civil tort. Your Lordships are invited to answer it on the assumption that the purpose of Shell and BP in entering into the agreement to do the various things that it must be assumed they did in contravention of the sanctions Order, was to forward their own commercial interests; not to injure those of Lonrho. So the question of law to be determined is whether an intent by the defendants to injure the plaintiff is an essential element in the civil wrong of conspiracy, even where the acts agreed to be done by the conspirators amount to criminal offences under a penal statute. It is conceded that there is no direct authority either way upon this question to be found in the decided cases; so if this House were to answer it in the affirmative, your Lordships would be making new law"( see p.188C-D).

54. Mr Flint relies on this passage as an indication that Lord Diplock was considering both types of conspiracy.
55. Lord Diplock continued in a long passage which it is necessary to set out in full:

"As I recall from my early years in the law first as a student and then as a young barrister, during its chequered history between Lord Coleridge C.J.'s judgment at first instance in Mogul Steamship Co.Ltd. v McGregor, Gow & Co. (1888) 21 QBD 544, and the Crofter case, the civil tort of conspiracy attracted more controversy among academic writers than success in practical application. Why should an act which causes economic loss to A but is not actionable at his suit if done by B alone become actionable because B did it pursuant to an agreement between B and C? An explanation given at the close of the 19^th century by Bowen L.J. in the Mogul case when it was before the Court of Appeal (1889) 23 QBD 598, 616 was:

"The distinction is based on sound reason, for a combination may make oppressive or dangerous that which if it proceeded only from a single person would be otherwise"

But to suggest today that acts done by one street-corner grocer in concert with a second are more oppressive and dangerous to a competitor than the same acts done by a string of supermarkets under a single ownership or that a multinational conglomerate such as Lonrho or oil company such as Shell or B.P. does not exercise greater economic power than any combination of small businesses, is to shut one's eyes to what has been happening in the business and industrial world since the turn of the century and, in particular, since the end of World War II. The civil tort of conspiracy to injure the plaintiff's commercial interests where that is the predominant purpose of the agreement between the defendants and of the acts done in execution of it which caused damage to the plaintiff, must I think be accepted by this House as too well-established to be discarded however anomalous it may seem today. It was applied by this House 80 years ago in Quinn v Leathem [1901] AC 495, and accepted as good law in the Crofter case [1942] AC 435, where it was made clear that injury to the plaintiff and not the self-interest of the defendants must be the predominant purpose of the agreement in execution of which the damage-causing acts were done.

My Lords, in none of the judgments in decided cases in civil actions for damages for conspiracy does it appear that the mind of the author of the judgment was directed to a case where the damage-causing acts although neither done for the purpose of injuring the plaintiff nor actionable at his suit if they had been done by one person alone, were nevertheless a contravention of some penal law. I will not recite the statements in those judgments to which your Lordships have been referred by the appellants as amounting to dicta in favour of the view that a civil action for conspiracy does lie in such a case. Even if the authors' minds had been directed to the point, which they were not, I should still find them indecisive. This House, in my view, has an unfettered choice whether to confine the civil action of conspiracy to the narrow field to which alone it has an established claim or whether to extend this already anomalous tort beyond those narrow limits that are all at that common sense and the application of the legal logic of the decided cases require.

My Lords, my choice is unhesitatingly the same as that of Parker J. and all three members of the Court of Appeal. I am against extending the scope of civil tort of conspiracy beyond acts done in execution of an agreement entered into by two or more persons for the purpose not of protecting their own interests but of injuring the interests of the plaintiff. So I would answer Question 5 (b): "No" (see pp.188-189).

56. 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.
57. 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).
58. In Lonrho Plc v Fayed, 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:

"Held, dismissing the appeal and allowing the cross-appeal,

(1) that where the primary or predominant purpose of the conspirators was to further or protect their own legitimate interests but there was also intent to injure the plaintiff, it sufficed to make their conduct tortious that they used unlawful means; that accordingly, albeit the plaintiff did not dispute defendants' pleaded intention that to cause injury to the plaintiff was not the predominant purpose of their alleged unlawful conduct, that was not necessarily fatal to the claim in conspiracy and therefore did not constitute a separate ground for striking out that part of the pleading."

59. Lord Bridge in his speech introduced the two types of tortious conspiracy in the following terms:

"In Rookes v Barnard [1964] AC 1129, 1204, Lord Devlin said:

"There are, as is well known, two sorts of conspiracies, the Quinn v Leathem [1901] AC 495 type which employs only lawful means but aims at an unlawful end, and the type which employs unlawful means."

Of these two types of tortious conspiracy the Quinn v Leathem type, where no unlawful means are used, is now regarded as an anomaly for the reason clearly explained by Lord Diplock in Lonrho v Shell…"(see p.463)

60. 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 v Shell (No 2). What is of significance, in our judgment, is what follows in Lord Bridge's speech. It reads:

"But this reasoning has no relevance to the second type of conspiracy which employs unlawful means. Of this type Lord Devlin said in his speech in Rookes v Barnard [1964] A. 1129, 1204, immediately following the passage I have just cited: "In the latter type…the element of conspiracy is usually only of secondary importance since the unlawful means are actionable by themselves."

It is no doubt for the reason mentioned by Lord Devlin that there is no direct authority, unless it be Rookes v Barnard itself, establishing the negative proposition that the tort of conspiracy to injure by unlawful means may be established without proof that the intention to injure the plaintiff was the predominant purpose of the conspirators. But in the many cases where plaintiffs have asserted a conspiracy to injure, but have been unable to prove that any unlawful means were used, judgments in the Court of Appeal and speeches in your Lordships' House emphasising the requirement of a predominant purpose to injure have repeatedly included dicta indicating that this requirement does not apply where the means used to effect the conspirator's purpose are unlawful. I need do no more than cite some outstanding examples."

61. 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 v Motor Trade Association [1921] 3 KB 40, Sorrell v Smith and Crofter that 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.
62. Lord Bridge continued at p. 465:

"The reasoning in these passages is both clear and cogent. Where conspirators act with the predominant purpose of injuring the plaintiff and in fact inflict damage on him, but do nothing which would have been actionable if done by an individual acting alone, it is in the fact of their concerted action for that illegitimate purpose that the law, however anomalous it may now seem, finds a sufficient ground to condemn their action as illegal and tortious. But when conspirators intentionally injure the plaintiff and use unlawful means to do so, it is no defence for them to show that their primary purpose was to further or protect their own interests; it is sufficient to make their action tortious that the means used were unlawful."

63. 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 v Fayed 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.
64. It is necessary briefly to refer to three other authorities. Two are Commonwealth decisions: Williams v Hursey (1959) 103 CLR and McKinnon v F W Woolworth (1968) 70 DLR 2d. Both lend some support to Mr Martin's submissions. We need say little about Williams v Hursey. The support in that case comes from a minority judgment of Menzies J for which no support is found in the other judgments. McKinnon v F W Woolworth is a decision of the Alberta Supreme Court and is, of course, not binding on us.
65. Finally, Mr Martin submits that some support is to be found in the decision of this court in Douglas & others v 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:

"The economic torts may be regarded as somewhat anomalous, in the sense that they give rise to a claim by a party who, ex hypothesi, is not within the class of persons who would claim for damage suffered simply as a result of the act embodied in the "unlawful means". However, once one accepts the evidence of the economic torts, it seems to us that it would add to any anomalies if only certain types of unlawful acts could, as a matter of principle, qualify as "unlawful means", at any rate unless the principles of exclusions were clearly identified and justified. It would be more consistent and more likely to lead to just results if any unlawful act could be "unlawful means", while requiring a sufficient nexus between the act and its unlawfulness and the harm complained of.

The need for a claimant to establish an intention on the part of the defendant to harm him, sufficient to satisfy test (a) or (b), would, at least normally, serve to incorporate this rather ill-defined reference to a sufficient nexus, although it is right to add that it also goes further than that."

66. 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.

Conclusion on this issue

67. Save for arguments raised on the Powell v Boldaz 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 v 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 v Fayed, which in our view support this conclusion.
68. 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.
69. Finally, we add that we find passages in Davis J's judgment in Mbasogo in support of our conclusion persuasive.

Powell v Boldaz

70. In Powell v Boldaz, 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:

"Finally, I must consider the tort of conspiracy. The substance of the allegation is set out in para 56 of the statement of claim already cited. This is an unlawful act conspiracy. Dr Powers now accepts that damages for personal injuries are not recoverable under this tort. But he submits that the costs of pursuing the appeal to the Secretary of State are economic loss caused by the tort.

There are to my mind three answers to this submission" (see p.126)

And further on in the judgment (on the same page):

"Secondly the unlawful act relied upon must be actionable at the suit of the plaintiff. It is not sufficient that it amounts to a crime or breach of contract with a third party. (see Clerk & Lindsell on torts 17^th ed para 23-80, Marinan v Vibart [1963] 1 QB 234 & 528. Hargreaves v Bretherton [1959] 1 QB 45. Lonrho v Shell [1982] AC 173 per Lord Diplock at p 186 etc). For this reason this form of unlawful act conspiracy adds little to the remedies available to a plaintiff."

71. The issue in this appeal is whether we are bound by Powell v Boldaz 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.
72. Mr Flint accepts that Marinan v Vibart and Hargreaves v Bretherton, 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 v Shell to support his submissions on first issue above. He further submits that in any event this court cannot hold that the decision in Powell v Boldaz was per incuriam.
73. Mr Martin, submitting that this court was entitled to find it was not bound by Powell v Boldaz, 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:

"I must, however, consider the statement of Lord Upjohn on the footing that it is one of two reasons which he gave for his decision. It is said that both reasons are binding on all courts in the land, including the House of Lords itself. The proposition is said to rest on Jacobs v London County Council: see also Behrens v Bertram Mills Circus Ltd. But I do not think those cases warrant so wide a proposition. It seems to me that if the House of Lords give two reasons for their decision, and the House afterwards finds that one of the reasons was right and the other wrong, then they are entitled to accept the right reason and reject the wrong. The decision is not authority "for nothing." It is authority for the right reason but not the wrong. I can see no justification whatever for saying they are bound by the wrong reason. Surely the House is not bound to perpetuate error. Nor is this court. I would repeat the wise words of Sir Frederick Pollock, which I quoted in Close v Steel Company of Wales.

"Judicial authority belongs not to the exact words used in this or that judgment, nor even to all the reasons given, but only to the principles accepted and applied as necessary grounds of the decision."

74. Mr Martin relies on this passage from Lord Denning's judgment. He submits that in Powell v Boldaz 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.
75. 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 v Boldaz can be ignored.
76. The next authority is Williams v Fawcett [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:

"If we are bound by these decisions, and we are unless they can be treated as having been reached per incuriam, they represent a very considerable change in the law for which, so far as I can see, there is absolutely no warrant. The change to which I refer is, of course, a requirement that these notices shall be signed by the proper officer. The rule of stare decisis is of the very greatest importance, particularly in an appellate court, such as this, which sits in six or seven divisions simultaneously. But for this rule, the law would not only bifurcate, it would branch off in six or seven different directions.

That of course has been stressed over and over again. It was emphasised in the classic case of Young v Bristol Aeroplane Co Ltd. [1944] KB 718 and in Morelle Ltd. v Wakeling [1955] 2 QB 379, which considered Young's case. But in each of those cases, as I will demonstrate briefly the court retained the power in an exceptional case to depart from its previous decisions. Thus in Young's case Lord Greene M.R. said, at p. 729:

"Where the court has construed a statute or a rule having the force of a statute its decision stands on the same footing as any other decision on a question of law, but where the court is satisfied that an earlier decision was given in ignorance of the terms of a statute or a rule having the force of a statute the position is very different. It cannot, in our opinion, be right to say that in such a case the court is entitled to disregard the statutory provision and is bound to follow a decision of its own given when that provision was not present to its mind. Cases of this description are examples of decisions given per incuriam. We do not think that it would be right to say that there may not be other cases of decisions given per incuriam in which this court might properly consider itself entitled not to follow an earlier decision of its own. Such cases would obviously be of the rarest occurrence and must be dealt with in accordance with their special facts."

Morelle's case [1955] 2 QB 379 was a five-judge Court of Appeal, although I hasten to add that it is now well-established that a five-judge Court of Appeal has no more authority than a three-judge Court of Appeal. It consisted of Sir Raymond Evershed M.R., Denning L.J., Jenkins L.J., Morris L.J. and Romer L.J. I read from Sir Raymond Evershed M.R., at p.406:

"As a general rule the only cases in which decisions should be held to have been given per incuriam are those of decisions given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on the court concerned; so that in such cases some part of the decision or some step in the reasoning on which it is based is found, on that account, to be demonstrably wrong. This definition is not necessarily exhaustive, but cases not strictly within it which can properly be held to have been decided per incuriam must, in our judgment, consistently with the stare decisis rule which is an essential feature of our law, be, in the language of Lord Greene M.R., of the rarest occurrence. In the present case it is not shown that any statutory provision or binding authority was overlooked… As we have already said, it is, in our judgment, impossible to fasten upon any part of the decision under consideration or upon any step in the reasoning upon which the judgments were based and to say of it: Here was a manifest slip or error."

77. 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 v Boldaz was a manifest error.
78. 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 v Shell (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 & 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 v Boldaz 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) v Export Credits Guarantee Department [1997] EWCA Civ 2165 following a concession made by the appellant's counsel.
79. We recognise the importance of the principle stated by Lord Donaldson in Williams v Fawcett. 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.

The Third Issue

80. 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.
81. 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;

"(1) Alldech is a taxable person, properly registered;

(2) A taxable supply has been made to it on which it has paid VAT;

(3) It has made a supply to Total which is zero-rated;

(4) Its trade or business is not exempt from VAT and must by law be subject to VAT;

(5) The transactions were carried out in the course of business."

82. 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.
83. 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.
84. 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.
85. Support for this proposition is to be found in the recent decision of the House of Lords in Deutsche Morgan Grenfell Group Plc v Her Majesty's Commissioners for Inland Revenue & another [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:

"When parliament enacts a special regime providing special rights and remedies, that regime may (but does not always) supersede and displace common law rights and remedies (or more general statutory rights and remedies). Whether it has that effect is a question of statutory construction: Marcic v Thames Water Utilities Limited [2003] UKHL 66; [2004] 2 AC 42, 56-58, paras 29-36 and Autologic Holdings plc v Inland Revenue Commissioners [2006] 1 AC 118 (which Mr Rabinowitz QC for DMG put forward as a procedural analogue to the present case). Where section 33 of the Taxes Management Act 1970 ("TMA") applies it does no doubt displace any common law remedy for tax paid under a mistake."

86. 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.
87. It follows that, in our judgment, the Commissioners do not have an independent actionable remedy against Alldech.

Conclusion

88. 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.