The High Court has refused Sarlingford Limited’s application for discovery of three categories of documents in its judicial review challenge concerning retrospective tax relief for patent royalty income.
Mr Justice Brian J. McGovern delivered the judgment on 28 January 2016. Sarlingford is challenging a decision by Appeal Commissioner Kelly that rejected its appeal against a negative determination by Frank Gallagher, a nominated officer, and the Revenue Commissioners. The dispute concerns whether income said to derive from a “radical innovation” could be treated as disregarded income under section 141 of the Taxes Consolidation Act 1997, as amended.
Sarlingford argued that it had a legitimate expectation that the relief would apply retrospectively. It relied on correspondence with Revenue, what it described as a generally accepted view, the treatment of another taxpayer, Machine and Graphic Consultants Limited, and a tax inspection of its group in 2004 or 2005 during which the relief was discussed.
The documents sought covered the other taxpayer’s application for determinations under section 141, Revenue policy or practice on retrospective application of the exemption, and any inspection or audit of Sarlingford’s tax affairs involving a site visit. The request concerning the other taxpayer allowed for redactions to protect the identities of that taxpayer and its directors.
The respondents opposed discovery. The judgment records that discovery in judicial review is harder to establish than in plenary proceedings, but may be ordered where necessary to resolve a factual dispute and dispose of the application fairly. The respondents argued that legitimate expectation could not arise where the challenge essentially concerned statutory interpretation, relying on the Supreme Court’s decision in Wiley v Revenue Commissioners.
Justice McGovern said the judicial review would be decided by interpreting section 141(5)(d). If that provision permits retrospective relief, Sarlingford may succeed; if it does not, legitimate expectation cannot entitle the company to a concession it is not legally entitled to receive. The court concluded that all three document categories related to legitimate expectation and were not necessary to dispose fairly of the statutory interpretation issue.
The court refused the discovery application. The judgment did not determine the underlying judicial review challenge or whether Sarlingford qualifies for the tax relief.