Total Network SL v Revenue and Customs

The House considered (1) whether HM Revenue and Customs (the Commissioners) could bring a private law claim in the tort of unlawful means conspiracy to recover sums equivalent to VAT from a person who was not a taxable person under the Value Added Tax Act 1994, and (2) whether the unlawful means relied on for the tort must be independently actionable in civil law (ie, give rise to a civil cause of action by the claimant against at least one conspirator).

The majority held that the statutory scheme for VAT in the Value Added Tax Act 1994 (read with the Commissioners' statutory functions and the remedies and procedures it creates, including ss 60, 72 and 73 and the tribunal appeal route) is a comprehensive code for remediation and enforcement and therefore precluded the Commissioners from using an extra‑statutory conspiracy claim to recover VAT from a non‑taxable overseas participant. The House nevertheless clarified the tort law point: criminal conduct (including common law offences such as cheating the public revenue) can constitute "unlawful means" for the tort of unlawful means conspiracy even if that unlawful conduct, when done by a single individual, would not give rise to a civil cause of action.

The Commissioners sued Total Network SL, a Spanish company, alleging participation in a series of missing‑trader (carousel) VAT frauds and claiming damages in the tort of unlawful means conspiracy, in sums equivalent to VAT lost or refunded as input tax. The pleaded unlawful means included the common law offence of cheating the revenue and deceit in support of false repayment claims. The pleaded facts described repeated chains of transactions involving UK traders (some of whom disappeared) and brokers who obtained VAT repayments from the Commissioners.

The preliminary issues for the House were:

• whether the Commissioners may bring a private law action in conspiracy to recover VAT‑equivalent sums from a person who is not made liable for VAT by statute, or whether the statutory VAT code (VATA 1994 and later amendments) is exclusive;
• whether unlawful means for the tort of unlawful means conspiracy must themselves be civilly actionable by the claimant or whether criminal conduct may suffice.

The court analysed the statutory VAT scheme (noting ss 1, 3, 25, 58, 60, 72, 73, 77 and the later additions such as s.77A and s.55A) and the comprehensive enforcement and appeal procedures it creates. A majority concluded that the statutory code provides the exclusive remedies and procedures for the recovery of VAT and for dealing with false repayment claims; allowing the Commissioners to recover VAT from a person who is not a taxable person (and so outside the statutory liability framework) by means of a common law damages claim would undermine the statutory scheme and legislative allocation of remedies, time limits and tribunals. Separately, and for future guidance, the House held that unlawful means in the tort of unlawful means conspiracy can include criminal conduct and other unlawful acts even if those acts are not independently actionable by the claimant; but that doctrinal point did not rescue the Commissioners' claim because the statutory code precluded the private law route in this case.

Procedure and path: the claim began in 2003, temporary freezing relief was obtained, Hodge J (10 January 2005) found a cause of action, the Court of Appeal ([2007] EWCA Civ 39) struck out the claim (following earlier authority that unlawful means had to be independently actionable), and the Commissioners appealed to the House of Lords. The House resolved that, while unlawful means may include criminal conduct, the Commissioners' damages claim was precluded by the statutory VAT scheme and was therefore struck out.

Appeal dismissed. The House held (by majority) that the Value Added Tax Act 1994 and the statutory enforcement and appeal machinery provide a comprehensive code for VAT recovery and preclude the Commissioners from recovering VAT‑equivalent sums from a non‑taxable overseas participant by a private law action in conspiracy; the House also clarified that criminal conduct can amount to "unlawful means" in the tort of unlawful means conspiracy, but that doctrinal point did not save the claim under the statutory scheme.

Claim issued 2 July 2003; freezing order obtained from Fulford J; preliminary trial before Hodge J who (10 January 2005) held that a conspiracy cause of action could lie; Court of Appeal allowed Total's appeal and struck out the claim ([2007] EWCA Civ 39); Commissioners were granted permission to appeal to the House of Lords, which delivered judgment [2008] UKHL 19 on 12 March 2008.