| MacNiven v Westmorel and Investments Ltd |
3 |
transactions but this did not simply refer to certain factual prerequisites which must be present before the court can apply a purposive Ramsay approach to interpreting statutes preordained conditions. The Ramsay approach was no more than a useful aid; this was not an area for absolutes. Lord Nicholls made no mention of his youthful essay in Young v Phillips and no one even bothered to cite it.11 He refrained from using terms such as juristic and commercial and explained in simple language that the meaning of the word payment could not vary according to the purpose for which the payment of interest is made (paragraph 15). Lord Hoffmann makes the same point, at much greater length, at paragraph 67. As one reads this one wonders whether this means that, for example, the Ramsay approach could not have been used to counteract dividend stripping (see §57.1). |
For Lord Hoffmann, and so for all members of the House, the true—and hitherto not completely understood—basis for the new approach lies in statutory construction. We have all become accustomed to beginning with the facts and applying the Ramsay doctrine as formulated by Lord Brightman in Furniss v Dawson 198412 to determine the end result or relevant transaction to which the law must be applied. We have all been wrong; we have put the cart before the horse. We must now start instead by discerning the statutory words falling to be applied in the particular case (the horse) and only then we may go and find the cart. How far this is going to be matter of substance and how far simply a change of rhetoric is but one of the mysteries of this case. |
In carrying out the search for the horse, the court must approach the legislation is the same purposive spirit expressed by Lord Steyn in McGuckian. However, one must then distinguish between terms which must be construed ‘juristically’ or, one might say, legalistically, from those which must be construed ‘commercially’. Whatever remains of the Ramsay doctrine is an example of the second way of interpreting the legislation. Lord Hoffmann explains the point thus at paragraph 48 ‘If the statutory language is construed as referring to a commercial concept then it follows that steps which have no commercial purpose, but which have been artificially inserted for tax purposes into a composite transaction will not affect the answer to the statutory question’. |
In Westmoreland Lord Hoffmann appears to endorse the American approach to interpreting tax statutes (paragraph 36). Many year ago this Review published a series of articles warning about the dangers and difficulties that lay ahead if we were to down that route.13 In Craven v White the Law Lords, before whom those articles had been placed, instructed counsel appearing for the Revenue not to take them on his proposed ‘world tour’.14 In this case Lord Hoffmann, repeating what Lord Wilberforce had said in Ramsay 20 years earlier, cites two of the American authorities without any apparent grasp of the consequences.15 This is rather disappointing; thus we need to know whether the House has it mind to send us off into a world where economic substance prevails over legal form—and, if so, what we can do to stop it. |
At this point it is enough to make three predictions and then to ask what is left standing of the law as we knew it. |