Premium Investments Ltd and Town & Country Resorts Ltd v Commissioner of General Consumption Tax

• Jurisdiction: Jamaica
• Judge: DOWNER, J.A. , BINGHAM J.A.: , SMITH, J.A.(Aq) , DOWNER, J.A.:
• Judgment Date: 06 April 2001
• Neutral Citation: JM 2001 CA 9
• Judgment citation (vLex): [2001] 4 JJC 0608
• Date: 06 April 2001
• Court: Court of Appeal (Jamaica)

IN THE COURT OF APPEAL

BEFORE:

THE HON. MR. JUSTICE DOWNER, J.A THE HON. MR. JUSTICE BINGHAM, J.A THE HON. MR. JUSTICE SMITH J.A.(Ag.)

BETWEEN:

PREMIUM INVESTMENTS LTD.

1 ^ST APPELLANT

TOWN & COUNTRY RESORTS LTD.

2 ^ND APPELLANT

AND

THE COMMISSIONER OF G. C. T.

RESPONDENT

Emil George, Q.C. & Julianne Mais instructed by Dunn Cox Orrett & Ashenheim for the Appellants

Hugh Small Q.C. and Drum Drummond instructed by the Director of State Proceedings for the Revenue

REVENUE LAW - Informations sworn - Failure to pay General Consumption Tax - Declaration as to entity responsible for collection and payment of General Consumption Tax

DOWNER, J.A.

1 There are pending before the Resident Magistrate in St. Ann two informations numbered 50 and 51 of 1999 sworn on the 16 ^th of April of that year for failure to pay General Consumption Tax. The named taxpayers are Town & Country Resorts Ltd. (the second appellant) and Frederick March, the 'responsible officer' designated by the second appellant pursuant to section 52 of the Tax Collection Act.

2 These informations were mentioned on at least five occasions during the period 26 ^th April to 27 ^th September before Her Honour Mrs. Carol DaCosta. On this latter date, Mr. Dabdoub for the second appellant informed the Court that proceedings had been instituted in the Supreme Court by way of an Originating Summons and an adjournment was requested and granted. It is exceptional to resort to such a procedure when the Resident Magistrate either in her Court or a Court of Petty Sessions has jurisdiction to determine all matters of law and fact pertaining to the recovery of taxes. Since the contention is that the second appellant is not the taxpayer, then there could have been resort to the supervisory jurisdiction of the Supreme Court by way of judicial review which is enshrined in Sec. 1(9) of the Constitution. The basis would be that the Resident Magistrate had exceeded her jurisdiction as the named taxpayers were not liable in law. See Collector of Taxes v Lincoln (1988) 25 JLR p.44 at pp.58–59. Alternatively after the Resident Magistrate had heard and determined the matter, appeal proceedings could be instituted in the Circuit Court. Since the proceedings were instituted in the Court of Petty Sessions, thereafter there could have been an appeal to this Court by way of case stated. See Sec. 49 of the Justice of the Peace (Appeals) Act. I will return to this important issue later after dealing with the order in the Supreme Court by, the late esteemed Courtenay Orr. J.

3 The proceedings before Orr. J.

4 It is clear that the jurisdiction of the Supreme Court, was invoked pursuant to section 531A of the Judicature (Civil Procedure Code) Law which reads:

"531A. Any person claiming any legal or equitable right in a case where the determination of the question whether he is entitled to the right depends upon a question of construction of a Law or an instrument made under a Law, may apply by originating summons for the determination of such question of construction, and for a declaration as to the right claimed."

5 Section 531D is important as it emphasizes the discretionary nature of the order sought, and in fact the learned judge rightly declined to answer two of the questions posed. The discretionary section reads:

"531D. The Court or a Judge shall not be bound to determine any such question of construction if in their or his opinion it ought not to be determined on originating summons."

6 Assuming that these were permissible proceedings, they were collateral. The main proceedings are pending before the Resident Magistrate. The questions posed before Orr J. were as follows:

• "1. Whether on a proper construction of Section 23A of the General Consumption Tax Act the entity liable for the collection and payment to the Commissioner of the tax chargeable on a taxable activity is the operator of the Resort known as The Enchanted Garden.

• 2. Whether on a proper construction of the Management Agreement by and Between Premium Investments Limited (formerly Consulting Services Limited) and DHC OCHO RIOS HOSPITALITY CORPORATION the 2 ^nd Applicant Town & Country Resorts Limited can be deemed to be the operator of the resort known as "The Enchanted Garden" within the meaning of Section 23A of the General Consumption Tax Act.

• 3. Whether on a proper construction of the said Management Agreement DHC OCHO RIOS HOSPITALITY CORPORATION is the entity responsible to collect the tax chargeable in respect of the taxable activities supplied by The Enchanted Garden and the entity responsible to pay the tax to the Commissioner in accordance with the provisions of Section 33 (1) of the General Consumption Tax Act."

7 Here is how Orr J. answered the questions:

"Accordingly, I determine question 1 of this summons as follows: I find and declare that Town and Country is the entity which has the responsibility to collect the tax chargeable in respect of the taxable activity of the resort known as The Enchanted Garden, and pay the tax to the Commissioner of General Consumption Tax in accordance with the provisions of Section 33 (1) of the General Consumption Tax Act."

8 Then as to questions 2 & 3 the learned judge declined to answer them thus:

"As regards question 2, I decline to construe the management agreement referred to therein having regard to my findings and the declaration in answer to question 1. Also having regard to the very important fact that DHC is not a registered taxpayer for the purposes of the General Consumption Tax Act.

As regards question 3, I decline to grant the relief sought for the reasons given regarding question 2, and for the further reasons as submitted by Mr. Small, that DHC is an entity which is not before the court and has not had a chance to be heard.

The costs of this application shall be paid by the applicants Premium and Town and Country to the Commissioner. Such costs to be taxed if not agreed.

I wish to thank counsel for their able submissions."

9 At this point it is convenient to refer to the specific Order made in the Supreme Court. It reads:

"1 Town & Country Resorts Limited is the entity which has the responsibility to collect the tax chargeable in respect of the taxable activity of the resort known as The Enchanted Gardens, and pay the tax to the Commissioner of General Consumption Tax in accordance with the provision of Section 33 (1) of the General Consumption Tax Act."

10 It is appropriate to endorse the answers given by the learned judge and to add to his reasons. The management agreement was between Premium Investments Ltd., the 1 ^st Appellant, and DHC Ocho Rios Hospitality Corporation a Delaware Corporation which was not registered under the Companies Act. See Part X of that Act. Nor was that Company a registered taxpayer pursuant to Sec. 26 and 27 of the General Consumption Tax Act (The "Act"). The Delaware Corporation was part of the informal economy beyond the reach of the tax gatherer. It is true that the second appellant is mentioned thus in Exhibit 1 of the Agreement:

"2. Town and Country Limited, a wholly owned subsidiary of the Owner, holds subleases from the Owner of the Townhouses and Apartments leased to Owner, and has consented to this Management Agreement and to the terms hereof."

11 In any event clause 22.05 of the Agreement reads:

"22.05 Applicable Law, Jurisdiction; Venue. This Agreement shall be construed under and shall be governed by the internal laws of the State of New York without giving effect to principles of conflicts of law. The parties hereto hereby subject themselves to the jurisdiction of the state and federal courts located in the State, City and County of New York. Each party represents and warrants to the other that it is not entitled to the defense of sovereign immunity in any matter in connection with the Agreement or the ownership, management, or operation of the Resort."

12 Additionally, there is Article XXI of the Agreement which contains an Arbitration Clause which reads:

"21.03. Uniform Arbitration Act All provisions of the Uniform Arbitration Act, New York Civil Practices law and Rules Section 5501, et seg ., shall apply unless otherwise modified by this Agreement."

13 As regards question 3, since DHC Ocho Rios Hospitality Corporation Limited is not registered under the Companies Act nor as a taxpayer under the Act the learned judge rightly declined to answer questions 2 & 3.

14 Why Orr J. was correct to declare that the 2 ^nd Appellant was the proper taxpayer

15 The specific section which Orr J. was asked to construe was section 23A of the Act which reads:

"23A.-(1) supply of -

Where a taxable activity consists of the

• (a) tourist accommodation; or

• (b) services offered to tourists through the operation of a tourism enterprise as defined in section 2 of the Tourist Board Act,

it shall be the responsibility of the operator of the accommodation or services to collect the tax chargeable in respect of that taxable activity and pay the tax to the Commissioner, in accordance with the provisions of section 33 (1)."

16 So Section 23 A(1) must be read in conjunction with Sec. 33 (1) to determine who the operator is in the eyes of the law. Be it noted that this amendment was by an Act of 1995. The licence granted by the Jamaica Tourist Board pursuant to the Tourist Board Act was granted on or about 12 ^th December 1991. See the evidence of Lorna Dunkley at pages 121–122 of the Record. The application for the licence states that Town & Country Resorts Ltd operated the hotel and that Consulting Services Ltd. the predecessor of Premium Investments Ltd. was the owner. See page 124 of the Record.

17 Here is relevant evidence from Vinette Keene the Acting Commissioner of General Consumption Tax at page 92 of the Record.

• "9. That, having done...