A is the operator of a waste disposal site. Hazardous waste produced and handed over to A by C causes polluting effects. B suffers a loss.

Who is liable? If C had not properly informed A of the dangerous properties of the waste, who will be liable?

Comparative remarks

Comparison

The producer of the waste is primarily subject to fault liability. With regard to hazardous waste, the producer must comply with a series of special duties regulating the management and disposal of waste under administrative law. The failure to perform these duties can give rise to liability for breach of a statutory duty according to fault liability. Under certain conditions, the laws of the neighbourhood – or an action in nuisance in the common law countries – can also be applicable.

In several countries, the producer of waste is under a strict liability obligation. Since 1974, Belgian law provides for a strict liability regime for toxic waste, which applies to industrial, commercial and research activities. Liability covers the production, transportation and disposal of toxic waste, even if these activities are not performed by the responsible party itself. Due to a rather restrictive definition of toxic waste (in a Royal Decree from 1976), there is still no case law available on this liability regime. In English and Scots law, the producer of waste can be held liable under section 73(6) EPA 1990, if he failed to inform the operator of the deposit site of the hazardous nature of the waste.

A is the operator of a facility that is used for the proper treatment of hazardous chemicals. An explosion occurs and large amounts of chemicals contaminate the soil of the surrounding land.

1. Who has standing to bring legal action as a result of the damage? What is the remedy?

2. Plaintiff B is one of the owners of the contaminated land. To what type of claim is B entitled, if the land can be restored to its original condition?

3. Immediately after the incident, public authorities took costly emergency measures in order to prevent further damage. Does A have to pay these costs? What happens if these emergency measures cause property damage to C? Does A have to pay these costs, too?

4. The neighbour C has not been directly affected by the disaster. He/she, however, finds that the market value of his/her land has dropped because of the incident. The property is now unsaleable, or at least seriously devalued, by the proximity to the contaminated site. Does C have a right to sue A for damages?

5. Would it make any difference if it could be shown that A was negligent?

Comparative remarks

Comparison

Legal standing

Contamination of land usually qualifies as property damage. In all European states, if such damage occurs, the owner of the land is entitled to claim damages according to tort law.

Operator A runs an industrial plant that causes polluting effects (e.g. smoke, wastewater, noise) to the environment. Due to these effects, B suffers loss of, or damage to, property. Fault cannot be established.

1. Is A liable to B? Would there be any difference if B had suffered loss of life or personal injury?

2. What would liability be like if the pollutants cause minor health damage (e.g. chronic bronchitis) and/or property damage to the majority of the people living in the community affected by the pollutants?

Comparative remarks

Comparison

Fault liability

The country reports show that liability for harm caused by polluting interference from neighbouring sites is rather incoherent among the European states. In all fourteen jurisdictions that were analysed, fault-based liability will apply generally. In some countries, however, there are special strict liability regimes for environmental damage that supersede traditional fault liability. This is especially the case in the Scandinavian countries (Finland, Sweden).

In countries where fault liability still plays an important role, several authors have pointed out that courts will use certain methods to tighten liability when it comes to harm caused by polluting interference from industrial facilities. These methods include heightening the level of care required from the defendant or shifting the burden of proof from the plaintiff to the defendant. This is the case in Spain, where scholars speak of an ‘objectivisation’ of fault liability, which, in its practical application, comes close to strict liability.

International conventions

In Europe, liability for damage caused by pollution is governed by a diversity of legal instruments, namely, international conventions, EC legislation and national law. Of the international conventions that address environmental liability issues, only certain sector-specific conventions have so far come into force. This applies to the nuclear liability conventions and the conventions regulating oil pollution damage by ships. These conventions provide for elaborate, but limited, compensation systems. Limitations exist especially with regard to the territorial application, the types of compensable damage and the amounts of compensation available. Compensation for impairment of the environment is only awarded by the oil pollution conventions and the new nuclear liability conventions, but not by the 1960 Paris Convention and the 1963 Vienna Convention. Liability is strict, covered by mandatory financial security, and exclusively channelled to the ship owner or the operator of the nuclear installation. Claims may also be brought directly against the insurer or another person providing for financial security. International conventions governing liability for the transboundary movement of waste and the transboundary effects of industrial accidents have not yet entered into force. With regard to damage caused by the transboundary movement of living modified organisms, the 2000 Cartagena Protocol on Biosafety proposes a new liability system in the near future.

The only convention that would establish a comprehensive environmental liability regime, the 1993 Lugano Convention of the Council of Europe, has not yet entered into force.

A's industrial plant releases a chemical substance into the environment that is generally considered to be harmless to human health. Recent medical studies, however, show that this substance can cause a very specific form of asthma. B, who suffers from this asthma, wants to sue A for damages. A objects that he did not know, and could not have known, that the emissions of his plant can cause this disease. Is A liable?

Comparative remarks

Comparison

The capability to foresee the risk of an activity is an essential prerequisite for a fault-based liability. Thus, in most European countries, fault cannot be established, if the operator of a plant did not and, due to the lack of empirical and scientific knowledge, could not have known that emissions from its plant were capable of causing damage. Only the Portuguese reporter stated that such circumstances do not exclude fault liability according to Article 22 LAP.

Under theories of strict liability, most jurisdictions do not allow the defendant to escape liability by showing that he did not and could not have known the risk. Product liability, however, poses an exception to this rule, as Article 7(e) of the EC Products Liability Directive provides that the producer of a defective product shall not be liable if he proves ‘that the state of scientific and technical knowledge at the time when he put the product into circulation was not such as to enable the existence of the defect to be discovered’.

If G. S. A. Wheatcroft initiated the academic teaching of tax law in UK universities, then John Tiley ensured its continuation. Professor Tiley has been the face of UK academic tax law for the past thirty years, both in domestic and international arenas. At home he has dealt with other law teachers who were dubious about the role of taxation in the curriculum, with the professions and with government. At an international level he has ably represented the UK in gatherings of tax teachers. It seems inconceivable that he will cease making a contribution to teaching and writing on his retirement, but this marks a suitable point at which to assess the position we have reached with tax teaching in the UK and to consider the future.

In his own fascinating survey of the development of UK tax law teaching, ‘50 years: Tax, Law and Academia’, written to celebrate the fiftieth anniversary of the British Tax Review, Tiley concluded the state of the tax academy is mixed and that, whilst –

It is hard to argue with his conclusion without seeming complacent (and complacency would certainly be misguided) but Tiley is over-modest in his article about his own contribution and about the progress he has fronted over the last two decades.

Introduction

In the realm of taxation, has the incorporation of the European Convention on Human Rights (hereafter ‘the Convention’) into United Kingdom domestic law by the Human Rights Act 1998 been all ‘fuss and bother’? Now that almost ten years have passed since the 1998 Act, what answer should one give to the question posed by Professor Tiley in 1998?

This short chapter cannot possibly seek to assess the impact of the European Convention on Human Rights on all aspects of the UK taxation system. Rather, this chapter seeks to examine only a narrow area: that is the impact of the Convention on the taxation of the family or, more correctly, how the Convention has been applied in tax cases involving personal and family status before the European Court of Human Rights. Taxation and the family is, of course, a particular area of interest of Tiley, and, as will be seen below, some of his comments on the discriminatory nature of UK tax provisions have proved to be quite prophetic.

Introduction

More years ago that either us would probably wish to call to mind, John Tiley taught me matrimonial law at Cambridge. He was a new fellow at Queens' and as a then first year student at Sidney Sussex I have a favourable recollection of his lectures even though the elements of family law that he taught me have barely impinged upon my professional career (and thankfully not at all upon my private life).

In those days I suspect that neither of us knew more about tax than what little we gleaned from the leading cases that tax issues had provided in the field of equity and the law of trusts and in other branches of the law. At some stage, and no doubt by different means and for different reasons, we were both drawn into the murky and unprincipled world of taxation. From there Tiley has risen to become the UK's foremost tax law professor and I have had the great pleasure of coming to know him through our shared interest in the subject.

Within the tax field Tiley has sought in particular to cast light on the difficult topic of tax avoidance. Among his many contributions to the British Tax Review on that topic is an article on the development of the case law since Ramsay and a case note on what have become known as the BMBF and SPI cases.

Introduction

John Tiley's breadth of interests and scholarship in matters of taxation is a disappearing art but makes it easy for friends to find starting points in his work for their own specialist eccentricities. History is fascinating to John and for a UK scholar working with the oldest income tax in the world, it is probably obligatory. Old income tax systems are generally schedular in nature and with schedules come many borderlines to draw; John has done his tours of duty surveying these borders, including the ones to be explored here. More to the point, John always wants to ask not only what the law is and where it came from but ‘Why?’. He has visited many other parts of the world in pursuit of solutions to why. Happily for me, his travels brought him to Sydney Law School to see our uncommon friend, Ross Parsons.

So an international cocktail is appropriate to celebrate Tiley's work and this one will mix the history of the tax treaty rule on royalties up to the emergence of the modern form, the borders of the provision and the fundamental question of ‘Why?’ we have it (viewed from an historical perspective). In the modern context of the Organisation for Economic Cooperation and Development (OECD) Model Tax Convention on Income and on Capital, with zero taxation at source on royalties, the ‘Why?’ is indeed a mystery.

Introduction

John Tiley's first experience of tax was updating Beattie's Estate Duty and his most recent article is on the history of death duties. I want to continue that topic and look at inheritance tax in the light of the proposals of the Meade Committee, on which I had the privilege to serve, knowing Tiley's enthusiasm for recommending the Committee's Report to his students. My timing is bad, as the ‘Mirrlees Review’, popularly known as Son of Meade, is currently in progress. I am glad that the topic of inheritance taxes is still on the Review's agenda, in spite of the international trend away from such taxes, and indeed it received a boost in Professor Alan Auerbach's IFS 2006 annual lecture, given on the same day as the launch of the Mirrlees Review.

Introduction

The author's personal relationship with John Tiley begins with the reading of his writings on tax avoidance some twenty years ago. Having returned to Germany from a three-month stint with City law firm Herbert Smith, I felt the necessity to keep my knowledge of UK law (and – even more important for a continental lawyer – of English legal terminology) updated. Respectfully, I resorted to the British Tax Review and the first piece I ever read in this prestigious journal was Tiley's masterly analysis of common law cases on tax avoidance. I got stuck with the writer and his topic (and the journal) immediately and followed his work (at least insofar as it was published in sources available on the other side of the Channel) during the following years. The first time I started to build my own thoughts on these writings occurred in 1995, when I gave a lecture on tax avoidance and EC law at Bonn University which ventured to set out a common understanding of tax avoidance both from a comparative view of Member States' legal approaches to tax planning and from an autonomous interpretation of EC law. Seven years later, I added a second piece to this mosaic which dealt with the concept of abuse in the ECJ's company law cases. Unfortunately, these presentations were not published in English.

Introduction

My first piece of academic research on being appointed to a Lectureship in Taxation at Cambridge, where I taught with John Tiley, concerned the extent to which the law of taxation could be supplemented by the common law of unjust enrichment. This was prompted by the decision of the House of Lords in Woolwich Equitable Building Society v IRC, which recognised a common law right to restitution of taxes. Over the subsequent fifteen years, the law of unjust enrichment has developed dramatically, and one of the main contexts for that development has concerned the recovery of taxes which were not due to the Revenue. This has recently reached its highpoint in the context of the extensive litigation arising from the decision of the ECJ that part of the UK tax legislation was discriminatory and consequently the national court had to provide remedies for those taxpayers who had paid taxes which were unlawfully paid to the Revenue. Now is an opportune time to review this litigation and to reassess the modern interrelationship between the law of unjust enrichment and the law of taxation.

At the heart of any claim for the restitution of taxes is the fundamental proposition that the state can only demand the payment of tax where it is lawfully authorised to do so. The Revenue can be considered to have received tax unlawfully for a variety of different reasons.

Introduction

This book has been structured along the lines of two themes that (amongst others) inspire the writings of John Tiley. The first of these themes, avoidance, essentially involves using tax law in a manner that is contrary to legislative intent. The second of these themes, taxation of the family, involves proper identification of the tax subject and so is one of the fundamental structural features of the income tax. It is, therefore, not surprising that John is interested in a case such as Jones v Garnett, which involves something of an intersection between these two themes. Jones v Garnett involves the family business with, like so many avoidance cases, an artificial entity (a company) inserted between the business and the family members. This paper takes a conceptual and retrospective look at the taxation of the family company and how it may be and has been used to determine the allocation of income to the tax subject identified by the legislature.

Jones v Garnett is in many ways a classic fact pattern for a family company. Two family members (Mr and Mrs Jones) owned equally the shares in a private company, Artic Systems Ltd. They both worked for the company but unequally, Mrs Jones working as an administrator for around five hours per week. Both drew small wages, particularly Mr Jones. In accordance with tax advice, they relied for their family income on the distribution of dividends not wages.

It is a real pleasure and a privilege to have prepared this foreword to a collection of essays honouring John Tiley as he nears retirement from the chair in Taxation Law at Cambridge University. The essays have been prepared by some of the most insightful writers on tax of recent times, all of them friends of John and some of them former students. In the paragraphs that follow I have described my personal experience of John, set out to say something about his achievements as one of the leading tax thinkers of modern times and then attempted to reveal something of the man that may not be readily apparent from his writings.

I first met John in the foyer of the Cambridge Law Faculty. As I walked in, he recognised me immediately – I still do not know how – and I realised that I was with the person who had been influencing my understanding of tax from the very first days of my career in the Inland Revenue.

In the second half of the 1970s, the Inland Revenue training regime for graduate entry tax inspectors was demanding, with a pass mark in internal examinations of 70 per cent. Tax cases had to be learnt by rote, which came hard after several years spent in research and university teaching. For a while, tax seemed a lot less stimulating than Cicero's speeches or letters.