Neutral Citation Number: [2009] EWHC 438 (Ch)
Case No: CH/2008/APP/0513
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 12/03/2009

Before :

MRS JUSTICE PROUDMAN
- - - - - - - - - - - - - - - - - - - - -
Between :

	UMBRO INTERNATIONAL LIMITED	Appellant	
	- and -		
	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS	Respondent	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Paul Chaisty QC and Nigel Bird (instructed by Steven Hodkinson solicitor to Umbro International Limited for the Appellant
Mario Angiolini (instructed by the Solicitor for HMRC) for the Respondent

Hearing date: 27th January 2009
- - - - - - - - - - - - - - - - - - - - -
Judgment

Mrs Justice Proudman: 

1.	This is an appeal by the taxpayer from a decision dated 12th February 2008 of the Value Added Tax and Duties Tribunal sitting at the Manchester Tribunal Centre.  The appeal lies in point of law only:  s.11 (1) Tribunals and Inquiries Act 1992, CPR Part 52 PD 23.8.  
2.	The appellant’s claim is for the refund of what it alleges is overpaid customs duty. The quantum of £830,238.89 claimed is disputed but quantum is not before me on this appeal.  
3.	The appeal to the Tribunal was from a Review Decision of the HMRC Review Officer (Mrs Pond) dated 9th May 2007, itself upholding a decision of an HMRC Higher Officer (Mr Patel) dated 19th December 2006.  
4.	The Tribunal was the primary decision maker and its role was not limited to a review of the decision made by HMRC and the reasons given for it.  Accordingly, it did not have to decide whether the reasoning adopted by Mrs Pond and Mr Patel was sound.

	  The issue
5.	Customs duty is paid on the customs value of imported goods.  Under the terms of Council Regulation (EEC) 2913/92 (“the Customs Code”) commission charged by the importer’s buying agent is excluded from the dutiable customs value. 
6.	The sole issue on this appeal is whether between 15th September 2003 and 15th August 2006 PNH Limited (“PNH”) acted as the buying agent for the appellant, Umbro International Limited (“Umbro”) in the purchase of sportswear.  Umbro alleges that it did, thus excluding buying commission from the price paid when assessing the customs value of the goods and the amount of duty payable.  It is common ground that by virtue of s. 16(6) Finance Act 1994 the burden of proving that PNH was Umbro’s buying agent falls upon Umbro.  The Tribunal held that Umbro had not discharged that burden.  
7.	Again it is common ground that inferences drawn by the Tribunal from its primary findings of fact can be overturned on appeal only if no reasonable tribunal, acting judicially and properly instructed as to the relevant law, could have come to the determination under appeal.  The basis for the court’s intervention on the ground of error of law is that it has no option but to assume that some misconception of law is responsible for the decision: see per Lord Radcliffe in Edwards (Inspector of Taxes) v. Bairstow and Another [1956] AC 14 at 36.  The test was restated by Sir John Donaldson MR in Potter and Another v. Customs & Excise Commissioners [1985] STC 45 at 48 in the following terms:
“I propose to consider this appeal on the basis of Edwards (Inspector of Taxes) v. Bairstow.  This requires me to examine the facts as found by the tribunal with a decent respect for that tribunal and to ask myself whether the only reasonable conclusion on the facts found is inconsistent with the determination to which it came.”
8.	The present case arises in the context of the decision of the European Court of Justice in Overland Footwear v. Commissioners of Customs & Excise [2005] ECR I-8937.   Until recently, Umbro paid customs duty on the full transaction value of the imported goods; that is to say on the full price specified in the invoices from PNH without deduction of PNH’s profit element.  The Customs Code provides for amendment of the customs declaration in certain circumstances.  Art 78 (3) of the Code provides:
“Where revision of the declaration…indicates that the provisions governing the customs procedure concerned have been applied on the basis of incorrect or incomplete information, the customs authorities shall, in accordance with any provisions laid down, take the measures necessary to regularise the situation, taking account of the new information available to them. ”
9.	Overland Footwear decided how that provision should operate.  It is now clear (see paragraph 53 of the decision) that if the import duties exceed those which ought properly to have been paid in accordance with the Customs Code, “the measure necessary to regularise the situation can consist only in reimbursement of the overpaid amount”.  In other words, HMRC are required (subject to a cap) to repay duty if the declared customs value erroneously included a buying commission. Until Overland Footwear, HMRC took the view that a claim for overpaid customs duty could not succeed if the amount of buying commission was not shown separately at the time of the customs declaration.  Following that decision, HMRC published a Policy Change statement: Adjustment to Customs Value concerning Buying Commission, JCCC (05) 71.  Also apparently as a result of the decision, Umbro made a claim in relation to overpaid customs duty on the basis of buying commission.   

The facts
10.	The underlying facts found by the Tribunal are for present purposes uncontroversial. Umbro’s case challenges the inferences drawn by the Tribunal from those facts.  
11.	Umbro is an importer and wholesaler of sports goods.  It does no manufacturing itself, but it provides a list of factories which it has audited and approved to manufacture its clothing. It is important to Umbro that clothing bearing the Umbro label should have been made only in factories complying with specified policies of social responsibility, health, safety and quality control. 
12.	The subject-matter of the present case comprises association football team shirts (including England team shirts) all of which were made in China by the Dongguan Haiqi Sports Garment Co Ltd (“DHS”).  Every Umbro branded item has a unique identifying label woven into the fabric to prevent unauthorised goods from being sold under the Umbro label.
13.	For more than 15 years, Umbro has used PNH in connection with its importation of goods from China.  PNH was part of the same corporate group as DHS (and they shared at least one common director, Mr Chung) but did not itself manufacture goods and had no facilities to do so.  PNH placed orders for Umbro goods only with companies on an approved list produced by Umbro.  
14.	Umbro gave PNH details of the specifications, quality and quantity of the products it required and set the target prices that it was prepared to pay for them.   PNH was responsible at its own expense for visiting manufacturers, negotiating prices with them, obtaining samples, scheduling delivery dates, performing quality control functions, ensuring that the products fell within EC customs duty quotas and ensuring that the goods could be supplied within the requisite time-scale.   PNH was also responsible for insurance and payment for transport, storage and delivery of the goods.  
15.	In agreeing a contract price with Umbro, PNH took into account the manufacturing costs, its costs of providing the above services and its own profit.  Umbro did not enquire about PNH’s margin of profit.  That profit might vary from order to order, and sometimes even within a single order.  PNH would make a greater profit on some orders, and parts of orders, than others.  
16.	All transactions between PNH and DHS were carried out at arm’s length between them.
17.	A written purchase order, containing terms and conditions describing PNH as “Supplier”, was submitted by Umbro to PNH once a contract price had been agreed.  PNH would then place an order with the manufacturer, in this case DHS.  PNH was free to place orders with any approved manufacturer of its choice without reference to Umbro.  On delivery of the goods, DHS invoiced PNH for them and PNH then invoiced Umbro in a higher sum, the difference being PNH’s gross profit.  Umbro would then pay PNH.  PNH’s invoices to Umbro did not specify PNH’s commission; it was not possible to calculate the amount of its profit from the information stated in the invoices. The invoices, raised “for account Umbro”, did not describe PNH as Umbro’s agent.  In the invoices from DHS to PNH, PNH was described as ‘purchaser’ and there was no mention of Umbro. There was no written agreement between PNH and Umbro purporting to define the commercial relationship between them.

PNH as manufacturer
18.	Initially, HMRC maintained that PNH was the manufacturer of the imported goods.  That was the basis on which Mr Patel proceeded.  It was also plainly asserted in paragraphs 7 and 10 of the Respondents’ statement of case to the Tribunal.   The Tribunal commented:
“…the Commissioners are required by rule 8 of the VAT Tribunals Rules 1986, as amended, to set out in the statement of case ‘all matters and facts relied upon’, and made no application either to correct their ‘misunderstanding’ and gave no notice that they intended to change their case to that subsequently advanced before us.  The Commissioners’ behaviour was both unacceptable and unprofessional.  We express the hope that it will never recur.”
19.	Mr Chaisty QC’s skeleton argument for Umbro on this appeal submitted that as HMRC’s case stated that PNH was the manufacturer, the Tribunal should have found for Umbro.  However, the case before the Tribunal and before me was put on the basis, not that PNH was manufacturing the goods for Umbro, but that it was either a selling agent for the manufacturer, DHS, or, alternatively, it was acting as a principal in the purchase from DHS and sale to Umbro.  The burden of proof was on Umbro to establish a buying agency.  
20.	The issue as argued and understood by the parties at the Tribunal was on whose account did PNH act, its own or Umbro’s?  Was the evidence more consistent with PNH acting as principal applying a variable mark-up on sales, or was it more consistent with acting as Umbro’s agent for which it charged a true agent’s commission?  The appellant was not taken by surprise by HMRC’s contentions at the hearing. In my judgment the Tribunal cannot be criticised for proceeding to decide that question.

The law
Legislation
21.	The point at issue is governed by Community Law.  The relevant legislation is contained in Chapter 3 (Articles 28 to 35) of the Customs Code.  Reference has also been made to Article 8 of the World Trade Organisation (WTO) Agreement on the implementation of Article VII of the General Agreement on Tariffs and Trade (GATT). Articles 32 and 33 of the Customs Code are based on Article 8.  The World Customs Organisation has provided explanatory notes to, and commentary on, Article 8 of the WTO Agreement.  Mr Chaisty submitted that these are of little if any relevance.  While not legally binding, I find that they do however constitute an important aid to interpretation: see BVBA Van Landeghem Case C-486/06 judgment 6 December 2007 at para 25.
22.	The starting point for assessing the dutiable customs value is the transaction value, namely the contract price for the goods.  Art 33.1 (e) of the Customs Code then excludes buying commissions from the customs value.  Art 32.4 defines “buying commissions” as:
“fees paid by an importer to his agent for the service of representing him in the purchase of the goods being valued.”

23.	The Customs Code contains no definition of what is an agent for this purpose. The Court must be careful to avoid applying technical English law agency concepts.  In De Danske Bilimpotorer v. Skatteministeriet (Case C-98/05, judgment 16 March 2006) A.-G Kokott, with whom the European Court of Justice agreed, said of the question whether a vendor had paid car registration duty in his own name or in the name and for the account of the customer:
“In law, that question must be answered by reference to…the Community law notion of acting in the name and for the account of another and not by reference to civil law provisions concerning agency and mandate which vary from one legal system to another.”

	   WTO Agreement Guidelines
24.	The Explanatory Note to and Commentary on Article 8 of the WTO Agreement provide assistance on the question of what is a buying agent and what is a buying commission under Community law. Common characteristics of buying and selling agents are set out in Explanatory Note 2.1.  Commentary 17.1 contains guidelines on the evidence necessary to establish under what circumstances fees paid by a buyer to an intermediary can be considered as buying commission.
Extracts from Explanatory Note 2.1
   Buying and selling agents
4.	The agent (also referred to as an “intermediary”) is a person who buys or sells goods possibly in his own name, but always for the account of a principal.  He participates in the conclusion of a contract of sale, representing either the seller or the buyer.
5.	The agent’s remuneration takes the form of a commission, generally expressed as a percentage of the price of the goods.
6.	A distinction can be made between selling agents and buying agents.
…..
9.	A buying agent is a person who acts for the account of a buyer, rendering him services in connection with finding suppliers, informing the seller of the desires of the importer, collecting samples, inspecting goods and, in some cases, arranging the insurance, transport, storage and delivery of the goods.
10.	The buying agent’s remuneration which is usually termed “buying commission” is paid by the importer, apart from the payment for the goods.
…..
15.	To sum up, when determining the transaction value of imported goods it will be necessary to include in that value commissions and brokerage incurred by the buyer, except buying commissions.  Accordingly, the question of whether or not payments made to intermediaries by the buyer and not included in the price actually paid or payable should be added to that price will depend, in the final analysis, on the role played by the intermediary and not on the term (“agent” or “broker”) by which he is known.  It is also clear from the provisions of article 8 that commissions or brokerage payable by the seller but which are not charged to the buyer could not be added to the price actually paid or payable.

  Extracts from Commentary 17.1
4.	This commentary provides guidelines on the question of the evidence necessary to establish under what circumstances fees paid by a buyer to an intermediary can be considered as a buying commission.
5.	In this context, all relevant documents necessary to ascertain the existence and precise nature of the services in question should be made available to Customs.
6.	Among such documents, one would be the agency contract between the agent and the buyer, stating the formalities and the activities which the agent may have to perform in the discharge of his duties up to the time that he puts the goods at the disposal of the buyer.  The agency contracts should accurately reflect the terms of the agreement between the buyer and the agent and other documentary evidence such as purchase orders, telexes, letters of credit, correspondence, etc., which clearly supports the bona fides of the agency contract are to be produced should Customs so request.
7.	In cases where written agency contracts do not exist alternative documentary evidence, such as mentioned in paragraph 6 above, which clearly establishes the existence of an agency relationship is to be produced should Customs so request.
8.	In cases where sufficient evidence establishing an agency relationship is not produced, Customs may conclude that no buying agency relationship exists.
9.	Sometimes, the contracts or documents do not clearly represent or reflect the nature of the activities of the so-called agent.  In such circumstances, it is essential that the actual facts of the case be determined and various factors, as explained below, be examined.
10.	One of the questions which could be the subject of an enquiry is whether the so-called buying agent assumes any risk or performs additional services other than those which are indicated in paragraph 9 of Capital Explanatory Note 2.1 and would normally be carried out by a buying agent.  The extent of these additional services could affect the treatment of the buying commission.  An example could be where the agent uses his own funds for the payment of the imported goods.  This opens the possibility of the so-called buying agent sustaining a loss or gaining a profit arising from ownership of the goods rather than receiving an agreed fee from acting as a buying agent.  In this situation, the totality of the circumstances which apparently establishes a buying agency arrangement may be examined.
11.	The result of this enquiry could indicate that the agent is acting on his own account and/or that he has proprietary interest in the goods.   
….
12.	Another factor to be examined is the relationship, within the meaning of article 15.4 of the parties involved in the transaction.  For instance, the relationship of the agent with the seller or with the person related to the seller has a bearing on the ability of the alleged agent to represent the buyer’s interest.  Despite the existence of an agency contract, the Customs is entitled to examine the totality of the circumstances to determine whether the so-called agent is in fact acting on behalf of the buyer and not on the account of the seller or even on his own account.

Case law
25.	Although Overland Footwear concerned the very provision which applies in the present case it does not assist on the meaning of agency as it was common ground in that case that there had been a buying commission.  However, the issue of what is an agent in Community law arose in the Court of Appeal decisions of AMB Imballagi Plastici SRL v. Pacflex Ltd 1999 2 All ER (Comm) 249 and Mercantile International Group plc v. Chuan Soon Huat Industrial Group Ltd [2002] EWCA Civ 288.  Both cases dealt with the different provisions contained in the Commercial Agents (Council Directive) Regulations Directive 1993 as to the meaning of “commercial agents” remunerated by commission.  In the latter case Rix LJ’s formulation of the issue shows that, although the legislative provisions are different, the issue was a similar one to that in the present case, namely:
“Did MIG operate as a distributor who undertook the obligations of a principal in chain, as buyer of the goods from CSH and as seller to the purchasers?  Or did it act as an agent and in particular as one who ‘has continuing authority to negotiate the sale or purchase of goods on behalf of another…or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of’ [a quotation from the definition in the regulations] his principal?”
26.	It was held in Imballagi that if a person bought or sold as principal he was outside the scope of the regulations because he was acting on his own behalf, not on behalf of another.  The Court of Appeal found that the words “on behalf of” fell to be interpreted to mean what an English court would naturally construe them as meaning.  The Court of Appeal in Chuan Soon Huat appears to have proceeded on the same basis.  In the present case the Tribunal did not expressly analyse how the Customs Code should be interpreted.  Nevertheless it is to be inferred from its reasons that the Tribunal believed that the expressions used in the definition of “buying commission” in Art 32.4 must be ascribed their natural meaning as understood by an English court, bearing the Explanatory Note and Commentary in mind.  I find that was the correct approach.
27.	As Evans LJ said in Chuan Soon Huat, the test is one of substance rather than form and, as A-G Kokott said in De Danske, the relationship must be categorised by reference to objective criteria. The parties’ course of dealings has to be considered, with the aid of the Notes and Commentary to the WTO Agreement, to see whether PNH was an “agent” performing “the service of representing [Umbro] in the purchase” within the definition in Art 32.4.

The Tribunal’s judgment
Grounds of Appeal
PNH’s characterisation of the relationship
28.	In its Grounds of Appeal, Umbro asserts that the Tribunal did not afford sufficient weight to its findings that PNH itself accepted that it was a buying agent for Umbro and that Umbro was aware that PNH charged Umbro a commission for the services provided.  All the evidence of Umbro’s witnesses, submitted Mr Chaisty, supported Umbro’s contention that PNH was a buying agent.
29.	In evidence, PNH’s witnesses consistently used the word ‘agent’.  However the characterisation employed by the parties cannot control the true nature of the relationship at law.  That common sense proposition is supported by para 15 of the Explanatory Note 2.1.  The proposition has even more force when the characterisation is employed in retrospect.  I note that Umbro did not assert an agency, or use the word, in its dealings with HMRC until it made this present claim in August 2006. As Sir John Donaldson MR observed in Potter at 51:
“The use of the word ‘agent’ in any mercantile transaction is, of itself, wholly uninformative of the legal relationship between the parties and the use of the words ‘independent agent’ takes the matter no further.  Either is consistent with a self-employed person acting either as a true agent who puts his principal into a contractual relationship with a third party or with such a person acting as a principal.”
30.	The Tribunal concluded that the view taken by Umbro, PNH and DHS was neutral to the true nature of the underlying relationship.  In my judgment that is not a basis for overturning its decision.  The Tribunal’s refusal to accept PNH’s own characterisation of the matter makes particular sense in a context where PNH and DHS were connected companies.  Import duty was, under the terms and conditions applicable between PNH and Umbro, charged to PNH.  A finding that PNH was the buying agent on its own say-so would potentially allow PNH and DHS to divide the purchase moneys between them, escaping duty on part of that price.  
31.	The Tribunal adopted Mr Chaisty’s criticism of HMRC for failing to cross-examine Umbro’s witnesses on “large parts of their evidence…claiming that PNH acted as Umbro’s buying agent”, and for not putting to them the case that PNH acted as DHS’s buying agent or as principal.  I observe in passing that, in reproving HMRC on this head, the Tribunal commented:
“Fortunately, we consider ourselves able to overcome that problem.”

32.	The word ‘fortunately’ was itself an unfortunate one to use in the circumstances.  However, it seems to me that the reproof was unmerited in any event.  All the examples of failure to cross-examine given by Mr Chaisty in his written closing submissions to the Tribunal relate to characterisation by Mr Jones and Mr Chung of the relationship between PNH and Umbro. Cross-examination of Umbro’s witnesses on their opinions of the nature of the legal relationship between the parties would have been irrelevant.  It is the underlying facts which are the fit subject of cross-examination.  After Mr Angiolini had elicited answers from Mr Jones which used the words “supply” and “supplies” in relation to PNH’s role it was legitimate for him not to cross-examine further.  I therefore reject Mr Chaisty’s submission that there was no relevant challenge to the evidence of Mr Jones or Mr Chung on these heads.
33.	In argument, Mr Chaisty attached significance to Mr Jones’s evidence that, in the event of products supplied being substandard, Umbro would consider DHS to be ultimately liable.  Umbro would notify PNH, which would take the matter up with DHS on its behalf.  However there was no evidence that this situation had ever happened; so, again, Mr Jones’s evidence was merely his opinion as to what might happen based on his analysis of the relationships.  As such, the Tribunal was entitled to attach no weight to it. 

	   Umbro’s internal systems
34.	Prints from a computer screen of an internal Umbro system used to record the details of intermediaries and factories was relied on by Umbro in support of the assertion that PNH was a buying agent.  The Grounds of Appeal assert that the Tribunal erred in determining that those internal systems were of little help to it.  However, Mr Jones accepted under cross-examination that the screen prints may have been created after the event and that they did not show anything conclusive about PNH.  At best they seem to me to show that PNH was not the manufacturer of the imported goods, a fact which is now undisputed in any event.  Again, the Tribunal’s finding was in my view correct.

The 2006 Agreement
35.	On 21st August 2006, Umbro and PNH entered into a written agreement called a Buying and Sourcing Agreement (“the Agreement”) regulating the relationship between them for the future.  The Agreement provided for two differences from the previous practice, namely that PNH’s commissions were stipulated at a fixed rate and were to be shown separately on PNH’s invoices to Umbro. Since then, HMRC have acted on the basis that PNH’s profit element provided for by the Agreement constitutes buying commission. 
36.	Umbro asserts that as the Tribunal had found that there was no material change in the operations of the parties after the agreement was entered into, it should have given weight to the fact that HMRC had accepted the Agreement as evidence of a buying agency.
37.	A number of points arise.  First, the Tribunal appears in context to have made a logical deduction from submissions, rather than a finding of fact, that “there is nothing to indicate any material change” between previous practice and the Agreement.  Be that as it may, the Tribunal made the observation (or finding) in support of its decision that there was no agency.  The Tribunal regarded the role of PNH under the Agreement as one of principal, not buying agent.  
38.	Mr Chaisty submitted that the Tribunal’s observations missed the point, which was that HMRC have accepted that PNH is a buying agent under the Agreement, in circumstances where the underlying relationship between PNH and Umbro is unchanged in any material respect.  The short answer to this is that, as is evident from Mr Angiolini’s submissions to this Court and to the Tribunal on behalf of HMRC, HMRC do not regard themselves as bound by their current treatment of customs duty payable as a result of the Agreement.  Mr Angiolini submitted, for example, that the Agreement renders PNH primarily and solely liable for the products supplied and for any consequential loss or damage and that PNH is required to maintain product liability. Depending on the result of this appeal, HMRC may well review the position.
39.	Thirdly, it seems to me that the Tribunal was right in holding that HMRC’s attitude to the Agreement cannot govern the legal analysis of earlier and different transactions.  The transactions covered by the Agreement were not in issue before the Tribunal. I therefore accept Mr Angiolini’s submission that HMRC’s conduct in relation to the Agreement is of limited relevance to the question of whether PNH was or was not acting as a buying agent in relation to supplies predating the Agreement.

	  Relative weight
40.	Mr Chaisty submitted that the Tribunal attached insufficient weight to facts found as to the role assumed by PNH.  By contrast, he said that the Tribunal attached disproportionate weight to the terms and conditions incorporated in the purchase orders placed with PNH.  I will deal with these matters in turn.  
41.	It was said that the Tribunal failed to give due weight to the following facts,:
•	The length of time (15 years) that Umbro had used PNH,
•	that PNH could only use factories approved by Umbro, 
•	that DHS knew of Umbro’s existence (and that there could have been an undisclosed principal), 
•	that Umbro knew that DHS was the manufacturer,
•	that PNH was responsible for typical services provided by a buying agent, namely: negotiating prices with manufacturers, visiting suppliers, obtaining samples, scheduling delivery dates, ensuring that products fell within quotas, for performing quality control functions according to Umbro’s specifications and for insuring goods.  Such services are those of a buying agent within WCO Explanatory Note 2.1 para 9. 
42.	In my judgment the Tribunal was entitled to decide that these matters, weighed against others, did not provide sufficient evidence of a buying agency.  In fact, the Tribunal dealt with these matters against the evidence of Mr Jones, considering that his choice of wording indicated that it was PNH which selected the manufacturer and the supply chain.  Again, in the context of Mr Jones’s evidence, the Tribunal considered that by producing a list of approved factories Umbro was exercising control over PNH’s supply chain.  It seems to me that the Tribunal took all relevant matters into account and came to a reasonable conclusion as to the overall weight and significance to be attached to them.   Similarly, the Tribunal was entitled to find that the functions which PNH undertook were neutral to the question of whether or not there was an agency.  They were, in context, capable of being performed both by an agent and by a person acting as principal on its own behalf.
43.	On the other hand, the Tribunal did attach weight to the standard terms & conditions printed on the back of each purchase order.  Mr Chaisty said that they were included as a matter of course and should carry little weight.  In particular, they should not control the interpretation of the transaction since they were received in the case of each order after the price had been agreed and thus after the contractual relationship had been entered into.  The Tribunal said (at paragraph 53),
“…it is suggested that we should ignore the only documentary evidence before us specifically to deal with Umbro’s contractual arrangements with PNH…[T]o do so would, in our judgment, be to accept Umbro’s unilateral interpretation of the content of the terms and conditions.  Our consideration of the terms and conditions as a whole points to their indicating that PNH acted as principal in all the transactions. ”
44.	Although a written agency contract is not a pre-requisite, (see para 7 of the WCO Commentary 17.1) documentation is an important factor, as is shown by paras 5-9 of that Commentary and the authorities reviewed by the Court of Appeal in the Chuan Soon Huat case.
45.	The terms and conditions on which the Tribunal relied were, it is to be inferred, those to which they were directed by Mr Angiolini in closing submissions.  First, the purchase order was addressed to PNH, described as “the supplier” with no mention of agency.  
46.	Secondly, they imposed obligations which pointed towards a liability as principal, such as the incidence of risk, warranty as to quality and provision as to refunds for unsatisfactory goods.  Thirdly, PNH was liable, at its own cost, to provide product liability insurance for the goods. Those are matters which are relevant and in accordance with the WCO Commentary 17.1.
47.	The terms and conditions tie in with the facts that all invoices from DHS were addressed to PNH which in turn invoiced Umbro, that all payments were made by PNH and all debit notes were issued by Umbro to PNH.  While that is not necessarily inconsistent with Umbro acting as undisclosed principal, the Tribunal considered that there was no or insufficient evidence that PNH was merely facilitating a contract between DHS and Umbro or otherwise to support a finding of agency.
48.	There is the further fact that the relationship between PNH and DHS could have a bearing on the ability of PNH properly to represent Umbro’s interests as its agent. This again is a matter referred to the WCO Commentary 17.1, (para 12).

Variable commission/mark-up
49.	A variable commission is not in itself an indication that the intermediary is not a buying agent.  It is neutral.  That is implicit in the WCO Explanatory Note 2.1 para 5.  As Lord Jessel MR observed in Ex p. Bright re Smith (1879) 10 Ch D 566 at 570,
“…there is nothing to prevent the principal from remunerating the agent by a commission varying according to the amount of profit obtained by the sale.  At present there is nothing to prevent his paying a commission depending on the surplus which the agent can obtain over and above the price which will satisfy the principal.  The amount of commission does not turn the agent into a purchaser.”

50.	Thus in my judgment the Tribunal, having considered the matter, was entitled to reach the conclusion that in the absence of any formal agreement as to the amount of commission, PNH derived its profit from a variable mark-up appropriate to a principal. There was a single overall price, negotiated without any control by Umbro over the amount retained by PNH out of that price, and PNH had complete freedom to purchase the goods at whatever price it could achieve.

   The logo
51.	The Tribunal’s decision contains one area of curious reasoning, and that is in relation to the logos on Umbro’s branded goods.  As I have said, the logo was integrally incorporated into Umbro’s football shirts to prevent piracy.  The Tribunal was evidently attracted by the argument that, as a result, Umbro products could only be sold to Umbro.  No factory would be able to manufacture such a product speculatively and then find another buyer for them.    Mr Chaisty’s submission was therefore that PNH could only ever act as Umbro’s agent in ordering the goods.  The Tribunal said two things about this.  First, in para 48:
“We accept that a product bearing the Umbro label and marked with its unique identification label could only be sold to Umbro, as could, say, a replica England football shirt.  But no evidence was adduced to show that products complying with basic Umbro standards, but not containing its logo, could not be manufactured speculatively by a manufacturer and, provided they bore neither the Umbro logo nor Umbro’s identifying label, be sold to any other purchaser.  Without evidence that a product might qualify as an Umbro clothing product by having its logo stitched into it (as opposed to being merely superimposed), we are unable to accept Mr Jones’s claim as indicating that PNH acted as Umbro’s agent.”

	Secondly (at para 54):
“The only submission of Mr Chaisty we might have had difficulty in dealing with is that, since any Umbro logo bearing products can only lawfully be  manufactured for Umbro, PNH can only ever act as its agent in ordering its goods.  Prima facie the submission would seem impossible of rejection, but since all the remaining evidence indicates quite clearly that in the relevant period PNH acted as principal in its own right in dealing with [DHS], we regard the evidence as overriding the submission.  The informality of the arrangements between Umbro and PNH seems to point to the parties never having considered the true position of PNH, and thus never having determined their true relationship. ”

52.	I was told by both Counsel that the first observation was a frolic of the Tribunal’s own.  It is common ground that no such argument was advanced at the hearing.  Mr Angiolini said that it is not one on which he would wish to rely.  He says that Mr Chaisty’s submission was not “impossible of rejection”, whether prima facie or at all.    The answer, he submitted, is the logical one that the need for Umbro to give prior authority for the manufacture of branded products does not affect the relationship of the parties in the supply of those goods.  Thus Umbro could either authorise an agent to instruct the manufacturer to produce the goods, or it could authorise an intermediary who is not its agent to have the goods manufactured and agree to purchase the goods when made.  Provided Umbro has consented to the use of its logo, PNH can either be acting as agent or as principal. Which it is depends on factors other than the incidence of trademarks and copyright.
53.	HMRC have not served a respondents’ notice of appeal. However it is clear from the Tribunal’s second observation that it came to its decision because it considered that the other factors to which I have adverted outweighed the weight to be attached to the logo issue.  It seems to me that “prima facie impossible of rejection” was a curious phrase, but it is “prima facie” rather than the “impossible” which the Tribunal was intending to emphasise.  In those circumstances I accept Mr Angiolini’s submission that the decision should not be overturned on this ground.

Reference to DHS in para 20 of the Tribunal’s reasons
54.	Mr Chaisty relied on a reference in para 20 of the decision to DHS which, he submitted, “does not seem to amount to a simple mistake or slip”.    The paragraph reads as follows: 
“In addition to being a director of PNH, Mr Chung is also a director of Dongguan.  Ideally he would have given evidence of the contractual arrangements between Umbro and Dongguan, but did not do so.  His failure in that behalf did nothing to assist Umbro in proving that Dongguan [sic] acted as its buying agent; on the contrary, it indicated to us that he had nothing to contribute toi Umbro’s claim in that regard, and that Dongguan had no documentary evidence positively to support Umbro’s case.”
55.	I am not sure what point is being made, but the submission can be dealt with very shortly, as it seems to me plain beyond argument that the third reference to DHS in that paragraph was indeed a simple mistake or slip.

Conclusion
56.	In my judgment the Tribunal came to the right decision that Umbro had not discharged the burden of proving that PNH was its buying agent.  Even if I am wrong, the threshold for reversing the decision is, as was shown in Edwards v. Bairstow and Potter v. CEC, a high one.  As the evidence before the Tribunal was capable of supporting the finding which it in fact made, it cannot be said that the only reasonable conclusion on the facts was that PNH was a buying agent for Umbro.  I do not consider that any of the grounds of appeal, taken separately or as a whole, justifies interference with the Tribunal’s decision.