Revenue & Customs v Proctor & Gamble UK

Are Pringles “similar to potato crisps and made from the potato?” That is the question. Upon it hangs the question of whether rather a lot of money, as much as £100m of tax for the past and about £20m a year for the future according to Mr Christopher Vajda QC for the Commissioners for Her Majesty’s Revenue and Customs (“HMRC”), the appellants in this appeal.

“Pringle” is the trade mark of a very successful product of the respondent, Procter and Gamble (“P&G”). It is a manufactured savoury snack product. We are concerned with the variety known as “Regular Pringles”. It is described in detail in the decision of the VAT and Duties Tribunal (Dr John Avery Jones CBE and Catherine Farquharson BSc ACA). The following is taken from some of the findings of fact of the Tribunal (the full findings of primary fact are set out by Warren J in an appendix to his judgment, [2008] EWHC 1558 (Ch)). It is not necessary to set them all out here).

(2)

Regular Pringles are made from potato flour, corn flour, wheat starch and rice flour together with fat and emulsifier, salt and seasoning. The precise percentages of each ingredient of Regular Pringles have varied from time to time and are not identical in the range of flavours because, for example, the flavouring may affect the salt content. …

(4)

Regular Pringles are manufactured by mixing the dry ingredients into dough with water and emulsifier, cutting shapes out of a dough sheet, frying it for a few seconds, adding oil and salt, cooling it and then adding flavours. A similar procedure applies to maize (in US parlance, corn) chips like tortillas. Mr Hogg considered that the unique feature of Regular Pringles was that the manufacturing process causes oil to go into the spaces throughout the texture of the product replacing the water content removed during the frying. This gives the “mouth-melt” feel when it is eaten. By contrast with potato crisps most of the fat stays on the surface.

(5)

Regular Pringles have a regular shape in the form of a saddle, which aids stacking them enabling high production speeds. They are a uniform pale yellow colour, which is paler than a potato crisp. They have a crisp texture.

The recipe for Regular Pringles has varied somewhat. Of importance in this case is the amount of potato flour. In the final product this amount has hovered around 40% - sometimes a little more, sometimes a little less. Currently it is 42%.

Food products are generally zero-rated for VAT purposes; see Schedule 8, Group 1 of the VAT Act 1994. However there are some excepted items. Item 5 reads:

“5.

Any of the following when packaged for human consumption without further preparation, namely, potato crisps, potato sticks, potato puffs and similar products made from the potato, or from potato flour, or from potato starch, and savoury products obtained by the swelling of cereals or cereal products; and salted or roasted nuts other than nuts in shell.”

The question I posed at the outset is based upon item 5. The language of the question has its meaning to be derived from that context.

There is really little else of context that is suggested to be relevant to construction. In particular it is common ground that Art. 28.2 of the Sixth Directive (Art. 110 of the Recast Directive) permits zero rating in this case, but does not require it or provide any aid to construction. The only other possible aid to construction, one relied upon by Mr Roderick Cordara QC for P&G, emerges from Item 2 of the excepted items (see below).

The Tribunal answered the question “yes”, so that Regular Pringles fell to be standard rated. On appeal, Warren J answered the question “no”, so that the product would be zero rated. Arden LJ granted permission for this second appeal on the papers.

Although Mr Christopher Vajda QC for HMRC opened the appeal by attacking the judgment of Warren J rather than concentrating upon the decision of the Tribunal (which of course he contended was correct) in the end counsel were agreed that what really mattered was whether the decision of the Tribunal was wrong in law. For it is the Tribunal which is the primary fact finder. It is also the primary maker of a value judgment based on those primary facts. Unless it has made a legal error in that in so doing (e.g. reached a perverse finding or failed to make a relevant finding) or has misconstrued the statutory test it is not for an appeal court to interfere. This has been said in other contexts e.g Osmani v Camden LBC [2007] EWCA Civ 1281 at [34] (“…the main focus of attention on a second appeal such as this should be on the decision of the Council rather than that of the County Court Judge on appeal” per Auld LJ and Waltham Forest LBC v Maloba [2007] EWCA Civ 1281 at [19] per Toulson LJ). The same applies for the same reasons to appeals from this Tribunal.

The effect of this principle in this case is that although P&G is the respondent to this second appeal, in reality it is necessary for P&G to show that the Tribunal erred in law. The Judge held that it had. Of course his reasons why need to be examined, but in the end the focus is on the Tribunal decision.

Often a statutory test will require a multi-factorial assessment based on a number of primary facts. Where that it so, an appeal court (whether first or second) should be slow to interfere with that overall assessment – what is commonly called a value-judgment.

I gathered together the authorities about this in Rockwater v Technip [2004] EWCA (Civ) 381:

[71] … In Biogen v Medeva [1997] RPC 1 at p. 45 Lord Hoffmann said when discussing the issue of obviousness:

“The need for appellate caution in reversing the judge’s evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance (as Renan said, la vérité est dans la nuance), of which time and language do not permit exact expression, but which may play an important part in the judge’s overall evaluation. It would in my view be wrong to treat Benmax as authorising or requiring an appellate court to undertake a de novo evaluation of the facts in all cases in which no question of the credibility of witnesses is involved. When the application of a legal standard such negligence or obviousness involves no question of principle but is simply a matter of degree, an appellate court should be very cautious in differing from the judge’s evaluation.”

[72] Similar expressions have been used in relation to similar issues. The principle has been applied in Pro Sieben Media v Carlton [1999] 1 WLR 605 at pp. 613-614 (per Robert Walker LJ) in the context of a decision about “fair dealing” with a copyright work; by Hoffmann LJ in Re Grayan Building Services [1995] Ch 241 at p.254 in the context of unfitness to be a company director; in Designer Guild v Russell Williams [2000] 1 WLR 2416 in the context of a substantial reproduction of a copyright work and, most recently in Buchanan v Alba Diagnostics [2004] UKHL 5 in the context of whether a particular invention was an “improvement” over an earlier one. Doubtless there are other examples of the approach.

[73] It is important here to appreciate the kind of issue to which the principle applies. It was expressed this way by Lord Hoffmann in Designer Guild:

“Secondly, because the decision involves the application of a not altogether precise legal standard to a combination of features of varying importance, I think that this falls within the class of case in which an appellate court should not reverse a judge’s decision unless he has erred in principle.”

It is also important to bear in mind that this case is concerned with an appeal from a specialist Tribunal. Particular deference is to be given to such Tribunals for Parliament has entrusted them, with all their specialist experience, to be the primary decision maker, see per Baroness Hale in SH (Sudan) at [30] cited by Toulson LJ.

In its full form the statutory question merely re-stated is whether Pringles are “similar [to potato crisps, potato sticks, potato puffs] and made from the potato, or from potato flour, or from potato starch.”

As Toulson LJ observed in oral argument, it is a composite question. So although it is convenient to ask separately whether Pringles are “similar” to potato crisps etc and whether they are “made from potato”, one must also take into account the composite nature of the question. Moreover it is, to my mind, precisely the sort of question calling for a value judgment of the sort to which the Biogen principle applies.

Before going further, I have this general observation. This sort of question – a matter of classification - is not one calling for or justifying over-elaborate, almost mind-numbing legal analysis. It is a short practical question calling for a short practical answer. The Tribunal did just that.

In so stating I am saying no more than was said by Lord Woolf MR in CCE v Ferrero [1997] STC 881 at p.884:

“I commend the Tribunal for the care which it took over this matter, but I am bound to say that, no doubt because of the submissions which were made to it by the parties, the treatment of the issue which was before it, was far more elaborate than was necessary. I do urge Tribunals, when considering issues of this sort, not to be misled by authorities which are no more than authorities of fact into elevating issues of fact into questions of principle when it is not appropriate to do so on an inquiry such as this. The Tribunal had to answer one question and one question only: was each of these products properly described as biscuits or not? If it had confined itself to that issue which is, and has to be, one of fact and degree, then the problems which subsequently arose would have been avoided.”

The same applies to an appeal court, indeed even more so when the Biogen principle comes into play for an appeal court is then only concerned as to whether there was an error of law.

First, then, is a Pringle “similar to a potato crisp etc?” Or to be more precise was the Tribunal wrong in law so to hold? As I have said it made its primary findings of fact as set out in the Annex to Warren J’s judgment. Those findings are unchallenged. They include comparisons with corresponding aspects of a potato crisp (e.g. “This gives the ‘mouth-melt’ feel when it is eaten. By contrast with potato crisps [where] most of the fast stays on the surface”; and “they are a uniform yellow colour which is paler than a potato crisp.”)

The Tribunal then went on to consider each side’s arguments. Its essential reasoning on similarity is contained in [13-15]. At [13] it discounted three matters (the fact that the product is made from a flour, a reference on P&G’s website and a Customs classification). Neither side suggests any error there.

So it is [14] and [15] which contain the essential reasoning:

[14] We are reluctant to grade the other factors to be considered, as the Tribunal did in the Pringles Dippers case, [I shall refer to this below] who took the ingredients as the most important, the size of packaging, marketing for dipping, manufacture, appearance and taste apparently in that order (or at least taking the first three as the most important in that order). We consider that the reasonable man applies the test as a whole without applying an order. However, we do not regard the shape of Regular Pringles as particularly important to this test given the wide variety of products on the market. Nor do we regard the size of packaging as particularly important. While potato crisps may primarily be sold in smaller packs, they are often sold in larger packs, and occasionally in tubes, and a smaller proportion of Regular Pringles are sold in smaller packs. While we are aware of the potato content, the reasonable man may not be aware of the fact that a normal potato crisp has a maximum potato percentage in the 70s, the next largest ingredient being fat, or that Regular Pringles have a potato content of about 42 per cent because this is not required to be stated on the packaging. While the potato content of Regular Pringles is not advertised as such, a purchaser can see from the label that it does contain potato.

[15] Standing back and taking all the factors of appearance, taste, ingredients, process of manufacture, marketing and packaging together (other than the ones we have stated above that we should ignore) and applying the reasonable man test in test (a), we consider that while in many respects Regular Pringles are different from potato crisps and so they are near the borderline, they are sufficiently similar to satisfy that test.

I cannot see anything wrong, still less anything wrong in principle, with this. It was not incumbent on the Tribunal in making its multifactorial assessment not only to identify each and every aspect of similarity and dissimilarity (as this Tribunal so meticulously did) but to go on and spell out item by item how each was weighed as if it were using a real scientist’s balance. In the end it was a matter of overall impression. All that is required is that “the judgment must enable the appellate court to understand why the judge reached his decision” (per Lord Phillips MR in English v Emery [2002] EWCA Civ 605, [2002] 1 WLR 2409 at 19]) and that the decision “must contain .. a summary of the Tribunal’s basic factual conclusion and statement of the reasons which have led them to reach the conclusion which they do on those basic facts” (per Thomas Bingham MR in Meek v Birmingham City Council [1987] IRLR 250). It is quite clear how this Tribunal reached its decision. In the words of Sir Thomas Bingham in Meek the parties have been told “why they have won or lost.”

I should say a word about the Tribunal’s reference to the “reasonable man”. It may come from this court’s use of him in Ferrero. The issue was whether the product concerned was “a biscuit” within the meaning of excepted item 2 of Schedule 8 Group 1. The Tribunal had used the test of “what view would be taken by the ordinary man in the street who had been informed as we have been informed.” This Court accepted that approach.

To my mind this approach is saying no more than “what is the reasonable view on the basis of all the facts” – it does not matter if some of the facts would not be known to the “man in the street.” That is why the test accepted as proper in Ferrero adds “who had been informed as we have been informed.” The uninformed view of the man in the street is deliberately not being invoked.

So one can put the test for an appeal court considering this sort of classification exercise as simply this: has the fact finding and evaluating Tribunal reached a conclusion which is so unreasonable that no reasonable Tribunal, properly construing the statute, could reach?

The Tribunal here perhaps concerned itself a little too much with how much the man in the street would know about the potato content of Pringles. It does not matter - one of the factors to be considered in judging similarity is, to my mind, clearly potato content.

The Judge was persuaded that the Tribunal had misread the language of the statute. He thought one should disregard the potato content when considering the question of similarity. I cannot agree. As I have said similarity involves a question of degree and a multifactorial assessment of all the factors. One would not disregard the potato content if there were not the further requirement of “made of the potato”. I do not see why adding it makes any difference.

There really is no more to be said about similarity. Even, if I had any temptation to try to analyse its meaning further – which I do not - I should resist it.

The “made of potato” point is equally short. Mr Cordara’s primary submission (rejected by the Judge) was that the product should be 100% made of potato or nearly so. Mr Cordara said that followed from the normal use of language and was reinforced by a contrast with Item 2 of Sched. 8 Part 2 which in the context of “confectionery” excludes from the exception “cakes or biscuits other than biscuits wholly or partly covered with chocolate”. He pointed to wholly or partly making the advocate-type point that if Parliament had intended to include a product made wholly or partly of potato in Item 5 it knew how to say it and did not do so.

I reject these submissions. First the normal use of language does not compel that conclusion. As Mummery LJ said in the course of argument, if it were right a marmalade made using both oranges and grapefruit, would be made of neither – a nonsense conclusion.

Secondly, not even potato crisps or potato sticks (no-one knew about potato puffs, even what they were) are 100% potato. So it is improbable that Parliament intended that a product, to be similar, must do so.

Thirdly the Item 2 “wholly or partly” point is not helpful. One can equally well say that when Parliament wanted to say “wholly” it said so. The different classes are essentially free-standing: so there is no reason to suppose that the draftsman trawls over each for an unnecessarily elaborate consistency between them.

If that point failed, Mr Cordara’s alternative submission was that the product should have a sufficient content of potato to give it a quality of what he called “potatoness”. Implicit in the submission was a challenge: if 100% potato is not called for, what is the lower limit?

I reject that submission too. As to “potatoness” I cannot think Parliament intended to invoke such an elusive test. It is an Aristotelian question: does the product have an “essence of potato”. Moreover I have no real idea what the suggested test means: when pressed Mr Cordara could not provide any further elucidation. It cannot be taste, partly because potato chips have lost all or nearly all of the natural taste of a potato, even when some overpowering flavour such a cheese and onion has not been imposed. And I do not see that it can be anything else besides taste.

What then of the lower limit challenge? I am reminded of what Justice Holmes wrote:

“When he has discovered that a difference is difference of degree, that distinguished extremes have between them a penumbra in which one gradually shades into the other, a tyro thinks to puzzle you by asking you where you are going to draw the line and an advocate of more experience will show the arbitrariness of the line proposed by putting cases very near it on one side or the other, Law and Science in Law Collected Legal Papers 1921, pp.232-233,”

Putting the point another way: you do not have to know where the precise line is to decide whether something is one side or the other.

The Tribunal said:

[17] Here the potato flour content is over 40 per cent; it is the largest single ingredient by about 9 percentage points; and it is nearly three times larger than the other flours in the ingredients taken together. We have to give a yes or no answer to the question “are Regular Pringles [partly] made from the potato, from potato flour or from potato starch” and we are bound to say yes. There are other ingredients but it is made from potato flour in the sense that one cannot say that it is not made from potato flour, and the proportion of potato flour is significant being over 40 per cent. The fact that it is also made from other things does not affect this.

I cannot begin to see anything wrong with that, still less that that was not a conclusion which any reasonable Tribunal could reach. There is more than enough potato content for it to be a reasonable view that it is made from the potato.

The Judge thought that the statutory language required the potato content of the product concerned should be the same, or about the same, as that of a potato crisp etc (i.e. excluding the oil). I do not see why. Moreover as Mr Vajda pointed out, the potato content of crisps varies over a not insignificant range so the test is inherently uncertain.

To my mind the Judge’s test (not advanced primarily by Mr Cordara before him or supported as his primary argument on this appeal) suffers from that wooliness objection, but the real objection is that it is just too elaborate. The statute is simply posing a kind of jury question “is it similar to a potato crisp etc and made of potato?” The question is not capable of elaboration or complex analysis.

I turn to Mr Cordara’s “reasons” attacks. The Judge rejected these. Mr Cordara’s principal argument before us on this point was not dealt with by the Judge – it was not raised before him. Nor is it in the Respondent’s Notice or Mr Cordara’s lengthy skeleton argument before us either. But no matter, I will deal it.

The point was based on a comparison with paragraph [12] of the Tribunal’s decision and paragraph [15], quoted above. Since a proper understanding of [12] requires citation also of the immediately preceding material, I set it out here:

[10] … Mr Cordara contended that the intention of Parliament was clear in requiring that potato, potato flour or potato starch (or a combination of them) should be the overwhelming ingredient.

[11] Regular Pringles are a unique product in ingredients, taste, and shape, and so asking whether they are similar to potato crisps as required by test (a) is a difficult task. Each party produced an impressive list of ways in which they were similar, or dissimilar, to potato crisps. In Quaker Oats it was agreed that test (a) was that of the ordinary reasonable man in the street which should take into account appearance, taste, ingredients, process of manufacture, marketing and packaging.

[12] As Mr Cordara stated, the answer to the test depends on the level of generality at which it is posed. But if we are to take account of all the factors of appearance, taste, ingredients, process of manufacturer, marketing and packaging, it is clearly wrong to say that Regular Pringles are similar to potato crisps as a crispy savoury snack, with potato content, made by frying, and marketed as a snack.

Mr Cordara submitted that at [12] the Tribunal was making an initial finding of dissimilarity but at [15] it concluded the opposite. There was no explanation for the volte face – hence the decision lacked reasons.

I do not accept this. It would be a most astonishing thing for such an experienced Tribunal to take such a bizarre course. I would only conclude that it had done so if there were no other explanation. There is such an explanation: [12] is merely recording Mr Cordara’s argument, not stating any conclusion, provisional or otherwise. That appears both from the face of the decision itself and from an examination of the arguments before the Tribunal.

As to the face of the decision, it is true that [9] onwards comes under the heading “Reasons for our decision” and that there is an earlier heading “Contentions of the Parties”. But it is clear that the “reasons” also include references to the parties’ contentions: for instance the passage before the above-quoted last sentence of [10] refers to Mr Hill's contentions for HMRC. And the last sentence of [10] refers to Mr Cordara’s contentions. [12] itself actually opens with an express reference to Mr Cordara’s argument. The second sentence is merely a continuation of it. If it were not, then it would have no logical place following the first sentence – which in turn would have just been left hanging.

As to the course of argument before the Tribunal, following the hearing we had written submissions from both sides about it. Notwithstanding the deeply analytical note of Mr Cordara – ending with the suggestion we should ask the Tribunal if we had any doubt – I am persuaded by Mr Vajda’s note and the transcripts quoted that the Tribunal in its second sentence was indeed just reciting the upshot of what it understood Mr Cordara to be submitting.

So the main “reasons” argument fails. As far as the reasons argument originally advanced is concerned, I have already dealt with it at [19] above and have no more to add.

Finally I should say a word about a decision of a differently constituted Tribunal concerning a product called Pringles Dippers (2003) VAT Decision 18381. It was decided that this was zero-rated. Part of the decision was devoted to the question of whether a Pringle Dipper was “made from the potato.” It was held not, although the amount of potato was broadly the same as for a Regular Pringle. The present Tribunal took the view that the earlier Tribunal had erred in law this respect, though there were other reasons (having no parallel with the present case) why the ultimate decision was justifiable. The present Tribunal were entitled to take that view – there is no rule of stare decisis between Tribunals of co-ordinate jurisdiction. Rightly it did so only when convinced the earlier decision was wrong – for broadly Tribunals should strive to achieve consistency amongst themselves. But once so convinced it was its duty to apply the law as it considered it to be. As far as we are concerned it was the present Tribunal which approached the question “made from the potato” correctly in law.

In the result I would allow this appeal.

I agree. I add my own comments because we are disagreeing with the closely reasoned judgment of Warren J although (as the other members of the court have emphasised in their judgments) the focus of attention is the decision of the VAT and Duties Tribunal.

The Tribunal was faced with a question of classification. It had to decide whether Regular Pringles fell within the category of

“Any of the following when packaged for human consumption without further preparation, namely, potato crisps, potato sticks, potato puffs, and similar products made from the potato, or from potato flour or from potato starch…” (Emphasis added)

Determining whether Regular Pringles should be so classified requires a combination of fact finding and evaluative judgment. It is a question of fact whether Regular Pringles are “packaged for human consumption without further preparation”, to which the undisputed answer is that they are. The question of similarity requires an evaluative judgment. The question whether the product falls within the expression “products made from the potato etc, is a mixed question of fact and interpretation.

Parliament has designated a specialist Tribunal to determine these matters. In reviewing the Tribunal’s decision, it is right to bear in mind the cautionary words of Baroness Hale in Secretary of State for the Home Department v AH (Sudan) [2007] UKHL 49, para 30, which were expressed in an asylum appeal but were clearly not intended to be limited to that area:

“This is an expert Tribunal charged with administering a complex area of law in challenging circumstances. To paraphrase a view I have expressed about such expert Tribunals in another context, the ordinary courts should approach appeals from them with an appropriate degree of caution; it is probable that in understanding and applying the law in their specialised field the Tribunal will have got it right: see Cooke v Secretary of State for Social Security [2001] EWCA Civ 734, [2002] 3 All E R 279, para 16. They and they alone are the judges of the facts. It is not enough that their decision on those facts may seem harsh to people who have not heard and read the evidence and arguments which they have heard and read. Their decisions should be respected unless it is quite clear that they have misdirected themselves in law. Appellate courts should not rush to find such misdirections simply because they might have reached a different conclusion on the facts or expressed themselves differently.”

To determine whether different things are to be treated as similar, the question has to be put in a context. The Tribunal therefore began by considering the history and purpose of the legislation. It noted that VAT took over an existing purchase tax category and that the wording of exempted group 5 was the same as the 1969 purchase tax wording. It observed that one could detect an intention by Parliament to tax food not normally bought primarily for nutrition but eaten as snacks – the sort of food that might have been purchased with pocket money in a sweetshop in the 1960’s, as distinguished from more nutritional foods that would be purchased from a grocery shop. But it added that the industry has changed very considerably since the 1960’s, and that singling out potato products now seems strange given the variety of savoury snacks on the market, many of which do not have any potato content. Because of the age of the legislation and the considerable changes in the market since then, it said that it found little help in the purpose of the legislation in deciding the present question; but it accepted the Commissioners’ contention that in general the intention of Parliament was to standard-rate food that was not purchased primarily for the purpose of nutrition.

The Tribunal went on to observe that the legislation imposed a double test: (a) whether the product is similar to potato crisps etc; and (b) whether it is made from the potato or from potato flour, etc. Having set out detailed findings about the content, method of production, shape, texture, taste, usage and marketing of Regular Pringles, as compared with potato crisps, it expressed its conclusions about similarity in the passage set out by Jacob LJ in para 18.

The Tribunal considered next whether the product was made from the potato, potato flour or potato starch. It disagreed with the view taken by the Tribunal in the Pringles Dippers case that this phrase required the product to be made wholly (or substantially wholly) from the potato etc. It concluded that the product was made from potato flour within the meaning of the statute, because it contained a significant proportion of potato flour, being over 40%, and that it did not matter that it was also made from other things. It declined to specify a minimum proportion that would satisfy the statutory test.

Warren J allowed P&G’s appeal because he held that on the facts found by the Tribunal the product was not made from the potato or from potato flour or from potato starch.

On this issue I disagree with Warren J, and agree with Jacob LJ that there was nothing wrong with the approach taken by the Tribunal.

The expression “similar products made from the potato or from potato flour or from potato starch” is a composite phrase. The words “made from the potato, or from potato flour, or from potato starch” qualify the preceding words “similar products” and exclude savoury snacks made from other vegetables, such as tortilla chips (which are made from maize).

I do not read the phrase as requiring that the products should be made wholly (or substantially wholly) from the potato or potato derivative, as P&G argue; nor would I agree with the qualified version of that test adopted by Warren J, which would exclude from consideration the oil content, because that was what was used to cook the ingredients, but would require the product otherwise to consist wholly (or substantially wholly) of potato or potato flour or potato starch. In adopting that qualified version, Warren J was mindful of the fact that the potato crisp, which is the statutory comparator, has typically a percentage of potato around 60, and is therefore not made wholly, or substantially wholly, of potato in any literal sense.

One way of testing a suggested construction is to consider its practical application. I found it telling that Mr Cordara was unable to suggest any type of product that would fall within the expression “similar products made from the potato, or from potato flour, or from potato starch”, if the words “made from ….” bear the meaning for which he primarily contended, or the qualified version adopted by Warren J.

Nor would I accept Mr Cordara’s alternative submissions, for the reasons given by Jacob LJ.

By contrast, the approach taken by the Tribunal accorded to the words “similar products made from…” a fair and natural meaning. Parliament not having specified a minimum percentage below which a product should not fairly or sensibly be considered to be “made from the potato etc”, the Tribunal was wise not to specify one. To do so was not only unnecessary, but would have been to legislate under the guise of interpretation.

On the question of similarity, Mr Cordara was critical of the Tribunal for saying that it did not regard the shape of Regular Pringles or the size of the packaging as particularly important factors. But those are classic examples of matters which were for the judgment of the Tribunal, and their view cannot be said to have been perverse. Otherwise, Mr Cordara did not suggest that the Tribunal either took into account any matters which it ought not to have taken into account or failed to take into account any matters which it ought to have taken into account. His primary criticisms are that the Tribunal failed properly to evaluate the various factors, because it failed to weight or grade them appropriately, and that it failed to give adequate reasons for its conclusion. The two criticisms are interlinked.

Where a Tribunal has taken into account all relevant factors, and has not been influenced by impermissible factors, a court will only exceptionally entertain a challenge based on the Tribunal’s evaluation of those factors for the reasons given by Baroness Hale in AH. The challenger would have to show that the decision was perverse, and in this case there is simply no foundation for such a challenge. The Tribunal was not obliged to accord a separate grading for each factor. It was entitled, as it did, to look at the matter in the round.

As to the complaint about inadequacy of reasons, in W v Leeds City Council [2005] EWCA Civ 988 Wall LJ at para 53 (with the agreement of the Judge LJ at para 40 and Thomas LJ at para 45) described the following passage from the judgment of Sir Thomas Bingham MR in Meek v Birmingham City Council [1987] IRLR 250 as “the definitive exposition of the attitude superior courts should adopt to the reasons given by Tribunals”:

“It has on a number of occasions been made plain that the decision of an Industrial Tribunal is not required to be an elaborate formalistic product of refined legal draftsmanship, but it must contain an outline of the story which has given rise to the complaint and a summary of the Tribunal’s basic factual conclusions and a statement of the reasons which have led them to reach the conclusion which they do on those basic facts. The parties are entitled to be told why they have won or lost. There should be sufficient account of the facts and of the reasoning to enable the EAT or, on further appeal, this court to see whether any question of law arises… ”

The Tribunal’s decision passed that test by an ample margin. A reader can tell from it why P&G lost, and the reasoning is quite sufficient to enable the court to see whether any question of law arises.

Mr Cordara was also critical of the way in which the Tribunal applied the “ordinary man in the street” test, which received the blessing of this court in Ferrero UK Limited [1997] STC 881. I rather regret the introduction of the ordinary man in the street into this area, because I do not regard it as necessary and it has led on to a distracting argument about what knowledge should be attributed to that hypothetical person. I agree with Jacob LJ that the approach approved in Ferrero really amounted to saying no more than that it was for the Tribunal to decide what was the reasonable view on the basis of all the facts known to the Tribunal; and it conveys that this is not a scientific question. In determining that question I do not see that any advantage is gained by referring to the hypothetical ordinary person in the street.

Warren J considered that, even if the Tribunal was right on the “made from” issue, the matter ought to be remitted for rehearing for two reasons; because the amount of potato contained in Regular Pringles had been taken into account as such, whereas it ought only to have been taken into account as a factor in assessing whether the product was made from the potato, etc; and because the Tribunal may have imputed an incorrect extent of knowledge to the reasonable man.

As to the second point, I consider with respect that the judge attached too much significance to what the Tribunal said about the reasonable man in the passage set out by Jacob LJ at para 18, and I do not regard it as vitiating its overall conclusion.

As to the first point on which Warren J would have remitted the matter for rehearing, although the statutory test has two limbs, it is nevertheless a composite test, and I can see no error of law on the part of the Tribunal in taking into account the potato content in addressing the issue whether the product was a “similar product made from the potato…” It was entitled to regard it as an obviously relevant factor.

I too would allow the appeal and restore the decision of the Tribunal.

We should allow this appeal. As explained by Jacob LJ, there was no error of law in the decision of the London VAT Tribunal, which could have justified Warren J’s order allowing P&G’s appeal from it.

There are a few points in Jacob LJ’s judgment, with which I fully agree, on which I add comments in my own words.

The issue for decision on an appeal on a point of law, at whatever level, should be accurately formulated. Contrary to an assumption underlying some of the submissions the issue on this appeal is not the same issue as was before the Tribunal at first instance.

It was for the London VAT Tribunal to decide whether P&G’s Regular Pringles were “similar to” potato crisps and “made from” the potato. The Tribunal had to ascertain the relevant facts. It did so and set them out with exemplary care and clarity in its excellent judgment. It then applied the relevant parts of the VAT legislation to the facts and reached concisely reasoned conclusions.

There was a hopeless attempt in this court to challenge the adequacy of the Tribunal’s reasons. P&G’s complaint was that they did not know why the Tribunal had decided the case against them. In my view, the judgment, read as a whole, as it ought to be, leaves the fair minded reader in no doubt as to why P&G lost the argument. I agree that the reasoning in the concluding paragraphs is concise. That is a commendation, not a criticism.

The Tribunal’s decision in favour of HMRC was not an absolute answer to a pure question of fact or to a pure question of law. It was a judgment of mixed fact and law on the classification of Regular Pringles for VAT purposes. “Similar to” and “made from” are loose textured concepts for the classification of the goods. They are not qualified by words such as “wholly” or “substantially” or “partly” which have crept into the legal arguments. Those words are not in the legislation itself. The Tribunal’s conclusions were on matters of fact and degree linked to comparisons with other goods and related to the composition of the goods themselves. Some aspects of the similarity of Regular Pringles to potato crisps are close to the centre, others are on the fringes. This exercise in judgment is pre-eminently for the specialist Tribunal entrusted by Parliament with the task of fact finding and with using its expertise to make the first level decision, subject only to appeal on points of law.

For such an appeal to succeed it must be established that the Tribunal’s decision was wrong as a matter of law. In the absence of an untenable interpretation of the legislation or a plain misapplication of the law to the facts, the Tribunal’s decision that Regular Pringles are “similar to” potato crisps and are “made from” the potato ought not to be disturbed on appeal. I cannot emphasise too strongly that the issue on an appeal from the Tribunal is not whether the appellate body agrees with its conclusions. It is this: as a matter of law, was the Tribunal entitled to reach its conclusions? It is a misconception of the very nature an appeal on a point of law to treat it, as too many appellants tend to do, as just another hearing of the self-same issue that was decided by the Tribunal.

Linked with accuracy in the formulation of the issue on appeal is the primary interest of this court in the first instance decision on the Tribunal rather than in the intervening appellate judgment. The judgment at the first level of appeal, given in this case by Warren J, is detailed, complex and valuable. Formally it is the judgment from which the appeal is made to this court. Nevertheless, the judgment of the Tribunal is the one in which an error of law must be found in order to give legal grounds for an appeal to any level. I mention this because some of the submissions, even by HMRC which was successful in the Tribunal, concentrated too much on points arising from the judgment of Warren J.

In most cases this court finds it more helpful to begin at the beginning and to work forwards than to take the recent judgment on appeal and work backwards. There are, of course, exceptions to this approach, such as where it is obvious that the Tribunal has erred for short reasons stated in the appeal judgment. There are also cases in which it is equally obvious that the first appeal court has misconceived the nature of its function or has misunderstood the Tribunal’s judgment. In short, what I wish to get across to users of this court and their legal representatives is that a detailed critique of a complex first level appeal judgment is not always the best way of persuading this court that the Tribunal ran off (or, as the case may be, stayed on), the legal rails.

Although, for presentation purposes, the submissions were divided into “similar to” points and “made from” points I agree that the arguments on interpretation and application for the Tribunal all relate to a composite question for determining the VAT treatment of Regular Pringles.

In the course of his urbane submissions on the “made from” aspect of Regular Pringles Mr Cordara QC referred to “the potato as a fiscal contaminant”, the “essential characteristics of the paradigm potato crisp”, the absence of “findings of potatoness” and the “quantitative role of the potato.” In contending that Pringles (42% potato, 33% fat) were not “made from” the potato he put forward this proposition:

“If a product has a number of significant ingredients it cannot be said to be ‘made from’ one of them.”

So it is argued that Regular Pringles, which also contain fat and flour, cannot be said to be “made from the potato.”

The response to these points is that it is vital to recall why the Tribunal was required in the first place to answer the question whether the goods in question are “made from” the potato. It was not in answer to a scientific or technical question about the composition of Regular Pringles, or in response to a request for a recipe. It was for the purpose of deciding whether the goods are entitled to zero rating. On this point the VAT legislation uses everyday English words, which ought to be interpreted in a sensible way according to their ordinary and natural meaning. The “made from” question would probably be answered in a more relevant and sensible way by a child consumer of crisps than by a food scientist or a culinary pedant. On another aspect of party food I think that most children, if asked whether jellies with raspberries in them were “made from” jelly, would have the good sense to say “Yes”, despite the raspberries.