Procter & Gamble UK v Revenue & Customs (including Supplemental Judgment)

I have had lengthy written submissions from both sides and have heard full oral argument. The first matter I want to deal with falls under the head of policy. I hope I will be forgiven if I deal with this aspect briefly if only for the reason that I find appeals to policy in the context of this legislation of no help in resolving the issues before me.

I do not dissent from Mr Cordara’s proposition, established by case law, that the VAT legislation has to be construed against a clear understanding of the policy, but that can only mean such policy as can be established. The starting point is EU legislation which allows, on grounds of social policy, for the zero-rating of supplies. It is on that basis that the UK legislation has an exemption for food. There is, however, no requirement that any exclusion from exemption for certain types of food be justified by any social policy. It does not seem to me, therefore, that any policy in relation to the exception of items from zero-rating is to be found in the EU legislation.

Nor do I think that the exceptions from zero-rating need to be restrictively construed. Since the basic rule is that supplies are standard rated, the exception from zero-rating simply brings the supply back to the norm. Further, although there is also a general principle of equality that similar transactions and supplies should be treated in a similar way, it is by no means clear (in the light of Article 28(2) of the Sixth Directive and Idéal Tourisme SA v Belgian State [2001] STC at paragraph 35) that the UK could bring into zero-rating supplies which are currently standard-rated. In any event, the court cannot re-write our domestic VAT legislation and even if it could it might simply standard rate certain items of food which are currently zero-rated.The principle of equality is, however, one which should be borne in mind when interpreting our own legislation. But it seems to me that that will not help much, if at all, in the present case where Regular Pringles are in competition with a variety of snacks some of which are, and some of which are not, zero-rated.

So far as our own domestic legislation is concerned, the purpose of the legislation is discussed in paragraph 9 of the Decision where the history of the legislation is also described. I agree with the Tribunal when they say that, because of the age of the legislation and the very considerable changes to the market since 1992, there is little help to be found (I would only change that to no help to be found) in the purposes of the legislation in deciding this appeal. In any event, I seriously question the admissibility, applying the principles of Pepper v Hart, of much of the material relied on. Since the construction of the legislation is a matter of law, I do not consider that I should rely on it one way or the other, whatever the Tribunal themselves may have done.

I propose at this stage of my judgment to state my own conclusions on the correct construction of the legislation and the approach to be adopted addressing some of the submissions made by the parties as I go along.

As I have already said, excepted item 5 must be construed as a whole and whilst separate examination of limb (a) and limb (b) may be helpful, each limb informs the other. Thus, limb (b) shows that there can be products which are similar to potato crisps but which are not made out of pure potato; they can be made from potato flour or starch so that the pure potato feature of a crisp is clearly not a requirement of a similar product; and it may be that the typical “crispyness” of a crisp, stick or puff does not have to be precisely matched, but can be found in something similar in the flour or starch product. For example, there are sticks on the market today made of potato flour rather than sticks of pure potato. Whether or not they are properly to be regarded as “potato sticks” or as a similar product does not matter; they are sufficiently similar to potato sticks (and are clearly made of potato flour) so as to fall within the excepted item.

The issue of construction is a question of mixed fact and law (see paragraphs 27 to 29 above). The context in which that question falls to be answered is the context of the general zero-rating of food but with standard-rating for certain items. As the Tribunal remark in paragraph 12 of the Decision, the answer to limb (a) (similarity) depends on the level of generality at which the question is asked; but it also depends critically on the context. Thus, Regular Pringles and potato crisps are clearly similar in the sense that they are both edible; but equally clearly, edibility is not the criterion by which similarity is to be judged (even assuming that the Pringle satisfies the “made from” test of limb (b)). Just to illustrate the importance of context, consider an edible mushroom. It may well be that for some purposes, for instance taxonomy, an edible mushroom is similar to a poisonous mushroom (in contrast with a truffle or a toadstool) but for other purposes it is clearly dissimilar for instance in the context of food for human consumption. It makes no sense to ask the question “Is a poisonous mushroom similar to an edible mushroom?” without explaining the context and understanding what it is, in that context, which is relevant to ascertaining similarity. In the present case, it is likewise necessary to set the question in its context in order to identify how similarity is to be assessed in the particular context of the wording of this excepted item.

One might hope that policy considerations would give some sort of a steer in answering the question how similarity is to be judged. Unfortunately, for reasons already given, it is not possible to identify a policy which seeks to standard-rate certain broad categories of food which might be regarded as unhealthy. Further, one cannot detect a policy to penalise the potato as such nor a policy to penalise crisps and other savoury snacks as such: the potato as such, is zero-rated and there are plenty of savoury snacks which are also zero-rated. Indeed, vegetable crisps (non-potato varieties) are zero-rated. Similarity cannot therefore be judged against a policy which seeks to standard-rate what might appear to be unhealthy foods although I suppose that the relative unhealthiness of two products might be a relevant factor in assessing their similarity. That is not an issue in the present case since there is nothing to suggest that the Regular Pringle is any more or less healthy or unhealthy than a potato crisp.

So one is left, I consider, having to answer the question in a context which does not tell us any more than that we are comparing two products as foods, or perhaps two savoury snacks. There is no guidance in the legislation about how to make that comparison, or to tell us, as a matter of law, what similarity comprises. There is not even a selection (as in Ferrero) to be made between two classes, putting Regular Pringles into one class or the other. If there were, it would at least be possible to identify the properties of each class and to see whether Regular Pringles are closer to the one class than the other.

The guidance we do have is to be found in the case law, in particular in Quaker Oats or Ferrero, cases on which both sides rely. But in neither of those cases did the courts seek to lay down some sort of bright-line, or even not-so-bright-line, test by which similarity is to be judged, and thus they did not go on to see how factors identified as relevant fitted in with that test. Instead, as in Quaker Oats, the court went straight to the factors by which similarity was to be judged which thereby defined the very test of similarity itself. Thus, the courts did not explain why ingredients, process of manufacture, appearance and marketing were relevant to testing similarity, but appear either to have regarded it as self-evident or simply adopted the factors apparently agreed by each side to the dispute. One can readily see that ingredients, taste and appearance are relevant factors when one asks whether two foods are similar: this is because knowledge of the ingredients is important in understanding what the food product actually is; and the taste and appearance of food are properties of food which any description of an item, as an item of food, would contain. As to the other factors, these were regarded by the judge in the context of the facts of Quaker Oats, as relevant. I would make two observations.

The first observation is this: the reason that these factors are relevant is not, so it seems to me, because the method of manufacture, the packaging and the marketing are or are not, of themselves, similar, but rather because those factors help to identify what it is about the relevant product (in that case the chewy bars, in our case Regular Pringles) which make them similar or dissimilar to something else (chocolate or sweets; and potato crisps). See further at paragraph 100 below.

The second observation is this: I do not think that Quaker Oats, or indeed any other case, lays down the four factors considered in that case as necessarily exhaustive in all cases (or, indeed, as necessarily relevant in all cases). The relative nutritional values of two items of food, or their vitamin or iron content, may be highly relevant in assessing similarity in the context in which the question is asked. Conversely, difference in packaging may tell us absolutely nothing about differences in the product. All that can be said is that in Quaker Oats itself, the four factors were all that anyone thought were relevant.

Before considering similarity further, I wish to address the issue of when a similar product can be said to be “made from the potato etc”.

Whatever the correct approach to similarity, it is also necessary to know what products can be said to be “made from the potato etc”(bearing in mind that similarity has to be judged in the context of the entirety of excepted item 5). No doubt there will be products which are so dissimilar that it is not necessary to decide whether they have sufficient potato content to be “made from” potato; and conversely, there will products which are so clearly not made from potato (eg a vegetable crisp with no potato content at all) that it will not be necessary to address the question of similarity The possible approaches to “made from” are, I think, the following:

As to the first approach, it is apparently easy of application. It is clear that the tribunal in Pringle One considered that this was the correct approach and Mr Cordara adopts their reasoning. I cannot go along with parts of their reasoning, however and prefer to deal simply with the submissions as Mr Cordara made them. He says that the first tribunal reached the right conclusion because it accords with a reasonable reading of the words “made from” rather than equating them with “made with” or “containing”. But as with the similarity test, everything depends on context. Suppose I have guests to a meal and serve them a sweet soufflé; it would make perfectly good sense to say “Here is my piece de resistance – a soufflé made from chocolate” even though the main ingredient is egg. The emphasis on chocolate is what distinguishes this soufflé from, say, a jam or cheese soufflé.

Mr Cordara naturally focuses on the use of the word “potato” a number of times in excepted item 5. One sees potato crisps, potato sticks and potato puffs with similar products being confined to ones made from potato. This, he says, shows that the really important component of all the products is potato. It was unnecessary for the draftsman to say “made wholly from” since this is implicit in the whole structure of the provision

The first approach is not, however, as straightforward and reasonable as it might seem and faces a difficulty on the facts. Mr Hill submits that, on the facts as found by the Tribunal, even a potato crisp in the packet is at most 70% or so potato. Accordingly, it is not made “wholly or substantially” from the potato and so a similar product need not be either.

As to that, Mr Cordara has two main points.

First, he says that the reason for the crisp in the packet being only 70% potato is because oil is left on them after cooking. The oil sits on the surface of the crisp and is a residue of the cooking process. As a matter of fact, I do not know if that is correct: it was not a finding of the Tribunal and it may, for all I know, be that some fat is absorbed by the potato slice in the cooking process. Be that as it may, the oil is there and it affects the texture and flavour of the crisp. I rather wonder what a potato crisp without oil would be. However, the fact that the cooking agent, oil, stays on the pure potato crisp after cooking throws no light, he says, on the question of what “made from” means.

Secondly, he says that the fact that similar products have to be wholly or substantially wholly made from potato does not mean that the potato crisp itself must be so made. He points out that the position in relation to potato sticks and potato puffs is unknown: there was no evidence before the Tribunal about the potato content of a stick or a puff once cooked. Accordingly, even if it is right to say that a potato crisp is not “made from” the potato, other similar products do have to be “made from” the potato etc.

I reject that second argument. In my judgment, excepted item 5 is drafted on the basis that the three specified products, potato crisps, potato sticks and potato puffs, are all products which are “made from” the potato; indeed, they are the paradigm potato products by which similarity of other potato products is to be judged. If any of those products is not, in fact, made wholly or substantially from potato, then the first approach cannot be right.

On the basis that the crisp in the packet contains a significant amount of oil (as it does and as is recognised by labelling requirements) it might be said to be obvious that the crisp cannot be said to be made wholly or substantially of potato. In that (literal) sense, the potato crisp is made from potato (plus flavourings) and oil; it would be wrong to say that the oil residue is simply a by-product of the cooking process which can be ignored. To ignore the oil would be to ignore what it is that the product – the crisp in the packet – contains. Accordingly, when the draftsman says “made from”, he means simply “wholly or partly made from”.

However, it can be said that that is not the sense in which the draftsman is using the words “made from” but rather that he is focusing on what it is in the relationship between the potato crisp and the potato which makes it correct to describe the crisp as “made from” potato (and similarly with the potato stick and the potato puff). The important aspect on this approach is what goes into making the crisp, its ingredients. The ingredients of a potato crisp are the potato slice and the flavourings (but the presence of these flavourings does not prevent the crisp being substantially made of potato). In contrast, the oil in which the crisp is cooked is not an ingredient of the crisp. Rather, on this approach, it is simply the medium by which the ingredients are cooked to produce the end product; the fact that the crisp contains perhaps 30% oil, does not mean that it is not “wholly or substantially made from” potato in the sense in which Mr Cordara says that the words “made from” are to be read.

As part of his argument, he compares the products before cooking: such a comparison shows a pure potato slice versus an artificial culinary mix (made with a number of dry – that is to say non-oil – ingredients). He says that it would be odd if by addition of oil in the cooking process, the two became similar. I do not find that at all helpful in ascertaining the true meaning of “made from”. In any case, the statutory test requires comparison of a product with a potato crisp or something made from, for instance, potato flour. Imagine, on the one hand a pure potato slice and on the other hand potato dough. It may be said that the dough is no more similar to the potato slice than the Pringle mix. But the dough, when cooked, might result in a product which is similar to a potato crisp and would clearly satisfy the “made from” test. One can see that it does not necessarily follow from an apparent, one might say common-sense, perception of dissimilarity of ingredients that the resulting products are also dissimilar.

Mr Cordara also referred to an argument which he anticipated HMRC would run namely that the “made wholly or substantially from” test cannot be right because Parliament is to be taken as knowing that one cannot make a flour based product without fat to bind. However, he says that the evidence on this aspect was that only 2 to 2.4% fat was needed to bind, an amount, accordingly to him, leaving the product clearly within the scope of “made wholly or substantially wholly from potato”. I am not sure that the evidence actually establishes that; even if it does, whether a flour-based product made with that amount of fat could ever be turned into a potato crisp etc or a similar product was not something the Tribunal decided and, so far as I know, there was no evidence on that point.

I will return to the first approach after considering the other approaches.

As to the second approach, I consider that it is a perfectly workable approach. If the legislation had said, expressly, “made in whole or in part from the potato etc” there would be no doubt about the meaning of the words: any product containing potato would be “made from”, the question then being whether the product is similar to a potato crisp etc.

I have already mentioned, in considering the first approach, Mr Cordara’s focus on the word “potato”. That focus, he would say, should lead to rejection of the second approach. If the draftsman had intended products made partly from potato to have been capable of being similar to potato crisps etc, it would have been easy for him to say “made in whole or in part from”. That is true, but equally it might be said he could have said “made wholly or substantially from” if the first approach was intended.

However, the words “made wholly or substantially from” potato would be inapposite to achieve the qualified version of the first approach. To use the words “wholly or substantially made from” would apparently be to prescribe the literal meaning. In that case, the potato crisp itself would not be “made wholly or substantially from” potato giving rise to the curious result that the similar product has to have a greater potato content that the crisp to which is it meant to be similar. Alternatively, it would be necessary to ascribe to the phrase “wholly or substantially made from” the special meaning which, on the first approach, is to be given to “made from”, an unnatural construction which I do not think could be supported.

One attraction of the second approach is that it avoids the difficult factual issues which would be likely to arise on either of the third and fourth approaches. But the second approach does raise some difficult questions. In particular, the question arises whether, once the threshold is crossed, potato content has any further part to play in assessing similarity. I will answer that question in due course.

It also raises, of course, the question of why on earth Parliament would want to tax an item which contained a small amount of potato but not a similar item which contained no potato. That sort of difficulty arises on any construction for one asks why on earth Parliament would want to tax a product made wholly of potato but not other snacks - even very similar snacks like vegetable (non-potato) crisps. But having said that, I think it is true to say that the difficulty is more stark on the second approach.

A variant of the second approach would be “wholly or mainly made from” or “wholly or significantly” potato. However, each of those may be difficult of application; I can see no warrant in the wording for adopting either of them as compared with the first or second approaches.

The third approach must, in my judgment, be rejected. On any footing, the product must contain some potato. The third approach is tantamount to saying that a product (which contains some potato) is made from potato if but only if it is similar to a potato crisp. The “made from” requirement adds nothing to the second approach. Further, there are other reasons for rejecting this approach including the following.:

That leaves the fourth approach which requires the “essential characteristic” of the product to be ascertained. The product is “made from” potato if its “potatoness” is sufficient. What I mean by essence in this context is the intrinsic nature of the product or the quality which determines its character: see for example the definition of the Compact Oxford English Dictionary. In this sense, the essence of a product is not necessarily determined quantitatively by its ingredients. It is not, as Mr Cordara puts it, a numbers game. The fact that potato is the single largest ingredient (eg 40% potato and 20% of each of two other ingredients) or even that it accounts for more that 50% does not mean that the potato represents the essence of the product or defines its essential characteristic. I can see that such a test might work in the context of similarity – a product is similar to a potato crisp if they have the same essential characteristics – but it is not a test which, in my judgment, can sensibly be adopted as the yardstick for whether a product is “made from” the potato etc. Indeed, an anomaly arises similar to that which arises on the third approach and mentioned in the third reason given in paragraph 77 above. This time, consider two different products with the same potato content; after taking into account all relevant factors, potato is the essential characteristic of one product but not of the other. It would, nonetheless, once again be very odd if the one product was “made from” potato but not the other.

Having rejected the third and fourth approaches, the competition is between the qualified first approach and the second approach. I consider that the first approach is in principle correct although it may not always be easy of application.

To say why this is so, I need to say something more about the interaction of limb (a) and limb (b). The three products specified in limb (a) are all products which can be said to be made of potato and not, relevantly, of anything else, notwithstanding that they in fact contain other matter, namely in the case of the crisp, residual oil (there is no evidence in relation to stick and puffs). Their distinguishing feature is that each of them is a product made substantially out of potato (and other ingredients including flavouring) to which a process has to be applied to turn them into crisps. Although that process involves adding a further ingredient to the product, it does not prevent the product being made from the potato in the sense required by the first approach. The use of the word potato in each limb reflects the need for the similar products in limb (b) to be comprised of potato in a way which corresponds to the way potato is comprised in one of the three products within limb (a). Since the products in each limb have to be similar, such correspondence should not be too difficult to ascertain.

Take, for example, the potato stick; a similar product would be the stick made of potato flour instead of pure potato (or if that is said itself to be an actual potato stick rather than a similar product, imagine a circular version). The flour stick might have to be cooked in a different way and may retain different residues of oil or other product (perhaps more than the pure stick does, if indeed the pure stick has any such oil residue). But the end product is still a potato product; it should be possible to assess, as a matter of fact, whether the potato flour is in the same sort of relationship to the flour stick as the pure potato is to the potato stick; or, as part of the same approach, to assess whether the contents other than potato flour or pure potato are as irrelevant to the question whether the flour stick is made from potato flour as they are to the question whether the potato stick is made from potato.

If this is the correct approach, then, for instance, a flour stick made half of potato flour and half of some other flour would not be “made from” potato in the sense required by excepted item 5. The way in which such a product is made from potato flour would not correspond with the way in which a potato stick is made from pure potato.

This approach may be reasonably straightforward to apply in cases such as that where it is possible to see quite easily how such correspondence operates. In other cases, it may be more difficult to decide whether the required correspondence is present. And in yet other cases, it may be absolutely clear that there is no correspondence between the way the potato is comprised in the product and the way it is comprised in the potato, crisp, stick or puff. The Regular Pringle, on this approach, is clearly not “made from” potato.

I consider that the statutory wording indicates that the draftsman intended this approach rather than the second approach, even though the second approach would be more simple to apply (which is so because it is easy to answer the question whether a product has any potato content). The second approach, however, does not, in my judgment, pay adequate regard to excepted item 5 as a whole nor to the interaction of limb (a) and limb (b). On the second approach, potato content is simply a threshold test and, as I have mentioned, leaves one asking why a very small amount of potato, exceeding a de minimis amount, should make a product taxable. Why did the draftsman not simply omit the words “made from” etc and make all products similar to potato crisps excepted items?

It has been said that the potato crisp was the only snack around when the “made from” wording first found its way into the legislation. That may be so; but if the wording were to be construed by reference to those circumstances, it would, it seems to me, be a further ground for rejecting the second approach. This is because the draftsman could be seen to have in mind only products made from potato in the sense of the first approach since there were no other relevant snack products around. It is, in any case, not right to construe the words in that way; the words must be construed in the context of the VAT Act 1994. It is not appropriate to indulge in legislative archaeology and to construe the words in the light even of earlier VAT legislation, particularly where there are differences in wording. By 1994 there were many snack products on the market; the draftsman can only have included the words “made from” etc to distinguish two classes of similar product – those made from potato and those not so made. In that context it is far more likely, in my judgment, that he intended the distinction to turn on more than the threshold content appropriate on the second approach.

In my judgment, the qualified first approach is correct. It follows, on the findings of fact made by the Tribunal, that Regular Pringles are not made from the potato, potato flour or potato starch so as to fall within excepted item 5.

In case that is wrong, I should address the question of similarity. I do so on the basis that the second approach is correct, seeing this as the only realistic alternative to the first approach. It is pointless to address similarity in the context of the first approach since it is clear that Regular Pringles are not, on that approach, made from potato.

I raised earlier the question whether, once the threshold is crossed, potato content has any further part to play in assessing similarity. It seems to me that the quantity of potato has played its part in full at the stage of the threshold test and has no further part to play in assessing similarity on the second approach. In other words, it would not be correct to say that one product, containing 50% potato, is less similar to a potato crisp than an almost identical product, containing 55% potato. But that is not to say that the potato as such, rather than its quantity as such, has no further part to play in assessing similarity for the quantity of potato may impact on other factors to be taken into account in the comparison. Thus a product containing, say, 50% potato might contain another ingredient which overpowers the taste of potato. Since taste is a factor in the comparison, the potato content will be relevant to the comparison in that its presence, or rather lack of sufficient presence, produces a taste which is not similar to that of a potato crisp. What would not be correct is to take into account, in effecting the comparison, the quantity of potato as a factor in its own right.

This is an extremely important point in the present case. It is on the basis of the case law (Quaker Oats and Ferrero in particular) that ingredients are not only taken into account but are taken into account in a quantitative sense. But in the present case, if I am correct in saying that potato content, in a quantitative sense, is exhausted at the “made from” stage, the proportion of potato is not, of itself, a relevant factor in assessing similarity. The Quaker Oats factors must be qualified to take account of that aspect. It is perhaps worth noting that the same is true on the first approach: on that approach, the potato content required before the product can be said to be made from potato is such that in practice the issue of similarity is assessed by reference to all the other relevant factors. The potato content is a given in both the potato crisp etc and in the other product; it is the other factors which determine whether these two potato products are similar.

The Tribunal do not address that point. But in paragraphs 14 and 15 of the Decision, they do seem to have taken account of potato content in a quantitative way. Their approach to the “made from” issue (see the end of paragraph 16 and the whole of paragraph 17) also suggests that they see potato content as relevant to the similarity of products. If that is their approach, then it displays an error of principle assuming that I am correct in my conclusion that the quantity of potato is not a relevant factor in assessing similarity.

It is, I think, an error which would justify allowing this appeal and ordering that the matter to be remitted, probably to a differently constituted tribunal. This is because (a) the Tribunal themselves found the case a borderline case on similarity and (b) it is therefore impossible to say that, had the potato content in a quantitative sense been ignored, the result would have been the same.

Accordingly, I would remit the matter if I were of the view that the second approach to “made from” was correct.

In case I am wrong on that as well as in my conclusion that the first approach to “made from” is correct, I should deal with some more detailed submissions about similarity.

Mr Cordara focuses on paragraphs 12 to 15 of the Decision. He submits that the Tribunal ought to have followed the tribunal in Pringle One which had held that a similarly constituted product was not similar to potato crisps etc. It is to be noted, however, that in reaching that conclusion, one dissimilarity was the dipping aspect: dipping was not a characteristic of the use of crisps and the shape of Pringle Dippers was designed for dipping, being flatter than the Regular Pringle. It may or may not be that the tribunal would have found the Pringle Dipper to be dissimilar even absent the dipping aspect but I do not know that for sure. Further, given that there were other reasons why Pringle Dippers did not fall within excepted item 5 – in particular because they were not packaged for human consumption without further preparation – I am not as concerned as the Tribunal seem to be that different conclusions have been reached in relation to the answers to the tests in limbs (a) and (b). To be fair to him, Mr Cordara does not rely on the first tribunal so much for the result as for the approach. But even then, matters are not as clear as he would have it. It is true that the first tribunal identified the relevant factors each way and gave some indication of how each factor played its part and the weight to be attached. But even they did not explain explicitly the concept of similarity which they were applying or the level at which similarity was to be assessed.

Mr Cordara submits that the Tribunal ought to have proceeded to analyse in a distinct way the legally relevant factors under the various headings laid down in the case-law (ie the ingredients marketing, manufacture, packaging and/or appearance) and then to apply the words of the statute to the resultant conclusion, instead of taking a global and analytically unspecific view (see in paragraph 14 of the Decision, where the Tribunal expressed themselves ‘reluctant to grade’ the factors to be considered). He says that this is particularly so for two additional reasons namely (i) the Tribunal themselves considered the case to be a borderline case and (ii) it was differing from the analysis of the first tribunal. While acknowledging that latitude must be allowed to tribunals when expressing their views, the approach in the Decision leaves one guessing, he says, in what respects the Regular Pringle is different from the potato crisp etc and how the balance has been struck (if indeed it has been) between those respects and other respects (unspecified) in which they are similar. In essence, he says that the Tribunal have failed to give their reasons for their decision in a way which complies with their duties.

Criticism is made that the Tribunal mishandled the use of the “reasonable man in the street” test which I have already described. According to Mr Cordara, it made two errors. First, they withheld from the reasonable man knowledge of the degree of potato content of the Regular Pringle as compared to a potato crisp and secondly, by assuming that the reasonable man would not carry out the step by step analysis that the prior tribunal had carried out; instead, the Tribunal were reluctant to grade the factors to be considered taking the view that the reasonable man applies the test as a whole without applying any order.

As to grading, I do not consider that the Tribunal can be criticised for refusing to grade the factors which they took into account in order of importance or to explain what weight they were attaching to each factor. I do not consider that they were obliged to do so as part of their duty to give reasons for their decision nor in identifying the view of the reasonable man. Provided that they identified the correct factors and took them into account, it was not an error of principle to make a global assessment.

Criticism is made that the Tribunal compare the shape of the Regular Pringle not just to potato crisps as Mr Cordara says it should have done but also to a wider group of products. What the Tribunal actually say is that they do not “regard the shape of the Regular Pringle as particularly important to this test given the wide variety of products on the market”. The group with which a product has to be compared in testing similarity comprises not only crisps, but sticks and puffs. If one is seeking to identify what it is about the group that is important in assessing similarity, shape would not seem to play much, if any, part; it is not irrelevant to look at other products, not themselves crisps, sticks or puffs, which are on any view similar products and to take account of their shape too. Thus Mr Hill gives the example of a KP Hula Hoop which the Tribunal record at paragraph 5(13) of the Decision as being standard-rated being a product containing flour and with a cylindrical ring shape. I agree with him when he says that all the Tribunal are really saying is that if the ordinary reasonable man regards Hula Hoops as similar to a potato crisp, then he could not regard the shape as being a particularly important factor in deciding whether a product is similar to a potato crisp.

Mr Hill also makes the valid point (relevant to shape but also in principle to other factors) that in assessing how the ordinary man would view Regular Pringles, it is inevitable that the Tribunal would have to look at the wide variety of snack products on the market. This is because the understanding of well-informed consumers as to what is a potato crisp or a similar product must derive from their experience of products on the market. Products change. A potato stick was originally made out of sticks of pure potato but, as the Tribunal observe in paragraph 5(16) today some may be made from potato powder or starch. In contrast, potato puffs are, according to the Tribunal, not generally known in the industry today, although Mr Hill did identify two such products on the market today. It is quite reasonable for the Tribunal to be informed of, and to take account of, the variety of savoury snacks on the market in determining whether a product is or is not similar to a potato crisp.

Criticism is also made that the Tribunal consider the size but not the shape of the packaging. The Tribunal in fact make some fairly comprehensive findings about packaging in paragraph 5(9) of the Decision, including about shape and including a finding that there are examples of potato crisps being sold in tubular cans like Regular Pringles. They took packaging into account in paragraph 15 – or at least they stated that they took it into account without in any way restricting what aspects they took into account (apart from saying, in paragraph 14, that they did not regard the size of packaging as particularly important where they also refer to tubes and packets ie shape). In any case, the Tribunal does not seek to say that, because the packaging of a product (being a product which is similar to a potato crisp) is similar (or indeed even identical) to the packing of Regular Pringles, this is an indication that the Regular Pringle is similar to a potato crisp or that dissimilarity of packaging means dissimilarity of product. It seems to me that the size and shape of packaging is of relevance only to the extent that it helps identify what it is about a Regular Pringle which makes it similar to or dissimilar from a potato crisp: one must treat with some caution the dissimilarity between the packaging of crisps and Pringles as a factor pointing towards dissimilarity of the product without understanding why the difference in the packaging indicates a difference in the product, especially if products which are similar to crisps also have packaging which is dissimilar to that of crisps. To put this another way, packaging (and the same goes for marketing) are not part of the product; they are relevant to the issue of similarity not because the actual package (or actual marketing) is similar in each case, but because of what the packaging (and the marketing) tell one about the product and how and when it is to be enjoyed. That is why, typically, positioning on supermarket shelves can be relevant in cases of this sort, just as it is in trade mark disputes.

Method of manufacture (in particular cooking) is also relevant not because of the similarity or dissimilarity of the process, but because of the result it has on the product. Care needs to be taken in how account is taken of this. A fried egg may be said to be dissimilar from a scrambled egg and the difference in cooking method may be pointed out as a dissimilarity. But the reality is that it is not the dissimilarity in the cooking as a process which is relevant, but the result that the different method of cooking has on the egg so that the fried egg is not similar to the scrambled egg.

It is convenient at this stage to say something about the knowledge which is to be imputed to the reasonable man, since one of the Grounds of Appeal is that the Tribunal erred in withholding from him knowledge as to the degree of potato content of Regular Pringles as compared with potato crisps. What the Tribunal actually say, in paragraph 14, is set out in paragraph 38 above. They were certainly not saying that ingredients were irrelevant. However they do seem to be proceeding on the basis that the reasonable man would not know the actual potato content although he would know that Regular Pringles do contain some potato. It is not disputed that the reasonable man must be taken to be well-informed; but HMRC say that there cannot be imputed to him specific information about the precise percentage of potato in Regular Pringles which the manufacturer does not publicise; it will be remembered that the packaging of Regular Pringles does not state the potato content. Indeed, it is pointed out that it is part of P&GUK’s case that “the ingredients of products in the modern snack market are largely irrelevant to purchasers, as is demonstrated by labelling requirements”.

If I am right in the account – or rather lack of it – which should be taken of potato content, viewed quantitatively, in assessing similarity, it makes no difference at all whether the reasonable man knows the actual content or not. But if I am wrong on that, I would incline to the view, without deciding the point, that the reasonable man would know more about the content than simply that potato is present. It seems to be common ground that the methods of manufacture of the Regular Pringle and the potato crisp are matters which, without going into technical detail, the reasonable man would know. If he is to be treated as knowing (or as having made sufficient enquiries to establish) the method of manufacture, it would be surprising to me if he did not also know the ingredients of each product and the rough, if not precise, proportions of each ingredient.

What then does Mr Cordara say is the correct approach to similarity? He says that the correct approach would have been to accept the following:

The appearance and taste of a Pringle is not that of a potato crisp;

Ingredients and manufacture:

Marketing and packaging:

Balancing the factors:

My conclusion on these attacks on the Tribunal is that they are misplaced. If, contrary to my view, the Tribunal have applied the correct approach as a matter of statutory construction to both similarity and the “made from” requirement, Mr Cordara’s attacks are said by Mr Hill to be a not-so-thinly-veiled attempt to go behind what are essentially findings of fact. Mr Cordara maintains that that is not so, saying that his examination of the facts is necessary to understand his complaints about the failure of the Tribunal to carry out the analytical approach which it should have, carried out. He does not seek a decision from me about whether the products are similar, but (ignoring the “made from” point) only a remitter in order that the proper test can be applied. I have nonetheless thought it right to look at the criticisms in some detail and, in doing so, I conclude that the Tribunal’s findings are ones which the Tribunal were entitled to reach on the basis of their findings of fact assuming, contrary to my view, that they have clearly applied the correct test.

Further, the Tribunal refer to what they describe as the impressive lists of similarities and dissimilarities from each side, although they do not go through them, in the Decision, one by one. They can be seen, or at least some of them can, from the written submissions before the Tribunal. I do not consider that the duty to give reasons for a decision requires a tribunal to recite every detail of this sort before being able to rely on the list as part of its decision-making process. It will be obvious, from a reading of the lists, which way a particular factor points and since, in my judgment, there is no need to grade factors, let alone state expressly the weight to be attached to each factor, I do not perceive any objection to the Tribunal taking the broad-brush approach which it did in paragraph 15 of the Decision provided that no error of principle is exposed by what they do say.

I would therefore reject the attack based on a failure to give reasons and the attack based on Edwards v Bairstow that no tribunal properly directed could have reached the conclusions on the evidence which it did.

This appeal is allowed because Regular Pringles are not, on the facts found, products “made from the potato, or from potato flour, or from potato starch” within excepted item 5.

If that is wrong, there is a serious question as to whether the Tribunal have applied the correct criteria in assessing similarity. This is because the amount of potato contained in Regular Pringles appears to have been taken into account as such, whereas such amount falls to be taken account of only as a factor in assessing whether Regular Pringles are made from the potato etc. Moreover, it appears that the Tribunal may have imputed an incorrect extent of knowledge to the reasonable man. Accordingly, the matter would fall to be remitted for rehearing.