• In the case In Re Selectmove 1995 2 All Er 531 it was found that the promise of future tax payments is not good consideration in contract law but an existing obligation under fiscal legislation.

Facts of the Case

  • A company owed the revenue sums deducted from its employees’ pay for tax as P.A.Y.E and national insurance contributions.
  • The company’s managing director met a collector od taxes in July 1991 and proposed that the company would pay any future liability as it fell due and that the arrears would be paid off at £1,000 a month from February 1992.
  • The collector intended to seek his superior’s approval for the arrangement and said that he would contact the managing director if it was not acceptable.
  • The company failed to make the payments.
  • On 9th October 1991 the revenue wrote to the company threatening that the company could be would up unless arrears totalling £24,650 were paid.
  • The managing director replied, giving details for the arrangement, and claiming that since he had not heard from the collector of taxes ad since the company had made two payments due under the agreement it was clear that the agreement had come into effect.
  • By 11th October 1991, the company paid the September instalment. In October 1991 the company dismissed its employees and sold its work in progress in what was said to be an attempt to provide £1,000 a month to meet the revenue’s claim.
  • On 22nd November 1991 a further late payment for October and November was made.
  • In 1992 seven cheques of £1,000 each were paid to the revenue, the first two on 3rd March 1992.
  • The revenue obtained to press for payment and served a statutory demand followed on 7th September 1992 by a winding up petition based on a claimed debt of £17,466.60.
  • The judge held that the debt was not disputed in good faith on substation grounds because there had been neither acceptance by the revenue nor consideration provided by the company and he made the winding up order.
  • The company appealed.   

Issues in In Re Selectmove 1995 2 All Er 531

  • Was there firstly a valid contract and secondly whether the tax collector had authority to bind the revenue.
  • Could consideration for the contract be proved.

Held by Court of Appeal

  • Appeal dismissed

Peter Gibson LJ

  • The appeal was dismissed as although it might be possible to infer acceptance from the silence of an offeree who had stated that the offer would be accepted unless he indicated to the contrary within an ascertainable tie, since the collector had no actual authority to convey the revenue’s acceptance of the offer by his silence and there was no facts from which ostensible authority so to do could have been inferred by the company, there had been no acceptance of the offer and no promise by the revenue capable of founding an estoppel.
  • “There are two elements to the consideration which the company claims was provided by it to the revenue. One is the promise to pay off its existing liability by instalments from 1 February 1992. The other is the promise to pay future P.A.Y.E. and N.I.C. as they fell due. Mr. Nugee suggested that implicit in the latter was the promise to continue trading. But that cannot be spelt out of Mr. ffooks’s evidence as to what he agreed with Mr. Polland. Accordingly, the second element is no more than a promise to pay that which it was bound to pay under the fiscal legislation at the date at which it was bound to make such payment. If the first element is not good consideration, I do not see why the second element should be either “Pg.8 D-E