Who's Suing Whom: Rental firms sue Government for pounds 400m

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The Independent Online
CONSUMER RENTALS groups Thorn and Granada are suing the Government for up to pounds 400m over the insurance tax. They claim that it has unlawfully raised the cost of extended warranty insurance on consumer goods and resulted in widescale shop closures and the loss of more than 500 jobs.

Thorn served a writ on the Attorney General and the Commissioners for Customs and Excise on Monday, and Granada issued a similar writ on Thursday.

The companies claim that the higher rate Insurance Premium Tax (IPT), introduced in the Finance Act last year, is unlawful under European law.

The action will affect millions of warranties taken out by customers buying consumer goods in hundreds of Thorn and Granada shops.

Thorn is claiming an estimated pounds 50m in damages over the problems the tax has caused to its business, as well as the repayment of pounds 125m in tax. Granada has yet to estimate how much it will be claiming, but since it is a larger retailer than Thorn its claims are expected to be even greater.

The dispute revolves around the tax levied on warranties issued along with consumer goods at the point of sale. If the warranty is provided by the company when the customer is buying the television set or satellite dish, IPT is levied on the insurance premiums at 17.5 per cent. However, if the customer goes somewhere else to obtain a warranty on the same goods, only 4 per cent would be levied on the insurance premiums.

Since this tax was introduced in April last year, Thorn claims that it has been forced to close 90 shops and sack 520 employees because of the added costs of the tax. Granada claims that it has closed 100 of the 565 shops it had open when the tax was introduced, and has been forced to make "a significant number of redundancies" because of the introduction of higher rate IPT.

Paul Thompson, a director with GIL Insurance, a subsidiary of Granada, said: "It wouldn't surprise me if other companies were looking at this. We haven't completed our calculations of how much we will be claiming, but the sum will be in the tens of millions. Each day that goes by our claim will increase, so that could be understated."

Both companies are claiming that higher rate IPT is unlawful under the European Community's sixth VAT directive. They also claim that higher rate IPT constitutes unlawful state aid under the Treaty of Rome since it prejudices customers against buying warranties with their consumer goods.

Lawyers working on the case expect proceedings to last for at least two years, and also anticipate that the dispute will end up in the Court of Appeal.

THE INNTREPRENEUR Pub Company is confident that two landmark rulings in the courts last week mean that a potential 400 legal claims, worth up to half a billion pounds against the company by the people who lease their pubs, will now fail.

The High Court judgement by Mr Justice Carnwath in the two test cases - Courage versus Crehan and Inntrepreneur versus Haigh and Raper - concluded that lessees who signed a contract that contained an allegedly unlawful beer tie were not entitled to damages, even if the beer tie was unlawful.

Inntrepreneur and other companies that have similar leases, such as Scottish & Newcastle, Gibbs Mew and Esso, have waited three-and-a-half years for the Crehan decision.

Hundreds of people who have leased pubs, shops and petrol stations will be affected.

Mr Justice Carnwath upheld previous judgements that the parties to a contract were not protected by Article 85, which was intended to protect third parties, not the participants in a contract.

Inntrepreneur, which owns 4,000 pubs and is owned by the Japanese investment bank Nomura, welcomed Mr Justice Carnwath's decision. A spokesman said: "This is a big decision for us."

A TRIAL starts in Swansea this Wednesday to decide a seven- year-old dispute between a small hi-tech start up and its former accountant PricewaterhouseCoopers.

Rapid Research was set up in the late 1980s to develop display systems for airports, and since then has supplied display systems to Stansted, Glasgow and parts of Gatwick and Heathrow.

The company hired Coopers & Lybrand - now PricewaterhouseCoopers - in 1990 to handle its accounts during a period of rapid growth. The company claims that PwC failed to complete its accounts on time, and that as a consequence of this Rapid Research's bankers, Barclays, withdrew support.

Rapid Research ended its association with PwC in July 1991 and refused to pay the firm's bill. PwC sued the company for pounds 7,000 in respect of the unpaid fees.

Rapid Research than counter-sued PwC for pounds 600,000, claiming that the accountancy firm's behaviour had encouraged Barclays to withdraw support, and as a result several big orders from the likes of Phillips and London Underground had been lost.

AN INTERNET company based in Peterborough, Cambridgeshire, is suing three Jersey-based firms and another in north London over the use of the name "LINX" and "London Internet Exchange".

The London Internet Exchange is seeking an injunction against Tele Linx, Tele Linx Holdings and Cordoba Holdings, all of St Helier, Jersey, and Cordoba of Commerce Road, Wood Green, London. The company is also seeking a court order to get the first two to change their names to ones that do not include "LINX" or London Internet Exchange.

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