An insurance company (NIG) offered troubleshooting insurance to used car buyers. NIG re-insured 100% of its risk to a group company called Crystal in Gibraltar, which in turn reassurated 85 per cent of this risk to another gibraltan company called Viscount. Viscount has entered into a claims processing agreement with WHA, a group company in the United Kingdom, under which WHA has agreed to process all claims and entered into agreements with repairers to provide for payment of repairs in accordance with the insurance. In light of the decisions of the Federal Court of Justice (and appeals) of the Department of Transport, ATS Pacific and Professional Administration Services, I think the approach taken in Australia with respect to tripartite and GST agreements is similar to that adopted in the United Kingdom. Given the similarities between VAT and GST, this is not surprising. A review by the British authorities reveals the difficulties in applying VAT to tripartite agreements. Instead of simply giving a historical audit of these authorities, I found it instructive to examine the experience of the United Kingdom in the eyes of the First Tier Tribunal in the recent decision adecco UK Ltd/Revenue -Customs  UKFT 600.  After reviewing this decision, the Tribunal asked the following question: where does the Supreme Court`s decision in LMUK leave the appeal? The Tribunal found that the economic reality of LMUK was consistent with the contracts in which LMUK had entered. The VAT analysis followed the contracts. However, the Supreme Court`s decision meant that the application of economic reality in some tripartite cases would mean that delivery management would not always follow contracts and the legal obligation to pay. It is clear that there is not a single test and that each regulation must be considered on its own particular facts.
Nevertheless, I believe that these proposals are a useful roadmap for rapprochement with tripartite agreements. In addition, the identification of the contractual position is generally a reasonable starting point and, in most cases, it will provide the answer. However, this cannot always be the case and it may be necessary to take into account the “economic” or “practical” reality of the agreement. The Tribunal found that it was superficially difficult to distinguish Redrow from WHAon: in both cases, there is a tripartite contract under which the “non-owner” must pay for the services. and the owners (at Redrow of the house, and in WHA of the car) were not obliged to pay for the services they would receive – yet the House of Lords/Supreme Court reached diametrically opposed conclusions, without the Supreme Court rejecting the earlier decision of the House of Lords.