Atec Associates Ltd v Revenue & Customs [2009] UKFTT 178 (TC)

FTT-Tax
Atec Associates Ltd v Revenue & Customs
[2009] UKFTT 178 (TC) · 2009-07-17
[1][2009] UKFTT 178 (TC) TC00133 Appeal number LON/2007/1551 PROCEDURE – Application to reinstate – Earlier Direction dismissing appeal given under Old Rules in absence of Applicant or any representative – Subsequent hearing under Old Rules to determine whether earlier Direction should be set aside – No attendance by Applicant – Earlier Direction remained in being – Further Application to reinstate made after coming into force of New Rules – Whether Tribunal has jurisdiction – No – Application dismissed – "Old" Trib Rules r.26(3) – SI 2009 No.56 ("New" Trib Rules) r.38 FIRST-TIER TRIBUNAL TAX CHAMBER ATEC ASSOCIATES LIMITED Appellant - and - THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS (VAT) Respondents TRIBUNAL: SIR STEPHEN OLIVER QC Sitting in public in London on 9 July 2009 David Scorey, counsel, instructed by Malletts Solicitors, for the Appellant Jonathan Hall and Howard Watkinson, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents © CROWN COPYRIGHT 2009 DECISION ATEC Associates Ltd ("ATEC") apply to set aside a decision given by me, sitting as a chairman of the VAT and Duties Tribunals, on 4 November 2008 and released on 11 November 2008. The decision ("the November decision") dismissed ATEC's appeal in its absence (and in the absence of its representative).[2]The November decision had been made following an application by HMRC on 17 September 2008 to strike out ATEC's appeal on grounds that ATEC had failed to comply with prior directions and that ATEC had been guilty of inordinate and contumelious delay. The appeal related to ATEC's claim to recover some £7.9m of input tax. ATEC's claim was refused on the grounds that ATEC's transactions had (HMRC considered) been connected with the fraudulent evasion of VAT of which ATEC was aware or should have been aware.[3]ATEC's application for which the present hearing (on 8 July 2009) was convened was made on 23 March 2009. The application states that it is made under rule 26(3) of the VAT Tribunals Rules ("the Old Rules") and, as noted, that it seeks to set aside the November decision. Prior to that application a hearing had taken place (on 29 January 2009). The Tribunal had addressed the question of whether to set aside the November decision in exercise of rule 26(3). There had been no representative for ATEC. Consequently rule 26(4) applied. The result was that (prima facie and subject to ATEC's arguments in the present application) ATEC lost its entitlement to apply to have the November decision set aside. The November decision remained in force. The appeal stood dismissed. The Tribunal's reasons were released on 4 February 2009.[4]HMRC say that the Tribunal became functus officio at the latest by 4 February 2009. The appeal had been dismissed by the November decision and rule 26(3) had not operated to enable the Tribunal to set it aside. The Tribunal had no jurisdiction over the 23 March 2009 application.[5]ATEC argue that it is saved by the "transitional provisions" in The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (2009 No.56 ("the TTF Order")). The 23 March 2009 application was, so the argument runs, made and accepted by the Tribunal, thereby creating a "lis" between the parties and the Tribunal. By the TTF Order the proceedings so created continued after 1 April 2009 in the First-tier Tribunal under the "New Rules" (SI 2009/56). Those New Rules give the Tribunal a discretion which it should now exercise in order to ensure that proceedings are dealt with fairly and justly, and in doing so to apply any provision of the Old Rules or to disapply any provisions of the New Rules. The resulting "default position" is for the New Rules to apply save where deliberately disapplied in the interests of fairness and justice. Those interests dictate that the requirements of rule 26(4), which are not found in the New Rules, be disapplied. The statutory provisions Rule 18(2) of the Old Rules gives the tribunal power to strike out or dismiss an appeal for want of prosecution or where one party has been guilty of inordinate and inexcusable delay. Rule 19(4) of the Old Rules provides that the tribunal may allow or dismiss an appeal or application where one party has failed to comply with any direction of the tribunal.[6]Rule 26(3) of the Old Rules states:
"(3) Subject to paragraph (4) below, the tribunal may set aside any decision or direction given in the absence of a party on such terms as it thinks just, on the application of that party or of any other person interested served at the appropriate tribunal centre within 14 days after the date when the decision or direction of the tribunal was released."
Rule 26(4) of the Old Rules states:
"(4) Where a party makes an application under paragraph (3) above and does not attend the hearing of that application, he shall not be entitled to have a decision or direction of the tribunal on the hearing of that application set aside."
[7]Rule 38 of the New Rules deals with "Setting aside a decision which disposes of proceedings". It reads as follows:
"(1) The Tribunal may set aside a decision which disposes of proceedings or part of such a decision, and re-make the decision, or the relevant decision, if – (a) the Tribunal considers that it is in the interest of justice to do so; and (b) one or more of the conditions in paragraph (2) is satisfied (2) The conditions are – (a) … (b) … (c) there has been some … procedural irregularity in the proceedings; or (d) a party, or a party's representative, was not present at the hearing related to the proceedings."
[8]The TTF Order provides, in Schedule 3 paragraph 6, that – "Any current proceedings are to continue on and after the commencement date as proceedings before the Tribunal." The commencement date was 1 April 2009. "Current Proceedings" are defined in paragraph 1(2) which says – "For the purposes of this Schedule there are "current proceedings" if, before the commencement date –(a) any party has served notice on an existing tribunal for the purpose of beginning proceedings before the existing tribunal, and(b) the existing tribunal has not concluded proceedings arising by virtue of that notice." Then, in the context of "current proceedings", paragraph 7(3) provides that the tribunal – "… may give any direction to ensure that proceedings are dealt with fairly and justly and, in particular, may – (a) apply any provision in procedural rules which applied to the proceedings before the commencement date; or (b) disapply any provision of the Tribunal Procedure Rules". The Facts[9]The facts that follow are those relevant to the issue of whether this Tribunal has jurisdiction in relation to ATEC's application lodged on 23 March 2009.[10]ATEC has been a trader in computer components and mobile telephones. It appealed in 2007 against HMRC's refusal to repay input tax incurred by ATEC in the periods 04/06 and 07/06. From the time the appeal was lodged, in August/September 2007, ATEC's representative in this appeal has been P H Ross & Co, accountants.[11]The events leading to the November decision are now summarised.[12]On 31 January 2008, following an application for directions agreed by both ATEC and HMRC, this Tribunal directed, among other things, that the appeals against all those decisions be consolidated and that ATEC serve a list of documents by 14 March 2008 and that ATEC serve witness statements and exhibits by 1 May 2008. ATEC specifically agreed and consented to all three directions.[13]HMRC notified ATEC's representative, on 15 February 2008, of HMRC's intention to seek an extension of time to 15 March to serve their statement of case and ATEC agreed to this extension and in turn sought an extension of time to serve its own list of documents to 31 March 2008. HMRC agreed to this timetable.[14]A month later, on 14 March, HMRC further notified ATEC's representative, P H Ross & Co, of HMRC's intention to seek an extension of time to 15 April to serve the consolidated statement of case. ATEC, through P H Ross & Co, agreed to the extension and in turn sought an extension of time to serve its own list of documents until 2 May 2008. HMRC agreed to this timetable.[15]HMRC filed and served their consolidated statement of case and list of documents on 16 April. On 8 April HMRC had written to P H Ross & Co informing them that a copy of the documents referred to in the list of documents would be provided at a cost of £870 and agreeing that the list of documents should be served by 2 May. By 12 May 2008 P H Ross & Co had served neither a list of documents nor any witness statements on behalf of ATEC. On that date the Respondents wrote informing P H Ross & Co that, as no application for an extension of time had been received, HMRC would make an application to have the appeal struck out and to seek costs unless ATEC provided evidence that it intended to pursue the appeal. No reply to this letter was received. HMRC's letter also invited ATEC to attend HMRC's offices to inspect the relevant documents.[16]On 20 June 2008 HMRC notified ATEC, through P H Ross & Co, of their intention to make an application for an "unless order" regarding service of witness statements and ATEC's list of documents. The matter came before the Tribunal on 6 August and ATEC was directed to serve its witness statements and list of documents by 29 August. Neither ATEC nor P H Ross & Co appeared at the above directions hearing despite being given notice of it. ATEC and P H Ross & Co knew of the direction made by the Tribunal and continued to fail to serve ATEC's witness statements by 29 August. ATEC wrote to the Tribunal on 22 August complaining about the direction to serve evidence by 29 August and stating that it wished to serve evidence by 31 October. By the time of the November direction, 31 October had come and gone and no witness statements had been served. On 3 October 2008 ATEC, through P H Ross & Co, filed a list of documents. This was some twelve months after the list had originally become due and more than one month later than the date directed by the Tribunal in the August 2008 Directions.[17]By the time of the hearing leading to the November Decision the Tribunal had seen no witness statements from ATEC nor had it received any applications for extension of time to serve them.[18]Following the hearing of 4 November the Tribunal issued the reasons for its decision (on 10 November 2008). In these the Tribunal noted that ATEC had, since 19 April 2008, taken no part in any correspondence with HMRC in relation to any procedural matters, nor had ATEC made any applications for extensions of time. The Tribunal noted further that more than six months since the date agreed by ATEC to serve its witness statements passed and no excuse had been put forward by either ATEC or P H Ross & Co for their non-service. The Tribunal observed that it was evident that ATEC had ceased to conduct the appeal within the original agreed timetable noting that neither ATEC nor P H Ross & Co had appeared at the August Directions hearing or at the present hearing. The Tribunal also noted that neither ATEC nor P H Ross & Co had made any representations as to what should be done or why they had been absent. The view expressed by the Tribunal was that ATEC and P H Ross & Co had simply failed to comply with the direction to serve the witness statements; moreover, the Tribunal observed, ATEC had served its list of documents late. Overall, the Tribunal noted, ATEC had failed to comply with its own proposed date for service of written statements as set out in its letter of 22 August and had still not served them.[19]The Tribunal went on to observe that no excuse or even reason for the non-compliance had been advanced by ATEC. The Tribunal took the view that since May 2008 ATEC had been guilty of inordinate and inexcusable delay, bearing in mind that ATEC had been in possession of HMRC's statement of case and list of documents since 16 April. ATEC had, it was noted, agreed to serve its witness statement by 1 May. But notwithstanding its agreement to this timetable, ATEC, more than six months later, had still failed to serve any witness statement.[20]The conclusion of the Tribunal, in the November decision, was that ATEC's non-compliance with the directions and the rules over a long period of time required the Tribunal to dismiss the appeal for want of prosecution and for ATEC's failure to comply with Direction 2 of the August 2008 directions.[21]The Direction Notice released on 10 November starts with a note observing that there has been no appearance for ATEC. The Notice then says in the first main paragraph that the Tribunal has decided to proceed in the absence of ATEC in pursuance of rule 26(2) of the Old Rules. The Notice sets out the words of rule 26(3) and says that "rule 26(4) provides that any party making an application under paragraph (3) has no right to apply to have the direction set aside unless he appears the hearing of his application".[22]That introductory statement in the Directions Notice is followed by a Direction that the conjoined appeals be dismissed on grounds of ATEC's non-compliance with the Directions of 12 August 2008 and on grounds of want of prosecution on the part of ATEC.[23]On 10 November 2008 the Directions (summarised above) were sent to P H Ross & Co. The accompanying letter contains the following passages:
"I enclose a copy of the Direction of the Tribunal, following the application made in this case. If you so wish, you are entitle to require the Tribunal to send you a written document containing any findings of fact and the reasons for the decision … . Such a request should be made within 14 days of the date of release of the Direction. If this application was heard in your absence and if you are dissatisfied with the outcome, you may, within 14 days of the date of the written direction, apply to have the direction set aside and the application reconsidered. Your request must give reasons for your failure to attend. The tribunal will consider your request and, if necessary, arrange for a hearing to decide the issue."
[24]On 21 November 2008 (i.e. within 14 days of the release of the November decision) P H Ross & Co replied referring to the Tribunal's letter of 10 November. This apologises for the delay and states that ATEC wishes to continue with the appeal.[25]On 3 December 2008 Renee Kalia e-mailed P H Ross & Co asking the following:
"ATEC – Means of Knowledge and JSL – can you confirm you have AB, Counsel at the rate of 5% as discussed. Also covering the JSL?" "
JSL" refers to "Joint and Several Liability". "AB" is the name of a practising barrister. It appears from the witness statement of Mr Bobby Kalia that he had been pressing for a hearing of the appeal for some time. An e-mail from Paul Ross to Mr AB of 4 December reads, among other things – "These two appeals have been outstanding for some time now and the company is keen to progress matters. Not much has happened from the company's side in respect of these appeals in the last few months and I suspect that Customs may want to have these appeals struck out."[26]The Tribunal's office file contains the following letter to P H Ross & Co of 9 December 2008 this reads:
"The Tribunal acknowledges receipt of your letter of 21 November 2008. The Chairman has instructed that we treat your letter as an application under rule 26(4) and he says to draw your attention to the first main paragraph of the direction of 10 November 2008."
A Hearing Notice was sent out on 23 December 2008. This gives 7 January 2009 as the date for hearing the Application. It reads as follows:
"I hereby give notice that the hearing of the application listed below will take place … on 7 January 2009 … . This will not be a hearing of the appeal. A hearing for directions (Application under Rule 26(4) of direction of 10 November 2008)"
[27]On 6 January 2009 (according to the Tribunal's file entry) the rule 26(3) (4) application was moved to 29 January because the chairman was not available. The file note observes that P H Ross & Co had been called on 5 January by the Tribunal and told that the hearing listed for 7 January was very likely to be cancelled for that reason. The parties were notified by a letter of the same day that "the hearing of the application listed below will take place on 29 January":
"listed below", according to the notice provided by the parties, were the words- "
A hearing for Direction".[28]The hearing took place on 29 January. The decision was released on 4 February and contains the following passages:
"1. ATEC … through P H Ross & Co, Chartered Accountants, apply under rule 26 … to set aside directions given in ATEC's absence at a hearing on 4 November 2008. The 4 November direction dismissed the appeal on grounds of non-compliance with an earlier direction of the Tribunal (to serve witness statements and a list of documents) on grounds of want of prosecution on the part of ATEC. 2. Neither ATEC nor P H Ross &Co attended the present hearing on 29 January of their rule 26(4) application. 3. In a letter of 28 January 2009 to the Tribunal, P H Ross & Co said: "
We were only advised yesterday by your office that the hearing is in respect of an application under rule 26(4)". 4. The Tribunal's records show that on 21 November 2008 P H Ross & Co had written to the Tribunal asking that the appeal be continued: this no doubt was in response to the explanation given at the start of the 4 November direction explaining the rule 26 procedure. P H Ross's application was acted upon by the Tribunal which sent out a hearing notice on 23 December stating that a "hearing for directions (Application under rule 26(4))" would take place on 7 January 2009. The 7 January 2009 hearing was postponed and re-fixed for 29 January; … … 7. In the Reasons for the Direction of 4 November 2008 I explained the requirements of rule 26(4). Rule 26(4) provides (and this was pointed out in the Reasons) that where a party, such as ATEC, makes an application for the decision to be set aside and does not attend the hearing of that application, that party is not entitled to have the application or direction of the Tribunal on the hearing of that application set aside. 8. As already stated, neither ATEC nor P H Ross & Co attended the hearing on 29 January. Neither has given any reason for their absence, save for P H Ross's explanation (in their 28 January letter) that they had only been advised "yesterday" by the Tribunal that the hearing was for an application under rule 26(4). That, as I have already explained, is at odds with the information given by the Tribunal on two previous occasions to P H Ross & Co. The letter of 28 January goes on to say that ATEC immediately advised its counsel who, as already noted, "advised that this is quite a complicated issue which will require more than a day to prepare for". It seems to me that in all the circumstances P H Ross & Co have done nothing to advance ATEC's appeal or the rule 26(4) application. They have taken no steps to comply with the original direction to provide witness statements and a list of documents. They have provided no reasons of any sort why the direction of 4 November 2008 should be set aside. Their conduct is inexcusable. I see no reason for allowing ATEC's rule 26(4) application. For those reasons the rule 26 application is dismissed." Conclusion[29]This Tribunal has, in my view, no jurisdiction in relation to ATEC's appeal or any matter arising in relation to it. The appeal was dismissed by the November decision. ATEC lost its right to seek to have the appeal revived by its failure (either through its directors or its appointed representative) to attend the hearing on 29 January 2009 in person as required by rule 26(4). No reason and no excuse has been offered to the Tribunal for ATEC's non-attendance at the 29 January hearing.[30]ATEC's application of 23 March 2009, for which the 9 July 2009 hearing was held, asked for the November decision (to dismiss the appeal) to be set aside. HMRC objected. By 23 March 2009 the Tribunal was functus officio in relation to the ATEC appeal. The Tribunal, a creature of statute, had no authority under VAT Act 1994 section 83 on any other statutory provision to entertain the application. There were no "current proceedings" to which Schedule 3 paragraphs 6 and 7 of the TTF Order could apply.[31]Paragraph 7(5) of the TTF Order provides in terms that – "Any direction or order made or given in proceedings which is in force immediately before the commencement date remains in force on or after that date as if it were a direction or order of the tribunal relating to proceedings before that tribunal." The effect of this provision is to leave intact and inforce the directions dismissing the appeal in the directions released as part of the November decision.[32]ATEC's case, presented by Mr David Scorey, emphasises that the Tribunal should not have treated the hearing of 29 January 2009 as a rule 26(4) hearing. The Hearing Notice sent out on 6 January, following the cancellation of the hearing listed for 7 January (of "the application under rule 26(4)"), did not say of the re-fixed directions hearing that it was of "the application under rule 26(4)". The facts are summarised above. The Tribunal expressly considered the circumstances in its decision published on 4 February 2009. It decided not to set aside the November Decision. The matter cannot, for reasons that I will now give, be re-opened.[33]The Tribunal has already decided the issue. In Fidelitas Shipping Co Ltd v Exportchleb [1966] 1 QB 630 at 640 and 643 Lord Denning MR observed:
"The plea of res judicata applies, except in special cases, not only to points on which the court was required by the parties to form an opinion and pronounce a judgment, but to every point which properly belong to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time … . The rule then is that, once an issue has been raised and distinctly determined between the parties, then, as a general rule, neither party can be allowed to fight that issue all over again. The same issue cannot be raised by either of them again in the same or subsequent proceedings except in special circumstances."
[34]Mr Scorey for ATEC stresses that the interests of justice warrant this Tribunal re-opening ATEC's appeal. ATEC's appeal had been mismanaged by the professional representative to such an extent that the earlier proceedings in the appeal had, he argued, been critically undermined. Reliance was placed on the Court of Appeal decision in Taylor v Lawrence [2003] QB 528 and [2002] EWCA 90 where Lord Woolf CJ, at paragraph 54, recognised that the Court of Appeal had "a residual jurisdiction to avoid real injustice in exceptional cases". The hearings in the present proceedings had, said Mr Scorey, been a charade.[35]If the New Rules had applied to these proceedings, I might have had authority to set aside the relevant decision in pursuance of rule 38 on grounds that this is in the interests of justice and that conditions (c) or (d) of rule 38(2) are satisfied. These cover "some other procedural irregularity in the proceedings" or a party not being present at the hearing.[36]I have already decided that the New Rules have no application. But supposing there were some residual authority to put things right in the interests of justice, does it extend to this situation? In paragraph 6 of his judgment in Taylor v Lawrence , Lord Woolf refers to the fundamental principle of our common law "that the outcome of litigation should be final". In paragraph 55 judicial bias is recognised as an occasion of a breach of natural justice that would invalidate a decision. I cannot see any breach of natural justice having occurred here. The only possibility canvassed for ATEC was the incompetence of its professional adviser.[37]This point was addressed by Lord Bridge on page 898 E-G of his speech in Al Mehdawi v Secretary of State for the Home Department [1990] 1 AC 876 . There he says:
"… a party to a dispute who has lost the opportunity to have his case heard through the default of his own advisers to whom he has entrusted the conduct of a dispute on his behalf cannot complain that he has been the victim of a procedural impropriety or that natural justice has been denied to him, at all events when the subject matter of the dispute raises issues of private law between citizens. Is there any principle which can be invoked to lead to a different conclusion where the issue is one of public law and where the decision taken is of an administrative character rather than the resolution of a lis inter partes? I cannot discover any such principle and none has been suggested in the course of argument."
A close parallel to the present situation is found in R (Mathialagam) v London Borough of Southwark [2004] EWCA Civ 1689 . I quote from the decision of Waller LJ (paragraph 38:
"The difficulty for the appellant in the instant case is that Al Mehdawi holds quite clearly that a failure on the part of a party to be present due to the negligence of the party's adviser gives no ground for quashing the decision."
[38]In the same passage the decision concludes that it "would be to recognise some general power to re-open hearings which the statute has as it would seem to me deliberately not provided."[39]The law is against ATEC. I should add only this. However incompetent their professional adviser, ATEC chose to use them as their representative from the beginning of these proceedings in 2007. According to Mr B Kalia's witness statement, however, ATEC instructed The Khan Partnership to progress the appeal in response to HMRC's refusal of the VAT reclaims; in May or June 2008, he says, the solicitor handling the case left so they replaced him with P H Ross & Co. This may be so, but (as already noted) P H Ross & Co were ATEC's representatives from the very beginning of this litigation. And the amounts reclaimed are large by any standards. If the matter were relevant, I would conclude from the information that is available to me (and none of the communications between ATEC and P H Ross & Co, other than the e-mail relating to the engagement of the barrister, Mr A B, have been made available to me) that ATEC could and should have kept a closer eye on their appeal proceedings.[40]For all those reasons I have concluded that this Tribunal has no jurisdiction to entertain ATEC's application lodged on 23 March 2009. I dismiss the application. SIR STEPHEN OLIVER QC CHAMBER PRESIDENT RELEASE DATE: 17 July 2009

Cited in 4 later judgments