Moreton Alarm Services (MAS) Ltd v Revenue and Customs (PROCEDURE : Other) [2016] UKFTT 192 (TC)
FTT-Tax
Moreton Alarm Services (MAS) Ltd v Revenue and Customs (PROCEDURE : Other)
[2016] UKFTT 192 (TC) · 2015-12-14
[37]“ 37. … the relevant principles applying to very late applications to amend are well known. I have been referred to a number of authorities : Swain-Mason v Mills & Reeve [2011] 1 WLR 2735 (at paras. 69 to 72, 85 and 106); Worldwide Corporation Ltd v GPT Ltd [CA Transcript No 1835] 2 December 1988; Hague Plant Limited v Hague [2014] EWCA Civ 1609 (at paras. 27 to 33); Dany Lions Ltd v Bristol Cars Ltd [2014] EWHC 928 (QB) (at paras. 4 to 7 and 29); Durley House Ltd v Firmdale Hotels plc [2014] EWHC 2608 (Ch) (at paras. 31 and 32); Mitchell v News Group Newspapers [2013] EWCA Civ 1537 . 38. Drawing these authorities together, the relevant principles can be stated simply as follows: a) whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted; b) where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission; c) a very late amendment is one made when the trial date has been fixed and where permitting the amendments would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept; d) lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done; e) gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation; f) it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay; g) a much stricter view is taken nowadays of non-compliance with the Civil Procedure Rules and directions of the Court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the courts enable them to do so. ” 52. As to the last point, it is clear that a similar approach applies to compliance with the Rules of this Tribunal – see BPP Holdings Limited v Revenue & Customs Commissioners [2016] EWCA Civ 121 . 53. In the light of the principles described by Carr J we are firmly of the view that the Respondents should not be permitted to raise a new case in relation to the Nano Products. 54. We consider that by 3 June 2013 the Respondents ought to have appreciated that the C18 demand included a sum referable to the Nano Products and that the Appellant was challenging the Respondents’ classification of the Nano Products. That was the date of the request for a review. Even if they had been in any doubt at that point in time, by 18 November 2014 there could have been no doubt that the Appellant was challenging classification of the Nano Products. That was the date the Appellant served its expert report. The Respondents then had two further opportunities to recognise and engage with the Appellant’s arguments in March 2015 and in September 2015. 55. What happened was that the Respondents made a very late application to amend their case and adduce the Supplementary Report. If we had granted the application then the hearing date would inevitably have been lost. Indeed the process of hearing the application left insufficient time for the hearing to proceed. With the benefit of hindsight we probably ought to have refused the application summarily at the hearing and proceeded with the appeal. 56. There is a heavy burden on the Respondents to show why it is fair and just for the application to be granted. The Respondents were seeking to put forward a significant amendment introducing issues in relation to an entirely different product. There was no good reason why the application was made so late. Nor was there any real explanation as to why previous opportunities to amend the Respondents’ case were not taken. It is no answer in such circumstances to say that there would be no prejudice to the Appellant, that the Appellant could be given an opportunity to reply to the new case or that any prejudice could be compensated for in costs. 57. We take into account that the Appellant itself may not have been in a position to proceed because its expert was not available to give oral evidence. That was an error on the part of the Appellant but it is not such an error as would cause us to reach a different conclusion on the Respondents’ application. It does not tip the balance in favour of allowing the Respondents’ application. 58. We acknowledge that refusing the application will prejudice the Respondents. We set out below the effect of a refusal on the appeal in relation to the Nano Products and we have taken that into account in our balancing exercise. 59. The amount of customs duty and VAT in relation to the Nano Products is approximately £9,000. It is a relatively modest sum and less than a third of the overall sum in issue on the C18 demand. 60. It was common ground that the decision under appeal was the review decision dated 17 July 2013. That decision confirmed the C18 demand as a whole, albeit the reasoning did not address the Nano Products. 61. The appeal against the review decision engages our jurisdiction under section 16(5) Finance Act 1994, which must be read together with section 16(4). To put these provisions into context the present appeal is against a matter which is not an ancillary matter. The provisions read as follows: “ 16(4) In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say —(a) to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;(b) to require the Commissioners to conduct, in accordance with the directions of the tribunal, a review or further review as appropriate of the original decision; and(c) … (5) In relation to other decisions, the powers of an appeal tribunal on an appeal under this section shall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal. ” 62. Section 16(5) expressly provides that our jurisdiction “shall also include” the power to quash a decision and substitute our own decision. There was some discussion as to whether our powers on an appeal such as this would include a power to direct a further review. In other words, are the powers under section 16(5) in addition to the powers under section 16(4)? We express no view on that matter. If we refused the Respondents’ application having found that they are not entitled to challenge the Appellant’s case on the Nano Products we would not be minded to direct a further review. To do so in the present circumstances would be unfair to the Appellant who we consider is entitled to a determination of any issues arising from the C18 demand within the scope of its appeal. 63. Mr Baig submitted that the review officer’s failure to consider the Nano Products meant that she should be taken as accepting the Appellant’s case on classification. We do not agree. As Mr Chapman pointed out, if the review officer had not carried out any review at all then section 15(2) FA 1994 provides that the original decision is deemed to be confirmed. It is difficult to see why the result of a partial review should be that a part of the decision which is not reviewed is deemed to be overturned. 64. In any event we are satisfied that the original decision to include the Nano Products in the C18 demand was confirmed by the review. The review letter clearly confirmed the C18 demand save for the April 2010 entry. The failure of the review officer was a failure to give reasons in relation to the Nano Products. 65. We turn now to consider the effect of a decision refusing the Respondents’ applications. It would not necessarily mean that the appeal in respect of the Nano Products must be allowed. We say nothing at this stage about the merits of the Appellant’s arguments on classification, although we note that the Respondents have never suggested that the Appellant’s case is unarguable. The question which arises is whether we can or should allow the appeal regardless of the merits or take some other approach. 66. Tribunal Rule 7(2) provides as follows: “ If a party has failed to comply with a requirement in these Rules, a practice direction or a direction, the Tribunal may take such action as it considers just, which may include – (a) waiving the requirement; (b) requiring the failure to be remedied; (c) Exercising its power under rule 8 (striking out a party’s case);(d) Restricting a party’s participation in proceedings; or(e) Exercising its power under paragraph (3) ” 67. It seems to us that Rule 7(2) is engaged because the Respondents failed to set out their case in the statement of case. Pursuant to Rule 7(2) we could certainly restrict the Respondents’ participation in the proceedings. Mr Chapman suggested that the Respondents should be entitled to challenge the Appellant’s expert evidence in cross examination and make submissions on the correct classification. That would involve the Respondents’ effectively presenting their new case, albeit without the benefit of the Supplementary Report. What is not clear is whether we could summarily allow the appeal in relation to the Nano Products. 68. The extent of the Tribunal’s jurisdiction under Rule 7 was considered in Elder v Commissioners for HM Revenue & Customs [2014] UKFTT 728 (TC) , a decision of Tribunal Judge Cannan, in the following terms: “ 82. It is not clear and I did not have any submissions as to whether Rule 7(2)(d) encompasses a power to effectively strike out a case, which is what barring the respondents from taking further part in the proceedings would involve. I would be inclined to the view that it does not because the grounds for striking out are comprehensively set out in Rule 8. In particular Rule 8(1) provides for automatic striking out for breach of a direction which stated that the appeal would be struck out in the event of non-compliance. Similarly, Rule 8(3)(a) provides for discretionary striking out for failure to comply with a direction which stated that non-compliance could lead to the striking out of the proceedings. There is no equivalent in the Tribunal Rules to CPR 3.4(2) which gives a court discretionary power to strike out a claim where there has been failure to comply with a rule. 83. Rule 7(2)(d) may be directed at some more limited form of restriction on participation in the proceedings falling short of striking out. Alternatively, at some exceptional circumstances which do not for some reason fall within the ambit of Rule 8. See for example the decision of Morgan J sitting in the Upper Tribunal in Foulser v Commissioners of Revenue & Customs [2013] UKUT 38 (TCC) (not cited). 84. Neither party invited me to make any more limited order than a barring order. 85. I am not minded to resolve issues as to the relationship between Rule 7 and Rule 8 in the context of the present application in the absence of detailed submissions. However what is clear is that if I have jurisdiction to bar the respondents from taking further part in the proceedings it would be a matter of discretion and the Court of Appeal’s guidance in Denton would be directly relevant. ” 69. Those issues now arise in the present case. We did not hear detailed argument as to how the appeal against the Nano Products should proceed in the event that the Respondents’ applications were refused. The extent to which the Tribunal Rules should be interpreted in the light of the Civil Procedure Rules in circumstances such as this might also be affected by the recent decision of the Court of Appeal in BPP Holdings Limited above. 70. Taking all the circumstances into account we are satisfied that it would be just and fair to refuse the Respondents’ application to amend their case and to rely on the Supplementary Report. Further we are satisfied that the Respondents should be barred from cross examining the Appellant’s expert witness and from making submissions on the Appellant’s case in relation to the Nano Products. We would have been minded to summarily allow the appeal in relation to the Nano Products but it is not clear to us that we have such jurisdiction. We will hear arguments as to the extent of our jurisdiction at the final hearing of the appeal in relation to the PC Based Products. Conclusion 71. For the reasons given above we refuse the Respondents’ application to amend their statement of case and to adduce the Supplementary Report. The Respondents will also be barred from cross-examining the Appellant’s expert witness and from making submissions in relation to the classification of the Nano Products. Any further sanction will be considered at the final hearing of the appeal. 72. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. JONATHAN CANNAN TRIBUNAL JUDGE RELEASE DATE: 21 MARCH 2016