El-Lamaa v Revenue and Customs (CUSTOMS DUTY : Reliefs) [2016] UKFTT 715 (TC)
FTT-Tax
El-Lamaa v Revenue and Customs (CUSTOMS DUTY : Reliefs)
[2016] UKFTT 715 (TC) · 2016-09-12
[37]15.There are two conflicting decisions of the UT about the principles that are to be applied when non-compliance with rules and directions falls to be considered by a tax tribunal. The first in time is the decision of Judge Sinfield in McCarthy & Stone (Developments) Ltd v HMRC [2014] UKUT 197 (TCC) , [2014 ] STC 973 and the second is the decision of Judge Bishopp in Leeds City Council v HMRC [2014] UKUT 350 (TCC) where he declined to follow Judge Sinfield's approach. The Leeds decision was promulgated after Judge Mosedale's determination in this case and accordingly she could not have known of it. Judge Bishopp followed his earlier reasoning in Leeds in coming to the conclusion that the FtT in this case had erred in law. 16.The key question underlying the two decisions can be characterised in the following way: whether the stricter approach to compliance with rules and directions made under the CPR as set out in Mitchell v News Group Newspapers Ltd [2014] 1 WLR 795 and Denton v TH White Ltd [2014] 1 WLR 3926 applies to cases in the tax tribunals. The two conflicting decisions of the UT on the point came to different conclusions. For the reasons I shall explain, I am of the firm view that the stricter approach is the right approach. ……………………………………….. 37. There is nothing in the wording of the relevant rules that justifies either a different or particular approach in the tax tribunals of FtT and the UT to compliance or the efficient conduct of litigation at a proportionate cost. To put it plainly, there is nothing in the wording of the overriding objective of the tax tribunal rules that is inconsistent with the general legal policy described in Mitchell and Denton . As to that policy, I can detect no justification for a more relaxed approach to compliance with rules and directions in the tribunals and while I might commend the Civil Procedure Rules Committee for setting out the policy in such clear terms, it need hardly be said that the terms of the overriding objective in the tribunal rules likewise incorporate proportionality, cost and timeliness. It should not need to be said that a tribunal's orders, rules and practice directions are to be complied with in like manner to a court's. If it needs to be said, I have now said it.[38]A more relaxed approach to compliance in tribunals would run the risk that non-compliance with all orders including final orders would have to be tolerated on some rational basis. That is the wrong starting point. The correct starting point is compliance unless there is good reason to the contrary which should, where possible, be put in advance to the tribunal. The interests of justice are not just in terms of the effect on the parties in a particular case but also the impact of the non-compliance on the wider system including the time expended by the tribunal in getting HMRC to comply with a procedural obligation. Flexibility of process does not mean a shoddy attitude to delay or compliance by any party. 34. Although he did not expressly analyse Data Select Limited v HMRC, at [44] of the judgment in BPP Holdings the Senior President said: “Morgan J applied CPR 3.9 by analogy…in just the manner I have suggested is appropriate”. 35. Mr Justice Morgan referred to Rule 3 . 9 o f the C i vil Pro cedu r e Ru les ( “C P R”) at [37] of his judgment in Data Select . Rule 3.9 has s i nce been amen ded and now reads: “(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need–(a) for litigation to be conducted efficiently and at proportionate cost; and(b) to enforce compliance with rules, practice directions and orders.” 36. In R (oao Dinjan Hysaj) v SSHD [2014] EWCA Civ 1633 (“ Hysaj ”), Moore-Bick LJ, giving the judgment of the Court of Appeal, gave guidance on whether the merits of a substantive appeal should be considered in applications for extension of time. His Lordship stated at [46]: “If applications for extensions of time are allowed to develop into disputes about the merits of the substantive appeal, they will occupy a great deal of time and lead to the parties' incurring substantial costs. In most cases the merits of the appeal will have little to do with whether it is appropriate to grant an extension of time. Only in those cases where the court can see without much investigation that the grounds of appeal are either very strong or very weak will the merits have a significant part to play when it comes to balancing the various factors that have to be considered at stage three of the process. In most cases the court should decline to embark on an investigation of the merits and firmly discourage argument directed to them. Here too a robust exercise of the jurisdiction in relation to costs is appropriate in order to discourage those who would otherwise seek to impress the court with the strength of their cases.” 37. In Raymond Harvey v HMRC [2016] UKFTT 597 (TC) the First-Tier Tribunal in considering an application for permission to appeal out of time adopted the approach of using the structure and the criteria set down by Mr Justice Morgan in Data Select at paragraph 34 of that decision: As a general rule, when a court or tribunal is asked to extend a relevant time limit, the court or tribunal asks itself the following questions: (1) what is the purpose of the time limit? (2) how long was the delay? (3) is there a good explanation for the delay? (4) what will be the consequences for the parties of an extension of time? and (5) what will be the consequences for the parties of a refusal to extend time. The court or tribunal then makes its decision in the light of the answers to those questions. Submissions of the parties Appellant 38. The appellant was very ably represented by his daughter who made six points in support of the application. 39. The first point was that as all communications were dealt with by the agents on the appellant’s behalf there was no reason why he would behaved any other way than the way he did. The appellant is a chauffeur with no knowledge of imports and exports thus he used a shipping company and agent to manage the transactions. The same companies were used for all transactions. The appellant had no direct communication with the relief unit or HMRC generally concerning all the containers onwardly shipped. The appellant never had any audit trail. He did not know what a C99 document was nor what the circumstances surrounding it were. 40. The second point was that the demand note of 1 June 2012 was the first time HMRC did not receive a C99 document within the period of time that the appellant was importing and exporting. When the appellant received the demand note he forwarded it to his shipping agent to find out what was going on. At that point the appellant did not understand that the responsibility was on him to deal with the letter. It was submitted that Mr Mayes’ email of 12 June 2012 to HMRC confirmed that the container left the UK and that a C99 was completed and sent but for some reason HMRC did not receive it. While the letter of 20 June 2012 gave him three options and he did not appeal within 30 days, the appellant did act within that time. He contacted the shipping company and forwarded the letter to them. Hence Seaport Freight Services Ltd wrote to HMRC’s C18 team explaining why C99 was late on 29 June 2012. All the agent’s previous documents were sent by post. The issue was therefore addressed at the time by the agent and there was a challenge made to HMRC’s letters of 1 and 20 June 2012. 41. The third point was that following Seaport’s letter of 29 June 2012, the appellant was assured over the phone by Seaport that the issue had been addressed and thus the appellant was so assured. Emails between Seaport and Luna in November and December 2014 evidence their belief, which the appellant shared, that the matter had been resolved in June 2012. While at no stage did the appellant receive anything in writing to say that the matter had been resolved either from HMRC, he had received nothing to say the representations had been rejected. Nothing further happened for 17 months until November 2013 when Officer Garland contacted the appellant. 42. The fourth point was that because of the appellant’s trusted relationship with the shipping company, they having completed eleven other transactions, he had no reason to believe that the matter was not resolved. Given this trusted relationship and appellant having no uncertainty that the issue was not resolved, he finally took personal ownership of the dispute with HMRC when it arose again on receipt of the letter of 18 November 2014. It was submitted that the appellant would have acted earlier if he had considered there was any risk that it had not been resolved. 43. The fifth point was that the appellant’s substantive appeal turns on only one document not being received in time. It was submitted that the appellant was being held responsible for one document where his shipper sent it to HMRC but HMRC deny receiving it. It was submitted that evidence exists that the sums charged are not due and that the containers left within the right time and the note was sent to HMRC. 44. The sixth point was, while HMRC said that it has taken the appellant 31 months to appeal the decision of 1 June 2012 it had not acted expeditiously either. At the time the appellant needed to appeal in June 2012 or at least address the issue, action was taken and a letter was sent from Seaport within a month. There was no further communication from HMRC for 17 months thereafter until November 2013 when Mr Garland contacted the appellant. Thereafter the appellant was assured once again by the shipping company that there was nothing to worry about and so he did nothing further. There was then a further 12 months before HMRC wrote to the appellant in November 2014. Thereafter the appellant took over the dispute and acted expeditiously thereafter resulting in the request for a review on 16 December 2014 and appeal on 2 January 2015. HMRC 45. Counsel for HMRC submitted that there was a public interest in the finality of their decisions. It was submitted that the length of the delay was extraordinary in being 31 months between the demand note of 1 June 2012, which explained the option of appealing to the tribunal within 30 days, and the appeal being filed on 2 January 2015. 46. It was submitted that there was no good explanation for the delay. The appellant was never informed that the matter had been resolved or concluded. The appellant was sent a warning letter by HMRC on 7 February 2012 that future late returns would not result in cancellation and that it was the appellant’s responsibility to ensure returns reach HMRC in time. The appellant was sent a letter on 14 April 2012 requiring a bill of discharge to be sent within 30 days in respect of the import of 14 October 2011. 47. On 1 June 2012 the appellant was sent the C18 Post Clearance Demand Note which explained his options of appealing to the tribunal or requesting a review within 30 days. As a result of Seaport Freight Services’ email on 12 June 2012, HMRC wrote on 20 June 2012 informing the appellant that a belated bill of discharge had been received. This letter again explained the options for the appellant in terms of a review to the tribunal or request for a review within 30 days. At no point thereafter was the appellant told that the matter had been concluded and Officer Garland never gave this assurance. If there was any doubt it would have been prudent to seek an assurance from HMRC. The appellant was made aware of his responsibilities both in sending bills of discharge, paying duties and making appeals and the timescales in which each was required and could not reasonably rely on others to discharge these duties. 48. It was submitted that where the appellant engaged an agent to act on his behalf it was still his responsibility to discharge the duties or ensure they were discharged on his behalf. This must apply with respect to requesting reviews or making appeals. The lack of knowledge of procedural rules cannot afford the appellant an opportunity to pursue the present appeal out of time. It was submitted that the fact that a litigant in person ‘does not really understand’ or ‘does not appreciate’ the procedural courses open to him for months does not entitle him to extra indulgence – see Tinkler v Elliott [2012] EWCA Civ 1289 . 49. It was submitted that there was a consequence for HMRC in extending time in that it would have to divert resources to defending an appeal against a decision which it was entitled to conclude was final. Discussion and Decision 50. This decision is not the forum in which to analyse the potential effect of the stricter approach to compliance with rules and directions mandated by BPP Holdings when balancing or giving weight to the competing factors in Data Select . However, the Tribunal adopts the approach of considering the Data Select questions in the context of the stricter approach in BPP Holdings . Purpose of the time limit 51. The purpose of the time limit in which to bring an appeal is in pursuit of a clear public interest in the finality of the decisions of HMRC. Time limits enshrine the need to bring the conduct or prospect of litigation to a speedy conclusion. As time limits, whether imposed by statute, tribunal rule or tribunal directions serve the public interest, compliance is normally to be expected. 52. In John O’Gaunt v HMRC TC/2014/04510, the Tribunal explained the purpose of such time limits at paragraph 21 of its decision: ‘ It is designed to provide certainty and it is not in the interest of justice to permit appeals after long periods of delay. There is a public interest in the finality of decisions of the commissioners .’ In North Berwick Golf Club [2015] UKFTT 82 (TC) at [33] the Tribunal stated ‘ time bar provisions are created for a reason and that is that they provide finality and certainty and that is not a matter that should be lightly disregarded ’. 53. Rule 2(2)(e) of the Tribunal Rules, part of the overriding objective, requires the tribunal to avoid delay so far as compatible with proper consideration of the issues. Length of the delay 54. The length of the delay in this case before a notice of appeal was filed and accepted by the tribunal on 2 January 2015 was extraordinary. It amounted to two years and six months from the deadline of 1 July 2012. 55. The tribunal notes that the Upper Tribunal in Romasave (Property Services) Limited v Revenue and Customs Commissioners [2015] UKUT 254 (TCC) at [96] stated that ‘ a delay of more than three months cannot be described as anything but serious and significant .’ The tribunal also notes that the Upper Tribunal in O’Flaherty v Revenue and Customs Commissioners [2013] UKUT 0161 (TCC) stated that permission to appeal out of time should only be granted exceptionally, meaning that it should be the exception rather than the rule and not granted routinely. Is there a good explanation for the delay? 56. The tribunal considers there to be an insufficiently good explanation for the delay. 57. Following the decision of 1 June 2012 and expiration of the appeal period on 1 July 2012, the appellant was never informed by HMRC that the matter had been concluded or resolved whether orally or in writing. 58. Prior to the decision under appeal the appellant had received a warning letter from HMRC on 7 February 2012 that future late returns would not result in cancellation and that it was the appellant’s responsibility to ensure returns reached the HMRC in time. This warned him to ensure that he complied with deadlines and that this was his personal responsibility. The appellant was also sent a letter on 14 April 2012 requiring a bill of discharge to be sent within 30 days. This was not done and it is not clear whether it was forwarded to his agent or shipping company. The explanation that was latterly given on 12 June 2012 could have been given within 30 days of 14 April 2012. The C99 dated 28 October 2011 which was sent on 12 June 2012 could have been re-sent to HMRC within the earlier time period. It would have been clear at this stage, had the appellant or agent turned their mind to it, that the document had not been received by HMRC in October 2011. 59. The appellant was informed personally twice of his appeal options to the tribunal and the timescale involved. On 1 June 2012 the appellant was sent the C18 Post Clearance Demand Note which explained his options of appealing to the tribunal or requesting a review within 30 days. As a result of Seaport Freight Services’ email on 12 June 2012, HMRC wrote on 20 June 2012 informing the appellant that a belated bill of discharge had been received. This letter again explained the options for the appellant in terms of a review to the tribunal or request for a review within 30 days. 60. The appellant was made aware of his options and it was his responsibility to pursue them if he chose. The only actions on his behalf within the required 30-day time period, the agent’s email of 12 June 2012 and the agent’s letter of 29 June 2012, were not appeals to the Tribunal nor indeed requests for a review from HMRC. 61. It is fair of course to say that these communications, the resending of the C99 and the agent’s explanation for the non-receipt of the C99, did constitute some action on behalf of the appellant during the required time period. However it was not suggested that the appellant believed either to be a request for a review or a request for an appeal. Even if there had been such a belief on the appellant’s behalf, a reasonable taxpayer would have been prompted to contact HMRC shortly thereafter in the absence of any further reply from HMRC upholding or rejecting the review or appeal. 62. At no point was the appellant told by HMRC that the matter had been concluded and Officer Garland never gave this assurance. If there was any doubt it would have been prudent by at least the autumn of 2012 to seek assurance from HMRC as to the position in respect of his review or appeal. The appellant was made aware of his responsibilities both in paying duties and making appeals and the timescales involved and could not reasonably rely on others to discharge these obligations. 63. It could not be reasonable for the appellant to rely upon his agent or shipping company for him. It was his responsibility to pursue avenues of review or appeal. Indeed he never received any written assurance from either the agent or the shipping company that the matter had definitely been concluded even if their correspondence may have led him to believe this to be the case. In any event, it would not be that of be reasonable to rely upon the word of an agent in the absence of confirmation from HMRC. 64. The lack of knowledge of procedural rules could not of itself afford the appellant an opportunity to pursue the present appeal out of time. It would be his responsibility to inform himself of the routes of challenge available and procedure to be followed. 65. It is fair to the appellant to note that there were substantial delays on HMRC’s part between July 2012 and November 2013 and November 2013 and November 2014 in seeking to enforce the demand note. To some extent this lack of action by HMRC within sensible timescales may have led the appellant into a false sense of reassurance. Therefore the tribunal has some degree of personal sympathy for the appellant who had, although not reasonably, come to rely both on these delays on the part of HMRC in enforcement and upon his agent and shipping company in their dealings with HMRC. 66. Indeed, accepting that the appellant’s English is not the best, the contact by telephone by HMRC twice within a period of three days in November 2013 would have put a reasonable taxpayer on notice that the matter were not concluded nor resolved. It would be sensible to ensure that matters were challenged immediately and in writing and that previous assurances that matters were resolved could not be relied upon. The mention by HMRC of court proceedings and available assets for enforcement would be likely to concentrate the mind of a taxpayer that there was a pressing need to take responsibility for the conclusion of any dispute. 67. Therefore, even accepting some mitigation on behalf of the appellant, none of the above can reasonably obviate the appellant’s personal responsibility to bring his appeal within a reasonable time period. Consequences of an extension 68. The consequences of granting an extension of time for the appeal to be brought would be that HMRC would have to divert resources to defending an appeal against a decision which it was entitled to conclude was final. However this factor does not hang heavily in the balance. The resources involved in defending the appeal would not be substantial and HMRC would not be greatly prejudiced, as it appears to have access to all the records and documents involved. It would be in the position to fully defend the appeal. 69. The consequence of granting an extension for the appellant would be the appeal proceedings and having the substantive merits considered. Consequence of no extension 70. The consequences of not granting an extension of time would be that HMRC would not have to expend any further time or financial resources in defending the appeal. If the appeal does not proceed then the demand note stands and it is entitled to payment thereupon. 71. The consequence of not granting an extension for the appellant would be the appeal proceedings would not proceed and the substantive merits would not be considered. HMRC would be entitled to continue enforcement action upon the demand note and the appellant would be expected to pay the sum of money involved. Conclusion 72. In considering all the competing factors in the balance the tribunal has concluded that the length of delay and the insufficiently good explanation provided by the appellant must weigh against him. Therefore the tribunal has decided that it is not in the interests of justice and overriding objective to extend time for filing the notice of appeal. The tribunal dismisses the application for permission for the appeal to be admitted out of time. 73. 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. RUPERT JONES TRIBUNAL JUDGE RELEASE DATE: 24 OCTOBER 2016