AGM (Riverside) Ltd v Revenue and Customs (PROCEDURE : Other) [2016] UKFTT 815 (TC)
FTT-Tax
AGM (Riverside) Ltd v Revenue and Customs (PROCEDURE : Other)
[2016] UKFTT 815 (TC) · 2016-09-19
[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 [1] 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. 28. 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”. 29. 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.” 30. In R (oao Dinjan Hysaj) v SSHD [2014] EWCA Civ 1633 (“ Hysaj ”) [2] , 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.” 31. In Raymond Harvey v HMRC [2016] UKFTT 597 (TC) [3] 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. Discussion and Decision 32. The submissions on behalf of the appellant were in line with the witness statement of Mr Georgiou as set out above. 33. HMRC submitted that 1) the purpose of the time limit was to ensure the finality of litigation; 2) there was long delay before the appellant filed its appeal; 3) the appellant did not have a good explanation for the delay; 4) the consequences of granting an extension would mean HMRC would have to expend significant resources in defending an appeal which they were entitled to conclude was out of time; 5) the consequences of not granting an extension is that the appellant’s appeal would fall away and HMRC’s denials of credit and assessments would stand. 34. 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 35. 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. Indeed, at paragraph 44 of the Court of Appeal’s judgment in BPP Holdings , the Senior President declined to analyse Data Select . However, the fact that the deadline for appeal in this case is set by statute, namely section 83G VATA, rather than the Rules only emphasises its importance. 36. In John O’Gaunt v HMRC TC/2014/04510 [4] , 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 ’. 37. 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. 38. In applying the law to the facts of this case, the purpose of the time limit in which to bring an appeal, is in pursuit of a clear public interest in the finality of decisions of HMRC. Time limits enshrine the need to bring the conduct or prospect of litigation to a speedy conclusion. Length of the delay 39. The length of the delay in this case before a notice of appeal was filed by the appellant at the Tribunal, on 28 July 2015 at the earliest, was long. It amounted to a minimum of nine months later than the 30-day deadline and ten months after the decision appealed of 5 September 2014. We note that the Upper Tribunal in Romasave (Property Services) Limited v Revenue and Customs Commissioners [2015] UKUT 254 (TCC) at paragraph 96 stated that ‘a delay of more than three months cannot be described as anything but serious and significant.’ We also note that the Upper Tribunal in O’Flaherty v Revenue and Customs Commissioners [2013] UKUT 161 (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. Good explanation for the delay 40. It seems to us that the appellant’s explanation for the delay is not good. HMRC’s review decision letter of 5 September 2014 was clear as to the appeal route available, the timescale involved and the sources of information which could be utilised. HMRC’s letter of 6 November 2014 re-iterated the appeal route available and invited submissions within 7 days. HMRC’s letter of 11 February 2015 also reminded the appellant of the availability of the appeal to the tribunal. It was at least a further five months after this letter until the appellant appealed. 41. All three of these letters would have put a reasonable company or taxpayer on notice as to the seriousness of the issues contained therein. 42. It was not reasonable of the appellant to consider that the letter of 27 October 2014 constituted a notice of the appeal to the tribunal, if indeed it did, given the information it had been provided on 5 September 2014. 43. HMRC provided a fourth mention of the availability of the appeal and the timescale involved in its letter of 27 April 2015 to the appellant’s solicitors. Yet still the appellant did not take up the opportunity to pursue an appeal for a further three months. HMRC’s four operative letters were sent either directly to the appellant or its representatives then instructed. 44. It is impossible to accept the appellant’s contention that at no time prior to 11 February 2015 did the Respondent confirm or seek to clarify with the appellant that any intention to appeal must or should have been filed within 30 days of the review decision. 45. Furthermore, the tribunal does not accept that the appellant acted reasonably in waiting for the provision of its VAT returns before filing the appeal. Even if copies of these had not been retained by the appellant, and HMRC’s copies had been lost and were not available, the appellant had repeatedly been given notice of the availability of the appeal and had the opportunity to pursue it. At all times it had a copy of the review decision letter of 5 September 2014 which was the subject of the appeal and was sufficient material on which to base any notice of appeal. 46. Mr Georgiou submitted that there had been constant flooding at his premises in the period 2000 to 2012 and again in December 2015. Therefore he had lost much documentation. Even if this is correct, and it had not ceased in 2007 as per his witness statement, this might only go to the merits of the substantive appeal and not this application where the relevant time period is September 2014 to October 2015 at the latest. 47. The appellant cannot reasonably rely on any lack of understanding or awareness of the procedure to appeal where HMRC’s notifications were clear and the appellant had its own responsibility to comply with the appeal procedures, notwithstanding the involvement of professional advisers, solicitors and accountants. Consequences to the parties of extending time 48. In terms of the consequences for both parties of granting an extension and permitting the appeal to be admitted, HMRC would not be greatly prejudiced by the substantive appeal being heard. HMRC did not suggest that it would be unable to reply to the substantive points raised nor submit that documents or evidence relevant to the appeal had become unavailable. However, it is fair to say that HMRC would be put to the expenditure of time and cost in defending the substantive appeal and this will require some resources. 49. If permission is granted then the appellant will benefit from its appeal being heard. It would of course be noted that the appeal would only concern the subject matter of the review decisions concerning at most £75,000 of the appellant’s liability to HMRC. The debt which HMRC is seeking from the company is understood to be a greater sum than this and involve other time periods and taxes. 50. HMRC submitted that the appellant’s appeal would have little prospect of success on its substantive merits. It was submitted that the review decision accurately reflected the adjusted account to HMRC. However the tribunal, following Hysaj , has not taken into the prospects of the appellant’s appeal succeeding in making this decision given that the outcome is not manifest or unarguable. Consequences to the parties of not extending time 51. The consequences for the appellant of the tribunal refusing permission would be dramatic in the sense that the appeal would fall away and the assessments and denials of credit would stand without consideration of the merits of the appeal. The total debt to HMRC would then become enforceable in a winding up petition brought against the appellant. Conclusion 52. The majority of the factors weigh against admitting the appellant’s appeal. In particular we considered that the appellant was repeatedly warned of the opportunity and method of appeal and had no good explanation for what was a long delay. 53. Therefore we considered that it would not be in accordance with the interests of justice and overriding objective to extend time for lodging the notice of appeal. We refuse to grant permission for the appeal to be brought out of time under Rule 20(4). 54. The application is dismissed. 55. 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: 8 DECEMBER 2016 [1] Not sure whether these should be in blue type [2] Sorry, I don’t have this case in the authorities bundle [3] Sorry, I don’t have this case in the authorities bundle [4] Sorry, I don’t have this case in the authorities bundle