Horsley v Revenue & Customs (PROCEDURE : Hearings in private) [2019] UKFTT 13 (TC)

FTT-Tax
Horsley v Revenue & Customs (PROCEDURE : Hearings in private)
[2019] UKFTT 13 (TC) · 2018-09-19
[15][15] Where a bankrupt is commencing or pursuing a claim which he knows he does not have, the abuse of process in commencing or pursuing that claim is obvious. No claimant is entitled to sue on a right which he knows belongs to someone else. The abuse lies in knowingly pursuing a claim which, as presently constituted, is bound to fail. The abuse does, however, depend on actual knowledge of the lack of title to the cause of action, not on what he or she ought to have known.[16][16] Nevertheless, where an action is commenced or continued after the cause of action has vested in a trustee in bankruptcy, the action does not abate and the position is capable of being regularised by the joinder of the trustee or by the taking of an assignment from him. Whether the court will permit that to happen will involve an exercise of discretion. It will be necessary to have regard to the interests of those likely to be affected, including the creditors in the bankruptcy. The court would be likely to stay the action until the position in the bankruptcy is clarified . 33. Muir Hunter also states at para 3-310.1: In Arnold v Williams [2008] EWHC 218 (Ch); [2008] B.P.I.R. 247 , HH Judge Purle QC held that where an assessment is raised against a discharged bankrupt in respect of tax due at the date of the bankruptcy order, the right of appeal under the statutory procedure is vested in the discharged bankrupt and not in his trustee. This conclusion, the inconvenience of which was acknowledged by the judge (ibid., at [55]), appears to be at odds with the tenor of the comments of Harman J in Re A Debtor Ex p. The Debtor v Dodwell [1949] Ch. 236 at 244 on the subject of the debt owed by the bankrupt in respect of tax going back some seven years before his bankruptcy:
“[I]t has been recently agreed by the trustee with the revenue after long negotiations. With these the [bankrupt] is dissatisfied … the complaint is an idle one. It is for the trustee and for him alone to settle with the Crown as with any other creditor, and … the bankrupt has no right whatever to call his decision in question”
In R. (on the application of Singh) v Revenue and Customs Commissioners [2010] UKUT 174 (TCC) ; [2010] BPIR 933 , Warren J doubted the correctness of the decision in Arnold v Williams , above. “[T]he bankrupt has no standing to proceed with the appeal because he has no interest in the estate which has vested in the trustee and which comprises the only assets out of which the tax could be paid. If the bankrupt has no standing then the trustee must have standing otherwise the unacceptable result would be reached under which no-one had a right of appeal at all. The answer may be that an appeal has to be brought in the name of the bankrupt, but if that is so, the decision whether to do so is that of the trustee and not of the bankrupt and the bankrupt is under a duty to co-operate accordingly under s.333” (ibid., at [35]). See further Count Artsrunik v Waller [2005] B.P.I.R. 82 , a decision of the Special Commissioners applying Re Hurren and in which the Special Commissioners ruled that in relation to tax assessments for periods preceding the bankruptcy the right of appeal against such assessments was vested in the trustee in bankruptcy who had sole responsibility for determining the debts outstanding and for accepting or challenging them. There was no basis for departing from that general position since in the case in question the taxpayer had no personal interest in the appeals which did not directly concern his estate as vested in the trustee: no penalties had been imposed but, even if they had been, they would be debts provable in the bankruptcy and the discharge of the taxpayer meant that he had already been released from such debts ( Heath v Tang [1993] 1 W.L.R. 1421 applied). This case was followed by the First-Tier Tribunal (Tax Chamber) in Ali v Revenue and Customs Commissioners [2015] UKFTT 464 (TC) ; [2015] B.P.I.R. 1348 . 34. None of the authorities referred to in paragraphs 31-33 above that post-date Heath and Artsrunik were cited by the parties at the hearing . The Tribunal has given consideration to whether it should before issuing its decision give the parties the opportunity to make submissions on other authorities. The Tribunal has decided against that course. The question of the effect of the Appellant’s bankruptcy on her standing to bring this appeal was squarely identified to the parties prior to the hearing as one of the main issues that was to be addressed at the hearing. Both parties have therefore had a full opportunity to make whatever submissions they wish. In reaching its decision, the Tribunal does not place any reliance on authorities not cited by the parties, other than to take into account that some of these authorities arguably are less unfavourable to the Appellant than Heath and Artsrunik . The Tribunal is persuaded on the basis of the authority of Heath and Artsrunik that by operation of the law of bankruptcy, the Appellant in this case no longer has any right to pursue an appeal before the Tribunal in respect of tax assessments or penalties in respect of periods preceding the bankruptcy, particularly given that the assessments were issued before the bankruptcy order. 35. The Appellant in this case, having now been discharged from bankruptcy, clearly has no intention of being liable to pay personally all of the assessments and penalties to which this appeal relates, in the event that the Tribunal were to allow the appeal to proceed and she was unsuccessful. By virtue of the bankruptcy, she has been released from those debts. 36. If any application were now to be made directly by the Appellant, rather than by the trustee in bankruptcy, that application would need to be made in the bankruptcy jurisdiction of the High Court, which made the bankruptcy order. In Artsrunik at [42] it was stated that if the Bankruptcy Court were to re-open the bankruptcy and request the Tribunal to determine the amounts of the assessments, then that court could refer the matter to the Tribunal, but that it is not for the Tribunal to determine the amounts without such a request. 37. It is the trustee in bankruptcy who has standing to bring an appeal before this Tribunal. The Tribunal proceeds on the basis that it has the power, in its discretion, to inform the trustee in bankruptcy of these proceedings, and to invite him to indicate whether he wishes to apply to take over and continue the present proceedings. The Tribunal has decided against that course for the following reasons. The appeal in this case was brought out of time. The application to reinstate the appeal was out of time. The trustee in bankruptcy must have been aware of the assessments and penalties, given that these formed the basis of the bankruptcy petition. The trustee in bankruptcy would presumably also be aware of the Tribunal appeal, given that the hearing of the bankruptcy petition was postponed to allow the Appellant to pursue that appeal. In any event, the bankruptcy petition was made on 5 June 2015, over 3 years before the hearing of the application to reinstate this appeal. If the trustee in bankruptcy has not made any application to reinstate within those three years, it is difficult to see why he would have an interest in doing so now. Furthermore, even if the trustee in bankruptcy were to make such an application now, he would need to persuade the Tribunal to give permission to reinstate the appeal, and would then need to persuade the Tribunal to give permission to appeal out of time. The merits of any such applications are not obvious. 38. For these reasons, the Tribunal refuses the Appellant’s application to reinstate this appeal. Other matters 39. Having refused the application to reinstate for the reasons above, the Tribunal does not need to deal with the other issues and matters that have been argued before it . 40. The Appellant has referred to personal matters, including medical issues affecting her and members of her family, and has claimed for instance that HMRC had admitted to her that they had made errors and that she should take action to have the bankruptcy annulled. She says that correspondence from HMRC was sent to the wrong address, and that two different UTRs were used by HMRC. She also says that she made considerable efforts to contact HMRC to resolve matters, and that she had been informed by HMRC that her tax liabilities had been waived. The omission of any discussion in this decision of these and other various matters raised by the Appellant is because they are not relevant to the decision above, and because the Tribunal has no basis for expressing any view on them given that the Appellant has no standing to bring this appeal. Failure to consider these matters should therefore not be taken as a lack of appreciation of the case that the Appellant was making. 41. None of these other matters alter the fact that a bankruptcy order was made against the Appellant on 5 June 2015. The Tribunal has found that by operation of law, for that reason alone, she has no standing to pursue this appeal. The merits of her appeal, no matter how strong they might be, cannot affect that. The Tribunal therefore refrains from discussing the other matters further. Conclusion 42. For the reasons above, the Appellant’s application to reinstate the appeal is refused . 43. 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. DR CHRISTOPHER STAKER TRIBUNAL JUDGE RELEASE DATE: 08 JANUARY 2019