“40. Overall, the FTT concluded at [19] that HMRC had behaved reasonably. On receiving Worldpay’s witness evidence, HMRC acted promptly in asking Worldpay for further information, waiting to see if that answered their questions and, when it did not, making an application for disclosure to the FTT. The answers that HMRC received to their questions were relevant to the pleaded case but also to the Halifax abuse issue. The core of the FTT’s conclusion on this issue is to be found in the following extract from the parties’ note of the decision: 20. It then comes down to whether HMRC ought to have pleaded the case on Halifax from the start. And whether the failure to do so means there is no good excuse for doing so now. What I’ve come down to in making that decision is that, this being a tax case, the Appellant holds all of the evidence. A significant amount of this evidence has recently been disclosed, which impacts upon the case to be heard. It is not unreasonable for HMRC to respond to that disclosure, and as a tax authority they are not going to have that evidence before they start the case. 21. To some extent, the real problem is that both parties allowed the hearing to be set down for listing before the exchange of evidence was complete. If I refuse the amendments requested, I will be depriving HMRC of the product of their reasonably pursued application for the further and better particulars and disclosure. My decision has not been easy and on balance, despite the inevitable expense and delay, I shall allow the amendments. There is a reasonable and good explanation for why the application was made late. It is important to see things in the round. Ultimately both parties should have made the Tribunal aware that the evidence process in this case was not complete. The amendments to the Commissioners’ Statement of Case are allowed, and the hearing set for10 June 2019 is adjourned.”
“13. Costs may be awarded on an indemnity basis where the litigation has been conducted in a way which is “unreasonable to a high degree” which takes the case “out of the norm”
“12. … [The] conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight. An indemnity costs order made under Rule 44 (unlike one made under Rule 36) does, I think, carry at least some stigma. It is of its nature penal rather than exhortatory.” 14. There was some discussion as to what is meant by “the norm”
“43. In order to determine if conduct, or a circumstance, is outside the norm it is first necessary to consider what constitutes the norm. That will depend upon the nature of the case and the particular circumstances. There can be no single criterion or set of criteria that defines the norm in a given case. There is likely to be a range of circumstances and conduct and behaviour all of which can be regarded as within the norm in a particular case, some of which may be closer to the unreasonable than others, but none of which is unreasonable to such a high degree as to merit the stigma that attaches to an award of indemnity costs.” 15. Further, in considering whether there has been unreasonable conduct to a high degree I should be wary of placing too much weight on the fact that the respondents effectively capitulated. The reason for this was given by Barling J in Catalyst Investment Group v Lewinsohn[2009] EWHC 3501 (Ch) : “34. … I remind myself that all other things being equal, I should be rather wary of placing much weight on the mere fact of capitulation by the defendants. To rely upon such capitulation as a factor pointing to a less favourable basis of assessment of costs for the party capitulating could be seen as non-conducive to achieving early resolution of litigation, and inconsistent with the overriding objective. One must also bear in mind that there can be many reasons for abandoning proceedings.” 16. Similarly, in Arcadia Group Brands Ltd v Visa Inc[2015] EWCA Civ 883 a judge had ordered the claimants to pay indemnity costs on the basis that their claims were bound to fail. That order was overturned by the Court of Appeal where the Chancellor stated: “83. The Judge had a wide discretion as to costs but I consider that, in awarding costs on the indemnity basis rather than the standard basis, the Judge made an error in principle. The weakness of a legal argument is not, without more, justification for an indemnity basis of costs, which is in its nature penal. The position might be different if proceedings or steps taken within them are not only based on a plainly hopeless case but are motivated by some ulterior commercial or personal purpose or otherwise for purely tactical reasons unconnected with any real belief in their merit.” 17. I was also referred to what was said by Sir Anthony Colman in National Westminster Bank plc v Rabobank Nederland[2007] EWHC 1742 (Comm) at [28]: “28. Where one is dealing with the losing party's conduct, the minimum nature of that conduct required to engage the court's discretion would seem, except in very rare cases, to be a significant level of unreasonableness or otherwise inappropriate conduct in its widest sense in relation to that party's pre-litigation dealings with the winning party or in relation to the commencement or conduct of the litigation itself. … in each case in which the costs of the whole litigation are under consideration, the conduct adversely criticised must be looked at in the context of the entire litigation and a view taken as to whether the level of unreasonableness or inappropriateness is in all the circumstances high enough to engage such an order.” 18. The reference to “pre-litigation dealings” would doubtless encompass compliance in civil procedure with any pre-action protocols which have no equivalent in tax tribunal procedure. However, I accept that the respondents conduct prior to an appeal to the tribunal is relevant in the context of the present application (see Judge Berner in Curran v HM Revenue & Customs[2012] UKFTT 655 (TC) at [16]. I must consider all the circumstances.”
“6.1. First, HMRC unreasonably advanced a case based on Halifax abuse very late in the day, necessitating an adjournment of the substantive hearing in June 2019, only to withdraw their case in its entirety two days before the re-listed substantive hearing in September 2021; 6.2. Secondly, HMRC’s case on Halifax abuse, upon which they shouldered the burden of proof, was unreasonably conducted in the course of the litigation; 6.3. Thirdly, HMRC’s case substantially changed over time, so that the final presentation of the arguments differed from the reasons given for the contested decision, moving the goalposts on the substantive case which Worldpay had to meet; 6.4. Fourthly, HMRC advanced submissions in the appeal which were wholly at odds with the submissions they had advanced in other recent cases before the Court of Justice of the European Union and the Court of Appeal.”
“Worldpay’s contention that HMRC had everything they needed at the time of their decision on liability, or at the time of service of their Statement of Case, is wide of the mark. To give just one example, one of HMRC’s requests for information arising from Mr Dunn’s witness evidence asked for samples of invoices setting out details of the 1p per transaction fee for providing remittance services. If the response to that request showed that, despite the contracts, Worldpay never charged that fee, or merchants never paid it, HMRC might reasonably consider that material relevant to their consideration of whether to make the serious allegation of Halifax abuse.”
“We do not accept the premise of Worldpay’s submission. The FTT did not base its conclusion on a finding that the May 2019 disclosure resulted in HMRC “turning a corner” in their perception of the case. The FTT had certainly observed that the May 2019 disclosure was “relevant” (at [18] of the note of the Decision). It also said, at [20], that a “significant amount of evidence has recently been disclosed”, but that was a reference to both the material provided in May 2019 and that provided in March 2019. The FTT’s core conclusion was, at [19], to the effect that it was reasonable for HMRC “to amend pleadings in the light of the evidence and disclosure received, even though that disclosure was only ordered because it was relevant to existing pleadings”
“…The bringing of a case alleging serious dishonesty may qualify for indemnity costs if on the material it can properly be categorised as speculative, weak, opportunistic or thin, if it is advanced on the basis of a constantly changing case, and if it is pursued on a very large scale without apology to the bitter end, including by hostile cross-examination, without constant regard to its merits. Some combination of those factors may justify the view that the litigation has been unreasonably pursued.”