The Commissioners for HMRC v Michael Breen [2025] UKFTT 1415 (TC)

“8. The procedural history which underlies this appeal is quite involved. It is fully set out in the Unless Order and is summarised in the Reinstatement Decision. For the purposes of this appeal, and because both of these decisions are unpublished, we have described in greater detail than would usually be necessary the main features of the history, in order to set out the background to our decision. 9. Mr Breen’s appeal concerned income tax assessments for the tax years from 1996/97 to 2011/12. Following a statutory review the amount of tax in dispute was £942,131.68. The assessments followed an HMRC investigation into Mr Breen’s tax affairs in 2012. In short, HMRC considered that Mr Breen was liable to tax on undeclared income and gains. Mr Breen’s contention was that there was no UK tax liability because he had an Irish domicile and because the relevant work giving rise to the disputed income had been undertaken outside the UK. 10. In the Reinstatement Decision the FTT stated that the assessments mentioned above were issued under section 29 Taxes Management Act 1970 on the basis that Mr Breen had deliberately failed to bring relevant income into account in the relevant tax years. In the course of the hearing before us, Mr Stone pointed out, and we did not understand it to be in dispute, that some of the assessments (for the years ended 5 April 2009, 2010, 2011 and 2012) had been issued on the basis that Mr Breen had been careless in failing to bring his income into account. 11. During HMRC’s investigation, Mr Breen had failed to comply with an information notice issued in 2014 resulting in penalties for non-compliance. Also in 2014, Mr Breen informed HMRC that much of the relevant documentation was no longer available. 12. In 2016, Mr Breen failed to provide answers to HMRC’s questions about his family and background that were designed to clarify his domicile status. In other words, there was a history of non-compliance by Mr Breen in the course of the investigation. 13. HMRC’s review decision was issued on 29 September 2017 and the deadline for appealing to the FTT was 29 October 2017. Appeal to the FTT 14. Mr Breen’s appeal was received by the FTT on 3 November 2017. Mr Breen said that he did not consider the tax assessed was due and indicated that he would “provide further detail/explanation once I have appointed a representative.” 15. A resubmitted appeal was received by the FTT on 27 November 2017. The Appellant indicated that the appeal was not late because he had incorrectly understood the date from which the time for appealing ran. He also explained that he had been working in the United States for much of October 2017 and this had contributed to his delay in appealing. FTT’s request for grounds of appeal 16. The FTT acknowledged receipt of the late appeal and assigned it to proceed under the Standard Category. However, the FTT wrote to Mr Breen and requested that he provide the grounds for his appeal (as required by Rule 20 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009). 17. On 19 January 2018, the FTT received a letter from Mr Breen dated 18 January 2018 in which he provided a further explanation of why his appeal was late. 18. However, on 15 February, the FTT wrote to Mr Breen seeking clarification of the grounds on which he was appealing in order that HMRC could produce a Statement of Case. The FTT requested a reply within 14 days. That deadline expired on 1 March 2018. By an email dated 27 February 2018, Mr Breen sought a further 14 days to provide his grounds of appeal. He said that bad weather on 27 February 2018 had prevented him from attending a meeting with his adviser and that the meeting had been postponed to the following week. On 5 March 2018, the FTT emailed Mr Breen and HMRC to grant the requested extension of time. 19. On 14 March 2018, Mr Breen emailed the FTT with his grounds of appeal. Those grounds were that at all material times Mr Breen was domiciled in Ireland and that the relevant services provided by Mr Breen (resulting in the funds in his Swiss bank account) were provided outside the UK. HMRC’s Statement of Case 20. On 18 May 2018, HMRC sought an extension of time to serve their Statement of Case. HMRC had not been sent an earlier direction to serve their Statement of Case and did not know of the fast approaching deadline. This extension of time was granted (and Mr Breen was copied in on this extension). The FTT noted that Mr Breen, in his notice of appeal, had requested correspondence by post, but that he had recently corresponded by email. The FTT therefore asked Mr Breen whether he would prefer correspondence by post, but no reply was received to that email. 21. On 20 June 2018, HMRC sought a stay of the appeal to allow discussions to take place. The FTT extended the deadline for HMRC’s Statement of Case (copying both parties) to 12 October 2018 to permit those discussions. HMRC applied for a further extension on 20 September 2018 and on 11 October 2018 the FTT further extended the deadline to 13 December 2018 (informing HMRC by email and Mr Breen by post). On 26 November 2018, HMRC requested a further extension which was granted and both parties were informed in the same manner as before. 22. The new deadline for HMRC to file their Statement of Case was 18 January 2019 but they filed the document with the FTT (and copied to Mr Breen) three days late on 21 January 2019. 23. Next, on 16 February 2019, Mr Breen emailed the FTT stating: “I write to request a 60 day extension to the date for filing of my Reply in answer to HMRC’s Statement of Case for the following reasons: 1. I did not receive HMRC’s Statement of Case on the due date; 2. I need time to source and instruct a firm of solicitors to represent me and such firm will in turn require time to source and instruct counsel; and 3. I have been corresponding with HMRC in an attempt to see if we can agree on the narrowing of the matters in issue in order to save court time and costs.” 24. HMRC emailed the FTT indicating that HMRC did not object to the extension requested by Mr Breen. The Directions of 6 March 2019 25. On 6 March 2019, the FTT issued directions to both parties. Direction 1 provided as follows: “1. List of documents: Not later than 19 April 2019 each party shall: a. send or deliver to the other party and the Tribunal a list of the documents in its possession or control which that party intends to rely upon or produce in connection with the appeal (“documents list”); and b. Send or deliver to the other party copies of any documents on that documents list which have not already been provided to the other party and confirm to the Tribunal that they have done so.” 26. At the same time, the FTT sent Guidance Notes to Mr Breen which explained what was required in order to comply with the Directions. HMRC’s application for an extension to the deadlines in Directions 1 to 4 27. On 17 April 2019, HMRC applied for an extension of time to the deadline of 19 April 2019, confirming that the proposed extension had been suggested to Mr Breen but that he had not responded. Apparently, HMRC’s email to Mr Breen went into his spam email folder. The extension was granted by Judge Poole on 8 of May 2019 (and confirmation of this was posted to Mr Breen at the time). 28. On 8 May 2019, Judge Poole agreed to HMRC’s application for an extension of the deadlines set out in the directions of 6 March 2019. This was communicated to Mr Breen by letter, which explicitly referred to HMRC’s application dated 17 April. Mr Breen did not contact the FTT to say that he had not received a copy of HMRC’s application. The fresh deadline for compliance with Direction 1 was 31 July 2019. 29. On 4 June 2019, HMRC requested a re-categorisation of the appeal from Standard to Complex, setting out their reasons for the request. HMRC referred to having contacted Mr Breen on 21 May 2019 but without receiving a response. It appears that HMRC’s emails went into Mr Breen’s spam email folder. HMRC’s application for re-categorisation of the appeal 30. On 27 June 2019, the FTT wrote by letter to Mr Breen and asked him to provide his representations on HMRC’s application of 4 June 2019. On 16 July 2019, Mr Breen emailed the FTT (but did not copy HMRC) stating that he had received the letter of 27 June 2019 but had not received the email of 4 June 2019 from HMRC. Mr Breen explained that, as a result of a telephone call with HMRC, he had become aware of HMRC’s April 2019 application. Mr Breen would also have been aware of the April 2019 application from the terms of the FTT’s letter of 8 May 2019. 31. On 31 July 2019, HMRC emailed the FTT with their list of documents and confirmed that the list had been served on Mr Breen on the same day. Apparently, HMRC’s list of documents was sent by post to Mr Breen. 32. Mr Breen did not file his list of documents with the FTT by the 31 July 2019 deadline. 33. On 16 August 2019, the FTT wrote by letter to Mr Breen enclosing a copy of HMRC’s applications of 17 April 2019 and 4 June 2019, requesting that Mr Breen make his representations on the applications within 14 days i.e. by 30 August 2019. 34. On 23 September 2019, the FTT wrote again to Mr Breen, noting that there had been no response to their letter of 16 August and asking for a response within a further 14 days i.e. by 7 October 2019. 35. On 7 October 2019, the FTT received a letter dated 2 October 2019 from Mr Breen which enclosed a copy of a letter dated 3 September 2019. This letter of 3 September 2019 contained a complaint by Mr Breen that HMRC did not have his permission to correspond by email and that the applications they made should have been sent by post. Mr Breen asked the FTT to direct that HMRC must correspond with him by first class post. Mr Breen stated that he would be flying to Ireland the next day to visit his mother and that he would be working abroad until 25 September. He asked for an extension of time until 31 October 2019 in order to take legal advice on HMRC’s application. 36. In neither his 3 September 2019 letter nor his 2 October 2019 letter did Mr Breen refer to not having received the copy applications sent by the FTT on 16 August 2019. Mr Breen did also not refer to any reason for his own failure to provide his list of documents, nor did he request an extension of time to comply with Direction 1. 37. The FTT wrote to Mr Breen (with a copy to HMRC, asking them to confirm that they would correspond with Mr Breen by post only) on 28 October 2019, granting his application for more time to respond. 38. The FTT’s letter of 28 October 2019 did not reach Mr Breen by 30 October 2019 because, on that date, Mr Breen wrote to the FTT to complain that he did not know the extension that he had requested had been granted. He asked for “a reasonable period of time” to respond to “all matters raised by HMRC” and stated that he did not feel that he was in a position to say how long he would need to respond when he had not seen “all the matters raised by HMRC” in correspondence. This was despite the FTT having posted copies of both of HMRC’s applications to Mr Breen on 16 August 2019. 39. On 26 November 2019, the FTT posted a letter to Mr Breen, drafted on the instructions of Judge Dean. Mr Breen was directed that the new deadline for him to provide his representations on HMRC’s application to re-categorise the appeal as a complex appeal was 9 December 2019. No response was received from Mr Breen by the expiry of the deadline and no explanation has been provided for his failure to comply with Judge Dean’s direction. 40. There was further correspondence between Mr Breen and the FTT in December 2019. Mr Breen complained about HMRC’s use of email rather than post for communications and said that HMRC’s application for re-categorisation had not been enclosed with the FTT’s letter of 26 November. However, this was because a copy of this application had already been sent to the Appellant by letter on 16 August 2019. A further copy of HMRC’s re-categorisation application of 4 June 2019 was sent to Mr Breen by the FTT on 13 January 2020 and again on 24 January 2020, noting that Mr Breen’s response had been outstanding for six months, and directing that he provide his comments on that application by 7 February 2020. 41. By a letter dated 6 February 2020 Mr Breen objected to the re-categorisation of the appeal, stating that although there was a significant amount of money at stake he considered the “facts relating to [the domicile of his father and himself] are very straightforward.”

“The correct position is that there are not many documents involved in this matter and part of the reason for this is because it relates to matters that took place more than 20 years ago.” 42. On 6 March 2020, the appeal was referred to Judge Bailey to decide HMRC’s re-categorisation application. Judge Bailey noted that there were fewer than 120 documents on HMRC’s list of documents and she agreed with Mr Breen that there was limited information concerning the number of witnesses. She also agreed with Mr Breen that appeals concerning domicile were lengthy rather than inherently complex. She therefore dismissed HMRC’s application. 43. However, in reaching her decision on re-categorisation, Judge Bailey noted that HMRC had filed a list of documents but that no list of documents had been filed by Mr Breen. She noted the length of time which had elapsed since directions were originally issued and directed that Mr Breen’s list of documents should be filed no later than 27 March 2020 i.e. 21 days after the issue of her re-categorisation decision. The pandemic 44. On 23 March 2020, the UK went into lockdown as a result of the Covid-19 pandemic. 45. On 31 March 2020, the FTT received a letter dated 26 March 2020 from Mr Breen. Mr Breen noted that he had not received HMRC’s list of documents and sought an extension of 12 weeks to provide his list of documents. Mr Breen stated that his daughter was vulnerable to Covid-19 and that he and his family were shielding. Consequently, he was unable to go to the post office to buy stamps or post letters. Mr Breen said that it had been his intention to obtain legal advice and to travel to Ireland “to obtain further information regarding the domicile point” but “this has simply not been possible”

“IT IS DIRECTED that the appellant having failed to comply with the Directions issued on 2 September 2020 to provide his list of documents and copies of those documents on which he intended to rely in this appeal in accordance with the Directions issued on 6 March 2019 and in particular Direction 1 of those Directions; and to provide information to the Tribunal to consider whether this matter should be decided on the papers, by telephone or at a video hearing, the Tribunal DIRECTS that UNLESS the appellant no later than 5 p.m. on 15 October 2020 complies with the aforesaid Directions to provide his list of documents and copies of those documents and provides the information requested by the Tribunal regarding the listing of this matter then these proceedings MAY be STRUCK OUT without further reference to the parties.” 57. The First Unless Order was posted to Mr Breen on 25 September 2020. 58. On 2 October 2020, the FTT received a letter from Mr Breen dated 29 September 2020 which was a late response to Judge Popplewell’s directions issued on 2 September 2020 and not a response to the Unless Order. In this letter Mr Breen reiterated that his daughter’s health condition, as well as his own, meant that they were both vulnerable to Covid-19. He asked for leniency with regard to the imposition of deadlines. Mr Breen also stated that he had wished to explore the possibility of legal representation and also to travel to Ireland, and he had not been able to do that during lockdown, or since. Mr Breen noted that he had received HMRC's list of documents but not the documents themselves, and asked the FTT to direct HMRC to provide a copy. 59. In response to the questions in the 2 September 2020 letter, Mr Breen initially asked for more time to respond to the direction to provide listing information but, in case that additional time was not granted, stated as follows: “I believe a paper or telephone or video hearing would not be appropriate or indeed satisfactory given the points and nature of the matters in contention. Accordingly, it is my position that there are a great number of very significant issues (both of fact and law) in dispute between the parties including but not limited to issues of witness evidence. It is my contention that the respondent’s witnesses should be subject to cross-examination in person. If this were not permitted then I believe I would be unfairly prejudiced as a direct result of the nature of the hearing. In short I am stating that I believe it is of vital importance given the matters in dispute that this hearing is an in person hearing.” 60. As Judge Bailey later observed, Mr Breen did not state whether he would call oral evidence and did not outline the factual assertions made by HMRC that he did not accept. Judge Bailey accepted, however, that it was implicit that the Appellant did not consider his appeal to be urgent. 61. In a letter dated 29 September 2020, Mr Breen stated that he was not in a position to provide his list of documents and so he could not respond in relation to the size of the bundles. Mr Breen asked for the directions to be suspended for a period of 12 weeks from the suspension of the first lockdown until it was safe for a high-risk individual to travel safely. Mr Breen asked the FTT to bear in mind the Convention for the Protection of Human Rights and fundamental freedoms, without specifying which particular rights he had in mind. 62. Further letters were received by post from Mr Breen on 7, 21 and 27 October 2020. Mr Breen expressed concern about the consequences for himself and his daughter if he stopped shielding, and stated that he was asking for more time to seek legal representation as “the issues involved in this case are very complex and I feel I require expert legal advice and input in order that I may be given the opportunity of putting forward my best defence.”

“It is also helpful to reiterate what it was that was required of the Appellant in …Judge Popplewell’s Unless Order. There are two aspects. The more recent non-compliance was a result of the Appellant’s late and incomplete listing information in response to Judge Popplewell’s Directions of 2 September 2020. I will look at this aspect first. The more serious non-compliance, lasting for about 15 months, is the Appellant’s failure to file and serve his list of the documents.” 68. Judge Bailey noted that there was no explanation provided as to why Mr Breen failed to comply with Judge Popplewell’s Directions of 2 September 2020 and that he should provide his listing information by 16 September 2020. Mr Breen had in his letter of 29 September 2020 belatedly provided responses to 3 of the 5 questions. However Mr Breen did not provide an outline of the factual assertions made by HMRC that he did not accept and he did not state whether he would call witnesses. Judge Bailey noted that Mr Breen had not answered the question whether he would be calling oral evidence and, if so, by whom. It was inconceivable, stated Judge Bailey, that Mr Breen should not know, by this stage, whether he would himself give evidence and whether he would call on anyone else as a witness. 69. Judge Bailey then addressed what she considered to be “the more serious non-compliance” i.e. Mr Breen’s non-compliance with Direction 1 which required Mr Breen to file and serve a list of documents in his possession or control or on which he would rely at the hearing. Judge Bailey dismissed the various reasons for non-compliance. As regards Mr Breen’s wish to instruct a legal representative she noted that Mr Breen’s assertions about the complexity of the appeal were inconsistent and that Mr Breen was capable of recognising whether or not he needed representation at an earlier stage. Indeed, in Mr Breen’s notice of appeal he had stated that he intended to appoint a representative. Mr Breen had used lack of representation as an explanation for delayed compliance – an explanation which Judge Bailey rejected. There was no explanation as to why Mr Breen had not used the almost 2 ½ years between 3 November 2017 and 23 March 2020 (when lockdown began) to instruct a legal representative. 70. Judge Bailey also rejected at [86] Mr Breen’s explanation that he was still shielding as an explanation for the delay in compliance. Furthermore, at [87] Judge Bailey rejected Mr Breen’s suggestion that he could not currently travel to Ireland in order to obtain further information from that country. 71. At [89] Judge Bailey said: “I am sorry to say that I am left with the strong impression that the Appellant has not given the progression of his appeal sufficient priority during the period 3 November 2017 to 23 March 2020. I can see that the Appellant responded (albeit after the Tribunal deadlines) when he realised he was not receiving emails from HMRC in the spring of 2019 but the Appellant has not complied with the Tribunal directions posted to him in March 2019 and he has not provided any explanation for not complying with Direction 1 on time. The explanations the Appellant has provided for his later non-compliance and for needing more time – that he was working abroad, that he was visiting family, that he had not yet instructed a representative – all indicate that the Appellant considered that these Tribunal proceedings could continue to be pushed back as being less important than other matters in his life. Unfortunately, the pandemic then struck. No one could have foreseen that this would occur, and it was no doubt a shock to the Appellant, as it was to everyone else. The Tribunal granted two general stays, totalling 14 weeks, to enable parties to adjust to their new circumstances and to work out how they could comply with Tribunal directions.” 72. At [92]-[93] Judge Bailey set out her conclusion: “92. I now have to decide whether the Appellant’s non-compliance is sufficiently serious to justify striking out this appeal. - In respect of the Appellant’s failure to provide the information required by Judge Popplewell, there was belated partial non-compliance and I do not consider that this non-compliance was sufficiently grave to justify striking out the appeal. - In respect of the Appellant’s failure to provide his list of documents, given the length of the non-compliance and the Appellant’s continued failure to provide a definitive list, I consider that this non-compliance is sufficiently serious to justify striking out this appeal. However, given the Appellant’s extremely belated attempt at compliance on 27 October 2020, I have decided to give the Appellant [Mr Breen] one last chance to comply with the Directions previously issued. 93. I stress to the Appellant that this is his last opportunity to produce his definitive list of documents and to provide the information required by Judge Popplewell. I am going to issue a further Unless Order but, unlike Judge Popplewell’s Order, this Order will take effect automatically if there is no compliance.” 73. To emphasise the stark choice facing Mr Breen, Judge Bailey said at [96]: “Therefore, the choice available to the Appellant now is as follows: he can comply with the Unless Order set out below, and his appeal will proceed, or he can choose not to comply, and the appeal will be struck out as a result of that non-compliance. I cannot state the position any more bluntly. I hope the Appellant will take this opportunity so that he can proceed with his appeal.” 74. At [98] Judge Bailey gave the following directions: “I DIRECT as follows: UNLESS the Appellant, no later than 5 p.m. on the fourteenth day from the date of release of this decision, files with the Tribunal and serves on HMRC: a) a written final list of the documents in his possession or control which he intends to rely upon or produce in connection with the appeal, b) a document setting out the factual assertions made by HMRC in their Statement of Case with which the Appellant does not agree, and c) a document setting out whether the Appellant intends to call oral evidence at the hearing of this appeal and, if so, by whom, THEN these proceedings WILL be STRUCK OUT without further reference to the parties.” 75. In order that “there can be no confusion”, Judge Bailey inter alia made the following points clear at [99]: “… – It is the Appellant’s choice to use postal communications rather than email, and therefore it is his responsibility to ensure that he replies with sufficient time for the Tribunal and HMRC both to receive his response by the stated deadline. If no response is received by the deadline, the appeal will be struck out automatically. That will be the case even if a response was posted the day before but not received until the day after. If the Appellant chooses to use email on this occasion to ensure he meets the deadline then his email must be received by 5 p.m. on the fourteenth day. … – This is the Appellant’s last chance to respond. As the Appellant has already failed to comply with one Unless Order, no extensions of time will be granted to the deadline in this Unless Order. If the Appellant does not meet this deadline, the appeal will be struck out.” 76. The Release Date of Judge Bailey’s decision was 10 November 2020. 77. Mr Breen received Judge Bailey’s decision containing the above-mentioned Directions on 16 November 2020. 78. Mr Breen served the documents specified in the Directions on 28 November 2020 i.e. four days after the date specified for compliance with the Directions. 79. Consequently, Mr Breen had failed to comply with the terms of Judge Bailey’s Unless Order, with the result that the appeal was struck out on 24 November 2020. 80. HMRC asked the FTT to confirm that the appeal had been struck out and by an email dated 3 December 2020 Mr Breen stated that he believed that he had complied with the terms of Judge Bailey’s Unless Order, having provided all the relevant documents to the FTT within 14 days of the receipt of the Unless Order. He pointed out that a further lockdown had been imposed and that he had continued to be unable to appoint legal representation. 81. Mr Birkbeck was appointed on 28 December 2020 to represent Mr Breen. 82. On 11 January 2021, Mr Breen was formally notified that the appeal had been struck out and of his right to apply for reinstatement. 83. On 5 February 2021, Mr Breen made an in-time application for reinstatement of his appeal and filed a witness statement in support of his application.”

“136. …Mr Breen’s conduct of his appeal has demonstrated a long history of non-compliance. There can be no doubt that the non-compliance was both serious and significant. There were two unless orders with which he had failed to comply and there was a long history of previous non-compliance with the Tribunal’s requirements and requests. We have found that the continued non-compliance related not just to a list of documents but also to an outline of the factual assertions made by HMRC that he did not accept and to the witness evidence to be produced. 138. …In other words, there was no good reason for the very lengthy failure…”

“2.—Overriding objective and parties’ obligations to co-operate with the Tribunal (1) The overriding objective of these Rules is to enable the Tribunal to deal with cases fairly and justly. (2) Dealing with a case fairly and justly includes— (a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties; (b) avoiding unnecessary formality and seeking flexibility in the proceedings; (c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings; (d) using any special expertise of the Tribunal effectively; and (e) avoiding delay, so far as compatible with proper consideration of the issues. (3) The Tribunal must seek to give effect to the overriding objective when it— (a) exercises any power under these Rules; or (b) interprets any rule or practice direction. (4) Parties must— (a) help the Tribunal to further the overriding objective; and (b) co-operate with the Tribunal generally.” (a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties; (b) avoiding unnecessary formality and seeking flexibility in the proceedings; (c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings; (d) using any special expertise of the Tribunal effectively; and (e) avoiding delay, so far as compatible with proper consideration of the issues. (a) exercises any power under these Rules; or (b) interprets any rule or practice direction. (a) help the Tribunal to further the overriding objective; and (b) co-operate with the Tribunal generally.”

“We would wish to add one small gloss to the above summary, namely that (as suggested by the FTT in Invicta Foods Limited v HMRC [2014] UKFTT 456 (TC) at [13]), questions of reasonableness should be assessed by reference to the facts and circumstances at the time or times of the acts (or omissions) in question, and not with the benefit of hindsight.”

“46. In assessing whether a party has acted unreasonably, this Tribunal in MORI went on to say this (at [49]): ‘It would not, we think, be helpful for us to attempt to provide a compendious test of reasonableness for this purpose. The application of an objective test of that nature is familiar to tribunals, particularly in the Tax Chamber. It involves a value judgment which will depend upon the particular facts and circumstances of each case. It requires the tribunal to consider what a reasonable person in the position of the party concerned would reasonably have done, or not done. That is an imprecise standard, but it is the standard set by the statutory framework under which the tribunal operates. It would not be right for this Tribunal to seek to apply any more precise test or to attempt to provide a judicial gloss on the plain words of the FTT rules.’” ‘It would not, we think, be helpful for us to attempt to provide a compendious test of reasonableness for this purpose. The application of an objective test of that nature is familiar to tribunals, particularly in the Tax Chamber. It involves a value judgment which will depend upon the particular facts and circumstances of each case. It requires the tribunal to consider what a reasonable person in the position of the party concerned would reasonably have done, or not done. That is an imprecise standard, but it is the standard set by the statutory framework under which the tribunal operates. It would not be right for this Tribunal to seek to apply any more precise test or to attempt to provide a judicial gloss on the plain words of the FTT rules.’”

“an inclusive phrase designed to capture cases in which an appellant has unreasonably brought an appeal which he should know could not succeed, a respondent has unreasonably resisted an obviously meritorious appeal, or either party has acted unreasonably in the course of the proceedings, for example by persistently failing to comply with the rules or directions to the prejudice of the other side”

“20. Even if the tribunal is satisfied that a party has acted unreasonably in the terms of rule 10, the tribunal nevertheless has a discretion whether or not to make a costs order, or as regards the extent of a costs order. Such a discretion, like any other discretion conferred on the tribunal, must be exercised judicially.”

“19. We reject each of Mr Jones QC’s arguments that HMRC have wrongly focussed on costs as being a punitive rather than compensatory measure and failed to prove any causative link between the unreasonable conduct and the incurring of costs. There is no requirement under Rule 10(3)(d) that there must be a direct causal connection between the costs claimed and the unreasonable conduct (and no authority for that proposition is provided by the Respondent). 20. We are satisfied that the Rule 10(3)(d) costs claimed by HMRC are compensatory in that HMRC are not claiming costs over and above what they have reasonably incurred in the proceedings and, in principle, once unreasonable conduct has been identified, the Tribunal has a complete discretion under Rule 10(3)(d) in relation to costs subject to the overriding objective. In exercising that discretion, it is just and fair for an award of costs to be increased by reference to the nature and severity of the paying party’s conduct throughout the proceedings.”

“39. Ms McCafferty submitted that her client’s liability for the costs was limited, as a matter of the construction of rule 14, by a requirement that the costs in issue were ‘attributable to’ specific instances of unreasonable conduct by him. She argued that the tribunal had misconstrued the rule and wrongly ordered payment of all the costs, irrespective of whether they were ‘attributable to’ the unreasonable conduct in question or not. The costs awarded should be caused by, or at least be proportionate to, the particular conduct which has been identified as unreasonable. 40. In my judgement, rule 14(1) does not impose any such causal requirement in the exercise of the discretion. The principle of relevance means that the tribunal must have regard to the nature, gravity and effect of the unreasonable conduct as factors relevant to the exercise of the discretion, but that is not the same as requiring BNP Paribas to prove that specific unreasonable conduct by Mr McPherson caused particular costs to be incurred…. 41. In a related submission Ms McCafferty argued that the discretion could not be properly exercised to punish Mr McPherson for unreasonable conduct. That is undoubtedly correct, if it means that the indemnity principle must apply to the award of costs. It is not, however, punitive and impermissible for a tribunal to order costs without confining them to the costs attributable to the unreasonable conduct. As I have explained, the unreasonable conduct is a precondition of the existence of the power to order costs and it is also a relevant factor to be taken in to account in deciding whether to make an order for costs and the form of the order.”

“HMRC were forced to make numerous applications to extend deadlines. Whilst this does not necessarily make their behaviour comparable, it does suggest that the severity of any costs sanction should be limited.”

“23. HMRC did not seek all of their costs but only sought a small proportion to reflect the additional costs arising from the Respondent’s unreasonable conduct and such an amount as would represent an appropriate sanction for the Respondent’s conduct. 27. We accept HMRC’s submission that it would not be practical or necessary to seek to identify the precise costs that flowed from the Respondent’s conduct, and neither would that approach be in accordance with the overriding objective. What must be achieved is a fair and just outcome and this should be arrived at by means of a costs order that reflects the Respondent’s conduct and that of his representatives. 28. Taking all of the relevant circumstances into account, in particular the Respondent’s unreasonable conduct and non-compliance throughout the proceedings, HMRC submit that a fair outcome would be for the Tribunal to award HMRC £5,000, being slightly less than 10% of their total costs incurred in the proceedings (which are £50,114.50). The Tribunal considers this to be fair and just in the circumstances.”