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	England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Cook, R (on the application of) v General Commissioners of Income Tax & Anor [2009] EWHC 590 (Admin) (02 March 2009) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2009/590.html Cite as: [2009] STI 683, [2009] BTC 168, [2009] EWHC 590 (Admin), [2009] STC 1212

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice The Strand London WC2A 2LL
		2 March 2009

Monday 2 March 2009

LORD JUSTICE DYSON:

1. The claimant started a transport business in November 1999. He traded as Cook Transport. On 16 November he informed Her Majesty's Revenue and Customs ("HMRC") that he had 18 employees. Between that date and 23 July 2003 no PAYE or NIC end of year returns were submitted by him. At a meeting on 19 June 2003, the claimant told Ms Cawley, an employer compliance officer of HMRC, that he had deducted PAYE but had not paid it over to HMRC because he had been building up the business. He was given until 16 July 2003 to deliver his records to the tax office. He says that he did this on 26 June, but if the documents were delivered they were lost or destroyed. So far as HMRC are concerned, the records were never delivered. That is why on 23 July 2003 Ms Cawley issued notices of determination of the claimant's PAYE liability under Regulation 49 of the Income Tax (Employment) Regulations 1993 for the tax years 1999/2000 to 2002/2003 inclusive. Each notice contained this statement:

"Making an appeal

If your client does not agree with the Notice of Determination, a written appeal should be sent to us at the address shown aside within 30 days from the date of issue. Tell us why you think the determination is wrong. Usually we can reach an agreement as to the amount due. But if we cannot agree then you can ask for the matter to be put before the appeal Commissioners. They are an independent body who will consider the matter and make a decision. If you want to know more about appeals, please ask any Tax Office for a copy of leaflet IR 37 Appeals."

The total of the amount thus determined was £232,378.

2. In the absence of any documentation, the determinations were followed by decisions on the NICs due in respect of the employees. These were issued on 2 October 2003 under section 8 of the Social Security Contributions (Transfer of Functions) Act 1999. On information provided by Ms Cawley, estimated National Insurance assessments for the relevant years were made in the total sum of £157,899. On the face of the decisions was a statement to the effect that any appeal must be in writing within 30 days of the date of issue.
3. On 9 December 2003, Ms Cawley wrote to the claimant informing him that since he had not appealed against the PAYE determinations, they were final and the tax was due and payable. He wrote to the National Insurance Office on 4 February 2004 to complain that the Inland Revenue had the documents from which true assessments could be made. On 8 March 2004, Ms Cawley wrote to the National Insurance Office (with a copy to the claimant) saying that the claimant had not provided her with any wages' records and that he had not appealed.
4. Still nothing was done by the claimant. A statutory demand was issued on 6 October 2004 in respect of the full amount which was the subject of the 23 July 2003 notices. This was served on 8 November 2004. The claimant was then moved to instruct an accountant, Mr Oaten. Mr Oaten wrote to HMRC on 31 December 2004 saying that the claimant was adamant that all the records that were held by him had been delivered to the Inland Revenue. Yet still the claimant did not appeal.
5. On 18 January 2005, a bankruptcy petition was served on the claimant. This finally spurred him to appeal. On 3 February he appealed against the assessments of 23 July 2003 on the ground that "the amount demanded is grossly excessive and is based on incorrect information". Appeals out of time are governed by section 49 of the Taxes Management Act 1970, subsection (1) of which provides:

"An appeal may be brought out of time if on an application for the purpose an inspector or the Board is satisfied that there was a reasonable excuse for not bringing the appeal within the time limited, and that the application was made thereafter without unreasonable delay, and gives consent in writing; and the inspector or the Board, if not satisfied, shall refer the application for determination by the Commissioners."

6. On 4 February 2005, Ms Cawley replied to Mr Oaten:

"I cannot accept the submitted appeal as I am not satisfied that there was a reasonable excuse for the lateness of the appeal and that the application has been made without reasonable delay after the expiry of the time limit.

Please withdraw the appeal. In the meantime the application for the admission of a late appeal will be listed for consideration by the General Commissioners under section 49 TMA 1970."

7. There is some uncertainty as to whether, and if so when, the claimant appealed against the NIC decisions. There is a document dated 7 April 2005 which appears to relate to an application for permission to appeal against the Inspector's refusal to admit late appeals against the section 8 decisions for the four years starting 1999/2000. This suggests that the claimant had by then appealed against those decisions. However, this is disputed by HMRC. The position they took before the General Commissioners of Income Tax ("the Commissioners") at the hearing on 13 February 2008, with which I am concerned, was that they were prepared to accept that the claimant had appealed against the NIC decisions, but made no admissions as to when he had done so. Neither party contends that it is necessary for me to resolve this issue, even if I had the material to enable me to do so.
8. The claimant then applied to the Commissioners for a determination under section 49 of whether he could bring the appeals out of time. The hearing took place on 11 May 2005. The claimant was neither present nor represented. The Commissioners decided not to admit the out-of-time appeal.
9. That decision was the subject of a successful judicial review challenge before Burton J. The judge held that the Commissioners had misapplied section 49 because the only issue they addressed was whether there was a reasonable excuse for the delay and whether the application was made without delay after the expiry of the 30 day time limit for appealing. As the judge pointed out at paragraph 22, there was "no reference to exercise of a discretion or a balancing act, to the presence or absence of merits, or the presence or absence of prejudice". The matter was remitted to the Commissioners for rehearing.
10. It was in these circumstances that on 13 February 2008 the appeals came before the Commissioners for a second time. The present proceedings include a challenge to the decision made on that occasion. It should be noted that this decision refers to "eleven determinations". These must have included the NIC decisions as well as the PAYE determinations. HMRC concedes that the Commissioners rejected late appeals on the decisions as well as the determinations.
11. I come to the Commissioners' decision. At the hearing on 13 February, the claimant and HMRC were represented by the same counsel who have appeared before me today. It was accepted on behalf of the claimant that Ms Cawley had been entitled not to grant permission to appeal out of time, since he had no reasonable excuse for not appealing in time and there had been unreasonable delay on his part in filing his appeal. It was submitted, however, that the most important factors to be considered by the Commissioners were the merits of the appeal and the "balance of prejudice". It was said that the balance of prejudice was all one way. If the Commissioners were persuaded that the appeal had merit, the claimant should be allowed to appeal out of time, since the balance of prejudice was in his favour.
12. The Commissioners decided to deal with the matter by assuming in the claimant's favour that the appeal would "potentially have merit". It is not entirely clear what this phrase means. But it seems to me that the Commissioners must have decided that they would approach the issue before them on the assumption that, if the appeal were heard, the claimant would be entirely successful. They were prepared to assume that he would show in an appeal that he was liable for a sum not exceeding the £66,000 odd that he had already paid and he would not be at risk of bankruptcy for non-payment of PAYE and NIC. In other words, the Commissioners used the word "potentially" to indicate that, if an appeal was heard, it would be successful, not that it might be successful. There is no challenge to the decision of the Commissioners to proceed in this way.
13. They then heard submissions regarding the way in which they should exercise their discretion under section 49 on the footing that it was accepted by the claimant that he did not have a reasonable excuse for appealing out of time and the delay in filing the notice of appeal was unreasonable.
14. Mr Rivalland submitted to the Commissioners that to hear the appeal out of time would not cause any prejudice to HMRC. On the other hand, the prejudice to the claimant if the appeal was not heard was great. He would be obliged to pay a substantial sum in respect of which, it was to be assumed, he had no legal liability to pay. The result of being denied an appeal would be that he would face bankruptcy.
15. In a detailed skeleton argument (supported by oral submissions) Mr Morrison relied on the reasoning of Lord Drummond Young in The Commissioners of Inland Revenue for Judicial Review of a Decision of the General Commissioners of Income Tax (Hugh Love) [2005] CSOH 135, and in particular paragraphs 21-24, where Lord Drummond Young said:

"21. In a sense a tension exists between these two sections. On its face, section 49 might be thought to confer an unrestricted power to reopen assessments by means of a late appeal. Section 33, by contrast, is limited in its application, both by the six-year limit stipulated in subsection (1) and by the exclusion for generally prevailing practice contained in the proviso to subsection (2). If section 49 is unlimited in its application, however, it provides an obvious route to circumvent the restrictions in section 33. That might be thought contrary to the statutory scheme. A similar point can be made in relation to section 29, dealing with discovery assessments, which is subject to a broadly similar limitation for generally prevailing practice. This difficulty arises, I suspect, because the assessment and appeal provisions that are not contained in the Taxes Management Act 1970 have their origins in a number of different Finance Acts, passed over a long period, and no attempt has been made to develop them into a coherent code using systematic concepts and terminology. It must be said that on the whole the assessment mechanism seems to work well in practice, but this is no doubt due to the good sense of Inspectors of Taxes and tax advisers rather than the coherence of the statutory provisions. In the present case, however, I have come to the opinion that the tensions are more apparent than real. They can readily be resolved by a proper analysis of section 49(1), and I now turn to that analysis.

22. Section 49 is a provision that is designed to permit appeals out of time. As such, it should in my opinion be viewed in the same context as other provisions designed to allow legal proceedings to be brought even though a time limit has expired. The central feature of such provisions is that they are exceptional in nature; the normal case is covered by the time limit, and particular reasons must be shown for disregarding that limit. The limit must be regarded as the judgment of the legislature as to the appropriate time within which proceedings must be brought in the normal case, and particular reasons must be shown if a claimant or appellant is to raise proceedings, or institute an appeal, beyond the period chosen by Parliament.

23. Certain considerations are typically relevant to the question of whether proceedings should be allowed beyond a time limit. In relation to a late appeal of the sort contemplated by section 49, these include the following; it need hardly be added that the list is not intended to be comprehensive. First, is there a reasonable excuse for not observing the time limit, for example because the appellant was not aware and could not with reasonable diligence have become aware that there were grounds for an appeal? If the delay is in part caused by the actings of the Revenue, that could be a very significant factor in deciding that there is a reasonable excuse. Secondly, once the excuse has ceased to operate, for example because the appellant became aware of the possibility of an appeal, have matters proceeded with reasonable expedition? Thirdly, is there prejudice to one or other party if a late appeal is allowed to proceed, or if it is refused? Fourthly, are there considerations affecting the public interest if the appeal is allowed to proceed, or if permission is refused? The public interest may give rise to a number of issues. One is the policy of finality in litigation and other legal proceedings; matters have to be brought to a conclusion within a reasonable time, without the possibility of being reopened. That may be a reason for refusing leave to appeal where there has been a very long delay. A second issue is the effect that the instant proceedings might have on other legal proceedings that have been concluded in the past; if an appeal is allowed to proceed in one case, it may have implications for other cases that have long since been concluded. This is essentially the policy that underlies the proviso to section 33(2) of the Taxes Management Act. A third issue is the policy that it is to be discerned in other provisions of the Taxes Acts; that policy has been enacted by Parliament, and it should be respected in any decision as to whether an appeal should be allowed to proceed late. Fifthly, has the delay affected the quality of the evidence that is available? In this connection, documents may have been lost, or witnesses may have forgotten the details of what happened many years before. If there is a serious deterioration in the availability of evidence, that has a significant impact on the quality of justice that is possible and may of itself provide a reason for refusing leave to appeal late.

24. Because the granting of leave to bring an appeal or other proceedings late is an exception to the norm, the decision as to whether they should be granted is typically discretionary in nature. Indeed, in view of the range of considerations that are typically relevant to the question, it is difficult to see how an element of discretion can be avoided. Those considerations will often conflict with one another, for example in a case where there is a reasonable excuse for failure to bring proceedings and clear prejudice to the applicant for leave but substantial quantities of documents have been lost with the passage of time. In such a case the person or body charged with the decision as to whether leave should be granted must weigh the conflicting considerations and decide where the balance lies."

Mr Morrison argued that there would be prejudice to HMRC and as a direct consequence also to the public interest if the appeal were allowed to proceed. Payment of tax is necessary in the general economic interest and there must be finality in legal proceedings and tax affairs. He also relied on two particular features of the claimant's tax affairs. First, the claimant had previously undertaken not to hold directorships or take part in the promotion, formation or management of a company for a period of eight years following Directors Disqualification Proceedings which had resulted from unfit conduct on his part. This conduct had included the retention of PAYE, NIC and VAT to finance the continued trading of PCT Ltd (the claimant's company) and failing to submit appropriate returns. Secondly, as at 13 February 2008, returns were outstanding for all tax years after 2002/2003, apart from those for the year 2004/2005 which were filed late.

16. The Commissioners expressed their decision in these terms:

"We have carefully considered all the relevant authorities including the decision of Burton J in his Judicial Review drawn to our attention. We considered in detail the tests/considerations as described in the case of Hugh Love and accepted for today's purposes on a without prejudice basis, that the appeals have merit. In formulating our decision we took into account the admission on behalf of Mr Cook that there was no reasonable excuse for the delay in making the appeals. After hearing arguments from both sides on the issue of the balance of prejudice we have decided not to accept the late appeal applications."

The Issues

17. Mr Rivalland seeks to challenge this decision on the grounds that it is irrational in the Wednesbury sense and that it is flawed for lack of adequate reasons.

Irrationality

18. It is common ground that the approach to section 49 was correctly stated by Lord Drummond Young in Hugh Love. I agree that the analysis in paragraphs 21-24 of that judgment provides valuable guidance as to the correct approach.
19. It is accepted by Mr Rivalland that the Commissioners took into account relevant considerations and did not take into account irrelevant considerations. His point is that the decision reached by them was one which no reasonable General Commissioners could have reached. As has been said many times, this is a high threshold to cross. In my judgment, the claimant comes nowhere near crossing it in this case.
20. Mr Rivalland puts his case very high. He submits that it cannot be rational for the State to deny a taxpayer a right of appeal in circumstances where he has an unanswerable appeal (as these appeals were assumed to have) and where, if permitted to appeal, he would avoid bankruptcy which would otherwise supervene. But that is to ignore the powerful countervailing factors that existed in this case.
21. First, there was the fact that, as was conceded, neither of the section 49(1) conditions was satisfied. There was no reasonable excuse for not bringing the appeals within the time limited and the out-of-time applications were not made without unreasonable delay after the expiry for the time for appealing. These are two distinct conditions. The first relates to the bringing of the appeals within the time for appealing. The second relates to the making of an out-of-time application under section 49 without unreasonable delay. The claimant's appeal on 3 February 2005 was approximately 18 months out of time. He argued that he had a reasonable excuse for not appealing until after 9 March 2004 because it was only when he received a copy of Ms Cawley's letter of 8 March that he appreciated that HMRC had (on his version of events) lost the papers that he had delivered to them. Even on that view of the facts, he had no reasonable excuse for waiting a further eleven months before appealing.
22. Secondly, there was prejudice to HMRC in not being able to close its books. Thirdly, there is a public interest in these cases in achieving finality in litigation. There is a public interest in promoting the policy that challenges to assessments by way of appeal should be brought within the short period specified by the statute.
23. A fourth countervailing factor in this case was the claimant's record. I have already referred to the circumstances which led to the Directors' Disqualification proceedings, the claimant's undertaking and his continuing failure to make returns.
24. As was stated in Hugh Love, it was incumbent on the claimant to identify particular reasons why he should be allowed to appeal many months outside the period specified by Parliament. The burden was all the greater where neither of the two conditions specified in section 49(1) was satisfied. In my judgment, the Commissioners were fully entitled to hold that the claimant did not discharge this burden on the facts of this case. The fact that he was assumed to have an appeal which was unanswerable on the merits was clearly a relevant factor. But it could not be decisive. Mr Rivalland relies on the decision of the Court of Appeal in Sayers v Clarke Walker [2002] 1 WLR 3095, 3099-3102. In that case Brooke LJ said at paragraph 34 that the court would not entertain an appeal unless satisfied that there was a real prospect of success and that, if other factors militated towards the refusal of an extension of time for appealing, the likely prospects of success would have to be weighed in the balance. In my judgment, what Brooke LJ said was consistent with the view I have just expressed.
25. As Mr Morrison points out, if the submission of Mr Rivalland which I have already summarised is correct, it would mean that any taxpayer with a meritorious appeal who claims that he faces bankruptcy as a result of a tax liability that he cannot set aside because of his own delay will succeed in having an appeal against years of account admitted even in cases of substantial delay. If this were right, it would inevitably lead to the disapplication of time limits for appeals for persons who can claim that they will be made bankrupt if they cannot appeal, notwithstanding that they only find themselves in such a situation because they have failed to file returns in accordance with their statutory obligations and then have further failed to appeal assessments raised against them within the time limit specified by Parliament.
26. I therefore reject Mr Rivalland's submissions on the first issue.

Reasons

27. Mr Rivalland accepts that the Commissioners have correctly identified the relevant factors in their brief decision, but submits that they have not spelt out the reasons for the decision. They failed to explain how they resolved the issue that was before them so as to enable the parties and any appellate tribunal readily to analyse the reasoning essential to their decision.
28. Mr Morrison has helpfully summarised the principles that are to be derived from the authorities about the adequacy of reasons at paragraph 19 of his skeleton argument. I did not understand these to be contested by Mr Rivalland. These principles are:

"19.1 The primary purpose of reasons is to enable a party to know why it has won or lost by identifying the principal issues that fell to be taken into account and recording what conclusions were reached on each.

19.2 This will enable an appellate court or a reviewing tribunal to follow the reasoning that led to the decision and therefore identify whether it was reached on erroneous grounds or unreasonably.

19.3 If a particular argument has not been addressed but the reviewing tribunal is satisfied that there are grounds upon which it could have been rejected, the reviewing tribunal should assume that this is what was done in the absence of reasons in support of the contrary view.

19.4 Brevity is regarded as a virtue rather than a vice and the reasons given will be sufficient if they can be understood in the context of the evidence heard by the tribunal and the submissions made to it. The party seeking to challenge the decision on the basis that it is inadequately reasoned must show that it has been prejudiced by the lack of reasons."

29. This decision is undoubtedly brief in its reasoning. But in my judgment it withstands the challenge made on behalf of the claimant. The Commissioners stated that they took into account the fact that the appeal was assumed to have merit and that it was conceded that there was no reasonable excuse for the delay. It is clear that they also took into account the "balance of prejudice". This must be a shorthand reference to the arguments of prejudice to the claimant on the one hand (loss of a meritorious appeal and prospect of bankruptcy) and the countervailing prejudice on the other. In the context of the submissions made on behalf of HMRC and their reliance on the Hugh Love case, this latter prejudice must include not only the loss of the ability of HMRC to close their books, but the public interest in enforcing the statutory time limits for appeal, subject only to section 49. It is not clear whether the Commissioners also took into account the claimant's previous, and continuing, conduct in relation to the filing of returns. There is no reason to suppose that they did not do so. In any event, that was a factor operating to the claimant's disadvantage.
30. Mr Rivalland's criticism is not so much that the Commissioners did not identify in short form the factors to which they had regard in reaching their decision. Rather, it is that they did not explain how much weight they had placed on the various factors and why they ultimately reached the decision that they made. In my judgment, it might have been preferable if they had given fuller reasons than they gave. But the claimant knew that the Commissioners' decision took into account all the principal factors which were the subject of argument before them; and he knew that, taking all those factors into account, they decided not to exercise their discretion in his favour. The Commissioners could have explained which factors they regarded as a particular weight, possibly explaining briefly why. However, the claimant could have been in no doubt as to why he was unsuccessful. It is not suggested that, if fuller reasons had been given, these might have exposed some legal error which, thus far, has been concealed from view. The only potential error (and Mr Rivalland would say actual error) in this decision is that it is said to have been irrational. I have already dealt with that under the heading of the first issue.
31. It follows that I also reject Mr Rivalland's submissions on the second issue.

Conclusion

32. For these reasons, this judicial review challenge to the Commissioners' decision of 13 February 2008 is dismissed.

The Claim against HMRC

33. This claim has not been pursued.

MR MORRISON: I am grateful, my Lord. My Lord, I think that only leaves the question of costs. I do not know if you have a schedule?

LORD JUSTICE DYSON: Yes. Mr Rivalland, first of all, do you seek to resist an order for costs?

MR RIVALLAND: Only in part. I did indicate to your Lordship that there was without prejudice material to consider in relation to the action against the second defendant. As to the action against the first defendant, I cannot resist that at all.

LORD JUSTICE DYSON: Right.

MR RIVALLAND: My learned friend and I are agreed that the schedule effectively should be split up four-fifths as to the matter you decided and so I concede four-fifths of the amount on the schedule.

LORD JUSTICE DYSON: How much is that? Do you have a figure for that?

MR MORRISON: My Lord, if you could just amend your schedule slightly, the "Attendance at hearing" section is obviously less because we have not gone into tomorrow. That figure should be £775. The total is, therefore, £8,986.

LORD JUSTICE DYSON: And four-fifths of that is conceded?

MR RIVALLAND: Is conceded.

LORD JUSTICE DYSON: So we are really arguing about one-fifth?

MR RIVALLAND: I know that it is a very small amount, my Lord, but you will see why.

LORD JUSTICE DYSON: Yes. All right. Shall I hear from Mr Rivalland first?

MR MORRISON: As you wish, my Lord.

MR RIVALLAND: My Lord, could you turn, please, to page 554 of the bundle?

LORD JUSTICE DYSON: Right.

MR RIVALLAND: If your Lordship could read that third witness statement, I will just make one point on it.

LORD JUSTICE DYSON: Well, I have read it quickly, but I did not read it knowing what the point was.

MR RIVALLAND: Well, just to summarise, there was a race against time to save Mr Cook from being bankrupted before the first judicial review. Luckily for us, the Bankruptcy Court took a month to decide the bankruptcy and Goldring J made the decision to grant permission for judicial review on the very last day of that month. We were able, therefore, to obtain an ex parte injunction from Jack J.

LORD JUSTICE DYSON: Sorry, do not go too fast. There was a bankruptcy petition?

MR RIVALLAND: Yes.

LORD JUSTICE DYSON: And you say there was a race against time.

MR RIVALLAND: Yes.

LORD JUSTICE DYSON: The Revenue were not staying their hand?

MR RIVALLAND: They originally wrote us a letter saying they would stay their hand until the end of the judicial review had taken place.

LORD JUSTICE DYSON: Right.

MR RIVALLAND: That was in April, I think, of 2005. In October 2005 Mr Craven, the advocate for HMRC, said that he now wished to go ahead with the bankruptcy proceedings on the basis that my client should be paying the amounts that he admitted were due.

LORD JUSTICE DYSON: Right. Because at that time he had not paid the £66,000?

MR RIVALLAND: He had not paid the £66,000, and indeed there were proceedings pending to determine whether his offer to pay that within six months was a reasonable offer. In any event, we do not criticise Mr Craven for that, but there was no way of stopping it. We had open assurance in a letter and we looked very carefully at whether we could rely upon that open assurance to stop HMRC bankrupting Mr Cook before we had the decision about judicial review at the permission stage, and we concluded that we could not.

In due course we got permission to proceed against the first General Commissioners and against HMRC. On this occasion we had also received permission from Kenneth Parker QC, sitting as a Deputy High Court Judge, to proceed against both. He certified that both claims were properly arguable.

Now, again, we faced the difficulty: should we proceed against HMRC?

LORD JUSTICE DYSON: When did you receive permission for that?

MR RIVALLAND: We received permission for that on 27 May 2008.

LORD JUSTICE DYSON: But meanwhile the bankruptcy proceedings were?

MR RIVALLAND: Were adjourned continually because by then Mr Cook had paid the £66,000.

LORD JUSTICE DYSON: Yes.

MR RIVALLAND: But it was causing much dissatisfaction in the Bankruptcy Court. I attended in March -- on 5 March 2008 -- when the Inland Revenue had agreed to an adjournment and Mr Registrar Jacques said to me, "This cannot continue". So we had to take the decision -- we were to lodge the papers in this judicial review two days later -- do we proceed against HMRC or not? What happens if the Bankruptcy Court just decides, whatever HMRC wants, that they are going to take action? Sure enough, in July 2008 Mr Registrar Jacques notified me that he was not happy with continuing adjournments, he was going to list the matter. My learned friend and I attended Mr Registrar Simmons in July.

Before that hearing, my learned friend informed me that if the Registrar was minded to dismiss the petition, which was the only course open, and not adjourn it in line with Mr Registrar Jacques' suggestion, then the Inland Revenue would press for a full hearing and they would argue that Mr Cook should be made bankrupt even for the disputed case -- in other words, before you came to rule on this matter.

So we say that we were right all along to take as a protective step the suit against HMRC, and I want to hand up a clip of e-mails which are without prejudice save as to costs and will answer one of your Lordship's questions about the time estimate. They speak for themselves. I do not think I need to make more than one submission at the end of it. Would your Lordship mind looking at these?

LORD JUSTICE DYSON: No. At the moment I am not clear what I am being asked to do. You client has decided not to proceed with the claim against HMRC. It is well-established that in those circumstances it is not for the court, when approaching the question of costs, to decide costs on the basis of how the court would have decided that issue. You are not asking me to say that your challenge against HMRC, if pursued, would have succeeded?

MR RIVALLAND: No, I am saying that has not been determined and it is not right for HMRC to ask for those costs, particularly as when you read this clip of correspondence we offered them a stay right at the beginning. Having protested in their grounds for contesting the claim, having protested at being joined in as a second defendant, we offered them a stay and their response was --

LORD JUSTICE DYSON: So you offered them a stay?

MR RIVALLAND: Yes.

LORD JUSTICE DYSON: On what terms?

MR RIVALLAND: Simply on the terms that if, as in the first ground, we were successful, there would be no need to go ahead with the action.

LORD JUSTICE DYSON: Sorry, a stay of what? A stay of the bankruptcy proceedings?

MR RIVALLAND: Sorry, a stay of these proceedings --

LORD JUSTICE DYSON: Of these proceedings?

MR RIVALLAND: -- against HMRC. They were clearly unhappy at being joined in as second defendant and did not want to have to spend money on it. We agreed. We needed to protect Mr Cook's position in case (a) they changed their mind, as they had before; or (b) the Bankruptcy Court --

LORD JUSTICE DYSON: You offered a stay until the judicial review against the Commissioners was concluded?

MR RIVALLAND: Yes.

LORD JUSTICE DYSON: The fact is that your client decided not to pursue this matter against HMRC without knowing how I was going to decide the matter against the Commissioners.

MR RIVALLAND: That is so, my Lord.

LORD JUSTICE DYSON: So what order are you seeking?

MR RIVALLAND: I am simply seeking an order that Mr Cook pay four-fifths of the costs.

LORD JUSTICE DYSON: And no order as to costs as to the balance?

MR RIVALLAND: Indeed.

LORD JUSTICE DYSON: So what do you want me to look at?

MR RIVALLAND: It is a clip of five e-mails, which are informative.

LORD JUSTICE DYSON: (Pause) They do go on a bit, but the basic point is that your client had started these proceedings against HMRC. HMRC's position was that really those proceedings were bound to fail. You suggested that they be stayed on the basis of no order as to costs. They said most of HMRC's costs have already been incurred. The only additional costs are those of the hearing.

MR RIVALLAND: Yes.

LORD JUSTICE DYSON: They took a hard position that they thought that this was a hopeless application and your client really had to choose. Either he was going to go against HMRC and take his chance, or, if he decided not to, then they would have to be discontinued with the ordinary costs consequences. That is, in a nutshell, the position.

MR RIVALLAND: In a nutshell, and, of course, one must differentiate between the decision you made, my Lord, and the decision you have not made.

LORD JUSTICE DYSON: Of course, but the fact is that your client decided, for whatever reason, not to pursue the matter against HMRC.

MR RIVALLAND: Yes.

LORD JUSTICE DYSON: The claim against HMRC was only brought, as was made quite clear, as a sort of contingent claim in case the claim against the Commissioners failed. I do find it very difficult to see on what basis your client, having decided not to proceed against HMRC, should not be fixed with the consequences. I think all you are saying is that you made what you say was a reasonable suggestion --

MR RIVALLAND: yes.

LORD JUSTICE DYSON: -- back in July.

MR RIVALLAND: Yes.

LORD JUSTICE DYSON: But you were only offering a stay, you were not offering a settlement.

MR RIVALLAND: What more could we do, my Lord, in circumstances where the Bankruptcy Court was threatening to go ahead? We could have not started the proceedings against HMRC. Picture the scene if I bowled up to the Administrative Court and said, "I would like a stay because I have a good case against HMRC in judicial review proceedings". The judge would turn round and say, "Well, what good case?" The reply of HMRC is that I should not have started against them, and only if they had changed their mind, or if the Bankruptcy Court had changed its mind, should I have then gone to a court and asked for an injunction. But the injunction has to be fixed to a cause of action, and the judge before whom I appeared would simply say to me, "Well, what is your cause of action? How do you explain not kicking off?" I say that it was a reasonable, protective step to take. We have done everything we could to accommodate them and all they have done is say, without arguing it, "You have a hopeless case".

LORD JUSTICE DYSON: Well, the fact is that it has been proved you did have a hopeless case, I am afraid.

MR RIVALLAND: I am afraid that is not right, my Lord. The hopeless case pertains to the second defendant, which has not been argued.

LORD JUSTICE DYSON: I am afraid we are not going to have a great, long argument. We are in danger of spending more time on this than on the substantive claim against the Commissioners.

MR RIVALLAND: I understand.

LORD JUSTICE DYSON: I have read these e-mails. I am afraid, I am not persuaded. I really do not see any reason why HMRC should not have their costs, which are very modest -- less than £2,000 -- of defending a claim which in the end your client decided not to pursue. The only argument put forward in justification of my taking a wholly exceptional view and not visiting the claimant with the costs of pursuing a claim which he decided ultimately at the very last minute not to pursue, is the fact that in July 2008 Mr Rivalland offered on behalf of the claimant that there should be a stay of the proceedings against HMRC pending the resolution of the claim against the Commissioners. I am afraid, in my judgment, that is not a sufficient reason for departing from the normal rule that a party who withdraws a claim against a party whom he has sued should pay the defendant's costs. This is unfortunate because Mr Cook is now having to pay yet more costs, but the costs claimed by the defendant in this case are extremely modest. To that extent at least Mr Cook may count himself fortunate.

So, in the upshot, Mr Cook will have to pay the costs, which I assess at £8,986, of proceeding against both defendants. I take it there is no need for me to apportion them between the two?

MR MORRISON: No, my Lord, that is not necessary.

LORD JUSTICE DYSON: Right. I am grateful to both of you for dealing with this matter economically.