Scottish Court of Session Decisions

"A summons has been raised by your office in the Court of Session against Mr Anderson craving payment of a number of sums of alleged unpaid tax. The summons was warranted on 9 March 2006. The purpose of writing is to enquire as to whether it would be possible for us to meet with you to discuss the taxation affairs of those individuals".

They went on to explain the difficulties and continued:

"As a result of considerable effort on our part and that of the Civil Recovery Unit, there is a prospect that matters may be resolved. As part of that process it is proposed that the business documentation and documentation relating to our client's personal affairs are released which in turn would allow our client's accountant to prepare the necessary documentation to be submitted to your office and their liability for tax to be identified. We would be grateful if you would confirm that if this process is completed that you will refrain from insisting upon the assessment made by your office which we assume is based on previous figures together with the interest and penalties. For our part we consider it iniquitous that our clients should face these penalties and court action when another aspect of government had contributed to the process which had led to the delay."

[66] On 28 July 2006 D Smith from the Solicitors Office wrote to Fleming & Reid in the following terms:

"I acknowledge receipt of your letter dated 26 July 2006. I have passed your letter to Debt Management and Banking, Enforcement and Insolvency, Elgin House, 28 Haymarket Yards, Edinburgh, they will reply to you in due course. Please note that decree was granted against Mr Anderson on 18 July 2006 and an extract was issued on 27 July 2006."

[7] 7] As noted above, the defender appeared on his own behalf. He explained that Fleming & Reid still acted for him. So far as the present action was concerned, he, himself, was dealing with the substantive tax issue while the solicitors dealt with the questions of interest and penalties. He claimed that he had told his solicitors that he was going to deal with the defence of this action himself. I am bound to say that in the light of the correspondence that explanation made no sense whatsoever. It is clear from the correspondence that as at the end of July 2006 the solicitors had been dealing with the Revenue throughout in all aspects of the defender's tax difficulties and were well aware of the action. The discussion of the tax affairs of the defender conducted between his solicitors and the Revenue had as its backcloth the summons in the present action.

[88] In any event, the defender went on to claim that in connection with the action he had had personal dealings with the General Department of the Court. He told me that he had been misinformed by a Clerk of Court in the Court of Session and led to believe that the Revenue would intimate when a date for a hearing would be. He said that on two occasions he had tried lodge answers and was told that he would have wait for the calling day.

[99] The defender confirmed that the position with respect to his records was as set out in the defences and the correspondence. Answer 2 of the defences lodged at the bar was in the following terms:

"Denied, under explanation that I have been subject to restraint proceedings as a result of all business documentation and personal paperwork were seized by officers of Strathclyde Police retained by them two and a half years to date [sic]. I have written repeatedly asking for access to this paperwork and denied. The Revenue are aware as to my predicament. To bring this application to court is a gross breach of the rights afforded to me in terms of the European Human Convention."

[1010] In his submissions the defender said that he was unable to complete his return because he could not get to his papers to complete his accounts. Both he and his legal team were refused access to his paperwork. He said that many times he had telephoned the Revenue. Each time he spoke to a different person who seemed to understand why the returns had not been completed and there was no threat of court of action. It was only when the Debt Management Department became involved that things changed. They indicated that they did not care about the difficulties and would take him to Court. He felt that one branch of government had frozen his assets and taken possession of things, books and paperwork while another department were trying to recover money which had already been frozen. The defender asserted that his human rights had been infringed but did not explain in what respect.

[1111] Mr Artis, who appeared on behalf of the pursuer, submitted that a party seeking relief under rule 2.1 required to demonstrate that the failure to comply with a provision in the rules was due to mistake, oversight or such other excusable cause. Only then could the court exercise its discretion to grant relief. The defender had failed to point to any mistake, oversight or such other excusable cause. Furthermore, the defences which the defender had lodged were skeletal and the defender would not be able to advance a defence. The determination under Section 28C of the 1970 Act followed upon the failure to make a return and the liabilities such as interest and penalties followed as a matter of law.

[1212] Mr Artis pointed out that the requirement under section 8 of the 1970 Act was to give such information as may reasonably be required. The obligation was to make a return to the best of the knowledge of the taxpayer correct and complete. A return could be amended. After a determination under section 28C was made it was up to the tax payer to make a return and have the determination superseded by making a self assessment. It would have been open to the defender to have made a return to the best of his knowledge and amended it later.

[1313] As was pointed out by Lord Carloway in Semple Cochrane Plc v Hughes 2002 SLT 1121 at p. 1124F the dispensing power under rule 2.1 enables the court to do substantial justice between the parties where because of some failure to abide by the rules, that would not be secured. In deciding whether to exercise the discretion to grant relief in relation to a failure to comply with the seven day time limit in rule 19.2 (2) it is necessary first to have regard to the nature of the cause of the failure to comply with that requirement, in order to ascertain whether it is excusable. If so, one consideration in deciding whether to exercise discretion in favour of granting relief will be the nature and quality of the defences that are lodged late.

[1414] In Semple Cochrane Plc Lord Carloway exercised his discretion to grant relief to the defender who had failed to observe the seven day time limit. The procedural history of that case was as follows. Service of the summons had been accepted by the defender's agent on 15 May 2001. On 25 May the agent wrote to the pursuers' agent, formally requesting to be told when the summons was to be lodged for calling. A trainee was subsequently informed by phone that it would be on the expiry of the induciae. That message was not passed on. The defender's agent awaiting a response to his letter, did not enter an appearance or lodge defences. The pursuers' agent twice enrolled for decree in absence without intimating the motion and obtained a decree on 29 June on the second motion. A motion for recall was enrolled on 16 July following intimation of the decree. Lord Carloway regarded the defender's agent's failure as excusable in the light of the pursuers' agents' failure to intimate twice that they were enrolling for decree in absence. Further, he noted that the defender had at least raised a colourable defence to the case against him as a matter of relevancy.

[1515] The circumstances in the present case are very different. I am not impressed by the explanation advanced by the defender as to why the seven day limit was not complied with. It is clear from the correspondence that his solicitors were aware that the action had been raised. Particular reference may be made to the letter from the Revenue dated 8 May 2006 and the letter from Fleming and Reid dated 26 July 2006. No explanation was offered as to why no appearance was entered or defences lodged.

[1616] The explanation given by the defender as to why he personally was dealing with the matter of defending the action rather than his solicitors is not consistent with the terms of the correspondence and defies common sense. His account of his dealings with the staff in the General Department is vague and wholly lacking in specification. Again, the account does not make much sense. In my opinion the defender has failed adequately to explain why the seven day time limit in rule 19.2 was not met. Nothing advanced by him before me would amount in my view to something which could be characterised as mistake, oversight or other such excusable cause. The defender was unable to justify his assertion that his human rights under the Convention had been infringed. In any event, the defences, which are skeletal, do not set forth a colourable defence. It is very questionable whether he would be able to advance any defence to the action.

[1717] In these circumstances I shall refuse the motion for recall of decree in absence and order that the defender be liable for the expenses of the hearing.