DECISION
Introduction
1. This
is an application by the Appellant for costs in relation to a decision of this
Tribunal dated 29 December 2010, which allowed the Appellant's appeal and
directed the Respondents to review the Appellant's application for a licence
under the Warehousekeepers and Owners of Warehoused Goods Regulations 1999
("WOWGR").
2. The
Appellant had lodged a Notice of Appeal with the VAT Tribunal on 25 September
2008.
3. In
summary, there are three issues for determination. The first issue is whether the
application is made out of time, and, if so, I must decide whether I should
exercise my discretion to permit the late application to be made. If the
application made out of time is allowed to proceed, the second question is
whether I should exercise my discretion to apply the old cost rules contained
in Rule 29 of the VAT Tribunal Rules 1986 ("the 1986 Rules") in
relation to the costs of the appeal. The third question, if Rule 29 is not
applied, is whether the Tribunal should exercise its discretion under Rule 10
(1) (b) The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009
("the 2009 Rules") to award costs to the Appellant.
Background
4. The
substantive appeal concerned whether HMRC had acted reasonably in the Wednesbury
sense when deciding to refuse the Appellant's application for registration
under WOWGR. We decided that because the relevant HMRC officer had failed to
take account of all relevant circumstances (and, indeed, had failed to apply
HMRC's published guidance requiring him to do so) his decision could not
reasonably have been arrived at, within the meaning of section 16 (4) Finance
Act 1994. We, therefore, directed HMRC, pursuant to section 16 (4) (b) Finance
Act 1994, to review its decision in accordance with our directions.
5. The
crux of our decision was contained in paragraph 118 where we said:
"Applying these tests to the evidence before us
it is plain that Mr Dyer's [the HMRC officer] decision took account only of the
convictions of Mr Windsor and Mr Singh [directors of the Appellant]. There is
no evidence that any other factors were taken into consideration. We do not
know why this was so. It may be that Mr Dyer was simply following the guidance
in paragraph 5.8 of Public Notice 201 or it may be that he thought that those
convictions were so important that no other factors needed to be taken into
account. It does not matter why he considered one factor and not others; it
only matters whether he failed to take into account matters which he should have
done. In our view, he should have taken into account other relevant
factors."
6. We
gave directions to HMRC (at paragraph 139) to carry out a further review of
the original decision and set out certain factors which should be taken into
account.
7. After
the hearing of the original appeal on 11 November 2010, there were further
proceedings between the parties. Mr Geraint Jones QC, for the Appellant,
summarised the chronology of the subsequent proceedings as set out below. His
chronology was not challenged by Mr Richard Smith, for HMRC. The summary was as
follows:
|
Date
|
Event
|
|
11 November 2010
|
Hearing of the appeal [by this Tribunal in respect of
the WOWGR application]
|
|
6 December 2010
|
Judge Hawkins QC (Central Criminal Court) grants Crown
Prosecution Service ("CPS") and HMRC ex parte Restraint and
Receivership Orders against, inter alios, the Appellant.
|
|
14 December 2010
|
Judge Hawkins QC extends the Receiver's powers, thus
preventing the Appellant's directors from performing any management functions
in respect of the Appellant's affairs.
|
|
23 December 2010
|
At an inter partes hearing, Judge Hawkins QC refused to discharge the Orders made on 6 December 2010.
|
|
29 December 2010
|
This Tribunal's decision in the appeal is released.
|
|
4 January 2011
|
Reasons are handed down for the decision given on the
23 December 2010
|
|
26 January 2011
|
Court of Appeal (Criminal Division) quashes the Orders
made by Judge Hawkins QC insofar as they appointed a Receiver in respect of
the Appellant and/or restraint dealings in the Appellant's assets.
|
|
8 February 2011
|
Court of Appeal (Criminal Division) quashes the Orders
made by Judge Hawkins QC insofar as they affected the other Appellant's. The
Court of Appeal found that there was no evidence adduced by the CPS and/or
HMRC that could give rise to a finding that there was reasonable cause to
suspect that the various Appellants were engaged in duty evasion.
|
|
22 February 2011
|
Mackay J (sitting at the Central Criminal Court) gave
judgement upon a renewed application by CPS and HMRC for Restraint Orders.
The applications were dismissed.
|
|
1 March 2011
|
E-mail from HMRC arguing that the Appellant is out of
time to make a costs application.
|
8. In
his written submissions, Mr Jones informed us that on 20 January 2012, in Eastenders
Cash & Carry PLC v HMRC [2012] EWCA Civ 15 the Court of Appeal held
that the power of detention under section 139 Customs and Excise Management Act
1979 could only be exercised where goods were in fact liable to forfeiture and
not where there was a reasonable cause to believe that they may be liable to
forfeiture.
Further submissions
9. The
Appellant's application was heard on 27 September 2011. At the hearing
reference was made by counsel to the fact that the decision of this Tribunal in
Atlantic Electronics Limited v HMRC [2011] UKFTT 276 (TC) – a decision
of Judge Wallace which dealt with the question of costs in appeals which ranked
as "current proceedings" – was under appeal to the Upper Tribunal. It
was, however, submitted that the grounds of appeal lodged by HMRC meant that
the appeal was of limited relevance to the present application. After the
hearing, I became aware that the Upper Tribunal would hear the Atlantic
Electronics appeal on 10 November 2011 and I concluded that I should
postpone my decision in respect of this application until the judgment of the
Upper Tribunal was available.
10. On 6 February
2012, the Chamber President, Warren J, delivered judgment in the Atlantic
Electronics appeal [2012] UKUT 45 TCC I then requested written submissions
from the parties on the Atlantic Electronics decision and these were
received in February and March 2012. I have, therefore, taken into account
Warren J's helpful decision in Atlantic Electronics and the parties'
submissions thereon in reaching this decision.
Statutory background
11. It was common
ground that if the appeal had been both lodged and determined before 1 April
2009 Rule 29 of the 1986 Rules would have applied to the appeal. On 1 April
2009 the 2009 Rules came into force and replaced the 1986 Rules. Appeals that
were pending prior to 1 April 2009 were defined as "current
proceedings" and were then to be governed by the 2009 Rules by virtue of
paragraph 1 (2) and 6 of Schedule 3 to The Transfer of Tribunal Functions and
Revenue and Customs Appeals Order 2009 ("the Transfer Order").
12. These provisions
were, however, subject to paragraph 7 (3) of Schedule 3 to the Transfer Order
("paragraph 7 (3)") which provided:
"The tribunal may give any direction to ensure
that proceedings are dealt with fairly and justly and, in particular, may –
(a) apply any provision in procedural rules which
applied to the proceedings before the commencement date [1 April 2009]; or
(b) disapply any provision of the [2009]
Rules."
13. The Tribunal
must, therefore, apply the 2009 Rules to proceedings before it, subject to a
discretion contained in paragraph 7 (3) to apply the 1986 Rules and disapply
the 2009 Rules to ensure that cases are dealt with fairly and justly.
14. Rule 10 (4) of
the 2009 Rules provides, so far as is relevant, that an application for costs
under Rule 10 (1) of the 2009 Rules may not be made later than 28 days after
the date on which the Tribunal sends the final decision notice disposing of the
proceedings. The decision of the Tribunal in the appeal was, as noted above, 29
December 2010 and was sent to the parties on that date. Therefore, it was
common ground that the time for making a costs application elapsed on 26
January 2011.
15. It should be
noted that paragraph 7 (7) of Schedule 3 to the Transfer Order provides that:
"An order for costs may only be made [in the
current proceedings] if, and to the extent that, an order could have been made
before the commencement date [1 April 2009] (on the assumption, in the case of
costs actually incurred after that date, that they had been incurred before
that date)."
16. Rule 29 (1) of
the 1986 Rules provided:
"A tribunal may direct that a party or
applicant shall pay to the other party to the appeal or application –
(a) within such period as it may specify such sum as
it may determine on account of the costs of such other party of and incidental
to and consequent upon the appeal or application; or
(b) the costs of such other party of and incidental
to and consequent upon the appeal or application to be assessed…by way of
detailed assessment."
17. Rule 10 (1) of
the 2009 Rules provides:
"(1) The Tribunal may only make an order in
respect of costs… --
(b) if the Tribunal considers that a party or their
representative has acted unreasonably in bringing, defending or conducting the
proceedings; and
(c) if—
(i) the proceedings have been allocated as a Complex
case under rule 23 (allocation of cases to categories); and
(ii) the taxpayer (or, where more than one party is
a taxpayer, one of them) has not sent or delivered a written request to the
Tribunal, within 28 days of receiving notice that the case had been allocated
as a Complex case, that the proceedings be excluded from potential liability
for costs or expenses under this sub-paragraph."
18. In my view, Rule
10 must also be read in the light of the overriding objective (Rule 2 (1)) of
the Rules which is "to enable the Tribunal to deal with cases fairly and
justly." In particular, Rule 2 (4) provides that:
"Parties must
(a) help the Tribunal to further the overriding
objective; and
(b) co-operate with the Tribunal generally."
Application out of time
19. The first issue
was whether the 28 day time limit for making an application for costs,
contained in Rule 10 (4) of the 2009 Rules, was relevant to an application
under Rule 29.
20. I was informed
by counsel that the 1986 Rules contained no time limit for making an
application for costs under Rule 29. Presumably, a very late application would
have been a factor in the exercise of VAT and Duties Tribunal's discretion
under Rule 29 to award costs.
21. Mr Jones
submitted that the 28 day time limit contained in Rule 10 (4) of the 2009 Rules
did not apply to an application for costs made under Rule 29 of the 1986 Rules.
Mr Smith submitted that absent a direction to the contrary, the default
position was that Rule 10 (4) applied unless it can be shown that it was
necessary for the time limit to be disapplied so that proceedings could be
dealt with fairly and justly. Mr Smith argued that it was not unreasonable to
have a time limit in relation to an application for costs and therefore it
could not be shown that it was necessary for the 28 day time limit to be
disapplied.
22. In my view, Mr
Smith's submission faces one insuperable hurdle in relation to Rule 29. The 28
day time limit in Rule 10 (4) only applies to an "application for an order
under paragraph (1)." The Appellant's primary application is for a
direction pursuant paragraph 7 of Schedule 3 to the Transfer Order that Rule 29
of the 1986 Rules should apply and for an award of costs under that Rule. It
therefore seems to me that Rule 10 (4) cannot apply to this application insofar
as it relates to Rule 29.
23. The 28 day time
limit in Rule 10 (4) does, however, apply to the Appellant's alternative
submission that costs should be awarded under Rule 10 (1) of the 2009 Rules. I
must, therefore, consider whether the failure by the Appellant to make an
application within the 28 day period is fatal to its alternative application
under Rule 10 (1).
24. Rule 5 (3) (a)
of the 2009 Rules permits the Tribunal to give a direction to "extend or
shorten the time for complying with any rule.…" I therefore have a discretion
whether to permit an application for costs under Rule 10 (1) to be made out of
time.
25. In support of
his Rule 10 application, Mr Jones, referring to the chronology set out above,
submitted that:
(1)
When the Tribunal's decision was released on 29 December 2010, the
Appellant was subject to Receivership and its directors had no control over its
affairs. The Receiver, having been appointed at the behest of the CPS and HMRC,
had no interest in making an application to the Tribunal.
(2)
The Appellant's directors did not regain control of the Appellant's
affairs until the Order of the Court of Appeal on 26 January 2011. The
directors were then faced with, what Mr Jones described as, a huge managerial
problem to salvage the business and goodwill of the Appellant after the
Receiver had run it down; purchased no new stock; but had spent approximately
£700,000 of the Appellant's money (in large measure in paying his own fees).
26. Mr Jones also
referred to the fact that there was e-mail correspondence between 9 February
2011 to 1 March 2011 between the Appellant's solicitor and HMRC on the issue of
costs.
27. Mr Jones
submitted that there was clear prejudice to the Appellant if it was denied the
opportunity to make an application in respect of an appeal in which it had been
successful. On the other hand, there was no real prejudice to HMRC. A few weeks
delay made little difference. This was not a case where evidence had to be
heard and where the delay might cause prejudice because witnesses were
unavailable or memories had faded. In addition, it was permissible for the
Tribunal to consider the merits of the application when considering the degree
of prejudice which the Appellant might suffer if its late application was
denied. In this case, the Appellant had a strong case for the award of costs.
Applying a test of the balance of prejudice, it was clear that an application
under Rule 10 (1) out of time should be permitted.
28. Mr Smith
submitted that it was clear from the correspondence that by 9 February 2011 the
Appellant's solicitors had instructions to apply for costs. There was,
therefore, no excuse for the failure to submit an application for costs in the
period between 9 February and 7 March 2011. As regards the balance of prejudice,
Mr Smith submitted that prompt efforts should be made to comply with the Rules.
HMRC did suffer prejudice. Like any litigant, HMRC was entitled to expect
finality once time limits had expired without an application having been made.
There was a public interest in certainty and finality which would be prejudiced
if the Appellant were permitted to pursue the application without proper
grounds to excuse its lateness. Mr Smith submitted that the merits of the case
were irrelevant.
29. I am persuaded
that the application should be permitted to be made out of time in the exercise
of my discretion under Rule 5 (3) (a). I consider that the correct approach in
deciding whether to exercise my discretion as to carry out a balancing
exercise, weighing up the potential prejudice to the Appellant and to HMRC and
taking account of any factors which may explain or excuse the late application.
30. Moreover, when
balancing the respective prejudice to the parties, I consider that it is
permissible to take account, at least in outline, of the likely merits of the
application. Where an applicant has a reasonably arguable case the prejudice
which it suffers if it is not able to make its application because that
application was made out of time is greater than that suffered by an applicant
making a plainly unmeritorious application. In assessing the merits of an
application it is not necessary, in my view, that I should think that the
application will certainly succeed. All that is necessary is that I should
consider that the applicant has a good arguable case.
31. I believe that
the balance of prejudice suggests that I should exercise my discretion in
favour of the Appellant. I consider that the Appellant has a reasonably
arguable case. I do not think that the Appellant's case is so unmeritorious
that it suffers no prejudice by being precluded from putting it forward. On the
other hand, HMRC seems to have suffered little prejudice occasioned by a delay
approximately one month. I do not deny the desirability of achieving finality
in litigation but I consider that the weight of this factor grows over time. As
Mr Jones pointed out, this is not a case where documents may no longer be
available or the memories of witnesses may have faded.
32. I also consider
that the Appellant's delay was, in part, attributable to reasonable causes.
First, I accept Mr Jones's submission that until the Order of the Court of
Appeal on 26 January 2011, there was no realistic likelihood of the Appellant
being able to make an application. Thereafter, I consider it probable that the
Appellant was preoccupied in rectifying the problems caused to its business by
the appointment of a Receiver.
33. For these
reasons, I direct that permission be given for the alternative application
under Rule 10 (1).
34. As I have said,
I do not think that the 28 day time limit in Rule 10 (4) of the 2009 Rules can
apply to an application under Rule 29 of the 1986 Rules. In the absence of a
specific time limit for an application under Rule 29, it is a matter for the
discretion of the Tribunal whether the application is made so late that it
would be unfair and unjust to permit it. For the reasons given above in
relation to the application under Rule 10 (1), I think that it would be fair and
just for the application to be made.
Rule 29 application
35. It was common
ground that:
(1)
the Appellant's Notice of Appeal was lodged on 25 September 2008 at a
time when the 1986 Rules were in force and some six months before the 2009
Rules came into effect.
(2)
The appeal constituted "current proceedings" for the purposes
of the Transfer Order and that the Tribunal had a discretion whether to direct
that Rule 29 of the 1986 Rules should apply.
36. The issue is whether
the Tribunal should exercise its discretion to direct that Rule 29 should apply
pursuant to paragraph 7 (3) Schedule 3 of the Transfer Order.
Atlantic Electronics – judgment of Warren J
37. I have set out
above the provisions of paragraph 7 (3). They are beguiling in their
simplicity. Nonetheless, they give rise to difficult issues of principle when
deciding what fair and just treatment demands in the context of current
proceedings. Warren J's careful decision in Atlantic Electronics extends
to 75 paragraphs and illustrates very clearly the difficulties faced (at one
point described by Warren J as "almost intractable") in the fair and
just exercise of the discretion created by paragraph 7 (3).
38. The facts in
that case were different from those in the present application and were as
follows.
39. The appellant
("Atlantic") was appealing from a decision of HMRC to disallow input
tax in accordance with the decision of the European Court of Justice in
Kittel v Belgium (Case C–439/04) [2008] STC 1537 and of the Court of Appeal
in Mobilx v HMRC [2010] STC 1436. Atlantic had lodged three appeals
(which were consolidated) in May and June 2007 and May 2008. The proceedings
were therefore "current proceedings" for the purposes of the Transfer
Order.
40. Atlantic's solicitors were erroneously informed by Tribunal staff that the case had been
categorised as standard. The solicitors did not rely on this information and
applied for a direction that Rule 10 of the 2009 Rules should not be
disapplied. HMRC opposed the application and applied, instead, for the 1986
Rules to be applied in respect of costs.
41. Judge Wallace,
sitting in the First-tier Tribunal, dismissed HMRC's application in respect of
Rule 29 , and, by implication, allowed Atlantic's application in respect of
Rule 10. Judge Wallace was influenced by the length of time which had passed
since 1 April 2009 and considered that it had given rise to a legitimate
expectation on the part of Atlantic that the 2009 Rules would apply.
42. An appeal to the
Upper Tribunal, the Chamber President, Warren J, dismissed HMRC's appeal and
held that Judge Wallace's decision was (paragraph 70):
"within the range of reasonable decisions open
to him for him to have reached the conclusion that the lapse of time in the
present case was such that HMRC should not obtain the prospective costs order
which they sought in relation to the entire proceedings including the costs in
the VAT Tribunal."
43. There are a few
initial points to note concerning the Atlantic Electronics case.
44. First, as is
clear from the above, the case concerned an application for a prospective costs
order rather than (as is the case with the application before me) a retrospective
one i.e. an application made after the result of the substantive proceedings
has been communicated to the parties.
45. Secondly, Warren
J observed that in Atlantic Electronics and in an earlier case on a
similar point, Hawkeye Communications v HMRC [2010] UKFTT 636 (TC) (Judge Berner), the parties had both argued for an "all or nothing"
approach i.e. that either Rule 10 or Rule 29 applied. Warren J noted that it
was, however, open to the Tribunal to make a "split" direction if it
considered this wouldproduce a fair and just result (paragraph 35 and 36). The
Tribunal could make such a direction even if neither party argued for this
approach and the Tribunal should not necessarily be "compelled to accede
to the parties' wishes."
46. The following
principles relevant to the exercise of my discretion under paragraph 7 (3) in
relation to the present application can be derived from Warren J's judgment in Atlantic
Electronics :
(1)
The use of the expression "legitimate expectation", to
describe the reasonable assumptions of the parties as to the costs position in
a case which straddled 1 April 2009 was misleading. Those assumptions did not
amount to a "legitimate expectation" in the sense "in which it
is understood in public law cases nor in the sense of the EU principle of
legitimate expectations." (Paragraph 25)
(2)
A party to a tax appeal has a reasonable expectation that the relevant
procedural rules will be applied, but also a right to have them applied in
fact. In the case of current proceedings, the relevant rules are to be found in
the 2009 Rules read with paragraph 7. Neither a taxpayer nor HMRC are entitled
to have the 2009 Rules applied as if paragraph 7 did not exist. But unless a
direction is made under paragraph 7, whether a prospective direction or a
direction at the time when a costs order comes to be made, then the Rule 10
will apply. In that sense, it is perfectly true that a taxpayer has a
reasonable expectation that Rule 10 will apply, indeed he has a right to that
effect. (Paragraph 54)
(3)
When it comes to exercising the discretion under paragraph 7 (3),
whether in making a prospective direction or an actual order for costs, the
Tribunal must act judicially and apply the correct principles. The discretion
cannot be exercised in an arbitrary manner. The reasonable expectation arises
because of the way that the taxpayer is entitled to expect that discretion to
be exercised; it is not the case that the discretion must be exercised in
favour of the application of Rule 10 because there is a reasonable expectation
that it would be. The expectations of the parties should be taken into account
by the Tribunal only as a reflection of the factors which lead to those
expectations and the Tribunal must be careful not to give separate weight to
those expectations (absent other circumstances e.g. an express representation
by HMRC as to the costs position). (Paragraphs 55 and 56)
(4)
Two policies could be identified in the 2009 Rules. First, the taxpayer
in a Complex case is to be given a choice as to the applicable costs regime
(Rule 10 (1) (c)). The choice must be made at an early stage whether to opt out
of the costs regime for Complex cases. If the taxpayer does not opt out, the
case falls, by default, within the costs shifting regime. The second policy is
to provide certainty about the applicable costs regime at an early stage. If
the taxpayer was able to exercise his right of election at a late stage, or
even once a result of the appeal was known, he would be able to elect the
regime he knew to be more favourable, resulting in effectively a one-way costs
shifting, which was never intended. (Paragraph 33)
(5)
current proceedings cannot be allocated to the Complex category, at
least according to Surestone Limited v HMRC [2009] UKFTT 352 (TC). It is
the nature of a case as complex, rather than its categorisation as a Complex
case, which is relevant to the exercise of the paragraph 7 (3) discretion
either to displace or fix in place the default regime for current proceedings
under Rule 10 (i.e. no costs shifting). (Paragraph 38)
(6)
once a reasonable time after 1 April 2009 has passed, there is no longer
a policy imperative to give the taxpayer a choice; on the contrary, the second
policy is to achieve certainty and suggests that the taxpayer should no longer
have a choice. If he is to have no choice, the default regime under Rule 10
(which is a no costs regime because there has been no allocation of the appeal
as the Complex case) should apply. The taxpayer could not, seeing the wind
flowing strongly in his favour, after the passage of time, successfully seek a
prospective costs order applying Rule 29 or seek an order for costs when he
actually wins appeal. (Paragraphs 41 and 42)
(7)
in the case of current proceedings where a substantial amount of work
and considerable expense has been incurred both before and after 1 April 2009
(Warren J's "third example", to which I shall refer to as a
"straddle appeal") there are good arguments for making a prospective
direction. Both the 1986 and 2009 Rules satisfy the second policy objective,
that of providing certainty. The 1986 Rules provide certainty that a costs
shifting regime will apply. The 2009 Rules provide certainty in that the costs
regime will be identified at an early stage (depending on whether the taxpayer
elects to opt out). (Paragraph 44)
(8)
the tension between applying the 2009 Rules to a "new" case
and the fairness and justice of maintaining the old regime in what is
essentially an "old" case cannot be resolved by appeals to policy in
a straddle appeal. That tension can be avoided by applying different costs
regime is to different periods i.e. Rule 29 to the period pre-1 April 2009 and
Rule 10 to the post-1 April 2009 period ( a “split direction”). That could be a
starting point from which to arrive at a direction best designed to achieve
fairness and justice in the context of the proceedings as a whole. (Paragraph
46).
(9)
If a single regime is to be imposed, a major factor in the exercise of
discretion will be the relative amount of time and money spent on the
proceedings before and after 1 April 2009. The actual length of time
proceedings continued before and after that date carries less weight compared
with the actual work done in the two periods, although ordinarily there would
be a correlation between the two. (Paragraph 47)
(10)
given the default position under Rule 10, it is incumbent on the party
who wishes to operate in a costs shifting regime to make an application to disapply
Rule 10 and to apply rule 29. (Paragraph 49).
(11)
Delay beyond a reasonable time after 1 April 2009 is relevant to the
exercise of discretion. After a reasonable time has expired, parties who wait
and see how their case develops before making an application should not
ordinarily expect their application to succeed. (Paragraphs 66 and 68) Delay is
something which falls to be taken into account and, where delay is present, the
legitimate expectation is that the paragraph 7 (3) discretion will not be
exercised to disapply the default position of Rule 10 (no cost shifting).
(Paragraph 66).
Arguments for the Appellant
47. At the hearing,
Mr Jones submitted that the Tribunal's power was necessary to address
situations where a party, having commenced an appeal in the VAT and Duties
Tribunal, had a legitimate expectation that the rules in relation to costs
contained in the 1986 Rules would apply to that litigation. He referred to two
decisions of the Tribunal, both decisions of Judge Berner, in The Bowcombe
Shoot v HMRC [2011] UKFTT 64 and Hawkeye Communications Limited v HMRC
[2010] UKFTT 636. Mr Jones noted that the issue of legitimate expectation was
not argued in either of the above-mentioned decisions.
48. In order to
achieve the overriding objective of the 2009 Rules – i.e. that cases should be
dealt with "fairly and justly" – it was, according to Mr Jones,
necessary to give effect to the legitimate expectation of an appellant that
existed when the appeal was launched. That expectation was that if the
appellant was successful it would recover its costs. Mr Jones submitted that
that was, in part, the rationale for the Transfer Order providing that the
Tribunal have the power to direct that the existing procedural rules (including
Rule 29 of the 1986 Rules) should apply to the appeal. Mr Jones said that the
provisions of paragraph 7 of Schedule 3 to the Transfer Order were transitional
provisions which were the legislative mechanism to ensure that accrued
legitimate expectations were not thwarted by legislation having retrospective
effect.
49. This was
reinforced, according to Mr Jones, by the fact the removal of an accrued or
contingent property right by retrospective legislation would be contrary to
Article 1, Protocol 1 of the European Convention on Human Rights
("ECHR").
50. If the appeal
had been commenced on or after 1 April 2009, Mr Jones submitted that it would
have most probably been allocated to the Complex category. In that event, costs
would usually have followed the event (Rule 10 (1) (c) (i)), subject to the
right of the Appellant to opt out of the costs regime. Subject to the opt out,
this would place the parties in effectively the same position as Rule 29. There
was no power to categorise this case now as a Complex case (see Hawkeye
Communications Limited, supra) because the categorisation provisions of the
2009 Rules did not apply to "current proceedings". The Appellant's
only avenue was to make an application for a direction that Rule 29 should
apply. This was an important factor which should persuade the Tribunal to
exercise its discretion in favour of the Appellant.
51. Mr Jones
referred to paragraph 118 of our Decision where we stated that it was
"plain" that the relevant decision took account of only one factor
i.e. the criminal convictions of two individuals. It should also have been
"plain" to HMRC. There was, therefore, an "overwhelming
likelihood" that the appeal would be successful for the reasons set out in
paragraph 118 of our Decision and this, therefore, offset any prejudice arising
from the fact that the Appellant had only made this application after knowing
of its success in the appeal.
52. In his written
submissions in relation to Atlantic Electronics, Mr Jones submitted that
the relevant principles should not be confused with different principles that
may apply when a prospective application was being made. He submitted that the
Tribunal had a wide discretion under paragraph 7 (3) which had to be exercised
fairly and justly. (Atlantic Electronics paragraphs 19 and 27)
53. Mr Jones
submitted that the present case is closest to Warren J's third example, but
noted that in that case he was dealing with a prospective application. He
referred to paragraph 55 of Warren J's judgment where the learned judge said:
“When it comes to exercising the discretion under
paragraph 7, whether in making a prospective direction or in making an actual
order for costs, the tribunal must, of course, act judicially applying the
correct principles whatever they may be. In the case of an application for a
prospective order, the passage of time since 1 April 2009 will be a relevant
factor, as I will explain, in how that discretion should be exercised. The
taxpayer has not only a reasonable expectation, but also a right to insist, that
the discretion will be exercised in accordance with those principles…”
54. He noted that in
paragraph 55 Warren J was dealing with a prospective application and argued
that he was not dealing with the situation (per Warren J's third example) of an
appeal commenced in the VAT Tribunal well before 1 April 2009, but straddling
that date. He argued that Warren J expressed the view that a taxpayer had a
reasonable expectation of recovering his costs if successful. Such a reasonable
expectation would be even stronger where the appeal began in September 2008
before the VAT Tribunal.
55. He recognised
that HMRC would rely on Warren J's comments in paragraph 68 (summarised in
paragraph 46 (11) above) that parties who awaited events and then made an
application should not ordinarily expect an award of costs. However, he
submitted that the substantive appeal had failed to make significant progress
right up to the time when the Appellant's business was subject to a
Receivership Order which the Court of Appeal later found should never have been
made. Although he recognised that Warren J's comments about delay being a
factor that can weigh against the party making an application for costs, Mr
Jones countered that by contending:
(1)
HMRC's defence of the appeal was wholly unreasonable. HMRC had attempted
to defend the indefensible.
(2)
This was not a case where they were 50-50 risks in litigation. This was
an appeal that was almost bound to succeed. This was not an opportunistic
application.
(3)
The Appellant's delay was because it had not appreciated, until advised
by counsel, that it should get its costs consequent upon a successful appeal.
(4)
Warren J's comment at paragraph 68 was plainly directed at discouraging
opportunistic applications.
(5)
The strength of the Appellant's case in relation to the substantive
appeal was a relevant factor which should be taken into account by the Tribunal
in exercising its discretion in favour of the Appellant.
(6)
The decision in Atlantic Electronics did not affect the
Appellant's arguments in relation to Rule 10 concerning HMRC's unreasonable
conduct of the appeal.
Arguments for HMRC
56. At the hearing, Mr
Smith submitted the fact that the appeal was commenced prior to the 2009 Rules
coming into force was not enough to require the Tribunal to direct that
fairness and justice demanded that the 1986 Rules should apply. This was
apparent from the terms of paragraph 7 (3) of the Transfer Order and this view
was confirmed by the Tribunal in Everest Limited v HMRC [2010] UKFTT 621 (TC) at paragraph 106:
"It is evident from the way in which para 7 (3)
is framed that the mere fact that an appeal qualifies as "current
proceedings" is not itself sufficient for the 1986 Rules, or any
particular provision of those rules, to be applied."
57. Mr Smith said
that this was enough to dismiss the Appellant's primary case for the
application of Rule 29. If, however, the Tribunal decided not to dismiss the
application on that basis, Mr Smith referred to Judge Berner's decision in
Hawkeye Communications Limited v HMRC [2010] UKFTT 636 (TC) for
guidance as to how the Tribunal should exercise the discretion conferred upon
it by paragraph 7 (3). Judge Berner said at paragraph 18:
"…what is required in considering the proper
approach to be adopted in the case of “current proceedings” is a balancing
exercise, weighing the question of fairness and justice in all the
circumstances of the individual case, and the prejudice that would be suffered
by either party were the tribunal, on the one hand, to exercise its discretion
to apply the 1986 Rules or, on the other, not to do so. I do not agree with Mr
Lakha [counsel for the Appellant] that the threshold for the exercise of the
discretion under para 7(3) is higher than that. As a general matter of course
rule 10 of the 2009 Rules does not of itself prevent the tribunal dealing with
cases fairly and justly. But what para 7(3) recognises in the special
circumstances of current proceedings is that fairness and justice might require
application of the former rules in certain respects."
58. Mr Smith
dismissed the argument of the Appellant that it was necessary to apply Rule 29
in order for the proceedings to be dealt with fairly and justly in order to
give effect to the Appellant's legitimate expectation, supported by Article 1,
Protocol 1 ECHR. The Appellant had no legitimate expectation that the 1986
Rules would apply on or after 1 April 2009. The Appellant had no accrued right
to costs until the Tribunal directed that Rule 29 should apply and, therefore,
no point under Article 1 arose. Mr Smith said that the Appellant's reliance on
the merits of the claim did not assist with the question whether it was fair
and just to apply the 1986 Rules.
59. Mr Smith did not
agree with Mr Jones's submission that the appeal would most probably have been
allocated to the Complex category if it had been commenced after 1 April 2009.
Rule 23 (4) of the 2009 Rules states:
"The Tribunal may allocate a case as a Complex
case under paragraph (1) or (3) only if the Tribunal considers that the case -
(a) will require lengthy or complex evidence or a
lengthy hearing;
(b) involves a complex or important principle or
issue; or
(c) involves a large financial sum."
60. Mr Smith noted
that the appeal did not involve lengthy or complex evidence and it did not
involve a complex important principle or issue. As to whether the appeal
involved a large financial sum, there was no evidence put forward to
substantiate this. The point had not been tested and, therefore, Mr Smith
submitted that it was dangerous for the Tribunal to take a view on this point.
61. Mr Smith
suggested that the following relevant factors should be taken into account:
(a)
The Notice of Appeal was dated 25 September 2008 so the proceedings
began only six months prior to the 2009 Rules coming into force.
(b)
Even when the 1986 Rules were in force, the Appellant could only have
recovered costs from the date when the original decision was deemed to have
been upheld on review (7 September 2008) because costs incurred prior to that
date would not have been incidental to the appeal: Customs and Exercise
Commissioners v Dave [2002] STC 900.
(c)
The Appellant's expectation of recovering the costs following a
successful appeal brought under the 1986 Rules ended, in the absence of any
application to the contrary, when those Rules were replaced by the 2009 Rules
on 1 April 2009. The Appellant could have had no such expectation from that
date because, absent a direction from the Tribunal pursuant to paragraph 7 (3),
given the provisions of Rule 10 of the 2009 Rules.
(d)
The bulk of the work done by the Appellant's solicitors was done after
the 2009 Rules had come into force.
(e)
The Tribunal ruled in Atlantic Electronics [2011] UKFTT 314 (TC)
( at paragraph 50) that the greater the amount of costs incurred after 1 April
2009, the stronger the position of the party resisting a direction for the 1986
Rules to apply.
(f)
The Appellant had advanced no grounds on which it can be said to be
necessary in the interests of fairness and justice to apply Rule 29 of the 1986
Rules and disapply Rule 10 of the 2009 Rules. The balancing exercise must,
therefore, come down against making any such direction.
62. In his written
submissions in relation to Atlantic Electronics, Mr Smith agreed that
this case fell within the third example (a straddle appeal) given by Warren J,
but argued that it was closer to his first example (i.e. where an appeal was
lodged shortly before 1 April 2009). In this case, the appeal had been lodged
only six months before 1 April 2009 and had been concluded 21 months later. In
addition, as noted above, the Respondents did not accept that the case would
have been allocated to the Complex category had it been commenced under the
2009 Rules.
63. Mr Smith
referred to Warren J's reasoning in paragraph 41 (summarised in paragraph 46
(6) above) where the President indicated that a party could not delay until it
had won an appeal before making an application for costs.
64. Mr Smith
submitted that the longer the time an application was made after 1 April 2009,
the less likely it was that at paragraph 7 (3) direction would be made.
65. The ratio of
work undertaken pre-and post-one April 2009 was to be taken into account is the
fact that away in the balance when considering fairness and justice under
paragraph 7 (3).
66. If neither party
made an application to the Tribunal for a prospective direction, the Tribunal
was unlikely to depart from the default regime (i.e. Rule 10 – no costs
shifting).
67. Mr Smith noted
that the President had made it clear that the Tribunal should not decide the
issue based on the notion of "legitimate expectation", save in
special circumstances (e.g. where HMRC had given some undertaking or promise).
The Appellant's arguments in relation to "legitimate expectation"
therefore proceeded on an erroneous basis. In this case the rules which the
parties could reasonably have expected to be applied were the 2009 Rules,
unless a direction under paragraph 7 (3) was made. In any event, as Warren J
make clear, it was not the expectations of the parties that should drive the
Tribunal's exercise of its discretion, but the analysis of the factors giving
rise to those considerations.
68. Mr Smith
submitted that the following factors should be weighed in the balance according
to the principles identified by Warren J:
(1)
the length of time after 1 April 2009 that the application for a
paragraph 7 (3) direction was made was 21 months;
(2)
the fact that the application was made after the conclusion of the
appeal;
(3)
the fact that the majority (more than 80%) of the Appellant's costs were
incurred after 1 April 2009 – according to the Appellant's Schedule of Costs.
69. In relation to
the points made in the Appellant's written submissions:
(1)
Mr Smith noted that the Receivership Order had been made in December
2010, after the hearing of the Appeal. Significant progress had, therefore,
been made in the appeal by that time and the Appellant had expended significant
amounts in costs to prosecute it. Mr Smith did not consider this factor
impacted on the discretion contained in paragraph 7 (3).
(2)
No satisfactory explanation had been given by the Appellant as to why a
prospective application had not been made and the appellant chose to wait until
it knew the result before applying for a direction.
(3)
The points made by the Appellant about the merits of the substantive
appeal did not explain the failure to make a timely application for a paragraph
7 (3) direction. If the Appellant had been so bullish about its prospects of
success there would be no reason for failing to make a prospective application.
70. Mr Smith noted
that the Appellant, all though referring to the apportionment argument or
"split" direction (mentioned by Warren J), was not actively pursuing
it there was no application to amend the existing application. Mr Smith argued
that apportionment would not be correct because of the time at which the
application was made.
Discussion of application of Rule 29
71. The question is
whether I should exercise my discretion under paragraph 7(3) to apply Rule 29
in order to ensure that the proceedings are dealt with fairly and justly.
72. I accept Mr
Smith's submission, based on the passage from the Tribunal's decision in
Everest cited above, that the mere fact that an appeal qualified as
"current proceedings" was not enough to require the Tribunal to
direct that Rule 29 should apply. Nonetheless, paragraph 7 (3) proceeds on the
assumption that, in the case of current proceedings, fairness and justice might
in some cases require the application of the 1986 Rules (at least in part).
73. I respectfully
agree with the view of Judge Berner in Hawkeye Communications that I
must carry out a balancing exercise, weighing all the factors involved in this
case, to reach an overall conclusion whether the application of Rule 29 was
required to ensure that the proceedings were dealt with fairly and justly. I do
not read the judgment of Warren J in Atlantic Electronics as in any
disapproving the need to perform this balancing exercise. That balancing
exercise, as Warren J made clear, must be conducted on a principled basis.
74. In Atlantic
Electronics, Warren J considered that the Tribunal should not determine
whether to exercise its discretion under paragraph 7 (3) on the basis of
legitimate expectation. As he said at paragraphs 55 and 56:
“The reasonable expectation arises because of the
way that the taxpayer is entitled to expect that the discretion will be
exercised; it is not the case that the discretion must be exercised in favour
of the application of Rule 10 because there is a reasonable expectation that it
will be.
…Accordingly, a tribunal must be careful to take
account of the expectations of a taxpayer only as a reflection of the factors
which lead to those expectations and must be careful not to give separate
weight to those expectations….”
75. In my view, from
1 April 2009 the Appellant could not reasonably have assumed that Rule 29 of
the 1986 Rules would apply absent a direction from the Tribunal. Any
expectation or assumption that the costs shifting rules of Rule 29 would apply
must have ended on that date. On 1 April 2009 the default position was
that Rule 10 of the 2009 Rules governed this appeal. Therefore, after that date
the assumption should have been that Rule 10 (and not Rule 29) would apply,
absent a direction from the Tribunal. I accept that from 25 September 2008 to
31 March 2009 the Appellant may have assumed that Rule 29 would apply. In my
view, however, that is outweighed by the fact that from 1 April 2009 to the
hearing date of 11 November 2010 the Appellant could have had no such
expectation.
76. Warren J
considered that the amount of work and cost undertaken or incurred in the
pre-and post-1 April 2009 periods was an important factor. With respect, I
agree. From the information available to me, it appears that the large majority
of work done by the Appellant's legal advisers was carried out after the 2009
Rules had come into force. The Schedule of Costs produced by the Appellant is
not broken down by specific dates and it is, therefore, not possible accurately
to compare the value of work done before and after 1 April 2009. However, I
note that the fees for work performed between 24 July 2008 and 31 December 2009
were £12,073.20 and the fees for work done in 2010 were £56,081. These periods
are obviously slightly inaccurate in that the figure of £12,073.20 includes some
costs incurred from the date of the original decision and before the appeal was
lodged (which are not recoverable) and eight months when the 2009 Rules were
applicable. Nonetheless, it is clear that the bulk of the costs were incurred
during the period when, because no application had been made for a direction
that Rule 29 should apply, the reasonable assumption to make would have been would
have been the 2009 Rules (no costs shifting) would apply.
77. Similarly, when
carrying out the balancing exercise, I have taken account of the fact that the
period from the commencement of this appeal to the hearing involves a period of
approximately 2 years. The Notice of Appeal was dated 25 September 2008. The
proceedings had been underway for only six months before the 2009 Rules came
into force. The period from 1 April 2009 to the date of the hearing (11
November 2010) was approximately 18 months. Therefore, the proceedings mainly
took place in the post 1 April 2009 period – a period when the 2009 Rules were
in force.
78. Therefore, in
respect of the proportionate work and expense incurred and the relative length
of time before and after one April 2009, the balance suggests that it should be
Rule 10, not Rule 29, which should apply.
79. We have had no clear
explanation why an application for a direction that Rule 29 should apply was
not made by the Appellant until after the hearing. Like Judge Berner in Hawkeye
Communications (paragraph 23), I believe that this is a factor that can be
taken into account. In his written submissions Mr Jones stated the Appellant's
delay in applying for costs "was because, until advised by counsel, it had
not appreciated that it would not, almost as of right, get its costs consequent
upon the successful appeal." I do not regard that as a sufficient explanation.
The Appellant could have applied for a direction under paragraph 7 (3) at any
time after 1 April 2009. As far as I am aware, it was at all times legally
represented. It did not, however, do so. The fact that it was under a
misapprehension as to the costs regime cannot be relevant.
80. This application
has been made after the result of the appeal has become known. I do not think
it is fair for a party to adopt a "wait and see" approach on the
question of costs. Warren J adopts a similar approach in his judgment (see, for
example, paragraphs 41 and 50). I do not agree with Mr Jones's submission that
this is "a superficial point" in view of the "overwhelming
likelihood" that the Appeal would be successful. After all the evidence
(including the various practice statements published by HMRC) and the arguments
of counsel had been considered, it may well have been "plain", as we
said, that the appealed decision was Wednesbury unreasonable, but this
applies a very considerable degree of hindsight. In any event, the confidence
of the Appellant in the merits of its case does not justify it in refraining
from clarifying the costs position until after the decision.
81. In my view, the
appeal would most probably have been categorised as Complex. I consider that
the appeal raised a complex issue i.e. whether the decision taken by HMRC was
Wednesbury unreasonable. It involved a careful analysis of the
decision-making process, a review of the quite complex HMRC public statements
and some carefully nuanced arguments put forward by counsel. On this hypothesis
(ie that the appeal had commenced after 1April 2009), it would have been open
to the Tribunal to have awarded costs in favour of the Appellant provided the
Appellant had not exercised its opt out. It is, however, impossible to say in
hindsight whether the Appellant would have exercised this right. Having won the
appeal, the Appellant now seeks its costs but would it have exercised its right
to opt out of the costs regime within the 28 day period from receiving notice
that the case had been allocated to the Complex category (Rule 10 (1) (c)
(ii))? It seems to me that this uncertainty reduces the weight to be given to
this point in the overall balancing exercise to be carried out in order to
determine whether I should exercise my discretion in paragraph 7(3).
82. Furthermore, had
this been categorised as a Complex case, the opt out would have had to be
exercised at an early stage (i.e. within the 28 day period) so that in the
run-up to the hearing and during the hearing itself – periods which typically
see the bulk of time and effort being expended by each party's legal team – the
costs position would have been clear. But in this case, there was no clarity.
No application was made to identify the applicable costs regime. The
application has only been made after the event. It seems to me, therefore, that
this also weakens the analogy which the Appellant draws with the position under
Rule 10 (1) (c).
83. For these
reasons, therefore, my conclusion is that I should decline to exercise my
discretion under paragraph 7 (3) Schedule 3 to the Transfer Order to apply Rule
29 of the 1986 Rules.
Rule 10 application
Arguments for the Appellant
84. Essentially, Mr
Jones submitted that it was obvious that the appealed decision was
unreasonable. Mr Dyer had taken only the criminal convictions into account. As
the Tribunal said, in paragraph 118 of its Decision, it was "plain"
that Mr Dyer only had taken the criminal convictions of Mr Singh and Mr Windsor
into account. HMRC knew (or ought to have known) that they had no reasonable
prospect of winning. Furthermore, HMRC sought to adduce further reasons to
support its decision which the Tribunal excluded (see paragraph 14 of the
Decision). This was a clear indication that HMRC knew or should have known that
it had no realistic chance of winning, but HMRC still sought to contest the
appeal even after the exclusion of the additional evidence.
85. Mr Jones said
that HMRC's subsequent refusal of a WOWGR registration, where HMRC failed to
take account of any or all of the matters which the Tribunal had directed it to
do so, was indicative of HMRC’s unreasonable approach.
86. Accordingly, Mr
Jones submitted that HMRC had acted unreasonably in defending and conducting
the proceedings.
Arguments for HMRC
87. Mr Smith submitted
that the application could not be granted because of the terms of paragraph 7
(7) of Schedule 3 to the Transfer Order. This precludes any order for costs
being made if it could not have been made before 1 April 2009, i.e. under the
1986 Rules. There was no provision in the 1986 Rules by which the Tribunal
could award costs to any party based on the unreasonableness of the other.
Therefore, an award of the whole of the party's costs under Rule 10 (1) (b)
could not be made in "current proceedings". Mr Smith referred to the
decision of this Tribunal in Surestone, supra, at paragraph 14 where Sir
Stephen Oliver said:
"The effect of paragraph 7(7) of Schedule 3 to
the TTF Order is that the making of a direction under rule 10(1) of the 2009
Rules relating to costs is not (in the circumstances to which this application
relates) open to this Tribunal. None of the situations in rule 10(1)(a)-(c)
applies. The 1986 Rules under which a costs award could have been made ceased
to have effect at the end of March 2009. Likewise the 1994 Special Commissioners
Rules, which contained no power to make costs awards (save where one party had
behaved wholly unreasonably), ceased to have effect. "
88. Mr Smith further
submitted that the application confused the finding of substantive Wednesbury
unreasonableness on the part of HMRC, in taking the decision to refuse WOWGR
registration, with procedural unreasonableness in defending HMRC's position. Mr
Smith said that HMRC had relied on a number of perfectly respectable lines of
argument before the Tribunal (summarised in paragraphs 86 to 96 of the
Decision). This presented a properly arguable case by which the appeal could
have been dismissed. It was not unreasonable for HMRC to defend their position
simply because they lost the appeal.
89. As regards the
Appellant's suggestion that it should always have been apparent to HMRC that
they would lose the appeal, this was an illegitimate use of hindsight. The
Tribunal did not find that HMRC's defence of the appeal was hopeless but,
instead, gave full and proper consideration to HMRC's arguments.
Discussion of the application of Rule 10
90. I do not
consider that I should award costs to the Appellant under Rule 10 (1) (b).
HMRC's defence of the appeal decision was not in my view unreasonable. As
summarised in our decision, HMRC advanced a number of respectable arguments.
The fact that those arguments did not find favour does not mean that HMRC's
arguments were wholly without merit to such an extent that an award of costs
under Rule 10 (1) (b) would be appropriate. It may be that having heard all the
evidence and the arguments of counsel that it was clear that the appealed
decision was Wednesbury unreasonable, but to say that HMRC should have
been aware that its position was not defensible involves a very considerable
measure of hindsight. In my view HMRC had an arguable case and it was not
unreasonable to put it forward.
91. The test in Rule
10 (1) (b) is simply whether a party "has acted unreasonably in bringing,
defending or conducting the proceedings." It is different from the old
test which applied to proceedings before the Special Commissioners which
required a party's conduct to be "wholly" unreasonable. There is,
therefore, a lower threshold for the award of costs in circumstances of
unreasonable conduct before this Tribunal. That said, I do not think the test
of unreasonableness in Rule 10 (1) (b) should become a "backdoor"
method of costs shifting. The test is simply one of unreasonableness in all the
circumstances of the case, but it would not be appropriate, in my view, to
apply that test with a too-ready resort to the benefit of the hindsight. It is
easy to be wise after the event.
92. For this
reason, I decline to award costs to the Appellant pursuant to Rule 10.
93. As regards Mr
Smith's argument that paragraph 7 (7) of Schedule 3 to the Transfer Order
precludes me from making an award of costs under Rule 10, I disagree. It is
true that paragraph 7 (7) acts as a limitation on the operation of Rule 10,but
it does not preclude the Tribunal from making an award of costs under Rule 10
in appropriate circumstances. As the Tribunal pointed out in Everest, supra,
at paragraph 98, paragraph 7 (7) prevents the Tribunal from awarding costs
where prior to 1 April 2009 the powers contained in Rule 10 did not exist. For
example, there was no ability to award costs in General Commissioners cases and
before the Special Commissioners there was only jurisdiction to award costs in
the case of "wholly unreasonable" conduct (not the lower standard of
unreasonable conduct found in Rule 10).
94. Rule 29 of the
1986 Rules, however, conferred on the VAT and Duties Tribunal a general power
to award costs. There is no doubt in my mind that the Tribunal could award
costs in circumstances of unreasonable behaviour as well as awarding costs
which simply followed the event. However, in the light of my decision that
HMRC's defence and conduct of the Appeal was not unreasonable, it is
unnecessary for me to venture any further opinion on this point.
Split direction
95. I have, so far,
considered the arguments in the manner in which they were presented by the
parties. Both the Appellant and HMRC argued for an "all or nothing"
approach: HMRC arguing for the application of Rule 10 and the Appellant arguing
for the application of Rule 29, in each case for the whole period of the appeal
(i.e. from the date that the appeal was lodged to the Tribunal's decision).
96. As Warren J
noted in Atlantic Electronics it is open to the Tribunal, if it
considers it would be fair and just to do so, to make a "split"
direction applying Rule 29 to the period prior to 1 April 2009 and Rule 10 to
the period from 1 April 2009 to the date of the Tribunal's decision.
Furthermore, it is open to the Tribunal to make this direction even if neither
party seeks it if the Tribunal considers that it is necessary to ensure that
proceedings are dealt with fairly and justly.
97. There are
attractions to this approach. Until 1 April 2009 the costs position of the
appeal was governed by Rule 29 and, thereafter, by Rule 10. A split direction
would recognise this reality.
98. Do I therefore
think that a split direction should be made to ensure that these proceedings
are dealt with fairly and justly? I do not consider that such a direction would
be appropriate in the circumstances of this case. I think there would have been
merit in such a course of action if an application had been made within a
reasonable time after 1 April 2009. But where the application is made after the
conclusion of the appeal I think it is simply too late. After the length of
time that has elapsed from one April 2009, my view is that it is fair and just
that Rule 10 should apply to the proceedings as a whole.
Conclusion
99. For the reasons
given above, I have decided that no award costs should be made either under
Rule 29 of the 1986 Rules or under Rule 10 of the 2009 Rules.
100. This
document contains full findings of fact and reasons for the decision. Any party
dissatisfied with this decision has a right to apply for permission to appeal
against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal)
(Tax Chamber) Rules 2009. The application must be received by this Tribunal
not later than 56 days after this decision is sent to that party. The parties
are referred to “Guidance to accompany a Decision from the First-tier Tribunal
(Tax Chamber)” which accompanies and forms part of this decision notice.
GUY BRANNAN
TRIBUNAL JUDGE
RELEASE DATE: 27 March 2012
Amended pursuant to rule 37 of the Tribunal Procedure (First
tier Tribunal) (Tax Chamber), Rules 2009 on 31 March 2012
