[2012] UKFTT 701 (TC)
TC02370
Appeal number: TC/2010/06255
PROCEDURE - COSTS – appeal
in standard category - appellant’s application for costs on the basis that HMRC
had acted unreasonably in not settling case sooner– period over which costs may
be incurred and period over which unreasonable conduct may be assessed
considered – whether HMRC acted unreasonably in not settling case before
service of appellant’s witness statements – no- whether HMRC acted unreasonably
in not considering witness statements sooner – yes – application granted for
costs incurred after point in time by which witness statements ought to have
been reviewed – application allowed in part
FIRST-TIER TRIBUNAL
TAX CHAMBER
|
|
SOUTHWEST
COMMUNICATIONS GROUP LTD
|
Appellant
|
|
|
|
|
|
|
- and -
|
|
|
|
|
|
|
|
THE
COMMISSIONERS FOR HER MAJESTY’S
|
Respondents
|
|
|
REVENUE &
CUSTOMS
|
|
|
TRIBUNAL:
|
JUDGE SWAMI RAGHAVAN
|
|
|
|
UPON the appellant’s application for costs under Rule
10(1)(b) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules
2009
Sitting in public at 45 Bedford Square, London on 29 June 2012
Mr G. Fraser of Thompson
Jenner LLP chartered accountants for the Appellant
Mr S. Foxwell, officer, HMRC
appeals and reviews unit, for the Respondents
© CROWN COPYRIGHT
2012
IT IS DIRECTED THAT:
HMRC pay to the appellant the costs of and incidental to
the proceedings which the appellant incurred from 20 July 2011 onwards in an
amount to be assessed on the standard basis by a costs judge if not agreed.
DECISION
Introduction
1.
This matter concerns the appellant’s application for an order that HMRC
pay the appellant’s costs on the grounds that HMRC acted unreasonably. The
costs are in relation to an appeal in the standard category lodged on 27 July
2010 which HMRC subsequently settled on 30 January 2012 some 3 weeks before the
substantive hearing of the appeal was due to take place on 20 and 21 February
2012.
2.
The appellant argues HMRC acted unreasonably because it ought to have
settled the appeal well before 30 January 2012 on 6 July 2010 following the
HMRC internal independent review process, there being no new information before
HMRC that was not already before them at the time of that review.
3.
HMRC say that it was not until they were able to appraise the
appellant’s witness statements that they were able to decide that the case
should not go ahead and that although it was unfortunate that there were delays
in considering the witness statements these were due to the officer handling
the appeal being absent on sick leave.
Legislation
4.
Section 29 of the Tribunals Courts and Enforcement Act 2007 which
provides the basis for the First-tier Tribunal’s ability to make a direction in
respect of costs states:
“(1) The costs of and incidental to—
(a) all proceedings in the First-tier Tribunal…
shall be in the discretion of the Tribunal in which
the proceedings take place.
(2) The relevant Tribunal shall have full power to
determine by whom and to what extent the costs are to be paid.
(3) Subsections (1) and (2) have effect subject to
Tribunal Procedure Rules.
5.
In so far as is relevant to this application, Rule 10 of the Tribunal
Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the Tribunal
Procedure Rules”) provide as follows;
“10. – (1) The Tribunal may only make an order in
respect of costs (or, in Scotland, expenses) –
(a) …
(b) if the Tribunal considers that a party or their
representative has acted unreasonably in bringing, defending or conducting the
proceedings;…
Background / Chronology
6.
In order to understand and assess the significance of the witness
statements the appellant served it is necessary to set out a little of the
background of the appeal.
7.
The appellant’s main business is the sale, supply, installation and
maintenance of communications to business customers. On 6 September 2005, the
appellant entered into a written sponsorship agreement with Exeter Chiefs
Rugby Club (“the Rugby Club”) under which the appellant was to pay £200,000 to
the Rugby Club. The substance of the appeal related to a further amount of £100,000
paid by the appellant to the Rugby Club and whether this was laid out “wholly
and exclusively” for the purposes of the appellant’s trade under section 74 of
the Income and Corporation Taxes Act 1988. The appellant maintained the
£100,000 payment was negotiated together with a £200,000 sum set out in the written
sponsorship agreement to form a sponsorship deal of £300,000, and that the
payment of both sums was wholly and exclusively for the purposes of the
appellant’s trade.
8.
Mr Rowe, a director and controlling shareholder of the appellant was
also the Chairman and Chief Executive of the Rugby Club. HMRC took the view
that the overriding motive and intention for paying the sum was to allow Mr Rowe
to contribute funds to the Rugby Club in response to the Rugby Club’s request
to the appellant. HMRC maintained that even if there was a business advantage
to the appellant of the £100,000 assisting the Rugby Club’s financial position in
order to further the appellant’s objective of being associated with a
successful team, assisting the Rugby Club’s financial position disclosed a dual
purpose. Therefore they said the payment of £100,000 was not “wholly and
exclusively” for the purposes of the appellant’s trade.
9.
The chronology of the dispute was as follows:
(1)
On 20 May 2008 HMRC opened the enquiry into the Corporation Tax Return
of the appellant for the year ended 31 December 2006 following which there were
numerous letters between HMRC and the appellant.
(2)
On 21 November 2008 there was a meeting attended by Mr Rowe, Mr Langley
(the Managing Director of the appellant and who from 2000 to 2006 was
Commercial Director of the appellant), three representatives from Thompson
Jenner, the firm representing the appellant, including Mr Fraser who appeared
at the hearing and two officers from HMRC (Mr Wilton and Mr Oakes).
(3)
On 21 April 2009 there was a meeting attended by the same
representatives from the appellant and two officers from HMRC (Mr Wilton and Mr
Weeks).
(4)
On 10 March 2010 HMRC issued a notice of amendment for the accounting
period ending 31 December 2006.
(5)
On 6 July 2010 HMRC concluded the independent review process which had
been requested by the appellant.
(6)
On 27 July 2010 the appellant notified its appeal to the Tribunal.
(7)
On 6 October 2010 HMRC submitted its Statement of Case.
(8)
On 29 November 2010 HMRC filed its List of documents.
(9)
On 28 February 2011, pursuant to a time extension the appellant filed
its List of documents.
(10)
On 21 March 2011 the Tribunal issued directions requiring amongst other
things that witness statements be filed by 3 May 2011. The appellant’s request
for an extension was granted and the deadline was extended to 31 May 2011.
(11)
On 31 May 2011 the appellant served 3 witness statements on the Tribunal.
These comprised a 15 page statement from Mr Langley, an 8 page statement from
Mr Rowe and a 3 page statement from Ms Flowers, Sales Director of the appellant.
(12)
On 22 June 2011 the Tribunal sent copies of the witness statements to
HMRC as copies had not been served on HMRC.
(13)
On 22 September 2011 the Tribunal notified the appellant through its
representative that a hearing had been fixed for 20-21 February 2012 having earlier
written to the parties to ask for listing information on 2 August 2011 and
received HMRC’s provisional dates to avoid on 3 August 2011.
(14)
On 30 January 2012 HMRC informed the appellant by telephone and letter
that HMRC had decided not to contest the appeals set down for hearing and the
Tribunal had been informed of the position. The letter written by Mr Foxwell went
on to explain:
“It is unfortunate that it is so late in the day but
as I explained I have been off work with a torn achilles tendon for 10 weeks.
Normally it would have been possible to make this important decision earlier
and I can only apologise that the witness statements were not considered in
more detail sooner.
As explained in the phone call, the crucial new
evidence introduced in the witness statements from Harry Langley and Sarah
Flowers, along with a detailed reconsideration of all evidence in the case
resulted in HMRC altering its view of the main issues. It is now felt that HMRC
has a no better than 50% chance of success on the balance of probability in
this appeal. HMRC was also mindful of a possible inappropriate use of resources
with both the costs involved in a two day hearing and the amounts at stake. It
is therefore considered wise to concede…”
Period over which costs may be incurred and period over which unreasonable
conduct may be assessed
10.
The costs the appellant is seeking include an element of costs which are
stated to be after HMRC’s internal review “in July 2010”. It is not therefore clear
to what extent if any these costs include costs incurred prior to notification
of the appeal.
11.
At the hearing the parties’ attention was drawn to the Upper Tribunal
case of Cataña v HMRC [2012] UKUT 172(TCC). This considered the Tribunal’s
power to make an order in respect of costs “of and incidental to” the
proceedings and whether there was power to make an order in respect of the
investigation of the appellant’s tax affairs which preceded the proceedings
before the Tribunal. After considering the High Court decision of Gamble v
Rowe [1998] STC 1247 (which had dealt with a similar restriction to the
costs ordering power of the Special Commissioners) Judge Bishopp quoted with
approval the First-tier Tribunal decision of Bulkliner Intermodal Limited
v HMRC [2010] UKFTT 395 (TC). Bulkliner had considered the effect
of the transfer of the Special Commissioners’ jurisdiction to the First-tier
Tribunal on the cost direction making power. At [9] Judge Bishopp approved the
following proposition from Bulkliner:
“… one thing that has not changed is that the
Tribunal’s jurisdiction continues to be limited to considering actions of a
party in the course of ‘the proceedings’, that is to say proceedings before
the Tribunal whilst it has jurisdiction over the appeal. It is not possible
under the 2009 Rules, any more than in was under the Special Commissioners’
regulations, for a party to rely upon the unreasonable behaviour of the other
party prior to the commencement of the appeal, at some earlier stage in the
history of the tax affairs of the taxpayer, nor, even if unreasonable behaviour
were established for a period over which the Tribunal does have jurisdiction,
can costs incurred before that period be ordered. In these respects the
principles in Gamble v Rowe … remain good law. That is not to say that
behaviour of a party prior to the commencement of proceedings can be entirely
disregarded. Such behaviour, or actions, might well inform actions taken during
proceedings, as it did in Scott and another (trading as Farthings SteakHouse) v
McDonald [1996] STC (SCD) 381, where bad faith in the making of an assessment
was relevant to consideration of behaviour in the continued defence of an
appeal.”
12.
Judge Bishopp went on at [10] to hold:
“It follows that so much of Mr Cataña’s application
as respects any costs he incurred before the proceedings before the First-tier
Tribunal were brought cannot succeed, irrespective of its underlying merits,
which consequently, I shall not explore.”
13.
The Tribunal’s power to make an order in respect of costs “of and
incidental to” proceedings was also considered in the First-tier Tribunal
decision of G Wilson (Glaziers) Limited v HMRC [2012] UKFTT 387.
14.
In G Wilson the Tribunal analysed the High Court decision of In
re Gibson’s Settlement Trusts, Mellors & Another v Gibson & Others [1981]
Ch. 179 which was a decision in the context of a taxing master under what was
then RSC Order 62. The High Court had considered that the words “incidental to”
extended the ambit of the costs order and had also made observations on how one
might indentify whether certain costs were truly incidental to the proceedings.
Having regard to In re Gibson’s Settlement Trusts the Tribunal at [12]
of its decision rejected HMRC’s contention that costs incurred before
commencement of the appeal proceedings could not be costs incidental to the
appeal proceedings and found that the matters in the applicant’s appeal (being
several VAT default surcharges) :
“…were sufficiently well defined so that all the
costs incurred before commencement of the appeal proceedings do constitute
costs incidental to the appeal proceedings…”.
15.
There is nothing in the decision in Cataña to suggest that the
judge was referred to G Wilson or to Gibson’s Settlement Trusts and
in any event neither of the decisions are binding authority on the
interpretation of the particular legislation relevant here. I think I
must proceed on the basis that Cataña as an Upper Tribunal decision is
binding authority for the proposition that I cannot make an order in relation
to costs incurred before the proceedings before the First-tier Tribunal were
brought.
16.
If I am wrong, and for any reason I am not so bound, I would find, in
line with the approach taken by the Tribunal in G Wilson that the
matters in this appeal were, at the stage of HMRC’s review on 6 July 2010,
sufficiently well defined so that the costs incurred from that point were costs
which were incidental to the appeal proceedings.
HMRC’s conduct
17.
In relation to the issue of the period over which HMRC’s conduct is
relevant this issue was also considered by the Tribunal in G Wilson. I agree with Judge Kempster’s conclusion at [19] that:
“..the words in Rule 10 that are relevant to the
Respondents are “defending or conducting the proceedings”. I conclude that the
actions of the Respondents at a time before there were any proceedings are not
relevant for the purposes of Rule 10.”
18.
This is consistent with the excerpt from Bulkliner at [8] above
which was approved in Cataña but I also take note of the caveat set
out there that behaviour or actions before proceedings commence should
not entirely be disregarded as it might well inform actions that were taken
during proceedings.
Did HMRC act unreasonably in defending or conducting the proceedings?
HMRC independent review
19.
The appellant says a review of evidence should have been carried out in
a much more detailed manner at the independent review stage.
20.
In written submissions the appellant says that as at the point “a
decision was taken to list matters for hearing before the Tribunal” HMRC had
failed to consider all the information available to them at that point.
21.
As HMRC point out it is not up to HMRC to decide to list the matter for
hearing, but rather the appellant’s notification of appeal to the tribunal
which starts proceedings. As discussed above the relevant conduct or acts for
the Tribunal to consider are acts and conduct after such notification.
Nevertheless the fact the appellant has sought to start HMRC’s “conduct clock”
running earlier than the point in time when the Tribunal can consider it for
the purposes of the costs order does not detract from what I understand to be the
appellant’s underlying grievance. This is that HMRC ought to have settled the
matter in advance of receiving the witness statements because, as at the date
the appeal was notified, HMRC had in their possession all the relevant information
that would have enabled them to settle the appeal from the letters and meetings
between the parties that had taken place before.
22.
I do not therefore consider whether HMRC, in not settling at the
independent review stage (which happened prior to the appeal being notified),
amounted to HMRC unreasonably defending or conducting the proceedings. The
earliest acts I may consider, (whether these are framed as HMRC continuing to
defend the appeal, or as an omission in not settling the case sooner) following
from what is said above, are those arising from when the appeal was notified.
23.
I may, having regard to the caveat discussed at [19] nevertheless
consider whether the behaviour before the proceedings informs the actions taken
during the proceedings. However, on the facts of this matter, there does not
appear to me to be anything material in the behaviour of HMRC which informs
actions taken during the proceedings. There is certainly no indication that the
enquiry or amended assessment which gave rise to the appeal were made in bad
faith.
24.
Mr Foxwell referred me to a First-tier Tribunal decision Thomas Maryan
v HMRC [2012] UKFTT 215 (TC) which also considered an application for costs
under Rule 10(1)(b) of the Tribunal Procedure Rules and in particular the
following excerpt from the decision at [110].
“The question, therefore, for the Tribunal is
whether the fact that the disputed decisions giving rise to the Appeal were
flawed constitute on its own unreasonable behaviour within the meaning of rule
10(1)(b) of the 2009 Tribunal Rules. The Tribunal thinks not. The wording of
rule 10(1)(b) is about the conduct of the case before the Tribunal rather than
the quality of the original decision. It is the standard of the handling of the
case not the decision that gives rise to a potential liability for costs under
rule 10(1)(b).”
25.
To the extent the appellant’s case entails a complaint about the quality
of the original decision in this case I would agree that is not relevant not
least, because if as discussed above, conduct before the notice of appeal is
not relevant then the quality of HMRC’s decision before that point in time
cannot therefore be relevant. However, the nub of the appellant’s case as I see
it is about HMRC not taking a decision to settle the case sooner whether that
was at the review stage or at a slightly later point in time once proceedings
had begun. While the underlying subject matter of that issue may overlap with
issues to do with the quality of HMRC’s original decision there cannot in my
view be any dispute that the issues of whether HMRC acted unreasonably in
continuing to defend proceedings or in not settling the matter sooner are
squarely within the remit of “defending or conducting the proceedings” for the
purposes of Tribunal Procedure Rule 10(1)(b).
26.
In relation to the appellant’s argument that there was no new
information I was referred in particular by Mr Fraser to the two meetings that
took place (one on 21 November 2008, at which Mr Langley and Mr Rowe were
present and the other which appears from the documents bundle to have taken
place on 21 April 2009 and which was attended by only the appellant’s
representatives and HMRC). I have also following the hearing reviewed the
bundle of correspondence between the appellant’s representatives and HMRC put
before me.
27.
Although three witness statements were served on HMRC on 22 June 2011 which
HMRC subsequently in its letter of 30 January 2012 letter referred to as
“crucial new evidence”, Mr Foxwell highlighted at the hearing that it was Mr
Langley’s statement in particular which led to the appeal being settled.
28.
Mr Foxwell drew attention to the following matters in Mr Langley’s
witness statement:
(1)
That sponsorship was Mr Langley’s sole responsibility. HMRC had thought
Mr Rowe was the “driving force” in that area.
(2)
The statement provided clear evidence that there had been a verbal
agreement to pay £300,000 for sponsorship.
(3)
The explanation in the statement that the appellant had made a conscious
effort to distance Mr Rowe from dealings between the appellant and the Rugby
Club.
(4)
The fact the written agreement had been drafted without formal legal assistance
although Mr Foxwell conceded this point probably had been mentioned before but
had not been given sufficient weight.
29.
Mr Foxwell thought the explanation given for the way in which the deal
was structured, namely to deal with the uncertainty of the Rugby Club’s move to
new grounds, was reasonable and noted there did not appear to be evidence to challenge
the commerciality of the approach taken.
30.
At the hearing Mr Foxwell described the significance of the witness
statements as altering the weight of different matters and in his written
submissions he accepted that most of the facts were known to HMRC prior to
closing the enquiry. The written submission went on to say that the facts were
given piecemeal at meetings and in various correspondence and that “once
presented as a whole in the witness statement it clarified the position…”.
31.
Mr Fraser emphasised that the appellant disputes the suggestion that the
witness statements raised matters that were not already known to HMRC as of the
outset of the proceedings. The witness statements did not contain “crucial new
evidence”. Mr Fraser said he was at the November meeting and that every
statement in Mr Langley’s witness statement had been made orally at the meeting
or in writing. The witness statement said nothing new and 4 different
inspectors had seen the information. Any fundamental points in Mr Langley’s
statement were already known as at July 2010.
32.
The appellant also says the inspector already knew that monthly
instalment payments of £25,000 had been sent to the Rugby Club and he could
have looked at those to see that from “day 1” that the series of monthly payments
in that amount over the year from the appellant to the Rugby Club would add up
to £300,000.
33.
Mr Foxwell confirmed to me that papers he received in order to produce
the statement of case would have included notes of the November 2008 and April
2009 meetings and all the relevant correspondence between the parties.
Discussion
Impact of the witness statements
34.
In an application of this kind it is not in my view necessary for me to
consider whether it was correct for a party, in this case HMRC, to settle the
matter. Indeed entering onto that terrain would risk pronouncing on the merits
of an appeal which, following settlement is not before the Tribunal. It is
nevertheless clear to me that this was a case where the nature of whether there
was an oral agreement as to the amount of £100,000 paid from the appellant to
the Rugby Club and the contents of any such agreement were to be key issues in
determining the strength or otherwise of the merits of the appeal.
35.
I have considered Mr Langley’s witness statement, those of Mr Rowe and
Ms Flowers, the notes of the various meetings and the subsequent correspondence
between the appellant’s representative and HMRC. I can well see how at a
general level that it would seem from the appellant’s point of view that there
was nothing hugely revelatory in Mr Langley’s witness statements or the other
witness statements, that could not have been apparent from notes of meetings
and correspondence already within HMRC’s knowledge from the time at which
proceedings were begun.
36.
But, to approach the matter simply at the level of whether there was new
information would, in my view, overlook important distinctions between
contentions that parties make, evidence that the parties put forward, and the
likelihood in appraising the merits of a case of whether a Tribunal will make
findings of fact which support the party’s contentions on the basis of the
evidence.
37.
A note of a meeting stating what a person has said, correspondence
between the parties about the meeting, correspondence from a party’s advisor
reporting a party’s contention of fact, and a signed witness statement by their
nature may carry different evidential weight. That a party may assert a
particular fact does not mean a Tribunal will make that finding of fact without
assessing the supporting evidence. A note of what someone has been reported as
saying in a meeting or what their advisor has said they said is going to be
viewed differently to a signed witness statement from that person.
38.
Although at a general level the factual contentions at play may not
have been new, the weight of the evidence that had been put forward to support
those contentions shifted materially when it was confirmed what witnesses the
appellant would be relying on and what they would say in evidence.
39.
The test of whether a party has acted unreasonably does not preclude the
possibility of there being a range of reasonable ways of acting rather than only
one. In a case such as this where an assessment of the strength of oral
evidence was going to be key, I do not consider that a party can be said to
have acted unreasonably in not settling the appeal on the basis of notes of
what had been stated at meetings, or stated in correspondence by
representatives but instead doing so as a result of their appraisal of the
anticipated evidence indicated by the witness statements. It is clear from the
correspondence from HMRC subsequent to the meeting on 21 November 2008 that
despite what had been said by Mr Rowe and Mr Langley at the meeting certain
matters of fact e.g. Mr Rowe’s involvement in the negotiations, were in
dispute.
40.
In relation to the appellant’s argument that it must have been apparent
to HMRC that the sponsorship agreement covered £300,000 because of the series
of £25,000 instalment payments I do not think this helps. In and of itself the fact
instalments were made of £25,000 did not exclude the possibility that some
element of the payment was for a purpose other than a purpose “wholly and
exclusively” for the purposes of the appellant’s trade.
41.
Looking at the meeting notes and correspondence that were available to
HMRC at the time the appeal was notified it does not appear to me that it was
unreasonable for HMRC to have taken the view that the case should continue to
be defended. Once the witness statements were received, that, I think, put a
different complexion on the potential facts that a Tribunal might find.
42.
For instance a statement in a signed witness statement that “Mr Langley
was the only person to be involved” in the negotiations might well be viewed
differently from discussion in a meeting to the effect that it would have been
improper for Mr Rowe to be involved. To the extent meeting notes and subsequent
correspondence between the appellant’s representatives canvassed an oral
agreement or its content that might well carry lesser weight when compared to the
references in the witness statement to there being an agreement albeit an oral
one to pay £100,000 in relation to sponsorship. In his witness statement Mr Langley
states unequivocally that he was not instructed to make the payment by Mr Rowe.
The weight of that is different to that which may be drawn from the records of
meetings and subsequent correspondence.
43.
The evidence given in the witness statements could of course be
challenged in the course of cross examination at a hearing or through putting in
alternative evidence. I do not need to express a view on whether HMRC were
right to have settled on the basis of the witness statements. Equally I do not need
to rule out the possibility that HMRC could have settled the case sooner than
when it received the witness statements. The test is whether HMRC acted
unreasonably and that, as discussed above, admits the possibility of there
being a range of reasonable ways of defending or conducting the proceedings.
44.
In view of the different complexion the witness statements put on the
possible findings of fact a Tribunal might make, I do not consider HMRC acted
unreasonably in defending or conducting the proceedings prior to receiving the
witness statements because they did not settle the appeal before that point in
time.
45.
I ought to mention that in reaching this conclusion I reject HMRC’s
argument to the effect that it was not until the witness statements drew
together matters which it said had been presented in a “piecemeal” fashion that
HMRC was in a position to settle. While it is no doubt a welcome bonus for HMRC
if the evidence the appellant chooses to rely on is draws matters together in a
comprehensive and well structured way for HMRC to consider, that is not the
function of witness statements. Rather it is to be assumed that HMRC will once
proceedings are started review all the relevant material that has been put
before it, something which it will need to do in any event to finalise a
Statement of Case and List of Documents, and will make an ongoing assessment of
whether a case should continue to be defended.
HMRC’s conduct after receiving the witness statements
46.
Mr Foxwell told the Tribunal that he is a “part-year” worker and does
not work in August. The copies of the appellant’s witness statements were not
sent to him until 22 June 2011 and he says it was not possible for him to
consider the statements straightaway, given his other work, and his other commitments
before the tribunals. He decided to leave consideration of the witness
statements until a firm date had been set for the hearing. By 22 September 2011
following a notification from the Tribunal he knew the hearing was to be in 5
months time. In scheduling his work own work he said he decided to leave consideration
of the witness statements until November 2011. Unfortunately in November 2011 he
tore his Achilles tendon and was off from 21 November 2011 to 23 January 2012.
He was initially signed off for 6 weeks, but the period was later extended to 8
weeks and then later again to 10 weeks. Mr Foxwell’s manager had faced the
dilemma of whether it made sense to reallocate the case or await his return. In
the New Year with the hearing fast approaching on 20-21 February 2012, Mr Foxwell’s
manager started to look at the papers. Following Mr Foxwell’s return on 23
January 2012 HMRC informed the appellant on 30 January 2012 that it had decided
not to contest the appeal. Mr Foxwell’s letter of that date apologised for the
fact the witness statements had not been considered sooner. At the hearing of
this application Mr Foxwell accepted that the decision not to settle could have
been taken before 21 September 2011 or in November 2011 before he suffered his
injury.
47.
Mr Foxwell’s handling of the matter looked at in isolation does not appear
to be a particularly unreasonable given competing priorities, his working
arrangements, and an absence due to an unforeseen injury. However, what I must
consider is whether HMRC’s conduct was unreasonable. Also I do not think I
should consider the conduct in isolation but in terms of the impact on the
other party, in this case the appellant, and also on the Tribunal and the overriding
objective of the Tribunal in the Tribunal Procedure Rules to seek to deal with
cases fairly and justly in exercising powers under the Rules.
48.
In my view an approach of waiting until a hearing date has been fixed to
consider the appellant’s witness statements was not a reasonable way for HMRC to
have conducted or defended proceedings.
49.
In common with directions issued in many other cases the Tribunal’s
directions in this case left a period of time in between service of witness
statements and provision of listing information (which information includes the
need to provide time estimates of the hearing). The timetable assumes that
parties will perform some level of consideration of the witness statements that
have been served in order to be able to provide an estimate of the length of
the hearing given that the hearing length will amongst other matters be
affected by the length of time a party anticipates needing for
cross-examination. It might also be expected that parties will consider the
evidence to check that it is not so adverse that there would be no point in
listing the hearing.
50.
The party receiving the statements would in any event want to look at
the statements to see what difference it made to its assessment of the merits
and to see if any applications to adduce further evidence might need to be
made. Absent communications to the contrary the appellant might, as was the
case here, set about making further preparations for taking its case to
hearing.
51.
In listing a matter for hearing the Tribunal will want to know that the
estimate is valid given the amount of evidence in issue. Furthermore, aside
from the administrative resource taken up in fixing a hearing date, there is an
impact on hearing capacity and delays to other appeals and other parties once a
hearing slot is taken up that might otherwise be available. The situation where
a hearing turns out to be listed unnecessarily because there had not been
timely consideration of whether the appeal ought to continue to be defended is
to be avoided.
52.
The witness statements in this case were not particularly lengthy or
complex and it was in my view unreasonable for HMRC not to have organised
itself in such a way that the statements were reviewed within 28 days of
service of the statements there being a 28 day gap provided for in the
Tribunal’s directions between service of witness statements and provision of
listing information.
53.
I should make it clear that I do not mean to single out the conduct of Mr
Foxwell, who in June / July 2011 it appeared was juggling other work priorities
and who by all accounts acted speedily in reviewing the statements on his
return in January 2012 after his absence due to his injury. The unreasonable
conduct arose from HMRC allocating and organising the resources it had to deal
with its appeals workload in such a way that the appraisal of evidence, which was
not overly voluminous or complex did not take place until shortly before the
substantive hearing.
Conclusion
54.
I have accordingly directed that HMRC pay to the appellant the costs of
and incidental to the proceedings which the appellant incurred from 20 July
2011 (being 28 days after the witness statements were sent) in an amount to be
assessed on the standard basis by a costs judge if not agreed.
55.
The appellant’s application for costs is therefore allowed but in
relation to a lesser period than that sought by the appellant.
56.
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.
SWAMI
RAGHAVAN
TRIBUNAL JUDGE
RELEASE DATE: 14 November 2012
