South Crescent Trustees Ltd v Revenue and Customs (INCOME TAX - TRIBUNAL PROCEDURE - appeal to Tribunal stayed following parties joint application for Alternative Dispute Resolution stay) [2025] UKFTT 417 (TC) (08 April 2025)

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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> South Crescent Trustees Ltd v Revenue and Customs (INCOME TAX - TRIBUNAL PROCEDURE - appeal to Tribunal stayed following parties joint application for Alternative Dispute Resolution stay) [2025] UKFTT 417 (TC) (08 April 2025) URL: https://www.bailii.org/uk/cases/UKFTT/TC/2025/TC09483.html Cite as: [2025] UKFTT 417 (TC)

DECISION

Introduction

1. In this decision notice I set out my decision in respect of:

– the Respondents application dated 20 December 2024, for an extension of time to file and serve their Statement of Case, and

– the Appellant's application dated 7 January 2025, for the Respondents to be barred from further participation in these proceedings.

Outcome

2. For the reasons set out below:

– the Appellant's application dated 7 January 2025 for the Respondents to be barred is refused, and

– the Respondents application dated 20 December 2024 for an extension of time is allowed.

Background facts

3. On the basis of the documents on the Tribunal file, I find the following facts:

4. The Appellant filed its appeal on 22 December 2023. Due to an IT incident affecting the Tribunal online service, on 6 February 2024, the Tribunal asked the Appellant to re-file its appeal. This appeal was re-filed by the Appellant on 28 February 2024, but not acknowledged and served by the Tribunal until 17 May 2024.

5. On 17 May 2024, the Respondents were directed to file and serve their Statement of Case no later than 16 July 2024 (being 60 days from 17 May 2024).

6. On 2 July 2024, the Respondents sought an extension of 30 days (until 15 August 2024) to the deadline for them to file and serve their Statement of Case. This extension was sought on the basis that the Appellant had applied for ADR, and both parties wished to proceed along that route prior to a Statement of Case being provided. This application was said to be with the consent of the Appellant. The Appellant was copied into the Respondents' email, and no objection from the Appellant was received by the Tribunal.

7. On 14 August 2024, the Appellant notified the Tribunal that the Appellant's application for ADR had been accepted by the Respondents on 31 July 2024. The Appellant filed an application which sought to have the appeal to stayed until:

30 days after the Appellant notifies the Tribunal of the conclusion of the alternative dispute resolution process.

8. That application did not specify a fresh deadline for the Respondents to file their Statement of Case if the ADR was unsuccessful.

9. On 11 September 2024, rather than granting a stay in the form sought by the Appellant, the Tribunal issued Directions which were in the Tribunal's usual form when the parties engage in ADR. These Directions stayed the appeal for a period so the parties could engage in ADR, but also provided a deadline for the Respondents to file their Statement of Case if ADR was unsuccessful. The Tribunal Directions of 11 September 2024 provided a deadline of 2 January 2025 for the Respondents to file and serve their Statement of Case.

10. On 20 December 2024, the Respondents made an application for an extension of 57 days (until 28 February 2025) to file and serve their Statement of Case. The grounds for this application were that the ADR had recently concluded unsuccessfully but the Respondents stated that their counsel and internal clients would not be available over the festive period so the Respondents did not consider that the deadline of 2 January 2025 could be met. The Respondents submitted that it was in the interests of all parties that the Statement of Case addressed all relevant issues raised by the Appellant.

11. On 23 December 2024, the Appellant filed a Notice of Objection to this application. In this objection the Appellant stated that mediation meetings had been paused on 4 November 2024, for the Respondents to file their Statement of Case but that the Appellant agreed to pause the mediation meetings only because the Respondents agreed to file and serve their Statement of Case by 2 January 2025. The Appellant argued that the Respondents had already had sufficient time to file and serve their Statement of Case, and that no extension of time should be granted.

12. This opposed application was not able to be referred to a judge in the few working days remaining prior to 2 January 2025.

13. On 7 January 2025, the Appellant applied for the Respondents to be barred from proceedings due to their failure to file their Statement of Case by 2 January 2025. More detail is set out below but, in this application, the Appellant argued that the Respondents' failure to meet the deadline of 2 January 2025 was:

symptomatic of the Respondents' disregard for proper procedure in their conduct of the case and is sufficiently serious to merit barring the Respondents from continuing to take part in the proceedings.

14. In this application, the Appellant reiterated the points made in its earlier Notice of Objection, and added that the Respondents' failure to have met the 2 January 2025 deadline:

can only be presumed to reflect an assumption that the Tribunal is bound to grant an extension after the fact.

15. The Appellant argued that it was suffering detriment from the delay as the deadline sought by the Respondents (of 28 February 2025) was a year after the appeal had been notified to the Tribunal. The Appellant argued that it would suffer as it was liable for interest on the disputed tax.

16. On 21 January 2025, the Respondents filed their objection to the Appellant's barring application, disputing that any agreement had been reached between the parties about terms or conditions for pausing the mediation. The Respondents also noted the terms of the order previously proposed by the Appellant, and suggested that there was limited prejudice to the Appellant given the early stage of the proceedings and that the Appellant's application appeared:

tactical rather than constructive.

17. On 29 January 2025, both parties were given the option of an oral hearing (which neither accepted) and the opportunity to submit further written submissions (which, again, neither accepted).

18. On 28 February 2025, the Respondents filed and served their Statement of Case.

Decision

19. It is appropriate to begin with consideration of the Appellant's application.

20. In this application the Appellant sets out its understanding that the parties had agreed to pause the mediation so that the Respondents could file and serve its Statement of Case. The Appellant's understanding of why that had been agreed was so that the parties had a clearer understanding of the issues that were in dispute. The Appellant stated (and this is denied by the Respondents) that the mediation was paused on the express understanding that the Respondents would not require more time to file their Statement of Case.

21. The Appellant's application is made under Rule 8(3)(b) and 8(7), which is that the Respondents have failed to co-operate with the Tribunal to such an extent that the Tribunal cannot deal with the proceedings fairly and justly. The Appellant also refers to the over-riding objective.

22. The Appellant sets out that by 2 January 2025, the Respondents had already had ample time to file their Statement of Case. The Appellant also sets out that it does not consider the non-availability of relevant personnel over the festive season to be an acceptable justification for seeking more time, given the Respondents had known since 4 November 2024 that the mediation would be paused. The Appellant also sets out its frustration that the application was not made earlier, and that the Respondents application is for considerably more than the time lost to the festive season.

23. The Appellant argued that the Respondents failure to file their Statement of Case by 2 January 2025 was to its detriment because it further delayed the appeal, and interest would continue to accrue.

24. The Appellant referred to BPP Holdings v HMRC [2017] UKSC 55 and to the comments in McCarthy & Stone (Developments) Limited v HMRC [2014] UKUT 196 (TCC) that the Tribunal should not employ a more relaxed attitude to compliance than that of the higher courts. The Appellant argued that the Respondents should not be treated more favourably than a private organisation.

25. In their response, the Respondents argued that there had been no express agreement that the Respondents would not seek more time, and that the Directions of 11 September 2024 expressly permitted any party to apply for a further direction, which was what had happened when the Respondents had sought an extension of time. The Respondents set out their understanding that they had offered to begin work on the Statement of Case while mediation was ongoing, and that that the Appellant had agreed to that proposal. The Respondents denied that any conditions had been agreed.

26. The Respondents noted that BPP is relevant to the position where there has been an unless order, not to applications under Rule 8(3)(b), and also noted that if the Tribunal had agreed the stay application proposed by the Appellant, and which the Appellant presumably would have been content with, then there would have been no deadline for the Respondents to file their Statement of Case.

27. The Respondents argued that the appeal was still at a very early stage and the Appellant had not suffered material prejudice as a result of the delay. The Respondents also argued that the Appellant had not been deprived of the opportunity to understand or respond to the Respondents case, and there was no compromise to the Appellant's ability to prepare their case.

28. In considering this barring application, I start by reminding myself that barring a party from continuing to participate in these proceedings is a draconian option. If I do consider that there has been a failure to co-operate, I should consider whether there is another remedy, short of barring, which will allow the appeal to be dealt with fairly and justly. I should only bar the Respondents if they have failed to co-operate to such an extent that there is no other measure that would enable the Tribunal to deal with this appeal fairly and justly.

29. The Appellant is correct to argue that my decision must take account of the over-riding objective, which includes:

(a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties;

(b) avoiding unnecessary formality and seeking flexibility in the proceedings;

(d) using any special expertise of the Tribunal effectively; and

(e) avoiding delay, so far as compatible with proper consideration of the issues.

30. The Respondents are correct in noting that the authorities cited by the Appellant relate to Rule 8(3)(a) and the situation where an unless order has been issued. Although not cited by either party, there are reported cases more relevant to consideration of Rule 8(3)(b).

31. The relevant authorities begin with First Class Communications plc v HMRC [2013] UKFTT 90 (TC) where the Appellant sought an order that HMRC be barred under Tribunal Rule 8(3)(b), on the basis that HMRC had failed to co-operate with the Tribunal. Judge Mosedale set out her understanding of when Rule 8(3)(b) could apply, as follows:

52. Firstly, Rule 8(3)(b) could apply where the appellant has already been so prejudiced by HMRC's conduct in a manner which cannot be remedied and that therefore the proceedings cannot be fair and just. In such a case HMRC should normally be barred from the proceedings. Secondly, I consider that Rule 8(3)(b) could apply where there has been a course of conduct by HMRC which, while it has not yet meant it is not possible to deal with the appeal fairly and justly, nevertheless is part of a pattern of conduct which, if it continues, will mean that the appeal cannot be dealt with fairly and justly. In such a case, I consider it might be appropriate to bar HMRC from proceedings.

32. In First Class Communications, Judge Mosedale considered the prejudice which had been caused to that appellant by the proceedings having been inexcusably delayed by HMRC for four months, and concluded:

67. On balance, I do not consider that the delay of four months, albeit caused by HMRC without any excuse being offered, is by itself sufficient to justify barring HMRC, which as I have said, would probably amount to allowing the appeal. I do not in any way wish to suggest that HMRC's conduct is condoned. HMRC's conduct is very serious indeed and on slightly different facts or longer delay might lead to a barring order.

68. The appellant did not claim any other specific prejudice had already been occasioned to it, and so I reject its application to bar HMRC on the basis of prejudice already occasioned to it.

69. However, as I have said Rule 8(3)(b) would, in my view, permit the Tribunal to bar HMRC where HMRC's conduct has been such in the past that, were it to continue, justice could not be done. In this respect, the question is whether HMRC's failings to date are likely to continue.

33. In First Class Communications, Judge Mosedale outlined HMRC's failures in that appeal, describing a pattern of mismanagement including late compliance with directions even when immediate compliance was directed, and late replies to correspondence. Judge Mosedale noted that HMRC's solicitor had since changed and further reassurances had been given by HMRC. Judge Mosedale concluded:

74. I am therefore not satisfied I should bar HMRC on the basis of a pattern of conduct either. Based on the change of personnel and HMRC's reassurances, I do not expect the mishandling of the appeal to continue. If, despite HMRC's reassurances, the failures on HMRC's part do continue, then no doubt the appellant will renew its barring application.

34. In Nutro UK Limited v HMRC [2014] UKFTT 971 (TC), Judge Berner concluded that the appeal before him should be struck out. Judge Berner described the Appellant's behaviour as including a "litany of persistent defaults", including the very delayed production of witness evidence. Judge Berner concluded that those delays were not sufficient by themselves to justify striking out the appeal but that the Tribunal could not deal with the proceedings fairly and justly because of the compounding effect of false statements made by the Appellant's director.

35. The approach taken in XG Concept v HMRC [2017] UKFTT 92 (TC) is similar. The Appellant had breached Tribunal directions on five occasions over five months. However, the compounding factor was the Appellant's failure to attend the strike out application, or oppose that application, which led Judge Rupert Jones to extrapolate that the Appellant's future conduct would be as equally non-compliant, and it was that overall conduct (past and extrapolated future) that meant that the Tribunal could not deal with the proceedings fairly and justly.

36. Applying those principles to the current appeal, the matters which the Appellant rely upon are the Respondents' failure to file their Statement of Case until 28 February 2025, and the Respondents' failure to file their application for an extension of time any earlier than 20 December 2024.

37. I cannot know whether the Respondents could have filed their application for an extension of time at an earlier date. I can see that the Respondents application was made in advance of the Tribunal deadline. The fact that the application was made, and made in advance, suggests that the Respondents understood and respected the appropriate Tribunal procedure. However, when the Tribunal was not able to decide the Respondents application for an extension of time by the original deadline, the Respondents chose not to file their Statement of Case until the extended deadline they had sought. I agree with the Appellant that, when the Respondents realised their application was not going to be decided in time, the Respondents should have attempted to meet the deadline set out in the Directions of 11 September 2024.

38. I do not agree with the Appellant's description of the Respondents failure to file a Statement of Case on 2 January 2025, as being "symptomatic of the Respondents disregard for proper procedure". There are no other incidents which would suggest that the Respondents have a general approach of disregarding proper procedure. There is also nothing to suggest that the Respondents would fail to meet another Tribunal deadline.

39. Like Judge Mosedale, I do not condone a party's failure to meet a Tribunal deadline. But, looking at the Respondents conduct in this appeal, it is far from the four months of unexplained delay in meeting deadlines or in replying to correspondence that was encountered in First Class Communications. The Respondents have not displayed either the "litany of persistent defaults" or the deceit described in Nutro UK Limited v HMRC, and there have not been five breaches in five months, and a failure to respond, as there was in XG Concept. From what has occurred so far there is no reason for me to extrapolate that the Respondents future conduct will deteriorate to anything like the conduct described in any of these authorities (or other appeals concerned with Rule 8(3)(b)).

40. The Appellant has argued that it is prejudiced by delay, and that it is prejudiced because interest continues to accrue. Statutory interest is a measure to ensure that those who pay tax on time are not in a worse position than those who pay tax late. If the Appellant is ultimately unsuccessful in this appeal, I do not accept that having to pay statutory interest puts it in a worse position than a comparable taxpayer who took a commercial decision either to pay the tax in dispute prior to an appeal, or who did not appeal at all. I also do not agree that having to pay interest on overdue tax is so prejudicial that it outweighs the advantage to the Appellant of having the use of the tax in dispute while the appeal persists.

41. I do agree with the Appellant that delay in Tribunal proceedings is prejudicial to both parties, and it should be avoided wherever possible. However, the delay in this case is just under two months. While I accept that the Appellant wishes to have this matter resolved, and that there have also been earlier delays by the Tribunal which must have been deeply frustrating to the Appellant, I do not consider that an additional two months at this stage of proceedings will affect the Tribunal's ability to deal with these proceedings fairly and justly.

42. Considering all of these points, I am not persuaded that the Respondents have failed to co-operate with the Tribunal to such an extent that the Tribunal cannot deal with these proceedings fairly and justly. Having reached that conclusion, I do not need to go on to consider whether there is another remedy, short of barring, that would suffice.

43. For the reasons set out above, the Appellant's application dated 7 January 2025 for the Respondents to be barred is refused.

44. I now consider the Respondents' application dated 20 December 2024 for an extension of time to file their Statement of Case.

45. The basis of that application is that the Respondents argued that they would be unable to meet the deadline of 2 January 2025 due to the festive season and the unavailability of internal clients and their counsel, and so required an extension until 28 February 2025. The festive season is usually considered to have concluded by 2 February, at the latest, and at such an early stage of proceedings there would be many other counsel who could be consulted if one particular counsel was not available. I note that the Statement of Case filed on 28 February 2025 was not settled by counsel, although I accept that does not mean that counsel was not consulted.

46. The Respondents describe this extension of time as a "short extension". The Appellant points out that the extension is of 57 days, almost as long as the 60 days Parliament expects will be sufficient in its entirety to prepare a Statement of Case, and that the proposed extension of 57 days was in addition to the time that had already passed prior to the ADR stay and during the ADR stay.

47. I agree with the Appellant that the Respondents seem to have sought more additional time than was strictly justified. However, given the time that has passed, the limited options available to the Tribunal to deal with breaches of directions if a shorter extension is granted, and in order to begin to progress this appeal again, I have eventually decided (albeit with some reluctance) to retrospectively grant the Respondents an extension of time until 28 February 2025 to file their Statement of Case.

48. For the reasons set out above, the Respondents application dated 20 December 2024 for an extension of time is allowed.

Consequential directions

49. The Tribunal will now issue case management Directions to progress this appeal.

Right to apply for permission to appeal

50. 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.

Release date: 08^th APRIL 2025

First-tier Tribunal (Tax)