Garde v Customs and Excise [2005] UKVAT V19037 (25 April 2005)

19037

DEFAULT SURCHARGE – Reasonable excuse – Pressure on taxpayer – Alleged blackmail of taxpayer by Inland Revenue – Alleged misfeasance by Court Service – Taxpayer’s time taken in resisting alleged wrongs – Whether reasonable excuse – No – Taxpayer’s wife acting as book-keeper – Taxpayer’s wife’s illness – Whether reasonable excuse – Not after expiration of two accounting periods

DEFAULT SURCHARGE – Legality – Whether Commissioners’ invocation of default surcharge regime violated taxpayer’s Magna Carta rights – No – Appeal dismissed

LONDON TRIBUNAL CENTRE

	ROBIN THOMAS GARDE	Appellant

-	and –

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	STEPHEN OLIVER QC  (Chairman)
						M M HOSSAIN FCA, FCIB 

Sitting in public in London on 6 April 2005

The Appellant in person

Patricia Crinnion for the Respondents

© CROWN COPYRIGHT 2005

DECISION

1.	Mr R T Garde appeals against default surcharge assessments for the five periods 4/03 to 4/04 inclusive.  Essentially, his reason  for appealing is that the State has caused the problems giving rise to his defaults; the State should not be allowed to benefit from the wrongs that it has caused.  To allow the State to benefit by upholding the default surcharge assessments would, Mr Garde argued, result in a violation of the rights conferred on him by the Magna Carta.  Mr Garde’s Notice of Appeal, lodged on 23 June 2004, states that the approximate amount of money in dispute is £1,500.  The grounds of appeal are stated as follows:

“The VAT was late because the Government made my wife ill and she is the one that does the books and I can’t afford to pay someone.  The reason my wife became ill is because of criminal action of HM Inspector of Taxes, the Inland Revenue and the North West Surrey Magistrates Court and no-one should benefit from criminal action. I would also like to point out that HM Customs and Excise have covered this up.”

2.	Mr Garde represented himself.  

3.	The events leading to the defaults included a dispute that he had been having with the Inland Revenue.  Mr Garde did not explain the circumstances of the dispute.  It had, he said, been going on for some seven years.  In the course of the dispute he had, he said, accused the Inland Revenue of blackmailing him into signing something false.  He had, he said, had another problem with the Court staff in the course of criminal proceedings leading to his conviction for an offence of being drunk and disorderly.  The Clerk to the Court had, Mr Garde said, in the year 2000 entered a false date of birth in the court records and on the summons.  Those and other complaints about other matters had, Mr Garde said, been covered up by the authorities and had not been investigated by them.  These led to at least two consequences.  Mr Garde spent a large part of his time pursuing those complaints. So much so that he had become depressed and his health had been affected in other ways.  Moreover, his wife, who had been book-keeper and was responsible for sending out invoices, had become ill in the latter part of 2002; her illness had been aggravated by post-natal depression.

4.	Mr Garde carries on an industrial flooring business as a sole trader.  His wife has looked after the books but not, as Mr Garde admitted, as an experienced book-keeper.  Mr Garde had been in trouble with his bank which, he said, had him “over a barrel”.  His efforts to obtain a loan had been successful but the bank had, without telling him, reduced his overdraft at the same time.  The consequence was that he thought he had more funds available to him than he actually had.  On one occasion he had had to re-mortgage his property to pay off his creditors.

5.	Defaults in the periods 10/02 and 1/03 had been excused.  The Commissioners recognized that Mr Garde’s wife’s illness has a cause for this defaults and recognized the illness as a reasonable excuse.  

6.	Mr Garde said that his wife’s illness was the cause of defaults occurring in periods later than 1/03.  Her illness had resulted in defaults that had not been apparent either to him or to her.  She had got behind in issuing invoices, with a consequent loss to cashflow, and her VAT compliance had not been good.  Mr Garde got shorter and shorter of money.  He was, for example, five months late in paying the £2,896 of tax due for the 1/04 period.  Mr Garde said frankly – “The problem was I had no money.  I had done a job and could not fund it properly.  So I had to re-mortgage my property to pay everyone off”.  He admitted he had “made mistakes” and that he had taken his “eye off the ball”.

7.	That Mr Garde had defaulted (for purposes of VAT Act 1994 section 59(1)) by not paying his tax on time all five periods was not challenged by him.  To the extent that he was relying on the reasonable excuse defence, however, we are unable to see that it has helped him.  By the time for paying the tax for the 4/03 period Mr Garde’s wife had been ill for six months.  The Commissioners have, as already noted, taken her illness into account by allowing the reasonable excuse defence to operate for the two earlier periods.  But we are not persuaded that the defence was available by the end of May 2003.  Mr Garde’s wife may have been ill at the time but by then the consequences should have been apparent to Mr Garde.  The reasonable competent businessman standing in Mr Garde’s shoes should, we think, have made some other arrangements to ensure his VAT compliance.  We use the yardstick of the reasonable competent businessman because that is one of the ingredients of the test of a “reasonable” excuse.

8.	Underlying the defaults has been a shortage of funds.  But section 71 of the VAT Act 1994 specifically excludes an insufficiency of funds from qualifying as a reasonable excuse.  On occasions that shortage may have been caused by late payment on the part of Mr Garde’s own clients.  Late payment is however a foreseeable hazard of the business.  It is only when it is not foreseeable that it can rank as a reasonable excuse.  We heard no evidence about any late payers; thus we cannot take this factor into account in determining whether Mr Garde has proved a reasonable excuse for any of the periods in dispute.

9.	We recognize that Mr Garde has been driven to distraction by what he perceives to have been the wrongs perpetrated on him by the State authorities.  He has developed an unstoppable need to bring the government body to book and obtain some form of recompense or retribution. The problem for us is that we cannot relate those alleged State wrongs to the defaults of 4/03 to 4/04.  No doubt Mr Garde was seriously distracted by his sense of injustice.  But the consequences of those alleged wrongs do not we think provide Mr Garde with a reasonable excuse.

10.	This brings us to Mr Garde’s more fundamental defence which is that the State should not be allowed to benefit from the wrongs that it has caused. The default surcharge regime, it is said, provides the State in the present circumstances with the unwarranted benefit of the default surcharge penalties.  Mr Garde has relied on the Magna Carta, the charter granted by King John in 1215.  Mr Garde did not refer to any particular provisions or chapters in the Magna Carta. He did not have a copy or a transcription with him in Court. We have therefore looked at it as it has been summarized in Jowitt’s Dictionary of English Law, Second Edition.  Nowhere can we find any principle that underlies Mr Garde’s understanding of its message.  

11.	The Magna Carta is a collection of statutes in thirty-seven chapters which are for the most part declaratory of ancient customs.  The first chapter is a confirmation of liberties.  It contains these words:

“We have granted also and given to all the freemen of our realm, for us and our heirs for ever, these liberties, underwritten, to have and to hold to them and their heirs, of us and our heirs for ever.”

The default surcharge regime is wholly contained in an Act of Parliament and is part and parcel of the compliance regime contained in the VAT Act 1994.  To the extent, therefore, that Mr Garde’s rights and liberties have been restricted the restriction has been lawfully effected by Act of Parliament and the rights in the first chapter of the Magna Carta have to that extent been lawfully diminished.

12.	Chapters 2-13 of the Magna Carta have either been repealed or quite obviously have nothing to do with the present issue.  

13.	Chapter 14 was directed at excessive fines and provided that:

“A freeman shall not be amerced for a small fault, but after the manner of the fault, and for a great fault after the greatness thereof, saving to him his contenement; and a merchant likewise, saving to him his merchandise; and any other’s villein than ours shall be likewise amerced, saving his wainage, if he fall into our mercy.  And none of the said amerciaments shall be assessed but by the oath of honest and lawful men of the vicinage.  Earls and barons shall not be amerced but by their peers, and after the manner of their offence.  No man of the church shall be amerced after the quantity of his spiritual benefit, but after his laytenement, and after the quantity of his offence.”

A man’s contenement is that which is absolutely necessary for his support and maintenance, as his tools and instruments of trade; and a wainage is that which is necessary for the labourer and the farmer for the cultivation of his land, as carts and implements of husbandry. The spirit of this chapter has been reproduced in subsequent legislation and in decisions of the courts.  It is found, in among other principles, in the doctrine of “proportionality”.  The question whether the VAT default surcharge regime was proportionate in the sense of going beyond what was strictly necessary was raised before this tribunal in the case of Greengate Furniture Ltd v Customs and Excise Commissioners [2003] V&DR 178.  The tribunal concluded that, in the context of European Community law, the surcharge regime was sufficiently proportionate to be compatible with the basic principles of proportionality recognized and developed by the Court of Justice which in turn reflected the jurisprudence of the European Court of Human Rights. Although it was not specifically Mr Garde’s  contention that the surcharge assessments raised on him were disproportionate, the Greengate’s decision is a tribunal ruling against him on this point.  

14.	There is nothing relevant in chapters 15-28 of the Magna Carta.  Chapter 29 provides that –

“No freeman shall be taken or imprisoned, or be disseised of his freehold, or liberties of free customs, or be outlawed or exiled, or otherwise destroyed; nor will we pass on him, nor condemn him, but by lawful judgments of his peers, or by the law of the land.   To no man will we sell, to no man deny, to no man delay, justice or right.”

In the present circumstances there is a valid right of appeal against a default surcharge.  Mr Garde has exercised this and his hearing has come on within a reasonable time.  We cannot see that there has been any violation of chapter 29.

15.	There were no other relevant chapters of the Magna Carta that, as we read them, substantiate Mr Garde’s case.  

16.	For those reasons we are not satisfied that the action of the Commissioners in any way violates Mr Garde’s rights under the Magna Carta.  He has not shown us any other relevant violation.  For all those reasons, therefore, we dismiss his appeal.

17.	Appeal dismissed.

STEPHEN OLIVER QC
CHAIRMAN

RELEASED: 25 April 2005

LON/04/1054