19767
VAT PROCEDURE: Penalty for alleged breach of directions – Costs order against the Appellants –no breach of directions – no substantive ground to depart from general rule that unsuccessful Appellants should not pay Respondents costs – No order for costs.

LONDON TRIBUNAL CENTRE

	SOUTH HEREFORDSHIRE GOLF CLUB	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal:	MICHAEL TILDESLEY OBE   (Chairman)
					 PAUL ADAMS FCA                    (Member)

Sitting in public in Birmingham on 9, 10, 11, and 12 May 2006

Rupert Baldry Counsel instructed by Dorsey and Whitney, Solicitors, for the Appellant

Peter Mantle Counsel instructed by the Acting Solicitor for HM Revenue & Customs, for the Respondents

SUBSTANTIVE DECISION RELEASED 13 JULY 2006

© CROWN COPYRIGHT 2006

DECISION
Background
1.	The Appellant’s Appeal against compulsory registration for VAT was dismissed. The disputed assessment for unpaid VAT was settled by agreement. The Tribunal decision was released on 13 July 2006. 
2.	The Respondents applied for costs in the event of the dismissal of the substantive Appeal. Respondents’ Counsel contended that the Appellant failed to comply with the directions of the Tribunal in respect of disclosure of documents referring specifically to the directions of Tribunal Chairman, John Clark, released on 19 January 2006. Mr Clark ordered a penalty of £1,000 in the event of non-compliance. Further Counsel complained that the Appellant had carried out “a document dump” just before the hearing.
3.	The Appellant was unable to respond in full to the Respondents’ representations on costs due to time constraints at the end of the hearing. We adjourned our decision about the costs order and the imposition of the penalty in the sum of £1,000 pending written representations from the Appellant.
4.	 We directed the Appellant to submit its written representations to the Tribunal Office with a copy served on the Respondents within 28 days from release of the decision. 
5.	The Appellant submitted written representations on 9August 2006 supported by a bundle of documents. 
6.	No party has requested an oral hearing. We have decided to determine the adjourned matters without a hearing. 
Alleged Contravention of Directions
7.	On 12 January 2006, Tribunal Chairman John Clark ordered:
1)	“that by 4pm on 2 February 2006 the Appellant is to provide the documents and information sought by the Respondents in their letter dated 1 August 2005, stating, where a document requested does not exist, whether it has ever existed and if so, when the Appellant last had it and in what circumstances it left the Appellant’s possession.
2)	that in the event that the Appellant fails to comply with Direction (1) the Appellant shall be liable to a penalty of £1,000 (One Thousand Pounds).
8.	The Appellant supplied the Tribunal with a letter dated 31 January 2006 from its solicitor to the Respondents. Having considered the contents of that letter we are satisfied that the Appellant complied with Mr Clark’s directions of 12 January 2006. Therefore, there are no grounds for imposing the penalty.
Application for Costs
9.	Appellant’s counsel fairly pointed out that the Respondents expressed their intention to apply for costs in their amended statement of case dated 1 July 2005. At the hearing the Respondents applied for costs principally on the ground of “a document dump” just before the substantive hearing. Counsel, however, decided to make submissions on all the potential grounds for a costs order.
10.	The general rule that prevails in the Tribunal was set out in a statement made in Parliament  by the Minister of State, The Hon. Peter Brook MP, recorded in Hansard Vol.102, 24 July 1986 Cols 459 – 460.
11.	The general rule is that the Respondents will not seek costs against unsuccessful Appellants unless:
(1)	The Appeal was exceptional in terms of its complexity and involved large sums of money.
(2)	If a case falls under (1) above did it involve an important general point of law requiring clarification, thus taking it out of (1) above.
(3)	The Appellant misused Tribunal Procedure, for example, bringing a frivolous or vexatious case or failing to appear or not disclosing relevant evidence until the Appeal hearing.
12.	Appellant’s counsel submitted that the Appeal was not exceptional in terms of its complexity and involved large sums of money. We would agree with counsel’s assessment. The disputed issues were relatively straight forward which involved consideration of whether the Appellant met the requirement of an eligible body to gain exemption from VAT. The law was contained in Group 10, Schedule 9 of the VAT Act 1994, and required consideration of three reported cases. Technically the substantive Appeal did not incorporate an assessment for unpaid VAT. However, we are advised that as a result of our decision the Appellant may incur a liability of about £20,000 per annum, which we do not consider to be a large sum of money within the meaning of the Hansard Statement.
13.	Appellant’s counsel pointed out, however, that the Tribunal resolved an important point of law requiring clarification which took out the ground of complexity and large sums of money. The point of law was whether a company limited by guarantee is capable of failing the test of being a “non-profit making organisation” since it does not have members in the narrow sense of shareholders. We resolved the point in law in favour of the Respondents.
14.	The final ground for awarding costs was whether the Appellant misused tribunal procedure. We are satisfied that the Appellant’s Appeal was not self evidently frivolous or vexatious. The Appellant’s appeal about whether its scheme for VAT exemption upon which it received professional advice met the statutory requirements was substantive and proper for airing before the Tribunal. 
15.	The real issue under this ground for awarding costs was whether the Appellant’s late delivery of documents disrupted the hearing and disadvantaged the other party with the presentation of its case. Appellant’s counsel made the following representations:
(1)	Whilst the late delivery of the documents caused inconvenience to the Respondents, it did not cause the Respondents to change its case.
(2)	The Appellant companies did not believe they were required to be registered for VAT and thus did not keep the records as required by VAT legislation. Thus the companies had difficulties in finding the documents requested by the Respondents.
(3)	The Respondents withdrew their offer to prepare the bundles which did not assist the Appellants.
(4)	Although the Respondents complained about the state of the bundles, they did not allege that there were serious omissions from the bundles.
16.	The late delivery of and the number of bundles of documents caused inconvenience to the parties, including Appellant’s counsel, and the Tribunal. However, the Respondents’ case was not materially affected by the late delivery. The additional documents did not introduce fresh evidence. The hearing did not extend beyond the four days listed for the Appeal. In those circumstances we are satisfied that the Appellant did not misuse Tribunal procedure in bringing the Appeal or in its conduct of it.
17.	We find that none of the exceptions apply which justify an award of the Respondents’ costs. We make no order for costs. 

MICHAEL TILDESLEY

CHAIRMAN
RELEASE DATE: 11 September 2006

LON/02/131