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You are here: BAILII >> Databases >> United Kingdom Supreme Court >> BPP Holdings Ltd & Ors v Revenue and Customs [2017] UKSC 55 (26 July 2017) URL: https://www.bailii.org/uk/cases/UKSC/2017/55.html Cite as: [2017] UKSC 55, [2017] BVC 36, [2017] WLR 2945, [2017] STC 1655, [2017] STI 1742, [2017] 4 All ER 756, [2017] 1 WLR 2945 |
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[2017] UKSC 55
On appeal from: [2016] EWCA Civ 121
JUDGMENT
BPP
Holdings Ltd and others (Respondents) v
Commissioners for Her Majesty’s Revenue and Customs (Appellant)
before
Lord Neuberger, President
Lord Clarke
Lord Sumption
Lord Reed
Lord Hodge
JUDGMENT GIVEN ON
26 July 2017
Heard on 27 June 2017
Appellant Jessica Simor QC Nicholas Gibson (Instructed by HMRC Solicitor’s Office) |
|
Respondents Sam Grodzinski QC (Instructed by Simmons & Simmons LLP) |
LORD NEUBERGER: (with whom Lord Clarke, Lord Sumption, Lord Reed and Lord Hodge agree)
1.
The issue ultimately to be determined on this appeal is whether the
First-tier Tribunal (“Ft-T”) was entitled to make an order debarring the
Commissioners for HM Revenue and Customs (“HMRC”) from defending an appeal
concerning liability for VAT brought by three companies in the BPP
Group of
companies (to which, save where it is important to distinguish between those
companies, I shall refer generically as “
BPP”).
The factual and procedural background
2.
Between 1999 and 2006, BPP
Holdings Ltd supplied education and books to
students. Following a corporate rearrangement in 2006, one company,
BPP
Learning Media Ltd, supplied books and another company,
BPP
University College
of Professional Studies Ltd, supplied education.
BPP
took the view that there
were now two separate supplies by separate companies, one of education (which
is standard rated for VAT purposes), and the other of books (which is
zero-rated). Accordingly,
BPP
did not account for VAT on the supplies of books.
However, HMRC did not agree with this and contended that
BPP’s
analysis was
flawed, or in the alternative that the changes made in 2006 represented an
abuse. (The law has been changed by section 75 of the Finance Act 2011).
3.
In November 2012, HMRC issued two VAT assessments, prepared on the basis
that BPP
should have accounted for VAT at the standard rate on the supplies of
books from 2006. Pursuant to a request from
BPP,
HMRC also issued a decision to
that effect on this issue in December 2012, which related to the VAT treatment
of
BPP’s
supplies from 19 July 2011.
4.
In May 2013, BPP
raised appeals to the Tax Chamber of the Ft-T against
the two assessments and the decision. Following directions from the Ft-T, HMRC
served its statement of case on 21 October 2013, which was 14 days late, and
applied for an extension of time, which
BPP
did not oppose. Disclosure was
ordered for 17 December and HMRC provided it a few days late.
5.
Meanwhile, BPP
considered that HMRC should provide further information
of their case, and made a request to that effect on 11 November 2013. After
some written and telephone exchanges between the parties,
BPP
applied to the
Ft-T on 22 November for an order that HMRC supply the information in 14 days
from the making of the order, failing which
BPP’s
substantive appeals should be
allowed. HMRC then offered to supply the information by 31 January 2014, but,
because they would not agree to the sanction sought by
BPP,
there was a hearing
of
BPP’s
application (together with a directions hearing) on 9 January 2014. At
that hearing Judge Hellier made an order which included the following
directions in relation to
BPP’s
application:
“UPON the respondents having agreed to provide by 31 January 2014 replies to each of the questions identified in the appellants’ request for further information dated 11 November 2013;
AND UPON hearing Counsel for the parties, the following Directions are made:
1. If the respondents fail to provide replies to each of the questions identified in the appellants’ request for Further Information by 31 January 2014, the respondents may be barred from taking further part in the proceedings …”
The order also included directions for the future conduct of the appeals including an order for the filing of disclosure statements and lists of documents by 30 April, and a provision for a seven day hearing.
6.
On 31 January 2014, HMRC served a response to BPP’s
request. On 14
March, the same day as it served its response to HMRC’s statement of case,
BPP
issued an application for an order barring HMRC from taking further part in the
proceedings (“a debarring order”) on the ground that the 31 January response
did not in fact reply to “each of the questions identified in [
BPP’s]
request
for further information”.
7.
On 24 April 2014, HMRC informed BPP
that they were withdrawing the two
assessments and therefore conceding two of
BPP’s
three appeals, but, as they
were not withdrawing the decision, the third appeal proceeded. Meanwhile, HMRC
supplied a defective disclosure statement and list of documents some eight days
late on 8 May, and did not apply for an extension of time in that connection
until four weeks later; they subsequently agreed to give a new list of
documents.
8.
BPP
maintained its claim for a debarring order in relation to the
surviving appeal, and its application came before Judge Mosedale on 23 June
2014. In a reserved judgment given on 1 July 2014, Judge Mosedale granted
BPP’s
application and made a debarring order - [2014] UKFTT 644 (TC). Following a
further hearing in July, in a judgment given on 25 September 2014, Judge
Herrington refused HMRC’s application to lift the debarring order, but gave
HMRC permission to appeal against Judge Mosedale’s decision - [2014] UKFTT 917 (TC). That appeal was heard by Judge Bishopp in the Tax and Chancery Chamber of
the Upper Tribunal (“UT”) in October; after a two-day hearing he allowed HMRC’s
appeal for reasons given in a judgment on 3 November 2014 - [2015] STC 415.
Following the grant to
BPP
of permission to appeal against his order, the Court
of Appeal (Moore-Bick V-P, Richards and Ryder LJJ) allowed
BPP’s
appeal and
restored Judge Mosedale’s debarring order for reasons given by Ryder LJ, who is
the Senior President of Tribunals - [2016] 1 WLR 1915.
The issue to be decided
“(1) The proceedings, or the appropriate part of them, will automatically be struck out if the appellant has failed to comply with a direction that stated that failure by a party to comply with the direction would lead to the striking out of the proceedings or that part of them.
…
(3) The Tribunal may strike out the whole or a part of the proceedings if -
(a) the appellant has failed to comply with a direction which stated that failure by the appellant to comply with the direction could lead to the striking out of the proceedings or part of them;
…
(5) If the proceedings, or part of them, have been struck out under paragraph (1) or (3)(a), the appellant may apply for the proceedings, or part of them, to be reinstated.
…
(7) This rule applies to a respondent as it applies to an appellant except that -
(a) a reference to the striking out of the proceedings must be read as a reference to the barring of the respondent from taking further part in the proceedings; and
(b) a reference to an application for the reinstatement of proceedings which have been struck out must be read as a reference to an application for the lifting of the bar on the respondent from taking further part in the proceedings.
…”
11.
It will be noted that by its application of 22 November 2013 BPP
sought
an order which substantially reflected the terms of rule 8(1) read together
with rule 8(7)(a), whereas the order made by Judge Hellier in the Ft-T on 9
January 2014 reflected the terms of rule 8(3)(a) read together with rule
8(7)(a).
The reasoning of Judge Mosedale
13.
In paras 2 to 36 of her judgment, Judge Mosedale set out the facts more
fully than I have done. In the course of doing so, she said in para 22 that HMRC’s
statement of case made hardly any “reference to facts, so far as the third
appeal was concerned”, so it followed that she concluded that BPP’s
request of
11 November 2013 was justified. In paras 33 to 36, she referred to the earlier
failures of HMRC to comply with time limits. In paras 37 to 54 of the judgment
she then addressed the question whether HMRC were in breach of their obligation
to “comply with the Unless order”, ie to provide the further information which
they were recorded as having agreed to provide in the Order of 9 January 2014.
Judge Mosedale concluded that they were. In effect, she said, by the end of
January 2014 hardly any further information had been supplied by HMRC.
14.
Judge Mosedale then turned to consider “the appropriate sanction”. She
analysed the guidance given in the Court of Appeal case of Mitchell v News Group
Newspapers Ltd [2014] 1 WLR 795, which she said had been held to be
applicable by analogy to the Tribunals in the UT decision, Revenue and
Customs Comrs v McCarthy & Stone (Developments) Ltd [2014] UKUT 196 (TCC); [2015] STC 973 and in the Ft-T decision, Compass Contract
Services UK Ltd v Revenue and Customs Comrs [2014] UKFTT 403 (TC). However,
in paras 59 to 60, she accepted the submission on behalf of HMRC that
“[s]trictly” those cases were not in point as they concerned cases where, as in
Mitchell, the order under consideration stated that the party concerned
will be debarred if he did not comply. By contrast, as she said, the order in
this case was that HMRC may be debarred if they did not comply (ie they were
rule 8(1) cases - or their equivalents in the court system - rather than rule
8(3) cases, as in the instant case). In other words, she accepted that HMRC
were not applying to be relieved from a debarring order which had automatically
come into effect as a result of the earlier order: rather BPP
was seeking to
have a debarring order imposed, when such an order had been foreshadowed by the
earlier order.
“[I]n considering whether to grant the appellant’s application to bar HMRC from further participation in this appeal I must consider all relevant factors. I will include in my consideration factors (a) and (b) from CPR 3.9 and accord them significant weight as part of my consideration of the overriding objective to deal with cases fairly and justly.”
CPR 3.9 is a rule which applies in the courts of England and Wales and it provides that, when considering an application for relief from sanctions (such as relief from a debarring order) the court would “consider all the circumstances of the case, so as to enable it to deal justly with the application”, including the need “(a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders”.
16.
In paras 67 to 72, Judge Mosedale then concluded that HMRC had, at least
arguably, finally provided the information required by the unless order in the
skeleton argument prepared by counsel, Mr Singh, for HMRC, “served shortly
before this hearing”, but the fact remained that, until that point, HMRC had
not provided the information ordered. In para 73, she described the “prejudice
to the appellants” as “very clear”, as BPP
had the right to “be put in the
position so that it can properly prepare its case”. In the following paragraph,
she explained that “the real prejudice to the appellant is in the delay” in
that “HMRC’s continued failure to make a proper statement of their case has
delayed the progress of this appeal by about eight months”.
19.
In paras 88 to 90, Judge Mosedale rejected the contention that the
importance of the case to HMRC was a relevant factor: if it was a test case,
they could for instance, concede the appeal, and fight another case, and, even
if it proceeded and HMRC lost, the authority of the decision would be weakened
by the fact that it was unopposed. In paras 91 to 93, she rejected as
irrelevant the contention that the case should be allowed to proceed as the
unfairness of a wrongly adverse decision would mean that it could be relied on
as res judicata by BPP
in relation to every claim, while expressly
leaving open the premise for that contention. In para 94, she rejected as
irrelevant the fact that Judge Hellier had thought it right to make a rule 8(3)
order rather than the rule 8(1) order sought by
BPP.
“There has been unnecessary delay and expense. Tribunal directions have been breached. There is clear prejudice to the appellant in having to wait eight months for a proper statement of HMRC’s case and not barring HMRC would leave the appellant without a remedy for this prejudice. There was no good reason for the delay in stating its case, the failure lasted for a significant period of time, and HMRC were clearly on notice from the first that the appellant did not consider their [statement of case] satisfactory, and clearly on notice from January that a failure to comply might lead to a barring order yet they did not correct the position for another five months. Barring is the appropriate sanction.”
Discussion
23. Secondly, it is said that Judge Mosedale’s reliance on the Court of Appeal’s reasoning in Mitchell was unsound as the reasoning has subsequently been modified by the Court of Appeal in Denton v T H White Ltd [2014] 1 WLR 3926. This inferentially raises an important point in relation to the interpretation and application of the rules of the Ft-T and the UT. The jurisdiction of many of these tribunals is not limited to England and Wales, but extends to the whole of the United Kingdom, and even where that is not so, the applicable rules may be the same in the different jurisdictions. In any event, it is highly desirable, particularly in a field where the law is the same throughout the United Kingdom (as in tax), that tribunals, or at any rate tribunals in the same field, apply the same, or (at least in some cases) even similar, rules in the same way throughout the UK. In these circumstances, all tribunals and appellate courts above the level of the UT should be wary of applying or relying on the procedural jurisprudence of the English and Welsh courts without also taking into account that of the Scottish and Northern Irish courts. As Lord Rodger memorably said in Mucelli v Government of Albania [2009] 1 WLR 276, para 11, in relation to the interpretation of a statute with UK-wide application,
Further, while it would be both unrealistic and undesirable for the tribunals to develop their procedural jurisprudence on any topic without paying close regard to the approach of the courts to that topic, the tribunals have different rules from the courts and sometimes require a slightly different approach to a particular procedural issue.
24. In this case, when considering the proper approach to the making of a debarring order in the Ft-T, the Ft-T, and indeed the UT, the Court of Appeal, and counsel before us, concentrated on recent English cases, particularly Mitchell and Denton, but also Durrant v Chief Constable of Avon and Somerset Constabulary (Practice Note) [2014] 1 WLR 4313. These cases provide a salutary reminder as to the importance that is now attached in all courts and tribunals throughout the UK to observing rules in contentious proceedings generally, but they are directed to, and only strictly applicable to, the courts of England and Wales, save to the extent that the approach in those cases is adopted by the UT, or, even more, by the Court of Appeal when giving guidance to the Ft-T.
26.
It is not for this Court to interfere with the guidance given by the UT
and the Court of Appeal as to the proper approach to be adopted by the Ft-T in
relation to the lifting or imposing of sanctions for failure to comply with
time limits (save in the very unlikely event of such guidance being wrong in
law). We have twice recently affirmed a similar proposition in relation to the
Court of Appeal’s role in relation to the proper approach to be taken in such
cases by first instance judges - see Global Torch Ltd v Apex Global
Management Ltd (No 2) [2014] 1 WLR 4495 and Thevarajah v Riordan
[2016] 1 WLR 76. The guidance given by Judge Sinfield in McCarthy &
Stone was appropriate: as Mr Grodzinski QC, who appeared for BPP
pointed
out, it is “an important function” of the UT to develop guidance so as to
achieve consistency in the Ft-T: see R (Jones) v First-tier Tribunal (Social
Entitlement Chamber) [2013] 2 AC 48, para 41, per Lord Carnwath. And, by
confirming that guidance in this case, the Senior President, with the support
of Moore-Bick V-P and Richards LJ, has very substantially reinforced its
authority. In a nutshell, the cases on time-limits and sanctions in the CPR do
not apply directly, but the Tribunals should generally follow a similar
approach.
“Judge Mosedale did not directly apply the CPR or the subsequent authorities that give guidance on CPR 3.9. She was careful to make it clear that her consideration of the same was limited to whether the guidance contained in them was relevant by analogy to the application of the overriding objective in the tax tribunal rules … Most importantly, she distinguished the guidance before applying a nuanced version of it to the overriding objective in the tax tribunal rules.”
29.
Secondly, in Denton, para 24, the Court of Appeal described the
guidance given in Mitchell as “remain[ing] substantially sound” and
suggested an approach which involved three stages, which it then went on to
expound. The refinements which the Court of Appeal then made to what had been
said in Mitchell were largely clarifications (see paras 26 and 32).
Unless it appears that Judge Mosedale misinterpreted the guidance given in Mitchell,
the decision in Denton would not therefore represent a reason for upsetting
her decision, and I can see no basis for saying that she did misunderstand the
guidance given in Mitchell. Thirdly, it was contended that in her
“Conclusions” in paras 95ff of her judgment, the Judge only considered the
delay caused by HMRC, the lack of explanation or excuse, and the prejudice
caused to BPP.
There was no consideration, it is said, of the disadvantage to
HMRC and the arguably disproportionate benefit to
BPP.
If one confines oneself
to the contents of Judge Mosedale’s “Conclusions” in paras 95 to 101 of her
judgment, that point has force. However, it seems to me that that involves an
unrealistic approach to the judgment. In the preceding 28 paragraphs, Judge
Mosedale considered all the relevant factors, and it appears to me to be
fanciful to suggest that she did not take them into account when reaching her
conclusion. The worst that can be said in this connection is that the Judge
should have said in terms in her “Conclusions” that she had taken all the
matters she had discussed in paras 67 to 94 into account, but in my view it is
clear that she did so: otherwise, one may rhetorically ask, why did she bother
to consider those other matters, and so carefully.
31.
Fifthly, Ms Simor argued that it was disproportionate of BPP
to have
sought a debarring order in the present case rather than proceeding to a
hearing in accordance with Judge Hellier’s directions. She pointed to the fact
that, had
BPP
taken that course, the issue raised by its substantive appeal
could well have been determined by the time the present appeal came on for hearing
in the Supreme Court. That is true, but it is a point which can only be made
because HMRC chose to challenge the decision of Judge Mosedale to make a
debarring order that these proceedings have lasted beyond 1 July 2014. More
importantly, the order made on 9 January 2014 specifically envisaged a
debarring order being made unless HMRC complied with their disclosure
obligation recited in the order by 31 January, and it is not suggested that it
was somehow culpable or unfair for
BPP
to have allowed some six weeks to elapse
after that date before applying for a debarring order.
32.
Sixthly, it was pointed out that a debarring order represents an
unjustified windfall for BPP.
It is true that the debarring order will either
improve
BPP’s
prospects of success in the substantive surviving appeal (if the
appeal goes ahead unopposed) or result in
BPP
succeeding on the appeal when it
might not otherwise have done so (if HMRC concede the appeal). However, that
point can always be made by a party facing a debarring order, and to give the
point any weight, save perhaps in exceptional circumstances, would appear to me
to undermine the utility of the sanction of a debarring order. I can see no
exceptional circumstances in the instant case.
33. Finally, it was said that, bearing in mind all the circumstances, a debarring order was outside the scope of what a reasonable judge in the position of Judge Mosedale could have ordered, even if she made no specific errors. I accept that the decision to make a debarring order against HMRC was tough, and I also accept that some Ft-T judges may not have made that decision. However, the issue whether to make a debarring order on certain facts is very much one for the tribunal making that decision, and an appellate judge should only interfere where the decision is not merely different from that which the appellate judge would have made, but is a decision which the appellate judge considers cannot be justified. In the words of Lawrence Collins LJ in Walbrook Trustee (Jersey) Ltd v Fattal [2008] EWCA Civ 427, para 33:
“[A]n appellate court should not interfere with case management decisions by a judge who has applied the correct principles and who has taken into account matters which should be taken into account and left out of account matters which are irrelevant, unless the court is satisfied that the decision is so plainly wrong that it must be regarded as outside the generous ambit of the discretion entrusted to the judge.”
In other words, before they can interfere, appellate judges must not merely disagree with the decision: they must consider that is unjustifiable. HMRC cannot in my view cross that high hurdle in this case.
34.
That is not to say that an appellate tribunal cannot interfere in a case
where a debarring order has been imposed or confirmed. The decision to impose a
debarring order (unlike case management decisions of a more routine nature) can
often have the effect of determining the substantive case. Further, as already
mentioned in para 27 above, an important function of the UT and the Court of
Appeal is to ensure a degree of consistency of approach among Ft-T judges. In
the context of court decisions, this concern was plainly in the mind of the
Court of Appeal in Mitchell and Denton. There must be a limit to
the permissible harshness (or indeed the permissible generosity) of a decision
relating to the imposition or confirmation (or discharge) of a debarring order.
It may well be that this case is not far from that limit (a view which
obviously draws support from Judge Bishopp’s careful judgment in the UT).
However, I do not consider that it was on the wrong side of the line, given the
combination of the nature and extent of HMRC’s failure to reply to BPP’s
request, the length of the delay in rectifying the failure and the length of
the consequential delay to the proceedings, the absence of any remedy to
compensate
BPP for the delay, and the absence of any explanation or excuse for
the failure, coupled with the existence of other failures by HMRC to comply
with directions.
Conclusion
36. However, for the reasons I have given, HMRC’s appeal must be dismissed.