Atec Associates Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 24 October 2016 |
| Neutral Citation | [2016] UKFTT 713 (TC) |
| Date | 24 October 2016 |
| Court | First-tier Tribunal (Tax Chamber) |
Judge Guy Brannan
Renée Kalia appeared for the appellant
Howard Watkinson, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax – Application by HMRC to strike out appeal – Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 8(3)(b) – Whether appellant company had failed to co-operate with the tribunal to such an extent that the tribunal cannot deal with the proceedings fairly and justly – HMRC's application refused.
The First-tier Tribunal (FTT) dismissed HMRC's application for the strike out of an appeal, because the FTT decided that it could still deal with the proceedings fairly and justly.
HMRC applied to strike out Atec's appeal under Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273), r. 8(3)(b) (“the Rules”), on the basis that Atec had failed to co-operate with the FTT to such an extent that the FTT cannot deal with the proceedings fairly and justly.
The dispute concerned alleged missing trader intra-Community (MTIC) fraud. HMRC rejected Atec's claims for repayment of input tax for periods 04/06, 05/06, 06/06 and 07/06 of more than £7m. The appeal had already been struck out twice, but then reinstated. This is yet another dispute concerning MTIC fraud, so much of the information is not of general interest and thus a detailed headnote has not been prepared.
The FTT assured Atec that a failure to cross-examine a witness of fact, in relation to an opinion expressed by that witness, did not mean that the Atec would be treated as having accepted that opinion. Then Atec confirmed that it did not require any HMRC witness to attend for cross-examination. The FTT was satisfied that Atec understood that assurance (para. 31 to 37 of the decision).
The FTT noted that, in R & C Commrs v Fairford Group plc (in liquidation) VAT[2014] BVC 529, the Upper Tribunal held that, if an appellant serves no evidence challenging the evidence of HMRC's witnesses, then their evidence can be given, and will be accepted by the FTT. This avoids numerous witnesses being called unnecessarily
Later Atec reversed its position, and proposed to cross-examine some of HMRC's witnesses (para. 67 of the decision). The FTT said that the logistical difficulties caused by this change of heart jeopardised the hearing of the appeal within the allotted time, so it was hard to avoid the conclusion that Atec was, at best, indifferent as to whether the hearing schedule was disrupted (para. 99 of the decision). The FTT considered whether this erratic behaviour justified striking out the appeal under r. 8(3)(b).
The FTT held that, in exercising its discretion under r. 8(3)(b), it must take account of all relevant circumstances. In so doing, it should take account of the history of the appeal and, in the light of that history, the likely conduct of the appeal in future. Also, it must take account of the overriding objective of dealing with cases fairly and justly.
The FTT decided not to strike out the appeal, as that would be disproportionate. However, the FTT directed that Atec should not be permitted to cross-examine certain of HMRC's witnesses, being witnesses in relation to defaulters and contra-traders (para. 108 and 109 of the decision).
This appeal had already been struck out (and then reinstated) twice, but some of Atec's failures in dealing with the appeal had apparently arisen because it had not been professionally represented. Atec was self-represented and claimed that HMRC had been overburdening and confusing it. The FTT was conscious of the severe consequences of a strike-out. An appeal should not be struck out merely for good housekeeping purposes or out of a preoccupation with tidiness. It is a draconian remedy, sometimes referred as an “atomic weapon in the judicial armoury”.
[1] This decision relates to an application by the Respondents in this appeal (“HMRC”) to strike out the appeal under rule 8(3)(b) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (“the Rules”) on the basis that the appellant, Atec Associates Limited (“Atec”), has failed to cooperate with the Tribunal to such an extent that the Tribunal cannot deal with the proceedings fairly and justly. In addition, this decision also deals with seven applications made by Atec, which I will set out in more detail later in this decision.
[2] At a hearing on 9 March 2015, I gave an oral decision to refuse the application to strike out this appeal. Instead, I directed inter alia:
The Respondents' witnesses listed in Schedule A to the Respondents' application for the hearing dated 30 January 2015 will not be required to attend the hearing either to give evidence-in-chief or for cross-examination and the Tribunal will accept the evidence contained in their witness statements.
[3] I now set out my reasons for my decision and directions. I also refused all but one of Atec's applications, giving brief reasons, which I now record.
[4] This appeal concerns what is commonly known as alleged MTIC trading. The appeal relates to the denial by HMRC of Atec's claims for repayment of input tax for periods 04/06, 05/06, 06/06 and 07/06. In total, HMRC have denied claims for repayment of input tax in excess of £7 million. The appeal was originally consolidated with an appeal by an associated company, Wireless 5 Ltd, and an appeal by Atec in relation to periods in 2010 but those appeals have now been withdrawn.
[5] The hearing of this appeal was originally set down for a period of six weeks commencing 9 March 2015. As will be apparent from the hearing dates in respect of the applications before me, the hearing of the substantive appeal was necessarily be delayed by these applications and the events leading up to them.
[6] Although at various times in the past Atec has been legally represented, it is now a self-representing appellant. In the three hearings before me, to which I will refer in more detail below, Atec was represented by Ms Kalia, the sister of Atec's director and main shareholder.
[7] This appeal has the distinction of already having been struck out (and then reinstated) twice.
[8] The appeal was first struck out by Sir Stephen Oliver QC ([2009] TC 00133) but was then reinstated by Briggs J (as he then was) sitting as a judge of the Upper Tribunal ([2010] BVC 1,526). A full description of the background can be found in those judgments. Sir Stephen Oliver QC struck out the appeal on 10 November 2008 on the basis that Atec:
1) had served its list of documents 12 months late;
2) had served its list of documents 12 months late;
3) had not complied with the directions of the Tribunal over a long period of time and had failed to attend hearings;
4) had been guilty of inordinate and inexcusable delay.
[9] Briggs J reinstated the appeal noting that Atec's appeal had been handled (or, more appropriately, allegedly mis-handled) by a Mr Paul Ross, Atec's accountant and one-time company secretary. Mr Ross appears, so it was said, to have been responsible for the many procedural defaults by Atec and that the directors of Atec were unaware of the extent of Mr Ross' mis-handling of the appeal (although Briggs J criticised the directors for not keeping a closer eye on Mr Ross' conduct of the appeal). Briggs J described Atec's conduct of the appeal as “lamentable”. After weighing up the relevant factors, Briggs J, in a decision delivered on 27 May 2010, concluded “on a narrow balance” that fairness and justice and the overriding objective required that the appeal should be reinstated.
[10] In reinstating Atec's appeal, Briggs J ordered Atec to pay HMRC's wasted costs on an indemnity basis. However, these costs had still not been paid by 30 September 2011.
[11] Accordingly, following an application by HMRC for the payment of its costs, Judge Cornwell-Kelly made an “unless” order for the payment of those costs on 30 September 2011 noting that Atec's “conduct of matters in the past is poor and it is important that there should be no return to the unjustified delay which has already been seen and which makes it increasingly difficult to do justice in the matter.”
[12] Atec failed to comply with agreed directions approved by Judge Poole on 14 May 2013 – the failure related to the agreement for the service of evidence by 10 August 2013.
[13] Judge Sinfield then issued an “unless” order against Atec and Atec then served witness statements on 6 and 19 September 2013, but failed to serve the exhibits to those witness statements within the required time. Atec also failed to comply with other directions and accordingly, for the second time, Atec's appeal was struck out on 20 September 2013.
[14] Atec applied for reinstatement of its appeal and the matter came before Judge Mosedale. Judge Mosedale reinstated the appeal on 28 March 2014 stating:
...HMRC also contend, and I find, that the appellants have a history of non-compliance, have often failed to act reasonably promptly in progressing proceedings and [this] appeal … has already been struck out … While I agree that I should take this into account when considering whether to reinstate, I also take into account that (a) the appeal is very complex and the appellant's are unrepresented and it was reasonable to seek legal advice before complying with directions 7 & 8, (b) the new directions were issued following the hearing on eight January which applied in substitution (and without prejudice to the application for reinstatement) and required the appellant by 3 March 2014 to state which witnesses' evidence was in dispute and comply with direction 8. I note that the appellant complied immediately before the deadline. There is reason to think the appellants have learnt to understand the importance of compliance with directions; and (c) the appellants have generally complied with the new directions …
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