Botleigh Grange Hotel Ltd v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Kitchin,Lady Justice Asplin,Lord Justice Henderson |
| Judgment Date | 09 May 2018 |
| Neutral Citation | [2018] EWCA Civ 1032 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2016/4397/CHBKF |
| Date | 09 May 2018 |
[2018] EWCA Civ 1032
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr Andrew Simmonds QC sitting as a Deputy High Court Judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Kitchin
Lord Justice Henderson
and
Lady Justice Asplin
Case No: A2/2016/4397/CHBKF
( Tarlochan Lall through Direct Access) for the Appellant
( Tiran Nersessian instructed by HMRC Solicitors' Office and Legal Service) for the Respondent
Hearing date: 25 th April 2018
Judgment Approved
The single remaining issue on this appeal is the proper construction of a consent order and, therefore, whether a cross claim upon which the Appellant relies has been preserved. The Appellant, Botleigh Grange Hotel Limited (the “Company”), says that Andrew Simmonds QC, sitting as a Deputy High Court Judge in the Chancery Division, wrongly construed a consent order and, accordingly, was wrong to dismiss the application to restrain presentation and advertisement of a winding up petition which was before him. It is no longer argued that it was not open to the court on such an application to determine the merits of the underlying dispute in relation to the petition debt or an alleged cross claim rather than merely to decide whether the debt was the subject of a genuine and substantial dispute or was subject to a cross claim which was genuine and of substance, that an incorrect test was applied or that there was other evidence which would have been relevant to the task of construction.
I take the essential facts from the Judge's judgment. The Company carries on business running a hotel outside Southampton and a number of coffee shops. A winding up petition was presented by the Respondent, Her Majesty's Revenue and Customs, (“HMRC”) on 28 January 2014 based on a debt of £224,164 in respect of unpaid National Insurance contributions, PAYE, Corporation Tax and VAT (the “First Winding Up Petition”). The First Winding Up Petition was amended in January 2015 and after the deletion of some items and the addition of others, the petition debt amounted to £313,447 odd. Unaware that the First Winding Up Petition had been presented, in February 2014, the Company applied to restrain presentation. That application was subsequently continued as one to restrain advertisement and dismiss the petition on the grounds that the debt was disputed. A large amount of evidence having been filed, the application was heard before Stuart Isaacs QC, sitting as a Deputy Judge of the Chancery Division on 22 January 2016.
Before judgment was handed down, settlement discussions took place. They are described succinctly by the Judge at paragraphs [6] – [11] of his judgment. There is no dispute in relation to the way in which the discussions are described and, therefore, it is convenient to set out those paragraphs as follows:
“6… . This started with a letter dated 28 th January this year from HMRC to the Company's then solicitors, Shakespeare Martineau LLP, and the relevant parts of that letter went as follows:
“I write following receipt of an email from Mr. Doherty dated 27 th January 2016, forwarded to me by Mr. Donnelly.”
Just pausing there, that should be a reference to Mr. O'Doherty, who is a director of the Company. The email referred to does not appear to survive. The letter continued:
“I can now confirm that HMRC have reviewed the recent s.458 claim submitted on behalf of the Company in respect of the written-off director's loan account and agree a reclaim amount in the sum of £159,974 plus accrued interest of £994.91. This credit will be offset in priority against the outstanding Corporation Tax arrears included within HMRC petition number 672 of 2014, as amended, and reduce the PAYE arrears also listed within the petition. Charges included within the petition reduce to nil.” Then it set out what those charges were and continued: “The balance will be utilised in reducing PAYE, NIC and student loan arrears for 2013/2014. Although the allocation of the credit has yet to be actioned the above represents the instruction I have provided to the Corporation Tax Officer reviewing the case. Taking into account the above, the balance of the petition debt outstanding amounts to £152,478.87. Upon receipt of CHAPS confirmation of payment in cleared funds received HMRC's solicitors will make the court aware of the settlement position and immediately seek dismissal of the petition with an order for costs.”
That last reference I think is clearly to an order for costs in favour of HMRC. By a matter of simple arithmetic, it will be seen that the total of the two amounts together, the s.458 reclaim capital plus interest was £160,968.91.
7. That letter was acknowledged by an email sent by Shakespeare Martineau the next day, 29 th January, at 14.34. This acknowledged receipt and replied as follows:
“Further to our earlier email as requested we acknowledge receipt of your facsimile transmission and are pleased to see that the s.458 claim has been agreed. However, the allocation of the relevant monies remains in issue. It ought properly to be allocated to undisputed elements of the petition debt and not to disputed elements. Accordingly, we must reserve our client's position in this regard.”
8. The “relevant monies” in that email in my judgment is clearly a reference to the £160,968 reclaim amount, even though that was, of course, a credit being allowed by HMRC rather than a payment made by the Company. I consider that to be clear, firstly, from the reference to the s.458 claim in the first paragraph of the email and, secondly, the fact that HMRC's letter was concerned to set out in detail the “allocation” of that credit. Mr. Nersessian, for HMRC, suggested that the relevant monies in the context of that email were the £140,500 payment to which I have already referred. I do not accept that. There is no reference to that sum in The Revenue's letter of 28 th January.
9. This was followed by a letter dated 2 nd February from HMRC. It is stated to be without prejudice but nobody has raised any objection to my considering it. It stated as follows:
“I write with reference to the above company and the schedule produced by UHY and exhibited to the witness statement of Mr. O'Doherty dated 21 st January.”
Pausing there, that is a reference to a schedule produced by UHY Hacker Young, the Company's accountants, for the purposes of the hearing before Mr. Isaacs. The schedule, which I have seen, asserted that many of the charges included in the first petition had been paid by the Company and it referred in terms to the £140,500 payment. The letter continued:
“Within the UHY schedule it is indicated that many of the PAYE charges have been paid. Unfortunately, no information has been provided as to the specific payments that it is claimed clear the charge due. For example, I would need precise details of the payment intended to clear the charge together with details of the allocation instruction submitted along with the payment when it was made.”
The next paragraph:
“I have attached for your information details of the payments received from the Company for the 2011/2012 to 2013/2014 periods and the allocation of these payments. If the Company has made payments in addition to these I can investigate the matter further if I am provided with full details of the payment. If full details are not provided I can only assume that your client is attempting to reopen points that have already been debunked in HMRC's witness statements.”
10. There has been some debate before me about whether the statements made in that letter were justified or not. It seems to me that the only thing that really matters is that it is clear from the two paragraphs I have just read that the Company's case in the first petition, based on payments including the £140,500 payment, remained disputed by HMRC.
11. There was no response to that letter until a letter was sent by Shakespeare Martineau to HMRC on 17 th February. That was headed “Without Prejudice Save as to Costs” and as it is an important letter I should read all of it.
“We refer to your letter of 2 nd February. As you are aware, our client disputes the petition debt and is confident the judge will find in its favour when judgment is handed down on 23 rd February 2016. In such circumstances, our client will seek to recover costs. Notwithstanding, we are instructed that our client is prepared to pay the full amount of the petition debt, £152,478.87, on the basis that HMRC consent to the petition being dismissed and that each party pays their own costs in respect of the petition. For the avoidance of any doubt, the petition remains disputed and our client reserves its rights in this regard. We anticipate being in funds to pay the entire petition by close of business on Friday, 19 th February. Please confirm your acceptance to our client's proposal and we will prepare a short settlement letter and notify the judge that settlement has, in principle, been agreed.”
It will be noted, of course, that the figure of £152,478.87 stated to be the full amount of the petition debt is the same figure referred to towards the end of HMRC's letter of 28 th January. I have not been referred to any response from HMRC to this letter and I proceed on the basis that there was none. In fact, as indicated in the letter, the balancing payment was made by the Company on 19 th February.”
On 23 February 2016 a consent order was made, having been approved by Mr Isaacs QC (the “Consent Order”). The first recital to the Consent Order sets out the fact that HMRC had presented the First Winding Up Petition on 28 January 2014 and the second recital explained the nature of the application which had been heard by Mr Isaacs QC, namely that it had...
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