BPP Holdings Ltd v Revenue and Customs Commissioners

JurisdictionEngland & Wales
JudgeLord Neuberger,Lord Clarke,Lord Sumption,Lord Reed,Lord Hodge
Judgment Date26 July 2017
Neutral Citation[2017] UKSC 55
Date26 July 2017
CourtSupreme Court
BPP Holdings Ltd and others
(Respondents)
and
Commissioners for Her Majesty's Revenue and Customs
(Appellant)

[2017] UKSC 55

before

Lord Neuberger, President

Lord Clarke

Lord Sumption

Lord Reed

Lord Hodge

THE SUPREME COURT

Trinity Term

On appeal from: [2016] EWCA Civ 121

Appellant

Jessica Simor QC

Nicholas Gibson

(Instructed by HMRC Solicitor's Office)

Respondents

Sam Grodzinski QC

(Instructed by Simmons & Simmons LLP)

Heard on 27 June 2017

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
9

The case comes before this Court as an appeal from the Court of Appeal, but the ultimate issue for us is whether Judge Mosedale's decision to make a debarring order can be justified. Accordingly, it is unnecessary to address all the criticisms of the reasoning of the UT and of the Court of Appeal, which have been raised by Ms Simor QC in her careful argument on behalf of HMRC. In those circumstances, it is right to record that, while, for the reasons given below, we agree with the conclusion reached by the Court of Appeal, we should not be taken as approving all its reasoning.

10

The procedures of the various chambers of the Ft-T are governed by rules, and it is common ground that the relevant rule for present purposes is rule 8 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273). This rule (which appears to be in the rules which apply to at least some of the other chambers of the Ft-T) provides, so far as relevant:

"(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
12

The reasons for Judge Mosedale's decision are self-evidently best appreciated by reading her careful judgment, but it is right to summarise its contents in order to explain our decision on this appeal.

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...

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