BPP University College of Professional Studies Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 September 2014 |
| Neutral Citation | [2014] UKFTT 917 (TC) |
| Date | 25 September 2014 |
| Court | First-tier Tribunal (Tax Chamber) |
[2014] UKFTT 917 (TC)
Judge Timothy Herrington
Mr Sam Grodzinski QC, instructed by Simmons & Simmons LLP appeared for the Appellant
Miss Jessica Simor QC and Mr Sarabjit Singh, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Procedure - Application to lift barring order - Principles to be applied - Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (SI 2009/273), r. 8(5) and (7)(b) - Application dismissed.
The First-tier Tribunal (FTT) has dismissed HMRC's application under the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273) ("the Tribunal Procedure Rules 2009"), r. 8(5) and (7)(b) to lift the barring order issued by the FTT in BPP University College of Professional StudiesTAX[2014] TC 03768 (BPP) finding that there was no obvious error of law in the FTT's decision and as the factual circumstances had not changed since, there was no proper basis on which the barring order ought to be lifted.
HMRC applied pursuant to the Tribunal Procedure Rules 2009, r. 8(5) and 8(7)(b) for the lifting of the bar imposed by the FTT in BPP on the basis that the Tribunal exercised its powers unlawfully (and therefore the strike out decision should be set aside). In the same application, HMRC also applied for permission to appeal to the Upper Tribunal (UT), which permission has been granted.
HMRC's criticisms of the FTT's decision were on the grounds that it involved an unreasonable exercise of the FTT's discretion and was contrary to the overriding objective of dealing with cases fairly and justly. In particular, the FTT had relied upon Mitchell v News Group Newspapers LtdUNK [2013] EWCA Civ 1537 which the later decisions of Denton v TH White LtdUNK [2014] EWCA Civ 906 and Leeds City Council v R & C CommrsVAT[2014] BVC 531 had confirmed was the wrong approach to take in the exercise of a discretionary power to bar or strike out.
The FTT noted that the decision to bar HMRC from participating in further proceedings was made pursuant to the discretionary power in the Tribunal Procedure Rules 2009, r. 8(3)(a) and that r. 8(5) provided the power to reinstate proceedings struck out under r. 8(3)(a). The FTT further confirmed that the Tribunal was required to give effect to the overriding objective in r. 2 (to deal with cases fairly and justly) when considering whether to exercise the discretion under r. 8(5) but that the primary focus of r. 8(5) was to deal with situations where strike out or barring decisions were made without the full participation of a party or where the full circumstances were not before the Tribunal when the decision was made; or where there had been a change of factual circumstances since the relevant decision was made.
The FTT noted that in this case there had been full argument before the Tribunal on the merits of the application to bar with a comprehensive and fully reasoned decision issued and there was no suggestion of a change of the circumstances.
The FTT considered the approach taken by the Tribunal Procedure Rules 2009, r. 41 to reviewing and setting aside a decision on an application for permission to appeal and concluded that the same approach was appropriate in exercising the power to effectively set aside a decision provided by r. 8(5). Accordingly, only where either factual circumstances had changed or where the Tribunal were satisfied that there had been an error of law would it be appropriate to reverse a decision under r. 8(5); and a Tribunal being "satisfied" meant that it had to be obvious that there had been an error of law such that any appeal was bound to succeed. It was not appropriate to set aside a decision merely because it was arguable that the Tribunal had made errors of law; in those circumstances the appropriate course was to grant permission to appeal (as had already been granted).
The FTT concluded that there were no obvious error in the FTT's decision; it was not obvious that a different conclusion would have been reached had the decisions of Leeds City Council and Denton been considered and there was, therefore, no proper basis on which to lift the barring order.
This case considers the application of the Tribunal Procedure Rules 2009, r. 8(5) and 8(7)(b) which provide a power to reinstate proceedings previously struck out and provides useful commentary on the circumstances in which the provision might operate; including, as an example, a case which is struck out following a party's non compliance but which non compliance subsequently transpires to have been due to illness and which circumstances the Tribunal were not aware of when the striking out decision was issued. The FTT, however, found that this was no such case because the merits of the striking out application had been fully argued before the Tribunal at the time and there was no "obvious" error in law in that decision. Permission to appeal to the UT against the barring decision had already been granted and that was the appropriate course to dealing with what were merely arguments that the Tribunal had made errors of law in the relevant decisions.
[1]By a direction released on 1 July 2014 the Tribunal (Judge Mosedale) barred the Respondents ("HMRC") from taking any further part in the proceedings relating to this appeal pursuant to rules 8(7) and (3)(a) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 ("the Rules"). The direction was accompanied by full written reasons for the decision ("the Decision").
[2]The barring order was made following a hearing of an application made by the Appellant ("BPP") in which BPP contended that HMRC had failed to provide further and better particulars of their Statement of Case in sufficient detail to comply with a direction of Judge Hellier to that effect, that direction having specified that failure to comply with it may lead to HMRC being barred from taking further part in the proceedings.
[3]By application dated 25 July 2014 HMRC applied pursuant to rule 8(5) and 8(7)(b) of the Rules to lift the bar on the basis that the Tribunal exercised its powers unlawfully (and therefore the Decision should be set aside) and in any event relief from the barring sanction is in all the circumstances necessary and appropriate.
[4]In the same application HMRC also applied for permission to appeal to the Upper Tribunal against the Decision with the FTT also being invited to undertake a review of its decision under rule 41 of the Rules and set it aside on the grounds that the Decision was erroneous in law.
[5]At the hearing of HMRC's application on 12 September 2014 I indicated that I was minded to grant permission to appeal on the grounds that it was arguable that the Decision disclosed errors of law as to whether the Tribunal applied the correct test in deciding whether or not to exercise its discretion under the Rules to bar HMRC from defending the appeal. Accordingly on 15 September 2014 a decision notice was released to that effect but, as the decision notice records, I decided not to undertake a review of the Decision as I was not satisfied that there was an error of law in the Decision.
[6]I gave an oral decision (with brief reasons) after the hearing on 12 September dismissing HMRC's application to lift the barring order. This document now sets out full findings of fact and reasons for that decision.
[7]Paragraphs 2 to 36 of the Decision set out the background to the substantive appeal and the issues that remain in dispute in the proceedings as well as the events which led BPP to seeking the barring order. I did not take the parties to have any issues concerning the accuracy of the matters stated in those paragraphs and I need not repeat them here.
[8]Judge Mosedale found that HMRC had not complied with the following direction of Judge Hellier released in January 2014:
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 …
[9]Judge Mosedale considered the material provided by HMRC in purported compliance with this Direction. This material was referred to in the Decision as the "Reply".
[10]Judge Mosedale made the following findings in paragraphs 53 and 54 of the Decision:
[53]In my view the Reply (so far as Notes (2) and (3) were concerned) contained no facts at all; and even if the Reply incorporated the letter of 29 November 2012, that letter contained all the facts known to HMRC and failed to identify those on which HMRC relied. One was too much and the other too little. In any event the letter predated the SOC and the Direction: if the letter was an adequate statement of HMRC's position then HMRC should not have agreed to provide the Reply and the Tribunal would not have issued the Unless Order which it did.
[54]I find that the Reply did not comply with the Directions of Judge Hellier. It failed to identify each and every matter on which HMRC intended to rely in support of their argument that the supply of printed matter by LM was "connected with" the supply of education services by Holdings, within the meaning of notes 2 and 3. HMRC were in breach of Judge Hellier's directions.
[11]Judge Mosedale then went on to consider what was the appropriate sanction, if any, in relation to the non-compliance that she had found.
[12]The Appellant sought to justify a barring order as the appropriate sanction, relying on the case of Mitchell v News Group Newspapers LtdUNK ...
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