Eclipse Film Partners No 35 LLP v Revenue and Customs Commissioners
| Jurisdiction | England & Wales |
| Judge | Lord Neuberger,Lord Mance,Lord Sumption,Lord Toulson,Lord Hodge |
| Judgment Date | 11 May 2016 |
| Neutral Citation | [2016] UKSC 24 |
| Date | 11 May 2016 |
| Court | Supreme Court |
[2016] UKSC 24
Lord Neuberger, President
Lord Mance
Lord Sumption
Lord Toulson
Lord Hodge
Appellant
Jolyon Maugham QC Kate Balmer (Instructed by GRM Law)
Respondent
Rajesh Pillai (Instructed by Her Majesty's Revenue & Customs Solicitors Office)
(with whom Lord Mance, Lord Sumption, Lord Toulson and Lord Hodge agree)
The issue raised on this appeal concerns the extent to which the jurisdiction of the First-tier Tribunal to make an order for costs is fettered by the provisions of the Rules regulating the procedure of the Tribunal. Although the Rules in question govern the procedure of the Tax and Chancery Chamber, we were told that our conclusion will apply to the other Chambers of the First-tier Tribunal ("FTT").
Subsections (1) and (2) of section 29 of the Tribunals, Courts and Enforcement Act 2007 provide that the "costs of and incidental to" any proceedings in the FTT "shall be in the discretion of the Tribunal in which the proceedings take place", and that the Tribunal has "full power" to make orders for costs. However, subsection (3) of the same section stipulates that the preceding two subsections "have effect subject to Tribunal Procedure Rules".
The Rules which governed the instant proceedings are the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273) (L1) ("the Rules"). Rule 2 describes the "overriding objective" of the Rules as being to enable the FTT "to deal with cases fairly and justly", which includes dealing with cases proportionately.
Rule 5 is headed "Case management powers" and it is in these terms:
"(1) Subject to the provisions of the 2007 Act and any other enactment, the Tribunal may regulate its own procedure.
(2) The Tribunal may give a direction in relation to the conduct or disposal of proceedings at any time, including a direction amending, suspending or setting aside an earlier direction.
(3) In particular, and without restricting the general powers in paragraphs (1) and (2), the Tribunal may by direction —
…
(i) require a party to produce a bundle for a hearing …"
In addition to sub-paragraph (i), rule 5(3) has eleven other sub-paragraphs, which include powers to (a) extend or shorten time for complying with the Rules, (c) permit or require an amendment, (f) hold a case management hearing, (h) adjourn a hearing, and (k) transfer proceedings to another tribunal.
Rule 10 is headed "Orders for costs". Rule 10(1) is somewhat convoluted, and it is in these terms:
"The Tribunal may only make an order in respect of costs (or, in Scotland, expenses) —
(a) under section 29(4) of the 2007 Act (wasted costs) …;
(b) if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings;
(c) if —
(i) the proceedings have been allocated as a Complex case under Rule 23 (allocation of cases to categories); and
(ii) the taxpayer (or, where more than one party is a taxpayer, one of them) has not sent or delivered a written request to the Tribunal, within 28 days of receiving notice that the case had been allocated as a Complex case, that the proceedings be excluded from potential liability for costs or expenses under this sub-paragraph …"
With one exception, it would therefore appear that, at least under rule 10(1), the FTT can only make two types of costs order. The first is a wasted costs order under sub-para (a), and the other is an order for costs where a party has behaved unreasonably under sub-para (b). The one exception is under sub-para (c), which envisages that there will be no such limitation on the FTT's jurisdiction to award costs if two conditions are satisfied — namely (i) the proceedings are a "Complex case" under Rule 23, and (ii) the taxpayer has not served a request (within the requisite 28-day period) that there should be no potential liability under rule 10(1)(c).
Rule 10(3) sets out how an application for costs under rule 10(1) is to be initiated. Rule 10(4) provides that such an application must be made within 28 days of the FTT's decision disposing of the proceedings. Rule 10(5) forbids the FTT from making an order for costs under rule 10(1) without first giving notice to the potential payer and enabling him to make representations. Rule 10(6) sets out three different ways in which costs under rule 10(1) can be assessed (summary assessment, agreement and normal assessment). Rule 10(7) provides that the sum so assessed can be recovered through proceedings in the County Court or the Costs Office of the High Court.
The only other reference to recovery of costs or expenses to which we were taken to in the Rules is in Rule 16, which is concerned with "Summoning or citation of witnesses and orders to answer questions or produce documents". Rule 16(2)(b) provides that a summons issued by the Tribunal requiring a person to attend proceedings (other than a party to the proceedings) "must … make provision for the person's necessary expenses of attendance to be paid, and state who is to pay them".
Eclipse Film Partners No 35 LLP ("Eclipse") filed a tax return in respect of the period which ended on 5 April 2007. The Revenue issued a closure notice determining that Eclipse did not carry on a trade or business, which, if correct, would have had severely adverse tax consequences for Eclipse. Accordingly, Eclipse appealed to the FTT against the closure notice. The appeal was allocated as a Complex case under Rule 23, and, within the 28-day period specified therein, Eclipse served a request under rule 10(3), that "the proceedings be excluded from potential liability for costs or expenses under" rule 10(1)(c).
Thereafter, Eclipse and the Revenue agreed directions for the procedure leading up to the hearing. The FTT duly made those directions, which included in para 13 a direction that the parties should try and agree an appropriate bundle of documents, which should be prepared by Eclipse, who were to serve three copies on the Revenue and three copies on the FTT. Paragraph 13 of the agreed Directions also provided that, if the parties were unable to agree the Bundle, each party was to prepare its own bundle of documents and serve three copies on the other party and on the FTT.
The parties were unable to agree a Bundle, and there was a hearing before the FTT, at which, among other issues, that problem was discussed. The...
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