Glencore Energy UK Ltd v Revenue and Customs Commissioners
| Jurisdiction | England & Wales |
| Judgment Date | 29 June 2017 |
| Neutral Citation | [2017] EWHC 1476 (Admin) |
| Date | 29 June 2017 |
| Court | Queen's Bench Division (Administrative Court) |
[2017] EWHC 1476 (Admin)
High Court (Queen's Bench Division)
Mr Justice Green
Sam Grodzinski QC, James Henderson and James Segan (instructed by Freshfields Bruckhaus Deringer LLP) appeared for the claimant
Timothy Brennan QC and Georgia Hicks (instructed by the General Counsel and Solicitor to HMRC) appeared for the defendant
Permission to apply for judicial review – Diverted profits tax (DPT) – Charging notice – Should claimant be required to pursue statutory review procedure before or instead of being permitted to apply for judicial review – Yes – FA 2015, s. 101, 102; Senior Courts Act 1981, s. 31(3C) – Permission refused.
The High Court (HC) held that the statutory review process provided under FA 2015, s. 101 and the appeal remedy under FA 2015, s. 102 for disputing a DPT charging notice provided a perfectly adequate and appropriate alternative remedy to judicial review for all the grounds on which the claimant sought judicial review, and so permission to apply for judicial review was refused. Nor would the outcome have been substantially different for the claimant if the conduct complained of had not occurred, so there were no grounds for granting permission under the Senior Courts Act 1981, s. 31(3C), (3D).
Glencore Energy (“the claimant”) had been served a charging notice under FA 2015, s. 95 to diverted profits tax. The claimant sought permission to apply for judicial review with respect to the notice on four grounds. Three of these asserted that HMRC's “designated officer” had failed to act as the statute required (including failure to take account of the claimant's representations as to its liability to DPT in the first place) and the fourth asserted that the calculation of DPT due was irrational.
Judicial review was a remedy of last resort, which required the parties to exhaust any effective and appropriate alternative remedy before seeking permission to apply for judicial review. The HC held that the statutory procedure under which an HMRC “designated officer” was obliged under FA 2015, s. 101 to carry out a review of the amount of DPT charged on the taxpayer, and the statutory right of appeal that the company had under FA 2015, s. 102 should the result of that review constitute an unsatisfactory outcome for the taxpayer, provided a comprehensive, two-stage, dispute-resolution mechanism. This facilitated and encouraged negotiation between the taxpayer and HMRC and, in the event of an unproductive outcome, allowed for an appeal by the taxpayer to a specialist tribunal. Stripped of their public-law “outer garments”, the true substance of the taxpayer's proposed grounds for judicial review were “the meat and drink” of the statutory review and appeal procedure. The review procedure was still under way.
The s. 101 procedure was a form of mandatory mediation that Parliament had imposed as a precondition for litigation. Although the wording of FA 2015, s. 101(1)(a) referred only to a review of the amount of DPT charged, properly interpreted in the light of its Parliamentary purpose, it included a duty on the part of HMRC to consider liability issues also. Moreover, HMRC and the claimant were already engaged in a reconsideration of the disputed issues and HMRC had accepted that if the claimant produced satisfactory evidence, it would amend or revoke the charging notice.
On all these grounds, permission to apply for judicial review would be refused.
HMRC had raised the issue pertaining to the Senior Courts Act 1981, s. 31(3C), (3D). This provided that if a defendant asked it to do so, the HC must consider whether the outcome for the applicant for judicial review would have been substantially different if the conduct complained of had not occurred. If the HC decides that question in the negative, it must refuse to grant permission to apply for judicial review.
Although it was not strictly necessary to consider this question, given the conclusion on alternative remedy, permission would also be refused on these grounds.
This is one of the first cases on DPT to come before the courts, albeit on grounds of public law. The judge gave a fairly robust approval of the review procedure under FA 2015, s. 101 as comprehensive and time-limited (one of the claimant's grounds for judicial review was what it regarded as an intolerably long time before it could appeal). However, the judgment involved a purposive construction of FA 2015, s. 101(1)(a) to include the liability issue as one that the HMRC review had to consider. Even here, it could be argued that, even if the review had to limit itself to the correct amount of DPT due, that correct amount could be zero.
It remains a basic principle that application for judicial review is a last resort, and that if an alternative and adequate remedy exists, that should be exhausted first.
There was an immediate application to the same judge to grant leave to appeal against his judgment to the Court of Appeal, which was refused (see Glencore Energy UK Ltd v R & C Commrs [2017] BTC 21).
[1] The present application concerns a narrow issue: should the Claimant (“the Claimant” or “GENUK”) be required to pursue alternative remedies before or instead of being permitted to apply for judicial review? The Defendant (HMRC) has issued a notice (a “Charging Notice”) to the Claimant, purportedly in accordance with section 95 Finance Act 2015 (“FA 2015”), imposing a charge for Diverted Profits Tax (“DPT”) for £21,129,349 plus interest of £218,221.14 in relation to the nine month accounting period of 1st April 2015 to 31st December 2015.
[2] Pursuant to sections 101 and 102 FA 2015, where a Charging Notice is issued to a company for an accounting period, a designated HMRC officer (the “Designated Officer”) is under a duty (“must”) to carry out a review of the amount of diverted profits tax charged on the company for the accounting period and such officer is empowered (“may”) to carry out more than one such review. If the review does not lead to an outcome satisfactory to the taxpayer, then a person to whom a Charging Notice is issued may appeal against the Notice. It follows that, in principle, the Claimant in the present case is now entitled to enter into the review process contemplated by section 101 FA 2015; and if this produces a result which is considered to be unsatisfactory, it has a right of statutory appeal under section 102 FA 2015 to a First-tier Tribunal (“FtT”), which may confirm, amend or cancel the Charging Notice or any supplementary Charging Notice.
[3] The Claimant now seeks judicial review upon the basis:
- that the Designated Officer in the Charging Notice applied a test which is not in accordance with relevant statutory requirements;
- that the Designated Officer failed to take account of the Claimant's representations;
- that the Designated Officer failed to give any or any adequate reasons for the calculation of DPT; and,
- that the calculation of DPT is, in any event, irrational.
[4] HMRC (which bears legal responsibility for the conduct and decisions of the Designated Officer) disputes these allegations both as to their substance but also as to their materiality. HMRC also contends that it is not open to the Claimant to apply for judicial review because there are other, alternative, remedies available to the Claimant which must be exhausted first. HMRC therefore says that even if, ex hypothesi, the Claimant's Grounds are arguable, nonetheless they should be ventilated through the designated statutory remedies under sections 101 and 102 FA 2015, and not through judicial review.
[5] For its part, the Claimant says that the statutory process is slow, inappropriate and ineffective and does not oust judicial review.
[6] By Order of the 27th March 2017, Mrs Justice Whipple adjourned the application for permission to apply for judicial review to an oral hearing at which the parties were invited specifically to address the question of alternative remedy.
[7] For the reasons set out below I have decided to refuse permission to claim judicial review. In my judgment the FA 2015 provides a comprehensive, two-stage, dispute resolution mechanism which first facilitates and encourages negotiation between the taxpayer and HMRC and then, if this is unproductive, allows for an appeal to a specialist tribunal. The proposed Grounds of Judicial review are carefully crafted in public law garb but when the outer garments are peeled back the true substance is revealed. And that true substance is the meat and drink of the statutory review and appeal procedure. The public law grounds conceal the real dispute between the parties and a determination of those public law issues would almost certainly leave the true issues unresolved. Moreover, on the facts of the case, and as confirmed orally during the hearing, HMRC and the taxpayer have now engaged in a re-consideration of the disputed issues arising and HMRC accepts that if GENUK presents evidence that satisfies it then HMRC will amend or revoke the Charging Notice. I therefore refuse permission because there are alternative remedies available to the Claimant which are in substance adequate and appropriate. On ordinary principles of discretion I also refuse permission upon the basis that because HMRC has embarked upon a review and reconsideration the Claim has become academic and / or is premature. In arriving at these conclusions I have considered the merits of the proposed Grounds. I consider them all to be weak. I have not however formally decided this case upon the basis that the Grounds are unarguable. Finally, I have considered the position under section 31(3C) Senior Courts Act 1981. Applying that test I have concluded that this is a yet further basis for refusing permission. In short, the Claimant has a perfectly proper case to advance in the statutory review and appeal process and that is where this dispute...
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