HM Revenue and Customs v Kearney

JurisdictionEngland & Wales
JudgeLady Justice Arden
Judgment Date23 March 2010
Neutral Citation[2010] EWCA Civ 288
Docket NumberCase No: A3/2009/0894
CourtCourt of Appeal (Civil Division)
Date23 March 2010

[2010] EWCA Civ 288

[2008] EWHC 842 (Ch)

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

(CHANCERY DIVISION)

Lewison J

Before: The Master Of The Rolls

Lady Justice Arden

and

Lord Justice Sullivan

Case No: A3/2009/0894

Between
The Commissioners For Her Majesty's Revenue And Customs
Respondents
and
John Joseph Kearney
Appellant

The Appellant represented himself

Mr Akash Nawbatt (instructed by HMRC Solicitors Office) for the Respondents

Hearing date: 3 March 2010

Lady Justice Arden

Lady Justice Arden:

1

This appeal concerns the circumstances in which the time for paying national insurance contributions (“NICs”) can be extended. The respondents, whom I shall call the Revenue, refused the request of the appellant, Mr John Joseph Kearney, for an extension of time in which to make voluntary Class 3 contributions for the years 1948 to 1965. Mr Kearney appealed to the General Commissioners of Income Tax for the Division of West Sussex Northern (“the Commissioners”). They found in his favour, and, at the Revenue's request, stated a question for the opinion of the High Court, asking essentially whether on the facts as found by them and evidence before them, they were correct to hold that Mr Kearney had satisfied the burden of showing that his failure to make NICs between 1948 and 1965 was due to ignorance that was not “the result of any failure on his part to exercise due care and diligence”, a condition he had to satisfy to obtain an extension of time. Lewison J ( [2008] STC 1506) concluded that their decision was wrong in law and Mr Kearney now appeals. The question, therefore, on this appeal is whether the Commissioners’ decision was correct in law. If it is upheld, then the decision of the Commissioners to the effect that, if the Class 3 NICs payable by Mr Kearney for the period 1 October 1948 to 5 September 1965 are paid, they should be treated as having been paid on their due dates, must stand. I shall have to consider the grounds on which an extension of time can be granted, and the circumstances in which the court can interfere with the conclusion of the Commissioners.

Background

2

As one of my conclusions is that cases in which an extension of time to pay NICs is sought must be considered on a case by case basis, it is important to note the facts of this case. Mr Kearney was born in Ireland in 1929 and grew up there. He spent a year in the Palestine police force from 1947 to 1948. He then returned to the United Kingdom and took a job as a hostel warden with London County Council (“LCC”) for some two months, just after the introduction in July 1948 of the NIC Scheme (“the NIC scheme”). Later, in October 1948, he went to Kenya. He did not receive his formal discharge from the Palestine police force until after he had started work in Kenya. He spent many years in the Kenyan Police Force, both before and after independence in 1963. Those years included five years (1951 to 1956) during the Mau Mau insurgency, a period he describes as traumatic. In addition, after Kenya's independence, he commanded one of the most volatile provinces in Kenya, the Rift Valley. Mr Kearney considers that there are many former colonial servants who are in the same position as he is, but we are only dealing with the facts of his case.

3

Additional facts are stated in the Case Stated issued on 15 October 2007:

“5. …

(ii) … The Respondent entered the National Insurance Contributions Scheme (NICS) on 5 July 1948 when it commenced (this last fact was agreed).

(iii) The commencement of the NICS was preceded by a publicity campaign.

(iv) Between 5 July 1948 and 30 September 1948 (inclusive) the Respondent made 10 contributions to the NIC.

(v) On 1 October 1948 the Respondent left the country…

(vi) After 5 April 1949 the NICS authorities sent the Respondent at his last known address Form RF 85E (contributions record card). The form was apparently returned undelivered.

(vii) The Respondent did not notify the NICS authorities that he had gone abroad until 1971. Had the Respondent so notified the NICS authorities he would have been sent leaflet NI 138 which contained information about liability and entitlement whilst abroad to pay National Insurance Contributions.

(viii) Although Mr West told us that it was the practice of the Colonial Office to send their employees going abroad a copy of a circular telegram dated 15 August 1948 (containing information about liability and entitlement of those abroad to pay National Insurance Contributions) the Colonial Office in Kenya apparently failed to ensure that all of its employees were so notified.”

4

It is convenient to refer here to the circular telegram dated 15 August 1948. It was from the Secretary of State for the Colonies to the colonial administration in Kenya. In the relevant part it enclosed a number of leaflets giving details of the NIC scheme. It pointed out that only persons working overseas for an employer with a place of business in the United Kingdom were required to pay contributions while working abroad. It also pointed out that, in certain circumstances, a person working abroad could if he wished contribute to the NICs scheme “and it may be of advantage for him to do so in order to build up or preserve the right to benefit”. The circular telegram continued:

“9. You will no doubt have the contents of these pamphlets brought to the notice of officers serving under your administration who may enquire as to their position. Any who may appear to be eligible, and may wish to contribute under the Scheme should be advised to communicate direct with the Ministry of National Insurance (Contributions), Newcastle upon Tyne, stating full particulars of their individual cases.”

5

On the face of it, the telegram is not helpful to Mr Kearney as he made no enquiries as to his position. However, the statement of practice in paragraph 5(viii) of the Case Stated (set out above) by the Revenue indicated that the telegram was intended to be brought to his attention whether he made enquiries about his eligibility or not. The Case Stated continues:

“(ix) On 18th October 1971 the Respondent paid Class 3 Contributions in respect of the period from 6th September 1965 to 5th September 1971 (this fact was agreed).

(x) The Respondent ceased working in Kenya on 30th October 1975 and returned to the UK. On 30th December 1975 the Respondent started work in South Africa. At the end of each of the tax years from 1976/77 to 1987/88 (inclusive), the Respondent paid Class 3 Contributions (these facts were agreed).

(xi) In 2005 the Respondent approached the National Insurance Contributions Office (NICO) about deficiencies in his National Insurance record that he thought he had already made good. After investigation it was established that the Respondent had not been advised by a deficiency in the 1975/76 year and because of this he was allowed to pay Class 3 Contributions in respect of 1975/6 outside the statutory limit.

(xii) The Respondent's failure to pay voluntary contributions during the period that he was abroad was due to his ignorance of the fact that he could have done so having not been made aware of the contents of the circular telegram dated 15th August 1948.”

6

The Commissioners’ conclusion was as follows:

“9(a) We, the Commissioners, having seen and read the evidence and heard the arguments, allowed the appeal of the Respondent.

(b) We were satisfied that the Respondent was not made aware of the need to notify the National Insurance Contributions Office of his posting abroad. Firstly by the National Insurance Office since his RF85E was returned and secondly because the Colonial Office in Kenya apparently failed to ensure that all of its employees were notified of the contents of the circular telegram dated 15 August 1948.

(c) We found that the Respondent took immediate action to remedy the situation on being made aware of it and that he had continued his fight for the last 35 years. The Respondent's failure to pay National Insurance Contributions was due to ignorance. We did not consider this failure was due to a lack of care and due diligence on the part of the Respondent. We ordered that if the Respondent pay the Class 3 National Insurance Contributions for the period 1 October 1948 to 5 September 1965 they are to be treated as having been paid on the due dates.”

7

The question of law posed by the Case Stated was as follows:

“Whether on the facts found and evidence before us we were right to find that the Respondent exercised due care and diligence in accordance with Regulation 24 of the National Insurance (Contributions) Regulations 1969 and Regulation 6 of the Social Security (Crediting & Treatment of Contributions, and National Insurance Numbers) Regulations 2001.”

Legislative scheme

8

It is common ground that, contrary to the question posed by the Case Stated, the relevant regulation is regulation 32(1) of the National Insurance (Contributions) Regulations 1969 (“the 1969 regulations”). Regulation 32 (1) provides that:

“(1) Where a person was entitled to pay a contribution under any of the provisions of the regulations referred to in regulation 31(2) of these regulations (imprisonment or detention in legal custody, full-time education, unpaid apprenticeship and training, and periods abroad) but he failed to pay that contribution in the period provided for payment in the said provisions applicable and his failure is shown to the satisfaction of the Secretary of State to be attributable to ignorance or error on his part which was not due to any failure on his part to exercise due care and diligence, that...

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