Hope v Ireland and Others
| Jurisdiction | England & Wales |
| Judgment Date | 03 December 2014 |
| Neutral Citation | [2014] EWHC 3854 (Ch) |
| Date | 03 December 2014 |
| Court | Chancery Division |
Mr John Male QC
Mr Timothy Brown (instructed by Richard Anthony and Co, Solicitors) appeared for the Appellant
Mr Mark Mullen (instructed by HMRC, Solicitors' Office) appeared for the Second Respondent
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic
[1] This is an appeal by Miss Emma Mary Constance Hope from the decision of Registrar Derrett made on the 16th May 2013. Permission to appeal was granted by Rose J on the 14th March 2014.
[2] Miss Hope was represented by Mr. Timothy Brown, who did not appear below. Her Majesty's Revenue and Customs (“HMRC”) was represented by Mr. Mark Mullen, who did appear below. The other two Respondents did not appear and were not represented either before Registrar Derrett or me.
[3] Since 1985 Miss Hope has made her living as a shoe designer, based in the UK. For over 25 years, the shoes have been made in factories outside the UK (usually located in Italy) which then ship direct to her customers around the world. For the last 20 years the same factories have shipped shoes to her retail stores in London. So, there were and are both wholesale and retail businesses.
[4] Until November 2007, Miss Hope operated as a sole trader. On the 30th November 2007, she transferred her business as a going concern to Emma Hope Shoes Limited (“EHSL”). This company went into liquidation in April 2009. Since then the business has operated through a company called Emma Hope Limited.
[5] On the 8th January 2007 an officer of HMRC, Surinder Aulak, visited Miss Hope to carry out a VAT audit. Although it was not before Registrar Derrett, there is a copy of the VAT Audit Report prepared by Mr. Aulak in the appeal core bundle.
[6] After that visit and audit, correspondence ensued between HMRC and Miss Hope and her advisers. Requests for information were made by HMRC, information was provided and the correspondence carried on throughout 2007 and, indeed, into subsequent years until matters were resolved in 2011/12.
[7] In the absence of what HMRC regarded as satisfactory information, HMRC made an assessment dated the 11th December 2007 in the sum of £120,725.54 (“the 2007 Assessment”).
[8] From the outset Miss Hope disputed the 2007 Assessment. However, despite having advisers acting for her, that Assessment was not actually appealed until the 6th May 2010. Notwithstanding what Mr. Brown suggested in oral argument, I am satisfied that the actual assessment, as opposed to the correspondence about the assessment, included notes informing Miss Hope and her advisers, who in any event presumably knew of it, about the right of appeal.
[9] Matters moved on during 2007 and 2008. There are disputes between the parties about the interpretation to be put on the requests for information by HMRC and on the information provided by Miss Hope and her advisers. There are also disputes between them about HMRC's interpretation and understanding of the information that was provided. However, on the 30th October 2008 a bankruptcy petition was presented by HMRC. That led to IVA proposals by Miss Hope, with an interim order being made under section 252 of the Insolvency Act 1986 (“the IA”) on the 30th April 2009. That interim order was extended on the 14th May 2009.
[10] On the 15th May 1999 a meeting of creditors was called to consider the IVA proposals. Mrs Ireland, the First Respondent, chaired that meeting which took place on the 25th June 2009. Miss Hope's proposals were discussed and the meeting was adjourned to the 9th July 2009.
[11] On the 2nd July 2009 HMRC submitted its proxy for rejection of the IVA proposals. Its total claim was for £722,326.67 comprising: unpaid direct taxes, surcharges and interest; the amount of the 2007 Assessment; and an estimated claim for £320,566.00 of VAT in respect of alleged post-November 2007 trading by Miss Hope personally. As at July 2009, there was no assessment in respect of this last claim, but it was in due course the subject of an assessment made on the 1st March 2010 (“the 2010 Assessment”).
[12] The IVA proposals were put to a vote at the meeting on the 9th July 2009. The necessary majority in excess of three quarters was not achieved. Miss Hope disputed part of the liability for direct tax, as well as the 2007 Assessment and the whole of the post-November 2007 trading liability. Mrs Ireland admitted HMRC's and Pegaso's claims in full. However, she noted that Danny Schaffer, on behalf of Miss Hope, “wanted objection noted against much of HMRC's claim; only £222,687.08 accepted”. So, there was an objection by Miss Hope pursuant to rule 5.22(4) of the Insolvency Rules 1986 (“the IR”).
[13] Just pausing here, it is apparent from the documents before me that there were various different possible ways of looking at the votes cast at that meeting. However, Counsel appearing before Registrar Derrett accepted that, on any basis, if the debt under the 2007 Assessment was properly admitted, then the vote would not have made the necessary three-quarters voting majority. Mr. Brown accepted, rightly in my judgment, that that was the position before Registrar Derrett and that on this appeal he could not re-visit the calculation of the votes.
[14] It follows that for Miss Hope to get her appeal off the ground she needs successfully to impugn the 2007 Assessment.
[15] Reverting to the background, on the 21st July 2009 Miss Hope appealed the decision of Mrs Ireland. Registrar Derrett gave directions on the 17th November 2009.
[16] The matter came before Mr Registrar Simmonds for hearing on the 23rd March 2010. Shortly before that hearing, on the 1st March 2010, HMRC issued the 2010 Assessment.
[17] On the 23rd March 2010 Mr Registrar Simmonds adjourned the matter to allow Miss Hope to appeal the 2007 and 2010 Assessments. There is a transcript of the hearing before the Registrar.
[18] Just pausing once again, in his skeleton argument and also in oral argument, Mr. Brown suggested that Registrar Derrett's eventual decision (which is the subject of the appeal before me) was at odds with the ruling of Mr Registrar Simmonds on the 23rd March 2010 on, amongst other things, the issues regarding the interpretation of rules 5.21 and 5.22 of the IR.
[19] I do not accept Mr. Brown's suggestion. I have read and re-read the transcript of what Mr Registrar Simmonds said. There is, quite simply, no decision in there about the interpretation of rules 5.21 and 5.22 or indeed about any other matter relevant to this appeal. Instead, there is what I regard as a pragmatic decision to adjourn the matter so that, if another meeting were to be held, the issue of the debts then due would be beyond doubt.
[20] Furthermore, it seems to me that Mr. Mullen is right when he says that, even if Mr Registrar Simmonds had thought that the successful appeal of the 2007 and 2010 Assessments would mean that the decision of Mrs Ireland was invalid at the date of the meeting, that would not bind Registrar Derrett. Nor would it bind me on this appeal.
[21] Reverting to the background, on the 6th May 2010 Miss Hope appealed the 2007 and 2010 Assessments out of time. On the 2nd August 2011 there was a meeting between Mr. Neal of HMRC and Mr. Welby of BDO Stoy Hayward as a result of which the 2007 Assessment was withdrawn on the 17th October 2011.
[22] As to the 2010 Assessment, on the 30th April 2012 Miss Hope submitted a declaration in lieu of a return in respect of the alleged post-November 2007 trading. Irrespective of whether Miss Hope was trading personally, bad debt relief meant that no VAT was payable by her in any event. This led to the 2010 Assessment also being withdrawn.
[23] The rights and wrongs of the 2007 Assessment and the 2010 Assessment are hotly contested by Miss Hope and HMRC. Miss Hope says that she has been vindicated because the two Assessments were withdrawn. I can see that, as a result, she no doubt feels that she has suffered a serious injustice at the hands of HMRC because it was the 2007 Assessment which led to, or more accurately contributed to, the defeat of the IVA proposals. In contrast, HMRC says that both Assessments were properly made and that Miss Hope (and her advisers) brought everything on herself (and their client) by providing inadequate information and not appealing the Assessments in a timely fashion.
[24] After the withdrawal of both assessments, on the 22nd August 2012, HMRC issued an application to return the matter to Court. That led to the hearing before Registrar Derrett now on appeal to me. Effectively, the only matter in dispute between the parties before Registrar Derrett was the costs. HMRC sought its costs. It argued that Mrs Ireland was right to admit the 2007 Assessment with the result that the IVA proposals could not have been approved; that Miss Hope (and her advisers) brought the bankruptcy petition and these proceedings on herself (and their client); and that the application to Court was misconceived. Miss Hope argued that she had been successful as regards the 2007 Assessment, but that neither party had been successful with respect to the 2010 Assessment. Miss Hope sought her costs.
[25] Registrar Derrett concluded that the attempt by Miss Hope to challenge HMRC's debt in the manner in which she did by the application to Court and then to appeal the...
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