New Miles Ltd (Hilton-Foster)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 09 January 2012 |
| Neutral Citation | [2012] UKFTT 33 (TC) |
| Date | 09 January 2012 |
| Court | First-tier Tribunal (Tax Chamber) |
[2012] UKFTT 33 (TC)
Judge Peter Kempster (Chairman)
Application for substitution of a party - Tribunal Procedure Rule 9 - whether subject matter of appeal is assignable - effectiveness of assignment - whether to add or substitute a party
1.References in this decision notice to the Tribunal Procedure Rules are to The Tribunal Procedure (First-Tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273) (as amended).
2.Pursuant to Tribunal Procedure Rule 29 the parties consented to this application being decided without a hearing and the Tribunal considered it was able to determine the matter without a hearing. As communicated to the parties in advance of the determination, and no objection having been received, the items considered in determining the application were:
(2) Notice of appeal dated 8 December 2009;
(3) Rule 9 application dated 21 October 2010 and exhibited deed of assignment;
(4) Notice by the Respondents ("HMRC") dated 24 February 2011;
(5) Letter from Barnard Atkins (Applicant's representative) to HMRC dated 15 June 2011 and enclosed bundle;
(6) Letter from Barnard Atkins to the Tribunal dated 23 June 2011; and
(7) Letter from HMRC to the Tribunal dated 23 June 2011.
3.By a notice of appeal dated 8 December 2009 New Miles Limited ("the Appellant") appealed against a decision by HMRC to refuse payment of compound interest on a repayment of VAT refunded to the Appellant ("the Appeal"). In January 2010 the proceedings were stayed pending developments in other cases concerning similar questions of law.
4.On 21 October 2010 the Applicant made an application to be substituted for the Appellant as the appellant in the Appeal ("the Application"). The Application states:
The Applicant makes this application to the Tribunal pursuant to a Deed of Assignment entered into between [the Appellant] and the Applicant, attached hereto as Exhibit 1, to the effect that the Applicant became entitled inter alia to the rights of action of [the Appellant] relating to this appeal. The Applicant submits that the requested substitution has become necessary because of a change in circumstances since the start of proceedings under [Tribunal Procedure Rule] 9(1)(b)…
5.The deed of assignment ("the Deed") is dated 11 October 2010; is executed by the Applicant (as assignee), the Appellant (as assignor) and a third party; and witnessed for each party. The third party was a commercial creditor of the Appellant and the Applicant undertook to pay the liability due to the third party.
6.The Deed recites:
(A) The [Appellant] has a claim against [HMRC].
(B) As the intention is that the [Appellant] will be dissolved, it will not be possible for the [Appellant] to pursue the claim. The [Appellant] therefore wishes to assign any and all of its rights under the claim to the [Applicant] and the [Applicant] has agreed to accept that assignment. The [Applicant] will thus be able to pursue the claim in their own name.
7.The operative provision of the Deed states:
2Assignment
In consideration of the sum of £1, receipt of which is acknowledged, the [Appellant] hereby assigns and transfers to the [Applicant] absolutely all its rights, title and interest in arising out of or relating to all claims and causes of action or other rights or relief (including costs), whether arising in (or in respect of) contract, tort, negligence, breach of duty, breach of statute or statutory instrument, breach of directly effective European Community law rights or otherwise, against HMRC (or any successor), including any claims arising out of or connected to overpaid Value Added Tax which was wrongly levied against the [Appellant] by HMRC (and therefore including any claims to compensation by way of an additional payment representing the difference between simple interest received by the [Appellant] to date and compound interest, arising from the loss of the use of money) (the "Claim") with the intent that hereafter the [Applicant] shall be solely entitled to pursue the Claim in their names and to any and all proceeds, profits, damages, compensation, interest or other money of whatever kind or however arising out of any action or proceedings related to the Claim, to hold for the [Applicant] for his absolute use and benefit.
8.The only other provisions of the Deed to note are:
(2) Clause 3.2 states:
The [Appellant] shall immediately notify HMRC of the assignment constituted by this Deed, such notification shall be made substantially in the form set out in the Schedule to this assignment.
(3) (The schedule is not with the papers submitted to the Tribunal.)
(4) Clause 7.3 contains a "blue pencil" provision preserving the remaining parts of the Deed if any part is unenforceable.
9.On 22 February 2011 HMRC served a notice which stated:
[HMRC] … would not dispute the assignment that the Appellant seeks to make is capable of being made. However, it is ultimately for the Tribunal to decide whether that assignment has been properly made. The Tribunal will determine the success or not of the Appellant's case and accordingly it would be for the Tribunal to satisfy itself that any right of action being pursued in this matter is being pursued by someone with a right to do so. [HMRC] would contend that the precedent case of Midlands Co-operative Society Ltd v R & C Commrs VAT[2008] BVC 414, suggests that the appropriate course of action would be for the Tribunal to add the [Applicant] as an appellant rather than the assignment being effected by a substitution.
10.On 15 June 2011 the Applicant's representative (who also acts for the Appellant) wrote to HMRC setting out their representations, the relevant parts of which are as follows:
… you state that HMRC v Midlands Co-operative Society… "suggests that the appropriate course of action would be for the Tribunal to add the [Applicant] as an appellant rather than the assignment being effected by substitution". We do not understand why you consider Midlands as authority for that proposition. There is no discussion in the case with regard to the proper means whereby the validity of the transfer of rights can be recognised within tribunal procedure. There is however reference to a previous application which Midlands Cooperative Society had made to be substituted for the Leicester Co-operative Society (as a result of the transferor of the rights) under rule 13 of the VAT Tribunal Rules (SI 1986/590), in relation to an appeal concerning a liability to VAT rather than a repayment of VAT, which HMRC had not opposed (see paragraph 12). Rule 13 deals exclusively with the substitution of a "successor" to the rights and liabilities of the appellant, not the addition of the successor as another appellant.
If the transfer of rights is valid - and you do not provide any objections to the proposition that it is - this ought to be recognised by way of the substitution of the [Applicant] for the [Appellant] as appellant.
If the [Applicant] is merely added as appellant, then the [Appellant] will be a "fifth wheel" in the proceedings as it will have divested itself of its rights. Furthermore, it is anticipated that it will shortly be struck off, and so will cease to exist.
It is difficult to see what useful purpose is met by retaining the [Appellant] as an appellant alongside the [Applicant] therefore.
HMRC's stance appears to be that it does not object to the application, but considers that a hearing is desirable so that the Tribunal can satisfy itself that the assignment is valid and that a direction substituting the [Applicant] for the [Appellant] is appropriate.
With respect, if HMRC does not have objections to the application, one would have thought that the appropriate course is to allow the Tribunal to decide the application on the papers, allowing for the possibility that the Tribunal may want to call a hearing of its own motion. It is unusual for HMRC to request a hearing to deal with an application without having particular objections to the application made.
11.On 23 June 2011 HMRC wrote to the Tribunal reiterating the points made in their 22 February notice (para. 9 above) and consenting to determination of the Application without a hearing. On the same date the Applicant's representative wrote to the Tribunal consenting to determination of the Application without a hearing.
12.By way of further background I note:
(2) the Appellant's representative has confirmed to the Tribunal that the Appellant is still in existence (letter dated 24 March 2011 refers); and
(3) a number of other taxpayers with appeals before the Tribunal have entered into identical assignment documentation (with other assignees) and so the outcome of the Application is of wider importance beyond the parties to the current proceedings. I should note that in para. 29 & 30 below I refer to legislation that does not extend to Scotland or Northern Ireland, so that further consideration may be required in respect of any other taxpayers whose affairs are governed by jurisdictions other than England & Wales.
13.Value Added Tax Act 1994 section 78Section 78 VAT Act 1994 states (so far as relevant):
Interest in certain cases of official error
(1)Where, due to an error on the part of the Commissioners, a person has-
(a) accounted to them for an amount by way of output tax which was not output tax due from him and, as a result, they are liable under section 80(2A) to pay (or repay) an amount to him, or
(b) failed to claim credit under section 25 for an amount for which he was entitled so to claim credit and which they are in consequence liable to pay to him, or
(c) (otherwise than in a case falling within paragraph (a) or (b) above) paid to them by way of VAT an amount that was not VAT due...
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Skywell (UK) Ltd
...Ltd v R & C CommrsVAT[2008] BVC 414 and also to the recent decision of the First-tier Tribunal (Tax) in New Miles Ltd (Hilton-Foster)TAX[2012] TC 01731 which relied upon Midland Co-op. He submitted that in Midland Co-op, the cause of action arose as incidental to the transfer of property ri......