Nutro UK Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 21 October 2014 |
| Neutral Citation | [2014] UKFTT 971 (TC) |
| Date | 21 October 2014 |
| Court | First Tier Tribunal (Tax Chamber) |
[2014] UKFTT 971 (TC)
Judge Roger Berner
The Appellant was represented by its director, Mr Gurdeep Singh Sethi
Howard Watkinson, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents
Procedure - Application to strike out - Rule 8(3)(b), Tribunal Procedure Rules - Whether the appellant had failed to co-operate with the tribunal to such an extent that the tribunal cannot deal with the proceedings fairly and justly
[1]I have before me two applications. The first, by HMRC, is that this appeal be struck out pursuant to rules 2 and 8(3)(b) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 ("the Rules") on the basis that the appellant, Nutro UK Limited ("Nutro"), has failed to cooperate with the Tribunal to such an extent that the Tribunal cannot deal with the proceedings fairly and justly. The second, by Nutro, is for the admission of further evidence in this appeal, to which HMRC object. The two applications are linked, as I shall describe.
[2]Nutro has appealed against two decisions of HMRC denying it entitlement to the right to deduct input tax in the total sum of £1,037,712.64 claimed in the VAT quarterly accounting periods 06/06 and 12/06. The basis of that refusal is the familiar one commonly described as MTIC fraud, namely that Nutro's transactions were connected with the fraudulent evasion of VAT and that Nutro knew, or should have known, of that connection.
[3]The appeal has a long procedural history, as I shall describe in some more detail later, but two appeals (consolidated into this) were made by Nutro on 26 June and 12 November 2008.
[4]Nutro has at times during the conduct of this appeal been represented by professional advisers. At other times it has not. Only shortly before the hearing of these applications, by letter dated 3 October 2014, Nutro's latest advisers, Imran Khan & Partners wrote to the Tribunal and HMRC to say that they were "professionally embarrassed" and no longer in a position to represent Nutro at the hearing. Nutro was therefore represented by Mr Sethi, a director of the company. I have, however, had regard to the written skeleton argument that Mr Khan filed on behalf of Nutro on 16 May 2014.
[5]I turn first to HMRC's strike out application. In this respect I had witness statements and heard oral evidence from two witnesses called by HMRC. The first was Mr Liban Ahmed, director of Controlled Tax Management Limited ("CTM"). CTM acted for Nutro in these appeals from 26 August 2008, when notice of acting was given by CTM to the Tribunal, until ceasing to act on 4 January 2013. The second was Ms Catherine Shaw, a solicitor at the Solicitor's office of HMRC who currently has day to day conduct of Nutro's appeal. Mr Sethi gave oral evidence for Nutro.
[6]I shall describe the factual background, as to which there was no dispute, and make findings of fact where there was a conflict of evidence. But before doing so, I turn to the law informing the jurisdiction of the Tribunal in this respect.
[7]The power of the Tribunal to strike out an appeal is contained in rule 8 of the Rules. In the context of HMRC's application, the power is a discretionary one, as indicated by the terms of the applicable rule, which is rule 8(3)(b):
The Tribunal may strike out the whole or a part of the proceedings if -
…
(b) the appellant has failed to co-operate with the Tribunal to such an extent that the Tribunal cannot deal with the proceedings fairly and justly …
[8]As is the case with the Rules generally, in the interpretation and exercise of rule 8 the Tribunal must seek to give effect to the overriding objective to deal with cases fairly and justly, according to rule 2. Dealing with cases fairly and justly includes (by rule 2(2)):
(a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties;
(b) avoiding unnecessary formality and seeking flexibility in the proceedings;
(c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings;
(d) using the special expertise of the Tribunal effectively; and
(e) avoiding delay, so far as compatible with proper consideration of the issues.
[9]In addition, rule 2(4) requires that the parties help the Tribunal to further the overriding objective and co-operate with the Tribunal generally.
[10]This Tribunal has previously considered the application of rule 8(3)(b) in First Class Communications LtdTAX[2013] TC 02508, a case concerning an application for HMRC to be barred from taking part in the proceedings. In that case, Judge Mosedale, whilst being careful not to limit the cases in which rule 8(3)(b) could apply, described, at [52], the following two situations where the rule might be applicable:
Firstly, Rule 8(3)(b) could apply where the appellant has already been so prejudiced by HMRC's conduct in a manner which cannot be remedied and that therefore the proceedings cannot be fair and just. In such a case HMRC should normally be barred from the proceedings. Secondly, I consider that Rule 8(3)(b) could apply where there has been a course of conduct by HMRC which, while it has not yet meant it is not possible to deal with the appeal fairly and justly, nevertheless is part of a pattern of conduct which, if it continues, will mean that the appeal cannot be dealt with fairly and justly. In such a case, I consider it might be appropriate to bar HMRC from proceedings.
[11]Mr Watkinson submitted that the conjunctive construction of rule 8(3)(b) - fairly and justly - is intended to provide the Tribunal with a broad discretionary power. It was not intended that such a power be dependent on whether a fair trial is still possible. The reference to "justly" in addition to "fairly" is intended to allow the Tribunal to consider the wider effects on the administration of justice of the failure of an appellant (or, of course, in appropriate circumstances, HMRC) to co-operate.
[12]Mr Watkinson derived support for this proposition from two cases concerning the powers of the court to strike out a case under the Civil Procedure Rules 1998 ("CPR"). The first is Biguzzi v Rank Leisure PLC[1999] WLR 1926, a case concerning an application to strike out a claimant's statement of case on the ground of repeated procedural failures. In the Court of Appeal, Lord Woolf MR referred to the then new CPR as emphasising the importance of the keeping of time limits, referring in particular to the discretion of the court to strike out a case where there has been a failure to comply with a rule, practice direction or court order. At p 1933, he said:
In considering whether a result is just, the courts are not confined to considering the relative positions of the parties. They have to take into account the effect of what has happened on the administration of justice generally. That involves taking into account the effect of the court's ability to hear other cases if such defaults are allowed to occur. It will also involve taking into account the need for the courts to show by their conduct that they will not tolerate the parties not complying with dates for the reasons I have indicated.
[13]On the other hand, as Mr Watkinson quite properly pointed out, Lord Woolf made clear that the step of striking out a case was a draconian one, and that the existence of the power did not mean that in applying the overriding objective (of enabling the court to deal with cases justly) the initial approach will be to strike out the statement of case. Lord Woolf emphasised the existence of other powers to deal with delay or failure to comply. He gave as examples orders for costs, including costs on an indemnity basis.
[14]The view of the courts as to the draconian nature of a strike out order can also be discerned from two authorities referred to in Mr Khan's skeleton argument, Hytec Information Systems Ltd v Coventry City Council[1997] WLR 1666, and Marcan Shipping (London) Limited v Kefalas and another [2007] EWCA Civ 463. In Hytec, the power was referred to by Ward LJ at p 1676 as an "atomic weapon in judicial armoury" (though one that in that case the court was fully justified in employing). In Marcan Shipping, which concerned the effect of an "unless" order, Moore-Bick LJ, at [36], described a conditional order for striking out of a case as:
… one of the most powerful weapons in the court's case management armoury and should not be deployed unless its consequences can be justified. I find it difficult to imagine circumstances in which such an order could properly be made for what were described in Keen Phillips v Field1 as "good housekeeping purposes"
[15]The second case on which Mr Watkinson relied in support of his proposition as to the approach required by the construction of the Tribunal's Rules is Eatwell v Smith & Williamson (A Firm) [2003] EWCA Civ 1932. There one question was whether, in deciding to strike out the claimant's case, the Master had made an error of law in not referring, in his decision, to the question whether or not, having regard to all the delays, there could have been a fair trial. In the Court of Appeal, at [8], Jacob LJ said:
I … do not see that the Master made any error in failing to consider the question of fair trial. Of course the question of fair trial is an important consideration in the operation of the rule, but it is equally apparent that the rule is not limited to cases where there can be no fair trial. It was a liberating rule and intended to be so. The fact that the Master did not mention the question of a fair trial is neither here nor there. No-one had said there could not be a fair trial. It was implicit that there could be in his decision. It was also explicit in his decision that there would be difficulties with the trial, though that is quite a different...
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