R (on the application of Hannah) v Chartered Institute of Taxation
| Jurisdiction | England & Wales |
| Judgment Date | 27 April 2021 |
| Neutral Citation | [2021] EWHC 1069 (Admin) |
| Date | 27 April 2021 |
| Court | Queen's Bench Division (Administrative Court) |
[2021] EWHC 1069 (Admin)
High Court (Queen's Bench Division)
Hon. Mr Justice Holgate
Richard Clayton QC and Julian Hickey (instructed by Levy and Levy) appeared for the claimant
Rupert Paines (instructed by DAC Beachcroft) appeared for the defendant
Claimant member of Chartered Institute of Taxation (CIOT) – CIOT referred a complaint against claimant to Taxation Disciplinary Board (TDB) – Complaint in respect of advice on Stamp Duty Land Tax – Whether defendant amenable to judicial review – Whether claimant had right to make representations prior to referral – Whether outcome would have been different if claimant had made representations – Decision by defendant to refer claimant to TDB not amenable to judicial review – Claimant did not have right to make representations – If representations had been made outcome would not have been different – Claim dismissed – Senior Courts Act 1981, s. 31(2A).
The High Court comprehensively dismissed a claim for judicial review of a decision of the defendant (the CIOT) to refer a complaint against the claimant, a CIOT member, to the TDB. The complaint was made by the CIOT itself in respect of advice given by the claimant in regard to Stamp Duty Land Tax (SDLT). The CIOT was of the view that the advice breached the Professional Conduct in Relation to Taxation (PCRT) standards. The claimant sought judicial review of that decision, mainly on the basis that the claimant should have been given the opportunity to make representations to the CIOT before the complaint was referred. The High Court found that the CIOT's decision was not amenable to judicial review in any event; had it been so, the lack of opportunity to make representations would not have been grounds for review; and even if representations had been made, the Court believed the CIOT would have made the same decision. Accordingly, the claim was dismissed.
The CIOT is a membership body acting under a Royal Charter. Each member of the CIOT enters into a membership contract, under which they are, inter alia, required to comply with the CIOT's byelaws and accept the jurisdiction of the TDB in disciplinary matters.
The CIOT's byelaws require it to establish a code of conduct for members and provide that breach of such code constitutes grounds for disciplinary action. The byelaws provide that the Council of the CIOT shall adopt such disciplinary schemes as it sees fit, and that complaints against members shall be dealt with by the TDB. Complaints may be made to the CIOT or direct to the TDB. The byelaws do not make the referral by the CIOT of a complaint against a member to the TDB subject to the member in question being allowed to make representations prior to such referral.
The TDB disciplinary process has four stages; the first is an initial review, undertaken to see if the complaint falls within the TDB disciplinary scheme, and the complaint is of sufficient concern to be taken further. The second stage is undertaken by the Investigation Committee, which determines whether there is a “prima facie” case against the member. The member must be afforded a reasonable opportunity to make representations at this stage. Should the committee conclude a prima facie case has been made, it may refer the complaint to a Disciplinary Tribunal (the third stage). The rules for a Disciplinary Tribunal allow the member to be represented and again require the member to be given a fair and reasonable opportunity to be heard. Should the complaint be upheld, the Tribunal can impose sanctions on the member. The fourth stage of the process is a right of appeal against the decision or the sanction.
The CIOT has adopted “Professional Rules and Practice Guidelines” (the “Rules”). Members must comply with these rules or face disciplinary action. Within the Rules is a requirement for members to carry on their work within the PCRT standards.
PCRT consists of five fundamental principles and five standards for tax planning. In this case, the relevant standard was found at paragraph 3.2 of the PCRT standards:
Members must not create, encourage or promote tax planning arrangements or structures that: i) set out to achieve results that are contrary to the clear intention of Parliament in enacting relevant legislation; and/or ii) are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation.
The CIOT concluded that a SDLT scheme devised and promoted by Cornerstone Ltd, a tax advisory company founded by and wholly owned by the claimant, may have breached this standard. The details of the scheme were outlined to the Court, and the claimant did not argue that the CIOT had misunderstood how the scheme operated.
The CIOT informed the claimant by letter in February 2020 that it considered the SDLT scheme may have breached the PCRT standard and that it had referred the claimant to the TDB.
The CIOT had seen documents produced by Cornerstone for its clients, and these were the basis for the referral.
This was the first issue considered by the Court. The Court of Appeal held in Regina v Take-over Panel, ex parte Datafin plc [1987] 1 QB 815 that judicial review was not restricted to bodies deriving their power from legislation or the prerogative. If the source of power of a body is purely contractual, judicial review is not available, but there are situations between a purely contractual relationship and power deriving from legislation or the prerogative that are capable of being subject to judicial review.
The Court conducted an extensive review of the jurisprudence, noting cases where decisions made by bodies had a sufficient “public element ”for them to be capable of review, and others that did not.
In the case of the CIOT and its decision to refer the claimant to the TDB, the Court noted that there was no statutory scheme regulating the conduct of tax advisers; the relationships between a member and the CIOT and between the CIOT and the TDB are purely contractual; disciplinary proceedings are a matter for the TDB, not the CIOT; there is no public law underpinning for the TDB; and, distinguishing from the circumstances in Datafin, the TDB is only able to make decisions affecting advisors who are members of the bodies which established the TDB, not the sector as a whole. This is unaffected by recent comments made by HMRC in relation to the partial self-regulation of the tax sector by professional bodies.
PCRT and the disciplinary scheme operated by the TDB are not woven into a fabric of public regulation, and the CIOT's decision to refer the claimant to the TD was not amenable to review.
Having concluded that the decision was not amenable to review, the claim would be dismissed in any case, but the judge also spoke to the remaining points.
The Court noted that the claimant was not entitled to make representations before a complaint was referred, but that the requirements of fairness were not necessarily confined by the provisions of a disciplinary scheme. In this case it was important that the referral stated that the provisions of PCRT may have been breached, not that they were breached. It also appeared that the claimant had misunderstood the requirements of the disciplinary scheme. The CIOT had merely referred the issue for investigation by the TDB; this was a preliminary step. During stages two and three of the disciplinary process the claimant would have opportunity to make representations. Accordingly, the requirements of fairness were well met by the TDB process.
Moreover, stages 1 and 2 of the disciplinary process were not publicised; and whilst disciplinary hearings were held in public, if a member was successful at the hearing, he or she would not normally be named. Thus, there were no grounds for the claimant considering his reputation had been harmed by the referral.
Therefore, the fact that the claimant had not been afforded the opportunity to make representations before the referral was not grounds for judicial review.
Again, having failed on the first two grounds, no decision on this point was necessary, but the judge decided to speak to the matter in any event.
If it is highly likely that the outcome for a claimant would not be different if the conduct objected to had not happened, judicial review must be refused under the Senior Courts Act 1981, s. 31(2A).
In this case, the claimant objected to the lack of representation prior to the referral.
The Court had heard that the claimant would have made various points to the CIOT, including that, based on advice from Counsel, the claimant had correctly interpreted the relevant SDLT legislation, and had not breached PCRT rules. However, having considered the relevant SDLT legislation, noting that similar schemes to that advanced had been challenged by HMRC and that Cornerstone itself expected challenges on the scheme, the Court concluded that the scheme was a proper issue of referral to the TDB. Therefore, had the claimant made representations, the Court believed it was highly likely the outcome would have been the same i.e., a complaint referred to the TDB.
Accordingly, had it been in point, there would have been no reason for disregarding the requirements of the Senior Courts Act 1981, s. 31(2A).
The claim was dismissed.
The decision is a very strong endorsement of the disciplinary processes of the CIOT (and also the ATT, which shares the process). The relevant paragraph of PCRT was included for the first time in 2017. It is notable that the complaint was made by the CIOT itself which is indicative of the strong intention of the tax professional bodies to act in the public interest when it comes to the...
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R (Professor Paul Taggart) v The Royal College of Surgeons of England
...not a reason for treating the decision as if it were a public law decision. 51 In R (Hannah) v The Chartered Institute of Taxation [2021] EWHC 1069 (Admin) at [44], Holgate J said the following: “If the source of power is legislation, then their body in question will generally be subject t......