Skywell (UK) Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 15 August 2012 |
| Neutral Citation | [2012] UKFTT 611 (TC) |
| Date | 15 August 2012 |
| Court | First-tier Tribunal (Tax Chamber) |
[2012] UKFTT 611 (TC)
Judge Alison McKenna
Paul O'Doherty of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
The Appellant did not appear
Tribunal procedure - application for substitution of appellant - has there been a change of circumstances due to assignment of claim - assignment invalid for reasons of champerty - application refused.
The First-tier Tribunal decided that a taxpayer's assignment of its VAT input tax claim to another company caused no change in circumstances which would necessitate an order directing the substitution of the assignee as the appellant in the taxpayer's appeal. The Tribunal held that this was not a case where the assignment of the cause of action was intended to protect some independent interest previously acquired by the assignee, but that the deeds of assignment purported to assign a bare right to litigate. The Tribunal further held that the agreement between the taxpayer and the assignee was void on the grounds that it was champertous and unenforceable for reasons of public policy.
The assignee, a debt-recovery company, filed an application for an order directing the substitution of the assignee as the appellant in the taxpayer's appeal against HMRC's decision denying a claim for VAT input tax for a certain period.
HMRC had denied the input tax claim on the basis that the taxpayer knew or ought to have known of the fraudulent nature of transactions connected to the supply of goods in relation to which the input tax arose; hence, the taxpayer appealed. During the course of the appeal, the taxpayer assigned its claim to the assignee.
HMRC objected to the application for substitution on the basis that the deed of assignment was void and further that the assignee did not have any standing to make the application in any event. The taxpayer then sent HMRC a draft supplemental deed of assignment, on which HMRC declined to comment.
The assignee argued that HMRC's objection to the deed of assignment had been satisfactorily addressed by the execution of the supplemental deed.
HMRC contended that the deed was intended to assign a mere "right to litigate" and was not supported by any collateral interest sufficient to justify the pursuit of the proceedings by the assignee for its own benefit. In the absence of any evidence or argument as to an independent interest by the assignee in the outcome of the proceedings, HMRC said that the deed was ineffective to transfer the right of appeal of the taxpayer to the assignee, because it was void for reason of champerty and unenforceable as contrary to public policy.
Whether the deed of assignment was void for reasons of champerty, so that it would not be effective to cause a change of circumstances required by The Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, r. 9(1)(b).
Held, dismissing the application for substitution of the assignee:
The Tribunal relied on the decisions in Midlands Co-operative Society Ltd v R & C CommrsVAT[2008] BVC 414 and Trendex Trading Corp v Credit SuisseELR[1982] AC 679, where there was an independent interest by the assignee in the outcome of the proceedings. In Midland, the assignor and the assignee had merged some years previously so that the assets transferred in the merger agreement included the claim under the Valued Added Tax Act 1994, Value Added Tax Act 1994 section 80s. 80 which later arose. In Trendex, the independent interest was identified by reason of the bank's security over the appellant's assets.
The Tribunal noted that in this case both the deed of assignment executed earlier and the supplemental deed of assignment were executed after the commencement of the appeal. The deeds did not refer to any prior dealings between the parties. The initial deed referred to the "assignment of the rights of appeal to the VAT Tribunal" and the supplemental deed referred to the assignment of "the right to litigate" in respect of three cases identified by their Tax Chamber numbers (two of which had been struck out so that the current appeal was the only live appeal remaining of the three). There was no identification in the recitals or in the deed that the assignee had an interest in these proceedings separate and independent from the right of appeal, and none had been pleaded.
The Tribunal decided that the matter before it was not a case where the assignment of the cause of action was intended to protect some independent interest previously acquired by the assignee, but that the deeds of assignment purported to assign a bare right to litigate. The Tribunal held that the agreement between the assignee and the appellant taxpayer was void on the grounds that it was champertous and unenforceable for reasons of public policy. Accordingly it found that there had been no change in circumstances necessitating a direction for substitution.
1.On 15 August 2012 the Tribunal directed inter alia that:
The Appellant's application for the substitution of Recovery Debts Limited as the Appellant in this appeal is refused. The Tribunal will provide full reasons for its decision shortly.
2.I now provide full reasons for the refusal of the application for substitution.
3.This appeal concerns HMRC's decision to refuse to allow a claim for VAT input tax for the period 3/06 on the basis that the Appellant company knew or ought to have known of the fraudulent nature of transactions connected to the supply of goods in relation to which the input tax arose. HMRC's decision to deny the input tax claim is dated 19 March 2009 and the Notice of Appeal was submitted to the Tribunal on 16 April 2009. The appeal was allocated to the complex track and there has been no notification of an opt out from the costs regime by the Appellant.
4.The appeal has had a somewhat chequered history. There was a change of legal representation by the Appellant and an issue as to hardship which together resulted in the Tribunal granting a stay of proceedings. The appeal was apparently struck out but then reinstated by the Tribunal. Directions have subsequently been issued with the intention of...
To continue reading
Request your trial
-
MG Rover Group Ltd (in creditors' voluntary liquidation)
...sale of the business which gave rise to the cause of action is likely to be void for champerty (see the analysis in Skywell (UK) LtdTAX[2012] TC 02288). It is not obvious to me how the representative member could validly assign any s 80 right unless the RWS at the same time transferred to t......