Spring Capital Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 07 May 2021 |
| Neutral Citation | [2021] UKFTT 147 (TC) |
| Court | First Tier Tribunal (Tax Chamber) |
[2021] UKFTT 147 (TC)
Judge Anne Scott
Procedure – Strike out application – Barring applications – Costs application – All refused.
[1] Following a hearing on 24 and 25 April 2019, I issued Directions of consent (“the April Directions”) in relation to case management in this appeal. Directions 3, 4, 5 and 6 are relevant in regard to this hearing. They read:–
3. By no later than noon on 24 May 2019, HMRC shall lodge with the appellant and the Tribunal:
- Confirmation of HMRC's stance as to whether or not the Undertaking is governed by either Scots or English law in respect of both its construction and effect.
- In the event that HMRC agree that Scots law is the applicable law, a submission addressing the issue as to whether the Appellant's argument that it is both relevant and admissible to lead expert evidence of Scots law to determine the factual basis (ie is Scots law in the forum for these appeals foreign law?).
4. In the event that there is no dispute as to the matters referred to in Direction 3 above, by no later than noon on 7 June 2019, the parties shall lodge with each other and the Tribunal, dates to avoid for a preliminary hearing for a minimum of two days and that within the period July to September 2019. That hearing will be the forum to debate the preliminary argument as to whether or not the appellant has title and interest to enforce the Undertaking.
5. In the event that there is a dispute as to either or both of the matters referred to in Direction 3 above, by no later than noon on 7 June 2019, the parties shall lodge with each other and the Tribunal, dates to avoid for a preliminary hearing for a minimum of two days and that within the period July to September 2019.
6. Any party may apply at any time for these Directions to be amended, suspended or set aside.
[2] This hearing is the much delayed preliminary hearing referred to in Direction 5. I say that because it had been strenuously argued for the appellant that the focus of this hearing was simply whether or not the appellant has title and interest to enforce the Undertaking. For that reason, on 25 August 2020, Mr Upton intimated that he wished to lead expert evidence at this hearing and if there were to be any opposition to that he would move the Tribunal to hear the evidence under reservation of any issue of admissibility.
[3] HMRC did object to that and, on 31 August 2020, I intimated that that would be considered as a preliminary matter at the hearing.
[4] I had an electronic bundle of authorities extending to some 1400 pages lodged by the appellant and that was supplemented on the day by a further bundle of authorities taking that to 1,619 pages. HMRC had lodged in process two Bundles of Authorities extending to 889 pages. I had a hearing Bundle extending to 46 tabs and 433 pages which were supplemented by a further three bundles of documents extending to a further 109 pages of documents. Both parties had lodged extensive Notes of Argument.
[5] On 22 May 2019, HMRC lodged what the appellant describes as a “purported” response to Direction 3(a).
[6] HMRC opened their Submission dated 22 May 2019, narrating Direction 3 at paragraph 1 but went on to state at paragraph 2:
Before addressing the specific questions posited by the Tribunal, HMRC submit there is also a further point that arises which has not been specifically raised in the current Directions, and which in HMRC's respectful submission, ought to be drawn to the attention of the Tribunal and the Appellant as it concerns the Tribunal's jurisdiction.
In summary, HMRC argued that the appellant's wish to rely on the Undertaking was predicated on an argument as to legitimate expectation and the Tribunal had no jurisdiction in that regard. If it were to be established that the Tribunal had no jurisdiction then, the questions posed in Direction 3 “do not arise” but in order to comply with the Directions at paragraph 15 they explicitly stated:
… Nevertheless, in compliance with the Directions, and in order to assist the Tribunal, HMRC's response is as follows:
- In answer to the question that Direction 3(a). HMRC submit that the appropriate law to apply is that of English law ….
- Given the answer in respect of Direction 3(b) the necessary precondition (requiring an agreement from HMRC that Scots law were to apply) has not been satisfied, HMRC are not required to provide a response.
[7] The Submission concluded with an application for strike-out on the basis of no jurisdiction and if that were not to be granted, the preliminary hearing should determine the issue of jurisdiction.
[8] On 24 May 2019, the appellant lodged a barring application on the basis that:–
- HMRC had failed to comply with the April Directions;
- They had failed to co-operate; and
- There was no reasonable prospect of HMRC's case succeeding.
The reasoning underlying those points was set out at some length but re-iterated later (see paragraph 10 below).
[9] On 12 June 2019, HMRC responded pointing out that they had complied in full with the April Directions and that in terms of Direction 5 the preliminary hearing should proceed because the parties were in dispute as to the legal effect of the Undertaking. They requested that the barring application should be dismissed.
[10] I directed that the appellant lodge a response thereto. On 7 August 2019, the appellant lodged a Submission amplifying their arguments in the barring application to the following effect:
- To raise a question of jurisdiction at this point is an abuse of process when the preliminary procedure had already been decided.
- HMRC had previously, and unsuccessfully, applied to have the appellant's reliance on the Undertaking struck out on jurisdictional grounds in 2017 and that decision11[2017] TC 05928 (the 2017 Decision) had not been appealed.
- There is binding Upper Tribunal authority that HMRC are wrong and that is to be found at paragraphs 30–38 in Spring Salmon & Seafood Ltd v R & C Commrs22[2016] BTC 511 (the Upper Tribunal Decision).
- The appellant has at no stage advanced an argument on legitimate expectation. Their argument is entirely based on the Scots private law of unilateral obligations.
[11] The appellant concluded by stating that their barring application should now be treated as a response to the strike-out application but that in any event the strike-out application should be dismissed without a hearing.
[12] I directed that HMRC respond to that and on 9 September 2019, HMRC responded on the basis that the appellant's objections to HMRC's application were not “obviously correct”, as averred by the appellant, and that therefore the question of jurisdiction should be determined at a hearing. Their arguments were:–
- Although it is a matter of regret that the question of jurisdiction was not raised at the April 2019 hearing, there was a change of both solicitors and counsel between the hearing and the response to the April Directions. The matter was identified and included in the response to the April Directions in order to enable the Tribunal to consider all potential issues relevant to the Undertaking at the same time.
- The threshold for establishing abuse of process is a high one and the fact that a matter could, and even should, have been raised at an earlier stage does not make raising it at a later stage abusive. Preliminary issues were still in play in this appeal.
- In respect of res judicata, the 2017 Decision dealt with an application under rule 8(3)(c) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (as amended) (the Rules) but this application is brought under rule 8(2)(a) of the Rules (a copy of Rule 8 is annexed at Appendix 1).
- As far as the Upper Tribunal Decision was concerned, the issue of jurisdiction was not considered by either the FTT or the Upper Tribunal. Therefore the Upper Tribunal Decision that the appellant was entitled to rely on the Undertaking is not, and cannot be, binding authority in respect of jurisdiction because that issue was not before it.
- Whilst the appellant argues that it is not running a legitimate expectation argument, nevertheless it is relying on an ex-statutory reason as to why it is not liable to the tax at stake and the FTT being a creature of statute does not have jurisdiction to entertain such an argument.
[13] On 15 October 2019, the appellant's solicitor emailed the Tribunal reiterating that the issue of jurisdiction should be decided on the papers but arguing that if jurisdiction were to be considered at a hearing then it should be a four day hearing instead of a two day hearing. It was listed for a four day hearing.
[14] In his Skeleton Argument, Mr Upton had identified 6 issues in the following terms which fell to be addressed, namely:
Issue 1.αWhether the respondents' objection to the appellant's reliance on the 2010 Undertaking is an abuse of process? If the answer is “Yes”, then Issue 2 arises; if it is “No”, then the next question is Issue 3, as the Tribunal's Direction of 26 April 2019 stated.
Issue 2. Does the Tribunal have jurisdiction to enforce the Undertaking? If the answer is “Yes”, then the next question is Issue 3; if the answer is “No”, then the Tribunal is asked to fix a full hearing on the remaining issues in the appeals.
Issue 3. Is the proper law of the Undertaking English or Scots? If the answer is “English” then the next question is Issue 6. If the answer is “Scots” then the next question is Issue 4.
Issue 4. In the Tribunal is Scots law (a) a matter of judicial knowledge or (b) a matter on which evidence is admissible? If the answer is (a), then the next question is Issue 6. If the answer is (b), then the next question is Issue 5.
Issue 5. Is that evidence to be heard (a) at this hearing or (b) at a further hearing? If the answer is (a), then the next question is Issue 6 and the appellant will lead that evidence at this...
To continue reading
Request your trial