TC03765: Majid Alimadadian
| Jurisdiction | UK Non-devolved |
| Judgment Date | 27 June 2014 |
| Neutral Citation | [2014] UKFTT 641 (TC) |
| Date | 27 June 2014 |
| Court | First Tier Tribunal (Tax Chamber) |
[2014] UKFTT 641 (TC)
Judge Alison McKenna
Appeal against taxpayer information notice - Claim of legal professional privilege - Appeal withdrawn by appellant prior to hearing - HMRC application for costs under Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273),r. 10(1)(b) - Was appellant's bringing and conduct of proceedings unreasonable - Yes - Making of order for costs deferred so as to consider appellant's means under SI 2009/273, r. 10(5)(b).
The First-tier Tribunal (FTT) has found that the conduct of the appellant's representative in bringing an appeal was unreasonable conduct under r. 10(1)(b) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273) and accordingly gave rise to a liability for the entirety of HMRC's costs in defending that appeal. However, the FTT has deferred making any such order pending the provision by the appellant of particulars of his financial circumstances for the FTT's consideration pursuant to r. 10(5)(b).
This case concerns an application for costs made by HMRC under r. 10(1)(b) of the Tribunal Procedure Rules 2009 following the withdrawal by the appellant of an appeal against an information notice issued pursuant to Finance Act 2008, Finance Act 2008 schedule 36Sch. 36. Rule 10(1)(b) enables the Tribunal to award costs if it considers a party or their representative has acted unreasonably in bringing, defending or conducting proceedings.
HMRC's application relied upon the appellant's conduct being unreasonable in two respects: (i) delays caused by the appellant's successive applications for time extensions and a missed deadline; and (ii) the lack of detail in the appellant's submissions and in bringing proceedings that were without merit.
The FTT considered a number of cases concerning the issue of what constitutes "unreasonable conduct" in the context of an application for costs; in particular, Catana v R & C CommrsTAX[2012] BTC 1625 (that the decision on costs was an exercise of judicial discretion) and Buckingham County Council v ST [2013] UKUT 468 (AAC) (which reviews a number of decisions from the higher courts).
The FTT concluded that in respect of HMRC's first argument (delays and missed deadline), the appellant's conduct was not unreasonable as both parties had been allowed time extensions and the missed deadline was of marginal significance to the case.
However, in respect of the second conduct, the FTT found that the bringing of the appeal was unreasonable in all the circumstances; particularly taking into account: (1) the absence of a detailed case in the grounds of appeal, (2) the lack of detail in the appellant's reply, the lack of evidential basis for the appeal, and reliance upon an FTT decision which sets no precedent and minority judgment of the Supreme Court in R (on the application of Prudential plc & Anor) v Special Commissioner of Income Tax & AnorTAX[2013] BTC 45 when the FTT were obliged to follow the majority decision; (3) the failure to respond to HMRC's submission that the appeal could not succeed in light of that majority decision; and (4) the decision to seek advice from a third party and delay obtaining legal advice until after that advice was received.
The "acid test" determined by Ridehalgh v Horsefield[1994] Ch 205 that "the conduct permits no reasonable explanation" was met and having been litigated on the advice of the appellant's representative rather than the appellant's insistence constituted unreasonable conduct on the part of the appellant's representative within r. 10(1)(b) giving rise, in principle, to a liability for the entirety of HMRC's costs in defending the appeal.
However, as r. 10(5) prevented the Tribunal from making a costs order without considering a person's means (r. 10(5)(b)) the FTT deferred making any costs order and instead directed the appellant provide details of his financial circumstances and ability to pay the sum claimed within 28 days. The FTT further made clear that no decision had yet been made as to whether any costs direction would be determined by summary assessment under r. 10(6)(a) or by the court under r. 10(6)(c) and (7)(a).
This case highlights the risk of bringing an unmeritorious appeal before the FTT in terms of the exposure to a costs order being made by the Tribunal under r. 10 of the Tribunal Procedure Rules 2009. Although confirming that representatives will not be held to have acted improperly simply for acting for a party who pursues a case that is doomed to fail (because clients can insist on cases being litigated even where advised by their representatives that their case is hopeless) the FTT found that this case was being litigated on the advice of the representatives rather than the client's insistence. The representatives did not take any legal advice on the technical point in the case (regarding the application of legal professional privilege) and did not put themselves in a position to give sound advice before lodging and pursuing the appeal, which consequently and unreasonably relied upon an FTT decision which was not binding and could not displace the Supreme Court decision upon which HMRC relied and further relied upon the view of the dissenting minority in that case when the FTT would clearly be bound by the majority decision. The conduct of the appellant's representatives in bringing the appeal was unreasonable and left the appellant liable for HMRC's costs.
[1]This matter concerns HMRC's application for costs under rule 10(1)(b) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. I have...
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