© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Procedure.Tax
For additional search results use Google and enter:
site:procedure.tax [search term]
M24: Lead cases
Power to direct a lead case
“(1) This rule applies if--
(a) two or more cases have been started before the Tribunal;
(b) in each such case the Tribunal has not made a decision disposing of the proceedings; and
(c) the cases give rise to common or related issues of fact or law.
(2) The Tribunal may give a direction--
(a) specifying one or more cases falling under paragraph (1) as a lead case or lead cases; and
(b) staying (or, in Scotland, sisting) the other cases falling under paragraph (1) ("the related cases").
(3) When the Tribunal makes a decision in respect of the common or related issues--
(a) the Tribunal must send a copy of that decision to each party in each of the related cases; and
(b) subject to paragraph (4), that decision shall be binding on each of those parties.
[…]
(5) The Tribunal must give directions in respect of cases which are stayed or sisted under paragraph (2)(b), providing for the disposal of or further steps in those cases.” (FTT Rules, r.18(1), (2), (3), (5)).
​
Clear definition of the common/related issues required
"[68] I was not referred to the case but I agree with Judge Citron in Kingston Maurward College v HMRC [2017] UKFTT 502 (TC) (“Kingston”) where he stated:-
“25. The tribunal’s power to specify lead cases under rule 18 is a case management tool for rationalising the tribunal’s consideration of common or related issues of fact or law across more than one appeal. The tribunal (Judge Mosedale) observed in 288 Group Limited & Others v HMRC [2013] UKFTT 659 (TC) at [39]:
'The purpose of rule 18 is, it seems to me, to avoid unnecessary litigation, and that must include shortening the length of hearings. It must also include decreasing the risk of multiple tribunals deciding the same issues, and particularly to avoid the risk of FTT tribunals in different hearings coming to different conclusions on the same issue.’
26. Rule 18 operates by making the tribunal’s decision in the lead case in respect of the common or related issues binding on the related cases. A clear definition of the common or related issues is important to the efficient operation of rule 18; without this, the case management efficiency of the rule 18 mechanism is reduced or reversed as related cases apply to the tribunal for a direction under rule 18(4) that they be unbound from the lead case. On the other hand, the presence of additional issues to the common or related ones, in the lead case or a related case or both, should not be a barrier to the operation of rule 18, as the decision in the lead case is binding only in relation to the common or related issues.” (emphasis added)
[69] I observe that whilst Rule 18(4) can apply to unbind, there is no right to be unbound.
...
[85] As I have pointed out I agree with Judge Berner that a decision to issue a Rule 18 direction should not be taken lightly. I have given the Rule 18 Application considerable thought and I accept that there are similarities in the approach taken by each of the appellants. However, I am afraid that I cannot agree with Mr Ewart that the differences in the factual matrices are simply nuanced. I am unable to identify with sufficient clarity factual issues in Putney or Cogeneration that would be determinative of all of the appeals." (Putney Power Limited v. HMRC [2023] UKFTT 292 (TC), Judge Anne Scott)
​
Relevant factors
Purpose is to shorten hearings and reduce risk of inconsistent decisions
“The purpose of rule 18 is, it seems to me, to avoid unnecessary litigation, and that must include shortening the length of hearings. It must also include decreasing the risk of multiple tribunals deciding the same issues, and particularly to avoid the risk of FTT tribunals in different hearings coming to different conclusions on the same issue.” (288 Group Ltd v. HMRC [2013] UKFTT 659 (TC), §39).
Existence of additional issues/possible factual differences not a reason for refusing lead case direction
“…the mere fact additional issues would arise on the would-be related case if the lead case succeeded, such as quantum or whether an appeal was lodged late, does not seem to be a good reason to refuse a rule 18 direction…The difficulties which are likely to arise are where the parties dispute whether the facts in the related cases are sufficiently similar such that the decision on law in the lead case actually applies and binds the related case. Nevertheless, it seems to me that even this is a fairly weak objection in that Tribunals and courts regularly have to decide whether a case is distinguishable on the facts in order to decide whether the decision on the law by a superior court is binding.” (288 Group Ltd v. HMRC [2013] UKFTT 659 (TC), §§39…41 – noting that HMRC had accepted that the issues were similar when consenting to a stay).
Lead case direction has benefit even if it is inevitable that HMRC will appeal
“But it seems to me that even if I accept that an appeal is inevitable if HMRC lose, so that the benefit to the appellant of a rule 18 direction mentioned in §9 could never be available to them, nevertheless they would still have the benefit that if HMRC win and Zipvit choses to accept that, the related appellants could appeal as per § 11.” (288 Group Ltd v. HMRC [2013] UKFTT 659 (TC), §13).
That HMRC may have to repay the tax in all related cases if they lose is not a reason to refuse lead case direction
“HMRC’s concern is that the effect of Rule 18 is that they might be obliged to pay the claims on all related cases if the lead appellant was successful even if HMRC then appealed the FTT decision. This would not be a risk if the cases were simply stayed pending the final outcome of the lead appeal. HMRC say they would make applications to disapply s 85B(1) in order to protect revenue but such applications would not necessarily be successful…I do not consider that S 85B amounts to a reason to refuse a Rule 18 direction. It is a matter that can be fully aired should the situation in § 21 arise, and the Tribunal needs to decide what are the appropriate directions to be made under Rule 18(4) and (5) following the FTT decision in the lead appeal.” (288 Group Ltd v. HMRC [2013] UKFTT 659 (TC), §23).
​
Lead case binding on related cases in respect of common or related issues
“Rule 18 directions do more than merely stay one case behind another. The difference, as Mr Grodzinski puts it, is that a rule 18 direction makes the FTT decision in the lead case binding on the related cases in the FTT. To this extent the FTT decision in the lead case creates binding precedent when, as the FTT is not a court of record, its decisions normally do not have this effect.” (288 Group Ltd v. HMRC [2013] UKFTT 659 (TC), §6).
Only binding in respect of common/related issues
“…it is the decision on the common or related issues that is binding on the related parties: it is not the outcome of the lead appeal which is binding (even though in many cases it would amount to the same thing). Take for instance, a lead appeal with an out of time issue and a main issue which was designated as the common or related issue with another case. If the lead appellant wins on the main issue of law but loses on the out of time issue, the related case, which did not raise the out of time point, would not be dismissed just because the lead appeal was dismissed. On the contrary, it would succeed.” (288 Group Ltd v. HMRC [2013] UKFTT 659 (TC), §13).
​
Substitution of lead case
“(6) If the lead case or cases are withdrawn or disposed of before the Tribunal makes a decision in respect of the common or related issues, the Tribunal must give directions as to--
(a) whether another case or other cases are to be heard as a lead case or lead cases; and
(b) whether any direction affecting the related cases should be set aside or amended.” (FTT Rules, r.18(6)).
Related case party objecting to being bound/applying to unbind
“(4) Within 28 days after the date that the Tribunal sent a copy of the decision to a party under paragraph (3)(a), that party may apply in writing for a direction that the decision does not apply to, and is not binding on the parties to, that case.” (FTT Rules, r.18(4))
​- HMRC may apply to be unbound if they lose
“And what if the lead case is won by the lead appellant and HMRC appeals? A similar problem arises: HMRC will need to make an application to unbind the related cases and it is likely that such applications would be stayed pending the outcome of the appeal on the lead case. Again there is the possibility of the Tribunal instead allowing all the related appeals thus creating individual decisions which HMRC would be able to appeal aswell.” (288 Group Ltd v. HMRC [2013] UKFTT 659 (TC), §14)
​
- Only unbound if injustice cannot be avoided in other ways
“In my judgment, a direction under rule 18(4) should be made only in circumstances where the binding effect on a party would create an injustice that cannot be avoided by any other procedural means which preserves the integrity of the lead case process. On making a lead case direction the Tribunal must be satisfied that the cases give rise to common or related issues of fact and law. This case itself is a good example, in fact, of the care that should be taken before an appeal is designated as a related case under a rule 18 direction. A lead case direction is not one that is made lightly, nor should it routinely be capable of being cast aside.” (General Healthcare Group Ltd v. HMRC [2014] UKFTT 353 (TC), §18, Judge Berner).
Even if lead decision is said to be contrary to EU law
“The crucial point, in my view, is that the binding effect of the decision on the common or related issues in the lead case is not in the nature of a binding precedent, but merely a determination of those issues in the related case…Thus, in the same way that it would not be open to a party to re-open proceedings before the First-tier Tribunal on a preliminary issue of law decided by the Tribunal in those proceedings or to re-open the relevant issue in the lead case itself on the ground that the tribunal was wrong as a matter of EU law, it is equally not open to a party to argue in the First-tier Tribunal that the decision in the lead case does not bind the parties to the related case because it is inconsistent with EU law. The proper forum for an argument of that nature is the Upper Tribunal on appeal on a question of law from the relevant decision of the First-tier Tribunal.” (General Healthcare Group Ltd v. HMRC [2014] UKFTT 353 (TC), §30, Judge Berner)
​
- Separate hearing of related case (without unbinding) only if there are potentially material factual differences/limited to material differences
"[31] Although I appreciate [the taxpayer's] concerns, it is clear from GHG that, in determining an application under rule 18(4), the starting point is to preserve the integrity of the lead case process. Also a direction under rule 18(4) should only be made in circumstances where the binding effect on a party would create an injustice that cannot be avoided by any other procedural means.
[32] Such an injustice would be created in the present case if Muller, which has not contended that there was an error of law in Jones Bros, was able to distinguish its appeal on the facts but was prevented from doing so because it was bound by Jones Bros. It is therefore necessary to ask whether that injustice can be avoided by any other procedural means whilst preserving the integrity of lead case procedure. In my judgment it can by way of a direction, as in GHG, under rule 18(5). As such, I do not consider it appropriate to make a direction under rule 18(4).
[33] I therefore dismiss Muller’s application under rule 18(4) but make the following directions under rule 18(5):
(1) There be a hearing for the purpose of the Tribunal giving directions under rule 18(5) providing for the disposal if this appeal.
(2) The parties shall liaise and use their best endeavours to agree case management directions for the further progress of this appeal (which shall include the exchange of evidence relevant to the case put by Muller that its appeal should be allowed, on its own facts, notwithstanding the binding effect of the determination in Jones Bros on the common or related issues of law) and not later than 56 days from the date hereof shall either provide to the Tribunal their agreed proposed directions or in the absence of agreement each party’s own proposed directions." (Muller Dairy (UK) Limited v. HMRC [2023] UKFTT 654 (TC), Judge Brooks)
​
“In an ordinary case, there will be no question of a hearing being required for the purpose of rule 18(5), and the tribunal will make no specific findings of fact in respect of the related case. Where, as in this case, it is argued that, even allowing for the binding effect of the decision in the lead case, there are material distinguishing features in the related case that make it arguable that a different conclusion should be reached in the related case, a hearing…may not be used as an opportunity for full fact-finding by the tribunal. The tribunal will confine itself to an examination only of the feature of the related case which are asserted to be distinguishing and material features.” (General Healthcare Group Ltd v. HMRC [2014] UKFTT 1087 (TC), §§25 - 26, Judge Berner)
​
- Binding effect as to fact does not permit distinction on the basis that tribunal made an error of fact
“[The taxpayer’s] case is that the tribunal in Nuffield failed to consider the correct facts in applying the law as it had found it to be. [The Taxpayer] submitted that it would be wrong for this tribunal to perpetuate such an error by the tribunal in Nuffield in making a direction in a related case. That is not something that is open to this tribunal to determine on the making of a direction under rule 18(5). It is an argument that the tribunal in the lead case erred in law in reaching its conclusions, because it failed to take account of relevant facts, or took into account something that was irrelevant. As I explained in my earlier decision, questions of law are for the Upper Tribunal to determine on appeal.” (General Healthcare Group Ltd v. HMRC [2014] UKFTT 1087 (TC), §§14 – 15, Judge Berner)
​
- Related Case party should appeal decision applying lead case to its facts
“the proper course for a related case party that wishes to appeal on a question of law arising out of the lead case, is to appeal the decision in the related case, which will be made under rule 18(5).” (General Healthcare Group Ltd v. HMRC [2014] UKFTT 1087 (TC), §25, Judge Berner).
“There is no provision in rule 18 for a party to a related case to appeal the decision in the lead case. There must first be a determination by the Tribunal of the related case.” (General Healthcare Group Ltd v. HMRC [2014] UKFTT 353 (TC), §23, Judge Berner).
​
“In practice, as the FTT must issue directions on related cases following the disposal of the lead case (see Rule 18(5)), in such an eventuality the FTT is likely to issue a direction dismissing the related appeals. This direction can then be appealed. The Upper Tribunal on appeal would then consider the merits of the decision in the lead case because the Upper Tribunal, unlike the FTT, would not be bound by the precedent created by the FTT decision.” (288 Group Ltd v. HMRC [2013] UKFTT 659 (TC), §11).
​
- FTT staying related cases pending appeal in lead case
“Having weighed up the various considerations, my overall conclusion is that the Stay Directions should remain in place for the following reasons:
(1) The FtT’s overriding objective is to deal with cases fairly and justly. The Stay Directions ensure that the related appeals are disposed of with the full benefit of the Upper Tribunal’s decision on appeal. By contrast, Mr Gammie’s approach runs the risk that those appeals are disposed of based on an imperfect understanding of the law. Any resulting mistake could be corrected (at least for those related appellants who seek permission to appeal against the disposal of their case under Rule 18(5)). However, the procedure for correcting any mistake could result in additional costs and complexity which would not arise under the Stay Directions.
(2) While the Stay Directions defer the point at which the binding nature of the FtT’s decision on the First Issue has tangible effects, they still acknowledge the binding effect of that decision. …
(3) Mr Gammie is correct to say that, until there is a “determination of the appeal” for the purposes of s55(3) of TMA 1970, any postponement of tax granted under s55 remains in place. However, HMRC are entitled to interest on any tax that is determined to have been underpaid…By contrast, if the FtT adopted Mr Gammie’s proposal and the appeal of a related appellant was wrongly disposed of based on a flawed appreciation of the law, that related appellant would need to appeal to the Upper Tribunal for the mistake to be corrected, would incur costs in doing so and may incur further costs if the matter were then remitted back to the FtT.
(4) I am reassured to note that Judge Mosedale, in paragraphs [12] and [13], of her decision in 288 Group Limited was endorsing an approach similar to the one I am suggesting. …
(5) … I am reinforced in my conclusion by the approach taken in Revenue and Customs Commissioners v RBS Deutschland Holdings GmbH [2007] STC 814 which suggests that I should consider whether the Upper Tribunal’s decision will be of “material assistance” in resolving the related appeals and whether it is expedient to stay proceedings. I consider both limbs of this test to be satisfied.” (ABL (Holding) Ltd v. HMRC [2017] UKFTT 220 (TC), §17, Judge Jonathan Richards).
“In such a case [where the lead appellant loses but appeals], as long as the related appellants make the application for unbinding, the current practice of the Tribunal is to stay the application pending the final resolution of the appeal in the lead case. An alternative approach would be to refuse to unbind the related cases and simply dispose of them, against the various appellants, under rule 18(5), thus creating a decision would could be appealed to the Upper Tribunal as per § 11. I am not aware of this approach being adopted and it has the disadvantage that it would mean all the related cases would have to appeal rather than waiting the outcome of the lead case appeal. This would increase costs and seem to defeat the object of the rule 18 procedure.” (288 Group Ltd v. HMRC [2013] UKFTT 659 (TC), §13)
​
No lead case directions in UT
​
“But the application of rule 18 is not without its difficulties. Most of these difficulties stem from the fact that a designation of cases as lead cases and related cases does not survive on an appeal: the Upper Tribunal has no mirror to rule 18. In this rule 18 in effect diverges from the CPR where a group litigation order survives on appeal.” (288 Group Ltd v. HMRC [2013] UKFTT 659 (TC), §8).
Lead case alternative
Hearing discrete point from multiple appeals at the same time
“At that hearing Judge Morgan decided that, under rule 5(3)(b) of the Tribunal Procedure (First-Tier Tribunal (Tax Chamber) Rules 2009, the CJEU referral in relation to each of the relevant appeals, including this appeal, is to be treated as a separate issue to be dealt with in a separate hearing at which all of the CJEU referrals will be considered together.” (Lowcost Holidays Ltd v. HMRC [2017] UKFTT 463 (TC), §4, Judge Gillett – the FTT determined the appeal in the taxpayer’s favour, subject to the discrete point).