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M29: Striking out proceedings
Strike out the appellant, debar the respondent
“(7) This rule applies to a respondent as it applies to an appellant except that--
a reference to the striking out of the proceedings must be read as a reference to the barring of the respondent from taking further part in the proceedings; and
a reference to an application for the reinstatement of proceedings which have been struck out must be read as a reference to an application for the lifting of the bar on the respondent taking further part in the proceedings.” (FTT Rules r.8(7)).
Failure to pay tax or claim hardship does not stop HMRC being debarred
“[HMRC submitted] that the directions and barring order – being made in contravention of the injunctions in [VATA] section 84 against the tribunal proceeding with an appeal, where no payment of the tax at issue has been made, and no ‘hardship’ application has been made or accepted – have been made without jurisdiction and are therefore of no effect. The argument is, as we understand it, that compliance with section 84(3)-(3C) is a condition precedent to the tribunal having jurisdiction to deal with an appeal (though it does not affecting the validity and existence of the appeal itself)…[T]his analysis goes too far and, while apparently giving full effect to the statutory prohibition, in the result produces a situation which cannot have been the legislator’s intention. Thus, should there be – as in this case – a failure to respect the requirements of section 84 and the case were still to proceed to a conclusion, the consequence would have to be that the decision of the tribunal would be void; and, more serious still, that any appeal proceedings from that decision would also fall.” (Compass Contract Services UK Ltd v. HMRC [2014] UKFTT 403 (TC), §§85…86).
Automatic strike out for failure to comply with an “unless” direction
“(1) The proceedings, or the appropriate part of them, will automatically be struck out if the appellant has failed to comply with a direction that stated that failure by a party to comply with the direction would lead to the striking out of the proceedings or that part of them.” (FTT Rules r.8(1))
Automatic strike out for lack of jurisdiction
“(2) The Tribunal must strike out the whole or a part of the proceedings if the Tribunal--
does not have jurisdiction in relation to the proceedings or that part of them; and
does not exercise its power under rule 5(3)(k)(i) (transfer to another court or tribunal) in relation to the proceedings or that part of them.” (FTT Rules r.8(2)).
Party must be given an opportunity to make representations
“(4) The Tribunal may not strike out the whole or a part of the proceedings under paragraphs (2) without first giving the appellant an opportunity to make representations in relation to the proposed striking out.” (FTT Rules r.8(4)).
Hearing not necessary if FTT in no doubt
“I consider that if I am in any doubt about the correct decision on the strike out application, I should hold a hearing to give parties the chance to explain their position fully.” (Ince v. HMRC [2017] UKFTT 645 (TC), §5, Judge Mosedale).
FTT must decide whether it has jurisdiction, not whether it is arguable
“The proper task before the FTT was not to identify potentially non-fanciful arguments that jurisdiction might exist. The task was to determine whether jurisdiction did or did not exist; if it did, the application on that ground would inevitably be refused, and if it did not it would inevitably be granted.” (Woodstream Europe Limited v. HMRC [2018] UKUT 398 (TCC), §18, Zacaroli J and Judge Thomas Scott).
“It is clear that in relation to strike outs on the basis of lack of jurisdiction the test is a binary one; either the tribunal has jurisdiction or it does not. On appeal, the issue of law is whether the FTT made an error of law in its determination on jurisdiction. The task for this Tribunal is not simply to consider whether there is an arguable case that the FTT had jurisdiction. That is the threshold relevant to a grant of permission to appeal. On the appeal itself, it is for this Tribunal to determine those questions of law before us which are material to that case.” (Raftopolou v HMRC [2015] UKUT 579 (TCC), §25, Judges Berner and Raghavan)
No discretion
“An appeal where this Tribunal has no jurisdiction must be struck out. It is not open to the Tribunal, having concluded that there is an arguable case on jurisdiction, to refuse to strike out the appeal: it must resolve the issue. It must decide whether there is jurisdiction or not and, in the latter case, the appeal must be struck out.” (Spring Capital v. HMRC [2013] UKFTT 041 (TC), §21).
Generally to be decided in advance of substantive hearing
“I agree with Judge Poole’s view ([5] above again) that applications of this nature should be dealt with when they arise, rather than be deferred to the substantive hearing of the appeal. That is because the nature of HMRC’s objection goes to the heart of whether the disputed grounds (ie paras 7-25 of the AGOA) constitute a matter which is within the jurisdiction of the Tribunal. It can be distinguished from the case of Tilling v Whiteman cited by Mr Brennan where the preliminary point of law concerned whether a statutory landlord and tenant provision “applies to a case where there are joint owners one only of which requires the house as a residence”. In Tilling the House of Lords was critical of the lower courts for not making findings of facts sufficient to inform the determination of the preliminary point of law. That is, in my view, qualitatively different from the situation before me; this is not a preliminary point of law arising in the substantive appeal but instead a strike-out application which alleges that the Tribunal should not be considering the challenged aspects of the dispute, for want of jurisdiction.” (Pertemps Ltd v. HMRC [2015] UKFTT 512 (TC), §41).
No jurisdiction where appeal is the same as previous appeal dismissed
“Once it has been drawn to the Tribunal’s attention that it has recorded as a new appeal a matter that has in fact been subject to a previous appeal and a decision on that previous appeal by the Tribunal, it may be that the Tribunal, as an administrative matter, can just delete the appeal from its systems and notify the parties accordingly…We make no decision to that effect because whether or not it is correct, Rule 8(2)(a) of the Tribunal Rules states that the Tribunal must strike out the proceedings if the Tribunal does not have jurisdiction in relation to the proceedings. We are satisfied that we have no jurisdiction in appeal TC/2013/00746 and therefore must strike it out.” (Westminster College of Computing Ltd v. HMRC [2014] UKFTT 132 (TC), §§18…19, Judge Gammie QC).
Burden on person asserting jurisdiction even in strike out
"[44] I agree with Judge Mosedale at paragraph 90 of Mather where, albeit in regard to standing, she states:-
“It is for a person who maintains that this Tribunal has jurisdiction to hear the appeal that must prove this Tribunal actually does have jurisdiction, and that is the case even where the jurisdiction issue is raised in an application for a strike out by the respondents”.
It is for the NHS Trusts to establish that this Tribunal does have jurisdiction." (Isle of Wight NHS trust v. HMRC [2023] UKFTT 23 (TC), Judge Anne Scott)
Strike out of appeal against VAT assessment where return not submitted
See K2: Appealable decisions (indirect tax)
Automatic strike-out for lack of standing
"The task before the FTT in this case was not to suggest possible lines of argument as to why standing might exist, and then to refuse the strike-out application on the basis that those arguments were “properly arguable” (paragraph 93 of the decision) or “strongly 20 arguable” (paragraph 90). The task was to decide whether the appellant had standing or not.” (Woodstream Europe Limited v. HMRC [2018] UKUT 398 (TCC), §19, Zacaroli J and Judge Thomas Scott).
Discretionary strike out: general power
“(3) The Tribunal may strike out the whole or a part of the proceedings if--
(a) the appellant has failed to comply with a direction which stated that failure by the appellant to comply with the direction could lead to the striking out of the proceedings or part of them;
(b) the appellant has failed to co-operate with the Tribunal to such an extent that the Tribunal cannot deal with the proceedings fairly and justly; or
(c) the Tribunal considers there is no reasonable prospect of the appellant's case, or part of it, succeeding.” (FTT Rules r.8(3)).
Party must be given an opportunity to make representations
“(4) The Tribunal may not strike out the whole or a part of the proceedings under paragraphs (2) or (3)(b) or (c) without first giving the appellant an opportunity to make representations in relation to the proposed striking out.” (FTT Rules r.8(4))
Except, perhaps, where due to failure to comply with direction stating proceedings “could” be struck out
Rule 8(4) does not mention r.8(3)(a) or r.8(1)
Failure to comply with direction stating that failure could lead to strike out (limb (a))
Strict interpretation of directions
“There was no explicit direction to serve them on the Appellant and thus there was no failure to comply with a direction which warned that HMRC could be barred as a consequence of their failure.” (Dangov v. HMRC [2017] UKFTT 734 (TC), §26, Judge Amanda Brown).
Similar approach to relief from sanctions
“This was not a case where the appellant was applying for relief from sanctions, but a case where the Tribunal was considering whether to impose the sanction of strike out…Nevertheless, it seems to me that similar considerations would apply in both situations, as long as I remain conscious that sanctions have not yet been imposed and it may not be appropriate to apply any sanctions. The Supreme Court in BPP [2017] UKSC 55 which was similarly a case where a ‘may’ Rule 8(3)(a) unless order had been imposed certainly appeared to consider the guidance in court cases on relief from sanctions was relevant but not binding on this Tribunal…So I will consider the seriousness of the breach, why it occurred, and then all relevant factors, before deciding whether it is right to strike out the appeal.” (Greenish Ltd v. HMRC [2017] UKFTT 727 (TC), §§19…20…22, Judge Mosedale).
Persistent failure to comply with directions
"[83] HMRC were therefore very clearly put on notice that the delays were of real concern to the Tribunal.
[84] That concern was reinforced when Judge Redston issued the Unless Order. Yet still HMRC appear to have taken little action to carry out their obligations. Aside from the problems arising from leaving matters to the last moment which I have already addressed in the context of their reliance on Mr Collins’ ill health as a reason for the failure to comply, HMRC only sent out the letter to officers seeking documents after HMRC had repeatedly failed to comply with the Agreed Directions. HMRC asked for the items to be disclosed to be provided by 10 January 2022.
[85] Therefore in relation to the importance of compliance with orders of the Tribunal I conclude that the behaviour of HMRC in relation to the seven documents alone weighs heavily against them being granted relief from sanctions." (Ebuyer (UK) Limited v. HMRC [2023] UKFTT 611 (TC), Judge Bowler)
“…the censure relates to his prolonged failure to produce the necessary “paperwork”. This has been sought over an extended period for part of which, apparently, he was perfectly fit…In short the Tribunal considers that Mr McKee’s failure to obtemper the Directions is deliberate and culpable. He has been cautioned as to the possibility of strike-out…Accordingly the Tribunal strikes out the whole of these proceedings on the basis of a continuing failure to comply with necessary Directions…” (McKee v. HMRC [2014] UKFTT 806 (TC), §§10…11…12).
“The crux of the matter in this case is that the representative submitted the Document List on which they intended to rely in the appeals in December 2010. In terms of Rule 27(3) HMRC have the right to see those documents. Repeated Directions have been issued by the Tribunal after detailed consultation with the representative and Counsel and there has been a repeated failure to obtemper those Directions. Mr C O’Brien and the representative have repeatedly failed to comply with the overriding objective of the Rules. There has been extensive delay. Mr C O’Brien was put on formal notice that if he failed to comply with those Directions the appeals would be struck out. He has so failed. Looking to the Tribunal Rules, the Tribunal finds that the application from HMRC should be granted and the appeals are struck out.” (O’Brien v. HMRC [2012] UKFTT 581 (TC) §41).
Failure to comply with directions and no serious intention of taking appeals to hearing
“It is clear to me that the Appellants do not have any serious intention of taking these appeals to a hearing. Ms Bradshaw and Mr Haft have been pursuing a settlement of the appeals. That is an entirely proper course of action and a laudable intention but it does not justify a failure to comply with directions. It will often be appropriate to stay proceedings to enable parties to discuss a possible settlement but where, for whatever reason, the proceedings have not been stayed then it is not acceptable for one party unilaterally to treat them as if they have been. Parties cannot be permitted to adopt an approach whereby they decide whether and when to comply with the Tribunal’s directions. The Appellants could have prepared their replies while, at the same time, seeking to progress negotiations with HMRC. The only reason given for not doing so is that the Appellants were in financial difficulties and did not want to incur costs unnecessarily. I do not regard that as a reason not to comply and it is, in any event, misconceived as the consequence has been that the Appellants have been put to more expense than if they had complied.” (Grindley v. HMRC [2016] UKFTT 384 (TC), §34).
Due to party being barred from advancing evidence in support
“HMRC’s decision might prove vulnerable if the appellant were to provide evidence which persuaded a Tribunal that HMRC’s version of events were incorrect but in the absence of such evidence there is nothing to suggest the appellant, if struck out would be losing the right to fight a case which it had a reasonable chance of winning. On the basis of information before me the merits do not point to a strong case where there would be an injustice in striking the matter out for non-compliance…Allowing the appeal to go forward, with the resulting time and cost resources both for the other party and the Tribunal in circumstances where the appellant makes very serious allegations, has indicated it has witness evidence, but where it has not made any effort to put that before the other party would not be in the interests of justice in my view.” (Tradium Ltd v. HMRC [2014] UKFTT 894 (TC), §§78…79…80).
Breach of directions to allow HMRC to understand taxpayer’s case where merits of appeal weak
“The appellant was in breach of an unless order: while its failure to comply was relatively minor, it was one of a number of failures to state its case to HMRC. And that was against a background of a failure by the appellant to ever give clear grounds of appeal: all the appellant had ever done in this appeal was to re-state its (in my view unfounded) complaint in generalised terms that HMRC had not given it enough information to check the validity of the assessment. It had never chosen to address the correctness of the actual assessment in this case despite being provided with sufficient material to do so. I have also found that its appeal was without reasonable prospect of success, and I have not found that HMRC were in breach of any directions. In all these circumstances, the appeal should be struck out.” (Greenish Ltd v. HMRC [2017] UKFTT 727 (TC), §120, Judge Mosedale).
FTT cannot deal with proceedings fairly and justly (limb (b))
Fairly and justly (strike out even where a fair hearing is possible)
“In considering whether a result is just, the courts are not confined to considering the relative positions of the parties. They have to take into account the effect of what has happened on the administration of justice generally. That involves taking into account the effect of the court’s ability to hear other cases if such defaults are allowed to occur. It will also involve taking into account the need for the courts to show by their conduct that they will not tolerate the parties not complying with dates for the reasons I have indicated.” (Biguzzi v. Rank Leisure Plc [1999] WLR 1926 (CA) at 1933 see also Nutro UK Ltd v. HMRC [2014] UKFTT 971 (TC)).
“Firstly, rule 8(3)(b) could apply where the appellant has already been so prejudiced by HMRC’s conduct in a manner which cannot be remedied and that therefore the proceedings cannot be fair and just. In such a case HMRC should normally be barred from the proceedings. Secondly, I consider that rule 8(3)(b) could apply where there has been a course of conduct by HMRC which, while it has not yet meant it is not possible to deal with the appeal fairly and justly, nevertheless it is a pattern of conduct which, if it continues, will mean that the appeal cannot be dealt with fairly and justly. In such a case, I consider it might be appropriate to bar HMRC from proceedings.” (First Class Communications Ltd v. HMRC [2013] UKFTT 90, §52 cited in Ritchie v. HMRC [2016] UKFTT 509 (TC), §52).
Significant weight of efficient conduct of litigation and compliance with rules
“It is plain that Judge Mosedale took into account all relevant factors. It is not alleged that she fell into error by failing to do so. Two of the factors that might have predisposed the tribunal to come to a different view were found in BPP's favour, namely not only was there no good reason for non-compliance, there was no reason at all and further, prejudice had been occasioned as a consequence i.e. significant delay and expense. The balance was stark on the facts. It is accordingly wrong to say that non-compliance was the only factor that militated in favour of a barring order. The lack of any reason for non-compliance and the finding of prejudice were also relevant factors…In any event, and given my conclusion on the legal policy question that has been raised, it is in my judgment an appropriate reflection of the purpose of the overriding objective that compliance and the efficient conduct of litigation at a proportionate cost are given the weight accorded to them by the FtT in this case.” (BPP Holdings Ltd v. HMRC [2016] EWCA Civ 121, §§41…42)
“The Court of Appeal therefore held that with the tax tribunal rules being silent on the question, it was appropriate that the tribunal accord the efficient conduct of litigation at a proportionate cost and compliance with rules, practice directions and orders significant weight as part of its consideration of the overriding objective set out in Rule 2 of the Tribunal Rules, which in this case requires the Tribunal to consider whether in all the circumstances it is fair and just to extend time.” (Clear Plc v. HMRC [2016] UKUT 347 (TCC), §18, Judges Herrington and Aleksander).
“In coming to my conclusions on each of these matters I must take account of all of the relevant circumstances, having regard to the overriding objective of the Tribunal to deal with cases fairly and justly. This includes giving appropriate weight to the need for litigation to be conducted efficiently and at proportionate cost and to enforce compliance with rules, practice directions and orders of the Tribunal.” (Ritchie v. HMRC [2016] UKFTT 509 (TC), §63(4)).
BPP (CA) overruled earlier case law that CPR case law on relief from sanctions was not relevant, e.g. HMRC v. BPP Holdings Ltd [2014] UKUT 496 (TCC), §40; Nutro UK Ltd v. HMRC [2014] UKFTT 971 (TC), §18.
Compliance with rules not an end in itself
“The Tribunal recognises that strike-out is a draconian remedy with severe consequences and therefore an appeal should not be struck out merely for good housekeeping purposes or out of a preoccupation with tidiness. Nor should an appeal be struck out for non-compliance with directions, other than unless orders, that will not affect the fairness or justice of the proceedings continuing.” (XG Concept Ltd v. HMRC [2017] UKFTT 92 (TC), §41).
“In so far as those cases afford any guidance to the approach to be adopted to the exercise of my discretion in a case such as this, it is in the need, according to Denton, to avoid taking an unduly draconian approach, and not to regard compliance with rules as an end in itself superior to doing justice in the case. In Chartwell Estate Agents Ltd v Fergies Properties SA [2014] EWCA Civ 506, Davis LJ gave a timely reminder, at [62], that “… the courts do not exist for the sake of discipline”, an observation reinforced by Sir David Eady in Groarke v Fontaine [2014] EWHC 1676 (QB), at [7].” (Nutro UK Ltd v. HMRC [2014] UKFTT 971 (TC), §19)
Consider lesser sanctions
“It is not simply a question of looking at serious prejudice having been or likely to be caused to the opposing party. There may be a range of lesser sanctions available to remedy failures causing prejudice such as unless orders, costs orders, exclusion of evidence and postponements that may yet render proceedings fair and just.” (XG Concept Ltd v. HMRC [2017] UKFTT 92 (TC), §42).
That case can still be dealt with in accordance with overriding objective is an important factor
Although caution is appropriate as this is pre-BPP (SC) case law.
“…the consequence of my imposing a barring order will be that the F-tT’s decision on the merits of the appeal, whatever it might be, will be unsatisfactory, in that it may hand an unwarranted windfall to BPP but perhaps more importantly will not adequately determine whether or not its supplies are zero-rated. The consequence of my refusal of a barring order, on the other hand, is that the F-tT will be able to reach a conclusion after full argument, and will be able to deal with the case fairly and justly, and thus in accordance with the overriding objective…I do not go so far as to say that there should never be a barring order (or, in the case of an appellant, a direction striking out the appeal) unless the overriding objective is incapable of performance.” (HMRC v. BPP Holdings Ltd [2014] UKUT 496 (TCC), §§60…61).
“In this case, as in BPP, HMRC's conduct has caused delay and expense. It is, however, plainly not so egregious that it should be barred from participating in the proceedings. It certainly cannot outweigh the desirability of the F-tT determining the appeal after hearing full argument on whether the Appellant's claim for input tax has merit. I do not see how it can be said that this appeal can no longer be dealt with fairly and justly.” (PGPH Ltd v. HMRC [2016] UKFTT 46 (TC), §37).
- FTT entitled to decide fair hearing possible even if parties agree fair hearing not possible
"[47] We did not understand either party (rightly in our view) to take the position that simply because the parties agreed a hearing would be unfair it must follow that holding a hearing would be unfair. The parties’ agreement would obviously be a factor to consider but it would not be conclusive. The FTT could clearly reach its own view on that issue. The appellants’ submission must therefore be that it not open to the FTT, in the circumstances of this case, to reach any finding other than that a fair hearing was impossible." (Parnham v. HMRC [2023] UKUT 285 (TCC), Judges Raghavan and Brannan)
Relevant factors
- Convenience is not sufficient
“Other than in relation to jurisdiction, which is accepted in these particular cases, the circumstances where an appeal may be struck out relate to compliance failures or where an appellant’s case has no reasonable prospect of success. Neither circumstance applies here. There can be no strike out purely on the basis of convenience.” (Baruela v. HMRC [2015] UKFTT 422 (TC), §20).
- General fairness not sufficient
“However, the appellants’ argument goes far beyond any reasonable purposive interpretation of Rule 8(3)(b) and amounts to an assertion that general considerations of fairness should permit the Tribunal to bar HMRC from proceedings even though the basic pre-condition of Rule 8(3)(b) is not met.” (Colman v. HMRC [2018] UKFTT 141 (TC), §30, Judge Jonathan Richards).
- Due lack of equality of arms/no fair trial
“The Appellant says that its challenge should be accepted without the matter even being heard, notwithstanding that the other party contests its appeal, simply on the grounds that any hearing would be a denial of its fair hearing rights. No authority was cited to us that fair hearing or fair trial rights could lead to such a result. The European Court of Human Rights did not go that far in Steel and Morris…” (Aleena Electronics Ltd v. HMRC [2015] UKFTT 0061 (TC), Annex 1, §9).
- Late evidence not sufficient unless deliberately withheld
“Absent any finding that Mr Sethi had been deliberately withholding material evidence, it does not seem to me that the production of these materials, albeit late, should, either alone or in combination with other procedural defaults, lead to a striking out of the appeal on this basis.” (Nutro UK Ltd v. HMRC [2014] UKFTT 971 (TC), §53)
- Deliberately including without prejudice material in statement of case
“I also take into account the fact that (as I have found), HMRC did not deliberately use without prejudice material in its statement of case. Had it done so, it would be much more likely that the Tribunal might feel that it could not deal with the proceedings fairly and justly.” (Ritchie v. HMRC [2016] UKFTT 509 (TC), §91).
- Lying to the Tribunal may be sufficient
“The decision to strike out an Appeal is an extreme step that we consider we should only take if we are satisfied that the conduct by the Appellant’s witnesses has involved lies, that that conduct may pervade much of their testimony that might be given in the substantive hearing and that we are clear that it would be impossible or unlikely for us to hear the substantive matters in dispute in a fair and just manner.” (JSM Construction Ltd v. HMRC [2016] UKFTT 163 (TC), §50)
“Even though I do not consider that this is a case where there could not be a fair hearing…the combination of the persistent defaults by Nutro, the numerous warnings given by the Tribunal, and the reprehensible attempts by Mr Sethi to mislead the Tribunal, lead me to the clear conclusion that this is a case in which the appellant has failed to co-operate with the Tribunal to such an extent that the Tribunal cannot deal with the proceedings fairly and justly.” (Nutro UK Ltd v. HMRC [2014] UKFTT 971 (TC), §57).
Difference between fabricating an entirely false story and untrue statements in cross-examination
“We accept that the Respondents’ counsel was able to make a powerful case in relation to the circumstances in which Mr. King’s witness statement was procured and produced. We also accept that some of the evidence given by Mr. Wiltshire, and to a lesser extent Mr. Scanlon, during the hearing has been evasive and some of it almost certainly untrue. Any untrue statements were however statements in response to rigorous cross-examination in relation to circumstances that the witnesses will have found embarrassing, but nothing remotely approaches the endeavour to fabricate an entirely false story…In the light of that, we dismiss the Application to strike out the Appeal. We are heavily influenced by the conclusion that we have reached that if anything Mr. King’s witness statement was repetitious and irrelevant, rather than materially false in any way.” (JSM Construction Ltd v. HMRC [2016] UKFTT 162 (TC), §§68…69)
- Catalogue of non-compliance indicates future non-compliance
“Nevertheless in this case the appellant’s five failures to comply with three different sets of directions over a period of five months might properly be described as litany of defaults. They have cumulatively and individually affected the fairness and justice of the proceedings to date and indicate that the approach of the appellant is likely to continue. The third and fifth of the appellant’s breaches, in response to the October and December directions, to provide witness statements and grounds to oppose the strike out application, were serious and significant breaches in their own right…This conduct is compounded by the appellant’s failure to attend or oppose the strike out application at the hearing itself…This catalogue of non-cooperation means that the Tribunal can reasonably extrapolate that the appellant’s conduct of the proceedings would continue in the same vein in the future were the case to proceed to a final hearing. This would mean that the Tribunal would not be able to deal with the case fairly or justly. This is an appeal where the appellant’s repeated failure to engage with the process means that a fair and just determination is not possible.” (XG Concept Ltd v. HMRC [2017] UKFTT 92 (TC), §§46 – 48, Judge Rupert Jones).
Pattern of conduct: no reason to suspect significant further delays
“In my view, however, this is not part of a “pattern of conduct” on the part of HMRC generally or Mr Hone specifically. There is no evidence of any attempt to prejudice the Applicants at every turn as suggested by Mr Gordon…In any event, looking forward to the likely future conduct of these appeals, there is no reason to suspect that there will be significant further delays on the part of HMRC. I am issuing updated directions agreed by all parties (see further below) which will no doubt be adhered to.” (Ritchie v. HMRC [2016] UKFTT 509 (TC), §§115 - 116).
- Inordinate delay caused by a party
“Clearly, HMRC have been prejudiced and there has been delay. On the other hand, although the issues in the substantive appeals relate to some 13 to 17 years ago, these appeals only came to the Tribunal two years ago. They are complex cases. I find that, viewed through the prism of the procedural history, the delay, which is to be deprecated, is not inordinate.” (Decker v. HMRC [2016] UKFTT 805 (TC), §72, Judge Anne Scott).
Delay more serious if it is a failure to comply with direction
“In the light of the Court of Appeal’s comments in BPP Holdings, this would have been much more serious had it constituted a breach of an order or directions made by the Tribunal. Whilst I have accepted that the delay in dealing with the legitimate concerns raised by Mr Rodgers on behalf of the appellants does amount to a failure to co-operate with the Tribunal (and therefore a breach of the Tribunal Rules), I do give this factor less weight than would be the case if the delay was a delay in complying with an order of the Tribunal.” (Ritchie v. HMRC [2016] UKFTT 509 (TC), §94).
Or a reasonable request
“Had Mr Rodgers informed HMRC that he intended to make an application for HMRC to be barred from taking any further part in the proceedings if it failed to revise its statement of case within a certain time, this might have been an additional factor which would weigh in favour of granting the application although I think it is unlikely in these circumstances that it would have tipped the balance.” (Ritchie v. HMRC [2016] UKFTT 509 (TC), §97).
- Extreme delay leading to difficulties of recollection not sufficient
"[50] We acknowledge that the procedural history in this case puts this case regrettably at the extreme end of delay. There are undoubtedly difficulties in the witnesses recollecting events from such a long time ago, and not only that but in relation to individual journeys that were said to be undertaken as a matter of routine. But these difficulties must be put in the context of the litigation in these appeals. Both witnesses prepared witness statements in 2008 that were already some time after the events in 2006 and the answers Mr Parnham gave in cross-examination, even in 2010, some four years after the relevant events would have inevitably needed to take account of the difficulties of making recollections in such circumstances. There was no suggestion the difficulty of recollection rendered the hearings in 2010, and 2015 unfair, or that when Judge Poole refused HMRC’s strike out application in 2018 a fair hearing would be impossible at that stage.
...
[53] 53. Thus the difficulties in recollection were always going to be an issue in the circumstances of this case where even when Mr Parnham’s evidence was heard in 2010 recollection would be challenging. Those difficulties will have increased by some increment over time but in the circumstances of this case they are not such that they would require the FTT to have held that it was impossible to hold a fair hearing." (Parnham v. HMRC [2023] UKUT 285 (TCC), Judges Raghavan and Brannan)
Examples
Six month delay and inclusion of without prejudice material not sufficiently prejudicial
“A delay of six months in giving evidence of events which started almost 30 years ago (in 1987) is not in my view seriously prejudicial in the absence of clear evidence that Mr and Mrs Ritchie are significantly less likely to be able to give that evidence in six months’ time.” (Ritchie v. HMRC [2016] UKFTT 509 (TC), §88).
Catalogue of defaults not leading to strike out where burden on HMRC
“Having heard from Mr Arthur and Mr Ahmad, who said that he had fully co-operated with HMRC and was willing to pay the correct amount of tax (which he considered was less than that assessed) for the years under appeal and subsequently, we dismissed the application to strike out the proceedings. Although there was clearly a failure to comply with the directions of the Tribunal, we did not consider it to be such that it prevented the Tribunal from dealing with the proceedings fairly and justly especially as the burden of establishing the validity of the discovery assessments and penalties was on HMRC.” (Ahmad v. HMRC [2016] UKFTT 722 (TC), §8 – unreasonable behaviour costs order made).
Catalogue of failures by HMRC not leading to debarring where burden on taxpayer
“In the Tribunal’s view, and somewhat reluctantly given the level of non-compliance and the reason for it (which amounts only to unacceptable inefficiency of a large government department), it cannot be concluded that such non-compliance prevents the Tribunal from dealing with the proceedings fairly and justly. This is not a case where the Appellant would simply succeed as a consequence of HMRC’s failure. As an unrepresented Appellant it is the Tribunal’s view that it is likely that the best interests of the Appellant are served by HMRC being involved in the proceedings.” (Dangov v. HMRC [2017] UKFTT 734 (TC), §28, Judge Amanda Brown).
Case, or part of it, has no reasonable prospect of success (limb (c))
See M29a: no real prospect of success
Discretion to strike out under general power to regulate own procedure (Rule 5)
“I am not persuaded that I should hold that the FTT could not produce the desired just result by using its power under Rule 5 ‘to regulate its procedure’, particularly to deal with the case fairly and justly (as required by Rule 2(1) and (3)). Accordingly, I am not prepared to accept the submission of Ms Dewar for HMRC that the FTT could not make a debarring order against HMRC if, on the facts, the FTT considered that the only way to deal with the case fairly and justly was to make such an order.” (Foulser v. HMRC [2013] UKUT 38 (TCC), §64 – strike out not covered by express provision).
Discretionary strike out for abuse of process
Recognition that FTT has this power
“Although rule 8 of the Tribunal Procedure (FTT) (Tax Chamber) Rules 2009 (which deals with striking out) does not expressly provide for striking out a case on the grounds of abuse of process, [the taxpayer] (correctly, in my view) did not dispute that that could be a basis of striking out…In my view the general case management powers of the FTT allow it to recognise the concept of an abuse of process, and those powers must be capable imposing a sanction, of which striking out is likely to be a necessary one in some circumstances. Accordingly, since the concept of abuse of the Johnson v Gore Wood type applies to the FTT, it would lie within the powers of the Tribunal, in an appropriate case, to strike out. The newly-taken jurisdictional point therefore fails.” (Shiner v. HMRC [2015] UKUT 596 (TCC), §§55…72, Mann J).
Overlap with no reasonable prospect of success
“My own view, in a case of this nature, is that an abuse of process ground is more properly to be treated as a sub-set of the power of the Tribunal to strike out all or part of the proceedings where there is no reasonable prospect of success. To the extent that a challenge would be excluded as an abuse of process, that challenge will no longer be available to the applicant. If that is the only material challenge, the consequence will be that the reference will have no reasonable prospect of success, and may be struck out.” (Badaloo v. FCA [2017] UKUT 158 (TCC), §34, Judge Berner).
Essence
“The essence of abuse of process is conduct which the court characterises as unacceptable, whether it be extraordinary delay, repeated attempts to re-litigate the same issue, some sort of collateral attack on a court's final decision, the improper use of court procedures or some other conduct. The categories of abuse of process are not closed. While it may be said that the Appellant, through his tax advisers, has acted aggressively, we do not consider that he has acted improperly or in a manner which a court would or even might characterise as unacceptable.” (Pattullo v. HMRC [2014] UKFTT 841 (TC), §84).
Arguability not the test where abuse of process relied on
“Although there will be some strike-out applications which will fail because a pleaded case is arguable, they will fail because the strike-out application is not the appropriate occasion to have that argument. The sort of arguments raised in the present appeal are arguments in relation to which it is possible (and indeed in the case of the abuse arguments, necessary) to determine arguments within the application.” (Shiner v. HMRC [2015] UKUT 596 (TCC), §33, Mann J).
Not relevant that others may succeed on the issue that is abusive for this party to pursue
“It may be true that subsequent appellants will be able to run arguments that Mr Shiner and Mr Sheinman cannot run, but that is because the latter gentlemen chose to run their case somewhere other than the FTT and did not advance evidential cases that later appellants may seek to run (it cannot be known whether or not they will). They will be in no different position from other litigants in more traditional litigation who litigate first, lose, and then see others with similar claims doing better than they did because those others run their cases differently. I do not think that this is a point which lessens or removes the abuse, or which ought to reduce the consequences to something less than a striking out.” (Shiner v. HMRC [2015] UKUT 596 (TCC), §76, Mann J).
Examples of abuse of process
Parties to litigation should bring forward at the same time everything they want to litigate
“the well-known principle that where a matter becomes the subject of litigation parties to that litigation should bring forward at the same time everything they want to litigate.” (Markem Corp v. Zipher Ltd [2005] EWCA Civ 267, §113)
Collateral civil challenge to a criminal conviction
“It is well-settled, by the highest authority, that it is prima facie an abuse of process to initiate a collateral civil challenge to a criminal conviction, and that such a challenge will be struck out.” (Badaloo v. FCA [2017] UKUT 158 (TCC), §31, Judge Berner).
Effect of debarring the respondent (FTT “may” summarily determine issues against respondent)
“(8) If a respondent has been barred from taking further part in proceedings under this rule and that bar has not been lifted, the Tribunal need not consider any response or other submissions made by that respondent, and may summarily determine any or all issues against that respondent.” (FTT Rules r.8(8)).
“The Tribunals Procedure Committee specifically considered objections to this difference in treatment between a taxpayer and HMRC, but noted that there is a relevant distinction and that it would “not necessarily be appropriate to rule in favour of the taxpayer, whatever the merits of its appeal, simply because of a failure to respond”: see the Response from the Tribunal Procedure Committee of June 2009 to the consultations on the draft First-tier and Upper Tribunal Rules from May to November 2008, at § 34.” (Compass Contract Services UK Ltd v. HMRC [2014] UKFTT 403 (TC), §38 – part of HMRC’s submissions).
Taxpayer may still need to present some evidence
“What is clear however, is that the non-participation of HMRC will not absolve the Appellant of fully making out his case and satisfying the Tribunal that the expenditure claimed is evidenced and thereby deductible.” (Dangov v. HMRC [2017] UKFTT 734 (TC), §24, Judge Amanda Brown).
“Nevertheless, the language of rule 8(8) is permissive – the tribunal “need not consider” and “may summarily determine”. If there are materials already before the tribunal that raise issues that the tribunal thinks need answering in order for it to be satisfied that the assessment should be reduced or discharged, there seems no reason why it should not take account of those materials and seek some explanation from the appellant; furthermore, I do not think that it would necessarily be open to the appellant to submit, without producing any evidence, that the assessment should be reduced or discharged, rather than standing good…If, however, the appellant merely demonstrated that HMRC’s case as stated had some fatal flaw without producing any material to explain why he was overcharged, it might be that the tribunal should demand more of the appellant before summarily determining the matter in his favour.” (Hull City AFC (Tigers) Ltd v. HMRC [2017] UKFTT 629 (TC), §§85 - 89, Judge Gammie QC).
Summary judgment if HMRC have to provided any response to the appeal at all
“Reasoning from first principles, it seems to me that where the respondent has chosen not even to respond to the appeal, as here, summary judgment in favour of the appellant is indicated. The failure to indicate that HMRC even wished to defend the appeal, let alone the failure to provide grounds on which they intended to resist the appeal, indicate that they have accepted the appeal as well-founded. The Tribunal should proceed on that basis and simply allow the appeal…Had grounds of defence been provided, it might have been appropriate to require the appellant to prove its appeal. That is not the case here.” (Whitehill Pelham Ltd v. HMRC [2017] UKFTT 781 (TC), §§12…13, Judge Mosedale).
Power to strike out without a hearing
“(3) The Tribunal may dispose of proceedings, or a part of proceedings, without a hearing under rule 8 (striking out a party's case).” (FTT Rules, r.29(3)).
Presumption in favour of a hearing
“This case is not on all fours with Frey v Labrouche but there are similarities; and the principle to be derived from what the Master of the Rolls said is that there is a presumption in favour of a hearing when a draconian step—there striking out, here refusal to reinstate—is in contemplation.” (SRN Horizon Ltd v. HMRC [2017] UKUT 246 (TCC), §32, Asplin J and Judge Bishopp).
Evidence at strike out hearing
May be set out in skeleton
“Although it is odd to define a factual case in a skeleton argument, that ought to be allowed here because the strike-out application was launched at an early stage before factual points were more fully defined.” (Shiner v. HMRC [2015] UKUT 596 (TCC), §49, Mann J).