M31: Reinstating proceedings/case
Powers of reinstatement following strike out/lifting barring orders
Power following strike out for not compliance with an unless order
“(5) If the proceedings, or part of them, have been struck out under paragraphs (1) or (3)(a), the appellant may apply for the proceedings, or part of them, to be reinstated.” (FTT Rules, r.8(5)).
Time limit: 28 days after notification
“(6) An application under paragraph (5) must be made in writing and received by the Tribunal within 28 days after the date that the Tribunal sent notification of the striking out to the appellant.” (FTT Rules, r.8(6)).
Power following strike out for lack of prospect of success
“I consider that the overriding objective in rule 2 supports my conclusion that the FTT’s general power under rule 5(2) to set aside an earlier direction in relation to the disposal of proceedings is not displaced by rule 8(5)…Rule 5(2) provides the flexibility to enable the FTT to deal with a situation, such as in this case, where it cannot be said that there is any error of law in the decision to strike out but that decision is challenged on the ground that it arose from a misunderstanding of the nature of the proceedings by the appellant.” (Jumbogate Ltd v. HMRC  UKFTT 0064 (TC), §38).
Power following strike out for lack of co-operation (change of circumstances required)
“On that basis it is open to me to consider setting aside my directions of 4 May 2012 provided I am satisfied that there is a change of circumstances or some other exceptional circumstances, although I should only do so if I am satisfied that in accordance with the overriding objective in Rule 2 of the Rules it is in the interests of justice to do so. In that regard, I must regard the burden on the Applicants as being a heavier one to discharge than in other reinstatement applications, bearing in mind that there is no specific power to reinstate, and the application is made after the lapse of a substantial period of time since the appeal was struck out, that is nearly two years. In other words, there must be truly exceptional circumstances.” (Clear Plc v. Director of Border Revenue PTA/88/2011, §45 Judge Herrington).
Consider appealing decision to strike out
“I note that Mr Galvin has not appealed against the striking out of his appeal, but has instead applied under Tribunal Rule 8(5) for his appeal to be reinstated. Following the decision of the Court of Appeal in Mitchell, my starting point is that the striking out was properly imposed and complied with the overriding objective. For that reason, I have taken no account of the fact that Mr Galvin was given only 14 days to respond to the Tribunal’s directions.” (Galvin v. HMRC  UKFTT 577 (TC), §64).
No reinstatement where Tribunal deemed to have determined appeal (e.g. TMA s.54, VATA s.85)
" In OWD v HMRC  UKFTT 497 (TC), Judge Falk (as she then was) considered the interaction between the Tribunal Rules and VATA s 85. She held, rightly in my view, that where s 85 applies it is not possible for an appeal to be reinstated. That is because s 85 deems the agreement between the parties to have the same consequences as if the Tribunal had come to a decision in the same terms. It is not possible to reinstate an appeal after it has been decided by the Tribunal." (Hussain v. HMRC  UKFTT 40 (TC), Judge Redston)
General approach similar relief from sanction
" We will apply the same approach as we applied when considering whether to extend time. We will consider the matter in the light of the overriding objective set out in Rule 2 of the FTT Rules and apply the three-stage approach set out in Martland.
 We start with an assessment of the seriousness and significance of the Company’s breach of the FTT’s case management directions..." (HMRC v. BMW Shipping Agents Limited  UKUT 91 (TCC), Judge Richards and Judge Cannan)
“In North Wiltshire the FTT concluded that it was not obliged consider [the criteria formerly set out in CPR 3.9(1) for relief from sanctions] but it accepted that it might well in practice do so. The same reasoning applies to the present case. These criteria were:
- The reasons for the delay, that is to say, whether there is a good reason for it.
- Whether HMRC would be prejudiced by reinstatement.
- Loss to the appellant if reinstatement were refused.
- The issue of legal certainty and whether extending time would be prejudicial to the interests of good administration.
- Consideration of the merits of the proposed appeal so far as they can conveniently and proportionately be ascertained.” (Pierhead Purchasing Ltd v. HMRC  UKUT 0321 (TCC), §23, Proudman J).
“I gratefully adopt the approach described by Proudman J in Pierhead Purchasing…I consider that the relevant factors that I should take into account when considering whether to set aside the Strike Out are:
(1) whether the appeal is arguable and has a reasonable prospect of success;
(2) the reasons for the Strike Out;
(3) whether there has been any material change since the Strike Out;
(4) whether HMRC would be prejudiced if the Strike out were set aside;
(5) what prejudice would [the appellant] suffer if the Strike Out were not set aside; and
(6) the conduct of the parties.” (Jumbogate Ltd v. HMRC  UKFTT 0064 (TC), §45 – reinstated as tax at stake substantial (£8m), case reasonably arguable, and prejudice to HMRC minor).
The right to be heard before strike out under r.8(1) and r.8(3)(a) was deliberately omitted (and thus does not argue in favour of reinstatement)
“In so far as the Revenue’s case suggests that the two directions and the order should not have been made without notice to the parties, who could then have sought to make representations to the tribunal, we think that it is an example of adding an impermissible gloss to the plain meaning of the rules themselves, and would risk giving rise to the kind of over-refinement to which we have referred.” (Compass Contract Services UK Ltd v. HMRC  UKFTT 403 (TC), §103).
Merits to be considered insofar as they can conveniently be ascertained
“We start this point by emphasising the words “so far as [the merits] can conveniently and proportionately be ascertained”. It is not necessary or appropriate for us to attempt to determine the outcome of the proceedings if they were to be reinstated. We are, however, obliged to consider the merits of the appeals…[W]e consider the most important guidance on the merits of the appeals can be obtained from the EBT scheme promoter: Montpelier. As we have already stated, Montpelier decided to withdraw after consultation with counsel on the merits of the appeals and on the basis of a detailed consideration of the prevailing relevant case law.” (Vaultdawn Ltd v. HMRC  UKFTT 383 (TC), §97).
Reinstatement where T not aware of strike out
“If those were the only factors to take into account, I would reinstate the appeal. While the default is not trivial and the appellant and/or his advisor cannot give a full explanation for the default, I am satisfied it was not deliberate and the default did not prejudice HMRC. Taking into account that HMRC do not oppose reinstatement and the importance of the case to the appellant, I would reinstate it.” (Parsanna v. HMRC  UKFTT 699 (TC), §25, Judge Mosedale – the extra issue was whether the appeal had a reasonable prospect of success, which it did).
“The reason for the delay was that the appellant was unaware that the appeal had been struck out. No blame is to be attached to the appellant or is representative for the fact that it was not notified of the striking out.” (Hattons (Southport) Ltd v. HMRC  UKFTT 710 (TC), §29, Judge Herrington).
No special treatment for HMRC in pursuing tax
“I found the approach of HMRC to compliance to be disturbing. At times it came close to arguing that HMRC, as a State agency, should be treated like a litigant in person and that the constraints of austerity on an agency like the HMRC should in some way excuse unacceptable behaviour. I remind HMRC that even in the tribunals where the flexibility of process is a hallmark of the delivery of specialist justice, a litigant in person is expected to comply with rules and orders and a State party should neither expect to nor work on the basis that it has some preferred status – it does not.” (BPP Holdings v. HMRC  EWCA Civ 121, §39).
“If special account is to be taken of the public interest in the correct payment of tax in a sense which differs from the public interest in the correct determination of civil disputes, then the point must be established elsewhere than at first instance.” (Compass Contract Services UK Ltd v. HMRC  UKFTT 403 (TC), §123).
Degree of latitude for litigants in person
“I accept, as did [HMRC] that [the appellant] was effectively a litigant in person at that point. In the circumstances, and bearing in mind the overriding objective, I consider that [the appellant] should be allowed a degree of latitude when its conduct is considered. It appears to me that [the appellant’s] failure to attend the case management hearing and its declared intention not to take part in the appeal were not due to deliberate disregard of its responsibilities but to the difficult financial situation in which it found itself and [the appellant’s] lack of experience in tax appeals.” (Jumbogate Ltd v. HMRC  UKFTT 0064 (TC), §50).
No leniency for adviser defaults
“…our view is that we must examine the history of Mr Green’s appeals on the basis that it fell to him to ensure that the relevant requirements were complied with and that this was done within the appropriate time limits. Any question as to the lack of adequacy of the service provided by a representative is a matter between the appellant and the representative and cannot be the concern of HMCTS, the Tribunal, or the other party to the appeal.” (Green v. HMRC  UKFTT 421 (TC), §63).
Reinstatement only to negotiate settlement counts against reinstatement
“If the only objective of the reinstatement applications was to provide an opportunity to participate in the EBT settlement opportunity then we would concur with HMRC that that would count against the Appellants.” (Vaultdawn Ltd v. HMRC  UKFTT 383 (TC), §96).
Consider the seriousness of the slip not just its consequences
" We consider, however, that it is possible to exaggerate the seriousness of those failings. We agree with the FTT that the mistake with the NG address was a minor clerical error, even though serious consequences flowed from it. Certainly, Mr Gibbon should have done more to follow up on the progress of the appeal. However, for most representatives who put correct contact details on a notice of appeal, the question of “following up” with the FTT will not typically arise: the appeal will be registered, an HMRC Statement of Case will be produced and the appeal will automatically be set on a path where the representative is notified of a case management timetable. It was because these steps did not follow that Mr Gibbon contacted the Tribunal in May 2017. His failure was not to diarise the appeal for follow up if he did not receive the Statement of Case. That was a matter of oversight on his part which on its own would not have led to significant difficulties. It is the combination of a single clerical error and a single oversight which has led to serious consequences." (HMRC v. BMW Shipping Agents Limited  UKUT 91 (TCC), Judge Richards and Judge Cannan)
" But the truth of the matter is that the fundamental reason for the delay is that the first email was not sent to HMRC. And it was only the second email which complied with the Unless Order. The reason for this is that Miss McMahon failed to send the first email to HMRC. This was a slip of the keyboard. It was simply a mistake albeit one which had significant consequences. The mistake was remedied in the second email. To our mind this mistake is again a justifiable reason why the deadline set out in the Unless Order was missed." (McFarland v. HMRC  UKFTT 355 (TC), Judge Popplewell)
Hattons (Southport) Ltd v. HMRC  UKFTT 710 (TC), Judge Herrington – appeal struck out but taxpayer/adviser not notified. T thought the appeal had been stayed behind a lead case. Reinstatement granted 6 years later as taxpayer/adviser had no reason to make any enquiries in the meantime.
Green v. HMRC  UKFTT 421 (TC) – appeal struck out due to non-compliance with an unless order. Reinstatement refused due to lack of good reason for not taking required steps and an apparent attempt to change the fundamental basis of the appeal.
Infocom IT(UK) Ltd v. HMRC  UKFTT 319 (TC) – appeal struck out due to serial non-compliance. Reinstatement refused as taxpayer had failed to engage with appeal process in any meaningful sense thereby rendering it impossible to conduct and progress litigation.
- Reinstatement where taxpayer unaware of strike out due to clerical error in email address
" In this context, the reasons are not particularly “good” because of the failings, both of Mr Gibbon and of the Company, that led to the breach. However, they are not particularly “bad” because the failings on their own were relatively modest, even though the combination of them led to a serious outcome.
 The final task, therefore, is to weigh all factors in the balance. In our judgment, the balance comes down, albeit by a slender margin, in favour of reinstating the appeal. Strike out of an appeal is a draconian sanction and for that reason it is not exercised without warning. Yet here, the Company received no warning before the appeal was struck out. Certainly neither the Company nor Mr Gibbon was blameless in this regard, but we have already explained our view as to the reasons for the default. In our judgment, not reinstating this appeal would involve imposing a sanction on the Company which is disproportionate to the seriousness of the conduct that led to breach of the FTT’s directions." (HMRC v. BMW Shipping Agents Limited  UKUT 91 (TCC), Judge Richards and Judge Cannan)
- Reinstatement granted where taxpayer complied with unless order 7 hours late due to a slip of the keyboard
" In our view, as in BMW, the fundamental reason for the breach, namely the failure by Miss McMahon to send the first email to HMRC, was not particularly bad but it had a serious outcome. If we reinstate the appeal, HMRC will suffer no prejudice. As mentioned above, they processed the information provided in the second email and granted hardship. If we reject the application, then the appellant will suffer prejudice in that it will not be able to proceed with this appeal. Whilst this might be an inevitable consequence of its failure to comply with the Unless Order, it is something to which we can give weight when considering the balance of prejudice. Our view when evaluating all the circumstances is the same as the conclusion reached by the Upper Tribunal in BMW. Rejecting the appellant’s strike out application and sanctioning the strike out would be disproportionate to the seriousness of the breach and the reasons for it. Subject to our decision on the out of time application, we allow the appellant’s strike out application." (McFarland v. HMRC  UKFTT 355 (TC), Judge Popplewell)
Costs of reinstatement hearing following strike out
“Using only the criterion of whether or not the Appellant has acted unreasonably in making the application for reinstatement, I believe that the Appellant (through its representatives) has acted unreasonably. This is because the extent of the defaults made by the Appellant in the 15 months preceding the striking out of its appeal and the absence of compelling reasons for those defaults means that the Appellant’s application for reinstatement was bound to fail.” (Infocom IT(UK) Ltd v. HMRC  UKFTT 319 (TC), §27).
Reinstatement following withdrawal
“(3) A party who has withdrawn their case may apply to the Tribunal for the case to be reinstated.
(4) An application under paragraph (3) must be made in writing and be received by the Tribunal within 28 days after –
(a) the date that the Tribunal received the notice under paragraph 1(a); or
(b) the date of the heading at which the case was withdrawn orally under paragraph (1)(b).” (FTT Rules rr.17(3) and (4)).
Only withdrawing party can apply to reinstate
“It is clear from Rule 17(3) that only the party who has withdrawn the appeal can apply for it to be reinstated. HMRC cannot do so.” (Orchid Properties v. HMRC  UKFTT 651 (TC), §20).
Matter for the Tribunal’s discretion
“The Upper Tribunal in Pierhead Purchasing is authority for the proposition that reinstatement remains a matter of discretion for the Tribunal and an applicant must still show sufficient reasons to justify reinstatement, taking into account the overriding objective.” (Rolls Group v. HMRC  UKFTT 404 (TC), §69).
Presumption in favour of reinstatement for appellants acting in good faith and within the time limit
“The right approach to a rule 17(3) reinstatement application is to proceed on 5 the basis that the Rules give an Appellant who has withdrawn his appeal the right to apply for reinstatement. If the Appellant is using the right to apply for an abusive purpose then the Tribunal may refuse it. It may, for example, be part of a delaying strategy on the part of an appellant to withdraw and then to apply for reinstatement…In my view the events of 7-24 September 2009 should (if the 7 September message really was a notice of withdrawal) be understood as a misplaced withdrawal which, as soon as Mr Sharma saw the implications, he took steps to put right. Both Mr Singh and Mr Sharma were acting in good faith. Their action came within the spirit of rule 17 and the Tribunal’s exercise of its power to allow the application to reinstate falls well within the object that rule 17(3) was designed to achieve.” (St Annes Distributors Ltd v. HMRC  UKUT 458 (TCC), §§40…41).
“Not only does Rule 17(3) contemplates the likelihood of a change of mind, but that Rule 17(4) allows such a change of mind to be made within the time allowed to make an application to reinstate the appeal. The Tribunal should therefore be slow to deny Mr Hadland the right to have his appeal dealt with fully, even though he had given an effective notice to withdraw.” (Hadland v. HMRC  UKFTT 195 (TC), §74, Judge Poon).
“The factors relevant to whether an appeal should be reinstated on an application pursuant to Rule 17(3) were set out by Proudman J in Pierhead Purchasing v Commissioners of Revenue & Customs  UKUT 321 (TCC). At  and  the Upper Tribunal set out the following criteria:
‘• The reasons for the delay, that is to say, whether there is a good reason for it.
• Whether HMRC would be prejudiced by reinstatement.
• Loss to the appellant if reinstatement were refused.
• The issue of legal certainty and whether extending time would be prejudicial to the interests of good administration.
• Consideration of the merits of the proposed appeal so far as they can conveniently and proportionately be ascertained.’ “(Rolls Group v. HMRC  UKFTT 404 (TC), §11).
Rule 17 not a weapon to cull unmeritorious appeals of non-cooperative traders
“Rule 17(3) and (4) are there to protect the Appellant who for some reason has, deliberately and in good faith, withdrawn his appeal but, for an acceptable reason (e.g. because he has insufficient funds to continue the fight or has come to see the implications of withdrawal), has applied to reinstate the appeal within the 28 day cooling off period. Rule 17 is not a weapon to enable the Tribunal to cull unmeritorious appeals of non-cooperative traders. That may be a subsidiary consideration in refusing the application to reinstate; but it cannot be the principal reason.” (St Annes Distributors Ltd v. HMRC  UKUT 458 (TCC), §39).
Lack of consultation by representative with appellant before withdrawal by representative only a factor
“From Training in Compliance we understand that there is no justification for drawing distinctions between a party and its representative; that we should take account as a fact of any lack of client consent but that that is not conclusive; and that the effect on the other party (here, HMRC) is equally important. From Mullock we understand that the obligation to co-operate with the Tribunal (Rule 2(4) refers) is on the Appellants “irrespective of the help and advice they are or are not receiving”; and that “a party should not shield behind his representatives”. (Vaultdawn Ltd v. HMRC  UKFTT 383 (TC), §82).
Whether the appellant understood the consequences of withdrawal is relevant
“It seems to me that, as I have said, the FTT in this case reached its conclusion on the assumption that counsel had not advised the appellant of the risk that its WOWGR licence might be withdrawn. It also made its findings on the basis that the appellant did not appreciate or even think about the risk. It is the necessary corollary that the appellant might have made a different decision on 30 withdrawal had that risk been considered. Having taken into account the circumstances in which the appeal was withdrawn, on the basis of those assumptions, the exercise by the FTT of its discretion is not in my judgment capable of being interfered with on appeal. It is important in my view to uphold robust case management decisions at first instance, and I do so.” (Pierhead Purchasing Ltd v. HMRC  UKUT 321 (TCC), §35, Proudman J)
“This is not a case such as Pierhead Purchasing where the appellant did not receive advice on the consequences of withdrawal. There is no suggestion that the appellants did not appreciate the consequences of withdrawal. Namely that they could not pursue the Appeals unless the Appeals were reinstated. Deloitte advised the appellants in terms that withdrawal would mean giving up on the matter. At that stage the appellants had an opportunity to consider the advice they had received, to take soundings within the industry or to raise the matter with AMS, their previous adviser whom they knew was sharing fees with Deloitte.” (Rolls Group v. HMRC  UKFTT 404 (TC), §70).
Incompetent advice is a factor
“[The taxpayer] submitted that the appellants were entitled to rely on the advice of a leading firm of professional advisers. I accept that is a factor to take into account, but for reasons given above it is also relevant to consider whether the advice was such that no reasonably competent professional adviser could have given it. If the advice was reasonable, then reliance on the advice would not really support the appellants’ case on reinstatement. The grounds for seeking reinstatement could then fairly be described as subsequently taking a different view as to the prospects of success of the Appeals.” (Rolls Group v. HMRC  UKFTT 404 (TC), §74 – but note that the Judge also said (§§15 – 19) that an application to reinstate was more akin to setting aside a default judgment and thus he should take into account the Court of Appeal’s decision in Mullock v. Price  EWCA Civ 1222 to the effect that a party should not in general be allowed to shield behind his representative).
Delay beyond 28 days is a factor pointing against reinstatement
“With each day that passes after a stipulated time limit, the effect of legal certainty strengthens its hold. The principle of legal certainty is central to the administration of justice, without which there can be no finality in dispute resolution. Where there is no finality in litigation, there can be no ultimate enforcement of justice, and the legal system would cease to command the respect of all concerned.” (Hadland v. HMRC  UKFTT 195 (TC), §85, Judge Poon – 4 months’ delay caused serious prejudice, reinstatement refused).
“I take into account the period of time which has passed since the appeals were withdrawn and the prejudice to both parties which I have described above.” (Rolls Group v. HMRC  UKFTT 404 (TC), §70).